Principles of Management Notes PDF

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Principles of Management POLC • Planning = Involves defining goals for future organisational performance and deciding on the tasks and use of resources needed to attain them. • Organising = Involves assigning tasks, grouping of tasks into departments and allocating resources to departments. • Leadin...

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Principles of Management POLC • Planning = Involves defining goals for future organisational performance and deciding on the tasks and use of resources needed to attain them. • Organising = Involves assigning tasks, grouping of tasks into departments and allocating resources to departments. • Leading = Involves the use of influence to motivate employees to achieve the organisations goal. • Controlling = Involves monitoring employees activities, keeping the organisation on track towards its goals, and making correction through review as needed.

Performance • Organisational performance is the organisations ability to attain its goals by using resources in an efficient and effective manner - Organisation = A social entity that is goal directed and deliberately structured - Effectiveness = The degree to which the organisation achieves a stated goal - Efficiency = The use of minimal resources, raw materials, money and people, to produce a desired volume of output Sustainable Development

- Is now a core issue for managers: Effective and Efficient management goes further than merely just achieving the bottom line

- Sustainable development practises benefit organisation, environment and society. - Emphasis on the triple bottom line in term of: Financial, environmental and social outcomes. - The ‘triple bottom line’ requires an organisation to balance their financial, environmental and social obligations.

- Leading organisations in all industries have advanced their financial outcomes through incorporating sustainable development principles an practices

Management is Challenging

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Complex human behaviour: Dealing with people Multiplicity of Stakeholders: Dealing with conflicting goals Environmental uncertainty: Coping with rapid changes and ambiguity in the environment Contextual dependence: Matching managerial style and type of organisations

- Managers have complex jobs that require a range of abilities and skills. - Conceptual skill is the cognitive ability to see the organisation as a whole and the relationship among its parts.

- Human skill refers to a manager’s ability to work with and through other people and to work effectively as part of a group.

- Technical skill is the understanding of and proficiency in the performance of specific tasks. - The two major reasons that managers fail are poor communication and poor interpersonal skills.

The Historical Foundations of management thinking

- Managers are always on the lookout for new techniques and approaches to meet shifting -

organisational needs. Looking at history gives managers a broader perspective for interpretation and responding to current opportunities and problems/threats.

- Management and organisations are shaped by forces in the larger society in the present (social, political and economic forces). Classical perspective

- Emerged during the 19th and early 20th centuries as a response to new problems arising from industrialisation.

- Emphasised a rational, scientific approach to the study of management; sought to make organisations efficient operating machines.

- Three sub fields: Scientific management (Taylor), Administrative principles (Fayol), Bureaucratic organisations (Weber). Scientific Management

- Key figures = F.W Taylor (‘Father of scientific management’ ); Frank and Lillian Gilbreth (Time and Motion studies) The focus was to improve efficiency and labour productivity.

- 1. A ‘best’ methodology should be developed scientifically for each task. - 2. Managers should select the best person to perform the task and ensure that the best training is given.

- 3. Managers are responsible for ensuring that the best person for the job does the job using the best methodology.

- 4. Remove all responsibility for the work method from the worker and give it to management. The worker is responsible only for the actual job performance.

- Key principles: • Develop standard method for performing each job (through scientifically analysing task/job to determine ‘one best way’)

• Select and train workers • Support workers through careful planning of their work • Provide wage incentives to workers for increased output Advantages to the scientific approach

- Introduced a scientific approach to management - Improved organisation efficiency and effectiveness (productivity) allowed managers to reward workers for higher performance and productivity through the differential rate system.

- Built a sense of cooperation between workers and managers Issues with scientific management

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How stable and definite is the ‘one best way’? Misplaced certitude (e.g ignoring worker expertise); or gaming by workers. Overspecialisation can lead to deskilling and dehumanisation. How well does scientific management generalise beyond manual labour? 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. Bureaucratic organisations

- Bureaucratic coordination of activities, he argued, is the distinctive mark of the modern era. - Bureaucracies are organised according to rational principles. - Emphasises management on an impersonal, rational basis trough elements such as clearly defined authority and responsibility, formal record keeping, and separation of management an ownership.

- Offices are ranked in a hierarchical order and their operations are characterised by impersonal rules.

- Like Taylor, Weber advocated a system based on standardised procedures and a clear chain of command. Weber stressed efficiency, as did Taylor, but also warned of the danger of emphasising technology at the expense of emotion.

