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Management: Definitions
“Management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aim(s) viz. to create a surplus(s).” …. Weihrich & Koontz
“Management is not an absolute; rather it is socially and culturally determined. Across all cultures and in all societies, people coming together to perform certain collective acts encounter common problems having to do with establishing direction, coordination and motivation. Culture affects how these 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 towards accomplishing a common objective.
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Additionally, Managers need to factor in external
environmental 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 Taylor‟s path-breaking “scientific approach”
Henri Fayol‟s classical definition of „functions‟, now modified to: Plan -- Organize -- Lead(Command&Coordinate) -- Control
Mintzberg‟s map of managerial „roles‟: Interpersonal + Informational + Decisional
Katz‟s interpretation of „skills‟: Technical / Human / Conceptual
Management – „get things done through others‟: Leadership: “The ability to influence a group towards
achievement of goals”.
Motivation: “The willingness to exert high level of effort towards goals”
Communication:”The transference and understanding of meaning”
Management: Roles & Skills
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Management: roles & skills …ctd. Managerial Roles (Mintzberg)
Role Description Examples Interpersonal •Figurehead 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 Informational •Monitor nerve centre and interpretator Reports •Disseminator networking within the organization Meetings etc. •Spokesperson Transmit intent to outsiders; expert Board Meets Decisional
•Entrepreneur 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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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 3 Sub-System 1
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Systems approach to Management …ctd.
Outputs and Inputs Systems produce Outputs from Inputs – i.e. the
Inputs are converted to Outputs.
Outputs of one subsystem become inputs to another subsystem.
Outputs must adhere to standards to be useful or 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 seamlessly put together for the transformation;
Measurement: score-keeping and in-process monitoring continuously with due feedback to keep on-course on time.
“Money” is required for generating all theses Ms – managers need to acquire, deploy, generate and distribute money as a primary need for business!
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Systems approach to Management …ctd.
“Stake”: Something wagered or risked;
an interest in an enterprise with contingent gain or loss …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 its citizens;
Output for “Stake-holders” in Business:
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Systems approach to Management …ctd.
Suppliers: continuity of their enterprise depends on the success of the customer enterprise;
Customers: require the goods and services provided by the 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 the enterprise 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, (as
derived from stakeholder needs) goals or
objectives
Systems approach to Management …ctd.
Management as a system transforms inputs:
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Inputs (Goal
Oriented)
Outputs (External
To Orgnzn.)
Pla
nnin
g
Org
anizin
g
Sta
ffing
Leadin
g
Contro
lling
Product/Services,
Profits, Customer &
Societal satisfaction,
Other Long-term Goals
Man, Machine
Material,
Method,
Measurement
Stake holder Feedback (reenergizing the system)
EXTERNAL ENVIRONMENT(Opportunities, Constraints)
Stakeholders
Shareholders;
Society; Customers;
Employees; Suppliers
Systems approach to Management …ctd.
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Planning
Planning involves selecting objectives or goals and the course of actions to achieve them:
Provides the bridge to take us from where we are 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 of resources needed?
What kind of people & org. structure to have?
How to lead them to reach planned goals?
How to control in case of deviation from plan ?
The primacy of Planning
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Types of Plans
Mission / Purpose
The basic function or „reason for existence‟ of an enterprise/ organization
Case in point: Mission of Indira Institute
“To train our students to become the best business minds and entrepreneurs today, who will lead their companies successfully into the future tomorrow , locally, nationally and globally.”
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Type of Plans (Cont‟d)
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 of employable/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 (cont‟d)
Policies
“Plans” that are general directional statements (or understandings) that guide/help in decision making:
Repeat decisions taken „reflexively‟;
Delegation of tasks without loss of control.
Some discretion is permissible depending on circumstances 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 (cont‟d) Procedures
Plans that are chronological sequences of required 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 no
discretion Caution: rules (and procedures too) limit initiative!
