Principles of Management

Defining Management

Management is the act of engaging with an organization’s human talent and its resources to accomplish desired goals and objectives.

Learning Objectives

Outline the theoretical scope and basic function that represent managerial responsibilities within a company

Key Takeaways

Key Points

  • Management comprises planning, organizing, staffing, leading /directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal.
  • In for-profit work, the primary function of management is meeting the needs of various stakeholders of the organization, such as customers, debtors, and owners.
  • In the public sector of countries that are representative democracies, voters elect politicians to public office, who then hire managers and administrators to oversee the everyday responsibilities that support those elected to office.
  • Since an organization can be viewed as a type of system, managers provide the necessary human action, so the organizational system produces planned outcomes or goals desired by the various stakeholders.

Key Terms

  • stakeholders: Persons or organizations with a legitimate interest in a given situation, action, or enterprise which are directly affected by the organization’s actions.
  • theoretical: Of or relating to the underlying principles or methods of a given technical skill, art, etc., as opposed to its practice.
  • shareholder: Through owning stock, the real owner of a publicly traded business that is run by management.

Overview

Management is the act of engaging with an organization’s human talent and using the physical resources at a manager’s disposal to accomplish desired goals and objectives efficiently and effectively. Management comprises planning, organizing, staffing, leading, directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal.

One of the most important duties for a manager is effectively using an organization’s resources. This duty involves deploying and manipulating human resources (or human capital), as well as efficiently allocating the organization’s financial, technological, and natural resources.

Since organizations can be viewed as systems, management can also be defined as human action, such as product design, that enables the system to produce useful outcomes. This view suggests that we must manage ourselves as a prerequisite to attempting to manage others.

Theoretical Scope

At first, management may be considered as a type of function, one which measures financial metrics, adjusts strategic plans, and meets organizational goals. This applies even in situations where planning does not take place. From this perspective, Henri Fayol (1841–1925) considers management to consist of six functions: forecasting, planning, organizing, commanding, coordinating, and controlling. He was one of the most influential contributors to modern concepts of management.

In another way of thinking, Mary Parker Follett (1868–1933) defined management as “the art of getting things done through people.” She described management as philosophy. Some people, however, find this definition useful but far too narrow. The phrase “management is what managers do” occurs widely, suggesting the difficulty of defining management, the shifting nature of definitions, and the connection of managerial practices with the existence of a managerial cadre or class.

Another perspective regards management as equivalent to “business administration” and thus excludes management in places outside commerce, for example in charities and in the public sector. More realistically, however, every organization must manage its work, people, processes, technology, etc. to maximize effectiveness and accomplish its goals.

Nature of Managerial Work

In the for-profit environment, management is tasked primarily with meeting the needs of a range of stakeholders. This typically involves making a profit (for the shareholders ), creating valued products at a reasonable cost (for customers), and providing rewarding employment opportunities (for employees). Nonprofit management has the added importance of attracting and retaining donors.

In most models of management/governance, shareholders vote for the board of directors, and the board then hires senior management. Some organizations have experimented with other methods (such as employee-voting models) of selecting or reviewing managers, but this occurs only very rarely. In the public sector of countries that are representative democracies, voters elect politicians to public office. Such politicians hire managers and administrators.

Several historical shifts in management have occurred throughout the ages. Towards the end of the 20th century, business management came to consist of six separate branches, namely:

  • Human resource management
  • Operations management or production management
  • Strategic management
  • Marketing management
  • Financial management
  • Information technology management (responsible for the management information systems)

Basic Functions

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Mary Parker Follett: Mary Parker Follett defined management as “the art of getting things done through people.”

Management operates through various functions, such as planning, organizing, staffing, leading/directing, controlling/monitoring, and motivating.

  • Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next five years, etc.) and generating plans for action.
  • Organizing: Implementing a pattern of relationships among workers and making optimum use of the resources required to enable the successful carrying out of plans.
  • Staffing: Job analysis, recruitment, and hiring of people with the necessary skills for appropriate jobs. Providing or facilitating ongoing training, if necessary, to keep skills current.
  • Leading/directing: Determining what needs to be done in a situation and getting people to do it.
  • Controlling/monitoring: Checking current outcomes against forecast plans and making adjustments when necessary so that goals are achieved.
  • Motivating: Motivation is a basic function of management because without motivation, employees may feel disconnected from their work and the organization, which can lead to ineffective performance. If managers do not motivate their employees, they may not feel their work is contributing to the overall goals of the organization (which are usually set by top-level management).

