business plan bottom up approach

Bottom-up strategy: Explained with Examples

A bottom-up strategy in business refers to a method where planning and decision-making start at the operational level and move up to the executive level. In contrast to top-down strategy, which typically begins with high-level strategic goals that are then translated into operational directives, bottom-up strategies focus on operational capabilities and efficiencies to inform strategic goals and directions.

Here are some key features of a bottom-up strategy:

• Employee empowerment: In a bottom-up strategy, front-line employees often have more decision-making power and are encouraged to innovate and improve processes. They are closer to the day-to-day operations and customers, which usually allows them to see improvement opportunities that might not be evident at higher levels of management.
• Communication: Information in a bottom-up strategy flows from the operational level to the executive level. Employees share their insights and observations; management uses this information to make strategic decisions.
• Implementation: With bottom-up strategies, implementing new initiatives often begins at the operational level and expands throughout the organization. This can result in high levels of buy-in and adoption, as employees feel ownership of the ideas and changes.
• Flexibility and Adaptability: Bottom-up strategies can be highly adaptable and flexible. They allow for quick adjustments based on feedback from operations and can result in ongoing improvements and modifications to operations and strategy.

While this strategy can create highly responsive and adaptable organizations, it has potential downsides. These include the potential for inconsistency across different areas of the organization, challenges aligning operational initiatives with strategic objectives, and the potential for slower decision-making processes due to the need for input and buy-in from a broader range of stakeholders.

Top-Down Strategy: Explained with Examples

How to develop a bottom-up strategy for the organization?

Developing a bottom-up strategy requires a shift in organizational culture, processes, and structures. Here are some steps to developing and implementing a bottom-up strategy:

• Engage Employees : Begin by engaging employees in strategy development. Encourage input from all levels of the organization and be open to new ideas. Employees closest to the work or customer are often best equipped to identify opportunities for improvement. Use meetings, surveys, or suggestion boxes to solicit input. What are employee engagement strategies?
• Empower Decision Making : Create a culture of empowerment where employees at all levels are encouraged and given the autonomy to make decisions. This involves granting permission and ensuring employees have the information and resources necessary to make informed decisions. Strategic Decision-Making Process & Examples
• Open Communication Channels : Develop transparent and open communication channels for employees to share their ideas and feedback with upper management. This could be through regular team meetings, intranet forums, or strategy review sessions. Internal Communication Strategy & Plan| Examples| Best practices
• Training and Development : Invest in training and development to ensure employees have the skills needed to contribute to strategy development and decision-making. This could include critical thinking, problem-solving, or specific technical skills training.
• Recognition and Reward : Acknowledge and reward employees who contribute valuable ideas or improvements. This could be through formal recognition programs or informal praise. Recognizing contributions reinforces the importance of employee involvement and encourages ongoing participation.
• Flexible Structures and Processes : Develop flexible organizational structures and processes that allow for quick changes and adjustments based on employee feedback. This might involve creating cross-functional teams or flattening organizational hierarchies.
• Align Goals : Make sure that the organization’s overall goals are well communicated and understood by everyone. Then, encourage each department or team to set goals aligned with the overall objectives.
• Regular Review and Adjustment : Regularly review and adjust the strategy based on employee feedback. This keeps the strategy relevant and effective and reinforces the importance of employee involvement.

Remember, shifting to a bottom-up strategy requires changes in organizational culture and may take time to implement fully. It’s essential to remain patient and persistent and to communicate openly with employees about changes and progress.

Examples of bottom-up strategy in business

Bottom-up strategies can be applied in many different ways depending on the context and industry. Here are a few examples:

• Toyota’s Lean Manufacturing System : Toyota is known for its lean manufacturing system, a significant part of which is the concept of Kaizen or continuous improvement. This system encourages front-line workers to stop the production line and suggest improvements when they see an opportunity. This is a powerful example of a bottom-up strategy where decisions and improvements are driven by those closest to the work.
• Google’s 20% Time : Google has a policy allowing its employees to spend 20% of their time on any project they think will benefit Google. This empowers employees to innovate, resulting in successful products such as Gmail and Google News. This policy exemplifies a bottom-up strategy, as it relies on the creativity and initiative of all employees, not just top management.
• Whole Foods Market’s Team-Based Structure : Whole Foods Market has a decentralized, team-based structure where decisions about product selection, pricing, and promotions are made by local teams closest to their customers and suppliers. This approach allows the company to tailor its offering to local needs and tastes and encourages innovation and entrepreneurship at the store level.
• Semco’s Participative Management : Semco, a Brazilian company, is renowned for its radical form of industrial democracy. Employees set their work hours and even their salaries. More significant strategic decisions are made collectively and transparently. As a result, Semco experienced significant growth and high levels of employee satisfaction.

These examples illustrate how bottom-up strategies can result in innovation, improved efficiency, and increased employee satisfaction and engagement. However, they also require a culture of trust, openness, and respect, where employees feel empowered and supported to contribute their ideas and take risks.

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Top-Down Vs. Bottom-Up Approach: A Comprehensive Guide

There is no business management approach or even leadership style that fits all.

In the complex world of organizational decision-making, two different methods emerged as crucial players: the top-down approach and the bottom-up approach .

These models shape how businesses create their plans, carry out projects, come to agreements, and even set their overall goals.

In this guide, we’ll first take a deep dive into these two approaches, exploring their core ideas, advantages, drawbacks, and examples that will provide valuable insights.

Then, we’ll explore how to integrate them to harness the strengths of both. Here’s a little teaser:

In a world where most organizations follow a top-down style of management, the key is to foster bottom-up engagement and empower employees to actively contribute to your strategy.

By balancing these two approaches, you’ll be able to bridge the gap between leadership and frontline teams, fostering collaboration, innovation, and ownership for effective strategy execution.

Let’s dive in!

Top-Down Approach

What is the top-down approach.

The top-down approach refers to a method where directives and decisions cascade from the upper management or higher-level leaders and filter down through the organizational structure.

This top-down management approach is often implemented through a top-down model of leadership, where strategies and instructions are formulated by higher-ups and then transmitted for execution at lower levels. Companies that adopt a top-down management approach are essentially choosing an autocratic leadership model.

In this context, the concept of top-down processing comes into play. It revolves around leaders deciding on the big-picture strategy , company goals, metrics, and initiatives that will guide the activities of different departments within the organization. This approach is built on the assumption that leadership possesses the necessary insights to make informed decisions that benefit the organization as a whole.

Advantages of the top-down approach

The top-down approach offers several advantages that can contribute to effective decision-making, streamlined communication, and cohesive implementation .

Clear direction

This approach establishes a unified sense of direction from upper management to all organizational levels. Alignment around common goals, strategies, and objectives minimizes confusion and fosters collective effort.

Efficient decision-making

With decision-making concentrated at the higher level, the top-down approach allows for quicker and more decisive choices. This is especially valuable in time-sensitive situations or during emergencies that require immediate action.

Effective coordination

By channeling information and decisions through a well-defined hierarchy, this model facilitates efficient coordination across different departments and functions. This can lead to smoother workflow and better integration of efforts.

Fast communication

The top-down model allows rapid communication of decisions, updates, and changes. This proves valuable for sharing critical information with a large number of employees in a short period of time.

📚 Recommended read : How to Execute Your Internal Communications Strategy In 8 Steps

Disadvantages of the top-down approach

Now that we’ve seen its advantages, it's time to explore its potential downsides.

Limited employee engagement and ownership

When decisions are made exclusively by upper management, employees at lower levels may feel excluded, leading to reduced motivation and satisfaction. Since they are not empowered as decision-makers, they don’t feel a sense of ownership which may result in a lack of commitment to executing these decisions effectively.

Lack of creativity and innovation

The top-down approach can stifle creativity and innovation , as decisions are primarily driven by a small group of leaders. Innovative ideas from front-line staff may not be considered or implemented, hindering the organization's ability to adapt and evolve.

Limited local knowledge

The executive team may not have a complete understanding of the day-to-day operations and challenges faced by lower-level employees. This lack of local knowledge can result in decisions that are disconnected from the realities of on-the-ground execution.

Reduced adaptability

A top-down management approach might struggle to adapt to rapidly changing environments or unforeseen circumstances since decisions made at the top may overlook emerging trends or unexpected challenges.

📚 Recommended read : Check out our Strategy Report, “You're doomed or you adapt”

When to use the top-down approach?

Taking the pros and cons into account, you’ll find the top-down approach works well in certain situations within an organization.

Crisis management & urgent decision-making

In states of emergency or impossible deadlines, democracy flies out of the window. There is no time to debate the decision, and the leadership team needs to step up and make the call. When inaction is worse than a bad decision, execution becomes a top priority.

Consistency & standardization

For tasks that require consistent processes, such as compliance with industry regulations or maintaining a uniform brand image, the top-down model helps ensure that the same guidelines are followed across the organization.

Large-scale initiatives

When introducing large-scale organizational changes , such as restructuring or implementing new technology systems, this approach can effectively manage the transition by providing a clear roadmap for implementation.

Bottom-Up Approach

What is the bottom-up approach.

In the bottom-up approach, the decision-making originates from individuals at lower levels —such as front-line staff, team members, and lower-level employees— and gradually rises to influence the entire company.

The bottom-up process involves synthesizing individual experiences, expertise, and suggestions to inform higher-level decisions. This approach gives value to the diverse perspectives of employees, acknowledging that those directly engaged in day-to-day operations can provide valuable insights into the strategy.

By adopting a bottom-up management style, leadership fosters open communication, encourages active employee involvement, and promotes the exchange of ideas. Engaging employees in the decision-making process enables organizations to tap into a reservoir of collective knowledge, foster a sense of ownership, and elevate overall employee engagement .

Advantages of the bottom-up approach

The bottom-up approach has its pros and can contribute to increased innovation and improved involvement from teams across the organization.

Diverse perspectives

This model values input from a wide range of employees across different roles and levels. The diversity of perspectives leads to well-rounded decisions that take into account several viewpoints and potential implications.

📚 Recommended read: Why Diversity Matters for Strategic Execution

Fast adaptability

Organizations that embrace the bottom-up model are often more adaptable to change. Employee input helps identify emerging trends and potential disruptions, allowing the organization to respond faster.

Innovation and creativity boost

Employees at the front lines often have unique insights and creative ideas based on their direct experiences. A bottom-up approach encourages the sharing of these ideas, fostering a culture of innovation and continuous improvement.

Increased employee engagement & buy-in

Employees are more likely to support and embrace decisions when they've had a role in shaping them. So, when employees feel that their opinions are valued and their contributions matter, they become more engaged. This leads to smoother implementation and reduces resistance to change.

Effective problem-solving

Lower-level employees often have a deep understanding of operational challenges and can provide practical solutions that might escape the notice of the leadership team. Embracing a bottom-up approach taps into this expertise, enabling effective problem-solving.

Disadvantages of the bottom-up approach

While the bottom-up approach offers various benefits, it also comes with possible disadvantages that need to be considered.

Time-consuming decision-making

Involving a larger number of employees in the decision-making process can be time-consuming. Consensus-building and gathering input from various sources may slow down the decision-making process.

Lack of long-term vision

Bottom-up decisions can sometimes focus on short-term goals and immediate concerns, potentially neglecting long-term strategic objectives. Bottom-up decisions might lack alignment with the bigger picture and the organization's overall strategic goals .

Organizational fragmentation

An excessive bottom-up approach without the right coordination can result in silos since teams might prioritize their own needs without considering the organization as a whole.

Risk of uninformed decisions

Not all lower-level employees have the same level of expertise or access to information. This can lead to uninformed decisions based on partial or limited information.

When to use the bottom-up approach?

The bottom-up model is particularly effective in certain scenarios like the ones below.

Innovation and creativity

When looking for innovative ideas and creative solutions, the bottom-up process allows you to tap into the diverse perspectives of your employees at all levels. This encourages brainstorming, experimentation, and out-of-the-box thinking.

Complex problem-solving

For complex challenges that require a deep understanding of operational intricacies, a bottom-up approach can involve employees who have hands-on experience and expertise in the specific area, leading to more effective solutions.

Localized decision-making

When decisions need to be tailored to specific departments, teams, or regions, the bottom-up model ensures that localized needs and nuances are taken into account, avoiding one-size-fits-all solutions.

Identifying improvement opportunities

A bottom-up approach can uncover hidden inefficiencies and opportunities for optimization since employees at lower levels often identify areas for improvement that might not be apparent to upper management.

Top-Down Vs. Bottom-Up Examples

We often hear that "it's easier said than done." And it’s true...

Let's look into some practical examples that explore both approaches.

Top-down approach examples

Example 1: Company-wide protocol rollout

In a large organization in the healthcare industry , a new patient care protocol is introduced. The executive leadership, led by the Chief Medical Officer and administrative heads, crafts a strategy to enhance patient outcomes. This strategy includes standardized procedures for diagnosis, treatment, and follow-up care. These directives then flow down the hierarchy, ensuring consistent patient care practices across departments and units.

Example 2: Organization-wide restructuring

A well-established manufacturing company decides to implement an organizational restructuring to improve efficiency and agility. The company's executive leadership, including the CEO and senior management, develop a strategic plan that involves merging certain departments, streamlining workflows and processes, and redefining reporting structures. This top-level strategy is then communicated down the hierarchy to department heads and managers.

Bottom-up approach examples

Example 1: Streamlined problem-solving

The development team at Meerkat.app, a software startup , encounters a roadblock in a critical project. Instead of waiting for top-down directives, the team members take the initiative to collaborate and brainstorm solutions. Through open discussions, they identify a more efficient coding methodology that can overcome the obstacle. This innovation is then presented to upper management for approval.

Example 2: Collaborative project planning

A construction company is about to embark on a complex project different from anything they've done before—let's say, constructing a state-of-the-art research facility. To ensure meticulous project planning , they gather the insights of their on-site engineers, project managers, and skilled workers who are intimately familiar with the practical aspects of construction. Through collaborative discussions and workshops, each team member contributes their expertise, estimating task durations, resource needs, and potential challenges. This collective input is then woven into a detailed project plan.

The Key To Success: Driving Bottom-Up Engagement In A Top-Down Organization

Achieving synergy between top-down directives and bottom-up contributions is often the key to successful strategy execution .

By fostering bottom-up engagement within a top-down structure, organizations can tap into the collective intelligence of their teams. This empowers employees to actively contribute their perspectives, solutions, and suggestions, thereby enriching strategies and initiatives.

The result is an organization that not only benefits from the strategic vision of its leadership but also thrives on the ground-level expertise of its diverse team members.

Balancing these two models not only enhances decision-making but also nurtures a culture of ownership, creativity, and adaptability.

How to effectively integrate both approaches?

When it comes to combining top-down and bottom-up models, the possibilities are vast and varied. Here are some suggestions to get you started:

• Enforce leadership's role in empowering employees: Leadership should exemplify active listening and responsiveness, setting a precedent for open communication .
• Open channels for two-way communication: Establish platforms where employees can freely share ideas, concerns, and suggestions with leadership. ‍
• Share your strategy rationale and goals: Foster transparency by sharing not just the strategy and goals but also the rationale behind them. Understanding the "why" behind upper management decisions will boost employee engagement. ‍
• Implement collaborative strategy development: Leverage team inputs and diverse perspectives for strategy formulation, enhancing alignment between departmental goals and the overall strategy. ‍
• Empower frontline teams for decision-making: Encourage autonomy and decision-making at lower levels to nurture a sense of ownership and accountability . ‍
• Promote cross-functional collaboration : Encourage collaboration among teams from different departments, cultivating diverse insights and holistic solutions. ‍
• Recognize and reward employee involvement: Celebrate innovative contributions from all organizational levels to inspire engagement. ‍
• Develop champions of engagement at all levels: Cultivate advocates for engagement across the organization to drive a culture of participation. ‍
• Measure engagement : Define metrics, goals, and KPIs to measure employee participation and ownership. That way, you’ll know what’s working and what needs to improve.

💡 Pro Tip : While these strategies and tactics may help combine both approaches and achieve bottom-up engagement, it’s not a one-time thing... It’s a process that involves a cultural shift. In order to sustain bottom-up engagement over time , you need to integrate engagement practices into your organizational processes and nurture an environment of continuous improvement.

Top-down & bottom-up integration—examples

Example 1: Budget allocation

In an effort to allocate its annual budget effectively, a large organization combines top-down and bottom-up approaches. The executive leadership establishes high-level budgetary goals and strategic priorities, providing a framework for departments. Simultaneously, the finance team collaborates with department heads to gather specific budget requirements based on project needs.

✅ Combining this bottom-up input with the top-down framework creates a comprehensive budget that aligns with strategic goals while accommodating practical departmental needs.

Example 2: Forecasting

A tech company seeks to forecast next year's sales. Combining approaches, the executive team sets high-level sales targets based on trends and growth goals, providing the forecast's direction. Simultaneously, the sales team, with customer insights, offers bottom-up input, estimating potentials in their sectors. Integrating these inputs enriches the forecast with market dynamics.

✅ The approach marries strategic vision with practical insights for an ambitious yet realistic forecast.

Real-life Example: IBM

IBM employs a balanced approach that combines both top-down and bottom-up methods.

At the top-down level, IBM's executive leadership defines the company's overarching strategic direction, setting the stage for its operations and initiatives. This top-down guidance aligns the organization towards specific goals, such as expansion into emerging markets or the development of cutting-edge technologies.

Simultaneously, IBM values bottom-up input to drive innovation. Employees are encouraged to contribute insights and ideas, leveraging their industry knowledge and customer understanding. This input influences the creation of diverse products and services, like cloud solutions and AI platforms. IBM's culture fosters collaboration across teams and geographies, enriching decision-making with varied viewpoints.

✅ This balance of strategic direction and employee-driven innovation empowers IBM to navigate the ever-evolving technology landscape effectively.

📚 Recommended read : How IBM Became A Multinational Giant Through Multiple Business Transformations

Striking The Optimal Balance With Cascade ⚖️

Cascade is the world’s #1 strategy execution platform that helps businesses connect siloed metrics, initiatives, and investments with their realized performance for accelerated decision-making. With Cascade, you gain full visibility of your strategy enabling your organization to cultivate a culture of strategic agility and collaboration.

In the journey to achieve the perfect balance between top-down and bottom-up approaches, Cascade serves as an invaluable ally with features that allow seamless integration of strategic vision and ground-level insights.

Cascade Planner : Navigate your strategic planning process with structure and ease by breaking down the complexity from the big-picture strategy to goal-setting, initiatives, and projects for your frontline employees.

Measures & Metrics : Track your progress and directly link your business data to core initiatives for clear data-driven alignment. Enable employees to update their progress and see how their day-to-day efforts contribute to overall goals.

Alignment & Relationship Maps : Visualize how different organizational plans work together to form your strategy and map dependencies, blockers, and risks that may lie along your journey. Dive deeper into your strategy's horizontal and vertical alignment from the corporate to initiative and even project level.

Dashboards & Reports : Access real-time visualizations of your strategic performance and share them with your stakeholders, suppliers, and contractors. Combine information from different parts of your business and strategy.

👉🏻 Take Cascade for a spin! Sign up today for a free forever plan or book a guided 1:1 tour with one of our Cascade in-house strategy execution experts.

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Top-Down Vs. Bottom-Up: Which Approach is Better for Your Business?

Managing a business is no small feat. You have to make decisions, plan strategies, allocate resources, and monitor performance. But how do you decide what is the best way to do these things? Do you follow a top-down approach or a bottom-up approach?

In this blog post, we will explain what these two approaches are, how they work, and what are their pros and cons. We will also give you some tips on when to use each approach and how to balance them.

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What is the Top-Down Approach?

A top-down approach is a management style where the leaders or executives set the goals, objectives, and strategies for the organization. They then communicate them to the lower levels of the organization, who are expected to follow them without much input or feedback.

