1.1PRINCIPLE OF MANAGEMENT
Perceptive of Managers:
There are many definitions of management but most perceptive managers are convinced that it is an organized effort of people whose purpose is to achieve the objectives and goals of an organization. Of course, it is not that simple. To gain a better understanding of management, let’s review the ideas and views expressed by academicians and practitioners.
- i. Management as a “Process”:
McFarland defines management as “A process by which managers create, direct, maintain and operate purposive organization through systematic, coordinated, cooperative human efforts”.
An important tern in this definition is “Process”. This term emphasis the dynamic or ongoing nature of management, an activity over varying span of time. The dynamic nature implies that change is reality of organizational life. In managing organizations, managers create changes adopt organizations to changes and implement changes successfully in their organizations. Businesses fail and become bankrupt because managers fail in their attempt to cope with the change.
- ii. Management as “coordination”:
Donally, Gibson and Ivancevich also support the view of management as a process but their stress in more on co-ordination. According to them, “Management is a process by which individual and group effort is coordinated towards group goals”. In order to achieve goals, coordination is essential and management involves securing and maintaining this coordination. This coordination effort is also stressed in the definition of Koontz and O’Donnell. According to them, “Management is a process of designing and maintaining an environment in which, individuals, working together in groups efficiently and effectively accomplish group goals”.
Management as a “Function”:
There are those who view management as a function rather than a process. Dunn, Stephens and Kelly contend that “Management is a role which includes a set of duties, responsibilities, and relationships-involved in work organizations”. These duties and responsibilities constitute the function a manager performs. The duties and responsibilities a manager performs are quite different from those performed by managerial employees.
Management is getting things done through other people:
A simple definition of management that is often quoted and it sounds very simple. According to this definition, managers do not do things they get other people to do things. If managing is an individual ability to get things done, then it is not a problem. We can plan and perform things according to our own convince and interests. When somebody else is involved and wants to get things done through them, there is a difficulty. All sorts of problems arise; personalities come into contact and conflict.
Interpersonal problems crop up. We have to understand the behavior of other people and must have knowledge as to how to motivate them in order to get things done through them. We have to consider the conveniences and interest of others also in planning and implementing things.
In getting things done through others, people have to be coaxed, they have to be shown, they have to inspired, they have to be motivated and this is what management means. These activities are performed not only by the people at the top but from the chairman of the board to the front line supervisors and foremen. They use the above mentioned methods to get things done through other people.
A comprehensive definition of Management:
In mid 1940s, academic people from various business schools in the United States gathered together with the sole purpose of deciding whether a definition of management could be written that businessmen would accept and practice and academicians would teach. Ultimately they came up with the fallowing definition. No individual is identified with this definition. The definition reads;
“Management is guiding human and physical resources into a dynamic organization
units that attain their objectives to the satisfaction of those served and with the high degree of moral and sense of attainment on the part of those rendering the services” .
What is Management?
Management is a vital aspect of the economic life of man, which is an organized group activity. A central directing and controlling agency is indispensable for a business concern. The productive resources – material, labor, capital etc. are entrusted to the organizing skill, administrative ability and enterprising initiative of the management. Thus, management provides leadership to a business enterprise. Without able managers and effective managerial leadership the resources of production remain merely resources and never become production. Under competitive economy and ever-changing environment the quality and performance of managers determine both the survival as well as success of any business enterprise. Management occupies such an important place in the modern world that the welfare of the people and the destiny of the country are very much influenced by it.
“Management is the process of getting things done through the efforts of other people in order to achieve the predetermined objectives of organization”.
Management may also be define as:
“The process by which execution of given purpose put into operation and supervise”.
A concise statement:
“The function of executive leadership anywhere”.
Management may be defined as “A technique by which the purpose and objectives of particular human group are determined, defined, clarified and completed”
From business Pont of view:
“Management is the art of securing maximum results with the minimum of efforts so as to get maximum prosperity and happiness for both employer and employee and give public the best possible service”.
Complete definition of management:
“Management is a distinct process consisting of planning, organizing, staffing, leading and controlling utilizing both in each science and art and followed in order to accomplish predetermined objectives of the organization”.
Necessity of Management:
(1) Management is an essential activity of all organizational level (Low, middle, and upper level)
(2) Management applies to:
(i) Small and large Organizations.
(ii) Profit and nonprofit Organization.
(iii) Manufacturing Organization.
(iv) Service rendering Organization.
Manager is also known as leader and administrative, Manager is a person who under take the tasks and function of managing at any level, in any kind of enterprise.
There are four skills of managers are expected to have ability of:
Technical skills that reflect both an understanding of and a proficiency in a specialized field. For example, a manager may have technical skills in accounting, finance, engineering, manufacturing, or computer science.
Human skills are skills associated with manager’s ability to work well with others, both as a member of a group and as a leader who gets things done through other.
Conceptual skills related to the ability to visualize the organization as a whole, discern interrelationships among organizational parts, and understand how the organization fits into the wider context of the industry, community, and world. Conceptual skills, coupled with technical skills, human skills and knowledge base, are important ingredients in organizational performance.
It is the ability to solve the problems in ways that will benefit the enterprise. Managers must be able to solve the problems.
The Skills vary at different levels:
Top management Concept and design Skills. Middle Human Skills. Supervisor’s Technical skills.
Skills of management at different levels.
Concepts of Management
Management as a Discipline
Discipline refers to a field of study having well-defined concepts and principles. When we refer to management as a discipline, we include in it the various relevant concepts and principles, the knowledge of which aids in managing
Management as a Group of People
We refer to management as a group of people in which we include all those personnel who perform managerial functions in organizations.
We refer to two distinct classes or groups of personnel in the organization. In the first category, we include all those persons who are responsible for managerial functions and in the second category, we include non-managerial personnel.
Management as a process
In studying management discipline, we generally refer to management as a process. A process can simply be defined s systematic method of handling activates. However, the management process can be treated as a complex one which can be referred to as an identifiable flow of information through interrelated stages of analysis directed towards the achievement of an objective or set of objective. It is a concept of dynamic rather than static existence in which events and relationships must be seen as dynamic, continuous, and flexible, and as such, must be considered as a whole. Thus, management as a process includes various activities and sub activities
Management as a Science
Science is a systematic body of knowledge pertaining to a specific field of study that contains general facts which explains a phenomenon. It establishes cause and effect relationship between two or more variables and underlines the principles governing their relationship. These principles are developed through scientific method of observation and verification through testing.
Science is characterized by following main features:
1. Universally acceptance principles – Scientific principles represents basic truth about a particular field of enquiry. These principles may be applied in all situations, at all time & at all places. E.g. – law of gravitation which can be applied in all countries irrespective of the time.
Management also contains some fundamental principles which can be applied universally like the Principle of Unity of Command i.e. one man, one boss. This principle is applicable to all type of organization – business or non-business.
2. Experimentation & Observation – Scientific principles are derived through scientific investigation & researching i.e. they are based on logic. E.g. the principle that earth goes round the sun has been scientifically proved. Management principles are also based on scientific enquiry & observation and not only on the opinion of Henry Fayol. They have been developed through experiments & practical experiences of large no. of managers. E.g. it is observed that fair remuneration to personal helps in creating a satisfied work force.
3. Cause & Effect Relationship – Principles of science lay down cause and effect relationship between various variables. E.g. when metals are heated, they are expanded. The cause is heating & result is expansion.
The same is true for management; therefore it also establishes cause and effect relationship. E.g. lack of parity (balance) between authority & responsibility will lead to ineffectiveness. If you know the cause i.e. lack of balance, the effect can be ascertained easily i.e. in effectiveness. Similarly if workers are given bonuses, fair wages they will work hard but when not treated in fair and just manner, reduces productivity of organization.
4. Test of Validity & Predictability – Validity of scientific principles can be tested at any time or any number of times i.e. they stand the test of time. Each time these tests will give same result. Moreover future events can be predicted with reasonable accuracy by using scientific principles. E.g. H2 & O2 will always give H2O. Principles of management can also be tested for validity. E.g. principle of unity of command can be tested by comparing two persons – one having single boss and one having 2 bosses. The performance of 1st person will be better than 2nd.
It cannot be denied that management has a systematic body of knowledge but it is not as exact as that of other physical sciences like biology, physics, and chemistry etc. The main reason for the inexactness of science of management is that it deals with human beings and it is very difficult to predict their behavior accurately. Since it is a social process, therefore it falls in the area of social sciences. It is a flexible science & that is why its theories and principles may produce different results at different times and therefore it is a behavior science. Ernest Dale has called it as a Soft Science.
Management as an Art
Art implies application of knowledge & skill to trying about desired results. An art may be defined as personalized application of general theoretical principles for achieving best possible results. Art has the following characters –
Practical Knowledge: Every art requires practical knowledge therefore learning of theory is not sufficient. It is very important to know practical application of theoretical principles. E.g. to become a good painter, the person may not only be knowing different color and brushes but different designs, dimensions, situations etc. to use them appropriately. A manager can never be successful just by obtaining degree or diploma in management; he must have also known how to apply various principles in real situations by functioning in capacity of manager.
Personal Skill: Although theoretical base may be same for every artist, but each one has his own style and approach towards his job. That is why the level of success and quality of performance differs from one person to another. E.g. there are several qualified painters but M.F. Husain is recognized for his style. Similarly management as an art is also personalized. Every manager has his own way of managing things based on his knowledge, experience and personality, that is why some managers are known as good managers (like Aditya Birla, Rahul Bajaj) whereas others as bad.
Creativity: Every artist has an element of creativity in line. That is why he aims at producing something that has never existed before which requires combination of intelligence & imagination. Management is also creative in nature like any other art. It combines human and non-human resources in useful way so as to achieve desired results. It tries to produce sweet music by combining chords in an efficient manner.
Perfection through practice: Practice makes a man perfect. Every artist becomes more and more proficient through constant practice. Similarly managers learn through an art of trial and error initially but application of management principles over the years makes them perfect in the job of managing.
Goal-Oriented: Every art is result oriented as it seeks to achieve concrete results. In the same manner, management is also directed towards accomplishment of pre-determined goals. Managers use various resources like men, money, material, machinery & methods to promote growth of an organization.
Thus, we can say that management is an art therefore it requires application of certain principles rather it is an art of highest order because it deals with molding the attitude and behavior of people at work towards desired goals.
Management as both Science and Art
Management is both an art and a science. The above mentioned points clearly reveal that management combines features of both science as well as art. It is considered as a science because it has an organized body of knowledge which contains certain universal truth. It is called an art because managing requires certain skills which are personal possessions of managers. Science provides the knowledge & art deals with the application of knowledge and skills.
A manager to be successful in his profession must acquire the knowledge of science & the art of applying it. Therefore management is a judicious blend of science as well as an art because it proves the principles and the way these principles are applied is a matter of art. Science teaches to ’know’ and art teaches to ’do’. E.g. a person cannot become a good singer unless he has knowledge about various ragas & he also applies his personal skill in the art of singing. Same way it is not sufficient for manager to first know the principles but he must also apply them in solving various managerial problems that is why, science and art are not mutually exclusive but they are complementary to each other (like tea and biscuit, bread and butter etc.).The old saying that “Manager are Born” has been rejected in favor of “Managers are Made”. It has been aptly remarked that management is the oldest of art and youngest of science. To conclude, we can say that science is the root and art is the fruit.
Characteristics or Nature of management can be highlighted as: –
Management is Goal-Oriented: The success of any management activity is accessed by its achievement of the predetermined goals or objective. Management is a purposeful activity. It is a tool which helps use of human & physical resources to fulfill the pre-determined goals. For example, the goal of an enterprise is maximum consumer satisfaction by producing quality goods and at reasonable prices. This can be achieved by employing efficient persons and making better use of scarce resources.
Management integrates Human, Physical and Financial Resources: In an organization, human beings work with non-human resources like machines.
Materials, financial assets, buildings etc. Management integrates human efforts to those resources. It brings harmony among the human, physical and financial resources.
Management is Continuous: Management is an ongoing process. It involves continuous handling of problems and issues. It is concerned with identifying the problem and taking appropriate steps to solve it. For achieving this target various policies have to be framed but this is not the end. Marketing and Advertising is also to be done. For this policies have to be again framed. Hence this is an ongoing process.
Management is all Pervasive: Management is required in all types of organizations whether it is political, social, cultural or business because it helps and directs various efforts towards a definite purpose. Thus clubs, hospitals, political parties, colleges, hospitals, business firms all require management. Whenever more than one person is engaged in working for a common goal, management is necessary. Whether it is a small business firm which may be engaged in trading or a large firm like Tata Iron & Steel, management is required everywhere irrespective of size or type of activity.
Management is a Group Activity: Management is very much less concerned with individual’s efforts. It is more concerned with groups. It involves the use of group effort to achieve predetermined goal of management of ABC & Co. is good refers to a group of persons managing the enterprise
Organized Activities: Management is a process of organized activities. Groups of people cannot be involved in the performance of activities without organized activities. Management comes into existence where a group of people are involved in achieving a common objective. The organized activities may take a variety of forms ranging from a tightly structured organization to a loosely-knit organization.
Existence of Objectives: The existence of objectives is a basic criterion of every human organization. The organizational objectives are the desired state of affairs which an organization attempts to realize. This realization of objectives is sought through the coordinated efforts of the people constituting an organization.
Decision-making: Management process involves decision making at all levels. Decision-making describes the process by which a course of action is selected as the way to deal with a specific problem. If there is only one alternative, the question of decision making does not arise. The quality of alternatives which a manger selects determines the organization’s performance, and the future of the organization.
Relationship among resources: The essence of management is integration of various organizational resources. Resources include money, machine, materials, and people. Management is concerned with the proper utilization of human resources which, in turn, utilize other resources.
Working with and through people: Management involves working with people and getting organizational objectives achieved through them. Working through people is interpreted in terms of assigning activities to subordinates.
Multidisciplinary: Management is multidisciplinary because it includes knowledge/information from various disciplines- economics, statistics, math, psychology, sociology, ecology, operations research, history, etc. Management integrates the ideas and concepts taken from these disciplines and presents newer concepts which can be put into practice for managing the organizations.
Management is dynamic: Management has framed certain principles, which are flexible in nature and change with the changes in the environment in which an organization exits.
Relative, Not Absolute Principles: Management principles are relative, not absolute, and they should be applied according to the need of the organization. A particular management principle has different strengths in different conditions. Therefore, principles should be applied according to the prevailing conditions.
Management: Science or Art: Management likes other practices- whether medicine, music composition, or even accountancy- is an art. It is know-how. Yet managers can work better by using the organized knowledge about management. It is this knowledge that constitutes science. Thus, managing as practice is an art; the organized knowledge underlying the practice may be referred to as science.
Management as Profession: Management has been regarded as a profession by many while many have suggested that it has not achieved the status of a profession. Schein concluded that by some criteria management is indeed a profession, but by other criteria it is not. Today we can see many signs that management is working towards increased professionalism.
Management is Universal: Management is a universal phenomenon. However, management principles are not universally applicable but are to be modified according to the needs of the situation.
The Function of Managers:
There are five functions of managers: Planning, Organizing, Staffing, Leading, and Controlling. The functions of managers provide a useful structure for organizing management knowledge.
Planning involves selecting missions and objectives and the action to achieve them it requires decision making, that choosing future courses of action from among alternatives. There are five types of planning:
- Missions and objectives.
- Strategies and polices.
- Procedures and rules.
Organizing is the part of managing that involves establishing an intentional structure of roles for people to fill in an organization. The purpose of an organization structure is to creating an environment helpful for human performance. It is then management tools and not an end. Although the structure must define the task to be done, the rules so established must also be designed in the light of the abilities and motivations of the people available designing an effective organization structure is not an easy managerial task. Many problems arises in making structures fit situations.
Staffing involves filling and keeping filled, the positions in the organization. This is done by identifying the work force requirement inventorying the people available and recruiting, selecting, placing, promoting, appraising, planning the careers, compensating and training.
Leading is influence people so that they will contribute to organization and group goals. All managers would agree that most problems arises from peoples desires and problems , their behavior as individuals and in groups and that effective managers also need to be effective leaders. Leading involves motivation, leadership styles and approaches and communications. (5)Controlling:
Controlling is measuring and correcting individuals and organizational performance. It involves measuring performance against goals and plans, showing where the deviations from standards exit and helping to correct them. In short controlling facilitates the accomplishment of plans. Control activity generally relate to the measurement of achievement. Some means of controlling like the budget for expenses, inspection, record of labors-hours lost, are generally familiar. Each shows whether plans are working out.
THE EVOLVATION OF MANAGEMENT
The origin of management can be traced back to the days when man started living in groups. History reveals that strong men organized the masses into groups according to their intelligence, physical and mental capabilities. Evidence of the use of the well-recognized principles of management is to be found in the organization of public life in ancient Greece, the organization of the Roman Catholic Church and the organization of military forces. Thus management in some form or the other has been practiced in the various parts of the world since the dawn of civilization. With the onset of Industrial Revolution, however, the position underwent a radical change. The structure of industry became extremely complex. At this stage, the development of a formal theory of management became absolutely necessary. It was against this background that the pioneers of modern management thought laid the foundations of modern management theory and practice.
Different Author says that history of management is different Author contribute in management. There are so many theories of management that why also called Jungle of management. Different period of management:
1. Scientific Management:
(i) Fredrick Taylor.
(iii)Frank and Lillian Gilbert.
2. Operational Management
(i) Henri Fayol.
3. Behavioral Science:
(i) Munster berg.
4. System Theory.
(i) Chester Barnard
5. Modern Management /Recent contribution to management thoughts.
(i) Peter F. Drucker 1974.
(iii) Thomas Peter & Robert Waterman.1982
1. Scientific Management:
F.W. Taylor and Henry Fayol are generally regarded as the founders of scientific management and administrative management and both provided the bases for science and art of management.
Features of Scientific Management:
1 It was closely associated with the industrial revolution and the rise of large-scale enterprise.
2 Classical organization and management theory is based on contributions from a number of sources. They are scientific management, Administrative management theory, bureaucratic model, and micro-economics and public administration.
