Top-down management is de rigueur for most businesses with directives passed down from above. This style typically follows a command-and-control ethos with more coercive and authoritative leadership. Like it sounds, the structure is hierarchical and goals, projects and changes are passed from top to bottom. There are pros to this autocratic approach, with strong characters and high authority figures providing clear direction. Alternatively, there is the bottom-up approach, which leverages employee input and gives staff a voice in how an organisation is run. Today, we discuss top-down management or bottom-up management pros and cons.
Top-down management
If you haven’t experienced top-down management, you are probably in the minority. If you have worked in a large organisation, this is the way. Many large, well-established and listed companies operate this way with strict authority and formal controls. It is little wonder with so much at stake in terms of share price and regulatory oversight. In such circumstances, there is often great disparity in remuneration between frontline employees and the top dog. According to The Guardian, FTSE 100 CEOs are paid an average of £3.4m, which is around 103 times the average salary of a full-time worker. Aside from an extraordinary package to justify, it requires a level of authority to manage challenging external stakeholders. Such leaders are often pulled in front of investigative committees and government hearings when things go wrong.
Pros of top-down management
- Centralised decision-making
- Clarity of purpose and goals
- Strong controls and governance
- Rapid change (in smaller organisations)
- Frontline staff can focus on doing their work
Cons of top-down management
- Autocratic
- Disengaged employees
- Decisions based on partial information
- Limited innovation
- Slow to respond to crises (in larger organisations)
Bottom-up management
Clearly, bottom-up management is the antithesis of the former approach. Here, employees get to have a say in what goes on. They provide feedback on their own experience and collaborate with other areas of the organisation. In such organisations, senior management often act as a support function for the rest of the business. This has parallels to the Chinese approach to business, providing the tools, applications and resources for frontline employees to innovate and follow through on new ideas. Bottom-up is also less hierarchical in approach with the people you employ helping to innovate and change for the better. In general, this is not a common model in occidental culture, with a high value placed on the best and brightest who reach the top. A few examples in the UK might include Co-Op, Timpson and John Lewis, who plough a more democratic furrow in their organisations.
Pros of bottom-up management
- High employee engagement and morale
- Greater innovation and creativity
- Distributed ‘ownership’ may reduce overall risk
- Greater autonomy and commitment to the cause
- Develops critical thinking to overcome challenges
Cons of bottom-up management
- May lessen clarity of purpose and goals
- Can be slow to gain consensus
- Making practical plans can be challenging
- Distraction from doing the job
- Greater opportunity for conflict
Management alternatives
Moving from top-down management or bottom-up management requires a cultural shift in an organisation. A top-down approach is difficult to discard with scepticism and suspicion running amok as to the true intentions. Similarly, a bottom-up approach is difficult to abandon and is perhaps perceived as a backwards step. Whereas a top-down approach is driven by macroeconomic trends and top executive experience, bottom-up is driven by employee ideas and lobbying. In both cases, these are mainly inside-out approaches to managing a business. That means that the organisation makes decisions based on where it sees the market going and using the resources it possesses.
Outside-in management
Some businesses take an outside-in approach to management, with purpose and goals driven by customers. In this hyper-competitive world, it is insufficient merely to win a customer. Peter Drucker is often quoted as saying that, “There is only one valid definition of business purpose: to create a customer.” He also went on to say that “The customer is the foundation of a business and keeps it in existence”. Today, a long-term future stems from an enduring relationship with the customer who is willing to continue to buy goods or services from you.
In summary, there are far too many alternative choices out there to treat winning business as a ‘transaction’. Furthermore, there are many benefits from adopting an outside-in approach, led by what truly matters to customers. These include higher customer satisfaction, less complaints and escalations and improved employee experience. Done right, such as in the case of Apple, it becomes a competitive advantage to be led by those who keep buying your wares.
Hybrid management
We tend to like to put things in neat little boxes and point to our approach as something recognisable. But what if the best approach is actually a combination of the others? Can we retain a top-down management style but increase employee involvement? Can we put more structure and control around a bottom-up approach? What if both approaches adopted an element of outside-in strategy? Many management experts will say that this approach is destined for failure and requires a complete organisational transformation.
An outside-in approach, without the guardrails and discipline that the top-down (often larger) organisation is ‘comfortable’ with, can create disruption and sacrifice efficiency. What this omits is the potential value creation and failed demand captured that may outweigh the loss of a small amount of efficiency. Similarly, the leaders in the organisation may need to change in any change in management approach. Their values, beliefs and approach may be incongruent with taking input from customers or employees.
More management pros than cons
In conclusion, organisations need the will to change their management approach. Whether the organisation’s fortunes have taken a turn for the worse or leadership has identified some risks in long-term survival matters not. We can all benefit from displaying a little more humility in our lives, our businesses and our decisions. Ultimately, we may not possess all the answers. Is top-down management or bottom-up management better? Which model suits my organisation’s needs? Organisations have their challenges and they also have competitors for their people, not just their customers. In some cases, the case to change is not an option, it is a necessity to stay relevant to current and future employees and to strengthen those customer relationships.
If you would like to explore this topic further, why not read about an improvement culture or why winning can hold back your business. There are also our thoughts on the importance of culture to employees.
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