The top-down approach is based on the assumption that the leaders have the best knowledge and vision of the organization and its environment. They are able to see the big picture and make decisions that align with the overall mission and vision of the organization.

The top-down approach is often used in situations where there is a need for speed, efficiency, consistency, and control. For example, when launching a new product, implementing a change, or dealing with a crisis.

What is the Bottom-Up Approach?

A bottom-up approach is where the employees or lower levels of the organization are involved in the decision-making process. They are encouraged to share their ideas, opinions, and feedback with the leaders or executives, who then consider them before making the final decisions.

The bottom-up approach is based on the assumption that the employees have the best knowledge and experience of the daily operations and challenges of the organization. They are able to provide valuable insights and suggestions that can improve the quality and effectiveness of the decisions.

The bottom-up approach is often used in situations where there is a need for innovation, creativity, diversity, and empowerment. For example, improving a process or solving a problem.

Differences Between Top-Down and Bottom-Up Approaches

The main difference between top-down and bottom-up approaches is the direction of the flow of communication and decision-making. In top-down approach, communication and decision-making flow from top to bottom. In bottom-up approach, communication and decision-making flow from bottom to top.

Another difference is the level of participation and autonomy of the employees. Employees have low participation and autonomy in the top down approach. They are expected to follow orders and instructions without questioning or challenging them. In bottom-up approach, employees have high participation and autonomy. They are expected to contribute ideas and opinions and take initiative in their work.

A third difference is the type of culture and environment that each approach creates. In top-down approach, the culture and environment are more formal, hierarchical, and centralized. There is a clear chain of command and authority. In bottom-up approach, the culture and environment are more informal, flat, and decentralized. There is more collaboration and teamwork.

Advantages of Top-Down Approach

Provides clarity and direction for the organization. The goals, objectives, and strategies are clearly defined and communicated by the leaders. This helps to align everyone’s efforts and avoid confusion or conflict.

Ensures consistency and quality across the organization. The decisions are made by the leaders who have the expertise and experience to ensure that they meet the standards and expectations of the organization.

Saves time and resources for the organization. The decisions are made quickly and efficiently by the leaders who have access to all the relevant information and resources. This reduces delays and wastage.

Enhances control and accountability for the organization. The leaders have full authority and responsibility for the outcomes of their decisions. They can monitor and evaluate the performance of their subordinates and take corrective actions if needed.

Advantages of Bottom-Up Approach

Fosters innovation and creativity for the organization. The employees are given opportunities to express their ideas and opinions freely. This stimulates their creativity and generates new solutions.

Improves motivation and engagement for the organization. The employees feel valued and respected for their contributions. This boosts their morale and commitment.

Enhances learning and development for the organization. The employees learn from each other and from the feedback they receive from the leaders. This improves their skills and knowledge.

It builds trust and collaboration for the organization. The employees develop mutual trust and respect with the leaders and with each other. This improves communication and cooperation.

Disadvantages of Top-Down Approach

It can create resistance and resentment for the organization. The employees may feel ignored or imposed upon by the leaders. They may not agree with or understand the decisions that are made for them. This can lead to dissatisfaction or rebellion.

Stifles innovation and creativity for the organization. The employees may not have the chance or the incentive to share their ideas or opinions with the leaders. They may also fear being criticized or rejected by the leaders. This can limit their creativity and potential.

Causes communication and coordination problems for the organization. The leaders may not have enough information or feedback from the lower levels of the organization. They may also have difficulty communicating or coordinating with a large number of subordinates. This can result in errors or misunderstandings.

Creates dependency and complacency for the organization. The employees may rely too much on the leaders for guidance and direction. They may also lose their initiative and sense of responsibility. This can reduce their productivity and performance.

Disadvantages of Bottom-Up Approach

Creates confusion and conflict for the organization. The goals, objectives, and strategies may not be clear or consistent across the organization. There may be too many or conflicting ideas or opinions from the employees. This can lead to confusion or conflict.

Compromises consistency and quality for the organization. The decisions may not meet the standards or expectations of the organization. There may be variations or discrepancies in the quality of work or service across the organization. This can affect the reputation or credibility of the organization.

It can waste time and resources of the organization. The decisions may take too long or too much effort to make. There may be duplication or inefficiency in the use of information or resources across the organization. This can increase costs or delays.

Reduces control and accountability for the organization. The leaders may have difficulty overseeing or influencing the outcomes of their decisions. They may also have difficulty holding their subordinates accountable for their actions or results. This can affect the performance or security of the organization.

When to Use Top-Down Approach and Bottom-Up Approach

There is no one-size-fits-all answer to which approach is better for your business. It depends on various factors, such as:

Nature and complexity of the decision or task

Urgency and importance of the decision or task

Availability and reliability of information and resources

Skills and experience of the leaders and employees

Culture and values of the organization

As a general rule, you should use a top-down approach when you need to:

Make quick and decisive decisions

Ensure consistency and quality across the organization

Deal with a crisis or a change

Have a clear vision and direction for the organization

You should use a bottom-up approach when you need to:

Generate new and diverse ideas

Improve motivation and engagement across the organization

Solve a complex or ambiguous problem

Collaborative and empowering culture in the organization

Top-Down or Bottom-Up: Which Method Should Your Company Choose?

The best way to manage your business is to balance both top-down and bottom-up approaches. You should not rely on one approach exclusively, but rather use them in combination to achieve optimal results. One way to do this is to use an iterative or incremental process, where you alternate between top-down and bottom-up phases. For example, you can start with a top-down phase where you define the overall goal or problem, then switch to a bottom-up phase where you develop or test possible solutions or components, then go back to a top-down phase where you evaluate or refine your solutions or components, then repeat until you reach your desired outcome.

Here are some additional tips on how to balance top-down and bottom-up approaches:

Involve both leaders and employees in setting goals, objectives, and strategies for the organization. This will ensure alignment and buy-in from all levels of the organization.

Communicate clearly and frequently with both leaders and employees about the expectations, progress, and outcomes of the decisions or tasks. This will ensure transparency and feedback from all levels of the organization.

Delegate authority and responsibility to both leaders and employees according to their skills, experience, and interests. This will ensure empowerment and accountability from all levels of the organization.

Recognize and reward both leaders and employees for their contributions, achievements, and improvements. This will ensure appreciation and recognition from all levels of the organization.

Top-down approach and bottom-up approach are two different management styles that have their own advantages and disadvantages. Depending on your situation, you may need to use one approach more than the other, or balance them both.

The key is to understand your goals, objectives, strategies, resources, challenges, opportunities, strengths, weaknesses, culture, values, leaders, employees, customers, competitors, stakeholders, environment, etc.

By doing so, you will be able to choose the right approach for your business.

Join over thousands of organizations that use Creately to brainstorm, plan, analyze, and execute their projects successfully.

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Hansani has a background in journalism and marketing communications. She loves reading and writing about tech innovations. She enjoys writing poetry, travelling and photography.

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Top-down approach vs. bottom-up approach: What’s the difference?

The top-down approach to management is when company-wide decisions are made solely by leadership at the top, while the bottom-up approach gives all teams a voice in these types of decisions. Below, we cover the details, pros, and cons of top-down vs. bottom-up management.

The top-down approach to management is a strategy in which the decision-making process occurs at the highest level and is then communicated to the rest of the team. This style can be applied at the project, team, or even the company level, and can be adjusted according to the particular group’s needs.

What is the top-down approach to management?

In the top-down approach to management, a team or project manager makes decisions, which then filter down through a hierarchical structure. Managers gather knowledge, analyze it, and draw actionable conclusions. They then develop processes that are communicated to and implemented by the rest of the team. You may hear this style of management referred to as “command and control” or “autocratic leadership.”

The top-down approach is probably what you think of when you think of the management process. Traditional industries like retail, healthcare, or manufacturing typically apply the top-down management style .

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How the top-down approach works

When approaching a project from the top down, higher-level decision-makers start with a big picture goal and work backward to determine what actions different groups and individuals will need to take in order to reach that goal.

The entire project planning process takes place at the management level. Then, once an action plan has been created, decision-makers communicate it to the rest of the team to be implemented (usually without much room for adjustment ).

The top-down approach can be effective because it remains the same from project to project, allowing teams to establish a well-practiced process that grows more efficient over time. Since the nature of the top-down style is so steady and reliable, many organizations (think: IBM, The New York Times, and other legacy organizations) choose to operate their entire companies according to this approach.

When to use the top-down approach

Today, very few organizations apply a purely top-down approach to management. Most teams apply a hybrid approach that falls somewhere along a spectrum of combinations between top-down and bottom-up management styles. 

The top-down approach is more rigid and structured, so teams with multiple sub-teams, many different project parts, or any other factor that makes processes difficult to keep organized will benefit from incorporating elements of top-down methodology. Smaller teams or teams with a narrower project focus will have the freedom to lean more heavily on the bottom-up style.

Advantages of top-down management

There are benefits to a top-down management style, especially for larger teams that consist of multiple smaller teams or groups that function together in a broader organizational hierarchy.

Well-known management style

The top-down management style is common, which means there’s less of a learning curve for new hires if they came from a company that uses this structure. As a team leader, you can help new team members adjust more quickly by incorporating some familiar elements of top-down methodology into your management style.

Greater clarity

The top-down approach results in clear, well-organized processes that leave little room for confusion. Because all decisions are made in one place and all communication flows in one direction, mix-ups and misunderstandings happen less frequently than with other management styles.

More accountability

When problems or inefficiencies do occur, the top-down management approach makes it easy to track them to their source. With clearly defined teams that each have their own separate responsibilities, it’s easier to locate, diagnose, and solve problems quickly and efficiently.

Quicker implementation

Since the decision-making process takes place at just one level of management, they can be finalized, distributed, and implemented much more quickly than decisions that require input from multiple leaders or project stakeholders .

Disadvantages of top-down management

Though top-down methodology has some advantages, there are also drawbacks to consider in how this approach might impact individual team members and overall team morale . Ultimately, top-down management doesn’t work for everyone. It can limit creativity and slow down problem-solving, so it may not be the best choice for teams that require greater flexibility and responsiveness.

More of a strain on leadership

Since all decisions are made at the top, a mismatched project management hire can have a bigger impact on the success of the team. Many process problems are only visible at the lower level, so project managers who fail to solicit feedback from individual team members before making decisions can inadvertently cause significant problems, delays, and losses.

Less creativity

With all communication flowing from leaders to team members with little room for dialogue, the top-down approach allows fewer opportunities for creative collaboration. Less interdepartmental collaboration may also eliminate fresh perspectives and stifle innovation.

Team disengagement

One challenge with the top-down management approach is that it requires proactive work to keep non-leadership team members feeling engaged, connected, and respected. When all decisions are made at the top, the rest of the team might feel that their feedback and opinions aren’t valued.

Greater distance between decision-makers and decisions

While a bottom-up approach allows decisions to be made by the same people who are working directly on a project, the top-down style of management creates distance between that team and decision-makers. This can lead to poorly-informed decisions if leadership doesn’t ask for input or feedback from their project team.  

What does bottom-up management look like?

When approaching project objectives from the bottom up, a team will collaborate across all levels to determine what steps need to be taken to achieve overall goals. The bottom-up approach is newer and more flexible than the more formal top-down strategy, which is why it’s more commonly found in industries where disruption and innovation are a priority. 

Examples of bottom-up management include:

Hybrid OKRs : broader objectives are set at the company level, but KRs (key results) are set by teams and individuals.

Scrum teams : the daily standup meeting brings the entire team together to coordinate collaboratively. 

Democratic management: leaders work with team members to determine what decisions should be made at each level, allowing for better collaboration while also maintaining structure.

Advantages of bottom-up management

The bottom-up style of management solves many of the problems that come with the top-down approach. This approach has advantages that make it a great fit for creative teams and industries where collaboration is key, like software development, product design, and more.

More informed decisions

In collaborative settings, those who work directly on projects and oversee project management can speak to the decisions that will impact their future work. Upper managers work directly with team members to chart a course of action, which prevents potential process blind spots that might otherwise appear when decisions are made without team input.

Better team morale

The bottom-up approach encourages greater buy-in from team members because everyone is given the opportunity to influence decisions regardless of seniority. It also facilitates better relationships between colleagues by offering members of all seniority levels an equal opportunity to influence project outcomes. In doing so, this approach increases the likelihood that all members will be invested in the team’s success.

More room for creativity

In top-down processes, there are fewer opportunities for teams to give input or suggestions. Collaborative approaches like the bottom-up approach, on the other hand, create opportunities for feedback, brainstorming , and constructive criticism that often lead to better systems and outcomes.

Disadvantages of bottom-up management

Of course, there’s a reason that the bottom-up approach hasn’t been more widely adopted: it comes with a number of challenges that make it incompatible with certain types of teams, projects, and industries.

Reduced momentum

A purely bottom-up approach to solving a problem might result in “too many cooks in the kitchen.” When everyone in a group is invited to collaborate, it can be harder to arrive at a decision and, as a result, processes can slow down. 

To avoid this: Consider assigning one to two group leaders who take into consideration all of the input and then make a decision based on feedback. 

Shift in team dynamics

Though it’s important to give team members the opportunity to provide feedback, not everyone is comfortable doing so—especially with leadership in the room. Keep in mind that everyone has different comfort levels and pushing too hard for feedback might stifle honesty or creativity. 

To avoid this: Offer different environments for team members to contribute, like in small group breakout rooms, 1:1 meetings, or quarterly anonymous feedback surveys. Encourage more senior team members to find ways to break the ice with new contributors so everyone feels comfortable participating.

Lack of high-level insight

In many ways, it makes sense for project decisions to be made at the project level. However, projects are still impacted by higher-level factors like company goals, budgeting, forecasting, and metrics that aren’t always available at the team level. Processes designed from the bottom-up can suffer from blind spots that result from a lack of access to insights  from upper management.

To avoid this: Create a communication flow that provides team leads with summaries of information from the company level that may be relevant to project-level decisions. As a team lead, you can pass along information to your team as you see fit to ensure team decisions are aligned with company-wide positions and goals.

Cross-functional team management tips

The key to implementing a management approach that works is to invest in your people as much as you do in your processes. The challenges of the top-down management approach can be alleviated or even eliminated entirely if the people at the top of the process aren’t just good managers, but are leaders too. 

Build relationships outside the management team

Since process-related communication flows top to bottom in top-down companies, it’s easy for individuals and groups to become siloed and eventually feel isolated. Create opportunities for communication across departments, teams, management levels, and even geographical locations to help ensure that your team members can build meaningful relationships with each other.

Facilitate cross-team communication

Whether your team uses a top-down or bottom-up approach, provide purpose-built opportunities for collaboration between teams that don’t normally work together. Though not part of your day-to-day processes, these additional brainstorms can help stimulate creativity, build relationships, and lead to creative solutions that can later be implemented to benefit the greater group.

Supplement with additional forms of feedback

Non-management teammates may feel less invested when their opinions and perspectives aren’t considered by the people making decisions at the top. Build new channels for bottom-up feedback to not only increase buy-in with lower-level team members, but also give decision-makers valuable insight into gaps or issues with processes.

Great management is all about balance

When it comes down to it, effective managers know how to balance the efficiency of the top-down approach with the collaborative and creative advantages that come from the entire team. 

By blending elements of different management styles, you can find an approach that works best for you and your unique team. Once you decide the right approach, you can establish streamlined workflow management. 

Test out Asana’s workflow management software to build and track your team workflows and communication all in one place. 

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Top-Down vs. Bottom-Up: What's the Difference?

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Top-Down vs. Bottom-Up: An Overview

Top-down and bottom-up approaches are methods used to analyze and choose securities. However, the terms also appear in many other areas of business, finance, investing, and economics. While the two schemes are common terms, many investors get them confused or don't fully understand the differences between the approaches.

Each approach can be quite simple—the top-down approach goes from the general to the specific, and the bottom-up approach begins at the specific and moves to the general. These methods are possible approaches for a wide range of endeavors, such as goal setting, budgeting, and forecasting . In the financial world, analysts or whole companies may be tasked with focusing on one over the other, so understanding the nuances of each is important.

Key Takeaways

• Top-down usually encompasses a vast universe of macro variables while bottom-up is more narrowly focused.
• Top-down investing strategies typically focus on exploiting opportunities that follow market cycles.
• Bottom-up approaches start with local or company-specific variables and then expand outward.
• Fundamental analysis is an example of a bottom-up investment approach.
• While top-down and bottom-up are distinctly different, they are often used in conjunction with each other.

Top-down analysis generally refers to using comprehensive factors as a basis for decision-making. The top-down approach seeks to identify the big picture and all of its components. These components are usually the driving force for the end goal.

Top-down is commonly associated with the word "macro" or macroeconomics. Macroeconomics itself is an area of economics that looks at the biggest factors affecting the economy as a whole. These factors often include things like the federal funds rate, unemployment rates, global and country-specific gross domestic product, and inflation rates.

An analyst seeking a top-down perspective wants to look at how systematic factors affect an outcome. In corporate finance, this can mean understanding how big-picture trends are affecting the entire industry. In budgeting, goal setting, and forecasting, the same concept can also be applied to understand and manage the macro factors.

Top-Down Investing

In the investing world, top-down investors or investment strategies focus on the macroeconomic environment and cycle. These types of investors usually want to balance consumer discretionary investing against staples depending on the current economy.

Historically, discretionary stocks are known to follow economic cycles, with consumers buying more discretionary goods and services in expansions and fewer in contractions.

Consumer staples tend to offer viable investment opportunities through all types of economic cycles since they include goods and services that remain in demand regardless of the economy’s movement.

When an economy is expanding, discretionary overweight can be relied on to produce returns. Alternatively, when an economy is contracting or in a recession, top-down investors usually overweight safe havens like consumer staples.

Investment management firms and investment managers can focus an entire investment strategy on top-down management that identifies investment trading opportunities purely based on top-down macroeconomic variables. These funds can have a global or domestic focus, which also increases the complexity of the scope.

Typically, these funds are called macro funds . They make portfolio decisions by looking at global, then country-level economics. They further refine the view to a particular sector, and then to the individual companies within that sector.

Top-down investing strategies typically focus on profiting from opportunities that follow market cycles while bottom-up approaches are more fundamental in nature.

The bottom-up analysis takes a completely different approach. Generally, the bottom-up approach focuses its analysis on specific characteristics and micro attributes of an individual stock.

In bottom-up investing, the concentration is on business-by-business or sector-by-sector fundamentals . This analysis seeks to identify profitable opportunities through the idiosyncrasies of a company’s attributes and its valuations in comparison to the market.

Bottom-up investing begins its research at the company level but does not stop there. These analyses weigh company fundamentals heavily but also look at the sector, and microeconomic factors as well. As such, bottom-up investing can be somewhat broad across an entire industry or laser-focused on identifying key attributes.

Bottom-Up Investing

Most often, bottom-up investors are buy-and-hold investors who have a deep understanding of a company's fundamentals. Fund managers may also use a bottom-up methodology.

For example, a portfolio team may be tasked with a bottom-up investing approach within a specified sector like technology. They are required to find the best investments using a fundamental approach that identifies the companies with the best fundamental ratios or industry-leading attributes. They would then investigate those stocks in regard to macro and global influences.

Metric-focused smart-beta index funds are another example of bottom-up investing. Funds like the AAM S&P 500 High Dividend Value ETF ( SPDV ) and the Schwab Fundamental U.S. Large Company Index ETF ( FNDX ) focus on specific fundamental bottom-up attributes that are expected to be key performance drivers.

Generally, while top-down and bottom-up can be very distinctly different, both are often used in all types of  financial approaches  like checks and balances. For example, while a top-down investment fund might primarily focus on investing according to macro trends, it will still look at the fundamentals of its investments before making an investing decision.

