Hierarchy

Conceptions of Hierarchy

Hierarchy has been conceptualized in two ways. A conventional usage, as epitomized by Max Weber's analysis of modern bureaucracy, highlights legal-rational authority in a formal organization. This view holds that hierarchy consists of a central authority and a tightly integrated chain of command and control and that authority is gradually transferred downward. The relationship between units at different levels is that of superordination and subordination, and each unit is accountable to only one superior at the next level.

Hierarchical organization is also characterized by both specialization and formalization of activities. Hierarchy is based on the division of labor: each unit is functionally differentiated and assigned a set of specific tasks. It is formalized in the sense that roles, relationships, and behaviors therein are prescribed in a set of rules, which serves as the cornerstone of rational-legal authority. Yet, hierarchy can also refer to an informal structure of inequality in power, such as class structure in society and hegemony in world politics.

Herbert A. Simon provided a broader notion of hierarchy in his analysis of complex systems. Simon believed that hierarchy need not be defined by its authority relations. Instead, it is to be distinguished by its nestedness, or an arrangement of units composed of several sub-units, each of which is further organized in the same fashion down to the bottom. This structure reduces complexity by making partitions within an organization to divide and conquer, as can be observed in configurations of congressional committees, governmental agencies, and corporate departments.

This instrumental conceptualization of hierarchy is tied with a voluntaristic view of authority. Here, authority is not imposed top-down; rather, it is based on mutual consent, especially that of subordinates, and is thus delegated upward. This alternative interpretation of hierarchy and authority paved the way for vast literature on organizational design. Agency theory, for example, focuses on the problems that accrue from the delegation of decision-making authority to an agent by a principal. Also at issue is the span of control: the number of subordinates directly supervised by a superior. A narrower span will render a direct control more effective while creating more levels; as a result, the overall management of an organization will likely be less effective.

The Prevalence of Hierarchical Organizations

How can we explain the prevalence of hierarchical organizations? There are three important approaches to this question. New institutional economics, as developed by Williamson, posited that hierarchy can be an efficient response to market failure. Given the assumption of bounded rationality and the possibility of opportunism, the higher the uncertainty and costs of transactions are, the more likely they are arranged hierarchically. Hendrik Spruyt extended this insight into a political realm to assert that sovereign state politics outmaneuvered alternative polities such as feudal state and empire because of its superior ability to reduce transaction costs, prevent opportunism of its members, and make credible commitments.

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