The contacts on your iPhone will automatically be sorted by their last name, alphabetically. If you want to change this then follow these simple steps.
Step 1 Tap the 'Settings' menu
Step 2 Go into 'Mail, Contacts, Calendars' and scroll down to the 'Contacts' section
Step 3 Select the 'Sort Order' option and select either 'First, Last' to sort your contacts alphabetically by first name instead.
This is useful if you think of your contacts by their first names and not their surnames.