C H A P T E R 1

Business Management

Definition and functions

All activities that are related to the management of all types of organisations

Includes various functional areas such as production, marketing, financial management, human resources management, supply chain management etc.

Business management is concerned with the management aspects of the inputs, the conversion process, and the outputs

Functions cont…

Traditionally the inputs are summarised in four categories:

Land – all natural resources used as raw materials

Capital – financial means to acquire other forms of production factors

Functions cont…

Labour – physical and mental abilities of human resources

Entrepreneurship – the initiative of putting together a range of production factors in various combinations in diverse businesses to satisfy the numerous needs of customers

Functions/value chain

The four aspects and functions are linked in a value chain where each activity needs to note the influence it may have on a variety of other aspects of the business

At every stage of the conversion process, one has to examine how value can be added to the process in the most efficient way

The entire chain of linked activities and processes, from the most rudimentary raw material to the most sophisticated end product, must be guided by adding value

Value chain

Value is not only restricted to money but also includes adding value in terms of place, time and form utilities

By adding value to these utilities, the products and services become enhanced need-satisfiers and can therefore demand higher monetary value as well.

The economic law of supply and demand is important in business management, businesses must therefore identify the needs for specific products and services and make these available to prospective customers

Adding competitive value

The concept of value chain can be used as a systematic

means of examining all of the organisation’s functional

activities and their effectiveness in creating customer value

The purpose of value chain analysis is to identify the value

that is added with each activity in the process of providing

products and or services and to compare business

performance with the performance of competitors

Value Chain

Analysing a business’s value chain can draw attention to

the organisation’s strengths and weaknesses.

A typical value chain divides activities within the business

into broad categories: primary activities and support

activities

Primary activities: line functions or core business

Support activities: Enable primary activities to take place

Primary Activities

Procurement and inbound logistic

Areas concerned with sourcing and receiving goods from suppliers, storing them until required by production/operations, and handling and transporting them within the organisation

Production/Operations

Actual production takes place/actual service provided

In some business it may be split in different departments

Primary Activities

Outbound Logistics

Distributing the final product to the customer

Marketing and Sales

Analysing the needs and wants of customers and brings the business’s products and service to the attention of the customer/client

Customer service

Before or after a product is sold there is often a need to provide a service or after sales service

Support Activities

Financial management

All activities, costs and assets related to the acquisition,

utilisation and control of the money in the organisation

required to finance its activities

Human resources management

Activities and costs associated with training, recruitment,

compensation of employees as well as labour relations

activities

Support Activities

Communication

Activities and costs associated with communicating with the

internal and external stakeholders of the organisation

Information management and e-business

Add value to total chain, often difficult to line with one

particular part of the organisation

The value Chain model

Class Activity

Let us assume that this value chain model depicts the manufacturing of a shirt. Discuss the support activities in the model:

Infrastructure (physical and environmental structure, building etc)

Human Resources (people) Technology Development (how is technology helping us with

making the shirt) Procurement (obtaining something i.e. material in this instance)

D E V E L O P M E N T O F M A N A G E M E N T T H E O R Y

Chapter 2

Management theory serve to:

Guide management decisions

Shape the manager’s view of organisations

Make the manager aware of the business

environment

Provide the manager with a source of new ideas

A theory is…

A coherent group of assumptions

Put forth to explain the relationship

Between two or more observable facts

And to provide a sound basis for predicting future events

It is thus a framework of principles

Factors influencing the development of theory

Management theories does not develop in isolation, it

develops within and as a result of the dynamic

environment

The environmental factors that impacts management

theory is as follows:

Political

Economic

International

Social

Ecological

Approaches to Management

The Classical Management School – (scientific

management theory and administrative management

theory)

Behavioural Management School

Quantitative Management Approach

Contemporary Management Theories

Classical Approach

Emerged during the early 1900s and was influenced by the

economic, technical and cultural changes which was

brought about as a result of the industrial revolution and the

introduction of steam power

Steam power provided for efficient production which in turn

lead to a shift from farm work to factory work where the

principle of mass production was upheld, however this led

to a number of organisational problems such as

demotivation of workers

Classical Approach cont…

Scientific Management theory was developed by a

manufacturing manager, Frederick Taylor who

sought to increase productivity and increase

efficiency by:

