The Purposes of Top-Down and Bottom-Up Management Styles
Both the top-down and bottom-up styles of management offer significant advantages for the companies that leverage each approach. Both styles distinguish between high level and low level work, but how each management styles achieves this process varies widely. As with any business, the goals of each are to appropriately and efficiently think, teach, gain insight, and develop an overall leadership system that works well for the company and generates revenue.
The top-down approach can spawn many positive business impacts through unique aspects of management, including the following:
- Creating clear lines of authority
- Standardizing products and services
- Facilitating quality control
- Streamlining tasks and achieving goals quickly
By comparison, the bottom-up approach utilizes alternative ways of management to achieve success. These can include the following:
- Forming a unique perception of the company, its goals, and its employees
- Measuring operational risk (in terms of fraud, model, and employee risk)
- Reallocating assets and decision-making power
- Giving voice to all employees
What Is a Top-Down Policy?
The top-down policy, also referred to as autocratic leadership, is a management process driven by a business’ upper level of executives.
Senior project managers create company-wide decisions that trickle down to lower departments. The decisions are first weighed on variables like frequency and severity, and then made based on the higher or lower levels of such variables. Upper management gathers and acts upon the knowledge, which employees carry out.
This policy type relies on a hierarchy of high versus low rank employees — the high ranking individuals rely on it for the decision of tasks and goals, and the low ranking employees to complete tasks and achieve goals. This structured programming of management leads to neatly defined subsystems of employees and departments. Sometimes referred to as a stepwise design or decomposition, a system and its goals are broken down into compositional sub-systems in order to gain insight into the smaller aspects that make up a larger system. This format is made more specific with the assistance of black boxes, which make the backward-looking approach easier to follow as upper management pushes down decisions. There is a distinct splitting of work between employees in different departments. This delegation of tasks is sometimes referred to as reverse engineering or a big picture outlook because of the way larger goals are fragmented into small tasks that are then handed down to lower level employees.
There are many industries in the workforce that find this business approach especially appealing. In particular, designers, software developers, and engineers are drawn to the top-down policy because reverse product engineering often leads to the best final outcome. Similarly, investors leverage this policy because it is non data-intensive and analyzes the entire economy rather than the ebbs and flows of an individual business or sector of an industry. The top-down style is also leveraged across companies in an effort to budget effectively.
Top-down budgeting assesses the larger budgeting strategies of a company and allots a certain amount to certain departments, events, and employees. Well-known, popularized figureheads who own companies also leverage this approach. For example, the Martha Stewart Living company, owned and managed by lifestyle expert Martha Stewart, utilizes the top-down approach — therefore, Stewart makes the decisions, holds the most equity in the company, and drives the brand awareness due to her worldwide popularity.
The perks of top-down approach make it widely utilized across many industries. These benefits include the following:
- Decreased Risk: Since the highest level of management is also usually the most informed and most knowledgeable about the business, there is a decreased risk involved in the decision-making process when lower level employees are taken out of the equation.
- Strong Management: The upper authorities in a company will be able to determine best practices and reach goals easier with decisions created and enforced at the highest ranks of a business. Should you need to make immediate changes, a top-down change (also known as an executive-driven change) can come into play to resolve any problems within an organization, bypassing a slower decision making process involving lower level employees.
- Good Organization: Tasks are determined and filtered down company lines without any confusion because business goals are set by upper management and will not be affected by outside opinions.
- Minimized Cost: Lower level employees are free to complete their own tasks unique to their role in the company and aren’t saddled with the responsibility of setting company-wide goals.
Of course, there are also some downfalls to the top-down approach:
- Limited Creativity: Employees are siloed in their responsibilities and are unable to contribute to the overall goals of the company — sometimes leading to frustration and a lack of motivation to perform.
- Dictatorial: The approach can seem oppressive to the employees who aren’t a part of the process.
- Slow Response to Challenges: When a challenge arises as a result of a decision, it can take time for upper management to establish a solution because there are limited minds contributing to decisions.
What Is a Top-Down Approach in Business?
Companies utilize the top-down approach in order to assess, determine, and implement business decisions made by upper executives.
The processes are streamlined and communicated to lower rank employees, who carry out these tasks. Consequentially, projects are more easily managed, and risk is decreased significantly due to strategic decisions created from the top management. This approach relies on the executive level to decide how to prioritize, manage, and conduct everyday processes.
