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Principles of Management

Management: Definitions,
Roles & Skills
Management: Definitions
 “Management is the process of designing and
maintaining an environment in which individuals,
working together in groups, efficiently accomplish
selected aim(s) viz. to create a surplus(s).” ….
Weihrich & Koontz
Management: Definition …ctd.
♦ Applies to and through any kind of organization
♦ Applies to Managers at all levels
♦ Concerned with “Doing the right things right at all times”:
1. Effectiveness: Achievement of objectives (Right Things);
2. Efficiency: Achieving those objectives with least amount/
sacrifice of resources (Things Right);
3. Continuous Improvement: in creating increasing ‘surplus’
(at all times);
– “Improve or die” = survival of the fittest
– “what gets measured, gets managed and improved” e.g.
Productivity= Output / Input ratio
 Collective, cohesive and consistent human effort towards
accomplishing a common objective.
Management: Definition …ctd.
Additionally, Managers need to factor in external
environmental forces:

Political Regulatory
Economic

Organization
Societal
Globalization

Technological

For maximum benefit to the organization


Management: Roles & Skills
 Management - what managers do:
 Fredrick Taylor’s path-breaking “scientific approach”
 Henri Fayol’s classical definition of ‘functions’, now
modified to:
 Plan -- Organize -- Lead(Command&Coordinate) -- Control
 Mintzberg’s map of managerial ‘roles’:
 Interpersonal + Informational + Decisional
 Katz’s interpretation of ‘skills’:
 Technical / Human / Conceptual
 Management – ‘get things done through others’:
 Leadership: “The ability to influence a group towards
achievement of goals”.
 Motivation: “The willingness to exert high level of effort
towards goals”
 Communication:”The transference and understanding of
meaning”
Management: roles & skills
Managerial Skills(Katz & others)

 Technical Skills: Skills Needed


Application of specialized
knowledge or expertise
acquired though formal
training & its use. Board

Con
 Human Skills:

cept
Ability to work with people,
Exec.

HUM
understand and motivate

ual
groups & individuals.

AN
 Conceptual Skills: Mgr.

Tec
Mental ability to recognize,

hnic
analyze, diagnose and think
Supr.

al
through complex situations.
Principles of Management

Management: A Systems
Approach
Systems approach to Management
ENVIRONMENT

Transformation
input output
process

Feedback (Reenergizing the system)

System Boundary

Organization as a System receives Input, transforms it


through a Process for Output and Operates in an
Environment (economic, regulatory and other forces)
Systems approach to Management …ctd.

Systems Concepts
♦ System Boundaries and Subsystems
> Systems often consist of numerous subsystems.
> Each subsystem has elements, interactions with
other subsystems, and objectives.
> Subsystems perform specialized tasks for the
overall system.
♦ Subsystem Interfaces and Interface
Problems

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


Systems approach to Management …ctd.
Outputs and Inputs
♦ Systems produce Outputs from Inputs – i.e. the
Inputs are converted to Outputs.
♦ Outputs of one subsystem become inputs to
another subsystem.
♦ Outputs must adhere to standards to be useful
or acceptable to the next subsystem.
System Environment
♦ Environment consists of people, organizations
and other systems that supply data to or that
receive data from the system
♦ Managers at different levels perceive
‘Environment” differently
Systems approach to Management …ctd.
“Inputs”: 5 Ms of Management
 Inputs or the resources managers deal with are:
 Man: human resources, both inside and connected with an
organization;
 Materials: goods (hard & software, processed or semi-
finished) and services required to create the sellable end
product;
 Machines: technology and expertise deployed towards the
transformation process;
 Methods: systems, procedures and processes seamlessly
put together for the transformation;
 Measurement: score-keeping and in-process monitoring
continuously with due feedback to keep on-course on time.
 “Money” is required for generating all theses Ms –
managers need to acquire, deploy, generate and
distribute money as a primary need for business!
Systems approach to Management …ctd.
Output for “Stake-holders” in Business:
“Stake”: Something wagered or risked;
an interest in an enterprise with contingent gain or
loss …Webster ‘s dictionary

