Management: Definitions, Roles & Skills Principles of Management
“ Management is the process of designing and maintaining an environment in which individuals, working together in groups , efficiently accomplish selected aim(s) viz. to create a surplus(s).” …. Weihrich & Koontz
“ Management is not an absolute; rather it is socially and culturally determined. Across all cultures and in all societies, people coming together to perform certain collective acts encounter common problems having to do with establishing direction, coordination and motivation. Culture affects how these problems are perceived and resolved.” … The Art of Japanese Management by R. Pascale & A. Athos .
Management : Definition …ctd.
Applies to and through any kind of organization
Applies to Managers at all levels
Concerned with “Doing the right things right at all times” :
Effectiveness: Achievement of objectives ( Right Things );
Efficiency: Achieving those objectives with least amount/ sacrifice of resources ( Things Right );
Continuous Improvement: in creating increasing ‘surplus’ ( at all times );
“ Improve or die” = survival of the fittest
“ what gets measured , gets managed and improved” e.g. Productivity= Output / Input ratio
Collective, cohesive and consistent human effort towards accomplishing a common objective.
Additionally, Managers need to factor in external environment al forces: For maximum benefit to the organization Management : Definition …ctd. Organization Economic Political Regulatory Societal Technological Globalization
Management, as a concept as we know it today, is associated with ‘mass consumption’ – leading to production of ‘standardized’ goods in large volumes;
Prior to the “Industrial Revolution”, man made devices were in use in sizeable numbers – but often one of a kind and crafted rather than manufactured e.g watches and clocks. However, many of the supportive processes can be traced to early roots: logistics, scheduling e.g. boat building; automation (use of m/c’s) e.g. printing;
The advent of the management as a science can therefore be traced to late 18 th /early 19 th century.
Elements of modern management, with a focus on ‘man’ i.e. HR concepts first began to appear in the West around the same time:
as a reaction to the harsh behaviour of autocratic businessmen like Henry Ford. It evolved through ‘(labour) Welfare’, ‘Industrial Relations’, ‘Personnel Management’ to its current form. (Marxism was becoming a recognizable philosophy in Europe!);
as a need to utilize human resource better due the adverse supply-demand situation. Employment in the ‘industry’ had overtaken agricultural labour. This was aggravated in Europe, by WW I.
In the 20’s, Rationalization & Efficiency were the buzz-words (Taylor, Fayol etc.), calling for a scientific approach to selection and work allocation – the corner-stones of modern production management:
Standardization of parts and work elements resulted in ability to make work repetitive for individuals (‘do-ers’)
Evolution of Management …ctd
End of WW II brought in an era of un-sated demand, resulting in a boom for production activity – more of everything was required. Quantity backed by efficiency were the guiding principles: an era of ‘ Optimization ’ driven by suppliers’ choice rather than customers’ wants.
However, some people – notably Japan – restarted their devastated economy with different orientation: Quality . The key was true economy of all resources with the customer as the focal point – since they did not have the luxury of a surplus funded, hungry market.
By the late 60’s, demand tended to slow down and the growing competition gave customers greater choice – ‘quality’ as an important buying criterion emerged.
OPEC crisis in mid-70’s turned the world around on its head! Energy the prime mover of industrial world became very expensive. The demand boom faded – with customers demanding quality and lower prices and better service.
Evolution of Management …ctd
First inventions of ‘mass production’ were linked to textile manufacturing (Spinning Jenny/ Hargreaves) – which combined with use of water power (Arkwright), made a powerful social impact in the late 1700s; Watt’s steam engine completely revolutionized harnessing of mechanical power for production (first to use were cotton mills) and transport;
Poor Reliability of early machines led to the creation of machine tools – the Lathe (Maudslay) in 1790, with which to turnout parts to closer tolerances and fit. This led to creation of ‘interchangeable parts’ – and the first uses were in manufacture of muskets and pistols!
These were the triggers for ‘ mass production ’ : mechanical power & interchangeable parts ; leading to production moving away from homes and craft-shops to work-shops / factories.
By 1900 (in the West), nearly everything was being produced by the factory system.
Evolution of Management …ctd
Division of Labour: under this principle, work could be organized/grouped into a set of specific, related tasks – which were repetitive in nature. Man could be trained to perform this set of tasks only, so that efficiency of task performance was maximized.