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Clearly defined job roles. A hierarchy of authority. Standardised procedures. Meticulous record-keeping. Hiring employees only if they meet the specific qualifications for a job. One primary difference between Max Weber and management, and other theories of management, is that while Weber outlined the principles of an ideal bureaucracy, he also pointed out the dangers a true bureaucracy could face. Division of labour and specialisation of skills, where each employee will have the necessary expertise and authority to complete a particular task.

- Complete and accurate rules and regulations, in writing, to govern all activities, decisions and situations.

- Impersonal relationships between managers and employees, with clear statements of the rights and duties of personnel.

- Technical competence is the basis for all decisions regarding recruitment, selection and promotion. Advantages of the Bureaucratic Theory

- 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. Limitations of the bureaucratic theory

- Overwhelming concentration on authority discourages innovation and creativity. - 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. The emphasis on impersonality and division of labour leads to boredom, dissatisfaction and discontent within the workforce

- rules and procedures may become so important in their own right that there is a tendency to forget the underlying processes that they are meant to make more efficient. Humanistic Perspective

- Emphasised the importance of understanding human behaviours, needs and attitudes in the workplace

- Early advocates included Mary Parker Follet and Chester Barnard - Has three sub fields: Human relations Movement, Human Resources Perspective and Behavioural Sciences Approach Human relations movement

- Suggests effective control comes from within individuals, not adherence to strict, authoritarian control

- Early response to social pressure for enlightened treatment of workers - Gained momentum from influence of the Hawthorne studies which were a series of studies in Chicago to test the effects of lighting on productivity; but the researchers found that productivity seemed to go up regardless of what they did with the lights. The Key figures were Elton Mayo and Fritz Roethlisberger • Hawthorne Effect = Workers were responding to interest shown in them by the researchers; workers perceived an improvement in their work environment

Human Resources Perspective

- Further developed the idea of considerate leadership and worker participation - Combines prescriptions for job design and theories of motivation - Key examples include: Abraham Maslow’s Hierarchy of needs and Douglas McGregor’s Theory X and Theory Y(extrinsic and intrinsic)

A foundational Debate? • Scientific Management and Human Relations are based on different images of organisation. - SM has a more mechanical picture of the organisation, in which the organisation has a known set of tasks that have to be done, and should be designed to get these tasks done as efficiently as possible.

- HR has a more organic, psychological picture of the organisation, in which the organisation needs to get people emotionally invested so that they'll devote themselves to their task and to coming up with new ideas that might help the organisation as a whole.

- Both metaphors make us look in different directions: they don't necessarily contradict each other, they can both be integrated.

- The modern manager needs to be BOTH a task-focused AND a people-focused manager

Management

- Management comprises of four interrelated functions (POLC) which are critical to an organisations ability to effectively and efficiently attain its goals.

- The history of management theory and practise can be seen as a struggles between the -

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Scientific Management and the Human relations approaches. These two approaches are not mutually exclusive. The goal is the same for everybody = To produce goods and services efficiently in a timely manner with a positive and beneficial outcome for employees, management and the organisation as a whole. Management is the attainment of organisational goals in an effective and efficient manner through POLC 1. Set objectives, 2. Organise, 3. Motivate and communicate, 4. Measure, 5. Develop people

- Managers get things done by coordinating and motivating other people. The external environment

- Reflects an open systems view of organisations. - Includes all elements existing outside the boundary of the organisation. - These elements have the potential to affect the organisation • External game changers - The internets influence - Consumers etc

A helpful framework for the task environment

The labour market • The people available for hire by the organisation. • Labour market forces: - Scarcity of people with skills required for new emerging roles - Globalisation of the competition for talent

New dimension: Natural environment

- Includes all elements that occur naturally on earth, including plants, rocks, and natural resources such as air, water and climate

- Environment advocates are increasing pressure for organisations to operate with sensitivity toward the natural environment.

- Also regulations to protect environment and promote sustainable operations. The organisation-environment relationship

- Environmental uncertainty: managers know what goal they wish to achieve, but information about alternatives and future events is incomplete.

Coping with uncertainty 1. Adapting the organisation to changes in the environment - Forecasting and planning - Boundary-spanning - Inter-organisational partnerships

- Mergers and joint ventures 2. Shaping the environment to the organisations needs - Advertising and public relations - Political activity

- Trade associations Goal setting and planning Personal planning

- Where do you want to be 10 years from now? If you don't care then there is no need for a plan. But if getting there is important, then you need a plan.