And, while a bottom-up approach focuses on the fundamentals of investments, investors still want to consider systematic effects on individual holdings before making a decision.

What Is the Main Difference Between a Top-Down and Bottom-Up Approach?

A top-down approach starts with the broader economy, analyzes the macroeconomic factors, and targets specific industries that perform well against the economic backdrop. From there, the top-down investor selects companies within the industry.

A bottom-up approach, on the other hand, looks at the fundamental and qualitative metrics of multiple companies and picks the company with the best prospects for the future—the more microeconomic factors. Both approaches are valid and should be considered when designing a balanced investment portfolio.

Which Is Easier: Top-Down or Bottom-Up Investing?

Top-down investing is often easier for new investors who are less experienced at reading a company's financial statements and for those who don't have the time to analyze those financials.

What Is a Limitation of a Top-Down Approach?

A top-down approach is more generalized, and so may miss out on a number of potentially good opportunities by eliminating specific companies that don't fall into its criteria.

A top-down analysis begins at the macro level, looking at things like national economic data (e.g., GDP or unemployment) and then honing in on more micro variables. A bottom-up approach is the opposite, beginning micro (e.g. looking at a single company's financial statements) and then broadening out.

In the end, there is no single best approach to investing, and every approach has its own pros and cons. A robust strategy is to employ features from both top-down and bottom-up together.

Charles Schwab. " FNDX Schwab Fundamental U.S. Large Company Index ETF ."

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What is Bottom-Up Forecasting?

Example of bottom-up forecasting, bottom-up vs. top-down forecasting, alternative forecasting methods, additional resources, bottom-up forecasting.

Estimating a company’s future performance by working “up” to revenue

Bottom-up forecasting is a method of estimating a company’s future performance by starting with low-level company data and working “up” to revenue . This approach starts with detailed customer or product information and then broadens up to revenue. This guide will provide examples of how it works and explain why it’s commonly used in financial modeling and valuation.

Below is a bottom-up forecasting example for predicting an E-commerce company’s future revenue growth. This example comes from CFI’s E-commerce Financial Modeling Course .

Step #1 Number of Orders (Sales Volume)

As you can see in the screenshot below, a financial analys t begins the analysis by outlining the total orders that will be placed for each of the company’s business channels. This is a common place for starting a bottom-up analysis, although it is possible to start “further down” at something like website traffic, for example.

Image:  CFI’s E-commerce Financial Modeling Course .

In this example, since the company sells its products through different marketing channels, it’s important to estimate the number of orders from each channel, and prices and costs may vary. In the course, we provide the estimated website traffic and conversion rates to arrive at the number of orders.

Step #2 Product/Service Prices

The next step is to estimate how much the company will charge customers for its products and/or services. Continuing with the E-commerce Course, you can see that we estimate the company charges an average of $275 per order in 2016, but after discounts and promotions, the net value per order is $193.

Step #3 Revenue

With the volume of orders and average net sales prices in place, we can calculate the company’s estimated revenue by multiplying the number of orders and the average price. Depending on the level of detail in your financial model , you may also wish to add other assumptions, such as returns, refunds, exchanges, chargebacks, and other items that may net out. You may also wish to include customer-level detail like total customers, retention rate, and churn rate.

The opposite approach to bottom-up forecasting is called top-down forecasting , which begins with broad assumptions like Total Addressable Market (TAM) and market share to work “down” to revenue. It is also a very common method of building a forecast in financial modeling and valuation.

There are several other forecast methods, in addition to top-down and bottom-up forecasting, such as regression analysis and Year-over-Year (YoY) analysis .

In regression analysis, a financial analyst uses Excel to calculate how changes in independent variables impact the dependent variable (revenue).

Year-over-Year analysis is the simplest method of forecasting where an analyst will look at historical growth rates and apply a growth rate percentage to historical revenue.

Learn more about different forecasting methods in CFI’s Budgeting and Forecasting Course .

Thank you for reading CFI’s guide to Bottom-Up Forecasting. To learn more, these additional CFI resources will be helpful:

• Customer Profitability Analysis
• E-Commerce Business Models
• High Low Method vs. Regression Analysis
• Start-up Valuation Metrics
• See all financial modeling resources
• See all valuation resources

CFI is a global provider of financial modeling courses and of the  FMVA Certification . CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses.  Below are some additional resources for you to further explore:

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Which Management Style Is Right for You: Top-Down or Bottom-Up Approach?

By Kate Eby | June 28, 2018

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The top-down approach relies on higher authority figures to determine larger goals that will filter down to the tasks of lower level employees. In comparison, the bottom-up style of communication features a decision-making process that gives the entire staff a voice in company goals. Each task remains fluid as employees achieve their goals.

Included on this page, we’ll detail the key features of both the top-down approach and bottom-up communication , what the top down bottom up approach looks like in project management , industries that leverage both approaches , and more.

The Purposes of Top-Down and Bottom-Up Management Styles

Both the top-down and bottom-up styles of management offer significant advantages for the companies that leverage each approach. Both styles distinguish between high level and low level work, but how each management styles achieves this process varies widely. As with any business, the goals of each are to appropriately and efficiently think, teach, gain insight, and develop an overall leadership system that works well for the company and generates revenue.

The downward communication approach can spawn many positive business impacts through unique aspects of management, including the following:

• Creating clear lines of authority
• Standardizing products and services
• Facilitating quality control
• Streamlining tasks and achieving goals quickly

By comparison, the bottom-up approach utilizes alternative ways of management to achieve success. These can include the following:

• Forming a unique perception of the company, its goals, and its employees
• Measuring operational risk (in terms of fraud, model, and employee risk)
• Reallocating assets and decision-making power
• Giving voice to all employees

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What Is a Top-Down Policy?

The top-down policy , also referred to as autocratic leadership , is a management process driven by a business’ upper level of executives.

Senior project managers create company-wide decisions that trickle down to lower departments. The decisions are first weighed on variables like frequency and severity, and then made based on the higher or lower levels of such variables. Upper management gathers and acts upon the knowledge, which employees carry out.

This policy type relies on a hierarchy of high versus low rank employees — the high ranking individuals rely on it for the decision of tasks and goals, and the low ranking employees to complete tasks and achieve goals. This structured programming of management leads to neatly defined subsystems of employees and departments. Sometimes referred to as a stepwise design or decomposition , a system and its goals are broken down into compositional sub-systems in order to gain insight into the smaller aspects that make up a larger system. This format is made more specific with the assistance of black boxes , which make the backward-looking approach easier to follow as upper management pushes down decisions. There is a distinct splitting of work between employees in different departments. This delegation of tasks is sometimes referred to as reverse engineering or a big picture outlook because of the way larger goals are fragmented into small tasks that are then handed down to lower level employees.

There are many industries in the workforce that find this business approach especially appealing. In particular, designers, software developers, and engineers are drawn to the top-down policy because reverse product engineering often leads to the best final outcome. Similarly, investors leverage this policy because it is non data-intensive and analyzes the entire economy rather than the ebbs and flows of an individual business or sector of an industry. The top-down style is also leveraged across companies in an effort to budget effectively.

Top-down budgeting assesses the larger budgeting strategies of a company and allots a certain amount to certain departments, events, and employees. Well-known, popularized figureheads who own companies also leverage this approach. For example, the Martha Stewart Living company, owned and managed by lifestyle expert Martha Stewart, utilizes the top-down approach — therefore, Stewart makes the decisions, holds the most equity in the company, and drives the brand awareness due to her worldwide popularity.

The perks of top-down approach make it widely utilized across many industries. These benefits include the following:

• Decreased Risk: Since the highest level of management is also usually the most informed and most knowledgeable about the business, there is a decreased risk involved in the decision-making process when lower level employees are taken out of the equation.
• Strong Management: The upper authorities in a company will be able to determine best practices and reach goals easier with decisions created and enforced at the highest ranks of a business. Should you need to make immediate changes, a top-down change (also known as an executive-driven change ) can come into play to resolve any problems within an organization, bypassing a slower decision making process involving lower level employees.
• Good Organization: Tasks are determined and filtered down company lines without any confusion because business goals are set by upper management and will not be affected by outside opinions.
• Minimized Cost: Lower level employees are free to complete their own tasks unique to their role in the company and aren’t saddled with the responsibility of setting company-wide goals.

Of course, there are also some downfalls to the top-down approach:

• Limited Creativity: Employees are siloed in their responsibilities and are unable to contribute to the overall goals of the company — sometimes leading to frustration and a lack of motivation to perform.
• Dictatorial: The approach can seem oppressive to the employees who aren’t a part of the process.
• Slow Response to Challenges: When a challenge arises as a result of a decision, it can take time for upper management to establish a solution because there are limited minds contributing to decisions.

What Is a Top-Down Approach in Business?

Companies utilize the top-down approach in order to assess, determine, and implement business decisions made by upper executives.

The processes are streamlined and communicated to lower rank employees, who carry out these tasks. Consequentially, projects are more easily managed, and risk is decreased significantly due to strategic decisions created from the top management. This approach relies on the executive level to decide how to prioritize, manage, and conduct everyday processes.

What Is Bottom-Up Communication?

Bottom-up communication revolves around the inclusion of all employees, their ideas, and their perceptions of the business in order to make the most informed decisions.

In this case, a business invites the entire team to participate in the company’s management and decision-making process. Communication and an all-encompassing approach is a vital aspect of this style of management, lending itself to the appropriate name of bottom-up communication.

The bottom-up communication style of business leverages all of its employee’s perceptions of business and ideas for the company. This process allows the company to identify its most targeted — and most appropriate — goals. Bottom-up communication is sometimes referred to as the seed model , as small ideas from each employee grow into complex, organic goals that lead to eventual successes. In a sense, there is a merging of employees and each of their roles into a broader focus dealing with the entire company. This forward-looking approach considers each aspect of a company by taking in the respective employees’ inputs to make a better decision for the entire company.

There are many industries that benefit from this holistic style of business management. These users embody the use of a pieced together system that creates a more informed, complex company with targeted goals. Sometimes known as parsing , businesses analyze a sequence of information in order to determine its overall function and structure, which leads to the most comprehensive view of a project. This gives way to the most appropriate decision. Biologists, pharmacologists, and people involved in the homebuilding industry all use small, pointed pieces of a project or company to generate a targeted goal. Banking companies in particular, like Ernst & Young, use the bottom-up approach to analyze aspects of their company in comparison to the microeconomic variables of the economy. These companies in wide-ranging industries benefit from having a well-rounded perception before jumping to quick decisions that may not have a positive affect.

In practice, this approach is extremely successful and results in many benefits for the companies who utilize it. These pros of practicing bottom-up communication include the following:

• Increased Company-Wide Communication: When every employee actively participates in the decision-making process, the overall communication among members of the organization will increase significantly.
• Build Morale: All members of the business community will feel included and valued, which fosters a supportive and communicative environment where employees can thrive and grow together.
• Share Solutions: A wide hearth of brain power goes into the problems of the company as they arise, which will result in quicker problem solving and more efficient solutions.
• Increased Collaboration: Employees of all levels are granted the opportunity to discuss problems, bounce ideas off of one another, and build trust across departments.

Despite the benefits of the bottom-up communication style, however, there are some potential pitfalls:

• Bogging Down of Employees: When all employees participate in larger decisions (that are typically saved for upper management), they can get bogged down by the sheer responsibility. Employees can be taken away from their own tasks and pulled into larger projects, causing them to lose precious time.
• Slowed Time Creating Plans and Reaching Goals: When many people with varying ideas contribute to the company’s decision-making process, conflicts and disagreements can arise. This can lead to delays in making plans and reaching goals.
• Inaccurate Reflections of Data: A variety of people working on the same projects simultaneously can cause skewed results and inaccurate decisions in the long term.

What Is the Bottom-Up Approach in Budgeting?

Businesses leverage the bottom-up approach in an effort to produce the most comprehensive budget plan for all departments, resources, and employees.

The approach gathers input from all members of the business and allots a certain dollar value to each department that is appropriate for their business needs. As a result of this inclusive approach to budgeting, every aspect of business is considered equally as the budgeting plan is created.

What Is Bottom-Up Approach in Project Management?

The inclusive nature of the bottom-up approach benefits project management. The open communication and shared solutions among all employees ensure that projects remain fluid and goals are achieved in a timely fashion.

As unforeseen events pop up during projects, targets are shifted through the open line of communication between business executive and lower-ranking employees. Collaboration fostered through the bottom-up approach gives businesses the transparency needed to maintain successful processes.

What Is Bottom-Up Leadership Style?

Keeping all employees, business processes, and departments in mind, leaders who adopt the bottom-up approach encourage input from all areas of the organization.

This leadership style allows for communication and continued fluidity as they are able to consider a greater number of opinions when making decisions. Rather than having a singular, overarching leader responsible for decision making, ideas are exchanged across a widespread group.

History of the Top-Down and Bottom-Up Approach

The development of the top-down and bottom-up approaches was a result of trial and error in managing, maintaining, and achieving success in a business. Although there are great differences in the two styles, both were created by developing a system that resulted in the most success, revenue, and employee happiness.

The top-down approach came to be in the 1970s, when IBM researchers Harlan Mills and Niklaus Wirth developed the top-down approach for software development field. Mills created a concept of structured programming that aided in the increased quality and decreased time dedicated to creating a computer program. This process was then successfully tested by Mills in an effort to automate the New York Times morgue index. Similarly, Wirth developed a programming language, named Pascal, that relied on the top-down approach to build this particular system. Wirth went on to write an influential paper on the topic, titled “Program Development by Stepwise Refinement,” that detailed the benefits of leveraging a top-down approach in project management, specifically within the software development field. From these studies completed by both Mills and Wirth, the top-down approach evolved into the popular management style discussed earlier.

The Origins of the Bottom-Up Approach

A more modern management technique, the bottom-up approach developed concurrently with a shift in focus towards Industrial and Organizational Psychology (I/O). Explained by the American Psychological Association (APA), I/O is defined as “the scientific study of human behavior in organizations and the workplace.” As I/O came to be a more widely-recognized study, there was a significant trend upwards in the use of bottom-up management. The field of I/O encourages employers to consistently value their employees and make their contributions to the company a top priority. This approach caused upper management to lessen their hold on decision-making power, and instead, allowed for lower ranking employees to contribute more frequently.

The Hawthorne Experiments, completed as early as 1924, found that employees who were given brighter lights at their work station were more productive than those who received dimmer lights. The belief behind this correlation was that employees were more likely to contribute more to the company when they felt cared for and valued. An advocate for the I/O movement and the bottom-up approach, Elton Mayo added to the human relations movement happening during the mid-20th century. Mayo believed that by improving the social aspects of the workplace, the company would ultimately benefit. Eventually, this led to the development of human resources (HR) departments . HR departments dedicated themselves directly to this newfound engagement to employees and their investment in the company. Even more radical divisions of bottom-up management have come to the surface in later years. One such approach is holacracy , which fully leans in to the bottom-up policy and is founded on ideas like transparent and moveable roles in a company, and a circular structure of authority instead of a vertical platform.

Industries that Use Top-Down and Bottom-Up Approaches

The top-down and bottom-up approaches have gained traction in certain sectors of the workforce. Sometimes a highly authoritative upper management and a delegation of tasks is better than employees with fluid roles and a large say in the decisions of a company, and vice versa. Below is a conclusive list of the industries that embody certain management styles over others.

• Investing/Banking: The top-down approach of banking focuses on how macroeconomic factors of the economy drive the market and stock prices, and then make business decisions accordingly. This approach is sometimes referred to as the big data bottom-up approach because of the large influx of numbers used to make company-wide decisions. The bottom-up approach in banking deals with microeconomic factors, focusing less on market cycles and more on an individual company’s performance in comparison to the larger market. Decisions are made on a case-by-case basis, and there is no dependency between companies.
• Nanotechnology: This industry utilizes both approaches for different purposes. The top-down approach is leveraged when developing molecular manufacturing strategies, whereas the bottom-up approach is ideal for developing conventional manufacturing strategies. In 1989, the Foresight Institute first applied bothy styles to the nanotechnology field.
• Neuroscience & Psychology: The ways in which people process information, and how they consequently analyze it, is part of both the top-down and the bottom-up approaches. Sensory input is thought of as a bottom-up approach because someone takes in information from the environment in order to make an informed decision. Comparatively, higher cognitive processes are thought of as a top-down procedure because these functions are done with little voluntary thought or outside influence.
• Public Health: The top-down approach in public health deals with programs that are run by whole governments of intergovernmental organizations (IGOs) that aid in combating worldwide health-related problems. HIV control and smallpox eradication are two examples of top-down policies in the public health sphere. The bottom-up approach is more plausible when combating local issues, like access to health care clinics. This approach invites the input of community members to deal with issues that affect people in closer proximity.
• Architecture: This category can be broken down based on two schools of art: the Ecole des Beaux-Arts School of Design and the Bauhaus. The former begins designs with a basic drawing plan that outlines a project in full, lending itself to a top-down approach. The latter starts by developing a small-scale system that will eventually become a larger, more architectural piece, making it a bottom-up approach.
• Ecology: There are top-down and bottom-up structures that are part of our natural world. In some ecosystems, top predators control the structure of a population. This is an example of a top-down approach. In comparison, other ecosystems exist on a bottom-up approach. These ecosystems, like some marine ecosystems, rely on the productivity of the primary producer at the lowest level to maintain the functionality of the rest of the population.

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Top-down vs. bottom-up management: What is the best fit?

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Top-down management

What companies use top-down management, pros and cons of top-down management, bottom-up management, what companies use bottom-up management, pros and cons of bottom-up management.

What is the countercurrent method, and how does it work?

Which approach is best for you?

You’re the boss. Maybe you just became one for the first time or maybe you’ve been managing people for a long time. Either way, whether you’re leading an entire organization or just a team or two, you now have the power, and responsibility, to make decisions and be accountable. 

Your team is looking to you, literally staring at you, for guidance on what to do next.

What do you do? 

Do you start handing out clearly defined tasks with explicit guidelines, deadlines, and steps so that all your employee has to do is execute your plan? After all, you know what needs to be done. If everyone executes as directed, your plan will work and your vision will be realized, and you’ll achieve good results. 

Or, do you start asking questions to understand what people are working on, what challenges they see, and let them define the priorities? The team is closest to the work, after all, and probably has insight into what is or isn’t working. If everyone does what they think is best, their plans should come together and achieve good results. 

These two choices for management represent extreme examples of two approaches, and accompanying mindsets, for managing: top-down management or bottom-up. 

The cliche of the boss-as-tyrant or boss-as-benevolent dictator or boss-as-all-knowing is prevalent for a reason. Most of us are used to top-down management — the traditional approach. The leadership team sets the company’s direction and major projects, and everyone else executes the plan. At the extreme, the employees execute tightly-specified tasks as quickly, consistently — and robotically — as possible.  

Bottom-up management is the opposite — ideas about upcoming goals, projects, and vision are funneled up by the teams and individual contributors. This allows more room for feedback and discussion. Bottom-up management first came about in software development to help teams implement user feedback into the product and to quickly work on iteration after iteration. At the extreme, employees are free agents, following their own direction and optimizing for their own interests. 

Both approaches have advantages and disadvantages. In reality, most managers and organizations will fall somewhere on a spectrum between the two. At the same time, it’s useful to understand the underlying mindset and beliefs, as well as the limitations and what is required to succeed. We’ll dive into them below so that you can decide which one is right for your business. 

Often referred to as command-and-control, top-down management is often the default. In this hierarchical style of management, the power and decision-making generally remain with those at the top (though there might be some input from middle management). Information tends to flow slowly and only in one direction. It’s up to everyone else to implement the vision that’s determined by the leadership team . 

The top-down approach comes with several benefits. First, because the decision-making process is extremely centralized, it leaves little room for ambiguity. With the input of just a few people, it’s easy to provide clarity, and the message doesn’t get muddled or crowded with additional revisions and perspectives. A clearer vision is much easier to implement. 

