A clear line of command is important to your business!
There are some organizations where a clear line of command always exists, the army for example couldn't survive without one. In private business the line of command is not always as clear and this can be a problem. It is important that you have a clear line of command and that everybody knows what it is. This will make your business much more efficient and help you to avoid a lot of problems that occur when it is not clear who is charge.
The reason that you have to have a clear line of command for your business is that it ensures that everybody knows who is responsible for what. All of your employees need to be clear about what their responsibilities are and a line of command does just that. Equally important it makes sure that people know who reports to who, there should never be any question about who is in charge. If there is it will create a situation where work is not being done in an efficient manner as excess discussion will be necessary.
Another reason that you have to have clear chain of command is that it makes communication much more effective. It should be a simple matter for the people at each level to pass information to the people below them and then allow them to inform the people below them. The same goes when things need to get passed up the chain of command, it should be clear who needs to be told when there is important information and how that information is to be passed up the chain.
A clear line of command also makes it much easier to delegate responsibility. It would be impossible for the president of a large company to get involved in deciding who will do what at the lower levels, there could be thousands of employees, it would take far too much time. Being able to delegate down the line of command makes sure that responsibility can be assigned to the right people. It also means that it can be done in a very short time since it should be able to move down the line very quickly.
Another reason that you want to have a clear line of command is that it helps to make the people who work for the company feel more involved. If all of the direction comes from a president who they never meet they are going to feel like faceless cogs in the company. However if they have a supervisor who they deal with directly one a regular basis they are going to feel much more important. This supervisor should of course be a good leader in order for this to work. As long as he is a good leader he should be able to get the best out of the employees and make them feel like important members of the team.