- A plan is a roadmap for the future that you want to have. It creates a firm basis for decision making and a standard against which progress can be assessed. It stimulates effort and persistence and eliminates resource/energy/time wastage Goal = A desired future state that the organisation attempts to realise. Plan = A blueprint specifying the resource allocations, schedules and other actions necessary for attaining goals Planning = Refers to identifying goals and deciding on the tasks and resource use needed to attain them

The Roles of mission and vision • The ultimate goals - Mission = Why do we exist as an organisation ? - Vision = What do we aspire to achieve in the future ? • Why have a mission and vision? - They communicate meaning and values to external stakeholders, potentially attracting their support

- They give meaning to the day to day activities and ideally inspire and energise employees - They provide an orientation for daily decision-making and action: tells us what our strategies should try to achieve

- They broaden employees view of the organisation and thus facilitate coordination Criteria for effective goals • SMART - Specific = Do we really know what we need to do? - Measurable = Can we be sure when we've done it?

- Attainable = Is it challenging? Will you drive towards it? - Relevant = Does it relate to key result areas? - Time bound = Is it urgent? Is there a motivating deadline? • Effective goals are consistent and mutually supportive so that achievements at lower levels logically lead to attaining high level goals • Effective goals should be linked to rewards Management by objectives (MBO)

- A four step approach to plan development and execution that many organisations rely on as a driver of performance (through intensification of focused effort)

MBO Implementation issues

- Neglect of participation and feedback elements of the approach - Often applied with SM flair (management knows best), when Drucker prescribed active involvement of everyone at all levels in the setting of goals and plans (especially critical to goal commitment, but also to creating better plans)

- Feedback is typically infrequent enough (annual basis) for any chance a meaningful corrective action and sustained motivation Some risks associated with MBO • Beware that you get what you measure and reward - Consider comprehensive goal setting e.g quantity and quality; performance and learning • Over-emphasis on goal attainment can lead to cutting corners and may subtly corrupt an organisations culture - Consider Management by means, and multiple ethics safeguards Benefits of planning • Planning is generally beneficial • Goals and plans: - Provide a source of motivation and commitment - Are a guide to resource allocation and action

- Set a standard of performance • Additionally, the very activity of planning: - Grants organisations legitimacy, indecently of whether or not planning is effective - Programs managers time (makes sure they don't forget to think about the future) Limitations of planning • Planning can also hurt organisations • Goals an plans: - Limits the benefit of intuition and creativity - Can create a false sense of security or certainty - Cause inflexibility in turbulent times Planning in a turbulent environment

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Types of planning to counter the effects of todays turbulent environment: Contingency planning/scenario planning Crisis management planning Decentralised emergent planning

1. Scenario planning - Brainstorming possible scenarios based on extrapolating from current trends and considering futures discontinuities

- Developing strategies to deal with each scenario - This helps managers to challenge their assumptions and to be better prepared for possible future developments 2. Crisis planning

3. Decentralised planning

Planning as a multi-level process

Strategic management = purposeful pursuit of sustainable competitive advantage. Thinking Strategically

- Involves taking long-term view of the business, seeing the big picture, looking at fit between organisation and environment

- Can make the difference between success and failure for both profit and not for profit organisations Strategic management

- Refers to a set of decisions and actions used to formulate and implement strategies (or plans) that aim to give an organisation its competitive advantage.

- Competitive advantage refers to what sets the organisation apart from others and provides it with a distinctive edge in the market Strategy formulation v execution • Formulation = Planning and decision making that leads to establishment of the organisations goals and specific strategic plan • Execution = Use of managerial and organisational tools to direct resources towards achieving strategic outcomes

Analytical side of strategy formulation

- Swot analysis link to formulation and implementation of strategies

VRIO framework

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Valuable? Rareness? Imperfect imitability? Organisation?

Core competencies

- Refer to resources and capabilities that generate sustainable competitive advantage for an organisation

- Distinguish an organisation competitively and reflect its personality - Core competencies may become irrelevant as time changes Business level strategy

- Porter’s generic ‘trade off’ strategies to stake a position in the market and outperform competitors: Differentiation, cost leadership, focus Corporate level strategy

- Considers an organisation to be a portfolio of businesses, resources, capabilities, or activities - The logic behind corporate strategy is one of diversification and synergy Strategic vehicles

Decision making models

Individual decision making

- Heuristics: intuitive shortcuts learned from experience

Cognitive biases

- Confirmation bias: seeking information that supports your expectations - Overconfidence bias: believing one’s estimates to be more accurate than they are CEO overconfidence and resistance to feedback

- Firms led by overconfident CEOs will: • Pay less heed in general to external indictions of error • Be less likely to comprehensively investigate root causes of major errors • Will be more likely to repeat major errors Group decision making

- Involves politics - Decision making as a political challenge: often made in groups with conflicting interests goals and values

- Politics: Process for making collective decisions, activities for obtaining preferred outcomes - Preventing breakdowns in framing clashes...