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What is management?
Management is creative problem solving. This creative problem solving is accomplished through four functions of management planning, organizing, leading and controlling. The intended result is the use of an organizations resources in a way that accomplishes its mission and objectives. (Higgins, page 7)
In Management Excel, this standard definition is modified to align more closely with our teaching objectives and to communicate more clearly the content of the organizing function. Organizing is divided into organizing and staffing so that the importance of staffing in small businesses receives emphasis along side organizing. In the management literature, directing and leading are used interchangeably.
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While most research on organization-environment interactions concerns itself with the effect of environment on well-established organizations, Stinchcombe argues that the environment at time of founding has the greatest impact.
Stinchcombe states that organizations which are founded at a particular time must construct their social systems with the social resources available, suggesting an imprinting argument of organizational form. As a result of structural inertia, among other factors, there tends to be a strong correlation between the structural form exhibited by an organization at any time and the date of its founding.
lines of research imprinting, liability of newness, and revolutions
Imprinting
There is a specific time in organizational history where imprinting really matters. Cohorts of organizations are imprinted with the social, cultural, and technical features that are common in the environment when the cohort is founded, these are highly resistant to change.
Organizations need capital and people. Question is how organizations can get people to hand time and money over to them. Organizations need legitimacy endorsement. People who control key resources have mental models of what an organization should be. If people present an organization that defies mental model, theyll have a hard time getting valued resources.
Liability of Newness
New organizations and especially new forms of organizations are likely to fail.
New forms of organizations lack reliability and legitimacy (compare w/ Hannan & Freemans density dependence theory).
Social structure (groups, institutions, laws, social relations) and its effect on organization (stable social relations deliberately created for accomplishing specific goal); founding; liability of newness; trust, learn new roles, stable ties, embeddedness; importance of environment/surroundings (political, social, economic, and legal); money economy, revolution; political stability and military stabilization affect organization capacity; isomorphism (see Scott p. 15); ranking of organizations brings competition and dependence
Pfeffer (18184-85); Scott (115)
Hofstedes Dimensions of culture
Power Distance (PD) -The degree of inequality among people. In organizations, Power Distance is related to the degree of centralization of authority and autocratic leadership. The higher the PD score the more inequity between the superior and a subordinate.
Individualism vs. Collectivism (IDV) -The relation between an individual and his or her fellow individuals. In collectivist societies, group interests supercede those of individuals. The higher the IDV score the more a culture emphasizes the right and obligations of the individual over the group.
Uncertainty Avoidance (UAI) -Uncertainty avoidance involves the acceptance or tolerance of uncertainty. High uncertainty avoidance societies socialize their members not to accept uncertainty. The higher the UAI score the less the citizen of a culture are comfortable with ambiguity.
Masculinity vs. Femininity (MAS) - In masculine societies, masculine social values such as the importance of showing off; achieving something visible, or making money predominate, while feminine societies would be more oriented to quality of life and personal relationships. The higher the MAS score the more masculine a culture is.
Various skills are related to each of the four management functions.
Planning
Skills required for Examples of skills Application
Planning Strategic thinking Highly developed conceptual skillsCapacity to view organisation as a wholeProduct-related and technical knowledgeUnderstanding of what can be done now
Vision Clear focus on the big pictureAble to perceive opportunityClear foresightAble to integrate component parts into an interacting wholeKnowledge of support services
Decision making Awareness of alternatives through ability to assemble data Ability to assess alternatives and decide Creative and lateral thinking skills Clear understanding of the competing interests of stakeholders; ability to maintain a balance between competing goals Highly developed conceptual understanding of all interacting parts Ability to communicate decisions clearly
Organising
Skills required for Examples of skills Application
Organising Self managing Time management skills Capacity to stay focused Understanding of the role of support services in the organisational framework
Teamwork Providing networks for effective information flow Coach, teacher, mentor roles in creating and developing groups Delegation of team roles, tasks and responsibility
Leading
Skills required for Examples of skills Application
Leading People skills Understanding how people think and act Ability to motivate workers Creation of a harmonious workplace Effective written and oral communication skills Successful delegation
Complex problem solving Ability to gather and assess data to isolate a problem Sensitivity to the needs of others Procedures for dispute resolution Negotiation skills learned and practised
Ethical and high personal standards Generally agreed qualities of decisiveness, consistency, responsiveness, trustworthiness, friendliness and approachability
Controlling
Skills required for Examples of skills Application
Controlling Skills involving setting of performance standards & measurement of performance Technical measurement and diagnostic skills A wide variety of effective communication skills Preparedness to face up to identified weaknesses
Flexibility & adaptability to change Willingness to move in a new direction Constant evaluation of decisions taken in the light of subsequent performance Consistent monitoring of the changing external environment
PLANNING
Planning is concerned with the future impact of todays decisions. It is the fundamental function of management from which the other four stem. The need for planning is often apparent after the fact. However, planning is easy to postpone in the short-run. Postponement of planning especially plagues labor oriented, hands on managers.
