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Having a strong organizational structure is paramount to the success of any business. Corporations need a structured hierarchy to establish internal control. A company's hierarchy allows employees on different levels to identify the chain of command and serves as a reference point for decision making. A company without a hierarchy cannot effectively hold its executives, managers and employees accountable.
In the most basic sense, a well-run organization functions like the human body. The head instructs the various body parts on how to move and react in unison to perform the simplest of tasks. In a company, this hierarchical decision making flows from the top (the head of the organization) down to employees who perform various tasks. Management is responsible for making the decisions that allow the company to function efficiently to achieve company objectives. In large corporations, there are three levels of management: top level, middle level and first level.
Generally, top-level management, often referred to as senior management or executives, sets the goals for the entire organization, directing the company on how to achieve its objectives. Top-level managers, or C-level managers, include the chief executive officer (CEO), chief financial officer (CFO) and chief operating officer (COO). Middle-level managers fall below top managers and often include titles such as general manager, regional and divisional managers. Their jobs are to supervise employees grouped together to form departments, units or divisions. Depending on the size of the company, the number of supervised employees can range from a few to hundreds. First-level managers are responsible for the day-to-day supervision of line workers -- employees who produce the company's products or offer its services. Typical titles for first-level managers include office manager, supervisor and crew leader.
Depending on the size of the organization and its complexity, management might opt for a flat (horizontal) or a vertical structure. A flat organization is one where there are fewer layers of management, making communication to the top of the organization quicker. A small company or one operating in a very competitive market could opt for such a structure. In contrast, a vertical organization has multiple layers, including top-, middle- and first-level managers, and the decision-making process is very formal and follows a specific chain of command. Decision making within a vertical organization follows a regimented process.
At its core, the issue of hierarchy within an organization is about accountability. Without an established structure, managers of all levels and employees are unable to perform their roles efficiently. In addition, having a hierarchy establishes protocol that informs everyone within the organization from the top down on how to address issues that affect the company. For instance, having a hierarchy holds a floor manager accountable for the performance of the employees under his supervision. In turn, the floor manager must report to a higher-level authority who assesses his work performance based on the results produced by line employees.