Levels of Management

In many small business enterprises, the owner is the only member of the management team. But, as the size of an organization increases, a more sophisticated organizational structure is required. It is a normal practice to categorize management into three basic levels: (1) top-level management, (2) middle-level management, and (3) supervisory or first-level management. Figure 1.3 illustrates the levels of management. The duties and responsibilities at these three levels of management vary from organization to organization, depending upon the size, technology, culture, etc. prevailing in the organization.

The number of managerial positions at each level varies from organization to organization. In most of the organizations, there are more positions at the first-level, fewer in the middle, and very few at the top. Many describe this kind of an organizational structure as a pyramid, as the managerial positions gradually decline as one progresses towards the higher levels of management. The various activities performed at each of these levels of management are illustrated in Table 1.2.

Top-Level Managers
Top-level managers are usually appointed, elected or designated by the organization’s governing body. They are few in number, and they include job classifications such as the “Chief Executive Officer” (CEO), “President”, “Vice President”, “Senior Vice President” and “Executive Director.” Top-level managers are responsible for taking major decisions for the organization as a whole. The top-level managers are responsible for the overall activities of the business and are accountable for its impact on the society at large. They work to some extent with the middle-level managers in implementing the plans, and maintaining overall control over organizational performance.

In public limited companies, top-level managers report to the Board of Directors. Members of the board are selected by shareholders. Depending on the size of the company, the number of board members vary from 15 to 25. When a board comprises a majority of individuals who have close ties with the management, they essentially act as “rubber stamps.” But, on the other hand, boards with more outsiders operate more independently and are more proactive. Though it is a usual practice to elect the CEO as the chairperson of the board, a study has suggested that companies having an outsider as a board chairperson perform better, as he/she helps the board to monitor the performance of the top management objectively.

Middle-Level Managers
Middle-level managers deal with the actual operation of various departments in an organization. They are directly responsible for the performance of managers at lower levels. Their typical titles include “manager”, “director”, “chief”, “department head” and “divisional head.” The number of middle-level managers in complex organizations is far higher than other managers. These managers are responsible for implementing the plans and strategies developed by top management for the accomplishment of organizational goals. They look to the top management for direction and guidance and are answerable to them. In many organizations, middle-level managers serve as a source of innovation and creativity. Thus, they play a vital role in the success of the organization.

Due to the advent of information technology, online technical assistance has become available to first- level managers. This has resulted in making middle-level managers redundant and has thus reduced the number of middle-level managers in many organizations

First-Level Managers
First-level managers are directly responsible for the performance of employees involved in operations. They are usually called supervisors. They may be addressed by different names. In a manufacturing plant, the first-level manager may be called a foreman, in a research department – the technical supervisor, and in a large office – the clerical supervisor. First-level managers implement the operational plans developed by middle managers and take corrective actions, when needed. They are responsible for output variables like number of units produced, labor costs, inventory levels, and quality control. Since first-level managers act as a link between the management and the rest of the workforce, they often confront conflicting demands. In recent times, the power of these managers has gradually decreased because of union influence, the increasing educational level of workers, and the growing use of computers to track many activities formerly monitored by first-level managers.