Boss or no boss – the pros and cons of a hierarchal setup in a startup

Hierarchy is bad for motivation — or at least this is what we often hear in startup office culture. Most startups have started using the term “team members” instead of “subordinates”, “managers” and so on. When a team contributes to the foundation of a business, creating a hierarchy often only leads to differences among employees that can eventually result in increased employee turnover in the long run. But, if your team is expanding, creating a hierarchy-driven structure becomes crucial for the smooth functioning of your business.

If you are going through the dilemma of choosing a hierarchical system or not, here are a few considerations that you must keep in mind:

Why is hierarchy good?

It helps address indecisiveness and increases accountability.

One of the greatest advantages of having a hierarchy-driven organisational structure is that you will always have someone taking full responsibility of the working teams, projects and even the fallbacks. Distributing power among your talented employees will ensure that everyone is aware of who is supposed to take the final call on both trivial and critical decisions and who would be kept accountable for struggles and failures. Without a hierarchy, keeping track of activities taking place in an organisation can be next to impossible for the top management.

It helps keep chaos in check.

Hierarchy also helps combat the chaos that would otherwise lead to a disruptive environment in the organisation. Distributing the power to make strategic and structural changes in the organisation is nothing but a recipe for disaster. Studies have shown that in organisations where the pecking order is unclear, team members become less committed to their work, resulting in decreased productivity and effectiveness.

In a good hierarchy-driven organisation, the power is pushed down. Only founders and CEOs should be able to make crucial key organisation-wide decisions in collaboration with senior team managers. The rest of the employees should be accorded with decision-making powers with respect to his/her key responsibility areas. Maintaining the level of power and authority at all levels with clear goals is your best bet to build an organisation that unveils simple and reasonable structure as opposed to a cumbersome and unmanageable one.

Why is hierarchy bad?

Not everyone is treated equally .

A fine example of a bad hierarchy is when the top management is treated with too much respect while the folks at the bottom are given little. The truth is that a lot of organisations confuse hierarchy with respect, and this is where things fall out. Motivation, respect and acknowledgement are three factors that drive your employees to stick around and, of all this respect tops the chart. If employees working at the lower base are treated badly because of their stature in the organisation, it would simply lead to a feeling of discontent and failed processes in the long run.

Top-level executives are granted too many perks.

In bad hierarchies, roles are defined in terms of status, which clearly means better pay packages and more perks for top and medium-level managers. This usually has a negative effect on other employees. The appraisal schedule and other monetary benefits for employees of all levels should be planned in a way that doesn't impact anyone’s self-esteem. Base these benefits on performance and deliveries. If, for instance, the senior manager of Team A wasn't able to meet his targets on time, rewarding him with a 30 percent appraisal merely based on his position and not his performance will only succeed in driving away hard working employees. Good hierarchies, on the other hand, make roles clear and explicit. People know what they’re responsible for and what they are expected to achieve, and the benefits they receive are aligned with their performance.

Hierarchy, by itself, isn’t the real issue. The predicament lies in the method utilised to distribute power and authority among employees. It is very important to assign responsibilities and power on the basis of an employee’s skills, performance and his/her overall capability to manage teams.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)