Professional Documents
Culture Documents
MANAGEMENT
DEFINITIONS
Management can be defined in many ways and many levels and there are many
definitions for management. So, management can be defined in many ways like;
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While on the other hand art is the ability and skill to do a task. And an art can be
developed through experience and practice.
Management is a science and also an art at the same time. In other words,
management has the art elements and also the scientific elements. So, management
is a mixture of both science and art. A good manger has to have the knowledge
(science) and also the ability and skill (art) to carry out the process of management.
So, management is both a science and also an art because knowledge (science)
without skill (art) is useless or dangerous and skill (art) without knowledge (science)
means nothing. A comparison can be made between a doctor and a manager.
SYSTEMS
“A system is one which has interrelated parts and functions as a whole.”
For example, the human body has parts or sub-systems function as one unit, the
muscular system, the skeletal system and many other systems inside our body.
Similarly in the business, there are several departments or units in a business
organization which are all interrelated and the organization functions as one system.
TYPES OF SYSTEMS
Systems are classified into open and closed types.
¾ CLOSED SYSTEM
A closed system is the one which has no contact with its surroundings.
For example, a balloon full of air is a closed system. A closed system neither
takes nor gives anything to the environment and it is on its own. When a system
is a closed one it will not be able to function successfully in today’s competitive
environment and eventually it will come to an end. Many organizations have
come to an end due to the closed nature.
¾ OPEN SYSTEM
On the other hand, an open system has relationship and interaction with
its external environment. It receives inputs and gives outputs to its environment.
Any living organism is the example of open system.
The traditional theorists viewed organization as a closed system while the
modern theorists view organization as an open system. So, we can conclude that
organizations cannot function as closed systems in our modern, highly
competitive environment. Interaction between an organization and its
environment must be taken into consideration in studying or practicing
management.
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MANAGERIAL SKILLS
There are some skills that an efficient and effective manager
should have like;
1. TECHNICAL SKILL
It is the knowledge to do the job. For example, to know the
techniques, methods, and processes. For example, a mechanic should know
how to use tools and the supervisor should be able to teach him the use of tools.
2. HUMAN SKILL
Human skill is the ability to be able to work in groups, do cooperative
and team work and creating an environment in which people feel secure to
express their ideas.
3. CONCEPTUAL SKILL
Conceptual skill is the ability of a manager to see the “big picture”. It
means a manger must be able to see the whole organization as one and know
the importance of its different units.
4. DESIGN SKILL
Design skill is the ability to solve problems in ways which will benefit
the organization. So, to solve problems in the best way managers must have the
ability to design new techniques and ideas.
TAYLOR’S PRINCIPLE
Fundamental principles of Taylor about the scientific approach to
management are the following points.
4. Developing all workers to the fullest extent possible for their own and their
company’s highest profitability.
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Foyol’s
Principles
HENRI FAYOL (1841-1925)
10. Order. Breaking this into “material “and “social “order, Fayol follows the
simple adage of “a place for everything [everyone], and everything
[everyone] in its [his or her] place.” This is essentially a principle of
organization in the arrangement of things and people.
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14. Esprit de corps. This is the principle that “in union there is strength,” as
well as an extension of the principle of unity of command, emphasizing the
need for teamwork and the importance of communication in obtaining it.
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¾ Labor
Another important input form the economic environment is the availability,
quality, and price of labor. In some societies, untrained common labor may be
plentiful, while highly trained labor may be in short supply. Engineers may scarce
at one time and plentiful in another, as has occurred in the ups and downs of the
defense and space operations of the United States.
The cost of labor is also a very important factor for an enterprise, although
automation mitigates high labor costs. The relatively high wages in some
western countries creates cost problems in these countries while many items
can be produced at al lower cost in countries such as Mexico, Korea and
Taiwan.
¾ Price Levels
The input side of the organization is clearly affected by the price-levels. If the
prices go up then the affect can be severe with the main problem of inflation.
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¾ Customers
One of the most important factors for the success of an enterprise is customers.
Without them, a business cannot exist. But to capture customers, a business
must try to find out what people want and will buy. Non-business enterprises
have to find out what people want and buy. Non-business enterprises have also
to find out what the customers want e.g. the universities and if they ignore the
customers and their preferences they will not survive in a contemporary
environment.
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1. The belief that there are opportunities for people who are willing and able to
work to take advantage of them
2. A faith in business and a respect for business owners and leaders
3.
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MEANING OF PLANNING
A variety of definitions have been offered to bring out the meaning of
planning. “Planning is a pervasive and continuous executive function involving
complex process of perception, analysis, conceptual thought, communication,
decision and action. “ Planning is an important managerial function, to get things
done through his subordinate, a manager must plan ahead.
Ackoff defines planning as “the design of a desired future and of effective ways of
bringing it about. “ this definition beings out the important aspect of planning, namely
the effectiveness in implementing the course of action.
Most of the definitions agree that a plan is a predetermined course of action. The
elements included in this definition are the future individual who undertakes the
planning.
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Standing Plans
These plans serve as guidelines to managerial action. Managerial
efficiency is enhanced because once the decision is made; it stands without the
necessity of deliberation each time a similar situation arises. These plans bring
consistency to the operations. A bank granting loans for house construction is and
example. It does not need a different plan to handle each request for loan. It uses
one standing plan that anticipates in advance whether to approve or not any request
for loan. Standing plans are used where an activity occurs repeatedly.
Single-use Plans
These plans are designed for a specific purpose or period. The plan
ceases to exist when the goals are achieved. One common single-use plan is the
budget. A plan to set up warehouse is another example for single-use plan.
Long-range Plans
These are the strategic plans of the organization. To become a leader in
its industry may be a long-range plan for an organization. It takes time to achieve this
goal. Under the plan, assumptions must be made about uncontrollable and
controllable variables. Technological change, uncontrollable variable, over which a
manager may not have any control because it takes place in the external
environment. A manager may have control over the product line of the organization.
The time span of long-range plans cannot be stated specifically because
circumstances vary from organization to organization. In practice they may range
from 3 to 5 years.
Intermediate Plans
These plans follow up once the long-range plans are formulated. To
become a leader in its industry (long-range plan) an organization may plan to set up
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district sales offices (intermediate plans) for realization of long-range goals. These
plans usually cover a one – to three – year period.
Short-range Plans
These plans provide the guidelines for day-to-day actions in the
organization. In realizing its long-range goal of becoming a leader in its industry, and
setting of district sales offices in the intermediate range, an organization may have to
recruit and train personnel as a short-range plan. Usually these plans may cover up
to a year
Marketing Plans
The common objectives of marketing plans are to increase their present
market share and develop new products. These objectives are converted into
operational plans
Production Plans
These focus on producing the desired amount of goods demanded at the
market place. Production planning involves routing, scheduling, and dispatching
processes. Routing determines the path for the flow of production. Scheduling sets
up a timetable. Dispatching signals the flow on time and follows up to find reasons
for delays.
Financial Plans
These provide a quantitative basis for decision-making and control. The
financial data tell managers how well they are doing, need for working capital, need
for expansion and the sources of funds.
Manpower Plans
These involve a systematic way of determining the types of personnel
needed in the long and short-range for an organization. Personnel of various
qualities and quantities must be recruited and made available at appropriate times.
To achieve this, forecasts ate necessary as the demand and supply of labor
Strategic Plans
These involve determining the major goals of the entire organization and
the policies to guide the achievement of these goals. This occurs at higher levels and
involves a longer period to time. All types of forecasts are needed for this planning.
Tactical Plans
They deal with the determination of the specific utilization of the
resources of the organization in achieving its strategic goals. The reliance for theses
plans is on past performance and practice as to how and organization allocated its
resources.
TYPES OF PLANS
The failure of some managers to recognize that there are several types
of plans has often caused difficulty in making planning effective. It is easy to see that
a major program, such as one to build and equip a new factory, is a plan. But a
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number of other courses of action are also plans. Keeping in mind that a plan
encompasses any courses of future action, we can see that plans are carried. They
are classified here as (1) purposes or missions, (2) objective or goals, (3) strategies,
(4) policies, (5) procedures, (6) rules,(7) programs, and () budgets.