When extended throughout the organization, this took the form of ‘Specialization’ - with the organization benefiting from the maximum use of specialist skills. Both economically and under supply-shortage conditions, this worked well.
Much of this was an extension of trade/craft skill-groups organization (guilds) which was the hallmark of pre-industrial ‘production’.
Till the end of the 30’s, these fundamentals were refined, polished(e.g. Organization structures) and extended ( e.g. work-measurements) in a relentless focus on efficiency .
With WW II, a further need for reliability gave birth to the principles of sampling & inspection – statistical methods were introduced to regulate quality of output .
Evolution of Management …ctd
Evolution of Management …ctd
This brought to the forefront the philosophy and practice of Total Quality as the guiding force for manufacturing – later to spread into management of operations and enterprises:
Central to this theme is the dominance of the Customer ; Customers were any person or person receiving goods and/or services – internal or external;
Quality was redefined as ‘ fitness for use ’ – elevated from the narrow confines of conformance to specifications;
Continuous improvement was the key to continuity and success against demands of customer and competition; importantly, everybody could contribute – quality is every- body’s business;
Particularly, for production, quality means best products at least cost – reduced waste of all resources, spawning a host of (linked) programs to conserve time, money & effort:
Just – in – Time, SMED/OTED;
5-S, TPM, DoE;
Principles of Management 2 Management: A Systems Approach
Systems approach to Management Organization as a System receives Input, transforms it through a Process for Output and Operates in an Environment ( economic, regulatory and other forces ) Transformation process input output Feedback (Reenergizing the system) ENVIRONMENT System Boundary
Systems approach to Management …ctd. Systems Concepts
System Boundaries and Subsystems
> Systems often consist of numerous subsystems.
> Each subsystem has elements, interactions with other subsystems, and objectives.
> Subsystems perform specialized tasks for the overall system.
Subsystem Interfaces and Interface Problems
Sub-System 2 Sub-System 3 Sub-System 1
Systems approach to Management …ctd. Outputs and Inputs
Systems produce Outputs from Inputs – i.e. the Inputs are converted to Outputs.
Outputs of one subsystem become inputs to another subsystem.
Outputs must adhere to standards to be useful or acceptable to the next subsystem.
Environment consists of people, organizations and other systems that supply data to or that receive data from the system
Managers at different levels perceive ‘Environment” differently
Systems approach to Management …ctd. “ Inputs”: 5 Ms of Management
Inputs or the resources managers deal with are:
Man : human resources, both inside and connected with an organization;
Materials: goods (hard & software, processed or semi-finished) and services required to create the sellable end product;
Machines: technology and expertise deployed towards the transformation process;
Methods: systems, procedures and processes seamlessly put together for the transformation;
Measurement: score-keeping and in-process monitoring continuously with due feedback to keep on-course on time.
“ Money” is required for generating all theses Ms – managers need to acquire, deploy, generate and distribute money as a primary need for business!
Systems approach to Management …ctd.
“ Stake”: Something wagered or risked;
an interest in an enterprise with contingent gain or loss … Webster ‘s dictionary
“ Holders” who have stake in Business:
Shareholders: are the owners. They have put in their money in the enterprise, expecting better returns from it than from other ventures;
Society: includes the State, provincial and local governments for the improvement of ‘quality of life’ of its citizens;
Output for “Stake-holders” in Business:
Systems approach to Management …ctd.
Suppliers: continuity of their enterprise depends on the success of the customer enterprise;
Customers: require the goods and services provided by the enterprise, better than than those from its competitors. The enterprise is, in turn, a supplier to its customers;
Employees: livelihood depends on the progress and success of the employing enterprise;
There is a “freedom of choice” (for association) between each of these stake-holders and the enterprise in the longer term:
But they sink or swim together in the shorter term
Length of term definition varies with individuals!
Output for “Stake-holders” in Business …ctd.
by the process of
to accomplish certain pre-determined, ( as derived from stakeholder needs) goals or objectives
Systems approach to Management …ctd. Management as a system transforms inputs:
Inputs (Goal Oriented) Outputs (External To Orgnzn.) Planning Organizing Staffing Leading Controlling Product/Services, Profits, Customer & Societal satisfaction, Other Long-term Goals Man, Machine Material, M ethod, Measurement Stake holder Feedback (reenergizing the system) EXTERNAL ENVIRONMENT (Opportunities, Constraints) Stakeholders Shareholders; Society; Customers; Employees; Suppliers Systems approach to Management …ctd.
