Principles of Management 1226074505766252 8

7/31/2019 Principles of Management 1226074505766252 8

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Management: Definitions, Roles &Skills

Principles of Management


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Management: Definitions

Management is the process of designing andmaintaining an environment in which individuals,working together in groups, efficiently accomplishselected aim(s) viz. to create a surplus(s). .Weihrich & Koontz

Management is not an absolute; rather it is sociallyand culturally determined. Across all cultures and inall societies, people coming together to performcertain collective acts encounter common problemshaving to do with establishing direction,coordination and motivation. Culture affects howthese problems are perceived and resolved. The

Art of Japanese Management by R. Pascale & A. Athos.


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Management: Definition ctd.

Applies to and through any kind of organization

Applies to Managers at all levels

Concerned with Doing the right things right at all times:

1. Effectiveness: Achievement of objectives (Right Things);

2.Efficiency: Achieving those objectives with least amount/sacrifice of resources (Things Right);

3. Continuous Improvement: in creating increasing surplus(at all times);

Improve or die = survival of the fittest

what gets measured, gets managed and improved e.g.Productivity=Output / Input ratio

Collective, cohesive and consistent human effort towardsaccomplishing a common objective.


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Additionally, Managers need to factor in externalenvironmental forces:

Organization

Economic

Political Regulatory

Societal

Technological

Globalization

For maximum benefit to the organization

Management: Definition ctd.


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Management - what managers do: Fredrick Taylors path-breaking scientific approach

Henri Fayols classical definition offunctions, nowmodified to: Plan -- Organize -- Lead(Command&Coordinate) -- Control

Mintzbergs map of managerial roles: Interpersonal + Informational + Decisional

Katzs interpretation ofskills: Technical / Human / Conceptual

Managementget things done through others:

Leadership: The ability to influence a group towardsachievement of goals.

Motivation: The willingness to exert high level of effort

towards goals

Communication:The transference and understanding ofmeaning

Management: Roles & Skills


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Management: roles & skills ctd.Managerial Roles (Mintzberg)

Role Description ExamplesInterpersonalFigurehead symbolic head; required to show Ceremonial,

face in social & legal conditions. Civic etc.Leader Motivating & directing subordinates project plan

Liaison Networking outside for information Industry -& favours group meets

InformationalMonitor nerve centre and interpretator ReportsDisseminator networking within the organization Meetings etc.Spokesperson Transmit intent to outsiders; expert Board Meets

DecisionalEntrepreneur Opportunity finding& reacting Strategy Plan

Trouble shooter Handling unexpected disturbance Contingency

Resource allocator Initiating/approving changes Budgeting

Negotiator Getting best deal for Organization Contracts


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Managerial Skills(Katz & others)

Technical Skills:

Application of specialized

knowledge or expertise

acquired though formal

training & its use.

Human Skills:

Ability to work with people,

understand and motivate

groups & individuals. Conceptual Skills:

Mental ability to recognize,

analyze, diagnose and think

through complex situations.

Skills Needed

Board

Exec.

Mgr.

Supr.

Management: roles & skills


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Principles of Management 2

Management: A Systems

Approach


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Systems approach to Management

Organization as a System receives Input, transforms it

through a Process for Output and Operates in an

Environment (economic, regulatory and other forces)

Transformation

process

input output

Feedback (Reenergizing the system)

ENVIRONMENT

System Boundary


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Systems approach to Management ctd.

Systems Concepts System Boundaries and Subsystems

> Systems often consist of numerous subsystems.

> Each subsystem has elements, interactions with

other subsystems, and objectives.> Subsystems perform specialized tasks for the

overall system.

Subsystem Interfaces and Interface

Problems

Sub-System 2 Sub-System 3Sub-System 1


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Outputs and Inputs

Systems produce Outputs from Inputs i.e. theInputs are converted to Outputs.

Outputs of one subsystem become inputs toanother subsystem.