And that implementation tends to happen quite quickly. Since there isn’t an opportunity to question, discuss, or provide feedback on the message coming from the top, the company saves valuable time by moving rapidly to the execution phase. 

One caveat here: Without the opportunity to hear any feedback, there’s a risk that management might make the wrong decision. Even if they already have a strong pulse on the organization, the needs of customers and the conditions surrounding how a company meets those needs are changing a lot faster now than they used to. A very hierarchical organization will struggle to respond quickly enough to address unexpected problems or pursue new opportunities . 

Company decision-makers also need to make sure they have the respect of other teams and a track record of acting in the company’s best interest. Top-down processing at a company where a new leader has just stepped in, or where there’s a management team who has been known to ignore the needs of other departments, provides fertile ground for problems ahead. 

Finally, in an overly prescriptive work environment where they are expected to execute like robots, people might not find the job satisfying. There isn’t a lot of room for growth and development, except for those chosen for management. Ultimately, the organization also isn’t benefiting from the range of insights or abilities the employees might have to offer. 

If you choose a company at random, there’s a pretty good chance that its approach to management is top-down, especially large organizations. If the company is in a heavily regulated industry or one with severe, irreversible consequences for mistakes, it’s even more likely. The financial sector , for example, has clear rules and strong repercussions when it comes to strategy, process, and execution, leaving little room for error. 

Generally, management has the clearest perspective on how to navigate these regulations. They understand the ins and outs of the sector and have the authority to make sure that all actions and communications are aligned to policy and legal requirements.  

The military has historically been used as the poster-child for command-and-control. Consider the classic drill sergeant scene: “When I say ‘jump,’ you say ‘how high?’” Interestingly, over the past two decades, the military itself has pioneered a less hierarchical, distributed, more agile form of management in response to the less predictable, faster-changing challenges they now face. 

• Most likely to create alignment in the team’s overall goals
• Provides clear goals and expectations for the employees
• Employees are able to focus solely on their work
• Discourages creativity and proactivity
• Can lead to unhappy employees due to lack of autonomy
• Employees may feel disconnected from the company’s values

You might hear about bottom-up management in the software development space or when talking about grassroots movements. Bottom-up management is about both casting a wider net and empowering employees at different levels of the organization. In this approach, the actions and vision for the wider company draw on input from employees across different levels. Teams and individuals have greater autonomy in how they approach the work and are likely to determine at least some of their own outcomes and priorities. 

This approach comes with its own set of benefits, not the least of which is greater employee engagement . When employees know that their voice is being heard and that they’re contributing to the company vision, they’re more motivated and more likely to connect more deeply with their work, showcasing higher levels of engagement and productivity. After all, their work was, in part, determined by them. 

The opportunity to provide feedback to leadership also adds value to the employee’s day-to-day work. It’s through their work and experience that they gain insight into which direction the company might take next. When management requests feedback, employees know that their learnings from their work experience hold value. A bottom-up approach emphasizes the fact that those who are out “in the field” every day can provide significant insights that management, from their perspective a bit higher up, might fail to notice. 

With this approach, organizations can also lessen the risk of surprising teams with any unexpected tasks or processes. Since the direction was set with the team’s input, it should have echoes of the problems and accompanying solutions that were funneled up through the feedback.

Bottom-up management also provides an opportunity to benefit from a diverse group of people across the company, many of whom will have unique perspectives on the business and new approaches to consider. Research has shown that teams and organizations are more innovative when they draw on more diverse perspectives and experiences.

Finally, bottom-up management can create more stretch opportunities for professional growth and development for everyone. Team members are more likely to stay relevant and up-to-date with skills that the company needs for the next strategy. 

The downside of bottom-up is that it can be difficult to dial in the right level of structure and guidance to give people. In addition, because authority isn’t centralized, figuring out who or if there is a signoff needed for a decision can be confusing. 

Generally, a completely hands-off approach to project management will be frustrating and ineffective, potentially leading to as much dissatisfaction as a strict top-down management approach. Starting from an assumption of trust, good intentions and competency doesn’t take into account the reality that many employees might need guidance and supported development to effectively tackle new challenges that they’ve never experienced. In addition, especially with larger organizations, team members and individual contributors might not have enough visibility into company goals or other workstreams to make informed decisions about where they should best focus their own efforts. 

Bottom-up management is commonly seen in start-ups. Often, start-ups have a smaller group of people working for them , which means that many voices can easily be heard and feedback can be taken into consideration. And because more nascent organizations are in quickly evolving industries, start-up employees are usually hired for their ability to take on the work that needs to be done, giving them autonomy to problem-solve and the power to step outside of their role to do so. 

This sense of autonomy offers employees both the ability to be innovative in their own role and to gain a good understanding of what they need from management in order to move forward. 

Journalism is an example of bottom-up management in a more traditional industry. Though the overall direction of the publication is set by those at the top, journalists are often responsible for finding their own stories and pitching ideas to editors. Grassroots movements are also, by definition, bottom-up, using the power of communities and individuals to press for change at the government level. 

• Can lead to better engagement and productivity
• Employees are empowered to share valuable insights
• Team is often better aligned to the big picture and company values
• May create disorganization and frustration
• Employees may be reluctant to share feedback
• Employees may derail the business’s mission with unrelated concerns

What is the countercurrent method, and how does it work? 

Both the top-down and bottom-up approaches have strengths and weaknesses. The countercurrent method attempts to eliminate the downsides by combining both approaches. You could think of it as a direction being set by executive leaders, with the front-line staff determining the best way to achieve each goal along the way.

The countercurrent method is bilateral, with team members sending their plans to the leader for approval before executing them. The big picture, long-term goals, and budgeting are managed and communicated to employees and staff. While this process can feel a little less direct than top-down management, it can actually be easier on large organizations. Each person can contribute within their i ndividual departments , with strategy and vision created through the chain of management. This method can be highly effective, empowering employees to make decisions while managing growth at higher levels.

To get an idea of the approach best for your organization, it’s helpful to think of the current stage of your organization. 

If you’re growing and consider your company more of a start-up, it might be best to start with a bottom-up approach as you continue to learn more about the space and the industry from your employees. Plus, having fewer people makes it much simpler to take everyone’s views into consideration. If you try to employ a top-down approach in a start-up, people who originally had huge areas of responsibility might begin to feel stifled. It’s tough to feel empowered exploring new areas of opportunity with strong directives set from the top. 

If you work in a heavily regulated industry or a much larger company, consider a top-down approach. However, be sure that you have other means of getting a pulse on the company and its challenges so that management is not too separated from what’s happening on the ground. If you need to move quickly, a top-down approach can ensure that people can move swiftly from strategy to execution — so long as leadership truly understands the situation.

Keep in mind that as an organization evolves, its management style should evolve with it. As organizations grow, expand into different areas and new types of leaders arrive, the process of company goal-setting needs to be flexible to accommodate for these changes. 

Of course, these two approaches aren’t mutually exclusive. For example, there might be certain decisions that are best made at the top then filtered down and other areas where management might need to rely heavily on team feedback to make a decision. 

What’s most important is maintaining as much communication and transparency about why you are being more top-down or bottom-up in a decision-making process as possible. You don’t want to seem inconsistent, erratic, or as if you say one thing but do another. Feel free to combine elements of these two approaches until you find the right mix for your situation, your individual company and team goals, and your leadership style.

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With over 15 years of content experience, Allaya Cooks Campbell has written for outlets such as ScaryMommy, HRzone, and HuffPost. She holds a B.A. in Psychology and is a certified yoga instructor as well as a certified Integrative Wellness & Life Coach. Allaya is passionate about whole-person wellness, yoga, and mental health.

Looking inward can make you a better leader

6 steps to create a management development program that works, what is inner work® it’s the key to being a better leader, josh bersin on the importance of talent management in the modern workplace, how to make decisions like a multi-billion dollar corporation, back to school 3 ways managers can support working parents, what we learned from leading a hybrid organization for 8 years, how to build a high performance team, according to patty mccord, how leadership coaching helps leaders get (and keep) an edge, need to move faster and smarter level up with distributed leadership, boss versus leader: develop the skills to bring out the best of both, exploring leadership vs. management and how to excel at both, what is culture add vs culture fit and which is right for me, reactive vs. proactive management styles: which one gets results, 11 types of organizational culture — and choosing the best one, principles and examples of adaptive leadership, upward communication: what is it 5 examples, top-down processing & how to avoid self-limiting behavior, stay connected with betterup, get our newsletter, event invites, plus product insights and research..

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The inside scoop on top-down and bottom-up planning

Budgeting & forecasting.

Updated: October 12, 2023 |

Jake Ballinger

FP&A Writer, Cube Software

Jake Ballinger is an experienced SEO and content manager with deep expertise in FP&A and finance topics. He speaks 9 languages and lives in NYC.

For any company, planning is critical.

Whether it's sales forecasting, budgeting, or headcount.

Each requires a firm, data-backed plan.

But where should this data—and the plans that follow it—come from? The top of the company? Or the bottom? 

Let's look at a hypothetical: how forecast planning might work with each approach to give you a clearer idea of the differences between top-down and bottom-up planning methods.

We'll then look at each planning strategy's general advantages and disadvantages.

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What is top-down planning?

Also known as retrograde planning, a top-down approach looks at the big picture—the market layout. 

Management observes market trends, conducts painstaking research, and tries to answer questions like "How can we increase our total market share?" or "How can we differentiate ourselves in this competitive landscape?" 

From there, they devise a sales plan that filters down to the rest of the company. The specifics of achieving goals laid out in the plan would be left to department heads.

So, top-down planning is more of a classic approach—executives create company goals, and the rest of the organization tries to reach them. There's little or no input from below.

When is top-down planning superior to the bottom-up planning method?

Top-down planning aligns the organization around the CEO's (or Board's ) vision for the company. 

As our co-founder and CEO is fond of saying, startups die from indigestion, not starvation. So the top-down approach is great for early-stage startups that must focus on growth.

As we'll see, though, bottom-up planning is not the quickest approach. Therefore, a top-down approach will be the best option when a company must move fast.

The macroeconomic view of top-down planning is better for budgeting when a company needs to cut costs. Management has a clearer view of revenue and understands where finances can reasonably be allocated in a crisis.

Disadvantages of top-down planning

Top-down planning is far from perfect.

Despite its broad outlook, it takes a narrow view. The top of the organizational hierarchy may be out of touch with individual departments and set unrealistic objectives.

This results in lower employee buy-in , less motivation, and less likelihood of meeting targets.

In addition, when the decision-making process involves only one person or a small group of people, it's possible they could be making the wrong decisions .

What is the bottom-up planning approach?

Also known as progressive planning, the bottom-up approach begins, at a very basic level, at a company's lower levels.

This might include individual department sales, production capacity, and regional details in sales forecasting . You'd begin with the product and end with the market trends in contrast to top-down planning.

Bottom-up planning is much more inward-focused than top-down planning—it concentrates more on the company's internal operations, getting into the nitty-gritty, granular detail.

Because bottom-up planning is based on solid, very focused data, departments can set more achievable, realistic financial projections.

These more precise metrics carry up the organizational hierarchy and inform the company's overall plan.

Advantages of the bottom-up approach

One of the bottom-up approach's primary advantages is higher employee morale. That's thanks to its inclusive nature.

Looking again at sales forecasting, there's higher buy-in when the data that informs the company-wide planning process originates from frontline workers.

Because workers set and understand their goals, they feel more invested in driving sales . The same could be said when departments help devise their budgets, as in bottom-up budget planning.

Compared to top-down planning, bottom-up planning provides a clearer view of a company's overall situation. When departments communicate goals to the top, management better understands the unique position of each subdivision.

The rich data gathered by bottom-up planning also clarifies how money is spent . Companies that need to make cuts more easily know where these cuts should occur.

Arguably, department heads know their hiring and spending needs better than distant executives—bottom-up headcount planning and budgeting can lead to a more efficient allocation of funds.

Finally, interaction and planning between different company levels help foster a culture of cooperation.

What are the disadvantages of bottom-up planning?

One of the biggest disadvantages of a bottom-up planning method is a time sink—analyzing all this data can take a lot of time, especially if the company is large.

Cohesion can also be a problem. Without a clear, overarching directive, things can get messy—think "too many cooks in the kitchen."

The bottom-up technique is an iterative method, meaning it's down to the top level to formulate all these different objectives into a cohesive plan. This takes time and effort—another disadvantage.

Of course, heads of individual departments might not have the same high-level insights executives have. Say the company needs to be cutting costs . If we're doing budgeting or headcount from the bottom-up, more money may be spent than the company can currently manage.

What is an example of bottom-up planning?

Consider a global company with divisions in many different countries for an example of bottom-up planning. 

On average, a top-down approach might see a specific product as the company's bestseller . Executives set a company-wide goal of increasing sales of that product. The problem is they don't necessarily understand each regional market across their very diverse company.

Naturally, no one will understand these better than the local department heads. It could be that the goal imposed from the top is unrealistic—maybe there's a cultural preference that misaligns with the product or unfortunate translations that tank desire in the market.

In a bottom-up planning strategy, that individual department would be free to determine what's best to improve their position and then take action.

Say they're looking at historical data and decide a different item produced by the company would be a much better fit. They set up their marketing budget, made sales, and emerged much stronger than they would have had they been forced to follow an inflexible, company-wide directive.

This is the idea behind bottom-up planning: that each department knows what's best for them regarding growth , where they need to focus their efforts, and so on.

Who uses bottom-up planning?

Bottom-up planning techniques are best for industries that require a spark of creativity—those looking to innovate or disrupt.

Think tech companies. Bottom-up planning widens the brainpower pool. Employees at all levels can bounce ideas off each other and refine the company's vision.

Close collaboration between departments—the kind that might not exist if top-down planning were employed—helps tweak different aspects of a product before it heads to market.

Countercurrent Planning

No rule says a company must use only top-down or bottom-up planning. Different circumstances favor different approaches; the best option is sometimes to combine the two methods.

This is known as countercurrent planning.

In a countercurrent procedure, the goals are set by the top. However, each department is permitted to work its own goals into how they achieve the primary goal. 

For example, let's say a division wants to increase its online marketing efforts. In a bottom-up plan, that is what they would do. In a top-down plan, management might require funds to be allocated elsewhere.

In a countercurrent plan, the goal communicated from the top might be: increase profitability from this product.

Through their research, the division has determined they can better sell this product through an online channel. By cutting their previous advertising method and boosting efforts online, they can reduce customer acquisition costs and increase profitability.

With a countercurrent plan, you get the best of both worlds—both goals have been satisfied, and everyone's happy.

Now you know all about bottom-up planning.

The difference between these planning approaches lies in how much control you want over the company's finances and the budgeting and planning process.

So what are you going to do now? Are you going to try bottom-up planning?

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Project Management

Top-down vs bottom-up: which is the best approach.

December 11, 2023

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What does it take to manage a project well? Leadership? Yes. Team work? Of course! But how do you approach it with balance? 

Imagine running a big project like building a treehouse. Do you start with a master plan from the top, ensuring every detail is in place, or gather the gang, brainstorm ideas, and build from the ground up?

It’s like choosing your management style of managing a new project. Do you go with the bossy top-down plan or the democratic, bottom-up approach? Let’s keep it simple: should the chief be the boss telling everyone what to do, or should the team decide things together?

This article will look at the top-down vs bottom-up approach to project management and see which works better for different situations.

What is a Top-Down Approach?

Benefits of a top-down approach, what is a bottom-up approach, benefits of a bottom-up approach, major differences between top-down vs bottom-up management, choosing the best approach for your team or business, improving your team’s management with clickup, finding the right balance for your project’s success—using clickup.

In project management, the top-down approach is like having a master plan ready before starting the project. Imagine you’re the chief architect, sitting comfortably at the top of the tree, sketching out every detail. You decide on the treehouse design, materials, and where each piece should go.

In practical terms, this means that the project leader or manager takes charge, analyzing the project as a whole and breaking it down into smaller, manageable tasks. Like our chief architect, they set the goals, allocate resources, and define the project’s overall structure. 

The advantage of the top-down approach is clarity. All team members know their role, and the vision (big picture) is crystal clear. There’s a potential downside, though. The top-down approach will miss the creative input and unique ideas the team could bring.

Imagine if, in our treehouse project, the chief architect forgot to ask the kids if they wanted a secret trapdoor or a telescope. Sure, they would have a functional treehouse, but would they be pleased with it? 

While the top-down approach offers a well-organized plan, ensuring that the finer details stay visible, it does not allow collaboration and creativity to flourish.

• Clear direction➡️ : The good thing about top-down is that everyone knows where the team is heading. The leaders (upper management team) set the goals, and the team follows them. This helps avoid confusion and keeps everyone on the same page
• Smart use of resources🛠️ : With top-down, the leaders will use resources wisely because they see the whole picture. They decide where time, money, and people should go to make the project successful
• Easy communication🗣️ : Top-down makes communication simple . The leaders say something, and it goes down the line. This way, everyone knows what’s happening, and there are fewer misunderstandings
• Greater accountability ✅: Since there is an established chain of command and clear allocation of responsibility, the top-down approach makes it easier to hold people accountable. You know who the source is if a problem arises, and fixing it is that much faster 

In project management, the bottom-up approach is akin to gathering the team at the tree’s base, tossing around ideas, and collectively deciding how to build the treehouse. It’s a democratic process where everyone has a say.

In a bottom-up approaches, the team members actively participate in decision-making. They share their insights, skills, and suggestions, and the project gradually takes shape based on their collective input. Each friend suggests a unique feature for our treehouse project, like a rope ladder or a cozy reading nook. The final design emerges through a collaborative effort, with contributions from everyone involved.

The strength of the bottom-up approach lies in its inclusivity and the wealth of diverse ideas it brings. Creativity flourishes since everyone has a voice, reflecting a broader range of perspectives. However, managing this process can be like wrangling playful monkeys in a tree—it might take longer to reach a decision, and the overall structure may need some adjustments.

While the bottom-up approach fosters innovation and team engagement, striking a balance is crucial. Too many ideas without a guiding structure might lead to chaos. It’s like ensuring that while building the treehouse, there’s still a sturdy trunk and branches to support all those exciting additions suggested by the team.

• Creative thinking 🧠 : Embracing the bottom-up management approach lets your team be creative. Team members can share their ideas; some might be smart solutions that leaders didn’t think of. It’s a way to encourage new and innovative thinking
• Happy team 😄 : When the team gets to make decisions, they feel more involved and happy. Everyone feels part of the success, which excites people to work on the project. That’s a crucial advantage in favor of the bottom-up approach in bottom-up vs top-down comparison
• Quick adaptation🏃 : Bottom-up is good at adapting to changes fast. Since the people doing the work make decisions, they quickly adjust plans when things change. This makes the project more flexible and able to handle unexpected situations

Decision-making authority

In the top-down approach, the decision-making authority rests primarily with a central figure, our chief architect in the treehouse scenario. They plan and decide the structure, design, and features, and the team follows their lead.

In the bottom-up approach, the team members share the decision-making process. Each participant has a say in the project, contributing ideas and collectively shaping the final product, much like friends collaborating on the design of a treehouse.

Clarity vs. creativity

The top-down approach provides clarity from the outset. The plan is well-defined, ensuring all team members know their role and the project’s direction. However, this clarity might come at the expense of stifling creative input from the team.

The bottom-up approach encourages creativity and inclusivity. Team members bring diverse ideas to the table, fostering innovation. However, the process may take longer, and managing multiple suggestions could impact the effectiveness of coordination.

Efficiency vs. engagement

The top-down approach can be more efficient in terms of decision-making and execution. With a clear plan, task assignment is quick, and the project progresses seamlessly.

