Shawn Grimsley Shawn has a masters of public administration, JD, and a BA in
political science. View bio Steven Scalia Steven completed a Graduate Degree is Chartered Accountancy at Concordia University. He has performed as Teacher's Assistant and Assistant Lecturer in University. View bio Organizational charts visually represent the hierarchy of different roles within an organization. Learn the definition of hierarchy in the workplace and explore an example of an organizational chart showing the organization's hierarchy. Updated: 09/28/2021 Meet Nathan. He is the chief executive officer of a large multinational corporation. He manufactures a wide variety of chemicals for both residential and commercial applications. Nathan's company engages in business activities on five continents in over 25 countries. The company employs over 50,000 people with a budget that rivals the GDP of
some third-world countries. Needless to say, running a company of this size requires a high degree of organization and management. This is where hierarchy comes in. Hierarchy is a way to structure an organization using different levels of authority and a vertical link, or chain of command, between superior and subordinate levels of the organization. Higher levels control lower levels of the hierarchy. You can think of an organizational hierarchy as a pyramid. The highest level of
authority is at the top of the pyramid, and orders flow from this top level down to the next level where it continues to move on down until it reaches the level where the order is supposed to be carried out. Information and directions flow vertically in a hierarchical structure. Information flows up through each level until it reaches the top. After all the information has been received and assessed, a decision will be made at the top and will flow down through the levels of the hierarchy
until it reaches the level where the decision will be implemented. Also, note that the top level of the hierarchy often coordinates all the activities and communication of the various parts of the organization. Hierarchy Defined
Let's look at an example. Nathan has received a report from his research and development division that a new cleaning solvent has successfully passed all regulatory requirements and is ready to be produced and marketed to the public. Nathan sends directions to his vice president of finance to prepare a budget for financing the production and marketing of the new chemical. He directs his marketing VP to have a marketing plan developed and his VP of production to develop a production schedule based on the projected budget received from the finance VP.
Each VP will delegate part of their task to their respective department heads who may, in turn, delegate some tasks to their supervisors. Once the task has been completed, the information will flow back up through the hierarchy to Nathan where it will be assessed and further decisions will be made.
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Hierarchy Chart
Organizational Chart and Hierarchy: a Business Case
The business case below will allow you to apply your knowledge of organizational hierarchy and to demonstrate the use of establishing a hierarchy in a growing business.
You are a management consultant working independently. Your specialty is helping companies establish and implement a sound structure to optimize the decision-making process and strategic effectiveness. You receive a call from the president of a small but quickly growing tech startup. "I can really use a hand - I am so overwhelmed. In the past six months, our company raised a round of financing and increased our sales by a factor of 10. The problem is that we're all over the place and that some processes take so long to get completed."
You take some notes regarding their current processes:
- The start-up never established a corporate hierarchy because "Who has time for that?" according to the president.
- The company has two functions, sales and development; however, there are no clear functions or managers. "Everybody works on everything. I'm the president and I spend half of my time developing based on orders given to me from other programmers."
- The company has the budget to hire two managers, one for sales and one for development.
Required
Write a brief email of 100-200 words explaining why the president feels so overwhelmed and how an organizational structure can truly benefit his or her company. Once you complete it, draw a preliminary organizational chart, including the two newly hired managers that will be used by the president as a starting point for establishing a hierarchy.
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