Chapter 1 intro to mgmt + planning 4 students

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  • Workers who specialized became much more skilled at their specific tasksIncreasing job specialization increases efficiency and leads to higher organizational performance
  • Douglas McGregor proposed the two different sets of assumptions about workers.Theory X assumes the average worker is lazy, dislikes work and will do as little as possible.Workers have little ambition and wish to avoid responsibilityManagers must closely supervise and control through reward and punishment.Theory Y assumes workers are not lazy, want to do a good job and the job itself will determine if the worker likes the work.Managers should allow workers greater latitude, and create an organization to stimulate the workers.
  • Chapter 1 intro to mgmt + planning 4 students

    1. 1. Chapter 1 Introduction to Management
    2. 2. Syllabus •Definitions & Characteristics •Management Science or Art •Development of Management Thought •Scope of Management •Functions of Management •Contribution by Management Experts
    3. 3. What is Management?  All managers work in organizations  Organizations – collections of people who work together and coordinate their actions to achieve a wide variety of goals
    4. 4. 1.0 The Management Process Resources Human Planning Financial Physical Informational Management Functions Goal Organizing Directing Controlling Achievements
    5. 5. Question? Person responsible for supervising the use of an organization’s resources to meet its goals? A. Team leader B. Manager C. President D. Resource allocator
    6. 6. Managers Managers –  The people responsible for supervising the use of an organization’s resources to meet its goals
    7. 7. What is Management? The planning, organizing, leading, and controlling of human and other resources to achieve organizational goals effectively and efficiently
    8. 8. What is Management?  Resources include people, skills, know-how and experience, machinery, raw materials, computers and IT, patents, financial capital, and loyal customers and employees
    9. 9. 5 M’s of Management 1. Money 2. Manpower 3. Materials 4. Machinery 5. Methods
    10. 10. DEFINITIONS: • F.W. Taylor - “Art of knowing what you want to do and then seeing that it is done the best and cheapest way”. • Henry Fayol – “To Manage is to forecast, to plan, to organize, to command, to co-ordinate and to control”. • Peter F.Drucker –”Management is work and as such it has its own skills, its own tools and its own techniques”. • “Management is the art of getting things done through and with people”.
    11. 11. The Universalism of Management Across Organizations of Different Size and Types Business Governmental Educational Agencies Institutions Across Organizational Levels Social Services Health Care Delivery Across Functional Areas Top Management Middle Management Lower Management Production arketing Finance Personnel M
    12. 12. CHARACTERISTICS OF MANAGEMENT 1. 2. 3. 4. 5. 6. 7. 8. 9. Universal Process Purposeful Creative Group Phenomenon Social Process Multidisciplinary Continuous Process Intangible Both Science and Art
    13. 13. MANAGEMENT AS SCIENCE OR ART: Management is the art of getting things done through others MANAGEMENT AS A SCIENCE PROVIDES PRINCIPLES AND AS AN ART HELPS IN TACKLING SITUATIONS.
    14. 14. • • • • • • Art Practical know how Technical skills Concrete results Creativity Personalized nature • • • • • • Science Empirically Derived Critically tested General principles Cause and effect relationship Universal applicability
    15. 15. MANAGEMENT AS A PROFESSION ?? • Existence of an organized and systematic body of knowledge, • Formalized methods of acquiring knowledge and skills, • Existence of an apex level body with Professionalization as its goal, • Existence of an ethical code to regulate the behavior of the members of the profession, • Charging of fees based on service and
    16. 16. A close scrutiny of management as a profession reveals that it has a long way to go to have a universal acceptance of management as a profession. Unlike other profession such as medicine, law etc., the practice of management is not restricted to individuals with a special degree.