While the bottom-up approach may take more time due to collaborative decision-making, it fosters high team engagement. The sense of ownership and involvement will lead to a more motivated and dedicated team.

Adaptability

When comparing the top-down vs bottom-up approach, the top-down might need help with adaptability. Once the plan is set, making significant changes without disrupting the entire structure is challenging.

On the other hand, the bottom-up approach is inherently adaptable. Since decisions evolve organically, the team quickly adjusts based on real-time feedback and emerging ideas.

The choice between bottom-up vs. top-down approaches boils down to whether you prefer a project where the leader decides on everything or evolves from a collaborative effort, where everyone contributes to the final masterpiece. Each approach has its strengths, and the best choice often depends on the specific needs and dynamics of the project at hand.

The same applies to project management. When looking at the top-down vs bottom-up management styles, you must consider the situation before picking one. How do you do that? Keep reading to find out! 

Deciding on the management approach for your projects is a crucial decision that significantly influences your team’s success. Take Google and Apple, for instance. Both of these tech behemoths follow different approaches to managing their teams. While Apple’s management is more inclined towards the top-down side , Google follows more of a bottom-up approach . 

To make the best decision for your team or business, you must look into some key aspects and develop your approach without getting caught up in the top-down vs bottom-up rivalry.

Understand your team dynamics

Think about your team’s expertise and experience. If your team is skilled and experienced, a bottom-up approach, where everyone contributes ideas, might be great. But if your team is relatively new or lacks specific skills, a top-down approach might be more suitable, with clear guidance and motivation from leaders.

Action steps : Consider conducting a skills assessment within your team to identify strengths and areas needing support. 

Project complexity and flexibility

Consider how complex your project is and how often it might change. For projects with well-defined goals, a top-down approach provides a clear roadmap. However, in fast-paced environments or industries where changes are frequent, a bottom-up approach, allowing for quick decision-making, might be a better fit. 🧩

Action steps : Create a project matrix outlining key variables like timelines, budget constraints, and stakeholder involvement—this will also help you develop better practices to manage that project.

Innovation and problem-solving needs

Think about the role of innovation in your projects. A bottom-up approach encourages creativity from everyone, leveraging diverse perspectives. Conversely, a top-down approach may be necessary for projects where a centralized vision is crucial for innovation.

Action steps : Facilitate regular brainstorming sessions or idea-sharing forums within your team. 

Organizational culture

Reflect on your organization’s culture. If it values collaboration and everyone’s input, a bottom-up approach supports this. A top-down approach might align better if it’s more hierarchical, where decisions come from the top.

Action steps : Conduct surveys or focus group discussions to understand your organization’s culture.

Risk tolerance

Consider how your organization deals with risks. In risk-averse industries, a top-down approach provides stability. Conversely, if your organization is open to experimentation, a bottom-up approach allows more flexibility in navigating risks.

Action steps : Create a risk assessment framework to quantify potential risks associated with your projects.

Combining approaches

Acknowledge the potential benefits of combining elements from both approaches. A hybrid approach offers clear leadership advantages while leveraging front-line employees’ creativity. 

Action steps : Explore case studies from organizations successfully implementing a hybrid approach. 

Continuous evaluation and adaptation

Understand that deciding to go one way or the other is not static. Regularly evaluate the effectiveness of your chosen approach and be prepared to adapt based on team composition, project requirements, or external factors.

Action steps : Implement a feedback loop within your project management framework, for example, regular check-ins, surveys, or retrospective meetings to gather insights on the effectiveness of the chosen approach.

Whether you prefer to lead from the top or believe in empowering your team from the bottom, ClickUp’s Project Management tool is the ultimate weapon you need to make your team more efficient . ClickUp is more than a project management software ; it’s a one-stop platform where all your work, projects, and teams come together without needing multiple apps .

Simplified collaboration and workflow management

ClickUp makes collaborating on projects and managing workflows straightforward. Its hierarchy framework neatly organizes the most complicated projects into tasks and subtasks. Easily switch between different views of your project data in one central place. 

Customizable features for actionable project roadmaps

ClickUp allows you to customize features according to your team’s needs. This means turning your ideas into action and creating project roadmaps around key milestones, all within the same platform, is easy. 🗺️

Integration capabilities for seamless connectivity

ClickUp stands out with its ability to connect with over 1,000 other work tools for free. Whether Slack, Google Drive, Figma, Loom, or more, ClickUp streamlines your project management and brings your team closer to achieving their goals.

In project management, it’s not about picking sides—bottom-up vs top-down—it’s about finding what works best for your team. Top-down management gives clear direction, while bottom-up sparks creativity. Many successful teams mix both, creating a dynamic project space.

Whatever approach you pick, you need to be on top of your game with project management.

Incorporating ClickUp project management software into your project management toolkit boosts efficiency and provides a user-friendly experience. It supports both leadership styles, top-down vs bottom-up, and ensures your team can focus on completing projects. 👉 Check out Clickup’s project management tool today!

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Top-Down vs. Bottom-up Approach: a 2023 Management Guide

Learn about the top-down and bottom-up approaches to management, including their pros and cons and how to choose which one is right for you.

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Am I using the right management style? Could a different approach help my team perform better?

Ever had those thoughts? If so, here’s the good news:

Exploring different leadership styles is the first step to becoming a more effective manager.

One of the most pivotal choices in management is deciding whether to take a top-down or a bottom-up approach. Both have advantages, as well as challenges that could hold your company back.

Implementing the most appropriate management style for your business impacts your employees, customers, and bottom line.

In this post, we’ll define the top-down vs. bottom up-approaches to management. Then, we’ll explore which businesses tend to use which strategy, along with the pros and cons for each to help you find the best fit for you.

Ready to learn more? Let’s go.

What are the top-down and bottom-up approaches to management?

Top-down and bottom-up are two important management styles.

‎The top-down approach starts with upper management. A CEO, senior supervisor, or project manager makes the initial decisions regarding goals, processes, and projects. This information is communicated to the company’s individual departments for fulfillment.

With bottom-up management, team members are involved in all (or most) aspects of decision-making. Each person’s voice carries weight as the team decides on common goals or works together to complete a project.

These two approaches are very different. And the one you choose will substantially impact the way your team functions.

Let’s break down both styles and their pros and cons.

The top-down approach

The top-down approach is also called the “autocratic leadership” style.

This approach can apply to the company’s fundamental procedures and the specifics of its project management.

A few decision-makers drive the top-down approach.

For example, one decision-maker could be the CEO, who establishes goals for the company and outlines the processes needed to achieve them. It could also be a senior project manager who determines the timelines and steps required to  manage a project  successfully.

Once the decisions are made, that information, along with the expectations for completion, is sent to the team for execution.

In a top-down approach, team members are expected to carry out responsibilities with little room for adjustment or collaboration.

When would you use the top-down approach?

The top-down approach is favored by businesses and organizations that thrive with clear leadership and highly structured processes.

• The  military  is a prime example of top-down management. Decisions are made by the highest-ranking officers, and instructions are related to the rank and file. Compliance within a rigid structure is expected.
• The  financial sector  also uses top-down management. Banks, investment firms, and other financial institutions rely on carefully controlled processes for consistency within dynamic markets.
• The  healthcare industry  also widely employs this management style. Upper management implements research-based, standardized processes to support patient health and wellness.
• Large businesses or corporations  often utilize top-down management approaches. Large-scale organizations may need the structure this approach provides to ensure the quality of their operations.

Top-down benefits

Top-down benefits start with strong leadership.

Clear management

In top-down management, roles and responsibilities are defined through a clear hierarchy. As a result, employees know who makes the decisions.

Highly structured

Companies that benefit from an enhanced structure may lean toward a top-down approach. This is because the  goals and objectives , along with clear processes and guidelines for their completion, are established at the top.

Faster implementation

Goals assigned using a top-down approach can be implemented quickly. Neither collaboration nor information gathering is needed, so employees can carry out their tasks and responsibilities immediately.

Processes standardized

Companies that consistently use the top-down approach standardize processes and procedures over time. Employees can rely on consistency and clarity as they set out to achieve their goals.

While the top-down approach is efficient, there are several disadvantages of the top-down approach that might impact your decision.

Less creativity and innovation

Decisions made by top leadership allow for little collaborative or creative input.

Businesses with rigid structures may have difficulty  adapting to change , which negatively impacts innovation.

Decreased employee engagement

Employees who are unable to contribute ideas may not be invested in their positions. As a result, they might start to feel disengaged.

Impacts of leadership

Strong leadership is important to an effective top-down approach, as it encourages company growth and contributes to a positive culture. Conversely, poor leadership often leads to weaknesses in goal-setting, process establishment, and company morale.

Limited opportunities for feedback

Limited opportunities for collaboration also lead to limitations with feedback. As management drives the decisions, it may take some time for them to hear concerns and adapt to challenges.

The bottom-up approach

Companies that employ the bottom-up management style start making decisions and formulating ideas at the ground level. While upper-level management or senior leaders might come up with the original goal or project, the company’s various teams work together to create the systems, processes, and steps for its completion.

When would you use a bottom-up approach?

Businesses that place a premium on creativity and innovation benefit from bottom-up management.

• Journalism  thrives with ongoing collaboration and input from team members to deliver a highly accurate, quality product.
• Grassroots organizations  tend to use a bottom-up approach. Smaller groups turn their collective ideas into plans of action to influence significant societal or cultural change.
• Software companies  rely on innovation. A bottom-up approach ensures all members contribute to product development and advances.
• Start-ups  are sometimes known as disruptors in their respective industries, and with good reason — they are attempting to innovate and add value to the market. As such, they often implement a bottom-up approach that encompasses high levels of collaboration.

Benefits to going bottom-up

For some businesses, the benefits of the bottom-up approach are hard to ignore.

Elevated creativity and innovation

The bottom-up approach provides more opportunities for creativity. Different perspectives allow for added depth to process development and improved problem-solving strategies.

Innovation is valued, so members are encouraged to offer suggestions and take risks with their ideas.

Increased engagement and productivity

Employees who know their ideas will be considered are more likely to offer them in the first place. Increases in engagement can lead to an  18% increase in productivity .

Stronger employee morale

Increased engagement leads to stronger employee morale. Employees who can provide input tend to feel more positive about their roles, responsibilities, and assignments.

Greater collaboration and investment

Among high-performing teams,  55% report  a high value on cross-collaboration and communication among members. Not only does the bottom-up approach support high collaboration, but it also encourages it across the rest of the organization.

Drawbacks of bottom-up

Before switching your management style to this creativity-driving approach consider whether the following disadvantages of bottom-up management would negatively influence your business:

Lack of high-level input

Team members who are charged with goal setting and processes may not always have the broad understanding that comes from higher management levels. As a result, they might not make the most strategic or practical decisions.

Employees who are unaware of over-arching company goals, budgetary issues, and performance metrics cannot apply them to their plans and processes moving forward.

Slowed momentum

The more people collaborating on a project, the slower it may progress. More input and ideas slow momentum, especially if members cannot come to a decision.

Decreased clarity

If all team members provide equal input, it might be challenging to determine an outcome. In addition, a lack of clear leadership can lead to confusion about assignments, project steps, and deadlines.

Increased mistakes

When decisions are spread across all members, there’s usually less organization. It also might not be clear where final-approved information lives and how to access it. Mistakes can happen more frequently and without clear accountability.

Which style is right for you?

Both of these management styles offer clear advantages and disadvantages.

As you decide which one to adopt for your business, here are some additional factors to keep in mind:

• Consider your culture . If you value high levels of creativity and innovation, a bottom-up approach will serve your business better.

If your business depends on highly structured processes to deliver products and outcomes, then you might lean toward the top-down style instead.

• Think about your size . If you are a start-up with plans to scale, you might want each member’s input and collaboration as you grow.

Larger organizations, however, may need consistent and refined processes to keep multiple teams on track and in sync.

• Remember your goals and objectives . Go back to the basics. What are you seeking to do? What products are you delivering? How quickly do you need to innovate?

Consider your baseline goals and objectives to determine if you need an autocratic top-down or collaborative bottom-up approach to deliver.

• Consider going hybrid . No rule states you  must  choose one management approach or the other.

Maybe you’re interested in a combination. If you need a clear leadership structure from the top-down approach, implement it. But then, build opportunities for team member collaboration and feedback where you can. Regular feedback will ensure you hear about new perspectives and ideas for problem-solving. If you prefer the collaborative, integrated, bottom-up approach, go for it. But assign one or two members for leadership roles within the project. Ensure your company goals and objectives are readily available when members plan projects and develop the next steps.

Approach your management style with confidence

Now you know more about the top-down vs. bottom approaches to management.

You know the different types of organizations that employ these styles and why, as well as the benefits and drawbacks of each.

Now it’s time to decide which option is right for you.

Do you own a smaller business or start-up?

Do you manage employees who thrive with collaboration and creativity?

Do you need to set clear guidelines with little opportunity for input or debate?

Maybe you need some of both.

Take what you’ve learned about each of these approaches to see how you might apply them to your business.

Use  Motion  to help you. Motion provides the tools you need to build your schedule and manage your projects in one easy place, no what management style you use.

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Top Down vs. Bottom Up Planning

insightsoftware is the most comprehensive provider of solutions for the Office of the CFO. We turn information into insights, empowering business leaders to strategically drive their organization.

All successful businesses have one important trait in common: planning. In order to start and maintain a profitable business, careful and well-thought-out strategies must be deployed across all divisions. Top-Down vs. Bottom-Up Planning are two of the most common strategies found in modern businesses.

At first glance, top-down planning and bottom-up planning appear to be polar opposites. Top-down planning aims to take a company from general endeavours to specific goals, whereas bottom-up planning is a tactic that synchronizes specific targets into a general framework. However, as you will see in this article, these two opposing strategies often go hand in hand in practical applications.

It could be overwhelming to choose the right planning approach, especially for a new business. insightsoftware provides a state-of-the-art solution that incorporates financial, operational, and people planning into a single user interface. This planning software extends beyond the executive’s office and empowers every decision maker to positively influence the company’s direction. As you will learn in this article, for any plan to be successfully executed, there must be buy-in from the employees.

Top Down Planning

As the name suggests, top-down strategic planning starts from the top of the company’s hierarchy. Management develops an all-encompassing framework that includes goals essential for the success of the business. These targets are then communicated down the chain of command and shape the workflow of each department. The specifics of how to achieve the target are left for the frontline workers to develop.

Top-down planning takes macroeconomics of the market into consideration, and it doesn’t get bogged down with the details of achieving the objectives. In top-down strategic planning, the goals are set to address the bigger picture and long-term plans of the company.

Bottom Up Planning

Bottom-up strategic planning starts from the workers on the front lines. Instead of being communicated down from management, goals are communicated up from individual departments. Each division is given the opportunity to identify its potential for growth. The philosophy behind this method is that each sector knows their workflow best and can develop more meaningful and achievable targets. The goals that are communicated up to management are analyzed by the executives and formed into a cohesive plan for the whole company.

Bottom-up planning takes the microeconomics of each section of the company into consideration. The targets are set to meet the current and future demands of each division. Bottom-up strategic planning doesn’t constrict the individual workers with abstract and intangible company-wide goals. It focuses on empowering each division of the organization to define how they want to move forward.

Finding what planning method works best for a business or market is a lengthy and tedious procedure. insightsoftware’s collaborative and efficient solutions aim to make this process easier.

Top-Down vs. Bottom-Up Planning

Even though top-down and bottom-up planning are very different methods, they both play crucial roles in a company’s growth. Top-down strategic planning is often applied at businesses that are in their early stages, whereas bottom-up strategic planning is typically implemented at established companies. The top-down approach steers a company in a general direction that the market demands, whereas the bottom-up approach provides a detailed guideline for each cog in the machine.

This article is not written to pit one strategy against the other. It is not about top-down vs. bottom-up planning, but about how a business can leverage both strategies at the right time to be a leader among its competitors.

Integrated Continuous Planning Resource Center

Top-down and bottom-up planning both have advantages and disadvantages. It is up to business managers to decide what planning style works best for the company. Here we highlight a few key benefits and downsides of each strategy:

Advantages and Disadvantages of Top-Down Planning

One of the most important advantages of top-down planning is that targets can be set quickly for the whole business. There is no time wasted in analyzing each department’s performance, and management can rapidly implement the company’s goals.

One of the other noteworthy advantages of top-down planning is that its targets are global. Because the directives are coming from the head of the organization, a cohesive and uniform message is sent to all departments. This means that there is no extra effort required to realign the endeavors of each department.

However, top-down strategic planning also has its disadvantages. For instance, even though this method is inclusive and quick to implement, the company goals might not be accepted by managers in every department. Decision makers should not be surprised to find that top-down planning doesn’t produce the expected results in every department.

Advantages and Disadvantages of Bottom-Up Planning

One of the biggest advantages of bottom-up planning is that, because it is generated at a department level, it results in a higher engagement rate from workers. In bottom-up planning, each key performance indicator (KPI) has been carefully crafted to help departments reach their potential. In this approach, employees feel more control over the future of their jobs.

One of the other significant advantages of bottom-up planning is that the deployment of targets has a higher success rate. In this planning style, each department collaborates within itself to create meaningful goals. This creates an environment in which individual workers feel more responsibility in achieving the objectives, there is a higher chance that the targets are met, and the desired results are attained. In addition, there is no extra effort required by each department to transform a global target into meaningful KPIs.

However, it is worth noting that similar to top-down planning, bottom-up strategic planning also has its disadvantages. Because the goals are set by each subsection of the organization, management will have to work harder to amalgamate each approach into a single company-wide message.

Many companies struggle to maintain course after the initial goal-setting; it is common to define an objective and move on. However, goals require tending. Correcting course based on new data is vital for success. insightsoftware provides all-encompassing planning solutions that will ensure a fast response to external and internal changes.

6 Best Practices for Continuous Planning

Top-down vs. bottom-up planning examples.

To better understand top-down and bottom-up planning, let’s use a simple analogy: food preparation. How do you decide what to cook?

In a top-down planning scenario, you have a nutrition plan. Your dietician has given you direction on how much protein, fat, and carbs to consume. This is an important but general goal. Even though it provides you with a guideline, it lacks specifics. What foods should you purchase? What recipes should you follow?

In a bottom-up planning scenario, you do not have a nutrition plan. So, before every meal, you start at your fridge and pantry. You assess what you have in stock or available to you at a nearby grocery store. Based on this information, you develop a meal plan. But is this a healthy meal? Are you eating enough of each food group?

You can see that neither of these plans are complete on their own. But what if we married the two concepts? What if when assessing the items in your fridge you considered which food group each item belonged to? This approach would allow you to prepare a meal that follows the dietician’s guidelines while taking availability into account. It’s the perfect solution!

This new planning strategy is called a countercurrent procedure. We will discuss this new method in detail at the end of the next example.

Let’s explore an example in the retail sector: a retail chain that sells children’s clothing. In a top-down planning approach, after careful analysis of company-wide sales data, the retail chain owner identifies the company’s best-selling item: children’s overalls. It then sets target numbers for sale of this item based on projected demand. This objective is then communicated to each region and branch.

In a bottom-up planning approach, each branch sets their own targets. A branch in North America sets targets for their best-selling item, which is overalls. Another branch in Central Europe sets their target for minimizing material waste. In the bottom-up planning method, the details of each target are much more defined. This means that the North American branch will set sub-goals to sell a certain number of overalls in a specific size, and the Central European branch will set sub-goals to optimize procurement and material processing. These goals and sub-goals are communicated to the retail chain owner and developed into a global and generic objective – maximizing profit.

