Your SlideShare is downloading. ×
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
ORGANISATION AND MANAGEMENT
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

ORGANISATION AND MANAGEMENT

37,743

Published on

Organization and Management support manual

Organization and Management support manual

Published in: Business, Technology
2 Comments
4 Likes
Statistics
Notes
No Downloads
Views
Total Views
37,743
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
745
Comments
2
Likes
4
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. ORGANISATION AND MANAGEMENT MGT 1111 Centre for Professional Development and Lifelong Learning UNIVERSITY OF MAURITIUS
  • 2. ii ORGANISATION AND MANAGEMENT MGT 1111 SUPPORT MATERIALS Centre for Professional Development and Lifelong Learning UNIVERSITY OF MAURITIUS
  • 3. iii Contributors ORGANISATION AND MANAGEMENT – MGT 1111 was prepared for the University of Mauritius. The Pro-Vice Chancellor - Teaching & Learning acknowledges the contribution of the following persons from the Faculty of Law and Management, University of Mauritius: Course Authors: R Baichoo (Miss) Associate Professor M Boolaky Associate Professor D Gokhool D Lai Wai J A Peerally (Miss) R R Ramsaran Fowdar (Mrs) A Seebaluck I Vencatachellum Further editing: R R Ramsaran Fowdar (Mrs) August 2009 All rights reserved. No part of this work may be reproduced in any form, without the written permission from the University of Mauritius, Réduit, Mauritius.
  • 4. iv TABLE OF CONTENTS About the Course Unit 1 Introduction to Management - Mrs R R Ramsaran Fowdar Unit 2 The Evolution of Management - Miss J A Peerally Unit 3 Planning - Dr M Boolaky Unit 4 Decision Making - Miss R Baichoo Unit 5 Organising - Mr D Lai Wai Unit 6 Motivation - Associate Professor D Gokhool Unit 7 Leadership - Mr I Vencatachellum Unit 8 Control - Mr A Seebaluck References Answers to “Additional Activities” Past Examination and Class Test Papers
  • 5. v We strongly recommend that you read this section before proceeding with the course. ABOUT THE COURSE ORGANISATION AND MANAGEMENT (O&M)– MGT 1111 is a one semester course for both diploma and degree students from the five faculties of the University. Most of you will move into positions of management responsibility at some time in the first part of the twenty first century. What challenges will you face and how would you best be prepared to meet these challenges. O&M aims to provide you with an overview of the evolution and an understanding of the major theories and practices related to the management of organisations. This module will therefore enable you to understand the complex and demanding nature of managerial functions in yesterday’s, today’s and tomorrow’s work environments. HOW TO PROCEED SUPPORT MATERIALS The support materials contain no prescribed textbook. You might, however, find it useful to refer to the following textbooks: 1. Bartol, K.M., Martin, D., Tein, M. & Matthews, G., Management: a Pacific Rim Focus, (latest edition), McGraw-Hill, Australia. 2. Robbins, S., Management, (latest edition), Prentice-Hall International. 3. Boolaky, M., Gokhool D., Seebaluck A., (1999), Management: Concepts and Applications, Editions de L’Ocean Indien. A few copies of these books are available at the UOM Library. There is also a list of references – sources used for the preparation of the units- at the end the support materials. Feel free to consult these books to deepen your knowledge of management and also to prepare assignments.
  • 6. vi A Student Reference Manual is distributed together with the support materials. This is a valuable information source aimed at helping you formulate your written assessment tasks. Video Sessions The course also includes a set of video programmes, Taking the Lead, the Management Revolution (1993), produced by INTELECOM, (USA) and acquired through the Mauritius College of the Air. The set includes the following episodes: Video Programmes (30 minutes each) Related to Unit in the support materials Episode 1: Management at Work: the Managerial World Unit 1: Introduction to Management Episode 2: In transition: The Changing, Challenging Environment Unit 2: The Evolution of Management Episode 14: All Systems Go: Motivating for Excellence Unit 6: Motivation Episode 16: At the Helm: Styles of Leadership Unit 7: Leadership You will not be viewing all episodes in one go but your tutor will be organising sessions for you as and when the relevant units are being covered in the support materials. For some units, your tutor has prepared a list of questions and issues that have to be borne in mind while viewing the video programmes. Be prepared to discuss your responses after the video viewing.
  • 7. vii HOW DO I USE THE SUPPORT MATERIALS? Take a few minutes now to glance through the entire document to get an idea of its structure. Notice that the format of the different units is fairly consistent. For example, each unit begins with a UNIT STRUCTURE, an OVERVIEW and a list of LEARNING OBJECTIVES. The UNIT STRUCTURE identifies the main topics in the Unit. The OVERVIEW provides a brief introduction of the unit. You should then read the LEARNING OBJECTIVES. These objectives identify the knowledge and skills you will have acquired once you have successfully completed the study of a particular unit. They also show the steps that will eventually lead to the successful completion of the course and provide a useful guide for review. The ACTIVITIES sprinkled throughout the unit are designed to reinforce the learning objectives for each part of the course. Therefore, make sure that you complete all the activities and be prepared to discuss and share your answers with your tutor and peers. WHERE DO I BEGIN? You should begin by taking a look at the TABLE OF CONTENTS. The table provides you with a framework for the entire course and outlines the organisation and structure of the material you will be covering. The Suggested Course Map indicates how you should allocate your workload and what you should be working on in each week to be ready for the respective tutorial. As far as possible, stick to the Suggested Course Map to ensure that you are working at a steady pace and that your workload does not pile up.
  • 8. viii SUGGESTED COURSE MAP Week Unit Topic Tutorial Submission of Assignment/ Class Test 1 Introduction to O & M Module 1 2 1 Introduction to Management 2 3 2 The Evolution of Management 3 4 3 Planning 4 5 4 Decision Making 5 6 Discussion on Units 1-4 6 7 Class Test End of Week 7 8 5 Organising 7 Submission of Assignment 9 6 Motivation 8 10 7 Leadership 9 11 Discussion on Units 5 - 7 10 12 Complete Assignment Date to be confirmed during the semester 13 8 Control 11 14 Discussion on Unit 8 12 15 Revision 13
  • 9. ix SUGGESTED ASSESSMENT CRITERIA → COURSE GRADING SCHEME: Assignment: 15 marks Class Test: 15 marks Examination: 70 marks CLASS TEST: Scheduled for Week 7 → FINAL EXAMINATIONS: • Scheduled and administered by the Registrar’s Office • A two-hour paper at the end of the semester. STUDY TIPS 1. Organise your time. It is best to complete each assigned reading in one sitting. The logical progression of thought in a chapter/unit can be lost if it is interrupted. 2. Be an active reader. Use question marks to flag difficult or confusing passages. Put exclamation marks beside passages you find particularly important. Write short comments in the margins as you go. For example, if you disagree with an author’s argument or if you think of examples which counter the position presented, note your opinions in the margin. If you prefer to leave your book pages unmarked, you can make your notations on “post-it-notes”. 3. Read critically. You must evaluate, as well as appreciate and understand, what you read. Ask questions. Is the author’s argument logical? Are there alternatives to the author’s explanations or to the conclusions drawn? Does the information fit with your experience? 4. Take notes. If you make notes on an article or chapter right after finishing it, you reap a number of benefits. First, note-taking allows you an immediate review of what you have just read. (You will find that this review helps you recall information). Second, it gives you an opportunity to reassess your flagged or margin comments. Finally, it gives you a second shot at deciphering any confusing passages. 5. Review your scribbling! Whether or not you make separate notes on your readings, review your flags, underlining and marginalia. Study closely those passages you considered significant or difficult.
  • 10. x 6. Write down your ideas in a course journal. As you progress through the course, the new information you absorb will stimulate new thoughts, questions, ideas, and insights. These may not be directly related to the subject matter, but may be of great interest to you. Use these ideas to focus your personal involvement in this and other courses. 7. Your ability to explain the subject matter to others is a good test of your true comprehension of the material. Try explaining the material you are learning to others, classmates or friends, without resorting to jargon. Even if some of them are not directly involved with the techniques discussed in this course, many of the concepts may be of interest to them. 8. Activities found in units will not be marked. We strongly recommend that you do not skip any of them. They will help you prepare for the graded assignments. Now, it’s time to get to work. Good luck and enjoy the course!
  • 11. 1 UNIT 1 INTRODUCTION TO MANAGEMENT Unit Structure 1.0 Overview 1.1 Learning Objectives 1.2 The Meaning of Management 1.3 Management Functions 1.4 The Importance of Management 1.5 Management Skills 1.6 Types of Managers 1.6.1 Management Levels 1.6.1.1 Management Levels and Functions of Management 1.6.1.2 Management Levels and Skills 1.6.2 Responsibility Area 1.7 What Managers Actually Do 1.7.1 Work Methods 1.7.2 Managerial Roles 1.7.3 Agenda-Setting and Network-Building 1.8 The Challenge of Management 1.9 Key Concepts 1.10 Additional Activities 1.11 Video Session
  • 12. 2 1.0 OVERVIEW This Unit introduces the concept of management and outlines the work of a manager. This Unit includes a video session. Refer to the Study Guide. 1.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Define management. 2. Explain the four functions of management. 3. Discuss the importance of management. 4. List the three skills, which an effective manager requires. 5. Describe the various management levels in a large organisation. 6. Explain how managerial work differs according to hierarchical level and responsibility area. 7. Discuss how the importance of management functions and the skills needed by managers vary at different levels of the hierarchy. 8. Describe the ten major roles performed by managers and evaluate Mintzberg's role approach. 9. Explain the aims of agenda setting and network-building and identify the factors which influence a manager's work agenda. 10. Explain how vision, ethics, respect for cultural diversity and training can help people meet the challenge of management.
  • 13. 3 Warm-up activity Peter is the manager of a branch of Pizza Hut. Jot down the duties which you think he has to perform as the manager of a pizzeria. Your answers will be discussed in the tutorial. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 1.2 THE MEANING OF MANAGEMENT The task of management is to get work done through other people in order to achieve the goals and objectives of organisations. An organisation can be defined as a systematic arrangement of two or more people who work together to achieve a specific goal or set of goals. While some organisations are structured in a very formal way, such as Happy World Foods Ltd., Mauritius College of the Air, Air Mauritius Ltd. and the Ministry of Labour,
  • 14. 4 others are more casually organised, like your neighbourhood football team. However, all these organisations share three common characteristics (Robbins 1988): (i) Each has a distinct purpose which can be expressed in terms of a goal or set of goals. For instance, the goal of the University of Mauritius is to provide quality tertiary level education to students, and the goal of the neighbourhood football team is to do its best to win all football matches played with rival teams. (ii) Each is composed of people. (iii) Each develops a structure that defines and limits the behaviour of its members. For example, rules and regulations are created, and tasks and responsibilities are assigned. Activity 1 Does Pizza Hut satisfy the basic criteria underlying the concept of an organisation? Elaborate on your answer.
  • 15. 5 An organisation must be organised and properly managed if it is to achieve its goals. Now, let's look at the various definitions of management. 'Management is the art of getting things done through other people.' Mary Parker Follett 'Management refers to the process of getting activities completed efficiently, with and through other people.' Stephen Robbins 'To manage is to forecast and plan, to organise, to command, to coordinate and to control.' Henri Fayol 'Management is the process of achieving organisational goals through engaging in the four major functions of planning, organising, leading and controlling.' Kathryn Bartol et al. 'Management is the process of planning, organising, leading and controlling the work of organisation members and of using all available organisational resources to reach stated organisational goals.' James Stoner et al. The above definitions are extremely broad. Follett's definition highlights the social nature of management and indicates that managers achieve organisational goals by allocating and delegating the required tasks to employees and not by performing the tasks themselves. This definition is not adequate of course and this is recognised in Robbins' definition of management where it is said that managers work in collaboration with other people.
  • 16. 6 It is worth explaining the term 'efficiently' used by Robbins and the difference between efficiency and effectiveness. Managerial performance in an organisation comprises two dimensions: effectiveness and efficiency (Drucker 1967). Effectiveness is 'the ability to choose appropriate goals and to achieve them' (Bartol et al. 1997), that is doing the right thing. Effectiveness can therefore be divided into two parts: first, choosing the right goals and second, achieving these goals. Efficiency is 'the ability to make the best use of available resources at minimum cost in the process of achieving goals (Bartol et al. 1997), that is doing things right. Efficiency is basically an 'input-output' concept. An efficient manager is one who achieves more output or results from a given input (such as materials, money, labour, equipment) or the same output from less input (Robbins 1994). Efficient managers should therefore minimise the cost of resources. The word 'process' in the definitions by Bartol et al. and Stoner et al. indicates that managerial activities are carried out in a systematic way. All managers achieve their goals by engaging in the four main functions of planning, organising, leading and controlling. It is on these functions that management activity is based. Therefore, they are used as a framework by which management is studied. It is useful to note that the term 'command' in Fayol's view of management is being replaced by the term 'lead' in the definitions propounded by contemporary authors.
  • 17. 7 Activity 2 Define management.
  • 18. 8 1.3 MANAGEMENT FUNCTIONS Management has been described above as a process whereby the resources of an organisation are used to achieve organisational objectives. The traditional approach, which is used to examine this process, is to condense it down to planning, organising, leading and controlling activities (called the POLC approach). These four functions are interrelated and are equally important in achieving the organisation's goals. For instance, a manager cannot just do the planning and ignore the other aspects. Although these four functions do not tell the whole story about what constitutes management, they are a convenient way of describing most of the key aspects of the work of managers in practice (Cole 1996). Let's now describe these four functions in detail. PLANNING Planning is usually listed as the first function of management. This is because we must have a plan before we can organise. Planning can be defined as the management function which involves setting the company's goals and then determining the means to achieve these goals, or in other words, deciding how best to achieve them. In simpler terms, we must first decide what to do and then find out how to do it. As you can see, planning involves decision-making and therefore, this support materials shall address both these elements in detail in Unit 3 - Planning and Unit 4 - Decision-Making respectively. ORGANISING Organising is the management function which focuses on arranging and allocating work, authority, and resources among an organisation's members so that plans may be successfully carried out. This function involves the setting up of an organisational structure whereby work is allocated, lines of authority and responsibility defined, and a system of rules and regulations which guide the conduct of employees laid down. This structure should constantly change to suit the organisation's needs. The organising function will be examined in more detail in Unit 5 - Organising.
  • 19. 9 LEADING The next management function is that of leading. Leading involves influencing others to engage in the work behaviours necessary to reach organisational goals (Bartol 1997). The manager must communicate with his/her subordinates, explain his/her plans to them, and lead and motivate them to exert their maximum efforts to achieve the goals. Key aspects of motivation and leadership will be dealt with in Unit 6 - Motivation and Unit 7 - Leadership. CONTROLLING Controlling is the management function aimed at regulating organisational activities so that actual performance will conform to expected organisational standards and goals (Bartol 1997). Therefore, the controlling function consists of three steps: (i) Establishing a standard or target, (ii) Measuring current performance and comparing it with the standard, and (iii)Taking corrective actions if deviations are detected. This function will be discussed in more detail in the Unit 8 - Control.
  • 20. 10 Activity 3 Some of Peter’s management activities are listed below. Tick the management function that normally includes each activity. ACTIVITY Planning Organising Leading Controlling 1. Deciding to open a take-away counter. 2. Assigning job duties. 3. Communicating to employees about new pay incentives. 4. Deciding to increase the price of pizzas. 5. Checking that pizzas are prepared on time. 6. Hiring new cooks. 7. Checking menu cards to ensure that correct prices are being charged. 8. Monitoring opening and closing schedules. 9. Instituting an employee- suggestion scheme. 10. Appointing a marketing manager to take charge of sales.
  • 21. 11 1.4 THE IMPORTANCE OF MANAGEMENT An organisation with access to materials, machines and manpower will fail if the most important element is missing- the ability to efficiently use these resources. Many businesses have failed because of mismanagement. Some call it bad planning, others blame it on lack of foresight or even bad luck. In our country, some well-known examples of mismanaged companies include Litra Co. Ltd., MCCB Ltd., Howard and Sang Furniture Ltd., Super Centre and recently, H. Teeluck & Sons Ltd. These testify to the importance of proper management. Resources can only be put to proper use by an efficient manager. In the words of Peter Drucker (1989), "The responsibility of management in our society is decisive not only for the enterprise itself but for management's public standing, its success and status, for the very future of our economic and social system and the survival of the enterprise as an autonomous institution". 1.5 MANAGEMENT SKILLS Robert Katz has identified three basic types of skills that make up effective management: technical, human and conceptual skills. Technical skill is the ability to use the procedures, techniques and knowledge of a specialised field (Stoner et al. 1994). This skill may be acquired through education, training or experience. The sales manager, for example, must be familiar with marketing techniques, the products of his company, and the tastes of his customers, his sales territories and the distribution network.
  • 22. 12 Human skill refers to the ability to deal with other people. A manager must be able to work with, communicate, understand and motivate others, both as a member of a group and as a leader who gets things done through others. Conceptual skill is the mental ability to see the overall picture and to understand how one part is related to the others. It is an important skill because a manager must be able to understand how, for instance, his actions can affect other departments, or how environmental influences can affect the organisation. We shall see in section 1.6.1.2 how the required mix of these three skills varies according to the manager's rank in the organisation. Activity 4 It has been said that good managers are born, and as such management skills cannot be acquired. Discuss this statement.
  • 23. 13 1.6 TYPES OF MANAGERS Managers can be classified in two ways: (i) by their level in the organisation; for example, as first-line, middle or top managers and (ii) by the range of organisational activities for which they are responsible; for example, as functional or specialist managers and general managers. 1.6.1 Management Levels The various levels of management in a large organisation form the management pyramid as illustrated in Figure 1.1. Figure 1.1. The Management Pyramid TOP MANAGEMENT Board of Directors Chief Executive Officer Managing Director President MIDDLE MANAGEMENT Department Head FIRST-LINE MANAGEMENT Supervisor
  • 24. 14 Top managers are managers at the very top levels of the hierarchy and are responsible for the overall running of the organisation. Typical titles of top managers include chief executive officer, president, and chairman of the board of directors, managing directors and general manager among others. Top managers develop overall plans for the company and make major decisions such as whether the company should expand its operations or whether new products should be launched. Top management has to work to some extent with the upper layers of middle management in implementing the plans. They also oversee organisational progress and spend much time in understanding how changes in the business environment can affect the company's operations. Middle managers, also referred to as tactical managers (see Unit 3) are managers below the top levels of the hierarchy and are directly responsible for the work of first-line managers and sometimes for that of operating employees as well. Operatives or operating employees work directly on a task or job and do not hold the responsibility of monitoring the work of others while a manager's work includes directing the activities of other people. A computer engineer is an example of operating personnel. Middle managers include plant managers, divisional, department or section heads. They are responsible for working out detailed plans and procedures in line with the overall plans laid down by top management. Middle managers are frequently part of several layers of the hierarchy in large organisations. Since the 1980s however, there is a trend towards fewer layers of middle managers in order to reduce costs, improve communication and to push decision-making closer to the operating level. As a result of this trend, the pressure on the remaining middle managers is higher since they now have to share more work and responsibility. First-line managers are managers at the lowest level in an organisation. They direct the work of operating employees only: they do not supervise the work of other managers. First-line managers are sometimes called supervisors. Examples of first-line managers include foreman, production supervisors in a manufacturing plant, technical supervisors in a repair shop, or floor sale supervisors in a departmental store. These managers are
  • 25. 15 responsible for the direct implementation of the plans developed in conjunction with middle management and for the smooth running of day-to-day operations. Research predicts that the autonomy and influence of first-line supervisors are likely to decline due to • increasing worker participation in workplace management, a trend towards work teams, • increased use of computers to track activities formerly monitored by first-line managers and, • increasing number of specialists who provide advice and direction to work areas involving sophisticated technology in particular (Bartol 1997) 1.6.1.1 Management Levels and Functions of Management No matter what title or position they hold, managers at all three levels on the pyramid perform the same functions of planning, organising, leading and controlling in trying to achieve the organisational goals. However, research demonstrates that the four functions of management are used in different proportions across the levels of management. Figure 1.2. Management Functions at Different Levels Planning Organising Leading Controlling First-line Middle Top Managers Managers Managers
  • 26. 16 As shown in Figure 1.2, top management spends more time in planning, as they need to define the objectives and policies of the whole organisation. Organising is more important for top and middle managers because they are the ones who are mainly responsible for allocating and arranging resource. Leading, on the other hand, is more important for first-line managers because they have to provide leadership support to the workers and communicate with them. In contrast, controlling is most similar at all levels since the monitoring of activities has to be done at all levels. 1.6.1.2 Management Level and Skills The importance of each of the key management skills depends on the manager’s rank in the organisation. For first-line managers, technical skill is more important as they need to deal directly with the daily operation-related problems requiring specific solutions. Technical skill becomes less important as a manager moves up the management pyramid. In contrast, conceptual skills are most important for the top manager since he/she must understand the overall picture. Finally, human skill is equally important for managers at all levels because all managers must understand and work with people. Figure 1.3. Management Skills at Different Levels Technical skills Conceptual skills Human skills First-line Middle Top managers managers managers
  • 27. 17 1.6.2 Responsibility Area Managerial jobs are also classified according to the nature of the responsibility involved. A functional manager is responsible for only one organisational activity or specialised area of the organisation such as production, marketing, finance or human resources. A general manager is responsible for a whole organisation or a complex sub-unit of the organisation such as a company, subsidiary or independent division and is responsible for all the activities of that unit such as marketing, production, accounting or engineering. Depending on circumstances, general managers can be called the president or the division manager or by other titles. Large organisations usually tend to have more than one general manager. 1.7 WHAT MANAGERS ACTUALLY DO According to the functional approach, managers plan, organise, lead and control. But is this what managers actually do? In the broad sense, yes: managers do plan, organise, lead and control. However, if we look at how managers actually spend their time, we would come to interesting conclusions about their work methods, the various roles that they have to play and the importance of agenda-setting and network-building to them. 1.7.1 Work Methods Over the past two decades, many studies have been conducted in an attempt to move away from the classical view of the activities of management (see Unit 2 for further explanations on the classical view of management) towards a more detailed and behaviour-oriented analysis of the actual work methods of managers. Based on a study of the work of five chief executives of medium to large organisations, Henry Mintzberg
  • 28. 18 (1973) found that contrary to traditional views at that time that managers were reflective and systematic planners, • Managers worked at an unrelenting pace, that is, they started working at the very moment they arrived at the office until leaving at night. Coffee and lunch were usually taken during formal or informal meetings. Everyday, the managers had to deal with an average of 36 pieces of mail and other matters. • The work of managers was characterised by variety, brevity and fragmentation. Indeed, the managers had to handle a variety of matters throughout the day and many of these activities were brief since half of them lasted less than nine minutes. The managers would also be constantly interrupted by telephone calls and by subordinates wishing to talk to them. Therefore, there was little time for reflective thinking during the office hours and many managers even had to think about planning at home. • The managers relied much on verbal contacts and networks. They preferred having phone conversations and informal and formal meetings rather than writing memos and reports. The CEOs also depended on their managerial networks for the exchange of information. Networks are sets of co-operative relationships with other people such as subordinates and peers, and individuals and groups both inside and outside the organisation. Such networks were considered essential for managers to have influence and operate effectively. Mintzberg's research focused on the work of CEOs. However, other researchers have observed that the findings of Mintzberg's study characterise the work of managers at all three levels of the hierarchy. 1.7.2 Managerial Roles Mintzberg's study of the work of the five CEOs led him to conclude that the activities of a manager can be classified into a set of ten different but closely interrelated roles or
  • 29. 19 organised sets of behaviour associated with a particular position. He argued that all managers have formal authority over the unit they command and derive a special position of status from that authority. This status causes managers to be involved in interpersonal relationships with other people who, in turn, provide the managers with the information they need to make decisions. The ten managerial roles can thus be classified into three main groupings: interpersonal roles, informational roles and decisional roles as follows: Interpersonal roles Informational roles Decisional roles Figurehead Monitor Entrepreneur Leader Disseminator Disturbance handler Liaison Spokesperson Resource allocator Negotiator INTERPERSONAL ROLES The interpersonal roles arise from the manager's authority and status and involve the development and maintenance of positive relationships with other people. (i) Figurehead As a figurehead, the manager has to perform ceremonial duties as head of the unit, such as signing legal documents, participating in subordinates' weddings, or taking clients to dinner. (ii) Leader The leader role involves the responsibility for the staffing and for the training, motivation and guidance of subordinates. (iii)Liaison Just like politicians, managers must build interpersonal relationships or networks with people outside their unit who can help them achieve their organisation's
  • 30. 20 goals by providing information, co-operation and support. These people can be individuals or groups inside or outside the organisation. INFORMATIONAL ROLES Informational roles involve the reception and transmission of information arising from the manager's interpersonal roles. The three informational roles performed by managers are the monitor, disseminator and spokesperson roles. (i) Monitor This role identifies the manager as seeking and receiving information both internally and externally, which enables the manager to develop thorough understanding of the working of the organisation and its environment. Managers can also collect information through personal contacts or by reading newspapers, magazines and reports for example. (ii) Disseminator The disseminator role involves internal transmission of information received either from outsiders or from other subordinates to organisational members. Transmission of information internally can be conveyed through staff meetings, notice boards, by making phone calls and/or through the writing of memos. The information may be factual or may be based on the manager's judgement of events. (iii)Spokesperson Managers also transmit information on the organisation's plans, policies, actions and results to people outside their own units, such as the board of directors and other superiors, and the general public such as customers, government departments, suppliers and the press.