    17. 17. Copyright © 2006 Thomson Business and Economics. All rights reserved. 1–18
    18. 18. Copyright © 2006 Thomson Business and Economics. All rights reserved. 1–19
    19. 19. Management Skills and Functions  Differences among management levels in skill needed and the functions performed: Planning Controlling Organizing Copyright © 2006 Thomson Business and Economics. All rights reserved. Leading 1–20 Exhibit
    20. 20. DIFFERENT ROLES OF A MANAGER  INTERPERSONAL ROLES  INFORMATIONAL ROLES  DECISION ROLES
    21. 21.  Interpersonal Roles: 1. The figurehead role (performing ceremonial/social duties as the organization’s chief) 2. The leader role 3. The liaison role (particularly communicating with the outsiders)  Informational Roles: 1. The recipient role (receiving information about the organization) 2. The disseminator role (passing information to subordinates) 3. The spokesperson role (transmitting information to those outside)  Decision Roles: 1. The entrepreneurial role 2. The disturbance-handler role 3. The resource allocator role
    22. 22. Levels of Management Board of Directors Managing Director TOP MANAGEME NT Executive Directors MIDDLE MGT Marketing Manager Finance Manager Personnel Manager Branch Manager Chief Accountant Labor Officers Sale Officers Finance Officers LOWER MGT
    23. 23. FUNCTIONS OF TOP activities of the LEVEL 1. To provide a basic sense of direction to the company by setting its MANAGEMENTtranslating into clear long range mission and set of objectives 2. To design the organization structure of the company in terms of differentiated and integrated activities, role of various positions, authority & responsibility between them. 3. Top management must ensure the quality of personnel in terms of their skills, orientations and commitment 4. To ensure that the resource conversion and exchange systems are designed and operated efficiently. 5. Periodic review of objectives for necessary modifications is a part of this function
    24. 24. FUNCTIONS OF MIDDLE LEVEL MANAGEMENT      To interpret and explain the plans and policies formulated by top management To monitor & control the operating performance To cooperate among themselves so as to integrate the various activities of a department To train, motivate and develop supervisory personnel; and To lay down rules & regulations to be followed by supervisory personnel.
    25. 25. FUNCTIONS OF LOWER LEVEL MANAGEMENT 1. To plan day to day production within the goal laid down by higher authorities 2. To assign jobs to workers and to make arrangements for their training and development 3. To issue orders & instructions 4. To supervise & control workers’ operations and to maintain personal contact with them 5. To arrange materials and tools and to maintain machinery 6. To advise & assist workers by explaining work procedures, solving their problems etc. 7. To maintain discipline and good human relations among workers 8. To report feedback information and workers’ problems to the higher authorities.
    26. 26. FUNCTIONS OF MANAGEMENT  PLANNING: Plans give the org its objectives and set up the best procedures for reaching them.  ORGANISING: It is the process of arranging and allocating work, authority and resources among organization’s members so they can achieve the org’s goals.  LEADING: It involves directing, influencing, and motivating employees to perform essential tasks.  CONTROLLING: There are three main elements of controlling: 1. establishing standard of performance 2. measuring current performance 3. Comparing these performance to the established standards 4. taking corrective action
    27. 27. Organizational Performance Efficiency  A measure of how well or how productively resources are used to achieve a goal Effectiveness  A measure of the appropriateness of the goals an organization is pursuing and the degree to which they are achieved.
    28. 28. Figure 1.1
    29. 29. Levels of Management Figure 1.3
    30. 30. Areas of Managers Department  A group of managers and employees who work together and possess similar skills or use the same knowledge, tools, or techniques
    31. 31. Levels of Management • First line managers - Responsible for daily supervision of the non-managerial employees who perform many of the specific activities necessary to produce goods and services • Middle managers - Supervise first-line managers. Responsible for finding the best way to organize human and other resources to achieve organizational goals
    32. 32. Levels of Management • Top managers –  Responsible for the performance of all departments and have crossdepartmental responsibility.  Establish organizational goals and monitor middle managers  Decide how different departments should interact  Ultimately responsible for the success or failure of an organization
    33. 33. Levels of Management  Chief executive officer (CEO) is company’s most senior and important manager  Central concern is creation of a smoothly functioning top-management team  CEO, COO, Department heads
    34. 34. Relative Amount of Time That Managers Spend on the Four Managerial Functions Figure 1.4
    35. 35. Question? What skill is the ability to understand, alter, lead, and control the behavior of other individuals and groups? A. Conceptual B. Human C. Technical D. Managerial
    36. 36. Managerial Skills  Conceptual skills  The ability to analyze and diagnose a situation and distinguish between cause and effect.  Human skills  The ability to understand, alter, lead, and control the behavior of other individuals and groups.  Technical skills  Job-specific skills required to perform a particular type of work or occupation at a high level.
    37. 37. Skill Types Needed Figure 1.5
    38. 38. Core Competency Specific set of departmental skills, abilities, knowledge and experience that allows one organization to outperform its competitors
    39. 39. Discussion Question What is the biggest challenge for management in a Global Environment? Building a Competitive Advantage B. Maintaining Ethical Standards C. Managing a Diverse Workforce D. Global Crisis Management A.
