Organizational structures are hierarchies of command. There are two major types: tall and flat. The main difference between tall and flat organizations is how information flows through the enterprise. The three-tier structure is classified as a flat hierarchy. Modern organizational theory favors the flat structure because the free, two-way information flow it embodies tends to encourage innovation -- an important enterprise trait in the rapidly changing technology industry, and in the industries that adopt technology to foster more rapid growth.
Tall Organizational Structure
A tall organizational structure is normally thought of as an old-style bureaucracy. It is composed of a small executive decision-making level, with several management levels under it, such as regional managers, department managers, administrative managers, and so on down the scale of authority. The staff employees, who perform the day-to-day work of the company and interface with the consumers, are at the bottom of the hierarchy. Information flows from the decision makers at the top down through layers of management, where each manager conveys the decisions from above and exercises authority over the managers below. There is little upward flow of information, and the staff levels carry out the orders from above, rarely reporting the actual efficacy of those orders on daily work and customer interaction.
Flat Organizational Structure
A three-tier organizational structure is more of a flat structure, but not as flat as they come. Some flat organizations place a broad executive management level just above the staff level. Another type of flat structure is the matrix organizational structure, which groups executive managers with staff according to projects. The value of a flat structure is the immediate two-way flow of information, which keeps decision makers close to the results of their decisions, and allows rapid change if those results are not meeting enterprise goals. A two-tier or matrix structure works well for the production of products where information flows horizontally between design, manufacture and sales. In an organization made up of many retail stores or sales branches, efficiency often dictates the introduction of regional or divisional managers between the executive level and the staff. Information flows horizontally between staff and management, and is reflected by management to the executive level.
Three-Tier Organizational Structure
A three-tier organizational structure is a standard hierarchical method of managing a large, wide-spread organization. It separates the top-level decision makers -- the board of directors, chairman of the board, chief executive officer, chief financial officer and chief operations officer -- from the bottom-level staff by a middle layer of management oversight generally made up of regional, divisional or subsidiary managers. In a three-tier structure, information flows both ways between staff and managers, and between managers and the executive level. In this structure, managers generally have the authority to make changes to directives from the executive level.
The flatter the organizational structure, the greater influence staff has on the direction of enterprise initiatives and decisions. This encourages a staff employee to innovate to solve problems. In a three-tier structure, staff and managers work together to overcome obstacles in the local business, with the authority to do so granted by the executive level. In many ways, a three-tier structure resembles a matrix structure, as management and staff collaborate on local production within their divisions and report their performance back to the executive level.
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