Hierarchies and Size: A Problem of Identification

Abstract

This paper shows that logarithmic transformation of the number of employees in an organization is nothing other than an approximation of the number of levels of hierarchy in that organization. Since the log of the number of employees has been used extensively in the literature as a measure of 'size', many of the empirical findings concerning the relationships between 'size' and organizational structure variables need to be re-examined. In particular, correlating the log of the number of employees with the number of levels of hierarchy amounts to correlating two different empirical measures of the same variable. Understanding the real meaning of the logarithmic transformation of the number employed should shed a different light on the interpretation of many earlier empirical studies.