    40. 40. Movie Example: Office Space What type of manager is Bill Lumbergh in the movie ― Office Space‖?
    41. 41. The Range of Management Activities Planning Investigating Organizing Communicating Commanding Securing Efforts Coordination Formulating purposes Controlling Staffing Directing Motivating Leading Innovating Representing Decision making Activating Evaluating
    42. 42. The Management Process under Pressure When you are up to your elbows in alligators, it’s hard to remember that your objective was to drain the swamp.
    43. 43. Chapter Two The Evolution of Management Thought
    44. 44. The Evolution of Management Theory  The driving force behind the evolution of management theory is to search for better ways to utilize organizational resources.  Advances in management thought occur as managers and researchers find better ways to perform the principal management tasks: planning, organizing, leading and controlling organizational resources.
    45. 45. The Evolution of Management Theory  The evolution of modern management began in the closing decades of the 19th century, after the industrial revolution had swept through Europe and America.  Many major economic, technical and cultural changes were taking place at this time.  There has been a shift from small-scale crafts production to large-scale mechanized manufacturing. Managers began to search for new techniques to manage their organizations.
    46. 46. Scientific Management theory  Modern management began in the late 19th century.  Organizations were seeking ways to better satisfy customer needs.  Machinery was changing the way goods were produced.  Managers had to increase the efficiency of the worker-task mix.
    47. 47. Job specialization  Adam Smith, 18th century economist, found firms manufactured pins in two ways:  Craft -- each worker did all steps.  Factory -- each worker specialized in one step.  Smith found that the factory method had much higher productivity.  Each worker became very skilled at one, specific task.  Breaking down the total job allowed for the division of labor.
    48. 48. The Evolution of Management Theory
    49. 49. Job Specialization and the Division of Labor  Adam Smith (18th century economist)  In a study of factories that manufactured pins, he observed two different ways of production:  - Craft-style—each worker did all steps.  - Production—each worker specialized in one step.
    50. 50. Job Specialization and the Division of Labor  Job Specialization  process by which a division of labor occurs as different workers specialize in specific tasks over time
    51. 51. F.W. Taylor and Scientific Management  Scientific Management  The systematic study of the relationships between people and tasks for the purpose of redesigning the work process to increase efficiency.
    52. 52. F.W. Taylor and Scientific Management 1) Study the way workers perform their tasks, gather all the informal job knowledge that workers possess and experiment with ways of improving how tasks are performed: Time-and-motion study 2) Codify the new methods of performing tasks into written rules and standard operating procedures 3) Carefully select workers who possess skills and abilities that match the needs of the task, and train them to perform the task according to the established rules and procedures 4) Establish a fair or acceptable level of performance for a task, and then develop a
    53. 53. The 4 Principles  Four Principles to increase efficiency: 1. Study the way the job is performed now & determine new ways to do it.   Gather detailed, time and motion information. Try different methods to see which is best. 2. Codify the new method into rules.  Teach to all workers. 3. Select workers whose skills match the rules set in Step 2. 4. Establish a fair level of performance and pay for higher performance.  Workers should benefit from higher output.
    54. 54. Problems of Scientific Management  Managers often implemented only the increased output side of Taylor’s plan.  They did not allow workers to share in increased output.  Specialized jobs became very boring, dull.  Workers ended up distrusting Scientific Management.  Workers could purposely “under- perform”  Management responded with increased use of machines.
    55. 55. Problems with Scientific Management  Managers frequently implemented only the increased output side of Taylor’s plan.  Workers did not share in the increased output.  Specialized jobs became very boring, dull.  Workers ended up distrusting the Scientific Management method.  Scientific Management brought many workers more hardship than gain and a distrust of managers who did not seem to care about workers’ well-being.
    56. 56. Scientific Management  Defined by Frederick Taylor, late 1800’s.  The systematic study of the relationships between people and tasks to redesign the work for higher efficiency.  Taylor sought to reduce the time a worker spent on each task by optimizing the way the task was done.
    57. 57. The Gilbreths  Frank and Lillian Gilbreth refined Taylor’s methods.  Made many improvements to time and motion studies.  Time and motion studies:  1. Break down each action into components.  2. Find better ways to perform it.  3. Reorganize each action to be more efficient.  Gilbreths also studied fatigue problems, lighting, heating and other worker issues.