“Holders” who have stake in Business:


 Shareholders: are the owners. They have put in their
money in the enterprise, expecting better returns from it
than from other ventures;
 Society: includes the State, provincial and local
governments for the improvement of ‘quality of life’ of its
citizens;
Systems approach to Management …ctd.
Output for “Stake-holders” in Business …ctd.
 Suppliers: continuity of their enterprise depends on the
success of the customer enterprise;
 Customers: require the goods and services provided by
the enterprise, better than those from its competitors. The
enterprise is, in turn, a supplier to its customers;
 Employees: livelihood depends on the progress and
success of the employing enterprise;

 There is a “freedom of choice” (for association)


between each of these stake-holders and the
enterprise in the longer term:
 But they sink or swim together in the shorter term
 Length of term definition varies with individuals!
Systems approach to Management …ctd.
Management as a system transforms inputs:
♦ by the process of
Planning
+ Organizing
+ Staffing
+ Leading
+ Controlling
to accomplish certain pre-determined, (as
derived from stakeholder needs) goals or
objectives
Systems approach to Management …ctd.
Stakeholders
Man, Machine Shareholders;
Product/Services,
Material, Society; Customers; Profits, Customer &
Method, Employees; Suppliers Societal satisfaction,
Measurement Other Long-term Goals

Organizing

Controlling
Planning

Staffing
Outputs

Leading
Inputs
(External
(Goal
To
Oriented)
Orgnzn.)

Stake holder Feedback (reenergizing the system)

EXTERNAL ENVIRONMENT(Opportunities, Constraints)


Principles of Management
3

Management Process
First Step: Planning
Planning
 Planning involves selecting
objectives or goals and the course of
actions to achieve them:
 Provides the bridge to take us from
where we are to where we want to go;
 Decision making in choosing the best
from alternative courses of action and is
integral to planning;
Plans as foundation of
Management
What kind of
resources
needed?

What kind of people


& org. structure
to have?
Plans
How to lead them
to reach planned
goals?

How to control in
case of deviation
from plan ?

The primacy of
Types of Plans
 Mission / Purpose
 The basic function or ‘reason for
existence’ of an enterprise/ organization

Case in point: Mission of Indira


Institute
“To train our students to become the best
business minds and entrepreneurs today,
who will lead their companies successfully
into the future tomorrow , locally, nationally
and globally.”
Type of Plans (Cont’d)
 Objectives/ Goals
 The end towards which activity of an
organization is aimed, e.g.
 For a Business enterprise – profit, surplus creation;
 For a Management Institute: The number of
employable/useful trainees;
 Strategies
 Determination of the long term objectives and
adoption of a course of action
 Gives a frame work for linked action-plans,
communicated systematically to guide thinking
and actions.
Types of Plans (cont’d)
 Policies
 “Plans” that are general directional
statements (or understandings) that
guide/help in decision making:
 Repeat decisions taken ‘reflexively’;
 Delegation of tasks without loss of control.

 Issues with “Policy”


Seldom documented in writing
 Subject to interpretations
Types of Plans (cont’d)
 Procedures
 Plans that are chronological sequences of
required actions: task-oriented in nature;
 Cuts across department boundaries (sub-
systems) in an organization: e.g. customer
complaint handling procedure;
 Procedures and policies are inter related:
e.g. authorization for paid leave
 Policy governs quota, responsible authority etc.
 Procedure governs application, grant and record-keeping.
 Rules
 Specific actions or non-actions allowing no
discretion
 Caution: rules (and procedures too) limit initiative!
Types of Plans (cont’d)
 Programs
 Action plans (mainly non-routine or for changed
activities) including, task assignments, steps to
be taken, resources to be deployed etc. to
achieve a (new/renewed) goal;
 Primary program may require supporting programs,
spreading across the enterprise;
 Perfect coordination between supporting & primary

programs essential to avoid delays, unnecessary costs


and expected roll-out.
 Programs are a complex of (sub) goals, policies,
rules and other elements necessary for the
course of action e.g. obtaining ISO certification.
Types of Plans (cont’d)
 Budgets
 A statement of expected results expressed in
“Numerical terms” e.g. financial operating
budget = “profit plan”;
 Budgets enforce precision in thinking:
 Making a budget is ‘planning’ by itself;
 Encourages innovation – a “different” way to work

 Budgets serve for ‘Control’:


 Enforces discipline in execution of plans;
 Instills cost consciousness;

 Makes people (constantly) plan!


