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Organizational Chart and Hierarchy: Definition & Examples

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  • 0:02 Hierarchy
  • 2:32 Organizational Chart
  • 3:36 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Most organizations take advantage of a hierarchy. In this lesson, you'll learn about the features and structures of hierarchies. You'll also learn about organizational charts and how they can be used in understanding hierarchies.

Hierarchy Defined

Meet Nathan. He is the chief executive officer of a large multinational corporation. He manufactures a wide variety of chemicals for both residential and commercial applications. Nathan's company engages in business activities on five continents in over 25 countries.

The company employs over 50,000 people with a budget that rivals the GDP of some third-world countries. Needless to say, running a company of this size requires a high degree of organization and management. This is where hierarchy comes in.

Hierarchy is a way to structure an organization using different levels of authority and a vertical link, or chain of command, between superior and subordinate levels of the organization. Higher levels control lower levels of the hierarchy. You can think of an organizational hierarchy as a pyramid. The highest level of authority is at the top of the pyramid, and orders flow from this top level down to the next level where it continues to move on down until it reaches the level where the order is supposed to be carried out.

Information and directions flow vertically in a hierarchical structure. Information flows up through each level until it reaches the top. After all the information has been received and assessed, a decision will be made at the top and will flow down through the levels of the hierarchy until it reaches the level where the decision will be implemented. Also, note that the top level of the hierarchy often coordinates all the activities and communication of the various parts of the organization.

Hierarchy Flow Chart
Chart Organization

Let's look at an example. Nathan has received a report from his research and development division that a new cleaning solvent has successfully passed all regulatory requirements and is ready to be produced and marketed to the public. Nathan sends directions to his vice president of finance to prepare a budget for financing the production and marketing of the new chemical. He directs his marketing VP to have a marketing plan developed and his VP of production to develop a production schedule based on the projected budget received from the finance VP.

Each VP will delegate part of their task to their respective department heads who may, in turn, delegate some tasks to their supervisors. Once the task has been completed, the information will flow back up through the hierarchy to Nathan where it will be assessed and further decisions will be made.

Hierarchy Chart
Hierarchy Organization

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