Organizational Wellness

Management Hierarchy, Explained for HR Leaders

May 29, 2024

Last Updated May 29, 2024

There is no downside to clear communication at work. When you know which manager to contact about Problem A and who will handle what part of a new project, everything feels much smoother. Everyone can focus on doing the right work and moving the company forward.

In most organizations, clarity comes from having a clear division of labor. People need to know whom they answer to and who answers to them. That's where a management hierarchy comes in. It gives employees a map of the company so their expectations are clear.

Today, there are multiple ways of setting up a management hierarchy. The more you know about each option, the better prepared you can be to make the right choices for your company.

What Is a Management Hierarchy?

A management hierarchy is a defined structure of organizational leadership. It shows the rank of every position within the company, including who reports to whom.

Types of Management Hierarchies

Management hierarchies clarify roles, responsibilities, and chains of command. Sometimes they look like pyramids, and sometimes they look like sheet cakes. Let's check out some examples.

Traditional

The traditional management hierarchy is a top-down, pyramid-style structure. The people at the top have the most responsibility and authority, and the buck stops with them.

Those at the bottom are accountable to those above them. They follow the instructions of their immediate superiors, who follow their immediate superiors.

Most companies with a traditional hierarchy have three levels of management — top, middle, and lower.

Top-level management

Top-level managers are the company's executive leaders. This level includes the C-suite: the chief executive officer (CEO), the chief operating officer (COO), the chief financial officer (CFO), and anyone else who's the "chief" of something.

However, not everyone in this category is on the same level. The CEO is at the top, reporting only to the board of directors. The rest of the C-suite and other top-level managers answer to the CEO.

Each other C-suite manager heads a particular department or function. COOs handle operations and logistics, CFOs manage everything related to money, and chief technology officers (CTOs) manage customer-facing tech.

The bigger the company, the more people it usually has in upper management. Smaller companies may have only a CEO and a senior director or two. The main defining factor is that those in upper management have no one above them except the CEO or president.

Middle management

Middle managers execute the plans that top-level executives create. They're the next step down, usually overseeing a division or department, like sales, marketing, or accounting. In some multi-site companies, middle managers oversee all of the departments within a particular location.

These managers have the personnel and operational knowledge to make things happen. CEOs and CFOs are skilled at creating high-level strategies and setting big goals, but they rarely work hands-on with junior employees.

Middle managers know how their departments function and where various teams shine. They're people-motivators and motivation-drivers, with responsibilities that include:

Developing personnel through constructive feedback and collaborative goal-setting
Setting teams up for success with new projects, strategies, or processes
Monitoring progress and taking action if things get off track
Keeping the focus on customer satisfaction

When they do this well, middle managers turn strategy into reality.

Lower management

Below middle management are the lower managers. They provide hands-on leadership for those who perform the work, whether that work is loading a truck or writing the next month's social media posts.

Lower-level managers include junior managers, department supervisors, shift supervisors, and production line leaders. Although their titles differ dramatically between organizations, they all have one thing in common: They rarely, if ever, have other managers beneath them.

But lower managers aren't the "bottom of the barrel." They're key personnel who know the non-managerial staff better than the middle or upper managers. Middle managers will often ask for their help in hiring, training, and corrective action, and they usually have great insight into what a particular team needs to grow.

Modern Variations

The most popular variations of the management hierarchy are the "functional" and "divisional" structures. With its top-down reporting model, the functional structure is closest to the traditional hierarchy. Employees report to a manager, who reports to a higher-up manager, up to the CEO.

The difference is that all managers below the CEO operate within a single department. If the product design team needs to talk with the software development team, their managers handle it. This structure works well for companies with highly specialized or technical functions.

The divisional organizational structure splits the hierarchy differently. Instead of creating functional teams, it separates the company into divisions. The most common divisions include:

Product lines: Each division is responsible for its product group from end to end.
Product or service market: Each division focuses on a particular target market or industry.
Geography: Each division serves a specific region and usually has its location within that region.

The divisional structure still has a hierarchy, but the pyramid is narrower. Actually, it's less of a pyramid and more like a handful of Greek columns with a roof supporting them.

Flat Organizations

Flat doesn't usually have a positive connotation in corporate culture. From flat ideas to flat revenue lines, the word usually means a problem to fix.

This is not so with the flat organizational structure, though. Here, flat means equal. The company has rejected the traditional management hierarchy and is putting everyone on the same level, except for one or two people who keep it all going.

OK, so a flat organization isn't completely flat. Someone has to coordinate things, usually the CEO — or a group serving a similar role. After all, large companies need multiple people to keep things from falling through the cracks.

Still, the goal of a flat structure is to minimize ranking and maximize collaboration. Without multiple levels of managers organizing everything, employees work together to solve problems and get things done. They learn to weigh their options, make decisions, and take action without relying on a chain of command.

Matrix Structures

A matrix structure adds another dimension to the reporting chain. The traditional hierarchical structure organizes the chain of command vertically, with the CEO at the top and layers of junior leaders below — a management wedding cake, if you will.

In a matrix-structured organization, employees report to two or more superiors. One is usually the department leader, while the other is a strategic or project head.

Sounds confusing? Only if the chain of command isn't transparent or there's poor communication about who reports to whom. If everyone has clarity on their roles and responsibilities, matrices make organizations more flexible. You can start new projects, enter new markets, and create new products without disrupting your hierarchy.

Hybrid Models

Predefined management hierarchy models work for only some organizations. Trying to force your company into someone else's box has never led to innovation, so many businesses create their own hybrid hierarchies.

A hybrid structure combines the features of different models to meet the company's unique needs. It usually incorporates functional or divisional elements — or a bit of both.

The best thing about a hybrid structure is its flexibility. Companies can design a hierarchy that works for them or create multiple structures across different areas of the company.

Management Hierarchy and Employee Wellbeing: Building a Harmonious Workplace

The right management style helps businesses perform at their best. Some companies thrive under a traditional hierarchy. Others function smoothly with a flat structure with fewer leaders, or a matrix structure, where everyone can look up to multiple people.

If you need clarification on the correct hierarchy for your company, you might ask your people how they prefer to work. Employees feel more at ease when they have agency and understand their expectations. This peace of mind is essential to workplace mental wellbeing, a key ingredient of optimal performance. Wellbeing programs can help you reach that level.

To learn more about our wellbeing programs and how they can help your company thrive, speak with a Wellbeing Specialist. We'll help you find the right solution for your team, no matter its structure.