Fulfilling the Organizing Function

Management organizes by creating patterns of relationships among workers, optimizing use of resources to accomplish business objectives.

Learning Objectives

Define the organizing function within a business framework, specifically the generation of structure and authority

Key Takeaways

Key Points

  • The organizing function typically follows the planning stage. Specific organizing duties involve the assignment of tasks, the grouping of tasks into departments, the assignment of authority, and the allocation of resources across the organization.
  • Authority is a manager’s formal and legitimate right to make decisions, issue orders, and allocate resources to achieve organization’s objectives. Types of authority include line, functional, and staff.
  • Organizations will use different structural strategies, which significantly affects the chain of command and decision-making process within an organization. These structures include centralized, decentralized, tall, and flat.
  • When approaching an organization within a company or institution, it is important to understand the implications of different structures as they pertain to the strategy and operations of the company.

Key Terms

  • capital expenditure: Funds spent by a company to acquire or upgrade a long-term asset.
  • controller: A person who audits and manages the financial affairs of a company or government; a comptroller.
  • delegation: The act of commiting a task to someone, especially a subordinate.
  • organizing: To constitute in parts, each having a special function, act, office, or relation.

Management and Organization

Management operates through various functions, often classified as planning, organizing, staffing, leading/directing, controlling/monitoring, and motivating. The organizing function creates the pattern of relationships among workers and makes optimal use of resources to enable the accomplishment of business plans and objectives.

The organizing function typically follows the planning stage. Specific organizing duties involve the assignment of tasks, the grouping of tasks into departments, and the assignment of authority and allocation of resources across the organization.

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The management process: The management process involves tasks and goals of planning, organizing, directing, and controlling.

Structure

Structure is the framework in which the organization defines how tasks are divided, resources are deployed, and departments are coordinated. It is a set of formal tasks assigned to individuals and departments. Formal reporting relationships include lines of authority, decision responsibility, number of hierarchical levels, and span of managers’ control. Structure is also the design of systems to ensure effective coordination of employees across departments.

Authority/Chain of Command

Authority is a manager’s formal and legitimate right to make decisions, issue orders, and allocate resources to achieve desired outcomes for an organization. Responsibility is an employee’s duty to perform assigned tasks or activities. Accountability means that those with authority and responsibility must report and justify task outcomes to those above them in the chain of command.

Through delegation, managers transfer authority and responsibility to their subordinates. Organizations today tend to encourage delegation from the highest to lowest possible levels. Delegation can improve flexibility to meet customers’ needs and to adapt to competitive environments. Managers may find delegation difficult, since control over the task assigned (and eventual outcome) is relinquished.

One critical risk of command chains is micromanagement, where managers fail to delegate effectively and exercise excessive control over their subordinates’ projects. Micromanagement reduces efficiency and limits autonomy, thus limiting the adaptability of a given organization. Effective chains of command must allow for flexibility and efficient delegation.

Types of Authority (and Responsibility)

  • Line authority: Managers have the formal power to direct and control immediate subordinates executing specific tasks within a chain of command, usually within a specific department. The superior issues orders and is responsible for the result; the subordinate obeys and is responsible only for executing the order according to instructions.
  • Functional authority: Managers have formal power over a specific subset of activities that include outside departments. For instance, a production manager may have the line authority to decide whether and when a new machine is needed, but a controller with functional authority requires that a capital expenditure proposal be submitted first, showing that the investment in a new machine will yield a minimum return. The legal department may also have functional authority to interfere in any activity that could have legal consequences. For example, a purchase contract for a new machine cannot be approved without a review of the machine’s safety standards.
  • Staff authority: Staff specialists manage operations in their areas of expertise. Staff authority is not real authority because a staff manager does not order or instruct but simply advises, recommends, and counsels in the staff specialists’ area of expertise; the manager is responsible only for the quality of the advice (in line with the respective professional standards, etc.). Staff authority represents a communication relationship with management. It has an influence that derives indirectly from line authority at a higher level.

