Smaller businesses sometimes operate well with looser structures, depending on the individuals working for the company. Once a business starts to grow, structure and specific job descriptions become more important for smooth operations and lack of confusion. As businesses grow, hierarchies develop that clarify who has decision-making power and control, and who gives direction to whom.
A hierarchy refers to the levels of management in any business, from highest to lowest. Those on a higher level have more decision-making power and control than employees who occupy a lower level in the hierarchy. Lower level workers take direction from higher level employees. Most businesses have three levels of management in place, according to Marcia J. Simmering in the Encyclopedia of Business, 2nd edition.
Top-level managers hold the maximum responsibility in the company. They're also called senior managers, executives or chiefs. Among the chiefs, CEO stands for Chief Executive Officer, while CFO stands for Chief Financial Officer. Owners are also part of the top-level management. Owners and senior managers have the most responsibility in the company. They make decisions regarding the direction the company will take, and have the last word on proposed changes to business procedures. Everyone else in the company takes direction from the top-level managers.
Middle managers are expected to complete the goals set by top-level management. They are sometimes called Regional Managers or General Managers. They're responsible for communicating goals to the various teams of people working under them, and for motivating these workers to do the best possible job. The lower levels below middle management do not communicate directly with the cheifs; rather, lower levels talk to middle management and middle management communicates with the chiefs when necessary. When workers on the lower levels do a poor job, the chiefs will hold the middle managers responsible.
Office managers, supervisors and crew leaders are first-level managers. They take direction from middle managers and work directly with the employees. They interact with workers on a daily basis, and are the people to whom workers go with problems or complaints. While lower-level managers don't have decision-making power within the company, they have a large influence on how well work is performed and, therefore, on the success of the business.
Maslow in Business
Abraham Maslow was a psychologist who developed "Maslow's Hierarchy of Needs." His theory states that certain needs must be met before a person can focus on other needs that are less important for survival. Basic life needs such as food and air come first, then the need for a sense of safety, then the person needs to feel loved. Once these three needs are met, the person may develop good self-esteem. With good self-esteem, the person has the opportunity to become "self-actualized," or fulfilled as a person. The latter needs may not be met until the first needs are taken care of. Some have taken Maslow's Hierarchy and applied it to business models. For example, some businesses are moving away from the sense of autocracy in the highest levels of the organization and recognizing that when employees are treated well, they do better work for the organization. For example, employees must have their physical needs taken care of to do their best work. This means reasonable breaks and lunch periods. When employees are shown respect -- which is part of Maslow's third level -- they can develop the self-esteem necessary to be creative problem-solvers for the company. Businesspeople who harness the power of Maslow's Hierarchy by respecting the ideas of employees may enjoy more success than those who give all power of thought and problem-solving to the highest levels of management.
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