  • 31. 21 DECISIONAL ROLES Decisional roles involve the making of strategic organisational decisions on the basis of the manager's status and authority, and access to information. (i) Entrepreneur As entrepreneurs, managers plan and initiate projects to bring about change and innovation to improve the performance of their unit and organisation. (ii) Disturbance handler As a disturbance handler role, the manager takes corrective action in response to previously unforeseen problems such as strikes, financial difficulties or change in government policy. In such situations, managers can, for instance, devise a strategy and set up committees that deal with disturbances and crises. (iii)Resource allocator As resource allocators, managers are responsible for the distribution of the organisation's resources such as money, time, equipment, staff and materials among organisational members. (iv)Negotiator The negotiator role relates to participation in negotiation activities with outside organisations (for example when negotiating a contract with suppliers) or with individuals working for the same organisation (for instance when bargaining about working terms and conditions with the trade union). Negotiation plays an important part of the manager's job because of his/her authority, responsibility and knowledge of information.
  • 32. 22 Evaluation of Mintzberg's role approach Mintzberg acknowledged that his categorisation of the ten roles was somewhat an arbitrary division of the manager's activities. It presented only one of the many possible ways of classifying the managerial roles. In practice, the ten roles are not isolated but they form an integrated whole. The effectiveness of the manager's performance is affected if any of the roles is removed. A number of studies support Mintzberg's view that this set of ten roles is common to the work of all managers in different organisations and at different levels of the hierarchy. However, the importance of the roles varies according to the hierarchical level. For instance, the leader role is more important at the lower level of the hierarchy while the roles of figurehead, liaison, disseminator, spokesperson and negotiator are more important at the higher levels. Mintzberg's model of managerial roles is a realistic approach to classifying the actual activities of managers and provides clues to the skills they require in order to carry out their work effectively. However, this model has been criticised. For example, Griffin (1984) found that activities involved in figurehead, disseminator, disturbance handler and negotiator were not separate roles but overlapped considerably with activities of the six other roles. Viewing management as playing roles is complementary to describing the functions of management. Each of the functions of planning, organising, leading and controlling may require any combination of roles; each role may involve any combination of functions. The two are different perspectives of the same thing. For instance, the three interpersonal roles are part of the leading function; planning, on the other hand, involves the allocation of resources and the transmission of information.
  • 33. 23 Activity 5-CASE STUDY Jean Marc at Pizza Hut The first branch of Pizza Hut (Mauritius) was opened in Port-Louis on 25 July 1993. Since then, the restaurant has known a huge success. The Mauritian scene now counts three other branches of Pizza Hut and there is no doubt that it is the No.1 pizzeria in Mauritius today. According to Jean Marc Ah-Foo, Operations Manager at Pizza Hut, the secret behind this success is due to the company's respect for procedures and standards as regards QSCH (Quality, Service, Cleanliness, Hospitality). When the first branch opened at Happy World House, there was a big craze for its pizzas during the first two months. The kitchen had to run for 24 hours for the preparation of fresh dough since the restaurant was open from 10.00 a.m. to 10.00 p.m. The opening of this first pizzeria initiated the 'pizza culture' in Mauritius. At first, there was no big competition in the pizza market, but then competition started earlier than expected with small pizzerias opening all over the island. Pizza Hut therefore decided to create "brand awareness" by having recourse to advertising and other promotional activities. It also made its restaurant more accessible to people by opening new branches with home delivery facilities. Jean Marc initially worked as a waiter after having followed a course in 'Restaurant and Housekeeping' at the Hotel School of Mauritius. After ten years spent in the hotel industry, he was appointed as the first Restaurant Manager at Pizza Hut. The company then provided him with the opportunity to follow courses in computer programming, time management, hygiene and finance. This enabled him to upgrade his management skills along with on-the-job training. He is now the Operations Manager and as a middle manager, is responsible for directing the activities of the four Restaurant Managers and is accountable to the General Manager. Unlike the four Restaurant Managers, Jean Marc does not spend his days in the same office. Every week he visits the Head Office at Coromandel and all the four branches of Pizza Hut on specific days to ensure they are operating smoothly. His main
  • 34. 24 responsibilities include staffing and the training of personnel, product development, menu planning, product tasting, ordering of overseas products, handling of customer complaints, liaising with the overseas business support manager located in India (home office overseeing Pizza Hut operations in Mauritius) and managing the overall organisation of the business. He also looks after the administrative side by supervising stock levels and monitoring food costs. Planning plays an important role in Jean Marc's job. Ordering of overseas products, sales forecasts and allocation of budget for promotional activities are usually carried out one year in advance. Rosters for all the management team and outings for staff are also prepared beforehand. Specific tasks are delegated to each of the staff in all the four branches; regular meetings are scheduled with managers, employees and cashiers respectively once a month to exchange information and to discuss on events which happened during the month. Jean Marc believes that such meetings help to prevent communication problems among organisational members. As far as his relationship with the staff is concerned, Jean Marc tries to be friendly and shows concern for his subordinates. In fact, he hates using the word 'subordinates' and entertains a cordial relationship with his personnel. Jean Marc sometimes even visits parents of female staff to reassure them that working at Pizza Hut is safe at night and that their daughters will be safely dropped at home by the company vehicle. He also attends weddings and funerals of staff. To motivate the personnel, the company gives special incentives for working on Sundays and management tries to be flexible when planning rosters. Jean Marc also tries to develop new ways of upgrading service, motivating staff, launching new products and reviewing the design of the restaurants. He recalls having high levels of absenteeism during the riots of February 1999 in the country when the restaurants had to remain closed for two days for security reasons. Jean Marc's staff look
  • 35. 25 upon him with respect because he deals with them in a professional manner and is conversant with all the operations of the business. However, when it comes to the 'controlling' function, Jean Marc acknowledges that he has to be strict on control procedures. In fact, he has adopted the principle 'main de fer dans des gants de velours' or otherwise his personnel will not respect the company's rules and standards. Many control procedures have been implemented at Pizza Hut such as the daily stock count of bottles, monitoring of cash and stock losses and audit of food costs. Any variances have to be reported to him. The respect for quality is especially important at Pizza Hut. At the branch in the Phoenix Commercial Centre, for instance, pizza slices are thrown away if they have not been sold after 20 minutes! Jean Marc also relies on his network of contacts to achieve organisational goals. He often talks to friends or other managers in Happy World Ltd. to share ideas and to look for information. For instance, he can contact the manager at the cargo department to know what has happened to his goods; or at the computer department if there is a problem with a computer. Sometimes, if his friends make complaints about the service at Pizza Hut, he acts upon such information. Occasionally, the company contracts the services of a specialised firm in marketing research to establish customers' profiles which it can target. Competitive shopping is usually carried once in a month to identify the most suitable suppliers of local materials in terms of prices and quality. Jean Marc also tries to negotiate with the existing suppliers from time to time to obtain discounts and gifts for his staff for the end-of-year party or to have better quotes for their uniforms. Question Consider Mintzberg's managerial roles and identify which of the roles Jean Marc undertakes as part of his job as Operations Manager of Pizza Hut.
  • 36. 26
  • 37. 27 1.7.3 Agenda-Setting and Network-Building Kotter (1982) studied the work of 15 successful American general managers in nine different organisations involved in a broad range of industries. He found that the managers had two significant activities in common: agenda-setting and network-building, despite the fact that their jobs differed and the way they handled their work was different. AGENDA-SETTING A work agenda is a set of tentative goals and tasks that a manager is trying to accomplish in order to bring about desired end-results. Kotter suggested that managers focus their efforts through the use of work agendas. A work agenda can be developed for a period of one month or more and has to be reviewed constantly due to changing circumstances. Stewart (1982) identified three factors which influence a manager's work agenda: (i) Job demands are what the jobholder has to do. Some responsibilities of the jobholder cannot be delegated: for example, attending meetings; meeting minimum criteria of performance which is expected of the manager, for instance the manager's department should achieve a 30 per cent increase in turnover by the end of the year. (ii) Job constraints are internal or external factors which limit what the manager can do: for example, resource limitations, technological limitations, union activity, attitudes of other people and geographical location. (iii) Job choices are activities that the manager can do but does not have to. A manager usually has the choice to do different work from another manager, or to do the work in a different manner. For instance, a manager can opt to do part of the work and delegate the rest of the work to others or he/she can choose to participate to a greater extent in public relations activities than another manager would. A
  • 38. 28 manager therefore enjoys a degree of flexibility when setting his/her work agenda which tends to reflect personal preferences, job demands and constraints, and career objectives of individual managers (Bartol 1997). NETWORK-BUILDING As explained in sub-section 1.7.1, networks involve the manager establishing co- operative relationships with people both inside and outside the organisation. The aim of network-building is to establish and maintain contacts which would be helpful to the manager to achieve the goals set on the agenda. 1.8 THE CHALLENGE OF MANAGEMENT The world economy is becoming fiercely competitive, turbulent and unstable. Stoner et al. (1994) argue that effective managers will need vision, ethics, respect for cultural diversity and training to meet the challenges of global competition. (i) The need for vision Managers have to develop a sense of vision and have to predict what will happen to their organisation in the longer-term. They also have to anticipate problems, identify and exploit opportunities which will allow the organisation to grow and prosper. (ii) The need for ethics Ethics are standards of conduct and moral judgement differentiating right from wrong (Bartol 1997). With the increasing pressure from competition, is it ethical for an organisation to pay bribes; or is it ethical to pollute the environment if this helps the company to reduce its production costs and hence the price of its products to its customers?
  • 39. 29 Organisations are gradually recognising the importance of ethics and social responsibility. Unethical practices harm the interests of stakeholders and will eventually hinder the organisation from achieving its goals. (iii) The need for cultural diversity With global competition and more companies likely to be doing business in other countries, managers will need to be familiar with international business and different cultures. Moreover, employees should be treated equitably and fairly, regardless of their racial, cultural or sexual differences. (iv) The need for training Managers have to continually upgrade their management skills through formal education or ongoing practice to maintain high levels of productivity and to keep pace with new technology. Activity 6 Discuss in small groups the extent to which organisations in Mauritius are meeting the four challenges of management mentioned above. You may illustrate your case by citing an organisation of your group's choice. 1.9 KEY CONCEPTS Agenda
  • 40. 30 Controlling Conceptual Skills Effectiveness Efficiency First-Line Managers Functional Managers General Managers Human Skills Leading Management Middle Managers Networks Organisation Organising Planning Roles Technical Skills Top Managers Work Methods 1.10 ADDITIONAL ACTIVITIES A: MULTIPLE CHOICE QUESTIONS: Encircle the correct answer. 1. Which of the following is NOT one of the major functions of management? A. Controlling B. Planning C. Leading D. Selling
  • 41. 31 2. Which of the following is the ability to choose appropriate goals and to achieve them? A. Planning B. Management C. Efficiency D. Effectiveness 3. Leading is the management function that involves A. setting goals B. allocating resources C. communicating to subordinates D. regulating activities 4. Which of the following is NOT a key management skill? A. Human skill B. Technical skill C. Conceptual skill D. Entrepreneurial skill 5. The set of goals which a manager is trying to accomplish is called A. an action plan B. a work agenda C. a slogan D. a mission statement 6. Which of the following is NOT an informational role? A. Spokesperson B. Disseminator C. Monitor D. Liaison
  • 42. 32 7. Stoner et al. predicts that managerial work will be affected by several trends in the future. Which of the following is NOT one of them? A. Managers will be more concerned with ethics B. There will be an increasing use of information technology in the future C. Organisations will grow in size D. Organisations will have to assume an international perspective B: TRUE OR FALSE ? 1. An organisation is two or more persons engaged in a systematic effort to produce goods and services. 2. The management function of organising involves the regulation of organisational activities. 3. Top managers are more concerned with the leading function than are managers at other levels. 4. Middle managers utilise human, conceptual and technical skills in somewhat equal proportions. 5. A general manager has responsibility for only one functional area. 6. First-line managers are mostly responsible for the day-to-day operations of the organisation. 7. The monitor role as identified by Mintzberg involves the responsibility of controlling the organisation's operations.
  • 43. 33 1.11 VIDEO SESSION “MANAGEMENT AT WORK: THE MANAGERIAL WORLD”: EPISODE 1 Your answers to the following questions will be discussed in the tutorial after you have viewed the video: 1. List the functions of management. 2. Which changes in the business environment are likely to have an impact on management in the future? 3. According to the video, what does ‘total quality management’ mean and how does it work? 4. Why do middle managers represent an ‘endangered species’?
  • 44. 34 UNIT 2 THE EVOLUTION OF MANAGEMENT Unit Structure 2.0 Overview 2.1 Learning Objectives 2.2 Historical Contribution to Management 2.3 Classical Management Approaches 2.3.1 Scientific Management 2.3.2 Bureaucratic Management 2.3.3 Administrative Management 2.4 Behavioural Management Approaches 2.4.1 The Hawthorne Studies 2.4.2 The Human Relations Movement 2.4.3 The Behavioural Science Approach 2.5 Quantitative Management Approaches 2.5.1 Management Science/Operations Research 2.5.2 Operations Management 2.5.3 Management Information Systems 2.6 Contemporary Management Approaches 2.6.1 Systems Theory 2.6.2 Contingency Theory 2.6.3 Theory Z 2.6.4 Total Quality Management 2.7 Key Concepts 2.8 Video Session
  • 45. 35 2.0 OVERVIEW This Unit reviews the major approaches to management which have emerged over the past two centuries. This Unit includes a video session. Refer to the Study Guide. 2.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Compare the different classical approaches to management as well as appreciate their contributions and limitations. 2. Recognise the important early management writers. 3. Assess the contributions of the major theories in the behavioural management approach. 4. Identify the major components of the quantitative management approach. 5. Explain the emergence of the different contemporary management approaches. 6. Identify the relationships among the various classical management approaches and the contemporary approaches. 2.2 HISTORICAL CONTRIBUTION TO MANAGEMENT As you have seen from Unit 1, management usually entails four main activities namely planning, organising, leading and controlling. Management theories and principles, as we know them today, have emerged through a gradual evolutionary process which took place over the past two centuries. In fact the first business and management programmes were offered by the Wharton School at the University of Pennsylvania in 1881 (Bateman et al., 1990).
  • 46. 36 It must be noted, though that many management techniques have been prevalent ever since ancient and medieval times. Around 5000 BC, for example, the Sumerians devised a method of record keeping to monitor and control their activities. Egyptians also were known for their ability to plan, organise and control which made the construction of pyramids, by over 100,000 slaves, possible. The Chinese have been practising five management functions, namely planning, organising, staffing, leading and controlling as early as 1100 BC. Even the Roman Empire, both before and after the birth of Christ, relied heavily upon decentralised management systems in order to sustain its reign (Bateman et al., 1990). However attempts to develop formal management theories are more recent and were spurred on by the industrial revolution in the United States from the early 18th Century. The different phases in the evolution of management can be classified as follows: 1. Classical management approaches 2. Behavioural management approaches 3. Quantitative management approaches 4. Contemporary management approaches 2.3 CLASSICAL MANAGEMENT APPROACHES The classical management movement began around the 1870s and this school of thought refers to three main management styles which are: 1. Scientific Management 2. Bureaucratic Management 3. Administrative Management
  • 47. 37 2.3.1 Scientific Management The concept of scientific management was originally put forward by Frederick Winslow Taylor. As a matter of fact, Taylor's contribution to this management viewpoint has been so significant that he has been unanimously accepted as "the father of scientific management". Many authors also refer to scientific management as "Taylorism". Hired by the Midvale Steel Co. in 1878 as an engineer, Taylor made two crucial observations on management and workers’ attitudes towards their responsibilities. Taylor’s Observations Management's Attitude • Midvale's management exigency on workers to be more productive while, at the same time, its reluctance to pay for higher wages. Hence management's objective was that of "maximum production for minimum pay"(Bateman & al., 1990). Workers' Attitude • Workers deliberate practice of restricting productivity by engaging in systematic soldiering. In other words the workers' main objective was that of "working at less than full capacity" (Bartol & al., 1998). According to Taylor the workers were involved in soldiering for three specific reasons: 1. they felt if only some workers worked at full capacity, others who did not do so would lose their jobs. So a feeling of solidarity towards their co-workers handicapped their obligation to work at a faster pace. 2. the implied system of "maximum production for minimum pay" imposed by management discouraged the workers from being more productive. 3. the working practices adopted by the workers were inherently inefficient. Taylor also believed that Midvale's management was not bent in determining the most efficient ways of tapping into the huge potentials of its workers. So in order to solve this conflicting situation between management and workers attitudes, Taylor devised a scientific approach to management, hence the name "scientific management".
  • 48. 38 Time and Motion Study His scientific approach to management was based on the "time and motion study", which involved scientifically finding and timing the most efficient motions involved in each production task on the workshop floor. This study established, in a definite manner, how much each worker can do per day and therefore eliminated the workers' ability to engage in soldiering. In addition the study was useful in determining which worker was better suited for which task. Furthermore, in order to strengthen his time and motion study, Taylor insisted that: • standardised tools be used by all workers and these would be provided by management. • regular breaks be taken by workers to relieve fatigue. • a "differential rate system" be introduced. Differential Rate System Taylor encouraged management to introduce a differential rate system whereby workers who reached higher levels of productivity would benefit from higher pay, provided they exceeded a standard level of output. Again to discourage soldiering he assured the workers that if ever their peers were to fall behind and lose their jobs, they would quickly find new jobs elsewhere due to the prevailing labour shortage (Stoner, 1995). Taylor assumed that workers would be satisfied with higher payments while management will benefit from higher quantity and quality of output for future sales, therefore increasing profits. So Taylor's scientific management rested on specific principles. Taylor's 4 Principles of Scientific Management 1. Management should scientifically study each task and develop the best method for performing the task. 2. Management should scientifically select, train and develop each worker in order to ensure that each worker is suited for each task. 3. Management should cooperate fully with workers to ensure that they use the proper methods. 4. Management should divide work and responsibility in such a way that management is responsible for planning work methods and workers are responsible for executing these work methods. Source: Bartol et al. (1998)
  • 49. 39 Scientific management contributed greatly to the spread of many factories in those days due to its revolutionary approach to increasing productivity and some of its principles are still of relevance today. In fact it was mostly scientific management that inspired Henry Ford to mass-produce the Model T car, so that most people could afford it. Scientific Management – Contributions: • Introduced a scientific approach to management. • Improved factory efficiency and productivity. • Used as a model upon which the creation of modern assembly lines was based on. • Allowed managers to reward workers for higher performance and productivity through the differential rate system. • Built a sense of co-operation between management and workers. However scientific management has also been criticised by many authors. Scientific Management - Limitations: • Limited by its underlying assumption that workers were primarily motivated by economic and physical needs. It therefore overlooked the desire of workers for job satisfaction. • Led, in some cases, to the exploitation of workers and it has been often suggested that scientific management was at the centre of many strikes prevalent in those days. • Excluded the tasks of management in its application. • Instilled an authoritarian leadership approach. • Focused only on the internal operations of the organisation. The theory of scientific management was further extended through the works of Frank and Lillian Gilbreth as well as of Henry L Gantt.
  • 50. 40 Activity 1 Why did Taylor find it necessary to introduce a scientific approach to management? 2.3.2 Bureaucratic Management The concept of bureaucratic management was put forward by Max Weber, a German sociologist. Weber's need to establish a bureaucratic system of management stemmed from his exposure to nepotism whereby he saw that many people were being recruited in organisations based on personal contacts (and based on who they were) rather than on their competence. This practice, he believed, led to a great deal of inefficiencies in organisations. In the 1940s Weber published "The Theory of Social and Economic Organisations" in which he proposed a set of principles that managers should follow in order to make their organisations "ideal bureaucracies" - ideal because these organisations would be based on rationality, efficiency, consistency and fairness.