1. MISSION
The mission, or purpose (the terms are often used interchangeably),
identifies the basic function or task of an enterprise or agency or any part of it. Every
kind of organized operation has, or at least should have if it is to be meaningful, a
purpose or mission. In every social system, enterprises have a basic function or task
that is assigned to them by society. For example, the purpose of a business
generally is the production and distribution of goods and services. The purpose of a
state highway department is the design, building, and operation of a system of state
highways. The purpose of the courts is the interpretation of laws and their
application. The purpose of a university is teaching and research. And so on
2. OBJECTIVES OR GOALS
Objectives, or goals, (the terms are used interchangeably in this book),
are the ends toward which activity is aimed. They represented not only the end point
of planning but also the end toward which organization, staffing, leading, and
controlling are aimed. While enterprise objectives are the basic plan of the firm, a
department may also have its own objectives. Its goals naturally contribute to the
attainment of enterprise objectives, but the two sets of goals may be entirely
different. For example, an objective of a business might be to make a certain profit
by producing a given line of home entertainment equipment, while a goal of the
manufacturing department might be to produce the required number of television
sets of a given design and quality at a given cost. These objectives are consistent,
but they different that the manufacturing of the basic department alone cannot
ensure the accomplishment of the company’s objective.
3. STRATEGIES
For years the military used the word “Strategies” to mean grand plans
made in light of what it was believed and adversary might or might not do. While the
tern “Strategies” still usually has a competitive implication, managers increasingly
use it to reflect broad areas of an enterprise operation. In this book, strategy is
defined as the determination of the basic long-term objectives of an enterprise and
the adoption of courses of action and allocation of resources necessary to achieve
these goals.
4. POLICIES
Polices also are plans in that they are general statements or
understanding that guide or channel thinking in decision-making. Not all policies are
“statements”; they are often merely implied from the actions of managers. The
president of a company, for example may strictly follow—perhaps for convenience
rather than as policy—the practice of promoting from within; the practice y then be
interpret as policy and carefully followed by subordinates. Interpret as policy minor
managerial decisions that are not intended to serve as pattern
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5. PROCEDURES
Procedures are plans that establish a required method to handling future
activities. They are chronological sequence of required actions. They are guides to
action, rather than thinking, and they detail the exact manner in which certain
activities must be accomplished procedures often cut across department lines. For
example, in a manufacturing company, the procedure for handling orders will almost
certainly involve the sales department (for the original order), the finance department
(for acknowledgement of receipt of funds and for customer credit approval), the
accounting department (for recording the transaction), the production department (for
the order to produce goods or authority to release them form stock), and the traffic
department (for determination of shipping means and route).
6. RULES
Rules spell out specific required actions or notations, allowing not
discretion. They are usually the simplest type of plan. At time, rules and procedures
are implemented because of unfavorable publicity. General Dynamics, one of the
largest defense contractors, has been accused of some improprieties. In order not to
be suspended from bidding on defense contracts, the company had to agree to a list
rules and procedures imposed by the Defense Department.
7. PROGRAMS
Programs are a complex of goals, policies, procedures, rules, task
assignments, steps to be taken, resources to be employed, and other elements
necessary to carry.
8. BUDGETS
A budget is a statement of expected results expressed in numerical
terms. It may be referred to as a “numberized” program. In fact, the financial
operating budget if often called a “profit plan.’ A budget may be expressed in
financial term; in terms of labor-hours, units of product, or machine-hours; or in any
other numerically measurable term. It may deal with operations, as the expense
does; it may reflect capital outlays, as the capital expenditures budget does; or it
may show cash flow, as the cash budget does.
Although it proceeds actual planning and is therefore not strictly a part of the
planning process, an awareness of opportunities in the external environment as well
as within the organization is the real starting point for planning. All managers should
take a preliminary look at possible future opportunities and see them clearly and
completely, know where they stand in light of their strengths and weaknesses,
understand what problems they wish to solve and why, and know what they expect
to gain. Setting realistic objectives depends on this awareness. Planning requires a
realistic diagnosis of the opportunity situation.
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2. ESTABLISHING OBJECTIVES
The second step in planning is to establish objectives for the entire enterprise and
then for each subordinate work unit. This is to be done for the long term as well as
for the short range. Objective specify the expected results and indicate the end
points of what id to be done, where the primary emphasis is to placed, and what is to
be accomplished by the network of strategies, policies, procedures, rules, budgets,
and programs.
3. DEVELOPING PREMISES
The third logical step in planning is establish, circulate, and obtain agreement to
utilize critical planning premises such as forecasts, applicable basic policies, and
existing company plans. They are assumptions about the environment in which the
plan is to be carried out. It is important for al the managers involved in planning to
agree on the premises. In fact, the major principle of planning premises is this: the
more thoroughly individuals charged with planning under stand and agree to utilize
consistent planning premises, the more coordinated enterprise planning will be.
After seeking out alternative courses and examining their strong and weak points,
the next step is to evaluate the alternatives by weighting them in light premises and
goals. One course may appear to be the most profitable, but it may require a large
cash outlay and have a slow payback; another may look less profitable but may
involve less risk still another may better suit the company’s long-range objectives.
6. SELECTING COURSE
This is the point at which plan is adopted—the real point decision making.
Occasionally, an analysis and evaluation of alternative courses will disclose that two
or more are advisable, and the manager may decide to follow several courses rather
than the one best course.
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balance sheet items such as cash and capital expenditures. Each department or
program of business or some other enterprise can have its own budgets, usually of
expenses and capital expenditures, which tie into the overall budget.
If done well, budgets become a means of adding together the various plans and also
set important standards against which planning progress can be measured.
Budget will be discussed in connection with managerial
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STEPS IN PLANNING
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LECTURE # III
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What is organizing?
Organizing is to set all the things and people in their respective places in an
organization. Or according to some others” Organizing is having a place for everything (and
everyone) and everything (and everyone) in its place”
Or
“Organizing is a formalized intentional structure of roles and positions in an organization”.
¾ In the first place, the structure must reflect activities and plans, because the
activities derive from them. For example, if we organize an organization into
many departments, then each department should show the activities that take
place there and what plans are made for those activities.
¾ In the third place, an organization structure should reflect its environment and
should be made as the situation demands. There is no single organizational
structure that will work well and applicable to all situations. So, in short, the
organizing and designing of an organization should be according to the
requirements of the environment and situation.
¾ In fourth place, since the organization is staffed with people, the groupings of
activities and the authority relationships of an organization structure must take
into account people’s limitations and customs. It means that the structure of
the organization should show us the skills and knowledge level of the people
needed in that organization.
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1. Establishing company plans, without plans and company objectives we can never
structure any organization.
2. Formulating supporting objectives, policies, and plans. It means that when the
basic plans of the organization are set there should be formulated some other
plans to support the plans and to achieve the objectives.
3. Identifying and classifying the activities necessary to accomplish these plans and
goals. Then the next step should be the identification and recognition of the
activities that will take place in that organization.
4. Grouping these activities in light of the human and material resources available
and the best way, under the circumstances, of using them. This means that for
ease and efficiency we should departmentalize our activities into department
according to our needs.
5. Delegating to the head of each group the authority necessary to perform the
activities. Then making a head or manager for each department and giving
him/her the power and authority to control the activities that will take place in that
organization.
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MEANING OF “ORGANIZATION”
Scholars from various disciplines have attempted to define the term “organization”.
Louise A defines a formal organization. Allen as “ the process of identifying and
delegating responsibility and authority, work most effectively in accomplishing
objectives. “Chester Bernard defines a formal organization as a system of
consciously coordinated activities or forces or two or more people; according to
Barnard, the three essential elements of an organization are common purpose,
willingness to serve, and communication most of the definitions of organization
appear to stress the following factors
TYPES OF ORGANIZATION
Doesn’t the fact that there are several types of organizations in existence present
some difficulty in understanding what constitutes an organization? Yes. But perhaps
we can clarify the matter by identifying and describing some of the common types of
organization, and discussing the purpose, objectives, and goals they commonly hold.
