While there is an argument to be made that the government, and especially the military, must maintain a hierarchical structure, there is no compelling reason to use this structure exclusively for businesses and charities. The commercial and charitable groups of civil society are protected by the courts, the police, and the military. They could conduct their activities in many other ways. The exclusive use of the military model for businesses and charities is lame and accidental. Employing the hierarchical structure as the only structure within a society is an ancient custom, but it does not optimally serve the goals of every type of organization. Organizations in the private sector need to be free to adopt novel and customized structures, as well as existing ones that are rarely used. Any structure that organizes the delivery of products or services within a free market and does not violate the rights of individuals must be permitted.
For-profit businesses that are owned by their employees and not-for-profit cooperatives must be lawful options for the delivery of any product or service. The degree to which any of these organization is democratic or hierarchical must be decided by the members or the owners. An employee-owned company or a cooperative could have a strictly hierarchical structure or it might have a collection of groups that each function democratically within their purview. These alternatives and others might serve the goals of an organization better than the military model.
Often, the structure is hierarchical only because the goals and methods of the organization are not fully decided and the authority to change direction is very much of interest. Most start-ups soon fail, and the lack of planning is a major reason for this. If an organization has a constitution that describes the methods and intended path of the organization in great detail, the functions usually associated with high-ranking management become well-defined jobs, much like any other. A defined service is performed for an agreed compensation.
Even in a fully hierarchical organization, all employees or members would ideally have a contract describing their duties and their compensation. Too many workers are obliged to do whatever some higher-ranking person decides is needed at the moment. This is less egregious than slavery, but more egregious than it needs to be. The result can be abuse, unionization, many laws, resentments, and class envy.
The idea that some people are to be more respected than others is not productive, constructive, or psychologically healthy. Workers need to be compensated for what they do without assigning to them a relative social rank. A skilled task such as periodically analyzing and reporting the financial condition of a company is worth a substantial salary, but elements of a superior or subordinate relationship with other workers should not be included among responsibilities or obligations. Why? It is because worker resentment is counterproductive. Each job exists because the organization needs that particular service. Some jobs are worth more compensation than others, but that is no reason to define social classes.
In the United states, groups organized both for a social purpose and to return a profit for investors often conduct business under two corporations. This would be unnecessary if government did not reward some activities more than others with tax exemptions. It would only be necessary to account for the proper expenditure of charitable contributions as represented by the organization, in addition to following reasonable investment regulation.
One psychological factor that biases the choice of structure is the power motive. Aspiring to leadership roles for their conspicuous perquisites and social distinction rather than aspiring to become a member valued for constructive service is a too common. The incentives of leadership are wrong. The authoritarian features of leadership tend to corrupt people. Leadership roles which socially reward the power motive are injurious to personal relationships and to the culture as a whole. Even though it is widely tolerated, people can now prosper without it.