Management Levels and Types

Top-Level Management

Top-level managers determine broad strategic strokes for the organization in general, and focus on the big picture.

Learning Objectives

Understand the responsibilities and characteristics of top-level management

Key Takeaways

Key Points

  • Vertically ordering managerial functions allows managers at different tiers to focus on different ranges or scopes of organizational behavior and strategy.
  • One of the weaknesses of this type of managerial organization is that it can polarize power and salary, as well as create a rigid structure that reduces information flow.
  • Top-level managers (such as CEOs) tend to be big-picture strategic thinkers with a substantial amount of experience in the industry and/or function they manage.
  • The executive team focuses on determining long-term strategy, strategic alliances, large financial decisions, and management of stakeholders (and the board of directors).

Key Terms

  • hierarchical: Ranked in some order, often order of importance or power.

Some views on management revolve around vertical differentiation, or creating an hierarchical view of managers. This is useful to visualize in a chart, where top management is logically at the top, overseeing the entire organization. Middle managers are in the middle, acting as a bridge between upper management and certain work groups. Lower managers are task or process oriented, managing functional specialists and projects.

The Pros and Cons of Vertical Thinking

The primary advantage of this perspective is that different management professionals can view the organization from different angles. Top-level managers tend to focus mostly on strategy and bigger picture thinking, while middle managers focus on aligning a large work group towards shared objectives. Frontline management thrives in pursuing operational efficiency, hiring on entry and mid-level talent, and assessing performance.

On the downside, this tends to consolidate power at the top of the organization, of building steep corporate ladders and often heavily polarized income. It can also create one-way information flows, where top management creates plans without understanding the core processes of the organization. Managing organizations vertically can reduce flexibility and agility.

This is an organizational structure example which cleanly demonstrates a vertical delegation of managerial responsibilities. The higher the level of management, the broader their scope. This means that lower level managers have a high degree of detail-orientation.

FedEx Organizational Structure: This is an organizational structure example that cleanly demonstrates a vertical delegation of managerial responsibilities. The higher the level of management, the broader their scope. This means that lower level managers have a high degree of detail-orientation.

Top-level Management

Core Characteristics

High level managers tend to have a substantial amount of experience, ideally across a wide variety of functions. Many high-level managers become part of an executive team by mastering their functional disciplines across various roles, becoming the Chief Operations Officer (COO), Chief Marketing Officer (CMO), Chief Technology Officer (CIO or CTO), Chief Financial Officer (CFO) or Chief Executive Officer (CEO).

Top management teams are also often industry experts, having a close association with the long term trajectory of the businesses they operate in. They often benefit from being charismatic, powerful communicators with a strong sense of accountability, confidence, integrity, and a comfort with risk.

Responsibilities

The primary role of the executive team, or the top-level managers, is to look at the organization as a whole and derive broad strategic plans. Company policies, substantial financial investments, strategic alliances, discussions with the board, stakeholder management, and other top-level managerial tasks are often high-risk high return decision-making initiatives in nature. Top-level management roles are therefore often high stress and high influence roles within the organization.

Middle-Level Management

Middle management is the intermediate management level accountable to top management and responsible for leading lower level managers.

Learning Objectives

Recognize the specific responsibilities and job functions often assigned to middle-level management professionals

Key Takeaways

Key Points

  • Middle management is at the center of a hierarchical organization, subordinate to the senior management but above the lowest levels of operational staff.
  • Middle managers are accountable to top management for their department’s function. They provide guidance to lower-level managers and inspire them to perform better.
  • Middle-management functions generally revolve around enabling teams of workers to perform effectively and efficiently and reporting these performance indicators to upper management.
  • Middle management may be reduced in organizations as a result of reorganization. Such changes can take the form of downsizing, ” delayering,” and outsourcing.

Key Terms

  • mentoring: Acting as a teacher or guide; providing advice and direction for one less experienced.
  • delayering: A planned reduction in the number of layers of a management hierarchy.

Defining Middle Management

Most organizations have three management levels: first-level, middle-level, and top-level managers. These managers are classified according to a hierarchy of authority and perform different tasks. In many organizations, the number of managers in each level gives the organization a pyramid structure.