The organizing, staffing, leading and controlling functions stem from the planning function (Higgins, Figure 6.1.) The manager is ready to organize and staff only after goals and plans to reach the goals are in place. Likewise, the leading function, influencing the behavior of people in the organization, depends on the goals to be achieved. Finally, in the controlling function, the determination of whether or not goals are being accomplished and standards met is based on the planning function. The planning function provides the goals and standards that drive the controlling function.
Planning is important at all levels of management. However, its characteristics vary by level of management. (Figure 6.) Note in this figure that the characteristics of the world being simple, certain, structured and short-term often become rationalizations for top managers not to plan. Top managers acting as if they are lower level managers plagues planning.
Planning Terminology
Basic planning terminology is illustrated in Figure 6.. The order from general to specific is vision-mission-objectives-goals (Figure 6.4.) (Note--In ManagementExcel practice established before the use of Higgins as the basic reference, we adopted the order vision-mission-objectives-goals. The Higgins text switches the order of objectives and goals. In reading the Higgins text, simply substitute the term objective for goal and the term goal for objective.) The key terms are defined as follows
Vision Nonspecific directional and motivational guidance for the entire organization. Top managers normally provide a vision for the business. It is the most emotional of the four levels in the hierarchy of purposes.
Mission An organizations reason for being. It is concerned with scope of the business and what distinguishes this business from similar businesses. Mission reflects the culture and values of top management.
Objectives Objectives refine the mission and address key issues within the organization such as market standing, innovation, productivity, physical and financial resources, profitability, management and worker performance and efficiency. They are expected to be general, observable, challenging, and untimed.
Goals Goals are specific statements of anticipated results that further define the organizations objectives. They are expected to be SMART Specific, Measurable, Attainable, Rewarding, and Timed.
Development of tactics is a fifth level of planning. Tactics, the most specific and narrow plans, describe who, what, when, where and how activities will take place to accomplish a goal.
Strategic Planning
Strategic planning is one specific type of planning. Strategies are the outcome of strategic planning. An organizations strategies define the business the firm is in, the criteria for entering the business, and the basic actions the organization will follow in conducting its business (Higgins, Page .) Strategies are major plans that commit large amounts of the organizations resources to proposed actions, designed to achieve its major objectives and goals. Strategic planning is the process by which the organizations strategies are determined (Figure 7..) In the process, three basic questions are answered
1. Where are we now?
. Where do we want to be?
. How do we get there?
The where are we now? question is answered through the first three steps of the strategy formulation process (1) perform internal and external environmental analyses, () review vision, mission and objectives, and () determine SWOT Strengths, Weaknesses, Opportunities and Threats. SWOT analysis requires managers to be honest, self-disciplined and thorough. Going on to strategy choices without a comprehensive SWOT analysis is risky.
Strengths and weaknesses come from the internal environment of the firm. Strengths can be exploited, built upon and made key to accomplishment of mission and objectives. Strengths reflect past accomplishments in production, financial, marketing and human resource management. Weaknesses are internal characteristics that have the potential to limit accomplishment of mission and objectives. Weaknesses may be so important that they need to be addressed before any further strategic planning steps are taken.
Opportunities and threats are uncontrollable by management because they are external to the firm. Opportunities provide the firm the possibility of a major improvement. Threats may stand in the way of a firm reaching its mission and objectives.
ORGANISING
Organizing is establishing the internal organizational structure of the business. The focus is on division, coordination, and control of tasks and the flow of information within the organization. Managers distribute responsibility and authority to jobholders in this function of management.