Both strategies could lead to success; however, the best results are achieved when the two methods are combined in a countercurrent procedure. In this example, a countercurrent procedure would mean that all branches will have a common goal communicated from the top – maximize profit from sale of overalls – but the details of this objective are decided by each branch. This means that the North American and Central European branch will have different target values for number of overalls sold. The sale target will depend on demands of each region. In this model, the North American branch is free to use novel marketing tactics to increase overall sale in a variety of sizes, and the Central European branch will have the opportunity to drive up its profit margin by reducing material waste. In this scenario, both branches play an effective role in the company’s macro framework while maintaining autonomy.

Countercurrent Procedure or Integrated Planning Approach

Countercurrent procedure combines the best qualities of each planning method to create a more feasible objective. In this approach, the framework is set from the top, but it is evaluated by each division and revised into a step-by-step plan. In other words, the goals defined by management are refined by frontline departments.

The key advantages of the countercurrent method are:

• Employees feel more connected to the company goals.
• Targets are more achievable and aligned with company’s capabilities.
• Objectives are more coordinated across divisions.

At insightsoftware, we understand that no two organizations are alike. Every planning strategy highlighted in this article will require time and effort to produce desirable results. insightsoftware’s Budgeting and Planning tool , which offers a collaborative and integrated solution, can significantly reduce the amount of time required to develop and implement a planning strategy. If you are interested in speaking with one of our budgeting and planning specialists, contact us here.

4 Things to Look for in a Financial Planning Solution

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Top Down vs Bottom Up: Which approach fits you better?

Choosing the right management style for your business is key to your success. There are two popular options: top down vs bottom up.

Before you can pick the right management approach, it’s important to take the time to fully understand these two models. While they are not difficult concepts to comprehend, there are a lot of elements to them. Therefore, it can be difficult to grasp the depth and nuance in these approaches to planning in management.

We will break down the top down and bottom up models in a way that is digestible and useful ( we hope ) to all managers and business owners, the veterans and the newbies. This blog covers everything from top down and bottom up communication to the pros and cons of each model.

What Is Top Down Planning?

• What Is Bottom Up Planning?

Top Down vs Bottom Up Approach

Top down vs bottom up for saas, which model is right for your company, combining top down and bottom up, hiring an external marketing management team.

If you are new to management, you may be wondering, what is a top down approach?  The traditional approach to business planning is top down meaning that the process starts with upper management and moves downward.

The top down model works best in companies with a clearly defined hierarchical structure. Upper management delivers goals and tasks to lower management to execute. Communication is often one-way from the company’s leadership down to the employees.

Here are some common characteristics of top down approach:

• Upper management is responsible for initiating projects and sales.
• Upper management purchases software and lower-level employees adopt the software.
• Lower-level employees complete tasks they are given and submit them to management for approval and implementation.
• Managers give feedback to employees.

Top Down Examples

Many companies, especially older, larger companies use the top down model of strategy, planning, and development. For example, the top down approach to software design was started by IBM . However, these days, IBM actually uses more of a mix of top down and bottom up.

Top down is also specific to certain industries. Industries that have a high level of regulation and need for consistency often rely on a top down model. Some examples include:

• Architecture
• Military and Defense
• Intergovernmental Organizations (IGOs)
• Public Health
• Human Resources

What Is Bottom Up Approach?

The bottom up approach is essentially the opposite of top down. With bottom up planning, specific goals are set by the lower levels of workers in the company and eventually work their way up to become part of the larger company’s goals. It’s kind of like going backwards up a funnel.

Some characteristics of the bottom up approach include:

• There is company-wide collaboration, communication, and sales efforts.
• Software use and structures develop organically from what employees are already doing.
• Lower-level employees have a voice in what happens.
• Both employees and managers give and receive feedback.

Bottom Up Examples

Many start ups and Software-as-a-service (SaaS) companies are adopting a bottom up approach . We’ll discuss why that’s happening later. For now, here’s a list of some of the most notable bottom up organizations:

• The New York Times
• Ernst & Young

Let’s explore the major differences between top down vs bottom up project management, planning, and development.

BENEFITS OF a TOP DOWN Model

A top down model centralizes decision-making and execution in the hands of a small group of executives. This allows for processes to happen faster than they might if dozens of people in different departments were giving input before decisions could be finalized.

Consistent Goals and Structures

In top down planning, business goals and company values are set by founders, owners, and upper management. Therefore, the goals and values are generally the same across departments. This alignment minimizes confusion and increases efficiency. Employees have clear expectations for their work.

Bigger Sales

One of the advantages of top down development is the ability to make larger sales because the sales effort is centralized to one or a few owners and executives. Obviously, if given the choice anyone would prefer bigger deals and larger contracts.

Disadvantages of Top Down Planning

When structures, goals, and tasks are pushed down from upper management, there may be a disconnect. Executives may be out of touch with the abilities and attitudes of their employees. This could lead to unrealistic expectations and a lack of employee motivation.

Limited Creativity

Your employees may have skills and talents that could be advantageous for the company. However, if workers are not given the freedom to problem solve on their own, those talents may be going to waste. These top down management disadvantages could actually be costing you money!

BENEFITS OF a Bottom Up Model

Using a bottom up approach eliminates many of the pitfalls of the top down approach including lack of employee motivation and limited creativity.

Increased Employee Engagement

One of the biggest advantages of bottom up planning is employee engagement. When employees have a say in what work they do and what direction the company takes, they feel more connected to the company and more valued. This improves retention and productivity.

Values Diversity

A group of executives may hold a limited range of perspectives and life experiences. Tapping into the larger range of perspectives held by all stakeholders, including low-level workers, in a company can increase innovation. Collaboration leads to creative problem-solving and gives companies an advantage in competitive markets such as SaaS.

For more tips on building a successful SaaS company, check out our core tactics for SaaS growth . 

Disadvantages of Bottom Up Planning

Can there be too much of a good thing? When it comes to bottom up project management, there can be. Bottom up planning requires a lot of coordination. This means it often uses more time and resources than the top down approach. It can be difficult to make quick changes and decisions.

 Lack of Cohesion

When everyone has a say in a company, there are likely a lot of different opinions being voiced. Some of those opinions may not align with the overall goals and values of the company. Furthermore, sub goals and plans set by various departments may contradict each other hindering productivity and growth.

For new SaaS business owners and start up founders, asking yourself basic questions like this is an excellent way to determine which management style fits you best.

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Pros OF Top DowN For SaaS SaleS

SaaS is a quickly evolving, competitive market. For example, the number of marketing tech SaaS solutions has grown from 947 solutions in 2014 to 8,000 solutions in 2020. That’s a 745% increase in six years!

“The number of competitors for SaaS firms starting around 2012 were less than three on average. By the end of 2017, every SaaS startup faced competition from nine other firms competing in the same SaaS market segment.” – Laura Shiff and Chrissy Kidd, BMC

Using a top down approach to SaaS sales often means larger contracts. Negotiating larger contracts allow companies to lock out their competitors for longer periods of time. They also, many times, will come with additional training, maintenance and support contracts – making you super sticky and creating significant barriers to change. Because of this, companies using top down can count on residual revenue for the duration of the contract and beyond.

Cons OF TOP DOWN for Saas Sales

However, top down does come with its drawbacks. Because of the nature of the bigger deals and larger contracts, sales can see big swings in revenue and it is a lot tougher to predict sales and revenue figures. Of course, these larger contracts also translate into longer sales cycles which can include numerous stakeholders. Lastly, if decision-makers end up purchasing a solution without complete stakeholder buy-in companies can run into user adoption issues. Nobody wants to buy a solution that users don’t like or use to the full extent of the software’s capabilities.

Pros OF BOTTOM UP For SaaS SaleS

Here is why the bottom up SaaS go-to-market model has been so attrfactive to SaaS leaders. First, the sales are aimed at users, so you don’t have to worry about push back and it is easier to get high usage and adoption metrics. Smaller sales and faster adoption allow companies to have more predictable and repeatable sales and revenue figures.

Saving investment dollars on sales allows for those investments to be redirected at R&D. This allows companies to be more responsive and tailor the product to the users’ needs – making them even more sticky.

Cons OF  BOTTOM UP for SaaS Sales

Most of the disadvantages of bottom up revolve around the fact that it takes longer to get to profitability. Starting off with freemium or small contract amounts means you have to plod through months of lower revenue until you hit the tipping point at which time you break even and become profitable. With top down, you may only need a couple of big contracts to make a year profitable and hit your revenue goals. The other issue that many bottom up companies have is transitioning users from free to paid. This can take time to figure out and can slow growth in revenue.

Of course, choosing top down versus bottom up is only one of many critical decisions that a SaaS company must make. Augurian’s digital marketing expert, Shinhee Son has an excellent video on other strategic approaches that can help ensure product-market fit for your SaaS company.

To learn more about SaaS start ups, check out our review of the top 5 best books for SaaS founders and entrepreneurs . 

As you can see, there are advantages and disadvantages of a top down approach and bottom up approach. However, knowing which one is right for your company requires really  knowing your company. You should have a good grasp of:

• The size of your organization
• The current company structure
• Your company’s maturity level
• Employees’ mindsets and company culture

The Size of Your Organization

Assess the current size of your company’s leadership and workforce. If possible, use growth predictions to estimate how many employees you will have throughout the year.

Typically, smaller companies use a bottom up strategy and larger companies use a top down strategy. However, be cautious in using size alone to make the top down versus bottom up choice. For example, a large company in an industry that requires constant innovation such as B2B SaaS may benefit from the bottom up approach.

Conversely, a smaller company that plans to grow exponentially within the next year may want to develop a top down approach of planning early on.

Organizational Maturity Level

There are five levels of organizational maturity . Most new companies will be in the initial or emergent stage of development. At the initial stage, there is no awareness of management styles. If the concepts in this blog are new to you, your company may be at the initial level.

For established companies, understanding what stage of maturity the organization is at will help you determine whether you already have a management approach in place or one that managers are unofficially using. Bringing awareness to styles of management that are already being used can help create consistency and efficacy within your organization. These characteristics are central to the final stage of maturity – optimization. Increasing your organization’s maturity level can ultimately lead to more growth and increased return of investment (ROI).

Company Structure

If you are looking to solidify a clear management style for your existing company, it’s essential to analyze the company’s structure. Structure is an element of maturity level. Initial and emergent organizations lack clear structures for project management and implementation. Integrated and optimized organizations have streamlined processes made possible through consistent structure.

When thinking about company structure, you should also consider the current structure of various departments and teams. Analyze the efficacy of those departments and their ability to sustain growth. Changes may need to be made to departments. Additionally, some departments may benefit more from a bottom up approach to management while others may benefit from a top down approach.

Mindset and Culture

Top down and bottom up are not simply protocols to follow. They are management mindsets, and changing approaches may require a culture shift at your company. Let’s look at an example:

Say your chief marketing officer (CMO) is an older team member who prefers a militaristic top down approach. This CMO may not be willing to genuinely consider the ideas that come from lower-level employees. To remedy this, the CMO will need to shift his mindset about management.

Do you run a small company or start up without a CMO? No matter what choice you make in the top down vs bottom up debate, consider hiring a fractional CMO to guide your marketing team . With a fractional CMO, you can specifically hire someone with expertise in the type of planning and project management that you want to implement right away. This is a great option if you want to switch from a top down to a bottom up approach.

While top down planning and bottom up planning may seem mutually exclusive, they are not.  Often the best choice is to use both the top down and bottom up approaches simultaneously. This is often called the countercurrent model and is favored by companies of all sizes.

Let’s look at how exactly this would work:

• Upper management creates broad goals and structures.
• Departments have a chance to review the framework suggested by upper management.
• Departments and individual employees revise the framework and break it into steps.

In the countercurrent model, goals, tasks, and communication occur on a two-way street between employees and managers.  Everyone has a voice in the company, but there are also unified objectives and values.

Finding the right balance between top down and bottom up can maximize your company’s growth and profits. And, at the end of the day, isn’t that the goal?

One of the obvious benefits of going with a marketing agency is that you can find one that is already experienced in implementing either top down or bottom up management. Or, you can find an agency that has experience blending the two approaches in a way that is personalized to the needs of that company.

Reach out today to find out more and subscribe to SaaS Scoop for great digital marketing tips. 

• Recent Posts

• Top Down vs Bottom Up: Which approach fits you better? - September 23, 2021
• 5 Best Books On SaaS Metrics from Starting up to Scaling - September 15, 2021
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Lean Strategy

• David J. Collis

Strategy and entrepreneurship are often seen as polar opposites. Strategy means rigorously defining and pursuing one clear path, while entrepreneurship involves continually changing direction to take advantage of new opportunities. Yet the two desperately need each other: Strategy without entrepreneurship is central planning; entrepreneurship without strategy leads to chaos.

There is a way to reconcile the two, through the lean strategy process. It ensures that start-ups innovate in a disciplined fashion so that they make the most of their limited resources. Lean strategy helps company builders choose viable opportunities, stay focused, and align the entire organization.

The process begins with setting the venture’s vision, or ultimate purpose—perhaps the only aspect of strategy that should be permanent. To deliver on it, senior executives agree on a deliberate strategy, defining the firm’s objective (the near-term goal that describes success), scope (what the firm will and will not do), and competitive advantage (how it will win). The deliberate strategy sets the bounds within which experiments will take place and guides daily decisions. But the results of those experiments and decisions lead to learning that reshapes the strategy. Though priorities evolve, at each point in time it’s clear to everyone in the firm which ones take precedence.

Start-ups need both agility and direction.

Idea in Brief

Leaders of start-ups often see strategy, the pursuit of a clearly defined path that is systematically identified in advance, as the enemy of entrepreneurship, which requires ventures to be opportunistic and quickly shift course as they learn what customers want.

The Reality

Entrepreneurs badly need strategies that articulate what their ventures will and will not do. Such boundaries are crucial for making the most of scarce resources, deciding which ideas to pursue, and evaluating experiments. But a rigid, fixed strategy is dangerous.

The Solution

The lean strategy process integrates the bottom-up approach of the lean start-up with the top-down orientation of strategic management. In an iterative fashion, the venture builds new capabilities and revises the original strategy in response to what it learns.

Strategy and entrepreneurship are often viewed as polar opposites. Strategy is seen as the pursuit of a clearly defined path—one systematically identified in advance—through a carefully chosen set of activities. Entrepreneurship is seen as the epitome of opportunism—requiring ventures to pivot in new directions continually, as information comes in and markets shift rapidly. Yet the two desperately need each other. Strategy without entrepreneurship is central planning. Entrepreneurship without strategy leads to chaos.

• David J. Collis is an adjunct professor of business administration at Harvard Business School and the winner of the McKinsey Award for the best HBR article of 2008.

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Table of Contents

What is a top-down approach, benefits of a top-down approach, companies using top-down approach, top-down approach examples, what is a bottom-up approach, benefits of a bottom-up approach, companies using bottom-up approach, bottom-up approach examples, top down vs bottom up management: key differences, choosing the best approach for your team or business, top down and bottom up approaches: effective management.

The strategies organizations use to manage and make decisions can significantly influence their success and adaptability. Among the most debated strategies are the top-down and bottom-up approaches, each offering distinct advantages and posing unique challenges. This article explores these two management styles, delving into their characteristics, the environments in which they thrive, and the outcomes they typically produce. Whether you're a seasoned leader re-evaluating your organization's direction or a startup entrepreneur deciding on your first management framework , understanding the nuances of the top-down versus bottom-up approaches can equip you with the knowledge to choose the best path for your team or business.

A top-down approach is a method or strategy of analysis, problem-solving, or organization where the process begins at the highest conceptual level and progresses to the details. This approach often contrasts with the bottom-up approach, which starts with the details and works upwards to form a comprehensive view or solution. Here are some key aspects of the top-down approach:

• Overview First: The top-down approach starts with a broad overview or general outline of the system, project, or problem. This includes defining main objectives and goals before diving into specifics.
• Breaking Down: After establishing a high-level perspective, the next step involves breaking down the larger system or problem into smaller, more manageable components or tasks. This division continues until the desired level of detail is achieved.
• Simplifies Complexity: This approach starts with a macro view, simplifying complex systems or problems, making them easier to understand and manage by showing how different parts relate to the whole.
• Focus on Priorities: It allows managers or decision-makers to focus on key priorities and strategic alignments from the outset, which can guide the detailed work that follows.
• Decision Making: In planning and decision-making, top-down approaches align lower-level activities and decisions with the overarching goals or policies decided at higher levels.

The top-down approach offers several benefits across different fields, from project management to software development. Here are some of the key advantages:

• Clear Vision and Direction: Starting from the top allows leaders to set clear objectives and establish a vision for the entire project or organization. This helps ensure that all efforts are aligned with the overarching goals, providing a consistent direction that guides all subsequent actions and decisions.
• Simplified Decision Making: The top-down approach simplifies decision-making processes by focusing on the big picture and main priorities. It helps filter out less relevant issues and concentrate resources on what truly matters, improving efficiency and effectiveness.
• Easier Management and Control: This approach facilitates management and control as the hierarchy and roles are clearly defined from the outset. Higher-level managers can more easily oversee and coordinate various parts of a project or organization since each lower level's activities are designed to align with top-level objectives.
• Facilitates Planning and Allocation of Resources: With a comprehensive view from the top, it becomes easier to plan and allocate resources effectively across different parts of the organization or project. Leaders can assess needs and distribute resources in a manner that supports the most critical aspects first.
• Improves Communication: A top-down approach can streamline communication by clarifying what information needs to flow between different levels of the organization. It ensures that all members are on the same page and that important messages and strategies are communicated clearly and directly from the top.
• Quick Implementation: In some cases, especially where rapid decision-making is critical, the top-down approach allows for quicker implementation of policies and decisions since directives come from the top and move down without requiring extensive consultations at every level.
• Reduces Complexity: This approach can reduce complexity by breaking down large projects or problems into smaller, more manageable parts after defining the main goals and structures. This simplifies understanding and executing tasks.

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The companies listed below are recognized for their structured hierarchy and centralized decision-making processes, which are characteristic of the top-down approach:

• General Electric (GE): Historically known for its strong central leadership and hierarchical structure.
• IBM: A legacy company that has used a top-down approach to drive innovation and maintain order across its global operations.
• Toyota: While known for its bottom-up elements like the Toyota Production System, Toyota's strategic decisions come from the top to ensure global consistency and quality control .
• Apple: Particularly under Steve Jobs, Apple was known for its top-down approach to product design and decision-making.
• McDonald's: Uses a top-down approach to maintain consistent service and product quality worldwide.
• Walmart: Employs a structured top-down management style to ensure uniformity and efficiency across all its stores and operations.
• Boeing: As a major manufacturer, Boeing uses a top-down approach to manage its complex projects and products.
• Goldman Sachs: In the financial industry, a top-down approach helps maintain strict control over decision-making processes and aligns operations with broader business strategies.
• Lockheed Martin: This defense contractor uses a top-down approach to align with governmental contracts and control project management.
• ExxonMobil: In the oil and gas industry, centralized decision-making is crucial for managing extensive resources and investments.

The top-down approach can be applied in various fields and projects. Here are some examples across different domains to illustrate how the top-down approach works in practice:

Corporate Strategy Development

A multinational corporation like Coca-Cola formulates global strategic goals at its headquarters. These strategies are then communicated to regional managers, who adapt and implement these strategies at the local level to align with local market conditions and opportunities.

Software Development

In software engineering , a top-down approach might involve defining the software's architecture and high-level functionality before breaking these down into modules and detailed coding tasks. For instance, a development team at Microsoft might start by defining the overall functionality for a new feature in Microsoft Office and then detailing the specific components and tasks required to build that feature.

Government Policy Making

A government might use a top-down approach when implementing new national policies. For example, introducing a new healthcare reform might start with legislation at the national level, followed by directives issued to state and local governments on how to implement the changes.

Event Planning

In planning a large event, such as the Olympics, the organizing committee first sets the vision and key objectives. They then outline the major focus areas, such as logistics, security, and marketing, before detailing the specific tasks within each area.