3 Management thought focused on job content division of labor, standardization, simplification and specialization and scientific approach towards organization.
Taylor’s Scientific Management (USA 1856-1915):
Started as an apprentice machinist in Philadelphia, USA. He rose to be the chief engineer at the Midvale Engineering Works and later on served with the Bethlehem Works where he experimented with his ideas and made the contribution to the management theory for which he is so well known. Frederick Winslow Taylor well-known as the founder of scientific management was the first to recognize and emphasis the need for adopting a scientific approach to the task of managing an enterprise.
He tried to diagnose the causes of low efficiency in industry and came to the conclusion that much of waste and inefficiency is due to the lack of order and system in the methods of management. He found that the management was usually ignorant of the amount of work that could be done by a worker in a day as also the best method of doing the job. As a result, it remained largely at the mercy of the workers who deliberately shirked work. He therefore, suggested that those responsible for management should adopt a scientific approach in their work, and make use of “scientific method” for achieving higher efficiency. The scientific method consists essentially of
(c) Experimentation and
He advocated a thorough planning of the job by the management and emphasized the necessity of perfect understanding and co-operation between the management and the workers both for the enlargement of profits and the use of scientific investigation and knowledge in industrial work. He summed up his approach in these words:
- Science, not rule of thumb
- Harmony, not discord
- Co-operation, not individualism
- Maximum output, in place of restricted output
- The development of each man to his greatest efficiency and prosperity.
Elements of Scientific Management:
The techniques which Taylor regarded as its essential elements or features may be classified as under:
- Scientific Task and Rate-setting, work improvement, etc.
- Planning the Task.
- Vocational Selection and Training
- Standardization (of working conditions, material equipment etc.)
- Mental Revolution.
1. Scientific Task and Rate-Setting (work study): Work study may be defined as the systematic, objective and critical examination of all the factors governing the operational efficiency of any specified activity in order to effect improvement.
Work study includes.
(a) Methods Study: The management should try to ensure that the plant is laid out in the best manner and is equipped with the best tools and machinery. The possibilities of eliminating or combining certain operations may be studied.
(b) Motion Study: It is a study of the movement, of an operator (or even of a machine) in performing an operation with the purpose of eliminating useless motions.
(c) Time Study (work measurement): The basic purpose of time study is to determine the proper time for performing the operation. Such study may be conducted after the motion study. Both time study and motion study help in determining the best method of doing a job and the standard time allowed for it.
(d) Fatigue Study: If, a standard task is set without providing for measures to eliminate fatigue, it may either be beyond the workers or the workers may over strain themselves to attain it. It is necessary, therefore, to regulate the working hours and provide for rest pauses at scientifically determined intervals.
(e) Rate-setting: Taylor recommended the differential piece wage system, under which workers performing the standard task within prescribed time are paid a much higher rate per unit than inefficient workers who are not able to come up to the standard set.
- Planning the Task: Having set the task which an average worker must strive to perform to get wages at the higher piece-rate, necessary steps have to be taken to
- Selection and Training: Scientific Management requires a radical change in the methods and procedures of selecting workers. It is therefore necessary to entrust the task of selection to a central personnel department. The procedure of selection will also have to be systematized. Proper attention has also to be devoted to the training of the workers in the correct methods of work.
- Standardization: Standardization may be introduced in respect of the following plan the production thoroughly so that there is no bottle neck and the work goes on systematically.
(a) Tools and equipment: By standardization is meant the process of bringing about uniformity. The management must select and store standard tools and implements which will be nearly the best or the best of their kind.
(b) Speed: There is usually an optimum speed for every machine. If it is exceeded, it is likely to result in damage to machinery.
(c) Conditions of Work: To attain standard performance, the maintenance of standard conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very essential.
(d) Materials: The efficiency of a worker depends on the quality of materials and the method of handling materials.
5. Specialization: Scientific management will not be complete without the introduction of specialization. Under this plan, the two functions of ‘planning’ and ‘doing’ are separated in the organization of the plant. The `functional foremen’ are specialists who join their heads to give thought to the planning of the performance of operations in the workshop. Taylor suggested eight functional foremen under his scheme of functional foremanship.
(a) The Route Clerk: To lay down the sequence of operations and instruct the workers concerned about it.
(b) The Instruction Card Clerk: To prepare detailed instructions regarding different aspects of work.
(c) The Time and Cost Clerk: To send all information relating to their pay to the workers and to secure proper returns of work from them.
(d) The Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.
(e) The Gang Boss: To assemble and set up tools and machines and to teach the workers to make all their personal motions in the quickest and best way.
(f) The Speed Boss: To ensure that machines are run at their best speeds and proper tools are used by the workers.
(g) The Repair Boss: To ensure that each worker keeps his machine in good order and maintains cleanliness around him and his machines.
(h) The Inspector: To show to the worker how to do the work.
6. Mental Revolution: At present, industry is divided into two groups – management and labor. The major problem between these two groups is the division of surplus. The management wants the maximum possible share of the surplus as profit; the workers want, as large share in the form of wages. Taylor has in mind the enormous gain that arises from higher productivity. Such gains can be shared both by the management and workers in the form of increased profits and increased wages.
Benefits of Scientific Management:
Taylor’s ideas, research and recommendations brought into focus technological, human and organizational issues in industrial management. Benefits of Taylor’s scientific management included wider scope for specialization, accurate planning, timely delivery, standardized methods, better quality, lesser costs, minimum wastage of materials, time and energy and cordial relations between management and workers. According to Gilberts, the main benefits of scientific management are “conservation and savings, making an adequate use of every one’s energy of any type that is expended”.
The benefits of scientific management are:
- Replacement of traditional rule of thumb method by scientific techniques.
- Proper selection and training of workers.
- Incentive wages to the workers for higher production.
- Elimination of wastes and rationalization of system of control.
- Standardization of tools, equipment, materials and work methods.
- Detailed instructions and constant guidance of the workers.
What is planning?
There are many definitions of planning. Planning may define as: According to Fayol -“The plan of action is, at one and the same time, the result envisaged, the line of action to be followed, the stages to go through, and the methods to use. It is a kind of future picture wherein proximate events are outlined with some distinctness….” Planning is deciding in advance what is to be done. It involves the selection of objectives, policies, procedures and programmes from among alternatives. A plan is a predetermined course of action to achieve a specified goal. It is a statement of objectives to be achieved by certain means in the future. In short, it is a blueprint for action.
According to Louis A Allen –“Management planning involves the development of forecasts, objectives, policies, programmes, procedures, schedules and budgets”. According to Theo Hayman -“Planning is deciding in advance what is to be done. When a manager plans, he projects a course of action, for the future, attempting to achieve a consistent, coordinated structure of operations aimed at the desired results”.
According to Koontz O’Donnell –“Planning is an intellectual process, the conscious determination of courses of action, the basing of decisions on purpose, acts and considered estimates”.
- PLANNING IS THE PRE-SELECTION: Planning is the pre-selection of objectives and outlines the action before starting any business.
- ANOTHER WORDS
Planning is selection of mission, objectives and true strategies, polices programs and procedure to achieve them.
3. SIMPLEST DIFINATION OF PLANNING:
Planning is decision making in advance.
4. ANOTHER DEFINATION:
Choosing the alternatives and making the decision is called planning.
THE NUTURE & PURPOS OF PLANNING:
The essential nature of planning can be defined by dividing it into four Major aspects.
1. THE CONTRIBUTION OF PLANNING TO PURPOSE AND OBJECTIVE:
Every plan and all its supporting plans should contribute accomplishment of the purpose and objectives of the enterprise. This concept and use in organized enterprise which try to accomplishment of group purpose through deliberate cooperation.
2. THE PRAMACY OF PLANNING:
Since managerial functions like organizing, Staffing, Leading and controlling support to the accomplishment of enterprise objectives, planning logically precedes or help the accomplishment of all other managerial functions. Because Manager must plan on order to know what kinds of organization relationship and personal qualifications are needed, which method should be filed by subordinates and what kind of control is to be applied. All the other Managerial functions must be planned if they are to be effective.
3. THE PERVASIVENESS OF PLANNING:
Planning is the function of all Managers, although the character and breadth of planning will vary with each Managers authority and with nature of polices and plans outlined by superiors. If Managers are not allowed a certain degree of discretion and planning responsibility they are not truly Managers. If we recognize the pervasiveness of planning, we can more easily understand why some people distinguish between the “manager” and the “administrator” or “supervisor” one manager, because of his or her authority or position in the organization, may do more important planning than another, or the planning of one may be more basic than that of another and applicable to a large portion of the enterprise. However, all managers from presidents to first level supervisors plan. Even the head of a road gang or a factory crew plans in a limited area under fairly
4. ANOTHER DEFINATION:
Choosing the alternatives and making the decision is called planning.
THE NUTURE & PURPOS OF PLANNING:
The essential nature of planning can be defined by dividing it into four Major aspects.
1. THE CONTRIBUTION OF PLANNING TO PURPOSE AND OBJECTIVE:
Every plan and all its supporting plans should contribute accomplishment of the purpose and objectives of the enterprise. This concept can be used in organized enterprise which try to accomplishment of group purpose through deliberate cooperation.
4. THE EFFIENCY OF PLANS
Plans are efficient, if they achieve their purpose at a reasonable cost, when cost is measured not only in terms of times or money or production but also in degree of individual and group satisfaction. Many managers have followed plans whose costs were greater than the revenue that could be obtained. For example, one airline acquired certain aircraft with costs exceeding revenues. Companies have also tried to sell products that were unacceptable to the market. Plan can even make it impossible to achieve objects if they make enough people in an organization this satisfied or unhappy.
TYPES OF PLANNING
The failure of some managers is inability to recognize the several types of plans. This makes difficulty in making planning effective. Plans are classified as:
1. PURPOSE AND MISSIONS & OBJECTIVES
This mission identifies the basic functions or tasks of an enterprise. However, an objective is the end toward which an activity is aimed. Objectives in other words. Are ends toward which organizational and individual activities or directed. Objectives are the end point toward which all managerial functions, (Planning, Organizing, Leading, Staffing, and Controlling) are aimed. Objectives form a hierarchy ranging from individual objectives to broad aims.
2. STRATEGIES & POLICIES
Strategies and policies are the basis of operational plans and framework for plans. Both gives direction and are closely related. The word strategy is derived from a Greek word “STRATEGOS” meaning General. Strategies is 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 policies are general statements or understandings that guide manager’s thinking and decision making. -34
3. PROCEDURE & RULES
Procedures are plans that establish a required method of handling future activities. Briefly, procedures guide actions. Rules are those required actions or non-actions allowing no discretion. Rules are simply called simple plans.
Programs are a complex of goals, policies, procedures, rules, tasks and steps to be taken, resources to be employed and other elements necessary to carry out a given course of action and normally supported by capital and operating budgets.
A budget is a numerized program. It is a statement of plans and expected results expressed in numerical terms or forms. The budget of an enterprise represents the sum total of income and expenses with profit or surplus.
STEPS IN PLANNING
There are eight applicable steps in planning which should be followed by managers in connection with major programs and in any other through planning.
1. AWARENESS OF OPPERTUNITIES
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 look at future opportunities and see them clearly and completely. They should know where they stand in light of their strengths and weakness, understand what problems they wish to solve and why, and know what they expect to gain. Setting realistic objectives depends on this awareness.
(i) About market (ii) About expected competition (ii) what customers wants (iv) Awareness about their qualities and weakness
2. SETTING OBJECTIVES
The second step in planning is to establish or set objectives for the entire enterprise and then for each subordinate work unit. Objectives specify the expected results and indicate the end points of (i) What is to be done (ii) Where the primary emphasis is to be placed (iii) What is to be accomplished by the network of strategies, policies, procedures, rules, budgets and programs. -35
3. DEVELOPING PREMISES
The third logical step in planning is to establish planning premises. Such as forecasts, applicable basic policies and existing company plan. They are assumptions about the environment in which the plan is to be the carried out. It is important for all the managers involved in planning to agree on the premises. Forecasting is important in premising: What kind of markets will be there? What volume of sales? What prices? What products? What technical developments? What cost? Etc.
4. INDENTIFYING ALTERNATIVE COURSES OF ACTION
The forth step in planning is to search and examined alternative courses of actions. The planner must usually make preliminary examination alternative courses to accomplish the goal.
5. EVALUATING ALTERNATIVE COURSES
After determining alternative courses and examining their strong and weak points, the next step is to evaluate the alternatives. That which alternative will give the best of meeting goals at the lowest cost and highest profit in a given period.
6. SELECTING A COURSE
Selecting an alternative is the real point of decision making. This is the point at which the plan is adopted. After identifying and evaluating alternative the manager has to decide one best alternative or several alternative courses of action.
7. FORMULATING DERIVATIVE PLANS
The seventh step in planning is formulating derivative plans. When a decision is made next step is to formulate a supporting plan, such as to buy equipment, materials, hire and train workers and develop a new product.
8. NUBERISING PLANS BY MAKING BUDGETS
After decision making and formulating plans the final step in planning is to numberise decision and plan by converting them into budgets. The overall budgets of an enterprise represent the sum total of income and expenses with resulting profit. Budgets are important thing in planning process. -36
STEPS IN PLANNING
Bing aware of opportunity in the light of the market competition what costumer want our strength or weakness. Settings objectives we want to be and what we want to accomplished and when. Considering planning premises in what environment external or internal will our plan operates. Identifying alternatives what are the most promising alternatives to accomplishing to our objectives. Comparing alternatives in light of goals which alternative will give as the best of meeting our goals at the lowest at highest profit. Choosing and alternative selecting the course of action we will pursue. Formulating supporting plans such as plans to buy equipment, buy materials, hire and train workers develop a new product. Numbering plans by making budgets develops such budgets as; volume and price of sales. Operating expenses expenditures for capital equipment.
THE PLANNING PROCESS
A rational approach to goal achievement planning is a rational approach to accomplishing objectives. The process can be shown by figure. X Figure Y X
n.x T-n t o
Progress, time, critical planning, premises
In this diagram, progress (toward more sales, higher profits, lower costs, and so forth) is on the vertical axis, and time is on the horizontal axis. Here x indicates where we are (at to or time zero) and y where we want to be at future time (at tn). In short, we are at ax and want to go to y. often we do not have all the data, but we start planning anywhere. We may even have to start our planning study at x (at t-n). The line x y is the decision path. If the future work completely certain, the line x y would be relatively easy to draw. Because we cannot forecast or consider everything, we try to develop our path x to y in light of the most critical premises. The essential logic of planning applies regardless of time interval between TO and TN, weather it is five minutes or twenty years. If the time span is long, premises may be unclear, goals may be more difficult to achieve and other planning complexities may be great. Various critical premises various critical premises.
MANAGEMENT BY OBJECT (MBO)
Management by objectives (MBO) is now practiced all over the world. Yet, despite its wide applications, it is not always clear what is meant by MBO. Some says that it is an appraisal tool; other sees it is a motivational technique; still others consider MBO a planning and control device. In other words, definitions and applications of MBO differ widely. MBO process consists of setting goals at the highest level of the organization, clarifying the rules of responsible persons for achieving the goals. Some still define MBO in a very narrow, limited way.
BENEFITS OF MBO
There are four benefits of MBO.
1. MBO IMPRVOES MANAGEMENT:
All the objectives of management by objective can be summarized by saying that it results in greatly improved Management objectives cannot be establish without planning. MBO force Managers to think about planning for results. MBO also requires that Managers think about the way from which they will accomplish results. They will think about need of assistance to achieve the objectives.
2. MBO CLASSIFY ORGANIZATION
MBO classify the organizational roles and structure. It force managers to delegate authority according to the results they expect.
3. MBO INCOURAGE PERSONAL COMMITMENTS;
One of the great advantages of management by objective is that it encourages people to commit themselves to their goals. Because of MBO people can understand their area of discretion, there authority, the part in setting their objectives.
4. MBO DEVLOPES EFFECTVE CONTROL
MBO help people to develop effective control. As MBO guides in setting result oriented planning. It is also guides people to develop effective control towards the accomplishment of the goals. -39
WEAKNESSES OF MANAGEMENT BY OBJECTIVES
With all its advantages, MBO has a number of weaknesses. There are several weakness of MBO.
1. MBO FALIURE TO EXPLIAN PHILOSPHY MBO
As MBO emphasis self-control and self-direction therefore sometimes managers fail to explain the philosophy of MBO to their subordinates. Managers often fail to explain about MBO that it is? How it works? Why it is being done? What part in performance appraisal? How participants can benefits?
2. MBO FAILURE TO GIVE GUIDE LINES FOR GOAL SETTING
One of the weaknesses of MBO is that it fails to give guide line for goal setting to managers. Managers need planning premises and knowledge of major company polices. People must have some assumptions about future. They should have some understanding about objectives affecting their areas of operations. They should know about objectives and programs. MBO fails to give guideline to Managers.
3. DIFFICULTY OF SETING GOALS
Truly verifiable are difficult to set. MBO difficult and verifiable goals.
4. EMPHASIS ON SHORT TIMES GOALS
In most MBO programs, managers set goals for the short term for yearly or quarterly. Emphasis on short term goals lead to danger more expensiveness as of the longer range.
5. DANGER OF INFLAXIBILITY
In MBO program managers often hesitate to change objectives. Change in objective can affect results. So in MBO managers often hesitate to know flexibility.
There are some other dangers and difficulties in MBO. 1-There may be a danger of overuse of quantitative goals or low gradation of important goals. 2-Difficulty in applying goal oriented planning.
3-Difficulty of converting broad objective into subordinate objectives. 4-Difficulty in measuring performance. 5-Difficulty in providing feedback. -40 6-Difficulty in setting long-range objectives and planning. 7-Difficulty in adjusting to the fast changing environment
Decision making is defined as the selection of course of action from among alternative. It is the core of planning. A plan cannot be said to exist unless a decision has been made. Managers sometimes see decision making as their central job because they must constantly choose what is to be done, who is to do it and when, where and how it will be done. Decision making is the part of planning and everyone’s daily living.