    58. 58. Administrative Management  Seeks to create an organization that leads to both efficiency and effectiveness.  Max Weber developed the concept of bureaucracy.  A formal system of organization and administration to ensure effectiveness and efficiency.  Weber developed the Five principles shown in
    59. 59. Bureaucratic Principles Figure 2.2 Written rules System of task A Bureaucracy should have relationships Fair evaluation and reward Hierarchy of authority
    60. 60. Key points of Bureaucracy Authority is the power to hold people accountable for their actions. Positions in the firm should be held based on performance not social contacts. Position duties are clearly identified. People should know what is expected of them. Lines of authority should be clearly identified. Workers know who reports to who. Rules, Standard Operating Procedures (SOPs), & Norms used to determine how the firm operates.  Sometimes, these lead to ―red-tape‖ and other problems.
    61. 61. Fayol’s Principles  Henri Fayol, developed a set of 14 principles: 1. Division of Labor: allows for job specialization.  Fayol noted firms can have too much specialization leading to poor quality and worker involvement. 2. Authority and Responsibility: Fayol included both formal and informal authority resulting from special expertise. 3. Unity of Command: Employees should have only one boss. 4. Line of Authority: a clear chain from top to bottom of the firm. 5. Centralization: the degree to which authority rests at the very top.
    62. 62. Fayol’s Principles 6. Unity of Direction: One plan of action to guide the organization. 7. Equity: Treat all employees fairly in justice and respect. 8. Order: Each employee is put where they have the most value. 9. Initiative: Encourage innovation. 10. Discipline: obedient, applied, respectful employees needed.
    63. 63. Fayol’s Principles 11. Remuneration of Personnel: The payment system contributes to success. 12. Stability of Tenure: Long-term employment is important. 13. General interest over individual interest: The organization takes precedence over the individual. 14. Esprit de corps: Share enthusiasm or devotion to the organization.
    64. 64. Behavioral Management  Focuses on the way a manager should personally manage to motivate employees.  Mary Parker Follett: an influential leader in early managerial theory.  Suggested workers help in analyzing their jobs for improvements.  The worker knows the best way to improve the job.  If workers have the knowledge of the task, then they should control the task.
    65. 65. The Hawthorne Studies  Study of worker efficiency at the Hawthorne Works of the Western Electric Co. during 1924-1932.  Worker productivity was measured at various levels of light illumination.  Researchers found that regardless of whether the light levels were raised or lowered, productivity rose.  Actually, it appears that the workers enjoyed the attention they received as part of the study and were more productive.
    66. 66. Theory X and Y  Douglas McGregor proposed the two different sets of worker assumptions. Theory X: Assumes the average worker is lazy, dislikes work and will do as little as possible.  Managers must closely supervise and control through reward and punishment. Theory Y: Assumes workers are not lazy, want to do a good job and the job itself will determine if the worker likes the work.  Managers should allow the worker great latitude, and create an organization to stimulate the worker.
    67. 67. Theory X v. Theory Y Figure 2.3 Theory X Theory Y Employee is lazy Employee is not lazy Managers must closely supervise Must create work setting to build initiative Create strict rules & defined rewards Provide authority to workers
    68. 68. Theory Z  William Ouchi researched the cultural differences between Japan and USA. USA culture emphasizes the individual, and managers tend to feel workers follow the Theory X model.  Japan culture expects worker committed to the organization first and thus behave differently than USA workers.   Theory Z combines parts of both the USA and Japan structure.  Managers stress long-term employment, workgroup, and organizational focus.
    69. 69. Management Science  Uses rigorous quantitative techniques to maximize resources. Quantitative management: utilizes linear programming, modeling, simulation systems. Operations management: techniques to analyze all aspects of the production system. Total Quality Management (TQM): focuses on improved quality. Management Information Systems (MIS): provides information about the organization.
    70. 70. Organization-Environment Theory  Considers relationships inside and outside the organization.  The environment consists of forces, conditions, and influences outside the organization.  Systems theory considers the impact of stages: Input: acquire external resources. Conversion: inputs are processed into goods and services. Output: finished goods are released into the environment.
