What is corporate hierarchy?

Up until the twentieth century, companies were usually family affairs

First published on Thursday, Jun 04, 2020

Last updated on Thursday, Jun 27, 2024

Corporate hierarchy reflected family responsibility, and in some businesses that’s still the case.

However, most organisations today are much more complex. To make sure that all business functions are carried out, and that each staff member understands their role, a degree of order and hierarchy becomes necessary.

Levels of hierarchy

There are four main levels of hierarchy commonly found within businesses:

Directors such as the Chairman, Executive Director and non-Executive Director. They lead strategic business activities and have ultimate financial responsibility towards all stakeholders.

Corporate Officers can include the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Information Officer (CIO) and others. They have specific areas of expertise and responsibility.

Managers are responsible for day-to-day running of specific areas of the business. Some organisations have more managerial levels than others.

Employees are the largest group, carrying out essential functions as directed by managers.

Larger organisations are more likely to have all of these levels, and to have more people at each. However, smaller companies will probably still use a structure that reflects the one above, with ‘big picture’ decisions sitting with the highest ranking staff.

Why is structure important?

A carefully designed structure can help a company work more effectively, because each of its staff has a clear line of responsibility. Employees can focus on the task at hand rather than stock market performance. Directors are free to concentrate on stakeholders’ interests over individual customers.

Communicating about your hierarchy

To work effectively, your company’s structure should be clear and understood by all employees. Organisational charts are commonly used for this purpose. They visually explain the levels of responsibility within the company, with labels giving the name and job title of each employee.

Your organisational chart should be easily accessible by all staff, and updated regularly (or whenever somebody leaves or joins the company).

Changes in hierarchy today

Nevertheless, hierarchy might be considered somewhat old-fashioned. Many companies today favour a more flexible or ‘flat’ approach. To break with tradition, they might:

  • foster leadership capability at lower levels
  • invite input into the company’s strategy from employee and manager level
  • identify influential staff and use them to bring about ‘change from within’

This is particularly relevant as companies become increasingly digital and ‘social.’ For example, employees at a lower level are now able to communicate to a global audience at the stroke of a key. This gives them unprecedented power to influence opinion — power that would normally be reserved for the upper tiers of a company.

Keeping levels in touch

Even where traditional hierarchy exists, it can be beneficial to bring together various levels of staff for discussion and brainstorming.

Employees ‘on the ground’ usually have valuable insight into customer behaviour and problems with processes. Staff at Chief or Director level might help resolve conflict by explaining in person why changes have been made, or praise staff for their help with recent successes.

As with all effective corporate structures, it’s about allowing staff at each level to play to their strengths.

Alan Price

CEO, BrightHR and Group Chief Operating Officer

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