What’s it: Levels of hierarchy refer to the various levels within the organizational structure at which authority and responsibility are attached. Higher levels have higher authority and decision-making power. In addition, they are responsible for monitoring and coordinating the work of lower levels. In other words, the hierarchical level shows us how the chain of command flows within the company, from the chief executives as top-level, middle managers to front-line managers.
Why are levels of hierarchy important?
Clearly defined levels of hierarchy ensure accountability in every position. It maps out positions and the relationship between them. Each has different roles, authorities, and responsibilities. Position holders understand who they are responsible for and report to. Thus, they are more responsible for their role.
In addition, the company develops a hierarchy to make the organization effective in achieving its goals. It maps out how companies should make decisions and allocate human resources, minimizing overlap and waste.
Top management develops strategy and directs the company’s operations through a series of programs and performance targets. Meanwhile, the lower levels carry out the program and try to achieve the set targets. Thus, every existing level unites and supports each other. Finally, it makes it easier for the company to achieve its goals.
Finally, the level of hierarchy chart career paths. Companies promote employees to higher positions based on the hierarchy. So, employees know about what can be achieved with their current career, motivating them to work well to achieve their desired position.
What is a three-level hierarchy?
The three-level hierarchy shows us how the organizational structure is divided into three main groups: upper, middle, and lower levels. Authority and responsibility flow from top to bottom. Whereas decision-making power works in the same direction, a higher level has higher power.
Top-level managers are responsible for setting the goals, direction, and corporate strategy. They also oversee the entire organization. Meanwhile, the level below it is responsible for implementing it.
Top-level managers are sometimes referred to as company executives. They govern and are responsible for the company as a whole. They usually include the president director and functional directors such as the marketing director, operations director, human resources director, and finance director. The president director has the highest authority and supervises the other directors. In some cases, their title may take the name:
- Chief Executive Officer (CEO)
- Chief Financial Officer (CFO)
- Chief Operating Officer (COO)
- Chief Marketing Officer (CMO)
- Chief Human Resources Officer (CHRO)
Top-level managers make decisions for the entire organization. They are not involved in daily activities. Rather, they set goals and strategies and direct the company to achieve them. They monitor how the organization is progressing in achieving the goals and targets set. And finally, they are responsible for the performance of the organization.
Top management teams need excellent conceptual and decision-making skills. They are usually experts in their respective fields.
Middle-level managers are the liaison between lower-level managers and top-level managers. They include departmental managers, general managers, and branch managers. They are responsible for their unit or department.
For example, departmental managers translate the strategies and targets set by top managers into divisional goals, targets, and work programs. And they supervise and devote more time to managing their functional areas and engaging in daily activities.
Although involved in day-to-day activities, middle managers take on a more strategic role. They control, motivate, and guide lower-level managers to achieve targets and goals. In addition, they provide top managers with valuable feedback and information such as on performance progress and recommendations for strategic changes.
Middle managers need excellent interpersonal skills. They must be good at communicating, motivating, and providing assistance to subordinates. In addition, they also need skills for leadership and decision-making, which are important in delegating tasks to lower managers.
Lower level management
Lower-level managers are sometimes referred to as first-line managers or front-line managers. They interact and supervise employees daily. They manage people to carry out the functional tasks inherent in each individual. Their work may also include organizing work, delegating functional tasks, assessing performance, scheduling, and giving and receiving feedback.
This level requires not only interpersonal skills. It also requires technical knowledge and skills for supervised work and tasks.
What is a hierarchical structure?
A hierarchical structure is an organizational structure by divides positions in the company into several levels or hierarchies, where each has different authorities and responsibilities. It outlines how command and communication flow to each.
A hierarchical structure adopts several layers, from the highest to the lowest level. Authority and decision-making power increase with higher levels. In contrast, fewer and fewer subordinates were supervised at each higher level. So, when drawn into a chart, it will form a pyramid (hence, it is called a pyramid structure). Sometimes, it is also called the tall structure.
Advantages of hierarchical structure
Clearly defined roles. The company assigns each position responsibilities and roles to perform and procedures to follow. It leads to an accountable action or decision.
Explicit authority. The company describes how authority and reporting flow within the organization. Thus, employees understand to whom they should be responsible or report.
Transparent career path. The levels in the organizational structure represent the achievable career paths for a position. So, employees know what position they can achieve with their current career. It allows them to be motivated to achieve the desired position. In addition, a clear career path allows for more targeted and appropriate employee development.
Work specialization. This structure provides an opportunity for employees to specialize and develop expertise in the functional area they are working on. So, they are more focused on developing themselves.
Disadvantages of hierarchical structure
Slow decision-making. Communication has to go through multiple layers, making it slower to reach the intended person.
Less flexible. Companies are less flexible to adapt and react to changes in the environment and market because it takes longer to make decisions and implement them.
Less autonomy. It can lead to dissatisfaction and demotivation. Employees are not free to organize their work.
Greater cost. The company has many layers. So they spend more money to fill each layer with the right people.
Lowers morale. The span of control tends to be narrow, where the manager has fewer subordinates. Thus, they may supervise subordinates too closely, lowering the morale of subordinates.
What to read next
- Levels of Hierarchy: Definition and Brief Explanation
- Chain of Command: Importance, Element, Advantages
- Span of Control: Importance, Types, Advantages, Disadvantages
- Delegation in Management: How it Works, Advantages, Disadvantages
- Accountability: Importance, Examples, Components
- Centralization: Importance, How it Works, Determinants, Pros, Cons
- Decentralization: Importance, Advantages, Disadvantages
- Bureaucracy: Importance, How it Works, Advantages, Disadvantages
- Delayering: Importance, How it Works, Strengths, Disadvantages
- Downsizing: Importance, Reason, Type, Pros, Cons
- Authority: How It Works, Sources, Types, Examples
- Organizational Chart: Importance, Features, and Types