Organizational Structure and Control/Decision-Making

  • Tall structure: A management structure characterized by an overall narrow span of management, a relatively large number of hierarchical levels, tight control, and reduced communication overhead. Decision-making can be quite rapid, if it occurs from the top down.
  • Flat structure: A management structure characterized by a wide span of control and relatively few hierarchical levels, loose control, and ease of delegation. Decision-making is often slower, as it involves a high degree of integration across the company.
  • Centralization: The location of decision making authority near top organizational levels. Similar to a tall structure, this expedites decision-making from the top down.
  • Decentralization: The location of decision making authority is relatively evenly dispersed across the company. This works well when creativity and independent operations create value for the organization.

As each structure will create a different organizational approach to operations, it is critical to consider how the selection of a structure will affect the business process. Enabling creativity and minimizing control often comes at the cost of speed and efficiency, and vice versa.

Fulfilling the Controlling Function

Management control can be defined as a systematic effort to compare performance to predetermined standards and address deficiencies.

Learning Objectives

Outline the characteristics and elements of the controlling function

Key Takeaways

Key Points

  • Control is a continuous and forward-looking process designed to objectively benchmark operations with the projected plan or projections.
  • The four basic elements in a control system are: the characteristic or condition to be controlled, the sensor, the comparator, and the activator.
  • Control is a continuous process.
  • Control is a continuous and forward-looking process designed to benchmark operations with the projected plan or projections.

Key Terms

  • Systematic: Methodical, regular, and orderly.
  • control: Influence or authority over.
  • hierarchy: An arrangement of items in which the items are represented as being “above,” “below,” or “at the same level as” one another.

Control

In 1916, Henri Fayol formulated one of the first definitions of control as it pertains to management: “Control consists of verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and principles established. It’s object is to point out weaknesses and errors in order to rectify [them] and prevent recurrence.”

Management control can be defined as a systematic effort by business management to compare performance to predetermined standards, plans, or objectives in order to determine whether performance is in line with these standards. It is also used to determine if any remedial action is required to ensure that human and other corporate resources are being used in the most effective and efficient way possible to achieve corporate objectives.

Control can also be defined as “that function of the system that adjusts operations as needed to achieve the plan, or to maintain variations from system objectives within allowable limits.” The control subsystem functions in close harmony with the operating system. The degree to which they interact depends on the nature of the operating system and its objectives. Stability concerns a system’s ability to maintain a pattern of output without wide fluctuations. Rapidity of response pertains to the speed with which a system can correct variations and return to expected output.

From these definitions, the close link between planning and controlling can be seen. Planning is a process by which an organization ‘s objectives and the methods to achieve the objectives are established, and controlling is a process that measures and directs the actual performance against the planned goals of the organization. Therefore, goals and objectives are often referred to as the siamese twins of management: the managerial function of management and the correction of performance in order to ensure that enterprise objectives and the goals devised to attain them are being accomplished.

Characteristics of Control

Control has several characteristics. It may be described as being:

  • A continuous process.
  • A management process.
  • Embedded in each level of organizational hierarchy.
  • Forward-looking.
  • Closely linked with planning.
  • A tool for achieving organizational activities.
  • An end process.

The Elements of Control

The four basic elements in a control system:

  1. The characteristic or condition to be controlled – We select a specific characteristic because a correlation exists between it and how the system is performing. The characteristic may be the output of the system during any stage of processing or it may be a condition that is the result of the system. For example, in an elementary school system, the hours a teacher works or the gain in knowledge demonstrated by the students on a national examination are examples of characteristics that may be selected for measurement, or control.
  2. The sensor – This is the means for measuring the characteristic or condition. For example, in a home-heating system, this device would be the thermostat; and in a quality -control system, this measurement might be performed by a visual inspection of the product.
  3. The comparator – This determines the need for correction by comparing what is occurring with what has been planned. Some deviation from the plan is usual and expected, but when variations are beyond those considered acceptable, corrective action is required. It involves a sort of preventative action to indicate that good control is being achieved.
  4. The activator – This is the corrective action taken to return the system to expected output. The actual person, device, or method used to direct corrective inputs into the operating system may take a variety of forms. It may be a hydraulic controller positioned by a solenoid or electric motor in response to an electronic error signal, an employee directed to rework the parts that failed to pass quality inspection, or a school principal who decides to buy additional books to provide for an increased number of students. As long as a plan is performed within allowable limits, corrective action is not necessary; however, this seldom occurs in practice.