Examining the ways in which workers performed their tasks

and experimenting ways of improving the manner in which the

task was performed

Recording the new methods of performing the task and the

standard operating procedures

Classical Approach – Scientific management theory

Determine an acceptable level of performance for

each task and develop a remuneration system which

rewards performance which exceeds the acceptable

level

Ensuring a match between the worker’s skills and abilities and

the task requirements. Providing training to ensure that workers

perform the task according to the rules and standard operating

procedures

Classical Approach – Scientific management theory

Frank and Lillian Gilbreth built on the work of Taylor and

focused on work simplification, which included:

Analysing each individual action required to perform a task

Identifying better ways of performing each action

Increasing the efficient performance of the whole task

through re-organising the individual actions

Classical Approach – Scientific management theory

Henry Gantt redesigned the incentive system developed by

Taylor by also paying a bonus to the worker’s supervisor

for exceptional performance.

He further devised the Gantt Chart for production

scheduling

The scientific management approach succeeded in

increasing productivity however it neglected to address the

“human” element which led to worker dissatisfaction and

distrust of management

Classical Approach – Administrative Management Theory

This theory focused on how to increase productivity at the level of the organisation whereas the scientific management theory focused on the productivity of the worker

Henri Fayol, identified 14 principles which he argued could increase the efficiency of the management process.

Many of the principles identified by Fayol form the basis of management and research today

Classical Approach – Administrative Management Theory

Fayol also identified five basic functions of administration, which corresponds with the four contemporary management functions:

Planning

Organising

Commanding

Coordinating

Controlling

Classical Approach –

Administrative Management Theory

Max Weber developed a theory of bureaucratic management and emphasized the need for a hierarchy governed by lines of authority

The administrative theory made a significant contribution to management practice however it is criticized for being more applicable to stable organisations and predictable environments of the past.

Behavioral and Human Relations Approach

This theory focus on the needs of the worker

Mary Parker Follett argued that it is the worker that knows more about his/her job and therefore should be involved in the job analysis and work development process.

Elton Mayo conducted an experiment that proved that management’s interest and concern for the workers well-being had served to enhance worker performance

Behavioral and Human Relations Approach

Douglas McGregor argued that two assumptions determine how manager’s view their subordinates and manage their departments:

Theory X managers assume that employees are inherently lazy and therefore needs to be closely supervised and controlled

Theory Y managers adopt a positive view of employees and believe that it is the manager’s task to create a climate in which employees can effectively perform their work

Quantitative Approach

Also referred to as the management science approach

Extension of Taylor’s Scientific Management Theory

Focuses on the use of rigorous quantitative techniques which enable managers to achieve productivity through the most effective and efficient use of organisational resources to produce goods and services

Quantitative Approach

Uses the following tools and techniques to increase the

effectiveness of his/her decision making:

Quantitative management

Operations management

Total Quality Management (TQM)

Management Information Systems (MIS)

Contemporary Approaches

Systems Theory The influence of the environment is not considered

One part or aspect of the organisation is focused on the neglect of all other parts and/or aspects

Views the organisation as a purposeful and unified system which is composed of interrelated elements

The principle of synergy applies in that the whole is regarded to be greater than the sum of its parts

Contemporary Approaches

Characteristics of a system

Internal interdependence: changes in one component of the system will result in changes in another component in the system

Capacity for feedback : information about the output can be used by the organisation to address problems

Equilibrium: if an event leaves the system in a state of imbalance it will react in such a way as to regain equilibrium

Contemporary Approaches

Characteristics of a system

Equifinality: the system can achieve its outputs through a number of different ways or system configurations

Adaptation: A systems survival depends on it maintaining a state of balance within the greater system in which it operates, i.e. the environment

Contemporary Approaches

The concept of congruence Refers to achieving an appropriate balance between the

parts of the organisation i.e. achieving a good “fit” between all of the organisation’s components

Nadler and Tushman’s congruence model of organisational behaviour views the organisation as a system which takes inputs from the environments and transforms them within its system to produce outputs.