  • 51. 41 Weber's Principles of Bureaucracy Principle 1 Specialisation of labour Description: Each job should have a set of specific and regular activities. This will ensure that each person in the organisation will know exactly what is expected of him/her and will also become an expert at what he/she does, through repeated task completion and regular training. It also ensures continuity in a job which has been handed over to a promoted or new member of the organisation. Principle 2 Formal rules and procedures Description: Written rules and procedures set by the organisation and which require strict adherence to. This will ensure that the organisation benefits from increased efficiency because all its members will have to perform their jobs according to these rules and procedures in a routine and unbiased manner. This will also reduce any scope for indolence and errors. It, for example, also involves strict application procedures for jobs in the organisation and hence the recruitment of competent people only. Principle 3 Impersonality Description: Rules, procedures and sanctions are applied uniformly throughout the organisation. This will ensure consistency and fairness in dealing with every member of the organisation regardless of any personal considerations. Principle 4 Well-defined hierarchy Descriptions: 1. The establishment of multiple levels of position in the organisation. 2. Authority is linked to specific positions in the management hierarchy. 1. This will ensure that relationships between each hierarchy are carefully defined and that each hierarchy is responsible for the one below it. Similarly each hierarchy should report to the one directly above it. Important decisions are however taken by senior managers found at the top of the hierarchical ladder. 2. This will ensure the efficient achievement of organisational objectives through the formal network of relationships among specialised positions. It is also considered as an efficient means of dealing with exceptional situations and establishing accountability of actions. Principle 5 Career advancement based on merits Description: Selection and promotion is based on the qualifications and performance. This will ensure that selection and promotion are done fairly and that only the most competent people are recruited. Source: Bateman & al. (1990), Stoner (1995), Bartol & al. (1998)
  • 52. 42 It must be noted though that these principles were first applied to large organisations following the publication of Weber's book in the United States in 1947. Managers there were impressed by Weber's approach to management and were eager to apply them in their own organisations. However, as mentioned above, Weber's intention was only to provide managers with guidelines in order to increase the internal efficiency of their organisations. Weber's bureaucratic approach includes many contributions to management. In fact Stoner (1995) suggests that it is the bureaucratic model which has "advanced the formation of huge corporations such as Coca-Cola and Exxon". Bureaucratic Management - Contributions: • Ensured that the organisation would be operated and managed by qualified/high calibre personnel only. • Allowed many organisations to efficiently perform routine organisational tasks through job specialisation. • Allowed management and employees to be more objective in their judgement and approach due to rules and procedures for doing specific tasks being clearly set. • Placed emphasis on job position, specialised employees and job continuity thus providing the organisation with long-term perspectives and quality employees. • Surpassed the loss of any employee or even of any manager due to the nature of job specialisation. Hence in such a bureaucracy anyone can be replaced. But inherent to this approach are also many limitations. Bureaucratic Management - Limitations • Imposed a formal and structured chain of command which is not compatible with organisations that require flexibility and rapid decision-making. This is truer today where organisations are constantly faced with a turbulent external environment of increased competition. • Made employees feel insecure and replaceable. • Did not promote, again through its formal and structured chain of command, interpersonal relationships between subordinates and superiors and vice versa.
  • 53. 43 • Often led to the abuse of power and control since only a few people in the hierarchy had authority. This, sometimes, resulted in authoritarian styles of management as well as autocratic styles of leadership. • Argued that bureaucracies are difficult to dismantle. Their nature is such that once they are institutionalised "they take a life of their own" (Bateman et al., 1990). Activity 2 In your own words list the advantages and disadvantages of adopting a bureaucratic approach to management. Advantages: Disadvantages:
  • 54. 44 2.3.3 Administrative Management The concept of administrative management was initially put forward by Henri Fayol, a French mining engineer and industrialist when he published, in 1916, his managerial experiences in a monograph titled “General and Industrial Management”. Administrative management, as designed by Fayol, is based on two recommendations which should be applied to the organisation, by senior managers, in order to achieve superior levels of performance. These recommendations are as follows: Recommendation 1 – Fayol’s Five Managerial Functions Planning, organising, commanding, co-ordinating and controlling which relate to the four functions discussed in Unit 1. According to Fayol senior managers should be involved in carrying out these functions in order to ensure effective organisational performance. Furthermore, since he broke down the job of managers into specific functions, Fayol demonstrated that the ability to manage and become managers could be taught to individuals. Recommendation 2 – Fayol’s 14 Principles of Management 1. Division of work Work is divided in order to produce more and better work with the same effort. 2. Authority Managers must exert authority whereby they have the right to give orders, establish each employee’s degree of responsibility and the power to extract obedience. 3. Discipline Managers establish clear and fair agreements between the organisation and the employees. Managers should also judiciously apply sanctions. 4. Unity of command Employees should receive orders from one superior only. 5. Unity of direction Activities aimed at the same objective should be organised so that there is one plan and one person in charge. 6. Subordination of individual interest to the general interest Personal interests of managers and employees are secondary to the overall interests of the organisation. 7. Remuneration Compensation should be fair to both the employees and managers. 8. Centralisation The proper amount of centralisation or decentralisation depends on the situation. 9. Scalar chain A scalar (hierarchical) chain of authority which forms a chain of superiors, ranging from the highest ranking to the lowest ranking manager. 10. Order There is a place for everyone in the organisation and everyone understands his/her place. Order also applies to materials, which should be kept
  • 55. 45 in well-chosen places, in order to facilitate activities. 11. Equity Employees should be treated with kindness and justice. 12. Stability and tenure of personnel Because time is required to become effective in new jobs, high turnover should be prevented. 13. Initiative Managers should encourage and develop subordinate initiative to the fullest. 14. Esprit de corps Harmony amongst all organisation members result in great strength. Fayol emphasised that these two recommendations be regarded as universal guidelines and be applied flexibly to the organisation. The scope of administrative management was further expanded through the effort of Chester Barnard, former president of New Jersey Bell Telephone Company. After many years of experience as an executive, Barnard published in 1938 “The Functions of the Executives”. Unlike Fayol, Barnard did not propose a list of principles; instead he argued that senior executives’ functions should include (Bateman et al., 1990): 1. Formulating the purpose and objectives of the organisation 2. Securing each employee’s effort in the organisation 3. Maintaining organisational communications These functions transpired in the form of the “acceptance theory of authority” which Barnard used to describe the perception which employees had for managerial authority. Acceptance Theory of Authority Barnard contended that communication, as opposed to authority, is more effective in ensuring that employees follow orders and directives. So regardless of the fact that orders and directives are communicated by superiors/managers in the hierarchy (hence “persons of authority”), Barnard explained these will only be followed if employees (Bartol & al., 1998): 1. Understand the orders and directives 2. See the orders and directives as consistent with the purposes of the organisation 3. Feel that the orders and directives conform with their needs and those of other employees 4. View themselves as mentally and physically able to comply with the orders and directives
  • 56. 46 Barnard believed that this approach to management would nurture a willingness to co- operate and ensure a clearly articulated common purpose between managers and employees. Administrative Management - Contributions • Viewed management as a profession which can be trained and developed • Offered universal managerial guidelines • Promoted communication between managers and employees • Highlighted the needs of employees through unity of command, unity of direction, equity, and so on... • Encouraged employees to act on their own initiatives Administrative Management - Limitations • Fayol's recommendations are too experience biased and therefore not driven by formal research. Hence its concepts have not been tested. • Lacked consideration for organisation's environmental, technological and personnel factors, due the blind application of Fayol's concepts. (Bateman et al., 1990). Activity 3 How effective, do you think, are Fayol's principles in increasing organisational performance?
  • 57. 47 2.4 BEHAVIOURAL MANAGEMENT APPROACHES As explained earlier the classical management approaches, and in particular scientific management, were criticised for being mechanistic and dehumanising in nature. Furthermore though the classical approaches looked at most functional avenues for increasing productivity and internal efficiency, none emphasised human behaviour in organisations. The behavioural approaches to management demonstrate that job satisfaction through effective leadership and motivation influences organisational performance. Behavioural approaches to management therefore attempted to understand the "human aspects" in organisations and the main contributions to this school of thought are: 1. The Hawthorne Studies 2. The Human Relations Movement 3. The Behavioural Science Approach 2.4.1 The Hawthorne Studies The Hawthorne studies were named so because they were conducted at the Western Electric's Hawthorne plant near Chicago. The management of the company hired a team of Harvard researchers led by Elton Mayo and Fritz Roethlisberger to find the main physical working conditions (starting with lighting) which might be affecting workers' efficiency and productivity. Three sets of studies were carried out and the first two are discussed below. Hawthorne Studies - Experiment 1 'The Illumination Experiments" - The researchers changed the lighting in the factory to assess the effects of different lighting conditions on productivity. However one group of workers - the control group - was kept in constant lighting conditions. They observed that: 1. The control's group productivity increased 2. Where lighting conditions were improved, productivity also increased 3. Where lighting conditions were deteriorated, productivity still increased As level of productivity was rising in an unpredictable manner, the researchers were baffled and decided to look for other physical working conditions that might affect productivity.
  • 58. 48 Hawthorne Studies - Experiment 2 In this second set of experiments, five female workers were placed separately in a Relay Assembly Test Room and the researchers acted as supervisors. As a consequence the researchers were able to alter a number of work conditions whereby: 1. There were no formal supervisors present 2. Wages were increased and workdays and workweeks were shortened 3. The length of rest periods was altered and the group members were free to choose when to take them. As a result the workers were allowed to leave their workstations without permission. The workers were also given the opportunity to suggest other possible changes in their working conditions. A control group, which did not benefit from any changes, was also tested in order to compare findings between both groups. Once again the researchers found that productivity, in both groups, peaked after which it began to fall erratically. At this stage in the Hawthorne Studies, Mayo and his associates made their first contribution to the behavioural approach - namely the Hawthorne Effect. The Hawthorne Effect It is obvious that the only common element between the control group and the "five female workers test group" was the presence of the researchers. The researchers argued that since both groups of workers were being monitored closely and received special attention, they became more motivated than usual. This phenomenon of increased motivation to work harder, due to special attention, is known as the Hawthorne effect. So the researchers suggested that employees' behaviour and productivity are influenced by management's/supervisors' attitude towards them. The researchers also noticed that the social environment of the employees may lead to the formation of informal work groups which also have a considerable influence on productivity and output. Informal Work Groups Informal work groups refer to the associations and friendships which co-workers usually tend to develop when they want to resist management expectations of productivity and/or when they are unhappy with working conditions. These work groups usually have different norms and they are able to influence productivity by exerting pressure on individuals in the group, so that they can influence level of output.
  • 59. 49 The Hawthorne Studies are regarded as a milestone in the behavioural movement. However many authors have branded the Hawthorne Effect as controversial [Stoner (1995), Bateman et al. (1990)]. In fact, according to Bartol et al. (1998), "More contemporary investigations now suggest that the Hawthorne-effect concept is too simplistic...and...defective". 2.4.2 The Human Relations Movement Although the findings of the Hawthorne studies were regarded as controversial, they nevertheless urged a shift towards the search for a better understanding of human behaviour. The human relations approach tried to encourage managers to move away from the belief that employees were motivated only by material and economic incentives and instead proposed that managers recognise the necessity of interpersonal processes as an important motivational mechanism for employees. Two important contributors to the human relations movement are: 1. Abraham Maslow for his "hierarchy of needs theory" which suggests that people are motivated by the need to satisfy a sequence of human needs, including physiological (the most basic needs), safety, social, esteem and self-actualisation. 2. Douglas McGregor for his "Theory X and Theory Y" which describe two opposing management views of employees. Theory X views employees as innately lazy and without ambitions, while Theory Y sees employees as motivated, hard-working and responsible beings. McGregor preferred the Theory Y management approach whereby he observed that job satisfaction increases employees' performance. This, he argued, is achieved by allowing employees to exercise responsibility and participate fully in the organisation.
  • 60. 50 2.4.3 The Behavioural Science Approach Though the human relations movement has contributed to management approaches by highlighting the importance of motivating employees through job satisfaction, it has nevertheless been criticised for being based solely on theories rather than scientific evidence. Hence the behavioural science approach to management is based on scientifically developing and establishing theories about human behaviour in organisations which can be used to provide practical guidelines for managers. Researchers from diverse disciplines such as economics, psychology, sociology and even mathematics have joined their efforts in order to gain scientific knowledge about human behaviour. Many concepts pertaining to human behaviour and the organisation are tested in laboratory settings. Findings are then presented to management practitioners, who can apply them to their organisations. Activity 4 Based on your knowledge of the classical management approaches, list the major contributions of the three behavioural management approaches.
  • 61. 51 2.5 QUANTITATIVE MANAGEMENT APPROACHES Quantitative methods were initially adopted during World War II when military planners began to apply mathematical techniques to defence and logistics problems. Executives gradually realised the importance and applicability of quantitative analysis to managerial decisions, organisational effectiveness and hence the industry as a whole. So, after the war, companies began to recruit quantitative experts who would be able to develop and enhance this revolutionary approach to management and decision-making. Nowadays, quantitative management includes, among other things, the application of statistics, mathematics, computer and information models to organisation activities. Quantitative approaches to management are applicable to many organisational functions such as: Production, Quality Control, Marketing, Finance, Distribution and Planning Quantitative management can be sub-divided into the following 3 main management styles: 1. Management Science 2. Operations Management 3. Management Information Systems 2.5.1 Management Science Management science is also known as operations research (OR). In OR, complex organisational decisions are made by using high-powered computers programmed with quantitative tools. OR is popular, for example, in new product development, where possible product models are simulated on computers and their features, cost of production, inputs and so on can be assessed.
  • 62. 52 Management science has also contributed to the development of other quantitative tools which facilitate linear programming, forecasting, break-even analysis and hence help decision-making process. 2.5.2 Operations Management Operations management is used mainly to improve productivity and efficiency in production through the use of quantitative tools. Some examples of production logistics and activities which have been improved through operations management include inventory modelling, quality control and distribution. 2.5.3 Management Information Systems (MIS) Management Information Systems (MIS) involve a management approach geared towards the "collection, processing and transmission of information to support management functions"(Bovée et al., 1993). So organisations which apply MIS, design and implement computer-based information systems on different aspects of the organisation, including its customers and environment. Upon requirement such information can be rapidly retrieved and utilised. Activity 5 Compare and contrast the three quantitative management approaches.
  • 63. 53 2.6 CONTEMPORARY MANAGEMENT APPROACHES As can be gathered above, classical, behavioural and quantitative management approaches tend to focus more on the internal workings of organisations. The contributions of each school's of thought are still being applied today. However both researchers and practitioners are now giving more attention to interaction of the organisations with their external environment. The contemporary approaches to management include: 1. The Systems Theory 2. The Contingency Theory 3. Japanese Management and Theory Z 4. Total Quality Management 2.6.1 The Systems Theory In the systems theory, organisations are seen as systems composed of a set of interdependent parts which co-ordinate their efforts in order to achieve common goals. Organisational systems operate on the basis of four elements (see Figure 2.1): 1. Inputs - the organisational resources, e.g. raw materials, human resources, financial resources, information and equipment. 2. Transformation processes - the conversion of inputs into outputs through managerial functions, technological operations and production activities 3. Outputs - the results of the transformation processes, which include profits/losses, goods/services and so on. Some of these outputs, like for example products and services, are returned to the environment for use by other organisations and individuals. 4. Feedback - the environment's reactions to these outputs are relayed back to the system.
  • 64. 54 External Environment Figure 2.1: The Organisational System This approach allows managers to assess their organisation's interaction with the larger environment. Open System and Closed System An open system is an organisational system which interacts with its environment (as shown in Figure 2.1), whereas a closed system is one that does not do so and is therefore self-sufficient. However, in reality, an organisation cannot be a totally closed system because for survival, an organisation has to interact with its environment. The concept of open and closed systems is used as a continuum to assess the extent to which an organisation interacts with its environment. 2.6.2 The Contingency Theory Contingency theorists argue that each organisational circumstance is unique and as a result management approaches should be selected and applied based on the specific situation at hand. The contingency theory therefore supports the view that "there is no one best way to manage" and emphasises the use of any management approach - scientific, behavioural and quantitative - provided it is suited to the organisational situation and helps managers to manage more effectively. Inputs Transformatio n Process Outputs Feedback
  • 65. 55 2.6.3 Theory Z Theory Z was put forward by William G. Ouchi after he studied the management practices of Japanese and U.S. firms which operated in both countries. Ouchi described the U.S. management approach as Theory A and the Japanese management approach as Theory J and integrated the successful practices of both to create the Theory Z. According to Ouchi's observations: Theory A typifies U.S. management approach as being geared towards: Theory J typifies Japanese management approach as being geared towards: 1. Short-term employment 2. Individual decision making 3. Individual responsibility 4. Rapid evaluation and promotion 5. Explicit, formalised control 6. Specialised career path 7. Segmented concern 1. Lifetime employment 2. Consensual decision making 3. Collective responsibility 4. Slow evaluation and promotion 5. Implicit, informal control 6. Non-specialised career path 7. Holistic concern Theory Z combined some of the U.S. and Japanese management approaches and is geared towards: 1. Long-term employment 2. Consensual decision making 3. Individual responsibility 4. Slow evaluation and promotion 5. Implicit, informal control with explicit, formalised measures 6. Moderately specialised career path 7. Holistic concern, including familySource: Bovée et al., 1993
  • 66. 56 2.6.4 Total Quality Management The concept of quality control was initially put forward by the American W. Edwards Deming, following a visit he made to Japan, in 1950, to advise top Japanese managers on how to improve their production effectiveness. His contributions have been subsequently expanded into the Total Quality Management (TQM) concept - a management approach that "aims at achieving zero defects by involving all workers in striving to make a product or service conform exactly to desired quality standards" (Bartol & al., 1998). An important aspect of TQM is its emphasis on minimising costs through doing things "right first time". Activity 6 Discuss the advantages of contemporary management approaches over the classical ones.
  • 67. 57 2.7 KEY CONCEPTS Scientific Management Soldiering Time and Motion Study Differential Rate Systems Bureaucratic Management Administrative Management The Hawthorne Studies Hawthorne Effect The Human Relations The Behavioural Science Quantitative Management Management Science/Operations Research (OR) Operations Management Management Information Systems (MIS) Systems Theory Open System Closed System Contingency Theory Theory A Theory J Theory Z Total Quality Management (TQM)
  • 68. 58 2.8 VIDEO SESSION “Intransition: The Changing, Challenging Environment”: Episode 2 1. In what terms did Taylor define each worker’s task? 2. What is the legacy of Taylor’s work? 3. Why would people be “unhappy” if there was not a level of bureaucracy? 4. Bureaucracies were often compared to ______________ - ____________ machines. 5. What was the “one” major shortcoming of the classical management theories? 6. What is the economic order of today? 7. What advantages does “diversity” bring to an organisation? 8. Who are the stakeholders of a business? 9. What barriers do businesses have to break in order to survive in today’s competitive environment? 10. What attributes will the company of tomorrow have?
  • 69. 59 UNIT 3 PLANNING Units Structure 3.0 Overview 3.1 Learning Objectives 3.2 Introduction 3.3 Planning 3.3.1 Benefits of Planning 3.3.2 Hierarchy in Planning 3.3.2.1 Strategic Plans 3.3.2.2 Tactical Plans 3.3.2.3 Operational Plans 3.3.3 Appellation for Plans 3.3.3.1 Statement of Objectives 3.3.3.2 Strategies 3.3.3.3 Policies 3.3.3.4 Procedures 3.3.3.5 Rules 3.3.3.6 Programmes 3.3.3.7 Budget 3.4 Objectives 3.5 Barriers to Planning: Why do organisations not Plan in Practice? 3.6 Forecasting 3.6.1 Methods of Forecasting 3.7 Summary
  • 70. 60 3.0 OVERVIEW In Unit 3, we introduce you to organisational planning, decision-making and forecasting. We highlight the benefits of planning in organisations and explain the barriers faced by planners. The Unit describes very briefly the various forecasting techniques that are commonly used by managers. Note that this Unit contains a group activity. 3.1 LEARNING OBJECTIVES After you have successfully completed this unit, you should be able to do the following: 1. Define planning. 2. Identify what is involved in planning. 3. Distinguish the different types of plan. 4. Assess the nature and importance of objectives. 5. List the benefits of planning. 6. Explain what forecasting implies. 7. Compile the most commonly used forecasting techniques 3.2 INTRODUCTION Plans and decisions are essential requirements to organisational tasks and management. Business success depends significantly upon successful planning and decision making. In fact, the challenge of management today lies in how to score success in the planning and decision making exercise. Organisations rarely operate in a vacuum. They are in fact open systems with significant interaction with the environment. Managers are becoming increasingly aware of the effects of the environment on organisations. Had it not been for the turbulence that
  • 71. 61 characterises today’s business environment, chances would have been better that activities would have proceeded as planned. The business environment is changing so rapidly that Drucker characterises this change as being irreversible. Resources - manpower, money, materials- are also getting scarcer and another challenge of management and the manager is how best to allocate these resources to survive and grow. This process calls for sound decision making and right allocation of resources. Unit 4 explains the major elements constituting the decision making process. Mistakes and errors can no longer be permitted in organisations as these involve wastage of resources and the organisation paying this off from its competivity. Thus, there is a need for making the right forecast and prediction about the future. Forecasting deals with this aspect. In Section 3.6, we deal with forecasting and highlight the major forecasting techniques available to managers. Now, let’s consider in more details the issues raised above. But before, complete the exercise below in the space provided. Warm up Activity Imagine a few instances when you have had to make certain plans. Jot down the major issues that crossed your mind about plans and planning from these experiences.
  • 72. 62 3.3 PLANNING All of us have been involved in “planning” in one way or the other, at home, at work, in college, etc. We all have our own experience of what planning is about. Let’s try to understand first a definition of planning. Planning may be defined as… Deciding now what to do in the future given certain intended conditions This definition of planning incorporates three important elements that require attention: now, what to do, and future. First, the word now indicates present circumstances and the current state of affairs pertaining to an organisation. It must be appreciated that organisations do not operate in a vacuum and are in fact, with very few exceptions, open systems with constant and dynamic interaction with the environment. Environment scanning is therefore a pre-requisite for the planning process. Environmental scanning is commonly carried out through what is termed a SWOT analysis – the identification of strengths and weaknesses pertaining to the internal environment of an organisation and opportunities and threats that the external environment presents. The internal environment relates to those factors that the organisation can relatively control. The external environment that constitutes the PEST (Political, Economical, Social and Technological) factors is relatively remote from what the organisation can control. You will have an opportunity to study more about this in Strategic Management. The second important element in the definition is “what to do” or “what to achieve”. These are expressed in terms of a statement of objectives, also referred to as goals and
  • 73. 63 targets. Put together planning is, therefore, a process that defines what the organisation aims to achieve at some point in time. The process produces what we commonly call plans. There are different appellations that are given to the output of the planning process. These are briefly described in the next Section. The third element that the definition of planning includes is the future. The future may be any time that succeeds now, that is the next second or a fraction of it, the next minute, hour, week, month, year, four years, ten years, etc. The future is basically characterised by uncertainty and uncertainty involves risk. Expressed differently, the future is quite unpredictable and the more we go into the future, the more it is difficult to predict what it is going to hold that in turn implies the more risk one has to take. It is particularly because of the uncertainty that rests with the future that there is a need for plans to be flexible. Flexibility provides some leeway to take care of changing situations and circumstances. To be meaningful, plans must necessarily be put into action. Effective planning therefore requires an effective and efficient process of coping with the uncertainty and risk of the future to enable achievement of organisation’s objectives. Expressed in other terms, planning takes care of defining from “what business we are in” to the nitty gritty of how in detail an organisation fulfils its day to day operational tasks, its medium and long term objectives. Expressed more briefly, planning involves → Objective – setting, that is, What an organisation wants to achieve. → Environment scanning, that is, assessing internal strengths and weaknesses and anticipating external opportunities and threats → Decision making, that is, what to do, how to do it, when to do it and who should do it.
