Understanding Company Hierarchy And Why It Matters


Most of us end up working at least part of our career with or within an organization’s hierarchy. Yet very few of us take the time to understand why a company even has one, what is a good hierarchy, and what alternatives are there. 

Understanding this hierarchy can prove vital to your career advancement. Within a company, it will help you plan your professional goals. Outside of a company, it will help you tell at a glance what organization has healthy practices that might be a good choice for employment, and which ones you should stay clear of.

If this seems interesting to you, then read further as we’ll be breaking down what a hierarchy is, the key indicators of a good one, and tips and tricks on navigating it.

The Company Hierarchy

The Company Hierarchy

So what is a company hierarchy? Well, first we need to understand what a hierarchy is: it’s a form or organization that allows a group of people to pool their resources for a given task. It’s also one of the best ones historically as it allowed us to do everything from hunting mammoths many times our size to building the Seven Wonders of the Ancient World.

Mammoth hunting will probably be the last thing on your mind when joining a company and looking at its hierarchy. But a good company structure should be easy to understand and let everyone know where they are in it. This is made increasingly easy nowadays with tools such as an online diagram creator, but a good understanding of what goes into it is still needed.

We can think of a company hierarchy as a bureaucracy, subdivided into multiple levels. Every member of it is a little cogwheel contributing to the machine: from the entry-level workers to their supervisors who assign them tasks, to the middle managers who head departments all the way to the CEO. The more we go up, the fewer people are involved until we reach the peak where only one person calls the shots.

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This is the typical pyramidal organization, which is needed in order to have a single direction to focus on. As the saying goes with too many chefs in the kitchen, so too if we have too many leaders calling the shots in different directions: we won’t go anywhere.

This is the core of hierarchy: one leader, many followers subdivided. It’s simple, but it works and while there are modern more democratic alternatives, the overall output so far isn’t competitive.

That does not mean a hierarchy is perfect in every way. We’ll be breaking down below what a good one is.

How Does It Work?

How Does It Work?


Many company hierarchies seem confusing, at the first glance but all of them have the same core mechanics. Any hierarchy can usually be divided into three starting from the bottom: the employees, the middle management, and the upper management.

The Employees make up the most numerous group. A good organization will have very clear descriptions of what their tasks would need to be, with a supervisor on top who both coordinates and is responsible for them. They usually do not have much leeway in terms of how the work gets performed and is filled with entry-level positions.

The Middle Management is usually made up of the department heads and coordinates the team leaders and supervisors of each specialized group. While the supervisors are interested in just getting work done, the managers have to also think of costs and the way in which the work is getting done.

Upper Management is usually made up of the ones in charge of whole parts of the company. They may be directors of operations or VPs, but one thing they all share is that they coordinate the below to get results while keeping an eye on the number of resources spent. At the very top are usually the executives who are a group of their own and need to also worry about the company image.

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The Company Pulse

The Company Pulse

So now that we know what a hierarchy is we can ask: what is a good hierarchy? It obviously varies from the type of operations that the company has to perform in its chosen field, but generally speaking, all good companies have a few things that work well.

  • Delegation and Specialization: the overall process is broken down into smaller chunks to be performed by each team. The subdivisions are well made to make sure the different groups do not butt heads as they all focus on something else.
  • Communication and Accountability: there’s a clear line of communication between the teams as well as between the different levels. When something goes wrong, the right person is held appropriately accountable so the system self-regulates.

This all might seem quite simple, but there is a lot that goes into everything. A good company is like a well-oiled machine: you don’t know where one part of the process starts and ends, it all has a flow. 

A bad company, however, will instantly let everyone know that something is bad, but what exactly will be a challenge to find. Everyone will know, however, from the employees to the managers. There is no hiding it.

The Bedrock

The Bedrock

Short-sighted organizations might focus on immediate returns instead of long-term investment into the company itself to perform better. This will lead to fewer resources for project managers and team leads to spend on their teams to ensure good day-to-day operations which in turn will lead to a breakdown in communication, employee development, and teamwork.

Bad communication might will turn into bad operations as the different teams will compete with each other for resources under a bad manager. The team leads themselves will not have the time to speak to each employee in one-to-ones, to process feedback further and the top of the pyramid will not hear of important issues affecting the bottom of the pyramid to make the needed changes.

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Lack of investment in employees will also affect the quality of work performed, the discipline, and teamwork of each department. People will see they are not valued and walk away at the first opportunity. In response to these re-occurring issues, many companies have come up with different strategies. 

To enforce communication, upper management might require every team leader to have a few individual meetings with employees every month or week, to ask them how they think things can improve and then process the feedback further. Clear communication lines can be topics in each new-hires training, with special mention of what to do when one chain in the link is broken.

The constant development of existing employees and real training that isn’t just on paper is a must for any healthy organization. As people will come and go over the years, the structure needs to be able to offer a clear path for people to fulfill the needed roles by promoting from within so the form of the structure isn’t broken down. Lackluster training practices will lead to bad specialists and middle management that won’t be able to fix flaws in the system.

Final Thoughts

Being able to navigate hierarchies is a must for anyone wanting to sail the seas of the corporate world. From the interview stage, you should try to ascertain the level of investment the company does in its self regulating processes: the training and development. Once in a company, keep an eye out for the bad practices to give your feedback to affect change.

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