Everybody must have specific areas of expertise and responsibility, and for day-to-day activities, Managers or supervisors are supposed to be responsible. You can have more levels of management than other organizations. Remember! Employees or staff are always the largest group, which carries out important and core business functions as directed or suggested by their immediate managers. You can deploy any structure that you believe suitable for your business.
What is the business hierarchy?
Business Hierarchy term implies the organization structure where staff and items are ranked according to importance. Almost every business has some form of business structure, a hierarchical framework. The hierarchy of your business depends on your business model and the business size. That hierarchical framework will help external and internal stakeholders know about how decisions are made, who reports to whom, the level span of control, and total management levels in your business organization.
Why are there different levels in Business Hierarchy?
The hierarchy will be the first step to structure your business and organization. While developing the hierarchy for your business, you are supposed to define each employee’s role, the chain of command among managers and the subordinates, a higher level of management, and a lower management level. You better make in the form a flow chart. Sometimes it is called an organizational chart.
I can suggest you consider three to four levels of hierarchy for your business; again, the number of levels depends on your business size and the business model. I have seen in most organizations, three to four levels of hierarchy are widespread.
If you have started or own the business, you can be the business’s chairman or executive. You will be taking care of all business-related activities and holding the financial responsibilities for all the stakeholders.
Hierarchy in business organization
What is the level of the hierarchy?
The concept of business-level hierarchy denotes the planning and division of tasks to the individuals within an organization as per the power, position, status, and functions accordingly. Largely, a hierarchy is somewhat a system or arrangement in which employees are tiered directly above the others, conferring to the authority and status or power. The company’s hierarchical levels clarify the different functions, management, control, and reporting lines horizontally.
Do you know why structure is so important for your business?
An appropriate and maturely established structure can aid your business in many ways effectively. A developed structure for business may help employees having a clear line of accountability and responsibility. Having a clearly defined business structure, each employee can focus on various tasks that managers will assign to them better.
Business hierarchy of needs
Business hierarchy or Maslow’s hierarchy of needs represents five needs that managers can use to understand better employees’ motivation in ways that lead to high productivity and job satisfaction.
- safety needs (job security)
- physiological needs (food and clothing),
- social needs (friendship)
- self-esteem
- self-actualization. This hierarchy addressing and address them
Does everybody know the hierarchy or structure in the workplace?
Your staff may not work effectively until they know to whom they are to report and get the directions from whom. If you have a clear structure for your business, don’t forget to share it with each employee. An updated organizational flow chart known as an organogram can be useful for this purpose. This must be effortlessly reachable by almost all of the employees, even at the time of joining.
As I discussed in the upper section, levels of hierarchy in business depend on the business model. There are many forms of business you can consider before you start your new business. Now I can share the major forms of business, which will help you decide the structure and hierarchical levels.
The most prevalent classifications of businesses are business corporations, limited liability companies (LLC), partnership, limited liability partnership (LLP), and a sole proprietorship or DAB (doing business as). All business types have dissimilar tax-related consequences, so you need to be very wise and vigilant before starting any business form, closed to your business goals and business needs.
Do you know about business or organizational organograms?
A hierarchical organizational chart or organogram (flow chart/diagram) is a useful tool to make all the stakeholders aware of how your organizational system works. The reporting relationship can also be described through the connecting lines in the organogram. In most organizations, three management levels are commonly found: top-level management responsible for all the decisions related to the entire organization, for instance, which product to market, which marketers need to address. Second, the middle management that is responsible for making implemented all the decisions made by the top management. The third level is the front-line management that is accountable for the implementation of all the decisions. The front-line management, along with their staff, interacts with the customers directly. Now we can discuss all level management in a bit more detail.
- Top-level management
- Middle-level management
- Lower-level management
Top Management
Generally, the president, board of directors, and CEO fall under top-level management. These individuals are accountable for controlling and overseeing the entire organizational decisions. Top-level management establishes the goals to achieve, organizational policies and procedures and decides other level management directions. Moreover, top-level management is responsible for mobilizing the external environment’s resources, starting from the capital, human resources, material required, and machinery, when needed. The top-level management is held accountable to the business shareholders.
Middle-level managers
The manager who works at the branch manager positions, floor manager, general manager, and departmental manager falls under middle-level management. They are answerable to the top-level management for their department and branch functions. Middle-level management’s role is to execute the plans according to the organizational policies and the objectives established by top-level management. They also disseminate the decisions and policies to the lower management and facilitate them to perform better.
Low-level managers
Supervisors, frontline managers, section leads, and supervisors type individuals come under low-level management. They are responsible for assigning tasks to the related employees, supervising them in daily activities, and ensuring quality and quantity in processes and production. Low-level management also provides guidelines concerning career planning, motivation, and performance feedback.
Are you a front-line manager?
The front-line or first-line managers are used simultaneously for the employees responsible and accountable for managing the tasks, converting the prospects into real customers for the organization, and producing the products or services. They are also known as core employees.
