Principles of Management - MGT503

Principles of Management MGT503 HISTORICAL OVERVIEW OF MANAGEMENT
VU Lesson 1.1
Major objective of treating Principles of Management in a concise, interesting, and understandable manner ill be to present management !istor" and t!eor" it! an emp!asis on t!e future# Most students ill be appl"ing t!e concepts learned !ere over a period of ne$t man" "ears# %not!er objective s!all be to identif" several areas !ere management concepts are applicable to t!e personal and professional goal& setting and also to appl" t!e management s'ills to t!e c!allenge of managing t!e most difficult peer or subordinate t!e one t!at ma" confront "ou in t!e mirror eac! morning in "our professional career# (n an" treatment of a basic subject li'e t!is, t!ere is little t!at t!e resource)anc!or person can claim to be uni*uel" !is o n e$cept !is)!er tacit 'no ledge and t!e presentation st"le# T!e rite&ups from c!apters of recommended te$t boo's for t!is course !ave also been included and are !ig!l" ac'no ledged# The Intellectual Heritage of Manage ent +rgani,ed endeavors directed b" people responsible for planning, organi,ing, leading, and controlling activities !ave e$isted for t!ousands of "ears# T!e -g"ptian p"ramids and t!e Great .all of /!ina, for instance, are tangible evidence t!at projects of tremendous scope, emplo"ing tens of t!ousands of people, ere underta'en ell before modern times# T!e p"ramids are a particularl" interesting e$ample# T!e construction of a single p"ramid occupied more t!an 000,000 or'ers for 10 "ears# .!o told eac! or'er !at to do2 .!o ensured t!at t!ere ould be enoug! stones at t!e site to 'eep or'ers bus"2 T!e ans er to suc! *uestions is managers# 3egardless of !at managers ere called at t!e time, someone !ad to plan !at as to be done, !o to organi,e people and materials to do it, lead and direct t!e or'ers, and impose some controls to ensure t!at ever"t!ing as done as planned# (t is not ver" difficult for us to imagine modern management tec!ni*ues in t!e da"s of t!e p!arao!s# True, e can get a laug! or t o t!in'ing of profit s!aring and ot!er t entiet!&centur" terms appearing in t!e ancient land of t!e 4ile, but t!e generic relations!ips of people managing people must !ave borne a great man" similarities# (n fact, man" ancient documents !ave been translated to reveal t!at, t!roug! t!e ages, !erever people !ave or'ed toget!er to accomplis! t!eir goals, man" of t!e same p!enomena !ave prevailed# Most sc!olars suggest t!at management, in its most basic format, !as e$isted since one person persuaded anot!er !et!er it! club or carrotto do somet!ing# 5re*uentl", management is defined as t!e c!allenge of creating as environment !ere people can or' toget!er to ac!ieve a mutual objective# .!ile t!is is true for managers in business, government, and ot!er organi,ations, ( !ope t!at eac! management student ill recogni,e t!e opportunities for appl"ing management concepts to personal c!allenges# 5or t!at purpose, management can be defined as t!e concepts, tec!ni*ues, and processes t!at enable goals to be ac!ieved efficientl" and effectivel"# The Eg!"tian #!ra i$% %ppro$imatel" four t!ousand "ears 6#/#, t!e -g"ptians ere building a civili,ation edge on t!e rest of t!e orld# 7er" fe of us can compre!end t!e e$tent to !ic! t!is culture ,oomed a!ead of its times# (f it ere possible to ma'e a reliable comparison, e ould probabl" find t!at no nation in our time is as far a!ead of its contemporaries as t!e land of t!e P!arao!s as bet een 8000 6#/# and 515 6#/# T!e most obvious demonstration of -g"ptian po er is t!e construction projects t!at remain even toda"# .it!out t!e service of cranes, bulldo,ers, or tea)coffee brea's, t!e -g"ptians constructed mammot! structures of admirable precision# T!e great p"ramid of /!eops, for e$ample, covers t!irteen acres and contains 1,300,000 stone bloc's# T!e bloc's eig! about t o and a !alf tons eac! and ere cut to si,e man" miles a a"# T!e stones ere transported and set in place b" slave labor and precision planning# T!e men !o built t!e enduring structures of ancient -g"pt not onl" 'ne
!o to use of !uman resources efficientl" but also 'ne "ear project#
!o
to manage 000,000
or'ers in a t ent"&
(n t!eir business and governmental affairs, t!e -g"ptians 'ept documents to s!o e$actl" !o muc! material as received and from !om, !en it came in, and e$actl" !o it as used# T!e militar", social, religious, and governmental aspects of -g"ptian life ere !ig!l" organi,ed# T!ere ere muc! inefficienc", 9 /op"rig!t 7irtual :niversit" of Pa'istan
Principles of Management MGT503 VU but t!e final tas' as accomplis!ed# T!ree commodities, !ic! virtuall" rule modern efforts, seem to !ave been onl" minor considerations along t!e 4ile; time, mone", and t!e satisfaction of t!e or'er# Great China Wall% T!e Great /!ina .all built in t!e time period of <5= "ears >=?? 6/ 0=88 %@A# (t is =000 Bm long# (ts base is 10 feet ide and top 00 feet ide# T!e !eig!t of /!ina .all is from C to 3C feet# T!e !ole /!ina all is made b" !ands# .or'ing as united for <5= "ears, t!ere s!ould be some purposes due to !ic! people or'ed for a long time# %ccording to !istor", t!e purpose of c!ina as; D D D To mar' territories To defend t!e area To protect sil' road all
T!ese e$amples from t!e past demonstrate t!at organi,ations !ave been around for t!ousands of "ears and t!at management !as been practiced for an e*uivalent period# The Wealth of Nation& +ne of t!e classic boo's on economic p!ilosop!" as ritten b" %dam Emit!, an eig!teent!& centur" professor at Glasgo , Ecotland# (n 0CC=, %dam Emit! publis!ed a classical economics doctrine, T!e .ealt! of 4ations, in !ic! !e argued t!e economic advantages t!at organi,ations and societ" ould gain form t!e $i'i&ion of la(or) t!e brea'do n of jobs into narro and repetitive tas's# :sing t!e pin manufacturing industr" as an e$ample, Emit! claimed t!at 00 individuals, eac! doing a speciali,ed tas', could produce about 8?,000 pints a da" among t!em# Fo ever, if eac! person or'ed separatel" and !ad to perform eac! tas', it ould be *uite an accomplis!ment to produce even 00 pins a da"G Emit! concluded t!at division of labor increases productivit" b" increasing eac! or'erHs s'ill and de$terit", b" saving time lost in c!anging tas's, and b" creating laborsaving inventions and mac!iner"# T!e continued popularit" of job speciali,ation& for e$ample, specific tas's performed b" members of a !ospital surger" team, specific meal preparation tas's done b" or'ers in restaurant 'itc!ens, or specific positions pla"ed b" pla"ers on a football or cric'et teamis undoubtedl" due to t!e economic advantages cited b" %dam Emit!# Emit!Hs emp!asis on t!e principle of speciali,ation s!o ed !im to be a!ead of !is time# Fe believed t!at increasing speciali,ation as t!e 'e" to productivit"# Productivit" ould produce more income, !ig!er ages, larger families, increased demand, and furt!er division of labor and # # # t!e c"cle ould never stop# Emit!Hs contribution to t!e literature of economics is onl" e$ceeded b" !is optimism about t!e predictabilit" of man# The #lea&ure& of #ro$ucti'it! %s e loo' briefl" at t!e development of t!e intellectual !eritage of management t!roug! t!e ages, e can see a consistent correlation of productive periods it! times of capitalism and individual competition# T!e concepts are for managers and prospective managers in bot! nonprofit and for&profit organi,ations# (s it degrading to t!e profession of management to suggest t!at effective management practice is primaril" common sense and as utili,ed b" primitive people2 (t is no insult # # # because common sense is suc! an uncommon *ualit" in most generations# (n fact, some of t!e most disappointed students ever to emerge from learning institutions are t!ose !o t!in' t!at, b" ta'ing a degree in management, t!e" ill receive inside 'no ledge of t!e secret ords and formulas for manipulating people# T!e trut! is t!at even t!e best management education curriculum can onl" !ope to s!arpen t!e s'ills and understanding t!at students alread" !ave
Manage ent in T*entieth Centur!% T!e major contribution of t!e In$u&trial Re'olution as t!e substitution of mac!ine po er for !uman po er, !ic!, in turn, made it more economical to manufacture goods in factories rat!er t!an at !ome# T!ese large, efficient factories using po er&driven e*uipment re*uired managerial s'ills# .!"2 Managers ere needed to forecast demand, ensure t!at enoug! material as on !and to ma'e products, assign tas's 9 /op"rig!t 7irtual :niversit" of Pa'istan
Principles of Management MGT503 VU to people, direct dail" activities, coordinate t!e various tas's, ensure t!at t!e mac!ines ere 'ept in good or'ing condition and or' standards ere maintained, find mar'ets for t!e finis!ed products, and so fort!# Planning, organi,ing, leading, and controlling became necessar", and t!e development of large corporations ould re*uire formal management practices# T!e need for a formal t!eor" to guide managers in running t!ese organi,ations !ad arrived# Fo ever, it asnHt until t!e earl" 0<00s t!at t!e first major step to ard developing suc! a t!eor" as ta'en# T!e development of management t!eories !as been c!aracteri,ed b" differing beliefs about !at managers do and !o t!e" s!ould do it# (n t!e ne$t sections e present t!e contributions of four approac!es# Ecientific management loo'ed at management from t!e perspective of improving t!e productivit" and efficienc" of manual or'ers# General administrative t!eorists ere concerned it! t!e overall organi,ation and !o to ma'e it more effective# T!en a group of t!eorists focused on developing and appl"ing *uantitative models to management practices# 5inall", a group of researc!ers emp!asi,ed !uman be!avior in organi,ations, or t!e people side of management# #rofe&&ional Managerial Era +,-./0 1 (n our present age of mar'et driven capitalism and futuristic 'no ledge driven economic mar'ets, t!e decisions are made and t!e trends are set b" t!e professional managers# :nli'e t!eir predecessors, t!e captains of toda"Hs business do not o n t!eir o n companies# T!e" must 'no t!e !ole business but !ave control over onl" one small part# T!e" must be product oriented, process conscious, financiall" responsible and public spirited# T!e" must 'no all t!ings, "et still function as onl" one cog in t!e !eel# (f t!e !istor" of management tells us an"t!ing, it is t!at, no matter .!at !appensI peace or ar, prosperit" or famine, t!is orld ill al a"s be in need of good managers # # # t!e 'ind !o can get societ" from !ere it is to !ere it ants to be# /an "ou be one2 S!$ne! O"era Hou&e% E"dne" +pera Fall is t!e milestone of t!e modern age situated in E"dne", %ustralia !ic! completed in a time period of 33 "ears >0<80 0<C3A# E"dne" +pera !all consists of follo ing; D D D 0000 rooms 5 t!eaters Fall for 1=C< persons as
E"dne" +pera Fall is 0?3 meter tall and 010 meter ide and its roof carries0, 05=,000 tiles !ic! ere imported from E eden and it coasted J 001 million# .!at is t!e purpose to build suc! a uni*ue !all2 T!e" used people and tec!nolog" to ac!ieve t!at purpose# T!e main purpose is to provide entertainment to public# Fl!ing Color& on #C% T!e most commonl" used operating s"stem on P/ is also a great e$ample to e$plain t!e topic of organi,ed effort done b" a modern (T organi,ation# (n ma'ing of one ne version of an operating s"stem, t!e do,ens of engineers are deplo"ed# .!en t!e first operating s"stem as launc!ed b" t!e compan", it too' several "ears to launc!, and toda" "ou get an operating s"stem ort! of millions on one /@# Eo, t!ere are t!e engineers !o made t!e operating s"stem b" some processes to give t!e services to t!e P/ users )customers# T!e (T organi,ation stands be!ind its products)services# What i& Organi2ation3 an
An entit! *here t*o or ore "er&on& *or4 together to achie'e a goal or a co on "ur"o&e i& calle$ Organi2ation56 T!ere are so man" organi,ations around us# @ail" e visit and see man" organi,ations# Fospitals, /olleges, 5actories, 5arms and Government offices# Mos*ue)/!urc! is also an e$ample of an organi,ation# People go t!ere and sa" pra"ers# %ctivities of pra"ing are to ac!ieve a certain goal# Eimilarl", an" unit in !ic! t o or more persons are or'ing toget!er for some purpose is called an organi,ation# 9 /op"rig!t 7irtual :niversit" of Pa'istan
Principles of Management MGT503 D #eo"le D #ur"o&e D #roce&& D #OLCA
VU
(f t!ere is an organi,ation, t!en t!ere must be some people# T!e" or' as !ole for a common purpose, so t!ere must be a defined purpose# (f an organi,ation doesnHt !ave an" purpose, it ill not survive for long run# To ac!ieve t!e purposes b" using people, t!e processes are needed# .it!out an" process, "ou cannot ac!ieve an" t"pe of purpose or goal# (f e see in our dail" life, e !ave some goals# 5or ac!ieving t!ese goals, e use some processes# Eo t!at process is also obvious and important for an organi,ation# T!e last important t!ing for an" organi,ation is t!at it re*uires main pillars of management i#e# #OLCA% D D D D #lanning Organi2ing Lea$ing Controlling it!
% manager must perform all t!eses management functions A&&urance7
9 /op"rig!t 7irtual :niversit" of Pa'istan
Principles of Management MGT503 MANAGEMENT AND MANAGERS
VU Lesson 1.2
T!e concepts of organi,ations, managers, and management are e$plored in t!is session# -ver" organi,ation, regardless of si,e, t"pe, or location, needs managers !o !ave a variet" of c!aracteristics# Managers ma" come from an" nationalit" or be of eit!er gender# 5our *uestions are addressed; 0# .!o are managers2 1# .!at do managers do2 3# .!at is management2 8# .!" stud" management2 ,5 Who are Manager&3 8A anager i& &o eone *ho *or4& *ith an$ through other "eo"le (! coor$inating their *or4 acti'itie& in or$er to acco "li&h organi2ational goal&56 T!e c!anging nature of organi,ations and or' !as blurred t!e clear lines of distinction bet een managers and non&managerial emplo"ees# Man" or'ersH jobs no include managerial activities# @efinitions used in t!e past ma" no longer or'# Fence, an organi,ational member !o or's it! and t!roug! ot!er people b" coordinating t!eir or' activities in order to accomplis! organi,ational goals ma" be called a manager# Fo ever, 'eep in mind t!at managers ma" !ave ot!er roles and or' duties not related to integrating t!e or' of ot!ers# Kou s!ould be a are t!at managers ma" !ave a variet" of titles and roles# T!e" perform various jobs and duties and are responsible for !ig!er profits and for great performance# Managers or' in various departments and are emplo"ed b" man" t"pes of organi,ation# Kou ill be meeting different managers in t!is session and note !at jobs, roles and or' t!e" perform in t!eir organi,ations, ma" it be national or multi&national or entrepreneurial organi,ation# 95 What $o anager& $o3 4o t o managersH jobs are ali'e# 6ut management riters and researc!ers !ave developed some specific categori,ation sc!emes to describe !at managers do# .e can focus on follo ing fi'e categori2ation &che e& !ile ma'ing mind !at do managers do; 0# Management functions and management process as detailed belo ; Traditionall", a managerHs job !as been classified according to t!e follo ing four functions i#e#; #lanning% determining organi,ational goals and t!e means for ac!ieving t!em Organi2ing% deciding or' for !om !ere decisions ill be made, !o ill do !at jobs and tas's, and !o ill
Lea$ing% inspiring and motivating goals
or'ers to
or' !ard to ac!ieve organi,ational !en
Controlling% monitoring progress to ards goal ac!ievement and ta'ing corrective action
needed (# Good managers are t!ose !o a&&ure t!emselves to perform t!ese functions ell# ((# 4e &st"le or 10st centur" managers are c!anging t!e a" t!e" perform t!ese functions, t!in'ing of t!emselves more li'e mentors, coac!es, team leaders, or internal consultants# T!e" or' it! an"one !o can !elp t!em accomplis! t!eir goals rat!er t!an onl" follo ing t!e c!ain of command# T!e" as' ot!ers to participate in ma'ing decisions and s!are information it! ot!ers# (((# 4e &st"le managers perform four functions t!at !ave evolved out of t!e traditional functions; ma'ing t!ings !appenI meeting t!e competitionI organi,ing people, projects, and processesI and leading# %# Ma4ing Thing& Ha""en% To ma'e t!ings !appen "ou must determine !at "ou ant to accomplis!, plan !o to ac!ieve t!ese goals, gat!er and manage t!e information needed to 9 /op"rig!t 7irtual :niversit" of Pa'istan
Principles of Management MGT503 VU ma'e a good decision, and control performance, so t!at "ou can ta'e corrective action if performance falls s!ort# 6# Meeting the Co "etition; 5ree trade agreements, s!orter product development c"cles, and fe er barriers to entering industries !ave created increased competition# /ompanies must consider !o to deal it! international competitors, !ave a ell&t!oug!t&out competitive strateg", be able to embrace c!ange and foster ne product and service ideas, and structure t!eir organi,ations to *uic'l" adapt to c!anging customers and competitors# /# Organi2ing #eo"le; Projects, and Processes; /!anges in !o a compan" is organi,ed must consider both people issues and or' processes >!o t!e or' gets doneA @# Lea$ing; Motivating and inspiring or'ers# Management process is the set of ongoing decisions and work activities in which managers engage as they plan, organize, lead, and control. 1# Managers perform various roles in organi,ations# 3# .!ile performing, variet" of management s'ills are needed and emplo"ed b" managers# 8# 3egardless of t!e level t!e manager is on, !e or s!e must ensure t!at t!e or' activities in t!e part of t!e organi,ational s"stem !e or s!e is responsible for are coordinated and integrated# 5# Managers must read and attempt to interpret t!e situational contingencies facing t!em before deciding t!e best a" to or' it! and t!roug! ot!ers as t!e" coordinate or' activities# What i& Manage ent Eimpl" spea'ing, management is !at managers do# Fo ever, t!is simple statement doesnHt tell us muc!# .e define anage ent as t!e process of coordinating and integrating or' activities so t!at t!e" are completed efficientl" and effectivel" it! and t!roug! ot!er people# LetHs loo' at some specific parts of t!is definition# T!e process represents t!e ongoing functions of primar" activities engaged in b" managers# T!ese functions are t"picall" labeled planning, organi,ing, leading, and controlling# Let us remember it b" P+L/%# Wh! Stu$! Manage ent3 Management is important for our societ", industr" and government organi,ations# T!e importance of stud"ing management can be e$plained b" loo'ing at t!e a" e interact it! organi,ations ever" da" in our lives# -ver" product e use, ever" service e receive, and ever" action e ta'e is provided or affected b" organi,ations# T!ese organi,ations re*uire managers# Modern management ensures to create competitive advantage t!roug! People; %# Top&performing companies recogni,e t!e importance of t!e a" t!e" treat t!eir or' forces# 6# T!ese companies use ideas suc! as emplo"ee satisfaction, selective recruiting, performance based !ig! ages , reduction of status differences, s!aring information, self&managed teams, and training and s'ill development # /# (nvesting in people ill create long&lasting competitive advantages t!at are difficult for ot!er companies to duplicate# @# Eound management practices can produce substantial advantages in sales, revenues, and customer satisfaction# -# Poorl" performing companies t!at adopted management tec!ni*ues as simple as setting e$pectations, coac!ing, and re arding ere able to substantiall" improve
return on investment# Good management can increase customer satisfaction because emplo"ees tend to treat customers t!e same a" t!at t!eir managers treat t!em# 6" stud"ing management, students ill be able to recogni,e good management and encourage it, as ell as to recogni,e poor management and or' to get it corrected# %fter graduation, "ou ill eit!er manage or be managed# % course in management provides insig!ts into t!e a" "our boss or peer be!ave and s!all !elp "ou to be familiar it! t!e internal or'ing of organi,ations# 5#
Principles of Management MGT503
VU Lesson 1.3 it! a
MANAGERIAL ROLES IN ORGANI:ATIONS Manage ent Role&% Managers fulfill a variet" of roles# % role is an organi,ed set of be!aviors t!at is associated particular office or position#
@r# Fenr" Min,berg, a prominent management researc!er, sa"s t!at !at managers do can best be described b" loo'ing at t!e roles t!e" pla" at or'# T!e term management role refers to specific categories of managerial be!avior# T!ere are t!ree t"pes of roles !ic! a manager usuall" does in an" organi,ation# Inter"er&onal role& are roles t!at involve people >subordinates and persons outside t!e organi,ationA and ot!er duties t!at are ceremonial and s"mbolic in nature# T!e t!ree interpersonal roles include being a figure!ead, leader, and liaison# Infor ational role& involve receiving, collecting, and disseminating information# T!e t!ree informational roles include a monitor, disseminator, and spo'esperson# ;eci&ional role& revolved around ma'ing c!oices# T!e four decisional roles include entrepreneur, disturbance !andler, resource allocator, and negotiator# (n t!e late 0<=0s, Fenr" Mint,berg concluded t!at managers perform 00 different, but !ig!l" interrelated roles# 5ollo &up studies of Mint,bergHs role categories in different t"pes of organi,ations and at different managerial levels it!in organi,ations !ave generall" supported t!e notion t!at managers perform similar roles# Fo ever, t!e more traditional functions !ave not been invalidated# (n fact, t!e functional approac! still represents t!e most useful a" of classif"ing t!e managerHs job# %s depicted in follo ing table, Mint,berg delineated ten managerial roles in t!ree categories# a5 Inter"er&onal role& gro directl" out of t!e aut!orit" of a mangerHs position and involve developing and maintaining positive relations!ips it! significant ot!ers# ,1 T!e figurehea$ performs s"mbolic legal or social duties# 91 T!e Leader builds relations!ips it! emplo"ees and communicates it!, motivates, and coac!es t!em# <1 T!e liaison maintains a net or' of contacts outside t!e or' unit to obtain information# (5 Infor ational role& pertain to receiving and transmitting information so t!at managers can serve as t!e nerve centers of t!eir organi,ational units# ,1 T!e onitor see's internal and e$ternal information about issues t!at can affect t!e organi,ation# 91 T!e $i&&e inator transmits information internall" t!at is obtained from eit!er internal or e$ternal sources# <1 T!e &"o4e&"er&on transmits information about t!e organi,ation to outsiders#
c5 ;eci&ional role& involve ma'ing significant decisions t!at affect t!e organi,ation# ,1 T!e entre"reneur acts as an initiator, designer, and encourager of c!ange and innovation# 91 T!e $i&tur(ance han$ler ta'es corrective action !en t!e organi,ation faces important, une$pected difficulties# <1 T!e re&ource allocator distributes resources of all t"pes, including time, funding, e*uipment, and !uman resources# =1 T!e negotiator represents t!e organi,ation in major negotiations affecting t!e managerHs areas of responsibilit"
$5 T!e four major functions of managementMplanning, organi,ing, leading, and controlling provide t!e purpose for managers ta'ing t!e roles t!e" do# 9 /op"rig!t 7irtual :niversit" of Pa'istan
Principles of Management MGT503 VU #rofe&&or Mint2(erg e$plained !is concept it! t!e !elp of tableI it is given on ne$t page; Mint2(erg>& Managerial Role& Inter"er&onal E?a "le& of I$entifia(le Acti'itie& Greeting visitors; signing legal documents Performing virtuall" all activities t!at involve subordinates %c'no ledging mail; doing e$ternal board or'; performing ot!er activities t!at involve 3eading outsiders periodicals and reports; maintaining personal contacts#
Role Figurehea$ Lea$er
Liai&on
Infor ational
Monitor
;i&&e inator
S"o4e&"er&on
;eci&ional
Entre"reneur
;i&tur(ance han$ler Re&ource allocator
Negotiator
;e&cri"tion E"mbolic !ead; obliged to perform a number of routine duties of a legal or 3esponsible t!e social nature# for motivation of subordinates; responsible for staffing, training, and associated duties# Maintains self& developed net or' of outside contacts and informers !o provide favors and Eee's and receives information# ide variet" of internal and e$ternal information to develop t!oroug! understanding of organi,ation and Transmits information received from outsiders or from subordinates to members of t!e organi,ation Transmits information to outsiders on organi,ationHs plans, policies, actions, results, Eearc!es organi,ation and its environment for opportunities and initiates improvement projects 3esponsible for corrective action !en organi,ation faces important, 3esponsible for t!e allocation of organi,ational resources of all 'inds ma'ing or approving all significant organi,ational 3esponsible for representing t!e organi,ation at major negotiations
Folding informational meetings; ma'ing p!one calls to rela" information# Folding board meetings; giving information to t!e media# +rgani,ing strateg" and revie sessions to develop ne programs +rgani,ing strateg" and revie sessions t!at involve disturbances and crises Ec!eduling; re*uesting aut!ori,ation; performing an" activit" t!at involves budgeting and t!e programming of subordinatesH or' Participating in union contract negotiations
VU Lesson 2.4
MANAGERIAL FUNCTIONS I5E5 #OLCA #OLCA a& function&% #lanning Management function t!at involves t!e process of defining goals, establis!ing strategies for ac!ieving t!ose goals# %nd developing plans to integrate and coordinate activities# Organi2ing Management function t!at involves t!e process of determining !at tas's are to be done# .!o is to do t!em, !o t!e tas's are to be grouped, !o reports to !om, and !ere decisions are to be made# Lea$ing Management function t!at involves motivating subordinates, influencing individuals or teams as t!e" or', selecting t!e most effective communication c!annels, or dealing in an" a" it! emplo"ee be!avior issues# Controlling Management function t!at involves monitoring actual performance, comparing actual to standard and ta'ing corrective action, if necessar"# A&&urance Nualit" function !ic! demands from ever" manager t!at !e)s!e ensures t!at prior management support and management processes are in place before P+L/ management functions are e$ecuted# Manage ent "roce&& (t is t!e set of ongoing decisions and or' activities in !ic! managers engage as t!e" plan, organi,e, lead, and control# The anage ent "roce&& includes more t!an t!e four management functions# T!e process also includes or' met!ods, managerial roles, and managerial or' agendas# 95 T!e management process applies to bot! profit&ma'ing and not&for&profit organi,ations# a5 % not0for0"rofit organi2ation is an organi,ation !ose main purposes center on issues ot!er t!an ma'ing profits# (5 -$amples of not&for&profit organi,ational include government organi,ations, cultural institutions, c!aritable institutions, and some !ealt!&care facilities# Manage ent #roce&&% #lanning @efining goals, establis!ing strateg", and developing sub plans to coordinate activities Organi2ing @etermining !at needs to be done, !o it ill be done, and !o is to do it Lea$ing @irecting and motivating all involved parties and resolving conflicts Efficienc! refer& to getting the -fficienc" >MeansA o&t out"ut fro Controlling ,5
Lea$ to
Monitorin g activities ensure t!at t!e" accomplis!ed planned %c!ieving t!e to organi,ationHs stated purpose are as
the lea&t a ount of in"ut&5
-ffectiveness >-ndsA Resource U&age Lo .aste Goal Attain ent Fig! %ttainment
Management Etrives 5or; Lo resource aste >!ig! efficienc"A Fig! goal attainment >!ig! effectivenessA
<
Principles of Management MGT503 VU Effecti'ene&& is often described as doing t!e rig!t t!ings t!at is, t!ose or' activities t!at ill !elp t!e organi,ation reac! its goals# .e !ave learnt t!atI a manager is someone !o or's it! and t!roug! ot!er people b" coordinating t!eir or' activities in order to accomplis! organi,ational goals# .!ile performing, t!e manager !as to 'eep in mind t!at !e )s!e !as to deal or'ers and ot!er people around !im in variet" of situations# Mi&ta4e& Manager& Ma4e% % comparison of arrivers, t!ose !o made it all t!e a" to t!e top of t!eir companies, and derailers, t!ose !o ere successful earl" but ere 'noc'ed off t!e fast trac', s!o s t!at alt!oug! bot! groups !ad talent and ea'nesses, t!e derailers !ad some fatal fla s# Fere are t!e top ten mista'es made b" derailers# 0# (nsensitive to ot!ers; abrasive, intimidating, bull"ing st"le# 1# /old, aloof, arrogant# 3# 6etra"al of trust# 8# +verl" ambitious; t!in'ing of ne$t job, pla"ing politics# 5# Epecific performance problems it! t!e business# =# +ver managing; unable to delegate or build a team# C# :nable to staff effectivel"# ?# :nable to t!in' strategicall"# <# :nable to adapt to boss it! different st"le# 00# +ver dependent on advocate or mentor# Euccessful entrepreneurs !ave all t!e managerial and tec!nical competencies along personal attributes to ta'e ris' and in t!roug! t!e odd situations#
it! some 'e"
00
Principles of Management MGT503 MANAGERIAL LEVELS AN; S@ILLS
VU Lesson 2.5
Le'el of Manager& in an Organi2ation% To" Manager& Mi$$le Manger& Fir&t0Line Manager& Non0 anagerial E "lo!ee& Fir&t0line anager& >or fir&t0line &u"er'i&or&1 are t!ose managers !aving t!e least aut!orit" and are at t!e lo est level in t!e !ierarc!" of t!e organi,ation# 5irst&line managers are at t!e lo est level of management and manage t!e or' of non&managerial individuals !o are involved it! t!e production or creation of t!e organi,ationHs products# T!e"Hre often called supervisors but ma" also be called line managers, office managers, or even foremen# T!e" are directl" responsible for t!e or' of operating >non& managerialA emplo"ees# a5 Titles often include t!e term, supervisor# (5 5actors c!anging t!e jobs of first&line managers include emp!asis upon or'er participation and team or' and t!e use of computers to regulate man" activities formerl" regulated b" first&line managers# c5 T!e jobs of first&line managers are li'el" to c!ange to ard a greater emp!asis on dealing it! internal !uman relations# Mi$$le0le'el anager& are t!ose managers beneat! t!e top&levels of t!e !ierarc!" and directl" supervise ot!er managers belo t!em# (t includes all levels of management bet een t!e first&line level and t!e top level of t!e organi,ation# T!ese managers manage t!e or' of first&line managers and ma" !ave titles suc! as department !ead, project leader, plant managers, or division manager# a5 T"pical titles include manager, director of, c!ief, department !ead, and division !ead# (5 Middle managers are mainl" responsible for implementing overall organi,ational plans so t!at organi,ational goals are ac!ieved as e$pected# c5 T!e" plan, allocate resources to meet objectives and coordinate and lin' groups, departments, and divisions it!in a compan"# $5 T!e" monitor and manage t!e performance of t!e subunits and individual managers !o report to t!em# e5 (mplement c!anges or strategies generated b" top managers# f5 T!e modern trend of adding la"ers of middle management is reversing as companies reduce t!e number of levels in t!e managerial !ierarc!"# g5 3educing t!e number of levels of managersH results in greater po er and responsibilit" for t!ose managers !o remain# h5 (t is predicted t!at t!ere ill be increasingl" less emp!asis on !ierarc!ical levels in organi,ation# To" anager& are t!ose managers at t!e ver" top levels of t!e !ierarc!" !o !ave t!e most aut!orit" and !o are ultimatel" responsible for t!e entire organi,ation# T!e" are t!ose !o are responsible for ma'ing organi,ation& ide decisions and establis!ing t!e plans and goals t!at affect t!e entire organi,ation# T!ese individuals t"picall" !ave titles suc! as e$ecutive vice president, president, managing director, c!ief operating officer, c!ief e$ecutive officer, or c!airman of t!e board# a5 +t!er titles include c!ief e$ecutive officer >/-+A, president, e$ecutive vice president, e$ecutive director, senior vice president, and sometimes, vice president# (5 T!e" oversee overall planning for t!e organi,ation, or' it! middle managers in implementing and planning, and maintain overall control over t!e progress of t!e organi,ation# c5 (n t!ose public corporation t!at sell t!eir stoc' to t!e public, top managersH report to t!e board of directors !ose function is to represent t!e interests of t!e
$5
stoc'!olders# d# T!e" are responsible for t!e overall direction of t!e organi,ation and for creating t!e conte$t for c!ange#
00
Principles of Management MGT503 VU e5 e# T!e" develop in emplo"ees t!e attitudes of commitment to and o ners!ip in t!e compan"Hs performance and create a positive organi,ational culture t!roug! language and action# f5 T!e board of directors appoints t!e /-+ > !o sometimes also serves as t!e /!airman or /!air oman of t!e 6oardA# T!e /-+ t!en appoints t!e ot!er top managers subject to board approval# ;ifference in Function& of Manage ent *ithin the Hierarch!% % number of aspects of t!e management process differ it!in t!e !ierarc!"# T!e importance of eac! of t!e function& of anage ent differs from one managerial level to anot!er# a5 (5 c5 $5 #lanning tends to be more important for top&level managers# Organi2ing tends to be more important for bot! top and middle&level managers# Lea$ing is more important for first&line managers# Controlling is important among all levels of t!e !ierarc!"#
Management E'ills, Bno ledge and Performance A5 Managers need a 4no*le$ge (a&e5 T!is 'no ledge base provides a conte$t for t!e managerHs activities# (t can include information about an industr" and its tec!nolog", compan" policies and practices, compan" goals and plans, compan" culture, t!e personalities of 'e" organi,ation members, and important suppliers and customers# Managers need t!ree t"pes of 4e! &4ill& to perform t!e duties and activities associated it! being a manager# Technical &4ill& are s'ills t!at reflect bot! an understanding of and a proficienc" in a speciali,ed field# Tec!nical s'ills include 'no ledge of and proficienc" in a certain speciali,ed field, suc! as engineering, computers, accounting, or manufacturing# T!ese s'ills are more important at lo er levels of management since t!ese managers are dealing directl" it! emplo"ees doing t!e organi,ationHs or'# Hu an &4ill& are associated it! a managerHs abilit" to or' ell it! ot!ers bot! as a member of a group and as a leader !o gets t!ings done t!roug! ot!ers# 6ecause managers deal directl" it! people, t!is s'ill is crucialG Managers it! good !uman s'ills are able to get t!e best out of t!eir people# T!e" 'no !o to communicate, motivate, lead, and inspire ent!usiasm and trust# T!ese s'ills are e*uall" important at all levels of management# Conce"tual &4ill& are s'ills related to t!e abilit" to visuali,e t!e organi,ation as a !ole, discern interrelations!ips among organi,ational parts, and understand !o t!e organi,ation fit into t!e ider conte$t of t!e industr", communit", and orld# /onceptual s'ills are t!e s'ills managers must !ave to t!in' and to conceptuali,e about abstract and comple$ situations# :sing t!ese s'ills, managers must be able to see t!e organi,ation as a !ole, understand t!e relations!ips among various submits, and visuali,e !o t!e organi,ation fits into its broader environment# ,5 T!e concept of organi2ational "erfor ance as anal",ed b" Peter @ruc'er# Effecti'ene&& is t!e abilit" to c!oose appropriate goals and to ac!ieve t!ose goals# 95 Efficienc! is t!e abilit" to ma'e t!e best use of available resources in t!e process of ac!ieving goals# -fficienc" is t!e ration of inputs used to ac!ieve some level of outputs
A# ,5
95
<5
Managing in the 9,&t centur!% A5 T!e orld of business !as c!anged dramaticall" in t!e past generation or so# Tec!nolog" !as s!run' distancesI made communications possible in real&time all around t!e globeI
01
Principles of Management MGT503 VU made possible computers it! incredibl" large memories and super fast speedsI made us more a are of different places, peoples and culturesI and provided businesses it! t!e opportunit" to compete in nearl" an" mar'et in t!e orld# A5 Four tren$& are li'el" to impact managerial or' in t!e future# ,5 Euccessful managers in t!e t ent"&first centur" ill !ave to be able to guide t!eir companies t!roug! s!ifts in economic conditions, modifications in customer preferences, rapidl" c!anging tec!nolog", and ot!er change&5 (ncreasingl", successful companies meet t!ese c!anges 95 ill rela" on inno'ation to successfull"
T!e or' force is becoming increasingl" $i'er&e5 Managers ill need to be able to effectivel" utili,e a muc! broader selection of personnel in t!e immediate future# Managing $i'er&it! is t!e planning and implementing of organi,ational s"stems and practices t!at ma$imi,e t!e potential of emplo"ees to contribute to organi,ational goals and develop t!eir capabilities un!indered b" group identities suc! as race, gender, age, or et!nic group# (n t!e coming millennium, managers t!emselves ill reflect t!e emerging diversit" and, at t!e same time, ill need to be able to effectivel" utili,e and increasingl" diverse or' force# 6usinesses increasingl" face global competitionI t!erefore, managers need to !ave greater 'no ledge of international business and to develop a glo(al "er&"ecti'e 6usinesses are also more li'el" to be operating in more t!an one count"# Nualit" management programs !ave become increasingl" important and total Bualit! anage ent program aimed at continuou& i "ro'e ent !ave been implemented in man" business# Global competition !as created an emp!asis for better *ualit"#
<5
=5
03
Principles of Management MGT503 MANAGEMENT I;EAS% CESTER;AC AN; TO;AC
VU Lesson 2.6
T!e purpose of t!is lecture is to demonstrate t!at 'no ledge of management past !istor" can !elp "ou better understand current management t!eor" and practice# T!us, in order to understand t!e t!eories and practices used toda", itHs important for management students to loo' at t!e evolution of management t!oug!t and practices# T!e practice of management !as al a"s reflected !istorical times and societal conditions# ,5 INTRO;UCTION Man" current management concepts and practices can be traced to earl" management t!eories# T!e practice of management !as al a"s reflected t!e times and social conditions, so man" organi,ations are responding to tec!nolog" brea't!roug!s and developing .eb&based operations# T!ese ne business models reflect toda"Hs realit"; information can be s!ared and e$c!anged instantaneousl" an" !ere on t!e planet# T!e purpose of t!is c!apter is to demonstrate t!at 'no ledge of management !istor" can !elp understand toda"Hs management t!eor" and practice# 95 MANAGEMENT>S CONNECTION TO OTHER FIEL;S OF STU;C Management courses !ave a ric! !eritage from !umanities and social science courses# %# Anthro"olog!Mt!e stud" of societies, !ic! !elps us learn about !umans, t!eir activities, and differences in fundamental values, attitudes, and be!avior bet een people in different countries and it!in different organi,ations# Econo ic&Mconcerned it! t!e allocation, distribution of scare resources, and understanding t!e c!anging econom", as ell as t!e role of competition and free mar'ets in a global conte$t#
6#
/# #hilo&o"h!Me$amines t!e nature of t!ings, particularl" values and et!ics# @# #olitical ScienceMstudies t!e be!avior of individuals and groups it!in a political environment, including structuring of conflict, allocating po er in an economic s"stem, and manipulating po er for individual self&interest# #&!cholog!Mscience t!at see's to measure, e$plain, and sometimes c!ange t!e be!avior of !umans and ot!er animals# !uman
-#
5# Sociolog!Mt!e stud" of people in relation to t!eir fello beings# <5
HISTORICAL AAC@GROUN; OF MANAGEMENT T!ere are man" e$amples from past !istor" t!at illustrates !o management !as been practiced for t!ousands of "ears# T!e -g"ptian p"ramids and t!e Great .all of /!ina are good e$amples of projects of tremendous scope and magnitude t!at emplo"ed tens of t!ousands of people# Fo as it possible for t!ese projects to be completed2 T!e ans er is management. +t!er e$amples of earl" management practices can be seen t!roug! assembl" lines, accounting s"stems, and personnel functions as just a fe of t!e processes and activities in organi,ations at t!at time t!at are also common to toda"Hs organi,ations# %dam Emit!, aut!or of t!e classical economics doctrine, The Wealth of Nations, argued brilliantl" about t!e economic advantages t!at $i'i&ion of la(or >t!e brea'do n of jobs into narro , repetitive tas'sA ould bring to organi,ations and societ"#
%#
6#
/#
08
Principles of Management MGT503 VU @# T!e In$u&trial Re'olution can be t!oug!t of as possibl" t!e most important pre& t entiet!& centur" influence on management# T!e introduction of mac!ine po ers, combined it! t!e division of labor, made large, efficient factories possible# Planning, organi,ing, leading, and controlling became necessar" # i5 the (irth of Earl! anage ent i$ea& A5 The E'olution of Manage ent Theorie& Tr"ing to ac!ieve goals t!roug! t!e judicious use of people and resources, getting t!e ot!ers to or' to ard t!ese goals, and 'eeping trac' of !et!er or not e are accomplis!ing !at e set out to do !as been around for centuries# -$pressed in ot!er terms e could sa" t!at management is a ver" old concept# Generall", t!oug!, e t!in' of modern management and t!e specific identification of planning, organi,ing, leading, and controlling being t!e functions of management as !aving begun at t!e end of t!e 0?00s# Most of t!e contributors e recogni,e toda" !ave been t entiet! centur" people# A5 #re0cla&&ical Contri(utor& T!ese contributors presented t!eir ideas before t!e late 0?00s # 0# Ro(ert O*en >0CC0&0?5?A as a 6ritis! factor" o ner !o advocated concern for t!e or'ing and living conditions of or'ers, man" of t!em "oung c!ildren# Man" of !is contemporaries t!oug!t !e as a radical for suc! ideas# 1# Charle& Aa((age >0C<1&0?C0A is considered to be t!e fat!er of modern computing# Fe foresa t!e need for or' speciali,ation involving mental or'# Fis management ideas also anticipated t!e concept of profit s!aring to improve productivit"# 3# Henr! E5 To*ne >0?88&0<18A called for t!e establis!ment of a science of management and t!e development of management principles t!at could be applied across management situations# 8# %n assessment of t!e "recla&&ical contri(utor& indicates t!at t!eir efforts ere fragmentar"# 6" and large t!e" applied t!eir efforts to ards developing specific tec!ni*ues or solutions# T!e" laid t!e ground or' for major management t!eories !ic! came later#
05
Principles of Management MGT503 CLASSICAL VIEW OF MANAGEMENT +SCIENTIFIC AN; AUREAUCRATIC1 Cla&&ical Vie*"oint is divided into t!ree parts; ,5 Scientific anage ent 95 Aureaucratic anage ent <5 A$ ini&trati'e anage ent
VU Lesson 3.7
,5 Scientific anage ent% Scientific anage ent is defined as t!e use of t!e scientific met!od to define t!e one best a job to be done# I "ortant Contri(ution&% 5rederic' .# Ta"lor is 'no n as t!e fat!er of scientific management# Ta"lorHs 6et!le!em Eteel companies motivated !is interest in improving efficienc"# a#
a" for
or' at t!e
Ta"lor soug!t to create a mental revolution among bot! or'ers and managers b" defining clear guidelines for improving production efficienc"# Fe defined four principles of management# idel" cited e$ample of scientific as able to define t!e one best a" for
b# Fis pig iron e$periment is probabl" t!e most management# c# d# :sing !is principles of scientific management, Ta"lor doing eac! job#
+verall, Ta"lor ac!ieved consistent improvements in productivit" in t!e range of 100 percent# Fe affirmed t!e role of managers to plan and control and of or'ers to perform as t!e" ere instructed#
Fre$eric4 Win&lo* Ta!lor +,D.E0,-,.1 as t!e first nationall" 'no n management t!in'er# Fis Ta"lorism or scientific management as a major contribution to business operations as e 'no t!em toda"# T!e overvie of !is studies is given belo ; a# b# Ta"lor developed scientific management to counter t!e problem of soldiering b" or'ersMdeliberatel" or'ing belo full capacit"# Ta"lor pioneered t!e time&and&motion stud", !ere b" a or' tas' is bro'en do n into its various motions, is improved b" eliminating unnecessar" motions, and t!en t!e motions timed to determine optimal dail" production# T!roug! !is four principles of scientific management, Ta"lor advocated scientific stud" of t!e tas' to find t!e best or' met!od rat!er t!an rel"ing on traditional met!ods !anded do n from one or'er to anot!er# Ta"lor successfull" implemented !is t!eor" at 6et!le!em Eteel in t o famous studies involving s!oveling and pig&iron !andling# %lt!oug! real and imagined abuses or misuses of scientific management occurred >leading in one instance to a congressional investigationMand t!ereb" adding to Ta"lorHs notoriet"A, Ta"lorHs strong support of science and !is redefining t!e role of managers remains !is primar"
c#
d# e#
contribution to management t!eor"# Ta!lor>& Four #rinci"le& of Scientific Manage ent% 0# Etud" eac! part of t!e tas' scientificall", and develop a best met!od to perform it# 1# /arefull" select or'ers and train t!em to perform a tas' using t!e scientificall" developed met!od# 3# /ooperate full" it! or'ers to ensure t!e" use t!e proper met!od# 9 /op"rig!t 7irtual :niversit" of Pa'istan
0=
Principles of Management MGT503 VU 8# @ivide or' and responsibilit" so management is responsible for planning or' met!ods using scientific principles and or'ers are responsible for e$ecuting t!e or' accordingl"# Fran4 an$ Lillian Gil(reth +,DED0,-9= an$ ,DFD0,-F9 re&"ecti'el!1% T!e" did studies aimed at eliminating unnecessar" motions and a" of reducing tas' fatigue# a# b" T!e" perfected t!e time&and&motion stud" tec!ni*ues first introduced
Ta"lor# b# Toget!er t!e" provided t!e first vocabular" for identif"ing !and, arm, and bod" motions used at or'M !ic! t!e" called T!erbligs# c# LillianHs doctoral dissertation as publis!ed as t!e boo', The Psychology of Management, one of t!e first boo's publis!ed on t!e findings of ps"c!olog" in t!e or'place# d# 5ran' proved t!e value of motion studies in !is o n construction compan" !ose productivit" as nearl" t!ree times better t!an !is competitors !o used t!e older or' met!ods# Henr! L5 Gantt +,DE,0 ,-,-1 +ne of Ta"lorHs closest associates is best 'no n for !is Gantt c!art, a grap!ic aide to planning, sc!eduling, and controlling# Fis ot!er interests included a uni*ue pa" incentive s"stem and t!e social responsibilit" of business# Ho* ;o To$a!>& Manager& U&e Scientific Manage ent3 To understand !" scientific management as vie ed as suc! an important development, "ou need to loo' at t!e times in !ic! Ta"lor, t!e Gilbret!s, and ot!er scientific management advocates lived# 0# (t as important because it could raise countriesH standards of living b" ma'ing or'ers more productive and efficient# 1# %lso, itHs important to remember t!at man" of t!e tools and tec!ni*ues developed b" t!e scientific management practitioners are still used in organi,ations toda"# 95 Aureaucratic anage ent%
GENERAL A;MINISTRATIVE THEORISTS T!is group of riters focused on t!e entire organi,ation# T!e"Hre important for developing more general t!eories of !at managers do and !at constitutes good management practice# T!e t o most prominent t!eorists be!ind t!e general administrative approac! ere Fenri 5a"ol and Ma$ .eber# 0# Fenri 5a"ol rote during t!e same time period as 5rederic' Ta"lor# 5a"ol as t!e managing director of a large 5renc! coal&mining firm# a# Fis attention as aimed at t!e activities of all managers# b# Fe described t!e practice of management as distinct from ot!er t"pical business functions# 1# Ma$ .eber >pronounced 7%K&6%3A as a German sociologist !o rote in t!e earl" part of t!e 10t! centur"# a# Fe developed a t!eor" of aut!orit" structures and described organi,ational activit" based on aut!orit" relations# b# Fe described t!e ideal form of organi,ationMt!e (ureaucrac!, defined as a form of organi,ation mar'ed b" division of labor, a clearl" defined !ierarc!", detailed rules and regulations, and impersonal relations!ips Ma$ .eber stated 08 "rinci"le& of anage ent >fundamental or universal trut!s of management t!at can be taug!t in
sc!oolsA# (t emp!asi,ed t!e need for organi,ational rationalit" rat!er t!an t!e o nerHs !ims as a means for determining !o or' s!ould be divided into individual or' positions and !o t!e or' s!ould be re arded# Ma$ .eber, t!e most important earl" advocate of t!is approac!, argued t!at too often organi,ational decisions and re ards ere made because of !o t!e or'er as >possibl" a relative of t!e managerA or !o t!e or'er 'ne rat!er t!an on t!e "erfor ance of t!e or'er# Ecientific management focused on t!e or' or t!e job and !o to do it better# 6ureaucratic management, on t!e ot!er !and, focused on !o to structure t!e organi,ation better so t!at better overall performance mig!t be ac!ieved# 9 /op"rig!t 7irtual :niversit" of Pa'istan
0C
Principles of Management MGT503 VU Ma? We(er +,DE=0,-9/1 a ell 'no n German sociologist coined t!e term bureaucrac" to appl" to t!e ideal of large organi,ations operating on a rational basis# .eberHs original definition as muc! different t!an t!e definition of government red tape and bungling usuall" associated it! t!e term bureaucrac" toda"# Characteri&tic& of We(er>& i$eal (ureaucrac! T!e major c!aracteristics of .eberHs ideal bureaucrac" include; a# Epeciali,ation of a labor b# 5ormali,ation of rules and procedures c# (mpersonalit" in application of rules and sanctions d# 5ormali,ation of lines of aut!orit" into a !ierarc!ical structure e# 5ormali,ation of t!e career advancement process to be based on merit T!e timing of .eberHs contributions is a little confusing# %lt!oug! !e as a contemporar" of Ta"lor and ot!ers described as classical contributors, .eberHs or's erenHt translated into -nglis! until t!e 0<80s# .eberHs bureaucratic c!aracteristics are still evident in man" of toda"Hs large organi,ationsMeven in !ig!l" fle$ible organi,ations of talented professionals !ere some bureaucratic mec!anisms are necessar" to ensure t!at resources are used efficientl! and effectivel"# Contri(ution of the cla&&ical 'ie*"oint% (# Fig!lig!ts t!e need for a scientific approac! to management# ((# Points out t!at or' met!ods often can be improved t!roug! stud"# (((# (dentifies a number of important principles t!at are useful in running organi,ation efficientl"#
0?
Principles of Management MGT503 A;MINISTRATIVE VIEW OF MANAGEMENT
VU Lesson 3.8
,5 The A$ ini&trati'e Manage ent (t is a term used for t!ose earl"&da" contributors !o developed and taug!t principles to be used b" managers, bot! individuall" and collectivel", to improve t!e performance of t!e overall functions of t!e organi,ation# Henri Fa!ol +,D=,0,-9.1 a successful 5renc! industrialist, developed t!eories about management !e t!oug!t could be taug!t to t!ose individuals it! administrative responsibilities# a# 5a"olHs lasting contribution is t!e functional approac! to management !ic! is still used toda"# T!e major managerial functions, according to 5a"ol, ere planning, organi,ing, commanding, coordinating, and controlling# T!e functions !ave been slig!tl" modified several times since 5a"ol# (n t!e main, t!oug!, t!e" still provide t!e basic frame or' for stud"ing management as itnessed b" t!e organi,ation of t!is and most ot!er principles of management te$ts used toda"# Li'e .eber, 5a"olHs or's ere not translated into -nglis! for a couple of decades after !is deat!# b# 5a"ol gives us 08 principles of management !ic! are still being used no ada"s# T!ese principles are given belo ; 5a"olHs 08 Principles of Management 0# 95 ;i'i&ion of *or4 Epeciali,ation increases output b" ma'ing emplo"ees more efficient# Authorit!5 Managers must be able to give order# %ut!orit" gives t!em t!is rig!t# %long aut!orit", !o ever, goes responsibilit"# ;i&ci"line5 -mplo"ees must obe" and respect t!e rules t!at govern t!e organi,ation# Unit! of Co an$ %n emplo"ee s!ould receive orders from one superior onl"# Unit! of $irection5 T!e organi,ation s!ould !ave a single plan of action to guide managers and or'ers# Su(or$ination of in$i'i$ual intere&t& to the general intere&t5 T!e interests of an" one emplo"ee or group of emplo"ees s!ould not ta'e precedence over t!e interests of t!e organi,ation as a !ole# Re uneration. .or'ers must be paid a fair age for t!eir services# Centrali2ation5 T!is term refers to t!e degree to !ic! subordinates are involved in decision ma'ing# Scalar Chain. T!e line term refers to t!e degree to !ic! subordinates are involved ( decision ma'ing# Or$er. People and materials s!ould be in t!e rig!t place at t!e rig!t time# it!
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Principles of Management MGT503 ,,5 EBuit!. Managers s!ould be 'ind and fair to t!eir subordinates# ,95 Sta(ilit! of tenure of "er&onnel Management s!ould provide orderl" personnel planning and ensure t!at replacements are available to fill vacancies# Initiati'e5 -mplo"ees !o are allo ed to originate and carr" out plans ill e$ert !ig! levels of effort# E&"rit $e cor"& Promoting team spirit ill build !armon" and unit" it!in t!e organi,ation#
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Principles of Management MGT503 AEHAVIORAL THEORIES OF MANAGEMENT Aeha'ioral Vie*"oint%
VU Lesson 3.9
+rgani,ational be!avior >+6A researc! !as contributed muc! of !at e 'no about be!avioral vie s of management, !uman resources management, motivation, leaders!ip, trust, team or', and conflict management# Earl! A$'ocate&% 5our people stand out as earl" advocates of t!e +6 approac!# T!ese include 3obert + en, Fugo Munsterberg, Mar" Par'er 5ollett, and /!ester 6arnard# 0# 3obert + en, a successful Ecottis! businessman, proposed a utopian or'place# 1# Fugo Munsterberg created t!e field of industrial ps"c!olog"Mt!e scientific stud" of individuals at or' to ma$imi,e t!eir productivit" and adjustment# 3# Mar" Par'er 5ollett as a social p!ilosop!er !o t!oug!t t!e managerHs job as to !armoni,e and coordinate group efforts# 8# /!ester 6arnard, president of 4e Oerse" 6ell Telep!one /ompan", sa organi,ations as social s"stems t!at re*uired !uman cooperation# a# Fe believed t!at managersH major roles ere to communicate and stimulate subordinates to !ig! levels of effort# b# Fe also introduced t!e idea t!at managers !ave to e$amine t!e environment and t!en adjust t!e organi,ation to maintain a state of e*uilibrium# Hugo Mun&ter(eg +,DE<0,-,E1 is considered to be t!e fat!er of industrial ps"c!olog" and is regarded b" students of ps"c!olog" as an important figure as 5rederic' Ta"lor is b" students of management# Munsterberg attempted to develop practical applications of ps"c!olog"# Fe argued t!at ps"c!ologists could !elp industr" in t!ree major areas; a# 5inding a"s to identif" individuals best suited to particular jobs# b# (dentif"ing t!e ps"c!ological conditions for optimum efficienc"# c# 5inding a"s to influence individual be!avior to be congruent it! managementHs objectives Mar! #ar4er Follett >0?=?&0<33A broug!t to management t!e perspectives of political science and social or'# E!e identified; a# T!e importance of t!e functioning of groups, not just individuals, in organi,ation# b# T!e principle of po er it! rat!er t!an Po er over in management& emplo"ee relations# c# /onflict resolution t!roug! integration, i#e#, finding a solution to a conflict t!at ould satisf" bot! parties# d# T!e ac!ievement of integrative unit", !ereb" t!e organi,ation operates as a functional !ole, it! t!e various interrelated parts or'ing toget!er effectivel" to ac!ieve organi,ational goals# The Ha*thorne Stu$ie& .it!out *uestion, t!e most important contribution to t!e developing +rgani,ation 6e!avior field came out of t!e Ha*thorne Stu$ie&) a series of studies conducted at t!e .estern -lectric /ompan" .or's in /icero, (llinois# T!ese studies, started in 0<18 and continued t!roug! t!e earl" 0<30s, ere initiall" designed b" .estern -lectric industrial engineers as a scientific management e$periment#
T!e"
anted to e$amine t!e effect of various illumination levels on or'er productivit"#
/ontrol and e$perimental groups ere set up it! t!e e$perimental group being e$posed to various lig!ting intensities, and t!e control group or'ing under a constant intensit"# (f "ou ere one of t!e industrial engineers in c!arge of t!is e$periment, !at ould "ou !ave e$pected to !appen2 T!at individual output in t!e e$perimental group ould be directl" related to t!e intensit" of t!e lig!t2 Eeems perfectl" logical, 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU doesnHt it2 Fo ever, t!e" found t!at as t!e level of lig!t as increased in t!e e$perimental group, output for bot! groups increased# T!en, muc! to t!e surprise of t!e engineers, as t!e lig!t level as decreased t!e productivit" decrease as observed in t!e e$perimental group onl" !en t!e level of lig!t as reduced to t!at of a moonlit nig!t# .!at ould e$plain t!ese un&e$cluded t!at illumination intensit" as not directl" related to group productivit", and t!at somet!ing else must !ave contributed to t!e results# Fo ever, t!e" erenHt able to pinpoint !at t!at somet!ing else as# (n 0<1C, t!e .estern electric engineers as'ed Farvard professor -lton Ma"o and !is associates to join t!e stud" as consultants# T!us began a relations!ip t!at ould last t!roug! 0<31 and encompass numerous e$periments in t!e redesign of jobs, c!anges in or'da" and or' ee' lengt!, introduction of rest periods, and individual versus group age plans#< 5or e$ample, one e$periment as designed to evaluate t!e effect of a group piece or' incentive pa" s"stem on group productivit"# Ha*thorne &tu$ie& reflected t!e scientific management tradition of see'ing greater efficienc" b" improving t!e tools and met!ods of or'Min t!is case, lig!ting# 0# 1# (n t!e first set of studies, no correlation as found bet een c!anges in lig!ting conditions and individual or' performance# (n fact, performance nearl" al a"s ent up it! an" c!angeMbrig!ter or dar'erMin illumination# (n t!e second set of studies, t!e concept of t!e Ha*thorne effect emerged# T!e Fa t!orne effect refers to t!e possibilit" t!at individuals singled out for a stud" ma" improve t!eir performance simpl" because of t!e added attention t!e" receive from t!e researc!ers, rat!er t!an because of an" specific factors being tested in t!e stud"# T!e t!ird set of studies centered on group production norms and individual motivation# %lt!oug! simplistic and met!odologicall" primitive, t!e Fa t!orne studies establis!ed t!e impact t!at social aspects of t!e job >and t!e informal groupA !ave on productivit"# as an attempt to e*uip managers it! t!e social
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5# Hu an Relation& Mo'e ent% T!is movement s'ills t!e" need#
A(raha Ma&lo* +,-/D0,-F/1 developed a t!eor" of oti'ation t!at as based on t!ree assumptions about !uman nature# a# Fuman beings !ave needs t!at are never completel" satisfied# b# Fuman be!avior is aimed at satisf"ing t!e needs t!at are "et unsatisfied at a given point in time# c# 4eeds fit into a some !at predictable !ierarc!" ranging from basic, lo er&level needs to !ig!er&level needs; 0A P!"siological >lo estA 1A Eafet" 3A 6elongingness or social 8A -steem 5A Eelf&actuali,ation >!ig!est and 4+T ac!ieved b" ever"oneA ;ougla& McGregor +,-/E0,-E=1 developed t!e Theor! G an$ Theor! C dic!otom" about t!e assumptions managers ma'e about or'ers and !o t!ese assumptions affect be!avior# a# Theor! G anager& tend to assume t!at or'ers are la,", need to be coerced, !ave little ambition, and are focused on securit" needs# T!ese managers t!en treat t!eir subordinates as if t!ese assumptions ere true#
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Theor! C anager& tend to assume t!at or'ers do not in!erentl" disli'e or', are capable of self&control, !ave t!e capacit" to be creative and innovative, and generall" !ave !ig!er&level needs t!at are often not met on t!e job# T!ese managers t!en treat t!eir subordinates as if t!ese assumptions ere true# .or'ers, li'e all of us, tend to or' up or do n to e$pectations# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU The Aeha'ioral Science A""roach% (t emp!asi,es scientific researc! as t!e basis for developing t!eories about !uman be!avior in organi,ations t!at can be used to develop practical guidelines for managers# 0# T!e emp!asis is upon developing useful tools for managers# :nli'e Ecientific Management from t!e /lassical -ra, t!e findings in be!avioral studies are often some !at difficult to find it! mat!ematical certaint"# T!at does not mean !o ever, t!at t!e scientific approac! s!ould not be attempted nor t!at t!e findings of suc! an approac! are an" less useful# 1# %n e$ample is t!e idea of improving performance b" setting goals t!e individual finds to be attainable "et not too eas"# Contri(ution& of the (eha'ioral 'ie*"oint% 0# Epotlig!t t!e managerial importance of suc! factors as communication, group d"namics, motivation, and leaders# 1# %rticulates practical applications of be!avioral studies# 3# @ra s on t!e findings of a number of disciplines suc! as management, ps"c!olog", sociolog", ant!ropolog", and economics# 8# Fig!lig!ts t!e importance of an organi,ationHs members as active !uman resources rat!er t!an passive tools#
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VU Lesson 4.10
HUANTITATIVE) CONTEM#ORARC AN; EMERGING VIEWS OF MANAGEMENT Huantitati'e A""roach to Manage ent% T!e Buantitati'e a""roach involves t!e use of *uantitative tec!ni*ues to improve decision ma'ing# T!is approac! !as also been labeled operations researc! of management science# (t includes applications of statistics, optimi,ation models, information models, and computer simulations Ho* ;o To$a!>& Manager& u&e the Buantitati'e a""roach3 T!e *uantitative approac! !as contributed directl" to management decision ma'ing in t!e areas of planning and control# 5or instance, !en managers ma'e budgeting, sc!eduling, *ualit" control, and similar decisions, t!e" t"picall" rel" on *uantitative tec!ni*ues# T!e availabilit" of sop!isticated computer soft are programs to aid in developing models, e*uations, and formulas !as made t!e use of *uantitative tec!ni*ues some !at less intimidating for managers, alt!oug! t!e" must still be able to interpret t!e results# T!e *uantitative approac!, alt!oug! important in its o n a", !as not influenced management practice as muc! as t!e ne$t one eHre going to discussorgani,ational be!aviorfor a number of reasons# T!ese include t!e fact t!at man" managers are unfamiliar it! and intimidated b" *uantitative tools, be!avioral problems are more idespread and visible, and it is easier for most students and managers to relate to real, da"&to&da" people problems t!an to t!e more abstract activit" of constructing *uantitative models# Aranche& in the Huantitati'e Manage ent Vie*"oint% T!ere are t!ree main branc!es in t!e Huantitati'e Manage ent Vie*"oint% management science, operations management, and management information s"stems Manage ent &cience +or o"eration& re&earch as it !as been calledA is an approac! aimed at increasing decision effectiveness t!roug! t!e use of sop!isticated mat!ematical models and statistical met!ods# T!is is 4+T a term to be used s"non"mousl" it! eit!er t!e term Ecientific Management described earlier featuring Ta"lor and ot!ers or T!e Ecience of Management, a term t!at usuall" refers broadl", to a deliberate, rational approac! to management issues# O"eration& Manage ent is t!e function or field of e$pertise t!at is primaril" responsible for t!e production and deliver" of an organi,ationHs products and services# Manage ent infor ation &!&te & +MIS1 is t!e name often given to t!e field of management t!at focuses on designing and implementing computer&based information s"stems for use b" management Conte "orar! 'ie*"oint&% T!is sc!ool of t!oug!t or vie point about management includes t!ose major ideas about managing and organi,ations t!at !ave emerged since t!e 0<50s# Eome of t!e ideas, s"stems t!eor" for e$ample, are rooted in e$periences gained during .orld .ar ((# The &!&te & theor! approac! is based on t!e notion t!at organi,ations can be visuali,ed as s"stems of interrelated parts or subs"stems t!at operate as a !ole in pursuit of common goals# T!is ill be discussed in more detail in t!e ne$t session# Contingenc! Theor! is t!e vie t!at appropriate managerial action depends on t!e particular
parameters of eac! situation# T!is approac! is in mar'ed contrast to t!e earliest universal approac! stemming from t!e classical management sc!ool !ic! suggested t!at t!ere as one, and onl" one, best decision for managers to ma'e !ic! applied in all cases and to all organi,ation, big or little, for profit, or not&for&profit, etc# T!e generali,ed corollar" to t!e universal approac! is t!at t!e secret to successful managing as just to 'eep loo'ing until t!at one best solution as found# it all depends, ould be t!e slogan of contingenc" t!eor"# T!e contingenc" approac! applies particularl" ell in suc! areas as environmental factors, strateg", organi,ational design, tec!nolog", and leaders!ip# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU E erging 'ie*&; 4o t!at "ouHve got a good understanding of t!e evolution and past !istor" of management t!eories and practices, !at current concepts and practices are s!aping toda"Hs management !istor" and c!anging t!e a" t!at managers do t!eir jobs2 A5 Glo(ali2ation# +rgani,ational operations no longer stop at geograp!ic borders# Managers in all t"pes and si,es of organi,ations are faced it! t!e opportunities and c!allenges of globali,ation# A5 Entre"reneur&hi" refers to t!e process !ereb" an individual or a group of individuals uses organi,ed efforts and means to pursue opportunities to create value and gro b" fulfilling ants and needs t!roug! innovation and uni*ueness# 0# T!ree important t!emes stand out in t!is definition; a# T!e pursuit of opportunities b# (nnovation c# Gro t! 1# -ntrepreneurs!ip ill continue to be important to societies around t!e orld# C5 0# 1# ;5 Managing in an E0Au&ine&& Worl$5 E0(u&ine&& >electronic businessAMa compre!ensive term describing t!e a" an organi,ation does its or' b" using electronic >(nternet&basedA lin'ages it! 'e" constituencies in order to efficientl" and effectivel" ac!ieve its goals# E0co erce >electronic commerceA is an" form of business e$c!ange or transaction in !ic! t!e parties interact electronicall"# Nee$ for Inno'ation an$ Fle?i(ilit!5
0# T!e constant flo of ne ideas is crucial for an organi,ation to avoid obsolescence or failure# 1# 5le$ibilit" is valuable in a conte$t !ere customers) needs ma" c!ange overnig!t, !ere ne competitors come and go, and !ere emplo"ees and t!eir s'ills are s!ifted as need from project to project# E5 Hualit! Manage ent S!&te &5
0# Total Bualit! anage ent is a p!ilosop!" of management t!at is driven b" customer needs and e$pectations and focuses on continual improvement in or' processes 1# TNM as inspired b" a small group of *ualit" e$perts, of !om .# -d ards @eming as one of t!e c!ief proponents# Fe !as also developed and presented !is *ualit" p!ilosop!" and t!eor" of profound 'no ledge# 3# TNM represents a counterpoint to earlier management t!eorists ere t!e onl" road to increased productivit"# !o believed t!at lo costs
8# T!e objective of TNM is to create an organi,ation committed to continuous improvement# F5 Learning Organi2ation& an$ @no*le$ge Manage ent5 Managers no must deal it! an environment t!at is continuall" c!anging# T!e successful organi,ations of t!e 10st centur" ill be fle$ible, able to learn and respond *uic'l", and be led b" managers !o can effectivel" c!allenge conventional isdom, manage t!e organi,ationHs 'no ledge base, and ma'e needed c!anges# 0# % learning organi2ation is one t!at !as developed t!e capacit" to continuousl" adapt and c!ange# 1# @no*le$ge anage ent involves cultivating a learning culture !ere organi,ational members s"stematicall" gat!er 'no ledge and s!are it it! ot!ers to ac!ieve better performance# G5 Theor! : % Willia Ouchi>& T!eor" P combines positive aspects of %merican and
Oapanese management into a modified approac! aimed at increasing managerial effectiveness !ile remaining compatible it! t!e norms and values of societ" and culture#
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Principles of Management MGT503 SCSTEM>S VIEW OF MANAGEMENT AN; ORGANI:ATION
VU Lesson 4.11
Managing S!&te & %not!er a" to loo' at t!e managerHs job is from t!e perspective of managing s"stems# S!&te %
% &!&te is a set of interrelated and interdependent parts arranged in a manner t!at produces a unified !ole# (tHs a concept ta'en from t!e p!"sical sciences and applied to organi,ations# T!e t o basic t"pes of s"stems are Clo&e$ &!&te & are not influenced b" and do not interact it! t!eir environment# O"en &!&te & d"namicall" interact it! t!eir environment# Toda", !en e call organi,ation s"stems, e mean open s"stems, t!at is, an organi,ation t!at constantl" interacts it! its environment# ,5 The &!&te & theor! approac! is based on t!e notion t!at organi,ations can be visuali,ed as s"stems of interrelated parts or subs"stems t!at operate as a !ole in pursuit of common goals# T!is ill be discussed in more detail in t!e ne$t session# 0# T!e major components of a s"stem are; a5 In"ut&% t!e various !uman, material, financial, e*uipment, and informational resources re*uired to produce goods and services# (5 Tran&for ation "roce&&e&% t!e organi,ationHs managerial and tec!nological abilities t!at are applied to convert inputs into outputs# c5 Out"ut&% t!e products, services, and ot!er outcomes produced b" t!e organi,ation# $5 Fee$(ac4% information about results and organi,ational status relative to its environment# O"en 'er&u& clo&e$ &!&te &5 T!ese are terms indicating t!e relative degree it! !ic! a s"stem interacts it! its environment# .!ile t!ere are ver" fe , if an", completel" open or completel" closed s"stems, e usuall" vie open s"stems as t!ose !aving continual interaction it! its environment# /losed s"stems are t!ose it! little interaction and feedbac' from t!eir environments# T o major c!aracteristics of open s"stems are; a5 (5 Negati'e entro"! is t!e abilit" of open s"stems to bring in ne energ" in t!e form of inputs and feedbac' from t!e environment in order for t!e organi,ation to dela" or to arrest entrop", t!e deca"ing process# S!nerg! is t!e abilit" of t!e !ole to e*ual more t!an t!e sum of its parts# The &!&te & 'ie*"oint suggests t!at managers are li'el" to be more successful if t!e" attempt to operate t!eir units as open s"stems rat!er t!an as closed s"stem#
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The Organization as an Open System