Educational Program Design

A university might redesign its curriculum using a top-down approach. First, the educational goals and outcomes for a department are defined. Then, specific courses and content are developed to meet these predefined goals.

Marketing Campaigns

A large retail company planning a national marketing campaign for a new product launch would start by setting the overall campaign goals and key messages at the corporate level. Then, specific marketing tactics, such as social media ads, in-store promotions, and online marketing, would be developed to support these goals.

Military Operations

Military strategies often begin with broad objectives determined by high-level leadership. Based on these top-level strategies, detailed operational plans are developed, specifying the tactics and resources needed for each operation phase.

Financial Budgeting

In financial management, a company may use a top-down approach for budgeting where top executives establish the overall budget limits based on strategic objectives. Departmental budgets are then created within these top-level constraints.

A bottom-up approach is a strategy used across various fields, including management, software development, and project planning , where the process begins at the most detailed and basic level and works upwards to form a comprehensive picture or solution. This approach often contrasts with the top-down approach, which starts at the highest conceptual level and progresses to the details. Here are the key aspects of the bottom-up approach:

• Detail-Oriented Start: The bottom-up approach starts at the grassroots level, focusing on specific details, small components, or individual elements before integrating them into a larger system or conclusion.
• Incremental Development: This method involves building systems incrementally, piece by piece, ensuring that each component works properly before integrating it into the larger system. This helps identify and fix issues at an early stage.
• Empowerment and Participation: The bottom-up approach encourages participation and decision-making from the lower levels of the organization or group. This can increase engagement, innovation, and morale as individuals feel their contributions are valued.
• Local Insights and Adaptability: The bottom-up approach starts at the grassroots level and takes advantage of local knowledge and expertise. This can be particularly beneficial in solving complex problems that require a nuanced understanding of specific contexts.
• Flexibility: This approach allows for more flexibility as changes can be made more easily at the lower levels without needing extensive revisions to a top-level plan.
• Problem-Solving: In a bottom-up approach, problem-solving is often more effective because it's done at the level where the problems occur, allowing for more accurate and tailored solutions.

The bottom-up approach offers several benefits, particularly when flexibility, innovation, and detailed insight are crucial. Here are some key advantages of using a bottom-up approach:

• Enhanced Innovation: A bottom-up approach can foster greater innovation by involving team members closest to the problems or tasks. These individuals often have unique insights and creative ideas that can lead to novel solutions.
• Increased Employee Engagement: This approach empowers employees by actively involving them in decision-making processes, which can boost morale, increase job satisfaction, and reduce turnover. Employees are more likely to be engaged when they feel their opinions are valued, and their contributions can make a direct impact.
• Greater Flexibility and Responsiveness: Starting from the ground allows organizations to adapt more to changes and challenges. Since decisions are made closer to the operational level, responses can be quicker and more tailored to the specific context or issue.
• Improved Problem-Solving: Problems are often identified and solved more effectively when tackled by those who encounter them daily. The bottom-up approach leverages individuals' hands-on experience to address issues accurately and efficiently.
• Detailed and Comprehensive Understanding: As the process starts at the ground level, it naturally incorporates a deeper understanding of all aspects of the project or problem, ensuring no detail is overlooked. This detailed scrutiny helps in building a thorough and robust overall picture.
• Democratization of the Workplace: It democratizes the workplace by distributing decision-making authority. This can lead to a more inclusive work culture where diverse perspectives are considered, leading to well-rounded decisions.
• Better Risk Management: With more individuals involved in the analysis and decision-making process, risks can be identified early and managed more effectively from various angles and perspectives.
• Local Optimization: In a bottom-up approach, each component or part of a project is optimized independently, leading to better performance and efficiency at the local level positively impacting the overall outcome.

The bottom-up approach is particularly prevalent in industries and companies emphasizing innovation, flexibility, and rapid adaptation to changing market conditions. Here are some examples of companies known for leveraging a bottom-up approach:

• Google: Known for encouraging its employees to work on projects that interest them personally, Google's bottom-up approach has led to many innovations and improvements to existing products.
• Valve Corporation: This video game developer operates without a formal management hierarchy, allowing employees to choose the projects they work on and make decisions collectively.
• W.L. Gore & Associates: The maker of Gore-Tex and other products, W.L. Gore, operates with a famously flat organizational structure. Teams form organically around projects rather than being assigned by top management.
• Semco Partners: Under the leadership of Ricardo Semler, Semco radically restructured its management approach to give a significant amount of autonomy to its employees, influencing everything from their salaries to the direction of the business.
• Whole Foods (now part of Amazon): Before its acquisition by Amazon, Whole Foods was known for allowing individual stores to decide what products to stock based on local customer preferences and feedback.
• Pixar: Known for its creative processes, Pixar encourages a collaborative and inclusive approach where everyone can pitch ideas and provide project feedback.
• Spotify: Spotify utilizes a structure composed of small, autonomous "squads" responsible for specific features or aspects of the business, allowing for agile development processes and quick adaptation to user needs.
• Zappos: Focused on delivering exceptional customer service, Zappos empowers its representatives to make independent decisions to satisfy customers without managerial approval.
• Patagonia: This outdoor clothing and gear designer is committed to environmental sustainability and involves employees at all levels in its initiatives and product development strategies.
• Atlassian: The Australian enterprise software company uses a bottom-up approach to foster innovation within its teams, allowing them to pursue projects that they believe will benefit the company most.

The bottom-up approach can be highly effective in various contexts, emphasizing grassroots involvement, detailed insights, and local optimizations. Here are some examples illustrating how the bottom-up approach is used across different fields:

Product Development in Tech Startups

A tech startup might use a bottom-up approach by allowing software developers to create small, independent features or improvements based on user feedback and analytics. These features are then integrated into the broader product framework, enhancing user experience and product functionality.

Community-Led Urban Planning

Local government agencies may employ a bottom-up approach by engaging community members in planning neighborhood improvements. Through community meetings and feedback sessions, residents have direct input on projects such as park placements, road improvements, and public service enhancements, ensuring the plans reflect the actual needs and desires of the community.

Research and Development (R&D)

In an R&D setting, such as at a biotech firm, scientists and researchers might work independently or in small teams on specific experiments or studies based on their areas of expertise. The results from these individual projects contribute to the overall understanding of a larger research question, like developing a new pharmaceutical drug.

Financial Services

A financial services firm might use a bottom-up approach in investment management, where individual portfolio managers can make investment decisions based on their research and analysis of specific sectors or companies. Their decisions contribute to the performance of the overall fund.

Environmental Conservation Initiatives

Non-governmental organizations (NGOs) working on environmental conservation often use a bottom-up approach by involving local communities in the conservation efforts. This could include training locals to monitor and report on wildlife activity or involving them in reforestation projects, ensuring that conservation efforts are tailored to the local ecology and community needs.

Educational Curriculum Development

Teachers in a school district might collaborate to develop curriculum modules based on their experiences and the specific needs of their students. These modules are then integrated into the district’s overall curriculum, ensuring it is comprehensive and meets the needs of all students.

Healthcare Public Health Campaigns

In public health, a bottom-up approach might involve local health workers in designing and implementing health campaigns that are culturally appropriate and relevant to the community's specific health challenges. This approach can increase the effectiveness and acceptance of health initiatives.

Software Bug Fixes and Enhancements

A software company might employ a bottom-up approach by encouraging developers to identify and fix bugs or enhancements based on user feedback. These improvements are incorporated into the next software release cycle, improving product quality.

Here is a table that summarizes the major differences between top-down and bottom-up management styles:

Top Down vs Bottom Up - choosing one approach depends on your business objectives, organizational culture, industry, and specific team dynamics. Here’s how you can determine the best approach for your team or business:

1. Consider Your Business Objectives

Top-Down: A top-down approach may be more suitable if your objectives require strict organizational compliance and uniformity or are safety-critical. This approach ensures that decisions align closely with the overarching goals set by the upper management.

Bottom-Up: If your objectives include fostering innovation, adapting quickly to market changes, or developing tailored solutions, a bottom-up approach might be better. It leverages the diverse ideas and expertise of employees at all levels.

2. Assess Organizational Culture

Top-Down: This approach works well in organizations that value structure, clear authority lines, and predictable outcomes. Traditional corporations, governmental organizations, and military setups often benefit from it.

Bottom-up: This approach is ideal for organizations that value flexibility, employee empowerment, and a collaborative work environment. Startups, creative industries, and research institutions might find it more effective.

3. Evaluate Industry Requirements

Top-Down: This approach is essential in industries where regulations and compliance are crucial, such as finance, healthcare, and manufacturing. It helps maintain control and ensures that all parts of the organization comply with external standards and internal policies.

Bottom-up: This approach is beneficial in dynamic industries such as technology and marketing, where customer feedback and rapid innovation are keys to success. It can quickly integrate new insights and adapt to changes.

4. Analyze Team Dynamics and Size

Top-Down: More effective in larger organizations or teams where managing a large number of employees systematically is crucial. It helps in maintaining order and disseminating information efficiently.

Bottom-Up: Suitable for smaller teams or organizations where close collaboration and quick decision-making are needed. It allows for greater flexibility and faster response times.

5. Examine Decision-Making Preferences

Top-Down: If decision-making is to remain centralized with senior leaders who have overarching knowledge and responsibility, this approach would be preferable.

Bottom-Up: If decision-making should be more democratic and include inputs from a wider range of stakeholders, consider adopting a bottom-up approach.

6. Look at the Need for Innovation vs. Control

Top-Down: Emphasizes control and a unified strategic direction, which can be beneficial when clear guidance and compliance are necessary.

Bottom-Up: Drives innovation by utilizing all employees' creative and intellectual capital, which can be more suited to environments where innovation provides a competitive edge.

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Consider Long-Term Strategic Goals

Align the choice of management approach with your long-term strategic goals. If the goal is to scale and standardize operations, top-down might be advantageous. Conversely, bottom-up could be more effective if the goal is to disrupt the market or continuously innovate.

Decision Process

When choosing the best approach, consider a hybrid approach that combines top-down and bottom-up elements. Many successful organizations find that a balance of these approaches allows them to benefit from structured strategic alignment while also capitalizing on their employees' innovative potential. This flexibility can be particularly valuable in rapidly changing industries or during organizational change.

Whether you lean towards a top-down or bottom-up approach depends on your organization's specific needs, the nature of the industry, and the culture you want to cultivate. While the top-down approach offers clear direction and control, ideal for organizations requiring strict compliance and uniformity, the bottom-up approach excels in environments that demand flexibility, rapid innovation, and employee empowerment. Understanding the strengths and limitations of each management style can greatly enhance how effectively you lead and manage your team.

A structured course can benefit those looking to deepen their understanding of effective project management strategies and refine their approach. The PMP Certification from Simplilearn is an excellent resource for those who aim to master project management principles and confidently lead projects, regardless of the preferred management style.

1. Top down vs bottom up approach. Which is best?

Neither the top-down nor the bottom-up approach is universally best. The choice depends on the organization's goals, culture, and specific circumstances. Top-down ensures consistency and alignment with strategic goals in structured environments, while bottom-up excels in innovation, flexibility, and employee engagement in dynamic settings.

2. What is an example of a bottom-up approach?

An example of a bottom-up approach is Google’s policy of allowing employees to spend 20% of their time on projects they choose independently, which has led to successful products like Gmail and Google News.

3. What is an example of a top-down approach?

An example of a top-down approach is the annual budgeting process in large corporations. In this process, top management sets overall budget limits and strategic priorities, which are then broken down into allocations for each department to implement.

4. What is the top-down approach used for?

The top-down approach is used to maintain strategic alignment, control, and consistency across an organization. It effectively manages large-scale projects, ensures compliance with regulations, and implements clear and unified organizational goals.

5. What is the bottom-up approach used for?

The bottom-up approach harnesses creativity, improves problem-solving, and increases employee engagement by involving lower-level employees in decision-making processes. It is particularly useful in environments where innovation, adaptability, and detailed insights from ground-level operations are critical for success.

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What is the top-down vs. bottom-up approach?

Different product teams take different product management approaches. Making critical decisions and overseeing the product development process from conception to market introduction is part of product management.

Throughout the whole process of product management, a lot of problem-solving happens at the organizational and user levels. Thus, product teams rely on two main approaches for processing and arranging information to make it smoother: top-down and bottom-up.

In product management, top-down and bottom-up approaches are the two ways to prioritize features, align these priorities with stakeholders, create a well-rounded product management strategy, and make informed decisions.

The top-down approach begins with the high-level vision and mission of the company. It then works downward to establish a product vision that helps achieve the company’s mission. After that, the top-down approach defines the specific features that will achieve the product vision.

On the other hand, the bottom-up approach begins with individual user problems and needs and works upward. It identifies the products or features that will fulfill those needs and align them with the overall product vision and strategy.

Top-down approach

The top-down approach is a strategy of product management where the whole workflow starts from management and goes down toward the roadmap and feature levels. In other words, the priorities are passed to the product managers by the company’s senior executives (or, if fortunate enough, the priorities are created in collaboration with the executives).

This approach is common in two scenes:

• Early-stage startups (before product-market fit ) where product managers are hired to execute and do more than product discovery
• Massive corporations with big product portfolios that hire product managers to do project management

The flow of the top-down approach

Now, let’s discuss the order of the top-down approach in product management.

1. Determining the vision

Oftentimes, the company’s board has a vision that states the (ideal) future of the company and clarifies the business purpose. However, the vision is only the first step in the puzzle — it’s quite wide and hard to execute. So, the board will consider it as a guiding star and move into the next step.

2. Mapping objectives

The objectives are the trackers. They tell the company whether they are moving towards their vision or not. Objectives are usually formed from measurable KPIs, product metrics, or OKRs .

In the top-down approach, the company’s board, along with the product leaders (senior product managers, group product managers, etc.) will hold one or more planning meetings (quarterly planning or annual planning) to determine the objectives they assume will move the company towards the vision. They’ll then prioritize, refine, and finalize them, and then communicate them with the entire company.

3. Structuring initiatives

Product initiatives are a high-level representation of the steps the product team should take to achieve objectives and move closer to the vision. They are the key themes (a mix of features and tasks) the company will invest in delivering.

With the help of the product leaders, the company board will turn the objectives into initiatives that solve multiple problems. The initiative should also be paired with one or more objectives to track progress. Then, the initiatives will be communicated company-wide.

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4. Translating initiatives into roadmaps and features

After finalizing the initiatives, the board and the product leaders might want to hold a workshop to brainstorm features that fit into each objective. However, this step is optional and most companies skip it.

After determining the set of features that the company wants to deliver within a certain timeframe, the product leaders will negotiate the product roadmap with the company board, finalize it, and communicate it with the company.

After that, the product leaders will start assigning initiatives and features to different product managers and product teams, and the actual work of designing and building them will start.

Bottom-up approach

On the other hand, the bottom-up approach is where the product team is more involved in determining features and aligning them with strategy. Typically, the whole flow starts with the product team gathering data and customer feedback , as well as doing a lot of market research. Based on the discovery and research work they do, they’ll determine the set of features that customers need and align them strategically with the company’s strategy, vision, and mission.

It’s also known that the bottom-up approach can lead to more user-centered products because it considers user needs when determining priorities. This approach is common in two scenes:

• Startups or scale-ups after finding the product-market fit. This is because they need to interact more with the customers and solve their problems to retain them
• Large companies that invest in their product teams to build a product-centric culture

The flow of the bottom-up approach:

1. Continuous customer feedback

The bottom-up approach is a built-in, company-wide mindset. The company should have already invested in the voice-of-customer (VOC) initiative or built a strategy for continuous customer feedback.

Customer feedback should have a continuous flow to the product team to always keep them informed. Some of the customer feedback channels are:

• User interviews
• Feedback forms
• Communities
• Customer success or support tickets
• Sales reports

2. Brainstorming

With continuous flowing feedback, the product team will always have user problems in mind, along with ideas on how to improve the experience and delight customers. The product managers often organize brainstorming sessions, or perhaps design sprints, to achieve a couple of goals:

• Organizing problems and ideas
• Refining the problems
• Brainstorming solutions
• Using OSTs to come up with validation plans
• Aligning the problems and proposed solutions with the company vision and strategy

3. Align with the company’s board

After coming up with problems and validated solutions, product leaders align with the board on:

• Why solving the problem is a priority
• How the problem fits into the vision and strategy
• What are the validated solutions and what signals validated them
• Any pivots or changes in strategy that the company should do (depending on the market conditions and updates)

Once the alignment is done, the product team(s) can kick-start the execution and build the products their customers need.

Benefits of a hybrid model

In product management, we combine everything. We rarely use one sole framework, method, or approach. We mix and match and tailor to our needs. And that’s the same thing you should do.

Top-down is all about getting the priorities from upper management to build your roadmap, while bottom-up is all about involving the customers more and gathering their feedback to build a backlog and construct a vision from a continuous feedback flow.

Combining both through a voice-of-customer pipeline (aka a feedback pipeline) that connects target users to upper management will come with multiple benefits:

Better product decision-making

By balancing between both, the product manager can align the high-level goals passed from the executives with the customer needs to prioritize their product backlogs.

More alignment

Combining both approaches ensures that all company initiatives and decisions related to product management align with the strategy of the company and with the user’s problems and needs.

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Enhances the product manager’s agility

By shifting focus between both strategies, the product manager will learn how and when to prioritize initiatives that target core customer problems, as well as strategic initiatives passed from the executives.

By switching between both and aligning the stakeholders on the priority, the product manager will improve their agility and have a more holistic view of the problems.

For any product team, the top-down and bottom-up approaches are crucial strategies. The top-down approach provides a high-level vision for the product, while the bottom-up approach ensures that the planned features in the roadmap are prioritized and designed to satisfy the market’s needs and bridge any gaps.

By integrating both strategies, product managers can create an all-around product vision and strategy that balances business objectives with the needs of the users. To build products that meet the target market’s needs and drive business success, product teams need to comprehend the pluses and minuses of both strategies.

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

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When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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Top down bottom up approach: a comprehensive guide for sales.

The top-down bottom-up approach is transforming sales strategies by blending big-picture vision with granular insights. Mastering this method helps you navigate complex sales cycles and boost success rates. In this guide, we'll explore how to target key decision-makers with top-down strategies while using bottom-up techniques.

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Ever wondered how top salespeople consistently close big deals?

The secret often lies in their approach. The top-down bottom-up approach in sales is revolutionising sales strategies. This method combines the best of both worlds: the big-picture vision of top-down selling and the granular insights of bottom-up tactics. By mastering this dual approach, you'll be better equipped to navigate complex sales cycles and improve your success rate.

In this comprehensive guide, we'll  look into the nuts and bolts of the top-down and bottom-up approach.

You'll discover how to implement a top-down strategy to target key decision-makers , as well as how to use bottom-up techniques to build grassroots support. We'll also explore the benefits of combining these methods into a hybrid approach, and provide practical tips to help you put these strategies into action. Whether you're new to sales or a pro, this guide will give you the tools to level up.

Understanding the Top-Down Sales Approach

The top-down sales approach is a strategic method that targets high-level decision-makers and executives within an organisation. Instead of working your way up through lower-level contacts, you aim directly at the C-suite—the people with the power to say yes. This approach is particularly effective in complex B2B sales environments where decisions impact multiple departments and require substantial investment.

When you use the top-down approach, you're leaning on relationships with those who have the authority to make purchasing decisions . This strategy can lead to faster sales cycles , as executive leadership usually has an easier time getting budget approval and company buy-in. By engaging with top executives, you can align your solutions directly with strategic business objectives , potentially resulting in larger deal sizes.

However, this approach isn't without challenges. You'll need to navigate through layers of gatekeepers and face intense competition to reach these busy decision-makers. It also demands a high level of expertise and preparation, as top executives expect a thorough understanding of their industry, company, and their competitors.

