BUSINESS MANAGEMENT

Discipline

Methods of management

associate professor Kiril Dimitrov, Ph.D

University of National and World Economy,
Industrial business department
e-mail: kscience@unwe.eu
 Learning Objectives
1. Define three main groups management methods.
2. Understand the characteristics of each group of
management methods.
3. Reveal the contents and essence of the items in
each group of management methods.
 Methods of management /1/
Managers use diverse means
(instruments, techniques,
mechanisms) for making direct or
indirect impact on different
organizational components.
These are called human resource
management methods or simply
methods of management.
Three management resources are
used in making impact
() on people:
Power
Money (income)
Personal influence ()
 Methods of management /2/
Emphasizing the human aspect in methods of
management widens analysis horizon which
includes not only technical procedures as
employee demand, labor norming, keeping labor
discipline, but also appraisal of employee
abilities and appropriate ways of directing them
to achievement of organizational goals.
Two perspectives of creating a holistic theory of
management methods, as follows:
Borrowing approaches and methods from other better-
developed knowledge areas as automation, computer
technology, informatics, etc.
Weakness: It does not recognize important characteristics and
phenomena in people management as personal interests,
necessities, weaknesses, distinctions, behavioral imitations, etc.
It originates from personal psychology.
Weakness: It does not recognize enough the possibilities of
cohesion among peoples characteristics by means of selection,
regulation, personnel training and stimulation of desired
behavior.
 Methods of management /3/
According to the type
of the used
management resource,
there exist three
groups of management
methods, as follows:
Administrative
(organizational) methods
Economical (monetary)
methods
Social-psychological
methods
Administrative methods of management /1/
Managers have definite rights over their
subordinates that ensue from their
responsibility of demonstrated behavior
by their subordinates (actions and labor
results).
The principle of congruence between
assigned responsibilities and granted
rights is enacted
This group of management methods is
based on the power, originating from the
position (place in the hierarchy) of each
manager in the organization.
This power bestows the manager with
three interrelated rights:
The right to reward
The right to punish
The right to require
 Administrative methods of management /2/
Common characteristics:
They are obligatory
They are applied in hierarchical
organizational structure where
each supervisor has
subordinates in his/her power.
Direct impact, i.e. requirements,
limits and behavioral
expectations are clearly given
to the subordinates.
The subordinates are put under
pressure in different forms
which creates in them a feeling
of fear of the managers.
Administrative methods of management
the list /3/
Selection of subordinates.
A sequence of actions, required by the supervisor /5/
Requirements
Job requirements define the appropriate incumbent, not someones
potential
At least several candidates to be searched for each vacant position
The situation of a new supervisor possible actions:
Proposes to the incumbent to remain at the current position
Agrees to transfer or dismiss a definite worker
Defines a reasonable trial period for the worker.
(Sub)Objective factrors, setting limits to managers right to
selection of subordinates.
Administrative methods of management
the list /4/
Instruction of subordinates.
Developing regulations.
Control and current appraisal.
Periodical appraisal (attestation)
Aspect of appraisal:
Workers conformity with job requirements
Workers career development perspective
Three possible marks on the scale:
Excellent conformity
Good conformity
Insufficient conformity
The appraisal of a persons career development perspective has three
possible marks:
Ready to occupy a higher position
May be promoted in the near future (1-2 years)
Is not liable to promotion
Administrative methods of management
the list /5/
Giving orders
Delegation of authority and
empowerment of subordinates
Authority organizationally sanctioned
right to make a decision.
Delegation managers delegate (assign)
certain tasks to others, simply because
one person cannot get all the work done.
But managers retain the responsibility
for the final business unit results.
Empowerment giving employees who
are responsible for hands-on production
or service activities the authority to make
decisions or take action without prior
approval.
 Economic (monetary) methods of
management /1/
These methods are based on
employee rational aspiration for
receiving higher remuneration
package from the employer
organization.
The application of these methods
depends on managers abilities to
measure and appraise their
subordinates labor and to reward it.
Two principles are enacted here:
The principle of equivalent exchange between
employer and employee.
The principle of fair reward for work done.
 Economic (monetary) methods of
management /2/
Common
characteristics:
The impact is done and
achieved through contingent
monetary rewards and
sanctions
The impact is long-term,
because it is enacted by
means of lasting systems
and rules
They ensure to some degree
the right to choose, that is
limited by employee material
interests.
Types of economic (monetary) methods of
management /1/
Compensation system the personal employee
compensation is determined by:
Individual results - (the most preferred option!)
Exerted efforts - (second preferred option!)
Proven capabilities (employee potential) - (last choice!)