    71. 71. Systems Considerations  An open system interacts with the environment. A closed system is selfcontained.  Closed systems often undergo entropy and lose the ability to control itself, and fails.  Synergy: performance gains of the whole surpass the components.  Synergy system. is only possible in a coordinated
    72. 72. The Organization as an Open System Figure 2.4 Input Stage Conversion Stage Output Stage Raw Materials Machines Goods Services Human skills Sales of outputs Firm can then buy inputs
    73. 73. Contingency Theory  Assumes there is no one best way to manage.  The environment impacts the organization and managers must be flexible to react to environmental changes.  The way the organization is designed, control systems selected, depend on the environment.  Technological environments change rapidly, so must managers.
    74. 74. Structures  Mechanistic: Authority is centralized at the top. (Theory X)  Employees closely monitored and managed.  Very efficient in a stable environment.  Organic: Authority is decentralized throughout employees. (Theory Y)  Much looser control than mechanistic.  Managers can react quickly to changing environment.
    75. 75. The Gilbreths Followers of Taylor: Frank & Lillian GILBRETH (1878-1972) They continued with time and motion studies. Ø Ø Ø Break up and analyze every individual action necessary to perform a particular task into each of its component actions Find better ways to perform each component action Reorganize each of the component actions so that the action as a whole could be performed more efficiently-at less cost in time and effort
    76. 76. Administrative Management Theory  Administrative Management  The study of how to create an organizational structure that leads to high efficiency and effectiveness.
    77. 77. Administrative Management Theory  Max Weber  Developed the principles of bureaucracy as a formal system of organization and administration designed to ensure efficiency and effectiveness.
    78. 78. Weber’s Principles of Bureaucracy Figure 2.2
    79. 79. Weber’s Principles of Bureaucracy 1) 2) 3) 4) 5) A manager’s formal authority derives from the position he holds in the organization. People should occupy positions because of their performance, not because of their social standing or personal contacts. The extent of each position’s formal authority and task responsibilities and it’s relationship to other positions should be clearly specified. Authority can be exercised effectively when positions are arranged hierarchically, so employees know whom to report to and who reports to them. Managers must create a well-defined system of rules, standard operating procedures, and norms so they can effectively control behavior .
    80. 80. Weber’s Principles of Bureaucracy  Bureaucracy: A formal system of organization and administration designed to ensure efficiency and effectiveness.  Authority: The power to hold people accountable for their actions and to make decisions concerning the use of organizational resources.
    81. 81. Rules, SOPs and Norms  Rules  formal written instructions that specify actions to be taken under different circumstances to achieve specific goals  Standard Operating Procedures (SOPs)  specific sets of written instructions about how to perform a certain aspect of a task  Norms  unwritten, informal codes of conduct that prescribe how people should act in particular situations
    82. 82. Fayol’s Principles of Management  Fayol had identified 14 principles that he thought were essential to increase efficiency and effectiveness:  Division of Labor  Allows for job specialization. However; jobs can have too much specialization leading to poor quality and worker dissatisfaction.  Authority and Responsibility  Managers have the right to give orders and the power to exhort subordinates for obedience.  Unity of Command  Employees should only have one boss  Line of Authority  A clear chain of command from top to bottom of the firm.  Centralization  Authority should not be concentrated at the top of the chain of command.
    83. 83. Fayol’s Principles of Management  Unity of direction  There should be a single plan to guide the managers and the workers.  Equity  All organizational members are entitled to be treated with justice and respect.  Order  The arrangement of employees where they will be of the most value to the organization and to provide career opportunities.  Initiative  Managers should allow employees to be innovative and creative.  Discipline  Obedient, applied, respectful employees are necessary for the organization to function.
    84. 84. Fayol’s Principles of Management  Remuneration of personnel  An equitable uniform payment system that motivates contributes to organizational success.  Stability of Tenure of Personnel  Long-term employment is important for the development of skills that improve the organization’s performance.  Subordination of Individual Interest to the Common Interest  The interest of the organization takes precedence over that of the individual employee.  Esprit de corps  Comradeship, shared enthusiasm foster devotion to the common cause (organization).
    85. 85. Discussion Question? Which of the following is the most important aspect of Fayol’s principles of management? Division of Labor B. Unity of Command C. Remuneration of Personnel D. Esprit de corps A.
    86. 86. Behavioral Management Theory  Behavioral Management  The study of how managers should personally behave to motivate employees and encourage them to perform at high levels and be committed to the achievement of organizational goals.
