Hierarchical organisational structure

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 common in larger businesses and organisations. It has several levels of authority, linked by a clear chain of command.

Decision-making is usually formal and moves from the top down. This creates a tall structure, with clear responsibilities and control at each management level. As the organisation grows, more levels are often added.

This structure often looks like a pyramid, widening as you move down. At the top is the chief executive, followed by senior managers, middle managers and workers. Each employee has a clearly defined role and place in the organisation.

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

Tall organisations can be complex. To deal with this, businesses may need strategies such as a decentralised organisational structure, where senior managers give some decision-making power to lower levels. 

A tall structure will not suit every business. Some may find that a flat organisational structure works better.

If you decide to change your organisational structure, it is important to manage the process well. See best practices in change management.