What Is Bottom-Up Communication?
Bottom-up communication revolves around the inclusion of all employees, their ideas, and their perceptions of the business in order to make the most informed decisions.
In this case, a business invites the entire team to participate in the company’s management and decision-making process. Communication and an all-encompassing approach is a vital aspect of this style of management, lending itself to the appropriate name of bottom-up communication.
The bottom-up communication style of business leverages all of its employee’s perceptions of business and ideas for the company. This process allows the company to identify its most targeted — and most appropriate — goals. Bottom-up communication is sometimes referred to as the seed model, as small ideas from each employee grow into complex, organic goals that lead to eventual successes. In a sense, there is a merging of employees and each of their roles into a broader focus dealing with the entire company. This forward-looking approach considers each aspect of a company by taking in the respective employees’ inputs to make a better decision for the entire company.
There are many industries that benefit from this holistic style of business management. These users embody the use of a pieced together system that creates a more informed, complex company with targeted goals. Sometimes known as parsing, businesses analyze a sequence of information in order to determine its overall function and structure, which leads to the most comprehensive view of a project. This gives way to the most appropriate decision. Biologists, pharmacologists, and people involved in the homebuilding industry all use small, pointed pieces of a project or company to generate a targeted goal. Banking companies in particular, like Ernst & Young, use the bottom-up approach to analyze aspects of their company in comparison to the microeconomic variables of the economy. These companies in wide-ranging industries benefit from having a well-rounded perception before jumping to quick decisions that may not have a positive affect.
In practice, this approach is extremely successful and results in many benefits for the companies who utilize it. These pros of practicing bottom-up communication include the following:
- Increased Company-Wide Communication: When every employee actively participates in the decision-making process, the overall communication among members of the organization will increase significantly.
- Build Morale: All members of the business community will feel included and valued, which fosters a supportive and communicative environment where employees can thrive and grow together.
- Share Solutions: A wide hearth of brain power goes into the problems of the company as they arise, which will result in quicker problem solving and more efficient solutions.
- Increased Collaboration: Employees of all levels are granted the opportunity to discuss problems, bounce ideas off of one another, and build trust across departments.
Despite the benefits of the bottom-up communication style, however, there are some potential pitfalls:
- Bogging Down of Employees: When all employees participate in larger decisions (that are typically saved for upper management), they can get bogged down by the sheer responsibility. Employees can be taken away from their own tasks and pulled into larger projects, causing them to lose precious time.
- Slowed Time Creating Plans and Reaching Goals: When many people with varying ideas contribute to the company’s decision-making process, conflicts and disagreements can arise. This can lead to delays in making plans and reaching goals.
- Inaccurate Reflections of Data: A variety of people working on the same projects simultaneously can cause skewed results and inaccurate decisions in the long term.
What Is the Bottom-Up Approach in Budgeting?
Businesses leverage the bottom-up approach in an effort to produce the most comprehensive budget plan for all departments, resources, and employees.
The approach gathers input from all members of the business and allots a certain dollar value to each department that is appropriate for their business needs. As a result of this inclusive approach to budgeting, every aspect of business is considered equally as the budgeting plan is created.
What Is Bottom-Up Approach in Project Management?
The inclusive nature of the bottom-up approach benefits project management. The open communication and shared solutions among all employees ensure that projects remain fluid and goals are achieved in a timely fashion.
As unforeseen events pop up during projects, targets are shifted through the open line of communication between business executive and lower-ranking employees. Collaboration fostered through the bottom-up approach gives businesses the transparency needed to maintain successful processes.
What Is Bottom-Up Leadership Style?
Keeping all employees, business processes, and departments in mind, leaders who adopt the bottom-up approach encourage input from all areas of the organization.
This leadership style allows for communication and continued fluidity as they are able to consider a greater number of opinions when making decisions. Rather than having a singular, overarching leader responsible for decision making, ideas are exchanged across a widespread group.
History of the Top-Down and Bottom-Up Approach
The development of the top-down and bottom-up approaches was a result of trial and error in managing, maintaining, and achieving success in a business. Although there are great differences in the two styles, both were created by developing a system that resulted in the most success, revenue, and employee happiness.