There are profit and non-profit organizations; formal and informal; public and private;
manufacturing and servicing; and small, medium, and large organization. All the
business organizations are profit organizations, operating to reach the goal of
making profit. Often this amount of profit is established annually in terms of a specific
figure in rate of return on investment. Unless on organization sets a specific goal like
this, it may not be possible to determine where the organization is heading. So let us
remember profit is one of the main goals of an organization. Unless an organization
makes a profit, it will not be possible to better the conditions of its employees, to otter
a better product to the consumer by inversing a portion of its profits in research and
development activities, or to pay taxes to the government. Thus profit helps many
segments of the organization and society at large , therefore, the profit, motive
should not be construed as selfish-motive of the organization. On the other hand, the
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business organizations must share their profits with those who help to achieve this
goal.
Profit Non-Profit
1. 1.
2. 2.
3. 3.
Manufacturing Servicing
1. 1.
2. 2.
3. 3.
Finally, there are formal and informal organizations. While the formal organizations
have a rigid organization structure, showing the chain of command, authority-
responsibility relationships, and functional-roles, the informal organizations lack a
rigid structure. Often the informal organizations are formed for the purpose of
satisfying some social needs. These organizations may exist within the formal
organizations or may exist and operate independently. Various clubs, teams,
associations, and similar other groups come under this category. All the business,
industrial organizations and educational institutions are formal organizations.
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Organizations come into existence with a goal to achieve. These objectives may be
to produce a particular product, to offer a particular service, to enter into a certain
industry or market, to make profit and so on. Vroom defines goal as desired future
states affairs. According to Vroom, goals serve the following purposes:
1. Focus attention
Goals serve as guidelines to focus the efforts and activities of
people in an organization. Thus they indicate what should be done.
3. Serve as standards
Goals can help determine how well people are performing their
work.
GROUP EFFORT
It would seem to us that the achievement of purpose would require the efforts of
many. Certainly a product cannot be produced and sold to many customers by one
individual, especially in these days of intensive competition, changing technology,
growing population, and changing economic conditions. All these force the individual,
to seek the efforts of others. Individual limitations (biological, physiological—being in
different places at one time or doing different things at one time) can be overcome by
securing the efforts of other.
In primitive marketing and economic systems, individual efforts were possible. But
environmental conditions forced the individual producer and seller to seek the efforts
of other people. Today, we see giant organizations securing the efforts of thousands
and thousands of people probably with the purpose of being leaders in their own
fields. Many of the limitations of individuals are overcome by securing the services of
others. Personnel administrators bear the major responsibility of adding more and
more people to an organization.
COORDINATION
Once the efforts others have been secured, they must be coordinated in such a way
that optimum efficiency is achieved in reaching the purpose of an organization. Good
personnel practices are vital in achieving coordination. Proper leadership styles,
motivational techniques and communication patterns must be utilized in this
achieving coordination.
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ORGANIZATION STRUCTURE
The structure of an organization refers to authority and responsibility relationships,
work and worker grouping and in general, a framework for coordinating the activities
of various members of the organization.
Usually the structure of an organization is diagrammatically shown in the form of a
chart. Depending upon the size of the organization, the structure of an organization
may range anywhere from a simple to an elaborate one. The chart is only a
simplified model of structure of an organization and not an exact representation. The
structure of an organization is shown diagrammatically in chart.
Managin Dirctor
Workers
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Centralization Decentralization
Control by few because men at the Control by many because men at the top
believe they are indispensable, top believe that participation will don’t
trust subordinates, and like to increase efficiency and effectiveness.
Build empires within empires
SPAN OF CONTROL
Another feature we have to be concerned with in developing organization structures
is the span of control, that is, the number of people an individual can competently
supervise and direct. Classical theorists stress that this number may range from
three to eight. The present trend is to consider the situation in which people are
being supervised in order to determine the appropriate number of subordinates, the
availability of communication techniques, the amount of time spend with
subordinates, and the capability of the supervisor, etc. Poor span creates problems
such as over supervision, impedes and lengthens communication delays decisions,
decrease initiative and morale decreases opportunity for responsibility and
development, and increases costs.
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In the diagrams, both organizational structures have ten subordinates under a top
person. This “tall” structure has four levels with a span of two. The “flat” structure has
two levels with a span of ten. As can be seen from figures, the “tall” organization
structure involves more organizational layers or levels then the “flat” structure. There
is no way of saying that one form of structure is preferred over the other. Both have
certain limitations and advantages. While the “flat” structure permits general
supervision, the “tall” structure leads to close or tight supervision. Communication is
much faster in an organization with a wide span of control than in an organization
with a narrow span. Organizations such as banks, accounting firms, and research
laboratories may find the “flat” structure ideal.
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LECTURE # IV
“THE CONTROL
FUNCTION”
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EXPLANATION
“Control is the function, where every manager, from president to
foreman, should make sure that what is done and what is intended”. Many managers
do not know the real meaning of the Control function. They think that it is only the
duty of top mangers. Some others think that control means tight supervision.
PREVENTATIVE CONTROLS
We should know that it is better to prevent fires than to develop skills in
putting out fires. A good manager concentrates on the prevention of a crisis rather
than the cure. Control measures should be designed to prevent things from going
wrong, that is, to keep people doing what they are supposed to do. This requires that
every employee should know exactly what results are expected from him and what
constitutes a good job. And no one should go to the supervisor after completion of a
task and ask “is this alright?” For every job, there are some observable factors such
as quality, quantity, time and cost. Every employee should know in advance exactly
what is going to be measured and what level of quantity, quality, time and cost will
indicate satisfactory performance. A performance standard should be set in advance
for every employee.
WARNING CONTROLS
Some times, not everything will go according to plan. Conditions
change and unforeseen circumstances develop. To deal with such circumstances,
we need warning controls which will alert us that something is not going as planned.
According to this control, plans must be broken down into parts and checkpoints
established at various points. For example, if we have a task that is supposed to be
completed at the end of the week and we don’t know until the last day that we are
behind schedule, we probably cannot do anything in one day to attain the result in a
week. On the other hand, if we had broken this down so that we know where we
were supposed to be at the end of the first day, the second day and so on then
there is an excellent chance to see that something is done to catch up and still meet
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the target date. The same thing applies to cost factors also. If proper checkpoints are
set up, costs can be controlled by bringing them in line.
PROCESS OF CONTROL
Control involves;
• Establishing standards
• Checking or measuring performance against the established standards.
• Taking corrective action when and where deviations from the standards occur
and
• Making sure recommended corrective actions are follow through.
ESTABLISHING STANDARDS
Standards are desired levels of performance and constitute the
foundation of the control process. These serve as the criteria against which the
performance is evaluated by the manager. Any performance can not be evaluated
without establishing standards. This is especially true if the task is complicated, long,
time-consuming and involves many intangible factors. For an executive or top
management level it is very difficult to set standards but for operative or production
types of jobs, setting standards is relatively easy. Some commonly used standards
are quantity, quality, time and cost. For example, a worker must produce a number
of units per day or per week (quantity); he must maintain a rejection rate not more
than 3 percent (quality); complete his work within six months of the assignment
(time); and not exceed the stated costs in producing a special number of units (cost).
MEASURMENAT
If performance standards are clearly established and made known to
the performer of a job, then measurement of performance becomes easy. Where it is
difficult to establish standards, measurement also activities, motion and time study
technique is used in setting up and as a result measurement of actual performance
tends to be simple. Wherever vague standards exist, measurements are often
developed in the area of performance measurement.