The system consists of four main components: the informal organisation, task, individual and formal organisation

Contemporary Approaches

Contingency Theory The systems theory provides for a contingency approach

(situational approach) to management

Chaos Theory Based on the premise that very rarely can events be

controlled. Argues that relationships is complex systems, like

organisations, are nonlinear, made up of interconnections and branching choices that produce unintended consequences and render the universe unpredictable

Chaos Theory and the Present Day Organisation

Tetenbaum identifies the information age to be characterised by the following:

Technology which increases production, efficiency and consumer power

Globalisation

Competition which, as a result of technology and globalisation has become more fierce

Change, the pace of which is considerable

Speed

Complexity and paradox which has emerged as a result of the above mentioned factors

Key characteristics of the chaos theory

Focuses on the web of feedback loops present in every system

Characteristics include:

Chaos as order- chaos describes a complex, unpredictable and orderly disorder which patterns of behaviour unfold in irregular but similar forms

Chaos as a self-organising entity: systems are self-adaptive and complex

Building a chaordic organisation

Chaordic organisations has the following characteristics:

Knowledge and information sharing

Innovation and creativity

Teamwork and project orientation

Diversity

Strong core values

facilitating the move to the chaordic organisation

Manage the transition

Build resilience to change

Destabilise the system

Manage complexity and paradox i.e. the present and future

Create and maintain a learning organisation

Other contemporary theories

Total Quality Management (TQM)

Strong emphasis on the customer

Focus on continual improvement

Quality improvement in all that the organisation does

Accurate measurement

Employee empowerment

Other contemporary theories The Learning Organisation

This theory is based on the systems theory and argues that organisations should overcome their learning disabilities through:

Commitment and lifelong learning

Challenging assumptions and generalisations

Sharing the organisation’s vision

Other contemporary theories

Promoting active dialogue within the organisation

Encouraging systems thinking

Re-engineering

Involves the redesign (re-engineering) of organisational processes so as to “create and sustain value for customers while managing costs”

Class Activity

Read the case study on page 42 and 43

Get into groups of 6

Each group discuss the various theories and how it is applicable to the case study

E N V I R O N M E N T A L A N A L Y S I S

Chapter 3

The environment of the organisation in perspective

The organisations micro-environment encompass its strategy, business functions, management tasks, setting of goals, resource abilities and expectations of stakeholders.

Management must therefore make decisions that relate to the strengths and weaknesses of the business

Strengths are the unique capabilities of a particular organisation that gives it an advantage over its competitors whilst weaknesses is a defiency which if not addressed can negatively affect the organisations position in the market

The environment of the organisation in perspective

The market/task environment lies between the micro and macro business environment, while influenced by both serves as a buffer between the two

The macro business environment encompasses all uncontrollable variables and the implications they have for management

Management must thus make strategic decisions with regard to economic, social, technological, physical, political and institutional and international envrionments, based on the changes in the macro-environment

The environment of the organisation in perspective

Changes in the market and macro-environment give rise to either opportunities or threats

An opportunity is defined as a favourable condition in the external environment that could be exploited to the benefit of the organisation by the deliberate actions of management

A threat, is defined as an unfavourable condition in the external environment, which if not responded to by management, could seriously harm the organisation’s position in the market

Characteristics of the business environment

Interrelatedness of environmental factors – a change in one external factor may cause a change in the micro-environment or internal factors and vice versa

Increasing instability – one of the consequences of interdependence in the environment is increasing instability and change

Environmental uncertainty – the amount of information about the external environment at management’s disposal and the confidence that management has on such information

Characteristics of the business environment

Complexity of the environment – the number of external variables to which a business organisation has to react, as well as variation s in the variables themselves

The International Environment

Refer to profit-oriented activities across national borders

Organisations that is involved in imports or exports are affected on both national and international levels

Local organisations need to keep up to date with the data on inflation, exchange rates etc

Organisations involved in international trade quickly realised that success or failure greatly depends on knowledge of legislation, customers, ethics, economic systems and management practices that needs to be followed.