What is your style of management?
Remember the various management styles, namely the autocratic style, democratic style, and free rein style. An autocratic management style is beneficial when staff is not fully aware of the products, customers, and processes or new to the organization. The democratic style of management is useful when the inputs of employees are considered mandatory in decision-making. The third management style is considered important when employees are highly experienced and qualified and very familiar with the customers, products, processes, and the market.
Which organizational structure should you follow?
You should consider the structure that suits more to your business model. Organizational structures direct the levels of hierarchy for business for improved business operations effectively and efficiently. There are many business structures; functional, divisional, and matrix structure, organizations can adapt according to the business dynamics. For instance, a functional structure is commonly used by several organizations. In this form of structure, top executives remain at the top, looking after various heads of the different organizational functions such as production, finance, marketing, HR, Sales, etc. all the function’s heads are supposed to report the top executives.
How business hierarchy help to create a great company?
You must not rely on any structure because there is no single universal organizational structure that may fit all business forms. Each organization has different business goals, products, processes, and an entrepreneurial mindset. You are required to build the hierarchy according to your employees’ various job roles in the functional business structure. The functional structure makes all the employees in the same function exert more for the common functional objectives. For instance, the employees in the marketing function, sales function, and HR functions will exert their efforts to their functions’ common goals, respectively. This structure is beneficial when you have a minimal number of products to market
Thus, you are not required to copy any structure for your new business because it gets changed as your business grows. The life cycle of your business will start from the entrepreneurial stage to the formulation and growth stages.
You can follow the divisional structure.
If you have more than four to five products of different natures, I can suggest the divisional structure for some basic reasons. This structure provides decentralized decision making and individuals are grouped by-products, geographical areas. For instance, one country as a market can be divided into different regions such as the north, south, or central region. You can also divide based on the product, such as cosmetics, edible, and or toiletry items, as these products are of different natures.
Matrix Organizational Structure can be adopted.
You are supposed to offer both products and services to the customers. This structure is more common in hotels, hospitals, and the educational industry. This structure carries the features of both divisional and functional structures. You bear in mind the matrix structure provides the highest decentralization level to each team that works under the matrix structure. All the teams under the matrix structure work for the common project.
What managerial skills do you need at any hierarchical level in business?
Nevertheless, all the employees working at any level or managerial positions must possess smooth business operations—human skills, technical skills, and Conceptual Skills.
CONCEPTUAL SKILLS for Top Management?
Have you ever thought about the skills you must run your business or even doing a job in any organization? If you are at the top-level management, you must possess more conceptual skills than other skills such as technical or human skills. What conceptual skills mean is your ability or capacity to look at the entire organizational activities and decisions. Conceptual skills are considered very important for top-level management because they need to at “the big picture” to accomplish the business goals. Although middle and low-level management also requires conceptual skills, the top executives capitalize on them more often.
HUMAN SKILLS are required more for!
Do you interact with others in life? Absolutely YES!
Do you know the human skills are required everywhere, either you do a job, business, or even at home? The most critical part of human skills is communication. How strong you are in communication, either verbal or non-verbal communication. Understanding body language is an exciting and complex part of human skills. Human skills refer to your ability to understand and interact with others effectively. Human skills become more critical when you are in the middle management of any organization. This is because when your role is in between the top-level management and low-level management, you are required to interact with both. Hence, you have to interact while receiving the plans, orders, directions, and instructions you interact with top management; then, you must interact with the lower-level management to implement the strategies and get the things done. That is why you are required to have more human skills than skills like conceptual and technical. You also need conceptual skills but with less magnitude, although human skills are needed at all management levels.
TECHNICAL SKILL
Are you technically strong? Do you know when you will need technical skills the most? Let me explain what will help you. The technical skills demonstrate the level of proficiency in product or service quality and quality. Many activities may fall under technical activities, where such skills are required like anything. For instance, making business presentations or business proposals, making a budget or conducting an audit, monitoring, or evaluating the performance will require more technical skills than human, conceptual, or other skills. The low-level management or first-line managers must take care of the organizational operations, so; they need technical skills.
CONCLUSION
Before you look into a business-level hierarchy, every manager is required to comprehend the bottom line message that is a hierarchy of any business would be a tool to structure any business enterprise or an organization that surely carries the diverse levels of authorities where top-level management controls and manages the lower-level management or staff. The flow of communication starts from the top-level to bottom-level management and then returns as feedback.
After leaving Wells Fargo Bank in 2014, Daniel began a career as a finance consultant, advising companies and individuals on economic policy, labor relations, and financial management.
At Nimblefreelancer.com, Daniel writes about personal finance topics, value estimation, budgeting strategies, retirement planning, and portfolio diversification.
Read more on Daniel Smith's biography page.
Contact Daniel: daniel@nimblefreelancer.com