Outputs must adhere to standards to be usefulor acceptable to the next subsystem.

System Environment

Environment consists of people, organizations

and other systems that supply data to or that

receive data from the system

Managers at different levels perceive

Environment differently


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Systems approach to Management ctd.Inputs: 5 Ms of Management

Inputs or the resources managers deal with are: Man: human resources, both inside and connected with an

organization;

Materials:goods (hard & software, processed or semi-finished) and services required to create the sellable end

product; Machines:technology and expertise deployed towards the

transformation process;

Methods:systems, procedures and processes seamlesslyput together for the transformation;

Measurement:score-keeping and in-process monitoringcontinuously with due feedback to keep on-course on time.

Moneyis required for generating all theses Msmanagers need to acquire, deploy, generate anddistribute money as a primary need for business!


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Stake: Something wagered or risked;

an interest in an enterprise with contingent gain orloss Webster s dictionary

Holders who have stake in Business: Shareholders:are the owners. They have put in their

money in the enterprise, expecting better returns from it

than from other ventures; Society:includes the State, provincial and local

governments for the improvement of quality of life of itscitizens;

Output for Stake-holders in Business:


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Suppliers:continuity of their enterprise depends on thesuccess of the customer enterprise;

Customers:require the goods and services provided bythe enterprise, better than than those from its competitors.

The enterprise is, in turn, a supplier to its customers; Employees:livelihood depends on the progress and

success of the employing enterprise;

There is a freedom of choice (for association)between each of these stake-holders and theenterprise in the longer term: But they sink or swim together in the shorter term

Length of term definition varies with individuals!

Output for Stake-holders in Business ctd.


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by the process of

Planning

+ Organizing

+ Staffing

+ Leading

+ Controlling

to accomplish certain pre-determined, (asderived from stakeholder needs) goals or

objectives


Management as a system transforms inputs:


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Inputs(Goal

Oriented)

Outputs(External

ToOrgnzn.)

Planning

Organizing

Staffing

Leading

Controlling

Product/Services,Profits, Customer &Societal satisfaction,

Other Long-term Goals

Man, MachineMaterial,Method,

Measurement

Stake holder Feedback (reenergizing the system)

EXTERNAL ENVIRONMENT(Opportunities, Constraints)

Stakeholders

Shareholders;

Society; Customers;

Employees; Suppliers



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Management Process

First Step: Planning


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Planning

Planning involves selecting objectives orgoals and the course of actions to achievethem:

Provides the bridge to take us from where weare to where we want to go;

Is a rational approach to achieving pre-selected objectives - based on innovation,

knowledge and purpose; Decision making in choosing the best from

alternative courses of action and is integral to

planning;


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Plans as foundation of Management

Plans

What kind ofresourcesneeded?

What kind of people

& org. structureto have?

How to lead themto reach planned

goals?

How to control incase of deviationfrom plan ?

The primacy of Planning


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Types of Plans

Mission / Purpose The basic functionor reason for existence of

an enterprise/ organization

Case in point:Missionof Indira Institute

To train our students to become the best business

minds and entrepreneurs today, who will leadtheir companies successfully into the futuretomorrow , locally, nationally and globally.


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Type of Plans (Contd)

Objectives/ Goals The end towards which activity of an

organization is aimed, e.g. For a Business enterprise profit, surplus creation;

For a Management Institute: The number ofemployable/useful trainees;

Strategies Determination of the long term objectives and

adoption of a course of action

Gives a frame work for linked action-plans,communicated systematically to guide

thinking and actions.


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Types of Plans (contd)

Policies

Plans that are general directional statements(or understandings) that guide/help in decisionmaking:

Repeat decisions taken reflexively; Delegation of tasks without loss of control.

Some discretion is permissible depending oncircumstances thus encouraging initiative within

limits and situational adjustments;

Issues with Policy

Seldom documented in writing

Subject to interpretations


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Types of Plans (contd) Procedures

Plans that are chronological sequences ofrequired actions: task-oriented in nature;

Cuts across department boundaries (sub-systems) in an organization: e.g. customer

complaint handling procedure; Procedures and policies are inter related: e.g.

authorization for paid leave Policy governs quota, responsible authority etc.