RATIONAL DECISION MAKING;
It is the rational decision making that goals cannot be attain without action. People acting or deciding rationally are attempting to reach some goal that cannot be attained without action. They must have a clear understanding of alternatives. Thy must have ability and information to analyze and evaluate alternatives in order to achieve goals. Finally they must have desire to come the best solution by selecting alternative.
STEPS IN DECISION MAKING
There are three steps in decision making.
1-THE SEARCH FOR ALTERNATIVES.
The first steps of decision making are to develop alternatives. There are almost always alternatives to any course of action. If we think of only one course of action, clearly we have not thought hard enough. The ability to develop alternatives is often as important as being able to select correctly from among them. One of the other hand ingenuity research and common sense will often unearth so many choices that all of them cannot be evaluated. The manager needs help in this situation, and this help can be solved by decision making.
2-EVALUATION OF ALTERNATIVES.
When an appropriate alternative has been found, the next steps in planning one best alternative to achieve the goals. There are three ways of evaluated decision making.
1-QUANTITIVE AND QUALITIVE FACTOR
Quantitative factor can be measured in numerical terms. This factor is very important but the success of the venture would be endangered qualitative factors were ignored. Qualitative factor are those that are difficult to measure numerically such as the quality of labor relations, the risk of technological change etc.
In evaluating alternatives managerial analysis is very important. Marginal analysis can be used in comparing factors other than costs and revenue. For example to find the best output of a machine, inputs could be varied against outputs until the additional input equals the additional output.
3-COST EFFECTIVENESS ANALYSIS
Cost effectiveness analysis seeks the best ratio of benefits and costs. For example finding the least costly way of reaching objectiveness is a technique for choosing the best plan.
SELECTING AN ALTERNATIVE
During the selection among the alternatives, managers can use three basic approaches
(1) Experience (2) Experimentations (3) research and analysis.
Bases for selecting from among alternatives
Experimentation How to select from among alternatives. Research and analysis Reliance on past Choice made
Reliance on past experience plays a larger part in decision making to some extent, experience is the best teacher. The very fact that managers have reached their position appears to justify their past decisions. Moreover, the process of thinking problems through making decisions and seeing programs succeed or fail.
One way of deciding among alternatives is to try one of them and see what happens. Experimentation is often used in scientific theory. The experimental technique can be most expensive, especially if a program requires heavy expenditures firm cannot afford to attempt several alternatives.
RESEARCH AND ANALYSIS
One of the most effective techniques for selecting from alternatives is research and analysis of decisions. This approach means solving problems by first comparing it. It is pencil and paper approach to decision making.
Organization involves division of work among people whose efforts must be coordinate to achieve specific objectives and to implement pre-determined strategies. Organization is the foundation upon which the whole structure of management is built? It is the backbone of management. After the objectives of an enterprise are determined and the plan is Prepared, the next step in the management process is to organize the activities of the Enterprise to execute the plan and to attain the objectives of the enterprise. The term Organization is given a variety of interpretations. In any case, there are two broad ways in which the term is used. In the first sense, organization is understood as a dynamic process and a managerial activity which is necessary for bringing people together and tying them together in the pursuit of common objectives. When used in the other sense, Organization refers to the structure of relationships among positions and jobs which is Built up for the realizations of common objectives. Without organizing managers cannot function as managers. Organization is concerned with the building, developing and maintaining of a structure of working relationships in order to accomplish the objectives of the enterprise. Organization means the determination and assignment of duties to People, and also the establishment and the maintenance of authority relationships among these grouped activities. It is the structural framework within which the various efforts are coordinated and related to each other. Sound organization contributes greatly to the Continuity and success of the enterprise. The distinguished industrialist of America, Andrew Carnegie has shown his confidence in organization by stating that: “Take away our factories, take away our trade, our avenues of transportation, our money, leave nothing but our organization, and in four years we shall have reestablished ourselves.” That shows the significance of managerial skills and organization. However, good organization structure does not by itself produce good performance. But a poor organization structure makes good performance impossible, no matter how good the individual may be. The term ‘Organization’ connotes different things to different people. Many writers have attempted to state the nature, characteristics and principles of organization in -45 their own way. It can be used as a group of persons working together or as a structure of relationships or as a process of management. Now, let us analyze some of the important definition of organizing or organization, and understand the meaning of organization.
ACCORDING TO SHELDON
“Organization is the process of so combining the work which individuals or groups have to perform with facilities necessary for its execution, that the duties so performed provide the best channels for efficient, systematic, positive and coordinated application of available effort.” In the words of Chester I Bernard, “Organization is a system of co-operative activities of two or more persons.”
MC FERLAND HAS DEFINED
Organization as, “an identifiable group of people contributing their efforts towards the attainment of goals”.
ACCORDING TO LOUIS A ALLEN,
“Organization is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing Relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.
ACCORDING TO NORTH WHITEHEAD
Organization is the adjustment of diverse elements, so that their mutual relationship may exhibit more pre-determined quality.
IN THE WORDS OF THEO HAIMANN
Organizing is the process of defining and grouping the activities of the enterprise and establishing the authority relationships among them. In performing the organizing function, the manager defines, departmentalizes and assigns activities so that they can be most effectively executed.
IN THE WORDS OF MOONEY AND RAILEY, “Organization is the form of every human association for the attainment of a common purpose.”
ACCORDING TO JOHN M PFIFFNER AND FRANK P SHERWOOD, “Organization is the pattern of ways in which large number of people, too many to have intimate face-to-face contact with all others, and engaged in a complexity of tasks, relate themselves to each other in the conscious, systematic establishment and accomplishment of mutually agreed purposes.”
SPAN OF CONTROL
(1) Span of control refers to the number of immediate subordinate who report a manager.
(2) Different level of organization level is also called span of control.
FACTORS DETERMINING AN EFFECTIVE SPAN
There are several factors which influence the span of management.
1-TRAINING OF SUBORDINATES
The better training of subordinates increases the necessary superior subordinate’s relationship. Well trained subordinates require less time of their managers also they have less contact with their managers. Training programs increase in new and more complex industries.
2-CLARITY OF DELEGATION OF AUTHORITY
Although training enables managers to reduce the frequency of time consuming contact but delegation of authority should be clear. If a manager clearly delegates authority to task with a minimum of the managers time and attention. But if a manager delegate’s authority unclearly than subordinate give his maximum.
3-CLARITY OF PLANS
If plans are well defined if they are workable, if the delegation of authority toward plan is clear, if the subordinate understands what expected than little of a supervisor time will be required on the other hand if plan cannot be drawn accurately and subordinates do much of their own planning, they may require considerable guidance.
4-USE OF OBJECTIVE STANDARD
A manager must find out, either by personal observation or through the use of objective standards, whether subordinates are following plans. Obviously, good objective standards enable managers to avoid many time consuming contact.
5-RATE OF CHANGE
Certain enter rises change much more rapidly than others. The rate of change is very important in formulating and maintaining policies. It may explain the organization structure of company’s railroad, banking and public utility companies.
Communication techniques also influence the span of management. If every plan, instruction, order or direction has to be communicated by personal contact than managers time will be heavily burdened. An ability to communicate plans and instructions clearly and concisely also tends to increase a managers span.
7-AMOUNT OF PERSONAL CONTACT NEEDED
Many instances, face to face meetings are necessary. Many situations cannot be completely policy statements planning documents or other communications that do not involves personal contact. An executive may and valuable information’s by meeting to subordinates and by discuss problems with them. Some problems can be handled only in face to face meeting so the best way of communicating problems, instructor, and subordinates is to spend time in personal contact.
8-VARIATION BY ORGANIZATION LEVEL
Several research projects have found that the size of the most effective span differs by organizational level. For example, it was studied that when a greater number of specialties were supervised, effective spans were narrower at lower and middle levels of organization but were increased at upper levels. 9-COMPETENCY OF MANAGERS
A manager who is competent and well trained can effectively supervise more people than who is not.
10-MATURITY AND MOTIVATION OF SUBORDINATES
The more mature subordinates may delegate more authority, thus widening the span.
TABLE: -FACTORS INFLUCING THE SPAN OF CONTROL DEPARTEMENTATION: Departmentation is process of grouping activities and people onto department make it possible to expend organization. After reviewing the plan, usually the first step in the organization process is departmentalization. Once job have been classified through work specialization, they are grouped so those common tasks can be coordinated. Departmentalization is the biases on which work or individuals are grouped into manageable units. There are five traditional methods for grouping work activities.
Thus workflow analysis can be used tighten the connection between employees’ work and customers’ needs. Also it can help to make major performance breakthroughs throughout business process reengineering (BPR).A functional rethinking and radical redesign of business process to achieve dramatic improvements in costs, quality, service, and speed. BPR use workflow analysis to identify jobs that can be eliminated or recombined to improve company.
TYPE OF DEPARTMENTATION: 1-DEPARTMENTATION BY NUMBERS:
Departmentation by number is telling off persons who are to perform the same duties and putting them under the superior of a manager the essential fact is not what these people do, where they work? Or what they work with, it is that the success of the
NARRO SPAN RELATED TO: WIDE SPAN RELATED TO:
1-little or no training. 1-through training of subordinate. 2-unclear authority, delegation. 2-Clear delegation of authority. 3-nonverefiyable objectives & standard. 3-Will define plans. 4-fast changes in external and internal environment. 4-Slow changes in external and eternal 5-use of communication techniques. Environment 6-ineffectiv interrogation of superior and subordinate.5-use of appropriate techniques such as written, 7-greater number of specialization at lower and oral communication. Middle level. 6effetive interaction between superior & superiors. 8-Infactive meetings. 7-Number of specialist at upper levels. 9-Incompletent & untrained managers. 8-Effective meetings. 10-Complex task. 9-Competent & train managers. 11-Imature subordinate. 10-Simple task. 11-mature subordinates.
-49 understanding depends only on the number of persons include in it. This method is rapidly applying in army.
DISADVANTAGES OR DECLINES REASONS;
There are many reason of decline of departmentation by numbers.
1-It has declined due to advance technology and demand of specialized and different skills.
2-A second reason is groups composed of specialized personnel are more efficient than those based on number.
3-Departmentation by number is useful only at the lowest level of the organization. 4-Departation by number fails to produce good results
2-DEPARTMENTATION BY TIME
It is grouping activities on the basis of time. It is oldest form of departmentation and it is generally used in low level of departmentation. It is particularly applied in hospitals and steel manufacturing enterprise where continue process of service and manufacturing is used.
1-It is process of working and services throughout 24 hours. 2-It is continuing service process. 3-Expensive machinery is used in shifts. 4-Students can work evening or at night.
1-There is lacking supervision at night. 2-Exhaustion factor.
3-DEPARTMENTATION BY FUNCTION
It is grouping activities on the basis on function of an enterprise. The basic enterprise functions are production, selling, and financing functional departmentation is bases for organizing activities and in organizational structure. It organizes by function to be performed. The function reflects the nature of the business. The advantage of this type of grouping is obtaining efficiencies from consoliding similar specialties and people with common skills, knowledge and orientations together in common units. -50
1-It is logical reflection of function.
2-Maintains power of major functions.
1-De-emphasis of overall company objectives.
2-Reduces coordination between function. 3-Slow adoption to change in environment.
4-DEPARTMENTATION BY GEOGRAPHY
Departmentation by geography is followed where geographic marked appear to offer advantages. Geographic department most often use in sales and production, it is not use in finance. Departmentalization by geographical regions groups jobs on the basis of territory or geography. For example Merek, a major pharmaceutical company, have its domestic sales departmentalized by regions such as Northeast, Southeast, & Northwest
President Manager southern region Manager central region Manager North region
1-It emphasis on local markets and problems.
2-Improves coordination in a region.
3-Better face to face communication.
1-Increases problem of top management control. 2-Requires more persons with general manager abilities.
5. DEPARTMENTATION BY CUSTOMER
Departmentalization by customer groups jobs on the basis of a common set of needs or problems of specific customers. For instance, a plumbing firm may group its work according to whether it is serving private sector, public sector, government, or not51 for-profit organizations. A current departmentalization trend is to structure work according to customer, using cross-functional teams. This group is chosen from different functions to work together across various departments to interdependently create new products or services. For example, a cross-functional team consisting of managers from accounting, finance and marketing is created to prepare a technology plan.
Executive Manager Business loans students loans Personal loans Army loans there is different difficult decision to be made in separating some type of customer departments from product departments. Business owners and managers arrange activities on the basis of customer requirements. Departmentation by customer can be defined by figure
1-Departmentation by customer emphasis on customer needs.
2-It develops experience in customer area.
1-It may be difficult to analysis customer demands.
2-It requires managers and staff expert in customer problems.
3-Customer groups may not always be clearly defined.
6-DEPARTMENTATION BY PROCESS
This type of departmentation is found in production and operative levels. Such type of departmentation can be found in paint or electroplating process. Departmentalization by process groups jobs on the basis of product or customer flow. Each process requires particular skills and offers a basis for homogeneous categorizing of work activities. A patient preparing for an operation would first engage in preliminary -52 diagnostic tests, and then go through the admitting process, undergo a procedure in surgery, receiver post-operative care, be discharged and perhaps receive out-patient attention. These services are each administered by different departments.
Manager Purchases Manager Finance Manager Production Manager Sales Dept. by process Heat treatment welding section Assembling section finishing section
1-It simplifies training. 2-Achieve economic advantage.
3-Uses specialized technology.
1-Coordination of departments is difficult.
2-Responsibility for profit is at the top.
7-DEPARTMENTATION BY PRODUCT
This type of departmentation used in organization where more than one product is producing. In this department all the sources and authority are placed under the control of one manager. Departmentalization by product assembles all functions needed to make and market a particular product are placed under one executive. For instance, major department stores are structured around product groups such as home accessories, appliances woman’s clothing, men’s clothing and children clothing.
1-Places attention on production.
2-Increase growth of product.
3-Places responsibility for profit at division level.
1-Requires more persons with general manager abilities. 2-Presents problems of top management control. Marketing Personnel Finance Purchases Industrial tool division Electronic meter division Indicator light division Instrument division Accounting Sales Engineering Production Accounting Sales Engineering Production -54
Formal and Informal Organization FORMAL ORGANIZATION
Formal organization means the intentional structure of rods informally organized enterprise. Formal organization must be flexible. Formal organization does not mean that there is anything inflexible. If a manager is to organize well, the structure must furnish an environment in which individual performance, both present and future contributes most effectively to group goals. President Marketing Finance Production President Cosmetics Clothing Appliances President Central Northeast Southwest President Receiving Sewing Shipping President Government Industrial consumer Product Departmentalization Geographical Departmentalization Process Departmentalization Customer Departmentalization Functional Departmentalization.
Informal organizational is define by different authors one says, Informal organization is any joint personal activity without conscious joint purpose, even though contributing to joint results. Thus informal relationships established in the group of people playing chess during lunch time may aid in the achievement of organization goals. It is much easier to ask for help on an organization problem from someone you know personally, even if he or she may be in different departments than from someone you know only as a name on an organization chart. Another author describes informal organization as a network of personal and social relationships not required by the formal organization but arising spontaneously as people but associate with one another.
AUTHORITY & POWER
Power is much broader concept than authority power is the ability of individuals or groups to informal the actions of other persons or groups. Formal organization
Informal organization: morning Coffee regular Informal organization: bowling team Informal organization: chess group President Voice president Decision managers Department managers
Authority is the legal right to command actions by others and to enforce compliance. Authority may also be defined as the degree of discretion in organizational position conferring on persons occupying these positions the right to use their judgment in decision making.
TOP TO DOWN AUTHORITY
Share holder Board of director Chief Executive Managers Supervisors
Power is border concept then authority. I may be defined as a strong influence on direction on individuals is behaviors power may also define as the ability of individuals or groups to influence the action of other persons. There are five bases / sources or kind of power.
The official position of a person is an organization is known as legitimate power. For example, a major in army has power over Captain and subordinate.
A person’s ability to create fear in other individuals and is based on subordinate’s expectation that punishment will be received for not completing work. It is closely related to reward power and normally arising from legitimate. Worker -57
Power arises from ability of some people to grant reward is known as reward power. University Professors have considerable reward. Power they made high grade.
Power may also come from the expertness of a person or a group. This power of knowledge. Physician lowers, &university professors may have considerable influence for their special knowledge.
This is the power of admiring high esteemed leader by individuals.
6-DECESION MAKING POWER
This power arises from the power of positions. When people speak pf authority in managerial setting, they are usually referring to the decision making power.
LINE & STAFF CONCEPT
Line authority gives a superior a line of authority over subordinates. It exists in all organizations. Line authority can also be defined as the superior – subordinate authority relationship where by a superior makes decision and tells them to a subordinate who is turn makes decision and tells to his subordinates and on from a line from top to low level of organization structure. This line of authority is known as line of authority. It is directly from superior to his subordinate.
LINE AUTHORITY chain of command
President Voice President Supervisor Employee.
The nature of the staff relationship is advisory. The function of people in pure staff capacity is to investigate research and give advice to line managers. In other words, staff functions are those that help the line persons work more effectively in accomplishing the objectives.
PRESIDENT LINE & STAFF ORGANIZATION OF A TYPICAL MANUFACTURING COMPANY
NATURE OF LINE & STAFF CONCEPT
Line authority gives a superior a line of an authority over a subordinate. Line authority is that relationship in which superior exercises direct supervision over a subordinate. On the other hand the nature of the staff relationship is advisory. The function of a person in staff capacity is to investigate research and give advice to line manager.
BENEFITS OF STAFF
1. Provide highly specialized knowledge indifferent areas, i-e-economics, technical, legal etc. Voice president Director Research Director Production Director public relation Voice President Manager Accounting Manager Cash control Manager Purchasing
Manager Factory Manager Personnel Manager domestic sales Manager Advertising Manager foreign sale Supervisor Production Control Supervisor Parts Production Chief Assembling Chief maintenance.
- Specialist staff avails lines to analysis collected data and make advice for managers.
- Staff analysis and advices help in resolving problems arise during process
WEAKNESSES OF STAFF
- Danger of understanding line authority.
- Lake of staff responsibility.
- Thinking in a vacuum
- Managerial problems.
