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During the discussion of the stages in the development of the planning process and the attitudes of managers to planning, the need has to be identified for both strategic long-term thinking and operational short-term action. It is necessary now to understand how these activities can be related to the structure of the firm and to the roles of the different management levels.
Management levels in an organization
A typical framework of a company consists of the following three management levels,
- the strategic level,
- the management level and
- the operational levels.
1. Strategic Level
In most companies the strategic level of the firm is typically responsible for formulating the broad aims of the company, setting corporate objectives, identifying resources that can be utilized and selecting broad strategies. These aims, objectives and resources are then broken down into the constituent parts and allocated between the, individual subsidiaries or operating units, which are referred to as strategic business units (SBUs).
2. Management Level
The management level then break down the above allocations into departmental objectives, budgets and tasks for which the functional managers (for example in R&D or marketing) at the operational level are responsible.
3. Organization Level
The performance of the company in implementing the plans is monitored and controlled by operating the process in reverse. The operational level managers are responsible for achieving the objectives set by the management level and the management level is expected to achieve the objectives set by the strategic level.
Distinctions between the three levels of management
At an early stage in the company’s development, the distinctions between levels are unclear as decisions are made in a largely unplanned, reactive way. As the company develops, the separation of management levels and functions becomes clearer and is reinforced by formalized procedures (reports and meetings) to plan and control the business. Whilst we have indicated three broad levels of management, the number of links in the chain between the chief executive and the customer can vary considerably.
Recent trend in Management levels
The recent trend in many companies has been to remove layers of management in order to have a flatter structure, thus giving individual managers far greater responsibility and authority for their part of the company. This has resulted in less distinction between the management activities, with managers at all levels being required to think strategically as well as operationally.