DEFINITION of 'Corporate Hierarchy'

The term corporate hierarchy refers to the arrangement of individuals within a corporation according to power, status and job function. It is a form of organization structure that delineates authority and responsibility, designating who has supervisory leadership over employees, departments, divisions, and other executives dependent on their place within the strata. This may also be referred to as the "chain of command," as it outlines where decision make powers reside, as well as who must adhere to those orders and who may supersede and make changes to the plans of their subordinates.

In a public company, the board of directors led by a chairperson usually resides at the top of the hierarchy. The directives set forth by the board, which typically include goals for revenue and profit growth, are put into detailed action through the executive leadership. This executive layer of management is typically headed by the CEO, who may also be the chair of the board of directors as well as the president. Below the CEO will be other C-level executives, such as the CFO, CIO and COO, followed by upper management (vice-presidents/managers/directors), then by the employees in each department, who are further broken down into levels of experience and authority.

BREAKING DOWN 'Corporate Hierarchy'

Each company's hierarchy will vary from this general structure. Corporate hierarchy affects the employees' ability to advance within the company and also impacts corporate culture. Corporations can have hierarchies that are considered more vertical, where the power comes from the top down, or a more horizontal hierarchy, where power and responsibility are more evenly spread across the firm.

How Corporate Hierarchy Affects the Workplace

The configuration of corporate hierarchy typically evolves as an organization matures. The founding team may make up the executive leadership, which can have a loose structure when a company launches. As more managers, employees, and investors become part of the endeavor, new layers almost inevitably are introduced to give clarity to the organization’s operational flow and the duties of each member.

There are instances of companies that state they have nontraditional corporate hierarchy, typically as a means to share responsibility across all employees and leaders. This may also influence elements of corporate culture, such as the layout of the company’s office. In many organizations, the higher one’s standing is in the hierarchy will affect the size, location, and aesthetics of their workspace. Premium office space, for instance, is often reserved for executives. Access to perks such as chambers reserved for executive use or, if within the company’s means, use of private jets and car service might also be included for members of upper leadership.

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