This article aims at summarizing several organizational functions of middle management,
and clarifying their tradeoffs. Comparing a three-tier (top-middle-bottom)
organizational structure with a two-tier (top-bottom) structure, we show the following
results: (1) middle management benefits the organization only if middle managers
have higher information gathering capabilities than top, as well as they serve
effective monitoring and communication roles; and (2) more communication from
middle to top is not necessarily desirable for the organization, because of its detrimental
effect on bottom. Result (2) arises from a tradeoff between communication
and incentives: While more communication improves project implementation by top,
it discourages bottom to exert effort to generate proposals.