Middle management is the intermediate leadership level of a hierarchical organization, being subordinate to the senior management but above the lowest levels of operational staff. For example, operational supervisors may be considered middle management; they may also be categorized as non-management staff, depending upon the policy of the particular organization.

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Four-tier pyramid: Workers, middle managers, senior managers, and executives: This figure illustrates the hierarchy of management within an IT department. Note that middle management is tasked with (1) their tier of technical skills, i.e. information management systems, as well as (2) communication of system efficacy upward to senior managers and (3) delegating tasks downward to workers.

Middle-Management Roles

Middle-level managers can include general managers, branch managers, and department managers. They are accountable to the top-level management for their department’s function, and they devote more time to organizational and directional functions than upper management. A middle manager’s role may emphasize:

  • Executing organizational plans in conformance with the company’s policies and the objectives of the top management;
  • Defining and discussing information and policies from top management to lower management;
  • Most importantly, inspiring and providing guidance to lower-level managers to assist them in performance improvement and accomplishment of business objectives.

Middle managers may also communicate upward by offering suggestions and feedback to top managers. Because middle managers are more involved in the day-to-day workings of a company, they can provide valuable information to top managers that will help them improve the organization’s performance using a broader, more strategic view.

Middle-Management Functions

Middle managers’ roles may include several tasks depending on their department. Some of their functions are as follows:

  • Designing and implementing effective group work and information systems
  • Defining and monitoring group-level performance indicators
  • Diagnosing and resolving problems within and among work groups
  • Designing and implementing reward systems
  • Supporting cooperative behavior
  • Reporting performance statistics up the chain of command and, when applicable, recommending strategic changes

Because middle managers work with both top-level managers and first-level managers, middle managers tend to have excellent interpersonal skills relating to communication, motivation, and mentoring. Leadership skills are also important in delegating tasks to first-level managers.

Middle management may be reduced in organizations as a result of reorganization. Such changes include downsizing, ‘delayering’ (reducing the number of management levels), and outsourcing. The changes may occur in an effort to reduce costs (as middle management is commonly paid more than junior staff) or to make the organization flatter, which empowers employees, leaving the organization more innovative and flexible.

Frontline Management

Frontline management balances functional expertise with strong interpersonal skills to optimize specific operational processes.

Learning Objectives

Recognize the core competencies and common responsibilities of frontline management

Key Takeaways

Key Points

  • Management is sometimes viewed through a hierarchical frame, dividing management groups by frontline, middle, and upper levels.
  • Separating management vertically allows different management groups to focus on different organizational scopes. Frontline managers are more zoomed in, whereas executives are more zoomed out.
  • Frontline managers often balance a functional or technical understanding of those who report to them with the interpersonal skills of a manager.
  • This form of leadership requires a strong ability to communicate, mentor, train, hire, organize, optimize processes, and prioritize.

One perspective that can be taken on management is a hierarchical view. Under this perspective, managers are responsible for different degrees of organizational scope, which can be visualized as having responsibility over a larger volume of processes and people. When illustrating this concept, the lower level managers are at the bottom of the chart (often shaped something like a pyramid) while the executives are at the top.

This is a simple example of an organizational chart, in this case the U.S. Coast Guard. This is a particularly good example of hierarchical thinking, as militarizes often function with a high degree of hierarchical authority.

USCG Organization Chart: This is a simple example of an organizational chart, in this case for the U.S. Coast Guard. This is a particularly good example of hierarchical thinking, as the military functions with a high degree of hierarchical authority.

Why Differentiate Management

When looking at different levels of management from a vertical frame, the value of separating management this way essentially allows different amounts of scope. The expression ‘seeing the forest for the trees’ is a particularly useful anecdote for the purpose of the upper managerial teams.

The objective at the top of the hierarchy is to consider mid and long term strategy for the organization at large. Middle managers usually take a more specific aspect of this larger strategy, and ensure a more detailed implementation. Managers on the front line focus almost exclusively on effective execution, and are often much more short-term oriented. This allows each class of management to narrow their focus enough for the work to actually be manageable.