En'iron ent
S!&te In"ut&
3a -mplo"eesH .or'
Tran&for ation
Products and Eervices %ctivities Management %ctivities Tec!nolog" and
Out"ut&
Materials
Fuman 3esources /apital Tec!nolog"
5inancial (nformation 3esults Fuman 3esults (nformation
Fee$(ac4
+perations Met!ods
En'iron ent
An&*er to Te&t Cour&elf on Manage ent Vie*"oint& an$ Theorie&7777 ,5
What are &o e earl! e'i$ence& of anage ent "ractice3 Eome earl" evidences of management practice are t!e -g"ptian p"ramids, t!e Great .all of /!ina, and t!e status of 7enice as a major economic trade center in t!e 0800s# E?"lain *h! $i'i&ion of la(or an$ the In$u&trial Re'olution *ere i "ortant to the &tu$! of anage ent5 @ivision of labor increases productivit" b" increasing eac! or'erHs s'ill and de$terit", saves time t!at is commonl" lost in c!anging tas's, and creates labor&saving inventions and mac!iner"# @uring t!e (ndustrial 3evolution, business o ners ere creating large businesses t!at re*uired formali,ed management practice# What are the four aIor a""roache& to the &tu$! of anage ent3 T!e four major approac!es to t!e stud" of management are scientific, general administrative, *uantitative, and organi,ational be!avior# -ac! is correct and ma'es an important contribution to our overall understanding of management#
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What rele'ance $oe& &cientific anage ent ha'e to current anage ent "ractice3 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU Ecientific management is t!e use of scientific met!ods to define t!e one best a" for a job to be done# (ts relevance to current management practice is t!at managers still use man" of t!e tec!ni*ues developed b" Ta"lor, t!e Gilbret!, and ot!er practitioners# .5
;e&cri(e Fre$eric4 W5 Ta!lor>& contri(ution& to &cientific anage ent3 5rederic' Ta"lor defined four principles of managementMdevelop a science for eac! element of an individualHs or'I scientificall" select, train, teac!, and develop eac! or'erI cooperate it! or'ers to ensure t!at all or' is done in accordance it! t!e principles of scienceI and divide or' and responsibilit" almost e*uall" bet een management and or'ers# E?"lain Fran4 an$ Lillian Gil(reth>& contri(ution& to &cientific anage ent3 5ran' and Lillian Gilbret! studied or' arrangements to eliminate asteful !and and bod" motions# T!e" also e$perimented it! t!e design and use of proper tools and e*uipment for optimi,ing or' performance# ;e&cri(e Fa!ol>& "rinci"le& of anage ent an$ ho* the! co "are *ith Ta!lor>&3 Fenri 5a"olHs principles of management ere division of or', aut!orit", discipline, unit" of command, unit" of direction, subordination of individual interests, remuneration, centrali,ation, scalar c!ain, order, e*uit", stabilit" of tenure of personnel, initiative, and esprit de corps# (n contrast to Ta"lorHs principles, 5a"olHs focused on t!e entire organi,ation and not just t!e individual or'er# What $i$ We(er contri(ution to the general a$ ini&trati'e theorie& of anage ent3 Ma$ .eber described an ideal t"pe of organi,ation called a bureaucrac", c!aracteri,ed b" division of labor, a clearl" defined !ierarc!", detailed rules and regulations, and impersonal relations!ips# 3ules and controls ere to be applied uniforml", avoiding involvement it! individual personalities and preferences of emplo"ees# E?"lain ho* the Buantitati'e a""roach e'ol'e$ an$ ho* it ha& contri(ute$ to the fiel$ of anage ent5 T!e *uantitative approac!, also called operations researc! or management science, is t!e use of *uantitative tec!ni*ues to improve decision ma'ing, and it evolved out of t!e development of mat!ematical and statistical solutions to militar" problems during .orld .ar ((# %fter t!e ar, man" *uantitative tec!ni*ues t!at !ad been used for militar" problems ere applied to t!e business sector# T!e *uantitative approac! !as added anot!er dimension to t!e evolution of management practice and t!in'ing and !as contributed most directl" to management decision ma'ing in planning and control# What i& organi2ational (eha'ior3 +rgani,ational be!avior is t!e field of stud" concerned it! t!e actions or be!avior of people at or'# What *ere &o e of the contri(ution& of the earl! a$'ocate& of OA3 -arl" advocates of t!e +6 approac! ere 3obert + en, !o proposed an ideali,ed or'place !ere or' !ours ould be regulated, c!ild labor outla ed, public education and meals provided, and business involved in communit" projectsI Fugo Munsterberg, !o created t!e field of industrial ps"c!olog", t!e stud" of individuals at or' to ma$imi,e t!eir productivit" and adjustmentI Mar" Par'er 5ollett, !o t!oug!t t!at organi,ations s!ould be
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based on a group et!ic rat!er t!an on individualism to release individual potentialI and /!ester 6arnard, !o sa organi,ations as social s"stems t!at re*uired !uman cooperation# ,95
;e&cri(e the Ha*thorne &tu$ie& an$ their contri(ution to anage ent "ractice5 T!e Fa t!orne studies, conducted at t!e .estern -lectric /ompan" .or's in /icero (llinois, from 0<18 t!roug! t!e earl" 0<30s, e$posed an e$perimental group of or'ers to various lig!ting intensities !ile providing a control group it! constant intensit"# %s t!e level of lig!t as increased in t!e e$perimental group, t!e output of bot! groups increased# T!e series of studies led
1?
Principles of Management MGT503 VU to a ne emp!asis on t!e !uman be!avior factor and !elped c!ange t!e dominant t!eme of t!e time t!at emplo"ees ere not different from an" ot!er mac!ines t!e organi,ation used# ,<5
Ho* i& glo(ali2ation affecting the *a! anager& $o their Io(&3 Management is no longer constrained b" national borders, and managers in organi,ations of all si,es and t"pes around t!e orld are faced it! t!e opportunities and c!allenges of operating in a global mar'et# What i& *or4force $i'er&it!) an$ *hat i "lication& $oe& it ha'e for anager&3 .or'force diversit" e$ists !en or'ers are more !eterogeneous in terms of gender, race, et!nicit", age, and ot!er c!aracteristics t!at reflect t!eir differences# (tHs an important issue because as more omen, minorities, elderl", and immigrants enter t!e job mar'et in t!e first part of t!e 10st centur", monumental c!anges are predicted in t!e or'place# ;i&cu&& the three i "ortant the e& in the $efinition of entre"reneur&hi"3 5irst, is t!e pursuit of opportunities, because entrepreneurs!ip is about pursuing environmental trends and c!anges t!at no one else !as seen or paid attention to# Eecond, is innovation, because entrepreneurs!ip involves c!anging, revolutioni,ing, transforming, and introducing products or services or ne a"s of doing business# T!ird, is gro t!, because entrepreneurs are not content to sta" small or to sta" t!e same in si,e# Ho* i& e0co erce $ifferent fro e0(u&ine&&) an$ *hat are the ain for & of e0 co erce tran&action&3 -&business is more t!an e&commerce, alt!oug! e&business can include e&commerce# -&business is a compre!ensive term describing t!e a" an organi,ation does its or' b" using electronic lin'ages it! its 'e" constituencies# T!e main forms of e&commerce transactions are (u&ine&&0 to0(u&ine&&) (u&ine&&0to0con&u er) con&u er0to0con&u er) an$ go'ern ent0to0(u&ine&&# ;e&cri(e the three categorie& of e0(u&ine&& in'ol'e ent5 T!e t!ree main categories of e&business are; enhance$Musing t!e (nternet to en!ance but not replace traditional a"s of doing businessI ena(le$Musing t!e (nternet to perform its traditional business functions better, but not to sell an"t!ingI totalM !ole e$istence is made possible b" and revolves around t!e (nternet#
,=5
,.5
,E5
,F5
,D5
# ,-5
Wh! &houl$ anager& (e concerne$ a(out inno'ation an$ fle?i(ilit!3 .it!out a constant flo of ne ideas an organi,ation is doomed to obsolescence or failure# %lso, fle$ibilit" is re*uired in a conte$t !ere customers)needs ma" c!ange overnig!t, !ere ne competitors come and go *uic'l", and !ere emplo"ees and t!eir s'ills are s!ifted as needed from project to project What i& THM) an$ ho* i& it affecting anager>& Io(&3 TNM is a p!ilosop!" of management driven b" continual improvement and response to customer, emplo"ee, and supplier needs and e$pectations# (t encompasses emplo"ees and suppliers as ell as t!e people !o purc!ase t!e organi,ationHs goods or services# T!e objective of managers is to create an organi,ation committed to continuous improvement in or' processes#
9/5
Ho* $oe& 4no*le$ge anage ent fit into the conce"t of a learning organi2ation3 % learning organi,ation is one t!at !as developed t!e capacit" to continuousl" learn, adapt, and c!ange# Bno ledge management involves cultivating a learning culture !ere organi,ational members s"stematicall" gat!er 'no ledge and s!are it it! ot!ers in t!e organi,ation in order to ac!ieve better performance# What i& *or4"lace &"iritualit! an$ ho* i& it an i&&ue that
9,5
anager&
u&t $eal *ith3
1<
Principles of Management MGT503 VU Wor4"lace S"iritualit! is a recognition of an inner life t!at nouris!es and is nouris!ed b" meaningful or' t!at ta'es place in t!e conte$t of communit"# .or'ers, and societ" in general, are searc!ing for a deeper understanding of !o t!e" are and !" t!e"Hre !ere on -art!# T!e" ant more t!an just a stead" job and a pa"c!ec'# /urrent researc! studies loo'ing at t!e relations!ip bet een or'place spiritualit" and productivit" !ave s!o n interesting results# .or'place spiritualit" is li'el" to be manifested in !o managers treat emplo"ees and !o emplo"eesH contributions are respected and valued#
30
VU Lesson 4.12 ANALC:ING ORGANI:ATIONAL ENVIRONMENT AN; UN;ERSTAN;ING ORGANI:ATIONAL CULTURE
T!is lecture discusses t!e components and comple$ities of an organi,ationHs culture and t!e e$ternal )internal environment and !o t!ese ma" constrain managers# Managers are also responsible for improving sta'e!older involvement in decisions ma'ing and actions ta'ing# Managers must be a are t!at organi,ational culture and organi,ational environments ill influence bot! t!e a" an organi,ation is managed as ell as its effectiveness# Fo can an understanding of organi,ational culture and t!e e$ternal environment !elp t!e manager2 Let us learn# THE ENVIRONMENT% T!e impact of t!e e$ternal environment on a managerHs actions and be!aviors cannot be overemp!asi,ed# T!ere are forces in t!e environment t!at pla" a major role in s!aping managersH endeavors T!e en'iron ent is defined as outside institutions and forces outside t!e organi,ation t!at potentiall" affect an organi,ationHs performance# T!"e& of En'iron ent% ,1 E?ternal En'iron ent 91 Internal En'iron ent E?ternal En'iron ent JMaIor force& out&i$e the organi&ation *ith "otential to influence &ignificantl! a "ro$uct or &er'ice>& li4el! &ucce&& i& calle$ it& e?ternal en'iron ent5> T!"e& of en'iron ent&% e?ternal
T!e insig!ts derived from s"stems t!eor" !ave !elped to !ig!lig!t t!e importance of a managed interaction bet een an organi,ation and its e$ternal environment# T o major divisions !ave been made in t!e e$ternal environment; ,1 The Mega En'iron ent 91 T!e Tas' -nvironment T!e Mega -nvironment T!e ega0en'iron ent) or general environment as it is sometimes called, is t!at segment of t!e e?ternal en'iron ent t!at reflects t!e broad conditions and trends in t!e societies it!in !ic! an organi,ation operates# MaIor Ele ent& En'iron ent 0# of the Mega
T!e technological ele ent of t!e mega&environment reflects t!e current state of 'no ledge regarding t!e production of products and services# a# Tec!nolog" is a particular state of 'no ledge# (t is not t!ings# % computer, for instance, is an artifact or an e$ample of tec!nolog" and is not tec!nolog" itself#
b# c# d#
3esearc! indicates t!at tec!nolog" tends to evolve t!roug! periods of incremental c!ange punctuated b" tec!nological brea't!roug!s t!at eit!er en!ance or destro" t!e competence of firms in an industr"# 4umerous publications >suc! as 6usiness .ee', 5orbes, etc#A and on& line services >suc! as L-Q(E)4-Q(EA provide information regarding tec!nological and ot!er environmental elements# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU 1# T!e econo ic ele ent of t!e mega&environment encompasses t!e s"stems of producing, distributing, and consuming ealt!# a# (n a ca"itali&t econo !) economic activit" is governed b" mar'et forces and t!e means of production are privatel" o ned b" individuals, eit!er directl" or t!roug! corporations# b# (n a &ociali&t econo !) t!e means of production are o ned b" t!e state and economic activit" is coordinated b" state plan# c# (n practice, countries tend to !ave !"brid economies, incorporating elements of capitalism and socialism# d# +rgani,ations are influenced in an" given economic s"stem b" a variet" of economic conditions over !ic! t!e" !ave little control, suc! as inflation and interest rates# 3# T!e legal0"olitical ele ent of t!e mega&environment includes t!e legal and governmental s"stems it!in !ic! an organi,ation must function# a# +rgani,ations must operate it!in t!e general legal frame or' of t!e countries in !ic! t!e" do business# b# +rgani,ations are subject to an increase in la suits filed b" customers or emplo"ees# c# T!e political issues !ic! affect organi,ations include t!ose !ic! influence t!e e$tent of government regulation# d# T!e &ocio0cultural ele ent of t!e mega&environment includes t!e attitudes, values, norms, beliefs, be!aviors, and associated demograp!ic trends t!at are c!aracteristic of a given geograp!ic area# a# T!e sociocultural element is of particular importance to multinational corporations# b# Eociocultural trends can result in important s!ifts in demand for products# c# T!e international ele ent of t!e mega&environment includes t!e developments in countries outside an organi,ationHs !ome countr" t!at !ave t!e potential impact to t!e organi,ation# (nternational factors far be"ond t!e direct influence of a particular organi,ation can !ave profound effects on its abilit" to operate successfull"# a# 5luctuations of t!e dollar against foreign currencies influence t!e abilit" of an organi,ation to compete in international mar'ets# b# 5ree&trade agreement, suc! as t!e 4%5T%, G%TT can affect an organi,ation eit!er positivel" or negativel"#
8#
5#
The Ta&4 En'iron ent T!e ta&4 en'iron ent is t!at segment of t!e e$ternal environment made up of specific outside elements >usuall" organi,ationsA it! !ic! an organi,ation interfaces in t!e course of conducting its business# T!e tas' environment depends on t!e products and services t!e organi,ation offers and t!e locations !ere it conducts business# T!e organi,ation ma" be more successful in affecting its tas' environment t!an it is its mega&environment# Ele ent& of the Ta&4 En'iron ent% 0# %n organi,ationHs cu&to er& an$ client& are t!ose individuals and organi,ations t!at purc!ase its products and)or services# (t is becoming increasingl" important to sta" in touc! it! customersH needs# 1# %n organi,ationHs co "etitor& are ot!er organi,ations t!at eit!er offers of !ave a !ig! potential of offering rival products or services# a# +rgani,ation needs to 'eep abreast of !o t!eir competitors are and
!at t!e" are doing# 9 /op"rig!t 7irtual :niversit" of Pa'istan
31
Principles of Management MGT503 VU b# .a"s to trac' !at competitors are doing include obtaining information from commercial data bases, specialt" trade publications, ne s clippings from local ne spaper, !elp& anted ads, publis!ed mar'et researc! reports, business reports, trade s!o s, public filings, advertisements, and personal contacts# 3# %n organi,ationHs &u""lier& are t!ose individual organi,ations t!at suppl" t!e resources >suc! as ra materials, products, or servicesA t!e organi,ation needs to conduct its operations# 8# %n organi,ationHs la(or &u""l! consists of t!ose individuals !o are potentiall" emplo"able b" t!e organi,ation# a# +rgani,ation ma" !ave to s!ift t!eir location if labor supplies dr" up in some areas and increase in ot!ers# 5# 7arious go'ern ent agencie& provide services and monitor compliance it! la s and regulations at local >e#g#, consumer affairsA, state or regional >e#g#, !ealt! departmentA, and national >e#g#, /63A levels# =# Organi2ation>& Relation&hi"& *ith Sta4ehol$er&% 0# Eta'e!olders are an" constituencies in t!e organi,ationHs e$ternal environment t!at are affected b", or !ave a vested interest in, t!e organi,ationHs decisions and actions 1# Eta'e!older relations!ip management is important for t o reasons; a# (t can lead to improved predictabilit" of environmental c!anges, more successful innovation, greater degrees of trust, and greater organi,ational fle$ibilit" to reduce t!e impact of c!ange# b# (t is t!e rig!t t!ing to do, because organi,ations are dependent on e$ternal sta'e!olders as sources of inputs and outlets for outputs and s!ould be considered !en ma'ing and implementing decisions# 3# Eta'e!older relations!ips are managed using four steps; a# (dentif" e$ternal sta'e!olders b# @etermine t!e specific interests of eac! sta'e!older group c# @ecide !o critical t!ese interests are to t!e organi,ation d# @etermine !at specific approac! managers s!ould use to manage eac! relations!ip# THE ORGANI:ATION>S CULTURE% Oust as individuals !ave a personalit", so, too, do organi,ations# .e refer to an organi,ationHs personalit" as its culture# Organi2ational culture is a s"stem of s!ared meaning and beliefs it!in an organi,ation t!at determines, in large degree, !o emplo"ees act# T!is definition implies several t!ings# 0# /ulture is a perception t!at e$ists in t!e organi,ation, not in t!e individual# 1# +rgani,ational culture is a descriptive term# (t describes rat!er t!an evaluates# 3# Eeven dimensions of an organi,ationHs culture !ave been proposed; a# (nnovation and ris' ta'ing >t!e degree to !ic! emplo"ees are encouraged to be innovative and ta'e ris'sA b# %ttention to detail >t!e degree to !ic! emplo"ees are e$pected to e$!ibit precision, anal"sis, and attention to detailA c# +utcome orientation >t!e degree to !ic! managers focus on results or outcomes rat!er t!an on t!e tec!ni*ues and processes used to ac!ieve t!ose outcomesA d# People orientation >t!e degree to !ic! management decisions ta'e into consideration t!e effect on people it!in t!e organi,ationA e# Team orientation >t!e degree to !ic! or' activities are organi,ed around teams rat!er t!an individualsA f# %ggressiveness >t!e degree to !ic! people are aggressive and competitive rat!er t!an eas"going and cooperativeA
g# in
Etabilit" >t!e degree to contrast to gro t!A
!ic! organi,ational activities emp!asi,e maintaining t!e status *uo
33
Principles of Management MGT503 VU -mplo"ees learn an organi,ationHs culture in different a"s# 0# +rgani,ational stories are one a" t!at emplo"ees learn t!e culture# T!ese stories t"picall" involve a narrative of significant events or people# 1# 3ituals are repetitive se*uences of activities t!at e$press and reinforce t!e 'e" values of t!e organi,ation, !at goals are most important, !ic! people are important#
38
Principles of Management MGT503 9,ST CENTURC MANAGEMENT TREN;S
VU Lesson 5.13
.!ere are e toda"2 .!at current management concepts and practices are s!aping tomorro Hs !istor"2 T!is session establis!es first a frame or' for understanding social responsibilit" and managerial et!ics# T!en, in t!is session, eHll attempt to ans er t!ose above stated *uestions b" introducing several trends and issues t!at e believe are c!anging t!e a" managers do t!eir jobs; globali,ation, entrepreneurs!ip, managing in an e&business orld# Organi2ational &ocial Re&"on&i(ilit! WHAT IS SOCIAL RES#ONSIAILITC3 6efore t!e 0<=0s, fe people *uestioned t!e role of business organi,ations in social responsibilit"# Fo ever, times !ave c!anged# 4o itHs important to get an understanding of what social responsibilit" is# %# T!ere are t o opposing vie s of !at social responsibilit" is# 0# T!e cla&&ical 'ie* is t!e vie t!at managementHs onl" social responsibilit" is to ma$imi,e profits# a# Milton 5riedman is t!e most outspo'en advocate of t!is vie # b# Fe argues t!at managersH primar" responsibilit" is to operate t!e business in t!e best interests of t!e stoc'!oldersMt!e true o ners of t!e organi,ation# 1# T!e &ocioecono ic 'ie* is t!e vie t!at managementHs social responsibilit" goes ell be"ond t!e ma'ing of profits to include protecting and improving societ"Hs elfare# a# T!e argument be!ind t!is vie is t!at corporations are not independent entities responsible onl" to stoc'!olders# b# %lso, modern organi,ations are no longer just economic institutions# 6# T!ere are 00 major arguments for social responsibilit", and t!e" include t!e follo ing; a# Public e$pectations b# Long&run profits c# -t!ical obligation d# Public image e# 6etter environment f# @iscouragement of furt!er government regulation g# 6alance of responsibilit" and po er !# Etoc'!older interests i# Possession of resources j# Euperiorit" of prevention over cures /# T!ere are si$ major arguments against social responsibilit"# T!ese include; a# 7iolation of profit ma$imi,ation b# @ilution of purpose c# /osts d# Too muc! po er e# Lac' of s'ills f# Lac' of accountabilit" 0# Social re&"on&i(ilit! is an obligation, be"ond t!at re*uired b" t!e la and economics, for a firm to pursue long&term goals t!at are good for societ"# 1# Social o(ligation is t!e obligation of a business to meet its economic and legal responsibilities# 3# Social re&"on&i'ene&& is t!e capacit" of a firm to adapt to c!anging societal conditions#
35
Principles of Management MGT503 SOCIAL RES#ONSIAILITC AN; ECONOMIC #ERFORMANCE5
VU
T!e *uestion of !et!er sociall" responsible activities lo er a compan"Hs economic performance !as been addressed in numerous studies# %# T!e majorit" of studies found a positive relations!ip bet een corporate social involvement and economic performance, but some caution is necessar" because of met!odological *uestions associated it! tr"ing to measure social responsibilit" and economic performance#
MANAGERIAL ETHICS5 Ethic& refers to t!e rules and principles t!at define rig!t and et!ical dimensions to managerial decisions and actions# rong conduct# T!ere are
0# 1#
3# 8# on
5our 7ie s of -t!ics# T!e utilitarian 'ie* of ethic& states t!at et!ical decisions are made solel" on t!e basis of t!eir outcomes or conse*uences# T!e right& 'ie* of ethic& sa"s t!at et!ical decisions are concerned it! respecting and protecting individual liberties and privileges suc! as t!e rig!ts of privac", freedom of conscience, free speec!, life and safet", and due process# T!e theor! of Iu&tice 'ie* of ethic& states t!at decision ma'ers see' to impose and enforce rules fairl" and impartiall"# 5inall", t!e integrati'e &ocial contract& theor! proposes t!at et!ical decisions s!ould be based empirical > !at isA and normative > !at s!ould beA factors# T!is vie is based on t!e integration of t o contractsMt!e general social contract and a more specific contract among members of a specific communit" t!at mig!t be affected b" a decision#
To*ar$ I "ro'ing Ethical Aeha'ior .!at can be done to improve et!ical be!avior2 T!ere are a number of t!ings organi,ations can do to cultivate et!ical be!avior among members# -ig!t suggestions ill be e$plored# 0# T!e selection process for bringing ne emplo"ees into organi,ations s!ould be vie ed as an opportunit" to learn about an individualHs level of moral development, personal values, ego strengt!, and locus of control# 1# % co$e of ethic& is a formal statement of an organi,ationHs primar" values and t!e et!ical rules it e$pects emplo"ees to follo # %lso, decision rules can be developed to guide managers in !andling et!ical dilemmas in decision ma'ing# Top managementHs leaders!ip and commitment to et!ical be!avior is e$tremel" important because itHs t!e top managers !o set t!e cultural tone# 8# -mplo"eesH job goals s!ould be tangible and realistic, because !en goals are clear and realistic, t!e" reduce ambiguit" and motivate rat!er t!an punis!# Oob goals are usuall" a 'e" issue in performance appraisal# 5# (f an organi,ation ants it emplo"ees to up!old !ig! et!ical standards, it must include t!is dimension in its appraisal process# Performance appraisals s!ould be compre!ensive and not just focus on economic outcomes# =# -t!ics training s!ould be used to !elp teac! et!ical problem solving and to present simulations of et!ical situations t!at mig!t arise# (f it does not!ing else, et!ics training s!ould increase a areness of et!ical issues C# (ndependent social audits evaluate decisions and management practices in terms of t!e organi,ationHs code of et!ics and can be used to deter unet!ical be!avior# ?# 5inall", organi,ations can provide formal protective mec!anisms so t!at emplo"ees it!
et!ical dilemmas can do somet!ing about t!em it!out fear of reprisal#
3=
Principles of Management MGT503 Entre"reneur&hi"
VU
Practicall" ever" !ere "ou turn t!ese da"s "ouHll read or !ear about entrepreneurs# (f "ou pic' up a current ne spaper or general ne s maga,ine or log on to one of t!e (nternetHs ne s sites, c!ances are "ouHll find at least one stor" >and probabl" man" moreA about an entrepreneur or an entrepreneurial business# -ntrepreneurs!ip is a popular topicG 6ut !at e$actl" is it2 Entre"reneur&hi" is t!e process !ereb" an individual or a group of individuals uses organi,ed effort and means to pursue opportunities to create value and gro b" fulfilling ants and needs t!roug! innovation and uni*ueness, no matter !at resources are currentl" controlled# (t involves t!e discover" of opportunities and t!e resources to e$ploit t!em# T!ree important t!emes stic' out in t!is definition of entrepreneurs!ip# 5irst is t!e pursuit of opportunities# -ntrepreneurs!ip is about pursuing environmental trends and c!anges t!at no one else !as seen or paid attention to# 5or e$ample, Oeff 6e,os, founder of %ma,on#com, as a successful programmer at an investment firm on .all Etreet in t!e mid&0<<0s# Fo ever, statistics on t!e e$plosive gro t! in t!e use of t!e (nternet and .orld .ide .eb >at t!at time, it as gro ing about 1,300 percent a mont!A 'ept nagging at !im# Fe decided to *uit !is job and pursue !at !e felt ere going to be enormous retailing opportunities on t!e (nternet# %nd t!e rest, as t!e" sa", is !istor"# Toda", %ma,on sells boo's, music, !ome improvement products, cameras, cars, furniture, je elr", and numerous ot!er items from its popular .eb site# T!e second important t!eme in entrepreneurs!ip is innovation# -ntrepreneurs!ip involves c!anging, revolutioni,ing, transforming, and introducing ne approac!est!at is, ne products or services or ne a"s of doing business# T!e final important t!eme in entrepreneurs!ip is gro t!# -ntrepreneurs pursue gro t!# T!e" are not content to sta" small or to sta" t!e same in si,e# -ntrepreneurs ant t!eir business to gro and or' ver" !ard to pursue gro t! as t!e" continuall" loo' for trends and continue to innovate ne products and ne approac!es# -ntrepreneurs!ip ill continue to be important to societies around t!e orld# 5or&profit and even not& for& profit organi,ations ill need to be entrepreneurialKt!at is, pursuing opportunities, innovations, and gro t!if t!e" ant to be successful# .e t!in' t!at an understanding of entrepreneurs!ip is so important t!at at t!e end of eac! major section in t!is boo's eHve included a special entrepreneurs!ip module t!at loo's at t!e topics presented in t!at section from t!e perspective of entrepreneurs!ip# Managing in An E0Au&ine&& Worl$ .!at a difference t!ree "ears ma'esG T!e last time e revised t!is boo', t!e (nternet and .orld .ide .eb ere still a novelt" to most managers and organi,ations# -&mail as a form of communication as gaining in popularit", and occasionall" "ou sa .eb addresses in compan" advertisements# T!ose da"s are long, goneG 4o , ever" !ere "ou loo', organi,ations >small to large, all t"pes, global and domestic, and in all industriesA are becoming e&businesses# Toda"Hs managers must manage in an e&business orldG (n fact, as a student, "our learning ma" increasingl" be ta'ing place in an electronic environment# .!at do e 'no about t!is e& business orld2 E0(u&ine&& +electronic (u&ine&&1 is a compre!ensive term describing t!e a" an organi,ation does its or' b" using electronic >(nternet&basedA lin'ages it! its 'e" constituencies >emplo"ees, managers, customers, suppliers, and partnersA in order to efficientl" and effectivel" ac!ieve its goals# (tHs more t!an e& commerce, alt!oug! e&business can include e&commerce# E0co erce +electronic co erce1 is an" form of business e$c!ange or transaction in !ic! t!e parties interact electronicall"#= 5irms suc! as @ell >computersA, 7arsit" boo's >te$tboo'sA, and P/ 5lo ers and Gifts >flo ers and ot!er giftsA are engaged in e&commerce because t!e" sell products over t!e (nternet# %lt!oug! e&commerce applications ill continue to gro in volume, t!e" are onl" one part of an e& business#
3C
Principles of Management MGT503 VU 4ot ever" organi,ation is or needs to be a total e&business# T!ere are t!ree categories of e& business involvement# T!e first t"pe is !at eHre going to call an e&business en!anced organi,ation, a traditional organi,ation t!at sets up e&business capabilities, usuall" e&commerce, !ile maintaining its traditional structure# Man" 5ortune 500 t"pe organi,ations are evolving into e&business using t!is approac!# T!e" use t!e (nternet to en!ance >not to replaceA t!eir traditional a"s of doing business# 5or instance, Eears, a traditional bric's&and&mortar retailer it! t!ousands of p!"sical stores orld ide started an (nternet division !ose goal is to ma'e Eears t!e definitive online source for t!e !ome# %lt!oug! Eears (nternet division, Eears#com, represents a radical departure for an organi,ation founded in 0??= as a catalog&sales compan", itHs intended to e$pand, not replace, t!e compan"Hs main source of revenue# Managing in an e& orld, !et!er as an e&business en!anced, e&business enabled, or total e& business organi,ation re*uires ne insig!ts and perspectives# To !elp "ou ac*uire t!ese, eHve included Managing in an -&6usiness .orld bo$es in a number of c!apters# Glo(ali2ation Management is no longer constrained b" national borders# 6M., a German firm, builds cars ( sout! /arolina# Mc@onaldHs, a :#E# firm, sells !amburgers in /!ina# To"ota, a Oapanese firm, ma'es cars in Bentuc'"# %ustraliaHs leading real estate compan", Lend Lease /orporation, built t!e 6lue ater s!opping comple$ in Bent, -ngland, and !as contracts it! /oca&/ola to build all t!e soft0drin' ma'erHs bottling plants in Eout!east %sia# E iss compan" %66 Ltd# !as constructed po er generating plants in Mala"sia, Eout! Borea, /!ina, and (ndonesia# T!e orld !as definitel" become a global villageG Managers in organi,ations of all si,es and t"pes around t!e and c!allenges of operating in a global mar'et# orld are faced it! t!e opportunities
3?
Principles of Management MGT503 UN;ERSTAN;ING GLOAAL ENVIRONMENT WTO AN; SAARC
VU Lesson 5.14
UN;ERSTAN;ING THE GLOAAL ENVIRONMENT Eeveral significant forces are res!aping t!e global environment t!at managers face# T o important features of t!e global environment are regional trading alliances and t!e .orld Trade +rgani,ation# %# 3egional Trading %lliances# 3egional trading alliances are res!aping global competition# (tHs no longer countr" versus countr", but region against region# 0# T!e Euro"ean Union +EU1 is a union of 05 +15 state members are according to @ecember, 10081 -uropean nations created to eliminate national barriers to travel emplo"ment, investment, and trade# a# T!e primar" motivation for t!e creation of t!e -: >in 5ebruar" 0<<1A as to allo t!ese nations to reassert t!eir position against t!e industrial strengt! of t!e :nited Etates and Oapan# b# T!e -: too' an enormous step to ards full unification in 0<<< !en 00 of t!e 05 countries became part of t!e -M:Mt!e economic and monetar" union, t!e formal name for t!e s"stem !ere participating countries s!are t!e same currenc", t!e euro# c# Ei$ ot!er countries >Tur'e", 3omania, Elova'ia, 6ulgaria, Latvia, Lit!uania, and MaltaA are considering starting members!ip negotiations# 1# T!e North A erican Free Tra$e Agree ent +NAFTA1 is an agreement among t!e Me$ican, /anadian, and :#E# governments in !ic! all barriers to free trade ill eventuall" be eliminated# a# 4%5T% ent into effect on Oanuar" 0, 0<<8# b# T!e signing of 4%5T% !ad bot! critics and c!ampions# c# -liminating t!e barriers to free trade >tariffs, import licensing re*uirements, customs user feesA !as resulted in a strengt!ening of t!e economic po er of all t!ree countries# d# /olombia, Me$ico, and 7ene,uela signed an economic pact eliminating import duties and tariffs in 0<<8# e# %n additional 3= countries in t!e /aribbean region, Eout! %merica, and /entral %merica are negotiating a 5ree Trade %rea of t!e %mericas >5T%%A trade agreement# f# %lso in e$istence is anot!er free&trade bloc' 'no n as t!e Eout!ern /one /ommon Mar'et M Mercosur# 3# T!e A&&ociation of Southea&t A&ian Nation& +ASEAN1 is a trading alliance of 00 %sian nations# a# (n t!e future, t!e %sian region promises to be one of t!e fastest&gro ing economic regions of t!e orld# b# %not!er significant !istorical and economic event in t!is region as t!e return of Fong Bong from 6ritis! rule to /!inese rule on Oul" 0, 0<<C# 8# T!e South A&ian Alliance for Regional Coo"eration (o$! i5e5 SAARC A .orld Trade +rgani,ation >.T+A is an international bod" of !ic! more t!an 000 countries are members# Eeveral trade treaties !ave been agreed and or'ed out so far for regulation of orld trade# (t is a bod" !ic! !elps in promoting global, regional and trade it! most favored nation states# Te&t !our an&*er&7 ,5
Ho* $oe& a glo(al econo ! create (oth o""ortunitie& an$ challenge& for anager&3 T!e global econom" creates opportunities because, it! t!e entire orld as a mar'etplace and national borders becoming irrelevant, t!e potential for organi,ations to gro and e$pand
increases dramaticall"# (t can create c!allenges in t!at ne competitors can suddenl" appear an"time, an" !ere, and managers !o donHt respond *uic'l" to c!anges are li'el" to find t!eir organi,ationsH survival in doubt# 95 ;e&cri(e the four aIor regional tra$ing alliance& inclu$ing *hat it i&) *h! it *a& for e$) an$ *hat challenge& it i& facing5 T!e -uropean :nion >-:A united 6elgium, @enmar', 5rance, Greece, (reland, (tal", Lu$embourg, t!e 4et!erlands, Portugal, Epain, t!e :nited Bingdom, German", %ustria, 5inland, and E eden in 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU a single mar'et it! no national barriers to travel, emplo"ment, investment, and trade# T!e -: as formed to allo its 05 member nations to reassert t!eir position against t!e industrial strengt! of t!e :nited Etates and Oapan# (ts ultimate goal, to !ave common customs duties and unified industrial and commercial policies, as ell as a single currenc" and regional central ban', faces problems particularl" over t!e establis!ment of a single currenc"# T!e 4ort! %merican 5ree Trade %greement >4%5T%A united Me$ico, /anada, and t!e :nited Etates in dropping all barriers to free trade suc! as tariffs, import licensing re*uirements, and customs user fees# (t as formed to provide suc! long&term benefits as job creation, mar'et development, and an increased standard of living for all t!ree countries# Etudies !ave reported bot! positive and negative effects on emplo"ment to date# (t faces continued opposition from labor advocates and environmentalists and competition from ot!er regional trade alliances and trading blocs# T!e %ssociation of Eout!east %sian 4ations >%E-%4A includes 6runei, (ndonesia, Mala"sia, t!e P!ilippines, Eingapore, T!ailand, 7ietnam, 6urma, /ambodia, and Laos in a trading entit"# %not!er significant development in %sia as t!e return of Fong Bong from 6ritis! 3ule to /!inese rule in Oul" 0<<C # Eout! %sian %lliance for 3egional /ooperation >E%%3/A is a bod" comprising of Pa'istan, (ndia, 6anglades!, Eri Lan'a, and 4epal# (t is a trading as ell as collaborative entit" for dialogue on concerns of mutual interest# <5 What are the legal0"olitical an$ econo ic factor& that anager& nee$ to (e a*are of in anaging glo(all!3 T!e legal&political environment consists of legal&political s"stems and legal&political procedures# Managers must understand t!e legal&political environment in a foreign countr" in order to un& derstand t!e constraints under !ic! t!e" operate and t!e opportunities t!at e$ist# T!e primar" economic factors t!at managers must be a are of in global management are fluctuating currenc" e$c!ange rates, inflation rates, and diverse ta$ policies# =5
Co "are an$ contra&t national culture an$ organi2ational culture5 Li'e organi,ational culture, national culture is s!ared b" all or most in!abitants of a countr" and s!apes t!eir be!avior and t!e a" t!e" see t!e orld# +rgani,ational and national cultures differ in t!at national culture !as a greater effect on emplo"ees t!an does organi,ational culture# ;e&cri(e Hof&te$e>& four characteri&tic& of national culture5 Geert Fofstede found t!at national cultures differed on four dimensions; >aA individualism vs# collectivism, !ic! describes !o itHs believed is responsible for caring for peopleMt!e individual or t!e groupI >bA po er distance, or t!e e$tent to !ic! a societ" accepts t!e fact t!at po er is distributed une*uall"I >cA uncertaint" avoidance, or t!e degree to !ic! people are tolerant of be!avior and opinions t!at differ from t!eir o nI and >dA *uantit" of life >assertiveness and t!e ac*uisition of mone" and material goodsA vs# *ualit" of life >importance of relations!ips and concern for t!e elfare of ot!ersA# Ho* can an un$er&tan$ing of Hof&te$e>& four $i en&ion& hel" anager& (e ore effecti'e in anaging in a glo(al ar4et"lace3 :nderstanding t!ese four dimensions !elps managers be more effective in managing in t!e global mar'etplace b" identif"ing t!ose countries t!at are most li'e and least li'e t!e :nited Etates,
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!ere :#E# managers ould be li'el" to fit best, and !ere t!e" adjustment problems# Let us no learn t!e first management function in P+L/% i#e# Planning# #lanningL Wh! an$ *hat 3 Planning is one of t!e four functions of management#
ould !ave t!e biggest
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Principles of Management MGT503 WHC ;O MANAGERS #LAN3 Purposes of Planning# Planning is important and serves man" significant purposes# 0# Planning gives direction to t!e organi,ation# 1# Planning reduces t!e impact of c!ange# 3# Planning establis!es a coordinated effort# 8# Planning reduces uncertaint"# 5# Planning reduces overlapping and asteful activities# =# Planning establis!es objectives or standards t!at are used in controlling# WHAT IS #LANNING3
VU
#lanning involves defining t!e organi,ationHs goals, establis!ing an overall strateg" for ac!ieving t!ese goals, and developing a compre!ensive set of plans to integrate and coordinate organi,ational or'# Planning is in fact t!e advance decision ma'ing b" managers# Beeping in mind t!at decision ma'ing and decision ta'ing, ma" it be for present or for future is al a"s re*uired and is ver" muc! a managerial job# Let us first stud" t!e nature process of decision ma'ing and its various models and t"pes#
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Principles of Management MGT503 ;ECISION MA@ING AN; ;ECISION TA@ING
VU Lesson 5.15
Intelligence co "uter &oft*are i& hel"ing anager& an$ other $eci&ion a4er& to (e ore effecti'e an$ efficient5 Se'eral $i'er&e in$u&trie& &uch a& energ!) health care) tran&"ortation) an$ teleco unication& are rel!ing on a""lie$ intelligence &oft*are to hel" a4e $eci&ion& (! co "uter& that *ere "re'iou&l! left to hu an&5 Can an! thing e'er re"lace the $eci&ion0 a4ing "roce&& utili2e$ (! hu an&3 In thi& &e&&ion ) *e>ll loo4 at the $eci&ion a4ing "roce&& an$ &ee that there i& nothing that *ill e'er re"lace the anager>& nee$ to a4e $eci&ion&5 Ma4ing goo$ $eci&ion& i& &o ething that e'er! anager &tri'e& to $o (ecau&e the o'erall Bualit! of anagerial $eci&ion& ha& a aIor influence on organi2ational &ucce&& or failure5 @ecision ma'ing is part of all four managerial functions# (n performing t!ese functions, managers are often called decision ma'ers# THE ;ECISION0MA@ING #ROCESS% % $eci&ion is a c!oice made from t o or more alternatives# T!e $eci&ion0 a4ing "roce&& is defined as a set of different steps t!at begins it! identif"ing a problem and decision criteria and allocating eig!ts to t!ose criteriaI moves to developing, anal",ing, and selecting an alternative t!at can resolve t!e problemI implements t!e alternativeI and concludes it! evaluating t!e decisionHs effectiveness# Models of decision ma'ing can be eit!er descriptive or normative# 0# 1# ;e&cri"ti'e $eci&ion0 a4ing o$el& attempt to prescribe !o managers actuall" do ma'e decisions# Nor ati'e $eci&ion0 a4ing o$el& attempt to prescribe !o managers s!ould process# a# 5ollo ing t!e prescription s!ould lead to a more effective decision& ma'ing process# b# T!e models usuall" incorporate four steps#
Ste"& in an effecti'e $eci&ion0 a4ing "roce&& %# T!e first step is to identif" the organi2ational "ro(le ) i#e#, discrepancies bet een a current state or condition and !at is desired# 0# T!e scanning state involves monitoring t!e or' situation for c!anging circumstances t!at ma" signal t!e emergence of a problem# 1# T!e categori,ation stage entails attempting to understand and verif" signs t!at t!ere is some t"pe of discrepanc" bet een a current state and !at is desired# 3# T!e diagnosis stage involves gat!ering additional information and specif"ing bot! t!e nature and t!e causes of t!e problem# The generation of alternati'e &olution& step is facilitated b" using t!e four principles associated it! brainstorming# 0# @onHt critici,e ideas !ile generating possible solutions 1# 5ree !eel, i#e#, offer even seemingl" ild and outrageous ideas in an effort to trigger more usable ideas from ot!ers# 3# +ffer as man" ideas as possible to increase t!e probabilit" of coming up it! an effective solution# 8# /ombine and improve on ideas t!at !ave been offered# The choice of an alternati'e step comes onl" after t!e alternatives are evaluated s"stematicall" according to si$ general criteria; 0# 5easibilit" is t!e e$tent to !ic! an alternative can be accomplis!ed it!in related organi,ational constraints, suc! as time, budgets, tec!nolog", and policies#
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Nualit" is t!e e$tend to !ic! an alternative effectivel" solves t!e problem under consideration# %cceptabilit" is t!e degree to !ic! t!e decision ma'ers and ot!ers !o ill affected b" t!e implementation of t!e alternative are illing to support it# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU 8# /osts are t!e resource levels re*uired and t!e e$tent to !ic! t!e alternative is li'el" to !ave undesirable side effects# 5# 3eversibilit" is t!e e$tent to !ic! t!e alternative can be reversed, if at all# =# T!e et!ics criterion refers to t!e e$tent to !ic! an alternative is compatible it! t!e social responsibilities of t!e organi,ation and it! et!ical standards# @# 5inall", the i "le enting an$ onitoring t!e c!osen solution step must be planned to avoid failure of t!e entire effort# 0# (mplementation re*uires careful planning# a# T!e amount of planning depends upon !et!er t!e projected c!anges are minor or major# b# (rreversible c!anges re*uire a great deal of planning# 1# (mplementation re*uires sensitivit" to t!ose involved in or affected b" t!e implementation# a# %ffected individuals are more li'el" to support a decision !en t!e" are able to participate in its implementation# b# (f Participation is not feasible, individuals s!ould be 'ept informed of t!e c!anges# 3# Monitoring is necessar" to ensure t!at t!ings are progressing as planned and t!at t!e problem t!at triggered t!e planning process !as been resolved# ;eci&ion Ma4ing Situation% @ecision&ma'ing situations differ according to t!e t"pes of problems t!at must be !andled# Certaint! is a situation in !ic! a manager can ma'e accurate decisions because t!e outcome of ever" alternative is 'no n# Fo ever, t!is isnHt c!aracteristic of most managerial decisions# Uncertaint! is a condition in !ic! t!e decision ma'er c!ooses a course of action it!out complete 'no ledge of t!e conse*uences t!at ill follo implementation# Ri&4 is t!e possibilit" t!at a c!osen action could lead to losses rat!er t!an t!e intended results# a5 :ncertaint" is seen as t!e reason !" situation is ris'"# (5 % rapidl" c!anging environment is a major cause of uncertaint"#
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Principles of Management MGT503 Manager& a& $eci&ion a4er&% RATIONAL ;ECISION MA@ING
VU Lesson 6.16