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Types of Plans (cont‟d) Programs
Action plans (mainly non-routine or for changed activities) including, task assignments, steps to be 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 costs and 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 (cont‟d)
Budgets
A statement of expected results expressed in “Numerical terms” e.g. financial operating budget = “profit plan”;
Budgets enforce precision in thinking:
Making a budget is „planning‟ by itself;
Encourages innovation – a “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 of challenges
Market, Customer‟s wants, Competition, Own strengths & weakness
Setting Goals/ Objectives
What to accomplish & when
Planning premises
Internal & external Environment/conditions
Identifying alternatives
Comparing & choosing an alternative
Decision making
Budgeting (Numberizing Plans)
e.g., Sales budget Operational Expense budget, Capital expenditure budget
Formulating Supporting
plans
e.g., plan to buy Equipment, recruit & train Employees, 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 course – requiring „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 of Opportunity
Considering, Market, Competition, Customer‟s wants, Own strengths &weakness
Setting Goals/ Objectives
What to accomplish & when
Objective = Important end towards which activities are directed; therefore needs verification at the end of the plan period.
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Hierarchy of Objectives& Org. Levels
Mission
Overall Objectives & Key result areas.
Divisional objectives
Departmental objectives
Individual objectives
Board of Directors
CEO
Division Head
Product X
Division Head
Product Y
Sales & Mktg Dept
Production Dept
Sales Manager A Sales Manager B
Objectives set end results – they need to be supported by a hierarchy of sub-objectives, duly networked through the organization to avoid discord and wasted effort.
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The Organizational Objectives is deployed into the objectives of :
Divisions Departments Individual
objectives;
The „cascade‟ principle: seamless flow;
Mutual support & interlocking of goals is essential
Managers must ensure that the components of 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
Overall Objectives & Key result areas.
Divisional objectives
Departmental objectives
Individual objectives
While setting Objectives, ideally, Top Management should get information / „buy-in‟ from lower levels to set realistic goals for a good result.
Top-down Approach
Bottom-up Response: 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 KRA‟s:
Market share
Return on Investment (ROI)
Service level
Customer satisfaction
Peter Drucker recommends: Market standing, innovation, productivity, physical & financial resource, profitability, managerial performance & development, worker performance & attitude and public responsibility.
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Management By Objectives (MBO) A comprehensive managerial system that integrates
many key managerial activities in a systematic
manner and that is consciously directed towards the
effective and efficient achievement of organizations‟
and individual objectives:
Set-out by Peter Drucker in 1954;
Integrated to personal performance appraisal by Douglas
McGregor in 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
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Planning Premises & Strategies
Setting Goals/ Objectives
What to accomplish & when
Planning premises
Internal & external environment
Identifying alternatives
Comparing & choosing an alternative
Decision making
Strategic Planning Process
Strategy = determination of the purpose / the basic long-term objectives; the adoption of courses of action and allocation of resources required to achieve the aims.
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Planning Premises & Strategies …ctd.
Stakeholder Wishes & Shareholder demands
Management Orientation
Enterprise Profile
Purpose & Major objectives of enterprise
Current External situation
Current resource situation
Forecast External situation
External Opportunity & Threat
Internal Strengths & Weakness
Key success factors & Alternative Strategies
Strategic choice
The Strategic Planning Process
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Planning Premises
Porter’s Five Forces : an Model for analysis of the Externals environment.
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Planning Premises: forecast of demand Estimate of future demand is 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 between two (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, International alignments, 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
B‟marking 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 high priority.
2. Differentiation: To constantly offer innovative and unique solutions. Supplier technology & quality has focus.
3. Customization: To offer required services in the
required manner is the focus. Speed and flexibility important.
Lean Management
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Generic Strategy: BCG Matrix Red: Marketing Perspective; Blue: Financial Perspective
Cash Source C
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Use
Hi
Hi Lo
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Ma
rke
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row
th r
ate
Relative Market Share
Hi
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STAR
“Hold”
???
“Build”
Cash Cow
“Harvest”
DOGS
“Divest”
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Planning Premises & Strategies …ctd.
Decision Making = is the core of the planning process; a plan does not come into being unless a „decision‟ i.e. certain commitments of resources, managerial time and money are made and risks are taken. Caution: A “Plan” is not intentions and should not suffer from “Analysis Paralysis”.
Comparing & choosing an alternative
Decision making
Budgeting ( Numberizing Plans)
Say, Sales budget Operational Expense budget, Capital expenditure budget
Formulating Supporting
plans
Say, plan to buy Equipment, 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 those limiting 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
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Decision Making…ctd.
How to select Amongst the Alternatives ?
“Experience”: good teacher and useful when routine/repeat situations arise under similar circumstances. Without due analysis of the conditions, mistakes tend to repeat or a poor fit results.