  • 74. 64 In essence, Planning: - gives direction; - enables predictability; - enables adaptation to changes without crisis. Activity 1 (a) State the major changes that you believe are affecting today’s business environment. (b) Give some examples of unexpected risks that may crop up in managing an organisation. 3.3.1 Benefits of Planning There are several benefits that an organisation may derive from initiating and organising planning exercises and processes. A few of these benefits are listed below:- Planning:- (a) helps to prepare for unforeseen eventualities (b) helps to clarify objectives (c) helps to develop criteria for monitoring performance
  • 75. 65 (d) helps to think ahead systematically (e) demands conscious co-ordination of projects and active participation and co- operation of subordinates (f) eases accommodation of change (g) helps to identify opportunities for greater efficiency (h) reveals duplication of effort, bottlenecks in workflows and foreseeable pitfalls (i) assists in integrating activities (j) helps to take decisions unhurriedly, using maximum or optimum information Activity 2 Write down an example from your experiences to illustrate four of the benefits that may result from planning. 3.3.2 Hierarchy in Planning Plans that emanate from different levels (hierarchies) of an organisation have different connotations and are commonly referred as (illustrated in Figure 3.1): • Broad long-term strategies • Medium term tactics and policies • Short term operational budgets and schedules
  • 76. 66 The planning process typically produces several types of planning documents: strategic plans, scenario plans and operational plans. 3.3.2.1 Strategic Plans Strategic plans help identify and communicate the mission of the organisation. There is usually at least one strategic plan in each planning document hierarchy. They deal with fairly broad groups of organisational stakeholders including employees, customers, shareholders, suppliers and the community. Objectives are normally only broadly defined in strategic plans. 3.3.2.2 Tactical Plans Tactical plans support strategic plan implementation and focus on intermediate time frames usually 1 to 3 years. Generally, they tend to be more specific and concrete than strategic plans. They are normally developed by middle managers who may consult lower-level managers to develop steps to reach tactical goals. ORGANISATION HIERARCHY PLANNING Top management Broad long term strategies Middle or tactical management Medium term tactics and policies Functional or Operational management Short term operational budgets and schedules Figure 3.1: Hierarchy in planning
  • 77. 67 3.3.2.3 Operational Plans Operational Plans specify how to accomplish the objectives defined broadly in the strategic plan. There are typically several operational plans in the planning document hierarchy. Operational plans should be checked for consistency and completeness with the strategic plan from where they originated. Objectives become more observable and measurable. There are two main types of operational plans: single-use plans and standing plans. 1. Single-use plans are suited to situations that are not likely to be repeated often, like the acquisition or divestiture of a new business or a move to new premises. Single-use plans usually include time-phased milestones, specific assignment of responsibilities, and a project budget. 2. Standing plans are suited to on-going operations and processes. The Human Resource process of justifying and hiring new employees and effluent control protocols in a river are examples of ongoing operations. Standing plans usually include policies, procedures, budgets, etc. 3.3.3 Appellation for Plans There are different appellations that have been given to plans or to the output of the planning exercise. These are briefly explained here. 3.3.3.1 Statement of Objectives Statement of objectives takes the shape of, for example: • Corporate mission • Strategic, tactical and operational plans
  • 78. 68 3.3.3.2 Strategies Strategies are statements of purpose to achieve a desired end: • Follow on from determination of long-term goals and objectives. • Plan for the allocation of resources to achieve objectives. 3.3.3.3 Policies These are general statements of understanding which provide guidelines for management decision-making and enable managers to exercise discretion and freedom of choice within certain acceptable limits. Some examples include the following: → Promote a manager from within the organisation wherever possible, instead of recruiting from outside. → Encourage all recruits to improve academic qualifications. → Grant loans to individuals fulfilling certain criteria of credit worthiness. 3.3.3.4 Procedures A procedure is a chronological sequence of actions necessary for performing a certain task. For example there is a procedure for handling employee grievances and complaints or for banking money earned from sales. 3.3.3.5 Rules Rules are specific, definite courses of action that must be taken in a given situation. Rules do not provide for deviations, exceptions, or exercise of discretion (unlike policies). For example, the rules that exist regarding the hours of work, rate of pay, etc.
  • 79. 69 3.3.3.6 Programmes A programme is normally a co-ordinated group of plans (goals, policies, procedures, and budgets) for the achievement of a particular objective. For example, a training programme that an organisation plans for its employees. 3.3.3.7 Budget A budget is a plan for carrying out certain activities within a given period of time in order to achieve certain objectives. Budgets indicate (in numerical terms) resources allocated to each department or activity in order to carry out planned activities. Production and marketing budgets are good illustrations. Activity 3 Think of an organisation of your choice. List down the major elements that go in each of the following department budget: production, human resource and marketing.
  • 80. 70 Figure 3.2 Activity 4 1. If you were Jack, what information would you require to answer the question from the Chairman, that is, “what are your budgeted production figures for this year”? 2. What are the possible implications for the Marketing, Human Resource and Finance Manager? What are your targeted production figures for this year, Jack? Chairman Marketing Manager Finance Manager HR Manager Production Manager (Jack)
  • 81. 71 3.4 OBJECTIVES As explained earlier, the planning process results in a definition of objectives that an organisation desires to achieve. Objectives are important in the learning process and are equally important in motivating employees. When you take care to define your objectives, you are in a better position to know: → how to adjust your behaviour; → how much effort to put in towards achieving your objectives; → whether you have succeeded or not. For objectives to be meaningful, they have to be set in such a way that they are: ♦ Specific as far as possible This will help to set clear guidelines at what is desired to be achieved. For example a stated objective of “we have to increase sales by 10%” is more meaningful and provides more direction than when the same objective is stated in terms of “we have to increase sales”. ♦ Time bound Again, when there is a limit set to the time over which it is desired to achieve a certain objective, the latter becomes more meaningful and helps to clear ambiguities. For example, the objective “we have to increase sales by 10%”, has a different meaning if we add to this “we have to increase sales by 10% this year or this month etc.”
  • 82. 72 ♦ Hard enough to challenge employees to put in extra effort and drive It has been recognised that many if not most people are motivated by challenge. When challenged, people have a tendency to put in the effort to face and deal with the challenge. Thus, objectives that are set and that are hard enough (careful that it is not beyond possibility of achievement) normally get people to work at them and obtain results. ♦ Clearly achievable/realistic and within ‘reach’ based on realistic forecast No person will dare getting up to break a strong brick wall with bare hands, as he or she knows that this is impossible. This is to say that people would not put in the effort to perform a task if it is seen to be extremely difficult or complex, with no chance of successful completion. Hence, when objectives are set, it is important to take these factors into consideration. For example, it would sound unreasonable to ask a salesperson to sell 100 units overnight in normal circumstances when he has been averaging a sale of 10 units a day. ♦ Agreed with employees wherever possible There is nothing more motivating than to get people to participate in defining and agreeing on the objectives assigned to them. People are more committed and feel more at ease to perform a task that they have agreed to do - results would be much better. When you participate to set your own aims or objectives, you are more likely to commit yourself to fulfil them than when these are imposed on or decided for you.
  • 83. 73 ♦ Reward – linked Reward, either intrinsic or extrinsic, as you will study in the “motivation” module, has great importance in obtaining results from performance. Consequently, to obtain better results, objectives must be set in such a way that people know what to expect as rewards when the objectives are achieved. ♦ Measurable It is common saying that what can be measured can be controlled. Thus, to this end, objectives must be expressed in quantifiable terms as far as possible. This will help to establish whether they have been or are being achieved or not. A measurable objective also clears ambiguity. For example, the objective “we have to increase sales by 100 units this month” is clear and relatively easy to check. Activity 5 Think of an organisation of your choice. Illustrate the importance of some of the characteristics of objectives as explained above.
  • 84. 74 3.5 BARRIERS TO PLANNING: WHY DO ORGANISATIONS NOT PLAN IN PRACTICE? There are several reasons to explain why organisations do not formally get involved in the planning exercise or process. These are highlighted below:- ♦Analysis instead of Planning Senior management often has more recourse to analysing situations than to sit down and work out plans. ♦Information instead of decisions There is often a quest for more and more information than to actually decide what to do. This is often seen as a delaying tactic in order not to implement what has been planned. ♦“Incrementalism” Many organisations proceed by adding on to what is being achieved and thus avoid the formal planning process. Some managers prefer to wait for what comes across and then take subsequent decisions. ♦Vested interests too strong When there are strong vested interests in an organisation, planning does not normally work.
  • 85. 75 ♦Organisational mindset There are still a number of managers who prefer using judgement and intuition rather than formal planning. ♦No ownership or commitment Managers at lower levels may not be committed to the plans when they have not been involved in their development. This also applies for managers who do not have a sense of ownership. ♦No resources for implementation Planning will not work when there are no resources available to implement plans. Many companies have resort to the planning process as a way to keep managers or employees busy but are rarely committed to execute or implement plans. Sometimes managers may lose the confidence that the organisation will provide the resources to achieve the objectives.
  • 86. 76 Diminishing effort and interest It is a fact that more often than not enthusiasm is not sustained over the period that plans are being implemented. Over time people provide diminishing effort in the execution of a task or an activity. This does not assist the achievement of objectives. ♦ Planning and results achieved Very often, managers refrain from stating their plans, as they are worried over the fact that planning and plans make it easier to assess whether results are being achieved. This applies particularly to managers who are not too sure about their performance. ♦ Fear of rigidity of planning system Many managers resist planning because they are fearful that it may close the option available to them. They would rather wait and see than to commit them in a specific direction. Activity 6: *Group Activity* 1. Elaborate, in small groups, the reasons, (mentioned above) that try to explain why organisations do not formally carry out the planning exercise. Can you think of some more reasons? 2. What recommendations would you make to overcome these “barriers to planning”? * Record your answer on a separate sheet of paper.
  • 87. 77 3.6 FORECASTING Planning is concerned with predictions or forecasts of what potential customers want, what competitors will develop, what suppliers will make available, what inflation and interest rates will be, etc. Forecasting is therefore an essential element of the planning process. Basically forecasting requires you to make assumptions about the future. You have to foresee future events by identifying trends, analysing risks normally based on past and current events. Forecasting, therefore, involves the analysis of: → past and current events; → trends; → ‘one-off events likely to recur’. While forecasting future performance, you will have to take into account both DEMAND (trends in population, number of customers, competition etc) and PERFORMANCE POTENTIAL or capability of the organisation (trends in staff growth, training, motivation, mechanisation and process etc.) Activity 7 Explain why it is important to match demand with performance potential or capability of an organisation?
  • 88. 78 3.6.1 Methods of Forecasting The methods that are utilised for forecasting are typically classified as either qualitative or quantitative. Qualitative forecasting techniques are appropriate when numerical models and data are unavailable or inappropriate. Examples of qualitative methods include jury of executive opinion (in which case opinions are sought from the executives of an organisation to develop a forecast and an average is worked out), expert opinion (opinions of experts are sought and averaged) and customer opinion (customers are contacted and invited to make predictions about their future, for example buying behaviour). Methods for determining opinion include Delphi panels, Nominal Group Technique, brainstorming, surveys, etc. Quantitative Technique involves the use of historical data or development of mathematical models that attempt to utilise causal variables to make a forecast. The analysed relationship of the causal factors to the product of interest will allow us to extrapolate for the future. The use of objective data avoids personal biases that sometimes contaminate qualitative methods. Quantitative forecasting techniques include least squares regression, time series, and dynamic systems analysis. Time series techniques focus on historical data. Moving average and exponential smoothing are forms of time series. They are also called autoregressive models because the values of the dependent variable in previous time periods are explanatory variables for the current forecast. Dynamic analysis includes rates of independent and dependent variables among the explanatory variables and is generally formulated as non-linear, partial differential or difference equations. Such expressions are typically difficult to resolve with direct mathematical analysis and are explored via computer simulation.
  • 89. 79 All the terms mentioned in this Section will become more familiar to you as your studies at University levels proceed. Activity 8 Explain how a supervisor or middle manager could contribute in forecasting. 3.7 SUMMARY You must have realised by now that organisational planning is a process. In other words, planning is action oriented and results in what is commonly called a plan. For the planning process to be effective, it is important that it: • is systematic. It must not be done haphazardly. • incorporates flexibility to take care of changing situations.
  • 90. 80 • is iterative and continuous. This is most important in the turbulent environment of to-day. This enables continuous reviewing. • involves the entire organisation. Although planning is usually depicted as a top- down, serial process, several planning elements may occur concurrently and some bottom-up input is solicited. Increasingly all levels of management are consulted and asked to participate in the planning exercise. • takes into consideration the current state of affairs of an organisation and reflects the desired state • translates strategies, opportunities and objectives into tactics and actions • produces one or more plans • identifies decisions to be made • reflects the organisation structure • identifies set points or benchmarks around which the organisation is controlled Furthermore the planning process must establish the person or group of persons who is entrusted with the responsibility and authority for planning. It also defines the horizon and as well as the assumptions (premises and constraints) upon which the process relies.
  • 91. 81 UNIT 4 DECISION MAKING Unit Structure 4.0 Overview 4.1 Learning Objectives 4.2 What is Decision Making? 4.2.1 Characteristics of Managerial Decision Making 4.2.1.1 Lack of Structure 4.2.1.2 Risk 4.2.1.3 Uncertainty 4.2.1.4 Conflict 4.3 Models of Decision Making 4.3.1 Rational Model of Managerial Decision Making 4.3.2 Non Rational Models of Decision Making 4.3.2.1 Satisficing Model 4.3.2.2 Incremental Model 4.4 The Decision Making Process 4.4.1 Problem Identification 4.4.2 Alternative Solution Generation 4.4.3 Alternative Evaluation 4.4.4 Implementation and Decision Evaluation 4.5 Group Decision Making 4.5.1 The Advantages of Using Groups 4.5.2 The Disadvantages of Using Groups 4.5.3 Managing Group Decision Making 4.5.3.1 Leadership Style 4.5.3.2 Constructive Conflict 4.5.3.3 Encouraging Creativity 4.5.3.4 Structured Alternatives to Traditional Group Decision 4.6 Organisational Decision Making
  • 92. 82 4.6.1 Constraints 4.6.2 Organisational Policies 4.6.3 Negotiations 4.6.4 Crisis Management 4.7 Key Concepts 4.0 OVERVIEW Decisions. If you can’t make them, you won’t be an effective manager. Unit 3 introduced the importance of planning and decision making as organisational tasks for management. In Unit 4, we are going to identify, evaluate and differentiate between the decisions we face as individuals, groups, managers and organisations. The unit also highlights the realities faced by managers in organisations that constrain effective decision making. 4.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Explain the concept behind decision making. 2. Explain the different characteristics of managerial decision making. 3. Identify and differentiate between rational and non-rational models of decision making. 4. List the different steps taken to enable effective decision making. 5. Evaluate the pros and cons associated with group decision making. 6. Determine and appreciate the difficulties involved in decision making at an organisational level.
  • 93. 83 4.2 WHAT IS DECISION MAKING? Wherever there are alternative courses of action that you can take regarding a particular situation, decision making arises. Decision making may be explained as a process through which problems are identified and possible solutions are generated and implemented. • What electives should you take in Year II? • How much time would you allocate to revision for O&M? • Where are you going to spend your holidays? These are all examples of decisions that you may be faced with as a university student. You may not always make the right decision, but you can use your knowledge of appropriate decision making processes to increase your odds. 4.2.1 Characteristics of Managerial Decision Making Warm Up Activity How do you think the decisions you are faced with in every day life are different from those faced by managers? 1. 2. 3. 4.
  • 94. 84 Managers are faced with problems to be resolved in most daily activities performed. These problems vary in degree of difficulty, complexity and the level of pressure experienced, as illustrated in Figure 4.1. Figure 4.1 4.2.1.1 Lack of Structure Most problems faced by managers are ill-structured, with a number of possible solutions, all of which have merits and drawbacks. Ill-structured implies a situation which is not at all routine, whereby the cause of the problem is not certain and in which several possible solutions may be present to resolve the issue at hand. 4.2.1.2 Risk Some degree of risk is inherent in many, if not most, decisions that have to be made. A determining factor to the level of risk and difficulty involved in making a decision is the amount and quality of information available to the decision maker. RISK LACK OF STRUCTURE UNCERTAINTY CONFLICT
  • 95. 85 4.2.1.3 Uncertainty Even when information is available and is of high quality, it is very often insufficient for managers to accurately identify options and their likely impact. Further, it is not known to a reasonable degree of accuracy what the future reserves. Indeed, what is widely acclaimed as ‘turbulence’ in the organisational environment, makes prediction an ever- increasing challenge. Thus uncertainty will more likely prevail but decisions, however, will still need to be made. 4.2.1.4 Conflict More often than not, managers are subject to opposing pressures from different sources when faced with making decisions. Sometimes, a decision may be in conflict with the manager’s personal opinion, but he may be in a situation where he still has to make a decision. For example, firing an employee for alcohol abuse during working hours, even when the employee is dedicated when working. Activity 1 Imagine a situation when you were faced with making a decision that was: a) lacking in structure b) headed by a high element of risk c) surrounded by uncertainty d) in conflict with your personal opinion or that of your family Write down a few comments about these situations.
  • 96. 86 4.3 MODELS OF DECISION MAKING Decisions that managers make have a profound impact on the success of an organisation. Much research has been invested in determining and analysing the different approaches to the decision making process. This section summarises some of these approaches. 4.3.1 Rational Model of Managerial Decision Making The rational decision making process is based on the premise that maximum information is required before a decision is made. The search for more information is crucial in this approach to decision making. This model stipulates that, despite the difficulties faced, managers are supposed to: • engage in rational decision processes • make optimal decisions, and • possess and understand all relevant information. This ideal is seldom realised. Activity 2 List three shortcomings that you think this model presents. 1. 2. 3. 4.3.2 Non-Rational Models of Decision Making In the real world, decision makers can rarely do a complete rational analysis because some decisions are complex and complete information is difficult if not impossible to obtain. Furthermore, people are not always capable of knowing, understanding or
  • 97. 87 objectively interpreting all the information that is available. Thus rational decision making has limitations that has prompted the proposition of Bounded Rationality as an alternative. This alternative acknowledges that complete information is difficult and time consuming to obtain. Bounded rationality, as the name suggests, accepts limited but sufficient information for making a decision. The Satisficing and Incremental models have been developed using this alternative rationale. 4.3.2.1 Satisficing Model Rather than optimising decisions, managers seek alternatives only until they find one that looks satisfactory. Let us say, for example, that you are stranded in a desert for days, without food or water. You come across a gypsy who only has camel milk to offer you. While you do not like the taste of camel milk, you want to quench your thirst and hunger, and may forego roaming around in the desert seeking some other drink, and settle for the milk. Activity 3 Describe a situation where you have applied the satisficing model to your decision making.
  • 98. 88 4.3.2.2 Incremental Model The approach seeks to implement a short run solution that alleviates the problem temporarily. To illustrate, imagine you have a small crack in a water pipe. At first, you may try covering the crack with some soap, then you may try something stronger like using glue and a rubber band to take care of the crack. These solutions seek to temporarily solve the problem of the leak, and to forego the need to spend money on a new water pipe, which will inevitably be the only effective solution to the problem. Activity 4 Describe a situation where you have applied the incremental model to your decision making. 4.4 THE DECISION MAKING PROCESS While managers do not frequently have control over many factors affecting the success of their decisions, many do have substantial control over the process used to make the decisions. Although the following systematic approach to decision making does not guarantee that all decisions will have the desired outcomes, it does increase the likelihood of success. Figure 4.2 illustrates the steps involved in effective decision making.
  • 99. 89 Figure 4.2 4.4.1 Problem Identification A problem usually occurs when a discrepancy exists between the way things are and the way they ought to be. For example, a discrepancy may be detected for the organisational performance when comparing current performance levels to forecasted performance levels. Once identified, it is important to diagnose the problem, so as to identify the cause. 4.4.2 Alternative Solution Generation Once the problem is diagnosed for potential causes, alternative courses of action aimed at solving the problem need to be developed. Alternative solutions may be generated from past experiences to similar problems, or if the problem is unprecedented, solutions have to be developed from scratch. 4.4.3 Alternative Evaluation Once alternative solutions have been generated, their value and adequacy have to be determined. Furthermore, importance should be given to predicting the consequences of implementing the different alternatives. The criteria for evaluating consequences are: • Feasibility: the extent to which an alternative can be accomplished within the time, budget, technology and policy constraints imposed by the organisation. Problem Identification Alternative Generation Alternative Evaluation Implementation Decision Evaluation
  • 100. 90 • Quality: the effectiveness of the alternative at solving the problem at hand. • Acceptability: the degree to which parties affected by the implementation of the alternative are willing to support it. • Costs: the resource levels required to implement the alternative and the potential costs of undesirable side effects. • Reversibility: the extent to which the alternative can be reversed, if after implementation, it is realised that it was the wrong alternative. • Ethics: the extent to which an alternative is compatible with the social responsibilities of the organisation and the ethical standards of its managers. 4.4.4 Implementation and Decision Evaluation The decision process is still incomplete upon evaluating alternatives. A choice has to be made, and the chosen alternative has to be implemented. Implementation is often carried out by people that were not involved in the decision making process. It is therefore essential that those implementing the decision should understand the choice and why it was made. At times implementation of a decision is delegated to different parties. For example, when a management team determines a change in policy or operating procedures, very often first-line managers and supervisors are involved to implement the changes. Motivation and commitment to the chosen alternative is crucial for successful implementation. Once the decision is made, and implemented, a monitoring system has to be set up. This will accurately determine the success of the decision. If negative feedback is received, this indicates failure in the decision making process and may suggest one of two scenarios: 1) implementation requires more time, resources, effort or thought, or, 2) the decision was a bad one.