The top-down approach came to be in the 1970s, when IBM researchers Harlan Mills and Niklaus Wirth developed the top-down approach for software development field. Mills created a concept of structured programming that aided in the increased quality and decreased time dedicated to creating a computer program. This process was then successfully tested by Mills in an effort to automate the New York Times morgue index. Similarly, Wirth developed a programming language, named Pascal, that relied on the top-down approach to build this particular system. Wirth went on to write an influential paper on the topic, titled “Program Development by Stepwise Refinement,” that detailed the benefits of leveraging a top-down approach in project management, specifically within the software development field. From these studies completed by both Mills and Wirth, the top-down approach evolved into the popular management style discussed earlier.
The Origins of the Bottom-Up Approach
A more modern management technique, the bottom-up approach developed concurrently with a shift in focus towards Industrial and Organizational Psychology (I/O). Explained by the American Psychological Association (APA), I/O is defined as “the scientific study of human behavior in organizations and the workplace.” As I/O came to be a more widely-recognized study, there was a significant trend upwards in the use of bottom-up management. The field of I/O encourages employers to consistently value their employees and make their contributions to the company a top priority. This approach caused upper management to lessen their hold on decision-making power, and instead, allowed for lower ranking employees to contribute more frequently.
The Hawthorne Experiments, completed as early as 1924, found that employees who were given brighter lights at their work station were more productive than those who received dimmer lights. The belief behind this correlation was that employees were more likely to contribute more to the company when they felt cared for and valued. An advocate for the I/O movement and the bottom-up approach, Elton Mayo added to the human relations movement happening during the mid-20th century. Mayo believed that by improving the social aspects of the workplace, the company would ultimately benefit. Eventually, this led to the development of human resources (HR) departments. HR departments dedicated themselves directly to this newfound engagement to employees and their investment in the company. Even more radical divisions of bottom-up management have come to the surface in later years. One such approach is holacracy, which fully leans in to the bottom-up policy and is founded on ideas like transparent and moveable roles in a company, and a circular structure of authority instead of a vertical platform.
Industries that Use Top-Down and Bottom-Up Approaches
The top-down and bottom-up approaches have gained traction in certain sectors of the workforce. Sometimes a highly authoritative upper management and a delegation of tasks is better than employees with fluid roles and a large say in the decisions of a company, and vice versa. Below is a conclusive list of the industries that embody certain management styles over others.
- Investing/Banking: The top-down approach of banking focuses on how macroeconomic factors of the economy drive the market and stock prices, and then make business decisions accordingly. This approach is sometimes referred to as the big data bottom-up approach because of the large influx of numbers used to make company-wide decisions. The bottom-up approach in banking deals with microeconomic factors, focusing less on market cycles and more on an individual company’s performance in comparison to the larger market. Decisions are made on a case-by-case basis, and there is no dependency between companies.
- Nanotechnology: This industry utilizes both approaches for different purposes. The top-down approach is leveraged when developing molecular manufacturing strategies, whereas the bottom-up approach is ideal for developing conventional manufacturing strategies. In 1989, the Foresight Institute first applied bothy styles to the nanotechnology field.
- Neuroscience & Psychology: The ways in which people process information, and how they consequently analyze it, is part of both the top-down and the bottom-up approaches. Sensory input is thought of as a bottom-up approach because someone takes in information from the environment in order to make an informed decision. Comparatively, higher cognitive processes are thought of as a top-down procedure because these functions are done with little voluntary thought or outside influence.
- Public Health: The top-down approach in public health deals with programs that are run by whole governments of intergovernmental organizations (IGOs) that aid in combating worldwide health-related problems. HIV control and smallpox eradication are two examples of top-down policies in the public health sphere. The bottom-up approach is more plausible when combating local issues, like access to health care clinics. This approach invites the input of community members to deal with issues that affect people in closer proximity.
- Architecture: This category can be broken down based on two schools of art: the Ecole des Beaux-Arts School of Design and the Bauhaus. The former begins designs with a basic drawing plan that outlines a project in full, lending itself to a top-down approach. The latter starts by developing a small-scale system that will eventually become a larger, more architectural piece, making it a bottom-up approach.
- Ecology: There are top-down and bottom-up structures that are part of our natural world. In some ecosystems, top predators control the structure of a population. This is an example of a top-down approach. In comparison, other ecosystems exist on a bottom-up approach. These ecosystems, like some marine ecosystems, rely on the productivity of the primary producer at the lowest level to maintain the functionality of the rest of the population.
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