The macro business environment

Includes all external influences that have a bearing on the business but does not fall within its direct sphere of influence

Emphasis is on the changes the uncontrollable macro-variables bring about and its implications for business

It is essential to develop environmental scenarios because they are largely unpredictable and change constantly

The economic environment

Economic factors such as the business cycle, inflation and recession influence the demand for goods and services by compelling consumers to reassess their priorities in terms of consumer products

Each significant economic change requires appropriate reaction by the business

It is the responsibility of business to try and forecast the possible cycle of the economy for at least the following year

Inflation

The continual rise in the general price level

Demand inflation – occurs when the demand for goods and services is higher than the supply resulting in higher prices

Cost push inflation – occurs when production costs of goods and services continually increase resulting in higher selling prices

Under high inflation the management of working capital such as debtors, stock and creditors is important

The business cycle

The pattern of expansion and contraction of economic activities around a long-term growth tendency

Western economies (SA included) have to deal with inflation as well as the periods of recession which follow each other quickly and are then interrupted by short periods of economic growth

A practical measure for business is to link the business cycle to the behaviour of the real gross domestic product which will provide a combined indicator of the prevailing economic climate.

The business cycle Exogenous factors such as wars, draught, natural disasters,

inventions and drastic changes in consumer demands may lead to an increase or decrease in economic activities

This result in changes in the volume of production activities and the volume of bank credit, in interest rate patterns, in orders for and the installation of capital equipment and in price increases or decreases

Interest Rates

Interest rates is the price paid for money

The repo rate is the cost at which banks can borrow money from the reserve bank

The prime rate is the price at which banks make loans or overdraft facilities available to their clients

High interest rates means financing becomes more expensive and places liquidity under pressure, it also discourage the purchase of durable consumer products such as furniture, cars etc

Provision of employment

Unemployment is one of the biggest problems in SA

Crime is on the increase and is becoming an increasing problem for business owners in that they have to spend a considerable amount on security

PRODUCTIVITY AND PROFITABLITY

There should ideally be a positive relationship between productivity and profitability however in South Africa this is not the case due to the conduct of trade unions.

The influence of trade unions

Due to the activities of trade unions, many organisations

have been forced to close down resulting in a loss in

employment opportunities

It is imperative for management to know how to deal with

labour disputes

The technological environment

Trading – developments in electronic communication have changed business (e-trading) and also created new types of business

Labour-saving machinery

Administrative systems

Increased productivity

The social environment

The organisation is a creation of the social environment

The organisation needs to continuously adapt to changing circumstances and meet the expectations of society

The organisation contributes to social change but is also influenced by it

The organisation must therefore be aware of the culture, needs, preferences, purchasing patterns, nationality, religion and geographical location of consumers

Distribution of income

The growth of the black consumer market and buying power is already of vital importance in many branches of industry

Management must establish where its biggest buying power is located and ensure that the market is exploited and served with high quality products and service

Consumerism and employee interest

The primary responsibility of an organisation towards its consumer is protecting them, but the demands of society for greater social responsibility on the part of the organisation culminate in consumerism.

Recently the organisation has a responsibility towards its employee’s as well as the greater community and is thus required to participate in the community (social involvement) and provide certain employee wellness services as well (medical services, counseling etc)

Different Languages

In effort to inform consumers about their products and services, organisations need to communicate with their target market in a language they understand

South Africa has eleven official languages and certain languages are most commonly used in certain geographical areas

Organisations should thus, formulate a policy regarding service to prominent language groups in its market without discriminating against any other language group.

