Hierarchies of Corporate Structure

With the ever changing corporate horizon, it has become even more difficult to understand what people do and where they are placed in a corporate structure. From CEO to BDE…. everyone has a role to play and each one has a corporate responsibility to fulfill.

However, arranging the employees, including the CEOs and GE in the form of a Corporate Hierarchy Structure, established to fulfill thepurpose and give shape to organizational activities, is highly favored by all sorts of organizations today.

Arranging A Corporate Structure

Flexibility and Structure both have to be kept in mind when organizing a Corporate. Hierarchies can be of different types, some very rigid and some very flexible. Although a well tightened or autocratic hierarchical corporate structure can be easy to manage and govern, it may become a problem when aninternal or external storm arises.

Why we do stress on flexibility?

Imagine a tree…consider it as your hierarchy of corporate structure. The root is the company and the bark is the top level management – the CEOs, COOs, Presidents, and VPs etc. From the bark, the branches come out and more and more branches emerge from the above level of branches. The level of branches represents different departments and associated heads and subordinates.

The entire tree is an interlinked structure where every level of employee is directly connected with its adjacent levels or branches; yet is indirectly connected to the organizational root through links.

When the winds start to blow…

Now when winds of change start to blow, it is essential for the tree to sway for the storm to pass by, rather than stay rigid and hurt its branches and newly emerged stems. The same applies to corporate culture. Although organizational structure needs to be organized and the business should be run in a managed and systematic way, an organizationalso needs to be flexible as it is totally dependent on the external environment or factors on which it has no control.

Therefore, Hierarchy of a Corporate Structure should intentionally be kept a little loose to accommodate changes taking place in both internal and external resources.

Different Hierarchies of Corporate Structure

Before the20th century, most of the companies were small and run by families and owned by families. Today the scenario has changed and what we see most are large international conglomerates that trade globally or have many trade exchanges.

On this note, we have explored 5 types of corporate structures today’s organizations can consider embracing. The concept is adapted from ‘The Future of Work: Attract New Talent, Build Better Leaders, and Create a Competitive Organization’ by Jacob Morgan.

Hierarchies of Corporate Structure

1. Traditional Hierarchy (Soon to be Extinct?)

The hierarchy looks like a pyramid where the flow of communication is top down and every level has a commanding authority, except for one, the CEO. This type of hierarchy was first adopted by the military to administer a stringent chain of command. Although it is perfect for linear work where skill is limited and brain power is not required, it does not suit organizations that experience a fierce talent pool.

There are many challenges in the traditional hierarchy including;

  • Communication is top down – innovation and collaboration in the bottom level do not exist.
  • It is very bureaucratic in nature and very sluggish.
  • Competitors can easily take over such organizations and new incumbents.
  • Employees are not one of the focal points.
  • Talent exploration is limited.

One of the greatest strengths of this hierarchy is it is reliable to maintain which was a great advantage, probably a decade ago. But not anymore… in fact, organizations are embracing different approaches today and are fervently trying to get rid of this contagious traditional corporate hierarchy.

2. Flatter Hierarchy (Flatter than Flat; it’s practical and scalable)

A flatter structure opens up doors for communication and collaboration. Unlike traditional hierarchy where the communication is typically one way and where the power and information rest at the top level, a flatter hierarchy has fewer levels and points communication arrow both ways.

The flatter hierarchy is most suitable for larger corporates as it is practical, scalable and easy to deploy. Large organizations where feedback, innovation and talent pool is utmost priority, a multiple communication line improves the rate of success rapidly.

However, the traditional hierarchy is not completely eliminated in the flatter option. To an extent, some form of hierarchy still exists in this approach.

But this hierarchy will only exist when certain things are taken under consideration such as

  • Robust set of technologies that ensure employees are collaborated and have access to any information, any time of the hour, through any device.
  • Where employees are given adequate freedom to explore, satisfactory incentives and appreciation and where employees are not treated as machines that are needed, but people that are wanted.
  • Where managers are not administrators but leaders who guide and influence; where managers are the support system to the employees and not vice versa.
  • Where there is theflexible working environment, exploration of creativity and mutual trust among the employees.

Few companies, like CISCO, Whirlpool and Pandora have happily implemented this approach where people are valued and teams are dedicated.

3. Complete Flat Structure (Be your own boss; not suitable for large organizations)

Flat companies are flat – just like the name suggests. No job titles, no CEOs or managers or executives. Everyone is seen and treated as equal and every one does each other’s work. Unlike other corporate structures, Flats are self-managed organizations and often termed so.

  • One of the best examples of a thriving Flat company is Valve, the enormous gaming company that has created Half-Life, Counter Strike and many other games. At Valve, there is no job title and nobody tells the other what to work on. Everyone has access to all projects and each one can choose projects as he sees fit.

Although it is said to have lots of advantages, it is not scalable or practical for larger organizations with over 100 employees. Informal hierarchy is often formed here. People who have been working in the company for years are termed as seniors and often have more decision making powers.

The lack of a hierarchy may frequently pose a hindrance in accountability and reliability. And this often leads to group development where each prefers to stay by themselves, resulting in communication and productive issues.

Small and medium sized companies can operate smoothly in flat hierarchy corporate structure.

Because imagine a large organization with more than 60,000 employees across the world decides to go flat.  Everyone would want to do their own thing, ensuing in thehuge capital and human resource loss and haywires everywhere.

Therefore, a Flatter Corporate Structure is better than this type of hierarchy.

4. Flatarchies (Dynamic in Nature; Combination of Flat and Hierarchy)

Flatarchies is the combination of both Flat and Hierarchical corporate structure where the companies are a little bit of both. They can be hierarchical and implement ad-hoc teams with flat structures or they can be flat structures organizations and implement impromptu teams that are more structured and firm.

Such organizations tend to be very dynamic in nature. Most innovative companies operate on Flatarchies. Although they work on existing structure, the company allows employees to move around freely, suggest new ideas and run new teams by themselves.

This type of structure can operate within any company, large or small. However, this type should be considered as a temporary structure only (example: Development of new project or product line branding etc.)

This is one of the trending corporate hierarchy structures being adopted by many organizations around the world, especially when they invest time and money in an innovative program that is beyond their usual R&D and products and services.

When you focus on innovation and new product, this model could be quite powerful with strong competitive advantage and faster growth rate.

5. Holocratic Organizations (Decentralised and Distributed Authority)

Holocracy is mainly found in media based organizations where the basic concept is distributed decision making power and equal opportunity to everyone to work on something they are best at. Although there is a fine line of hierarchy in this approach, it is not found in human resources but found in departments instead. Authorities are distributed to teams and decisions are made locally.

In Holocratic Corporate Structure, information is open, communication is undisturbed and issues are processed and sorted during special meetings, directly with the top management. Here, everyone, including CEO is bound by the same rules and the entire organization is updated via small iterations.

However, Holocracyagain cannot coexist with larger organizations with thousands of employees around the world. Although organizations can apply some of the concepts of holocracy in their current hierarchy, this model typically suits medium and small organizations