Procedure governs application, grant and record-keeping. Rules

Specific actions or non-actions allowing nodiscretion Caution: rules (and procedures too) limit initiative!


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Types of Plans (contd) Programs

Action plans (mainly non-routine or for changedactivities) including, task assignments, steps tobe taken, resources to be deployed etc. to

achieve a (new/renewed) goal; Primary program may require supporting programs,

spreading across the enterprise;

Perfect coordination between supporting & primary

programs essential to avoid delays, unnecessary costsand expected roll-out.

Programs are a complex of (sub)goals, policies,rules and other elements necessary for the

course of action e.g. obtaining ISO certification.


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Types of Plans (contd)

BudgetsA statement of expected results expressed inNumerical termse.g. financial operating

budget = profit plan; Budgets enforce precision in thinking:

Making a budget is planning by itself;

Encourages innovationa different way to work

Budgets serve for Control: Enforces discipline in execution of plans;

Instills cost consciousness;

Makes people (constantly) plan!


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Steps in Planning

Being aware ofchallenges

Market, Customers

wants, Competition,Own strengths& weakness

Setting Goals/Objectives

What to accomplish

& when

Planning premises

Internal & external

Environment/conditions

Identifyingalternatives

Comparing &choosing analternative

Decision

making

Budgeting(Numberizing Plans)

e.g., Sales budget

Operational Expense budget,Capital expenditure budget

FormulatingSupporting

plans

e.g., plan to buy

Equipment, recruit & trainEmployees, develop product etc


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The Planning Process

Planning Period: Short range plans e.g. material procurement

plan in a factory

Long range plans e.g. product development

plan, plant/production facility installation;Urgent drives out the Important mismatch

between short & long term plans!

Planning horizon must allow for actions to

run their courserequiring commitments: Thus decisions today are key to good plans;

Long-term plans reap benefits of good short-

term plans.


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Steps in Planning

Being aware ofOpportunity

Considering, Market,

Competition, Customerswants, Own strengths&weakness


What to accomplish

& when

Objective = Important end towards which activitiesare directed; therefore needs verification at the endof the plan period.


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Hierarchy of Objectives& Org. Levels

Mission

OverallObjectives &Key result areas.

Divisional objectives

Departmental objectives

Individual objectives

Board ofDirectors

CEO

DivisionHeadProduct X

DivisionHeadProduct Y

Sales & MktgDept

Production Dept

Sales Manager A Sales Manager B

Objectives set end results they need to be supported by ahierarchy of sub-objectives, duly networked through the

organization to avoid discord and wasted effort.


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The Organizational Objectives is deployedinto the objectives of :

Divisions Departments Individual

objectives;

The cascade principle: seamless flow;

Mutual support & interlocking of goals isessential

Managers must ensure that the componentsof the network fit each other;

Departments/divisions can be blind-sided.

Hierarchy of Objectives& Org. Levels ctd.


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Hierarchy of Objectives& Org. Levels ctd.

Mission

OverallObjectives &Key result areas.

Divisional objectives

Departmental objectives

Individual objectives

While setting Objectives, ideally, Top Management should getinformation / buy-in from lower levels to set realistic goals for

a good result.

Top-downApproach

Bottom-upResponse:The result


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Key Result Areas (KRA)

Are areas in which performance is essential for the

success of an enterprise

Examples of generic KRAs:

Market share

Return on Investment (ROI) Service level

Customer satisfaction

Peter Drucker recommends: Market standing,

innovation, productivity, physical & financialresource, profitability, managerial performance &development, worker performance & attitude andpublic responsibility.