%lt!oug! e 'no about t!e decision&ma'ing process, e still donHt 'no muc! about t!e manager as a decision ma'er# (n t!is session, eHll loo' at !o decisions are made, t!e t"pes of problems and decisions managers face, t!e conditions under !ic! managers ma'e decisions, and decision&ma'ing st"les# The nature of anagerial $eci&ion a4ing% %# ;eci&ion a4ing is t!e process t!roug! !ic! managers identif" organi,ational problems and attempt to resolve t!em# @ecision ma'ers face t!ree t"pes of problems# 0# % cri&i& "ro(le is a serious difficult" re*uiring immediate action# 1# % non0cri&i& problem is an issue t!at re*uires resolution, but does not simultaneousl" !ave t!e importance and immediac" c!aracteristics of crises# 3# %n o""ortunit! "ro(le is a situation t!at offers a strong potential for significant organi,ational gain if appropriate actions are ta'en# a# +pportunities involve ideas t!at could be sued, rat!er t!an difficulties t!at must be resolved# b# 4on&innovative managers tend to focus on problems rat!er t!an upon opportunities# Mo$el& of ;eci&ion Ma4ing% Rational Mo$el% %ccording to t!e rational o$el of decision ma'ing, managers engage in completel" rational decision processes, ultimatel" ma'e optimal decisions, and possess and understand all information relevant to t!eir decisions at t!e time t!e" ma'e t!em >including all possible alternatives and all potential outcomes and ramificationsA# 3ational Model Etep b" Etep; @efining Problem b" gat!ering relevant information; Etep 0 is identifying a problem. % "ro(le is defined as a discrepanc" bet een an e$isting and a desired state of affairs# Eome cautions about problem identification include t!e follo ing; 0# Ma'e sure itHs a problem and not just a s"mptom of a problem# 1# Problem identification is subjective# 3# 6efore a problem can be determined, a manager must be a are of an" discrepancies# 8# @iscrepancies can be found b" comparing current results it! some standard# 5# Pressure must be e$erted on t!e manager to correct t!e discrepanc"# =# Managers arenHt li'el" to c!aracteri,e some discrepanc" as a problem if t!e" perceive t!at t!e" donHt !ave t!e aut!orit", mone", information, or ot!er resources needed to act on it# Etep 1 is identif"ing t!e decision criteria# ;eci&ion criteria are criteria t!at define !at is relevant and important in ma'ing a decision# Etep 3 is allocating eig!ts to t!e criteria# T!e criteria identified in Etep 1 of t!e decision&ma'ing process arenHt all e*uall" important, so t!e decision ma'er must eig!t t!e items in order to give t!em correct priorit" in t!e decision# Etep 8 involves developing alternatives# T!e decision ma'er no needs to identif" viable alternatives for resolving t!e problem#
Etep 5 is anal",ing alternatives# -ac! of t!e alternatives must no be criticall" anal",ed# -ac! alternative is evaluated b" appraising it against t!e criteria# Etep = involves selecting an alternative# T!e act of selecting t!e best alternative from among t!ose identified and assessed is critical# (f criteria eig!ts !ave been used, t!e decision ma'er simpl" selects t!e alternative it! t!e !ig!est score from Etep 5# Etep C is c!oosing a course of action and implementing t!e alternative# T!e c!osen alternative must be implemented# (mplementation is conve"ing a decision to t!ose affected b" it and getting t!eir commitment to it# Etep ? involves evaluating t!e decision effectiveness# T!is last step in t!e decision&ma'ing process assesses t!e result of t!e decision to see !et!er or not t!e problem !as been resolved#
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Principles of Management MGT503 NATURE AN; TC#ES OF MANAGERIAL ;ECISIONS Nature of Managerial ;eci&ion0 a4ing%
VU Lesson 6.17
T!e situations in !ic! managers !ave to act differ according to t!e t"pes of problems t!at must be !andled# #rogra e$ $eci&ion& are t!ose made in routine, repetitive, ell&structured situations t!roug! t!e use of predetermined decision rules# Man" programmed decisions are derived from establis!ed practices and procedures or !abit# /omputers are an ideal tool for dealing it! several 'inds of comple$ programmed decisions# Most of t!e decisions made b" first&line managers and man" b" middle managers are Programmed decisions# Non0"rogra e$ $eci&ion& are t!ose for !ic! predetermined decision rules are impractical because t!e situations are novel and)or ill&structured# T!"e& of #ro(le & an$ ;eci&ion&% Managers ill be faced it! different t"pes of problems and ill use different t"pes of decisions# 0# Well0&tructure$ "ro(le & are straig!tfor ard, familiar, and easil" defined# (n !andling t!is situation, a manager can use a "rogra e$ $eci&ion) !ic! is a repetitive decision t!at can be !andled b" a routine approac!# T!ere are t!ree possible programmed decisions# a# % "roce$ure is a series of interrelated se*uential steps t!at can be used to respond to a structured problem# b# % rule is an e$plicit statement t!at tells managers !at t!e" oug!t or oug!t not to do# c# % "olic! is a guide t!at establis!es parameters for ma'ing decisions rat!er t!an specificall" stating !at s!ould or s!ould not be done 1# #oorl! &tructure$ "ro(le & are ne or unusual problems in !ic! information is ambiguous or incomplete# T!ese problems are best !andled b" a non0"rogra e$ $eci&ion t!at is a uni*ue decision t!at re*uires a custom&made solution#
General Organi2ational Situation&% a# %t t!e !ig!er levels of t!e organi,ation, managers are dealing it! poorl" structured problems and using non&programmed decisions# (5 %t lo er levels, managers are dealing it! ell&structured problems b" using programmed decisions# Eince managers can ma'e decisions on t!e basis of rationalit", bounded rationalit", or intuition, let us tr" to understand t!em one b" one; 0# %ssumptions of 3ationalit"# Managerial decision ma'ing is assumed to be rationalI t!at is, c!oices t!at is consistent and value ma$imi,ing it!in specified constraints# T!e assumptions of rationalit" are summari,ed belo # a# T!ese assumptions are problem clarit" >t!e problem is clear and unambiguousAI goal orientation >a single, ell&defined goal is to be ac!ievedAI 'no n options >all alternatives and conse*uences are 'no nAI clear preferencesI constant preferences >preferences are constant and stableAI no time or cost constraintsI and ma$imum pa" off# b# T!e assumption of rationalit" is t!at decisions are made in t!e best economic interests of t!e organization, not in t!e managerHs interests# c# T!e assumptions of rationalit" can be met if: t!e manager is faced it! a simple problem in !ic! goals are clear and alternatives limited, in !ic! time pressures are minimal and t!e cost
of finding and evaluating alternatives is lo , for !ic! t!e organi,ational culture supports innovation and ris' ta'ing, and in !ic! outcomes are concrete and measurable# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 T!e rational model is fla ed in t!at it does not appl" to actual decision aiming for t o reasons# a# Perfect information is not available# b# ManagerHs values and personalit" factors enter into t!eir decisions# T!e rational model presents an ideal against !ic! actual decision&ma'ing patterns can be measured ;eci&ion0Ma4ing St!le&
VU
Managers !ave different st"les !en it comes to ma'ing decisions and solving problems# +ne perspective proposes t!at people differ along t o dimensions in t!e a" t!e" approac! decision ma'ing# 0# +ne dimension is an individualHs a" of t!in'ingMrational or intuitive# T!e ot!er is t!e individualHs tolerance for ambiguit"Mlo or !ig!# 1# T!ese t o dimensions lead to a t o b" t o matri$ it! four different decision&ma'ing st"les# a# T!e $irecti'e &t!le is one t!atHs c!aracteri,ed b" lo tolerance for ambiguit" and a rational a" of t!in'ing# b# T!e anal!tic &t!le is one c!aracteri,ed b" a !ig! tolerance for ambiguit" and a rational a" of t!in'ing# c# T!e conce"tual &t!le is c!aracteri,ed b" an intuitive a" of t!in'ing and a !ig! tolerance for ambiguit"# d# T!e (eha'ioral &t!le is one c!aracteri,ed b" a lo tolerance for ambiguit" and an intuitive a" of t!in'ing# 3# Most managers realisticall" probabl" !ave a dominant st"le and alternate st"les, it! some rel"ing almost e$clusivel" on t!eir dominant st"le and ot!ers being more fle$ible depending on t!e situation#
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Principles of Management MGT503 Non Rational Mo$el% NON RATIONAL ;ECISION MA@ING
VU Lesson 6.18
T!e non0rational o$el& of managerial decision ma'ing suggest t!at information&gat!ering and processing limitations ma'e it difficult for managers to ma'e optimal decisions# 0# T!e &ati&ficing o$el) developed in t!e 0<50s b" 4ovel Pri,e inning economist Ferbert Eimon, !olds t!at managers see' alternatives onl" until t!e" find one t!at loo's satisfactor", rat!er t!an see'ing t!e optimal decision# a# Aoun$e$ rationalit! means t!at t!e abilit" of managers to be perfectl" rational in ma'ing decisions is limited b" suc! factors as cognitive capacit" and time constraints# b# %ctual decision ma'ing is not perfectl" rational because of 0A (nade*uate information 1A Time an cost factors 3A T!e decision ma'erHs o n misperceptions or prejudices 8A Limited !uman memor" Limited !uman data&processing abilities# Eatisficing can be appropriate !en t!e cost of dela"ing a decision or searc!ing for a better alternative out eig!s t!e li'el" pa"off from suc! a course# T!e incre ental o$el !olds t!at managers ma'e t!e smallest response possible t!at ill reduce t!e problem to at least a tolerable level# a# Managers can ma'e decisions it!out processing a great deal of information# b# (ncremental strategies are usuall" more effective in t!e s!ort run t!an in t!e long run# T!e gar(age0can o$el of decision ma'ing !olds t!at managers be!ave in virtuall" a random pattern in ma'ing non&programmed decisions# a# 5actors t!at determine decisions include t!e particular individuals involved in t!e decisions, t!eir interests and favorite solutions to problems, as ell as an" opportunities t!e" stumble upon# b# T!e garbage&can approac! is often used in t!e absence of solid strategic management and can lead to severe problems# Grou" ;eci&ion %# a4ing%
@ecisions on all levels of organi,ation are fre*uentl" made b" groups# Group decision ma'ing !as several advantages and disadvantages over individual decision ma'ing# 0# Eome a$'antage& of group decision ma'ing include; aA Groups bring more diverse information and 'no ledge to bear on t!e *uestion under consideration# bA %n increased number of alternatives can be developed# cA Greater understanding and acceptance of t!e final decision are li'el"# dA Members develop 'no ledge and s'ill for future use# 1# Group decision ma'ing !as several $i&a$'antage& !en compared to individual decision ma'ing# aA Group decision ma'ing is more time consuming# bA @isagreements ma" dela" decisions and cause !ard feelings# cA T!e discussion ma" be dominated b" one or a fe group members# dA Grou"thin4 is t!e tendenc" in co!esive groups to see' agreement about an issue at t!e e$pense of realisticall" appraising t!e situation# A5 Manager& can enhance grou" $eci&ion0 a4ing "roce&&e& (! ta4ing &te"& to a'oi$ the "itfall& of grou" $eci&ion a4ing5 0# (ndividuals s!ould be involved onl" if t!e" !ave information and 'no ledge relevant to t!e decision#
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Principles of Management MGT503 VU 1# T!e composition of t!e group s!ould reflect t!e diversit" of t!e broader or'group# Feterogeneous groups !ave been found to be more effective over time t!an groups it! t!e same nationalit" and et!nic bac'grounds# 3# T o tactics are available to avoid group&t!in' a# ;e'il>& a$'ocate& are individuals !o are assigned t!e role of ma'ing sure t!an t!e negative aspects of an" attractive decision alternatives are considered# b# ;ialectical ineBuit! is a procedure in !ic! a decision situation is approac!ed from t o opposite points of vie #
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Principles of Management MGT503 GROU# ;ECISION MA@ING AN; CREATIVITC a4ing
VU Lesson 7.19
Grou" ;eci&ion
@ecisions on all levels of organi,ation are fre*uentl" made b" groups# /# Group decision ma'ing !as several advantages and disadvantages over individual decision ma'ing# 3# Eome a$'antage& of group decision ma'ing include eA Groups bring more diverse information and 'no ledge to bear on t!e *uestion under consideration# fA %n increased number of alternatives can be developed# gA Greater understanding and acceptance of t!e final decision are li'el"# !A Members develop 'no ledge and s'ill for future use# 8# Group decision ma'ing !as several $i&a$'antage& !en compared to individual decision ma'ing# eA Group decision ma'ing is more time consuming# fA @isagreements ma" dela" decisions and cause !ard feelings# gA T!e discussion ma" be dominated b" one or a fe group members# !A Grou"thin4 is t!e tendenc" in co!esive groups to see's agreement about an issue at t!e e$pense of realisticall" appraising t!e situation# Managers can en!ance group decision&ma'ing processes b" ta'ing steps to avoid
@# t!e
pitfalls of group decision ma'ing# 8# (ndividuals s!ould be involved onl" if t!e" !ave information and 'no ledge relevant to t!e decision# 5# T!e composition of t!e group s!ould reflect t!e diversit" of t!e broader or'group# Feterogeneous groups !ave been found to be more effective over time t!an groups it! t!e same nationalit" and et!nic bac'grounds# =# T o tactics are available to avoid groupt!in' +a1 ;e'il>& a$'ocate& are individuals !o are assigned t!e role of ma'ing sure t!an t!e negative aspects of an" attractive decision alternatives are considered# +(1;ialectical ineBuit! is a procedure in !ic! a decision situation is approac!ed from t o opposite points of vie # -# Eeveral grou"*are soft are pac'ages are no available to enable managers to ma'e use of recent advances in information tec!nolog" t!at enables groups to utili,e computers in t!eir decision ma'ing# 0# Teleconferencing enables groups to meet electronicall"&eit!er b" conference p!one !oo'ups or t!roug! computer net or's# 1# Group decision support s"stems are ne speciali,ed computer&based information s"stems !ic! support groups or'ing on less ell defined problems# 3# /omputer aids to group decision ma'ing seem to increase creativit"# Fo ever, face&to&face meeting still tend to s!o stronger consensus and satisfaction among members of t!e group
The Creati'it! Factor in ;eci&ion Ma4ing (nnovation is important to organi,ational success in t!e mar'etplace# %# 0# 1# or /reativit" versus (nnovation# T!ere is a difference bet een creativit" and innovation# Creati'it! is t!e abilit" to combine ideas in a uni*ue a" or to ma'e unusual associations bet een ideas# Inno'ation is t!e process of ta'ing a creative idea and turning it into a useful product, service,
met!od of operation# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU Creati'it! is t!e cognitive process of developing an idea, concept, commodit", or discover" t!at is vie ed as novel b" its creator or a target audience# %# /reativit" re*uires bot! convergent and divergent t!in'ing# 0# Con'ergent thin4ing is t!e effort to solve problems b" beginning problem and attempting to move logicall" to a solution# 1# ;i'ergent thin4ing is t!e effort to solve problems b" generating ne vie ing a problem and see'ing novel alternatives# !as t!ree necessar" it! a a"s of
6# /reativit" ingredients# 0# 1#
3#
@omain&relevant s'ills are t!ose associated it! e$pertise in t!e relevant field# /reativit"&relevant s'ills include a cognitive st"le, or met!od of t!in'ing t!at is oriented to e$ploring ne directions, 'no ledge of approac!es t!at can be used for generating novel ideas, and a or' st"le t!at is conducive to developing creative ideas# Tas' motivation is interest in t!e tas' for its o n sa'e, rat!er t!an because of some e$ternal re ard possibilit", suc! as more
/# %n individualHs creative process !as several stages# 0# Preparation involves t!e individualHs immersion in ever" aspect of a problem t!roug! a# Gat!ering initial information b# Generating alternatives c# Eee'ing and anal",ing furt!er data relating to t!e problem# 1# (ncubation involves a rest from consciousl" focusing on t!e problem as subconscious mental activities and divergent t!in'ing ta'e over# 3# (llumination is often e$perienced as a brea't!roug! as a ne level of insig!t is ac!ieved# 8# 7erification involves testing t!e ideas to determine t!e validit" of t!e insig!t# 5# Group creativit" can be en!anced b" means of a number of tec!ni*ues# T o of !ic! are follo ing; 0# Arain&tor ing is a means of en!ancing creativit" t!at encourages group members to generate as man" novel ideas as possible on a given topic it!out evaluating t!em# a# T!e ground rules used in brainstorming ere described earlier in t!is c!apter# b# /omputer assisted brainstorming !ave been found to give superior results# 1# T!e 4o inal Grou" TechniBue >4GTA is a means of en!ancing creativit" and decision ma'ing t!at integrates bot! individual or' and group interaction it!in certain ground rules# as developed to foster creativit" and to overcome t!e tendenc" to critici,e ideas !en
a# t!e" b# are;
4GT
are presented T!e ground rules of 4GT 0A (ndividuals independentl" prepare a list of t!eir ideas on a problem# 1A Group members present t!eir ideas one at a time in turn, and ideas are listed for all to see# 3A Members discuss t!e ideas to clarif" and evaluate t!em# 8A (ndividuals vote silentl" using a rating
c#
procedure# 3ecent researc! suggests t!at 4GT is superior to brainstorming groups in generating ideas but not so !en compared to computer& assisted brainstorming# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 Lateral Thin4ing V& Vertical Thin4ing
VU
7ertical t!in'ing is logical but onl" in one direction# Kou ignore t!e possibilities and alternatives around "ou or various ot!er a"s of doing same t!ing# 7ertical a" of t!in'ing is t!e problem solving a" t!e a" computers do# 3otating a problem from different angles to tr" and locate alternative points of entr" involves Lateral t!in'ing# T!is is a creative processing t!at t!e !uman mind can do, but computers are generall" unable to do# (t is useful !en one c!annel of t!oug!t reac!es a dead end and anot!er approac! is needed# (t can be difficult but satisf"ing to solve and ill encourage "ou to e$amine lots of different clues and information it!out an" prejudice# T!in'ing laterall" and avoiding t!e obvious is a great tool in life of a manager# T!is t!in'ing as's "ou generate 3&8 alternatives to a given problem and t!en tr" one option at a time to put into action and see t!e results for best# Other ;eci&ion Ma4ing Metho$& ,5 ;el"hi Metho$%
T!e @elp!i met!od is a structured approac! to gain t!e judgments of a number of e$perts on a specific issue relating to t!e future# a# % panel of e$perts is surve"ed in t!e interest of compiling a list of li'el" scientific brea't!roug!s and t!e predicted time of t!eir occurrence# b# T!e resultant list is resubmitted to t!e e$perts !o t!en estimate !et!er t!e predicated brea't!roug!s are li'el" to occur earlier or later t!an t!e average estimated time frame# c# T!e ne$t set of results is again submitted to t!e e$perts# 0A (f a consensus is reac!ed, dissenters are as'ed to e$plain !" t!e" disagree it! t!e majorit"# 1A (f t!ere is a ide divergence of opinion t!is step is repeated# 95 Scenario Anal!&i&% T!e Scenario anal!&i&) developed in 5rance, approac! addresses a variet" of possible futures b" evaluating major environmental variables, assessing t!e li'el" strategies of ot!er significant factors >e#g#, ot!er organi,ationsA, devising possible counter strategies, developing ran'ed !"pot!eses about t!e variables, and formulating alternative scenarios# a# Scenario& are outlines of possible future conditions, including possible pat!s t!e organi,ation could ta'e t!at ould li'el" lead to t!ese conditions# b# +ne object of t!e met!od is to enable t!e organi,ation to ma'e decisions t!at do not greatl" in!ibit furt!er freedom of c!oice ;e ing>& TOOL FOR I "ro'e ent an$ Inno'ation% P@/% or P@E% i#e# Planning, @oing, /!ec'ing)Etud"ing and %cting are t!e four activities !ic! @r# @eming taug!t to Oapanese companies to solve or' related dail" and "earl" problems# .!en t!e tool i0s deplo"ed out in a c"clic fas!ion ill lead to improvement and innovation in ever" process and or' area of t!e organi,ation# T!is is one of t!e ell 'no n *ualit" management tool# Hue&tion& an$ An&*er& ,5 ;ifferentiate (et*een creati'it! an$ inno'ation5 /reativit" is t!e abilit" to combine ideas in a uni*ue a" or to ma'e unusual associations bet een
ideas# (nnovation is t!e process of ta'ing a creative idea and turning it into a useful product, service, or met!od of operation# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU 95 Ho* can the &!&te & o$el (e u&e$ to hel" organi2ation& (eco e ore inno'ati'e3 (n t!e s"stems model e use inputs li'e creative people and groups and, t!roug! a creative process or situation, transform t!e inputs into t!e desired output suc! as creative products# T!e rig!t environment is also important# <5 ;e&cri(e the &"ecific &tructural) cultural) an$ hu an re&ource 'aria(le& a&&ociate$ *ith inno'ation5 7ariables associated it! innovation are structural >organic structure, abundant resources, and !ig! inter& unit communicationA, cultural >acceptance of ambiguit", tolerance of t!e impractical, lo e$ternal controls, tolerance of ris's, tolerance of conflicts, focus on ends, and open&s"stem focusA, and !uman resource >!ig! commitment to training and development, !ig! job securit", and creative peopleA#
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Principles of Management MGT503 #LANNING AN; ;ECISION AI;S0I
VU Lesson 7.20
T!is session and t!e one follo s s!all introduce t!e planning tools and tec!ni*ues t!at managers !ave at t!eir disposal to assist t!em in performing t!e management functions# Management Ecience or +peration 3esearc! is a management perspective aimed at increased decision effectiveness b" use of sop!isticated mat!ematical models and statistical met!ods# ,5 TECHNIHUES FOR ASSESSING THE ENVIRONMENT
Eeveral tec!ni*ues !ave been developed to assist managers in assessing t!e organi,ationHs environment# En'iron ental &canning -nvironmental scanning is t!e screening of large amounts of information to anticipate and interpret c!anges in t!e environment# (tHs used b" bot! large and small organi,ations, and researc! !as s!o n t!at companies it! advanced environmental scanning s"stems increased t!eir profits and revenue gro t!# SWOT anal!&i& is an anal"sis of an organi,ationHs strengt!s, ea'nesses, opportunities, and t!reats# (t brings toget!er t!e internal and e$ternal environmental anal"ses in order to identif" a strategic nic!e t!e organi,ation mig!t e$ploit# Co "etitor intelligence is an environmental scanning activit" t!at see's to identif" are, !at t!e" are doing, and !o t!eir actions ill affect t!e organi,ation# %not!er t"pe of environmental scanning is global scanning in and trends in t!e global environment# !o competitors
!ic! managers assess t!e c!anges
-nvironmental scanning provides t!e foundation for developing foreca&t&, !ic! are predictions of outcomes# 0# T!ere are t!ree categories of forecasting tec!ni*ues# a# Huantitati'e foreca&ting applies a set of mat!ematical rules to a series of past data to predict outcomes# b# Hualitati'e foreca&ting uses t!e judgment and opinions of 'no ledgeable individuals to predict outcomes# c# Mu$g ental foreca&ting Foreca&ting 5orecasting is t!e process of predicting c!anging conditions and future events t!at ma" significantl" affect t!e business of an organi,ation# 0# 1# 5orecasting is important to bot! planning and decision ma'ing# 5orecasting is used in a variet" of areas suc! as; production planning, budgeting, strategic planning, sales anal"sis, inventor" control, mar'eting planning, logistics planning, and purc!asing among ot!ers# !en
(tHs important to loo' at forecasting effectiveness# 5orecasting tec!ni*ues are most accurate t!e environment is not rapidl" c!anging# Eome suggestions for improving forecasting effectiveness are as follo s; 0A :se simple forecasting tec!ni*ues# 1A /ompare ever" forecast it! no c!ange#
3A @onHt rel" on a single forecasting met!od# 8A @onHt assume t!at "ou can accuratel" identif" turning points in a trend# 5A E!orten t!e lengt! of t!e forecasts# =A 5orecasting is a managerial s'ill and can be practiced and improved# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 Metho$& of Foreca&ting %#
VU
Huantitati'e foreca&ting relies on numerical data and mat!ematical model to predict future conditions# T!ere are t o t"pes of *uantitative forecasting most fre*uentl" used# 0# Ti e0&erie& etho$& used !istorical data to develop forecasts of t!e future# a# T!e underl"ing assumption is t!at patterns e$ist and t!at t!e future ill resemble t!e past# b# Time&series met!ods do not in t!emselves predict t!e impact of present or future actions t!at managers mig!t ta'e to bring about c!ange# c# % trend reflects a long&range general movement is eit!er an up ard or a do n ard direction# d# % seasonal pattern indicates up ard or do n ard c!anges t!at coincide it! particular points it!in a given "ear# e# % c"clical pattern involves c!anges at particular points in time t!at span longer t!an a "ear# f# Time&series are more valuable for predicting broad environmental factors t!an in predicting t!e impact of present or future actions# g# 6ecause time&series rel" on past trends t!ere can be a danger in t!eir use if environmental c!anges are disregarded# 1# E?"lanator! or cau&al o$el& attempt to identif" t!e major variables t!at are related to or !ave caused particular past conditions and t!en use current measures of t!ose variables >predictorsA to predict future conditions# a5 -$planator" models allo managers to assess t!e probable impact of c!anges in t!e predictors# (5 Regre&&ion o$el& are e*uations t!at e$press t!e fluctuations in t!e variable being forecasted in terms of fluctuations among one or more ot!er variables# c5 Econo etric o$el& are s"stems of simultaneous multiple regression e*uations involving several predictor variables used to identif" and measure relations!ips or interrelations!ips t!at e$ist in t!e econom"# $5 Lea$ing in$icator& are variables t!at tend to be correlate it! t!e p!enomenon of major interest but also tend to occur in advance of t!e p!enomenon# Technological) or Hualitati'e) Foreca&ting is aimed primaril" at predicting long& term trends in tec!nolog" and ot!er important aspects of t!e environment
6#
T!e focus is upon longer&term issues t!at are less amenable to numerical anal"sis as *uantitative approac!es# T!e ;el"hi /# etho$ an$ Scenario anal!&i& can (e u&e$ a& techniBue&5 Mu$g ental Foreca&ting relies mainl" on individual judgments or committee agreements regarding future conditions# 0# 1# 3# Oudgmental forecasting met!ods are !ig!l" susceptible to bias# T!e Iur! of e?ecuti'e o"inion is one of t!e t o judgmental forecasting model# (t is a means of forecasting in !ic! organi,ation e$ecutives !old a meeting and estimate, as a group, a forecast for a particular item# T!e Sale&0force co "o&ite is a means of forecasting t!at is used mainl" to predict future sales and t"picall" involves obtaining t!e vie s of various salespeople, sales managers, and)or distributors regarding t!e sales outloo'#
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Principles of Management MGT503 T!e c!oice of !ic! forecasting met!od to use depends upon t!e needs forecasting situations# 0#
VU it!in particular
1#
3#
Huantitati'e foreca&ting met!ods; a# !ave a s!ort&to&medium time !ori,on b# re*uire a s!ort period of time if a met!od is developed c# often !ave !ig! development costs d# are !ig! in accurac" in identif"ing patterns e# are lo in accurac" in predicting turning points for time series, but medium for ot!er met!ods# f# %re difficult to understand Technological foreca&ting met!ods; a# !ave a medium&to&long time !ori,on b# re*uire a medium&to&long time c# !ave medium development costs d# are of medium accurac" in identif"ing patterns e# are of medium accurac" in predicting turning points f# are easil" understood# Mu$g ental foreca&ting met!ods; a# !ave a s!ort&to&long time !ori,on b# re*uire a s!ort time c# !ave lo development costs d# are of medium&to&!ig! accurac" in identif"ing patterns e# are of lo accurac" in predicting turning points f# are easil" understood
Aench ar4ing Aench ar4ing is t!e searc! for t!e best practices among competitors or non&competitors t!at lead to t!eir superior performance# # T!e benc!mar'ing process t"picall" follo s four steps# a# % benc!mar'ing planning team is formed# T!e teamHs initial tas' is to identif" !at is to be benc!mar'ed, identif" comparative organi,ations, and determine data collection met!ods# b# T!e team collects internal and e$ternal data# c# T!e data is anal",ed to identif" performance gaps and to determine t!e cause of t!e difference# d# %n action plan is prepared and implemented#
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Principles of Management MGT503 #LANNING AN; ;ECISION AI;S0II ,5 TECHNIHUES FOR ALLOCATING RESOURCES5
VU Lesson 7.21
Re&ource& are t!e assets of t!e organi,ation and include financial, p!"sical, !uman, intangible, and structural# ,5, Au$geting % (u$get is a numerical plan for allocating resources to specific activities# 6udgets are popular because t!e"Hre applicable to a ide variet" of organi,ations and units it!in an organi,ation# 0# T!ere are four different t"pes of budgets# a# % re'enue (u$get is a budget t!at projects future sales# b# %n e?"en&e (u$get is a budget t!at lists t!e primar" activities underta'en b" a unit and allocates a dollar amount to eac!# c# % "rofit (u$get is a budget used b" separate units of an organi,ation t!at combines revenue and e$pense budgets to determine t!e unitHs profit contribution# d# % ca&h (u$get is a budget t!at forecasts !o muc! cas! an organi,ation ill !ave on !and and !o muc! it ill need to meet e$penses# 1# T!ese budgets are based on t!e assumption of a single specified volumeMfi?e$ (u$get&# Fo ever, volume canHt be predicted e$actl"# T!erefore, a 'aria(le (u$get is a budget t!at ta'es into account t!e costs t!at var" it! volume# ,59 Sche$uling Sche$uling involves a list of necessar" activities, t!eir order of completion, !ic! is to do eac!, and time needed to complete t!em# Eome useful sc!eduling tools include t!e follo ing# 0#1#0# T!e Gantt chart, named after Fenr" Gantt, is a sc!eduling c!art t!at visuall" s!o s actual and planned output over a period of time# % Gantt chart is a speciali,ed bar c!art t!at s!o s t!e current progress on eac! major project activit" relative to necessar" completion dates# 0# % project is bro'en do n into separate main activities listed on t!e left side of t!e c!art# 1# T!e time frame is listed at t!e top or t!e bottom of t!e c!art# 3# T!e duration and sc!eduling of activities is s!o n b" a bar# 8# Gantt c!arts do not s!o interrelations!ips among activities# 5# Eoft are pac'ages for creating and using Gantt c!arts >and man" ot!er decision toolsA on computer are becoming idel" available# 0#1#1 #ERT) or #rogra E'aluation an$ Re'ie* TechniBue P-3T is a net or' planning met!od for managing and controlling large one&time projects# (t is a tec!ni*ue for sc!eduling complicated projects comprising man" activities, some of !ic! are interdependent# % #ERT net*or4 is a flo c!art li'e diagram t!at depicts t!e se*uence of activities needed to complete a project and t!e time or costs associated it! eac! activit"# 0# %ll of t!e major activities in t!e project are specified# 1# T!e se*uences of t!ese activities are determined 3# % net*or4 $iagra a grap!ic depiction of t!e interrelations!ips among activities, is constructed# a# %n acti'it! is a or' component to be accomplis!ed, and is
8#
represented b" an arro on t!e net or' diagram# %n e'ent +or no$e1 represents a single point in time t!at is t!e beginning or t!e ending of an activit"# T!ree time estimates for eac! activit" are determined and an e$pected time is calculated for eac! activit"# b# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU 5# T!e critical "ath is t!e pat! of activities and events in t!e net or' t!at ill ta'e t!e longest time to complete a# @ela"s on an" activities on t!e critical pat! mean t!at t!e project ill be dela"ed# b# Slac4 is t!e degree of latitude about !en various activities can be started it!out endangering t!e completion date of t!e entire project# =# %fter t!e project !as begun, actual times for completion of eac! activit" are collected and recorded on t!e P-3T net or' so t!at an" resc!eduling and adjustments can be made as *uic'l" as possible# Please remember in P-3T c!arts t!e follo ings; 0A 1A a 3A 8A P-3T ,5< E'ent& are end points t!at represent t!e completion of major activities in a P-3T net or'# Acti'itie&) !ic! are t!e time or resources re*uired to progress from one event to anot!er in P-3T net or'# Slac4 ti e is t!e amount of time an individual activit" can be dela"ed it!out dela"ing t!e !ole project# Critical "ath is t!e longest or most time&consuming se*uence of events or activities in a net or'# Area4e'en Anal!&i& Area4e'en anal!&i& is a tec!ni*ue for identif"ing t!e point at !ic! total revenue is just sufficient to cover total costs#
,5=
Linear #rogra ing Linear "rogra ing is a mat!ematical tec!ni*ue t!at can be used to solve resource allocation problems# Linear "rogra ing +L#1 is a *uantitative tool for planning !o to allocate limited or scarce resources so t!at a single criterion or goal >often profitsA is optimi,ed# 0# (t is t!e most idel" used *uantitative planning tools in business# 1# T!ere are optimal conditions for using linear programming# a# % single objective must be ac!ieved# b# %ttainable constraints e$ist# c# 7ariables are linearl" related to t!e objective, i#e#, and increase >or decreaseA in t!e variable leads to a proportional increase >or decreaseA in t!e objective# 95 CONTEM#ORARC #LANNING TECHNIHUES5
T o planning tec!ni*ues t!at are appropriate for planning in an environment t!atHs bot! d"namic and comple$ are project management and scenario planning# 95, #roIect Manage ent % "roIect is a one&time&onl" set of activities t!at !as a definite beginning and ending point in time# #roIect anage ent is t!e tas' of getting a projectHs activities done on time, it!in budget, and according to specifications# Project Management Process# T!ere are seven steps in t!e project planning process# a# @efine objectives# b# (dentif" activities and
resources# c# -stablis! se*uences# d# -stimate time for activities# e# @etermine project completion date# f# /ompare it! objectives# g# @etermine additional !uman resource re*uirements# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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T!e role of t!e project manager a# T!e onl" real influence project managers !ave is t!eir communication s'ills and t!eir po er of persuasion # b# Team members seldom or' on just one projectI t!e"Hre usuall" assigned to t o or t!ree at an" given time# 959 0# 1# 3# <5 <5, Scenario "lanning % &cenario is a consistent vie of !at t!e future is li'el" to be# @eveloping scenarios also can be described as contingenc" planning# T!e intent of scenario planning is not to tr" to predict t!e future but to reduce uncertaint" b" pla"ing out potential situations under different specified conditions# Ecenario planning is difficult to use !en forecasting random events Other #lanning TechniBue&% Hueuing or *aiting0line o$el& are mat!ematical models t!at describe t!e operating c!aracteristics of *ueuing situations# 0# Nueuing situations can be an" combination of single&server or multiple& server *ueues# a# Eingle&server *ueues involved service provided at a single point# b# Multiple&server *ueues occur !en a number of stations dra from a single line# 1# Nueuing models allo managers to var" t!e parameters of a situation to determine t!e probable effects# Si ulation Mo$el& Eimulation is a mat!ematical imitation of realit"# (t is used for linear programming or *ueuing t!eor"# !en t!e situation is too comple$
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<5<
;eci&ion Tree& Trees are grap!ic models displa"ing structures of a se*uence of alternative course of action and usuall" s!o ing pa"offs associated it! various pat!s and probabilities associated it! potential future conditions#
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Principles of Management MGT503 #LANNING% FUNCTIONS N AENEFITS WHAT IS #LANNING3
VU Lesson 8.22
#lanning involves defining t!e organi,ationHs goals, establis!ing an overall strateg" for ac!ieving t!ese goals, and developing a compre!ensive set of plans to integrate and coordinate organi,ational or'# T!e term planning as used in t!is c!apter refers to formal planning# T!e !ality of t!e planning process and appropriate implementation probabl" contribute more to !ig! performance t!an does t!e e"tent of planning# WHC #LAN3 Purposes Planning# ;O MANAGERS of
Planning is important and serves man" significant purposes# 0# Planning gives direction to t!e organi,ation# 1# Planning reduces t!e impact of c!ange# 3# Planning establis!es a coordinated effort# 8# Planning reduces uncertaint"# 5# Planning reduces overlapping and asteful activities# =# Planning establis!es objectives or standards t!at are used in controlling# HOW ;O MANAGERS #LAN3 Planning is often called t!e primar" management function because it establis!es t!e basis for all ot!er functions# Planning involves t o important elements; goals and plans# The Role of Goal& an$ #lan& in #lanning 0# GoalsMdesired outcomes for individuals, groups, or entire organi,ations# 1# Goals are objectivesMt!e t o terms are used interc!angeabl"# 3# T"pes of goals# a# 5inancial performance versus strategic goals b# Etated versus 3eal# 0A State$ goal& are official statements of !at an organi,ation sa"s, and various sta'e!olders to believe, its goals are# 1A Real goal& are t!ose t!at an organi,ation actuall" purses# Hue&tion& an$ An&*er& ,5 ;efine "lanning5 Planning involves defining t!e organi,ationHs goals, establis!ing an overall strateg" for ac!ieving t!ose goals, and developing a compre!ensive set of plans to integrate and coordinate organi,ational or'# (tHs concerned it! bot! ends > !atHs to be doneA and means >!o itHs to be doneA#
!at it
ants its
95 What "ur"o&e& $oe& "lanning &er'e3 Planning gives direction, reduces t!e impact of c!ange, establis!es coordinated effort, reduces uncertaint", minimi,es aste and redundanc", and sets t!e standards used in controlling# <5 What i& the relation&hi" (et*een "lanning an$ organi2ational "erfor ance3 5ormal planning is associated it! !ig!er profits, !ig!er return on assets, and ot!er positive financial results# T!e *ualit" of t!e planning process and t!e appropriate implementation of t!e plans probabl" contribute more to !ig! performance t!an does t!e e$tent of planning# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU =5 ;ifferentiate (et*een goal& an$ "lan&5 Goals are desired outcomes for individuals, groups, or entire organi,ations# Plans are documents t!at outline !o goals are going to be met and t!at t"picall" describe resource allocations, sc!edules, and ot!er necessar" actions to accomplis! t!e goals# .5 What are the $ifferent t!"e& of goal&3 +rgani,ations ma" utili,e financial and)or strategic goals, stated and)or real goals# E5 ;e&cri(e each of the $ifferent t!"e& of "lan&5 Etrategic plans appl" to t!e entire organi,ation, establis! t!e organi,ationHs overall goals, and see' to position t!e organi,ation in terms of its environment# +perational plans specif" t!e details of !o t!e overall goals are to be ac!ieved# Long&term plans are plans it! a time frame be"ond t!ree "ears# E!ort& term plans cover one "ear or less# Epecific plans are clearl" defined and leave no room for interpretation# @irectional plans are fle$ible plans t!at set out general guidelines# Eingle&use plans are one&time plans specificall" designed to meet t!e needs of a uni*ue situation# Etanding plans are ongoing plans t!at provide guidance for activities performed repeatedl" and include policies, rules, and procedures# The Nature of organi2ational Goal& T!e use of goals !as several benefits# 0# 1# <5 =5 #erfor ance can be improved# E?"ectation& can be improved# T!e Controlling function can be facilitated so t!at progress can be assessed and corrective action ta'en# Meeting goals can increase oti'ation5
T!e t!ree levels of goals it!in an organi,ation form a !ierarc!" of goals, it! lo er&level goals forming a mean&end c!ain it! t!e ne$t level of goals# Strategic goal& are broadl" defined targets or future end results set b" top management# 1# Tactical goal& are t!e targets or future end results usuall" set b" middle management for specific departments or units# 3# O"erational goal& are t!ose targets or future end results set b" lo er management t!at address specific, measurable outcomes re*uired from t!e lo er levels# Lin4age of goal& an$ "lan&5 Goal and plans are closel" related in t!at plans specif" t!e means to ac!ieving t!e goals# %# Plans, li'e goals, enter into a hierarch! of levels and priorit"# 0# Strategic "lan& are detailed action steps mapped out to reac! strategic goals# a# Etrategic plans are organi,ational ide and are developed b" top management# b# T!e time !ori,on tends to be long 3 to 5 "ears or more# 1# Tactical "lan& are t!e means c!arted to support implementation of t!e strategic plan and ac!ievement of tactical goals# a# Tactical plans tend to be more specific and concrete t!an strategic plans# b# Tactical plans are important to t!e success of strategic plans# c# T!e time !ori,on tends to be intermediate in range 0 to 3 "ears# 0#
3# O"erational "lan& are t!e means devised to support implementation of tactical plans and ac!ievement of operational goals# a# +perational plans spell out specificall" !at must be accomplis!ed to ac!ieve operational goals# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU b# T!e time !ori,on is relativel" s!ort&temMusuall" less t!an 0 "ear as a ma$imum# 6# Plans can be categori,ed according to t!e e$tent to !ic! t!e" ill be used on a recurring basis# 0# Single0u&e "lan& are plans aimed at ac!ieving a specific goal t!at, once reac!ed, ill most li'el" not recur in t!e future# a# % "rogra is a compre!ensive plan t!at coordinates a comple$ set of activities related to a major non&recurring goal# b# % "roIect is a plan t!at coordinates a set of limited&scope activities t!at do not need to be divided into several major projects in order to reac! a major non&recurring goal# Programs are broader t!an projects# 1# Stan$ing "lan& are plans t!at provide ongoing guidance for performing recurring activities# a# % "olic! is a general guide t!at specifies t!e broad parameters it!in !ic! organi,ation members are e$pected to operate in pursuit of organi,ational goals# b# % "roce$ure is a prescribed series of related steps to be ta'en under certain recurring circumstances# 0A Procedures are detained and infle$ibleI policies are general# 1A .ell establis!ed and formali,ed procedures are often called standard operating procedures >E+PsA#
/# @ifferent le'el& of goals and plans are related to different ti e hori2on&5 Etrategic plans t"picall" involve time periods of 5 "ears or more, but t!e time frame is dependent upon t!e stabilit" of t!e industr" in *uestion# 0# Tactical goals and plans t"picall" involve time periods of 0 to 5 "ears# 1# +perational goals and plans can be for as s!ort a period as 0 ee' or as long as 0 "ear# @# T!e planning process can be used to promote inno'ation in organi,ations# 0# T!e organi,ational mission statement can be a primar" means of encouraging innovation# 1# T!e goals component can translate t!e mission in a a" supporting innovation#
T!e plans component can provide actual plans for ac!ieving innovative outcomes#
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Principles of Management MGT503 #LANNING #ROCESS AN; GOAL LEVELS The o'erall "lanning "roce&& %#
VU Lesson 8.23
#lanning is a t o&part functionMsetting goals and determining !o to tr" to ac!ieve t!e goals# 0# % goal >often used interc!angeabl" it! objectiveA is a future target or end result t!at an organi,ation is!es to ac!ieve# 1# % "lan is t!e means devised for attempting to reac! a goal# %n organi,ationHs i&&ion is t!e organi,ationHs purpose or fundamental reason for e$istence# 0# A i&&ion &tate ent is a broad declaration of t!e basic, uni*ue purpose and scope of operations t!at distinguis!es t!e organi,ation from ot!ers of t!is t"pe# 1# % mission statement serves a variet" of purposes# a# 5or managers, a mission statement can be a benc!mar' against !ic! to evaluate success# b# 5or emplo"ees, mission statements define a common purpose, nurture organi,ational lo"alt", and !elp foster a sense of communit" among members# c# 5or e$ternal groups, mission statements !elp provide uni*ue insig!ts into an organi,ationHs values and future directions# 3# T!e mission statement t"picall" defines t!e organi,ation in terms of t!e important attributes of t!e organi,ation# %ns ers to man" of t!ese *uestions are ans ered using information and processes described in t!e t o previous c!apters in t!e te$t# a# /ustomers; .!o are t!e organi,ationHs customers2 b# Products or services; .!at are t!e organi,ationHs major products or services2 c# Location; .!ere does t!e organi,ation compete2 d# Tec!nolog"; .!at is t!e firmsH basic tec!nolog"2 e# P!ilosop!"; .!at are t!e basic beliefs, values, aspirations, and p!ilosop!ical priorities of t!e organi,ation2 f# Eelf&concept; .!at are t!e organi,ationHs major strengt!s and competitive advantages2 g# /oncern for public image; !at are t!e organi,ationHs public responsibilities and !at image is desired2 !# /oncern for emplo"ees; .!at is t!e organi,ationHs attitude to ard its emplo"ees2
6#
a#
b# c#
T!"e& of #lan& Plans can be described b" t!eir breadt!, time frame, specificit", and fre*uenc" of use# 6readt!; strategic versus operational plans# Strategic "lan& are t!ose t!at are organi,ation ide, establis! overall objectives, and position an organi,ation in terms of its environment# O"erational "lan& are plans t!at specif" details on !o overall objectives are to be ac!ieved# Time frame; s!ort&term versus long&term plans# Short0ter "lan& are plans t!at cover one "ear or less# Long0ter "lan& are t!ose t!at e$tend be"ond t!ree "ears# Epecificit"; specific versus directional plans# S"ecific "lan& are t!ose t!at are clearl" defined and leave no room for interpretation# ;irectional "lan& are fle$ible plans t!at set out general guidelines#
