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.