A hierarchical organization or hierarchical organisation (see spelling differences) is an organizational structure where every entity in the organization, except one, is subordinate to a single other entity. This arrangement is a form of hierarchy. In an organization, this hierarchy usually consists of a singular/group of power at the top with subsequent levels of power beneath them. This is the dominant mode of organization among large organizations; most corporations, governments, criminal enterprises, and organized religions are hierarchical organizations with different levels of management power or authority. For example, the broad, top-level overview of the hierarchy of the Catholic Church consists of the Pope, then the Cardinals, then the Archbishops, and so on. Another example is the hierarchy between the four castes in the Hindu caste system, which arises from the religious belief "that each is derived from a different part of the creator God’s (Brahma) body, descending from the head downwards."
Members of hierarchical organizational structures mainly communicate with their immediate superior and their immediate subordinates. Structuring organizations in this way is useful, partly because it reduces the communication overhead costs by limiting information flows.
Although the image of organizational hierarchy as a pyramid is widely used, strictly speaking such a pyramid (or organizational chart as its representation) draws on two mechanisms: hierarchy and division of labour. As such, a hierarchy can, for example, also entail a boss with a single employee. When such a simple hierarchy grows by subordinates specialising (e.g. in production, sales, and accounting) and subsequently also establishing and supervising their own (e.g. production, sales, accounting) departments, the typical pyramid arises. This specialisation process is called division of labour.
Common social manifestations
Governmental organizations and most companies feature similar hierarchical structures.
In business, the business owner traditionally occupies the pinnacle of the organization. Most modern large companies lack a single dominant shareholder and for most purposes delegate the collective power of the business owners to a board of directors, which in turn delegates the day-to-day running of the company to a managing director or CEO. Again, although the shareholders of the company nominally rank at the top of the hierarchy, in reality many companies are run at least in part as personal fiefdoms by their management. Corporate governance rules attempt to mitigate this tendency.
Origins and development of social hierarchical organization
Smaller and more informal social units – families, bands, tribes, special interest groups – which may form spontaneously, have little need for complex hierarchies – or indeed for any hierarchies. They may rely on self-organizing tendencies.
A conventional view ascribes the growth of hierarchical social habits and structures to increased complexity;
the religious syncretism
and issues of tax-gathering
in expanding empires played a role here.
However, others have observed that simple forms of hierarchical leadership naturally emerge from interactions in both human and non-human primate communities. For instance, this occurs when a few individuals obtain more status in their tribe, (extended) family or clan, or when competences and resources are unequally distributed across individuals.
Studies
The organizational development theorist Elliott Jaques identified a special role for hierarchy in his concept of requisite organization.
The Peter Principle is a term coined by Laurence J. Peter in which the selection of a candidate for a position in an hierarchical organization is based on the candidate's performance in their current role, rather than on abilities relevant to the intended role. Thus, employees only stop being promoted once they can no longer perform effectively, and managers in an hierarchical organization "rise to the level of their incompetence."
Hierarchiology is another term coined by Laurence J. Peter, described in his humorous book of the same name, to refer to the study of hierarchical organizations and the behavior of their members.
David Andrews' book The IRG Solution: Hierarchical Incompetence and how to Overcome it argued that hierarchies were inherently incompetent, and were only able to function due to large amounts of informal lateral communication fostered by private informal networks.
Types of hierarchy
Hierarchical organization is a phenomenon with many faces. To understand and map this diversity, various typologies have been developed. Formal versus informal hierarchy is a well-known typology, but one can also
distinguish four hierarchy types.
Two types of hierarchy: Formal and informal
A well-known distinction is between formal and informal hierarchy in organizational settings. According to Max Weber, the formal hierarchy is the vertical sequence of official positions within one explicit organizational structure, whereby each position or office is under the control and supervision of a higher one. The formal hierarchy can thus be defined as "an official system of unequal person-independent roles and positions which are linked via lines of top-down command-and-control." By contrast, an informal hierarchy can be defined as person-dependent social relationships of dominance and subordination, emerging from social interaction and becoming persistent over time through repeated social processes. The first two types can be equated with the formal and informal hierarchy, as previously defined. Accordingly, this typology extends the formal and informal hierarchy with two other types.
Hierarchy as ladder of formal authority
This type of hierarchy is defined as a sequence of levels of formal authority, that is, the authority to make decisions. It involves differences in status, other than those arising from formal authority. Status is one's social standing or professional position, relative to those of others. In anthropology and sociology, this notion of status is also known as achieved status, the social position that is earned instead of being ascribed. The underlying mechanism is social stratification, which draws on shared cultural beliefs (e.g. regarding expertise and seniority as drivers of status) that can make status differences between people appear natural and fair. A ladder of achieved status is socially constructed, which makes it fundamentally different from the ladder of authority that (largely) arises from an underlying legal structure. For example, a small firm composed of only three equivalent partners can initially operate without any hierarchy; but substantial growth in terms of people and their tasks will create the need for coordination and related managerial activities; this implies, for example, that one of the partners starts doing these coordination activities. Another example involves organizations adopting holacracy or sociocracy, with people at all levels self-organizing their responsibilities; that is, they exercise "real" rather than formal authority. In this respect, responsibility is an expression of self-restraint and intrinsic obligation. Examples of self-organized ladders of responsibility have also been observed in (the early stages of) worker cooperatives, like Mondragon, in which hierarchy is created in a bottom-up manner.
Hierarchy as ladder of ideology
In a hierarchy driven by ideology, people establish themselves as legitimate leaders by invoking some (e.g., religious, spiritual or political) idea to justify the hierarchical relationship between higher and lower levels. Ideological hierarchies have a long history, for example in the administrative hierarchies headed by pharaohs in ancient Egypt or those headed by kings in medieval Europe. The main legitimacy of any pharaoh or king arose from the strong belief in the idea that the pharaoh/king acts as the intermediary between the gods and the people, and thus deputizes for the gods. An example is the ideology of "maximizing shareholder value", which is widely used in publicly traded companies.
Matrix organizations became a trend (or management fad) in the second half of the 20th century.
Amidst constant innovation in information and communication technologies, hierarchical authority structures are giving way to greater decision-making latitude for individuals and more flexible definitions of job activities; and this new style of work presents a challenge to existing organizational forms, with some research studies contrasting traditional organizational forms with groups that operate as online communities that are characterized by personal motivation and the satisfaction of making one's own decisions.
When all levels of a hierarchical organization have access to information and communication via digital means, power structures may align more as a wirearchy, enabling the flow of power and authority to be based not on hierarchical levels, but on information, trust, credibility, and a focus on results.