The Nature of organi2ational Goal& %# T!e use of goals !as several benefits# 0# #erfor ance can be improved# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU 1# E?"ectation& can be improved# <5 T!e Controlling function can be facilitated so t!at progress can be assessed and corrective action ta'en# =5 Meeting goals can increase oti'ation5 6# T!e t!ree levels of goals it!in an organi,ation form a !ierarc!" of goals, it! lo er& level goals forming a mean&end c!ain it! t!e ne$t level of goals# 8# Strategic goal& are broadl" defined targets or future end results set b" top management# 5# Tactical goal& are t!e targets or future end results usuall" set b" middle management for specific departments or units# =# O"erational goal& are t!ose targets or future end results set b" lo er management t!at address specific, measurable outcomes re*uired from t!e lo er levels#
Ho* Goal& Facilitate #erfor ance T!e content of goals s!ould meet five criteria# 0# 1# 3# 8# 5# =# Challenging goals usuall" lead to !ig!er performance from individuals and groups# Attaina(le goals, not impossible demands, are more li'el" to improve performance# S"ecific an$ ea&ura(le goals are needed so t!at it is clear !en t!e" !ave been ac!ieved# Ti e0li ite$ goals give t!em meaning# Rele'ant goals enable emplo"ees to see t!e purpose of t!e goals and to devise a"s of meeting t!em# Mea&ura(le means t!e performance and targets can be measured after an interval of time#
Goal co it ent is oneHs attac!ment to, or determination to reac!, a goal# .it!out commitment goals !ave little impact on performance# Managers can !elp foster commitments in a number of a"s# 0# 1# 3# 8# goal 5# Su"er'i&or! authorit! s!ould serve to motivate emplo"ees to meet t!eir goals# #eer an$ grou" "re&&ure ma" serve as motivation# E?"ectation& of &ucce&& can be improved b" managerial coac!ing and instruction# Incenti'e& are offered during t!e goal&setting processI re ards occur upon
ac!ievement# #artici"ation in t!e goal setting process ma" be effective in engendering goals commitment#
.or' be!avior ma" be affected b" four factors influenced b" goals content and goal commitment# 0# 1# 3# 8# Goals provide ;irection b" c!anneling attention and action to ard activities related to t!ose goals, rat!er t!an to ot!er activities# Goals to !ic! e are co itte$ boost effort b" mobili,ing energ"# #er&i&tence involves maintaining direction and effort on be!alf of a goal until it is reac!ed# Goal setting leads to "lanning if t!e goals are appropriatel" c!allenging#
T!e impact of goals on performance of an" specific job can be influenced b" a number of ot!er process components# 0# Mo( 4no*le$ge an$ a(ilit! are li'el" to affect an individualH and prospects for reac!ing goals# 9 /op"rig!t 7irtual :niversit" of Pa'istan or' be!avior
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Principles of Management MGT503 VU 1# T!e co "le?it! of t!e tas' ma" affect t!e degree to !ic! goal&directed or' be!aviors influence job performance# <5 Situation con&traint& include suc! t!ings as !aving t!e proper tools, materials, and e*uipment# =5 @no*le$ge of re&ult& or feedbac' about progress enables individuals to gauge t!eir progress to ard goal attainment# Etrategic plans t"picall" involve time periods of 5 "ears or more, but t!e time frame is dependent upon t!e stabilit" of t!e industr" in *uestion# T!e planning process can be used to promote inno'ation in organi,ations# 3# T!e organi,ational mission statement can be a primar" means of encouraging innovation# 8# T!e goals component can translate t!e mission in a a" supporting innovation# 5# T!e plans component can provide actual plans for ac!ieving innovative outcomes# O(&tacle& to "lanning e$ist, but ma" be countered b" organi,ations# 0# +bstacles to planning t!reaten t!e abilit" of organi,ations to develop effective plans# a# Plans in a rapidl" c!anging environment re*uire fre*uent revisions# Manager ma" resist formali,ed planning if t!e" believe planning is unnecessar"# T!e pressure of da"&to&da" responsibilities ma" 'eep managers from planning# Managers ma" be poorl" prepared# Etaff specialists ma" come to dominate t!e planning process 1# +rgani,ations can ta'e steps to reduce t!e obstacles to planning# a# Top&level managers ma" demonstrate t!eir support of t!e planning process# b# % "lanning &taff is a small group of individuals !o assist top& level managers in developing t!e various components of t!e planning process# T!is staff s!ould focus on !elping rat!er t!an ta'ing over t!e planning process# c# Contingenc! "lanning is t!e development of alternative plans for use in t!e event t!at environmental conditions evolve differentl" t!an anticipated, rendering original plans un ise or unfeasible#
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Principles of Management MGT503 MANAGEMENT AC OAMECTIVE +MAO1
VU Lesson 8.24
Ti e S"an of Goal& an$ #lan& 0# Etrategic goals and plans generall" involve time periods of 3&5 "ears# 1# Tactical goals and plans t"picall" involve time periods of 0 to 3 "ears# 3# +perational goals and plans can be for as s!ort a period as 0 ee' or as long as 0 "ear# Characteri&tic& of Well0;e&igne$ Goal& a# .ritten in terms of outcomes b# Measurable and *uantifiable c# /lear as to a time frame d# /!allenging but attainable e# .ritten do n f# /ommunicated to all organi,ational members Ste"& in Goal& SettingOFi'e Ste"& a# 3evie t!e organi,ationHs mission# Goals s!ould reflect !at t!e mission statement sa"s# b# -valuate available resources# c# @etermine individuall", or it! input from ot!ers, t!e goals# d# .rite do n t!e goals and communicate t!em to all !o need to 'no # e# 3evie results and !et!er goals are being met# ;e'elo"ing #lan& T!e process of developing plans is influenced b" t!ree contingenc" factors and b" t!e planning approac! follo ed# 0# /ontingenc" 5actors in Planning# a# ManagerHs level in t!e organi,ation# +perational planning usuall" dominates t!e planning activities of lo er&level managers# %s managers move up t!roug! t!e levels of t!e organi,ation, t!eir planning becomes more strategic# b# 0A 1A c# 0A 1A @egree of environmental uncertaint"# T!e greater t!e environmental uncertaint", t!e more plans s!ould be directional and emp!asis placed on t!e s!ort term# .!en uncertaint" is !ig!, plans s!ould be specific, but fle$ible# Managers must be prepared to re or' and amend plans, or even to abandon t!eir plans# Lengt! of 5uture /ommitments# /ommitment concept means t!at plans s!ould e$tend far enoug! to meet t!ose commitments made !en t!e plans ere developed# Planning for too long or for too s!ort a time period is inefficient and ineffective#
A""roache& to E&ta(li&hing Goal& Goals can be establis!ed t!roug! a process of traditional goal setting or t!roug! management b" objectives a# Tra$itional goal &etting is defined as t!e process !ereb" goals are set at t!e top of t!e organi,ation and t!en bro'en do n into sub goals for eac! level in an organi,ation# 0A Top managers are assumed to 'no !atHs best because t!e" see t!e big picture# 1A T!ese goals are also often largel" non operational# 3A Epecificit" is ac!ieved as eac! manager applies !is or !er o n set of interpretations and biases#
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Principles of Management MGT503 8A 5A
VU Fo ever, !at often results is t!at objectives lose clarit" and unit" as t!e" move from top to bottom# .!en t!e !ierarc!" of objectives is clearl" defined, it forms an integrated ean&0en$ chain in !ic! !ig!er&level objectives are lin'ed to lo er&level objectives# T!ese lo er&level objectives serve as t!e means for t!e accomplis!ment of t!e !ig!er&level objectives# %nd t!e goals at t!e lo er levels >meansA must be ac!ieved in order to reac! t!e goals at t!e ne$t level >ends#A
Goal &etting ha& &o e "otential "itfall& 0# 1# 3# 8# 5# =# Eetting difficult goals increases t!e ri&4 t!at t!e" ill not be reac!ed# Fig! goals ma" increase t!e &tre&& le'el& of organi,ational members# 5ailure to meet !ig! goals ma" undermine t!e &elf0confi$ence of organi,ational members# Non goal area& ma" be ignored# Eetting goals ma" encourage e$cessive &hot0range thin4ing5 (nappropriate goals ma" lead to $i&hone&t! an$ cheating5
Manage ent (! O(Iecti'e& Manage ent (! o(Iecti'e +MAO1 is a process t!roug! !ic! specific goals are set collaborativel" for t!e organi,ation as a !ole and ever" unit and individual it!in itI t!e goals t!en are used as a basic for planning, managing organi,ational activities, and assessing and re arding contributions# In Manage ent (! o(Iecti'e& +MAO1 specific performance goals are jointl" determined b" emplo"ees and t!eir managers, progress to ard accomplis!ing t!ese goals is periodicall" revie ed, and re ards are allocated on t!e basis of t!is progress# 0A M6+ as first described b" Peter @ruc'er and consists of four elements; iA Goal specificit" iiA Participative decision ma'ing iiiA -$plicit time period ivA Performance feedbac' 1A M6+ ma'es objectives operational t!roug! t!e process b" !ic! t!e" cascade do n t!roug! t!e organi,ation# %lt!oug! t!ere is considerable variation across organi,ations, M6+ processes t"picall" include si$ steps# 0# +rgani,ational goals are developed based on organi,ational missions# 1# Epecific goals are establis!ed for departments, subunits, and individuals# a# (n t!e top&do n process, upper&level managers, conferring it! t!eir immediate managerial subordinates, formulate specific objectives for t!eir areas of responsibilit"# T!ese in turn enter into t!e formulation of objectives for t!e ne$t level do n, and so fort!# b# (n t!e bottom&up process, operational goals are proposed b" lo er& level managers on t!e basis of !at t!e" t!in' t!e" can ac!ieve# T!ese in turn are developed into tactical and finall" strategic plans# 3# %ction plans are formulated, describing !at is to be done, !o , !en, !ere, and b" !om in order to ac!ieve a particular goals# 8# (ndividuals are given t!e responsibilit" of reac!ing t!eir objectives and t!at goals ill ultimatel" be met#
5# "ear
Performance is appraised at t!e end of t!e goal&setting c"cle, t"picall" at one& intervals# Praise, recognition, and re ards s!ould be given for effective performance#
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Principles of Management MGT503 T!e &trength& of M6+ are t!at it 0# %ids coordination of goals and plans# 1# Felps clarif" priorities and e$pectations# 3# 5acilitates vertical and !ori,ontal communications# 8# 5osters emplo"ee motivation#
VU
T!e *ea4ne&&e& of M6+ are t!at it 0# Tends to falter it!out strong, continual commitment from top management# 1# 4ecessitates considerable training of managers# 3# /an be misused as a punitive device# 8# Ma" cause overemp!asis of *uantitative goals# T!e spirit of M6+ is tremendous# (n practice !o ever, M6+ !as been successful onl" about 10 to 15 percent of t!e time, primaril" because of lac' of support from top management and poor goal& setting and communication s'ills#
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Principles of Management MGT503 INTRO;UCTION STRATEGIC MANAGEMENT 0,
VU Lesson 9.25
Toda"Hs business ne s is filled it! reports of organi,ations ma'ing c!anges in t!eir strategies for !atever reasons# %n underl"ing t!eme of discussing strategic management is t!at good strategies can lead to !ig! organi,ational performance# THE IM#ORTANCE OF STRATEGIC MANAGEMENT T!e environmental s!oc's during t!e decades of t!e 0<C0s and 0<?0s forced managers to develop a s"stematic means of anal",ing t!e environment, assessing t!eir organi,ationHs strengt!s and ea'nesses, identif"ing opportunities t!at ould give t!e organi,ation a competitive advantage, and incorporating t!ese findings into t!eir planning# T!e value of t!in'ing strategicall" as recogni,ed# The conce"t of &trategic anage ent
Strategic anage ent is a process t!roug! !ic! managers formulate and implement strategies geared to optimi,ing goal ac!ievement, given available environmental and internal conditions# Strategic anage ent is t!at set of managerial decisions and actions t!at determines t!e long&run performance of an organi,ation# (t entails all of t!e basic management functionsMplanning, organi,ing, leading, and controlling# #ur"o&e& of &trategic anage ent 0# +ne reason strategic management is important is because itHs involved in man" of t!e decisions t!at managers ma'e# 1# %not!er reason is t!at studies of t!e effectiveness of strategic planning and management !ave found t!at, in general, companies it! formal strategic management s"stems !ad !ig!er financial returns t!an t!ose companies it! no suc! s"stems# 3# Etrategic management !as moved be"ond for&profit organi,ations to include all t"pes of organi,ations, including not&for&profit# Strategic it anage ent i& i "ortant to organi2ation& (ecau&e 0# 1# Felps organi,ations identif" and develop a co "etiti'e a$'antage) a significant edge over t!e competition in dealing it! competitive forces# Provides a sense of direction so t!at organi,ation members 'no !ere to e$pend t!eir efforts#
Felps !ig!lig!t t!e need for innovation and provides an organi,ed approac! for encouraging ne ideas related to strategies# Strategie& are large&scale action plans for interacting it! t!e environment in order to ac!ieve long& term goals# Most ell&run organi,ations attempt to develop and follo strategies# The &trategic anage ent "roce&& i& a$e u" of &e'eral co "onent&5 0# Strateg! for ulation is t!e part of t!e strategic management process t!at includes# a# (dentif"ing t!e mission and strategic goals# b# /onducting competitive anal"sis c# @eveloping specific strategies 1# Strateg! i "le entation is t!e part of t!e strategic management process t!at focuses on# a# /arr"ing strategic plans# b# Maintaining control over !o t!ose plans are carried out# ;efine &trategic anage ent an$ ho* it entail& the four anage ent function&5 Etrategic management is t!at set of managerial decisions and actions t!at determines t!e long& performance of an organi,ation# (t entails all of t!e basic management functions because
H5 %# run
t!e organi,ationHs strategies must be planned, organi,ed, put into effect, and controlled# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 STRATEGIC MANAGEMENT 0 9 THE STRATEGIC MANAGEMENT #ROCESS
VU Lesson 9.26
T!e &trategic anage ent "roce&& is an eig!t&step process t!at encompasses strategic planning, implementation, and evaluation# %# T!e first step is identif"ing t!e organi,ationHs current mission, objectives, and strategies# 0# -ver" organi,ation needs a i&&ion) !ic! defines t!e purpose of t!e organi,ation# .!at is t!e organi,ationHs reason for being in business2 1# (tHs also important to identif" t!e organi,ationHs current objectives and strategies, as ell# 6# Etep 1 is anal",ing t!e e$ternal environment# (tHs important to anal",e t!e environment because, to a large degree, it defines managementHs strategic options# 0# % successful strateg" is one t!at aligns ell it! t!e environment# 1# T!is step is complete !en managers !ave an accurate grasp of !at is ta'ing place in t!e e$ternal environment and are a are of important trends t!at mig!t affect t!e organi,ation# /# T!e t!ird step is identif"ing opportunities and t!reats# %fter anal",ing t!e e$ternal environment, managers need to assess !at opportunities to e$ploit and !at t!reats to avoid# 0# O""ortunitie& are positive e$ternal environmental factors# 1# Threat& are negative e$ternal environmental factors# @# 0# 1# -# Etep 8 is anal",ing t!e organi,ationHs resources# (n t!is internal anal"sis, managers are loo'ing at t!e organi,ationHs specific assets, s'ills, and or' activities# Managers loo' for core co "etencie&, !ic! are an organi,ationHs major value&creating s'ills, capabilities, and resources t!at determine its competitive advantage# T!is step forces managers to reali,e t!at ever" organi,ation, no matter !o large or po erful, is constrained in some a" b" its resources and s'ills#
Etep 5 is identif"ing strengt!s and ea'nesses# T!e anal"sis in step 8 s!ould lead to a clear assessment of t!e organi,ationHs internal resources# 0# Strength& are t!ose activities t!e firm does ell or t!e uni*ue resources it controls# 1# Wea4ne&&e& are t!ose activities t!e firm doesnHt do ell or t!e resources it needs but doesnHt possess# 3# +ne area t!atHs often overloo'ed in t!is step is an anal"sis of t!e organi,ationHs culture and its strengt!s and ea'nesses# a# 3emember t!at culture is t!e organi,ationHs personalit"# b# T!e strengt! of t!e culture is a result of !o muc! emplo"ees understand and support t!e s!ared values# c# % strong culture s!ould ma'e it eas" for managers to conve" to emplo"ees t!e organi,ationHs distinctive competencies# Fo ever, t!e strong culture ill ma'e it more difficult to c!ange, if needed# d# Etrategic c!oices ill also be influenced b" t!e cultureHs tolerance of ris' and innovation and !o performance is re arded# e# T!e culture can also promote or !inder an organi,ationHs strategic actions# 8# T!e merging of steps 3 and 5 results in a SWOT anal!&i&, !ic! is an anal"sis of an organi,ationHs strengt!s, ea'nesses, opportunities, and t!reats# (t brings toget!er t!e internal and e$ternal anal"ses in order to identif" a strategic nic!e t!e organi,ation mig!t e$ploit# 5# (n lig!t of t!e E.+T anal"sis, managers need to reevaluate t!e organi,ationHs current mission and objectives#
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Principles of Management MGT503 VU 5# Etep = is formulating strategies# Etrategies need to be establis!ed for t!e corporate, business, and functional levels of t!e organi,ation# (n formulating strategies, managers !ope to give t!e organi,ation a competitive advantage# G# T!e ne$t step is implementing strategies# T!e strategies must no be put into action# Etrategies are onl" as good as t!eir implementation# F# T!e eig!t! >and finalA step in t!e strategic management process is evaluating results# Managers must evaluate t!e results to determine !o effective t!eir strategies !ave been and !at corrections are necessar"# The role of co "etiti'e anal!&i& in &trateg! for ulation 6efore an effective strateg" to gain a competitive advantage can be formulated, t!e organi,ationHs competitive situation needs to be carefull" anal",ed# %# % E.+T %4%LKE(E is one met!od for doing so# T!e E.+T anal"sis involves assessing organi,ation strengt!s >EA and ea'nesses >.A, as ell as environmental opportunities >+A and t!reats >TA# 0# Etrengt!s and ea'nesses appl" to internal c!aracteristics# a# % strengt! is an internal c!aracteristic t!at !as t!e potential of improving t!e organi,ationHs competitive situation# b# % ea'ness is an internal c!aracteristic t!at leaves t!e organi,ation potentiall" vulnerable to strategic moves b" competitors# 1# +pportunities and t!reats are found in t!e e$ternal environment# a# %n opportunit" is an environmental condition t!at offers significant prospects for improving an organi,ationHs situation relative to competitors# b# % t!reat is an environmental condition t!at offers significant prospects for undermining an organi,ationHs competitive situation#
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Principles of Management MGT503 LEVELS OF STRATEGIES) #ORTER>S MO;EL AN; STRATEGC ;EVELO#MENT +ACG1 AN; IM#LEMENTATION Le'el of Strategie&
VU Lesson 9.27
Man" organi,ations develop strategies at t!ree different levels# T!ese t!ree different and distinct levels of strateg" are corporate, business, and functional; Cor"orate0le'el &trateg! is developed b" top&level management and t!e board of directors# T!e cor"orate0le'el &trateg! see's to determine !at businesses a corporation s!ould be in or ants to be in# T o popular approac!es for ans ering t!e *uestion of !at business>esA s!ould e be in are t!e grand strategies frame or' and t!e corporate portfolio matri$# ,5 The&e &trategie& a$$re&& a# .!at business t!e organi,ation ill be coordinated to strengt!en t!e organi,ationHs competitive position# b# Fo t!e strategies of t!ose businesses ill be coordinated to strengt!en t!e organi,ationHs competitive position# c# Fo resources ill be allocated among businesses#
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Au&ine&&0le'el &trateg! concentrates on t!e best means of competing it!in a particular business !ile also supporting t!e corporate&level strateg"# a# T!e distinction bet een corporate&level and business&level strateg" applies onl" to organi,ations it! separate divisions t!at compete in different industries# b# % &trategic (u&ine&& unit +SAU1 is a distinct business, it! its o n set of competitors t!at can be managed reasonabl" independentl" of ot!er businesses it!in t!e organi,ation# Functional0le'el &trateg! focuses on action plans for managing a particular functional area it!in a business in a a" t!at supports t!e business&level strateg"# a# 5unctional areas include operations, mar'eting, finance, !uman resources management, accounting, researc! and development, and engineering# b# 5unctional strategies are usuall" developed b" functional managers and are t"picall" revie ed b" business unit !eads#
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=5 Coor$inating strategies across t!ese t!ree levels is critical in ma$imi,ing strategic impact# The role of co "etiti'e i "le entation #orter>& Mo$el% Force& anal!&i& in &trateg! for ulation an$
Mic!ael -# Porter, a noted strateg" e$pert, !as devised t!e fi'e co "etiti'e force& o$el as an approac! for anal",ing t!e e$ternal environment for bot! t!e nature and t!e intensit" of competition in a given industr" in terms of five major forces# 0# T!e model provides an environmental assessment of strategicall" significant elements of t!e organi,ationHs tas' environment# 1# 3ivalr" is t!e e$tent to !ic! competitors use tactics to lo er t!e profits of t!eir competitors# 3# T!e bargaining po er of suppliers is t!e e$tent to !ic! suppliers can e$ert po er over business in an industr" b" t!reatening to raise prices or reduce t!e
*ualit" of goods and services t!e" provide#
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Principles of Management MGT503 VU 8# T!e bargaining po er of bu"ers depends on t!e factors suc! as number of customers in t!e mar'et, customer information, and t!e availabilit" of substitute !ic! determine t!e amount of influence t!at bu"ers !ave in an industr"# 5# T!e t!reat of ne entrants is t!e t!reat of a price ar if ne competitors can enter t!e mar'et# =# T!e t!reat of substitute products or services is t!e e$tent to !ic! businesses in ot!er industries can offer substitute products, t!us reducing t!e profit potential for t!e industr"# T!e competitive environment, in some industries, ma" reac! t!e point of h!"er co "etition0a state of rapidl" escalating competition# .!en t!is !appens, environments ma" become up ard spirals of uncertaint", d"namism, and !eterogeneit" of pla"ers ma'ing it difficult for an" organi,ation to sustain competitive advantage# %n organi2ational a&&e&& ent determines !o affect t!e competitive situation# 0# organi,ational factors in t!e internal environment
T!e resource&based strategic vie is a useful approac! to internal assessment as it focuses on competitive implications of several sets of organi,ational resources and capabilities# a# 5inancial resources include debt, e*uit", retained earnings, and ot!er mone" related matters# b# P!"sical resources include buildings, mac!iner", and ot!er materials to operate# c# Fuman resources include s'ills, abilities, e$perience, and ot!er or' related c!aracteristics of t!ose associated it! t!e organi,ation# d# +rgani,ational resources include t!e !istor", relations!ips, levels of trust, and ot!er culture dimensions# %ssessing t!e competitive implications of t!ese resources and capabilities relative to t!e environment involves ans ering *uestions about four critical factors# a# Fo muc! value does an" resource or capabilit" add2 b# .!at, if an", degree of rareness does eac! resource or capabilit" !ave among competing firms2 c# .!at is t!e degree of imitabilit" b" competitors of eac! resource or capabilit"2 d# (s t!e organi,ation of t!e firmHs resources and capabilities b" t!e formal reporting relations!ips, t!e control and re ard s"stems, and ot!er factors suc! so as to ac!ieve t!e best competitive advantage2
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3# %c!ieving sustained competitive advantage re*uires bot! t!e development in industries in !ic! competitive forces are favorable and upon t!e development of resources and capabilities t!at are valuable, rare, and are difficult to imitate# .!en a firm !as valuable, rare, and difficult to imitate resources and capabilities, it is said to !ave a $i&tincti'e co "etence5 For ulating &trateg! %# cor"orate0le'el A gran$ &trateg! >master strateg"A provides t!e basic strategic direction at t!e corporate level of t!e organi,ation# 5our grand strategies !ave been identified#
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Gro*th &trategie& are grand strategies t!at involve organi,ational e$pansion along some major dimension# a# Concentration focuses on effecting t!e gro t! of a single product or service or a small number of closel" related products or services# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 0A 1A 3A is b# of
VU Mar'et development is gaining a larger s!are of a current mar'et or e$panding into ne ones# Product development is improving a basic product or service or e$panding into closel" related products or services# Fori,ontal integration is adding one or more business t!at
similar, usuall" b" purc!asing suc! business# Vertical integration involves effecting gro t! t!roug! t!e production
inputs previousl" provided b" suppliers or t!roug! t!e replacement of a customer role >Euc! as t!at of a distributorA b" disposing of oneHs o n outputs# 0A 6ac' ard integration occurs !en a business gro s b" becoming its o n supplier 1A 5or ard integration occurs !en organi,ational gro t! encompasses a role previousl" fulfilled b" a customer# ;i'er&ification entails effecting gro t! t!roug! t!e development of ne areas t!at are clearl" distinct from current businesses# 0A /onglomerate diversification ta'es place !en an organi,ation diversifies into areas t!at are unrelated to its current business# 1A /oncentric diversification occurs !en an organi,ation diversifies into a related, but distinct, business# c# T!ese gro t! strategies can be implemented t!roug! a number of means; 0A (nternal gro t! occurs as t!e organi,ation e$pands b" building on its o n internal resources# 1A %n acBui&ition is t!e purc!ase of all or part of one organi,ation b" anot!er# 3A % erger is t!e combining of t o or more companies into one organi,ation# 8A % joint venture occurs !en t o or more organi,ations provide resources to support a given project or product offering# 1# % &ta(ilit! &trateg! is a second t"pe of grand strateg" t!at involves maintaining t!e status *uo or gro ing in a met!odical, but slo , manner# a# Emall, privatel" o ned businesses are most li'el" to adopt t!is strateg"# b# Eome of t!e reasons for adopting a stabilit" strateg" are t!at it 0A %voids t!e ris's or !assles of aggressive gro t!# 1A Provides t!e opportunit" to recover after a period of accelerated gro t!# 3A Lets t!e compan" !old on to current mar'et s!are# 8A Ma" occur t!roug! default# ;efen&i'e &trategie&) t!e t!ird class of grand strategies, are sometimes called retrenc!ment strategies# T!e" tend to focus on t!e desire or need to reduce organi,ational operations usuall" t!roug! cost reductions, suc! as cutting bac' on non&essential e$penditures and instituting !iring free,es, and)or asset reductions suc! as selling land, e*uipment, or t!e business itself# a# Har'e&t entails minimi,ing investments !ile attempting to ma$imi,e s!ort&run profits and cas! flo , it! t!e long&run intention of e$isting it! t!e mar'et# b# % turnaroun$ is designed to reverse a negative trend and restore
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t!e organi,ation to appropriate levels of profitabilit"# c# % $i'e&titure involves an organi,ationHs selling or divesting of a business or part of a business# d# % (an4ru"tc! is a means !ereb" an organi,ation t!at is unable to pa" its debts can see' court protection from creditors and from certain contract obligations !ile it attempts to regain financial stabilit"# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 e# LiBui$ation entails selling or dissolving an entire organi,ation# 6#
VU
% "ortfolio &trateg! a""roach is a met!od of anal",ing an organi,ationHs mi$ of businesses in terms of bot! individual and collective contributions to strategic goals# T o portfolio approac!es are used most fre*uentl"# -ac! uses a t o&dimensional matri$, and eac! ma" appl" to eit!er t!e e$isting or to potential strategic business units >E6:sA# T!e portfolio concept is analogous to an individualHs selecting a portfolio of stoc's to ac!ieve balance in terms of ris', long&term gro t!, etc#
T!e Ao&ton Con&ulting Grou"& +ACG1 gro*th0&hare atri? compares various businesses in an organi,ationHs portfolio on t!e basis of relative mar'et s!are and mar'et gro t! rate# T!e corporate portfolio matri$ approac! !as been a popular approac! to determining corporate&level strateg"# T!e ACG atri?) developed b" t!e 6oston /onsulting Group, is a strateg" tool to guide resource allocation decisions based on mar'et s!are and gro t! of E6:s# a# 3elative mar'et s!are is determined b" t!e ratio of a businessHs mar'et s!are compared to t!e mar'et s!are of its largest rival# b# Mar'et gro t! rate is t!e gro t! in t!e mar'et during t!e previous "ear relative to gro t! in t!e econom" as a !ole# T!e matri$ defines four business groups# E6:s plotted on t!e 6/G matri$ can be categori,ed; 0A T!e Star !as a !ig! mar'et s!are in a rapidl" gro ing mar'et# 1A % Hue&tion Mar4 >problem c!ildA !as a lo mar'et s!are in a rapidl" gro ing mar'et# 3A T!e Ca&h Co* !as a !ig! mar'et s!are in a slo l" gro ing mar'et# 8A % ;og !as a lo mar'et s!are in an area of lo gro t!# c# Etrategies are suggested b" t!e E6:Hs position on t!e matri$# 0A :se funds from cas! co s to duns stars and possibl" *uestion mar's# 1A @ivest dogs and less desirable *uestion mar'# 0# T!e "ro$uctP ar4et e'olution atri? >sometimes called t!e life&c"cle portfolio matri$A is a 05&cell matri$ in !ic! business is plotted according to t!e business unitHs business strengt!s or competitive position, and t!e industr"Hs stage in t!e evolutionar" product)mar'et life c"cle# a# .!ile t!e 6/G matri$ measures mar'et gro t! rate t!e product)mar'et evolution matri$ s!o s t!e industr"Hs stage in t!e evolutionar" life c"cle# b# T!e maturit" and saturation stage is particularl" important because it ma" last for an e$tended period of time and is a stage t!at presents special c!allenges to preserve mar'et s!are !ile facing t!e prospect of t!e decline stage# (n a&&e&&ing the&e "ortfolio atri?e& remember t!at eac! model offers a some !at different perspective# Portfolio matrices do not provide advice about specific business it!in t!e organi,ation&suc! specifics are derived at t!e business level#
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T!e 6/G matri$ >and t!e portfolio conceptA !as lost muc! of its merit because; a# 4ot ever" organi,ation !as found t!at increased mar'et s!are leads to lo er costs# b# T!e portfolio concept assumes t!at an organi,ationHs businesses can be divided into a reasonable number of independent units#
c# d#
/ontrar" to predictions, man" so&called dogs !ave s!o n consistentl" !ig!er levels of profitabilit" t!an t!eir gro ing competitors it! dominant mar'et s!ares# Given t!e rate at !ic! t!e econom" !as been gro ing and t!e fact t!at a mar'et can !ave onl" one leader, ell over !alf of all businesses b" definition fall into t!e dog categor"# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU e# Etrategic implications of t!e 6/G matri$ are; mil' t!e cas! co sI invest resources in t!e starsI li*uidate or sell t!e dogsI and sell off or invest in t!e *uestion mar's# For ulating Au&ine&&0le'el &trateg! %# 6usiness&level strategies provide advice about specific strategies for various businesses# 6# Mic!ael -# Porter !as developed t!ree business&level strategies t!at are generic, i#e#, idel" applicable to a variet" of situations# 0# % co&t lea$er&hi" &trateg! involves emp!asi,ing organi,ational efficienc" so t!at t!e overall costs of providing products and services are lo er t!an t!ose of competitors# a# T!e business s!ould !ave a cost advantage t!at is not easil" or ine$pensivel" imitated# b# Managers s!ould consider ma'ing t!ose product or service innovations t!at are most important to customers# 1# % $ifferentiation &trateg! involves attempting to develop products and services t!at are vie ed as uni*ue in t!e industr"# a# @ifferentiation ma" occur in brand image, tec!nolog", customer service, features, *ualit", and election# b# /osts are not as important as product or service uni*ueness# % focu& &trateg! entails speciali,ing b" establis!ing a position of overall cost leaders!ip, differentiation, or bot!, but onl" it!in a particular portion, or segment, or an entire mar'et#
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For ulating functional0le'el &trateg! %# 6# Etrategies at t!e functional level are important in supporting a business&level strateg"# 5unctional areas develop t!e distinctive competencies t!at lead to potential competitive advantages#
Strateg! I "le entation Etrategies at t!e functional level are important in supporting a business&level strateg"# 5unctional areas develop t!e distinctive competencies t!at lead to potential competitive advantages# Strateg! i "le entation includes t!e various management activities t!at are necessar" to put t!e strateg" in motion, institute strategic controls t!at monitor progress, and ultimatel" ac!ieve organi,ational goals# %# Managers need to s"nc!roni,e major factors it!in an organi,ation needed to put a c!osen strateg" into action# 0# Technolog! is t!e 'no ledge, tool, e*uipment, and or' tec!ni*ue used b" an organi,ation in delivering its product or service# 1# Hu an re&ource& are t!e individuals !o are members of t!e organi,ation# 3# Re*ar$ &!&te & include bonuses, a ards, or promotions provided b" ot!ers, as ell as re ards related to internal e$periences, suc! as feeling of ac!ievement and c!allenge# 8# ;eci&ion "roce&&e& include t!e means of resolving *uestions and problems t!at occur in organi,ations# 5# Organi2ation &tructure is t!e formal pattern of interactions and coordination designed b" management to lin' t!e tas's of individuals and
groups in ac!ieving organi,ational goals# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU 6# Managers need to be able to monitor progress t!roug! strategic control# 0# Etrategic control involves monitoring critical environmental factors t!at could affect t!e viabilit" of strategic plans, assessing t!e effects of organi,ational strategic actions, and ensuring t!at strategic plans are implemented as intended# Etrategic control s"stems include information s"stems t!at provide feedbac' on t!e implementation and effectiveness of strategic plans
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Principles of Management MGT503 ENTRE#RENEURSHI# MANAGEMENT What I& Entre"reneur&hi"3 0# 1#
VU Lesson 10.28
Entre"reneur&hi"Mt!e process !ere individuals or a group of individuals ris' time and mone" in pursuit of opportunities to create value and gro t!roug! innovation regardless of t!e resources t!e" currentl" control# -ntrepreneurial ventures vs# small businesses Entre"reneurial 'enture&Morgani,ations t!at are pursuing opportunities, c!aracteri,ed b" innovative practices, and !ave gro t! and profitabilit" as t!eir main goals# S all (u&ine&&e&Morgani,ation t!at is independentl" o ned, operated, and financedI !as fe er t!an 000 emplo"eesI doesnHt necessaril" engage in an" ne or innovative practices, and !as relativel" little impact on its industr", usuall" remaining small b" c!oice or b" default#
Wh! I& Entre"reneur&hi" I "ortant3 0# 1# (nnovationMa process of c!anging, e$perimenting, transforming, revolutioni,ing, and a 'e" aspect of entrepreneurial activit"# 4umber of 4e Etart&:ps @ata collected b" t!e :#E# Emall 6usiness %dministration s!o s t!at t!e number of ne start& ups rose bet een 0<<5 and 1000# %ssuming t!at some of t!ese ne businesses engage in innovative practices and pursue profitabilit" and gro t!, t!en entrepreneurs!ip !as contributed to t!e overall creation of ne firms# Oob /reation T!e latest figures s!o t!at virtuall" all ne net jobs ere generated b" firms it! fe er t!an 500 emplo"ees # -$!ibit P1#0 on p# 088 provides t!e results of t!e G-M >Global -ntrepreneurs!ip MonitorA stud" t!at loo'ed at t!e level of entrepreneurial activit" in 10 countries#
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The Entre"reneurial #roce&& 0# -$ploring t!e entrepreneurial conte$t (t includes t!e realities of t!e ne econom", societ"Hs la s and regulations t!at compose t!e legal environment, and t!e realities of t!e c!anging orld of or'# (dentif"ing opportunit" and possible competitive advantages Etarting t!e venture (t includes researc!ing t!e feasibilit" of t!e venture, planning t!e ventures, organi,ing t!e ventures, and launc!ing t!e venture# Managing t!e venture (t includes managing processes, people, and gro t!#
1# 3#
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What ;o Entre"reneur& ;o3 0# (nitiall", an entrepreneur is engaged in assessing t!e potential for t!e venture, and t!en dealing it! start&up issues#
1# 3#
+nce t!e venture is up and running, t!e entrepreneurHs attention s itc!es to managing it# 5inall", t!e entrepreneur must manage t!e ventureHs gro t!#
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Principles of Management MGT503 An&*ering the Hue&tion&
VU
,5 ;ifferentiate (et*een entre"reneurial 'enture& an$ & all (u&ine&&e&5 Entre"reneurial Venture&Morgani,ations t!at are pursuing opportunities, c!aracteri,ed b" innovative practices, and !ave gro t! and profitabilit" as t!eir main goals# S all Au&ine&&e&Morgani,ation t!at is independentl" o ned, operated, and financedI !as fe er t!an 000 emplo"eesI doesnHt necessaril" engage in an" ne or innovative practices, and !as relativel" little impact on its industr", usuall" remaining small b" c!oice or b" default# 95 Wh! i& entre"reneur&hi" i "ortant in #a4i&tan3 T!e important of entrepreneurs!ip in Pa'istan can be s!o n in t!ree areas; innovation, number of ne start&up business and EM-s, and job creation# <5 I& the "ur&uit of entre"reneur&hi" i "ortant onl! in #a4i&tan3 E?"lain5 T!e Global -ntrepreneurs!ip Monitor >G-MA studied t!e pace of entrepreneurial activit" on economic gro t! in various countries# %mong t!e major industriali,ed G&C countries in particular, t!ere as a ver" strong relations!ip bet een t!e level of entrepreneurial activit" and annual economic gro t!# Eame is true for ever" countr" li'e Pa'istan i#e# developing nation# =5 ;e&cri(e the four 4e! &te"& in the entre"reneurial "roce&&5 -$ploring t!e entrepreneurial conte$tI includes t!e realities of t!e ne econom", societ"Hs la s and regulations t!at compose t!e legal environment, and t!e realities of t!e c!anging orld of or'# (dentif"ing opportunit" and possible competitive advantages Etarting t!e ventureI includes researc!ing t!e feasibilit" of t!e venture, planning t!e ventures, organi,ing t!e ventures, and launc!ing t!e venture# Managing t!e ventureI includes managing processes, people, and gro t!# .5 $o3 What $o entre"reneur&
(nitiall", an entrepreneur is engaged in assessing t!e potential for t!e venture, and t!en dealing it! start&up issues# +nce t!e venture is up and running, t!e entrepreneurHs attention s itc!es to managing it# 5inall", t!e entrepreneur must manage t!e ventureHs gro t!# E5 Wh! are &ocial re&"on&i(ilit! an$ ethical con&i$eration& i "ortant to entre"reneur&3 -t!ical considerations pla" a role in decisions and actions of entrepreneurs# T!e results of a stud" of appro$imatel" 300 entrepreneurs and corporate managers s!o ed t!at entrepreneurs generall" !ave more strict et!ical standards t!an do managers and are also better able to live b" t!eir beliefs, probabl" because t!e" !ave more control over t!eir decisions and actions# #re"aring Au&ine&&% to O"erate a S all
,5 Writing a Au&ine&& #lan% % business plan is a document ritten b" an entrepreneur or perspective o ner t!at details t!e nature of business, t!e product or service, t!e customers, t!e competition, t!e production and mar'eting met!ods, t!e management, t!e financing and ot!er significant aspects of proposed business venture#
(t !as purposes; 0# 1# 3# 8#
several To t!in' in concrete terms about ever" aspect of business# To able to get financing To measure progress To establis! credibilit" it! ot!ers#
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Principles of Management MGT503 WHAT IS CHANGE3
VU
Organi2ational change is defined as an" alteration in people, structure, or tec!nolog"# /!ange is ever present in organi,ations and cannot be eliminated# (nstead, e need to loo' at t!e 'e" issues related to managing c!ange# FORCES FOR CHANGE T!ere are e$ternal and internal forces t!at create t!e need for c!ange# %# -$ternal forces t!at create t!e need for c!ange come from various sources# 0# T!e mar'etplace 1# Government la s and regulations 3# Tec!nolog" 8# Labor mar'ets 5# -conomic c!anges 6# (nternal forces tend to originate primaril" from t!e internal operations of t!e organi,ation or from t!e impact of e$ternal c!anges# /!anges in t!e emplo"ee
0# strateg" 1# /!anges in or'force 3# 4e e*uipment 8# /!ange in attitudes
STIMULATING INNOVATION (nnovation is important to organi,ational success in t!e mar'etplace# %# /reativit" versus (nnovation# T!ere is a difference bet een creativit" and innovation# 0# Creati'it! is t!e abilit" to combine ideas in a uni*ue a" or to ma'e unusual associations bet een ideas # 1# Inno'ation is t!e process of ta'ing a creative idea and turning it into a useful product, service, or met!od of operation# Ho* can anager& fo&ter inno'ation3 a# +rganic structures positivel" influence innovation# b# T!e eas" availabilit" of organi,ational resources provides a critical building bloc' for innovation# c# 5re*uent interunit communication !elps brea' do n barriers to innovation# Hu an re&ource& 'aria(le& are in$icati'e of the i "ortant role that "eo"le "la! in inno'ati'e organi2ation&5 a# (nnovative organi,ations activel" promote t!e training and development of t!eir emplo"ees so t!eir 'no ledge remains current# b# (nnovative organi,ations offer emplo"ees !ig! job securit"# c# (nnovative organi,ations encourage individuals to become i$ea cha "ion&Mindividuals !o activel" and ent!usiasticall" support a ne idea, build support, overcome resistance, and ensure t!at t!e innovation is implemented#
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Principles of Management MGT503 ORGANI:ING
VU Lesson 10.29
+rgani,ations are e$perimenting it! different approac!es to organi,ational structure and design# +rgani,ational structure can pla" an important role in an organi,ationHs success# T!e process of ORGANI:INGMt!e second management functionsMis !o an organi,ationHs structure is created# The nature &tructure of organi2ation
Managers are see'ing structural designs t!at ill best support and allo emplo"ees to effectivel" and efficientl" do t!eir or'# Organi2ing is t!e process of creating an organi,ationHs structure# Organi2ation &tructure is t!e formal pattern of interactions and coordination designed b" management to lin' t!e tas's of individuals and groups in ac!ieving organi,ational goals# %n organi2ational &tructure is t!e formal frame or' b" !ic! job tas's are divided, grouped, and coordinated# T!is formal pattern designed b" management is to be distinguis!ed from t!e informal pattern of interactions t!at simpl" emerges it!in an organi,ation# 1# +rgani,ation structure consists primaril" of four elements; a# Oob design b# @epartmentali,ation c# 7ertical coordination d# Fori,ontal coordination 3# Organi2ation $e&ign is t!e process of developing an organi,ation structure# Organi2ational $e&ign is t!e process of developing or c!anging an organi,ationHs structure# (t involves decisions about si$ 'e" elements; or' speciali,ation, departmentali,ation, c!ain of command, span of control, centrali,ation)decentrali,ation, and formali,ation# .e need to ta'e a closer loo' at eac! of t!ese structural elements# T!e organi2ation chart is a line diagram t!at depicts t!e broad outlines of an organi,ationHs structure# .!ile var"ing in detail from one organi,ation to anot!er, t"picall" organi,ation c!arts s!o t!e major positions or departments in t!e organi,ation, t!e a" positions are grouped toget!er, reporting relations!ips for lo er to !ig!er levels, official c!annels for communications, and possibl" t!e titles associated it! major positions in t!e organi,ation# T!e organi,ation c!art provides a visual map of t!e chain of co an$) t!e unbro'en line of aut!orit" t!at ultimatel" lin's eac! individual it! t!e top organi,ational position t!oroug! a managerial position at eac! successive la"er in bet een# 1# 4earl" all organi,ations !aving just a fe members !ave an organi,ation c!art# Re&"on&i(ilit! is t!e obligation or e$pectation to perform and carr" out duties and ac!ieve goals related to a position# Authorit! is t!e rig!t in!erent in a managerial position to tell people !at to do and to e$pect t!em to do it, rig!t to ma'e decisions and carr" out actions to ac!ieve organi,ational goals# .!ile part of a managerHs or' ma" be delegated, t!e manager remains accountable for results# a# Accounta(ilit! is t!e re*uirement of being able to ans er for significant deviations from duties or e$pected results# b# T!e fact t!at managers remain accountable for delegated or' ma" cause t!em to resist delegation# @elegation is assignment of part of managerHs or' to ot!ers along it! responsibilit" and 0# 0#
