What is the Hierarchy of a Business?

Once a business starts to grow in numbers, both in its tangible and intangible resources, specific job roles and descriptions, and a well-defined structure becomes a requirement.

Forundisturbed operations and smooth execution of organizational goals and visions, hierarchical development is needed to help businesses in clarifying decision making power and control, and directional authority.

Why Hierarchy is required in a Business?

As a company evolves from a bud to a bloom, the employees look to the managerial staffs and certain corporate rules and regulationsfor career development, planning and execution of goals and leadership control.

Thus, a hierarchical business culture is a model formed on the basis of a well-defined organizational structures and levels.

Let’s Understand First, What Exactly does a Business Hierarchy Comprise Of?

A Business Hierarchy refers to the organization structure where staffs and items are ranked according to the level of importance.

While those on the higher level are bestowed with more decision making and controlling power, those on the lower level in hierarchy take direction from the top level and work their way up by complying with the corporate laws set by the higher level management.

In most established corporates, the hierarchy of business consists of 3 levels

  • Top Level ManagementControl and direction of the overall organization.
  • Middle Managers – Execution of organizational plans in accordance with company norms. Intermediator between thetop and first level.
  • First Level ManagersRole models of employees and staffs. Control and direction of day to day activities.

The level’s structureis founded on thechain of command, employee designation, and categories and takes theform of a pyramid with the largest segment of employees stationed at the base.

As the structure goes up, the pyramid narrows to only one or two top level heads. The structure is quite important to understand the roles of various employees.

“The employees who are stationed at the base of pyramid are directed and controlled by a small group of supervisors or senior level executives who in return are administered and directed by managers or team leaders and this way, each level of staffs is directed by their immediate senior level until the highest level is reached – the CEO or board of directors.”

What is the Hierarchy of a Business?

1. Top Level Management

The CEOs, COOs, Managing Directors, Chairman, Presidents and Vice Presidents of an organization form the Top Level Management. Theyare accountable for the growth of the company and hold the maximum responsibility.

Owners are also part of the top level management in the business hierarchy. The personnel of this level are involved in creating the vision of the company, setting the long and short term goals, and hiring the senior managers.

Their decisions and actions reflect in the overall performance of the corporate.

They deal with the totality of the business system. They majorly engage themselves in scanning, navigating, and mobilizing the external and internal business environments.

They are accountable to the stakeholders of the company and general public.

The profits and losses are distributed among the top level management on the basis of their share percentage.

They should possess extraordinary decision making, leadership,and reasoning and cognitive analysis skills.

2. Middle Managers

The second level of thehierarchy of business includes the managerial designations such as assistant managers, regional managers, senior managers, deputy managers, managers etc.  They are the most important part of the company and are bestowed with huge roles and responsibilities.

Middle managers coordinate with the top level and proceed to execute organizational goals set by them.  These managers are accountable to the CEOs and Board members of the company.

They are, in fact, the backbone of the corporate as they devote the maximum time in organizational development. They are also the minds behind yearly, quarterly and monthly operational and financial objectives.

They are the foremost intermediator between thetop and first level managers and are hold accountable if any glitches occur in the lower end of the business hierarchy pyramid.

The key skills required in themiddle level of management are job knowledge, leadership, and interpersonal skills.

If a bottleneck arises in a company, most probably it is due to coordination, planning, and execution of this level of management.

These managers’ work is to manage various activities that involve the use of resources effectively and leading employees towards the right direction.

They are responsible for communicating the visions and goals framed by the top level managers to the first level or operational level managers.

3. First Level Management

The front line employees who perform the day to day activities and deal with various units of operations constitute the first level of management.

Team leaders, office managers, crew head, department head and supervisors fall into this category. They are directly accountable for the working operations and daily objectives of the organization.

They take directions from the middle managers and work directly with the employees and staffs. They talk to the employees, workers, laborers, and staffs on a daily basis, take updates, solve internal issues and are part of grievance and complaints department.

They also take part in the recruitment and hiring of staffs and executives.

The first level of hierarchy of a business is directly associated with the machineries, raw materials, production, manufacturing, and quality of product and services.

They are the minds behind resource utilization and implementation of technology, ideas, and plans. They are also termed as operational level employees.

Although they don’t have any decision-making powers, their effectiveness and work efficiency influence a great deal in the organizational success.

Some of the important qualities that they should possess include time management, interpersonal skills, and job related skills.

Key Points or Takeaways From the Blog:

  • Growing organizational management identifies business functions and assigns leadership and responsibilities accordingly
  • Business Hierarchy – group of objects ranked to fulfill different business roles and functions.
  • Hierarchy of business management is divided into 3 – Top, Middle and First Level Management

Top Level Managers

  • CEO or Board Members
  • Decision makers
  • Shareholders
  • Accountable to stakeholders
  • Profit-makers
  • Define goals, strategies, company policies and vision of organisation
  • Direct middle managers

Middle Level Managers

  • Execute plans
  • Reports to top level
  • Directs lower level managers
  • Define and discuss information
  • Create and implement project and project groups
  • Monitor group level performance
  • Solve grievance
  • Implement reward system and incentive plans

First Level Managers

  • Basic staff supervision
  • Ensure product quality and quantity
  • Assign and delegate task
  • Career planning
  • Recruiting
  • Performance feedback
  • Recommendations and suggestions
  • Report generation and updates