Approaches to Objective Setting: Top-Down or Bottom-Up Approach?
Objectives need to be set for the entire organization as well as for each division and department. Even individual objectives, consistent with departmental objectives, are also common.
Organizations may use different approaches for setting objectives at different levels.
What should be the approach for setting objectives in an organization?
There is no short-cut answer. You can follow either a top-down approach or a bottom-up approach.
Some organizations follow a combination of both approaches. In the case of the top-down approach, the senior managers set the objectives based on the needs of the organization, and then they pass down these to the lower levels.
When managers at the top level foresee that there would be a downslide in the market in the near future due to some environmental reasons, they may find no alternative but to take drastic measure to improve profitability.
So, they may set an objective like this: “To reduce the number of operating level employees by 7% in Factory A and Factory C within the next three months.” The mid-level and operating level managers would simply undertake steps for the realization of the objective. This is a top down approach.
On the other hand, in some organizations, mangers follow a bottom-up approach.
That means, the senior managers ask the lower-level managers to set objectives for their units and send them to the top level for review and approval.
This approach encourages ‘buy-in’ of the objectives from all employees.