aut!orit"# 0# (n addition to issues of accountabilit", managers ma" resist delegation for a number of reasons# a# Managers ma" fear if subordinates fail# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU b# Managers ma" t!in' t!e" lac' time to train subordinates# c# Managers ma" ant to !old on to t!eir po er# d# Managers ma" enjo" doing t!e tas's subordinates could do# e# Managers ma" feel t!reatened b" subordinates# f# Managers ma" not 'no !o to delegate# 1# Eubordinates ma" resist delegation because of fear of failure or of ris' ta'ing# 3# 5ailure to delegate ma" !ave serious negative conse*uences for a mangerHs career#
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Principles of Management MGT503 MOA ;ESIGNPS#ECIALI:ATION AN; ;E#ARTMENTALI:ATION Auil$ing Aloc4& of Organi2ing ,5 Mo( $e&ign %#
VU Lesson 10.30
Oob design is an essential part of organi,ational structure# 0# Mo( $e&ign is t!e specification of tas' activities, usuall" repeated on a regular basis, associated it! eac! particular job# a# Tas' activities need to be grouped in reasonabl" logical a"s for eac! job# b# T!e a" t!e jobs are configured influences emplo"ee motivation# 1# Wor4 &"eciali2ation is t!e degree to !ic! t!e or' necessar" to ac!ieve organi,ational goals is bro'en do n into various jobs# In Wor4 &"eciali2ation t!e tas's in an organi,ation are divided into separate jobs# %not!er term for t!is is division of labor. 0# .or' speciali,ation can be traced bac' to t!e ritings of %dam Emit!# 1# .or' speciali,ation as seen as a a" to ma'e t!e most efficient use of or'ersH s'ills because or'ers ould be placed in jobs according to t!eir s'ills and paid accordingl"# 3# +t!er advantages of or' speciali,ation included improvement in emplo"eesH s'ills at performing a tas', more efficient emplo"ee training, and encouragement of special inventions and mac!iner" to perform or' tas's# 8# .or' speciali,ation as vie ed as a source of unending productivit" improvements# %nd it as M up to a certain point# 5# T!e !uman diseconomies from or' speciali,ation included boredom, fatigue, stress, lo ered productivit", poor *ualit" of or', increased absenteeism, and !ig!er job turnover# 6# T!ere are four approac!es to job design# 0# Mo( &i "lification is t!e process of configuring or designing jobs so t!at job !olders !ave onl" a small number of narro , repetitive, activities to perform# a# T!e concept of job simplification as c!ampioned b" economist %dam Emit! and b" 5rederic' Ta"lor b# Training ne or'ers becomes relativel" eas" and or'ers become almost interc!angeable# c# T!e advantage is t!at major production efficiencies ma" be gained# d# T!e disadvantages are t!at, if carried too far, job satisfaction ma" be destro"ed b" narro , repetitive, boring jobs and t!e firm ma" become too infle$ible to serve customers it! var"ing needs#
T!"e& of ;e"art entali2ation ;e"art entali2ation is t!e clustering of individuals into units and units into departments and larger units in order to facilitate ac!ieving organi,ational goals# %n organi,ation design is an overall pattern of departmentali,ation# T!ere are four major patterns of departmentali,ation# a# T!e functional structure groups jobs into units based upon similarit" of e$pertise, s'ills, and or' activities, e#g#, mar'eting, accounting# b# T!e divisional structure groups jobs into units according to t!e similarit" of products or mar'ets# c# T!e !"brid structure combines aspects of bot! t!e functional and divisional forms, it! some jobs grouped into departments b" 0#
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functions and ot!er grouped b" products or mar'ets# d# T!e matri$ structure superimposes a !ori,ontal set of divisional reporting relations!ips onto a !ierarc!ical functional structure# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 A&&e&&ing Structural Alternati'e& %# 6#
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-ac! of t!e four most common t"pes of departmentali,ation !as major advantages and disadvantages# Functional &tructure is a t"pe of departmentali,ation in !ic! positions are grouped according to t!eir main functional >or speciali,edA area# 0# T"pical functional form of organi,ation !as several major advantages# 1# T!e functional form of organi,ation !as several major advantages# a# (n&dept! development of e$pertise is encouraged# b# -mplo"ees !ave clear career pat!s it!in t!eir function# c# 3esources are used more efficientl"# d# -conomies of scale ma" be possible because of speciali,ed people and e*uipment# e# (ntradepartmental coordination is facilitated# f# Epeciali,ed tec!nical competencies ma" be developed and ma" constitute a competitive advantage# 3# T!e functional form of origination !as several disadvantages# a# 3esponse time on multifunctional problems ma" be slo due to coordination problems# b# Major issues and conflicts bet een departments ma" !ave to be resolved b" top management, it! resultant dela"s# c# 6ottlenec's due to se*uential tas's# d# +ver speciali,ation ma" lead to a restricted vie of t!e departmentHs and t!e organi,ationHs needs# e# Performance ma" be difficult to measure because several functions are responsible for organi,ational results# f# Managers ma" be trained too narro l" in a single department# 8# T!e functional form of departmentali,ation is more appropriate under certain circumstances# a# T!e organi,ation is small or medium&si,ed# b# T!ere is a limited number of related products or services, or a relativel" !omogeneous set of customers or clients# c# T!e organi,ation is large and diverse, but t!e environment is stable#
;i'i&ional &tructure is a t"pe of departmentali,ation in !ic! positions are grouped according to similarit" of products, services, or mar'ets# 0# @ivisional structures are also called self&contained structures because eac! division contains t!e major functional resources it needs to pursue its o n goals it! little or no reliance on ot!er divisions# 1# T!e t!ree major forms of divisional structure differ according to t!e rationale for forming t!e divisions# a# #ro$uct $i'i&ion& are divisions created to concentrate on a single product or service or at least a relativel" !omogeneous set of products or services# b# Geogra"hic $i'i&ion& are divisions designed to serve different geograp!ic areas# c# Cu&to er $i'i&ion& are divisions set up to service particular t"pes of clients or customers# @ivisional structure !as several major advantages# a# @ivisions can react *uic'l" to c!anges in t!e environment# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 b# /oordination across functions is simplified# c# -ac! division can focus upon serving its customers# d# T!e divisionHs goals can be emp!asi,ed# e# Performance is more easil" measured# f# Managers can be trained in general management s'ills# 8# @ivisional structure !as several disadvantages# a# @uplication of resources in eac! division often occurs# b# (n&dept! e$pertise ma" be sacrificed# c# @ivisions ma" compete for limited resources# d# -$pertise across divisions ma" not be s!ared# e# (nnovations ma" be restricted to single divisions# f# @ivisional goals ma" ta'e priorit" over overall organi,ational goals#
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T!e divisional structure is li'el" to be used in large organi,ations !ere substantial differences e$ist among products or services, geograp!ic areas, or customers served#
;5 H!(ri$ &tructure is a form of departmentali,ation t!at adopts parts of bot! functional and divisional structures at t!e same level of management# 0# F"brid structures are adopted b" large organi,ations to gain t!e advantages of functional and divisional structures# a# 5unctional departments are created to ta'e advantage of resource utili,ation efficiencies, economies of scale, or in&dept! e$pertise# b# @ivisional departments are usuall" created to benefit from a stronger focus on products, services, or mar'ets# 1# T!e !"brid structure !as several advantages# a# /orporate and divisional goals can be aligned# b# Epeciali,ed e$pertise and economies of scale can be ac!ieved in major functional areas# c# %daptabilit" and fle$ibilit" ma" be ac!ieved in !andling diverse product or service lines, geograp!ic areas, or customers# T!e !"brid structure !as several disadvantages# a# /onflict ma" arise bet een departments and divisions# b# F"brid organi,ations tend to develop e$cessivel" large staffs in t!e corporate&level functional departments# c# T!ere ma" be a slo response to e$ceptional situations re*uiring coordination bet een a division and a corporate functional department# T!e !"brid structure is best used under particular conditions# a# T!e organi,ation faces environmental uncertaint" best met b" a divisional structure# b# T!e organi,ation re*uires functional e$pertise and)or efficienc"# c# T!e organi,ation !as sufficient resources to justif" t!e structure#
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-# % atri? &tructure is a t"pe of departmentali,ation t!at superimposes a !ori,ontal set of divisional reporting relations!ips onto a !ierarc!ical functional structure# 0# %n organi,ation it! a matri$ structure !as a functional and a divisional structure at t!e same time# 1# -mplo"ees !o or' in a matri$ organi,ation report to t o bosses, t!us, t!e unit"&of&command principle is violated# 3# +rgani,ations t!at adopt a matri$ structure usuall" go t!roug! several
identifiable structural stages# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU a# Etage 0 is a traditional structure, usuall" a functional structure, !ic! follo s t!e unit"&of&command principle# b# Etage 1 is a temporar" overla" in !ic! managerial integrator positions are created to !andle issues of finite duration t!at involves coordinating across functional departments# c# Etage 3 is a permanent overla" in !ic! t!e managerial integrator positions become permanent# d# Etage 8 is a mature matri$, in !ic! matri$ bosses !ave e*ual po er# 8# %s an organi,ation passes t!roug! t!e matri$ stages, !ori,ontal integration increases at t!e cost of greater administrative comple$it"# T!e matri$ form of organi,ation !as several advantages# 5# T!e matri$ form of organi,ation !as several advantages# a# @ecision ma'ing can be decentrali,ed# b# Fori,ontal coordination is strengt!ened# c# -nvironmental monitoring is improved# d# 3esponses to environmental c!anges are *uic'l" made# e# 5unctional specialists can be added to or resigned to projects as needed# f# Eupport s"stems can be allocated to projects as needed# =# Matri$ designs !ave several disadvantages# a# %dministrative costs are increased# b# Lines of aut!orit" and responsibilit" ma" not be clear to individual emplo"ees# c# Possibilities of conflict are increased# d# (ndividuals can become preoccupied it! internal relations at t!e e$pense of clients and project goals# e# %ll decisions ma" become group decisions, leading to gross inefficienc"# f# 3eactions to c!ange ma" be slo ed if interpersonal s'ills are lac'ing or top management fig!ts for control# C# Matri$ designs are usuall" appropriate !en t!e follo ing t!ree conditions are met; a# T!e considerable pressure from t!e environment t!at necessitates a simultaneous and strong focus on bot! functional and divisional dimensions# b# T!e demands placed on t!e organi,ation are c!anging and unpredictable, ma'ing it important to !ave a large capacit" for processing information and coordinating activities *uic'l"# c# T!ere is pressure for s!ared resources# ?# 3esearc! indicates some of t!e factors t!at ma" be necessar" to t!e success of a matri$ s"stems a# T!e organi,ational culture ma" need to be c!anged to support collaboration# b# Managers ma" need special training, especiall" in interpersonal relations# 5# +f particular interest are t o ne t"pes of organi,ational structure t!at !ave recentl" emerged; t!e "roce&& &tructure and t!e net*or4e$ &tructure5 0# % process structure is a t"pe of departmentali,ation !ic! groups positions into process team !ic! are given beginning&to&end responsibilit" for t!at process or t!at specified or' flo # T!e process structure is sometimes called t!e !ori,ontal organi,ation# 1# T!e net or'ed structure is a form of organi,ing in !ic! man" functions are contracted out to ot!er independent firms and coordinated t!roug! t!e use of information tec!nolog" net or's# Eometimes t!e net or'ed structure is called t!e
virtual corporation because it performs as virtuall" one corporation#
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Principles of Management MGT503 S#AN OF COMMAN;) CENTRALI:ATION VS ;E0CENTRALI:ATION AN; LINE VS STAFF AUTHORITC Metho$& of Vertical Coor$ination
VU Lesson 11.31
Vertical coor$ination is t!e lin'ing of activities at t!e top of t!e organi,ation it! t!ose at t!e middle and lo er levels in order to ac!ieve organi,ational goals# For ali2ation is t!e degree to !ic! ritten policies, rules, procedures, job descriptions, and ot!er documents specif" !at actions are >or are notA to be ta'en under a given set of circumstances# 0# Most organi,ations need some degree of formali,ation so t!at fundamental decisions do not !ave to be made more t!an once and so t!at ine*uities ill be less li'el" to occur# 1# 6eing too !ig!l" formali,ed can lead to cumbersome operations, slo ness in reacting to c!ange, and lo levels of creativit" and innovation# S"an of anage ent or &"an of control is t!e number of subordinates !o report directl" to a specific manager# 0# Managers s!ould !ave neit!er too man" nor too fe subordinates# 1# 3esearc! indicates t!at t!ere is no universall" correct span of management for all managers# 3at!er, spans of management can be narro er or broader depending on t!e circumstances of eac! managerial job# a# EubordinatesH or' is suc! t!at little interaction it! ot!ers is re*uired# b# Managers and)or t!eir subordinates are !ig!l" competent# c# T!e or' of subordinates is similar# d# Problems are infre*uent# e# Eubordinates are located it!in close p!"sical pro$imit" of one anot!er# f# Managers !ave fe non supervisor" duties to perform# g# Managers !ave additional !elp suc! as secretaries or assistants# !# T!e or' is c!allenging enoug! to motivate subordinates to do a good job# Epans of management determine t!e number of !ierarc!ical levels in an organi,ation# a# % tall &tructure is one t!at !as narro spans of management and man" !ierarc!ical levels in an organi,ation# b# % flat &tructure is one t!at !as broader spans of management and fe !ierarc!ical levels and ide spans of control# T!e number of !ierarc!ical levels in an organi,ation affects organi,ational effectiveness# a# 7er" tall organi,ations raise administrative over!ead, slo communication and decision ma'ing, ma'e it more difficult to pinpoint responsibilit" for various tas's, and encourage t!e formation of dull, routine jobs# b# ;o*n&i2ing is t!e process of significantl" reducing t!e la"ers of middle management, e$panding t!e spans of control, and s!rin'ing t!e si,e of t!e or' force# c# Re&tructuring is t!e process of ma'ing a major c!ange in organi,ation structure t!at often involves reducing management levels and also possibl" c!anging some major components of t!e organi,ation t!roug! divestiture and)or ac*uisition# d# @o nsi,ing must be planned and implemented carefull"# 0A @one ell, do nsi,ing ma" result in reduced costs, faster decision ma'ing, more c!allenging jobs, fe er redundancies, and increased innovation#
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@one poorl", do nsi,ing ma" result in t!e loss of valuable emplo"ees, demorali,ed survivors, and an ultimate decline in productivit"#
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Principles of Management MGT503 3A
VU % five&"ear stud" s!o ed onl" increases in profits and productivit" in a relativel" small number of firms t!at do nsi,ed !ile most !ad noticeable decreased in morale# T!e degree to !ic! aut!orit" in an organi,ation is centrali,ed or decentrali,ed affects t!e pattern of decision ma'ing in t!e organi,ation# 0# 1# 3# b" a Centrali2ation is t!e e$tent to !ic! po er and aut!orit" are retained at t!e top organi,ational levels# ;ecentrali2ation is t!e e$tent to !ic! po er and aut!orit" are delegated to lo er levels# %n organi,ation is centrali,ed if decisions made at lo er levels are governed
restrictive set of policies, procedures, and rules, and if situations not e$plicitl" covered are referred to !ig!er levels for resolution# 8# %n organi,ation is decentrali,ed to t!e e$tent t!at decisions made at lo er levels are made it!in a general set of policies, procedures, and rules, it! decisions not covered left to t!e discretion of lo er&level managers# 5# /entrali,ation offers advantages# a# (t is easier to coordinate t!e activities of various units and individuals# b# Top managers !ave more e$perience and ma" t!erefore ma'e better decisions# c# Top managers !ave a broader perspective on decision situations# d# @uplication of effort b" various organi,ational units can be avoided# e# Etrong leaders!ip is promoted# =# @ecentrali,ation offers advantages# a# Top managers can concentrate upon major issues# b# T!e jobs of lo er&level emplo"ees are enric!ed b" t!e c!allenge of ma'ing decisions# c# @ecisions can be made faster# d# (ndividuals at lo er levels ma" be closer to t!e problem and ma" be in a better position to ma'e good decisions# e# 3elativel" independent units emerge as divisions, it! more easil" measured outputs# C# +rgani,ations s!ould move to ard a decentrali,ed structure !en; a# T!e organi,ation is so large t!at top managers do not !ave t!e time or t!e 'no ledge to ma'e all t!e major decisions# b# +perations are geograp!icall" dispersed# c# Top managers cannot 'eep up it! comple$ tec!nolog"# d# T!e environment is increasingl" uncertain# T!e configuration of line and staff positions can affect t!e vertical integration in organi,ations# 0# % line "o&ition is a position t!at !as aut!orit" and responsibilit" for ac!ieving t!e major goals of t!e organi,ation# 1# % &taff "o&ition is a position !ose primar" purpose is providing speciali,ed e$pertise and assistance to line positions# 3# Line aut!orit" differs from staff aut!orit"# a# Line authorit! is aut!orit" t!at follo s t!e c!ain of command establis!ed b" t!e formal !ierarc!"# b# Etaff departments !ave functional authorit!) aut!orit" over ot!ers in t!e organi,ation in matters related directl" to t!e staff departmentsH functions# c# /onflicts of line and functional aut!orit"# 0A Etaff personnel ma" usurp line aut!orit"# 1A Line personnel ma" abdicate responsibilit" of staff departments# 3A /onflicts ma" be avoided b" clarif"ing lines of aut!orit" and encouraging team or'#
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3ecentl" a trend !ad developed to reduce t!e number of corporate& level staff positions in cost cutting moves# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 #ro oting Inno'ation% Metho$& of Hori2ontal coor$ination Hori2ontal coor$ination is t!e lin'ing of activities across departments at similar levels#
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T!e need for !ori,ontal coordination in an organi,ation is directl" proportional to t!e information&processing needs of t!e organi,ation# 1# +rgani,ations need to process more information under certain circumstances# a# T!e organi,ation faces comple$ and)or c!anging tec!nolog"# b# T!e environment is uncertain# c# T!e compan" is gro ing# 3# (n facilitating information processing across t!e organi,ation, !ori,ontal coordination also promotes innovation# a# 4e ideas are more li'el" to emerge !en vie s are s!ared# b# % areness of problems and opportunities across areas ma" spar' creative solutions# c# (nvolving emplo"ees in t!e development of ideas promotes commitment to proposed c!anges# % anagerial integrator is a manager !o is given t!e tas's of coordinating related or' t!at involves several functional departments# 0A Project managers usuall" are responsible for coordinating t!e or' associated it! a particular project until its completion# 1A Product managers orc!estrate t!e launc!ing of ne products and services and ma" t!en continue coordinating interdepartmental or' related to t!e ne products and services# 3A 6rand manager coordinate organi,ational efforts involving particular brand&name products, most often it!in t!e soap, food, and toiletries industries# Managerial integrators do not !ave t!e line aut!orit" and must gain t!e cooperation of staff mangers to implement t!eir proposals#
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Principles of Management MGT503 ORGANI:ATIONAL ;ESIGN AN; ORGANIC VS MECHANISTIC VS VIRTUAL STRUCTURES
VU Lesson 11.32
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Mo( rotation is t!e practice of periodicall" s!ifting or'ers t!roug! a set of jobs in a planned se*uence# a# +ne purpose of job rotation is to combat boredom, but its success is s!ort&lived if tas's are too simple# b# %not!er purpose of job rotation is cross training so t!at t!ere is ma$imum fle$ibilit" in job assignments# c# % related purpose is emplo"ee development so t!at emplo"ees increase t!eir capabilities and understanding of various aspects of t!e organi,ation# d# % potential problem is t!at rotating individuals ma" be treated as temporar" !elps and t!eir lo"alt" perceived as *uestionable# 8# Mo( enlarge ent is t!e allocation of a ider variet" of similar tas's to a job in order to ma'e it more c!allenging# a# Oob enlargement broadens Io( &co"e) t!e number of different tas's an emplo"ee performs in a particular job# b# T!e problem is t!at if additional simple tas's are added, or'er boredom ma" persist# Too, lo er efficienc", mental overload, increased errors, and ot!er problems ma" develop# 5# Mo( enrich ent) pioneered b" 5rederic' Fert,berg, is t!e process of upgrading t!e job&tas' mi$ in order to increase significantl" t!e potential for gro t!, ac!ievement, responsibilit", and recognition# a# Oob enric!ment increases Mo( $e"th) t!e degree to !ic! individuals can plan and control t!e or' involved in t!eir jobs# b# T!e important Io( characteri&tic& o$el is a model developed to guide job enric!ment efforts t!at include consideration of core Io( characteri&tic&) critical "&!chological &tate&) and outco e&5 c# T!e job c!aracteristics model !as five core job c!aracteristics# 0A S4ill 'ariet! is t!e e$tent to !ic! t!e job re*uires a number of activities t!at re*uire different s'ills# 1A Ta&4 i$entit! is t!e degree to !ic! t!e job allo s t!e completion of a major identifiable piece of or', rat!er t!an just a fragment# 3A Ta&4 &ignificance is t!e e$tent to !ic! t!e or'er sees t!e job output as !aving an important impact on ot!ers# 8A Autono ! is t!e amount of discretion allo ed in determining sc!edules and or' met!ods for ac!ieving t!e re*uired output# 5A Fee$(ac4 is t!e degree to !ic! t!e job provides clear, timel" information about performance results# %ccording to t!e job c!aracteristics model, t!e core c!aracteristics ill increase or'er motivation onl" if or'ers e$perience t!ree critical ps"c!ological states# 0A .or'ers must feel t!at t!e or' is meaningful# 1A .or'ers must 'no t!e" are responsible for t!e outcomes# 3A .or'ers must actuall" find out results# %ccording to t!e job c!aracteristics model, outcomes of t!e critical states ill be !ig!er internal or' motivation, greater satisfaction of gro t! needs, !ig!er general job satisfaction, and increased or' effectiveness# T!e job c!aracteristics model is li'el" to be used successfull" under t o conditions# 0A .or'ers !ave !ig! gro*th0nee$ &trength) t!e degree to !ic! an individual needs personal gro t! and development on
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t!e job# .or'ers are satisfied it! ot!er aspects of t!e job conte$t, i#e# supervision, pa", co or'ers, and job securit"#
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Principles of Management MGT503 ORGANI:ATIONAL ;ESIGN ;ECISIONS
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+rgani,ations arenHt structured t!e same a"# Top managers put a lot of t!oug!t into !o best to design t!e organi,ationHs structure# T!at best design depends on four contingenc" variables; t!e organi,ationHs strateg", si,e, tec!nolog", and degree of environmental uncertaint"# T!ere are t o generic models of organi,ational design# 0# % echani&tic organi2ation is an organi,ational structure t!at is c!aracteri,ed b" !ig! speciali,ation, rigid departmentali,ation, narro spans of control, !ig! formali,ation, a limited information net or', and little participation in decision ma'ing b" lo &level emplo"ees# 1# %n organic organi2ation is a structure t!at is !ig!l" adaptive and fle$ible it! little or' speciali,ation, minimal formali,ation and little direct supervision of emplo"ees# 3# .!en is eac! design favored2 (t depends on t!e contingenc" variables# /ontingenc" factorsMappropriate structure depends on four contingenc" variables; ,5 Strateg! an$ &tructure +ne of t!e contingenc" variables t!at influences organi,ational design is t!e organization#s strategy. Most current strateg"&structure frame or's tend to focus on t!ree strateg" dimensions; 0A (nnovationMneeds t!e fle$ibilit" and free flo of information of t!e organic organi,ation 1A /ost minimi,ationMneeds t!e efficienc", stabilit", and tig!t controls of t!e mec!anistic organi,ation 3A (mitationM !ic! uses c!aracteristics of bot! mec!anistic and organic Si2e an$ &tructure T!ere is considerable !istorical evidence t!at an organization#s size significantl" affects its structure# Larger organi,ations tend to !ave more speciali,ation, departmentali,ation, centrali,ation and formali,ation alt!oug! t!e si,e&structure relations!ip is not linear# Tec!nolog" also !as been s!o n to affect an organi,ationHs c!oice of structure# a# -ver" organi,ation uses some form of tec!nolog" to transform inputs into outputs# b# T!e stud" of structure and tec!nolog" found t!at organi,ations adapted to t!eir tec!nolog" and t!at t!ree distinct tec!nologies !ad increasing levels of comple$it" and sop!istication# 0A Unit "ro$uction is t!e production of items in units or small batc!es# 1A Ma&& "ro$uction is large&batc! manufacturing# 3A #roce&& "ro$uction is continuous&process production# En'iron ental uncertaint! an$ &tructure T!e final contingenc" factor t!at !as been s!o n to affect organi,ational structure is environmental !ncertainty. +ne a" to manage environmental uncertaint" is t!roug! adjustments in t!e organi,ationHs structure# T!e more uncertain t!e environment, t!e more fle$ible and responsive t!e
organi,ation ma" need to be# COMMON ORGANI:ATIONAL ;ESIGNS %# Traditional organi,ational designs# .e no need to loo' at various organi,ational designs t!at "ou mig!t see in toda"Hs organi,ations# 0# % &i "le &tructure is an organi,ational design it! lo departmentali,ation, of control, aut!orit" centrali,ed in a single person, and little formali,ation# a# (ts strengt!s are its fle$ibilit", speed and lo cost to maintain# b# (ts major dra bac' is t!at itHs most effective in small organi,ations# ide spans
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Principles of Management MGT503 VU %s an organi,ation gro s, t!e structure tends to become more speciali,ed and formali,ed# .!en contingenc" factors favor a bureaucratic or mec!anistic design, one of t o options is li'el" to be used# 1# +ne option e$pands functional departmentali,ation into t!e functional &tructure) !ic! is an organi,ational design t!at groups similar or related occupational specialties toget!er# 3# T!e ot!er option is t!e $i'i&ional &tructure) !ic! is an organi,ational structure made up of autonomous, self&contained units# 6# /ontemporar" organi,ational designs# Fo ever, man" of toda"Hs organi,ations are finding t!at t!e traditional !ierarc!ical organi,ational designs arenHt appropriate for t!e increasingl" d"namic and comple$ environments t!e" face# Tea 0(a&e$ &tructure&% +ne of t!e ne er concepts in organi,ational design is t!e tea 0(a&e$ &tructure) !ic! is an organi,ational structure made up of or' groups or teams t!at performs t!e organi,ationHs or'# #roIect an$ atri? &tructure&% %not!er variation in organi,ational arrangements is based on t!e fact t!at man" of toda"Hs organi,ations deal it! or' activities of different time re*uirements and magnitude# +ne of t!ese arrangements is t!e atri? organi2ation t!at assigns specialists from different functional departments to or' on one or more projects being led b" project managers# %not!er of t!ese designs is t!e "roIect &tructure) !ic! is a structure in !ic! emplo"ees are permanentl" assigned to projects# Autono ou& Internal Unit&% Eome large organi,ations !ave adopted a structure t!atHs described as autono ou& internal unit&, a design in !ic! t!ere are independent, autonomous decentrali,ed business units, eac! it! its o n products, clients, competitors, and profit goals# The Aoun$ar! le&& Organi2ation% %not!er approac! to organi,ational design is t!e (oun$ar! le&& organi2ation, !ic! describes an organi,ation !ose design is not defined b", or limited to t!e !ori,ontal, vertical, or e$ternal boundaries imposed b" a predefined structure# Learning Organi2ation% %n organi,ation t!at facilitate t!e life long learning and development of its emplo"ees !ile transforming itself to respond to c!anging demands and needs of mar'et#
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Principles of Management MGT503 LEA;ING AN; LEA;ERSHI# MOTIVATING SELF AN; OTHERS The nature oti'ation of
VU Lesson 11.33
6eing able to effectivel" motivate emplo"ees is a c!allenge t!at managers face in all t"pes and si,es of organi,ations# -ver"t!ing t!at e give to our or'ers gets returned to us in terms of efficienc", *ualit", lo"alt", and innovation# Moti'ation is t!e illingness to e$ert !ig! levels of effort to reac! organi,ational goals, conditioned b" t!e effortHs abilit" to satisf" some individual need# %# -ffort is a measure of intensit" or drive# Fig! levels of effort are unli'el" to lead to favorable job performance unless t!e effort is c!anneled in a direction t!at benefits t!e organi,ation#
6# % nee$ is an internal state t!at ma'es certain outcomes appear attractive# %n unsatisfied need creates tension t!at stimulates drives it!in an individual# T!ese drives generate a searc! be!avior to find particular goals t!at, if attained, ill satisf" t!e need and reduce t!e tension# Hence oti'ation is t!e force t!at energi,es be!avior, gives direction to be!avior, and underlies t!e tendenc" to persist# 0# % personHs motivation is not directl" measurable, but must be inferred from be!avior# 1# Performance is a function of abilit", motivation and or'ing conditions# 3# 6esides !iring individual it! abilit" to do t!e or', managers !ave t!e c!allenge to provide or'ing conditions t!at nurture and support individual motivation to or' to ard organi,ation goals# T!e main elements of motivation !ave been identified based on numerous studies# % simplified model of motivation !as been developed# 0# (nner needs and cognitions lead to be!aviors# 1# %ppropriate be!aviors ma" result in re ards, !ic! reinforce t!e be!aviors, fulfill needs, and provide cognitive input regarding t!e future association of be!aviors and re ards# 3# Lac' of re ards ma" lead to unfulfilled needs, un&reinforced be!aviors, and cognitive input in t!e form of e$pectations about t!e future# Intrin&ic Moti'ator& % personHs internal desire to do some t!ing for !is satisfaction, respect, prestige or lo"alt"# E?trin&ic Moti'ator& 5actors of motivation t!at comes from outside >environmentA or organi,ation li'e pa", bonuses, tangible benefits etc# FROM THEORC EM#LOCEES TO #RACTICE% SUGGESTIONS FOR MOTIVATING !at is currentl" 'no n
Eeveral suggestions for motivating emplo"ees are given and are based on about motivation#
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3ecogni,e individual differences in terms of needs, attitudes, personalit", and ot!er important individual factors# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU 6# Matc! people to jobs b" identif"ing !at needs are important to individuals and tr"ing to provide jobs t!at allo t!em to fulfill t!ose needs# /# :se goals because t!e literature on goal setting suggests t!at managers s!ould ensure t!at emplo"ees !ave !ard, specific goals and feedbac' on !o ell t!e"Hre doing in pursuit of t!ose goals# -nsure t!at goals are perceived as attainable# -mplo"ees reduce t!eir levels of effort# -# 5# G# F# !o see goals as unattainable !at is a re ard ill
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(ndividuali,e re ards# 6ecause emplo"ees !ave different needs, and reinforce to one ma" not or' for anot!er#
Lin' re ards to performance b" ma'ing re ards contingent on desired levels of performance# /!ec' t!e s"stem for e*uit"# -mplo"ees s!ould perceive t!at t!e re ards or outcomes are e*ual to t!e inputs given# @onHt ignore mone"# T!e allocation of performance&based increases, piece or' bonuses, and ot!er pa" incentives is important in determining emplo"ee motivation#
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Principles of Management MGT503 MASLOW>S NEE;S THEORC AN; ITS ANALCSIS Ma&lo*>& Nee$ Theor! %ccording to %bra!am Maslo Hs hierarch! of nee$& theor!, one of t!e most of motivation, individual needs form a five&level !ierarc!"# 0#
VU Lesson 12.34
idel" 'no n t!eories
1# 3# 8# of
Maslo Hs !ierarc!" of needs from t!e most basic to t!e !ig!est# a# #h!&iological nee$& are basic and include needs for food, ater, and s!elter# b# Safet! nee$& pertain to t!e desire to be safe, secure and free from t!reats to our e$istence# c# Aelongingne&& nee$& involve t!e desire to affiliate it! and be accepted b" ot!ers# d# E&tee nee$& are related to t!e t o&pronged desire to !ave a positive self&image and to !ave our contributions valued and appreciated b" ot!ers# e# Self0actuali2ation nee$& pertain to t!e re*uirement of developing our capabilities and reac!ing our full potential# 4eeds at one level do not !ave to be completel" fulfilled before t!e ne$t level becomes relevant# %s needs on one level are fulfilled, t!e" cease to act as motivators and tension develops to fulfill needs at t!e ne$t level# 3ecent studies !ave raised *uestions as to !et!er t!e !ierarc!ical aspect Maslo Hs t!eor" is applicable to ever"one and t!an five levels of needs# !et!er t!ere mig!t be fe er
Anal!&i& an$ Wea4ne&& of Theor! 0# 1# 3# 8# needs found 5ive levels of need are not al a"s present# +rder of needs and !ierarc!" ma" not be t!e same for all emplo"ees# T!ere are certainl" cultural differences !ic! t!e t!eor" did not ta'e care# %nal",ing t!e t!eor" in countr" and cultural conte$t, for e$ample in /!ina, t!e !ierarc!" of as different t!an Maslo Hs t!eor"#
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Principles of Management MGT503 OTHER NEE; AN; COGNITIVE THEORIES OF MOTIVATION McGregor>& Theor! G an$ Theor! C distinct vie s of !uman nature# 0# 1# 3# K
VU Lesson 12.35 ere developed b" @ouglas McGregor and describe t o
Theor! G as t!e assumption t!at emplo"ees disli'e or', are la,", see' to avoid responsibilit", and must be coerced to perform# Theor! C as t!e assumption t!at emplo"ees are creative, see' responsibilit", and can e$ercise self&direction# T!eor" Q assumed t!at lo er&order needs >Maslo HsA dominated individuals, and T!eor" assumed t!at !ig!er&order needs dominated#
Moti'ation0h!giene theor! is t!e t!eor" developed b" 5rederic' Fer,berg t!at suggests t!at intrinsic factors are related to job satisfaction and motivation, and e$trinsic factors are associated it! job dissatisfaction# T!e basis of Fer,bergHs t!eor" is t!at !e believed t!at t!e opposite of satisfaction as not dissatisfaction# 3emoving dissatisf"ing c!aracteristics from a job ould not necessaril" ma'e t!e job satisf"ing# 5rederic' Fer,bergHs t*o0factor t!eor" states t!at t!ere are onl" t o categories of needs# H!giene factor& are factors t!at eliminate dissatisfaction# T!e" include t!ings suc! as supervision, compan" polic", salar", or'ing conditions, securit" and so fort!Me$trinsic factors associated it! job conte$t, or t!ose t!ings surrounding a job# H!giene factor& are necessar" to 'eep or'ers a a" from feeling dissatisfied# T!ere are several !"giene factors# a# Pa" b# .or'ing conditions c# Eupervisors d# /ompan" policies e# 6enefits Moti'ator& are factors t!at increase job satisfaction and !ence motivation# T!e" include t!ings suc! as ac!ievement, recognition, responsibilit", advancement and so fort!Mintrinsic factors associated it! job content, or t!ose t!ings it!in t!e job itself# Moti'ator factor can onl" lead or'ers to feel satisfied and motivated# a# %c!ievement b# 3esponsibilit" c# .or' itself d# 3ecognition e# Gro t! and ac!ievement /la"ton %lderferHs ERG theor! combines Maslo Hs five needs into t!ree need levels; e$istence, relatedness and gro t!# 0# E?i&tence nee$& include t!e various forms of material and p!"siological desires, suc! as food and ater, as ell as suc! or'&related forms as pa", fringe benefits and p!"sical or'ing conditions# 1# Relate$ne&& nee$& address our relations!ips it! significant ot!ers, suc! as families, friends!ip groups, or' groups and professional groups# 3# Gro*th nee$& impel creativit" and innovation, along it! t!e desire to !ave a productive impact on our surroundings# 8# -3G needs differ in concreteness, i#e# t!e degree to !ic! t!eir presence or absence can be verified#
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T!e &ati&faction0"rogre&&ion "rinci"le is a principle t!at states t!at satisfaction of one level of need encourages concern it! t!e ne$t level# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU =# 6esides disagreeing as to t!e number of need levels t!at mig!t e$ist, t!e -3G t!eor" differs from Maslo Hs !ierarc!" of needs t!eor" in t!ree ot!er significant a"s; a# %lt!oug! t!e general notion of a !ierarc!" is retained, %lderferHs t!eor" argues t!at e can be concerned it! more t!an one need categor" at t!e same time# b# -3G t!eor" is more fle$ible in ac'no ledging t!at some individualsH needs ma" occur in a some !at different order t!an t!e posited b" t!e -3G frame or'# c# -3G t!eor" incorporates a fru&tration regre&&ion "rinci"le !ic! states t!at if e are continuall" frustrated in our attempts to satisf" a !ig!er& level need, e ma" cease to be concerned about t!at need# Mc/lellandHs acBuire$0nee$& theor! argues t!at our needs are ac*uired or learned on t!e basis of our life e$perience# 0# T!e T!ematic %pperception Test >T%TA measures t!e needs for ac!ievement, affiliation, and po er# 1# T!e nee$ of achie'e ent +nAch1 is t!e desire to accomplis! c!allenging tas's and ac!ieve a standard of e$cellence in oneHs or'# 3# T!e nee$ for affiliation +nAff1 is t!e desire to maintain arm, friendl" relations!ips it! ot!ers# 8# T!e nee$ for "o*er +n#o*1 is t!e desire to influence ot!ers and control oneHs environment# a# #er&onal "o*er is t!e need for po er in !ic! individuals ant to dominate ot!ers for t!e sa'e of demonstrating t!eir abilit" to ield po er# b# In&titutional "o*er is t!e need for po er in !ic! individuals focus on !at t!e" can do to solve problems and furt!er organi,ational goals# 5# T!e need profile of successful managers in competitive environments appears to include; a# % moderate&to&!ig! need for institutional po er# b# % moderate need for ac!ievement to facilitate individual contributions earl" in oneHs career and a desire for t!e organi,ation to maintain a competitive edge as one moves to !ig!er levels c# %t least a minimum need for affiliation to provide sufficient sensitivit" for influencing ot!ers# d# 4eed for ac!ievement ma" actuall" be more important t!an need for po er in running small or large, decentrali,ed companies# =# (t ma" be possible to foster t!e needs for ac!ievement and for institutional po er t!roug! training#
Significance for Manager& Man" aspects of need t!eories are of value to managers# 0# 1# of 3# 4eed t!eories are compatible in pointing out t!e importance of !ig!er&level needs as a source of motivation# 3esearc! indicates t!at it is more li'el" t!at individuals differ in t!e ma'eup t!eir need structures t!an t!at t!e need structures of individuals are basicall" t!e same# T!e frustration&regression aspect of -3G t!eor" ma" !ave serious implications for organi,ations#
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Principles of Management MGT503 Cogniti'e #er&"ecti'e&
VU
EBuit! Theor!) developed b" O# Etace" %dams, sa"s t!at an emplo"ee perceives !at !e or s!e got from a job situation >outcomesA in relation to !at !e or s!e put into it >inputsA and t!en compares t!e inputs& outcomes ratio it! t!e inputs&outcomes ratios of relevant ot!ers and finall" corrects an" ine*uit"# 0# T!e referent& are t!e persons, s"stems, or selves against !ic! individuals compare t!emselves to assess e*uit"# 1# -*uit" t!eor" recogni,es t!at individuals are concerned it! t!eir absolute re ards as t!e relations!ip of t!ose re ards to !at ot!ers receive# 3# .!at ill emplo"ees do !en t!e" perceive an ine*uit"2 a# @istort eit!er t!eir o n or ot!ersH inputs or outcomes# b# 6e!ave in some a" to induce ot!ers to c!ange t!eir inputs or outcomes# c# 6e!ave in some a" to c!ange t!eir inputs or outcomes# d# /!oose a different comparison person# e# Nuit t!eir job
ell as
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VU Lesson 12.36 EG#ECTANCC) GOAL SETTING AN; RE0ENFORCEMENT THEORIES
E?"ectanc! Theor! is t!e t!eor" t!at an individual tends to act in a certain a" based on t!e e$pectation t!at t!e act ill be follo ed b" a given outcome and on t!e attractiveness of t!at outcome to t!e individual# T!ree relations!ips are important to t!is t!eor"# 0# -ffort&performance lin'age >e$pectanc"A is t!e probabilit" perceived b" t!e individual t!at e$erting a given amount of effort ill lead to a certain level of performance# 1# Performance&re ard lin'age >instrumentalit"A is t!e degree to !ic! an individual believes t!at performing at a particular level is instrumental in, or ill lead to, t!e attainment of a desired outcome# 3# %ttractiveness of t!e re ard >valenceA is t!e importance t!at t!e individual places on t!e potential outcome or re ard t!at can be ac!ieved on t!e job# 8# T!ere are four features in!erent in t!e t!eor"# a# .!at perceived outcomes does t!e job offer t!e emplo"ee2 b# Fo attractive do emplo"ees consider t!ese outcomes to be2 c# .!at 'ind of be!avior must t!e emplo"ee e$!ibit to ac!ieve t!ese outcomes2 d# Fo does t!e emplo"ee vie !is or !er c!ance of doing !at is as'ed2 5# T!e 'e" to understanding e$pectanc" t!eor" is understanding an individualHs goal and t!e lin'age bet een effort and performance, bet een performance and re ards, and bet een re ards and individual goal satisfaction# Goal0Setting Theor! sa"s t!at specific goals increase performance, and difficult goals, !en accepted, result in !ig!er performance t!an eas" goals# .!at do e 'no about goals as motivators2 0# (ntention to or' to ard a goal is a major source of job motivation# Epecific and c!allenging goals are superior motivating forces# Epecific !ard goals produce a !ig!er level of output t!an do generali,ed goals# 1# (s t!ere a contradiction bet een ac!ievement motivation and goal setting2 4o, and !ereHs !"# a# Goal&setting t!eor" deals it! people in generalI ac!ievement t!eor" is based onl" on people !o !ave a !ig! need for ac!ievement# @ifficult goals are still recommended for t!e majorit" of emplo"ees# b# T!e conclusions of goal&setting t!eor" appl" to t!ose !o accept and are committed to t!e goals# @ifficult goals ill lead to !ig!er performance onl" if t!e" are accepted# 3# .ill emplo"ees tr" !arder if t!e" participate in t!e setting of goals2 a# .e canHt sa" t!at participation is al a"s desirable# b# Fo ever, participation is probabl" preferable to assigning goals !en t!e manager e$pects resistance# 8# .ill people do better !en t!e" get feedbac' on !o ell t!e"Hre progressing to ard t!eir goals2 a# 5eedbac' acts to guide be!avior# b# Eelf&generated feedbac' !as been s!o n to be a more po erful motivator t!an e$ternall" generated feedbac'# 5# .!at contingencies e$ist in goal&setting t!eor"2 T!ere are four contingencies e need to 'no about# a# 5eedbac' influences t!e goal&performance relations!ip#
b# Goal commitment is anot!er contingenc"# /ommitment is most li'el" to occur !en goals are made public, !en t!e individual !as an internal locus of control, and !en t!e goals are self&set rat!er t!an assigned# c# Self0efficac! is anot!er contingenc" and refers to an individualHs belief t!at !e or s!e is capable of performing a tas'# T!e !ig!er "our self&efficac", t!e more confidence "ou !ave in "our abilit" to succeed in a tas'# d# T!e last contingenc" t!at affects goal setting is national culture# =# +ur conclusion about motivation from goal&setting t!eor" is t!at intentions, as defined b" !ard and specific goals, are a po erful motivating force# a# (n t!e proper conditions, t!e" can lead to !ig!er performance# b# Fo ever, t!ereHs no evidence t!at suc! goals are associated it! increased job satisfaction# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU Reinforce ent Theor! is counter to goal&setting t!eor"# (t proposes t!at be!avior is a function of its conse*uences# 0# 3einforcement t!eor" argues t!at be!avior is e$ternall" caused# 1# .!at controls be!avior are reinforcer&, !ic! are conse*uences immediatel" follo ing a response t!at increase t!e probabilit" t!at t!e be!avior ill be repeated# 3# 3einforcement t!eor" ignores factors suc! as goals, e$pectations, and needs# 8# (t focuses solel" on !at !appens !en a person ta'es some action# 5# Fo can t!e concept of reinforcement be used to e$plain motivation2 a# People ill most li'el" engage in a desired be!avior if t!e" are re arded for doing so# b# T!ese re ards are most effective if t!e" immediatel" follo a desired response# c# 6e!avior t!at isnHt re arded or is punis!ed is less li'el" to be repeated# =# Managers can influence emplo"eesH be!avior b" reinforcing t!e or' be!aviors t!e" desire# O"en Aoo4 Manage ent O"en0(oo4 anage ent is a motivational approac! in >t!e boo'sA are opened to and s!ared it! all emplo"ees# 0# !ic! an organi,ationHs financial statements