Steps in Planning

Being aware of Setting Goals/ Identifying


challenges Planning premises
Objectives alternatives

Market, Customer’s What to accomplish Internal & external


wants, Competition, & when Environment/conditions
Own strengths
& weakness

Budgeting Formulating
(Numberizing Plans) Supporting Comparing &
plans choosing an
alternative
e.g., Sales budget e.g., plan to buy Decision
Operational Expense Equipment, recruit & train making
budget, Employees, develop product
The Planning Process
 Planning Period:
 Short range plans e.g. material procurement plan in a
factory
 Long range plans e.g. product development plan,
plant/production facility installation;
 “Urgent” drives out the “Important” – mismatch between
short & long term plans!
 Planning horizon must allow for actions to run their
course – requiring ‘commitments’:
 Thus “decisions today” are key to good plans;
 Long-term plans reap benefits of good short-term plans.
Steps in Planning
Being aware of Setting Goals/
Opportunity Objectives

Considering, Market, What to accomplish


Competition, Customer’s & when
wants, Own strengths
&weakness

Objective = Important end towards which activities


are directed; therefore needs verification at the end
of the plan period.
Hierarchy of Objectives& Org.
Levels

Mission Board of
Directors
Overall
Objectives & CEO
Key result areas.
Division Division
Head Head
Divisional objectives Product X Product Y

Sales & Mktg


Production Dept
Departmental objectives Dept

Individual objectives Sales Manager A Sales Manager B

Objectives set end results – they need to be supported


by a hierarchy of sub-objectives, duly networked
through the organization to avoid discord and wasted
Hierarchy of Objectives& Org. Levels …
ctd.
 The Organizational Objectives is
deployed into the objectives of :
 Divisions Departments  Individual
objectives;
 The ‘cascade’ principle: seamless flow;
 Mutual support & interlocking of goals is
essential
 Managers must ensure that the components
of the network fit each other;
 Departments/divisions can be ‘blind-sided’.
Hierarchy of Objectives& Org. Levels
…ctd.
Top-down
Approach Mission
Overall
Objectives &
Key result areas.
Bottom-up
Divisional objectives Response:
The result
Departmental objectives
Individual objectives

While setting Objectives, ideally, Top Management


should get information / ‘buy-in’ from lower levels to
set realistic goals for a good result.
Key Result Areas (KRA)
 Are areas in which performance is essential for
the success of an enterprise
 Examples of ‘generic KRA’s:
 Market share
 Return on Investment (ROI)
 Service level
 Customer satisfaction
 Peter Drucker recommends: Market standing,
innovation, productivity, physical & financial
resource, profitability, managerial performance
& development, worker performance & attitude
and public responsibility.
Management By Objectives

