What's the value of hierarchical organizations?

One of the main goals of socialists is to abolish hierarchy. They seek to do this by abolishing capitalism, which they see as inherently hierarchical. Advocates of free markets have pointed out, however, that it is perfectly possible for a non-hierarchical organization to exist under a capitalist system, that socialists would have every right to form private co-operatives and such in a free society. Nevertheless, we have to admit that such is not common practice under modern capitalism (or quasi-capitalism): the vast majority of corporations, partnerships, and other private organisations have a strictly hierarchical structure with a boss at the top, administration below him, and rows and rows of employees of various rank below that. Why is this the case? What are the advantages of hierarchical organization? Would a free society be more or less hierarchical?