Organisational structures define a hierarchy within an organisation. The two most common arrangements include:
- a flat organisational structure
- a hierarchical organisational structure
Each structure has its advantages and disadvantages. The most appropriate arrangement will depend on the size and the type of your business, and the number of management levels that you need. See reasons for changing your organisational structure.
How does a hierarchical organisational structure work?
A hierarchical structure is typical for larger businesses and organisations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organisation.
The decision-making process is typically formal and flows from the top down. This creates a tall organisational structure where each level of management has clear lines of responsibility and control. As the organisation grows, the number of levels increases and the structure grows taller.
Often, the number of managers in each level gives the organisation the resemblance of a pyramid. This structure gets wider as you move down - usually with one chief executive at the top, followed by senior management, middle managers and finally workers. Employees' roles are clearly defined within the organisation, as is the nature of their relationship with other employees.
What are the advantages of a hierarchical structure?
A hierarchical structure can provide benefits to businesses. For example, it can help establish:
- clear lines of authority and reporting within the business
- a clearer understanding of employee roles and responsibilities
- accountability for actions or decisions at different management levels
- clear career paths and development prospects which can motivate employees
- opportunities for employees to specialise and develop expertise in their field
- close supervision of employees through a narrow span of managerial control
- a culture of loyalty towards teams, departments and organisation as a whole
What are the disadvantages of a hierarchical organisational structure?
Workplace hierarchies are not always effective. Common disadvantages of hierarchical structures include:
- complicated chains of command which can slow down decision-making
- inconsistencies in management at different levels which can impede work
- delays in communicating vertically through the levels and horizontally between teams
- less flexibility to adapt and react to environmental and market pressures
- disconnect of employees from top-level management
- a strain on the employee-manager relationship due to lack of autonomy
- difficulties collaborating outside of the team 'silo' or dealing with team rivalry
- considerable amount of corporate overhead to support the many management layers
Generally, tall organisations are very complex. Strategies should be in place to deal with the challenges that are likely to occur under this structure. This could include creating a decentralised organisational structure - one in which senior management assigns the authority for limited decision-making to lower levels in the organisation.
For some businesses, a tall organisational structure will not be appropriate at all. Find out more about the flat organisational structure.
If you decide to change your organisational structure, make sure that you manage the process correctly. See best practices in change management.
FAQs
A hierarchical structure is the chain of command within a company that begins with senior management and executives and extends to general employees. This organization of authority ensures management levels understand their relationships with each other and helps companies make efficient decisions.
What company has a hierarchical organizational structure? ›
Amazon has over a million employees and operations in various business areas across many regions. To manage its diverse and rapidly expanding market reach, Amazon follows a hierarchical structure that enables extensive top-down control over global e-commerce operations.
What is the hierarchical structure of a business company? ›
Often, the number of managers in each level gives the organisation the resemblance of a pyramid. This structure gets wider as you move down - usually with one chief executive at the top, followed by senior management, middle managers and finally workers.
Why does the NHS use a hierarchical structure? ›
The concept of hierarchy and bureaucracy fits well with a public sector such as the NHS because there is a requirement for uniformity, equity and accountability. It provides a mechanism for the public to assess value for money from the NHS.
What are the disadvantages of a hierarchical structure? ›
Disadvantages of a Corporate Hierarchy
- Slow Communication & Decision Making. Inherent in the traditional corporate hierarchy is a need for everything to be approved and OK'd at every level as it passes up and down the chain. ...
- Reduced Autonomy. ...
- Inhibited Collaboration. ...
- Less Innovation. ...
- Concentrated Power.
Amazon organizational structure can be classified as hierarchical. Senior management team include three CEOs and three senior vice presidents responsible for various vital aspects of the business reporting directly to CEO Andy Jassy.
Does Apple use hierarchical structure? ›
Apple's organizational structure exhibits a strong emphasis on control and efficiency through its hierarchical approach. The management, with a considerable number of employees under its purview, effectively fulfills its responsibilities while maintaining tight control over the entire process.
Is Coca-Cola a hierarchy structure? ›
The Coca-Cola Company is controlled through a vertical top-down hierarchy, with decision-making authority residing with the company's upper management and flowing down the organizational hierarchy.
Is McDonald's a hierarchical structure? ›
1. Global hierarchy. McDonald's has an overarching global hierarchy for all of its operations which fall under the umbrella of the McDonald's Corporation. This feature of the divisional organizational structure emphasizes corporate control in the context of managerial control.
What is the hierarchical system of a company? ›
A corporate hierarchy may also be referred to as the chain of command within a business because it outlines where decision-makers reside. It also defines who must adhere to those orders and who may supersede and make changes to the plans of their subordinates.
Here are some examples of hierarchy culture in today's workplace. Healthcare: While there are many different types of healthcare models, they all tend to have a hierarchy culture. In healthcare, power starts at the top with a board of directors and continues down to president, CEO, and other management levels.
How to find company hierarchy? ›
Some search methods include: 1) a basic search on the company name, 2) an advanced "corporate information" search on the name of a subsidiary, or 3) an advanced "textual" search on a company name in "business history."
How is NHS organised in the UK? ›
The NHS in England is not one single organisation. It is made up of hundreds of different organisations of differing sizes, at central, national, regional, and local levels with different roles and responsibilities. The NHS is said to be the largest employer in Europe.
What is the hierarchical structure of Tesco? ›
Tesco's organizational structure is tall (hierarchical). It means that there are many leaders and layers of management. Here, managers have a narrow span of control and there is typically a long chain of command. The firm's organizational structure has three levels of management: top, mediate and base.
What is the difference between HSC and NHS? ›
In England, Scotland and Wales, the National Health Service (NHS) provides health care services while local councils provide social care services. In Northern Ireland these services are combined under what is known as Health and Social Care (HSC). Like the NHS, the service is free at the point of delivery.
What is the difference between hierarchical and flat structure? ›
Hierarchical organizations are more top-down, with decisions made at the top and flowing down to lower levels. Flat organizations, on the other hand, are more decentralized, with decision-making power distributed throughout the organization. Another difference is communication and collaboration.
What does hierarchical mean? ›
arranged according to people's or things' level of importance, or relating to such a system: The military has a hierarchical rank structure. It's a very hierarchical organization in which everyone's status is clearly defined. See.
What is a hierarchical system? ›
A hierarchical system or organization is one in which people have different ranks or positions, depending on how important they are.
What is the meaning of hierarchical structure in data structure? ›
A hierarchical data structure is a way of organizing data in a tree-like structure, where each element in the structure has one parent node and zero or more child nodes. In a hierarchical data structure, the top-level element is known as the root node, which has child nodes that are connected to it.