    87. 87. Behavioral Management  Mary Parker Follett  Concerned that Taylor ignored the human side of the organization  Suggested workers help in analyzing their jobs  If workers have relevant knowledge of the task, then they should control the task, they should participate in the work development process  Unlike Fayol, she believed that power is fluid, it should flow to the person who can best help the organization achieve its goals.  Her approach was very radical for her time.
    88. 88. The Hawthorne Studies  Studies of how characteristics of the work setting affected worker fatigue and performance at the Hawthorne Works of the Western Electric Company from 1924-1932.  Worker productivity was measured at various levels of light illumination.
    89. 89. The Hawthorne Studies  Human Relations Implications  Hawthorne effect — workers’ attitudes toward their managers affect the level of workers’ performance
    90. 90. The Hawthorne Studies  This finding led many researchers to turn their attention to managerial behavior and leadership.  If supervisors could be trained to behave in ways that would elicit cooperative behavior from their subordinates, then productivity could be increased.  From this view emerged the human relations movement.
    91. 91. The Hawthorne Studies  Human relations movement  advocates that supervisors be behaviorally trained to manage subordinates in ways that elicit their cooperation and increase their productivity
    92. 92. Implications of the Hawthorne Studies  Behavior of managers and workers in the work setting is as important in explaining the level of performance as the technical aspects of the task  Demonstrated the importance of understanding how the feelings, thoughts, and behavior of work-group members and managers affect performance  Led to the development of an area of management known as ―organizational behavior‖:  The study of the factors that have an impact on how individuals and groups respond to and act in organizations.
    93. 93. Theory X vs. Theory Y Figure 2.3
    94. 94. Management Science Theory  Management Science Theory  Contemporary approach to management that focuses on the use of rigorous quantitative techniques to help managers make maximum use of organizational resources to produce goods and services.  It is like the contemporary extension of scientific management developed by Taylor
    95. 95. Management Science Theory  Quantitative management  utilizes mathematical techniques, like linear programming, modeling, simulation and chaos theory  Operations management  provides managers a set of techniques they can use to analyze any aspect of an organization’s production system to increase efficiency
    96. 96. Management Science Theory  Total quality management  focuses on analyzing an organization’s input, conversion, and output activities to increase product quality  Management information systems  help managers design systems that provide information that is vital for effective decision making
    97. 97. Organizational Environment Theory  Organizational Environment  The set of forces and conditions that operate beyond an organization’s boundaries but affect a manager’s ability to acquire and utilize resources
    98. 98. The Open-Systems View  Open System  A system that takes resources from its external environment and transforms them into goods and services that are then sent back to that environment where they are bought by customers.
    99. 99. The Organization as an Open System Figure 2.4
    100. 100. The Open-Systems View  Input stage  organization acquires resources such as raw materials, money, and skilled workers to produce goods and services  Conversion stage  inputs are transformed into outputs of finished goods  Output stage  finished goods are released to the external environment
    101. 101. Closed System  Closed system  A self-contained system that is not affected by changes in its external environment.  Likely to experience entropy and lose its ability to control itself  Entropy: The tendency of a closed system to lose its ability to control itself and thus dissolve and disintegrate.
    102. 102. The Organization as an Open System  Synergy  the performance gains that result from the combined actions of individuals and departments  Possible only in an organized system
    103. 103. Contingency Theory  Contingency Theory  The idea that the organizational structures and control systems managers choose are contingent on characteristics of the external environment in which the organization operates.  ―There is no one best way to organize‖
    104. 104. Contingency Theory Figure 2.5
    105. 105. Type of Structure  Mechanistic Structure  Authority is centralized at the top.  Emphasis is on strict discipline and order  Employees are closely monitored and managed.  Can be very efficient in a stable environment.