  • 101. 91 Key points The best decision is made when: 1. A wide range of alternatives are considered 2. The full range of objectives to be pursued is taken into consideration 3. The costs and benefits of each alternative are weighed 4. Useful, first hand information is sought 5. Advice and information from different sources are considered 6. All consequences are thoroughly examined before making the final choice 7. Provision is made for contingency plans in case the implementation goes wrong. If managers think about these decision-making activities in a conscientious manner, they will know that they have done the best to make the most rational decision (though as mentioned previously, this still does not guarantee that this decision will work). 4.5 GROUP DECISION MAKING Very often, when important decisions need to be made, a manager finds it helpful if a group of people- subordinates, peers and/or superiors- is convened to help in the decision making process. The basic philosophy behind the use of groups for decision making is captured in the old saying ‘two heads are better than one’. However, this saying does not always prove right. The quality of group decision making depends heavily on the understanding of how groups work together; capitalising on the potential benefits while minimising the potential shortcomings.
  • 102. 92 Activity 5 List three major benefits and pitfalls of using a group for decision making: Benefits 1. 2. 3. Pitfalls 1. 2. 3. 4.5.1 The Advantages of Using Groups Using groups instead of any one individual to make a decision has several potential benefits, namely that a more fully informed, higher-quality decision will result, and that the decision will be effectively executed. 1. Larger pool of information: When several people are coming together to make a decision, more information is available. One group member’s lack of information is always complemented by another’s access to such information. 2. More perspectives and approaches: Different group members can suggest different ways to approach a problem, and also shed light on the issue from different angles. Looking at a problem from different perspectives - for example legal, financial, marketing, personnel- increases the chances of reaching an optimal solution.
  • 103. 93 3. Intellectual Stimulation: Making a decision alone may not allow the person to explore the problem in depth and to be creative in problem solving. Through brainstorming, group discussions provide an opportunity to get members to think in a broader way, and away from the more traditional manner of issue resolution. 4. Clearer understanding: People participating in a group decision making process tend to have a clearer understanding of why a particular stance was taken or a particular decision implemented. After being exposed to the process of evaluating different alternatives, the group has better insight with regards to the issue at hand. 5. More Commitment: Involving a group in the decision making process, ensures a higher level of buy in from all members. Involvement makes members feel personally responsible for the success of the decision and therefore motivates them to successfully implement the proposed solution. 4.5.2 The Disadvantages of Using Groups As mentioned earlier, the success of group decision making depends heavily on understanding how group members interact with one another. Most failures in group decision making arise through the way members interact with one another. 1. Dominant members: When making use of groups, it is often the case that not all members will have the same personality. In fact, more often than not, there is one member who will dominate the decision making process which ultimately defeats the purpose of resorting to a group in the first place. In this case, the wrong decision may be implemented simply because the dominant member has made his/her preferences clear. 2. Satisficing: This concept was introduced when discussing the non-rational models of decision making in 4.3.2.1. Satisficing is more likely to occur in groups as people search for quick, convenient and time saving solutions. With busy schedules and
  • 104. 94 deadlines for different duties, members tend to be half-committed to the decision making process and often come to a hasty, and not necessarily optimal, decision. 3. Groupthink: This is a very common symptom of group decision making. There is a tendency for members to go along with the preferred group solution in order to avoid any potential disagreements. In the search for cordial, positive interpersonal relationships among team members, there is the possibility that members will refrain from raising objections or highlighting possible negative developments. 4. Goal Displacement: Group decision making sessions often digress from the common goal of finding a solution to the problem identified, to attaining personal goals. When conflict exists between certain members of a group, there is a move from rational persuasion and discussions to heated and personal disagreements. 4.5.3 Managing Group Decision Making Effective managers pay close attention to group interaction processes, managing them carefully to avoid the pitfalls outlined above. Effective management of group decision making requires: I) an appropriate leadership style, II) constructive use of disagreement and conflict, III) the enhancement of creativity, and IV) the use of structured techniques. 4.5.3.1 Leadership Style A group leader’s main role is to minimise, if not eliminate, process-related problems. This means that dominating group members should be controlled, quieter members encouraged, while ensuring that the leader him/herself does not dominate the group discussion. Furthermore, the leader should be aware of the inclination towards groupthink and satisficing, and where possible should try to safeguard the primary objective of the exercise.
  • 105. 95 4.5.3.2 Constructive Conflict Disagreement and conflict are destructive to the group if the result is emotional, bitter and a cause for goal displacement. However, if used to air legitimate differences of opinion and to develop better ideas and problem solutions, disagreement can be very constructive. Some groups formally introduce conflict into a decision making group in the form of a devil’s advocate. The person designated to be the devil’s advocate has the main role of criticizing ideas to thoroughly assess the potential risks, drawbacks and negative impacts of ideas generated. Such a practice encourages an in-depth analysis of proposed solutions and can lead to generation of new alternatives that were previously not thought of. 4.5.3.3 Encouraging Creativity Ready-to-implement solutions are rarely available to solve problems faced by a company and solutions that are available may be inadequate or sub-optimal. With the right application of leadership style and constructive conflict, creativity is enhanced. The technique of generating as many potential ideas to a problem is called brainstorming. Members are encouraged to think out loud and say anything that comes to mind. No criticism is allowed as the ideas generated are then used as building blocks to finding the right solution. 4.5.3.4 Structured Alternatives to Traditional Group Discussion With the need to maintain creativity and to make group members less inhibited and more likely to voice out unusual or odd opinions, the Nominal Group and Delphi techniques have been developed. The objectives behind generating these techniques were to: a) decrease people’s inhibitions about disagreeing, b) encourage creativity and c) keep group members oriented towards problem resolution.
  • 106. 96 Nominal Group Technique: Individuals sit at a table and write down their ideas. These are then displayed on a flipchart/chalkboard for further discussion, clarification and evaluation. The final decision is determined by a written, silent vote. Delphi Technique: Anonymity is maintained using this technique, as group members do not meet face to face. The decision making process is in writing, through the mail, whereby ideas are generated on a questionnaire. These ideas are summarised into a feedback report and sent back to members for independent voting. 4.6 ORGANISATIONAL DECISION MAKING Decision making at an individual level involves certain complexities, which are even more inherent at a group level. However, a more complicated process is decision making at an organisational level. Within the organisational context, several additional processes and concepts come into play, which the manager must take into consideration before coming to a decision. 4.6.1 Constraints The decision makers within an organisation are seldom given a freehand where important decisions are concerned. In the same way that managers are sometimes faced with conflict (Refer to 4.2.1.4), organisational decision makers are faced with varying constraints- financial, legal, market, human and organisational- which encroach upon their ability to take certain actions. Legal restrictions may prevent the setting up of international business operations in certain regions; financial constraints may make an attractive but expensive new venture impossible. 4.6.2 Organisational Politics Very often decisions involve determining the allocation of limited resources among competing departments, groups and/or individuals. It is not surprising therefore that
  • 107. 97 decisions are not always made on objective grounds and, more often than not, powerful individuals are able to push through their own preferred alternatives. Internal politics has come to be accepted as a reality and a challenge of organisational life. Appreciating the existence of such practices helps in managing the decision making process more effectively, insofar that when an influence is sought for a particular decision, managers need to know who will be supportive and which groups would be interested in having the decision implemented. 4.6.3 Negotiations Decisions often need negotiations, bargaining, and/or compromises, whether cooperation or permission is being sought from parties external to the organisation, or decisions being made within the company. Internally, certain decisions require buy in from all levels of management before it can be implemented. When a decision is bound to have an impact on the environment, negotiations may need to be carried out with external parties. The proposal to build an industrial zone on land that was previously used for agricultural purposes requires buy in and support from several parties, including the relevant ministries in the government, and residents of the area. Obviously such a proposal would require an analysis to determine the environmental impact of the decision, if implemented. 4.6.4 Crisis Management In crisis situations, managers not only have to make decisions while being under tremendous pressure, but also have the additional problem of playing against time. In such situations, the key between success and failure lies in responding quickly, honestly and effectively to the crisis. Usually, a crisis management team is established with the sole responsibility of collecting information, evaluating opportunities, making and implementing the appropriate action plans. Decision making during a crisis can cause the
  • 108. 98 rise or fall of an entire organisation which makes the management of the crisis process all the more critical. Activity 6 This mini case study gives you a chance to apply what you have learnt from Units 3 & 4. It requires application of the concepts learnt in planning and decision making. Imagine that you are CEO of a major corporation. One of your oil tanks was destroyed (though no fault of your own), spilling thousands of gallons of oil into a river. There is a severe drought in the country, and this river has dried up considerably. However, this river still provides drinking water to 3000 homes. Within hours, the oil has spread down the river, contaminating the drinking water of thousands of people, killing so many fish and other water life in the process. How would you handle the crisis, and what would be the expected outcome? (Consider the following points for discussion in class) 1. Public perception 2. Planning 3. Goals 4. Action
  • 109. 99 4.7 KEY CONCEPTS Bounded Rationality Brainstorming Constructive Conflict Goal Displacement Group Think Incremental Model Managerial Decision Making Satisficing Model
  • 110. 100 UNIT 5 ORGANISING Unit Structure 5.0 Overview 5.1 Learning Objectives 5.2 Elements of Organisational Structure 5.3 Job Design 5.3.1 Job Simplification 5.3.2 Job Rotation 5.3.3 Jon Enlargement 5.3.4 Job Enrichment 5.3.5 Scheduling Options 5.3.5.1 Flexitime 5.3.5.2 Compressed Work Week 5.3.5.3 Job Sharing 5.4 Departmentalisation 5.4.1 Functional structure 5.4.1.1 The Advantages of Functional Structure 5.4.1.2 The Disadvantages of Functional Structure 5.4.2 Divisional Structure 5.4.2.1 The Advantages of Divisional Structure 5.4.2.2 The Disadvantages of Divisional Structure 5.4.3 Hybrid Structure 5.5 Vertical Co-ordination 5.5.1 Line and Staff Authority 5.5.2 Delegation 5.5.3 Centralisation versus Decentralisation 5.5.3.1 The Advantages of Centralisation 5.5.3.2 The Advantages of Decentralisation 5.5.4 Formalisation
  • 111. 101 5.5.5 Span of Management 5.6 Horizontal Co-ordination 5.6.1 Slack Resources 5.6.2 Information Systems 5.6.3 Lateral Relations 5.7 Key Concepts 5.8 Additional Activities 5.0 OVERVIEW In this unit, we introduce the different types and approaches to construct an organisational structure. We also explain managerial hierarchy and show the importance of both vertical and horizontal co-ordination. 5.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Describe the elements making up organisational structure. 2. Explain the different approaches to job design. 3. Explain the different approaches to creating departments. 4. Discuss the different methods of vertical co-ordination. 5. Explain the importance of horizontal co-ordination.
  • 112. 102 5.2 ELEMENTS OF ORGANISATIONAL STRUCTURE Organisation structure is the way in which an organisation’s activities are divided, organised, and co-ordinated [Stoner, 1995]. An adequate organisational structure is essential because it is the backbone of an organisation. It caters for the smooth running of activities and work distribution with a view to achieve set goals. The elements of designing an organisation structure are as follows: Identify every single task that the organisation needs to perform. Allocate those tasks to the individuals or groups. Combine the tasks and group employees together in a logical and strategic way. Set up mechanisms to facilitate co-ordination, both vertically and horizontally. Chain of command is the line of authority which links individuals at different managerial levels indicating who reports to whom. 5.3 JOB DESIGN With the big leap in technology and with customers becoming more and more demanding, production of goods and services turn out to be more complex. No person possesses the physical or psychological ability and skills to perform the whole series of operations that form part of the production process. Therefore, in order to be able to achieve organisational goals, the tasks and activities related to a specific job must be clearly defined. This process is known as job design.
  • 113. 103 Stoner (1995) defines division of work as the breakdown of a complex task into components so that individuals are responsible for a limited set of activities instead of the task as a whole. The major approaches to job design are job simplification, job rotation, job enlargement and job enrichment. 5.3.1 Job Simplification Job simplification is based on the concept of division of work. As a result, the smaller tasks can be learned and completed relatively quickly. Simple and repetitive tasks allow workers to perform better since they become experts in their particular job, thus enhancing production efficiencies. A good example is the different operations involved in making a garment in a textile factory; the collar, sleeve, front panel, etc. are separately stitched and then assembled together to make a garment. 5.3.2 Job Rotation A simplified and repetitive task leads to monotony and boredom. In order to alleviate boredom, the workers are made to shift through a set of jobs in a sequential manner. A job rotation across the different units/tasks allows the individuals to understand the various aspects of the organisation better. In addition, the individuals will become more capable and flexible since they are exposed to a series of different and more challenging jobs and will thus develop new skills. 5.3.3 Job Enlargement Job enlargement is the combination of various operations at a similar level into one job to provide more variety for workers as well as making it more challenging thus increasing their motivation and satisfaction [Stoner,1995]. The idea behind this approach is to
  • 114. 104 counteract monotony by increasing job scope, that is, the number of different tasks an employee performs in a particular job. 5.3.4 Job Enrichment Job enrichment is the combination of several activities from a vertical cross section of the organisation into one job to provide the worker with more autonomy and responsibility [Stoner, 1995]. Job enrichment is meant to increase the level of satisfaction among the employees by increasing job depth, that is, the workers are allowed a degree of freedom to work at their own pace, to do their planning and to devise their own way of improving and controlling their job. Power to act and accomplish set goals is delegated by top management to a certain extent. In other words, the subordinates are empowered with a view to enhance self-satisfaction. Activity1 List the possible difficulties that may be associated with each of the job design options: job simplification, job rotation, job enlargement and job enrichment.
  • 115. 105 5.3.5 Scheduling Options Another approach to job design for increasing job satisfaction and motivation, is to offer different options concerning work schedules. Different people have different needs and priorities, and therefore work scheduling options help finding a compromise to cater for such variance. The common options are flexitime, compressed work-week and job- sharing. 5.3.5.1 Flexitime Flexitime is a system that permits employees to arrange their work hours to suit their personal needs. Flexitime allows the individuals to choose their own starting and finishing time to be on duty as long as they fulfil the specified core of daily or weekly working hours. It helps workers to avoid traffic jams during peak congestion hours which eventually results in a decreased lateness. Some disadvantages are that it is quite difficult to co- ordinate people and to have adequate control over staff and key people may not be available within a period of time. Flexitime is also not appropriate for assembly-line operations and usually suits jobs where most of the workload is assigned mainly on an individual basis. 5.3.5.2 Compressed Work-week Compressed work week is a type of scheduling work where employees are made to work longer hours per day as opposed to the usual eight-hour day and then they are given days off as soon as they satisfy the specified working hours per week. Such a work schedule leads to greater job satisfaction. But the disadvantages are the fatigue caused to the employees who are then more prone to accidents, and it is difficult to deal with other companies that do not apply similar schedule.
  • 116. 106 5.3.5.3 Job Sharing Job sharing is a work practice where two or more people share a single full-time job [Bartol, 1996]. This allows these persons to arrange the working time among themselves, for instance alternating workdays. Consequently, people who want to work part time benefit from this system. Furthermore this arrangement helps the organisation to ensure the co-ordination of the activities of part-time workers. Activity 2 Distinguish among the different approaches to job design. Illustrate with appropriate examples. 5.4 DEPARTMENTALISATION Departmentalisation is the grouping of employees and tasks into areas of work activities that are similar and logically connected. In an organisation, it is important to have the jobs arranged in a well-defined way so that a good co-ordination of the activities involved becomes possible. By grouping units of workers into departments, there is a better chance to achieve the goals of an organisation. Some of the major ways of departmentalising are: by function and by product (or market)
  • 117. 107 5.4.1 Functional Structure Functional structure is the grouping of people having similar working skills and expertise and who are engaged in the same activities. For example, an organisation adopting a functional structure will have different departments such as finance, marketing, production, human resource, etc. Each of the departments is a specialised area comprising specific set of activities. Such a structure is usually regarded as the most logical and basic form of departmentalisation and is used mainly by organisations having a limited range of products or services. Figure 5.1 gives an example of functional structure. 5.4.1.1 The Advantages of Functional Structure • Expertise is encouraged since managers concentrate on a restricted range of skills. • Supervision becomes easier since each manager focuses on a particular department. • The organisation is more efficient with experts working for it since bigger volume of work can be handled. Quality Officer Quality Manager Personnel Manager Financial Supervisor Financial Manager Foreman Foreman Production Supervisor Foreman Foreman Production Supervisor Production Manager Marketing Officer Marketing Manager Managing Director Figure 5.1: Functional Structure
  • 118. 108 • There can be better co-ordination when similar activities are grouped into one department. 5.4.1.2 The Disadvantages of Functional Structure • Decisions and actions are relatively slow since all functional managers have different points of views and they have to report to the MD or CEO to be able to find a solution. • It is difficult to trace the real causes of failures since all departments contribute towards meeting the organisational goal, in other words “Who is to blame?”. • The very advantage of grouping individuals of similar specialisation together turns out to create major differences between departments. • Such an organisation usually fails to produce all-rounder managers to take over top management since each functional manager possesses a school of thought reflecting his/her specialised area. 5.4.2 Divisional Structure Divisional structure groups similar products, services or markets thus creating departments which look like small, separate businesses within the organisation itself. These departments are commonly known as divisions which are again categorised as product divisions, geographic divisions and customer divisions. This kind of structure is usually applied in companies that have different customers, dealing with a large variety of products and services, and which need to cope with various geographical areas. Product divisions obviously group a single set of products or services or those having similar characteristics. Each product department has its own manufacturing system, marketing, personnel, etc. that suit the process and organisation accordingly.
  • 119. 109 Geographic divisions are created to satisfy different geographic areas. Many times it is better to be close to crucial markets in order to gain in delivery time. In other cases, the availability of raw materials may compel an organisation to open a division in a particular geographical area for economic benefits. For example, some textile industries open branches in Asia in order to be closer to the Asian market. Customer divisions are set up to look after products or services that are meant for particular types of customers. Such a structure is useful when discrepancies among the customers are significant. 5.4.2.1 The Advantages of Divisional Structure • Decision making is relatively quick since the divisions are independent to one another, that is, there is hardly any chance for interdepartmental clash. • Performance appraisal is more precise as bad performers can be traced relatively easily since the department concentrates on limited range of products or services. • More opportunities exist for managers to acquire general management competence because they have the chance to deal with different functions. 5.4.2.2 The Disadvantages of Divisional Structure • Resources are likely to be duplicated because each division has to be self-sufficient and there is a risk of the resources being underutilised. • It is unlikely to have experts since the division is not as restricted as in a functional structure. • Employees tend to focus on their particular division rather than consider the objectives of the organisation as a whole.
  • 120. 110 5.4.3 Hybrid Structure In the real world, many organisations include some features associated with the functional structure as well as characteristics of divisional structure. Such organisation of activities is known as a hybrid structure. Activity 3 Think of an organisation with which you are familiar. In your opinion, which of the above best describe the structure of that organisation? 5.5 VERTICAL CO-ORDINATION Vertical co-ordination is the flow of information related to the activities in an organisation from top to bottom in the managerial hierarchy. There are different ways of carrying out vertical co-ordination, such as line and staff authority, delegation, centralisation versus decentralisation, formalisation and span of management [Bartol, 1996].
  • 121. 111 5.5.1 Line and Staff Authority Line authority represents the authority exercised by managers over their subordinates to ensure that organisational goals are met. It follows the chain of command throughout the organisational structure. Line managers represent those managers directly responsible for achieving organisational objectives. Staff managers consist of those managers who advise and service line managers. For example in a manufacturing organisation, production and sales are regarded as line departments (directly related to organisational goals), whereas personnel and accounting are staff departments (indirectly related to organisational goals). Staff authority is the authority that allows staff managers to advise and service line managers. 5.5.2 Delegation Delegation is the process by which an individual manager or supervisor transfers part of his legitimate authority to a subordinate but without passing on the ultimate responsibility which has been entrusted to him by his own superior [Cole, 1995]. It is important that the amount of authority delegated is sufficient and well defined. The reasons for delegation are to prevent managers from being overloaded so that they can concentrate on more important issues. Moreover, quicker solutions can be found when decisions are taken nearer to the source of problems. The subordinates will get better job satisfaction, as they will have the opportunity of experiencing decision-making.
  • 122. 112 Activity 4 Outline the possible barriers to effective delegation. 5.5.3 Centralisation versus Decentralisation Centralisation is the extent to which power and authority are retained at the top organisational levels [Bartol, 1996]. If employees of lower managerial hierarchy are not allowed to take decisions and they only follow general rules and procedures, it can be said that the organisation is centralised. Decentralisation is the extent to which power and authority are delegated to lower levels [Bartol, 1996]. In a decentralised organisation, employees at lower levels are able to participate in decision-making and these decisions are considered and included in the general policies by top management. Activity 5 Refer to an organisation with which you are familiar and provide examples of centralisation and decentralisation.
  • 123. 113 5.5.3.1 The Advantages of Centralisation • The co-ordination of activities is easier when top management takes decision. • Centralisation fosters strong leadership since the power is preserved at top managerial level. • The organisation will be more effective in the sense that there will be no overlapping of effort since each department will be working on different activities. 5.5.3.2 The Advantages of Decentralisation • Better strategic decisions can be made, as top management will not be overloaded. • Quicker solutions can be achieved when decision-making can be done at a lower level. • Staff will be motivated since they will feel more responsible and it is more likely that they will take initiatives. Both centralisation and decentralisation have their advantages and it is up to top management to devise a strategy that will benefit the organisation. Most managers like to hold the maximum power, that is, going for centralisation. However, there are factors that compel top management to go for decentralisation. For example, the larger in size an organisation becomes, the more difficult and complex it is for top management to deal with everything and hence there is no choice but to delegate authority to management at lower levels. Furthermore, technological improvement brings about more complex products that require in-depth expertise. Another aspect is the geographical factor whereby the managers have to be on site in order to be able to make appropriate decisions. In such cases, decentralisation becomes imperative.
  • 124. 114 Activity 6 Compare and contrast the advantages and disadvantages of centralisation and decentralisation. 5.5.4 Formalisation Formalisation is the extent to which policies, rules, procedures, etc. are in written forms. The organisation has to operate in accordance with those formal guidelines put forward by top management with a view to achieve the organisational goals. Such bureaucracy helps large organisations to have a better workflow. For example safety rules are clearly displayed in the workshop of any manufacturing industry and the workers are compelled to follow them. However, too much formalisation that is, too many rules and procedures, make operations become heavier to deal with. The employees tend to be less creative and innovative and they hardly react to changes since they have a frame of mind to always abide by or refer to rules and regulations. 5.5.5 Span of Management Span of management or span of control is the number of subordinates reporting directly to a specific manager [Bartol, 1996].