COMPARISON
This is the core of the control process. This phase of the control
process involves checking to determine whether the actual [performance meets the
predetermined or planned performance. Manager must constantly seek to answer,
“How well are we doing?” When a production supervisor checks the actual output or
performance of department with the production schedule, he is performing
comparison aspect of control. When an executive evaluates the performance of
his subordinates once in six months or annually, he is performing comparison aspect
of control. Checking return on investment is a comparison phase of control.
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CORRECTIVE ACTION
When a significant discrepancy occurs between the actual output or
performance and the planned or predetermined performance standards, specific
action must be taken to correct the situation. We have already examined two types
of controls which specifically apply to corrective action of the control process. Some
innovative people and organizations have already built-in corrective actions in their
control process, if the deviations are due to controllable factors. Some even go to the
extent of identifying the uncontrollable factors and developing alternative courses
regarding corrective actions are given in advance to the performers job, actions can
be taken without delay.
FOLLOW-THROUGH
Recommendation of corrective action is never the last step in control
and a manager’s task does not end here. Often the control process is ineffective or
fails because the corrective action is not followed through. Specific procedures must
be established and the responsibility must be clearly assigned to carry out the action.
FEEDBACK ON CONTROL
In the control process performance is measured and reported back to
the manager. Performance information thus measured and channeled back to
management is known as feedback. It tells what kind of job is being done, what
variations have occurred, and what kind of temporary measures had been taken to
make adjustments.
CHARACTERISTICS OF COTROL
Following are some of the characteristics of controls
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There is no use of a control process that is more costly than the problem itself.
So, the control process used for measurement and identification of the problem
should be economical and affordable.
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DETERMINE
PERFORMANCE
STANDARDS
COMPARISION
REVIEWING STAGE OF ACTUAL AND
PLANNED
PERFORMANCE
TAKE CORRECTIVE
CORRECTING STAGE ACTIONS
FOLLOW-THROUGH
FOLLOW-UP STAGE ACTIONS AND
FEED BACK
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TYPES OF CONTROL
1. CONTROLS USED TO STANDARDISE PERFORMANCE
To increase efficiency and decrease costs. Control mechanisms used for this
purpose are: inspection, written procedures and production schedule.
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LECTURE # V
“THE STAFFING
FUNCTION”
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RECRUITMENT STAFFING
Whenever there are vacancies it is necessary to find persons to fill
those vacancies. Recruitment is the process of finding potential candidates to
fill vacant jobs in an organization. Some organizations do not wait until a vacancy
arises, but they anticipate such vacancies and new openings in the short and long
run and thus plan for their future needs. This approach gives ore time to perform
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recruiting and also increases its effectiveness. The results obtained from recruitment
selecting, placing, training, developing and motivating employees depend directly for
their success upon the effectiveness of the planning and forecasting phase of
employment development.
STEPS IN RECRUITMENT
1. Need Assessment
At first it should be identified that whether there is a need for a person to work at
a position in that organization or not. And if there is a need for someone to fill the
place, noticing the need.
3. Job Description
Then the need should be defined and determined in terms of job. The job
description should answer the following questions like;
4. Job Specification
Here the post or the vacancy is really well defined along with the minimum
responsibilities, skills and experience required. Some things that should be done
in this stage are;
a) Newspapers
b) Other organizations
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c) Educational institutes
Or inside the organization in through our personnel.
MANPOWER
The human element was either ignored or oversimplified under
traditional school of thought in the field of management. The human being was
regarded merely as a factor of production. It was assumed that they could be bought
at any time like any other resource of production. The respect for the human element
was recognized only under the Human Relations movement. This movement brought
to the attention of management the powerful role that individuals play in determining
the success of an organization. Thus the importance of human beings as a resource
and a power came to be accepted in industrial situations. Many organizations and
managers now recognize this fact and plan and preserve their manpower.
Sources of Manpower
After determining the manpower requirements and setting up programs
to acquire various types of personnel the next step in recruitment and selection
process is identifying and evaluating various sources of manpower. The type of
source can be a crucial factor in selecting personnel for certain types of jobs.
Sometimes the personnel manager has to shop around through various sources to
get the best individuals. These sources whether an agency or individual play an
important role in bringing the job seeker and the employer together there are many
sources of manpower. These sources are classified into two broad groups namely
internal and external.
Stages in Selection Process
The selection process is not a one-shot approach in choosing the suitable candidate
for the job. It involves a series of steps. Each step important because at the each
stage information may be reviewed which will disqualify the candidate. A candidate
has to pass through the barriers before getting the job. In each of these steps job
description are matched against job specifications.
An analysis of the literature and the practices of many companies this area reveal
that a majority of these use the following steps in choosing a suitable candidate.
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1. Screening
The forms filled by the candidates are screened and those who are not
qualified enough or are incompatible with the job are screened out and the remaining
are moved to a list where they will be further selected.
2. Preliminary Interview
The candidates who are looking for jobs in the labor market respond to
the job advertisements by sending brief descriptions about their bio-data (resume) to
the employer. The colleges students who are about to graduate sign up to for the
preliminary interview or screening when they are informed about the visit of a
representative from a company. Sometimes the candidates contact the employment
office of the company and request a preliminary screening. Whatever the approach
the primary purpose of screening is to determine whether the candidate meets the
minimum requirement for the job.
3. Application Blanks
Every organization designs and uses its own application blank. The
application is designed to gather information about the candidate’s background
education and training work experiences and reference. A well-designed application
blank serves several purposes. It is useful in testing the candidate’s ability to spell
write legibly and answer questions accurately. Providing accurate information
indicates one’s sense of responsibility and honesty. It is a popular belief that one’s
handwriting is a reflection of one’s character. The application blank also provides
basic information for interview to concentrate on obtaining deeper explanations that
help to bring out character motivation initiative and the like the interviewer need not
spend time in recording the factual information that could better be written by the
applicant himself. Another purpose of the application blank is that several
interpretations regarding job success can be made from the information provided by
the candidate. G. J. Spencer contends that the application blanks sever as indicators
of energy, morality, aggressiveness, and self-centeredness. Some sample
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application forms are shown in the previous pages. In a survey of 140 largest
organizations, fifty-seven of them had ten or more irrelevant questions in their
application forms. This calls for reexamination and redesign of application forms
according to changing needs.
4. Psychological Testing
The next step in the selection process is administrating psychological
tests. These tests are designed to secure information about an applicant’s
amiabilities, aptitudes, interests, creativity, and personality. While some
organizations rely on commercially available tests, others construct test batteries to
fit their own need. Their reason for using psychological tests is based on an
assumption that individuals differ in their characteristics and that these differences
can be accurately measured. Such a measurement would also reveal that who ii
going to be successful in future job performance. Therefore, it can be concluded that
one can predict a person’s job performance on the basis of his test scores.
5. Interviewer
Testing usually follows interviewer. The interviewer gets an opportunity
to go through the scores before interviewing the candidate. The interview is probably
the most essential step in the entire selection procedure. At this stage the interviewer
matches the information obtained about candidate through various sources such as
the application blank screening and testing. He relates this information with the
information obtained through his own observation during the interview. Clarification
and elaboration of brief responses given in the application blank are also sought in
the interview process. Much of the interview maybe devoted to giving the applicant
information about the job and the company. Thus, this selection device achieves and
interaction and exchange between the employer and the prospective employee. If
subjectivity can be minimized or eliminated, the interview will serve a great purpose
in selecting candidates who will be successful in their job performance. Often the
final decision to hire the candidate is made during the interview.
6. Reference Check
Once the interview is over, the personnel department will engage in
checking references. These references maybe from individuals who are familiar with
candidate’s academic achievements and from the applicant’s previous employers
and some times from his full workers. Checking the references give and indication of
the person’s future success on the job by showing his past performance. Often a
telephone call is match quicker and gives better information than other methods.
Sometime the candidate is required to provide the names, address and telephone
numbers of three or four referees. These referees should not be the personnel
friends or relatives of the candidate. Instead of asking the referees to send letters of
recommendation to the employment department, the supervisor for whom the
applicant will work can contact the referees on the phone and ask a few questions
about the candidate. Some of these questions would be “in what capacity do you
know the candidate?”“What are his strengths and weaknesses?” and so on.