These occur in the same sequence and maintain a consistent relationship to each other in every system.

Fulfilling the Leading Function

Managers lead their organizations and can vary their style and approach to achieve the desired outcome.

Learning Objectives

Identify the key characteristics and considerations of the leadership function within the organizational framework

Key Takeaways

Key Points

  • Leaders who demonstrate persistence, tenacity, determination, and synergistic communication skills will bring out the same qualities in their groups.
  • Leadership can be viewed as either individualistic or group-based and can be considered “transactional” (i.e. procedures, rewards, etc.) or “transformational” (i.e. charisma, creativity, etc. ).
  • A leadership style is often determined by context, whereas the degree of control (autocratic or democratic) may alter based upon the situation or process being managed.
  • Positive reinforcement is an example of a leadership technique. This reinforcement occurs when a positive stimulus is presented in response to a behavior, increasing the likelihood of that behavior in the future.

Key Terms

  • laissez-faire: In business, an environment in which an organization’s employees are free from excessive oversight or management, with sufficient control only to ensure organizational goals are met.

Defining Leadership

Over the years the philosophical terms ” management ” and “leadership” have been used both as synonyms and with clearly differentiated meanings. Debate is fairly common about whether the use of these terms should be restricted and generally reflects an awareness of the distinction made by Burns (1978) between “transactional” leadership (characterized by emphasis on procedures, contingent reward, management by exception) and “transformational” leadership (characterized by charisma, personal relationships, creativity). Management is often associated with the former and leadership with the latter.

Leaders who demonstrate persistence, tenacity, determination, and synergistic communication skills will bring out the same qualities in their groups. Good leaders use their own inner mentors to energize their team and organizations and lead a team to achieve success.

Group Leadership

In contrast to individual leadership, some organizations have adopted group leadership. In this situation, more than one person provides direction to the group as a whole. Some organizations have taken this approach in hopes of increasing creativity, reducing costs, or downsizing. Others may see the traditional leadership of a boss as costing too much in team performance. In some situations, the team members best able to handle any given phase of the project become the temporary leaders. Additionally, staff experiences energy and success when each team member has access to elevated levels of empowerment.

Leadership Styles

A leadership style is a leader’s approach towards providing direction, implementing plans, and motivating people. It is the result of the philosophy, personality, and experience of the leader. Rhetoric specialists have also developed models for understanding leadership (Robert Hariman, Political Style; Philippe-Joseph Salazar, L’Hyperpolitique. Technologies politiques De La Domination).

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Engaging Style of Leadership: Different styles of leadership can achieve the leading function.

Different situations call for different leadership styles. In an emergency, when there is little time to reach an agreement and where a designated authority has significantly more experience or expertise than the rest of the team, an autocratic leadership style may be most effective. However, in a highly motivated and aligned team, with a homogeneous level of expertise, a more democratic or laissez-faire style may be more effective. The leadership style adopted should be the one that most effectively achieves the objectives of the group while balancing the interests of its individual members.

Positive Reinforcement

Anyone thinking about managing a team must consider positive reinforcement. B.F. Skinner, the father of behavior modification, developed this concept. Positive reinforcement occurs when a positive stimulus is presented in response to a behavior, increasing the likelihood of that behavior in the future.

The following is an example of how positive reinforcement can be used in a business setting. Assume praise is a positive reinforcement for a particular employee. This employee does not show up to work on time every day. The manager of this employee decides to praise the employee for showing up on time when the employee actually does so. As a result, the employee comes to work on time more often because the employee likes to be praised. In this example, praise (the stimulus) is a positive reinforcement for this employee because the employee arrives at work on time (the behavior) more frequently after being praised for it.

The use of positive reinforcement is a successful and growing technique used by leaders to motivate and attain desired behaviors from subordinates. Organizations, such as Frito-Lay, 3M, Goodrich, Michigan Bell, and Emery Air Freight, have all used reinforcement to increase productivity. Empirical research covering the last 20 years suggests that reinforcement theory has a 17% increase in performance. Additionally, many reinforcement techniques, such as the use of praise, are inexpensive and provide higher performance and employee satisfaction for lower costs.