  • 125. 115 It is important to have the right size of span of management because too many subordinates make it hard for the manager to co-ordinate and control activities properly, while too few subordinates create a situation of managers being underutilised. The span of management affects the number of levels in an organisation’s hierarchy and this is illustrated by Figures 5.2 and 5.3. A tall structure has a narrow span of control and many hierarchical levels whereas a flat structure has a wide span of control and few hierarchical levels. The major problems associated with a tall structure are that communication is relatively slow, administrative expenses are higher and it is difficult to locate the source of error. In order to avoid these problems, organisations make their structure flatter by expanding the span of control and reducing the middle management levels and workforce. This process is known as downsizing. However, if downsizing is not properly done, the organisation may lose valuable staff. Figure 5.2: Organisation with Narrow Spans (Tall organisation structure) Figures 5.3: Organisation with Wide Spans (Flat organisation structure)
  • 126. 116 Activity 7 Nowadays organisations tend to have flatter structure. Discuss this statement.
  • 127. 117 5.6 HORIZONTAL CO-ORDINATION Horizontal co-ordination is the connection of activities through flow of information across departments of the same levels. With the ever increasing competition, it is imperative for an organisation to have adequate methods of conveying information so that the different departments are aware of the happenings within the entire organisation and work as a big team accordingly in order to achieve the organisational goals. Horizontal co-ordination enhances the exchange of information across departments and among individuals through slack resources, information systems and lateral relations [Bartol, 1996]. 5.6.1 Slack Resources Slack resources are extra resources that help to relieve pressures (both external and internal) as well as contribute to innovation. These resources can take any form, for example, a mobile phone can embetter the daily life of a busy person. In an organisation, extra equipment and manpower will help reduce tension by allowing a smoother co- ordination of activities. 5.6.2 Information Systems Another means of horizontal co-ordination is the use of information systems. A breakthrough in information technology has led to an increasing importance of computer as an effective means to transfer information. A computerised information system has become the sine qua non for organisational success since information are being exchanged at very high speed, for instance, through extensive use of email. The entire organisation can be connected via a local area network for rapid information transfer.
  • 128. 118 5.6.3 Lateral Relations Lateral relations is the co-ordination of efforts through communicating and problem- solving with peers in other departments or units, instead of referring issues up the hierarchy for consideration [Bartol, 1996]. One means of lateral relations is direct contact, that is two or more individuals of different departments interact and work towards a solution for problems affecting them; many times problems can be solved at the lower or middle management levels. Another way is to have a liaison role, that is, somebody who is employed to facilitate communication between different departments and to ensure that the respective needs are met. The liaison person improves horizontal co-ordination by maintaining a good internal customer-supplier relationship. Lateral relations can also be in the form of a taskforce whereby people from different units are appointed to work together and share ideas with a view to provide recommendations on important issues and try to implement them. Activity 8 Explain with the help of examples, the means to facilitate horizontal co-ordination.
  • 129. 119 Activity 9 Describe the strategy you would adopt in (re)designing an organisation structure that would make an organisation competitive. (Reference could be to any organisation of your choice, may it be from manufacturing or service sector.) 5.7 KEY CONCEPTS Chain of Command Job Design Departmentalisation Vertical Co-Ordination Delegation Span of Management Horizontal Co-Ordination
  • 130. 120 5.8 ADDITIONAL ACTIVITIES 1. The number of people reporting to a manager is known as (a) Slack resources (b) Span of management (c) Line and staff (d) Job sharing 2. Delegation is the extent to which __________ is transferred from a manager to his/her subordinate. (a) Position (b) Workload (c) Authority (d) Approach 3. Job enlargement is one of the approaches of job (a) Rotation (b) Scheduling (c) Sharing (d) Design 4. Horizontal co-ordination is the ___________of activities across departments of the same levels. (a) Linking (b) Set (c) Measurement (d) Structure 5. Formalisation is one of the methods of (a) Horizontal co-ordination (b) Vertical co-ordination (c) Motivation (d) Innovation
  • 131. 121 UNIT 6 MOTIVATION Unit Structure 6.0 Overview 6.1 Learning Objectives 6.2 Motivation 6.2.1 The Importance of Motivation 6.2.2 Motivation and Behaviour 6.2.3 Meaning of Motivation 6.3 Theories of Motivation 6.3.1 Early Approaches to Motivation 6.3.2 Need or Content Theories 6.3.2.1 Abraham Maslow’s Hierarchy of Needs Theory 6.3.2.2 Douglas Mc Gregor’s Theory X and Theory Y 6.3.2.3 Frederick Herzberg’s Motivation Hygiene Theory 6.3.2.4 Clayton Alderfer’s ERG Theory 6.3.2.5 David Mc Clelland’s Acquired Needs Theory 6.3.3 Process or Cognitive Theories 6.3.3.1 Victor Vroom’s Expectancy Theory 6.3.3.2 J. Stacy Adam’s Equity Theory 6.3.3.3 Harold Kelly’s Attribution Theory 6.3.3.4 Edwin A Locke and Gary P. Latham’s Goal Setting Theory 6.3.4 Reinforcement Theory 6.3.5 Social Learning Theory 6.4 A Model of Motivation 6.5 Key Concepts 6.6 Video Session
  • 132. 122 6.0 OVERVIEW This Unit defines the concept of motivation and introduces the various theories of motivation. It also underlines the importance of motivation in achieving managerial and organisational effectiveness. 6.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Define the concept of motivation. 2. Outline the theories of motivation. 3. Identify the elements of a motivational process. 4. Design a model of motivation. 6.2 MOTIVATION 6.2.1 The Importance of Motivation Some people like their jobs and work harder as well as smarter. They are also very proud of the organisations for which they work. Other people simply dislike their jobs and would do anything just to avoid working. They would also prefer, if given the choice, to leave the organisations where they are working. Such attitudes and behaviours are not uncommon. They have a direct link with the issue of motivation at work.
  • 133. 123 Managers and supervisors are always expected to obtain higher levels of performance and productivity from the employees. They are expected to ensure that employees are committed and dedicated to their work. Motivating employees is, therefore, an important responsibility for managers and supervisors and their effectiveness is closely connected with the issue of motivation. The presence of motivation is equivalent to the achievement of better results and higher levels of job satisfaction. Absence of motivation is synonymous to low levels of outputs and can give rise to frustration, poor workmanship, strained interpersonal relations and conflicts. Understanding and managing motivation is of interest to managers, supervisors as well as to anybody entrusted with the task of working with and through people to achieve certain goals and objectives. 6.2.2 Motivation and Behaviour Motivation is not behaviour itself. We can infer the presence or absence of motivation by examining the behaviours of people in a given context. Some behaviours are desirable and are encouraged. Other types of behaviours are undesirable and will not be encouraged. Some of the factors that explain the presence of undesirable behaviours are due to a lack of motivation. The responsibility of those who are managing the motivational issue is to trigger the motivational process within individuals.
  • 134. 124 Activity 1 (a) List some behaviours that are normally considered undesirable in a work setting. Example: 1. Coming to work late 2. 3. 4. (b) List some of the likely causes of undesirable behaviours in work settings. Example: 1. The work is poorly defined. 2. 3. 4. 6.2.3 Meaning of Motivation The term motivation has a Latin origin. It is derived from the word ‘movere’ which means ‘to move’. Motivation implies and involves a movement. Such movement can be towards or away from a given situation or context. The word motivation is also associated with such words like motives, needs, wants, wishes, desires, likes, urges, and goals and objectives.
  • 135. 125 Motivation is a derivation of the term motives that is equivalent to the term “needs”. We shall, therefore, stick to the term “needs” when discussing the concept of motivation. Needs Needs are internal states or conditions whereby an individual experiences a certain deficiency or scarcity, either of a physiological or psychological nature. For example, whenever we are thirsty, hungry or sleepy, we are experiencing a certain need. Needs and Drives The term “drives” is associated with needs. Whenever the needs are sufficiently aroused to push a person towards a certain action, the needs transform into drives. Drives are needs that assume a certain orientation or direction and normally result in some action or activity. In other words, motivation is an activation of a need into a drive, which is likely to result in a particular behaviour, under certain specific conditions. The degree or strength of motivation depends upon the attractiveness of the “incentives” or rewards which will be available for the efforts that are being made by the person. For instance, a person is hungry (a need) and decides to go to a restaurant to eat a plate of delicious food (incentive). How fast the person goes to the restaurant and how enthusiastically he consumes the food will be illustrative of a typical motivational situation. Motivation is, therefore, an internal process that energises people to engage in certain types of behaviours.
  • 136. 126 Activity 2 What are the different types of needs or motives that a person can experience? 6.3 THEORIES OF MOTIVATION 6.3.1 Early Approaches to Motivation The work of Frederick Winslow Taylor, commonly known as the Scientific Management Movement, was one of the earliest attempts to understand and to deal with the problem of worker motivation. Taylor advocated a system of wage incentives in order to encourage workers to increase productivity.
  • 137. 127 His assumptions were based on the concept of the Economic/Rational Man. It emphasised the maximisation of gain as the prime concern in human beings. More money for more and more work was equated as being a recipe for greater job satisfaction. However, Taylor’s approach to motivating workers by providing them more “carrots” or “incentives” in terms of higher wages had important limitations. The limitations in Taylor’s approach to motivation were investigated by a team of researchers led by Professor Elton Mayo of Harvard University. The work of Elton Mayo is known as the Hawthorne Experiments / Studies or the Human Relations Movement. This movement emphasised the importance of social needs and the importance of the informal organisation and informal leadership in group dynamics and behaviour. The Human Relations Movement argued that managers should pay attention to the social dimensions in a work situation. If these aspects are taken care of, the workers will be motivated. Better communication, shared-decision making and consultation in job-related issues, group incentives and attention to informal groups and the informal leader were some of the ideas that were promoted as contributing to higher levels of motivation. However, even under this approach, the managers were still responsible for prescribing the type of behaviour that was acceptable to the organisations. Workers had to comply with the managerial directives. The improvements proposed under the Human Relations Movement were confined to whatever the managers considered to be primary in the interests of the organisations.
  • 138. 128 Activity 3 (a) What were the limitations of Taylor’s approach to motivation? Note: You are STRONGLY advised to refer to Unit 2 on “The Evolution of Management” when tackling this question. (b) In view of the limitations of the Human Relations approach to motivation, suggest how the approach to motivation can be improved.
  • 139. 129 6.3.2 Need or Content Theories The early approaches to motivation contained certain weaknesses. These weaknesses were addressed by a number of more sophisticated theories of motivation. The need or content theories of motivation were based on the idea that people experience a number of needs .To fulfil those needs, they will engage in specific activities. Need theories require managers to understand and identify those needs. All that managers would be required to do, having determined the needs of the workers would be to design and implement appropriate motivational programmes with the right mix of incentives. The contributors to these theories are: Contributors Theories • Abraham Maslow The hierarchy of needs • Douglas Mc Gregor Theory X and Theory Y • Frederick Herzberg Motivation–Hygiene Theory • Clayton Alderfer ERG Theory • David C. McClelland Acquired-needs Theory. 6.3.2.1 Abraham Maslow’s Hierarchy of Needs Theory According to this theory, human beings experience at least five types of needs. These needs normally exist in a hierarchical order ranging from the basic, first order needs to the highest, second order needs. They are physiological or biological, safety or security, social or belongingness, self-esteem and self-actualisation as shown in Figure 6.1
  • 140. 130 Hierarchy of Needs Figure 6.1 The strength or intensity of a particular need activates the motivational process in human beings. However, critics of the theory argue that every human being may not experience the various needs in the same manner. Moreover, a need may not be completely fulfilled before another need becomes more pressing. It is also not necessary that the needs be classified into five distinct categories. Maslow’s theory nevertheless provides an interesting framework for understanding the issue of motivation. 6.3.2.2 Douglas Mc Gregor’s Theory X and Theory Y Theory X is based on a set of assumptions about the nature of work and human beings. For the theory X type, work is viewed as a necessary evil and people are normally predisposed to avoid work. Work needs to be highly prescribed and tightly controlled. Threats and punishments have to be resorted in order to get work done. Social or Belongingness Self-esteem Self- Actualisation Physiological or Biological Safety or Security
  • 141. 131 In contrast, Theory Y is based on a opposite set of assumptions. Work is viewed as an interesting activity and people are normally predisposed to enjoy doing their work. Managers are therefore encouraged to provide workers with opportunities to assume higher responsibilities and greater autonomy. Theory X and Theory Y did not depart from the ideas put forward by Maslow. They looked at the issue of motivation from the point of view of managers. They argued that managers held a set of assumptions about work and workers and these assumptions influenced their attitudes and behaviours. 6.3.2.3 Frederick Herzberg’s Motivation Hygiene Theory According to this theory, in any given work situation, there are two types of factors that can affect the attitudes and behaviours of employees. The first set of factors are termed as the satisfiers. They relate to the intrinsic nature of the work itself and what the worker does; for example, the diversity of tasks to be carried out by the employee or the opportunities for growth available to the employee. If these factors are present, the worker may experience high job-satisfaction. The other set of factors are referred to as the dissatisfiers; for example, working conditions, salary or company policies which are available to the employee. They relate to the environment of the work and the environmental conditions in which the work is carried out. If these factors are not appropriate, the workers may experience a certain level of job-dissatisfaction. Herzberg’s theory has raised interesting issues. Are satisfied workers motivated workers? Does the removal of dissatifiers in a work situation lead to job-satisfaction? Herzberg seems to have related the notion of job-satisfaction to motivation in his theory. While job-satisfaction can influence motivation, it does not, in all cases, have a cause and effect relationship with motivation.
  • 142. 132 6.3.2.4 Clayton Alderfer’s ERG Theory Alderfer’s theory is considered as an alternative to Maslow’s Hierarchy of Needs Theory. The five needs are grouped into three categories: existence, relatedness and growth (ERG). They can be viewed as different stages along a continuum and differ in terms of their concreteness. This is illustrated in Figure 6.2. Figure 6.2 As one level of need is satisfied, another level takes over. Thus, the ERG theory incorporates a satisfaction-progression principle, which is also present in Maslow’s Hierarchy of Needs Theory. Thus, the ERG theory also proposes that the levels of needs were satisfied in a sequential manner. Further, if a need is not satisfied on a continuous basis, the individual may decide to give such a need a low priority. For example, if you invite a person for dinner, but your invitation is not reciprocated on several occasions, you may decide to stop issuing any further invitation. 6.3.2.5 David Mc Clelland’s Acquired Needs Theory According to this theory, the needs that individuals experience are acquired through life experiences; they are learned. Growth Relatedness Existence
  • 143. 133 The needs can be classified into: Need for affiliation (nAff), Need for achievement (nAch) and Need for power (nPow). The existence of these needs defines the need profile of an individual .The strength of a particular need becomes the driving force for an individual’s behaviour. In most situations, individuals are likely to possess a combination of all the three needs. Activity 4 List the strengths and weaknesses of the content theories of motivation. 6.3.3 The Process or Cognitive Theories Need or content theories focus on WHAT motivates people. They do not explore how the mind processes the needs in relation to other factors that can influence motivation. They suggest what the antecedents of motivated behaviour are. The process or cognitive theories go a step further and give a different perspective to our understanding of motivation. They attempt to explain HOW behaviour is aroused and energised. They focus on the cognitive or thought processes that precede or accompany motivation. The major process or cognitive theories are: • Victor Vroom’s Expectancy Theory(The VIE Theory) • J.Stacy Adams’ Equity Theory
  • 144. 134 • Harold Kelly’s Attribution Theory • Edwin A. Locke and Gary P. Latham’s Goal-setting Theory 6.3.3.1 Victor Vroom’s Expectancy Theory Three key elements constitute the basis of this theory. They are Effort- Performance expectancy (EP), Performance – Outcome expectancy (PO) and Valence. Effort-Performance expectancy refers to the evaluation that efforts made will result in a desired performance. Performance – Outcome expectancy consider the rewards that are available if the outcome is attained. Valence is the value that is attached to the rewards. Expectancy theory of motivation originally suggested that an individual will put in efforts on the basis of the assessment made with respect of each element of the theory. Subsequent work modified this approach and proposed that an individual will make a global assessment of each element and combine them in a general formula: (EP) × (PO) × valence = motivation If any of the element obtains a low or a zero value, there will be an absence of motivation. Expectancy theory is not particularly suited for making comparisons among individuals and their motivational levels. Each individual makes a unique assessment that influences his/her behaviour. 6.3.3.2 J.Stacy Adam’s Equity Theory Feelings or perceptions of equity are at the heart of Equity theory. It is based on the fact that people are always comparing their efforts and the associated rewards with those of other people. Whenever there is a situation which involves an element of injustice or lack
  • 145. 135 of fairness (not in an absolute basis) there is an imbalance. In such circumstances, the individual will try to engage in certain activities to reduce or remove the imbalance. The efforts that will be expended will demonstrate the level of motivation. 6.3.3.3 Harold Kelley’s Attribution Theory Kelley focusses on the complexity of human behaviour. His theory is concerned with the “whys” of behaviour and motivation. The causes are to be found in the relevant environment of the individual, both at the internal (within the individual) as well as external levels. Cognition and perception are the two processes that are involved in the search for causes or attributes and this information influences the behaviour and motivation of individuals. Attribution theory is not a theory of motivation; rather, it is a theory of the relationship between personal perception and interpersonal behaviour. 6.3.3.4 Edwin A. Locke and Gary P.Latham’s Goal Setting Theory The process of goal setting provides opportunities for shaping the attitudes and behaviours of the people involved in the process. The particular attributes that are associated with the set goals also contribute towards determining the level of motivation. The element of feedback plays a key role in the motivational process. Goal setting theory provides managers with an interesting approach to deal with the issue of motivation at work. It is interactive and both managers and employees share the responsibility for motivation.
  • 146. 136 Activity 5 Is there any conflict or contradiction between the need/content theories and the process/cognitive theories? Explain your answer. 6.3.4 The Reinforcement Theory The reinforcement theory of motivation was promoted by psychologist B. F. Skinner and others. The theory is also known as the Operant Conditioning, Behaviourism or the Law of Effect. According to this theory, behaviour is dependent upon its consequences. If the consequence of behaviour is positive and pleasant, such behaviour will be repeated. If the consequence is negative or unpleasant, the behaviour will be discontinued. Behaviour can be shaped or reinforced by different types of reinforcements or rewards.
  • 147. 137 • Positive reinforcement is a reward that is pleasant and the individual repeats the behaviour in order to obtain the reward. • Negative reinforcement (also referred to as Avoidance Learning) is a negative or unpleasant stimulus that an individual would avoid or escape by engaging in the required behaviour. • Extinction is a technique whereby a positive reinforcement that was available for an individual to continue with a behaviour, is deliberately withheld or denied in order to discourage the behaviour from being continued. • Punishment is a technique whereby a negative reinforcement is applied in order to discourage or stop an undesirable behaviour. Schedules of Reinforcement Behaviour can be reinforced either on a continuous or a partial basis. The types of schedules chosen for reinforcement specify the purpose, the timing and the situation being addressed. The Reinforcement theory is considered as an opposite to the Cognitive or Process Theories of motivation. The thought processes behind behaviour is given less consideration than the consequence of the behaviour itself. Activity 6 (a) Identify a couple of situations where the Reinforcement Theory can be applied. (b) Provide examples of various types of reinforcement that can be utilised by a manager in dealing with employees.
  • 148. 138 6.3.5 Social Learning Theory This theory has been put forward by A. Bandura. He argues that behaviour cannot be explained by excluding the learning process that an individual goes through in his/her experiences. Nor can we exclude the personal or environmental factors that can influence the learning process as well as the behaviour. According to Bandura, the Social Learning Theory combines elements of both the Reinforcement and the Cognitive or Process Theories. The Social Learning Theory involves symbolic processes, vicarious learning and self- control. • Symbolic Processes relate to our ability, through words and symbols, to visualise situations even before experiencing them. Through self-efficacy (a cognitive aspect) we are able to have an idea about our ability to do certain tasks. • Vicarious Learning involves learning through observation, without having to make the experience ourselves. We observe, retain, and reproduce behaviours. In order to adopt such behaviours as our own, the element of motivation through appropriate types of reinforcement becomes important. • Self-control is our ability to be master of our own acts. For example, we have the power in us to withhold our co-operation to a project, even if the reinforcement is highly positive.
  • 149. 139 Activity 7 Illustrate, with suitable examples, instances of (i) Symbolic Processes (ii) Vicarious Learning (iii) Self-control
  • 150. 140 6.4 A MODEL OF MOTIVATION All the different elements or factors involved in a typical motivational situation can be incorporated within a simple model. This is illustrated in Figure 6.3. Such a model will provide a very useful and pragmatic way of sizing up the issue of motivation. Needs or wants Cognitive activities Motivated (including personal factors) Behaviour Behaviour Reinforcements or rewards Unmotivated Behaviour Environmental factors Figure 6.3: A Model of Motivation
  • 151. 141 Activity 8 (a) In designing motivational programmes, what considerations should a manager keep in mind? (b) Do managers themselves face the problems of motivation? How should they deal with such situations?
  • 152. 142 6.5 KEY CONCEPTS Behaviour Drives Motivation Needs Needs Theory Relatedness 6.6 VIDEO SESSION “All Systems Go: Motivating for Excellence”: Episode 14 Pay particular attention to the following questions while viewing the video. Your answers will be discussed during the tutorial. 1. What set of factors can influence people’s behaviours? 2. How can managers empower employees? 3. What elements can be included in rewards/incentive systems?
  • 153. 143 UNIT 7 LEADERSHIP Unit Structure 7.0 Overview 7.1 Learning Objectives 7.2 Definition of Leadership: In Search of the Holy Grail 7.3 Theories of Leadership 7.3.1 Traditional Theories of Leadership 7.3.1.1 Trait Theory 7.3.1.2 Style Theories 7.3.1.2.1 Autocratic and Democratic Leadership 7.3.1.2.2 Participative and Directive Leadership 7.3.1.2.3 People Oriented and Productivity Oriented Leadership 7.3.1.3 Contingency Theories 7.3.2 Contemporary Theories of Leadership 7.3.2.1 Transactional Leadership 7.3.2.2Transformational Leadership 7.3.3 The Future of Leadership -Spiritual Leadership 7.4 Management and Leadership 7.4.1 Leadership: An Asset of a Successful Manager 7.4.2 Differences in Approaches 7.5 Skills of Leadership 7.6 Motivation and Leadership at Work 7.7 Key Concepts 7.8 Suggested Further Readings 7.9 Video Session
  • 154. 144 7.0 OVERVIEW After having gone through Unit 6 on Motivation, Unit 7 provides us with an insight of the different theories of leadership and discusses the trend in its development. Since a manager is called upon to become a leader in the workplace, we will see how this transition could be enhanced through a comparison of leadership and management, and identification of the skills pertaining to a leader. Motivation and leadership are not independent concepts, and the last part of this unit attempts to illustrate this interdependence. Throughout this Unit, you will tackle various activities to help you assess your level of understanding of the unit content. 7.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Define leadership. 2. Distinguish between the different theories of leadership. 3. Differentiate between a manager and a leader. 4. Identify the skills of a leader. 5. Discuss the importance and relevance of motivation and leadership for managerial and organisational effectiveness.