Principles of Management 3 Management Process First Step: Planning
Planning involves selecting objectives or goals and the course of actions to achieve them:
Provides the bridge to take us from where we are to where we want to go ;
Is a rational approach to achieving pre-selected objectives - based on innovation, knowledge and purpose;
Decision making in choosing the best from alternative courses of action and is integral to planning;
Plans as foundation of Management The primacy of Planning Plans What kind of resources needed? What kind of people & org. structure to have? How to lead them to reach planned goals? How to control in case of deviation from plan ?
Types of Plans
Mission / Purpose
The basic function or ‘reason for existence’ of an enterprise/ organization
Case in point: Mission of Indira Institute “ To train our students to become the best business minds and entrepreneurs today, who will lead their companies successfully into the future tomorrow , locally, nationally and globally.”
Type of Plans (Cont’d)
The end towards which activity of an organization is aimed, e.g.
For a Business enterprise – profit, surplus creation;
For a Management Institute: The number of employable/useful trainees;
Determination of the long term objectives and adoption of a course of action
Gives a frame work for linked action-plans, communicated systematically to guide thinking and actions.
Types of Plans (cont’d)
“Plans” that are general directional statements (or understandings) that guide/help in decision making:
Repeat decisions taken ‘reflexively’;
Delegation of tasks without loss of control.
Some discretion is permissible depending on circumstances thus encouraging initiative within limits and situational adjustments;
Issues with “Policy”
Seldom documented in writing
Subject to interpretations
Types of Plans (cont’d)
Plans that are chronological sequences of required actions: task-oriented in nature;
Cuts across department boundaries (sub-systems) in an organization: e.g. customer complaint handling procedure;
Procedures and policies are inter related: e.g. authorization for paid leave
Policy governs quota, responsible authority etc.
Procedure governs application, grant and record-keeping.
Specific actions or non-actions allowing no discretion
Action plans (mainly non-routine or for changed activities) including, task assignments, steps to be taken, resources to be deployed etc. to achieve a (new/renewed) goal;
Primary program may require supporting programs, spreading across the enterprise;
Perfect coordination between supporting & primary programs essential to avoid delays, unnecessary costs and expected roll-out.
Programs are a complex of (sub)goals, policies, rules and other elements necessary for the course of action e.g. obtaining ISO certification.
Types of Plans (cont’d)
A statement of expected results expressed in “ Numerical terms” e.g. financial operating budget = “profit plan”;
Budgets enforce precision in thinking:
Making a budget is ‘planning’ by itself;
Encourages innovation – a “different” way to work
Budgets serve for ‘Control’:
Enforces discipline in execution of plans;
Instills cost consciousness;
Makes people (constantly) plan!
Steps in Planning Being aware of challenges Market, Customer’s wants, Competition, Own strengths & weakness Setting Goals/ Objectives What to accomplish & when Planning premises Internal & external Environment/conditions Identifying alternatives Comparing & choosing an alternative Decision making Budgeting (Numberizing Plans) e.g., Sales budget Operational Expense budget, Capital expenditure budget Formulating Supporting plans e.g., plan to buy Equipment, recruit & train Employees, develop product etc
The Planning Process
Short range plans e.g. material procurement plan in a factory
Long range plans e.g. product development plan, plant/production facility installation;
“Urgent” drives out the “Important” – mismatch between short & long term plans!
Planning horizon must allow for actions to run their course – requiring ‘commitments’:
Thus “decisions today” are key to good plans;
Long-term plans reap benefits of good short-term plans.
Steps in Planning Being aware of Opportunity Considering, Market, Competition, Customer’s wants, Own strengths &weakness Setting Goals/ Objectives What to accomplish & when Objective = Important end towards which activities are directed; therefore needs verification at the end of the plan period.
Hierarchy of Objectives& Org. Levels Objectives set end results – they need to be supported by a hierarchy of sub-objectives, duly networked through the organization to avoid discord and wasted effort. Mission Overall Objectives & Key result areas. Divisional objectives Departmental objectives Individual objectives Board of Directors CEO Division Head Product X Division Head Product Y Sales & Mktg Dept Production Dept Sales Manager A Sales Manager B
The Organizational Objectives is deployed into the objectives of :
Divisions Departments Individual objectives;
The ‘cascade’ principle: seamless flow;
Mutual support & interlocking of goals is essential
Managers must ensure that the components of the network fit each other;
Departments/divisions can be ‘blind-sided’.