DELEGATION OF AUTHORITY
Delegation is necessary for an organization to exist. Authority is delegated when a superior gives a subordinate discretion to make decision. Clearly, supervisors cannot delegate authority they do not have, whether they are board members, Presidents, Voice Presidents or superiors. The process of delegation involves.
- Determining the results expected from a position.
- Assigning tasks to the positions.
- Delegating authority to accomplishment of the tasks.
- Holding the persons in that position responsible for the accomplishing meat of the tasks.
- Authority is delegate from higher level to lower level.
STEPS IN DELEGATING SPLINTERERD AUTHORITY
Splintered authority exits whenever a problem cannot solve. In day to day operations of any company. There are many cases of splintered authority. Many Managerial Conferences are held because of the necessity of splintered authority to make decisions.
RECOVERY OF DELEATED AUTHORITY
A manager who delegates authority does not permanently dispose of it, delegated authority can always be regained. Re organization involves reorganization, rights are recovered by the responsible head of the firm or a departments, to head of a new department may receive authority formally held by other Managers.
THE ART OF DELEGATIONOF AUTHORITY
The most failure in effective delegation occurs not because Manager does not understand the nature and principles of delegation because they are unable to apply them. There are many reasons for poor delegation.
PERSONAL ATTITUDE TOWARD DELEGATION
There are many kinds of personal attitudes which cause poor delegation of authority so Managers should fallow these steps.
Decision making always involves some discretion and a subordinates decision is not likely to be exactly the one superior would have made the manager who known how to delegate must be able to help other and to compliment on their ingenuity.
2-WILLINGNESS TO LET GO
A manager who will effectively delegate authority must be willing to release the right to make decisions to subordinates. A major fault of some managers is that they want to continue to make decisions for the positions they have left. Corporate president and vice presidents who insist on confirming every purchase do not realize that doing so takes their time and attention away from more important decisions.
3-WILLINGNESS TO LET OTHER MAKE MISTAKES
Since everyone makes mistakes, a subordinate must be allowed to make some, and their cost must be considered an investment in personal development serious or repeated mistakes can be largely avoided without multifying delegation.
4-WILLINGNESS TO TRUST SUBORDINATES
Superiors have no alternative to trusting their subordinates; for delegation implies a trustful attitude among them. A superior may put off delegation will the thought that subordinates have not yet experienced enough, they cannot handle people, and they have not developed Judgment etc. Sometimes these considerations are true but then a superior or should either train subordinates or else select others who are prepared to assume the responsibility.
5-WILLINGNESS TO ESTABLISH AND USE BROAD CONTROLS
Superiors should not delegate authority unless they are willing to find means of getting feedback. Obviously, controls cannot goals, policies and plans are used as basic standard for judging the activities of subordinates.
GUIDES FOR OVERCOMING WEAK DELEGATION
The following guide can overcome weak delegation.
1-Define assignments and delegate authority in the light of results expected. 2-Select the person in light of the job to be done.
3-Maintain open lines of communication.
4-Establish proper control. 5-Reward effective delegation and successful assumption of authority.
What is staffing?
Staffing is define as “Filling and keeping filed, positions in the organization structure”
This process is done by ten concepts.
- Identifying the work force requirements.
- Inventorying the people available.
- Selecting candidates.
- Planning candidates.
- Promoting candidate.
- Appraising candidates.
- Planning careers of candidates.
- Training candidate.
- Developing and compensating candidates and current jobholders.
DEFINING THE MANAGERIAL JOB
There is no agreed definition of managerial job of a manager. There are several different definition of managerial job by different writers. One group of writers studied successful managers and described their behaviors and habits. Although the stories about these people are interesting but authors do not provide a theory to explain the success of these successful managers. Other writers focus on profit maximization, innovation, risk taking and similar activities. Yet another group of writers emphasizes decisions that cannot be easily programmed. Managerial job also define as leadership having power and influence over the environment and subordinates. One says, managerial job is process of observing the activities of managers. However the key tasks of managers are planning, organizing staffing, leading, and controlling.
THE SYSTEM APPROCH TO HUMAN RESOURCE MANAGEMENT
Figure shows the managerial function of staffing relates to the total management in system approach to staffing enterprise plan or organization plane become important inputs for staffing tasks. The organization structure determines required numbers and kinds of managers. These demands for managers are compared with the available talents through management inventory. Internal environment personal policies reward system
Analysis of present and future needs for managers
External sources Appraisal Career strategy Training and Development Enterprise plans Organizational plans Number and kinds of manager required Manager inventory
Internal sources Recruitment Selection Placement Promotion Separation Leading and controlling
On the basis of this analysis, external and internal resources are utilized in the process of recruitment, selection, placement, promotion and separation. Other aspects of staffing are appraisal, career strategy and training and development of managers. Staffing effects leading and controlling. Well trained managers create an environment in which people working together in the organization setup can achieve enterprise objectives and accomplish personal goals. Staffing requires an open system approach. It is carried out within the enterprise which is linked to the external environment. Therefore it cannot be carried out within the enterprise which is linked to the internal environment.
ASPECTS IN THE SYSTEM APPROCH TO STAFFING
In system approach to human resource management or staffing the fowling aspects are to be considered.
1. FACTORS AFFECTING THE NUMBER & KINDS OF MANAGER REQUIRED
The number of managers needed in an enterprise depends on (1) Size of business
(2) Plans of expansion
(3) Rate of turnover of managers
(4) Complexity of organization structure.
2. DETERMINATION OF AVAILABLE MANAGERIAL RESOURCS
It is also known as management inventory. It is common for any business and non-business enterprises, to keep an inventory of new materials and goods on hand to enable it to carry on its operations.
3. ANALYSIS THE NEED FOR MANAGERS.
Analysis of the need for managers depends upon internal resources.
- Plane for growth.
- Replacement or out replacement staff.
- Early retirement.
- External factors.
- Internal factors.
- External factor include -66
- Economic factor.
- Technological factors.
- Social factors.
- Political factors.
- Legal factors.
4. OTHER IMPORTANT ASPECTS
After the need for managerial personnel a number of candidates may have to be.
THERE ARE MANY OBJECTIVES & PURPOSES OBJECTIVES OF STAFFING
The objective and purpose of managerial staffing is to ensure that organizational positions are filled by the qualified personnel, who are able to willing to occupy them. 2ndly, the purpose / objective of managerial staffing is to define job, performance appraisal training and development of people. 3rdly, the purpose / objective of managerial staffing is to matching the persons with job, identifying job requirement, job, design etc.
SITUATIONAL FACTORS AFFECTING STAFFING
The actual process of staffing is affected by many environmental factors. For example external and internal factors.
Factors in external environment do affect staffing to various degrees. These influences can be grouped into educational, social cultural, legal political and economic opportunities. External factors include.
- Well trained managers.
- Well educated managers.
- Highly skilled managers.
Ignorance of external factors may keep away an enterprise from growing at design rate
Internal factors include
- Personal policies.
- Organizational climate.
- Reward system. Internal factors of staffing are required to be taking consideration.
THE SELECTION PROCESS
Selection is the process of choosing from among the candidates, from within the organization or from the outside organization the most suitable person for the current position or for future positions.
THE SELECTION PROCESS
There are many steps in the selection process, for example, the interview of a candidate, tests, assessment centers etc. There are some variations in the steps of selection process For example the interview of candidate for a first level supervisory position may be relatively simple then interviews for a top level executive. In the selection process firstly, the selection criteria are established in the basis of current and future job requirements. These criteria include:
- Education, knowledge, skills and experience.
- The candidate is requested to complete the application form.
- A screening interview is conducted.
- Candidates are tested for additional information.
- Formal interviews conducted on the basis of test.
- Information provided by candidates are checked and verified.
- Physical fitness is examined.
- On the basis of previous step the candidate is offered job or information about that he/she has not been selected for the position. Let’s determine some parts of selection process.
In a structured interview the Manager ask a set of prepared questions, such as the following.
- What were your specific duties and responsibilities in your last job?
- What did you achieve in that job?
- Who could be asked to verify these achievements?
- Who are they?
- What did you like or dislike about your job?
- Why do you want to change your job?
The primary aim of test is to obtain data about the applicants. Some of the benefits from testing include finding the best person for the job obtaining a high degree of job satisfaction for the applicant, and reducing turnover. The most commonly used tests can be classified as follows.
1. INTELEGENCE TEST
Intelligence test are design to measure mental capacity, to test memory, speed of thought and ability to see relationship in complex problem situations.
2. PROFICIENCY TEST
It constructed to discover interest, existing skills and potential for acquiring skills.
3. VOCATIONAL TESTS
Vocational test are designed to show a candidates most suitable occupation.
4. PERSONALITY TESTS
Personality tests are designed to show or discover candidate’s personal characteristics.
The assessment center is not a location but a technique for selecting and promoting managers. This approach may be used in training assessment centers were first used for selecting and promoting lower level but now they are applied to middle level managers as well.
LIMITATION OF SELECTION PROCESS
There are many limitation of the selection process.
- There is no one perfect way to select managers.
- There is distinction between what person can do,
- Testing process and especially psychological testing is limited.
- Time and cost involved in making personnel decisions. It is important to identify such factor as advertising expenses, agency fees, cost of test materials, time spent interviewing candidate, costs for reference check etc. When recruiting costs are recognized it becomes evident that turnover can be very expensive to an enterprise.
STEPS/PROCESS/PRINCIPLES OF STAFFING there are six steps/process or principles of staffing.
- Principle of job definition
- principle of managerial appraisal
- Principle of open competition.
- Principle of management training & development.
- Principle of training objectives.
- Principle of continuing development.
1. PRINCIPLES OF JOB DENIATION
The more precisely the results expected of managers are identified the dimensions of their positions can be defined.
2. PRINCIPLE OF MANAGERIAL APPRASIAL
The more clearly verifiable objectives and required managerial activities are identified.
3. PRINCIPLE OF OPEN COMPETETION
The enterprise encourages open completion among all candidates for management positions. Open competition shows the quality management. Open competition better candidate can be brought in the organization. -70
4. PRINCIPLES OF MANAGEMENT TARINING & DEVELOPMENT
Training and develop efforts are related to managerial function. Management training and development Leeds to the effective developed programs and activity of an enterprise.
5. PRINCIPLES OF TRAINING OBJECTIVES
The principle of training objectives gives direction to development and facilitates the measurement of the effectiveness of training efforts. This principle suggest that in a fast changing and competitive environment, manages cannot stop learning. Instead they have to update their managerial knowledge continually and improve their managerial skills and performance to achieve enterprise result. -71
OUTLINE NO: LEADING OUTLINE 04
Leading Definition Ingredients of leadership
1) o Power
2) o Fundamental understanding of people
3) o Ability to inspire followers
4) o The ability to act in manner Trait approaches to leadership Motivation & motivators Special motivational techniques
5) o Participation
6) o Quality of working life An early behavioral model
7) o Mcgor Gor’s theory X and theory Y
8) o Clarification of theories The Hierarchy of need theory
9) o Physical needs
10) o Security or safety needs
11) o Affiliation or acceptance needs
12) Esteem needs
13) Needs for self-actualization Hygiene approach to motivation
14) Frederick Herzberg theory of motivation
15) Comparison of Maslow’s & Herzberg’s theories of motivation
16) Job enrichment
17) Job enlargement -72
Leading is the process of influence people so that they will contribute to organization and group goals.
Leadership has different meanings by different authors. Leadership is influence. Leadership is the art or process of influencing people so that they will contribute willingly. And whole hardly toward the achievement of group goals. Ideally. People should be encouraged to develop not only zeal and confidence. Zeal is intensity in the execution of works; Confidence reflects experience and technical ability. Leaders help a group to attain objectives through the maximum application of its capabilities. They do not stand behind a group but they inspire the group to accomplish organizational goals. A good example is an orchestra leader, whose function is to produce coordinated sound and correct tempo through the integrated efforts of the musicians. Depended on the quality of director’s leadership,
The orchestra will respond. Leadership is a great quality and it can create and convert anything. There are many definitions of leadership. Some of the definitions of leadership are reproduced below:
“LEADERSHIP” ACCORDING TO ALFORD AND BEATTY “is the ability to secure desirable actions from a group of followers voluntarily, without the use of coercion”.
ACCORDING TO CHESTER I BARNARD
“It (leadership) refers to the quality of the behavior of the individual whereby they guide people on their activities in organized efforts”.
ACCORDING TO TERRY
“A leader shows the way by his own example. He is not a pusher, he pulls rather than pushes”.
ACCORDING TO KOONTZ AND O’DONNELL
Managerial leadership is “the ability to exert interpersonal influence by means of communication, towards the achievement of a goal. -73 Since managers get things done through people, their success depends, to a considerable extent upon their ability to provide leadership”. In the words of R.T. Livingston -Leadership is “the ability to awaken in others the desire to follow a common objective”.
ACCORDING TO PETER DRUCKER
Leadership “is not making friends and influencing people i.e., salesmanship. Leadership is the lifting of man’s vision to higher sights, the raising of man’s performance to higher standards, the building of man’s personality beyond its normal limitations”.
ACCORDING TO LOUIS A ALLEN
“A leader is one who guides and directs other people. He gives the efforts to his
Followers a direction and purpose by influencing their behavior”. In the words of THEO HAIMANN “Leadership is the process by which an executive imaginatively directs, guides and influences the work of others in choosing and attaining specified goals by mediating between the individuals and the organization in such a manner that both will obtain maximum satisfaction”.
ACCORDING TO KATZ AND KALM
“In the descriptions of organizations, no word is used with such varied meanings. The word leadership is sometimes used to indicate that it is an attribute of personality; sometimes, it is used as if it were a characteristic of certain positions, and sometimes as an attribute of behaviour”. From the above definitions we can conclude that leadership is a psychological process of influencing followers (subordinates) and providing guidance, directing and leading the people in an organization towards attainment of the objectives of the enterprise.
INGREDIENTS OF LEADERSHIP
Every group of people that performs job has same person as its head who is skilled in art of leadership. This skill seems to be a compound at least four major ingredients.
- Fundamental understanding of people. -74
- Ability to inspire fowler
- The ability to act in a manner That will develop a conducive climate to responding and rousing motivations.
The first ingredient of leadership is power. Power may be define as a strong influence on the direction of an individual’s behavior. There are five kind of power.
1. LEGITMATE POWER
The official position of a person is organization is known as legitimate power.
2. COERECTIVE POWER
A person’s ability to create fear in other individuals is known as coercive power.
3. REWARD POWER
This power arises from ability of some to grant reward is known as reward power.
4. EXPERT POWER
This power comes from the expertness of a person or a group.
5. REFERENT POWER
This is the power of admiring high esteemed leader by individuals.
6. DECISION MAKING POWER
This power arises from the power of positions.
2-FUNDAMENTL UNDERSTANDING F PEOPLE
The second ingredient of leadership is fundamental understanding of people. A manager or any other leader who knows the present state of motivation theory and understands the elements of motivation is more aware of the nature and strength to define and design ways satisfaction.
3-ABILITY TO INSPIRE FALLOWERS
The third ingredient of leadership is an ability to inspire followers to apply their full capabilities to a project. Inspirations also come from group heads. They may have qualities of charm and appeal that increase loyalty, deviation and strong desire in followers that the leaders want. This is not a matter of need satisfaction; it is a matter of people giving unselfish support to a chosen objective. -75
THE ABILITY TO ACT IN A MANNER:
The forth ingredient of leadership is related to style of leader and the climate he or she develops. The strength of motivation greatly depends on expectations, perceived rewards, the task to be done and other factors that are part of an environment as well as an organizational climate.
PRINCIPLE OF LEADERSHIP:
The fundamental is since people tend to follow those who in their view offer them a means of satisfying their own personal goals. The more managers understand what motivates their subordinates and how these motivation operate, and the more they reflect their understanding in caring out their managerial actions, the more effective they are likely to be as leaders.
TRAIT APPROACHES TO LEADERSHIP
Many studies of traits have been made various researches have identified specific traits related to leadership ability. Five physical traits (such as energy, appearance and height), Four intelligence and ability traits; sixteen personality traits (such as adaptability, aggressiveness, self-confidence etc). Six task related characteristics (Such as achievement drive, persistence and initiative) and nine social characteristic (Such as co cooperativeness, interpersonal skill and administrative ability). More recently following key leadership taints were identified drive (including achievement, motivations energy, ambition etc). Honest and integrity, self-confidence (including emotional stability), cognitive ability and understanding of the business. Less clear taints is creativity, flexibility etc)
In general, the study of leader’s traits has not been a very fruitful approach to
Explaining leadership. Not all leader processes all the traits and many non-leaders may possess most or all of them. Also, the trait approach gives no guidance as to how much of any train a person should have. Most of these so called traits are really patterns of behavior.
Motivation & Motivators: Motivation: Motivation is a general term applying to the entire class of drives, desire needs similar forces. To say that managers motivate their subordinates is to say that they do those things which they hope will satisfy these drives and desire and induce the subordinates to act in a desired manner.
THE NEED WANT SATISFACTION CHAIN:
Motivation can be explain by a chain reaction: Felt needs give rise to want or goal sought which cause tensions (that is unfulfilled desired), which give rise to action toward achieving goals which finally result in satisfaction. This chain can be explained by figure.
Needs want-satisfaction chain
The chain explanation is complex. In the first place, except for physiological needs, such as food, need are not independent of person’s environment. Many physiological needs are stimulated by environmental factors the small of food may cause hunger, a lower thermometer reaching may cause chills. Environment has a major influence on our perception of secondary needs. The promotion of a colleague may arouse one’s desire for higher position. In second place, the need want satisfaction chain does not always operate as simply as portrayed. Needs do cause behavior but needs also may result from behavior. Satisfying one deed may lead to a desire to satisfy more needs.
COMPLEXITY OF MOTIVATIONS:
In individuals motives maybe quite complex and often conflicting. A person maybe motivated by a desire for economy goods and services (a better house, a new car or a Needs Give Rise to Wants Which cause Tension Give Rise to Action Which result in Satisfaction trip and these desires may be complex and conflicting. Should one buy a new house or a new car?) Motivators are things that induce an individual to perform motivators sharpen the drive or need to satisfy wants. Motivators are also the means by which conflicting needs may be reconciled. A manager can do much to sharpen motive by establishing an environment. So the motivator is something that influences an individual’s behavior. In any organization are any enterprise, managers must be concerned about motivators, and also inventive in their use. People can often satisfy their wants in a variety of ways.