  • 155. 145 Warm Up Activity Before going into the heart of the subject matter, write down in the space provided below, what 'leadership' brings to your mind. As you proceed through the unit, check in the right column below, the points that match your answers. • • • • • • • • • • • 7.2 DEFINITION OF LEADERSHIP: IN SEARCH OF THE HOLY GRAIL A lot of studies and research have been undertaken, and are still going on, on the topic of leadership. In such a context, finding a specific definition can prove restrictive. Different authors have their own ideas about leadership. Leadership has commonly been defined as the traits, qualities, and behaviours of a leader, Horner (1997).
  • 156. 146 For Dobbins and Pettman (1997) leadership is the ability to motivate people to work towards achieving common goals, to make ordinary people display extraordinary performance. In short, leadership has been related to a person's skills, abilities and degree of influence to get people moving in a direction, making decisions and do things that they would not normally have chosen to. 7.3 THEORIES OF LEADERSHIP Now, let’s look at the different theories of leadership through the various stages of its development; traditional theories, contemporary theories and future of leadership. In the process we will review the outcomes of studies done by psychologists and researchers from the Universities of Michigan and Ohio, and many others. 7.3.1 Traditional Theories of Leadership The traditional theories include: • Trait theory • Style theories • Contingency theories 7.3.1.1 Trait Theory Trait theory is based on the belief that leaders have different personality characteristics or traits than other people. It assumes that leadership is innate (one is born a leader). The emphasis is more on the individual rather than the situation. Although the same traits are found in everyone, people may differ from each other on each trait. So psychologists tried to identify the traits that were prominently present in Leaders or Great Men.
  • 157. 147 Traits are distinctive internal qualities or characteristics of an individual, such as physical characteristics (height, weight, appearance, energy), personality traits (dominance, extroversion, originality), skills and abilities (intelligence, knowledge, technical competence), and social factors (interpersonal skills, sociability and socio-economic position). Different studies under this perspective, which according to Handy (1993) amounted to over hundred by 1950, attributed the following common traits to a leader: • Intelligence • Initiative • Self-assurance • Helicopter factor - Adopting a holistic approach. Referring to a study undertaken by Kouzes and Pasner in 1993, Cacioppe (1997) presented the six highest characteristics that people admire in leaders: 1. Honesty 2. Forward looking 3. Inspiring 4. Competent 5. Fair-minded 6. Supportive It is normally found that a great leader has a personal quality of magnetism or charisma, and that such a person tends to be higher in certain characteristics than other people (e.g., intelligence, level of activity and social participation). However, psychologists remain unconvinced that there is any link between any specific characteristics and any form of leadership.
  • 158. 148 Activity 1 a. List a few leaders whether national or international. b. Provide the criteria that influenced your choices. c. Make a list of personality characteristics or traits common to them. d. Compare your answers with the responses of your classmates. 7.3.1.2 Style Theories
  • 159. 149 Failure to discover who the best leaders are, made the emphasis switch to an examination of what the best leaders do, that is, at the behaviour of leaders. The assumption behind the style theories is that employees will work harder and more effectively under some given styles of leadership than others. Style theories are reviewed under:- (a) Autocratic and Democratic Leadership (b) Participative and Directive Leadership (c) People-oriented and Productivity-oriented Leadership 7.3.1.2.1 Autocratic and Democratic Leadership In 1939, Lewin, Lippitt and White conducted a study concerning the effects of different styles of leadership on group performance. In the study, the leaders had to adopt one of three styles in performing their role: - Autocratic - where the leader decides what should be done, when, how and by whom. Democratic - where the work of the group is decided on by group discussion, supported by the leader. Laissez-faire - where the leader's input is minimal, limited to supplying materials and information.
  • 160. 150 Autocratic Democratic Laissez-faire Figure 7.1: Trilateral Leadership Styles The democratic leadership was the most appreciated and productive of the three methods. Researchers from the University of Michigan confirmed this, at the beginning of the 1960s, when they found that the leadership of the successful groups was democratic in style. In 1961, R. Likert proposed a classification of four systems of leadership styles: 1. Exploitative autocratic 2. Benevolent autocratic 3. Consultative 4. Democratic Figure 7.2: Leadership Continuum System 1 System 2 System 3 System 4 • No trust in followers • Leader makes decision • Limited trust in followers • Bulk decision making by leader • Incomplete trust in followers • Followers allowed decision making under leader’s control. • Complete trust in followers. • Decentralised decision making process. Autocratic Democratic Leadership style Leadership style
  • 161. 151 Likert advocated the universal use of System 4 type of leadership, the democratic style, in the management of organisations. According to Statt (1994), the programmes Likert developed for the universal applicability of System 4 were closely related to the goal setting and feedback aspects of motivation that we encountered in Unit 6. There are however, situations in which autocratic leadership can improve a group’s performance. The rationale behind this is that in some situations the satisfaction owing to lifting up the burden of responsibility can outweigh that associated with participation in decisions. 7.3.1.2.2 Participative and Directive Leadership This dimension, illustrated in Figure 7.3, refers to the extent to which leaders in organisations encourage their staff to participate in decision making regarding issues affecting them directly. It is somehow similar to the Autocratic-Democratic dimension mentioned above. Kurt Lewin’s studies involving participative discussions showed that people are more likely to accept and act on a group decision if they have participated in making that decision. Participation by workers in decisions affecting their jobs can also lead to increased enthusiasm, commitment and productivity. This finding is supported by Locke's goal setting theory of motivation reviewed in Unit 6. But there exist situations in which directive leadership seems to be more effective. In the case of people knowing their job inside out, participation would be superfluous. Participative Leadership Figure 7.3: Bipolar Leadership Styles Directive Leadership
  • 162. 152 7.3.1.2.3 People-oriented and Productivity-oriented Leadership This dimension refers to the work undertaken by the Ohio State University team that identified two general factors which describe the behaviour of a leader: - 1. Consideration: the extent to which a leader shows attention to subordinates and is concerned about their welfare. 2. Initiating Structure: the extent to which the leader’s role and the activities of the group are structured around the accomplishment of the group’s task. Generally the consideration dimension seems to be the more effective of the two, with high consideration being associated with subordinates’ high job satisfaction and low staff turnover. Initiating structure and its effects on subordinates' job satisfaction and work performance seems to vary with the influence of other factors like the type of organisation and the size of the work group. Leaders like to think that they can operate on both dimensions but their subordinates feel that they cannot, and tend to see their leaders as either people-oriented or productivity- oriented. Blake and Mouton's Managerial Grid From the work done by the Ohio State University team on People-oriented and Productivity-oriented Leadership dimensions, Blake and Mouton have designed a managerial grid. The grid indicates the position of a manager according to the degree of concern shown to people and production.
  • 163. 153 For Blake and Mouton, we should strive for the (9,9) leadership approach, that is, high concern for both people and production. In some situations, other positions on the grid could be held following the leader's assessment of the people and production issues, as shown in Figure 7.4. High 9 8 7 6 5 4 3 2 Concernforpeople 1 Low 1 2 3 4 5 6 7 8 9 High Concern for production Adapted from Bartol and Martin (1998) Figure 7.4: Blake and Mouton's Managerial Grid 1,9 Country Club Management • Attention to people's needs for a friendly organisational climate. 1,1 Impoverished Management • Promote minimum effort for accomplish- ment of work and retaining people. 9,9 Team Management • Committed people • Pursuing common goals Cli t f t t d Authority - Obedience • Reduce human interference to a minimum for the accomplishment of work. 9,1 5,5 Organisation Person Management Maintain satisfactory: • work output • people morale.
  • 164. 154 Activity 2 Consider the following cases and suggest which style(s) of leadership would be more appropriate. Provide the rationale behind your answers. Case 1 A client meets the Director of the Management Consultancy Services of a consultancy firm. A project for the consultancy team is the outcome of this meeting. The Director requires the various expertise of his team to work on the project. He calls his first general meeting on this project. Case 2 On the production floor of a textile factory, the line supervisor will have to reshuffle operators on the chain to resolve a line-balancing problem.
  • 165. 155 7.3.1.3 Contingency Theories As the trait and style theories had not generated a universally effective leadership style, researchers focused their attention on the situation in which leadership occurred. The question now asked is, what kind of leadership behaviour would produce the most effective response from people in a given situation? In that perspective, variables involved in a leadership situation, such as the task, the work group and the position of the leader within that work group, were then taken into account. We review here the different contingency theories: (a) Fiedler’s LPC theory (b) Vroom-Yetton theory (c) Path-Goal theory (d) Hersey-Blanchard Situational theory (a) Fiedler’s LPC theory Fiedler tried to match the most appropriate form of leadership with a particular context by combining aspects of both trait and style theories. He assumed leadership styles would take one of two forms: (i) Concern mainly with task in hand or (ii) interpersonal relationships among the people trying to perform the task. The position of the leader on this dimension was determined by a questionnaire rating his or her Least Preferred Co-worker (LPC). Leaders with a high LPC score shows that they empathise with even their least appreciated colleague and express concern with maintaining harmonious relationships. On the other extreme, a low LPC score implied a greater concern with the task in hand and less concern with interpersonal relationships.
  • 166. 156 According to Fiedler, in Statt (1994), the more effective style of the two forms will depend on three situational factors and the extent to which the combined effect of these factors is favourable to the leader. The situational factors are: - • relations between leader and group members – degree to which the members accept and support the leader. • task structure – degree of the group’s task clarity, with well defined goals and procedures. • leader’s position power – ability of the leader to control group members through rewards and punishments. The most favourable context for the leader is where there are good relations with group members, a very structured task and high position power. The least favourable one is when there are poor relations with group members, a very unstructured task and low position power. As illustrated in Figure 7.5, Fiedler concluded that at the two poles-very favourable and very unfavourable contexts-a group works best if its leader has a low LPC score and is task oriented. A situation in between the extremes-only moderately favourable- requires a high LPC score and person-oriented leader to achieve good group performance. Very favourable context Very unfavourable context Low LPC and task oriented Low LPC and task oriented High LPC and person-oriented Moderately favourable context Figure 7.5
  • 167. 157 Fiedler’s theory has been criticised in that the LPC score of a leader does not remain stable but changes radically over time. The LPC score also changes as group performance does influence the relations between a leader and a group member. (b) Vroom-Yetton Theory Vroom and Yetton formalised the participative - directive conception of leadership into a model to guide leaders in their choice of the most effective style. They found that most leaders had a style that varied with the people and situation. But most leaders were usually at the intersection of the participative - directive dimension, that is, at the ‘consultation’ point. The Vroom-Yetton model identified five decision-making styles, from directive/autocratic through consultative styles to participative/democratic: 1. Autocratic 1: leader uses information already available to make decisions. 2. Autocratic 2:additional information obtained from group before leader reaches decision. 3. Consultative 1: after sharing the problem with subordinates individually, leader comes to a decision. 4. Consultative 2: group discussion on the problem before leader decides. 5. Democratic: sharing of the problem with the group of subordinates for group decision while leader acts as chair. The research seems to promote a participative style, except where the group members do not share the leader’s commitment to the organisational goals. However, in the long run, implementing the participative style in the workplace could generate some problems. Traditional autocratic leaders find it difficult to allow for workers' participation to the extent that their own involvement becomes much less necessary.
  • 168. 158 (c) Path-Goal Theory This theory focuses on leadership from the viewpoint of motivating subordinates. It is based on the expectancy theory of motivation, which was discussed in Unit 6. Path-goal theory incorporates some elements of the Michigan and Ohio research into leadership style and Fiedler’s contingency theory. From this theory the leader’s role is to facilitate the subordinates’ paths to the achievement of performance goals that will carry some rewards, and thus enhance their opportunities for job satisfaction. According to the situation, there are four effective leadership styles: 1. Supportive 2. Directive 3. Participative 4. Achievement-oriented Leaders can adopt different styles in different situations with the key situational factors being leader-group relations, task structure and position power, as in Fiedler’s theory. In stressful situations, supportive behaviour enhances group satisfaction while a directive style suits ambiguous contexts. Path-goal theory is appealing to both behavioural scientists and managers because of its objective, rational and quantifying approach. However, it ignores a large part of people’s lives and cannot explain much of workplace behaviour. The theory concentrates on the task and stresses extrinsic rewards to encourage its accomplishment, denying the possibility of intrinsic factors in motivation, thus contradicting Herzberg’s motivational theory encountered in Unit 6.
  • 169. 159 7.3.2.4 Hersey - Blanchard Situational Theory This theory tries to match the leadership style to the maturity of the followers. Maturity refers here to: (i) Psychological maturity - the followers’ self-confidence, desire for achievement and readiness to accept responsibility. (ii) Job maturity - the followers’ task-related ability, relevant skills, technical knowledge and experience. Thus an assessment of the level of expertise and knowledge of followers, and an awareness of the goals to be achieved, are necessary factors that determine an effective leadership style. As the maturity of the followers increases, leadership should be more relationship-motivated than task-motivated. As shown in Figure 7.6, depending on the degree of follower’s maturity, from highly mature to highly immature, the leadership style could involve: • Delegating to followers • Participating with followers • Selling ideas to followers • Telling followers what to do Highly Immature Highly Mature Telling Selling Participating Delegating Figure 7.6: Leadership Styles v/s Followers' Maturity
  • 170. 160 The traditional theories of leadership showed that there are many appropriate ways to lead and various styles of leadership. The contingency theories differ from, and also build on, the trait and behaviour theories as the trend in leadership research evolved from the one best way to lead into a complex analysis of the leader and situation. As suggested by Horner (1997), to be effective, it is best to evaluate the leader style, situation, and characteristics of the followers. Then, given the leader’s style of leadership and the different behaviours that can be exhibited, either appoint the leader to an appropriate situation or adjust the latter to match the former. Therefore, to be effective, we must use all three traditional theories of leadership.
  • 171. 161 Activity 3 Identify situations in which it will be most suitable to use the following styles of leadership: (a) Autocratic/Directive (b) Consultative (c) Democratic/Participative Discuss the findings with your classmates.
  • 172. 162 7.3.2 Contemporary Theories of Leadership As the studies on leadership evolved into more complex analysis of the leader and situation, it became obvious that leadership could not be tied up to the process and activity of the person who is in a leadership position. Leadership is more and more concerned with responding to the surroundings, it also encompasses the environment the leader creates, and the particular skills and activities of the people being led. So we have reached a point where a distinction needs to be made between: a) Transactional leadership, and b) Transformational leadership 7.3.2.1 Transactional Leadership For Burns (1978), transactional leadership originates from more traditional views of workers and organisations, emphasising the leader’s position of power to use followers for task completion. As its name implies, transactional leadership refers to interpersonal exchanges (transactions) in the workplace. It is concerned with maintaining agreements; responsibility and fairness, that is, more emphasis is placed on the means rather than the ends. Thus transactional leadership relates more to a manager than a leader. Cacioppe (1997) supports this view, emphasising that transactional approaches identify the main task of the leader as guiding and motivating their followers in line with established goals and rewarding their efforts fairly, in ways that the followers value. Cacioppe also linked transactional leadership to Blanchard’s situational leadership model, Path-goal and Vroom-Yetton theories, as he presented situational leadership as one of several transactional approaches to leadership.
  • 173. 163 7.3.2.2 Transformational Leadership This approach to leadership transcends followers beyond personal goals and self- interests, emphasising goals contributing to a greater team, organisational, national and world betterment. Transformational leadership differentiates itself from transactional leadership, as it is more dynamic. A transformational leader is concerned with the ends rather than the nitty-gritty of an organisation’s day to day running, and with transforming the way the organisation operates. Such a leader accomplishes this transformation by doing the right thing for the organisation rather than by doing things by the book. The transformational leader empowers everybody in the organisation to fulfil their potential, and enhance their prospects by creating and following new objectives. Transformational leadership is concerned with a dynamic and changing organisational process. Transformational leaders can initiate and cope with change, creating something new out of the old. Thus these leaders personally evolve and at the same time help their followers and organisations to do so. They support and encourage each individual’s development while building strong relationships with others. Bass (1985) describes transformational leadership as searching for ways to motivate followers by satisfying higher-order needs and involving them in the process of the work, that is empowering them. For Cacioppe (1997), transformational leadership is concerned with communicating a vision, inspiring and motivating enough, to unleash people’s potential into achieving extraordinary things. Such leaders are concerned with aligning people and systems throughout the organisation towards this vision. Transformational leaders have a vision and ability to inspire followers into indulging higher values to achieve important challenges. They cater for the concerns and developmental needs of the followers. Some recent leadership approaches have been questioning the idea of leadership existence within a single designated person and a situation. Gardner (1990) views leadership as the work of multiple members of a group, as opposed to that of a single skilled individual, striving towards a group goal. In such a case the leader will serve as a
  • 174. 164 resource, in addition to setting the direction and moving the group forward, with the involvement of other group members as other thinkers and doers. In the same trend, Manz and Sims (1991) propose an integrative perspective on leadership with their “Superleadership”. For them a leader is someone who can inspire others to lead themselves. Therefore leadership is within each individual, and not restricted to the boundaries of formally appointed leaders. Such successful leaders are facilitators in the process of initiating individuals to lead themselves. They are concerned with unleashing the potential and abilities of followers. Therefore they are expected to have the knowledge of many people instead of only counting on their own skills and abilities. Drath and Palus (1994) view leadership as a process whereby leaders are not individuals in charge of followers, but considered as members of a community of practice. The community of practice is defined as “people united in a common enterprise who share a history and thus certain values, beliefs, ways of talking, and ways of doing things”. Drath and Palus suggest that leadership is the process of co-ordinating efforts and moving together as a group, with much emphasis on the social process that takes place within the group of people. People do not need to be motivated and dominated but rather be involved in the activity by playing an active role in leadership. The evolution of leadership is being almost imposed by the fast-changing and dynamic environment. The notion of leader and followers is being questioned, resulting in reflection on the assumptions behind the trait and contingency theories. This has brought the movement from transactional leadership to transformational leadership. Leadership is viewed as a process and more of a group dynamic. This requires a paradigm shift, that is a change in mind-set, which becomes obvious when we will look at the future of leadership that involves traditional human values, spirituality, and integrates wisdom into leadership.
  • 175. 165 Activity 4 a) Compare and contrast transactional and transformational leadership. b) Identify some leaders who exhibit either of those types of leadership.
  • 176. 166 7.3.3 The Future of Leadership – Spiritual Leadership With new concepts in management like the learning organisation, knowledge management and the virtual organisation, and transformational leadership reaching dimensions beyond imagination, the future of leadership is becoming more and more complex. We are called upon to work in teams, be flexible and responsible with a touch of autonomy accompanying new technology. The workplace and workforce are more dynamic. More knowledgeable employees with professional cultures are joining organisations. This means that the battle of effective leadership will be won on the grounds of the various cultures interacting in an organisation, that is harnessing multiculturalism. Values are more predominant, especially human values, which take us to the new dimension in leadership: Spiritual leadership. Spiritual Leadership This dimension of leadership lies in the trend set by management gurus like S.Covey, championing the integration of traditional spiritual values in leadership. This is so to achieve the peace of mind that results from aligning the soul and mind. It is what Cacioppe (1997) calls leadership wisdom. To be effective in leadership wisdom would mean being very high on emotional intelligence. Goleman (1996) defines emotional intelligence as a person’s awareness of the appropriate emotions, how to manage and use them, in dealing with people in various situations. The importance of emotional intelligence has been confirmed in a survey, reported by Cacioppe (1997), of about 200 managers and professionals who rated successful leaders as being very high on emotional intelligence and moderate to high on intellectual intelligence. Therefore successful leaders need to be aware of their own emotions and those of others, and be able to manage them when responding to other people’s feelings.
  • 177. 167 In addition to emotional intelligence, leadership wisdom incorporates other characteristics that we have come across in our discussion on leadership: - • Ability to identify the needs of the specific situation, • Managing and using the knowledge of others and that of the leader as required by the situation, • Showing empathy to followers so as to respond appropriately and differently, • Inspiring and influencing followers to strive towards higher level values and goals, • Ability to focus on the present situation while being aware of the people around. We now have an insight of the different theories of leadership, its evolution and development. It is a dynamic and complex subject, and we cannot say that we have reached the end of the journey, as summarised in Figure 7.7: Figure 7.7: Development and Evolution of Leadership. Spiritual Leadership Transformational leadership Transactional leadership Contingency theories of leadership Style theories of leadership Trait theories of leadership ?
  • 178. 168 7.4 MANAGEMENT AND LEADERSHIP We have looked at the evolution of leadership from the past (traditional), present (contemporary) and future perspectives. We will now try to distinguish between management and leadership. Leadership and management have been used interchangeably. In fact, they are two notions describing two different concepts. We are going to discuss here, the differences and similarities. 7.4.1 Leadership: An Asset of a Successful Manager One of the several assets of a successful manager is leadership. The manager has to undertake several functions, as seen in Unit 1, such as: • Planning • Organising • Leading • Controlling Leadership is a component of the leading function. Management is not just about leadership but requires involvement, playing various roles that cannot be delegated. In some cases leadership may not be required, for example in self-motivated groups, thus proving that leadership is just an asset of management. 7.4.2 Differences in Approaches Managers tend to think incrementally while leaders adopt a radical approach. Managers aim at doing things by the book whereas leaders are intuitive. Thus a leader is likely to be more emotional than a manager, and this could be an explanation for teams choosing to follow leaders, as some people are mostly driven by their emotions rather than their intelligence. Managers adopt a transactional approach whereas leaders use a transformational perspective.
  • 179. 169 A leader is a pioneer with a vision that will unite people who will naturally become followers through their own choice. A manager could have earned his/her position of authority for years of service and loyalty to the organisation rather than through owning leadership qualities. Hence the manager will be obeyed and will rule but not necessarily be followed. Table 7.1 gives a comparison between a leader and a manager.
  • 180. 170 Table 7.1: A Comparison between a Manager and a Leader. Manager Leader • Motivates people and organises resources to attain stated organisational goals • Pragmatic • Limits focus • Rational • Does things right and by the book • Transactional • Static approach • Motivates people to generate new objectives • Visionary • Widens horizons • Emotional • Intuitive and does the right thing • Transformational • Dynamic approach 7.5 SKILLS OF LEADERSHIP Along the line of our discussion throughout this unit, we can safely state that leadership is not just innate. If one adopts the characteristics of leaders, do what they do, one can become a leader. Hence we will have a quick overview of the skills and characteristics of leadership and what leaders do.