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Management By Objectives (MBO) A comprehensive managerial system that integrates

many key managerial activities in a systematicmanner and that is consciously directed towards the

effective and efficient achievement of organizations

and individual objectives:

Set-out by Peter Druckerin 1954;

Integrated to personal performance appraisal by Douglas

McGregorin 1957;

Has formed the basis for many theories on motivation; Has been criticized for introducing a short-term focus and

undesirable behaviour;

Currently viewed as a way of managing not a specific

tool.


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Weaknesses of MBO

Emphasis on:

short term at the expense of long term

Results over Process

Individual over collective effort Failure to grasp and deploy the concept of

seamless cascade

Difficulty in setting agreed, harmonized

goals

Danger of inflexibility

Pl i P i & S i


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Planning Premises & Strategies


What to accomplish

& when

Planning premises

Internal & externalenvironment

Identifyingalternatives


Decision

making

Strategic Planning Process

Strategy= determination of the purpose / the basic long-termobjectives; the adoption of courses of action andallocation of resources required to achieve the aims.


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Planning Premises & Strategies ctd.

Stakeholder

Wishes &Shareholderdemands

ManagementOrientation

EnterpriseProfile

Purpose &Major objectives

of enterprise

CurrentExternalsituation

Currentresourcesituation

ForecastExternalsituation

ExternalOpportunity& Threat

InternalStrengths &Weakness

Key success factors &Alternative Strategies

Strategicchoice

The Strategic Planning Process


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Planning Premises

Porters Five Forces : an

Model for analysis of the

Externals environment.


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Planning Premises: forecast of demand Estimate offuture demandis made by qualitative methods, time-

series methods and/or causal methods: Qualitative relies on judgement of experts to translate to quantities;

Time-series statistically interpolate demand on historical data;

Causal method seek co-relation on cause and effect basis betweentwo (or more) variables to quantify demand;

However, all forecasting methods are limited by:

Handling of un-quantifiable factors e.g. national pride

Unrealistic assumptions fuelled by a desire to succeed

Excessive data required (often unobtainable) to make accurate forecasts

Uncertainty with environmental changes: Technology, Govt. Policy, Internationalalignments, New materials/sources, Climate etc.

Coping with uncertainties require: Sensitivity analysis & What if scenarios (trust instinct!);

Planning for contingencies with defined cut-in milestones.


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Generic Strategy

Relationship

Bmarking Partnering

Company

Customer

Competitor Supplier

Ultimate competitive position:- position w.r.t major Customers- K.S.Fs of Competitors

- leveraging of suppliers

Competitive Advantage

1. Cost Leadership:To continually work reducing

the cost prices of products.Supplier Q-C-D has very highpriority.

2. Differentiation:To constantly offer innovativeand unique solutions. Suppliertechnology & quality has focus.

3. Customization:To offer required services in therequired manner is the focus.Speed and flexibility important.

Lean Management

Generic Strategy: BCG Matrix


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Generic Strategy: BCG MatrixRed: Marketing Perspective; Blue: Financial Perspective

Cash Source

Cash

Use

Hi

Hi Lo

Lo

MarketGrowthrate

Relative Market Share

Hi

Hi Lo

Lo

STAR

Hold

???

Build

Cash Cow

Harvest

DOGSDivest

Pl i P i & St t i td


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Planning Premises & Strategies ctd.

Decision Making = is the core of the planning process; a plandoes not come into being unless a decision i.e. certaincommitments of resources, managerial time and moneyare made and risks are taken.

Caution: A Plan is not intentions and should not suffer from

Analysis Paralysis.


Decisionmaking

Budgeting( Numberizing Plans)

Say, Sales budgetOperational Expense budget,

Capital expenditure budget

FormulatingSupporting

plans

Say, plan to buyEquipment, recruit & train

Employees, develop product etc

Deployment (MBO etc.)


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Decision making is a rational choice process,

bounded by: Limitations: time, information and logic;

Behaviour: Risk averseness and biases.