Hierarchy of Objectives& Org. Levels …ctd.
Hierarchy of Objectives& Org. Levels …ctd. While setting Objectives, ideally, Top Management should get information / ‘buy-in’ from lower levels to set realistic goals for a good result. Mission Overall Objectives & Key result areas. Divisional objectives Departmental objectives Individual objectives Top-down Approach Bottom-up Response: The result
Key Result Areas (KRA)
Are areas in which performance is essential for the success of an enterprise
Examples of ‘generic KRA’s:
Return on Investment (ROI)
Peter Drucker recommends: Market standing, innovation, productivity, physical & financial resource, profitability, managerial performance & development, worker performance & attitude and public responsibility.
Management By Objectives (MBO)
A comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed towards the effective and efficient achievement of organizations’ and individual objectives:
Set-out by Peter Drucker in 1954;
Integrated to personal performance appraisal by Douglas McGregor in 1957;
Has formed the basis for many theories on motivation;
Has been criticized for introducing a short-term focus and undesirable behaviour;
Currently viewed as a ‘way of managing’ – not a specific tool.
Managing the MBO way involves:
Identifying clearly defined KRA’s
Setting verifiable measurement of KRA’s
Facilitating self-direction, accountability & commitment by subordinates
Motivation of subordinates to achieve and exceed set targets
Emphasis on performance rather than on personality
Guidelines for setting Objectives
Clear & Verifiable
Clarity scores over precision – ‘approximately right over accurately wrong’!
Expressed in Quantitative terms
Time frame (by which date)
Should cover main ‘deliverables’ of the job/ function
Challenging yet reasonable: “S.M.A.R.T”
Guidelines for setting Objectives (Cont’d)
Identification of assumptions underlying the objectives
objectives with those of superiors, Organization & other departments
Short time action-plans with Long-term objectives
Inclusion of personal growth, development and improvement targets
Ensuring availability of and access to needed resources
Documentation and communication of objectives to concerned persons
Benefits of MBO
Result oriented planning of goals, resources, organization
Setting of standards for Control
Decentralization of Management and clarification of Organizational roles & responsibilities:
Accountabilty & commitment of employees
Enables timely corrective actions (as required)
Weaknesses of MBO
short term at the expense of long term
“Results” over “Process”
Individual over collective effort
Failure to grasp and deploy the concept of “seamless cascade”
Difficulty in setting agreed, harmonized goals
Danger of inflexibility
Planning Premises & Strategies Setting Goals/ Objectives What to accomplish & when Planning premises Internal & external environment Identifying alternatives Comparing & choosing an alternative Decision making Strategic Planning Process Strategy = determination of the purpose / the basic long-term objectives; the adoption of courses of action and allocation of resources required to achieve the aims.
Planning Premises & Strategies …ctd. The Strategic Planning Process Stakeholder Wishes & Shareholder demands Management Orientation Enterprise Profile Purpose & Major objectives of enterprise Current External situation Current resource situation Forecast External situation External Opportunity & Threat Internal Strengths & Weakness Key success factors & Alternative Strategies Strategic choice
Planning Premises Porter’s Five Forces : an Model for analysis of the Externals environment.
Planning Premises: forecast of demand
Estimate of future demand is made by qualitative methods, time-series methods and/or causal methods:
Qualitative relies on judgement of experts to translate to quantities;
Time-series statistically interpolate demand on historical data;
Causal method seek co-relation on cause and effect basis between two (or more) variables to quantify demand;
However, all forecasting methods are limited by:
Handling of un-quantifiable factors e.g. national pride
Unrealistic assumptions fuelled by a desire to succeed
Excessive data required (often unobtainable) to make accurate forecasts
Uncertainty with environmental changes: Technology, Govt. Policy, International alignments, New materials/sources, Climate etc.
Planning for contingencies – with defined cut-in milestones.
Generic Strategy Ultimate competitive position: - position w.r.t major Customers - K.S.Fs of Competitors - leveraging of suppliers
To continually work reducing
the cost prices of products.
Supplier Q-C-D has very high
To constantly offer innovative
and unique solutions. Supplier
technology & quality has focus.
To offer required services in the
required manner is the focus.
Speed and flexibility important.