  • 181. 171 Table 7.2: Summary of Skills, Characteristics And Actions of a Leader. Basic Skills of Leadership Characteristics of leaders What do leaders do? • Leaders set goals. • Leaders have a vision, mission and clear goals. • Inspire and motivate others. • Leaders have high expectations of themselves and others. • Leaders have high expectations and are focused on winning. • Put meaning and purpose into work. • Leaders are good listeners. • Leaders listen to and learn from others. • Communicate well. • Leaders are hard workers and believe in action to obtain results. • Build winning teams. • Leaders display courage in uncertainty. • Leaders are strategic thinkers and show ability to plan. • Leaders are results- oriented. • Leaders relish leading and are confident in their abilities to lead. • Leaders have high self- esteem. • Leaders have the ability to self-motivate. • Leaders thrive on continuous learning. • Leaders possess high integrity. Compiled from Dobbins and Pettman (1997)
  • 182. 172 Activity 5: Don’t limit yourself to sections 7.4 and 7.5 while doing this activity. (a) Think of the best manager you know or have worked with. Explain why you chose that person. Was your choice guided by his/her leadership skills? Explain how “leadership” affected your choice. (b) Do the same exercise for the worst manager you know or have worked with. (c) ‘A subordinate cannot be a leader'. Discuss.
  • 183. 173 7.6 MOTIVATION AND LEADERSHIP AT WORK Managers are expected to be effective leaders. The ability to influence the attitudes and behaviours of others is essential in achieving organisational goals and objectives. It is equally essential to be able to obtain the commitment and dedication of employees. People always expect to be recognised and rewarded for their efforts and contributions. Understanding and applying the theories of motivation can enhance the effectiveness of managers as leaders. Activity 6 (a) 'Effective managers facilitate and promote innovation'. Discuss with respect to leadership and motivational theories. (b) Provide suitable examples of the: (i) leadership and (ii) motivational skills, demonstrated by such managers.
  • 184. 174 7.7 KEY CONCEPTS Theories of Leadership Transactional and Transformational Leadership Spiritual Leadership Management and Leadership Skills of a Leader Motivation and Leadership at Work 7.8 SUGGESTED FURTHER READINGS 1. Bartol, K.M. and Martin, D.C. 1998, Management, London: McGraw-Hill. 2. Steers, R.M., Porter, L.W. and Bigley, G.A. 1996, Motivation and Leadership at Work, Singapore: McGraw-Hill International Editions. 3. Stoner, J.A.F., Freeman, R.E. and Gilbert, Jr, D.R. 1996, Management, New Delhi: Prentice-Hall. 7.9 VIDEO SESSION “At the Helm: Styles of Leadership”- Episode 16. Hints while viewing the programme: • Record the interviewees’/participants’ names to substantiate your answers to questions listed below. • Keep evidences from the programme to support your arguments.
  • 185. 175 Answer the following questions after viewing the programme: 1. In trying to define leadership, some participants have talked about “Elements of Leadership”. Identify these elements and relate them to what you have read in Unit 7. 2. Transformational leadership” is covered throughout the programme. What are the interviewees’ contributions to the views provided in Unit 7 on “transformational leadership”? 3. What additional information from the video could you bring to the distinction made in Unit 7 between management and leadership? 4. From the programme, what are the challenges awaiting leadership in the future?
  • 186. 176 UNIT 8 CONTROL Unit Structure 8.0 Overview 8.1 Learning Objectives 8.2 Control 8.3 Control Related to other Management Activities 8.3.1 Dealing with Uncertainties 8.3.2 Detecting Irregularities 8.3.3 Identifying Opportunities 8.3.4 Handling Complex Situations 8.3.5 Decentralising Authority 8.4 Contribution of Management Levels to Control 8.4.1 Strategic Control 8.4.2 Tactical Control 8.4.3 Operational Control 8.5 The Control Process 8.5.1 Determine Areas to Control 8.5.2 Establish Standards 8.5.3 Measure Performance against these Standards 8.5.4 Correct Variations from Standards and Plans 8.6 Types of Control 8.6.1 Controls by Timing 8.6.1.1 Feedforward Control 8.6.1.2 Concurrent Control 8.6.1.2.1 SPC 8.6.1.3 Feedback Control 8.6.1.3.1 Quality Control 8.6.2 Multiple Controls 8.6.3 Cybernetic/Non-cybernetic Control
  • 187. 177 8.7 Managerial Approaches to Control 8.7.1 Market Control 8.7.2 Bureaucratic Control 8.7.3 Clan Control 8.8 Characteristics of a Control Process 8.9 Potential Dysfunctional Aspects of Control 8.9.1 Behavioural Displacement 8.9.2 Game Playing 8.9.3 Operating Delays 8.9.4 Negative Attitudes 8.10 Key Concepts 8.11 Additional Activities 8.0 OVERVIEW This Unit will show you the steps involved in a control process. The different types of control as well as the approaches to control are discussed. Furthermore, you will be aware of the characteristics of an effective control process. 8.1 LEARNING OBJECTIVES After you have successfully completed this Unit, you should be able to do the following: 1. Describe the role of controls and their importance for different management levels in organisations. 2. Explain the types of controls. 3. Describe the different approaches to implementing controls. 4. Explain the potential dysfunctional aspects of control systems. 5. Outline the characteristics of an effective control system.
  • 188. 178 Warm up Activity Before going through this unit, reflect on the meaning of control in an organization setup. 8.2 CONTROL “Controlling is the measurement and correction of performance, in order to make sure that enterprise objectives and the plans devised to attain them are accomplished.” [Koontz, 1989]. Controlling can be likened to a thermostat set to control room temperature, in as much as it checks, measures, appraises, and corrects if necessary. During its monitory phase it is passive, that is not directly contributory, only becoming active when correction is required. Control is essential at every managerial level since each level has its own planning and responsibility regarding the respective set of activities. However, there is a misconception that control is from top management due to the fact that responsibility increases with the level of hierarchy.
  • 189. 179 8.3 CONTROL RELATED TO OTHER MANAGEMENT ACTIVITIES The fundamental idea behind control is to assist managers in preventing problem occurrence. Control helps in dealing with uncertainty, detecting irregularities, identifying opportunities, handling complex situations and decentralising authority [Bartol, 1996]. 8.3.1 Dealing with Uncertainties In practical situations, things do not always come out as planned. There are many factors that contribute to the success or failure of an organisation, for example availability of material, change in technology and consumer tastes. But with a good control system, management is in a better position to monitor activities and thereby react accordingly to any changes. 8.3.2 Detecting Irregularities In many cases, irregularities such as running over budget, unexpected high staff turnover and product defects arise in an organisation, thus bringing it to perform badly. Control systems help in detecting those irregularities and money can be saved when major problems are prevented at an early stage. 8.3.3 Identifying Opportunities Controls not only point out dark areas but also indicate favourable ones. For example, managers will be aware of performance which is beyond expectation and by exploiting those successful areas, the organisation will be more profitable. Such management strategy can be developed with the help of controls.
  • 190. 180 8.3.4 Handling Complex Situations The larger the organisation the more difficult it is to have good co-ordination. Controls, therefore, help to better co-ordinate large and complex operations. 8.3.5 Decentralising Authority Controls help managers to go for decentralisation since they will be able to monitor decisions made at lower levels. For example, a top manager can exercise control over a delegated activity by monitoring accounting ratios such as return on sales, inventory turnover, etc. 8.4 CONTRIBUTION OF MANAGEMENT LEVELS TO CONTROL Each managerial level has its own level of responsibility and different types of controls are applied correspondingly. These are strategic, tactical and operational controls. 8.4.1 Strategic Control Strategic control consists of monitoring the determining factors which can affect the strategic plans of an organisation and ensuring that the plans are realised. Such control is exercised at top management level whereby the organisation is being looked over as a whole and strategic decisions are taken on a relatively long term basis. 8.4.2 Tactical Control Tactical plans are implemented at departmental level. Tactical control deals with the assessment of these plans. It also covers the monitoring of results and taking corrective measures when required. Middle management usually carries out this type of control since they are mainly concerned with tactical decisions.
  • 191. 181 8.4.3 Operational Control Operational control consists of making sure that operating plans are well implemented by lower level managers who need to rule within tight schedules and limited budget. This type of control monitors the results on a daily basis followed by relevant corrective actions. Activity 1 Elaborate on the controls that exist in the different managerial hierarchy. Illustrate with examples from an organisation with which you are familiar.
  • 192. 182 8.5 THE CONTROL PROCESS There is a general route to set up a control system although each managerial hierarchy requires different types of control. The basic steps in a control process is as follows: Figure 8.1 8.5.1 Determine Areas to Control In an organisation there are many controllable factors and it will be too expensive and time consuming to control everything. So the very first step in a control process is to find out which areas require control. Therefore managers have to focus on critical operations to be controlled in order to achieve organisational goals. Determine areas to control Establish standards Measure performance against these standards Correct variations from standards and plans
  • 193. 183 8.5.2 Establish Standards The next step is to establish standards which will bring about a common understanding of the specific activities and actions to be taken in order to achieve organisational objectives. Standards are by definition simply criteria of performance. Standards might point out the steps and requirements of a particular job with a view to achieve the organisational goals. The standards will guide the employees throughout their work and they will be in a better position to perform effectively. 8.5.3 Measure Performance Against these Standards After setting up standards, the manager has to measure performance. The means for performance measurement depends on those standards, and it can be in terms of number of defects, number of units sold, return on investment (ROI), etc. These are quantitative measurement and sometimes performance has to be assessed qualitatively, for example, the evaluation of the attention paid to a customer. In such cases, the performance evaluation is done by the peers in the organisation. The frequency of measuring performance has to be determined as well, that is whether the control data has to be on a monthly, weekly, daily, or even hourly basis. Then these performance values can be compared to the standards set in terms of reports highlighting planned versus actual results. 8.5.4 Correct Variations from Standards and Plans The last step consists of analysing the difference in the actual results from the planned ones, that is the variations from standards and necessary adjustments have to be made accordingly. If the performance meets or exceeds requirements, the manager has to show recognition and celebrate the success so as to encourage the subordinates to keep up the performance. However, if standards are not met, the manager has to identify the root cause of the problems and then appropriate corrective actions have to be taken. In some
  • 194. 184 cases, the standards themselves have to be modified because they may be inappropriate for the organisation. 8.6 TYPES OF CONTROLS Apart from looking for the areas to be controlled, it is important for managers to decide upon the types of controls to apply. The common types of controls are divided into control by timing, multiple controls and cybernetic/non-cybernetic controls [Bartol, 1996]. 8.6.1 Controls by Timing A production cycle can be broken down into three main stages namely inputs, transformation processes and outputs. Controls based on timing means applying control at these different stages of a production cycle and such control types are divided into feedforward, concurrent and feedback. Figure 8.2 INPUTS OUTPUTSCONVERSION PROCESS Feedforward control Concurrent control Feedback control
  • 195. 185 8.6.1.1 Feedforward Control Feedforward control concentrates on the very first stage of production and deals with inputs. It ensures that inputs, which may be in the form of materials, people, time, money, etc. meet the required standards so as to satisfy the next stage which is the transformation process. It acts as a preventive measure for later process. An example of feedforward control is inventory control whereby the necessary materials needed to start production are verified to ensure that they conform to requirements. 8.6.1.2 Concurrent Control Concurrent control looks upon the transformation process so that conformance to standards is maintained throughout. It helps regulate the continuous process of producing outputs so as to minimise defects, in other words, increase the quality level. This type of control requires a sound knowledge of the process involved. An example of concurrent control is statistical process control (SPC), one of total quality management (TQM) tools. 8.6.1.2.1 Statistical Process Control (SPC) The aim of SPC is to minimise or prevent the risk of having defects by looking at the process itself instead of inspecting finished products. In any process, variations exist. For example, one of the factors pertaining to the quality of a product is its consistency. Therefore, each product from the same production line must be similar or have a minimum acceptable variance. Hence the performance of the process has to be monitored and analysed, by using a control chart (see Figure 8.3) which is the main tool of SPC. Scientific steps and statistical calculations are performed to set control limits. The control data are plotted on the charts and these have to be within the lower and upper control limits. Any deviation outside the limits will necessitate immediate corrective action. SPC allows the operator to correct or adjust the production process in time, thus avoiding the rejection of a whole defective batch at a later stage. Whenever the existing variation is
  • 196. 186 controllable and predictable, it is said that the state is in statistical control, that is stable. SPC is a vital tool of TQM. Figure 8.3 Upper Control Lower Control Sample number Data
  • 197. 187 8.6.1.3 Feedback Control Feedback control is the verification of a product or service after it has been completed to see whether it meets the required standards. Sometimes deviations remain undetected although feedforward or concurrent control has been exercised, and hence feedback control can be regarded as a final check before supplying a product or service to the customer. An example of feedback control is quality control, which is a traditional type of control. 8.6.1.3.1 Quality Control Quality control has existed for many years and is traditionally known as the identification of nonconformances in the end products before they go to the customer. For large production size, quality controllers take samples from the production batch and check to see whether the batch must be accepted, rejected or sent back as rework. When the product is safety critical or the batch is small, 100% inspection is performed. 8.6.2 Multiple Controls Each of the methods described previously is useful. However, this usefulness is limited if only one method alone is used since each method measures only part of the overall production cycle. Therefore, most organisations use a combination of two or more of the control types in order to be able to maintain higher overall quality. This use of multiple controls scrutinise and, when required, correct at each stage, with the aim of ensuring quality is maintained or improved, is the basis on which management practises total quality management (TQM).
  • 198. 188 8.6.3 Cybernetic/Non-cybernetic Control Controls can be either cybernetic or non-cybernetic, that is without the involvement of human being or relying on human factors respectively. A cybernetic control system automatically monitors and makes the necessary adjustments when needed. An example of such a type of control is the air-conditioning of a room whereby the room temperature and humidity level are automatically regulated. Another example is the monitoring of water level in tank and a pump automatically switches on whenever the water level drops to a particular height. Nowadays, computers facilitate largely the implementation of cybernetic control systems. A non-cybernetic control system relies partly on human beings and this type of control is used in most organisations. Many times the activities that need to be controlled are complex and can be difficult to predict. Therefore human decision is essential before any action is taken. For example many organisations have computerised inventory control system and automatic order can be made, but at the same time a warning signal is sent to the responsible manager before any action is taken. Activity 2 Describe the different types of controls and illustrate their applications through some examples.
  • 199. 189 8.7 MANAGERIAL APPROACHES TO CONTROL There are different managerial approaches to implement controls and these are known as market, bureaucratic and clan control [Bartol, 1996]. 8.7.1 Market Control Market control is an approach that emphasises the use of external market mechanisms, such as price competition and relative market share, to establish the standards used in the control system [Robbins, 1999]. Basically, market control focuses on financial performance. For example, an organisation specifies its requirements and then publishes an invitation for suppliers to provide quotations, thus creating competition among the suppliers. The supplier who offers the best deal will then be given the contract. 8.7.2 Bureaucratic Control Bureaucratic control is based on rules and regulations, standards, policies and other mechanisms that are meant for the employees to comply, with the objective of achieving organisational goals. This type of control is mainly a top-down hierarchical one and is based on rewarding individual performance. Bureaucratic control is very useful to monitor predictable activities since the rules and policies are developed to deal specifically with these known variables. However, too much bureaucratic control suppresses creativity and the employees tend to be slow to react to changes.
  • 200. 190 8.7.3 Clan Control Clan control or cultural control lays emphasis on teamwork among employees to reach organisational goals. It also relies on values, corporate culture, informal relationships rather than stringent rules and policies. Mutual influence is preferred to top-down hierarchical control. Clan control directs rewards at group performance and encourages employee participation. In addition, it fosters commitment from employees. 8.8 CHARACTERISTICS OF A CONTROL PROCESS Effective control systems should be future-oriented, multidimensional, cost-effective, accurate, realistic, timely, monitorable, acceptable to organisation members and flexible [Bartol, 1996]. → Future-oriented A control system must help us monitor the actual work progress as well as to predict future events and get prepared to take the necessary corrective actions if needed. → Multidimensional A control system must be able to acquire all the various data that are relevant for specific organisations. → Cost-effective The cost of setting up and maintaining a control system must bring positive return on investment to the organisation.
  • 201. 191 → Accurate Control data has to be accurate since future actions will be based on them. Inaccurate control data will mislead the manager who will in turn take wrong decisions that might badly affect the organisation. → Realistic An organisation must be realistic about factors that can be controlled and those that are uncontrollable. Otherwise there is a risk that employees will get frustrated. → Timely Control systems have to be able to provide information when required during a production cycle. The time basis may take the form of a daily, weekly or monthly report depending on the process and customer requirements. → Monitorable Being able to monitor a control system is very important because the latter is liable to fail like any other system. Since control data is crucial in decision making, it is imperative that the control system can be monitored to ensure that it is working properly and do not fail to detect defective part. → Acceptable to the organisation A control system will work only if the employees accept it. If they find it as something cumbersome or redundant, the control system on its own will not benefit the organisation. In order for it to be accepted, the employees need to see its usefulness and the control system has to reflect their performance. → Flexible Flexibility is important since the control system has to be able to respond to changes and meet new requirements. A control system must be designed in such a way that it can be quickly modified to check new parameters.
  • 202. 192 8.9 POTENTIAL DYSFUNCTIONAL ASPECTS OF CONTROL Control systems are not always successful and a poorly designed one can lead to a deterioration in the real purpose of controlling, which in turn will have a negative impact on the organisation. The major dysfunctional aspects of control systems are: behavioural displacement, game playing, operating delays and negative attitudes [Bartol, 1996]. 8.9.1 Behavioural Displacement It is a situation where the individuals focus their efforts on what is measured by the control system rather than real organisational objectives. For example employees may overemphasise on quantitative aspects and forget about qualitative importance. 8.9.2 Game Playing Game playing is the manipulation of control data by managers in order to create a fictitious improvement in performance. The manipulation can take the form of falsifying the data or by using more resources than allowed etc. 8.9.3 Operating Delays Excessive controls especially feedforward and concurrent, will prevent the organisation from running smoothly to achieve its goal. This is because controlling becomes so time consuming that operations are delayed.
  • 203. 193 8.9.4 Negative Attitudes A control system tends to build negative attitudes towards it. Some individuals might find it as being excessive or not suitable for the organisation. In other cases employees look upon control as extra work. Activity 3 Explain the dysfunctional aspects of a control system. How can you prevent them?
  • 204. 194 Activity 4 Choose an organisation you are familiar with and outline the major factors that need to be considered to set up a control system 8.10 KEY CONCEPTS Control Process Types of Controls Approaches to Control Characteristics of a Control Process Potential Dysfunctional Aspects of Control
  • 205. 195 8.11 ADDITIONAL ACTIVITIES 1. Control is to be performed by individuals at A top management B all levels C middle management D low level management 2. Clan control lays emphasis on A standards B costs C teamwork D strategy 3. Concurrent control is also known as A yes-no control B output control C clan control D market control 4. An effective control process should be A sophisticated B complex C flexible D costly 5. Market control is a ___________to implementing controls. A managerial approach B characteristic C variation D measure
  • 206. 196 REFERENCES 1. Bartol, K. M., Martin, D.C., Tein, M., Matthews, G., 1996, Management: A Pacific Rim Focus, McGraw-Hill, Australia. 2. Bartol, K.M., Martin, D.C., Tein, M., Matthews, G., 1997, Management: A Pacific Rim Focus, McGraw-Hill, Australia. 3. Bartol, K.M. and Martin, D.C. 1998, Management, London: McGraw-Hill, Inc. 4. Bass, B.M.,1985, Leadership and Performance beyond Expectations, New York: Free Press. 5. Bateman, T.S., Zeithaml, C.P., 1990,“Management: Function and Strategy” - Von Hoffman Press, Inc. 6. Burns, J.M., 1978, Leadership, New York, Harper and Row 7. Bovée, C.L., Dovel, G.P., Thill, J.V., Wood M.B., 1993, “Management” - McGraw- Hill, Inc. 8. Cacioppe, R., 1997, 'Leadership moment by moment', Leadership and Organisation Development Journal, 18.7, 335-345. 9. Cole, G. A., 1995, Management: Theory and Practice – 4th Edition, ELBS. 10. Cole, G. A., 1996, Management: Theory and Practice, 5th Edition, DP Publications, London. 11. Dobbins, R., Pettman, B.O., 1997, 'Self-development: the nine basic skills for business success', Journal of Management Development, 16.8, 521-667. 12. Drath, W.H., and Palus, C.J., 1994, Making Common Sense: Leadership as Meaning- making in a Community of Practice, Greensboro, NC: Centre for Creative Leadership. 13. Drucker, P. F., 1967, The Effective Executive, Harper, New York. 14. Drucker, P.F., 1989, The Practice of Management, Heinemann Professional. 15. Fink, S., 1986, Crisis Management: Planning for the Inevitable, New York: AMACOM. 16. Gardner, J.W., 1990, On Leadership, New York: Free Press. 17. Goleman D., 1996, Emotional Intelligence, Bloomsbury, London.
  • 207. 197 18. Griffin, R. W., 1984, Management, Houghton Mifflin, Boston. 19. Handy, C., 1993, Understanding Organisations, Middlesex: Penguin Books. 20. Horner, M., 1997, 'Leadership theory: past, present and future', Team performance management, 3.4, 270-287. 21. Katz, R.L., 1974, ‘ Skills for an Effective Administrator’, Harvard Business Review, vol. 52, no. 5, pp. 90-102. 22. Koontz, H., Weihrich, H., 1989, Management - 9th Edition, McGraw-Hill. 23. Kotter, J.P. 1982, The General Managers, The Free Press, New York. 24. Luthans, F., 1992, Organisational Behaviour, International Edition, Singapore. 25. Manz, C.C., and Sims, H.P., Jr , 1991, SuperLeadership: Beyond the Myth of Heroic Leadership, Organisational Dynamics, 19, 18-35 26. Mintzberg, H., 1973, The Nature of Managerial Work, Harper & Row, New York. 27. Robbins, S.P., 1994, Management, 4th Edition, Prentice-Hall Inc. 28. Robbins, S. P., Coulter M., 1996 “Management”, Prentice-Hall, Inc. 29. Robbins, S.P., Coulter M., 1999, Management, Prentice Hall Inc. 30. Statt, D.A., 1994, Psychology and the World of Work, London: Macmillan Press. 31. Stewart, R., 1982, ‘ A model for understanding managerial jobs and behaviour’, Academy of Management Review, vol. 7, pp. 7-13. 32. Stoner, J.A.F., Freeman, R.E.,1995,“Management”, 5th Edition – Prentice-Hall, Inc.
  • 208. 198 ANSWERS TO ADDITIONAL ACTIVITIES Unit 1: Introduction to Management Multiple Choice Questions True or False 1. D 2. D 3. C 4. D 5. B 6. D 7. C 1. T 2. F 3. F 4. F 5. F 6. T 7. F Unit 5: Organising 1. B 2. C 3. D 4. A 5. B Unit 8: Control 1. B 2. C 3. A 4. C 5. A

×