Employee hierarchy refers to the organizational arrangement of the business’s individual employees, divided and grouped into departments and around functions. This hierarchical arrangement shows the chain of command, the delegation of responsibilities, and the channel for the communication of authority from higher to lower levels and vice versa. The hierarchical structure of a business also defines the roles of employees within the organization and the relationships employees have with each other. Employee hierarchy is important for any organization; here’s how to arrange it for a startup.
Having a clearly defined employee hierarchy is essential to any good business and is especially important for a startup. Startups must take many factors into account and choose their employee hierarchy wisely as that can have a great impact on the success of the business. Here are five steps a startup should take to establish the right employee hierarchy for your business.
1. Identify and divide work.
Look at the total amount of responsibilities, and divide them into smaller units called jobs. Everyone in your startup is given a job according to their capabilities and qualifications. This division and assignment lead to specialization among your employees. By assigning work to employees based on specialization, they are more inclined to take ownership of their responsibilities as they will begin to see themselves as necessary for the organization’s success, and not just as interchangeable workers.
2. Align your organizational structure around markets.
When you build an organizational structure, build a flattened one centered around markets. This increases efficiency, removes bottlenecking, and eliminates conflicting priorities. It allows the decision-making process to move very quickly since there are no unnecessary levels of organizations and makes it easier since there are fewer people involved. A market-oriented organizational structure increases the level of personal responsibility in your employees and may help reduce the amount of payroll.
3. Departmentalize or group jobs together.
After all the work in your organization has been divided into jobs, all similar and related jobs need to be grouped together. There are two main ways to go about departmentation: functional departmentation, which groups together jobs that are related to a common function; and divisional departmentation, which is used by organizations that produce multiple products and groups the jobs related to each product together.
4. Empower employees to make decisions.
This goes back partly to step two. Obviously, everybody can’t run the startup at the same time, but the power to make every decision, even big decisions, should not always be invested in management positions. Each member of the team should be empowered to make important decisions that will influence their groups and their own roles in the company. This will speed up the decision-making process, help mold employees into future managers, instill a sense of personal and team responsibility in employees, and endow the entire team with a sense of ownership.
5. Don’t let seniority dictate decisions.
Hiring, firing, and promotions should never be determined by how long a person has worked at your startup. Some employees get a sense of entitlement because they have been working there longer than others. However, decisions affecting the team should always be based on the merit of the employee. Hard workers and those who introduce and develop great ideas should be rewarded regardless of how short a time they have been at the company.
A clearly defined employee hierarchy offers a sense of structure and organization. Each person knows who to go to and who to discuss or assign different matters to at the appropriate time. While there are different types of hierarchies, finding out the right one that will work well for your business is of utmost importance for maintaining sanity and being productive.