Level of Education

The low levels of productivity and skill in the South African labour force are to some degree attributable to the relatively low level of education in the broader society

It is rather difficult to develop a sophisticated industrial work ethic

The treat of HIV/AIDS

The costs associated with Aids affects the following:

Loss of trained manpower

Recruitment costs

Loss of productivity

Loss of efficiency due to the loss of skills and expertise

Direct and indirect costs associated with health care

Interruptions in the production process

Increased costs of employee benefits

Decline in consumer base

Decline in disposable income of consumers as a result of higher health care costs

Population Growth & Urbanisation

The size of the market, the labour force and unemployment are closely related to population growth

Urbanization along with the expectant population growth , has far reaching social implications and consequences on the economy

The physical environment

Includes the availability, conservation, improvement and utilisation of the limited natural resources the country possesses

The business contains its raw materials from the physical environment in order to place a product on the market in combination with other factors of production

The shortage of basic factors of production influences supply of goods and contributes to large price increases which results in high inflation rates

The physical environment

Consideration must be given to different and more sophisticated methods of production, and even a reorientation in marketing thinking.

The availability of suitably, qualified personal is also another critical factor for consideration and training interventions can help alleviate the skills shortage problem

The political environment

Management needs to ensure that it is familiar with the government policy with regard to the acceptance of a free market system as the key to economic activity as well as being informed of government standpoints such as monopolistic laws, environmental conservation, employment policies and tax laws.

The effect of political decision making on the economy as a whole needs to form part of strategy formulation in all organisations

The institutional environment

Encompasses all the government, semi-government and other institutions with which the organisation is directly or indirectly involved.

The market environment

The ability of a business to be competitive is determined by its interaction with its immediate environment, which is the market environment

The market environment is the link between the organisation and the macro-environment

It is the responsibility of management to see to the needs of the consumer in the market, identify opportunities and possible threats and convert threats into opportunities and to develop specific strategies to counteract competition

The market environment

Interest groups

Groups that has an interest in the existence of the business with each group placing a different emphasis on the activities of the business

These groups lace the power of government agencies but they can exert considerable influence by using the media to their advantage

The market environment

Consumers They have a major effect on the organisation’s

performance through purchasing its products and services

Effective managers offers the consumer value for money, which if often the primary responsibility of the marketing department

Through continual market research the business stays in touch with the needs, motives and behaviour with the consumer which may offer opportunities and threats

The market environment

Competition

Effective managers develop strategies that offer a unique advantage over the competition in the market

The market strategies of the business is continuously adjusted in order to ensure an advantage over competitors

A sound competitive strategy is thus required to ensure that business stay competitive

The market environment

Suppliers

They affect the organisation’s performance hence close working relationships with them is important

Labour Force

The organisations mission, structure, systems and processes are major determinants of the capability levels employees need in order to achieve objectives

The market environment

Strategic alliances

Two or more companies working together in joint ventures

Allows organisations to supplement skills that they lack internally

Management needs to look outside the organisation and be aware of trends in the market environment in order to utilise opportunities and counteract threats

The micro environment

Also known as the decision making environment

Incorporates the goals of the organisation, management of the functions of the organisation of the organisation, its entrepreneurial ability, interest groups and all other aspects controllable by management

The micro environment

The functional division of the organisation

Encompass all functions of the organisation

Functions complement each other and does not operate in isolation

Each function forms part of the entrepreneurial ability of the organisation

The micro environment

Entrepreneurial ability

Encompass an analysis of the potential availability of the means of production, as well as of possibilities for the creative utilisation of these means of production

Resources that contribute to the entrepreneurial capacity of the organisation are:

Capital –

Labour expertise

Raw materials

Management skill

Expert management at all levels

The micro environment

Interest groups

Shareholders

Employees

General public

Authorities

Competitors

Clients

Suppliers

Environmental analysis and scenario development

Environmental analysis is essential for the formulation of a corporate strategy

A corporate strategy is a deliberate decision of management to adapt to the current and anticipated change in the market and micro-environments in a timeous, economical and effective manner

It is important for management to be aware of all external powers, opportunities, threats, strengths and weaknesses of the organisation

Environmental analysis and scenario development

Steps in the development of a typical scenario:

Determine the internal and or external factors which scenarios have to be developed

Select critical indicators for each factor

Determine the nature, occurrence and trend of the indicators of the past

Verify potential future trends

Forecast or extrapolate in order to form idea of what might happen in future

Write the scenario on the basis of the information gleaned

Scenario development

By comparing the organisations strengths, weaknesses, opportunities and threats (SWOT) a logical framework for the systematic analysis of the organisation can be obtained.

