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Unlock This CourseThink of your school - there's a head teacher at the top, deputy heads below them, then heads of department, teachers and finally students. This pyramid-like structure is called a hierarchy and businesses use exactly the same system to organise their employees.
A hierarchical organisation chart is like a family tree for a business. It shows who's in charge of whom, how information flows up and down and where everyone fits in the company. It's one of the most common ways businesses structure themselves, especially larger companies.
Key Definitions:
Imagine a pyramid with the CEO at the top, senior managers in the middle and front-line employees at the bottom. Each level has different responsibilities and authority. The higher up you go, the more decision-making power you have, but also more responsibility for the company's success.
Most hierarchical organisations have three main levels, each with distinct roles and responsibilities. Understanding these levels helps explain how decisions are made and work gets done in a business.
Every level in a hierarchy has a specific purpose. Let's break down what each level does and why they're important for the business to function properly.
Who: CEO, Managing Director, Board of Directors
Role: Make major strategic decisions, set company vision, represent the company to investors and media
Example: Deciding to launch in a new country or acquire another company
Who: Department heads, Regional managers, Team leaders
Role: Implement top-level decisions, manage departments, coordinate between levels
Example: A marketing manager planning how to launch a new product campaign
Who: Supervisors, Team leaders, Front-line employees
Role: Carry out day-to-day tasks, serve customers, produce goods or services
Example: Shop assistants serving customers or factory workers making products
McDonald's is a perfect example of hierarchical structure. At the top is the Global CEO, below them are Regional Presidents (Europe, Asia, Americas), then Country Managers, Area Managers, Restaurant Managers, Assistant Managers and finally Crew Members. Each level has clear responsibilities - the CEO sets global strategy, whilst crew members focus on serving customers and making food. This structure helps McDonald's maintain consistency across 40,000 restaurants worldwide.
The chain of command is like a ladder - information and orders flow up and down through each level. This system ensures everyone knows who they report to and who reports to them.
Information flows from employees to managers. This includes reports, feedback, problems and suggestions. For example, a shop assistant might report low stock levels to their supervisor, who then informs the store manager.
Instructions and decisions flow from managers to employees. This includes company policies, work assignments and performance feedback. For instance, head office might announce new opening hours that get passed down to all staff.
Span of control refers to how many people a manager directly supervises. This varies greatly depending on the type of work and management style. Getting the span of control right is crucial for effective management.
The number of people a manager supervises affects how they work and how the organisation functions. Both wide and narrow spans have their place in different situations.
What: Manager supervises many employees (8-15+)
Best for: Simple, routine tasks where employees need little supervision
Example: A factory supervisor overseeing 20 assembly line workers
Benefits: Lower management costs, faster communication, more employee independence
What: Manager supervises few employees (2-6)
Best for: Complex tasks requiring close supervision and support
Example: A research team leader managing 4 scientists
Benefits: Better supervision, more support for employees, higher quality control
Like any business structure, hierarchies have both benefits and drawbacks. Understanding these helps explain why some businesses choose hierarchical structures whilst others prefer different approaches.
Not all hierarchies look the same. Some are tall with many levels, whilst others are flat with fewer levels. Each has different implications for how the business operates.
The shape of an organisation's hierarchy affects everything from communication speed to employee motivation. Let's explore how tall and flat structures compare.
Features: Many management levels, narrow span of control, long chain of command
Example: Traditional banks with CEO, Regional Directors, Branch Managers, Assistant Managers, Supervisors, Tellers
Good for: Large, complex organisations needing tight control
Features: Few management levels, wide span of control, short chain of command
Example: Tech startups with CEO, Team Leaders, Developers
Good for: Smaller, innovative companies needing quick decisions
Tesco, one of the UK's largest retailers, traditionally had a very tall structure with many management layers. However, in recent years, they've "flattened" their structure by removing middle management positions. This change aimed to reduce costs, speed up decision-making and bring senior managers closer to customers and front-line staff. The result was faster communication and more empowered store managers, though some employees felt they lost career progression opportunities.
Today's business world is changing rapidly and traditional hierarchies face new challenges. Technology, changing employee expectations and global competition are forcing many companies to rethink their organisational structures.
Digital communication tools allow employees to communicate directly across levels, bypassing traditional chains of command. Video calls, instant messaging and collaborative platforms are making hierarchies less rigid and more flexible.
Modern workers, especially younger employees, often prefer more autonomy and involvement in decision-making. They want flatter structures where their voices can be heard and their ideas valued, not just orders to follow.
Despite challenges, hierarchical structures remain popular because they work well in certain situations. Understanding when to use hierarchies helps explain why they're still common in many industries.
Hierarchies thrive in specific business environments. Recognising these conditions helps explain why some companies maintain traditional structures whilst others adopt alternatives.
John Lewis uses a hierarchical structure but with a unique twist - it's owned by its employees (called Partners). The hierarchy includes Chairman, Executive Directors, Divisional Directors, Branch Managers and Partners. However, because everyone owns part of the business, there's more consultation and communication between levels than in typical hierarchies. This shows how traditional structures can be adapted to modern values whilst maintaining clear organisation.