Hierarchy is a type of organizational structure in which items are ranked according to levels of importance. In a corporate environment, hierarchies depend upon structure, rules and top-down control to guide business practices and activities. An adherence to identified best practices, controlled processes and considerable oversight are considered essential to productivity and success.
Critics of hierarchical corporate culture, on the other hand, argue that the control and rigidity of the model stifle creativity and employee initiative.
A hierarchical organization is an organizational structure where every entity in the organization, except one, is subordinate to a single other entity. This arrangement is a form of a hierarchy. In an organization, the hierarchy usually consists of a singular/group of power at the top with subsequent levels of power beneath them. This is the dominant mode of organization among large organizations; most corporations, governments, criminal enterprises, and organized religions are hierarchical organizations with different levels of management, power or authority. For example, the broad, top-level overview of the general organization of the Catholic Church consists of the Pope, then the Cardinals, then the Archbishops, and so on.
Members of hierarchical organizational structures chiefly communicate with their immediate superior and with their immediate subordinates. Structuring organizations in this way is useful partly because it can reduce the communication overhead by limiting information flow.
A hierarchy is typically visualized as a pyramid, where the height of the ranking or person depicts their power status and the width of that level represents how many people or business divisions are at that level relative to the whole; the highest-ranking people are at the apex, and there are very few of them, and in many cases only one; the base may include thousands of people who have no subordinates. These hierarchies are typically depicted with a tree or triangle diagram, creating an organizational chart or organogram. Those nearest the top have more power than those nearest the bottom, and there being fewer people at the top than at the bottom. As a result, superiors in a hierarchy generally have higher status and command greater rewards than their subordinates.
Employee Development and Guidance
Employee development happens at all levels of an organization. Employees look to the managerial staff to help develop work skills, the managers work with company executives to improve managerial performance, and the executives draw on the experience of company owners for business guidance. The hierarchy of authority helps an employee to understand who he is to receive guidance from, and it helps that employee to see where his manager is getting her career development from. This is why competence at all levels of the corporate hierarchy is important.
Accountability for Projects and Activities
Managerial accountability in the hierarchy of authority should not be used to point fingers and accuse staff members of being incompetent. A clearly defined hierarchy creates a path of accountability for every project and activity within the company. For example, an accounts receivable associate reports to an accounting manager, who reports to the operations manager. If the accounts receivable system is consistently reporting erroneous information, then you can follow the hierarchy of authority to determine who is responsible for the errors.
The accounting manager may be approving payment logs that have errors on them, or the operations manager may be failing to detect a problem with the accounting software during monthly audits of the system. The point is to find the point of failure, repair it and then allow the responsible person to learn from the experience.
Providing a Clear Career Path
The hierarchy of authority provides a clear career path for each employee in the organization. The outline of executive, managerial and supervisory positions within the company can help employees to determine their career goals and what kind of move up the corporate ladder they would like to take. Executives and managers can use the hierarchy as motivation for employees that show supervisory or managerial potential to perform at a high level of productivity.
Efficient Company Communication
A hierarchy helps to establish efficient communication paths between employees, departments and divisions of the company. The manager of each department becomes the departmental administrator, and any information that is relevant to the department is given to the manager. The manager can either act on the information or delegate it to someone within her staff. Information can be effectively distributed through company managers rather than trying to contact each individual employee. The manager’s understanding of her staff and the structure of her department makes her the ideal person to improve communication to her department.