Hierarchical Structure: Advantages and Disadvantages

Updated March 10, 2023

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A team meets in an office meeting room. A writing board is seen to the left of them, and the team sits at a large table in front of a wall of windows.

While businesses can organize their authority levels in various ways, one of the most common structures is a hierarchy. A hierarchical structure refers to the delegation of authority using a pyramid model, with the most authoritative professionals at the top and general employees at the bottom. Understanding this type of structure can help a company determine whether implementing a hierarchy would help it achieve its goals.

In this article, we define a hierarchical structure and discuss its advantages and disadvantages for delegating authority within a company.

What is hierarchical structure?

A hierarchical structure is the chain of command within a company that begins with senior management and executives and extends to general employees. This organization of authority ensures management levels understand their relationships with each other and helps companies make efficient decisions. On paper, you can represent a hierarchical structure as a pyramid. The management levels near the top hold the most authority but tend to have fewer employees. The general employees near the bottom have less authority but tend to have greater numbers.

For example, imagine a company has 50 employees. General employees are in teams and report to their supervisors who report to the chief executive officer. The chief executive holds the most authority and makes decisions that the supervisors are responsible for implementing and sharing with their team members.

Related: How To Become a Manager in 6 Steps (With Tips for Success)

Advantages of hierarchical structure

Benefits an organization may reap from implementing a hierarchical structure include:

1. Clearly defined career path and promotion path

When a business has a hierarchical structure, its employees can more easily ascertain the various chain of command. Having clear advancement opportunities can help attract and retain talented professionals. Promotions also help employees experience increased morale, motivation and productivity.

Related: What Is a Career Trajectory? (And How To Create One)

2. Department loyalty

Companies with hierarchical structures divide employees into teams and departments. When employees are part of a department, they tend to grow a sense of team spirit and loyalty. These sentiments can help retain employees and encourage team members to work together to achieve the organization's goals.

Related: Talent Relationship Management: Definition, Importance and Benefits

3. Efficient leadership and communication

Having a hierarchical structure helps employees understand the various levels of leadership. Employees tend to know who to talk to when providing progress updates or reporting issues. Management also benefits, as they can use their authority to effectively delegate tasks and ensure operational efficiency. Overall, hierarchical structures can lead to better communication and collaboration across teams.

Related: What Is a Chain of Command? (Definition and Explanation)

4. Delegation of authority

Instead of having one entity hold all the authority, a hierarchical structure delegates power to different employees. This distribution benefits the chief executive officer, as they can focus on making decisions that affect the entire organization. Supervisors at the department level have the necessary authority to manage the daily performance of general employees.

Related: Manager vs. Supervisor: What's the Difference?

5. Encourages specialization

The various departments within a hierarchical structure allow employees to become specialized in a particular field. Specialization ensures an organization can offer high-quality products and services that stand out from competitors. For example, a newspaper company could separate employees into roles like news reporters, sports reporters and designers. The news reporters can focus on generating breaking news, while the sports reporters specialize in sportswriting. The designers can hone their artistic abilities to create attractive news materials.

Related: How To Ask for a Promotion

Disadvantages of hierarchical structure

Although implementing a hierarchical structure has many benefits, this type of organizational technique can also have drawbacks. Here are some potential disadvantages to consider:

1. It can be costly

Because a hierarchical structure requires multiple departments, companies employing this organizational technique employ several managers and supervisors. Employees in these roles have higher education levels and experience, requiring higher salaries. Companies can prevent these higher salaries from affecting their profits by managing their budgets and hiring only the management staff necessary for efficient operations.

Related: What Is a Salary Range and How Do Employers Use It?

2. Slower decision-making

Hierarchical companies tend to involve their managers and supervisors in decision-making. While this amount of expertise can seem beneficial, it can also result in slower actions. This effect is especially prevalent when a fast decision is necessary to respond to urgent business decisions. For instance, a company might involve several supervisors in the hiring process. Differing opinions might lead to slow hiring decisions that lead qualified candidates to apply elsewhere. A hierarchical organization can prevent this issue by delegating decisions to specific management teams and limiting the amount of input across the organization.

Related: 12 Ways To Make Better Decisions

3. Poor communication

Dividing employees into different departments and levels can lead to a lack of communication. Professionals might deem it unnecessary to communicate with other teams or lack the necessary resources. An organization with a hierarchical structure might prevent this issue by hosting regular cross-department meetings. Prioritizing communication across the organization promotes effective teamwork and ensures all departments have readily available opportunities to collaborate.

Related: What Are Organizational Silos? Pros and Cons and How To Break Them Down

4. Department rivalry

The division into teams might also cause department rivalry within a hierarchical organization. Employees might feel like competing with their peers instead of working together toward the company's objectives. These various departments could also make decisions that only benefit themselves rather than the company. Fortunately, an emphasis on unity can help curb the possibility of department rivalry. The organization can ensure every department has the resources it needs and can create consistent policies across departments, which allows employees make effortless transitions throughout their careers.

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