Advantages of the hierarchical organizational structure are many, the most impelling of which is that your employees will have clearly defined roles and responsibilities, and a sense purpose in accomplishing those roles.

Hierarchical structure of an organization usually has vertical levels leading up to the top head – the CEO or Managing director. As long as the business hierarchy has enough space for the managers to administer benevolently and employees to communicate effectively, it always comes with several advantages. Any organization that has more than a few employees, and that is developing quite fast should consider forming a hierarchical structure for its business.

The following post defines abusiness hierarchy, levels and roles of business hierarchy and finally, the advantages of a hierarchical organizational structure.

What is a Business Hierarchy?

Almost all organizations follow the traditional business hierarchy structure where the emphasis is placed on a top-down reporting structure. An organizational structure is administered to delineate lines of communication, roles and responsibilities, policies and authority.

“Hierarchical structure of a business determines to what magnitude and nature leadership is distributed within an organization and the method by which information, communication, and data flow.

There are fundamentally two types of Hierarchy that companies follow – Flat and Hierarchical structure. However, we are here to discuss the advantages of the latter in business, be it small or large.

3 Levels in Hierarchy of Business Organisation!!

A traditional organization hierarchy looks like a pyramid where the narrow top comprises of the top level management such as CEOs, CFOs, General Managers, etc. who direct and control the middle-level managers, who then are responsible for the lower level managers and employees, placed at the wide foot end of the pyramid. The communication flow is top-down where each level acts as the intermediator between its previous and next.

In a hierarchical organization structure, every employee except the CEO is a subordinate to someone else. And each level consists of a number of entities that descend.

Although many businesses over the years have moved away from the traditional hierarchy to structures that reflect team coordination and external networks, the hierarchy still remains the same (top-down) with slight variation in designation and communication.

Keeping the reporting relationships and functional interactions between employees and their supervisorsin mind, a typical organization chart outline3 levels of business hierarchy. They are;

1. Top or Senior Level Management – They are the personnel who controls and manages theoverall They create visions, long and short-term goals and companies policies, and are accountable to the company stakeholders and thegeneral public.

They also bear the profit and losses of the company (depending upon the share percentage).

2. Middle Level Management–They are the senior heads of different divisions such as managers, branch heads, regional head etc. whose role involve effective execution of organizational plans set by the top level management.

They are the backbone of the company and devote crucial time in the expansion of the business.

3. First Level or Operational Managers – They are company staffs who monitor the day to day activities of the organization such as sales, marketing, promotion, production, manufacture etc.

They are responsible for the product and service quality and quantity. Team leads, office managers, department head, and supervisors are part of this hierarchy level.

Advantages of A Hierarchical Organizational Structure

1. There Is Proper Authority and Control Over Employees

• In a hierarchical structure, functional interaction ladder ascends from top level management. Within the pyramid, departments are assigned with clear roles, responsibilities, and goals.
• They are also assigned with effective managers for administrative purpose and quality control.
• With this type of vertical hierarchy, employees will know whom, how and when to report. They will also be aware of their duties and roles towards their subordinates and peers.
• E.g.: A medium sized IT company might have 3 marketing department and two project development department. The marketing departments might have a deputy manager, 3 team leads, 3 associate team leads and 12 business development executives whereas a project development department might have a deputy manager, head project developer, 2 project team-leads and 2 teams of 7 project development executives.
  Here the executives report to the associate team leads and project team leads,who in return report to their team leads and projects heads respectively; both marketing team lead and project head report to the deputy manager, who directly seek guidance from top-level manager.

2. There Will Be More Interdepartmental Loyalty

• As employees work together to fill a common role, common goal and common purpose, they create a bond and develop trust while contributing towards the goals.
• Every department over the time has specific jargons for communication which help bind the people in that division effortlessly.
• A precise hierarchical structure also eliminates misunderstanding between employees when it comes to reporting, updating, leading or heading projects.
• Employees, when they face similar challenges, help each other grow by sharing insights and experiences.
• It also gives them someone to look up to (middle managers) when facing glitches.

3. A Precise Pathway for Promotion and Success

• When your employees are aware of a clear hierarchy, they will know which is the next step up on the ladder or whom they should seek for promotion and appraisal.
• In a hierarchical structure, the paths are clearly defined with criteria and necessary skills to achieve them.
• It also works as a motivational factor for a new managerial position or new job role.
• E.g.: In the aforementioned IT Company, the project development executive aims to become project development team lead, who in return aims for the head of project department position and so on.

4. You Will Get To Hire Skill Specific Managers

• Hiring skill specific managers for each level will be considerably easy. When you segregate the levels of management, you are able to define key roles needed for that particular level.
• In other type of organizational hierarchies, a single manager oversees workers from a different He might have basic knowledge of different functionalities but will lack anin-depth understanding of that particular skill or job role.
• When managers are hired for specific functions having definite skills, they will be more effective in guiding staffs in solving complex problems.

Therefore, it is quite obvious that a hierarchical organizational structure not only fosters personal development but also enhances skills and competency level among employees. This would prove advantageous for an organization in the long run when it grows into a larger corporate with more than 100 employees and several departments.