Although there is no right or wrong place to begin planning, the starting point may affect success. Therefore, companies should prioritize their plans according to their significance to the organization — this is what planning hierarchy is about. It helps businesses clarify lines of authority, organize communication, and conduct efficient operations.
🔝 Top Examples of Hierarchy in Business
- Orange PLC’s Organizational Behavior and Negotiation
- Operations Management and Capacity Planning
- Destination Marketing Characteristics
- Reorganizing Accounting Firm
🤔 What Is the Hierarchy of Planning?
Planning hierarchy refers to arranging organizational plans depending on their importance to the company’s performance. Higher-level plans are at the top, just as they are in the managerial hierarchy. Lower-level plans are at the bottom and are prepared by middle and first-line managers. As a result, planning hierarchy provides the organization with a consistent level-by-level planning framework and decreases future uncertainty.
🆙 Levels of Management and Its Function
Overall, there are 3 levels of management: top, middle, and lower. Each has a unique set of responsibilities, working toward the same goal.
Top Level
Top-level management is the highest level of the managerial hierarchy. It receives its authority directly from the enterprise’s proprietors. Top-level management functions lie in establishing the organization’s overarching objectives, developing strategic plans and policies, and presenting the business to the outside world.
Middle Level
Middle-level management comprises functional heads from several organizational units and is responsible for developing and implementing departmental plans. This level includes department leaders such as HR managers, production managers, finance managers, procurement managers, and others. Middle managers delegate power and control, submit progress reports, make recommendations, and develop departmental goals and strategies.
Lower Level
The lower management level is directly involved in marketing, production, financing, accounting, etc. It includes supervisors, sales officers, accounts officers, superintendents, and other operational heads. The lower level is accountable for completing work on schedule, giving the necessary instructions and recommendations, and improving the working environment.
🧩 Planning Hierarchy Components
The pyramid of planning hierarchy consists of 8 fundamental components: 4 higher-level plans, including mission, goals, strategies, and policies, and 4 lower-level ones, such as procedures, rules, programs, and the budget:
- Mission. It is the most crucial element since it indicates the viable rationale for the organization’s existence. The mission is defined by top-level management and describes the unique core purpose that distinguishes a company from similar organizations. It also includes the company’s attitude toward doing business and treating its people.
- Goal and objectives. These are the desirable outcomes that an organization strives for. They direct all organizational activities toward the desired result and help the company develop and grow.
- Strategies. A strategy is a detailed master plan that outlines how an organization will accomplish its mission and goals. It sets the primary long-term objectives and allocates the resources required to achieve a competitive advantage.
- Policies. The policy is a complete decision-making guideline that connects strategy design and implementation. It determines the scope of decisions and ensures that they align with the objectives.
- Procedures. These are detailed guidelines that outline how to perform a specific task. In addition, they often specify how a policy will be implemented.
- Rules. Rules are stricter and more specific than procedures and must be followed by everyone in the firm. They help the company run smoothly and achieve its goals.
- Programs. A program is a list of tasks required for a single-use plan. It includes a complex set of goals, procedures, rules, resource flow, etc.
- Budgets. A budget is a financial plan that estimates future expenditures required to fulfill particular organizational goals. Budgets are created to allocate corporate resources to various activities.