What’s it: An organizational structure by hierarchy or, in short, a hierarchical structure is an organizational arrangement in which a company has a long chain of command. The company has many middle managers who bridge the top management to the employees. It is the traditional model for representing organizational structure. Sometimes, we call this model a tall structure.
The chain of command is divided into several layers. And it gets wider as it moves down along the organizational chart. For example, top managers are at the top. Underneath are middle managers, lower managers, and employees. The company clearly defines their role and the nature of their relationship. Authority flows from top to bottom. And top managers hold the highest authority.
Where is an organizational structure based on hierarchy commonly adopted?
The organizational structure generally includes two categories: flat structure and hierarchical structure. Which is more appropriate can vary between companies depending on factors such as their nature of business and the organization’s size. And each structure has advantages and disadvantages.
A flat structure is common for small businesses with a small organization and few employees. They do not need many managers to supervise and control the organization. For example, a small business might consist of only owners and employees where each person reports to and is accountable to the owner.
In contrast, a hierarchical structure is typical for large companies with a complex scale of operations. They have large organizations with many employees, even thousands of employees. They rely heavily on many managerial layers to oversee and control operations. They are interconnected in a chain of command with different levels of authority.
What are the characteristics of an organizational structure based on hierarchy?
An organizational structure based on a hierarchy has many managerial layers. Each has a different role and authority. The highest power is under the top managers. And the lower the level, the lower the power. Other characteristics of the hierarchical structure are:
- The chain of command is long and involves many managerial layers.
- The authority within the company is tiered, with the highest position holding the highest power.
- Organizations use a top-down approach to decision-making, flowing through the chain of command from top to bottom.
- The span of control tends to be wide, where each manager has fewer subordinates than in a flat structure.
- The organizational structure will form a pyramid when we draw it on a chart.
- The company defines roles and responsibilities for each level clearly.
- Organizations are more bureaucratic with concentrated authority and emphasis on compliance with rules and procedures.
- Less delegation and autonomy leave subordinates fewer opportunities to organize work and make decisions.
- Managers tightly control subordinates and monitor them closely.
What are the advantages of an organizational structure based on hierarchy?
The hierarchical structure allows the company to organize operations more efficiently. As a result, it facilitates them to operate on a large scale and continue to grow in the future. On the other hand, if they rely on a flat structure, the company may find it difficult to grow due to disorganization problems.
Here are other advantages of the hierarchical organizational structure:
Clarity about roles and functions. The company defines clear lines of authority and reporting. So, there is no confusion in making decisions.
In addition, the company also describes specifically the job functions within the company. As a result, it makes employees understand their roles and responsibilities clearly.
Accountability. The company assigns roles and responsibilities to each managerial layer. Then, companies hold managers accountable for their actions or decisions.
More prospective career. The company has many positions, as indicated by the many managerial layers available. Employees see it as a great opportunity to get a higher career. Finally, they are passionate about it and do their best to get promoted.
Specialization. Companies promote specialization by dividing operations into specific functions or tasks. It allows employees to develop themselves and become experts in their areas.
More distributed workload. Specialization and division of roles allow the workload to be distributed among people in the organization according to their respective capacities. It also minimizes any overlap or dual roles within the organization.
High productivity. Specialization allows employees to quickly become proficient in carrying out their routine work. They can learn by doing and take proper training. On the other hand, management can more easily prioritize when they want to develop them.
More controlled operation. Managers closely supervise subordinates. They could do that because they had few subordinates. In addition, the company also asks employees to comply with the rules and procedures. Finally, it all leads to a more controlled operation by minimizing the possible deviations.
What are the disadvantages of an organizational structure based on hierarchy?
Even if the operations are well-organized, companies must hire more managers when adopting a hierarchical structure. It consumes costs. Moreover, they have to pay and provide managers with benefits at a higher cost than they spend on staff. Other disadvantages of a hierarchical organizational structure are:
More bureaucratic. Companies rely on many managerial layers to oversee operations. In addition, they rely more on compliance with rules and procedures, which must be strictly adhered to.
Slow decision. Every decision and instruction had to go through a long chain of command. If the dynamic business environment requires companies to adapt quickly, that can be a problem.
Communication distortion. Communication flows through the chain of command, which is slow because it has to go through many layers. In addition, information is more likely to be distorted as it passes through the layers, making the message ineffective.
Decision inconsistency. Management at different levels may make different decisions from each other. These inconsistent decisions can hinder work within the company.
Less flexible. Companies are inflexible to adapt and react to threats in the business environment. Bureaucracy, slow decisions, and communication are among the causes.
Low job satisfaction. Employees view their work as boring because they lack autonomy. They cannot independently organize and control their work.
Relationship tension. Lack of autonomy can lead to strained employee-manager relationships. Employees feel they are not valued and perceive managers as controlling and supervising too tightly.
What to read next
- Organizational Structure: Why It Matters and What are the types
- Tall Organizational Structure: Characteristics, Advantages, Disadvantages
- Flat Organizational Structure: Characteristics, Advantages, Disadvantages
- Organizational Structure By Hierarchy: Advantages, Disadvantages
- Organizational Structure by Function: Advantages and Disadvantages
- Organizational Structure By Product: Advantages and Disadvantages
- Organizational Structure by Region: Advantages and Disadvantages
- Organizational Structure by Customers: How It Works, Advantages, Disadvantages
- Matrix Structure: How It Works, Advantages, Disadvantages
- Horizontal Organizational Structure: Characteristics, Advantages, Disadvantages
- Vertical Organizational Structure: Characteristics, Advantages, Disadvantages
- Shamrock Organization: How it Works, Advantages and Disadvantages
- Project-Based Organizational Structure: Strengths and Weaknesses
- Centralized Organizational Structure: Advantages, Disadvantages
- Decentralized Organizational Structure: Advantages, Disadvantages
- Formal Organizational Structure: Characteristics, Advantages, Disadvantages
- Informal Organizational Structure: Characteristics, Advantages, Disadvantages
- Multidivisional Structure: Importance, How it Works, Pros, Cons