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8. Medical Examination
A candidate might have everything going in his favor so far in the
selection in the process, but if his physical qualifications failed to meet job
requirements, and then he will not get the job. The physical examination enables the
employer to determine if the employee is physically able and fit to perform the job.
Placing the candidate with disability and the job maybe a liability to the company for
unfounded and unreasonable compensation claims when the employee has small
accident.
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While training prepares the individual to meet the requirements of the job,
development involves improving a manager’s general knowledge to perform
managerial responsibilities.
TRAINING METHODS
As a result of research in the field of training a number of programs are available.
Some of these are new methods while others are improvements over the traditional
methods. It is the responsibility of the trainer to select the most suitable programs.
Such a decision is usually determined by considerations of cost nature of job amount
of knowledge and skill required background of the trainees time available and the
policies if the organization. The findings of the survey undertaken by Utgaard and
Dawis of training methods in sixty-three manufacturing and forty-nine non-
manufacturing firms in the Minneapolis-St. Paul area show that the following training
methods are the most frequently used:
Job instruction;
Conference or discussion;
Apprenticeship training;
Job rotation;
Coaching; and Lecture
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On-the-job Training
This type of training, also known as Job instruction is the most commonly used
method. Under this method the individual is placed on a regular job and taught the
skills necessary to perform the job. The trainee learns under the supervisor and
guidance of a qualified worker or instructor. Apprenticeship, job rotation and
coaching are some examples this type of training.
Off-the-job Training
Under this method of training the trainee is separated from job situation and his
attention is focused upon learning the material related to his future job performance.
Vestibule (simulating actual work conditions in a classroom) role-playing lecture
method, conference or discussion and programmed instruction, are some examples
of this type of training.
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LECTURE # VI
“MOTIVATION”
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MOTIVATION
Motivation one of the most important functions of a manager and for a
manager to motivate his/her employees to get the best out of them he/she has to
motivate his employees.
DEFINITION:
All the people and scholars have their own definitions of motivation.
Usually one or more of the following words are included in the definitions: “desires”,
“wants”, “wishes”, “aims”, “goals”, “needs”, “drives”, “,motives” and “incentives”.
Technically, the term “motivation” can be traced form a Latin word “movere”
which means “to move”. So, motivation can be defined as the process that starts with
a physiological or psychological deficiency or need that activates a behavior or a
drive that is aimed at a goal or incentive. Thus, the key in understanding the process
of motivation is to understand the relationship among needs, drives, and incentives.
The process of motivation depends upon these three factors.
1. NEEDS:
Needs are created whenever there is a physiological and psychological
imbalance or deficiency. For example, when the body is deprived of food
(physiological need) or the personality of a person is deprived of other people who
serve as friends or companions. Physiological needs are always based on a shortage
or deficiency, for example, we feel thirsty only when we are really thirsty and our
body needs water. But psychological needs may be or may not be based on a
deficiency or shortage. For example,
An individual with strong need to get ahead may have a history of consistent
success.
2. DRIVES:
Drives and motives (the two terms are mostly used interchangeably) are
set up to alleviate and lessen needs and deficiencies. Physiological and
psychological drives are action-oriented and provide an energy and struggle to reach
an incentive. Drives are at the very heart of motivational process. For example the
need for food and water are translated into the hunger and thirst drives and the need
for friends becomes a drive for affiliation.
3. INCENTIVES:
At the end of motivation process is the incentive, defined as anything that
alleviate need and reduce drive. Thus, attaining an incentive will tend to restore
physiological or psychological balance and will reduce or cut off the drive. Eating
food, drinking water, and obtaining friends will tend to restore the balance and reduce
the corresponding drives. Food, water and friends are the incentives in these
examples.
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1. Physiological needs; they are unlearned primary needs e.g., hunger, thirst,
sleep and sex are some examples.
2. Safety needs; Maslow stresses on emotional and physical safety.
3. Love needs; Maslow had a poor choice of wording. Here love does not mean
sex, but it means affiliation and belongingness.
4. Esteem needs; esteem represents higher needs of humans. Need of power,
achievement, and status can be considered parts of this level.
5. Need for self-actualization; in this step a person comes to know about his
potentials, talents and shortcomings. Very few people reach this step.
Need for
Self-actualization
Esteem needs
Affiliation or
Acceptance needs
Security or
Safety needs
Physiological needs
EQUITY THEORY
The equity theory is another theory that shows how people should be
motivated. This theory was put forward by J.Stacy Adams. The essential aspects of
the equity theory may be shown as follows;
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MONEY
Money can never be overlooked as a tool of motivation. Whether in the form
of wages, piecework (getting paid for units produced) or any other incentive pay,
bonuses, stock options, or any of the other things that may be given to people for
performance, money is important. Money, as money, is likely to be more important to
people who are raising a family, for example, than to people who have no
dependents. Some new pay technique (financial motivation) are the following.
NEW PAY TECHNIQUES
There have been many changes in the work environment and
many factors and variables have changed from the past years and a comparison
between the factors today and a few decades back will show many changes and one
of them has been the pay techniques to motivate people. At first money was
considered to be the only way and the most effective way to get the best out of
people and later it was considered that there are also some other factors that help in
motivation and even in financial incentives there can be many ways to motivate
workers and some of these new financial types of incentives can be the following
ones.
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SKILL PAY
Many organizations pay incentives to the more skilled workers in the
organizations for their expertise and skills when they train the juniors and the
new comers.
COMPETENCY PAY
This is a technique much similar to the skill pay but it provides
financial awards to the knowledge or unique skills of the workers.
BROADBANDING
First the range of the salaries was limited for any particular level
of workers. But nowadays companies are using extended levels of salary
ranges so it makes it easier for the managers to increase the salary of any
worker even without moving him to the next level.
¾ Financial reward can be given through a systematic way and it can not be
given at anytime the manager wants but recognition can be used any time to
motivate and appreciate workers.
PARTICIPATION
Participation means involvement and contribution of the subordinates in any
decision making and activity in an organization. Researches show that if the people
(workers) are given the chance to participate more than they contribute more in the
organization and hence they are much more motivated.
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JOB ENRICHMENT
The researches say that the job should be made more challenging and
meaningful to the workers. This applies to the jobs of managers as well as to those
of non-managers.
Job enrichment is concerned with designing jobs that include a greater variety
of work content; require a higher level of knowledge and skill; give workers more
autonomy and responsibility in terms of planning, directing, and controlling their own
performance; and provide the opportunity for personal growth and a meaningful work
experience. As opposed to job enlargement, which horizontally loads the work or job,
job enrichment vertically loads the job; there are not necessarily more tasks to
perform, but more responsibility and accountability.
Example; if a person works in a factory line to make a part of product and another
person to make another part and at last the inspector to check the product. The job
can be enriched by giving the knowledge to the person how to make all the parts of
the product and join them together and at last inspecting the product himself.
Job enrichment technique is very viable and result giving method still it
does not give solution to all the problems of job designing.
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LECTURE # VII
“MANAGEMENT BY OBJECTIVE
(MBO)”
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OBJECTIVES
Objectives can be defined as the end results towards the achievement of which all the group
and individual activities and efforts of an organization are directed. Objectives can be long-
term and short-term, broad or specific but one thing that is mostly accompanied with these
objectives is that they are always verifiable and measurable. It means that we should be
able to measure objectives on the basis of;
9 Time
9 Quantity
9 Quantity
9 Cost
Multiplicity of Objectives
An organization can not make only one objective for all the activities and operations in that
particular organization because then that single objective would be so vague and long that it
will be impossible to measure it or in other case it will not cover all the activities and aspects
of that organization. The organization, therefore, has to make a multiple number of
objectives and each one specifying a number of similar activities. So, it can be said that in
any organization there can be many different objectives, for example, each department head
makes his own objectives which can be different from the other department’s objectives but
all the departmental objectives should be so that they will contribute to over all objective.