T!e goal of open&boo' management is to get emplo"ees to t!in' li'e an o ner b" seeing t!e impact t!eir decisions and actions !ave on financial results# 1# To be effective, emplo"ees !ave to be taug!t t!e fundamentals of financial statement anal"sis and !at t!e numbers s!o # 3# T!e st"le of management demands for involvement of emplo"ees in all decision ma'ing for organi,ation involving t!e transparenc" of financial statements# 8# -mplo"ees ma" be treated as business partners so productivit" and profitabilit" is en!anced# #a!0for0"erfor ance "rogra & are compensation plans t!at pa" emplo"ees on t!e basis of some performance measure# 0# Performance&based compensation is probabl" most compatible it! e$pectanc" t!eor"# 1# T!e increasing popularit" of pa"&for&performance programs can be e$plained in terms of bot! motivation and cost control# 3# @o pa"&for&performance programs or'2 Etudies seem to indicate t!at t!e" do# Integrating Moti'ation Conte "orar! Theorie& of
0# T!e basic foundation is t!e simplified e$pectanc" model# 1# T!e model also considers t!e ac!ievement&need, reinforcement and e*uit" t!eories# 3# 3e ards also pla" an important role in t!e model#
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Principles of Management MGT503 MOTIVATING @NOWLE;GE #ROFESSIONALS LEA;ERSHI# TRAIT THEORIES Moti'ating the #rofe&&ional&56 8Ne* Wor4force i5e5 @no*le$ge
VU Lesson 13.37
%not!er current motivation issue revolves around motivating t!e ne or'force# T!ese special groups present uni*ue motivational c!allenges to managers# T!ese professionals possess specialt" 'no ledge of mar'ets, of customers, of supplier, of soft are, of !ard are, of tec!nolog" and are ver" important to run t!e organi,ations smoot!l" in 10st centur"# 0# Motivating professionals is one of t!ese special c!allenges# a# Professionals are different from nonprofessionals and !ave different needs# b# Mone" and promotions are t"picall" lo on t!e motivation priorit" list for professionals# Oob c!allenge is usuall" ran'ed !ig! as is support and t!e feeling t!at t!e"Hre or'ing on somet!ing important# Epecial c!allenges in motivating professionals include t!eir long&term commitment to t!eir field of e$pertise, it! greater lo"alt" to t!eir profession t!an to t!eir emplo"er# Mone" and promotions are t"picall" lo on professionalsH priorit" list# /ontingent or'ers lac' t!e securit" t!at permanent emplo"ees !ave and do not identif" it! or displa" muc! commitment to t!e organi,ation# Temporar" or'ers also t"picall" lac' benefits suc! as !ealt! care and pensions# Lo &s'illed minimum& age or'ers t"picall" !ave limited education and s'illsI offering !ig!er pa" is usuall" not an option# Lea$er&hi" T!e recognition of t!e important role t!at leaders!ip pla"s in organi,ational performance is idel" ac'no ledged b" managers ever" !ere# Leaders!ip is !at ma'es t!ings !appen in organi,ations# MANAGERS LEA;ERS VERSUS
T!ere are distinctions bet een managers and leaders# Managers are appointed and !ave legitimate po er it!in t!e organi,ation# Lea$er& are t!ose persons aut!orit"# !o are able to influence ot!ers and !o possess managerial
Lea$er&hi", t!en, is t!e abilit" to influence a group to ard t!e ac!ievement of goals# Ho* lea$er& influence other& Lea$er&hi") t!e foundation of t!e management function of leading, is t!e process of influencing ot!ers to ard t!e ac!ievement of organi,ational goals# #o*er is t!e capacit" to affect t!e be!avior of ot!ers# T!ere are different t"pes of po er depending upon t!eir sources originall" identified b" 5renc! and 3aven# 0# Legiti ate "o*er stems from a positionHs placement in t!e managerial !ierarc!" and t!e aut!orit" vested in t!e position#
1# Re*ar$ "o*er is based on t!e capacit" to control and provide valued re ards to ot!ers# 3# Coerci'e "o*er is based on t!e abilit" to obtain compliance t!roug! fear of punis!ment# 8# E?"ert "o*er is based on t!e possession of e$pertise t!at is valued b" ot!ers# 5# Infor ation "o*er result from access to and control over t!e distribution of important information about organi,ational operations and future plans# =# Referent "o*er results from being admired, personall" identified it!, or li'ed b" ot!ers# T!e different t"pes of po er can engender different levels of subordinate motivation# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 0#
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.it! commitment, emplo"ees respond ent!usiasticall" and e$ert a !ig! level of effort to ard organi,ational goals# a# /ommitment is t!e most common outcome of referent po er and e$pert po er# b# /ommitment is least li'el" to result from t!e use of coercive po er# 1# .it! compliance, emplo"ees e$ert at least minimal efforts to complete directives, but are li'el" to deliver average, rat!er t!an stellar, performance# a# /ompliance is t!e most li'el" outcome of t!e use of legitimate po er, information po er, and re ard po er# b# /ompliance is a possible outcome of coercive po er if used in a !elpful a" or of referent po er of e$pert po er !en some element of apat!" is present# 3# .it! resistance, emplo"ees ma" appear to compl", but actuall" do t!e absolute minimum, possibl" even attempting to sabotage t!e attainment of organi,ational goals# a# 3esistance is a li'el" outcome of coercive po er# b# 3esistance is a possible outcome of ot!er t"pes of po er if used inappropriatel"# 8# T!e effective manager is one !o does not !ave to rel" on a single po er base but rat!er, !as !ig! levels of po er in several >all if possibleA of t!ese si$ po er t"pes# Searching Trait& for Lea$er&hi"
3esearc!ers began to stud" leaders!ip in t!e earl" part of t!e 10t! centur"# T!ese earl" t!eories focused on t!e leader >trait t!eoriesA and !o t!e leader interacted it! !is)!er group members >be!avior t!eoriesA# %# Trait T!eories 0# 3esearc! in t!e 0<10s and 0<30s focused basicall" on leader traits it! t!e intent to isolate one or more traits t!at leaders possessed, but t!at nonleaders did not# 1# (dentif"ing a set of traits t!at ould al a"s differentiate leaders from nonleaders proved impossible # 6# Trait& are distinctive internal *ualities or c!aracteristics of an individual suc! as p!"sical c!aracteristics >e#g#, !eig!t, eig!t, appearance, energ"A, personalit" c!aracteristics >e#g#, dominance, e$troversion, originalit"A, s'ills and abilities >e#g#, intelligence, 'no ledge, tec!nical competenceA, and social factors >e#g#, interpersonal s'ills sociabilit", and socioeconomic positionA# /# % number of t!e earl" researc! attempts ere reanal",ed in t!e 0<50s and concluded t!at t!ere is no set of traits !ic! consistentl" distinguis! leaders from nonleaders# @# 3ecent efforts suggest t!at t!e trait approac! ma" !ave been abandoned prematurel"# 0# More sop!isticated statistical tec!ni*ues are no available# 1# Eeveral rat!er predictable traits !ave no been suggested suc! as a# intelligence b# dominance c# aggressiveness d# decisiveness T!e *uestion of !et!er traits can be associated
-#
it! leaders!ip remains open# 3ecent
researc! or' !as loo'ed at communication s'ills, !uman relations s'ills, resistance to stress, tolerance of uncertaint", and ot!ers#
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Principles of Management MGT503 AEHAVIORAL AN; SITUATIONAL MO;ELS OF LEA;ERSHI# I$entif!ing Lea$er Aeha'ior& % number of researc!ers !ave focused on t!e *uestion of traits, ma'e some leaders more effective t!an ot!ers# 0#
VU Lesson 13.38
!et!er specific be!aviors, rat!er t!an
(f be!avior studies turned up critical be!avioral determinants of leaders!ip, people could be trained to be leaders# 1# 5our main leader be!avior studies are carried out# a# :niversit" of (o a EtudiesMBurt Le in and associatesMstudied t!ree leaders!ip st"les; autocratic, democratic, and laisse,&faire# b# T!e +!io Etate Etudies identified t o important dimensions of leader be!aviorM initiating structure and consideration# c# :niversit" of Mic!igan Etudies identified t o dimensions of leader be!aviorMemplo"ee oriented and production oriented# d# T!e Managerial Grid is a t o&dimensional grid for appraising leaders!ip st"les using concern for people and concern for production as dimensions# 3# Predicting leaders!ip success involved more t!an isolating a fe leader traits or be!avior# T!is failure to attain consistent results led to a focus on situational influences# :niversit" of (o a researc!er, Burt Le in, conducted some of t!e earliest attempts to identif" effective leaders!ip be!aviors# 0# T!ree t"pes of leaders!ip be!avior st"les ere identified# a# Autocratic leaders tend to ma'e unilateral decisions, dictate or' met!ods, limit or'er 'no ledge about goals to just t!e ne$t step to be performed, and sometimes give feedbac' t!at is punitive# b# ;e ocratic leaders tend to involve t!e group in decision ma'ing, let t!e group determine or' met!ods, ma'e overall goals 'no n, and use feedbac' as an opportunit" for !elpful coac!ing# c# Lai&&e20faire leaders generall" give t!e group complete freedom, provide necessar" materials, participate onl" to ans er *uestions, and avoid giving feedbac'# 3esearc! on t!e comparative effectiveness of t!e t!ree leaders!ip st"les as inconclusive# a# T!e laisse,&fair st"le as ineffective# b# T!e effectiveness of t!e autocratic and democratic leaders varied, alt!oug! satisfaction levels tended to be !ig!er in t!e democraticall" led groups#
1#
Michigan Stu$ie&
T!e Mic!igan studies compared leaders!ip it!in groups alread" identified as effective or as ineffective# 0# % continuum as developed from emplo"ee&centered to job&centered approac!es# 1# .it! t!e e "lo!ee0centere$ approac!, managers c!annel t!eir main attention to t!e !uman aspects of subordinatesH problems and to t!e development of an effective or' group dedicated to !ig! performance goals# 3# .it! t!e Io(0centere$ approac! >or production&centered approac!A, leaders divide t!e or' into routine tas's, determine or' met!ods, and closel" supervise or'ers to ensure t!at t!e met!ods are follo ed and productivit" standards are met#
8#
T!e outcomes of t!e stud" ere mi$ed, but t!e" sometimes s!o ed t!at t!e !ig!& producing or' units tended to !ave job&centered supervisors# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 Ohio State Stu$ie& 3esearc!ers at t!e +!io Etate :niversit" developed a *uestionnaire to measure leadersH be!aviors and to correlate t!em it! group performance and satisfaction#
VU
0# T o be!aviors ere identified as particularl" important# a# Initiating &tructure is t!e degree to !ic! a leader defines !is or !er o n role and t!e roles of subordinates in terms of ac!ieving unit goals# b5 Con&i$eration is t!e degree to !ic! a leader builds mutual trust it! subordinates, respects t!eir ideas, and s!o s concern for t!eir feelings# 1# (n contrast to t!e (o a and Mic!igan studies, t!e t o be!aviors ere considered to be independent variables and are best illustrated it! separate continuums rat!er t!an t!e single continuum developed in t!e (o a and Mic!igan studies# T!e leader !o is !ig! in bot! initiating structure and consideration as t!oug!t to be t!e most effective, but furt!er researc! indicated t!at suc! a generali,ation as too simplistic#
3#
The Mouton0Ala4e Managerial Gri$ uses concern for people and concern for production as its t o a$es# :sed a training device, t!e grid enables managers to understand t!eir o n st"les# T!e manager !ig! in concern for people and concern for production is t!e t!eoretical ideal# a# 3esearc! into male&female stereot"pes of management st"les do not !old# Most studies indicate t!at male and female leaders are similar in t!e amounts of interpersonal and tas' be!aviors e$!ibited# Situational Theorie& %# Lac' of success in identif"ing an effective leaders!ip st"le generali,e&able to all situations led to consideration of situational factorsMi#e#, an" particular st"le of leaders!ip could be effective depending on t!e situation# 0# Situational theorie& are t!eories t!at emp!asi,e situations# 1# /ontingenc" t!eories are t!eories of leaders!ip because t!e" !old t!at appropriate leader traits or be!aviors are contingent, or dependent, on relevant situational c!aracteristics# o$el is a situational approac! originall" developed b" 0# 1#
6# 5red
Fiel$er>& contingenc!
5ielder and !is associates# 0# % leaderHs L#C orientation is a personalit" trait measured b" t!e least preferred co or'er >LP/A scale# 1# 3# T!e LP/ scale is a 0 to ? rating b" t!e leader of t!e person leader can or' least ell# it! !om t!e
T!e interpretation of t!e scale !as been controversial, but t!ere is an ort!odo$ interpretation at present# a# Lo &LP/ leaders describe a least&preferred co or'er in relativel" negative terms and are li'el" to be tas'& motivated# b# Fig!&LP/ leaders describe a least&preferred co or'er in relativel"
positive terms and are li'el" to be people&motivated#
003
Principles of Management MGT503 VU 8# 5ielder maintains t!at management st"le or LP/ orientation is difficult to c!ange, so it is important to carefull" matc! t!e leaderHs personalit" to situational factors t!at favor t!e leaderHs prospects for success# a# T!e situation s!ould be assessed to determine t!e degree of situational control for t!e leader# 0A T!e most important situational variable is leader& member relations, i#e#, t!e e$tent to !ic! t!e leader !as t!e support of group members# 1A Tas' structure is t!e e$tent to !ic! a tas' is clearl" specified it! regard to goals, met!ods, and standards of performance# 3A Position po er is t!e amount of po er t!at t!e organi,ation gives t!e leader to accomplis! necessar" tas's# b# Leaders!ip st"le s!ould be matc!ed it! situation# 0A Lo &LP/ leaders do best in situations of eit!er !ig! favorabilit" or e$tremel" lo favorabilit"# 1A Fig!&LP/ leaders do best in situations of moderate favorabilit" 5# 3ecent anal"ses are tending to support 5ielderHs original researc! do suggest t!at t!ere are additional factors at or' t!at are not accounted for in t!e contingenc" model#
/#
T!e nor ati'e lea$er&hi" o$el is a model t!at !elps leaders assess important situational factors t!at affect t!e e$tent to !ic! t!e" s!ould involve subordinates in particular decisions# 0# 5ive t"pes of management met!od for solving group problems are delineated# a# %utocratic ( >%(A; Kou solve t!e problem or ma'e t!e decision "ourself using present information# b# %utocratic (( >%((A; Kou obtain necessar" information from subordinates it!out involving t!em in t!e decision, and ma'e t!e decision "ourself# c# /onsultative ( >/(A; Kou s!are t!e problem it! t!e relevant subordinates individuall", t!en "ou ma'e a decision !ic! ma" or ma" not be influenced b" subordinates# d# /onsultative (( >/((A; Kou obtain ideas and suggestions from subordinates in a group session, but ma'e t!e decision "ourself# e# Group (( >G((A; Kou s!are t!e problem it! "our subordinates as a group and coordinate t!eir efforts to devise a solution# 1# % decision about !ic! met!od to use is guided b" t!e ans er to eig!t *uestions# a# Fo important is t!e tec!nical *ualit" of t!is decision2 b# Fo important is subordinate commitment to t!is decision2 c# @o "ou !ave sufficient information to ma'e a !ig!&*ualit" decision2 d# (s t!e problem ell structured2 e# (f "ou ere to ma'e t!e decision b" "ourself, is it reasonabl" certain t!at "our subordinates ould be committed to t!e decision2 f# @o subordinates s!are t!e organi,ational goals to be attained in solving t!is problem2 g# (s conflict among subordinates over preferred solution li'el"2 !# @o subordinates !ave sufficient information to ma'e a !ig!& *ualit" decision2 T!e revised normative leaders!ip model can be used in eit!er of t o variations; !en developing subordinates is more important t!an conserving time in decision ma'ing or !en minimi,ing time is more important#
3#
008
Principles of Management MGT503 VU @# T!e &ituational lea$er&hi" theor!) developed b" Paul Ferse" and Ben 6lanc!ard, is on t!e premise t!at leaders need to alter t!eir be!aviors depending on t!e readiness of follo ers# 0# T o leader be!aviors are considered to be independent dimensions# a# Tas' be!avior is t!e e$tent to !ic! t!e leader engages in spelling out t!e duties and responsibilities of an individual or group# b# 3elations!ip be!avior is t!e e$tent to !ic! t!e leader engages in t o& a" or multi& a" communication 1# T!e four levels of readiness defined along a continuum from lo to !ig! readiness prescribe t!e appropriate leaders!ip st"le# a# Telling is used in situations of lo readiness, !en follo ers are unable and also un illing or too insecure to ta'e responsibilit" for a given tas'# b# Eelling is used for lo to moderate readiness, !en follo ers are unable to ta'e responsibilit", but are illing or feel confident to do so# c# Participating is used it! moderate to !ig! readiness, !en follo ers are able to ta'e responsibilit", but are un illing or too insecure to do so# d# @elegating is used for !ig! readiness, !en follo ers are able and illing or confident enoug! to ta'e appropriate responsibilit"# 3# Leaders s!ould !elp increase t!e tas'&related readiness of t!eir follo ers as *uic'l" as feasible b" adjusting t!eir o n leaders!ip st"les# 8# Etudies !ave found t!e situational t!eor" of leaders!ip particularl" effective it! ne l" !ired emplo"ees and emplo"ees in ne jobs# 5# 3ecent anal"ses are tending to support 5ielderHs original researc! do suggest t!at t!ere are additional factors at or' t!at are not accounted for in t!e contingenc" model# T!e "ath0goal theor! of leaders!ip attempts to e$plain !o and job satisfaction of subordinates# 0# leader be!avior impacts t!e motivation
1# 3#
T!e t!eor" gets its name from t!e fact t!at it focuses on !o leaders influence t!e a" t!at subordinates perceive or' goals and possible pat!s to reac!ing bot! or' goals >performanceA and personal goals >intrinsic and e$trinsic re ardsA# Pat!&goal t!eor" relies !eavil" on t!e e$pectanc" t!eor" of motivation# 5our major leader be!aviors can be used to affect subordinate perceptions of pat!s and goals# a# ;irecti'e leader be!avior involves letting subordinates 'no !at is e$pected of t!em, providing guidance about or' met!ods, developing or' sc!edules, identif"ing or' evaluation standards, and indicating t!e basis for outcomes or re ards# b# Su""orti'e leader be!avior entails s!o ing concern for t!e status, ell& being, and needs of subordinatesI doing small t!ings to ma'e t!e or' more pleasantI and being friendl" and approac!able# c# #artici"ati'e leader be!avior is c!aracteri,ed b" consulting it! subordinates, encouraging t!eir suggestions, and carefull" considering t!eir ideas !en ma'ing decisions# d# Achie'e ent0oriente$ leader be!avior involves setting c!allenging goals, e$pecting subordinates to perform at t!eir !ig!est level, and conve"ing a !ig! degree of confidence in
subordinates# Eituational factors must be ta'en into account !en c!oosing a leader
be!avior# 0# Eubordinate c!aracteristics include personalit" traits, s'ills, abilities, and needs# 1# /onte$t c!aracteristics include t!e tas' itself, t!e or' group, and t!e organi,ationHs formal aut!orit" s"stem# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU @iagnosis in terms of e$pectanc" t!eor" leads to a c!oice of appropriate leader be!avior and involves t!ree steps# 0# a# level# b# to T!in' in terms of t!e elements used in e$pectanc" t!eor" to diagnose various situational factors in terms of t!eir effects on t!e t!ree e$pectanc"&t!eor" elements >t!e pat!A# -ffort&performance is t!e probabilit" t!at our efforts ill lead to t!e re*uired performance Performance&outcome e$pectanc" is t!e probabilit" t!at our successful performance ill lead
certain outcomes or re ards# c# 7alence is t!e anticipated value of t!e outcomes or re ards# 0A 1A factors# @iagnose situational factors t!at can be c!anged to en!ance t!e e$pectanc" t!eor" elements are targeted# %ppropriate leader be!aviors are initiated to c!ange t!e situational
Pat!&goal t!eor" encompasses multiple leader be!aviors and a potentiall" large number of situational variables# (ts fle$ibilit" provides a useful frame or' about li'el" impacts of leader be!avior on subordinate motivation, goal attainment, and job satisfaction#
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Principles of Management MGT503 STRATEGIC LEA;ERSHI# MO;ELS CUTTING0E;GE A##ROACHES TO Strategic LEA;ERSHI# T!e most current approac!es to loo'ing at leaders!ip are discussed#
VU Lesson 13.39
T!e researc! eHve discussed !as described transactional leader# .!at is t!e difference bet een transactional and transformational leaders2 0# Tran&actional lea$er& are leaders !o guide or motivate t!eir follo ers in t!e direction of establis!ed goals b" clarif"ing role and tas' re*uirements# 1# Tran&for ational lea$er& are leaders !o provide individuali,ed consideration and intellectual stimulation and possess c!arisma# 3# Transformational leaders!ip is built on top of transactional leaders!ip# 8# T!e evidence supporting t!e superiorit" of transformational leaders!ip over t!e transactional variet" is over !elmingl" impressive# a# Tran&for ational lea$er& motivate subordinates to perform at e$pected levels b" !elping t!em recogni,e tas' responsibilities, identif" goals, ac*uire confidence about meeting desired performance levels, and understand !o t!eir needs and t!e re ards t!at t!e" desire are lin'ed to goal ac!ievement# b5 Tran&for ational lea$er& motivate individuals to perform be"ond normal e$pectations b" inspiring subordinates to focus on broader missions t!at transcend t!eir o n immediate self& interests, to concentrate on intrinsic !ig!er&level goals >suc! as safet" and d securit"A, and to !ave confidence in t!eir abilities to ac!ieve t!e e$traordinar" missions articulated b" t!e leaders!ip# c# Tran&for ational lea$er&hi" is not a substitute for transactional leaders!ipI it is an en!ancement# d5 Chari& a is t!e leaderHs abilit" to inspire pride, fait!, and respectI to recogni,e !at is reall" important, and to articulate effectivel" a sense of mission, or vision, t!at inspires follo ers# 0A /!arisma as once t!oug!t to be an inborn personalit" trait# 3ecent researc! attempts to identif" be!aviors c!arismatic# Chari& atic0Vi&ionar! !ic! cause people to vie a person as Lea$er&hi"
Chari& atic lea$er&hi" t!eor" is an e$tension of attribution t!eor" and suggests t!at follo ers ma'e attributions of !eroic or e$traordinar" leaders!ip abilities !en t!e" observe certain be!aviors# 0# 5ive personal c!aracteristics of c!arismatic leaders !ave been identified# a# Fave a vision b# %re able to articulate t!at vision c# %re illing to ta'e ris's to ac!ieve t!at vision d# %re sensitive to bot! environmental constraints and follo er needs e# -$!ibit be!aviors t!at are out of t!e ordinar" 1# %n increasing amount of researc! s!o s impressive correlations bet een c!arismatic leaders!ip and !ig! performance and satisfaction among follo ers# 3# Most e$perts t!in' t!at individuals can be trained to e$!ibit c!arismatic be!aviors
8# /!arismatic leaders!ip ma" not al a"s be needed to ac!ieve !ig! levels of emplo"ee performance# (t ma" be most appropriate !en an emplo"eeHs job !as a lot of ideological content# Vi&ionar! lea$er&hi" is described as going be"ond c!arisma it! t!e abilit" to create and articulate a realistic, credible, attractive vision of t!e future for an organi,ation or organi,ational unit t!at gro s out of and improves on t!e present# 0# (f t!e vision is properl" selected and implemented, it can be so energi,ing t!at it incites individuals to use t!eir s'ills, talents, and resources to ma'e it !appen# 1# % vision differs from ot!er forms of organi,ational direction in t!at it uses compelling imager", taps into peopleHs emotions and energ", and creates t!e ent!usiasm t!at people need to bring energ" and commitment to t!e or'place# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU 3# T!e 'e" properties of a vision are t!at it !as inspirational possibilities t!at are value centered, are reali,able, !ave superior imager", and are ell articulated# 8# .!at s'ills do visionar" leaders !ave2 a# T!e abilit" to e$plain t!e vision to ot!ers# b# T!e abilit" to e$press t!e vision not just verball" but t!roug! be!avior# c# T!e abilit" to e$tend or appl" t!e vision to different leaders!ip conte$ts# %not!er important contemporar" issue for leaders is creating a culture of trust and credibilit"# 0# Cre$i(ilit! is t!e degree to !ic! follo ers perceive someone as !onest, competent, and able to inspire# 1# Tru&t is t!e belief in t!e integrit", c!aracter, and abilit" of a leader# 3# 3esearc! !as identified five dimensions t!at ma'e up t!e concept of trust# a# (ntegrit" >!onest" and trut!fulnessA b# /ompetence >tec!nical and interpersonal 'no ledge and s'illsA c# /onsistenc" >reliabilit", predictabilit", and good judgment in !andling situationsA d# Lo"alt" > illingness to protect a person, p!"sicall" and emotionall"A e# +penness > illingness to s!are ideas and information freel"A 8# Given t!e fact t!at man" organi,ations !ave moved to self&managed or' teams, trust is e$tremel" important because man" of t!e traditional control mec!anisms !ave been removed# 5# Fo s!ould leaders build trust2 Fere are eig!t suggestions# a# Practice openness# b# 6e fair# c# Epea' "our feelings# d# Tell t!e trut!# e# E!o consistenc"# f# 5ulfill "our promises# g# Maintain confidences# !# @emonstrate competence# Tea Lea$er&hi"
%s t!e usage of or' teams gro s, t!e role of team leader becomes increasingl" important# 0# T!e c!allenge for most managers is learning !o to become an effective team leader# 1# -ffective team leaders !ave mastered t!e difficult balancing act of 'no ing !en to leave t!eir teams alone and !en to get involved# 3# T!ere are t o priorities for a team leader# a# Managing t!e teamHs e$ternal boundaries b# 5acilitating t!e team process 8# T!ese priorities can be bro'en do n into four specific leaders!ip roles# a# Liaisons it! e$ternal constituencies b# Troubles!ooters
c# /onflict managers d# /oac!es Gen$er Lea$er&hi" an$
T!e ne$t contemporar" leaders!ip issue e ant to discuss is gender and leaders!ip# T!is topic is one t!at still creates controvers"G .!at, if an", differences e$ist bet een male and female leaders and !at implications ould t!ese differences !ave2 0# T!e evidence generall" !as found t!at males and females do use different leaders!ip st"les# a# .omen tend to adopt a more democratic or participative st"le and a less autocratic or directive st"le t!an men do# b# .omen are more li'el" to encourage participation, s!are po er and information, and attempt to en!ance follo ersH self& ort!# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU c# Men are more li'el" to use a directive, command&and&control st"le# d# Men rel" on t!e formal aut!orit" of t!eir position for t!eir influence base# e# Men use transactional leaders!ip, !anding out re ards for good or' and punis!ment for bad# 1# (s different better2 T!e best managers >leadersA listen, motivate, and provide support to t!eir people# T!e" inspire and influence rat!er t!an control# Generall" spea'ing, omen seem to do t!ese t!ings better t!an men# 3# Fo ever, gender doesnHt impl" destin"# .!ic! leaders!ip st"le is effective depends on t!e situation# Gender simpl" provides a be!avioral tendency in leaders!ip st"le#
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Principles of Management MGT503 UN;ERSTAN;ING GROU# ;CNAMICS IN ORGANI:ATIONS INTRO;UCTION
VU Lesson 14.40
.or' groups are a common arrangement it!in toda"Hs business organi,ations# .or' is being restructured around groups of all 'inds and in all si,es of organi,ations# Managers need an understanding of group be!avior and t!e concept of teams in order to appreciate !at groups can and cannot do it!in organi,ations and !o groups function# %n" one member in group can influence t!e be!avior of t!e individuals in t!e group and team or'# .e ill e$amine some basic c!aracteristics of groups including t!e t"pes of or' groups, t!e development of informal groups, and t!e manner in !ic! groups operate# UN;ERSTAN;ING GROU# AEHAVIOR Groups e$!ibit different be!aviorMmore t!an just t!e sum total of eac! group memberHs individual be!avior# (n t!is section, eHre going to loo' at various aspects of group be!avior# What i& Grou"3 a
% grou" is defined as t o or more interacting and interdependent individuals !o come toget!er to ac!ieve particular objectives# 0# Groups differ from mere aggregates of individual because t!e latter !ave no interdependence, interaction, or common goal# 1# Groups differ from organi,ations because t!e latter involve s"stematic efforts and are engaged in t!e production of goods and services# 3# Team or' occurs !en groups are able to or' efficientl" and effectivel" toget!er to ac!ieve organi,ational goals# There are a nu (er of t!"e& of *or4 grou"& 0# % for al grou" is a group officiall" planned and created b" an organi,ation for a specific purpose# a# % co an$ or functional grou" is a formal group consisting of a manager and all t!e subordinates !o report to t!at manager# 0A -ac! identifiable or' group consisting of manager and subordinates is a command group# 1A % lin'ing is an individual !o provides a means of coordination bet een command groups at t o different levels b" fulfilling a supervisor" role in t!e lo er&level group and a subordinate role in t!e !ig!er&level group#
1# (nformal groups are natural social formations t!at appear in t!e or' environment# %n infor al grou" is a group t!at is establis!ed b" emplo"ees, rat!er t!an b" t!e organi,ation, in order to serve group membersH interests or social needs# (nformal groups are unplanned groups# a# %n interest group is an informal group created to facilitate emplo"ee pursuits of common concern# b# % friends!ip group is an informal group t!at evolves primaril" to meet emplo"ee social needs# O'er'ie* ;!na ic& of Grou"
5ormal and informal or' groups are becoming increasingl" important competitive factors in organi,ations# Team or' is t!e result of groups or'ing toget!er to effectivel" and efficientl" ac!ieving organi,ational 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU goals# 5ormal groups include command and tas' groups# (nformal groups include interest and friends!ip groups# % useful a" to anal",e groups is to vie t!em as s"stems t!at use inputs, engage in various processes or transformations, and produce outcomes# Managers can !elp bring about !ig!er performance from formal or' groups b" eig!ing t!e c!aracteristics of members t!e" assign to particular groups# Group members s!ould !ave tas'& relevant e$pertise and appropriate interpersonal s'ills# %lso, it !as been found, t!at a degree of diversit" among group members usuall" adds to performance# Group training, particularl" for diverse groups, !as been found to be useful# Members ma" be attracted to a group for a number of reasons including being attracted to or li'ing ot!er members of t!e group, li'ing t!e activities of t!e group, t!e goals or purposes of t!e group, because t!e group satisfies an individualHs need for affiliation, and)or because t!e group can !elp an individual ac!ieve a goal outside t!e group# T!e absence of attraction can prevent t!e group from ac!ieving !ig! performance# Member roles in groups include group tas' roles, group maintenance roles, and self performance# Member roles in groups include group tas' roles, group maintenance roles, and self oriented roles# T!e si,e of t!e group !as also been found to !ave significant bearing on t!e groupHs performance# Mid&si,ed groups, from five to seven members, seem to be an optimum si,e according to recent researc!# Emaller groups can often e$acerbate individual differences# Large groups tend to be !en or'ing in groups t!an !en or'ing alone# 5ree riding is particularl" li'el" !en members e$!ibit individualism rat!er t!an collectivism# Managers can combat social loafing b" several met!ods# %ssign just enoug! people to do t!e or' is one 'e" met!od# +t!er met!ods include ma'ing eac! individualHs or' visible, providing for individual feedbac', !ave people or' it! t!ose t!e respect, !ave standards to actuall" measure group performance, and ma'ing re ards contingent on a combination of individual and group performance# T!e or' group processes usuall" result in greater or lesser performance t!an ould occur if t!e individuals or'ed alone rat!er t!an as members of t!e group# T!is process is called s"nerg"# Managers strive to !ave a positive s"nerg" from t!e group rat!er t!an negative# T!ree 'e" c!aracteristics of t!e group !elp determine t!e s"nerg" levels# T!ese are group norms, group co!esiveness, and group development# 4orms are t!e be!aviors of group members t!at are acceptable to t!e group# 4orms stem from e$plicit statements b" supervisors and co or'ers, critical events in a groupHs !istor", primac", and carr"over be!aviors# Group co!esiveness !as important conse*uences for group communication, satisfaction, performance, !ostilit" and aggression to ard ot!er groups, and a groupHs illingness to innovate and c!ange# 5actors influencing t!e amount of co!esiveness in a group include !et!er or not members of t!e group s!are attitudes and values, t!e amount and severit" of e$ternal t!reats to t!e group, !et!er or not t!e group e$periences recogni,able successes, t!e degree of difficult" encountered in joining t!e group, and t!e si,e of t!e group# +ne vie of group development s!o s groups passing t!roug! five distinct stages; forming, storming, norming, performing, and adjourning# % groupHs performance varies depending on t!e stage it is in# % special 'ind of group be!avior is found in group meetings# 6ecause of t!e considerable amount of time spent in meetings, it is important for managers to 'no !o to ma$imi,e group meeting effectiveness# T!is c!apter includes an e$cellent s!ort guide for !o managers can lead more effective group meetings# Groups can also !elp facilitate creativit" and innovation in t!e organi,ation# Eome of t!e major mec!anisms t!at organi,ations use to encourage t!e creative and innovative capacit" of groups include t!e use of tas' forces, or ad !oc committees, and teams, particularl" entrepreneurial and self&managing teams#
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Principles of Management MGT503 GROU# CONCE#TS) STAGES OF GROU# ;EVELO#MENT AN; TEAM EFFECTIVENESS Wor4 Grou" In"ut& %# 6#
VU Session 14.41
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@#
.or' group inputs are t!ose t!at are necessar" for t!e group to operate# T!e composition of a or' group !as a strong bearing on t!e groupHs ultimate success, so careful consideration s!ould be made in ma'ing group assignments# 0# /!aracteristics of members t!at influence group effectiveness include tas'& relevant e$pertise, interpersonal s'ills, and diversit" in t!e ma'eup of t!e group to include sufficient individual s'ills and interest# 1# (ndividuals ma" be attracted to a group because of friends!ips, interest in t!e activities of t!e group, s!ared values, t!e need for affiliation, and t!e need to fulfill objectives outside t!ose of t!e group# %n input into t!e group is t!e membersH assumption of role&) set of be!aviors e$pected of individuals !o occup" particular positions in a group# 0# Grou" ta&4 role& are roles t!at !elp a group develop and accomplis! its goals# a# T!e initiator&contributor proposes goals, suggests a" of approac!ing tas's, and recommends procedures for approac!ing a problem or tas'# b# T!e information see'er as's for information, vie points, and suggestions about t!e problem or tas'# c# T!e information giver offers information, vie points, and suggestions about t!e problem or tas'# d# T!e coordinator clarifies and s"nt!esi,es various ideas in an effort to tie toget!er t!e or' of t!e members# e# T!e orienter summari,es, points to departures from goals, and raises *uestions about discussion direction# f# T!e energi,er stimulates t!e group to !ig!er levels of or' and better *ualit"# 1# Group leaders often assume tas' roles# 3# %n infor al lea$er is an individual, ot!er t!an t!e formal leader, !o emerges from a group, !as major influence, and is perceived b" group members as a leader# Grou" Si2e is an important input into t!e functioning of groups# 0# T!e number of individuals in a group influences !o t!e members interact# a# 7er" small groups !ave a number of disadvantages# 0A (n t o&person groups, or d"ads, members are eit!er at odds fre*uentl" or are e$tremel" polite to avoid differences# 1A T!ree&person groups fre*uentl" lead to t o&against&one situations# 3A -ven&numbered groups often lead to deadloc's b# Groups of five to seven are ideal because of enoug! input and t!e lac' of deadloc's# c# Large groups be"ond seven, and more so be"ond eleven, pose difficulties# 0A (nteractions tend to become centrali,ed to a fe members# 1A +verall group satisfaction declines# 3A (nteractions become too lengt!" !en comple$ issues are considered# 1# Group performance stops rising and even possibl" declines as group si,e increases# a# Eocial loafing is t!e tendenc" of individuals to e$pend less effort !en or'ing in groups t!an !en or'ing alone# b# 5ree riders are individuals !o engage in social loafing in a group
c#
In$i'i$uali& ) a condition !ere b" personal interests are stronger t!an t!e needs of t!e group, often leads to social loafing# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU d# +n t!e ot!er !and, collecti'i&t& tend to put t!e good of t!e group before personal interest# e# To reduce t!e li'eli!ood of social loafing, managers, ma" 0A %ssign just enoug! people to do t!e or' 1A Fave eac! group member of different tas's 3A Ma'e eac! individualHs or' visible in some a" 8A Provide for individual feedbac' 5A Faving individuals or' it! people t!e" respect =A Provide standards against !ic! to measure !o t!e group is doing CA Ma'e re ards contingent on individual, as ell as group performance ?A @esign interesting, c!allenging tas's, or select members committed to particular tas's# Wor4 Grou" #roce&&e& %# Group processes are t!e d"namic, inner or'ings of groups as t!e" operate over a period of time# 0# Process loss is t!e energ" diverted from t!e tas' to develop and operate t!e group itself# 1# #o&iti'e &!nerg! is t!e force t!at results !en t!e combined gains from group interaction >as opposed to individuals operating aloneA are greater t!an group process losses# 3# Negati'e &!nerg! is t!e force t!at results !en group process losses are greater t!an an" gains ac!ieved from combining t!e forces of group members# 6# Nor & are e$pected be!aviors sanctioned b" a group t!at regulate and foster uniformit" in member be!aviors# 0# .or' groups tend to develop and enforce norms related to certain central issues# a# Groups develop norms regarding production processes# b# Groups develop norms regarding informal social relations!ips, e#g#, !ere to !ave lunc!# c# Groups develop norms regarding allocation of resources, e#g#, materials, e*uipment, etc# 1# 4orms t"picall" develop t!roug! one of four mec!anisms# a# -$plicit statements made b" supervisors and co or'ers can provide information about e$pectations# b# /ritical events set precedents for t!e future# c# Primac" is t!e p!enomenon t!at t!e first be!avior pattern t!at emerges in a group tends to establis! group e$pectations# d# /arr"over be!aviors are t!ose t!at arise among individuals !o !ave or'ed toget!er in ot!er groups# /# Grou" cohe&i'ene&& is t!e degree to !ic! members are attracted to a group, are motivated to remain in t!e group, and are mutuall" influenced b" one anot!er# 0# % !ig! degree of co!esiveness in a group can !ave conse*uences on group performance# a# Members tend to communicate more fre*uentl" and be more sensitive to one anot!er, leading to greater job satisfaction# b# /o!esiveness can also lead to giving more aid to ot!er group member, a form of organi,ational citi,ens!ip# c# %ggression among groups ma" arise# 0A .it!in t!e same organi,ation, competition ma" be !elpful or detrimental# 1A /ompetition it! ot!er organi,ations ma" !ave positive effects#
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Principles of Management MGT503 VU d# Performance levels ma" be eit!er ver" !ig! or ver" lo , depending upon t!e groupHs norms and co!esiveness# e# T!e groupHs openness to innovation ma" be ver" !ig! or ver" lo # 1# % number of factors !ave a positive effect on group co!esivenessI t!e" include; a# Eimilar attitudes and values# b# -$ternal t!reats c# +utstanding successes d# @ifficulties encountered in joining a group e# Emall group si,e Stage& of Grou"& ;e'elo" ent 0# (t !as been proposed t!at groups progress t!roug! a series of five stages, but ma" regress it! c!anges in members!ip# a# Etage 0; For ing occurs as group members attempt to assess t!e ground rules t!at ill appl" to a tas' and to group interaction# b# Etage 1; Stor ing occurs as group members e$perience conflict it! one anot!er as t!e" locate and attempt to resolve differences of opinion regarding 'e" issues# c# Etage 3; Nor ing occurs as group members begin to build group co!esion, as ell as develop a consensus about norms for performing a tas' and relating to one anot!er# d# Etage 8; #erfor ing occurs as energ" is c!anneled to ard a tas' and as norms support team or'# e# Etage 5; A$Iourning occurs as group members prepare for disengagement as t!e group nears successful completion of its goals# 1# 3esearc! indicates t!at t!ese five stages appl" primaril" to ne l" formed, relativel" unstructured groups# Man! organi2ational $eci&ion& are a$e (! grou"&
0# Group decisions !ave certain advantages over individual decisions# a# Provide more complete information# b# Generate more alternatives# c# (ncrease acceptance of a solution# d# (ncrease legitimac"# 1# Fo ever, group decisions also !ave disadvantages# a# Time consuming# b# Minorit" domination# c# Pressures to conform, !ic! can lead to grou"thin4# d# %mbiguous responsibilit"# 3# -ffectiveness and -fficienc" of Group @ecision Ma'ing# %re group decisions more effective2 (t depends on t!e criteria used for defining effectiveness# a# Group decisions tend to be more accurate# b# (ndividual decisions are *uic'er in terms of speed# c# Group decisions tend to !ave more acceptance# d# T!e effectiveness of group decisions tends to be influenced b" t!e si,e of t!e group# Groups s!ould not be too large# e# Groups also are not as efficient as individual decision ma'ers# 8# Tec!ni*ues for (mproving Group @ecision Ma'ing# a# Arain&tor ing is an idea&generating process t!at encourages alternatives !ile it!!olding criticism#
b#
No inal grou" techniBue is a group decision&ma'ing tec!ni*ue in are p!"sicall" present but operate independentl"# 9 /op"rig!t 7irtual :niversit" of Pa'istan
!ic! group members
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Principles of Management MGT503 c# Electronic eeting& are one of lin'ed computers#
a" t!at decision&ma'ing groups can interact b"
VU a"
TURNING GROU#S INTO EFFECTIVE TEAMS Wor4 tea & are formal groups made up of interdependent individuals, responsible for attaining goals# +rgani,ations are increasingl" designing or' around teams rat!er t!an individuals# .!"2 Most of us are probabl" familiar it! t!e concept of a team# Fo ever, e ma" not be as familiar it! or' teams# %ll or' teams are groups, but onl" formal groups can be or' teams# T!ere are different t"pes of teams# 5our c!aracteristics can be used to distinguis! different t"pes of teams# 0# 1# 3# 8# 5# Teams can var" in t!eir p!rpose or goal. T!e d!ration of a team tends to be eit!er permanent or temporar"# Team membership can be eit!er functional or cross&functional# 5inall", teams can eit!er be s!pervised or self$managed. Given t!ese four c!aracteristics, some of t!e most popular t"pes of teams used toda" include t!e follo ing; a# % functional tea is a t"pe of or' team t!at is composed of a manager and !is or !er subordinates from a particular functional area# b# % &elf0$irecte$ or &elf0 anage$ tea is one t!at operates it!out a manager and is responsible for a complete or' process or segment t!at delivers a product or service to an e$ternal or internal customer# c# % 'irtual tea is one t!at uses computer tec!nolog" to lin' p!"sicall" dispersed members in order to ac!ieve a common goal# d# 5inall", a cro&&0functional tea is one in !ic! individuals !o are e$perts in various specialties >or functionsA or' toget!er on various organi,ational tas's# ;EVELO#ING AN; MANAGING EFFECTIVE TEAMS Teams arenHt automaticall" going to magicall" perform at !ig! levels# .e need to loo' more closel" at !o managers can develop and manage effective teams# T!ere are eig!t c!aracteristics associated it! effective teams# 0# 1# 3# 8# 5# =# C# ?# /lear goals 3elevant s'ills Mutual trust :nified commitment Good communication 4egotiating s'ills %ppropriate leaders!ip (nternal and e$ternal support anaging tea &3
What>& in'ol'e$ *ith 0# 1# 3# 8#
(n planning, itHs important t!at teams !ave clear goals and t!at t!ese goals be clear to and accepted b" ever" member of t!e team# +rgani,ing tas's associated it! managing a team include clarification of aut!orit" and structural issues# Leading issues include suc! t!ings as determining !at role t!e leader ill pla", !o conflict ill be !andled, and !at t!e best communication process is# T o important controlling issues include !o to evaluate t!e teamHs performance and !o to re ard team members#
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Principles of Management MGT503 +ne popular approac! to group incentive plans is gain0&haring) gains of t!e efforts of group members it! t!ose group members#
VU !ic! is a program t!at s!ares t!e