Organizational Structure
Each organization has an organizational structure. By action and/or inaction, managers structure businesses. Ideally, in developing an organizational structure and distributing authority, managers decisions reflect the mission, objectives, goals and tactics that grew out of the planning function. Specifically, they decide
1. Division of labor
. Delegation of authority
. Departmentation
4. Span of control
5. Coordination
Management must make these decisions in any organization that has more than two people. Small may not be simple. Note Dan and Nancys organizational alternatives in the third transparency for this section. Dan and Nancy have three organizational chart alternatives for their two person business. As shown on the page following Dan and Nancys organization charts, who reports to whom and why may not be apparent in a slightly more complex business with three employees and five family members involved.
Organizational structure is particularly important in family businesses where each family member has three hats (multiple roles) family, business and personal. Confusion among these hats complicates organizational structure decisions.
Division of Labor
Division of labor is captured in an organization chart, a pictorial representation of an organizations formal structure. An organization chart is concerned with relationships among tasks and the authority to do the tasks. Eight kinds of relationships can be captured in an organization chart
1. The division/specialization of labor
. Relative authority
. Departmentation
4. Span of control
5. The levels of management
6. Coordination centers
7. Formal communication channels
8. Decision responsibility
Organization charts have important weaknesses that should be of concern to managers developing and using them
1. They may imply a formality that doesnt exist.
. They may be inconsistent with reality.
. Their usual top down perspective often minimizes the role of customers, front-line managers and employees without management responsibilities.
4. They fail to capture the informal structure and informal communication.
5. They often imply that a pyramidal structure is the best or only way to organize.
6. They fail to address the potential power and authority of staff positions compared with line positions.
Delegation of Authority
Authority is legitimized power. Power is the ability to influence others. Delegation is distribution of authority. Delegation frees the manager from the tyranny of urgency. Delegation frees the manager to use his or her time on high priority activities. Note that delegation of authority does not free the manager from accountability for the actions and decisions of subordinates.
Delegation of authority is guided by several key principles and concepts
Exception principle - Someone must be in charge. A person higher in the organization handles exceptions to the usual. The most exceptional, rare, or unusual decisions end up at the top management level because no one lower in the organization has the authority to handle them.
Scalar chain of command - The exception principle functions in concert with the concept of scalar chain of command - formal distribution of organizational authority is in a hierarchial fashion. The higher one is in an organization, the more authority one has.
Decentralization - Decisions are to be pushed down to the lowest feasible level in the organization. The organizational structure goal is to have working managers rather than managed workers.
Parity principle - Delegated authority must equal responsibility. With responsibility for a job must go the authority to accomplish the job.
Span of control - The span of control is the number of people a manager supervises. The organizational structure decision to be made is the number of subordinates a manager can effectively lead. The typical guideline is a span of control of no more than 5-6 people. However, a larger span of control is possible depending on the complexity, variety and proximity of jobs.
Unity principle - Ideally, no one in an organization reports to more than one supervisor. Employees should not have to decide which of their supervisors to make unhappy because of the impossibility of following all the instructions given them.
Line and staff authority - Line authority is authority within an organization's or units chain of command. Staff authority is advisory to line authority. Assume a crew leader reports to the garden store manager who in turn reports to the president. Further assume that the crew leader and store manager can hire and fire, and give raises to the people they supervise. Both the crew leader and store manager have line authority. To contrast, assume that the president has an accountant who prepares monthly financial summaries with recommendations for corrective action. The accountant has staff authority but not line authority.
Departmentation
Departmentation is the grouping of jobs under the authority of a single manager, according to some rational basis, for the purposes of planning, coordination and control. The number of departments in an organization depends on the number of different jobs, i.e., the size and complexity of the business.
Farm businesses are most likely to have departments reflecting commodities and services. For example, a large dairy farm might be organized into dairy, crop, equipment and office departments. The dairy department might be further divided into milking, mature animal and young stock departments.
Informal Structure
The formal structure in each organization that has been put in place by management has an accompanying informal structure. Management does not and cannot control the informal structure.
The informal structure has no written rules, is fluid in form and scope, is not easy to identify, and has vague or unknown membership guidelines.
For management, the informal structure may be positive or negative. Positive qualities include the ability to quickly spread information and provide feedback to the information. The informal structure gives people a sense of being in the know. Management can feed information into the informal structure at very low cost. The informal structure can also help satisfy employees social needs.