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even lower. For example, in one company the system was first started in a division where it
was carried down to the lowest level of supervision with an interlocking network of goals.
Under the personal leadership and tutelage of the division general manager, it succeeded in
the areas of profitability, cost reduction, and improved operations. Soon, some other division
mangers and the chief executive became interested in, and attempted to implement, similar.
Programs in another case the head of an accounting section developed a system for his
group: his success not only earned him recognition (and promotion) but also served as the
starting points for a company wide program.
4. RECYCLING OBJECTIVES
Objectives can hardly be set by starting at the top and dividing them up among subordinates.
Nor should they be started from the bottom. A degree of recycling is required. The arrows in
figures 6-1 and 6-3 indicate recycling. Top mangers may have some idea of what their
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subordinates’ objectives should be indicate recycling but they will almost certainly change
these preconceived goals as the contributions of the subordinates come into focus. Thus,
setting objectives is not only a joint process but also an interactive one. For example, a sales
manager may realistically set a goal to achieve product sales that are much higher than what
top management has believed possible. In this event, the goals of the manufacturing and
finance department will surely be affected.
BENEFITS
There is consideration evidence, much of it from laboratory studies, but
shows the motivational aspects of clear goals. But there are other benefits.
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WEAKNESSES
With all its advantages, a system of management by objectives has a number
of weaknesses. Most are due to shortcomings I applying the MBO concepts.
• Failure to teach the MBO philosophy. People who put MBO into practice must fully
understand and appreciate a good deal about it. And they should explain to the
subordinates that what MBO is and how it works, why it is being done, what part it will
play in appraising performance, and above all, how participants can benefit. And if these
concepts are not fully understood then one can not take advantage of this system of
management.
• Failure to give guidelines to goal setters. MBO, like any other kinds of planning,
cannot work if those who are expected to set goals are not given needed guidelines.
Managers should know how the goals and objectives of the company set, so that a better
system of MBO can be established.
• Difficulty of setting goals. Setting goals is one of the most difficult tasks in
management and if the goals are not set properly and realistically then one will not be
able to achieve them and hence MBO or any other system will fail to achieve the aims
and targeted progress. So, mangers should know their workers abilities and then set
goals that will be challenging but achievable.
• Emphasis on short-run goals. In most MBO programs, managers set goals for the
short term, seldom for more than a year and often for a quarter of less. There is clearly a
danger of emphasizing the short-run, perhaps at the expense of the longer range. This
means, of course, that supervisors must always assure themselves that current
objectives, like any other short-run plan, are designed to serve longer-range goals.
• Danger of inflexibility. Managers hesitate to change objectives and when objectives
and plans are not changed when necessary it will cause the plans to be ineffective. But
goals should not also be changed too much if they have to be meaningful.
Finding and identifying the ineffective programs by measuring them against the
objectives that are already designed.
Applying the MBO concepts and techniques to measure the performance of each
individual and group performances.
Preparing long-range objectives and plans and then dividing them into shorter
programs too for the purpose of effective and easier control.
Finding and designing different control techniques that are suitable for the activities
and then using them to measure the performance of the workers.
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Training the officials and officers in the organization and government so that they are
able to use these techniques.
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MANAGERS’ OBJECTIVES
Managers can create a checklist including the following questions specifying activities
regarding the objectives;
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LECTURE # VIII
“DECISION MAKING”
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DECISION MAKING
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most managers do attempt to make the best decisions they can within the limits of
rationality and in light of the size and nature of the risks involved.
MANAGERIAL ANALYSIS
Evaluating alternatives may involve utilizing the techniques of marginal analysis to
compare additional revenues arising from additional costs. Where the objective is to
maximize profits, this goal will be reached as elementary economics teaches when
the additional revenues additional costs are equal. In order word, if the additional
revenues of a larger quantity are greater than its additional costs, producing more
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can make more profits. However, if the additional revenues of the larger quantity are
less than its additional costs, producing less can make a larger profit.
Experience
Reliance on past experience probably plays a larger part than it deserves in
decision-making. Experienced managers usually believe, often without realizing it,
that the things they have successfully accomplished and the mistakes the have had
furnish almost infallible guides to the future. This attitude is likely to be more
pronounced the more experience a manger has had and the higher in an
organization he or she has raised. To some extend, experience is the best teacher.
The very fact that mangers have reached their position appears to justify there past
decision. More ever, the process of thinking problem through, making decision, and
seeing programs succeed or failed does make for a degree good judgment (a times
bordering on institution). Many people, however, do not profit by their errors by their
errors. And there are managers who seem never to gain the seasoned judgment
required by modern enterprise. Relying on past experience as a guide for future
action can be dangerous, however. In first place, most people do not recognize the
under lying reasons for their mistakes or failures. In second place, the lessons of
experience maybe entirely in applicable to new problems. Food decision must be
evaluated against future events, while experience belongs to the past.
Experimentation
An obvious way to decide among alternatives is to try one of them and see what
happens. Experimentation is often used in scientific inquiry. People often argue that
it should be employed more often in managing and that the only way a manager can
make sure some plans are right—especially in view of the intangible factors—is to try
the various alternatives and see which is best.
The experimental techniques is likely to be the most expensive of all techniques,
especially if a program requires heavy expenditures of capital and personnel and if
the firm cannot afford to vigorously attempt several alternatives. Besides, after an
experiment has been tried, there may still doubt what is proved, since the future may
not duplicate the present. This technique, therefore, should be used only considering
other alternatives.
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evaluate the interactions of the different variables. For example, a corporation that
decide to expand its operation in a strange country may know little about the
country’s cultural, lows, economic environment, and politics. The political situation
maybe so volatile that even the experts cannot predict a possible change in
government.
In a risk situation, factual information may exist, but it maybe incomplete. To improve
decision making, one may estimate the objectives probabilities of an outcome by
using, for example mathematical models. On the other hand, subjective probability,
based on judgment and experience, may be used. Fortunately, there are a number
of tools available that help managers make more effective decisions.
Risk Analysis
All intelligent decision makers dealing with uncertainty like to know the size and
nature of the risk they are taking in choosing a course of action. One of the
deficiencies in using the traditional approaches of operations research for problem
solving is that many of the data used in a model are merely estimates and others are
based on probabilities. The ordinary practice is to have staff specialists come up with
‘’ best estimates.” However, new techniques have been developed that give a more
precise view of risk.
DECISION TREES
One of the best ways to analyze a decision is to use a so-called decision trees.
Decision trees depict, in the form of a tree, the decision points, chance events, and
probabilities involved in various courses that might be under taken. A common
problem occurs in business when a new product is introduced. Managers must
decide weather to install expensive permanent equipment to ensure production a the
lowest possible cost or the under take cheaper, temporary tooling that will involve a
higher manufacturing cost, but lower capital investments in will result in smaller
losses if product does not sell as well as estimated.
PREFERENCE THEORY
Preference, or utility, theory is based on the notion that individual attitudes toward
risk will vary: some individuals are willing to take only smaller risks than those
indicated by probability (risk averters), in others are willing to take greater risks
(gamblers). While referred to here as “preference theory, this techniques is more
classically called “utility theory”. Purely statistical probabilities, as applied to decision-
making, rest on the assumption that decision makers will follow them.
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new way of doing things. Although this discussion centers on the creative process, it
is implied that organizations not only generate new ideas, but also translate them
into practical applications.
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Brainstorming, which emphasis group thinking was widely accepted after its
introduction? However, the enthusiasm was dampened by research, which
showed that individuals could develop better ideas working by themselves than
they could work in groups. Additional research, however, showed that in some
situations the group approach might work well. This may be the case when the
information is distributed among various people or when a poorer group decision
is more acceptable than a better individual decision that, for example, may be
opposed by those who have to implement it. Also, the acceptance of new ideas is
usually greater when the group charged with its implementation makes the
decision.