(MBO)
A comprehensive managerial system that integrates many
key managerial activities in a systematic manner and that is
consciously directed towards the effective and efficient
achievement of organizations’ and individual objectives:
 Set-out by Peter Drucker in 1954;
 Integrated to personal performance appraisal by Douglas McGregor
in 1957;
 Has formed the basis for many theories on motivation;
 Has been criticized for introducing a short-term focus and
undesirable behaviour;
 Currently viewed as a ‘way of managing’ – not a specific tool.
MBO (cont’d)
Managing the MBO way involves:
 Identifying clearly defined KRA’s
 Setting verifiable measurement of KRA’s
 Facilitating self-direction, accountability &
commitment by subordinates
 Motivation of subordinates to achieve and
exceed set targets
 Emphasis on performance rather than on
personality
Guidelines for setting
Objectives
 Clear & Verifiable
 Clarity scores over precision – ‘approximately right
over accurately wrong’!
 Expressed in Quantitative terms
 Figures
 Percentage
 Time frame (by which date)
 Should cover main ‘deliverables’ of the job/ function
 Challenging yet reasonable: “S.M.A.R.T”
Guidelines for setting Objectives
(Cont’d)
 Identification of assumptions underlying the
objectives
 Consistency of:
 objectives with those of superiors, Organization &
other departments
 Short time action-plans with Long-term objectives
 Inclusion of personal growth, development and
improvement targets
 Ensuring availability of and access to needed
resources
 Documentation and communication of
objectives to concerned persons
Benefits of MBO
 Result oriented planning of goals,
resources, organization
 Setting of standards for Control
 Decentralization of Management and
clarification of Organizational roles &
responsibilities:
 Accountabilty & commitment of employees
 Enables timely corrective actions (as required)
Weaknesses of MBO
 Emphasis on:
 short term at the expense of long term
 “Results” over “Process”
 Individual over collective effort
 Failure to grasp and deploy the concept of
“seamless cascade”
 Difficulty in setting agreed, harmonized
goals
 Danger of inflexibility
Planning Premises &
Strategies

Setting Goals/ Comparing &


Identifying
Objectives Planning premises choosing an
alternatives
alternative
What to accomplish Decision
Internal & external
& when making
environment

Strategic Planning Process

Strategy = determination of the purpose / the basic long-ter


objectives; the adoption of courses of action and
allocation of resources required to achieve the aim
Planning Premises & Strategies
…ctd.
Stakeholder
Wishes &
Shareholder Current
demands External
situation
External
Opportunity
& Threat
Management Enterprise Forecast
Orientation Profile External
situation Key success factors &
Alternative Strategies
Purpose &
Major objectives
of enterprise Current Internal
resource Strengths &
situation Weakness

Strategic
choice
The Strategic Planning Process
Planning Premises

Porter’s Five Forces : an


Model for analysis of the
Externals environment.
Planning Premises: forecast of
demand
 Estimate of future demand is made by
qualitative methods, time-series methods
and/or causal methods:
 Qualitative  relies on judgement of experts to
translate to quantities;
 Time-series  statistically interpolate demand on
historical data;
 Causal method  seek co-relation on cause and
effect basis between two (or more) variables to
quantify demand;
 However, all forecasting methods are limited by:
 Handling of un-quantifiable factors e.g. national pride
 Unrealistic assumptions fuelled by a desire to succeed
 Excessive data required (often unobtainable) to make
accurate forecasts
 Uncertainty with environmental changes: Technology,
Generic Strategy
Competitive
Customer Advantage

Relationship 1. Cost Leadership:


To continually work reducing
the cost prices of products.
Supplier Q-C-D has very high
Company priority.

2. Differentiation:
B’marking Partnering To constantly offer
innovative
and unique solutions.
Competitor Supplier Supplier
technology & quality has
focus.
Ultimate competitive position:
- position w.r.t major Customers 3. Customization:
- K.S.Fs of Competitors To offer required services in
- leveraging of suppliers the
Lean Management
required manner is the
Generic Strategy: BCG Matrix
Red: Marketing Perspective; Blue: Financial Perspective
Hi Cash Source Lo
Hi Hi
Market Growth rate

STAR ???

“Hold” “Build”

Cash Use
Cash Cow DOGS

“Harvest” “Divest”

Lo Lo
Hi Lo
Relative Market Share
Planning Premises & Strategies …
ctd.
Budgeting Formulating Comparing &
( Numberizing Plans) Supporting choosing an
plans alternative
Say, Sales budget Say, plan to buy Decisio
Operational Expense Equipment, recruit & train n
budget, Employees, develop product making
Capital expenditure etc
budget
Deployment (MBO etc.)