    106. 106. Type of Structure  Organic Structure  Authority is decentralized throughout the organization.  Departments are encouraged to take a cross- departmental or functional perspective  Works best when environment is unstable and rapidly changing
    107. 107. Type of Structure  Nokia’s organic approach to operating:  Control is much looser and decentralized  Reliance on shared norms and common expectations to guide organizational activities is greater  Organic structure can react more quickly to a changing environment  More expensive due to increasing coordination costs
    108. 108. Chapter 2 Planning
    109. 109. Overview of Planning  Objectives  End states or targets  Plans  Means to hit the desired targets  Strategic, Tactical, Operational  Planning  Decision-making process focused on the future of an organization and how it will achieve its goals
    110. 110. Types of Plans  Strategic plans  Broad future of the organization  External environmental demands  Internal resources  Tactical plans  Translate strategic plans into specific goals  Specific parts of the organization
    111. 111. Types of Plans  Operational plans  Translate tactical plans into specific goals and  Small units of the organization  Near term actions
    112. 112. Types of Plans Strategic Plans Tactical Plans Operational Plans Time horizon Typically 3-5 years Often focused on 1-2 years in the future Usually focused on the next 12 months or less. Scope Broadest,originating with a focus on the entire organization Rarely broader than a strategic business unit Narrower, usually centered on departments or smaller units of the organization Complexity The most complex and general, because of the different industries and business potentially covered Somewhat complex but more specific, because of the more limited domain of application The least complex, because they usually focus on small homogenous units Adapted from Exhibit 8.1: Types of Plans: Key Differences
    113. 113. Types of Plans Strategic Plans Impact Tactical Plans Have the potential to dramatically impact, both positively and negatively, the fortunes and survival of the organization Can affect specific businesses but generally not the fortunes or survivability of the entire organization Impact is usually restricted to specific department or organization unit Moderate interdependence, must take into account the resources and capabilities of several units within a business Low interdependence, the plan may be linked to higher-level tactical and strategic plans but is less interdependent with them Interdependence High interdependence, must take into account the resources and capabilities of the entire organization and its external environments Operational Plans Adapted from Exhibit 8.1: Types of Plans: Key Differences
    114. 114. Organizational Levels  Corporate level (Strategic)  What industries should the firm be in?  What markets should the firm be in?  In which businesses should the firm invest money?  Business level (Tactical0  Who are our direct competitors?  What are their strengths and weaknesses? What advantages do we have over them?  What are our own strengths and weaknesses?  What do customers value in our products/services?
    115. 115. Organizational Levels  Functional level (Operational)  What activities must my unit perform well in order to meet customer expectations?  What information about competitors does my unit need in order to help the firm compete effectively?  What are our unit’s strengths and weaknesses?
    116. 116. According to Syllabus  Types of Plan  Single Use Plans  Programm, Projects, Budgets, Standards, Schedules  Repeated Use Plans  Objectives  Mission  Strategies  Policies  Rules n Methods  Procedures
    117. 117.  Objectives: Objectives are very basic to the organisation and they are defined as ends which the management seeks to achieve by its operations. They serve as a guide for overall business planning.  Strategy: strategy is a comprehensive plan for accomplishing an organisation objectives. This comprehensive plan will include three dimensions, (a) determining long term objectives, (b) adopting a particular course of action, and (c) allocating resources necessary to achieve the objective.  Policy: They are guides to managerial action and decisions in the implementation of strategy.  Procedure: Procedures are routine steps on how to carry out activities. Procedures are specified steps to
    118. 118.  Method: Methods provide the prescribed ways or manner in which a task has to be performed considering the objective. It deals with a task comprising one step of a procedure and specifies how this step is to be performed.  Rule: Rules are specific statements that inform what is to be done. They do not allow for any flexibility or discretion.  Programme: Programmes are detailed statements about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required and the budget to implement any course of action.  Budget: It is a plan which quantifies future facts and figures. It is a fundamental planning instrument in many organisations.
    119. 119. Planning Process Analysis of External Environment Analysis of Inner Environment Set of Goals to be achieved Establishing Planning Premises Wal-Mart Venture in India Govt, Tech, Mkt, Political, Sociological, Maruti India -- 5M Nissan – Expand Dealership Introduce low cost Datsun Nissan – Fuel Costs, Sales Forecasts, Gen Econo Special Cond
    120. 120. Planning Process Determining Alternative Course of Action Fiat India Tie up with Tata n break up, Renualt Mahindra Ti Evalu & selecting Best Course Fiat India – Parallel Dealershi Establishing Sequence of Activities Formulation of Long Range & Functional Plans Nissan – Mini Dealerships Further break up of twns Ponds – Olay – Fair n lovely example
    121. 121. Planning Process Formulation of Action Plan TATA Nano new plant and relocation Measuring & Controlling the process Bajaj Auto – Talks fail
    122. 122. Analyzing the Environment The Planning Process  Analyzing the environment  Forecasts: what does the future look like?  Environmental uncertainty  Contingency plans: identify key factors that could affect the desired results and specify what actions will be taken if key events change  Benchmarking  Investigation of the best results among competitors and non competitors and the practices that lead to those results
    123. 123. Discussion – Wall Mart & Easy Day  Study complete business environment  Parameters Wal-Mart considers before entering a     country Easy Day (Airtel Wal-Mart Joint Venture) Fallout reasons Future (Role Play Session) Presentation – Advantages & Disadvantages of Planning 5 slides
    124. 124. Setting Objectives The Planning Process  Setting objectives  Priorities and multiple objectives  Establish which objectives are most important and which have priorities,  Measuring objectives  Financial    performance Profits relative to sales Profits relative to assets Many others  Non-financial performance
    125. 125. Determining Requirements The Planning Process  Determining requirements  Assess current performance  What will it take in order to get from current levels of performance to that level specified in the objectives?  What drives market share?  What capital will be required?