Synectics. Originally known as the Gordon technique (named after its creator,
William J. Gordon), this system was further modified and became known as
synectics. In this approach, the members of the synectics team are carefully
selected for their suitability to deal with the problem, which may involve the entire
organization. The leader of the group plays a vital role in this approach. In fact,
only the leader knows the specific nature of the problem. This person narrows
and carefully leads the discussion without revealing the actual problem itself. The
main reason for this approach is to prevent the group from reaching a premature
solution to the problem. The system involves a complex set of interactions from
which a solution emerges—frequently the invention of a new product.
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LECTURE # IX
“STRATEGIES AND
POLICIES”
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The term “strategy” (which is derived from the Greek word strategos, meaning
“general”) has been used in different ways. Authors differ in at least one major
aspect about strategies. Some writers focus on both the end points (purpose,
mission, goals, and objectives) and the means of achieving them (polices and plans).
As pointed out in planning function, strategy refers to the determination of the
purpose (or mission) and the basic long-term objectives of an enterprise, and the
adoption of courses of action and allocation of resources necessary to achieve these
aims. Therefore, objectives are a part of strategy formulation.
Since ends have already been discussed (objectives), let us turn our attention now to
the means of achieving them, including the situation analysis. It is assumed that the
purpose of the enterprise has already been established yet is subject to change after
an evaluation of the situation.
Policies are general statements or understandings that guide mangers’ thinking in
decision-making. They ensure that decisions fall within certain boundaries. They
usually do not require action but are intended to guide mangers in their commitment
to the decision they ultimately make.
The essence of policy is discretion. Strategy, on the other hand, concerns the
direction in which human and material resources will be applied in order to increase
the chance of achieving selected objectives.
Certain major policies and strategies may be essentially the same. A policy of
developing only those new products that fit into a company’s marketing plan one of
distributing only through retailers may be an essential element of a company’s
strategy for new product development or marketing. One company may have a
policy of growth through the acquisition of other companies, while another may have
a policy of growing only by expanding present markets and products. While these
are policies, they are also essential elements of major strategies. Perhaps one way
to draw a meaningful distinction is to say that policies will guide a manger’s thinking
in decision-making—if a decision is to be made—while a strategy implies the
commitment of resources in a given direction.
They key function of strategies and policies are to unify and give direction to plans.
In other words, they influence the course along which an enterprise is trying to go.
But, standing alone, they do not ensure that an organization will, in fact, go where it
wants to go.
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Strategies and policies help mangers plan by guiding operating decision and often
premaking them. The principle of the strategy and policy framework is, then, that
the more strategies and policies are clearly understood and implemented in practice,
the more consistent and effective will be the framework for enterprise plans. For
example, if a company has a major policy of developing only new products that fit its
marketing organization, it will avoid wasting energy and resources on new products
that do not meet this test.
To be effective, strategies and policies must be put into practice by means of plans,
increasing in detail until they get down to the nuts and bolts of operations. Tactics,
then, are the action plans through which strategies are executed. Effective tactics
must support strategies.
Since strategies and policies effect planning, they also greatly affect other areas of
managing. For example, major strategies and policies will naturally influence
organization structure and, through this, other functions of the manager. In his
extraordinary analysis of the history of some of the nation’s largest companies,
Alfred Chandler, Jr., depicts in detail how strategy affected organization structure. In
the Due Pont Company, the organization around product lines, with centralized
control, followed the strategy of product diversification. General motors had
essentially the same situation. In Due Pont, the strategy of diversification was
dictated by the need to use resource made surplus by the post-World War I decline
in the explosive business. In General Motors, on the other hand, the strategy was on
of integration and expansion of a large, disparate group of companies acquired by
W.C. Duran in his formation of the company during the two decades before 1920.
While the strategies of these two companies were based on different premises and
situations, they led to essential the same organization structure.
Although specific steps in the formulation of a strategy may vary, the process can be
built, at least conceptually, around the key elements.
Inputs
The various organizational inputs are one of the key elements in the strategic
planning process and you should know inputs well by now.
Enterprise Profile
The enterprise profile is usually the starting point for determining where the company
is and where it should go. Thus, top mangers determine the basic purpose of the
enterprise and clarify the firm’s geographic orientation, such as whether it should
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operate in selected regions, in all states in the United States, or even in different
countries. In addition, managers assess the firm’s competitive situation.
External Environment
The present and future external environment must be assessed in terms of threats
and opportunities. The evaluation focuses on economic, social, political, legal,
demographic developments, for products and services on the markets, and for other
factors necessary in determining the competitive situation of the enterprise.
Internal Environment
Similarly, the firm’s internal environment should be audited and evaluated in respect
to its resources and its weakness and strengths in research and development,
production, operation, procurement, marketing, and products and services. Other
internal factors that are important for formulating a strategy and should assess
include human resource and financial resources, as well as the company image, the
organization structure and climate, the planning and control system, and relations
with customers.
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To systemize these choices the TOWS metrics has been purposed “T” stands for
threats “O” for opportunities “W” for weaknesses “S” for Strengths the TOWS model
stars with threats because in many situations a company undertakes strategic as a
result of a perceived crisis problem or threat.
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weaknesses, they will strive to overcome them, making them strange if they
face threats, they will cope with them so that they can focus on opportunities.
Low
Cash Cows Dogs
Strong Weak
Growth
Growth strategy gives answers to such questions as these: How much growth should
occur? How fast? Where? How should it occur?
Finance
Every business enterprise and, for that matter any nonbusiness enterprise must
have a clear strategy for financing its operations. There are various ways of doing
this and usually many serious limitations.
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Organizational
Organizational strategy has to do with the type of organizational pattern an
enterprise will use. It answers practical questions—for example, how centralized or
decentralized should decision-making authority be? What kinds of departmental
patterns are most suitable? How should staff? Positions are designed? Naturally
organization structures furnish the system of roles and role relationships that help
people accomplish objectives.
Personal
There can be major strategies in the area of human resources and relationships.
They deal with such topics as union relations, compensation, selection, hiring,
training and appraisal, as well as with special matters such as job enrichment.
Public Relations
Strategies in this area can hardly be independent: they must support other major
strategies and efforts. They must also be designed in light the company’s type of
business, its closeness to the public, and its susceptibility to regulation by
government agencies. In any area, strategies can be developed only if the right
questions are asked. While no set of strategies can be formulated that will fit all
organizations and situations, certain key questions will help any company discover
what its strategies should be. The right questions will lead to answers. As example,
some key questions are presented below for two major strategic areas: products or
services and marketing. With a little thought, you can device key questions for other
major strategic areas.
Products or Service
A business exists to furnish products or services. In a very real sense, a profit is
merely a measure—although an important one—of how well a company serves its
customers. New products or services, more than any other single factor, determine
what an enterprise is or will be.
The key questions in this area can be summarized as follows:
What is Business?
Who are our customers?
What do our customers want?
How much will our customers buy and at what price?
Do we wish to be a product leader?
Do we wish to develop our own new products?
What advantages do we have in serving customer needs?
How should we respond to existing and potential competition?
How far can we go in serving customer needs?
What profits can we expect?
What basic form should our strategy take?
Marketing
Marketing strategies are designed to guide mangers in getting products or services
to customers and in encouraging customers to buy. Marketing strategies are closely
related to product strategies; they must interrelated and mutually supportive. As a
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matter of fact, Peter Drucker regards the two basic business functions as innovation
(for example, the creation of new good or services) and marketing. A business can
scarcely survive without at least one of these functions and preferably both.
The key questions that serve as guides for establishing a marketing strategy are
these.
Where are our customers, and why do they buy?
How do our customers buy?
How is it best for us to sell?
Do we have something to offer that competitions do not?
Do we wish to take legal steps to discourage competitions?
Do we need, and can we supply, supporting services?
What are the best pricing strategy and policy for our operation?
How can we best serve our customers?
INDUSTRY ANALYSIS
In the analysis of the industry, Porter identified five forces: (1) the competition among
companies, (2) the threat of new companies entering the market, (3) the possibility of
using substitute products or services, (4) the bargaining power of supplies, and (5)
the bargaining power if the buyers or customers. On the basis of the industry
analysis, accompany may adopt generic strategies. These strategies are generic
because they may be suitable on a broad level of different kinds of organizations.