“Research & analysis”: the approach is in at first understanding the problem („half the solution‟!), then finding relations between various factors which hinder or foster goal attainment. This is a structured, analytical approach quantitative or otherwise.
“Experimentation”: arguably, the best technique to use, particularly when either experience or rationale is lacking/limited. However is expensive and „success/failures‟ are magnified, results are subject to interpretational errors.
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Decision Making…ctd.
Decision making takes place under varying degrees of uncertain conditions and risks. Techniques used to aid the process are:
Risk analysis: every decision is based on interactions amongst different factors/variables – each of which have their own probabilities (towards „success‟). Analysis of these probabilities yield a risk profile for each alternative path. In the absence of defined probabilities, estimates can be used.
Decision trees: the outcome (measure pre-decided e.g. cost or time) of every step in the decision is charted and a course selected on the most favourable outcome. Very much like making a trip, navigating by using a road-map (refer example in W & K, “Management – a global perspective/10th edn. Pg. 209)
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Decision Making…ctd.
Flow Charts: as a process-guide to taking a decision and helps as a check-list of key variables, the sequence in which they fall and the interrelations. Key to making a choice or re-examining the path taken are also indicated as 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 to use their time more effectively for decision making of semi-structured tasks – by providing alternative evaluations. They focus on the process of decision making, taking data provide by the management information systems in enterprises.
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Nature of Organizing
Organizing may be broadly defined as:
1. The identification and classification of required activities;
2. The grouping of those activities towards attaining their set objectives;
3. The assignment of those groupings to a responsible manager, duly empowered;
4. The provision for coordination among, within and across the groups in the organization.
Organization structures are designed to:
Clarify tasks & responsibilities,
Remove obstacles,
Furnish decision making & communication network
Support attainment of enterprise objectives
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Nature of Organizing …ctd.
The Business Organization Model: “Value Chain” (Porter,1985)
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound
Logistics Operations
Outbound
Logistics
Marketing
& Sales Service
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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Nature of Organizing …ctd.
Inbound Logistics: relate to receiving, storing and disseminating inputs;
Operations: associated with transformation of inputs into final product form;
Outbound Logistics: relate to collecting, storing and physically distributing 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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Nature of Organizing …ctd.
Procurement: relates to the function of purchasing inputs used across the firm‟s primary and support activities;
Technology Development: relates to know-how, processes & procedures, „technology‟ embodied in the product design and delivery. 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 the firm as a whole, with the company as its customer eg. Finance & accounting, Quality;
The Value Chain: “Support Activities”
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Most practicing mangers would translate this “value chain” to imply an organization as: “ a formalized, intentional structure of roles and
positions”
Thus „formal organization‟ implies the intentional structure of roles in an enterprise.
However, in an enterprise „informal organization‟ will form, not necessarily bad and is:
“ a network of personal and social relations not established or required by formal organizations but arising spontaneously as people associate with each other”.
Nature of Organizing …ctd.
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Nature of Organizing …ctd.
Hierarchical levels
Span of control
The building block of an organization is 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 to an 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. This method, defined by F.W.Taylor, is arguably the most prevalent method still used.
Nature of Organizing …ctd. “Departmentation”
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By territory or geography – is very common when the geographical spread is wide. It was a device introduced to speed up management in similar units for easy and swift communication 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 becoming “multi-line” with „function‟ needing adaptation/integration to suit specific products e.g. Tata Motors: Passenger Vehicles / Commercial vehicles
“Departmentation” …ctd.
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By „grid‟ control – in essence combining the „functional‟ and 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 company‟ to allow for maximum flexibility and freedom of operations, especially when the products/businesses are unconnected e.g. General Electric. Generally, SBU‟s 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.
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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.U‟s
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The purpose of organizing is to make human cooperation effective and is limited by:
the number of persons a manager can „supervise‟ effectively and efficiently;
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 in the 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 communication techniques;
Rate of change;
Maturity and experience of the manager and organization.
Nature of Organizing …ctd.
Span-of-Management
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Levels, per se, are not desireable:
They are expensive – as they increase, both infrastructure costs and staffing tends to increase;
Real work is accomplished at the „gemba‟ (Japanese: workplace) where the actual value-addition/transformation takes place. The contribution of levels on top are not directly co- relatable, thus best avoided;
Communication become complicated – omissions, filterations and 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.