A key step in the process is to identify thoselimiting factors, road-blocks to each effective(right thing) alternative then finding a

solution with least sacrifice of resources (thing

right): Factors: quantitative, qualitative/intangible;

Finding solutions:

marginal analyses benefits with incremental inputs;

cost-effectiveness assessment of benefits over costs.

Decision Making

D i i M ki d


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Decision Makingctd.

How to selectAmongst theAlternatives ?

Experience: good teacher and useful when

routine/repeat situations arise under similarcircumstances. Without due analysis of theconditions, mistakes tend to repeat or a poorfit results.

Research & analysis: the approach is in at firstunderstanding the problem (half the solution!),then finding relations between various factorswhich hinder or foster goal attainment. This is astructured, analytical approach quantitative orotherwise.

Experimentation: arguably, the best techniqueto use, particularly when either experience orrationale is lacking/limited. However is expensiveand success/failures are magnified, results aresubject to interpretational errors.

Decision Making ctd


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Decision Makingctd.

Decision making takes place under varying degreesof uncertain conditions and risks. Techniques usedto aid the process are:

Risk analysis: every decision is based on interactionsamongst different factors/variables each of which havetheir own probabilities (towards success). Analysis ofthese probabilities yield a risk profile for each alternativepath. In the absence of defined probabilities, estimatescan be used.

Decision trees: the outcome (measure pre-decided e.g.

cost or time) of every step in the decision is charted anda course selected on the most favourable outcome. Verymuch like making a trip, navigating by using a road-map(refer example in W & K, Management a global perspective/10thedn. Pg. 209)

Decision Making ctd


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Decision Makingctd.

Flow Charts: as a process-guide to taking a decision and

helps as a check-list of key variables, the sequence inwhich they fall and the interrelations. Key to making achoice or re-examining the path taken are also indicatedas risk-reduction devices.

(refer example in W & K, Management a global perspective/10th

edn. Figure 8-5)

Decision Support Systems: a wide variety of (proprietary)computer based programs are available for managers touse their time more effectively for decision making of

semi-structured tasks by providing alternativeevaluations. They focus on the process of decisionmaking, taking data provide by the managementinformation systems in enterprises.


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Management Process:

Organizing for results

Nature of Organizing


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Nature of Organizing

Organizing may be broadly defined as:

1. The identification and classification of requiredactivities;

2. The grouping of those activities towards attainingtheir set objectives;

3. The assignment of those groupings to a responsiblemanager, duly empowered;

4. The provision for coordination among, within andacross the groups in the organization.

Organization structures are designed to: Clarify tasks & responsibilities,

Remove obstacles,

Furnish decision making & communication network

Su ort attainment of enter rise ob ectives

Nature of Organizing ctd


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Nature of Organizing ctd.

The Business OrganizationModel: Value Chain (Porter,1985)

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound

LogisticsOperations

Outbound

Logistics

Marketing

& SalesService

Primary Activities

The margin reflects the reward for the risks run by the company.

All activities together need to generate value greater than the sum of its costs.



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Inbound Logistics:relate to receiving, storing and disseminatinginputs;

Operations:associated with transformation of inputs into finalproduct form;

Outbound Logistics:relate to collecting, storing and physicallydistributing the products to buyers;

Marketing & Sales:relate to advertising, Promotion, sales,distribution-channel selection & management and Pricing;

Service:associated with enhancement or maintenance of

product value over life;

The Value Chain: Primary Activities



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Procurement: relates to the function of purchasing inputs usedacross the firms primary and support activities;

Technology Development: relates to know-how, processes &

procedures, technology embodied in the product design anddelivery. Most activities have their own sub-set of technology;

Human Resource Management: directed at recruiting, training,

developing and compensating all personnel;

Firm Infrastructure: associated with serving and supporting thefirm as a whole, with the company as its customer eg. Finance &

accounting, Quality;

The Value Chain: Support Activities

f O i i d


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Most practicing mangers would translate thisvalue chain to imply an organization as:

a formalized, intentional structure of roles andpositions

Thus formal organization implies the intentionalstructure of roles in an enterprise.