(n conclusion, a TEAM is a temporar" or ongoing tas' group !ose members are c!arged it! or'ing toget!er to identif" problems, form a consensus about !at s!ould be done, and implement necessar" actions in relation to a particular tas' or organi,ational area# 0# Teams differ from tas' forces in t o a"s# a# Teams identif" problems rat!er t!an merel" reacting to problems identified b" ot!ers# b# Teams decide on a course of action and implement it, rat!er t!an leaving t!e implementation to ot!ers# 1# Teams are idel" used toda" and are often, but not al a"s, tas' groups from across command groups# 3# %n entre"reneurial tea is a group of individuals it! diverse e$pertise and bac'grounds !o are broug!t toget!er to develop and implement innovative ideas aimed at creating ne products or services or significantl" improving e$isting ones# 8# Self0 anage$ tea &) or autonomous or' groups, are or' groups given responsibilit" for a tas' area it!out da"&to&da" supervision and it! aut!orit" to influence and control bot! group members!ip and be!avior# 0A %ssessment of t!e situation is critical in t!at self&managing teams are not successful in all situations# 1A Group ma'eup and proper allocation of needed resources is important# 3A Team training and guidance in cultivating appropriate norms are important# 8A Managers need to remove performance obstacles and assistance to !elp t!e group continue to learn# Managing Conflict in Grou"& %# Conflict is a process in !ic! one part" perceives t!at its interests are being opposed or adversel" affected b" one or more ot!er parties# 6# /onflict can !ave constructive as ell as destructive conse*uence# 0# /onflict can dela" projects, drive up costs, and cause valued emplo"ees to leave# 1# /onflict can !ig!lig!t areas for improvement, promote constructive c!anges, en!ance morale and co!esiveness, and encourage ne ideas# /# T!ere are a number of causes of conflict# 0# T o t"pes of tas' interdependence can lead to conflict# a# Ee*uential interdependence occurs !en one individual or or' unit is !eavil" dependent on anot!er# b# 3eciprocal interdependence occurs !en individuals or or' units are mutuall" interdependent# 1# Ecarcit" of resources can lead to conflict# 3# Goals of different organi,ational members ma" be incompatible# 8# /ommunication ma" fail due to distortions or lac' of communication# 5# @ifferences in personalit", e$perience, and values ma" breed conflict# =# Poorl" designed re ard s"stems ma" foster competitions !en cooperative be!avior is necessar" for organi,ational success# @# Managers ma" use a number of approac!es to reduce and resolve conflict# 0# /onflict&producing factors in a situation can be c!anged#
1#
+ne of five interpersonal modes ma" be adopted to resolve conflicts# a# A'oi$ance involves ignoring or suppressing a conflict in t!e !ope t!at it ill eit!er go a a" or not become too disruptive# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU b# Acco o$ation focuses on solving conflicts b" allo ing t!e desires of t!e ot!er part" to prevail# c# Co "etition involves attempting to in a conflict at t!e ot!er part"Hs e$pense# d# Co "ro i&e aims to solve conflict issues b" !aving eac! part" give up some desired outcomes in order to get ot!er desired outcomes# e# Colla(oration involves devising solutions t!at allo bot! parties to ac!ieve t!eir desired outcomes#
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Principles of Management MGT503 UN;ERSTAN;ING MANAGERIAL COMMUNICATION INTRO;UCTION
VU Session 14.42
/ommunication bet een managers and emplo"ees provides t!e information necessar" to get or' done effectivel" and efficientl" in organi,ations# (n t!is and follo ing lecture, basic concepts in managerial communications ill be presented including; t!e interpersonal communication process, met!ods of communicating, barriers to effective communications and a"s to overcome t!ese barriers, communication flo and communication net or's, and contemporar" issues and c!allenges associated it! electronic communications and information tec!nolog"# The Nature of anagerial co unication
%# Co unication is t!e transfer and understanding of meaning# 0# (f no information or ideas !ave been conve"ed or transferred, communication !asnHt ta'en place# 1# 5or communication to be successful, t!e meaning must be imparted and understood# 6# Good communication does not re*uire agreement it! t!e message, just clear understanding of t!e message# /# Managerial communication encompasses bot! inter"er&onal co unication >bet een t o or more peopleA and organi2ational co unication >all t!e patterns, net or's, and s"stem of communication it!in an organi,ationA# @# Co unication and associated inter"er&onal "roce&&e& are important ingredients of organi,ational effectiveness# -# Co unication is t!e e$c!ange of messages bet een people for t!e purpose of ac!ieving common meanings# 5# Managers use t o t"pes of communication in t!eir or'# 0# Ver(al co unication is t!e use of ords to communicate# a# .ritten communication includes letters, memoranda, reports, ne sletters, polic" manuals, etc# b# @isadvantage includes t!e fact t!at t!e conversations ma" be time& consuming and difficult to terminate, and t!at additional time ma" !ave to be spent to document !at as said# 1# Non'er(al co unication is communication b" means of elements and be!aviors t!at are not coded into ords# 3# Non'er(al Co unication is communication transmitted it!out ords# T!e best&'no n t"pes of nonverbal communication are bod" language and verbal intonation# a# Ao$! language refers to gestures, facial e$pressions, and ot!er bod" movements t!at conve" meaning# b# Ver(al intonation refers to t!e emp!asis someone gives to ords or p!rases t!at conve" meaning# The co unication "roce&& can (e anal!2e$ into it& (a&ic co "onent& 0# 1# T!e &en$er is t!e initiator of t!e message# Enco$ing is t!e process of translating t!e intended meaning into s"mbols# a# E"mbols include ords and gestures# b# T!e senderHs c!oice of s"mbols depends upon 0A Eender encoding s'ills# 1A %ssessments of t!e abilit" of t!e intended receiver to
3A 8A 5A =A
understand various s"mbols Oudgments regarding t!e appropriateness of t!e use of certain s"mbols Past e$perience in similar situations Oob status and education -motional state at t!e time of t!e communication attempt
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Principles of Management MGT503 VU 3# T!e e&&age is t!e encoding&process outcome, !ic! consists of verbal and nonverbal s"mbols t!at !ave been developed to conve" meaning to t!e receiver# a# T!e e$iu is t!e met!od used to conve" t!e message to t!e intended receiver, e#g#, telep!one, meeting, formal report# b# 5actors to consider !en selecting a medium include relative speed, cost, intelligibilit", convenience, timing, flo of communication, feedbac' options, interpersonal d"namics, and documentation# 8# T!e recei'er is t!e person it! !om t!e message is e$c!anged# a# ;eco$ing is t!e process of translating t!e s"mbols into t!e interpreted message# 0A -ffective communication results in t!e senders and receivers ac!ieving a common meaning# 1A T!e receiver needs to consider t!e medium and t!e conte$t of t!e message# b# Noi&e is an" factor in t!e communication process t!at interferes it! e$c!anging messages and ac!ieving common meaning# c# Fee$(ac4 is t!e basic response of t!e receiver to t!e interpreted message# 0A T!e receiver becomes t!e sender during feedbac'# 1A 5eedbac' provides preliminar" information to t!e sender about t!e success of t!e communication# 3A One0*a! co unication is t!e communication t!at results !en t!e communication process does not allo for feedbac'# 8A T*o0*a! co unication is t!e communication t!at results !en t!e communication process e$plicitl" includes feedbac'# Aarrier& to Effecti'e Inter"er&onal Co 0# a# b# t!at 1# 3# 8# our unication
Filtering is t!e deliberate manipulation of information to ma'e it appear more favorable to t!e receiver# %s information is communicated up t!roug! t!e organi,ational levels, itHs condensed and s"nt!esi,ed, and t!ose doing t!e condensing filter communication t!roug! t!eir personal interests and perceptions of !at is important# T!e more t!at organi,ational cultural re ard emp!asi,es st"le and appearance, t!e more managers ill be motivated to filter communications in t!eir favor# Selecti'e "erce"tion is !en people selectivel" interpret !at t!e" see or !ear on t!e basis of t!eir interests, bac'ground, e$perience, and attitudes# E otion& influence !o a receiver interprets a message !en it is received# (tHs best to avoid reacting to a message !en t!e receiver is upset because !e)s!e is not li'el" to be t!in'ing clearl"# Infor ation o'erloa$ !appens !en t!e information e !ave to or' it! e$ceeds
processingMsuc! as =00 aiting e&mail messages in t!e inbo$# a# 3eceivers tend to select out, ignore, pass over, or forget information !en t!e" !ave too muc! information# b# +r, receivers ma" put off furt!er processing until t!e overload situation is overMstill ineffective communication# 5# ;efen&i'ene&&Mengaging in be!aviors suc! as verball" attac'ing ot!ers, ma'ing sarcastic remar's, being overl" judgmental, and *uestioning ot!ersH motivesM!appens !en people feel t!at t!e"Hre being t!reatened# =# LanguageM ords mean different t!ings to different people# a# %ge, education, and cultural bac'ground can influence language use and definition given to ords b# Margon is speciali,ed terminolog" or tec!nical language t!at members of a group use to communicate among t!emselves# C# National culture can affect t!e a" a manager c!ooses to communicate# O'erco ing the Aarrier& to Effecti'e Inter"er&onal Co unication
0# 1# 3# a#
:se feedbac'# T!is feedbac' can be verbal or nonverbal# Eimplif" language# Listen activel"# Listening is an active searc! for meaning, !ereas !earing is passive# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU b# Acti'e li&tening is listening for full meaning it!out ma'ing premature judgments or interpretations, and demands total concentration# c# %ctive listening is en!anced b" developing empat!" it! t!e senderMplacing "ourself in t!e senderHs position# d# -motions; T!e simplest ans er is for a manager to refrain from communicating until !e)s!e !as regained composure# 8# .atc! nonverbal cuesMactions spea' louder t!an ords# ORGANI:ATIONAL COMMUNICATION %# 0# 1# a# b# 5ormal versus (nformal /ommunication# For al co unication refers to communication t!at follo s t!e official c!ain of command or is part of t!e communication re*uired to do oneHs job# Infor al co unication is organi,ational communication t!at is not defined b" t!e organi,ationHs structural !ierarc!"# (nformal communication s"stems permit emplo"ees to satisf" t!eir needs for social interaction# (nformal communication s"stems can improve an organi,ationHs performance b" creating alternative, and fre*uentl" faster and more efficient, c!annels of communication# unication Flo*
;irection of Co 0# 1# a# b# trust,
;o*n*ar$ co unicationMflo s from a manager to emplo"ees and is used to inform, direct, coordinate, and evaluate emplo"ees# U"*ar$ co unication flo s from emplo"ees to managers :p ard communication can be used in order to 'eep managers a are of !o emplo"ees feel about t!eir jobs, t!eir co or'ers, and t!e organi,ation in general# T!e organi,ational culture influences t!e e$tent of up ard communication# % climate of respect, and participative decision ma'ing ill encourage considerable up ard communication# % !ig!l" mec!anistic and aut!oritarian environment ill severel" limit up ard communication in bot! st"le and content# Lateral co unication ta'es place among emplo"ees on t!e same organi,ational level# ;iagonal co unication is communication t!at cuts across bot! or' areas and organi,ational levels# T!e increased use of e&mail facilitates diagonal communications# @iagonal communication !as t!e potential to create problems if emplo"ees donHt 'eep managers informed#
3# 8# a# b# t!eir
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Principles of Management MGT503 COMMUNICATION NETWOR@S AN; CHANNELS EFFECT OF ICT ON MANAGERIAL COMMUNICATION %s organi,ational or'forces become more and more diverse and orld, communication issues increase in importance# Organi2ational co unication net*or4
VU Session 15.43
idespread t!roug!out t!e
(t is t!e pattern of information flo among tas' group members# 5ive major net or' structures !ave been identified# 0# T!e t!ree centrali,ed net or's are structured so t!at most messages must flo t!roug! a pivotal person in t!e net or'# a# (n t!e !eel net or', all messages must flo t!roug! t!e individual at t!e center of t!e !eel# b# (n t!e c!ain net or', some members can communicate it! more t!an one member of t!e net or', but t!e individual in t!e center of t!e c!ain still tends to control t!e messages# c# (n t!e K net or', t!e member at t!e for' of t!e K usuall" becomes t!e central person in t!e net or'# 1# T!e t o decentrali,ed net or's permit freer communication among t!e various members# a# (n t!e circle net or', eac! member can communicate it! t!e individual on eit!er side# b# (n t!e star net or', eac! member can communicate it! an" ot!er member# 3# Eome general differences !ave been found bet een t!e centrali,ed and t!e decentrali,ed t"pes of net or's# a# -ffective performance is a function of t"pe of net or' and t"pe of tas's underta'en# 0A T!e centrali,ed net or's ere usuall" faster and more accurate at performing simple, routine tas's# 1A T!e decentrali,ed net or's ere usuall" faster and more accurate at performing comple$ tas's# b# Group moral in t!e decentrali,ed net or's as consistentl" !ig!er t!an in t!e centrali,ed, regardless of tas' assignment# Organi2ational co %# unication channel&
0# or more lo er levels in t!e organi,ation# a# Most do n ard communication involves information in one of five categories; 0A Oob instructions related to specific tas's# 1A Oob rationales e$plaining t!e relations!ip bet een a tas' and ot!er organi,ational tas's#
Co unication channel& are various patterns of organi,ational communication flo t!at represent potential establis!ed conduits t!roug! !ic! managers and ot!er organi,ation members can send and receive information# 6# Vertical co unication is a communication t!at flo s from a !ig!er level to one or more lo er levels in t!e organi,ation# ;o*n*ar$ co unication is a vertical communication t!at flo s from a !ig!er level to one
3A 8A 5A t!e
Procedures and practices of t!e organi,ation# 5eedbac' on individual performance on assigned tas's# -fforts to encourage a sense of mission and dedication to t!e goals of organi,ation# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU b# @o n ard communication is prone to distortion# 0A 5ault" message transmission ma" occur because of sender carelessness, poor communication s'ills, and t!e difficult" of encoding a message for a number of receivers# 1A +veruse of one& a" communication met!ods means t!at manager get no feedbac' 3A 5iltering of communication ma" occur t!roug! it!!olding, screening, or manipulating information to en!ance personal po er# c# T!e effectiveness of do n ard communication can be increased b" using multiple c!annels, b" repeating t!e message, and b" encouraging feedbac'# 1# U"*ar$ co unication is t!e vertical flo of communication from a lo er level to one or more !ig!er levels in t!e organi,ation# a# 5orms of up ard communication include individual and group meetings it! superiors, memos and reports, suggestion s"stems, grievance procedures, and emplo"ee attitude surve"s# b# T!e information disseminated t!roug! up ard communication t"picall" pertains to; 0A Progress of current or' projects 1A Eerious unsolved problems and situations in !ic! subordinates need !elp from superiors# 3A 4e developments arising it!in or affecting t!e or' unit or organi,ation suggestions for improvements and innovations# 8A -mplo"ee attitudes, morale, and efficienc" c# :p ard communication can be distorted# 0A Eubordinates filter information t!at t!e" send up ard# 1A Managers do not e$pend enoug! effort to encourage up ard communication# d# Manage ent (! *an$ering aroun$ +MAWA1 is a practice !ereb" managers fre*uentl" tour areas for !ic! t!e" are responsible, tal' to various emplo"ees, and encourage up ard communication# /# Hori2ontal co unication is lateral or diagonal message e$c!ange eit!er it!in or'& unit boundaries, involving peers !o report to t!e same supervisor, or across or'& unit boundaries, involving individuals !o report to different supervisors# 0# Fori,ontal communication can ta'e t!e form of meetings, reports, memos, telep!one conversations, and face&to&face discussions# 1# Fori,ontal communication usuall" relates to; a# Tas' coordination b# Problem solving c# (nformation s!aring d# /onflict resolution e# Peer support 3# T!ere are t!ree impediments to necessar", or'&related !ori,ontal communication# a# 3ivalr" among individuals or or' units ma" cause individuals to !ide information# b# Epeciali,ation ma" cause individuals to be concerned mainl" about t!e or' of t!eir o n unit and to !ave little appreciation for t!e or' and communication needs of ot!ers# c# Motivation ma" be lac'ing !en subordinate !ori,ontal communication is not encouraged or re arded#
@#
Infor al co unication) better 'no n as t!e gra"e'ine)6 is communication t!at ta'es place it!out regard to !ierarc!ical or tas' re*uirements# 0# (nformal communication it!in organi,ations differs from formal communication# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU a# For al co unication is vertical and !ori,ontal communication t!at follo s pat!s specified b" t!e official !ierarc!ical organi,ation structure and related tas' re*uirements# b# 5ormal communication relates to position in t!e organi,ationI informal communication depends upon personal relations!ips# 1# Grapevines can be configured in a number of a"s# a# (n t!e single&strand c!ain, communication moves seriall" from person % to 6 to / and so on# b# .it! t!e gossip c!ain, person % see's out and tells ot!ers# c# .!en follo ing t!e probabilit" c!ain, person % spreads t!e message randoml", as do individuals 5 and @# d# (n t!e cluster c!ain, t!e most predominant form, person % tells t!ree selected individuals, and t!en one of t!ese tells t!ree ot!ers# 3# Grapevines !ave a number of c!aracteristics# a# T!e" are fast# b# T!e data produced ranges from 50 to <0 percent accurate# 8# Grapevines are most !armful !en t!e" carr" false rumors and gossip# 5# Grapevines mig!t serve positive organi,ational purposes# a# T!e" ma" serve to transmit organi,ational rules, values, and morals# b# T!e" ma" serve to disseminate organi,ational traditions and !istor"# c# T!e" ma" !elp to reinforce formal messages, to test ne proposals, and to obtain feedbac' about emplo"ee feelings and ideas# d# T!e" ma" !elp to foster innovation b" facilitating communication among various parts of t!e organi,ation# Ho* Technolog! Affect& Managerial Co unication
T o developments in information and communication tec!nolog" seem to be !aving t!e most significant impact on current managerial communication; net or'ed computer s"stems and ireless capabilities# Net*or4e$ S!&te & 0# %n electronic ail &!&te is a mail s"stem t!at allo s !ig!&speed e$c!ange of ritten messages t!roug! t!e use of computeri,ed te$t&processing and communication net or's# a# -lectronic mail !as advantages# 0A (t is a time&saver# 1A (t leads to e$c!anges of information among managers !o previousl" did not communicate# 3A Managers tend to receive ne t"pes of information t!roug! t!ese s"stems# b# -lectronic mail !as a couple of disadvantages# 0A (t eliminates t!e nonverbal cues t!at serve as aids in face&to& face communication# 1A (t is eas" to vent anger and frustrations over email t!at ould never be communicated t!roug! regular ritten communication c!annels# 3A (t leads to an e$cess of irrelevant mail# 1# Voice ail is t!e recording s"stems !ic! enable senders to leave messages for receivers b" telep!one# a# Eome nonverbal cues are sent, suc! as voice *ualit" and tone# b# (t is particularl" suited for s!ort messages t!at re*uire no furt!er discussions or feedbac'# 3# Teleconferencing is t!e simultaneous communication among a group b" telep!one or
via computer using speciall" designed soft are# T!e soft are is often referred to a group are# a# Meeting can be !eld !ile members are not in t!e same location# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU b# -ac! group member !as access to t!eir o n computer !ic! is lin'ed to a net or' and to an over!ead projector# c# Messages are anon"mous# d# Most, and sometimes all, communication is done t!roug! t!e computers# e# T!ese s"stems !ave incredibl" !ig! speeds and, usuall", ver" !ig! success rates# 8# Vi$eoconferencing is t!e !olding of meetings it! individuals in t o or more locations b" means of closed&circuit television# 0A (t is s"nc!ronous, meaning t!at senders and receivers can engage in simultaneous communication of t!e t"pe associated it! face&to&face conversation# 1A (t is fast# 5# Electronic $ata interchange +E;IA is a a" for organi,ations to e$c!ange standard business transaction documents, suc! as invoices or purc!ase orders, using direct computer&to&computer net or's# =# Intranet s"stems are organi,ational communication net or's t!at use (nternet tec!nolog" and are accessible onl" b" organi,ational emplo"ees# C# E?tranet s"stems are organi,ational communication net or's t!at use (nternet tec!nolog" and allo aut!ori,ed users inside t!e organi,ation to communicate it! certain outsiders suc! as customers and vendors# Wirele&& Ca"a(ilitie& .ireless communication depends on signals sent t!roug! air or space it!out an" p!"sical connection using t!ings suc! as micro ave signals, satellites, radio aves and radio antennas, or infrared lig!t ra"s# Ho* Infor ation Technolog! Affect& Organi2ation& 0# /ommunication and t!e e$c!ange of information among organi,ational members are no longer constrained b" geograp!" or time# 1# Fo ever, managers must not forget to address t!e ps"c!ological dra bac's suc! as t!e cost of an emplo"ee being constantl" accessible, pressure to c!ec' in even during off !ours, and t!e separation of or' lives and personal lives#
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Principles of Management MGT503 CONTROLLING AS A MANAGEMENT FUNCTION Intro$uction an$ O'er'ie* of Controlling
VU Session 15.44
3egardless of t!e t!oroug!ness of t!e planning done, a program or decision still ma" be poorl" or improperl" implemented it!out a satisfactor" control s"stem in place# /ontrolling is t!at process of regulating organi,ational activities so t!at actual performance conforms to e$pected organi,ational goals and standards# .!ile interrelated it! all of t!e ot!er management functions, a special relations!ip e$ists bet een t!e planning function of management and controlling# Planning, essentiall", is t!e deciding of goals and objectives and t!e means of reac!ing t!em# /ontrolling lets manager tell if t!e organi,ation is on trac' for goal ac!ievement, and if not, !" not# % ell&developed plan s!ould provide benc!mar's t!at can be used in t!e control process# /ontrols serve ot!er important roles including !elping managers cope it! uncertaint", detecting irregularities, identif"ing opportunities, !andling comple$ situations, and decentrali,ing aut!orit"# Li'e planning, controlling responsibilities differ b" managerial level it! control responsibilities paralleling planning responsibilities at t!e strategic, tactical, and operational level# T!ere are several major steps usuall" identified in t!e basic control process# T!ese are, in order, determining t!e areas to be controlled, establis!ing t!e appropriate standards, measuring performance, comparing t!e performance against standards, recogni,ing performance if standards are met or e$ceeded or ta'e corrective actions as necessar" if not, and adjusting eit!er)or standards and measures as necessar"# +f course it ould be impossible to control all activit" in an organi,ation# /onse*uentl", it is important for t!e manager to decide !ic! activities s!ould !ave t!e control process applied# %rgues t!at managers need to consider controls mainl" in areas in !ic! t!e" depend on ot!ers for resources necessar" to reac! organi,ational goals# 5our conditions !elp delineate !en controls s!ould be used# T!ese are !aving a !ig! dependence on t!e resource, !aving a !ig! e$pectation t!at t!e resource flo s ould be unacceptable it!out proper controls, t!at t!e instituting of a control process ould be feasible, and t!at t!e total control process costs ould be it!in t!e acceptable range# Timing is one of t!e bases for differentiating control s"stems# Eome major control t"pes are based on timing# T!ese include feed for ard controls, concurrent controls, and feedbac' controls# T!ese are terms !ic! are unfamiliar to man" students and special note needs to be made in revie ing t!is material# % variet" of t!ese t"pes of control is fre*uentl" used in multiple control s"stems and usuall" involve non& c"bernetic# /"bernetic controls involve little, if an", !uman discretion as part of t!e s"stem# 3at!er, it is a self&regulating s"stem t!at, once put into operation, can automaticall" monitor t!e situation and ta'e corrective action !en necessar"# 4onc"bernetic s"stems, on t!e ot!er !and rel" on !uman discretion as a basic part of its process# (n addition to deciding t!e t"pes of controls to use, managers also !ave t!e options regarding t!e mec!anisms to be used to implement controls# T!e t!ree basic approac!es are bureaucratic, clan, and mar'et# 6ureaucratic controls rel" on regulation t!roug! rules, policies, supervision, budgets, sc!edules, re ard s"stems, and ot!er administrative mec!anisms aimed at ensuring acceptable be!avior and performance /lan controls rel" on t!e values, beliefs, traditions, corporate culture, s!ared norms, and informal relations!ips to regulate be!avior and to facilitate t!e reac!ing of organi,ational goals# T!e mar'et controls !ave a some !at more limited application in organi,ations t!an do bureaucratic or clan controlsI all t!ree approac!es are li'el" to be used to some e$tent# Mar'et controls rel" on mar'et mec!anisms to regulate prices for certain goods and services used b" t!e organi,ation# T!ere are some potential d"sfunctional aspects of control s"stems t!e manager must consider# 6e!avioral displacement, game pla"ing, operating dela"s, and negative attitudes are some of t!ese#
To decrease t!e li'eli!ood of t!e effects, managers need to avoid engaging in eit!er over&control or under&control# To be 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU effective, control s"stems s!ould be future&oriented, multidimensional, cost&effective, accurate, realistic, timel" monitor able, acceptable to organi,ation members, and fle$ible# Control a& a %# anage ent "roce&& Controlling) one of t!e four major functions of P+L/% management, is t!e process of regulating organi,ational activities so t!at actual performance conforms to e$pected organi,ational standards and goals# 0# /ontrolling is largel" geared to ensuring t!at t!e be!avior of individuals in t!e organi,ation contributes to reac!ing organi,ational goals# 1# /ontrols encourage anted be!aviors and discourage un anted be!aviors# % control &!&te is a set of mec!anisms t!at are designed to increase t!e probabilit" of meeting organi,ational standards and goals# /ontrols can pla" five important roles in organi,ations# 0# /ontrol s"stems enable managers to cope it! uncertaint" b" monitoring t!e specific activities and reacting *uic'l" to significant c!anges in t!e environment# 1# /ontrols !elp managers detect undesirable irregularities, suc! as product defects, cost overruns, or rising personnel turnover# 3# /ontrols alert managers to possible opportunities b" !ig!lig!ting situations in !ic! t!ings are going better t!an e$pected# 8# /ontrols enable managers to !andle comple$ situations b" en!ancing coordination it!in large organi,ations# 5# /ontrols can decentrali,e aut!orit" b" enabling managers to encourage decision ma'ing at lo er levels in t!e organi,ation !ile still remaining in /ontrol responsibilities differ according to managerial level# 0# Strategic control involves monitoring critical environmental factors t!at could affect t!e viabilit" of strategic plans, assessing t!e effects of organi,ational strategic actions, and ensuring t!at strategic plans are implemented as intended# a# Etrategic control is t"picall" t!e domain of top&level managers !o must insure core competencies are developed and maintained# b# Long time frames are involved, alt!oug! s!orter time frames ma" be appropriate in turbulent environments# 1# Tactical control focuses on assessing t!e implementation of tactical plans at departmental levels, monitoring associated periodic results, and ta'ing corrective action as necessar"# a# Tactical control is primaril" under t!e direction of middle managers, but top&level managers ma" at times get involved# b# Time frames are periodic, involving ee'l" or mont!l" reporting c"cles# c# Tactical control involves department&level objectives programs, and budgets# 3# O"erational control involves overseeing t!e implementation of operating plans, monitoring da"&to&da" results, and ta'ing corrective action !en re*uired# a# +perational control is t!e responsibilit" of lo er&level managers# b# /ontrol is a da"&to&da" process# c# T!e concern is it! sc!edules, budgets, rules, and specific outputs of individuals# 8# 5or controls and t!ree levels to be effective t!e" must operate in concert it! one anot!er#
6# /#
control# @#
The control "roce&&
%# T!e basic process used in controlling !as several major steps# 0# @etermine areas to control# a# (t is impractical, if not impossible, to control ever" aspect of an organi,ationHs activities# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 VU b# Major controls are based on t!e organi,ational goals and objectives developed during t!e planning process# 1# @evelop standards spelling out specific criteria for evaluating performance and related emplo"ee be!aviors# a# Etandards are often incorporated into t!e objectives set in t!e planning process# b# Etandards serve t!ree main purposes related to emplo"ee be!avior# 0A Etandards !elp emplo"ee understand !at is e$pected and !o t!eir or' ill be evaluated# 1A Etandards provide a basis for detecting job difficulties t!at are related to personal limitations of organi,ation members# 3A Etandards !elp reduce t!e potential negative effects of goal incongruence) a condition in !ic! t!ere are major incompatibilities bet een t!e goals of an organi,ation member and t!ose of t!e organi,ation# 3# Ma'e a decision about !o and !o often to measure performance related to a given standard# a# M6+ is a popular tec!ni*ue for coordinating t!e measurement of performance t!roug!out an organi,ation# b# T!e means of measuring performance depends upon t!e performance standards t!at !ave been set, as ell as data, suc! as units produced, *ualit" of output, or profits# c# Most organi,ations use combinations of bot! *uantitative and *ualitative performance measures# d# T!e period of measurement usuall" depends upon 0A T!e importance of t!e goal to t!e organi,ation 1A Fo *uic'l" t!e situation is li'el" to c!ange 3A T!e difficult" and e$pense of rectif"ing a problem if one ere to occur 8# /ompare performance against standards# a# 3eports t!at summari,e planned versus actual results are often developed# b# Manage ent (! e?ce"tion is a control principle !ic! suggests t!at managers s!ould be informed of a situation onl" if control data s!o a significant deviation from standards# c# Mangers ma" compare performance and standards t!roug! personal observation# d# T!e 3=0&degree feedbac' s"stem described in c!apter 00 is being used b" a number of organi,ations as an evaluation approac!# 5# 3ecogni,e above&standard performance bot! to give precognition to top performing emplo"ees and also to aid improving performance on regular bases# =# %ssess t!e reason !" standards are not met, and ta'e corrective action# C# %djust standards and measures as necessar"# a# Etandards and measures need to be c!ec'ed for relevance# b# Managers must decide !et!er t!e cost of meeting certain standards is ort! t!e resources consumed# c# -$ceeding a standard ma" signal opportunities, t!e potential to raise standards, and)or t!e need for possible adjustments in organi,ational plans# 6# Managers can ta'e a number of approac!es to deciding !at to control# 0# Re&ource $e"en$ence is an approac! based on t!e vie t!at managers need to consider controls mainl" in areas in !ic! t!e" depend on ot!ers for resources consider control mainl" in areas in !ic! t!e" depend on ot!ers for
resources necessar" to reac! organi,ational goals# a# Strategic control "oint& are performance areas control because t!ese are particularl" important organi,ational goals# 9 /op"rig!t 7irtual :niversit" of Pa'istan
c!osen for in meeting
01C
Principles of Management MGT503 VU b# Etrategic control points meet four conditions# 0A @ependence on a resource is !ig! because t!e resource is important and limited in availabilit"# 1A T!e probabilit" t!at t!e e$pected resource flo ill be unacceptable is !ig! because of anticipated problems it! *uantit", *ualit", or timeliness# 3A (nstituting a control s"stem is feasible# 8A T!e cost of instituting t!e control s"stem is acceptable# 1# Mangers need to develop an alternative to controls if t!e" are needed, but cannot be instituted due to problems of feasibilit" or cost# a# T!e dependence relations!ip can be c!anged so t!at controls are unnecessar", e#g#, lining up several suppliers# b# T!e nature of t!e dependence relations!ip can be c!anged so t!at a control s"stem is feasible and)or cost&effective, e#g#, job simplification or vertical integration# c# +rgani,ational goals can be c!anged so t!at t!e resources in *uestion are no longer necessar"# REVISITING CONTROL #ROCESS Let us ta'e t!e control "roce&& as t!e t!ree&step process of measuring actual performance, comparing it against a standard, and ta'ing managerial action to correct deviations or inade*uate standards# %# Measuring# Measuring is t!e first step in t!e control process# 0# %ow we meas!re is done t!roug! four common sources of information t!at managers use# -ac! of t!ese sources !as its o n advantages and dra bac's# a# Personal observation b# Etatistical reports c# +ral reports d# .ritten reports 1# What we meas!re is probabl" more critical t!an t!e !o # 6ot! objective and subjective measures are used# 6# /omparing is t!e ne$t step in t!e control process# 0# (t determines t!e degree of variation bet een act!al performance and t!e standard# 1# (tHs critical to determine t!e range of 'ariation, !ic! are t!e acceptable parameters of variance bet een actual performance and t!e standard# /# Ta'ing managerial action is t!e final step in t!e control process# %lt!oug! t!e manager mig!t decide to do not!ing, t o ot!er alternatives are possible# 0# &orrect act!al performance. +nce t!e manager !as decided to correct actual performance, !e or s!e !as anot!er decision to ma'e# a# Ta'e i e$iate correcti'e action, !ic! is correcting an activit" at once in order to get performance bac' on trac'# b# Ta'e (a&ic correcti'e action, !ic! is determining !o and !" performance !as deviated and correcting t!e source of deviations# c# T!e action ta'en ill depend on t!e cost)benefit of doing so# 1# 'evise the standard. (f t!e standard as set too !ig! or too lo , a manager ma" decide to revise it# @# Eummar" of Managerial @ecisions# T!e control process is a continuous flo bet een measuring, comparing, and managerial
action# ;e&igning Control S!&te & Since control is t!e process of monitoring activities to ensure t!e" are being accomplis!ed as planned and of correcting an" significant deviations# T!ere are t!ree different approac!es to designing organi,ational control s"stems# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 %#
VU
Mar4et control is an approac! t!at emp!asi,es t!e use of e$ternal mar'et mec!anisms to establis! t!e standards used in t!e control s"stem# 6# Aureaucratic control is an approac! t!at emp!asi,es organi,ational aut!orit" and relies on administrative rules, regulations, procedures, policies, standardi,ation of activities, ell& defined job descriptions, and ot!er administrative mec!anisms to ensure t!at emplo"ees e$!ibit appropriate be!aviors and meet performance standards# 0# 6ureaucratic control !as advantages# a# :nli'e mar'et control, bureaucratic control does not re*uire t!at all re*uirements be specified in advance# b# 6ureaucratic control is useful for 'eeping recurring, relativel" predictable activities running smoot!l"# c# 6ureaucratic control focuses on doing t!e job and aids e$trinsic re ard s"stems# 1# 6ureaucratic control !as disadvantages# a# (nnovation is not encouraged# b# 4eeded c!anges ma" be in!ibited# c# -mplo"ees tend to compl" it! regulations rat!er t!an committing to a course of action# /# Mar4et control relies on mar'et mec!anisms to regulate prices for certain clearl" specified goods and services needed b" an organi,ation# 0# T o conditions must !old if mar'et control is to be used# a# T!ere must be a reasonable level of competition in t!e goods or service area# b# (t must be possible to specif" re*uirements clearl"# 1# Mar'et controls ma" be used to regulate internal operations as ell as e$ternal relations# a# Profit centers, e#g#, p!otocop"ing centers, are set up and c!arge ot!er departments for t!eir services# b# T!e intra&organi,ational use of mar'et controls is limited because t!e conditions of competitiveness and specificit" or re*uirements ma" not !old# T!e use of mar'et controls is increasing# 5or e$ample, out&ourcing) using outside vendors to perform services normall" carried out it!in t!e organi,ation, is becoming a more common practice# @# Clan control is an approac! to designing control s"stems in !ic! emplo"ee be!aviors are regulated b" t!e s!ared values, norms, traditions, rituals, beliefs, and ot!er aspects of t!e organi,ationHs culture# /lan control relies on values, beliefs, traditions, corporate culture, s!are norms and information relations!ips to regulate emplo"ee be!aviors and facilitate t!e reac!ing of organi,ational goals# 0# /lan control differs from bureaucratic control# a# (nternal motivation is emp!asi,ed# b# @uties are fle$ible and tas's are broadl" defined# c# (nfluence is based on relevant information and e$pertise, rat!er t!an upon position in t!e !ierarc!"# 1# % primar" advantage of clan control is t!at it is conducive to innovation#
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Principles of Management MGT503 CONTROLLING ORGANI:ATIONAL #ERFORMANCE THROUGH #RO;UCTIVITC AN; HUALITC
VU Session 15.45
T!"e& of control& %#
/ontrols can be classified according to t!eir timing or place in t!e productive c"cle# 0# Fee$for*ar$ control focuses on t!e regulation of inputs to ensure t!at t!e" meet t!e standards necessar" for t!e transformation process# a# T!e emp!asis is upon preventing problems# b# +t!er names for feedfor ard control are preliminar" control, pre& control, preventative control and steering control# 1# Concurrent control involves t!e regulation of ongoing activities t!at are part of t!e transformation process to ensure t!at conform to organi,ational standards# a# /!ec'points are in place to determine !et!er to continue t!e process, ta'e corrective action, or stop or' altoget!er# b# +t!er names for concurrent control are screening and "es&no control# c# T!is t"pe of control is not appropriate for or' t!at re*uires creativit" or innovation# 3# Fee$(ac4 control is regulation e$ercised after a product or service !as been completed in order to ensure t!at t!e final output meets organi,ational standards and goals# a# 5eedbac' control is used !en feedfor ard and concurrent controls are not feasible or are too costl"# b# 5eedbac' control serves a number of functions; 0A To serve as a final means to c!ec' for deviations not detected earlier 1A To provide information t!at ill facilitate t!e planning process 3A To provide information regarding emplo"ee performance c# +t!er names for feedbac' control are post action control or output control# Multi"le control &!&te & are s"stems t!at use t o or more of t!e feedfor ard, concurrent, and feedbac' control processes and involve several strategic control points# 0# Multiple control s"stems develop because of t!e need to control various aspects of a productive c"cle, including inputs, transformation, and outputs# 1# /omputer soft are companies provide e$amples of processes comple$ enoug! to re*uire multiple controls# T!e degree to !ic! !uman discretion is part of a control process determines !et!er it is c"bernetic or non&c"bernetic# 0# % c!(ernetic control &!&te is a self&regulated control s"stem t!at, once it is put into operation, can automaticall" monitor t!e situation and ta'e corrective action !en necessar", e#g#, a !eating s"stem or some computeri,ed inventor" s"stems# 1# % non0c!(ernetic control &!&te is a control s"stem t!at relies on !uman discretion as a basic part of its process#
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CONTROLLING FOR ORGANI:ATIONAL #ERFORMANCE %# .!at (s +rgani,ational Performance2 #erfor ance is t!e end result of an activit"# Managers are concerned it! organi2ational "erfor ance O t!e accumulated end results of all t!e organi,ationHs or' processes and activities#
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Principles of Management MGT503 VU Mea&ure& of Organi2ational #erfor ance -mplo"ees need to see t!e connection bet een !at t!e" do and t!e outcomes# T!e most fre*uentl" used organi,ational performance measures include organi,ational productivit", organi,ational effectiveness, and industr" ran'ings# 0# Organi2ational "ro$ucti'it! is t!e overall output of goods or services produced divided b" t!e inputs needed to generate t!at output# (tHs t!e managementHs job to increase t!is ratio# 1# Organi2ational effecti'ene&& is a measure of !o appropriate organi,ational goals are and !o ell an organi,ation is ac!ieving t!ose goals# TOOLS FOR MONITORING AN; MEASURING ORGANI:ATIONAL #ERFORMANCE Managers mig!t use an" of t!e follo ing t"pes of performance control tools; financial controls, information controls, balanced scorecard approac!, or benc!mar'ing best practices approac!# A5 Financial Control&5 0# Traditional 5inancial /ontrol Measures# a# 5inancial ratios are calculated b" ta'ing numbers from t!e organi,ationHs primar" financial statementsMt!e income statement and t!e balance s!eet# T!e four 'e" categories of financial ratios are as follo s# 0A Li*uidit" ratios measure an organi,ationHs abilit" to meet its current debt obligations# 1A Leverage ratios e$amine t!e organi,ationHs use of debt to finance its assets and !et!er itHs able to meet t!e interest pa"ments on t!e debt# 3A %ctivit" ratios measure !o efficientl" t!e firm is using its assets# 8A Profitabilit" ratios measure !o efficientl" and effectivel" t!e firm is using its assets to generate profits# b# .e !ave also discussed budgets as a planning tool# Fo ever, budgets are also control tools# T!e" provide managers it! *uantitative standards against !ic! to measure and compare actual performance and resource consumption# 1# +t!er 5inancial /ontrol Measures# Managers are using measures suc! as -7% >economic value addedA and M7% >mar'et value addedA# a# Econo ic 'alue a$$e$ is a tool for measuring corporate and divisional performance b" calculating after&ta$ operating profit minus t!e total annual cost of capital# b# Mar4et 'alue a$$e$ adds a mar'et dimension b" measuring t!e stoc' mar'etHs estimate of t!e value of a firmHs past and e$pected capital investment projects# A5 0# usable Infor ation Control&5 /ontrolling information can be vital to an organi,ationHs success# .e need to loo' at t!e development and use of management information s"stems# % anage ent infor ation &!&te is a s"stem t!at provides managers it! needed and
information on a regular basis# a# Managers need usable information, not just data b# ;ata are ra , unanal",ed facts# Infor ation is anal",ed and processed data# 1# (nformation can !elp managers control t!e various organi,ational areas efficientl" and effectivel"# (t pla"s a vital role in t!e controlling process# C5 Aalance$ Scorecar$ A""roach5 0# T!e (alance$ &corecar$ is a performance measurement tool t!at loo's at four areasM financial, customer, internal processes, and people)innovation)gro t! assetsMt!at contribute to a compan"Hs performance# 1# T!e intent of t!e balanced scorecard is to emp!asi,e t!at all of t!ese areas are important to an organi,ationHs success#
;5 0#
Aench ar4ing of Ae&t #ractice& Aench ar4ing is t!e searc! for t!e best practices among competitors or non&competitors t!at lead to t!eir superior performance# 9 /op"rig!t 7irtual :niversit" of Pa'istan
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Principles of Management MGT503 1# 3esearc! s!o s t!at best practices fre*uentl" alread" e$ist usuall" go unidentified and unused# (nternal benc!mar'ing best practices program# E&ta(li&hing Hualit! Manage ent S!&te &
VU it!in an organi,ation, but
6" implementing international *ualit" standards li'e (E+&<000, -uropean Nualit" % ard, @eming Pri,e, or Malcom 6alridge % ardI an organi,ation can boost its productivit" and *ualit"# T!is ill give leverage for a continuous improvement and consistent *ualit" products for customers and 'eeping t!e emplo"ees !app" as ell# +ne can also adapt TNM p!ilosop!" of @eming, Ouran or /rosb" or Taguc!i to outperform t!eir competitors in t!e global mar'et# TF- -4@
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Principles of Management MGT503 HISTORICAL OVERVIEW OF MANAGEMENT

