All companies must have a clear strategy in place for decision-making and project planning for the most efficient use of their resources. The two most common approaches used by businesses are the top-down and bottom-up planning methods.
Creative industries may find more benefit from using the bottom-up approach, whereas new startups will find top-down planning more accessible to implement.
Top-Down Planning Defined
The top-down management style is used when business processes and systems are determined by upper-levels of management, starting with the chief executive officer (CEO). The decision-making process lies within the hands of a select few and is delegated throughout the company.
In the top-down planning method, the global objectives and strategies are defined at the top. These plans are then moved gradually to the lower organization levels to be specified and further developed.
Also referred to as retrograde planning, this approach relies on an organization's management to identify the framework plan based on company goals, market research, and growth targets. Sub plans and subordinate levels of planning are outlined and given to respective departments and employees at lower levels.
Bottom-Up Planning Defined
Companies that choose not to take on a top-down approach are driven by the desire to diversify decision-making in an inclusive environment. This is a collaborative project management method, where the entire organization will participate in setting goals and determining the direction of operations.
Autonomous teams are assembled based on their expertise and are then self-directed in their approaches to complete tasks, rather than having to follow rigid strategies set by upper-level leaders. Though this approach is less common than top-down management, large companies such as The New York Times have tried the bottom-up management style.
Also known as progressive planning, this method focuses on the development of particular services or products within a company in a specific location based on data such as demand forecasts, market trends, and production capacity.
Top-Down Planning - Pros and Cons
As the main organizational hierarchy, top-down planning has many advantages, including the following-
- The objectives of the sub-plans across all levels of the company correspond to the company's overall objective.
- Time and resources are saved by not having to focus so much on coordination.
- Clear goals and expectations are set with one person delivering the instructions, rather than multiple people and opinions making the task organization more complex.
- With the singular leadership style of top-down planning, middle management has direct orders to act upon, without having to move through many channels of decision-making. This saves time and allows more clarity for their delegation of tasks to lower-level employees.
However, if there is no clear leadership structure or there is little room for flexibility and creative decision-making, top-down management can present disadvantages, such as-
- Team morale can be low when the leader is dictatorial or too weak to hold the authority needed for people to listen and follow. This impacts the quality of output from the team.
- There is a lack of opportunities for the team to be creative in problem-solving and to be autonomous in how they complete their tasks, since top-down management doesn't generally allow for collaborative decision-making.
- If management does not have a clear idea of the systems, structures, and capacities of lower levels of the organization, they can set unattainable targets with unrealistic standards.
Bottom-Up Planning - Pros and Cons
The ones who benefit the most from a bottom-up management style are employees who are not at the organization's top tier. Bottom-up planning advantages are-
- In giving lower-level team members a voice, there is higher morale and buy-in to projects, as they feel part of the process. This can boost productivity, with everyone feeling a sense of ownership over the goals of the company.
- As the planning stage begins with all team members involved, the established plans, goals, and deadlines are more realistic.
- Business process improvement can be achieved when employees lower down in the organizational structure are closer to the product, service or customer, and understand what is most needed and desired by the market.
However, when the bottom-up management style is poorly executed, the project planning process can lead to inefficiencies and more confusion. Other disadvantages can include-
- There is a high time expenditure to coordinate tasks, teams, and projects to ensure that they are aligned. The need for effective communication is paramount and any company with poor communication will spend more time with task management than project execution.
- This method can slow down the process of decision-making, without one set project manager and too many voices being accounted for. This can cost the company valuable time and money simply trying to reach a decision.
- If the team is comprised of members who are not focused on the overall success of the company, and instead are focused on their own self-interest, decisions may lead to conflict and internal division.
How to Determine the Right Planning Method
The right method ultimately depends on the nature of the business and the resources available.
The bottom-up planning method is useful for companies that require innovation and creative solutions in their processes or product developments. Realistic financial projections are more achievable with the bottom-up approach, as it allows more effective allocation of resources to tasks and teams.
The top-down planning approach is suited to industries that are less creative. Startups can also benefit from top-down planning since they may not have strong collaborative processes in place. Having a decision-making hierarchy in these situations could be more beneficial for faster results.