What Is Business Hierarchy? Definition and Examples

The term corporate hierarchy refers to the arrangement and organization of individuals within a corporation according to power, status, and job function. In general, a hierarchy is any system or organization in which people or groups are ranked one above the other according to status or authority.

Business Studies – Organisation Structure: Business Exam Tips

Why is business hierarchy important?

Businesses with a strong organizational hierarchy can gain a number of advantages. Here are some examples of why business hierarchy is important:

What is business hierarchy?

A term used to describe a company’s organizational structure is “business hierarchy.” Entry-level workers, mid-level workers, mid-level managers, senior managers, and executives, such as the CEO, are all included in this.

Important members of business hierarchy and how they contribute to a company

Here are some illustrations of significant individuals in a company’s organizational hierarchy and their contributions to business operations:

Board of directors

A group of businessmen who have invested in the company make up the board of directors of a company. They typically hold stock shares in the business and account for a larger proportion of its shareholders. These people attend regularly scheduled board meetings where they review business data, market developments, and other crucial matters. Important decisions regarding company policies, revenue streams, and managerial adjustments may also be made during these meetings. The board of directors is in charge of selecting, interviewing, and evaluating the company’s CEO.

Chief executive officer (CEO)

The top executive position within a company is that of the chief executive officer, or CEO. CEOs are in charge of leading their business and assisting it to adapt to market changes. To make critical decisions for the future of the company, they closely collaborate with the board of directors and other senior executives. CEOs are also accountable for appointing other chief executives in functional areas such as business operations, finance, marketing, and technology.

Chief operating officer (COO)

The second-highest executive position in a company is that of the chief operating officer, or COO. They collaborate closely with the CEO to make sure the company’s overarching objectives line up with its ongoing business operations. A company’s COO typically oversees a number of departments, including human resources, marketing, sales, business development, finance, and any other crucial areas. To determine productivity levels, technology needs, hiring needs, or business opportunities, they review department data. To find ways to enhance company culture and employee satisfaction, they also keep an eye on HR data.

Chief financial officer (CFO)

The chief financial officer, or CFO, is responsible for managing all business finances. They are in charge of the accounting and finance departments, as well as the finance director. Additionally, CFOs monitor company revenue streams and cash flow. To ensure future security, they locate investment opportunities, carry out risk analyses, and finish financial forecasting tasks. The CFO is also in charge of compiling the company’s annual financial report and developing comprehensive strategies for debt reduction over time.

Vice presidents

There could be one or more vice president positions, depending on the size of the business. For instance, the vice president of sales or the vice president of marketing Vice presidents within their field of expertise directly answer to the CEO or another senior-level executive. The vice president of finance reporting to the chief financial officer is one instance of this. Vice presidents serve as a conduit for information between higher-ranking executives and directors or managers at lower levels. Additionally, they guarantee that departments carry out fresh directives or policies from senior management.


Directors oversee department managers and department activities within a company. In their particular field, they typically answer to the vice president or a senior executive. For instance, a company’s director of marketing may report to the chief marketing officer (CMO) or the vice president of marketing (VP of marketing). Directors in their position offer department managers advice on how to hire, train, motivate, and lead their departments using their professional experience.

Department managers

Low-level managers known as department managers are in charge of the daily operations of a department within a business. They usually report to a director. The manager of the sales department reporting to the director of sales would be an example of this. Department managers are accountable for creating job postings, reviewing applications, interviewing applicants, selecting applicants, and hiring and preparing them for success in their department. They track each employee’s productivity and look for ways to inspire them to achieve department goals. Department managers also inform their staff of information coming from higher management.

Department supervisors

In large departments, companies may allow for department supervisor positions. These people typically have a smaller team of subordinates and report directly to the department manager. For instance, there might be a payroll supervisor and an accounting supervisor within a finance department.

Examples of business hierarchies and their benefits

Companies can employ a variety of business hierarchal structures. Examine the advantages of these examples to decide which one is best for your company:

Traditional business hierarchy

The board of directors is at the top of a traditional business organizational structure, which also includes the CEO, other chief executives, vice presidents, directors, managers, and lower-level employees. Important information is disseminated in this hierarchal structure from the top down. Businesses that use traditional business hierarchies can benefit in a few ways. Here are some examples:

Functional business hierarchy

A variant of the traditional business hierarchy that concentrates on the specialized areas within company departments is called a functional business hierarchy. For instance, the CEO of the company is in charge of the marketing, finance, business development, and IT departments. Within each department, a director oversees several specialized job areas. For instance, the marketing director would be in charge of marketing campaign planning, market research, and analytics. Employees concentrate on their particular areas of expertise, such as graphic design, content writing, marketing campaign scheduling, or market data research, within each of these marketing subcategories.

Review these potential benefits of a functional business hierarchy:

Divisional business hierarchy

A company can divide into distinct divisions using a divisional business hierarchy, which can be based on a company’s target markets, target markets it serves, or product lines. As a result, there are departments for accounting, sales, HR, IT, marketing, and customer service within each division of the business. This type of structure usually works well for large corporations. You can gain from a divisional business hierarchy in the following ways, for example:

Horizontal business hierarchy

Businesses often use a horizontal business hierarchy as their initial organizational structure. The CEO and senior management team collaborate closely with lower-level company employees in this structure. One start-up has a CEO, a general manager, sales, marketing, and finance directors, among other positions. They are followed by two salespeople, three marketers, and two accountants. Due to the company’s current size, the CEO regularly meets with department directors and employees. The following are some possible advantages of employing a horizontal business hierarchy:

Team-based business hierarchy

A type of hierarchical structure used in team-based businesses is where management experts group employees with various specialties and backgrounds into teams. As a result, the business works in teams rather than having separate departments for sales, marketing, IT, accounting, product development, or customer service. As an illustration, consider how each of the three teams has its own accountants, salespeople, marketers, IT support personnel, and staff members responsible for product development. The following are some advantages of employing a team-based organizational hierarchy:

Network business hierarchy

When a company employs both internal and external personnel, the hierarchal structure is known as a network business hierarchy. Additionally, they might have offices in various cities and decide to outsource some departments. An illustration of this would be if a business had internal departments for marketing, finance, and sales, but relied on an outside IT company to develop its software and networking systems and an HR firm to assist in hiring and onboarding new employees. Review these benefits of a network business hierarchy:

Matrix business hierarchy

A hierarchical structure known as a “matrix business hierarchy” allows employees from various departments to work together on the same projects. The CEO is at the top of this hierarchy, followed by a general manager. Department managers report to the general manager and are responsible for each department’s staff. The project director collaborates with department directors to choose a team of people to carry out a project by a specified deadline. A team with a marketing specialist, a salesperson, an accountant, and an IT professional would be an example of this. Here are some benefits of a matrix structure:


What are the 4 levels of business?

Every business, whether it’s big or small, goes through the 4 stages of business growth:
  • Startup.
  • Growth.
  • Maturity.
  • Renewal or decline.

What are the 3 hierarchy levels?

There are usually three levels of management in organizations: top-level, middle-level, and first-level. These top three managerial levels are arranged in a hierarchy according to importance.

What are the 4 types of organizational structures?

Functional, divisional, flatarchical, and matrix structures are the four types of organizational structures.

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