Relationship B’marking Partnering Company Customer Competitor Supplier Lean Management
Generic Strategy: BCG Matrix Red: Marketing Perspective ; Blue: Financial Perspective Cash Source Cash Use Hi Hi Lo Lo Market Growth rate Relative Market Share Hi Hi Lo Lo STAR “ Hold” ??? “ Build” Cash Cow “ Harvest” DOGS “ Divest”
Planning Premises & Strategies …ctd. Decision Making = is the core of the planning process; a plan does not come into being unless a ‘decision’ i.e. certain commitments of resources, managerial time and money are made and risks are taken. Caution: A “Plan” is not intentions and should not suffer from “ Analysis Paralysis”. Comparing & choosing an alternative Decision making Budgeting ( Numberizing Plans) Say, Sales budget Operational Expense budget, Capital expenditure budget Formulating Supporting plans Say, plan to buy Equipment, recruit & train Employees, develop product etc Deployment (MBO etc.)
Decision making is a ‘rational choice’ process, bounded by:
Limitations: time, information and ‘logic’;
Behaviour: Risk averseness and biases.
A key step in the process is to identify those limiting factors, ‘road-blocks’ to each effective (‘right thing’) alternative – then finding a ‘solution’ with least sacrifice of resources (‘thing right’):
Factors: quantitative, qualitative/intangible;
marginal analyses – benefits with incremental inputs;
cost-effectiveness – assessment of benefits over costs.
Decision Making…ctd. How to select Amongst the Alternatives ? “ Experience”: good teacher and useful when routine/repeat situations arise under similar circumstances. Without due analysis of the conditions, mistakes tend to repeat or a poor fit results. “ Research & analysis”: the approach is in at first understanding the problem (‘half the solution’!), then finding relations between various factors which hinder or foster goal attainment. This is a structured, analytical approach quantitative or otherwise. “ Experimentation”: arguably, the best technique to use, particularly when either experience or rationale is lacking/limited. However is expensive and ‘success/failures’ are magnified, results are subject to interpretational errors.
Decision making takes place under varying degrees of uncertain conditions and risks. Techniques used to aid the process are:
Risk analysis: every decision is based on interactions amongst different factors/variables – each of which have their own probabilities (towards ‘success’). Analysis of these probabilities yield a risk profile for each alternative path. In the absence of defined probabilities, estimates can be used.
Decision trees: the outcome (measure pre-decided e.g. cost or time) of every step in the decision is charted and a course selected on the most favourable outcome. Very much like making a trip, navigating by using a road-map (refer example in W & K, “Management – a global perspective/10 th edn. Pg. 209)
Flow Charts: as a process-guide to taking a decision and helps as a check-list of key variables, the sequence in which they fall and the interrelations. Key to making a choice or re-examining the path taken are also indicated as risk-reduction devices.
(refer example in W & K, “Management – a global perspective/10 th edn. Figure 8-5)
Decision Support Systems: a wide variety of (proprietary) computer based programs are available for managers to use their time more effectively for decision making of semi-structured tasks – by providing alternative evaluations. They focus on the process of decision making, taking data provide by the management information systems in enterprises.
Principles of Management 4 Management Process: Organizing for results
Nature of Organizing
Organizing may be broadly defined as:
The identification and classification of required activities;
The grouping of those activities towards attaining their set objectives;
The assignment of those groupings to a responsible manager, duly empowered;
The provision for coordination among, within and across the groups in the organization.
Organization structures are designed to:
Clarify tasks & responsibilities,
Furnish decision making & communication network
Support attainment of enterprise objectives
Nature of Organizing …ctd. The Business Organization Model: “Value Chain” (Porter,1985) The margin reflects the reward for the risks run by the company. All activities together need to generate ‘value’ greater than the sum of its costs. Margin Margin Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Support Activities Primary Activities
Nature of Organizing …ctd.
Inbound Logistics: relate to receiving, storing and disseminating inputs;
Operations: associated with transformation of inputs into final product form;
Outbound Logistics: relate to collecting, storing and physically distributing the products to buyers;
Marketing & Sales: relate to advertising, Promotion, sales, distribution-channel selection & management and Pricing;
Service: associated with enhancement or maintenance of product value over life;
The Value Chain: “Primary Activities”
Nature of Organizing …ctd.
