Do you rely on charts, templates,  and workflows? 

It is a safe bet to say you do use visually organized information to make sense of your company hierarchy. 

If you don’t have a written business chart, you probably have one in your head.

(BTW, you should write it down!)

And if your current business hierarchy structure is not supporting your goals, it pays off to revisit it at once or twice a year and see what works and what doesn’t.

How can you redefine the company hierarchy for the new work?

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Business Hierarchy Benefits

The business hierarchy chart defines job roles and identifies power, status, and job functions associated with each role. 

In a corporate hierarchy, the organizational chart reflects the chain of command. Before you link hierarchy with bureaucracy and military discipline, consider its multiple benefits even in the smallest companies:

  • A company structure is necessary to organize work and assure task ownership.  
  • Organizational workflow diagrams support company growth. 
  • Business hierarchy is the basis of role clarity.
  • Employee onboarding templates help you with new hires.
  • The business hierarchy chart builds team transparency.
  • Goal charts provide the roadmap to achieving business goals. 

Corporate hierarchies are usually associated with a pyramidal structure where most of the power is concentrated at the top of the pyramid. That type of organization is beneficial for centralized-decision making but it stifles innovation. When work is disruptive, fast-paced, and inundated with technological advancement, you need a new type of work pyramid.

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business hierarchy types

Types of Company Hierarchy

For different companies, it will make sense to organize work and job roles in a specific business hierarchy according to different criteria. 

1. Market Needs

For example, a large retail company with multiple departments (divisions) based on the market needs to create a market-based divisional company hierarchy

2. Product

When the division criteria are product-specific, the business hierarchy is called product-based company hierarchy

3. Function/Job Role

Functional company hierarchy has an organizational chart that keeps people closely together by job role. The key criterion for creating teams is sharing a similar function. For example, salespeople are a part of one team (division), while software developers are a part of another team.   

4. Growth Phase

Horizontal business hierarchy usually has one person at the top while everyone else has pretty much the same job role and authority. Startups usually maintain a flat/horizontal structure at the beginning.  

5. Location

Finally, a very common factor that predefines a company structure is geography. In a geographical business hierarchy, where the personnel is located plays a crucial role; in virtual work, geography is not a factor.

There are many tools you can use for a business hierarchy chart. The problem with having only one hierarchy is that it doesn’t meet the requirements of New Work. Potentially, it can impede organic growth. 

Organic vs. Mechanistic Business Hierarchy

In a mechanistic structure, top managers make most of the decisions. Employees are expected to follow through. They usually have specifically defined, stable tasks. Communication flows from the top down. There is less interdependence between departments. As a result, there are fewer cross-functional teams. 

The best example of a mechanistic organization is the government. 

The organic business structure is lateral rather than vertical. An organic company must be able to respond quickly to changing circumstances and reorganize. The communication flow is distributed laterally, top-down and bottom-up, and employees are encouraged to give initiative, and make decisions. Tasks and business goals should be able to be redefined to maintain competitive advantage.

Shortly, mechanistic organizations are centralized and more controlled while organic organizations are distributed and less controlled.  

Virtual teams are based on the organic model.

Virtual Team Structure and Hierarchy

Virtual teams with freelancers work with a network/matrix hierarchical model

In the network business hierarchy, the main factor for organizing roles, work, authority, and responsibility is the network. The network is a string of connections developed to complete a goal or finish a project. It doesn’t need to last long, it can be short-lived, flexible, and volatile.

Software-development teams are often project-based hierarchical models. Service-based companies can create a network company hierarchy that meets client needs and consists of a network of service-specialized experts. Agile teams are a perfect example of a flexible business structure.

How to Create a Business Hierarchy Chart for Your Virtual Team 

There are creative ways in which you can adjust the following hierarchical principles to your organization. Make things easier for you by adopting the correct mindset and focus on processes, actions, and goals. Let’s go:

  • Create action blocks of input, output, and in-between actions.
  • Add or remove action blocks to scale projects up or down.
  • Assign block leaders to create a temporary leadership structure. 
  • Identify growth parameters for action blocks, based on metrics (KPIs).
  • Ensure action block members work independently.
  • Employees from each action block can see the real-time results of their colleagues relative to the OKRs.
  • Define rules about the interaction of atomic blocks for complex goals and large projects.
  • Design role clarity in the context of task execution. You don’t need full-time employees for all tasks. Think action-task-role. 

Virtual Teams-as-a-Service (VT-aa-S) use a network hierarchy model, which encourages task ownership and supports individual, team, and organizational growth. As a result of the elastic company structure, they drive innovation and respond to pressure with confidence.

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