The Evolution of Hierarchy toward Heterarchy: A Case Study on Baosteel’s Managerial Systems

Abstract

In recent years, the hierarchical nature of organizations is severely criticized. Will hierarchy be gradually replaced by networks? Or else, will it be revitalized through certain variations while remaining its distinct characteristics in the vertical relationship between upper and lower levels of an organization? Drawing upon research on “administrative organization” by Simon (1962), this research is based upon an in-depth case study on Baosteel, one of the “Fortune Global 500” Chinese iron & steel conglomerate. We find that heterarchy is a variation of hierarchy and applicable in both systems of operations management and strategic management. Moreover, the seemingly paradoxical decentralization of authority and concentration of business activities are discovered as the key driving forces in the formation of hierarchical structure. The existence of heterarchy adds variety to organizational world.

Keywords

hierarchy / heterarchy / vertical specialization

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2014 Higher Education Press and Brill