Organizational Hierarchical Structure

How does a business organize the levels of management of its staff so that information flows and responsibilities become crystal clear? Authority usually rests with the owner of the business and flows down through levels of management until it reaches ordinary employees. Policy making, models of conduct, product and service standards, evaluations of efficiency and profit – all these help to determine how management runs operations. A smooth flow of operations usually produces the most profit.

Many theories and methods of management have been suggested in the various fields of enterprise but business organizations commonly utilize 2 basic modes of structure: the flat or the pyramid type. Most organizations are a mix of these two types but when starting out on a business or in the midst of transforming one’s business, it would be wise to take a second look at the benefits and the drawbacks that each type may bring with it.

Starting a new business can be tremendously stressful, but determining early on one’s own management style can give you insights into the best business structure fit for your type of company.

Simple single proprietorships often adapt a flat organization, especially when the owner is the hands-on type. With only a few or even no levels of management, this organizational type allows staff a greater degree of involvement in decisions with greater empowerment and leeway in problem-solving. Less supervision can sometimes be tricky though, with staff slacking off or abusing their privileges. Training and change processes are easier to handle since information easily flows down to the employees directly. Less need of supervision also translates to lower costs for management. Communication is enhanced with the top levels keeping their ear on the ground, and with ordinary employees secure in the knowledge their insights are always taken into consideration.

There are disadvantages too, however. Since staff often lacks a specific boss to report to, lack of a clear direction and neatly drawn up responsibilities often means that jobs and tasks can fall through the cracks. Confusion can lead to great dissatisfaction or worse, instigate power struggles as supervisors and managers try to cover up or correct mistakes.

Although flat organizations bring employees freedom to operate, most of the job descriptions would tend to expand their scope of responsibilities rather than promote specific skills or a specialization. When business grows more complex, another type of business organization becomes more popular, one where new opportunities can be addressed by specialists and specialized teams- the pyramid structure.

A taller structure implies more levels of organization with each subordinate level being supervised by the one above it, much like following the structure of a triangle or pyramid. Every employee is subordinate to someone else, except for the top position. Everyone answers to someone else. Lines of communication are clearly defined from the top down through several layers of management, until one reaches the base level of ordinary staff or employees. Such clear-cut levels of leadership allow employees to remain motivated for their own advancement. Specialization and superior performance in specific fields of the enterprise are valued. Expertise is often honored with recognition and higher responsibility. Employees bond tighter with departmental groups and are concerned with advancing the best interest of their group.

In a hierarchical structure, there may often be a large number of groups and departments. Communication up and down the pyramid, as well as across co-lateral levels tends to be less effective. Departmental rivalries can prove to be detrimental adversely affects the performance of another. Escalation of these rivalries complicates matters as each department tries to preserve its advantages rather than the interconnections that point to building the interests of the organization as a whole.

This increase in bureaucracy is costly, not only in terms of salaries for multiple layers of management, but also slows down responsiveness to change. Longer processes and formalities may be required in responding to client’s needs. These days, larger organizations look for ways to flatten their structures, to increase efficiency and adapt to an ever quickening world. While there may be no sure way to organize your business to ensure success, what remains true is that when one is quick enough to understand the need for change, those who implement structural changes when needed are sure to be the best adapters, the ones who will survive best!