Mastering the bottom-up sales strategy

Bottom-up selling is a powerful approach that starts at the individual or department level, gradually working its way up the organisational hierarchy. Unlike top-down strategies, this method focuses on targeting end-users and their immediate needs, making it particularly effective for SaaS companies offering free or low-cost options.

When you use a bottom-up strategy, you're casting a wide net to capture multiple leads. You invite potential customers to try your product and encourage them to introduce it to their companies. This approach leverages the fact that end-users often understand the value of your product best, turning them into educated proponents within their organisations.

One of the key advantages of bottom-up selling is the ability to create larger-scale campaigns that appeal to multiple industries and job titles. This allows you to test and iterate quickly, achieving more immediate results. Additionally, you're able to nurture brand advocates within a company, as executives are more likely to listen to recommendations from their employees than from your sales team.

Implementing a Hybrid Top-Down Bottom-Up Approach

Combining top-down and bottom-up strategies can give you the best of both worlds. This hybrid approach allows you to target decision-makers while also building grassroots support. To implement it effectively, start by understanding your customer segments' preferences and behaviours . Then, choose sales channels that align with these insights, integrating both digital and traditional tactics .

Consistency is key - ensure your messaging and brand experience are unified across all touch points . This creates a seamless customer journey that transitions smoothly between online and offline channels . Remember, the goal is to provide tailored experiences that satisfy diverse customer demands .

By adopting this balanced approach, you can prevent revenue plateaus and buffer against market fluctuations . It's not about choosing one method over the other, but rather finding the right mix for your unique business setup and goals .

Final thoughts

The top down bottom up approach in sales offers a powerful strategy to boost success rates and navigate complex sales environments. By combining the big-picture vision of targeting key decision-makers with the grassroots support built through end-user engagement, salespeople can create a more comprehensive and effective sales process. This balanced approach has an influence on faster sales cycles, larger deal sizes, and a stronger foundation of brand advocates within target organisations.

To make the most of this hybrid strategy, it's crucial to understand your customer segments and tailor your approach accordingly. By using a mix of digital and traditional tactics, maintaining consistent messaging across all touch points, and adapting to diverse customer demands, you can prevent revenue plateaus and buffer against market fluctuations. In the end, the key is not to choose between top-down or bottom-up, but to find the right blend that aligns with your unique business goals and customer needs.

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Top down versus bottom up forecasting: which one is right for you.

Posted by Early Growth

October 18, 2019    |     11-minute read (2043 words)

Financial forecasting is an important tool for any business as it helps you project estimates for your future sales and revenue. Even if you are pre-revenue or pre-sales, you need to go through this process — both for your own better understanding of your company’s cash flow and needs, as well as to help you to secure funding.

And forecasting isn’t just a once-in-a-company’s lifetime process, of course. Once the sales start rolling in, you’ll need to prepare forecasts on a regular (read: monthly) basis to help you to manage your cash reserves and increase your sales.

Many entrepreneurs use a top-down approach for financial forecasting. While this yields impressive numbers, they’re not always realistic. In fact, it’s the opposite: the results are usually completely unobtainable.

So, top-down or bottom-up forecasting? What do they mean and which approach should you use?

Top-down financial forecast

A top-down forecast looks at the overall market and uses this information to identify your company demographics and target mark. The assumption is that, given the existing market and potential market growth, your company can expect to capture a certain percentage share of the market in year one, a greater percentage in year two and so on.

A top-down analysis assesses how much of the market will buy your products or services? You then examine your company's strengths and weaknesses and how to amplify your strengths and remedy your weaknesses — and what to do about them.

For example, if your company has created an iPhone app, you might take a look at the number of consumers who have purchased apps for their iPhones. If there are 80 million active iPhone users and half of iPhone users buy at least one app per month, you can extrapolate from here. Being conservative, you could estimate that of the 40 million active iPhone users who purchase apps, 1% of these consumers will purchase your app. That would give you 400,000 new customers.

Pros of using top-down financial forecasting

Reduced variability:.

One of the benefits of using top-down analysis is that it avoids statistical anomalies or data swings, common to lower level facts and figures. Businesses can uncover sales patterns and get a more accurate image of their prospective revenue with the aid of a top-down perspective on their industry.

They might be able to develop more precise models as a result for planning strategies and allocating resources. This approach typically offers a more upbeat perspective, therefore organizations may find it simpler to pique investor interest with it.

Quick results:

Companies don't require current point of sale (POS) data to estimate outcomes when using top-down forecasting. Businesses, especially new ones, may find it simpler to create estimates if they evaluate the available market income from the top down. A top-down perspective also assesses whether a market is growing or shrinking, which helps businesses quickly understand their long-term profit potential.

Sounds good, right? Unfortunately, too good.

While you want to be optimistic in your projections — enough so as to be interesting to investors — you should not be unrealistic about your potential growth. Entrepreneurs typically tend to be way too optimistic with their forecasting. Grounding your forecasting with facts and creating more realistic projections will provide legitimacy to your business, if there is real potential there.

Cons of top-down analysis

Overly optimistic:.

Top-down revenue forecasting has significant limitations, particularly for businesses that are expanding. The largest one is that because it is founded on generalizations rather than a strategy to reach a goal, it may be unduly optimistic or wrong. While an optimistic forecast may be helpful in drawing your investors interest, but they’ll want to see a credible operational plan for achieving that target.

Unsuitable for smaller organizations:

Smaller businesses find it challenging to adopt top-down forecasting, particularly if they serve a sizable Total Addressable Market (TAM). It is somewhat simpler for a major player in a sizable industry.

Also top-down revenue estimates aren't very helpful in terms of operations. The first thing to consider when growth exceeds or falls short of expectations is why. It's quite challenging to respond to that question if you don't have a forecast model that links how your company operates to the revenue it creates.

So how can you create a more realistic projection? Forecast from the bottom-up.

Bottom-up financial forecast

A bottom-up forecast is a detailed budget with spending plans by department. Hiring plans and revenue projections are based on actual sales forecasts. It’s essentially your operating expense plan, less the depreciation expense, plus capital expenditures. In other words, you calculate your potential revenue by multiplying the number of potential sales per product by the average sale value. Obviously, this is a more strategic approach wherein you take a real look at your current situation and capabilities and see where you can reasonably expect to go from here.

Using our previous example of your new iPhone app, you can see how your revenue projections would substantially shrink using this approach. Now, instead of looking at the market and its potential, you need to look at your own market (for example, your existing customers or Twitter followers) and map out how you can parlay your current standing into new sales.

Because you’re looking at real numbers and your real situation, it’s obviously much harder to get huge projections with bottom-up forecasting. With this approach, the only way to grow your numbers is to increase your overall exposure and make sure you are working all the angles to market and sell your product/service.

Pros of bottom-up forecasting

More practical.

According to many experts, bottom-up forecasting provides a more accurate financial picture than the top-down model. Bottom-up approaches, in contrast to top-down forecasting, estimate revenue by dividing the average value per sale by the anticipated sales for each product. Bottom-up forecasting uses actual sales data, thus the forecast that results may be more accurate, allowing you to make more informed strategic choices going forward.

Better item-level forecasting

Profits from numerous goods and regions are averaged rather than taken into account one at a time in top-down forecasting. As a result, companies would have trouble selecting how to produce and market particular goods. A bottom-up financial projection might be the best course of action if you want to determine how to effectively devote your resources to particular goods.

Active employee participation

A bottom-up strategy has the advantage of giving managers and employees additional opportunities to participate in budgeting. Owners monitor operating costs and evaluate spending by department with a bottom-up method. Costs associated with employment, marketing and distribution are included.

Small business owners can give department heads and advisers the information they need to make smarter spending decisions by looking at these numbers. Plus, if managers were involved in budget creation, they were more inclined to follow it.

Cons of using bottom-up forecasting

Time consuming.

Bottom-up forecasting can take a lot longer than top-down forecasting because of how detailed it is. And occasionally, without the proper tools, it can be too late to use the data that a business gathers and analyzes for a bottom-up projection.

Inaccurate forecasting

Any mistakes a company makes at the micro level (such having an overly optimistic closing rate) are magnified as they get closer to the macro level. In order to exceed expectations, departments occasionally purposefully produce false estimates that sandbag the model and its targets.

Conclusion: Top-down versus bottom-up : the right choice?

Forecasting sales is fine, but it's better to proactively ensure that the company can achieve a sales objective. The greatest revenue projections combine aspects of top-down and bottom-up strategies because they can be used to balance one another.

A top-down forecast can be used to verify the validity of a bottom-up forecast. Additionally, a bottom-up forecast might shed light on the operational conditions that must exist in order to achieve the top-line objective.

Whether it’s top-down or bottom-up, the best way to approach forecasting is to use a rolling forecasting model

Do you use bottom-up or top-down forecasting? Tell us about it in the comments below or contact Early Growth Financial Services for help with your financial planning and strategy.

Frequently Asked Questions

What is an example of a top-down approach.

If your business develops an iPhone application, you can note users who purchased the app for their iPhones. You can extrapolate from this if there are 80 milion active iPhone users and 50% of iPhone users purchase at least one app every month. If you want to be conservative, you may assume that 1% of the 40 million active iPhone users who buy apps will do so for your app. You would gain 400,000 new clients as a result.

What is an example of a bottom-up approach?

If you wish to construct a template for a sales forecast, you'll normally start by describing how many orders are anticipated from each business channel. You could even start farther down with advertising conversion rates or the productivity indicators within a particular team if you wanted to go more in-depth.

Next, you project the prices that will be charged for those sales as you'll as the profit that the company will make from them. You will have the statistics you need to estimate revenue in larger terms once you have determined the value of low-level transactions after refunds, exchanges, return charge-backs and other relevant considerations.

Which is better top-down planning or bottom-up planning?

Bottom-up forecasting provides knowledge of which company activities have the most impact on financial performance whereas top-down forecasting provides a projection of the amount of market share required to be profitable. The use of forecasting will determine which strategy, if not both, you should employ and depending on that both can be quite advantageous for a business.

Why is the bottom-up forecasting approach better?

You may get a more precise, detailed and practical result by forecasting income from the bottom up. It weaves together the data and organizational structure and shows how the actions of the organization might affect its financial well-being. Bottom-up forecasting enables you to make decisions based on data.

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Top-down vs. bottom-up: What's the right approach for your team?

 Being a leader isn’t easy. Whether you’re a senior manager or CEO, the choices you make day to day dictate the overall success of the business. From influencing employee engagement to project progress, there is a lot at stake for key decision-makers.

That’s why it’s important to select the right management approach for your business and team structure. The way you make decisions, who you involve in the process, and how outcomes are shared with the wider team make up your management approach and play a part in defining your business’s culture.

Two common management strategies are the top-down and bottom-up approaches. The top-down approach sees those in leadership roles making decisions before they are shared with the rest of the team. It has many benefits and is used by most traditional businesses, either at the project or business level.

Yet, a top-down approach won’t work for all. If your employees are innovative, creative, and strategic in their thinking, chances are they’ll benefit from a bottom-up approach. This sees all employees given a chance to weigh in.

But what’s best for your team? Choosing the right approach to decision-making can make or break your project. So, let’s get into what’s great (and what’s less than perfect) about each approach.

What is top-down management?

When a business uses the top-down management approach , decisions are made by those in the highest position of power — upper management. They then filter down to the rest of the workforce via team leaders.

This structure looks similar at a project level, too; in an agency’s project teams, the project leaders make decisions about how to move forward or deal with issues before sharing the action plan with their team.

A top-down management style is favored in many industries, including those with a traditional approach to business management.

How this approach works

Projects that are managed using a top-down approach are usually inflexible because decisions have been made by those in senior leadership positions based on strategic and long-term goals.

Decision-makers begin with their desired end goal and create a plan of action to get them there. Once they have agreed on a plan, they communicate this with the rest of the team.

How this information is shared will depend on the business, the number and size of the teams, and the specific matter at hand. Typically, decisions that affect the entire business are shared in town hall meetings or via email, whereas project-specific outcomes are shared in planning meetings or status updates.

Applications for top-down management

Due to its structured nature, the top-down approach is best suited for businesses that lean into tradition. This standard approach to project management leaves little room for change as decisions are final, which won’t suit more agile businesses and projects.

Top-down management suits large organizations with lots of teams and numerous moving parts. Communication can become a challenge in these types of businesses, so standardizing your approach to decision-making can limit opportunities for miscommunication or inconsistency.

At a project level, top-down management works best for teams whose work is recurring and consistent. In these cases, employees likely perform the same tasks each day, using standardized processes, and don’t often seek creative solutions to problems.

• Popular style of management: In many businesses, senior managers are responsible for delegating tasks and making calls on how to move forward. That’s because the top-down approach is considered the gold standard in many industries. It’s straightforward, consistent, and aligns with standardized procedures.
• Simplified communication: Clarity is key, as blurred lines and misunderstandings can lead to problems. A top-down approach uses clearly defined processes of communication, with decisions made by the top level before being filtered down to the rest of the team.
• Fast implementation: Limiting the number of stakeholders who can share their input means decisions can be made quickly. Too many cooks can confuse matters and lead to delays. 
• Encourages accountability: Not all our decisions will be good ones. In the event that a bad call is made, it is important to trace this back to the decision maker. Understanding where the decision came from helps teams learn and rectify the issue quickly. This is only possible when it is clear who is responsible for decision-making. Accountability also makes sure people take their responsibilities seriously.

Disadvantages

• More challenges for leadership: When decisions can’t be delegated, the onus is on one level of management. This can cause bottlenecks when the team only has one person responsible for making calls on a project.
• Low team engagement: Burnout is a huge buzzword for the 2020s, but many employers fail to recognize when their employees are facing boreout . Under-stimulation can occur when employees — especially creative thinkers — are kept out of decision-making processes. If your team feels you make decisions without considering their feelings, thoughts, and experiences or don’t value their input, they’ll likely become disengaged.
• Less informed decisions: In project management, leaders are often not involved in the day-to-day running of the account, which can mean they are unaware of nuances or problems with processes.
• Less opportunity for creativity: Collaborative working breeds creativity, but there is little room for teamwork with the top-down approach. Junior team members with interesting perspectives are cut out of conversations, and information is not shared between teams, limiting opportunities for innovation.

What is bottom-up management?

Bottom-up management flips this framework on its head. Whereas in top-down management, communication only flows in one direction, there is greater collaboration across the board in bottom-up management.

This marks a shift away from traditional ways of working, which value seniority, experience, and hierarchy above all else.

The main difference between the top-down and bottom-up approaches is that the latter is flexible. It’s favored by more modern industries, especially those that see innovation as the key driver of growth.

A bottom-up management approach is also popular in more modern, disruptive agencies. Those that work within agile frameworks likely already use this approach in scrum teams that rely on stand-ups for daily collaboration and coordination. Similarly, some agencies may take a democratic approach to decision-making, getting employees from across the business together when discussing the future.

Applications for bottom-up management

This approach is best for more modern teams that prioritize flexibility and innovation above hierarchies. It’s typically used by creative teams, including creative agencies and software developers, where collaboration and creativity are more valuable than predictability.

A bottom-up approach can also be implemented at a project level. Introducing brainstorming sessions can provide opportunities for creative thinking and collaboration. Likewise, at the end of the project, a post-mortem involving the entire project team allows employees to give feedback on processes and suggest improvements.

• More informed decisions: When managers make decisions without consulting those on the ground, they miss out on vital information and insights. When everyone is consulted, better decisions can be made; the impact of humble leadership is far-reaching.
• Embrace modernity: While top-down management has its advantages, its reliance on tradition can slow down progress. A bottom-up approach better aligns with modern approaches, embraces innovation, and does away with old-fashioned ideals.
• Greater team motivation: Doing away with hierarchy means everyone’s experiences and views are considered, from interns to CEOs. This goes a long way to improving employee engagement and motivation . Making sure your team is involved in making decisions that impact their work is a great way to get them invested in your long-term success.
• Slower processes: The more people involved when making decisions, the longer it’ll take. However, a consensus doesn’t need to be found for progress to be made. The important thing is to give everyone a chance to contribute. To speed up progress, a small selection of leaders should gather up everyone’s contributions and make informed decisions taking those insights into account.
• Blind spots: More junior team members likely won’t be privy to higher-level business information, such as influences to profit and long-term goals. Yet, these are important to take into account; one way to circumvent this is to make sure at least one person is aware of these factors and can share relevant information as needed.
• Won’t work for everybody: Not everyone will be comfortable being open and honest about what they feel does and doesn’t work. Providing avenues for employees to share thoughts anonymously via surveys can reduce anxiety and facilitate honest conversation.

How to do great teamwork

Whether your business embraces innovation or prioritizes consistency, your people are at the heart of what you do. Both approaches have their benefits; their value comes from how well your team communicates.

Prioritize communication

Communication will make or break your management approach. For businesses using a bottom-up approach, use a RACI matrix to assign and track levels of responsibility. Project management tools can help keep everyone in the loop and make information widely accessible.

Ask for feedback and listen

Even if your team isn’t involved in decision-making processes, their opinions are still valuable. Regularly ask for feedback and make sure to listen; you never know what insights you may gain.

Gather data

Leaps of faith have their merit, but all decisions should be rooted in data. Using a project management tool like Forecast can help you track project progress, uncover inefficiencies, and understand how decisions around processes are affecting your team’s productivity and quality of output.

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The Difference Between Top-Down and Bottom-Up Strategic Management

by Sampson Quain

Published on 23 Aug 2018

When it comes to establishing the strategy for running a company, business owners are faced with a binary decision: top-down management or bottom-up management. Benefits and drawbacks exist for both strategies, and a business owner who makes the wrong choice can cause workplace disorganization, which could negatively affect productivity.

The Elements of Top-Down and Bottom-Up Strategic Management

With a top-down strategic approach, the executive team of the business establishes plans and goals, and then communicates that strategy to middle managers, who then become tasked with executing that strategy through rank-and-file employees.

In contrast, a bottom-up strategic approach takes advantage of the specialized skills and talents of the rank-and-file employees, and encourages them to communicate ideas and plans to middle managers, who then pass the ideas along to the executive team.

The Advantages of Top-Down and Bottom-Up Strategic Management

A primary advantage of a top-down approach is that it maintains a chain of command that provides stability and direction in the workplace. Another advantage is that when companies have experienced and knowledgeable executives, this approach can streamline the decision-making process and save time and money.

Businesses that adopt the bottom-up approach can also reap benefits because they can mine the expertise and creativity of their entire team. Rank-and-file workers are in the best position to understand the barriers to increased productivity and efficiency. As a result, they can offer practical solutions that are often effective. Bottom-up strategic management can also build morale in the workplace because it empowers workers to develop solutions to problems and to introduce initiatives based on their expertise.

The Disadvantages of Top-Down and Bottom-Up Strategic Management

Although many companies choose the top-down approach, there are several drawbacks, including the fact that executives can ignore or fail to seek the input of talented and creative middle managers and employees. As a result, effective ideas and initiatives that could improve productivity and efficiency never filter up to those with the power to implement them. Another disadvantage is that executives may make decisions that are not practical or easy to implement, which can limit employee buy-in and create a toxic work environment.

The primary disadvantage of a bottom-up approach is that it can become difficult for middle managers to sort through the number of ideas and proposals to determine which are viable. Also, worker morale may suffer if executives reject a majority of the ideas, or if executives decide not to implement the ideas precisely the way they were conceived.

Choosing Between the Two Approaches

Businesses that feature regimented levels of management are most conducive to the top-down approach that maintains organizational discipline. On the other hand, businesses with a freer flowing management structure often find that a bottom-up approach is ideal. For example, Google has a loose management structure that encourages its smart, forward-thinking workers to submit ideas and improvements to senior executives without having to go through a rigorous vetting process.

In some instances, business owners may find that a combination of the two approaches is the most effective strategy to pursue.