Decision Making = is the core of the planning process; a plan


does not come into being unless a ‘decision’ i.e. certain
commitments of resources, managerial time and money
are made and risks are taken.
Caution: A “Plan” is not intentions and should not suffer from
“Analysis Paralysis”.
Decision Making
 Decision making is a ‘rational choice’
process, bounded by:
 Limitations: time, information and ‘logic’;
 Behaviour: Risk averseness and biases.
 A key step in the process is to identify
those limiting factors, ‘road-blocks’ to each
effective (‘right thing’) alternative – then
finding a ‘solution’ with least sacrifice of
resources (‘thing right’):
 Factors: quantitative, qualitative/intangible;
 Finding solutions:
 marginal analyses – benefits with incremental inputs;
 cost-effectiveness – assessment of benefits over costs.
Decision Making…ctd.
“Experience”: good teacher and useful when
routine/repeat situations arise under similar
circumstances. Without due analysis of the
conditions, mistakes tend to repeat or a poor
fit results.
How to select
Amongst the “Research & analysis”: the approach is in at firs
Alternatives ? understanding the problem (‘half the solution’!
then finding relations between various factors
which hinder or foster goal attainment. This is a
structured, analytical approach quantitative or
otherwise.
“Experimentation”: arguably, the best technique
to use, particularly when either experience or
rationale is lacking/limited. However is expensi
and ‘success/failures’ are magnified, results are
subject to interpretational errors.
Decision Making…ctd.
 Decision making takes place under varying
degrees of uncertain conditions and risks.
Techniques used to aid the process are:
 Risk analysis: every decision is based on interactions
amongst different factors/variables – each of which
have their own probabilities (towards ‘success’).
Analysis of these probabilities yield a risk profile for
each alternative path. In the absence of defined
probabilities, estimates can be used.
 Decision trees: the outcome (measure pre-decided
e.g. cost or time) of every step in the decision is
charted and a course selected on the most favourable
outcome. Very much like making a trip, navigating by
using a road-map (refer example in W & K, “Management –
a global perspective/10th edn. Pg. 209)
Decision Making…ctd.
 Flow Charts: as a process-guide to taking a decision and
helps as a check-list of key variables, the sequence in
which they fall and the interrelations. Key to making a
choice or re-examining the path taken are also indicated
as risk-reduction devices.
(refer example in W & K, “Management – a global perspective/10th
edn. Figure 8-5)
 Decision Support Systems: a wide variety of (proprietary)
computer based programs are available for managers to
use their time more effectively for decision making of
semi-structured tasks – by providing alternative
evaluations. They focus on the process of decision
making, taking data provide by the management
information systems in enterprises.
Principles of Management
4

Management Process:
Organizing for results
Nature of Organizing
 Organizing may be broadly defined as:
1. The identification and classification of required
activities;
2. The grouping of those activities towards
attaining their set objectives;
3. The assignment of those groupings to a
responsible manager, duly empowered;
4. The provision for coordination among, within
and across the groups in the organization.
 Organization structures are designed to:
 Clarify tasks & responsibilities,
 Remove obstacles,
 Furnish decision making & communication
network

Nature of Organizing …ctd.
The Business Organization Model: “Value
Chain” (Porter,1985)
Support Activities

Firm Infrastructure

Human Resource Management

M
ar
gi
Technology Development

n
Procurement

Inbound OutboundMarketing

n
Operations Service

gi
Logistics Logistics & Sales

ar
M
Primary Activities
margin reflects the reward for the risks run by the company.
All activities together need to generate ‘value’ greater
Nature of Organizing …ctd.
The Value Chain: “Primary Activities”
 Inbound Logistics: relate to receiving, storing
and disseminating inputs;

 Operations: associated with transformation of


inputs into final product form;

 Outbound Logistics: relate to collecting,


storing and physically distributing the
products to buyers;

 Marketing & Sales: relate to advertising,


Promotion, sales, distribution-channel
selection & management and Pricing;

 Service: associated with enhancement or


Nature of Organizing …ctd.
The Value Chain: “Support Activities”
 Procurement: relates to the function of
purchasing inputs used across the firm’s
primary and support activities;

 Technology Development: relates to know-how,


processes & procedures, ‘technology’
embodied in the product design and delivery.
Most activities have their own sub-set of
technology;

