The prime objective of business executive hierarchy is to make employees realize as to where they stand in the organization & what their responsibilities are. For example, since Board of directors comes at the top most position in the business executive hierarchy, they must be aware of their responsibilities and accountabilities. If this is the case, only then the Executive level officers like CEO, COO, CFO etc., will be able to understand their role clearly. This happens because in hierarchies every level is dependent and closely linked to its adjacent levels on both sides of the hierarchy.
The hierarchical arrangement of the organizations also helps in developing a communication system through which employees can take support from the higher level employees and can address their problems. Such communication system is called as the formal communications system and it establishes the flow of communication in upward, downward or lateral direction. The organizations which follow such systems have certain protocols for communication which enforce professionalism in the communications across the organization. This also helps in reducing the unnecessary communications which in turn contributes towards the effectiveness of the work.
The liberalization of the economy and its movement towards globalization has brought in new challenges for business in terms of business strategies, quality concerns, management systems, technology and cost effectiveness. This has also given rise to formal structures in terms of business executive hierarchy. With proper hierarchies existing within the organizations, it becomes easier to implement process hierarchies by distributing the sub processes and sub sub processes to the employees at the similar levels, as illustrated by the order of business process hierarchies. The business process structure can be easily synchronized with the already existing business executive hierarchy, and this way the tasks, duties, responsibility gets easily divided. It even helps in supervision of activities.
To address all these issues and to develop a result & growth oriented positive environment, most of the organizations prefer to adopt hierarchical structures. These days the commitment building, competence building and culture buildings have become quite important concerns of corporations which can be achieved through a good business executive hierarchy.
In the organizations, this results in improvement of coordination, role understanding, responsibility division and motivation among the employees. Hierarchies also help in creating departments and then forming teams from the departments which streamline the tasks under individual departments effectively and efficiently, and also creates dynamic performance oriented environment.