The negative qualities of the informal structure mirror the positive qualities in several ways. The juicier a rumor, the more likely is the informal structure to repeat it, expand it and make it into the truth. Management may not know what information is flowing through the informal structure. Employees can waste a great deal of time nurturing and participating in the informal structure. Finally, the informal structure can fence out new employees, rate breakers, and change agents no matter the extent to which the formal structure makes them a part of the organization.
This discussion of organizing principles draws on the basic reference for Management Excel teaching James Higgins, The Management Challenge, Second Edition, Macmillan, 14. The text provides a more detailed discussion of the key points included in this outline.
LEADERSHIP……….
CONTROLLING
Controlling is a four-step process of establishing performance standards based on the firms objectives, measuring and reporting actual performance, comparing the two, and taking corrective or preventive action as necessary.
Performance standards come from the planning function. No matter how difficult, standards should be established for every important task. Although the temptation may be great, lowering standards to what has been attained is not a solution to performance problems. On the other hand, a manager does need to lower standards when they are found to be unattainable due to resource limitations and factors external to the business.
Corrective action is necessary when performance is below standards. If performance is anticipated to be below standards, preventive action must be taken to ensure that the problem does not recur. If performance is greater than or equal to standards, it is useful to reinforce behaviors that led to the acceptable performance.
Characteristics of the Control Process
The control process is cyclical which means it is never finished. Controlling leads to identification of new problems that in turn need to be addressed through establishment of performance standards, measuring performance etc.
Employees often view controlling negatively. By its very nature, controlling often leads to management expecting employee behavior to change. No matter how positive the changes may be for the organization, employees may still view them negatively.
Control is both anticipatory and retrospective. The process anticipates problems and takes preventive action. With corrective action, the process also follows up on problems.
Ideally, each person in the business views control as his or her responsibility. The organizational culture should prevent a person walking away from a small, easily solvable problem because that isnt my responsibility. In customer driven businesses, each employee cares about each customer. In quality driven dairy farms, for example, each employee cares about the welfare of each animal and the wear and tear on each piece of equipment.
Controlling is related to each of the other functions of management. Controlling builds on planning, organizing and leading. (Figure 18.)
Management Control Strategies
Managers can use one or a combination of three control strategies or styles market, bureaucracy and clan. (Figure 18.) Each serves a different purpose. External forces make up market control. Without external forces to bring about needed control, managers can turn to internal bureaucratic or clan control. The first relies primarily on budgets and rules. The second relies on employees wanting to satisfy their social needs through feeling a valued part of the business.
Self-control, sometimes called adhocracy control, is complementary to market, bureaucratic and clan control. By training and encouraging individuals to take initiative in addressing problems on their own, there can be a resulting sense of individual empowerment. This empowerment plays out as self-control. The self-control then benefits the organization and increases the sense of worth to the business in the individual.
Designing Effective Control Systems
Effective control systems have the following characteristics
1. Control at all levels in the business (Figure 1.1)
. Acceptability to those who will enforce decisions
. Flexibility
4. Accuracy
5. Timeliness
6. Cost effectiveness
7. Understandability
8. Balance between objectivity and subjectivity
. Coordinated with planning, organizing and leading
Dysfunctional Consequences of Control
Managers expect people in an organization to change their behavior in response to control. However, employee resistance can easily make control efforts dysfunctional. The following behaviors demonstrate means by which the managers control efforts can be frustrated
1. Game playing-- control is something to be beaten, a game between the boss and me and I want to win.
. Resisting control-- a blue flu reaction to too much control
. Providing inaccurate information -- a lack of understanding of why the information is needed and important leading to you want numbers, we will give you numbers.
4. Following rules to the letter-- people following dumb and unprofitable rules in reaction to do as I say.
5. Sabotaging -- stealing, discrediting other workers, chasing customers away, gossiping about the firm to people in the community
6. Playing one manager off against another -- exploiting lack of communication among managers, asking a second manager if dont like the answer from the first manager
Bartol, K.M., Martin, D.C., Tein, M. & Matthews, G. (00). Management A Pacific Rim focus. (rd edition) Sydney McGraw Hill.
Davidson, P. and Griffin, R.W. (00). Management AN Australasian Perspective. (nd edition) Brisbane Wiley.
Higgins J. (14). The Management Challenge. (nd edition) Macmillan.
Hofstede. G., Cultures and Organizations Software of the Mind. New York, NYM McGraw-Hill.
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