However, in an enterprise informal organizationwill form, not necessarily bad and is:

a network of personal and social relations notestablished or required by formal organizationsbut arising spontaneously as people associatewith each other.


N f O i i d


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Hierarchical levels

Span of control

The building block of an organizationis the Department: a group charged

with independent task & responsibility.

##

#

#

#

# Office Bridge Team

$ $ $

$ Car pool



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Grouping activities & people into departments makes

it conceptually possible to expand organizations toan infinite degree.

Different patterns have been successfully used to

group activities: By simple nos. is a simple method works well for the

lowest levels where work is routine, uniform and non-specialized; time-grouping is an extension of this method

where shift-working is required; By enterprise functions embodies what enterprises

typically do e.g. Production, Engineering, Sales etc. Thismethod, defined by F.W.Taylor, is arguably the mostprevalent method still used.

Nature of Organizing ctd.Departmentation

Departmentation ctd


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By territory or geography is very common when thegeographical spread is wide. It was a device introduced to

speed up management in similar units for easy and swiftcommunication e.g. Sales: N/E/W/S; Fire Brigade: Camp,Hinjewadi, Aundh etc.

By Customer/Account orientation reflecting the primary

interest in nature of markets/business/customer e.g.Banks: Institutional banking, Small Savings etc.

By Process groups encountered primarily in specialized/manufacturing operations where processes are vital e.g.

Advertising: Copy-writing, Creative etc.; Manufacturing:Steel Melting, Wire-drawing etc.

By Product Lines has evolved with enterprises becomingmulti-line with function needing adaptation/integrationto suit specific products e.g. Tata Motors: Passenger

Vehicles / Commercial vehicles

Departmentation ctd.

Departmentation ctd


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By grid control in essence combining the functionaland the product-line patterns to best effect. Functional

excellence is not subjugated to Operational ease.In projects, this serves to bring together the diversity

of skills required into one team.

The Strategic Business Unit: companies today are

organizing themselves as companies within a companyto allow for maximum flexibility and freedom ofoperations, especially when the products/businesses areunconnected e.g. General Electric. Generally, SBUs

have: Their own Missions, Goals and Strategies;

Distinct and definable set of competitors;

Deploy and manage resources in key areas;

A reasonable size.

Departmentation ctd.

Departmentation ctd


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C.E.O

Finance Qual. HRM BU 1 BU 2

I.R.M

Recr.

T&D

G/H.R

Plant 1

G/H.R

Ind.

Sin.

I.S.O

Departmentation ctd.Example of Grid Control & S.B.Us



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The purpose of organizing is to make human cooperationeffective and is limited by:

the number of persons a manager can supervise effectively andefficiently;

while the total number is dictated by the quantum of work/

nature of task/spread etc. Thus the two dimensions, Level(depth) and Span of control (width) are interrelated .

The reason for creating Levels of organization is the limitation inthe span of control. Effective span is influenced by:

Training/skill of subordinates and personal contact required;

Clarity of delegation of authority;

Clarity of plans, use of objective standards and communicationtechniques;

Rate of change;

Maturity and experience of the manager and organization.


Span-of-Management

Span of Management ctd


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Levels, per se, are not desireable:

They are expensive as they increase, both infrastructure costsand staffing tends to increase;

Real work is accomplished at the gemba (Japanese: workplace)where the actual value-addition/transformation takes place. Thecontribution of levels on top are not directly co- relatable, thusbest avoided;

Communication become complicated omissions, filterationsand misinterpretations lead to wasted and misdirected effort;

Planning and control become tortuous, requiring complicated

coordination and alignment between levels. Studies reveal that between 8 to 10 people at higher levels

and upto 15 at lower levels is a good span. Increasingly,enterprises are attempting to cut back levels to 5 or less.

Span-of-Management ctd.

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Principles of Management 1226074505766252 8

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