Abstract: It is well known that fixed costs play an important role in determining the structure of industry. However, it is not as well known the relationship between organizational structure and organizational fixed costs. This paper focuses on such a relationship and presents correspondingly a mathematical model.With this model we are able to determine the size of firms, explain such phenomena as fluctuations in layoff and downsizing of the organization, and explain why the structure of hierarchies of firms is pyramid-shaped. Advantages of using fixed costs to explain the organizational structure are twofold: first, it provides a complementary perspective into organizational structure;second, it provides a link between many seemingly unrelated
phenomena ( e. g., downsizing and pyramidal hierarchies ).

Key words: firm, firm size, fixed cost, layoff, organizational structure, pyramidal hierarchies