Organizational Hierarchies

Organizational Hierarchies fulfill basic psychological needs of employees such as the needs for power and achievement, the needs for certainty, predictability, and structure. It helps people to get rewarded by promotions or salary increments. This pushes employees to work towards a goal and in-turn increases their efficiency. (Chou et al., 2011)

Hierarchy helps establish clear lines of communication throughout the organization. The employees are well aware of whom they should report to and share their information with. Orders from the top flows through established lines of communication and makes it easy to plan and implement business strategies. (Alvesson, 1996)

In order to achieve business goals employees need to coordinate. When the organization is large and the number of employees is high, this coordination has to happen systematically in order to attain the target efficiently. Hierarchy reduces conflict and facilitates tacit coordination by offering psychologically prominent and stable solutions to shared problems. (Bass, 1960)

Most Western organizations nowadays are seen to be moving towards a flat structure with lower number of hierarchical levels. It is believed that this method is cost effective and at the same time highly successful in achieving organizational goals. Westerners are goal oriented and are concerned with getting things done. Therefore they do not afford to delay work due to a large number of organizational levels. (Guinote, 2007)

In moving toward this type of hierarchy it is seen that most US and European companies are increasingly using team work as a key ingredient. (Steiner, 1972) These teams share goals with the organization and the members of the team are assigned the authority and the responsibility needed to get things done. The advantage of this approach is that even if one person doesn't work, the task gets done. At the same time, since everyone is given equal responsibility, it encourages individual team players to put in their maximum effort to achieve the team goals. (Pozin, 2012)

The Eastern culture is much more concerned about hierarchy. In large Japanese corporations like Sony, Hitachi, Panasonic and Toyota, there tend to be a clear division of labor, from blue-collar floor operations to middle management to R&D to upper management. These operations tend to favor hierarchical management structures. ("Confucian Business Ethics - Hierarchy," n.d.)