Front Line Management

At the front line, managers are often highly skilled and even functional specialists. A front line manager is best positioned when they focus on controlling and directing specific employees (think in terms of supervisors, team leaders, line managers, and project managers).

Skill Sets

A front line manager needs to have two distinctive skill sets: the interpersonal skills to manage people as well as the technical expertise to be among the front lines actively executing functional tasks. As a result, frontline managers are often highly valuable team members with the versatility to contribute in various ways.

Core skill sets for frontline managers can change depending on what function they are overseeing. However, on the interpersonal side they should be effective at:

  • Communicating
  • Observing and actively listening
  • Giving and receiving feedback
  • Prioritizing
  • Aligning resources
  • Organizing processes and tasks

Responsibilities

Responsibilities of a frontline manager will therefore come in two flavors. The first is the expertise required to do whatever it is they are managing. If we are talking about an accounting manager, they must be able to balance the books and understand enough of everyone’s specific function to fill the gaps. If it is a frontline manager on an automobile manufacturing facility, the manager should be aware of how to run most of the machines and how to assess the productivity of different positions (ideally from experience).

On the managerial side, frontline managers are often tasked with hiring, assessing performance, providing feedback, delegating functional tasks, identifying gaps, maximizing efficiency, scheduling, and aligning teams. As the primary point of contact for most employees, frontline managers must be careful listeners capable of understanding employee needs, removing blockers, and optimizing performance.

Functional vs. General Management

General managers focus on the entire business, while functional managers specialize in a particular unit or department.

Learning Objectives

Differentiate between functional management and general management from a business perspective

Key Takeaways

Key Points

  • General management focuses on the entire business as a whole (a top-down organizational view).
  • A functional manager is a person who has management authority over an organizational unit—such as a department—within a business, company, or other organization. Under functional management, direct reports reside in the same department.
  • A general manager is responsible for all areas and oversees all of the firm’s functions and day-to-day business operations. The general manager has to communicate with all departments to make sure the organization performs well.
  • General management and functional management have many similarities; the primary difference is that a functional manager focuses on one facet of an organization, while the general manager must keep everything in view.

Key Terms

  • staffing: The practice of hiring and firing staff.
  • delegating: Assigning a task to somebody, usually a subordinate.

Functional management and general management represent two differing responsibility sets with an organization. Functional managers are most common in larger organizations with many moving parts, where different business functions are led by managers within those respective fields (i.e. marketing, finance, etc.). General management is more common in smaller, more versatile, environments where the general manager can actively engage in every facet of the business

Functional Management

Besides the heads of a firm’s product and/or geographic units, the company’s top management team typically consists of several functional heads (such as the chief financial officer, the chief operating officer, and the chief strategy officer). A functional manager is a person who has management authority over an organizational unit—such as a department—within a business, company, or other organization. Functional managers have ongoing responsibilities and are not usually directly affiliated with project teams, other than ensuring that goals and objectives are aligned with the organization’s overall strategy and vision.

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Functional vs. general management: This chart shows a particular organizational hierarchy employing both general and functional management. Each functional manager is in control of a particular area of expertise—e.g., operations or policy and planning—and the general manager supervises all the functional managers.

General Management

General management focuses on the entire business as a whole. General management duties and responsibilities include formulating policies, managing daily operations, and planning the use of materials and human resources. However, general managers are too diverse and broad in scope to be classified in any one functional area of management or administration such as personnel, purchasing, or administrative services.

General managers include owners and managers who head small-business establishments with duties that are primarily managerial. Most commonly, the term general manager refers to any executive who has overall responsibility for managing both the revenue and cost elements of a company’s income statement. This means that a general manager usually oversees most or all of the firm’s marketing and sales functions, as well as the day-to-day operations of the business. Frequently, the general manager is responsible for effective planning, delegating, coordinating, staffing, organizing, and decision making to attain profitable results for an organization.

While both general and functional management involve similar skills (interpersonal skills, communication, multitasking, etc.), the critical difference is that a functional manager often “zooms in” to one particular aspect of a broader operational paradigm. The general manager must be more of a jack-of-all-trades, understanding enough about various different gears in the machine to ensure it is running properly.

