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Essentials of Management
An International Perspective
Harold Koontz & Heinz Weihrich
Lesson 1
Characteristics of the term Organization:
Social unit with a purpose
Characteristics of the term Management
Process of optimum utilization of the resources of the
Organization to accomplish its goals
Functions of Management
Planning
Organizing
Leading
Controlling
Coordination
Managerial Hierarchy
The levels of management in the organization
Levels are established to accomplish the organizational goals
As the size of the organization keeps on growing, it gives rise to
levels, for all activities to accomplish the organization goals
cannot be performed by a single person.
Management Process
Process is defined as Value addition
Value addition takes place in core activities
Scope of Management:
Scope includes functions, like marketing / operations / human
resources / finance
Types of Plan:
Objectives / Goals
o Purpose for which the Organization exists
Strategies
o A long term objective, which gives a competitive advantage
to business
Policies
o General statements / understanding that guides thinking in
decision-making
Procedures
o Plans that establish, a required method of handling future
activities
Rules
o Spells out specific required action or nonaction allowing no
discretion
Programs
o Consists of:
Goals / Policies / Procedures / Rules / Task assignment
/ Steps to be taken / resources to be employed
o Necessary to carry out a given course of action
o They are ordinarily supported by budget
Budgets
o Statement of expected results expressed in numerical terms
Steps in Planning:
Being aware of Opportunities
o Doing SWOT Analysis
Establishing Objectives
o Specifying expected results
o Could be long / short term
o Gives direction to plans
Developing Premises
o Making assumptions about the environment in which the
plan is to be carried out
Determining Alternative Courses
o Brain storming ways of reaching the destinations
Evaluating Alternative Courses
o Weighing each alternatives pluses & minuses
Selecting a Course
o Zeroing down upon the alternative, which will be adopted
Formulating Derivative Plans
o Listing the activities to be performed
Numberizing Plans by Budgeting
o Estimate the income / expenditure for the entire activities to
be performed
o Business Unit
Further classified into
• Cost leadership
o Organization attempts to increase
efficiency / cut costs
• Differentiation
o Product / Services are differentiated
o Creating a niche market
o Can charge premium price
• Focus
o Markets are segmented
o Only on one segment the organization
focuses
Premising & Forecasting
Forecasting is anticipating the future
Future is unknown
Hence forecasting is based on assumptions
ORGANIZING
A single individual cannot accomplish organizational goals.
Employees have to cooperate with each other & work in team
For cooperating with each other, every employee must
understand one’s role, & how it is interconnected
Designing & maintaining these systems of roles is basically the
managerial function of organizing.
For organizational role to exist, & be meaningful, employees must
know their objectives, & the activities they have to perform, &
have the discretion of defining their roles
To perform the role effectively, needed resources should be
provided, & authority with respect to resources & decision
making should be highlighted
For the above to take place the organization needs a structure
Structure are department-wise
For every role, there is a level
The structure should be aligned with external environment
STAFFING
Means Recruitment PLUS Selection
Sources of recruitment
o Internal
o External
Both the sources has its own advantages & disadvantages
In selection care should be seen to match the organization
requirement with people requirement. That is matching the
organization’s culture with that of the people’s nature.
The organization must understand the needs of its employee, &
ensure that the needs are met. If needs are not met, then the
employee will not be motivated to work towards the organization
goal
DIRECTING [LEADERSHIP
Leader is the person who influences others willingly &
enthusiastically towards accomplishing long term organization
goals.
Leadership is the style of leader
The leadership styles can be either:
o Transactional
Through external motivation influence the followers
o Transformation
Through internal motivation influence the followers
CONTROLLING
It is measurement & correction of performance in order to make
sure that enterprise objectives & plans devised to attain them are
being accomplished
Planning & Controlling are closely related
The control process involves the following steps:
o Establishing a standard
o Measuring the performance against the standard
o Correcting the variations
Control classified as:
o Feedback
Given after the execution of the plan
o Feed-forward
Taken before implementation of the plan
MANAGERIAL SKILLS
A manager requires the following skills:
o Technical
Knowledge about the job
The executives should have this skill
o Conceptual
Capability to apply knowledge
The functional heads should have this skill
o People
Understanding / predicting / motivating the people to
perform
The leaders should have this skill
TYPES OF MANAGERS
Functional
o Has a competency in one of the aspects of management
functions like HR / Finance / Marketing
Specialist
o Has core competency in one of aspects of the functional
management
Generalist
o Has a competency in running a business
Line & Staff
o Line manager is accountable for results. Example:
Production / Marketing.
o Their outcomes are measurable
o Staff manager is accountable for quality & timely resources.