Salary B
A

Zone 1 Zone 2 Zone 3

(independent) (of increase) (bonus)

Base of determination
Types of economic (monetary) methods of
management /2/
Premium system the amount of paid
additional reward (bonus) to each
employee is determined according to
the achieved financial result of the
whole organization or a certain self-
supporting unit for a period of 6 or 12
months.
Advantages of Japanese premium
system:
Bonus is directly related to the final
financial result that is the most
generalized indicator of organizations
efficiency
Internally integrates the personnel
members equal percent for everyone
Simple calculations
Types of economic (monetary) methods of
management /3/
Employee stock ownership
Appropriate conditions for application
The organization achieves or will achieve in the near future
large higher profitability on equity
The personnel may improve greatly organizations results
The personnel members possess effective means of
influencing organizations management
One-time (target) pay for high labor results,
propositions with great economic effect or actions,
preventing great losses for the workers:
Bonus pay
Profit-sharing pay
Loss prevention pay
Types of economic (monetary) methods of
management /4/
Rewards for desired behavior for consecutive
keeping of important work behavior rules and
norms for a definite time period, as follows:
Well pay
Safety pay

Gain-sharing pay
Tasks to be solved:
Settingnorms of incurred expenses
Choosing the scheme of gain distribution
The Scanlon Plan:
20% of gain are reserved (for greater security in the future)
The residue: 75% of it goes to the worker and 25% remains in
the firm
Types of economic (monetary) methods of
management /5/
Rewards for intrapreneurship the
workers are given the option of
investing their own funds in risky
undertakings, in which they
participate. They are granted the right
to receive a preliminary negotiated
portion of the potential profit,
resulting from the project.
Example:
AT&T: the workers may invest up to
15% of their salaries in projects,
realized under the protection of the
company. They are given the right to
receive a fair portion of the potential
profit later.
 Social-psychological methods of
management /1/
This group of methods is based on the
natural human inclination to appraise and
approve or blame other peoples behavior.
The successful application of this group of
methods depends on managers capability
of creating attractive behavioral images for
their subordinates.
 Social-psychological methods of
management /2/
Common characteristics:
The impact is directed to workers value
system
The impact is long-term as features and
result (values are slowly formed, but
are durable)
They provide great freedom for making
personal choices, because the usual
punishments are not expected
They do not include control and
measurement
Socio-psychological methods =
soft management
Types of social-psychological methods of
management /1/
Managers leading
example
Appraisal of ones behavior
Imitation of ones behavior
that is considered good
This method is used by the
manager in spite of his/her
wish.
Its impact frequently is
stronger than managers
written or oral orders and
advises
Types of social-psychological methods of
management /2/
Professional work attitude
(professionalism)
Higher extent of development of human
ethics
Moral category
Its qualification and moral dimensions:
Faithfulness to profession overrides loyalty to
a firm (whistle blower!)
High continuous proven and developed
qualification of the person
High own standards of work quality
Steadiness to external hindrance and
disturbance
Pursuit of high appraisal of ones own work
A desire to develop followers
Types of social-psychological methods of
management /3/
Provoking of desired labor
behavior (job behavior
modification)
Steps:
1. Define clearly desired behavior of
the subordinates.
2. Functional analysis of the
semantic chain: prerequisites
behavior consequences.
3. Creating of all necessary
prerequisites. Two kinds of
prerequisites:
a. Suppressing obstacles
b. Creating opportunities
Types of social-psychological methods
of management /4/
Provoking of desired labor behavior (job
behavior modification)
Steps:
4. Human behavior monitoring and appraisal and
supplying the expected consequences on schedule.
Rules for determination of consequences:
Each behavioral improvement is supported, not
only the ends
Different accomplishments correspond to
different stimuli
Natural rewards are preferred (commendation,
assigning of desired project or task, flexible
working time), not material rewards
Each possibility of objective behavioral appraisal
is utilized
Stimuli for good behavior are preferred, not
punishments for undesired behavior,
demonstrated by subordinates
Consequences follow certain schedule; at the
beginning continuous; after stabilization of
required behavior on intermittent intervals
constant or variable
Types of social-psychological methods
of management /5/
Creation of conditions
for behavioral self-
regulation
The method of great
expectations
Creation of self-
managing
(autonomous) groups
Developing a specific
(target) firm culture
 Ladies and Gentlemen,

THANK YOU FOR THE ATTENTION!