The Strengths & Weaknesses of Hierarchical Organizations

by Denise Sullivan

A hierarchical organizational structure uses layers of management to designate authority. The layers are broken into smaller teams, usually between five and 10 employees. Each team reports directly to a manager on a layer above it. As your company grows, you may find that the hierarchical structure no longer suits your needs. The larger the company, the more distance there is between its customers and the CEO.

Short-Term Decision Making

Hierarchical organizations can efficiently manage small numbers of employees in local areas. Communication does not usually break down until more than a few levels of management get involved in a decision. On a small scale, you should see improved communication and loyalty within each team. Keeping the same team together for a long period of time helps all members become experts in their specialized area. When performing at its best, the company's operations will seem as if they are on autopilot because the key processes are standardized.

Clear Definitions

Each employee's job description and the organization's hierarchical structure is clearly defined. Most companies prepare organizational charts showing the levels and team members so there is no confusion. Having a specific path for promotions improves employee motivation and gives them specific goals to achieve. Conflict management within the company is based on the organizational structure and not personality differences.

Lack of Flexibility

The hierarchical structure works best in established companies with standardized daily tasks. The main disadvantage to this structure is its lack of flexibility. Hierarchical organizations are not well-suited for markets where the company must respond to quickly changing conditions. Because communication and approvals must travel through multiple levels, company-wide changes are slow. As the company grows, middle management levels can become bloated and consume a disproportional amount of the available resources.

Authority and Responsibility

Individual employees are not granted much authority in hierarchical organizations. An employee may be given responsibilities that require more authority than he is allowed to exert, making it impossible for him to successfully perform his job duties. Frustrated employees will leave if they have the desired skills. Your company will eventually be left with the poorly performing employees who have no other options. This can also cause customer service problems, because your salespeople do not have the authority to resolve issues at the point of contact.

Office Politics

Each layer of the organization is split into several departments, which can cause inter-office rivalries and competition for budgets, manpower and other company resources. Decisions made within a department may only benefit that department instead of the company as a whole. If interdependent departments refuse to work together, it can bring your entire business to a halt. For example, the accounting department may delay processing expense reimbursements for the sales department, making it difficult for them to meet prospective customers out in the field.

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