By making use of a SWOT analysis, management can convert threats into opportunities and weaknesses into strengths

Results of environmental scanning and scenario development

The purpose of environmental scanning and scenario development is to provide a basis for the formulation of a strategy regarding the activities of the organisation

Some possible strategic decisions may be taken including the following:

A maintenance strategy where the organisation continues along the route taken and attempts to maintain the current profit situation

Results of environmental scanning and scenario development

A growth strategy involving an extension of activities

A combination strategy, which may be a combination of the maintenance and growth strategy and is mainly used where the organisation serves a variety of markets

Class activity

Mrs. Stock would like to open a hair salon in Rosebank, using your knowledge about the business

environment what factors would you take into account if you were her?

G E N E R A L M A N A G E M E N T

Chapter 4

Planning

Planning is the first primary management task

Strategic planning – developing the vision, mission and long-terms goals of the organisation as a whole

Functional planning – focus on medium term objectives and is conducted by middle management

Operational planning – setting short term objectives and determining in advance how they will be accomplished

Strategic Planning

Steps in strategic planning:

1. Develop the organisation’s vision (dream), mission (reason for existence) and long-term goals

Vision – a proactive ideal business situation, the driving force or passion directing the organisation’s future and gives the employees direction on what the organisation strives for

Mission – what is our business?

Strategic Planning

2. Analyse the business environment (market, micro and

macro environment)

SWOT analysis conducted, considering the organisation’s products and services, financial position, marketing and sales, HR, organisational structure

3. Set long-term goals

Indicates the desired results when pursuing the organisation’s mission statement

Strategic Planning

Develop strategies at corporate level which is applicable for the overall performance of the organisation which includes growth, stability, turn-around and combination strategies

Growth strategies are concentration, integration, diversification, mergers and acquisitions

A stability strategy attempts to hold or maintain the organisation’s present size or grow slowly

A turn-around strategy is an attempt to reverse a declining business as soon as possible

Strategic Planning

At business level, generic strategies as identified by Porter include cost leadership, differentiation and focus strategy

Generic strategies allow the organisation to create or maintain a competitive advantage

At functional level, strategies are developed for each management function and must be aligned with the business unit generic strategy and the corporate grand level strategy to ensure success and competitive advantage

Functional Planning

Medium term planning performed by middle managers for the various functional departments to realise their objectives

Includes HR strategy on employment equity

Operational Planning

Short term objectives that should be met in less than one year

Middle and first-level managers develop operational plans

E.g.. Plans that reflect the day-to-day activities of the organisation

Some organisation’s combine tactical plans with strategic and operational plans depending on the size of the organisation

Levels of planning

Corporate level strategy – plan for multiple businesses

Business level strategy – managing one line of business, focused on the product line or service provided by one of the enterprises

Functional level strategy – the plan for managing one functional area of the business e.g. the marketing division

The importance of planning

It gives direction to the organisation and its employees

It allows for the use of advanced technology in all business processes

It ensures all related entities (departments, teams) interact effectively in order to establish synergy in practice

Forces all manager to look towards the future

Steps in the planning process

1. Objectives and setting objectives

An objective is a particular future state of things to be achieved by the organisation and its employees

Objectives should be precise, accurate, consistent with other objectives, accepted and understood by those implementing the objectives and those influenced by it

Employee involvement is important in setting objectives

Steps in the planning process

2. Develop plans: The choice of alternatives

The objectives must include the combination of resources required and ways or plans that have to be followed to fulfill the objectives

Role clarification is important

This step also considers alternatives

Steps in the planning process

3. The implementation of the selected plan

Includes the development of a framework for its execution, necessary leadership to activate the set plan, and the exercising of control to determine whether the performance has, according to the set standards, been achieved.