    126. 126. Assessing Resources The Planning Process  Assessing resources  Resources required  What resources are needed to achieve the stated objectives?  Resources available  Do we have the needed human talent to meet the requirements?  Do we have the financial resources available?  Do we have the required technology?
    127. 127. Developing Action Plans The Planning Process  Developing action plans  Sequence and timing  Raw materials, manpower and components must be brought together in the right amounts and sequences  Accountability  Who is accountable for which actions?
    128. 128. Implementing Plans The Planning Process  Implementing Plans  Monitoring the implementation  Monitor the progress of the plan and its implementation  Monitor the level of support that the plan receives as it is being implemented  Monitor the level of resistance  Real-time adjustment
    129. 129. Monitoring Outcomes The Planning Process  Monitoring outcomes  Unanticipated consequences  Negative unanticipated consequences  Positive unanticipated consequences  Feedback loop  Apply what has been learned to modify and improve the planning process
    130. 130. Planning Tools  Budgets  Capital expenditure budget  Specifies the amount of money to be spent on specific items that have long-term use and require significant amounts  Expense budget  Includes all primary activities on which a unit or organization plans to spend money and the amount allocated for the upcoming year
    131. 131. Planning Tools  Budgets  Proposed budget  Provides a plan for how much money is needed, and is submitted to a superior or budget review committee  Approved budget  Specifies what the manager is actually authorized to spend money on and how much
    132. 132. Planning Tools  Two budgetary approaches  Incremental budgeting approach  From the approved budget of the previous year present arguments for why the upcoming budget should be more or less  Zero-based budgeting approach  Justify all allocations of funds from zero each year
    133. 133.  What’s the planning of organizations?  Management by objectives  The strategic management process  Benchmarking / ISO9000 series /six sigma  Entrepreneurship: a special case of strategic planning
    134. 134. What’s the planning of organizations?  The content of planning  Advantages and disadvantages of planning  Types of plans
    135. 135. Planning Encompasses:  Defining the organization’s objectives or goals.  Establishing an overall strategy for achieving those goals.  Developing a comprehensive hierarchy of plans to integrate and coordinate activities.
    136. 136. Advantages of Planning  It gives direction to managers and nonmanagers alike.  Planning can reduce the impact of change.  It minimize waste and redundancy.  Planning establishes objectives or standards that facilitate control.
    137. 137. Disadvantages of Planning  Planning may create rigidity. can’t be developed for a dynamic environment.  Formal plans can’t replace intuition and creativity.  Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival.  Formal planning reinforces success, which may lead to failure.  Plans
    138. 138. Exhibit 4-1 Types of Plans Breadth Time frame Specificity Frequency of use Strategic Long term Directional Single use Tactical Specific Short term Standing
    139. 139. Strategic and Tactical Plans  Strategic plans are plans that apply to the entire organization, establish the organization’s overall objectives, and seek to position the organization in terms of its environment.  Tactical plans (sometimes referred to as operational plans) specify the details of how the overall objectives are to be achieved.  Strategic and tactical plans differ in three primary ways— their time frame, scope, and whether they include a known set of organizational objectives.
    140. 140. Short-term and Long-term Plans  Short-term plans are plans that cover less than one year.  Long-term plans are plans that extend beyond five years.  Their differences lie in the length of future commitments and the degree of variability organizations face.
    141. 141. Specific and Directional Plans  Specific plans have clearly defined objectives and leave no room for misinterpretation.  Directional plans are flexible plans that set out general guidelines.
    142. 142. Single-use and Standing Plans  Single-use plans are used to meet the needs of particular or unique situation.  Standing plans are ongoing, and provide guidance for repeatedly performed actions in an organization.

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