SPECIAL MOTIVATIONAL TECHNIQUES:
There are many motivational techniques:
1: Money: Money is important in form of wages, prince work, stock options, bonuses, company paid, insurance etc. Many are often more then monetary value. It can also mean status or power. Tended to place money high on the scale of motivators or an high scare of motivators, while behavioral scientists tends to place it on low sale. But if money is to be kind of motivator then managers must remember several things. First, money, as money is likely to be more important to people who are raising and family. Second, it is quite true that in most kinds of business and other enterprises, money is used as mean of keeping an organization staffed. Third money becomes dull if salaries of many managers in a company are similar. Fourth, if is to be an effective motivator, people in various positions must be given salaries and bonuses that reflect their individual performance. It is almost certainly true the money can motivate only if payment is large relative to persons income.
The second motivational technique is increase of awareness and use of participation. Participation is necessary far the solution of problems participation is a mean of recognition. It produces need for affiliation and acceptance. It gives people a sense of accomplishment but encouraging participation should not mean that managers -78 weaken their position. They should encourage participation of subordinates on matter and they should listen carefully but they should make decision on matters themselves.
QUALITY OF WORKING LIFE:
The third motivational technique is quality of working life program. Quality work life (QWL) is not only a very broad approach to job enrichment but also a field of inquiry and action combining industrial and organization psychology and sociology, industrial engineering, organization theory and development motivation and leadership theory and industrial relations. QWL has received support from a number of sources. Manager use it as a means of dealing with productivity. Workers and union representatives have seen it as a mean of improving working conditions and productivity and as a mean of justifying higher pay.
AN EARLY BEHAVIORAL MODEL:
The nature of people has been expressed in two sets of assumptions developed by Dauglas Megragor and commonly known as “Theory X” and “Theory Y” Megragor chosen these terms because he wanted natural terminology. Without any connotation of being “good or bad”.
THEORY X ASSUMPTIONS:
The traditional assumptions about the nature of people in theory X are:
1: Average human beings have an inherent dislike of work and will avoid it if they can.
2: Because of this human nature or characteristic of dislike work most people must be coerced, controlled, directed and threatened with punishment to get them to put forth adequate effort toward the achievement of organizational objectives
3: Average human beings prefer to be directed wish to avoid responsibility have relatively little ambition and want security above all
THEORY Y ASSUMPTIONS:
The assumption of theory Y of Mceneyor as follows:
1: the expenditure of physical effort and mental effort in work is as natural as play or rest. -79
2: External control and the threat of punishment are not the only means for producing effort toward organizational objectives. People will exercise self-direction and self-control in the service of objectives to which they are committed.
3: The degree of commitment to objective is in proportion to the size of the rewards associated with their achievements.
4: the capacity to exercise high degree of imagination, ingenuity and creativity in solution of organizational problem is widely distributed in the population.
5: Average human being learns under proper conditions not only to accept responsibility but also to seek it.
6: Under the conditions of modern industrial life, the intellectual potentialities of the average human being are only partially utilized. These two sets of assumptions are fundamentally different theory x is pessimistic, static and rigid. Theory y is optimistic, dynamic and flexible with an emphasis an self-directions. There is little doubt that each set of assumption will effect managerial functions and activities of managers.
THE SYSTEM &PROCESS OF CONTROLLING DEFINATIONS
There are many definitions of controlling.
- Controlling is the process of determining what is being accomplished.
- Controlling is evaluating the performance and if necessary applying corrective measures so that the performance takes place according to plans.
- Controlling is measurement and correction of performance in order to make sure that enterprise objectives and the plane advised to attain then are being accomplish.
- Controlling is looking behind planning bears a close relationship to controlling.
- Effective controlling assists to regulate actual performance to assure that it takes place as planned.
- Controlling exists at every management level from president to supervisor of a company Control is the process through which managers assure that actual activities conform to planned activities.
ACCORDING TO BREACH
“Control is checking current performance against predetermined standards contained in the plans, with a view to ensuring adequate progress and satisfactory performance.”
ACCORDING TO GEORGE R TERRY –
“Controlling is determining what is being accomplished i.e., evaluating the performance and if necessary, applying corrective measures so that the performance takes place according to plans.”
ACCORDING TO BILLY E GOETZ
“Management control seeks to compel events to conform plans”.
ACCORDING TO ROBERT N ANTHONY –
“Management control is the process by which managers assure that resources are obtained and used effectively and efficiently.” -86
IN THE WORDS OF KOONTZ AND O’DONNELL
“Managerial control implies measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans.”
IN THE WORDS OF HAYNES AND MASSIE
“Fundamentally, control is any process that guides activity towards some predetermined goal. The essence of the concept is in determining whether the activity is achieving the desired results”.
IN THE WORDS OF HENRY FAYOL
“Control consists in verifying whether everything occurs in conformity with the plan adopted, the instructions issued and the principles established. Its object is to find out the weakness and errors in order to rectify them and prevent recurrence. It operates on everything, i.e., things, people and actions”. From the above definitions it is clear that the managerial function of control consists in a comparison of the actual performance with the planned performance with the object of discovering whether all is going on well according to plans and if not why. Remedial action arising from a study of deviations of the actual performance with the standard or planned performance will serve to correct the plans and make suitable changes. Controlling is the nature of follow-up to the other three fundamental functions of management. There can, in fact, be not controlling without previous planning, organizing and directing. Controlling cannot take place in a vacuum.
THE BASIC CONTROLL PROCESS
The basic control process involves three steps.
- Establishing standards.
- Measuring performance against these standards.
- Correcting variations from standard and plans / correction of deviations.
1. ESTABLISHING STANDARD
Standards are by definition is simply criteria of performance. Standards are the selected points in a planning performance at which performance is measured, so that managers can receive signals about how things are going. There are many kinds of standard.
(2) Cost Standard
(3) Capital Standard
(4) Revenue Standard
(5) Program Standard
(6) Intangible Standard
(7) Goals/ objectives Standard
(8) Strategic plans as control point strategic control.
2. MEASUREMENT OF PERFORMANCE
It is the second step of control process. Although such measurement is not always predictable, but if standard are appropriately drown and if means are available for determining exactly what subordinates are doing then measurement of performance is fairly easy. But there are many activities for which it is difficult to develop accurate standards and there are many activities that are hard to measure. Technical kind of work is hard to measure performance.
3. CORRECTION OF DEVIATIONSS
It is third and last step of control process. If performance is measured accurately, t is easier to correct deviations manage know exactly where the corrective measure must be applied correction of deviations is the point at which contact can be related to the other managerial factions. Managers may correct deviations by redrawing their plans or by modifying their goals or they may correct deviations by clarification of duties.
CRICTICAL CONTREL POINTS & STANDARDS
Standards are yardsticks against which expected performance is measured. In simple operation a manager may control through careful observations. But, in most operations this is not possible because of the complexity of the operations. Manager must choose points for special attention and then watch them to be sure that the whole operation is proceeding as planned. The points selected for control should be critical. With such standards, manager can handle a large group of subordinates and plans are working out the principle or critical. Points control states “effective control requires attention to these Factors critical to evaluating performance against plans.
QUESTION OF SELECTED CRITICAL POINT OF CONTROL
In selection of critical control points, manager must ask themselves such questions.
1-What will best reflect the goals of my department?
2-What will best show me when these goals are not being met?
3-What will best measure critical deviation?
4-What will tell me who is responsible for any failure?
5-What standard will cost the least?
6-For what standards is information economically-available?
TYPES OF CRITICAL POINT STANDARDS
There are many types of standards
Physical standards are non-monetary measurements and common at operating level where material is used, labor is employed, services are rendered and goods-are produce-they may-reflect quantities such as labor hours per unit of output, unit of production per machine hour etc. physical standards may also reflect quality such as hardness of bearing, durability of fabric, fastness of color etc.
Cost standards are monetary measurements and common at the operating level. Cost standards are widely used to measure direct and indirect costs per unit produced, labor cost per unit or per hour material cost per unit, machine cost per hour etc.
There are varieties of capital standards. These standards are primarily related to the balance sheet rather than to the income statements. Capital standards range from monetary measurements to physical items. These standards may be indifferent ratios such as the ratio of current assets to current liabilities etc.
Revenue standards arise from attaching monetary values to sales. They may include such standards as average sales per customer etc.
Such standards are determined for installing a variable budget program, for example program for improving the quality of a sale fore. -89
Sometime it is difficult to establish standards for quantitative and qualitative measurement, especially when human relationships count in performance. It is very difficult to measure human attitudes, in connection with individual’s loyalty, efficiency, etc. All this need to be based on intangible standards.
GOALS AS STANDARDS
Goal can be used as performance standards. Both in simple in complex operations quantitative and qualitative Goals represents an important development in the area of standards.
STRATEGIC PLANS AS CONTOL POINTS FOR STRATEGIC CONTROL
Strategic plans require strategic control. Through the use of strategic control awareness about the organizational performance and about ever changing environment by monitoring it.
CONTROL AS A FEED BACK SYSTEM
Many systems control themselves through information feedback, which shows deviations from standards. A simple feedback system can be shown by figure. Any attempt to control without plan is meaningless. Plans furnish the standards of control. Information feedback is like the house thermostat when the house temperature falls below the preset level, an electric message is sent to the heating system, which is then activated. When the temperature increases and reaches the (setlevel) another message shuts off the heater. This continual measurement and training on and off the heater keeps the house at the desired temperature. A similar process activates the air-exceed the preset level, the air conditioning system cool the house to
Implementation of plans. Planning Controlling comparison plans with result. Corrective Action No undesirable deviations from plans Undesirable deviation
The desired temperature. Likewise, in human being body, a number of feedback systems control temperature, blood pressure and another conditions. Management control as a feedback system is similar to the system of feedback in house thermostat. This can be shown by diagram.
CONTROL AS FEEDBACK SYSTEM
This system places control in more complex way. These systems including steps, establishing standards, measuring performance and correcting for deviations. Managers do measure performance, establish standards and identify deviations, they must then to make the necessary corrective action.
RAEL TIME INFORMATION & CONTROL FEEDBACK FORWARD CONTROL
Feed forward control is system that attempts to identify future deviations. This control shows the deficiency of historical data. For example one of the difficulties with such historical data is that they tell business managers is November that they lost money in October or even September because of something that was done in July. At this late time such information is only an interesting historical fact. Feed forward control is manager have been so dependent for purposes of control on accounting and statistical data.
CONTROL TECHNIQUES THE BUDGET
A widely used device for managerial control is the budget. Budgeting is the device for accomplishing control. Desired Performance. Actual Performance. Measurement of actual performance. Comparison of actual performance against standard. Implementation of corrections. Program of corrective action. Analysis of cause of deviation. Identification of deviations.
THE CONCEPT OF BUDGETING
Budgeting is the formulation of plans for a given future period in numerical terms.
THE PURPSE OF BUDGETING
Starting plans in terms of numbers and breaking into parts parallel the parts of an organization. Budgets enables managers to see clearly what capital will be spent by whom and where, and what expense, revenue the plans will involve. A budget must reflect the organizational pattern. When plans are completed, co-coordinated and developed a departmental budget can be used as an instrument of control.
TYPES OF BUDGETS
Budgets may be classified in to several basic types
1. REVENUE AND EXPENSE BUDGETS
Revenue and expense budgets are most common budget which are used to make plans for revenue and expenses in dollar terms.
2. TIME, SPACE, MATERIAL &PRODUCT BUDGETS
Many budgets are better expressed in quantities rather than in numerical terms or monetary terms. Although such budgets are usually translated into monitory terms but if they are expressed in terms of quantities, they are must significant at certain stage of planning and control. I.e. machine hours, etc.
3. CAPITAL EXPENDITURE BUDGETS
Capital expenditure budgets shows capital expenditure for plant, machinery, equipment, inventories etc.
4. CASH BUDGETS
The cash budget is a forecast of cash receipts. Cash budgeting shows the availability of excess cash etc.
EFFECTIVE BUDGETARY CONTROL
If budgetary controls are to work well managers have limitations and they must be tailored to each job. There are many effective budgetary controls.
1. TOP-MANAGEMENT SUPPORT
To make most effective budget, administration must receive the whole hearted support of top-management.
Real participation in budget making is necessary for success.
One of the key to successful budgeting is to develop and make available standards by which programs and work can be translated in to need for labor, operating expenses, capital expenditures, space and other resources. Many budgets fail for lake of such standards.
Finally if budgetary control is to work managers need ready information about actual and forecast performance under budgets by their departments. This information must be designed to show them how well they are doing.
DANGERS IN BUDGETING
Budgets are used for planning and control. Unfortunately, some budgetary control programs are so complete and detailed that they must become meaningless and expensive. There are many dangers in budgeting.
- Over budgeting.
- Hiding influences.
- Causing inflexibility.
- Overriding enterprise goals.
METHODS FOR DECREASING DANGERS
1. VARIABLE BUDGETS
Because dangers arise from inflexibility in budgets so these dangers can e decrease by variable or flexible budgeting?
2. ALTERNATIVE AND SUPLEMENTARY BUDGETS
Another method of obtaining variable budgeting is to establish alternative budgets and variable budgets can also be obtained by supplementary budgets.
3. ZERO BASE BUDGETING
Another method to obtained budget flexibility is zero-base budgeting. -93
TRADITIONAL NON BUDGETORY ONTROL TECHNIQUES
There are also many traditional non-budgetary control techniques used for budgetary control. The more important are
1. STATISTICAL DATA
Statistical analysis of an operation and the clear presentation of statistical data (historical forecast nature) are important to control. Most managers understand statistical data best when the data are presented in chart or graphic form. In chart or graphic trends and relationship are easier to see. Moreover, if data are meaningful, when presented on chart then data should be formulated in such a way that comparison with some standard can be made. What is the significance of a 3 or 10 percent rise or fall in sales or costs? Who is responsible clear presentation of statistical data in chart in an art that requires imagination? Moreover, since no manager can do anything about history so the data, presented an charts should be made available about information like variations due to accounting adjustment and other periodic difference.
SPECIAL REPORTS AND ANALYSIS
Special reports and analyses help in problems for control purposes.Althouh
accounting and statistical reports gives necessary information’s but there are some
problems in which they are inadequate. One successful manager of a completed operation hired a small staff of trained analysts and gives them no assignment other then investigating and analyzing activities under his control. This group developed of a surprising sense for situations in which things did not seem just right. Almost invariable, their investigation disclosed opportunities for cost improvement.
Another effective tool of managerial control is the internal audit or operational audit. Operational auditing is the regular and independent appraisal of the accounting, financial and other operations of an enterprise by a staff of internal auditors. The operational auditors reflect the fact, appraise polices procedure, use of authority, quality of management, effectiveness of methods, special problems and other phases of operations. -94
One should never over-look the importance of control through personal observation.Budgets, charts, reports, ratios, auditors, recommendations and other devices are essential to control. But the manager who depends wholly on these devices and sit cannot make effective control. Managers should have task of seeing the enterprise objectives are accomplished by people. A manager can get information and experience from personal observation.
TIME-EVENT NET WORK ANALYSIS DEFINATION
Time-event network analysis is a planning & control technique. It is also called (PERT). Performance, evaluation and review technique.
What is PERT? P-Program E-Evaluation R-Review T-Techniques PERT is a planning and control technique through which we evaluate a program and courses of implementation and on the basic of that evaluation we review over program. In this time event analysis introduced in PERT from and then introduced further two more techniques. First is Gantt chart Second Milestone budgeting.
An Analysis of the contributions of various thinkers to the field of Management, and a review of the management practices
Henri Fayol (1841-1925): Principles of Management one of the first persons to sit down and try to work out what managers do (and what they should do) was a Frenchman called Henri Fayol. Fayol was a mining engineer who became the managing director of an ailing coal mining firm and turned it into a highly successful coal and steel business. All this took place between 1888 and 1918, when he retired. In 1916, after many years of thinking about the job of the manager, he published a small book called General and Industrial Management. Henry Fayol was years ahead of his time in linking strategy and organizational theory and in emphasizing the need for management development and the qualities of leadership. Igor Ansoff, in Corporate Strategy (1965) said that Fayol ‘anticipated imaginatively and soundly most of the more recent analyses of modern business practice,’ although Peter Drucker in his great compendium Management: Tasks, Responsibilities and Practice (1973), criticized the application of Fayol’s functional approach to larger and more complex organizations than the one he knew and managed. Oddly enough, it was years before a translation appeared in English, even though it contains a great deal of wisdom and sense.
Part of the book deals with the ‘elements’ or ‘functions’ of management, and Fayol identifies five such functions. They are:
Forecasting and Planning
It is important to appreciate what Fayol meant by these five functions:
Forecasting and Planning is looking ahead, examining and making provision for the future, and drawing up a plan of action. Failure to plan signifies managerial incompetence.
Organizing is in building up the structure of the business/undertaking, and providing it with everything it needs to operate (equipment, materials, finance, people) and includes management training as a key part in it.
Command is how organizing gets achieved; in a nutshell, it is directing and maintaining activity among your personnel.
Co-ordination is binding together, unifying, and harmonizing activities and efforts for successful results.
Control is seeing that everything occurs in conformity with established rule and expressed command.
The first and last functions—planning and control—are immediately recognizable from the analysis that has just been carried out, and indeed there tends to be less argument generally about these two functions than about others.
Organizing is, of course, similar to planning in that it is concerned with preparation for some future events. But whereas planning is the more glamorous activity of deciding on the overall future direction of the business, organization is that tough, demanding business of putting together the elements in such a way that the overall plans succeed.
Command is seen as the function that actually makes things happen. It is really derived from military practice, and no doubt in Fayol’s time all employees in organizations responded to command. The very word suggests ‘ordering about’ and has been the subject of a great deal of debate and argument. Fayol did not really intend it to be taken in a very narrow sense, but rather in the sense of making sure that things get done—the actual operations of the organization. As a result, all kinds of substitute words have been used in its place—like ‘direction’ and (horribly) ‘actuating’.
