Hierarchy is a structural system directly connected to a chain of authority. In business hierarchy is important for many reasons and while the foundational structures and formality of hierarchy found in organizations may vary, you'll typically find hierarchy serves a role in the way a business is led.
There are different kinds of leadership structures. The hierarchal structure is traditionally constructed as a top to bottom kind of arrangement for business management, but this is not the only option.
Modern businesses have increasingly turned to a more flattened and team-oriented structure. The kind of hierarchy chosen for an organization typically will be related to the organizational culture of the company.
While the flattened hierarchy has become popular, there are some businesses that operate better on the traditional model of leadership; primarily large organizations tend to operate more efficiently on the top to bottom hierarchy style. The reason for this is often that too little hierarchal organization can lead to chaos and disorganization.
There are many different styles and qualities to lead; some are more dominating and others allow for employee empowerment. Companies that embrace modern leadership techniques are geared towards empowerment, but all forms of hierarchy serve a useful purpose and play an important role in business.
For many reasons it is beneficial to have employee input and allow levels of empowerment and autonomy. When this is encouraged differing perspectives and viewpoints can be reached; this allows for heightened innovation and creativity. A more 'flat' hierarchy also allows multiple line members of the organization (managers and employees) to participate and understand why and how decisions are being made.
While this perhaps presents an argument for less hierarchy, it should also be recognized that there is an entirely other process to implement decisions, and this is where a leader comes into play. Without a person to oversee the organization and put together a strategic plan, often ideas remain idle and do not evolve into action.
Some level direction is essential for every organization. While leaders do not need to micro-manage and dominate every aspect of an organization, formal guidance is necessary to an extent which is why all organizations need some form of hierarchal leadership.
In the hierarchy, a leader who provides motivation, inspiration and coaching will probably experience good results and get a positive reaction from employees. While maintaining standards, flexibility can be exercised as well such as experienced in the flattened organization.
Hierarchies provide leadership, direction, and division of labor. Without hierarchical presence chaos and disorganization could occur in a company, and even the most modern companies who are gravitating towards more flattened types of management still need an element of traditional hierarchy.