McDonald’s offers an example of ways to understand both types of management. McDonald’s has functional managers at the corporate level who discuss advertising strategies, assess financials, discuss expansion, and so forth. Meanwhile, general managers run individual stores, focusing on the quality of service, operational efficiency, local tastes, etc. at their store.

Management in Different Types of Business: For-Profit, Non-Profit, and Mutual-Benefit

Managers must adjust their management style to fit the type of organization.

Learning Objectives

Apply managerial styles within different business types and to accomplish different objectives

Key Takeaways

Key Points

  • For-profit corporations are administered to earn profit to increase the wealth of their owners. Managers in for-profit organizations focus on the system and production.
  • A non-profit organization must dedicate its operations to achieve a charitable or educational goal. A manager must ensure that the organization’s operations are solely dedicated to achieving that goal. A manager of such an organization is not focused on generating profit.
  • Mutual- benefit corporations are usually formed for non-profit purposes, such as managing a condo association. The managers of such an organization are concerned about improvements in human and environmental well-being rather than maximizing profits for external shareholders.
  • While all types of organizations are tasked with managing resources efficiently, for-profits and non-profits have differentiated management styles, in many instances, because of differences in motivation (e.g., non-profits must rely on fewer monetary rewards).

Key Terms

  • mutual-benefit non-profit corporation: A type of nonprofit corporation chartered by a state government that exists to serve its members.
  • non-profit: An organization that exists for reasons other than to make a profit, such as a charitable, educational, or service organization.
  • for-profit: An organization engaged in the trade of goods, services, or both to customers with the goal of earning profit to increase the wealth of the business’s owners.

Management style is influenced by the goals and purpose of the organization, which are in large part established by the type of business being managed.

Management in For-Profit Organizations

A for-profit business is an organization engaged in the trade of goods, services, or both to customers with the goal of earning profit to increase the wealth of the business’s owners. Managers have to direct their efforts towards achieving that goal.

Management in Non-Profit Organizations

In contrast, a non-profit organization is legally prohibited from making a profit for owners. All income generated by a non-profit’s activities must be used to achieve the charitable or educational purpose defined in the organization’s bylaws. The managers of non-profits must always be aware of that charitable purpose and ensure that the organization’s operations conform to those purposes.

One component of nonprofit management that contrasts with the for-profit model is the existence of volunteer workers. Non-profits’ lack of free-flowing capital means they rarely have the resources to staff the organization sufficiently. In this scenario, managers often reach out to individuals passionate about the organization’s mission to contribute through monetary donations or volunteer hours. Managing volunteers is different than managing employees, as there is essentially no contract or agreement governing the relationship. This means managers must motivate by community-building and a sense of shared accomplishment.

Management in Mutual-Benefit Organizations

A mutual-benefit non-profit corporation can be non-profit or for profit. However, mutual benefit corporations are usually formed for nonprofit purposes like managing a condo association, a downtown business district, or a homeowners association. A mutual is therefore owned by its members and run for their benefit; it has no external shareholders to pay in the form of dividends, and as such does not usually seek to generate large profits or capital gains. Managers in mutual benefit organizations are, therefore, more concerned about improvements in human and environmental well-being than maximizing profits for external shareholders.

Comparing Management in For-Profit, Non-Profit, and Mutual-Benefit Organizations

The management of all three types of organizations (for-profit, non-profit, and mutual-benefit) may have similar responsibilities, such as drafting a budget and ensuring that the organization generates enough revenue to fulfill its operational needs. Management will need to plan, organize, direct and control the business’s activities. All three types require that management motivate employees.

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Management processes: Management styles vary among types of organizations, but they still follow the main steps of planning, organizing, directing, and controlling.

However, the approach managers take will vary based on the type of organization. For example, a manager of a for-profit company may be able to motivate employees through bonuses for sales targets or profit sharing. This strategy cannot work for a non-profit or mutual-benefit corporation. In those cases, management must either appeal to the employees’ sense of duty to the mission of the non-profit or to the benefit they would receive from a well-run mutual-benefit corporation. While every organization poses different challenges, effective managers consider the type of organization and adjust their style to fit those circumstances.