The fifth function of management in Fayol’s view is that of co-ordination. It is concerned with harmony, with making sure that all the bits work together, and, like an orchestra under its conductor, play the same tune. This is the only function that does not seem easily to stand on its own and will be found to be part of planning, of organizing, of control, and the key to successful operations themselves.
An organization, therefore, begins with a strategic plan or definition of goals, progresses to a structure to put that plan into action, is carried forward by controlled activity between manager and workforce, has the work of its disparate departments harmonized by coordinated management and, finally, is subject to checks on the efficiency of its working, preferably by the independent ‘staff’ departments separate from the functional departments.
The five functions of management have been adequately discussed, but there are two other aspects of management that Fayol mentioned that must be looked at separately.
Fayol believed that a manager obtained the best performance from his workforce by leadership qualities, by his knowledge of the business and his workers, and by the ability to instill sense of mission.
From his own long experience in Industry, Fayol identified fourteen General Principles of Management, or guidelines, and he emphasized that these are not rigid but have to be adapted to suit the particular needs of the situation.
1 Division of work—with specialization allowing individuals to build up skills and become more productive. ‘The objective of division of work is to produce more and better work with the same effort.’
2 Authority—both official and personal, and matching responsibility. ‘Generally speaking, responsibility is feared as much as authority is sought after, and fear of responsibility paralyzes much initiative and destroys many good qualities. A good leader should possess and infuse into those around him courage to accept responsibility’
3 Discipline—‘in essence, obedience, application, energy, behavior and outward marks of respect observed in accordance with the standing agreements between the firm and its employees… when a defect in discipline is apparent or when relations between superiors and subordinates leave much to be desired… the ill mostly results from the ineptitude of leaders.
4 Unity of Command—each man should have only one boss with no conflicting lines of command. ‘In all human associations, in industry, commerce, army, home, State, dual command is a perpetual source of conflicts…’
5 Unity of direction—‘one head and one plan for a group of activities having the same objective. It is the condition essential to unity of action, coordination of strength, and focusing of effort.’
6 Subordination of individual interests to general interests, reconciling conflicting interests where necessary—‘that represents one of the great difficulties of management.’ Means of affecting it are (1) firmness and good example on the part of the superiors (2) agreements as fair as possible (3) constant supervision.
7 Fair Remuneration for effort—‘every mode of payment likely to make the personnel more valuable and improve its lot in life, and also to inspire keenness on the part of employees at all levels, should be a matter for managers’ constant attention.’
8 Centralization or decentralization—the choice to depend on the condition of the business and the culture of its staff. ‘The finding of the measure which shall give the best overall yield; that is the problem of centralization or decentralization. Everything which goes to increase the importance of the subordinate’s role is decentralization; everything which goes to reduce it is centralization.’
9 The scalar chain or hierarchical principle of management—a path ‘dictated both by the need for some transmission and by the principle of unity of command, but it is not always the swiftest… it is an error to depart needlessly from the line of authority but an even greater one to keep to it when detriment to the business ensues… when an employee is obliged to choose between the two practices, and it is impossible for him to take advice from his superiors, he should be courageous enough and feel free enough to adopt the line dictated by the general interest.’
10 Order, both managerial and social—‘Social order demands a precise knowledge of the human requirements and resources of the concern and a constant balance between these.’ In terms of managerial order—‘a place for everything and everything in its place’, e.g. the organization chart and statement of areas of responsibility
11 Equity in the treatment of employees—‘the head of the business should strive to instill a sense of equity throughout all levels of the scalar chain.’—i.e. kindliness and justice by managers help to produce loyalty from staff
- Stability of tenure among personnel—‘generally the managerial concern of prosperous personnel is stable, that of unsuccessful ones is unstable. Instability of tenure is at one and the same time cause and effect of bad running. Nevertheless, changes of personnel are also a question of proportion.’
- Initiative—‘thinking out a plan and ensuring its success is one of the keenest satisfactions for an intelligent man to experience. It is also one of the most powerful stimulants of human endeavor… the initiative of all, added to that of the manager and supplementing it if need be, represents a great source of strength for business… the manager must be able to sacrifice some personal vanity in order to grant this sort of satisfaction to subordinates.’
- A sense of Esprit de corps—essential for management to foster the morale of its workforce. ‘Real talent is needed,’ said Fayol, ‘to coordinate effort, encourage keenness, use each person’s abilities, and reward each one’s merit without arousing possible jealousies and disturbing harmonious relations.’
Qualities needed in a manger:
- Physical: healthy, vigorous;
- Mental: ability to understand and learn, judgment, mental vigor, adaptability;
- Moral: firmness, acceptance of responsibility, initiative, loyalty, tact;
- General Education: good general knowledge;
- Special Knowledge: for the work;
Fayol also stressed on the importance of managerial training, ‘steady, methodical training of all employees at all levels’, and made the point that a manager should not ignore his responsibility for his own training.
Elton Mayo (1880-1949): Human relations in industry and respect for individuals
Australian-born Mayo is regarded as the founder, of Industrial sociology, particularly the ‘Human Relations Movement,’ based on his discoveries in the Hawthorne Experiments of 1927-32 of what really motivates workers to higher performance.
A graduate of Adelaide University and a medical student in London and Edinburgh, Mayo taught mental and moral- philosophy at the University of Queensland between 1911 and 1919. In 1923 he immigrated to the United States, where he worked first on a three-year research project at a Pennsylvania textile mill, prior to joining Harvard University, as associate professor of industrial research in 1926.
Mayo spent most of his career at Harvard, ending up as professor of industrial research in the Graduate School of Business Administration. He was also a consultant on industrial problems to the postwar British Labor government led by Clement Attlee.
Elton Mayo’s most important finding was to identify the roots of work ‘satisfaction as non-economic and to connect them more with the interest taken in a worker’s performance than with financial reward. In this, he reversed the emphasis on the incentive of monetary reward which had been the conventional wisdom ever since the writings of F. W. Taylor. Workers rejected ‘Taylorism,’ Mayo explained, because in spite of its aids to efficiency it was basically an imposed system, not one that took account of the employees’ own views.
The vital importance of management-worker communication, a key Mayo discovery, laid the foundation for the work of many later management thinkers and writers, including Peters and Waterman (In Search of Excellence) and the 1950s school of sociologists headed by Chris Argyris, Frederick Herzberg and Abraham Maslow.
The Hawthorne Experiments with which Mayo’s name is forever linked were named after Western Electric’s Hawthorne Works in Chicago. They ran from 1927 to 1932 under Mayo’s leadership (and a further five years after that), and were conducted by a team of Harvard scientists and between 75 and 100 investigators working with 20,000 Western Electric employees.
The experiments arose from an earlier series of tests by Western Electric which had involved changes in working conditions and produced unexpected results in employee performance. Two teams of workers took part in these tests, in which the lighting conditions for one group only were improved. Production in that group rose dramatically – but so it did in the group for which the lighting remained unchanged. Mayo took these further, making as many as ten changes in working conditions such as shorter hours, varied rest breaks and a number of incentives. Mayo’s research team spent a great deal of time with the work groups—each consisting of six women—discussing the changes before they were put into effect. Output increased each time a change was made. Yet when the teams were asked to return to their original working conditions, with a 48hour week, no incentives and no rest breaks, output rose again—indeed, to the highest ever recorded at Hawthorne. Other significant results included a decline in absenteeism of 80 per cent. The only explanation, Mayo concluded in one of his later works, was that the employees had gained enormously in work satisfaction by, the feeling that they were teams of individuals, not cogs in a machine, and by the communication between researchers and workers, leading to everyone feeling more valued and responsible for her performance and that of the group as a whole. This sense of cohesiveness and self-esteem was more important to performance than any number of improvements ill the working environment. Although Mayo did not crystallize his findings until years after the Hawthorne Experiments, a contemporary series of interviews in the Chicago works established an equally important discovery: that worker-management conflict may often be due less to the ostensible reasons for a dispute, such as tea-breaks or insufficient light, than to basic emotional attitudes. Workers were ruled by the logic of sentiment, thought Mayo, whereas managers were activated by the ‘logic of cost and efficiency.’ Thus, without understanding the compromise, conflict was inevitable.
The ultimate importance of the Hawthorne experiments was their demonstration, in Mayo’s view; that the dour Taylorist philosophy of ‘self-interest was disproved: that workers valued spontaneous cooperation and creative relationships among those with, whom they worked, and would perform accordingly. ‘The desire to stand well with one’s fellows, the so-called human instinct of association, easily outweighs the merely individual interest and the logic of reasoning upon which so many spurious principles of management are based,’ wrote Mayo in the Social Problems of an Industrial Civilization.
Mayo was not, however, against scientific management, for all that he debunked Taylor’s rigid application of it. ‘Observation – skill – experiment and logic—these must be regarded as the three stages of advancement,’ he observed in the same book. Mayo believed that his findings disproved what he called the ‘rabble hypotheses of society as ‘a horde of unorganized individuals,’ each of whom ‘acts in a manner calculated to secure his self-preservation or self-interest.’
Two later sociological writers, D. C. Miller and W. H. Form, developed eight principal conclusions from Mayo’s researches in their book Industrial Sociology, quoted in J. A. C. Brown’s The Social Psychology of Industry (1954):
(1) Work is a group activity.
(2) The social world of the adult is primarily patterned about work activity.
(3) The need for recognition, security, and sense of belonging is more important in determining a worker’s morale and productivity than the physical conditions under which he works.
(4) A complaint is not necessarily an objective recital, of facts; it is commonly a symptom manifesting disturbance of an individual’s status position.
(5) The worker is a person whose attitudes and effectiveness are conditioned by social demands from both inside and outside the work plant.
(6) Informal groups within the work plant exercise strong social controls over the work habits and attitudes of the individual worker.
(7) The change from an established to an adaptive society . . . tends continually to disrupt the social organization of a work plant and industry generally.
(8) Group collaboration does not occur by accident; it must be planned for and developed. If group collaboration is achieved, the work relations within a work plant may reach a cohesion which resists the disrupting effects of adaptive society.
Another writer on industrial psychology in the 1950s, Gordon Rattray Taylor, estimated from his observations of firms which had put similar principles into practice
that by using such methods Britain could expand its national income by 50 per cent within five years without additional capital investment, and that the price of many manufactured goods could be reduced by a third. Needless, to say, the experiment has never been carried out on a sufficiently wide scale to prove or disprove his theory.
Mayo’s discovery of the importance of the peer group at work led/him to conclude that within each formal organization existed many informal ones which could be encouraged to greater productivity by being led to do it themselves, through interest and respect on the part of their managers.
More profoundly, Mayo believed that by creating such an atmosphere of spontaneous cooperation in industry, society at large should help to combat the postwar collapse in traditional values. This, for him, remained one of the most important tasks facing a manager. The whole Human Relations movement, as engendered by Mayo’s work, became concerned with discovering, through scientific research, how to harness the motivation and commitment of individuals to corporate goals. .
Mayo’s contribution to management thinking was seminal. It revealed the importance, in hard bottom-line terms, of human emotions, reactions and respect to the business of managing others. It also pioneered the whole concept of proper management-worker communication—again a new idea because of the respect for the individual it required between bosses and workers.
Management, Mayo demonstrated once and for all, could only succeed in leading an organization’s employees if the workers in their informal groups, accepted that leadership without reservation. In his own words, Mayo identified the importance of the Hawthorne findings as specifying, quite clearly, that the relation of working groups to management was one of ‘the fundamental problems of large-scale industry. Organizing teamwork—developing and Sustaining cooperation—had to be a major preoccupation of management. Above all, management needed to think less about what ‘we’ wanted to get across to ‘them’ than to listen to what ‘they’ wanted to know and would be receptive to.
‘The human relations prescription, though rarely practiced, remains the classic formula,’ wrote Peter Drucker in 1973. It is still too rarely practiced; though every management pays lip service to it.
W. Edwards Deming (1900-1993): The key to quality: reducing variation
US statistician and founding father of the quality movement, who was responsible, with his fellow-American Joseph Juran, for instilling the quality philosophy into postwar Japanese industry. The message had been rejected or ignored by American companies and was only re-imported after Japanese manufacturing began its competitive march into American markets.
Deming and Juran remain icons of Japanese industry, whose companies compete annually for a Deming Prize, awarded since 1951 for major improvements in quality. Both men were honored by the Emperor with the Order of the Sacred Treasure, second class, the highest Japanese award ever given to foreigners.
Deming is regarded by the Japanese as the chief architect of their phenomenal industrial success, but his home country only began to recognize him in 1980, as a result of an NBC television documentary on Japanese industry called ‘If Japan Can, Why Can’t We’’ Overnight, American industry discovered his existence. Now he is revered internationally for his simple yet revolutionary principle that all processes are vulnerable to loss of quality through variation: if the levels of variation are managed, they can be decreased and quality raised.
After US industry finally woke up to Deming’s theories, several large corporations suffering intractable problems came to credit Deming as the key to their revival; most notably Ford Motor Company in the early 1970s. Nashua Corporation in New Hampshire, a Fortune 500 company making computer disks, copiers and other office products, was one of the first Western companies to adopt Deming’s principles. Nashua subsequently managed to cut its order-entry lead times from eight days to one hour and achieved a 70 per cent reduction in customer claims.
William E. Conway, Nashua’s president and later chief executive officer, who ‘discovered’ Deming when the guru was 78, has called him ‘the father of the Third Wave of the Industrial Revolution’ for the way in which he developed statistical control of quality levels into a new way of managing business. ‘The Japanese manufacturers, utilizing the statistical control of quality are sweeping the world in the second half of the 20th century, just as American manufacturers utilizing mass production swept the world in the first half,’ said Conway.
‘In the UK, Sir John Egan applied Deming principles to turning round the ailing fortunes of Jaguar Cars in the early 1980s. Egan wrote of Deming’s 1986 book Out of the Crisis that it was ‘required reading for every chief executive in British industry who is serious about ensuring the international competitiveness of his company’ (Director Magazine, September 1988).
Deming, an electrical engineer by training (University of Wyoming, 1921) and a Ph.D. in mathematical physics from Yale, worked for a time in the 1920s at the Western Electric Hawthorne plant in Chicago where Elton Mayo carried out his famous experiments in communication and motivation. Here Deming discovered the work of Walter Shewhart, the pioneer of controlled and uncontrolled variables and the statistical control of processes. He later became a statistician for the US government, working on data for the national census of 1939/40. In 1942 he set up courses to teach Shewhart’s methods to industrialists and engineers. After the war he was invited to Japan by General Macarthur to advise on the Japanese census. Contacts made then resulted in the watershed invitation of 1950 which was to have such reverberating effects.
Deming’s approach to quality control is basically that of a statistician (his compatriot and fellow quality guru J. M. Juran has criticized him for it), but it is also firmly rooted in the belief that quality is about people, not products—an approach which made a particular impact on the Japanese. He also believes that 85 per cent of production faults are the responsibility of management, not workers. The famous Deming ‘Fourteen Points’ of management are at the heart of his philosophy.
In 1950, when W. Edwards Deming made his first visit to Japan, the country was still recovering from the atomic bombing raids of August 1945. The economy was struggling to stand upright, much less move ahead, and Japanese goods still suffered from their prewar reputation for shoddiness.
Deming embarked on an exhausting series of lectures to engineers, from 8am to 5pm day after day in punishing heat. ‘I was dripping wet by 8.30am,’ he recalled in the BBC2 television series Nippon. ‘The Japanese appreciated it. They were sorely afraid that they had established a reputation for shoddy quality and that they could never undo it. I assured them that it would take only a short while to undo that reputation and develop a new one. ‘I think I was the only man in Japan in 1950 who believed my prediction—that within five years manufacturers the world over would be screaming for protection. It took four years.’ The core element in this apparent miracle was the ‘management circle’—still known in Japan as the ‘Deming circle’—of planning, implementation, check and action. Above all, it rested on the belief in ‘Management for Quality’ (Deming uses this term where Juran ‘brands’ his approach as ‘Company-Wide Quality’.)
Deming’s basic management philosophy, as impressed on his eager Japanese audiences, was to regard the consumer as ‘the most important part of the production line.’ Developing this in Out of the Crisis (1984), he insisted that merely having a satisfied customer was not enough. ‘Profit in business comes from repeat customers, customers that boast about your product and service, and that bring friends with them.’
Deming also teaches the necessity of staying ahead of the customer, anticipating what his needs will be in years to come.
His Fourteen Points for management were developed over some twenty years and are still being refined and re-worded by the master. Henry Neave, author of The Deming Dimension (SPC Press, Knoxville, 1990), explains that they are not instructions or techniques, but rather ‘vehicles for opening up the mind to new thinking, to the possibility that there are radically different and better ways of organizing our businesses and working with people.’ These, as quoted in Neave’s book and Deming’s own words, are the basic Fourteen Points:
1 Create constancy of purpose for continual improvement of products and service.
2 Adopt the new philosophy created in Japan.
3 Cease dependence on mass inspection: build quality into the product in the first place.
4 End lowest-tender contracts; instead, require meaningful measures of quality along with price.
5 Improve constantly and forever every process for planning, production and service.
6 Institute modern methods of training on the job for all, including management.
7 Adopt and institute leadership aimed at helping people to do a better job.
- Drive out fear, encourage effective two-way communication.
- Break down barriers between departments and staff areas.
- Eliminate exhortations for the workforce – they only create adversarial relationships.
- Eliminate quotas and numerical targets. Substitute aid and helpful leadership
- Remove barriers to pride of workmanship, including annual appraisals and Management by Objectives.
- Encourage education and self-improvement for everyone
- Define top management’s permanent commitment to ever-improving quality and productivity, and their obligation to implement all these principles
The Fourteen Points are comprehensively expounded, chapter by chapter, in The Deming Dimension, a fascinating exposition of the guru’s work and its development since publication of Out of the Crisis.
