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Organization Hierarchy: What’s Wrong With It…And How To Fix It

Hierarchy is basically defined as different levels in an organization. Hierarchy generates considerable discussion and controversy. Many consider it to be old fashioned, inappropriate or just plain wrong.

What’s Wrong With Hierarchy?

Let’s start by agreeing that there are many issues related to how hierarchy is used.

  • It can be “command and control”. This would be micromanaging and it is inappropriate. Employees should be in positions that are “right sized” so that they can use their full capabilities within the requirements of the organization.
  • It can be “bureaucratic”. This generally means that there are too many rules and controls such that work is needlessly slowed down and made more difficult. Again, this is inappropriate.
  • It can be rigid and unchanging… “carved in stone”. Again, this is not appropriate. Flexibility is needed to deal with constant change.
  • It can confuse level in the organization with human worth. Someone higher up is considered a better, more worthwhile person. This is plain wrong. There are different levels of work, but all are important, and do not equate to human worth.
  • It can result in people not being treated well or respected, especially at lower levels of the organization. Again, there is no excuse for this type of behaviour under any circumstances.

How To Fix Hierarchy

Let’s agree that these situations are not acceptable or appropriate. What is the solution?

Let’s start with the non solution. We could try to eliminate hierarchy or pretend that it doesn’t exist. We could pretend that we all do the same type / level of work, and / or we’ll just figure it out. This takes us to the other end of the continuum: from “command and control” to lack of appropriate direction. This results in people going in different directions, creates lack of clarity of accountability and authority, and into this vacuum creeps a heavy dose of politics. Surely we need something other than the extreme ends of the continuum. Doesn’t work have to be organized so that employees can use their full capabilities and also be pulling in the right directions?

Let’s make a confession and an assertion. The confession is that I don’t like the word “hierarchy”. I find that it has become so emotionally laden that it is difficult to have constructive discussions. I prefer to think of organizations as stratified human systems. They are systems (I find this a good way to think…inputs, throughputs, outputs in an environment, etc.); they are human systems (about human groupings), and they are stratified (have different levels).

Second, I’ll make this assertion. Organizations are stratified. Look at your organization. Does it have differential titles (vice president, manager, customer service rep, etc.)? Does it have differential compensation? Does it have reporting relationships (e.g. managers and direct reports)? If so, it is stratified. This is a fact. It does not seem very helpful to pretend that it is not, or even wish that it was not.

So, it seems to me that if organizations are stratified, the question is how to make the stratification as “good” as possible. This would certainly include dealing with the issues we raised earlier. How do we design an organization to produce better employee satisfaction, better customer satisfaction, and better financial performance?

Stratification in organizations is about differential complexity of work and differential individual capability. Quite simply, as one moves up the organization, the work should become more complex and the individual capability should be greater to successfully handle this work.

Fortunately, and surprisingly to many, both the complexity of work and individual capability are measureable. Jaques (1996) and his colleagues developed methods related to time span analysis and information processing capability. The related research goes back over 50 years. They discovered that organizations have different levels (or to use the technical term, strata). Further, each level or stratum is different in the nature of the work, its complexity and the information processing capability required to work at that level.

“Good” stratification (or to use my less favourite term, hierarchy) is a necessary but not sufficient condition for organization performance. Other factors are also critical. We define organization design as the alignment of five major factors: positions (vertical and functional); accountabilities and authorities (managerial and cross functional); people; deliverables and tasks. All are important for strong performance.

Our Optimizing Organization Design Approach

I recently wrote a book called Optimizing Organization Design (Capelle, 2013). It is based on over 100 large scale projects and 24 research studies that we have conducted over the past 25 years. The research and executive experience shows that optimizing organization design leads to better employee satisfaction, customer satisfaction and financial performance.

The Manager – Direct Report Alignment

We made an important discovery in this journey. One of the sub factors of organization design, by itself, was directly related to those outcome measures. We wouldn’t have expected that one factor could be robust enough to do this. That factor is the manager – direct report alignment. The basic idea is that every employee should have a manager exactly one level or stratum above, both in the complexity of the work done and the capability to work at that level.

Imagine the two problem situations. In the first one, the manager and direct report are actual operating at the same level. We call this compression. In this situation, the manager is likely micro managing (a waste of money since the manager is not operating at the level being paid), and the direct report can’t use full capability (resulting in dissatisfaction).

In the second one, the manager and direct report are more than one level or stratum apart. We call this a gap. The manager generally complains about “being pulled down into the weeds” or that the direct report has “no initiative”. The direct report complains that the manager provides no direction. This is generally treated as a performance problem of one or the other, but it is really a structural problem with a missing position.

Our benchmarking database, with over 59,000 manager – direct report relationships from 76 organizations shows that the correct alignment occurs 55% of the time; compression occurs 36% of the time; and gaps occur 9% of the time. This is a horrendous waste of human resources.

The power of the manager – direct alignment is interesting to us. Part of it is related to the importance of relationship with manager (Buckingham & Coffman, 1999). A cliché is that employees don’t leave organizations, they leave managers. It is clear that manager – direct report alignment is a necessary (but not sufficient) condition for an optimal relationship with a manager.


So, what can we conclude? I would suggest the following.

Organizations are stratified. The question then becomes how to best stratify them.
Stratification is about complexity of work and related individual capability. This can be measured and aligned properly… including the critical manager – direct report alignment.

Stratification (or hierarchy) should never be about fundamental human worth or be used as an excuse to not treat people with respect.


Buckingham, M. & Coffman, C. (1999). First, Break All the Rules. New York: Simon & Schuster.

Capelle, Ronald G. (2014). Optimizing Organization Design: A Proven Approach to Enhance Financial Performance, Customer Satisfaction and Employee Engagement. San Francisco: Jossey-Bass.

Jaques, E. (1996). Requisite Organization (2nd ed.). Arlington, VA: Cason Hall.

For more information on determining the organizational capabilities of your company, request a discussion with our organization consultants today.

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