Young businesses typically have a simple managerial hierarchy made up of one level alone, usually occupied by the owner. As a business grows, it adds employees and additional management, and a true hierarchy emerges. This managerial hierarchy may have up to three levels. Operational management sits at the lowest level. Above these supervisors reside middle managers, while top management controls the entire company. Though occupying different hierarchical levels, all management exercises the same basic functions -- organizing, planning, leading, controlling and attending to staff. What differentiates the levels are the scope and main areas of managerial concern.


Operational managers are also called first-line managers, supervisors, team leaders or team facilitators. This management level deals directly with employees, and must exercise strong leadership skills. Technical ability -- the understanding of the actual work processes -- is also a key concern of operational management. Supervisors answer to middle management, who provide the first line with tactical goals and plans. It’s up to operational managers to translate these targets to short-term goals and plans that will eventually fulfill the expectations of middle management.


Depending on their positions, middle managers may supervise first-line managers, other middle managers, departments or whole divisions of a company. Carrying titles of vice president or below, these managers create plans and objectives they want realized in a year or less. Successful plans further the overall strategy and direction of the company as set by upper management. While the concern of operational plans is day-to-day work, the focus of middle management’s plans focus on competing in the marketplace. Middle managers often serve as liaisons to other departments and use interpersonal skills to coordinate and cooperate interdepartmentally


Upper management is concerned with the organization as a whole -- its mission, vision, and long-term strategy. As such, top management plans heavily, playing the role of company visionary. In a sole proprietorship or partnership, owners and top management are synonymous. In a corporation, key top management roles are appointed by a board of directors to which top management must answer. Besides planning, upper management oversees middle managers. If any alliances with outside organizations are needed, it is top management that creates the partnerships.


The managerial hierarchy at a company depends on different factors such as the age and size of a company, its strategy and its organizational structure. Increasingly complex companies add more management layers as they age, eventually possessing several layers of middle management. Over time, the expanding bureaucracy hampers the company’s responsiveness so that older companies must prune management. Organizational structures that cut management this way become “flat” organizations. Leaving behind few managers, authority is decentralized and distributed among employees. By contrast, the functional organizational structure has many layers of middle managers that make it “tall.”