Deming himself has said: ‘If I had to reduce my message for management to just a few words, I’d say it all had to do with reducing variation’
Joseph M Juran (b. 1904): Company-wide quality cannot be delegated
US electrical engineer born in Romania, worked contemporaneously with W. Edwards Deming on pioneering the quality management revolution that began in postwar Japan. Ironically, no industrialist in the US was interested in the theories of Deming and Juran – the production mentality ruled at the time – until Japanese manufacturing, practicing the quality philosophy, began driving American products to the wall.
By coincidence, bath Deming and Juran had became interested in the techniques of assuring quality in manufacturing based an statistical control while working in the 1920s at Western Electric, the manufacturing division of Bell Telephone System. Juran joined Western in 1924, three years before the famous Elton Mayo experiments at Western’s Hawthorne plant in Chicago, which revolutionized thinking about motivation and the human element in industry.
Juran then joined the manufacturing side of AT&T in the 1920s. He became a corporate industrial engineer and later branched out as a quality consultant.
Juran established his reputation in 1951 with the publication of his Quality Control Handbook, the first manual of its kind. The Japanese, who had already absorbed Deming’s lessons to the extent of instituting a Deming Prize that year, invited Juran to Tokyo in 1953 for a series of lectures. In the early 1980s his contribution to Japanese quality achievements was recognized with the award of the Order of the Sacred Treasure, second class, an honor also conferred on Deming.
Since 1954 he has preached his gospel in Japan and claims some of the credit for turning round Japan’s initially poor reputation for quality: His ‘Management of Quality’ courses have been attended by more than 20,000 managers in over 30 countries. As a consultant, his clients include Texas Instruments, Du Pont, Monsanto, Xerox, Motorola and the Internal Revenue Service.
Juran’s principal contribution to quality management thinking is his methodology for determining the avoidable and the unavoidable costs of quality, thus providing a yardstick for measuring the cost of a quality programme. Juran has devised a structured concept known as CWQM – Company-Wide Quality Management. He believes it absolutely essential for senior managers to involve themselves, to define the goals, to assign responsibilities and to measure progress. Quality, Juran teaches, cannot be delegated.
Like other management thinkers – notably Peter Drucker, Charles Handy and Rosabeth Moss Kanter – Juran has developed a vision of the future corporation, in which he sees quality targets being incorporated in business plans as routinely, as targets for sales, profits, return on capital and earnings per share. Like Moss Kanter, Juran sees greater ’empowerment’ of the workforce as a key – in this case to achieving quality through self-organization and self-supervision. For Juran, quality has always been indissolubly linked with human relations and teamwork. Joseph M. Juran and W. Edwards Deming are so closely linked – by age, experience and their part in the Japanese economic miracle, that it is sometimes hard to differentiate their contribution. Juran himself has set out to develop Company-Wide Quality Management into a full-blown corporate philosophy, and has criticized the Deming approach for being more at home with statistics than with management.
Juran’s approach is heavily oriented towards the human side of achieving quality, and he has praised the Japanese use of quality circles for their effect on human relations in the workplace, while acknowledging that QCs have accounted for less than ten per cent of Japan’s improvement in quality.
The Juran methodology has most recently been laid out in Juran on Planning for Quality (1988), which sets out to demonstrate how quality planning affects different levels of quality planning, quality management and quality improvement—by which managers learn how to implement strategic quality planning across the company.
Key elements include: identifying customers and their needs; creating measurements of quality; planning processes that are capable of meeting quality goals under operating conditions; producing continuing improvements in market share and premium prices and in reducing the error rate.
The book emphasizes the universal application of quality commitment throughout an organization—to all products, both goods and services; to all corporate levels from CEO downwards; to all corporate functions from general management to product development; and to all industries, in both manufacturing and service sectors.
Peter Drucker (b.1909): Primary tasks for effective managers
The management guru’s management guru… Born in Vienna during the heyday of that city’s pre-1914 culture, Drucker has invented or prefigured most of the leading management theories of the last half century, from “Management by Objectives” to privatization; from putting the customer first to the role of the chief executive in corporate strategy; from “structure follows strategy” to “stick to the knitting”, from decentralization to the implications of the information age.
His five basic principles of management remain as valid as ever: setting objectives, organizing, motivating and communicating, establishing measurements of performance and developing people.
Tom Peters, whose co-authored book In Search of Excellence developed many of Drucker’s ideas, says the Viennese sage deserves much of the credit for “moving 75 to 80 percent of the Fortune 500 to radical decentralization,” adding that no true “discipline of management” existed before Drucker.
For many years a pillar of New York University Business School, Drucker since 1971 has been Clarke Professor of Social Science at Claremont Graduate School, Claremont California. He is still writing prolifically in his eighties, adding to the 24-odd books he has published since The End of the Economic Man appeared in 1939. They divide almost equally between works on management theory and technique and works of economic, political and social analysis. Many of the latter are seminal works which mapped out whole landscapes of the future with much wider horizons than those bounded by management. Philip Sadler, vice-president and former director of Ashridge Management College, found his thinking entirely changed by Drucker’s 1969 book The Age of Discontinuity, which for Sadler pointed clearly to the coming decline of Britain’s manufacturing industry.
This book, still well worth study, prefigured many of the business best-sellers of the late 1980s and early 1990s on managing chaos and disruptive change. Drucker’s books have anticipated those of Charles Handy, Tom Peters, and Richard Pascale, to name only three. In some of its ideas, The Age of Discontinuity was 20 years ahead of John Naisbitt’s Megatrends and Charles Handy’s The Age of Unreason. It was in The Age of Discontinuity, incidentally, that Drucker introduced the concept of privatization, though he called it “re-privatization”. He accurately forecasted the disillusionment with government arising from the discovery that governments could now, after all, produce miracles. “There is little doubt, for instance, that the British in adopting the National Health Service believed that medical case would cost nothing … Nurses, doctors, hospitals, drugs, and so on have to be paid for by somebody. But everybody expected this “somebody” to be somebody else.”
Drucker advocated privatization on the grounds that the purpose of government was to govern, not to “do”, and that the two roles were incompatible. His vision, unlike the Conservative Party’s realization of it, was for privatization to cover all institutions, not merely business ones—universities, for example.
A year or so after publication of The Age of Discontinuity, the word “privatization” made its first appearance in a Conservative Central Office pamphlet in May 1970 (“A New Style of Government”), crediting Drucker with the coinage.
The son of an Austrian government official who helped found the Salzburg Festival, Drucker came to Britain in the late 1920s, and his first job was as an apprentice clerk in a Bradford wool exporting firm, working with a quill pen in 80-ound brassbound ledgers chained to the desk. Between 1933 and 1936 he worked as an economist in a London merchant bank and then decided to throw in his lot with the United States. He immigrated to the US in 1937, produced his first book two years later and in 1942 took a consultant’s job with General Motors, then the world’s largest company.
Out of this experience came his influential 1946 book Concept of the Corporation, still one of the best and most perceptive analyses if the successful large organization. As well as General Motors, other companies studied in the book were General Electric, IBM, Sears Roebuck, and Drucker identified their success with certain managerial characteristics, notably delegation and goal=setting (Management by Objectives) and certain structural characteristics, such as decentralization.
Drucker believed that the ultimate key to success in all these companies was that “they knew what businesses they were in, what their competencies were and how to keep their efforts focused on their goals.” (Organization Theory, ed. D.S. Pugh) Nearly 30 years later, Peters and Waterman reached much the same conclusion, set out in more populist style, in their best-seller In Search of Excellence.
Concept of the Corporation also analyzed the importance of marketing—at that time an almost universally neglected function—and the delicate balance which a company mush seek to achieve between long-term strategy and short-term performance.
Drucker figures in more management-book indexes than any other individual by far. In Makers of Management, by David Clutterbuck and Stuart Crainer, he rates no fewer than 40 separate page references.
Peter Drucker’s reputation as a management guru was established with The Practice of Management (1954), a work still regarded by later theorists as one of the best and clearest in the field. In this, he identified management by objectives as the first of seven primary tasks of management. MBO, dignified with capital letters, became a movement of its own, and Britain’s John Humble made a speciality of developing its theory and practice.
Management by Objectives emerged out of Drucker’s work with General Electric among his studies for Concept of the Corporation. Each GE managed was responsible for a profit center and given targets to achieve—seven percent return on sales and 20 percent return on Investment. These were severely applied; you lost your job if you didn’t meet them.
Drucker perceived that, since businesses survive or fall by the bottom line corporate goals should be divided into objectives and clearly assigned to units and individuals. “Management by Objectives,” as Richard Pascale observes in Managing on the Edge, “ensures that each link in the chain of command does its part…”
A subsequent handbook, Managing for Results (1964) is, in Drucker’s own words of introduction, a “what-to-do book.” It was, he believed, “the first attempt at an organized presentation of the economic tasks of the business executive and the first halting step towards a discipline of economic performance in business enterprise.” It sets out in clear, no-nonsense prose, guidelines for understanding business realities and for analyzing a company in terms of revenues, resources, prospects, cost centers, customer needs, building on strengths, finding potential, making key decisions, and building strategies for the future. It is still one of the best practical vade mecums for anyone running a business enterprise. Drucker believes that every three years or so a company should be put under the microscope and every product, process, technology, service or market subjected to a grueling assessment. Throughout his work, Drucker’s emphasis has been on the effectiveness of managers—particularly in making good use of their human resources—as key to a productive and profitable organization. Management, says Drucker, is the job of organizing resources to achieve the satisfactory performance of an enterprise. Managers must in the end be measured by their economic performance, though this is not necessarily synonymous with maximum profits; rather, with sufficient profit that will cover the risks which have been taken, and to avoid the enterprise making a loss. Management by objectives is the key to this.
Drucker has sometimes been criticized for neglecting theories of motivation, though he was one of the first to recognize and praise Douglas McGregor’s Theory Y of consultative management as early as 1954.
Drucker’s emphasis on objective-setting for management is most clearly set out in his mammoth compendium Management: Tasks, Responsibilities and Practices (1973). This represents an encyclopedia of his earlier writings and is recommended as the bedrock of any aspiring manager’s reading list. Studded with illuminating case studies, the massive volume (weighing 3 ½ pounds in hardback) defines every aspect of managerial skills and pinpoints eight areas where clear objectives are vital: marketing, innovation, human organization, financial resources, physical resources, productivity, social responsibility, and profit requirements. A thorough grounding in this vast work is virtually the equivalent of a do-it-yourself business-school course.
Shortly before it was published, Drucker had defined his broad view of management in People and Performance (1973): “To fulfill the specific purpose and mission of the organization to make work productive and the worker achieving; and to manage the social impacts and responsibilities”
In Management: Tasks, Responsibilities, Practices, he identified five basic operations in the work of the manager, which together “result in the integration of resources into a viable growing organism.” These summarize the essentials of management with more clarity than any other book before or since:
“A manager, in the first place, sets objectives. He determines what the objectives should be. He determines what the goals in each area of objectives should be. He decides what has to be done to reach these objectives. He makes the objectives effective by communicating them to the people whose performance is needed to attain them. “Second, a manager organizes. He analyses the activities, decisions and relations needed. He classifies the work. He divides it into manageable activities and further divides it into manageable jobs. He groups these units and jobs into an organization structure. He selects people for the management of these units and for jobs to be done.
“Next, a manager motivates and communicates. He makes a team out of the people that are responsible for various jobs. He does that through the practices with which he works. He does it in his own relations to the men with whom he works. He does it through his “people decisions” on pay, placement and promotion. And he does it through constant communication, to and from his subordinates and to and from his superior, and to and from his colleagues.”
“The fourth basic element in the work of the manager is measurement. The manager establishes the yardsticks—and few factors are as important to the performance of the organization and of every man in it. He sees to it that each man has measurements available to him which are focused on the performance of the whole organization and which, at the same time, focus on the work of the individual and help him do it. He analyses, appraises and interprets performance. As in all other areas of his work, he communicates the meaning of the measurements and their findings to his subordinates, to his superiors and to colleagues.”
“Finally, a manager develops people, including himself.”
Taking a historical perspective, Drucker has since identified seven key elements in postwar management development:
(1) Scientific management of work as the key to productivity;
(2) Decentralization as a basic principle of organization;
(3) Personnel management as the orderly way of fitting people into organization structures;
(4) Manager development to provide for the needs of tomorrow;
(5) Managerial accounting—use of analysis and information as the foundation for firm decision-making;
(7) Long-range planning.
In recent years, Drucker’s books have included Innovation and Entrepreneurship (1985), a typically wide-ranging study of growth sectors of the US Economy in the early 1980s, including many businesses not normally considered as suck: private health care, for example, non-profit-making private schools and public/private partnerships in which government units contract out services to competitive private companies. The New Realities (1989) ranged over a global stage, anticipating the development of such contemporary phenomena as the transnational economy, the democratization of the Soviet Republics, the changing ethos of the United States and the demands of a postindustrial, post-business society.
Drucker’s breadth of vision, and eclectic range of publications spring from his belief that management is central to life; not merely to business… One of his recurring concepts is that of the Chief Executive as conductor of an Orchestra. As he says, “We are beginning to realize that management itself is the central institution of our present society, and that there are very few differences between managing a business, managing a diocese, managing a research lab, managing a labor union, managing a hospital, managing a university, or managing a government agency. All along, this has been the main thrust of my work, and one that distinguishes it from practically all my contemporaries working in the field.”
Rosabeth Moss Kanter views his goals as even more embracing. In an article in New Management (winter 1985), she wrote: “Good management is also our best hope for world peace. In the Drucker perspective, imperatives for growth push organizations beyond national borders in the search for new markets. The world becomes interconnected by a series of cross-cutting trade relationships in which the interests of managers in the survival of their multinational enterprises outweigh the interests of politicians. Quality of life, technological progress, and world peace, then, are all the products of good management… at root, Drucker is a management utopian, descended as much from Robert Owen as Max Weber.”
To Drucker, the business organization, as any organization, is “a human, a social, indeed a moral phenomenon.” Customer service rather than profit should dominate management thinking, profit being the means of continued investment in innovation and improvement.
“Contrary to the approach to the study of political and social organization that has prevailed in the West since Machiavelli, I stressed all along that organization does not deal with power but with responsibility. This is the keynote of my work that has remained constant over more than 40 years.”
Drucker sums up his own vast contribution to management thinking in these words, quoted in Makers of Management (Clutterbuck and Crainer):
“I was the first one to see that the purpose of a business lies outside of itself—that is, in creating and satisfying a customer. I was the first to see the decision process as central, the first to see that structure has to follow strategy, and the first one to see, or at least the first to say, that management has to be management by objectives and self-control.”
Michael E. Porter (b. 1947): Strategies for competitive advantage, both national and international.
Michael E. Porter is the Bishop William Lawrence University Professor, based at Harvard Business School. A University professorship is the highest professional recognition that can be awarded to a Harvard faculty member. Michael Porter is the fourth faculty member in Harvard Business School history to earn this distinction, and is one of about 15 current University Professors at Harvard. In 2001, Harvard Business School and Harvard University jointly created the Institute for Strategy and Competitiveness, to further Michael Porter’s work.
Michael Porter, the author of 17 books and over 125 articles, is a leading authority on competitive strategy and the competitiveness and economic development of nations, states, and regions. He received a B.S.E. with high honors in aerospace and mechanical engineering from Princeton University in 1969, where he was elected to Phi Beta Kappa and Tau Beta Pi. He received an M.B.A. with high distinction in 1971 from the Harvard Business School, where he was a George F. Baker Scholar and a Ph.D. in Business Economics from Harvard University in 1973.
Porter joined the Harvard faculty at the age of twenty six after earning his Ph.D. Books such as Competitive Strategy, and the Competitive Advantage of Nations analyze various factors of strategy,–corporate and governmental/trans-national
Michael Porter’s ideas on strategy have now become the foundation for the required strategy course at the Harvard Business School, and his work is taught in virtually every business school in the world. Michael Porter’s primary course for Harvard graduate students is a University-wide course, Microeconomics of Competitiveness, which is taught not only at Harvard but at 56 other universities around the world using video content and instructor support developed at Harvard. Michael Porter also created and chairs Harvard’s program for newly appointed CEOs of billion dollar corporations. Michael Porter speaks widely on competitive strategy, competitiveness, and related subjects to business and government leaders throughout the world.
Research on Strategy
Michael Porter’s core field is strategy, and this remains a primary focus of his research. His book, Competitive Strategy: Techniques for Analyzing Industries and Competitors, was his first book-length publication on strategy. The book is in its 58th printing and has been translated into 17 languages. His second major strategy book, Competitive Advantage: Creating and Sustaining Superior Performance, was published in 1985 and is in its 34th printing. His book On Competition (1998) includes a series of articles on strategy and competition, including his Harvard Business Review article ‘What is Strategy?’ (1996). ‘Strategy and the Internet‘ was published in 2001.
Competitiveness of Nations and Regions
Michael Porter’s 1990 book The Competitive Advantage of Nations was motivated by his appointment by President Ronald Reagan in 1983 to the President’s Commission on Industrial Competitiveness. This book kicked off his second major body of work, which addresses competitiveness and economic development. The book presents a new theory of how nations, states, and regions compete, and their sources of economic prosperity. It was followed by an extensive body of publications on the influence of locations on competition, with a special focus on the role of clusters. These ideas have guided economic policy throughout the world.
National Competitiveness: Building on The Competitive Advantage of Nations, Michael Porter has published books about national competitiveness on New Zealand, Canada, Sweden, and Switzerland. Most recently, his book Can Japan Compete? (2000) challenges long-held views about the sources of Japan’s economic miracle and offers a new path for that nation’s future. It was selected as one of the top three non-fiction books of 2000 by The Economist.
Michael Porter co-chairs the Global Competitiveness Report, an annual ranking of the competitiveness and growth prospects of more than 100 countries released by the World Economic Forum.
Clusters: Michael Porter’s ideas on clusters, first introduced in 1990, have given rise to a large body of research on new cluster-based economic development approaches and hundreds of public-private cluster initiatives throughout the world. Michael Porter’s research on clusters is summarized in “Clusters and Competition: New Agendas for Companies, Governments, and Institutions” in On Competition (1998) and other publications listed in his curriculum vitae.
