The chain-of-command principle refers to the relationship of the reporting mechanism within an organization. A chain of command establishes the line of authority within the organization—i.e., who reports to whom and how all employees are linked within the company.
There are essentially two components that constitute a chain of command, namely unity of command and the scalar principle. “Unity of command” means that each individual reports to one (and only one) boss or supervisor. This is a vital issue in that all employees need to know from whom to accept commands and to whom they are directly accountable. Unity of command establishes the legitimate authority that a supervisor has over his/her workers. In reality, it legitimizes the right of the supervisor to make decisions, to allocate resources, and to direct an employee in his/her job. It gives authority to the supervisor to give an employee orders and then hold that person accountable in carrying out those orders. This legitimate authority is vested in the position and not the person.
Upholding unity of command in the organizational design provides structure and clarity for employees in the workplace. In management, one organizational structure breaks the unity-of-command rule—specifically, the matrix design, which imposes a lateral reporting relationship on top of the traditional vertical reporting relationship that results from unity of command. Thus, a dual reporting relationship emerges, and the employee is accountable to two bosses or supervisors. A major disadvantage of the matrix is that it can result in inefficiency and discord if the two supervisors do not coordinate the employee’s time. A major advantage is that the talents of one employee can be utilized more fully, resulting in greater efficiency in the use of a company’s human resources. Ultimately, however, when an unresolved dispute arises between the two supervisors, the matrix design collapses to unity of command, with the one supervisor over the two disputing supervisors resolving the issue.
The second component in chain of command is called the scalar principle. This term means that an unbroken line can be traced from the lowest employee on the organizational chart to the chief executive officer (CEO). This unbroken line represents the line of authority and reporting relationship within the company.
Referring to the organizational chart, formal lines or channels of communication can be identified. Information within an organization is often passed through formal channels. This is especially the case with paperwork that needs approval to conform to company policies.