information and drawing connections between pieces of information to form new concepts and
anticipate on events (for top-level managers).
3.2.5 BUSINESS RESPONSIBILITY
A final way to describe organizational level differences was more pragmatic. This approach
corresponded most closely to how different organizational levels are distinguished in practice (Charan
et al., 2001; Freedman, 1998). The lower level is the first level where individuals have responsibility
for the performance of others, typically non-managerial employees. Section managers and department
managers are typical first-level managers. They worked within a single functional area (e.g.
production, sales, finance) within one and the same organization. The next level was the middle
management level. The qualitative distinction was that this position entailed coordination between
varied functional units. The individuals who reported to middle managers also tended to be managers
themselves or other highly specialized professionals. A key challenge for managers at this level was to
manage individuals with expertise in an area of which they knew relatively little about (Freedman,
1998). Middle managers were also likely to have P&L (profit and loss) responsibilities. Middle
managers were responsible for the performance of a division of a business unit that produced a
particular product or service line. At the top was the executive level. Whereas middle managers
coordinated the activities of several different functional areas within one business unit, executives
typically were responsible for a portfolio of businesses. Similar to middle managers, top-level
managers may have had relatively little prior experience with some aspects of the industries and
markets in which their businesses operated. Top-level managers were accountable to key
organizational constituents, typically, a board of directors and shareholders in publicly traded firms,
owners in the private case, or the government. The differences between the three organizational levels
are briefly summarized in Table 3-1.