Regional Competitiveness: Michael Porter has extended his work on competitiveness to sub-national regions. He led the Clusters of Innovation project (20012002) which studied five major U.S. regions, developing new theory, new sources of data, and new methodologies for fostering innovation and prosperity in regional economies. Growing out of this research, the Harvard Cluster Mapping Project was developed and provides rich data on the economic geography of U.S. regions and clusters from 1990 to 2002. The Cluster Mapping Project has over 7,900 registered users. His article ‘The Economic Performance of Regions’ (2003) summarizes some of the important findings.
Michael Porter has led studies on the role of private capital investment in competitiveness, including Capital Choices (1992) and Lifting All Boats (1995). He has also written on competition policy, including ‘Competition and Antitrust: Towards a Productivity-based Approach to Evaluating Mergers and Joint Ventures’ (2002).
Competition and Society
Michael Porter’s research on economic development gave rise to his third major body of work: the relationship between competition and society.
Inner Cities: Michael Porter has conducted extensive research on economic development in America’s distressed inner city areas, beginning with the Harvard Business Review article ‘The Competitive Advantage of the Inner City’. In 1994, he founded The Initiative for a Competitive Inner City (ICIC), a non-profit, private-sector organization to catalyze inner-city business development across the country. Michael Porter is Chairman and CEO of the ICIC, a national organization with a staff of more than 40 professionals. The ICIC has conducted extensive research and practiced extensively in this field, and a bibliography of work is available on the organization’s website.
Environment: Michael Porter has examined the relationship between competitiveness and the natural environment. His Scientific American essay ‘America’s Green Strategy’, showed that economic competitiveness and environmental improvement could and should be complementary. This essay triggered a body of literature and new policy thinking, including publications by Michael Porter: ‘Green and Competitive’ (1995), ‘Toward a New Conception of the Environment-Competitiveness Relationship’ (1995), and ‘National Environmental Performance Measurement and Determinants’ (2002).
Philanthropy: Michael Porter has devoted growing attention to philanthropy and especially the role of corporations in society. His Harvard Business Review article with Mark Kramer, ‘Philanthropy’s New Agenda: Creating Value’ (1999), offers a new framework for developing strategy in foundations and other philanthropic organizations. He co-founded the Center for Effective Philanthropy, an organization dedicated to creating concepts and measurement tools to improve foundation performance.
Michael Porter’s Harvard Business Review article, ‘The Competitive Advantage of Corporate Philanthropy’ (2002), addresses how corporations can create more social benefit by integrating their philanthropy with their business context. A forthcoming article tackles the strategic underpinnings of corporate social responsibility.
Health Care: Recently, Michael Porter has devoted considerable attention to competition in health care and the reform of the U.S. health care system. His article with Elizabeth Teisberg, ‘Redefining Competition in Health Care’ (2004), has stimulated a national dialog. His joint book with Teisberg, Redefining Health Care (Harvard Business School Press) is due to be published in September 2005.
The very words “competitive strategy” or “competitive advantage” are enough to identify Michael Porter wherever management gurus gather. Some critics claim that his ideas for analyzing markets and industries are based on old economic theories, and Porter himself has acknowledged his debt to Joseph A Schumpeter, among others, in The Competitive Advantage of Nations. What he does brilliantly, however, is to package and simplify analytical models that would otherwise be dauntingly difficult for most working businessmen to understand. His seminars, in particular, are as lively as those of Tom Peters. On joining the Harvard faculty, Porter was among the first to project corporate strategy in marketplace terms rather than as a theoretical concept linking various functions in an organization.
His basic tool for managers seeking to analyze their own company’s competitive position employs five factors or forces that drive competition:
(1) Existing rivalry between firms
(2) The threat of new entrants to a market
(3) The threat of substitute products and services
(4) The bargaining power of suppliers
(5) The bargaining power of buyers.
He then identifies five generic descriptions of industries: fragmented, emerging, mature, declining, and global.
Porter says a firm may possess two kinds of competitive advantage: low cost or differentiation. “Competitive advantage is a function of either providing comparable buyer value more efficiently than competitors (low cost), or in performing activities at comparable cost but in unique ways that generate more buyer value than competitors and, hence, command a premium price (differentiation).”
Firms that operate in a number of different countries can locate processes where the best advantage lies—e.g. low labor costs, or proximity to vast markets like Japanese firms based in the UK—but at the same time, Porter argues, the most competitive ones come from home bases that are themselves strong and competitive. This sharpens up the instinct to succeed and provides valuable “cluster” support from equally successful linked industries that act as buyers and suppliers.
This theory, developed over several books and numerous articles, reaches its full, flowering in The Competitive Advantage of Nations, which takes as its key a “diamond” of factors that makes some nations (and consequently their industries) more competitive than others.
The four points of this diamond are:
(1) Factor conditions: the nation’s position in factors of production (such as skilled labor or infrastructure) necessary to compete in a particular industry.
(2) Demand Conditions: the nature of home demand for the industry’s product or service and how discriminating it is.
(3) Related and supporting industries” the presence or absence of supplier industries and related industries that are internationally competitive themselves.
(4) Company strategy, structure, and rivalry: the conditions governing how firms are created, organized, and managed, as well as the nature of domestic rivalry. Tough domestic rivalry breeds international success.
Firms gain competitive advantage outside their home markets, Porter argues, when their own countries provide a dynamic competitive environment, characterized by an accumulation of specialized assets and skills and a constant stimulus to upgrade and improve their products and processes. “Clusters” of mutually supporting industries are important to success; one reason why Britain’s performance has declined over the years.
Among Michael Porter’s strategic recommendations for the competitive company are:
(1) Sell to the most sophisticated and demanding buyers: they will set a standard for the organization.
(2) Seek out buyers with the most difficult needs; they become a part of the firm’s R&D program.
(3) Establish norms of exceeding the toughest regulations, hurdles or product standards: these provide targets that will force improvement.
(4) Source from the most advanced and international home-based suppliers; those with competitive advantage already will challenge the firm to improve and upgrade.
(5) Treat employees as permanent instead of demoralizing hire-and-fire approach.
(6) Establish outstanding competitors as motivators.
One of Porter’s favorite methods of identifying a firm’s competitive position is to analyze its “value chain”—all the activities it performs and how they interact. Examining these components sheds lights on the roots of costs and how they behave, and picks out existing and potential sources of differentiation. “A firm gains competitive advantage by performing these strategically important activities more cheaply or better than its competitors.”
Kathryn Rudie Harrigan, a former student of Porter’s—and now a guru in her own right as well as being professor of strategic management at New York’s Columbia University—says the ideas in Competitive Strategy are required reading in every US Business School and most executive education programs. “The framework he popularized forms the cornerstone for the next decade of research concerning strategy formulation… the first chapter of the book Competition in Global Industry provides what has become a the dominant framework for looking at issues in Global Strategy.
Tom Peters (b. 1942): The “excellence” cult and prescriptions for managing chaotic change
Tom Peters and Robert Waterman will forever be linked because of the phenomenal success of In Search of Excellence, although it was the only book the two former McKinsey consultants wrote together. Since its publication in 192, each has carved out his own distinctive niche in authorship on the lecture trail.
Excellence is by far the world’s best selling business book. It was slow to take off on both sides of the Atlanta, but its reputation rocketed by word of mouth, and suddenly companies were ordering “50, 100, 200 copies to give to their executives,” as their British publisher recalls. It reached the million mark in sales in record time, within a year, and has now sold over 5m copies. Despite the fact that 2/3rds of its “excellent” companies have since faded in performance—Peters began his 1987 book Thriving on Chaos with bold words, “There are no excellent companies”—In Search of Excellence still endlessly reprints in paperback and its distinctive black, white and gold cover continues to walk off the airport bookstalls where most business books are sold in the UK.
Before joining McKinsey in 1974, Peters worked in the Pentagon for two years, where he became “fascinated by complex organizations.” He then took a master’s degree in civil engineering at Cornell University before serving in Vietnam. Later, he took an MBA at Stanford and worked again in Washington for the Office of management and Budget. Today, he and Michael Porter can probably claim to be the most sought-after and expensive management lecturers in the world. The Tom Peters Group has built a huge business in videos, cassettes, and TV series as well as personal appearances and Consultancy work.
Peters left McKinsey after Excellence was published. As Waterman was not enthusiastic about a sequel, Peters wrote the sequel—A Passion for Excellence with Nancy Austin. Peters’ work took on a new direction with Thriving on Chaos (1987) which inaugurated a genre of books on managing change.
Peters and Waterman have almost branded the word “excellence” as a branch of management theory. Their phenomenally successful book has spawned a host of other imitators and this was indeed the subject of a fascinated study by Japan’s Kenichi Ohmae, also a McKinsey man. At the time, Waterman says they had no idea it would prove such a watershed.
Its simple idea was the extension of a McKinsey project that began in 1977, to analyze the lessons from 43 of Fortune’s top 500 companies that had consistently beaten their competitors over twenty years by six financial yardsticks:
(1) Compound asset growth
(2) Compound equity growth
(3) Ratio of market value to book value
(4) Return on Capital
(5) Return on Equity
(6) Return on Sales
Peters and Waterman developed the famous McKinsey “Seven-S” formula to analyze an organization: structure, strategy, systems, style of management, skills (corporate strengths), staff and shared values.
Applying this framework to their 43 companies, they identified their eight by now well-known characteristics shared by all of them:
(1) A bias for action: getting on with it
(2) Close to the customer: learning from the people they serve
(3) Autonomy and entrepreneurship: fostering innovation and nurturing “champions”
(4) Productivity through people: treating rank and file as a source of quality
(5) Hands-on, value-driver: management showing its commitment
(6) Stick to the knitting: stay with the business you know
(7) Simple form, lean staff: some of the best companies have a minimum of headquarters staff
(8) Simultaneous loose-tight properties: autonomy in shop floor activities plus centralized values.
All their 43 companies, Peters and Waterman found, were “brilliant on the basics” Also, in almost every case, a strong leader had been influential at some stage in forming the culture of excellence.
Five years later, only 14 companies of the original 43 could still be described as excellent by the original criteria.
Peters concluded that nothing in today’s chaotic business environment stays the same long enough for excellence of the sustained type possible before 1982 to be developed. In Thriving on Chaos, he cited IBM—“declared dead in 1979, the best of the best in 1982, and dead again in 1986.” People Express, one star of Excellence, collapsed completely!
Excellence, suggested Peters, required redefining—excellent firms were now those that believed only in constant improvement and the demands of constant change.
A key concept behind Thriving on Chaos, a title that struck a chord with many gurus in the late 80s, was the need to move from a hierarchical pyramid of management, to a horizontal, fast, cross-functional cooperative one.
Peters evolved 42 precepts for managers across every level. They ran as follows:
(1) Quality Revolution
(2) Become a Service addict
(3) Achieve total customer responsiveness
(4) Become true internationalists, both small and large firms
(5) Strive to achieve uniqueness
(6) Listen to customers, end users, suppliers, retailers
(7) Make manufacturing the prime marketing tool
(8) “Over-invest” in people, frontline sales, service, distribution (make the company heroes)
(9) become customer-obsessed
(10)Develop an innovation strategy
(11)Use multi-function teams for all development activities
(12)Substitute pilots and prototypes for proposals
(13)Ignore “Not invented here” and learn to adapt from the best (practice “creative swiping”)
(14)Use systematic word of mouth for launching
(17)Support failures by publicly rewarding well throughout mistakes
(19)Make innovation a way of life for everyone
(20)Involve all personnel in all functions in virtually everything
(21)Organize as much as possible around teams
(22)Invest time in recruiting
(23)Invest human capital as much as hardware
(24)Provide bold financial incentives for all
(25)Guarantee continuous employment for a large slice of the workforce
(26)Radically reduce layers of management
(27)Re-conceive middle managers as facilitators instead of guardians
(28)Reduce and simplify paperwork and bureaucratic procedures
(29)Challenge conventional management wisdom on a day-to-day basis
(30)Develop and live an “enabling and empowering vision” (effective leadership at all levels is marked by a core philosophy [values] and a vision of how the enterprise or department wishes to make its mark)
(31)Lead by personal example
(32)Practice visible management
(33)Become a compulsive listener
(34)Ensure that frontline people know they are heroes
(35)Examine each act of delegation and increase it radically
(36)Destroy bureaucratic baggage
(37)Focus on exactly what you have changed recently—what your subordinates have changed. Ask the question a dozen times a day at least, induce a sense of urgency throughout
(38)Develop simple systems to encourage participation and understanding
(39)Simplify control systems (e.g. performance appraisals, setting of objectives, job descriptions)
(40)Share information with everyone
(41)Set conservative financial targets
(42)Demand total integrity in all dealings, both inside and outside the firm.
Henry Mintzberg (b. 1939): How strategy is made, and how managers use their time
Canadian-born professor of Management at McGill University, Montreal, whose immensely influential work falls into three main categories: strategy-making, what managers actually do with their time (as opposed to what they think they do), and how mental processes work (left-brain and right-brain theories), and how organizations design themselves to suit their needs.
Mintzberg studied engineering at McGill and later studied management at the Sloan School in MIT. In all, Mintzberg has published about 130 articles and about 10 books. Honors accorded to him have included election as an Officer of the Order of Canada, and of l’Ordre national du Quebec, and selection as Distinguished Scholar for the year 2000 by the Academy of Management.
Henry Mintzberg believes that both management and management education are deeply troubled, but that neither can be changed without changing the other.
In his latest book, Managers not MBA, Mintzberg asserts that conventional MBA classrooms overemphasize the science of management while ignoring its art and denigrating its craft, leaving a distorted impression of its practice. We need to get back to a more engaging style of management, to build stronger organizations, not bloated share prices. This calls for another approach to management education, whereby practicing mangers learn from their own experience. We need to build the art and the craft back into management education, and into management itself.
Mintzberg examines what is wrong with our current system. Conventional MBA programs are mostly for young people with little or no experience. These are the wrong people. Programs to train them emphasize analysis and technique. These are the wrong ways. They leave graduates with the false impression that they have been trained as managers, which has had a corrupting effect on the practice of management as well as on our organizations and societies. These are the wrong consequences.
Mintzberg describes a very different approach to management education, which encourages practicing mangers to learn from their own experience. No one can create a manager in a classroom. But existing managers can significantly improve their practice in a thoughtful classroom that makes use of that experience.
Mintzberg’s reputation was made by The Nature of Managerial Work (1973) and the article in the Harvard Business Review in 1975, which brought it to a wider public— The Manager’s Job: Folklore and Fact. In researching the book, he spent a week in each of five middle- to large-sized organizations—a consulting firm, a technology company, a hospital, a consumer goods company and a school system, observing how CEOs used their time, as well as reporting other studies of managers lower down the line.
Far from confirming any grand all-embracing role, such as Peter Drucker proposed in his analogy of the manager as orchestra conductor, Mintzberg found that a manger’s time is constantly being fragmented by interruptions, but that these appeared to produce adrenaline of their own and to convince the manager that he was achieving a great deal through responding to pressures of the job over a great many issues, even in summary and incomplete fashion.
“Jumping from topic to topic, he (the manager) thrives on interruptions, and, more often than not, disposes of items in ten minutes or less. Though he may have 50 projects going on, they all are delegated. He juggles them, checking each one periodically before sending it back into orbit”
The four definitions of managerial work laid down by Fayol in 1916—planning, organization, coordination and control—have very little bearing on actually daily routine, Mintzberg discovered. Yet, as he explained in the Harvard Business Review article, “Without a proper answer, how can we teach management? How can we design planning or information systems for managers? How can we improve the practice of management at all? … The traditional literature notwithstanding, the job of managing does not breed reflective planners; the manager responds to stimuli as an individual who is conditioned by his job to prefer live to delayed action?
Indeed, Mintzberg concluded in a memorable finding, “the executives I was studying—all very competent by any standard—were fundamentally indistinguishable from their counterparts of 100 years ago, or a 1000. The information they need differs, but they seek it in the same way-by word of mouth.”
Mintzberg identified ten principle managerial roles, grouped into 3 main areas— interpersonal, informational, and decisional. Interpersonal roles, in his definition, compromise three functions—those of figurehead, leader, and liaison. The first two are “ceremonial”, rather, while the third covers a manager’s network of relationships within and without the organization, outside his vertical chain of command, and mainly in pursuit of building up a private information system.
Informational roles involve those of monitor (keeping tabs on what’s going on), disseminator (transmitting essential information to subordinates), and spokesman (the public voice of the unit). The manager emerges as the nerve center of any organization, even though he may not know everything. It is the way in which the manager develops information that communicates it, that is what defines the organization.
Decisional roles, not surprisingly, are described as the most important. Mintzberg divided these into 4 categories—entrepreneur, disturbance handler, resource allocator, and negotiator.
As an entrepreneur, the manager “seeks to improve his unit and to adapt it to changing conditions” sometimes juggling more than 50 different projects at a time
As a disturbance handler, the manager reacts to events and change beyond foresight or control; a strike, the bankruptcy of a major customer, or the failure of a key supplier—Mintzberg parts company with Drucker’s idea of the Orchestral conductor strikingly at this point, by saying, “in effect, every manager must spend a good part of his time responding to high pressure disturbances.”
As a resource allocator, the manager must decide how to best deploy human, intellectual, time-based and physical assets of the company; and must use his abilities as a negotiator to ensure smooth process flow.
All the variables contained within these permutations led Mintzberg to conclude that management is an art rather than a teachable science, and that it requires a continuous process of self-education and assessment.
Management schools, he concluded, would only begin “the serious training of managers when skill training takes a serious place next to cognitive learning… cognitive learning no more makes a manager than it does a swimmer. The latter will drown the first time he jumps into the water if hic coach never takes him out of a lecture hall, gets him wet, and gives him feedback on his performance.
“No job is more vital to our society,” declared Mintzberg. “it is the manager who determines whether our institutions serve us well or whether they squander our talents and resources. It is time to strip away the folklore about managerial work, and time to study it realistically so that we can begin the difficult task of making significant improvements in its performance.”
He concluded that most organizational structures fall into 5 basic categories: simple, machine bureaucracy, professional bureaucracy, divisionalized form and adhocracy.