!o to use of !uman resources efficientl" but also 'ne "ear project#

Principles of Management MGT503 D #eo"le D #ur"o&e D #roce&& D #OLCA

% manager must perform all t!eses management functions A&&urance7

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 MANAGEMENT AND MANAGERS

Lea$ing% inspiring and motivating goals

or' !ard to ac!ieve organi,ational !en

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503

VU Lesson 1.3 it! a

Role Figurehea$ Lea$er

;i&tur(ance han$ler Re&ource allocator

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503

the lea&t a ount of in"ut&5

9 /op"rig!t 7irtual :niversit" of Pa'istan

it! some 'e"

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 MANAGERIAL LEVELS AN; S@ILLS

9 /op"rig!t 7irtual :niversit" of Pa'istan

9 /op"rig!t 7irtual :niversit" of Pa'istan

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 MANAGEMENT I;EAS% CESTER;AC AN; TO;AC

5# Sociolog!Mt!e stud" of people in relation to t!eir fello beings# <5

9 /op"rig!t 7irtual :niversit" of Pa'istan

9 /op"rig!t 7irtual :niversit" of Pa'istan

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 A;MINISTRATIVE VIEW OF MANAGEMENT

9 /op"rig!t 7irtual :niversit" of Pa'istan

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 AEHAVIORAL THEORIES OF MANAGEMENT Aeha'ioral Vie*"oint%

anted to e$amine t!e effect of various illumination levels on or'er productivit"#

5# Hu an Relation& Mo'e ent% T!is movement s'ills t!e" need#

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 SCSTEM>S VIEW OF MANAGEMENT AN; ORGANI:ATION

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503

The Organization as an Open System

Fuman 3esources /apital Tec!nolog"

5inancial (nformation 3esults Fuman 3esults (nformation

An&*er to Te&t Cour&elf on Manage ent Vie*"oint& an$ Theorie&7777 ,5

u&t $eal *ith3

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503

VU Lesson 4.12 ANALC:ING ORGANI:ATIONAL ENVIRONMENT AN; UN;ERSTAN;ING ORGANI:ATIONAL CULTURE

!at t!e" are doing# 9 /op"rig!t 7irtual :niversit" of Pa'istan

Etabilit" >t!e degree to contrast to gro t!A

!ic! organi,ational activities emp!asi,e maintaining t!e status *uo

9 /op"rig!t 7irtual :niversit" of Pa'istan

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 9,ST CENTURC MANAGEMENT TREN;S

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 SOCIAL RES#ONSIAILITC AN; ECONOMIC #ERFORMANCE5

et!ical dilemmas can do somet!ing about t!em it!out fear of reprisal#

9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 Entre"reneur&hi"

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9 /op"rig!t 7irtual :niversit" of Pa'istan

Principles of Management MGT503 UN;ERSTAN;ING GLOAAL ENVIRONMENT WTO AN; SAARC

ould !ave t!e biggest

9 /op"rig!t 7irtual :niversit" of Pa'istan

An&er to Te&t Cour&elf on Manage ent Vie"oint& an$ Theorie&7777 ,5