We propose that hierarchy is such a prevalent form of social organization because it is functionally adaptive and enhances a group's chances of survival and success. We identify five ways in which hierarchy facilitates organizational success. Hierarchy (a) creates a psychologically rewarding environment; (b) motivates performance through hierarchy-related incentives; (c) capitalizes on the complementary psychological effects of having versus lacking power; (d) supports division of labor, and, as a result, coordination; and (e) reduces conflict and enhances voluntary cooperation. Overall, we specify a causal model linking organizational structure (hierarchy), processes (motivation, leadership, coordination, and cooperation) and outcomes (performance). We also discuss three variables that moderate the need for and acceptance of hierarchy — (a) the level of task interdependence; (b) the legitimacy of hierarchical differentiation; and (c) the alignment of different bases of hierarchy — and link them to the mediating processes through which hierarchy facilitates organizational success.