 Human Resource Management: directed at


recruiting, training, developing and
compensating all personnel;
Nature of Organizing …ctd.
 Most practicing mangers would translate this
“value chain” to imply an organization as:
“ a formalized, intentional structure of roles and
positions”
 Thus ‘formal organization’ implies the intentional
structure of roles in an enterprise.
 However, in an enterprise ‘informal organization’ will
form, not necessarily bad and is:
“ a network of personal and social relations not
established or required by formal organizations
but arising spontaneously as people associate
with each other”.
Nature of Organizing …ctd.
Hierarchical levels The building block of an organization
is the Department: a group charged
with independent task & responsibilit

$ $ $

# Span of control

# Office Bridge Team

$ Car pool
#
Nature of Organizing …ctd.
“Departmentation”
 Grouping activities & people into departments
makes it conceptually possible to expand
organizations to an infinite degree.
 Different patterns have been successfully used
to group activities:
 By simple nos. is a simple method – works well for the
lowest levels where work is routine, uniform and non-
specialized; time-grouping is an extension of this
method where shift-working is required;
 By enterprise functions – embodies what enterprises
typically do e.g. Production, Engineering, Sales etc.
This method, defined by F.W.Taylor, is arguably the
most prevalent method still used.
“Departmentation” …ctd.
 By territory or geography – is very common when the
geographical spread is wide. It was a device introduced to speed
up management in similar units for easy and swift communication
e.g. Sales: N/E/W/S; Fire Brigade: Camp, Hinjewadi, Aundh etc.
 By Customer/Account orientation – reflecting the primary interest
in nature of markets/business/customer e.g. Banks: Institutional
banking, Small Savings etc.
 By Process groups – encountered primarily in specialized/
manufacturing operations where processes are vital e.g.
Advertising: Copy-writing, Creative etc.; Manufacturing: Steel
Melting, Wire-drawing etc.
 By Product Lines – has evolved with enterprises becoming “multi-
line” with ‘function’ needing adaptation/integration to suit specific
products e.g. Tata Motors: Passenger Vehicles / Commercial
vehicles
“Departmentation” …ctd.
 By ‘grid’ control – in essence combining the
‘functional’ and the ‘product-line’ patterns to best
effect. Functional excellence is not subjugated to
Operational ease. In ‘projects’, this
serves to bring together the diversity of skills
required into one team.
 The Strategic Business Unit: companies today are
organizing themselves as ‘companies within a
company’ to allow for maximum flexibility and
freedom of operations, especially when the
products/businesses are unconnected e.g. General
Electric. Generally, SBU’s have:
 Their own Missions, Goals and Strategies;
 Distinct and definable set of competitors;
 Deploy and manage resources in key areas;
 A reasonable ‘size’.
“Departmentation” …ctd.
Example of “Grid Control” & S.B.U’s
C.E.O

Finance Qual. HRM BU 1 BU 2

I.S.O I.R.M G/H.R G/H.R

Recr. Plant 1 Ind.

Sin.
T&D
Nature of Organizing …ctd.
Span-of-Management
 The purpose of organizing is to make human
cooperation effective and is limited by:
 the number of persons a manager can ‘supervise’
effectively and efficiently;
 while the total number is dictated by the quantum of
work/ nature of task/spread etc. Thus the two
dimensions, “Level” (depth) and “Span of control”
(width) are interrelated .
 The reason for creating Levels of organization is the
limitation in the span of control. “Effective span” is
influenced by:
 Training/skill of subordinates and personal contact
required;
 Clarity of delegation of authority;
 Clarity of plans, use of objective standards and
communication techniques;
Span-of-Management …ctd.
 Levels, per se, are not desireable:
 They are expensive – as they increase, both
infrastructure costs and staffing tends to increase;
 Real work is accomplished at the ‘gemba’ (Japanese:
workplace) where the actual value-
addition/transformation takes place. The contribution of
levels on top are not directly co- relatable, thus best
avoided;
 Communication become complicated – omissions,
filterations and misinterpretations lead to wasted and
misdirected effort;
 Planning and control become tortuous, requiring
complicated coordination and alignment between levels.
 Studies reveal that between 8 to 10 people at ‘higher’
levels and upto 15 at lower levels is a good “span”.