Any enterprise, however, may use more than one strategy.
DIFFERENTIATION STRATEGY
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FOCUSED STRATEGIES
Let us look first at some of the reasons why strategic planning may fail and then
consider what can be done to improve such planning.
One study attributed strategic planning failures to the following factors:
1. Managers are inadequately prepared for strategic planning.
2. The information for preparing the plans is insufficient for panning for action.
3. The goals of the organization are too vague to be of value.
4. The business units (a distinct form of organization that will be discussed in
Chapter 10) are not clearly identified.
5. The reviews of strategic plans of the business units are not done effectively.
6. The link between strategies planning and control it insufficient.
Strategic planning is the job of line managers, especially those at the top of the
organization. These managers may be staff planners, particularly in large
companies. But in order to do an effective job, line managers must be coached in
strategic planning.
The overall strategic plan needs to be supplemented by specific action plans. This, in
general, requires the contribution of line mangers from different functional
departments, such as research and development, engineering, production,
marketing, financing, and personal to plan for the people required to carry out the
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plan. But integrating the various functional groups is not easy. Thus, companies
have set up a task force, with heavy representation of middle managers, to cut
across the functional barriers.
Goals and objectives, to be meaningful, have to be more than platitudes such as
“achieving excellence.” The degree of specificity depends on the level in the
hierarchy of objectives, as pointed out in chapter 6. When organization become to
large, they are frequently broken down into strategic business units (SBUs) these
units are expected to operate if they were relatively independent business. But it is
important that the boundaries of the different SBUs be correctly drawn. Otherwise,
strategic planning maybe difficult consider for example a large organization with
many SBUs each having its own strategies plan each competing with the others for
scarce resources, each making overly optimistic projections for its own strategic.
Conflicts are bound to arise at the corporate level. It is indeed and art of the top
executive to centigrade these strategic plans into a meaningful whole that serves the
interest of the total organization. SBUs will be discussed in greater detail in chapter
10, on the departmentation.
Plans are the basics for control. Without plans no control is possible. Too often
strategic plans and budgets are in conflict. Too often budgets are based on last
year’s budgets rather than on the strategic plan. Too often budgets are prepared
without a specific action plans to implement the strategy. Strategic plans can also be
thwarted by a compensation system that rewards short-term results at the expense
of the long-term health of the organization.
From this discussion it is clear that strategic planning needs to be intergraded with
the total managerial process, such as the organization structure; the appraisal,
reward and motivational system; and the controls used to measure performance
against objectives. This is just another illustration that effective management
requires a system approach that recognizes the independence of the managerial
activities.
It is one thing to develop clear and meaningful strategies. It is another matter, and
one of very great practical importance, to implement strategies effectively. If strategic
planning is to be successful, certain steps must be taken to implement it. Following
are eight recommendations that should be considered by managers who wish to put
their strategies to work.
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making chain, and give instructions to develop programs and make decisions to line
with them. Too few organizations do this. Bit if premises do not include key
assumptions about the environment in which plans will operate, decisions are likely
to be based on personal assumptions and predilections. This will almost certainly
lead to a collection of uncoordinated plans.
3. Ensuring that action plans contribute to and reflect major objectives and
strategies. Action plans are tactical or operational programs and decisions, major or
minor that takes plans in various part of an organization. If they do not reflect desired
objectives and strategies, the result will be vague hopes or useless intentions. If care
is not taken in this area, strategies planning are not likely to have a button-line
impact; this is, to have an important effect on company profiles.
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One of the essential and often overlooked steps in effective and coordinate planning
is premising, which is the establishment of, and the agreement by mangers and
planners to utilize, consistent assumptions critical to plans under consideration.
Planning premises are defined as the anticipated environment in which plans are
expected to operate. They include assumptions or forecasts of the future and known
conditions that will affect the operation of plans. Examples are prevailing policies and
existing company plans that control the basic nature of supporting plans.
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ENVIRONMENTAL FORECASTING
If the future could be forecast with accuracy, planning would be relatively simple.
Managers would need only to take into account their human and material resources
and their opportunities and threats, compute the optimum method of reaching their
objectives, and proceed with relatively high degree of certainty toward it. In practice,
forecasting is much more complicated.
Note that the purpose of the successive opinions and feedback is not to force the
experts to compromise but, rather, by bringing additional information inputs to bear,
to make opinions more informed. It is thus hoped, and experience has verified this
hope, that an informed consensus among experts will be arrived at.
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government welfare department must gear its plans to meet expected case loads,
and church plans must be influenced by number of communicants expected in an
area.
The sales forecast is a prediction of expected sales, by product and price, a number
of the month or years. It is the, then, a kind of pro forma sales portion of the
traditional in come statement for the future.
The sale forecast is the key to internal planning. Business and capital outlays and
policies of all kinds are made for the purpose of maximizing profits from expected
sales. Although there are some enterprises that need to pay scant attention to sales
(for example, the small-city water company or the government defense contractor
with a long-term order that has little chance of being canceled or modified), it is a
rare business that can overlook the market for long. Even the farmer, who, operating
under price supporters may have a guaranteed market for a certain product for a
coming year, can hardly ignore market influences as they affect succeeding years or
alternative crops.
Smaller companies often make the mistake of believing that sales forecasts are too
expensive and of overlooking the variety of sources of data available at little or not
cost. The purchasing agent, members of the sales staff, the treasurer, information
that gathered together, could make an acceptable forecast. Moreover, the wide
range of information available from government and industry sources is neither
difficult nor expensive to obtain.
¾ Sales force composite method. One of the commonly used methods of sales
forecasting it to obtain from salespeople and sales managers their combined view
ads to expected sales. The usual technique is to ask salespeople to forecast sales
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for their districts and have these estimates reviewed by regional sales managers and
then by the head-office sales mangers. Sometimes salespeople are given guides in
the form of company planning premises as to business conditions in general, and the
product specialists, such as the company brand, sales, and advertising mangers,
review often the salespeople’s estimates.
This method is based on the belief that those closets to the sales picture have the
best knowledge of the market. Other advantage s ascribed to this method are that it
places forecasting, initially at least, in the hands on those who must make good on
the forecast; it gives a broad sample that makes the total forecast more valid; and it
allows an easy breakdown by product, customer, or territory.
¾ Statistical Method. The most generally relied upon approach to sales forecasting is
the application of various statistical methods. As mathematical techniques have
improved and the computer has come into wider use, so have statistics. These
statistical methods may be divided into (a) analysis of trends and cycles, (b)
correlation analysis, and (c) use of mathematical formulas or models.
¾ Mathematical formula or model. The third statistical method one that usually grows
out of finding either a trend or correlation analysis relationships is to develop a
mathematical formula to depict the relationship of a number of variables to the
company’s sales. Often sales for an individual company are subject to a number of
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Limitations of statistical methods: Although statistical methods are good for sales
forecasting from the standpoint of reliability, they are often subject to certain
drawbacks. They require researched the use of statistically trained help. This may be
costly. It is not always possible of find reliable trends, correlations, r mathematically
relationships. Many defense subcontractors have found, for example, that their sales
potential is closely related to such vague factors as defense strategy the course of a
conflict individual program expenditure level and advances in the art of the industry
none of which bears a reliable correlation with predictable national or industry data.
There is also a danger that managers may rely too heavily on statistically
relationships and the results implied and thereby miss significant changes that
intelligent judgment would have appraised. In any statistical method it must be
realized that the past is used only as basis for predication and that the future not
necessary reflect the past.
DEDUCTIVE METHODS
No forecaster should overlook the opportunity to apply judgment and draw intelligent
deduction from facts and relationships. Generally, what is involved is finding out what
the present situation is, where the sales are, and why and then analyzing
deductively, the factors underlying sales. Although the indications so developed may
be put into a mathematical model or merely left as am imprecisely correlated.
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