Organising

Structuring activities of the organisation to facilitate the attainment of its objectives

Developing mechanisms to put the strategy or plan into effect

Making arrangements to determine what activities can be carried out

Determining what resources will be employed and who will perform the various activities

Organising

Involves the distribution of tasks amongst employees

The allocation of resources to persons and departments

Giving the necessary authority to certain people to ensure that tasks are carried out

It is important to have communication, cooperation and coordination between the people and the departments performing the tasks

Organising

Unity of command: each employee should only have one direct line of reporting

Chain of command: Vertical separation between levels based on differences in authority and responsibility

Span of control: Number of employees reporting to a manager

Organising

Division of labour: Employees have specialised jobs and related functions are grouped together under a single manger

Coordination: All departments working together to achieve common organisational goals and objectives

Responsibility and authority : all employees have the authority to meet their responsibilities.

Authority is the right to make decisions, issue orders or utilise resources

Accountability ensures that individuals meet their responsibilities

Organising

Delegation: the process of assigning responsibility and authority for accomplishing objectives

Organisational design

Organisational structure: a formal system of working relationships that both separates and integrates tasks

Separation of tasks clearly indicate who should do what and integration of tasks indicates how efforts should interact and interrelate

Organising

The interaction of organising as a management task, with planning, leading and controlling is based on:

Planning can be implemented and leading can take place only once human resources are assigned to tasks

Leading can be effective only once clear responsibilities and authority are allocated to employees

Controlling can take place once procedures are established for collecting and evaluating information to help managers make decisions, evaluate performance and solve problems

Organising

Departmentalisation: grouping of related activities into units with an internal or external focus.

An internal focus would result in functional departementalisation whereas an external focus would result in product, customer or geographic departmentalisation

Leading

Leadership is the process by which an individual exerts influence over other people and inspires, motivates and directs their activities to help achieve group or organisational goals

Charismatic leaders have the ability to enable ordinary leaders to achieve extra-ordinary results. Some of their qualities are self-confidence, clear vision, extra ordinary behaviour and environmental sensitivity

Leading

Elements of leadership

Authority: right to give instructions and delegate work to subordinates

Power: ability to influence

Influence: using authority and power in a manner which inspires and motivates

Delegation: where the leader allocates a part of his/her work to a subordinate with the necessary authority

Leading

Responsibility and Accountability: where the leader is responsible for carrying out tasks and must account for his/her performance

Types of power

Legitimate power: Based on a leader’s formal position

Reward power: power to give or withhold rewards such as a salary increase, bonus, recognition, interesting assignments

Leading

Coercive Power: Ability to obtain compliance through fear of punishments such as official reprimands, less desirable work assignments, pay cuts, demotions, suspensions or termination

Referent Power: Personal power, where subordinates admire the leader

Expert Power: Special knowledge or expertise

Controlling

Three types of control:

Pre-control focus on inputs (HR, material, capital etc)

Steering control focus on the transformation process (production and service process)

Post control focus on outputs (goods and services)

Criteria for effective control

Control systems should be linked to the desired objectives of the organisation

The control process must be objective in order to eliminate subjectivity

The control process must be completed by considering all relevant factors and evaluating what is supposed to be evaluated

Criteria for effective control

Timely control provides information when it is needed most

Acceptable control is recognised by employees as necessary and appropriate for establishing and maintaining good performance

All individuals exposed to a control system must fully understand the meaning of the system and specifically the implications of the set standards

Criteria for effective control

The cost-benefit scenario regarding control must be clearly evaluated in order to establish the economic viability of the measure

Control is of no use if the control measure indicate deviations but no applicable corrective action follows

Managerial decision making

Routine decisions: selection or choice in response to a relatively well defined and common problems and alternative solutions

Adaptive decisions: made in order to continuously adapt to changes and can involve improving past routine decisions and practices.

Innovative decisions: choices under conditions of high risk and uncertainty

Decision making process steps

Definition and diagnosis of the problem

Setting of goals and objectives

Searching for alternative solutions

Comparing and evaluating alternative solutions

Choosing from among alternative solutions

Implementing the solutions selected

Follow up and control

Class Activity

What are the four general management functions?

Can these functions be used in isolation?

How best can you integrate these functions to ensure organisational success?