Procurement: relates to the function of purchasing inputs used across the firm’s primary and support activities;
Technology Development: relates to know-how, processes & procedures, ‘technology’ embodied in the product design and delivery. Most activities have their own sub-set of technology;
Human Resource Management: directed at recruiting, training, developing and compensating all personnel;
Firm Infrastructure: associated with serving and supporting the firm as a whole, with the company as its customer eg. Finance & accounting, Quality;
The Value Chain: “Support Activities”
Most practicing mangers would translate this “value chain” to imply an organization as:
“ a formalized, intentional structure of roles and positions”
Thus ‘formal organization’ implies the intentional structure of roles in an enterprise.
However, in an enterprise ‘informal organization’ will form, not necessarily bad and is:
“ a network of personal and social relations not established or required by formal organizations but arising spontaneously as people associate with each other”.
Nature of Organizing …ctd.
Nature of Organizing …ctd. The building block of an organization is the Department : a group charged with independent task & responsibility. # Hierarchical levels Span of control # # # # # Office Bridge Team $ $ $ $ Car pool
Grouping activities & people into departments makes it conceptually possible to expand organizations to an infinite degree.
Different patterns have been successfully used to group activities:
By simple nos. is a simple method – works well for the lowest levels where work is routine, uniform and non-specialized; time-grouping is an extension of this method where shift-working is required;
By enterprise functions – embodies what enterprises typically do e.g. Production, Engineering, Sales etc. This method, defined by F.W.Taylor, is arguably the most prevalent method still used.
Nature of Organizing …ctd. “Departmentation”
By territory or geography – is very common when the geographical spread is wide. It was a device introduced to speed up management in similar units for easy and swift communication e.g. Sales: N/E/W/S; Fire Brigade: Camp, Hinjewadi, Aundh etc.
By Customer/Account orientation – reflecting the primary interest in nature of markets/business/customer e.g. Banks: Institutional banking, Small Savings etc.
By Process groups – encountered primarily in specialized/ manufacturing operations where processes are vital e.g. Advertising: Copy-writing, Creative etc.; Manufacturing: Steel Melting, Wire-drawing etc.
By Product Lines – has evolved with enterprises becoming “multi-line” with ‘function’ needing adaptation/integration to suit specific products e.g. Tata Motors: Passenger Vehicles / Commercial vehicles
“ Departmentation” …ctd.
By ‘grid’ control – in essence combining the ‘functional’ and the ‘product-line’ patterns to best effect. Functional excellence is not subjugated to Operational ease. In ‘projects’, this serves to bring together the diversity of skills required into one team.
The S trategic B usiness U nit: companies today are organizing themselves as ‘companies within a company’ to allow for maximum flexibility and freedom of operations, especially when the products/businesses are unconnected e.g. General Electric. Generally, SBU’s have:
Their own Missions, Goals and Strategies;
Distinct and definable set of competitors;
Deploy and manage resources in key areas;
A reasonable ‘size’.
“ Departmentation” …ctd.
C.E.O Finance Qual. HRM BU 1 BU 2 I.R.M Recr. T&D G/H.R Plant 1 G/H.R Ind. Sin. I.S.O “ Departmentation” …ctd. Example of “Grid Control” & S.B.U’s
The purpose of organizing is to make human cooperation effective and is limited by:
the number of persons a manager can ‘supervise’ effectively and efficiently;
while the total number is dictated by the quantum of work/ nature of task/spread etc. Thus the two dimensions, “Level” (depth) and “Span of control” (width) are interrelated .
The reason for creating Levels of organization is the limitation in the span of control. “Effective span” is influenced by:
Training/skill of subordinates and personal contact required;
Clarity of delegation of authority;
Clarity of plans, use of objective standards and communication techniques;
Rate of change;
Maturity and experience of the manager and organization .
Nature of Organizing …ctd. Span-of-Management
Levels, per se, are not desireable:
They are expensive – as they increase, both infrastructure costs and staffing tends to increase;
Real work is accomplished at the ‘gemba’ ( Japanese: workplace ) where the actual value-addition/transformation takes place. The contribution of levels on top are not directly co- relatable, thus best avoided;
Communication become complicated – omissions, filterations and misinterpretations lead to wasted and misdirected effort;
Planning and control become tortuous, requiring complicated coordination and alignment between levels.
Studies reveal that between 8 to 10 people at ‘higher’ levels and upto 15 at lower levels is a good “span”. Increasingly, enterprises are attempting to cut back levels to 5 or less.