Fulfilling the Planning Function

Planning is the process of thinking about and organizing the activities required to achieve strategic objectives.

Learning Objectives

Illustrate the primary considerations and influencing factors for organizations when pursuing strategic planning

Key Takeaways

Key Points

  • Planning involves the maintenance and organizational approach of achieving strategic objectives.
  • To meet objectives, managers may develop plans such as a business plan or a marketing plan.
  • Strategic planning is an organization ‘s process of defining its strategy or direction and making decisions about how to allocate its resources to pursue this strategy.
  • When pursuing strategic planning, organizations should ask themselves what they do, for whom do they do it, and how they can excel (or differentiate from) competitors.
  • The execution of the planning function requires a comprehensive understanding (or generation of) a vision, mission, set of values, and general strategy.

Key Terms

  • strategy: A plan of action intended to accomplish a specific goal.
  • allocating: The act of distributing a given set of resources according to a plan.
  • forecasting: The act of estimating future outcomes.

Planning

Planning is the process of thinking about and organizing the activities required to achieve a desired goal. Planning involves the creation and maintenance of a given organizational operation. This thought process is essential to the refinement of objectives and their integration with other plans. Planning combines forecasting of developments with preparing scenarios for how to react to those developments. An important, albeit often ignored, aspect of planning is the relationship it holds with forecasting. Forecasting can be described as predicting what the future will look like, whereas planning predicts what the future should look like.

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Research planning: Planning involves the creation and maintenance of a plan.

Planning is also a management process, concerned with defining goals for a company’s future direction and determining the missions and resources to achieve those targets. To meet objectives, managers may develop plans, such as a business plan or a marketing plan. The purpose may be achievement of certain goals or targets. Planning revolves largely around identifying the resources available for a given project and utilizing optimally to achieve best scenario outcomes.

Strategic Planning

Strategic planning is an organization’s process of defining its strategy or direction and making decisions about allocating its resources to pursue this strategy. To determine the direction of the organization, it is necessary to understand its current position and the possible avenues through which it can pursue a particular course of action. Generally, strategic planning deals with at least one of three key questions:

  • What do we do?
  • For whom do we do it?
  • How do we excel?

The key components of strategic planning include an understanding of the firm’s vision, mission, values, and strategies. (Often a “vision statement” and a ” mission statement ” may encapsulate the vision and mission. )

  1. Vision: This outlines what the organization wants to be or how it wants the world in which it operates to be (an “idealized” view of the world). It is a long-term view and concentrates on the future. It can be emotive and is a source of inspiration. For example, a charity working with the poor might have a vision statement that reads “A World without Poverty.”
  2. Mission: It defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its vision. For example, the charity above might have a mission statement as “providing jobs for the homeless and unemployed.”
  3. Values: These are beliefs that are shared among the stakeholders of an organization. Values drive an organization’s culture and priorities and provide a framework in which decisions are made. For example, “knowledge and skills are the keys to success,” or “give a man bread and feed him for a day, but teach him to farm and feed him for life.” These example values place the priorities of self-sufficiency over shelter.
  4. Strategy: Strategy, narrowly defined, means “the art of the general”—a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. A strategy is sometimes called a roadmap, which is the path chosen to move towards the end vision. The most important part of implementing the strategy is ensuring the company is going in the right direction, which is towards the end vision.

Tools and Approaches

There are many approaches to strategic planning, but typically one of the following is used:

  • Situation-Target-Proposal: Situation – Evaluate the current situation and how it came about. Target – Define goals and/or objectives (sometimes called ideal state). Path/Proposal – Map a possible route to the goals/objectives.
  • Draw-See-Think-Plan: Draw – What is the ideal image or the desired end state? See – What is today’s situation? What is the gap from ideal and why? Think – What specific actions must be taken to close the gap between today’s situation and the ideal state? Plan – What resources are required to execute the activities?

Among the most useful tools for strategic planning is a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). The main objective of this tool is to analyze internal strategic factors (strengths and weaknesses attributed to the organization) and external factors beyond control of the organization (such as opportunities and threats).