Example: HR / Finance / Materials / Engineering
o Risk
Information is incomplete.
To arrive at a decision, one may use an estimate of
objective probability example: mathematical models.
Or use subjective probability, based on judgment &
experience.
It is important to know the size & nature of the risk
involved.
Rationality in decision-making
A decision to be effective has to be rational.
But decisions are pertaining to future, which is unpredictable
So selecting an alternative to reach the goal is difficult in terms of
rationality
Moreover all alternatives cannot be analysed
So limitations of time / information / uncertainty limit rationality
in decision-making
Rationality also get bound by likes & dislikes, playing it safe, or
picking up a course of action that is satisfactory or good enough.
Hence best decision are taken within the limits of rationality & in
the light of size & nature of risk involved.
Evaluations of alternatives:
Once appropriate alternatives are found, the next step is
evaluating them, & selecting the one that will best contribute to
the goal.
Following factors should be considered in evaluating of
alternatives
o Quantitative / Qualitative factors:
In comparing alternatives sometimes numbers
become easy [quantitative]
While comparing, we cannot also forget the
qualitative aspects. Do not ignore the intangible
factors. Try & give them quantitative dimension
o Marginal analysis
It is a technique of comparing additional revenues
arising from additional costs
If our objective is maximization of profits, then this
factor cannot be ignored
o Cost effective analysis
It seeks the best ratio of benefits. It is a variation of
marginal analysis
Selecting an alternative:
There are three approaches
o Experience
Reliance on past experience. Carefully analyse the
experience, rather than blindly following it.
But this should not be the exclusive method.
o Experimentation
Taking risk, & seeing what happens.
But it is important to take calculated risk, & not blind
risk
o Research & analysis
Studying the cause & effect
Types of Decisions:
Programmed
o Decisions made by precedent
o No choice.
o Requires objective judgments
o Made at lower level
Non-programmed
o Requires subjective judgments
o Made at senior level
Brainstorming
A technique for facilitating creativity.
The purpose is to find out new & unusual solution to the problem.
Multiplication of ideas is sought
Rules of brainstorming are:
o No ideas to be criticised.
o The more radical ideas are, the better
o The quantity of idea production is emphasised
o The improvement of ideas by others is encouraged.
Acceptance of idea is greater; for it is contributed by the group
Limitations of traditional group discussion:
Group members may pursue an idea to the exclusion of other
alternatives
Fear of being ridiculed
Lower level of people may be inhibited in expressing their views
Pressure to conform
Need of getting along with others, than the need for exploring
creative idea.
Pressure to take decision
Organizational Division:
The Department
o It designates a distinct area, division, or branch of an
organization over which a manager has authority for the
performance of specified activities
o It is headed by a head.
Lesson 8:
Organizational Structure: Departmentation
Departmentation by enterprise function:
Functionwise
o Grouping activities in accordance with functions of an
enterprise
o Has its own advantages / disadvantages
Territory or Geography
o Grouping activities in a given area or territory are grouped
& assigned to manager
o Useful to large scale firms or other enterprises whose
activities are physically or geographically dispersed
o However plant may be local in its activities
o For example: marketing function is split region-wise
o Has its own advantages / disadvantages
Customer-wise
o Activities are grouped together customer-wise
o For example: if we take banking industry, then we have
Community-city banking; corporate banking,; institutional
banking, agricultural banking; etc.
o Has its own advantages / disadvantages
Product-wise
o Grouping activities product-wise
o For example: a Company that manufactures various
products Switchgear, Rotating Machines, Transformers,
have the following divisions: like Switchgear Division,
Rotating Machine Division, & Transformer Division
o Has its own advantages / disadvantages
Matrix Organization:
o An individual reports functionally to one person, &
administratively to another person.
o He is located where the administrative head sits.
o For example: The HR Head of a unit administratively
reports to the Manufacturing Head of the Unit, while
functionally reports to Corporate HR Head who sits at
Head Office
o This happens on the following two occasions:
When the Organization grows in size
Or the Organization manufactures more than one
product at different locations
Lesson 9
Line / Staff Authority, Empowerment, & Decentralization
Introduction:
Authority relationships whether vertical or horizontal are the
factors that make organization possible, facilitate departmental
activities, & bring coordination to an enterprise
Lesson 10
Effective Organizing & Organizational Culture
Introduction
Organizing involves developing an intentional structure of roles
for effective performance.
Organizing is coordinating the activities of individuals towards
the common goal. The critical element in the activity is decision,
which takes you towards the goal
The following are the guidelines to make organizing effective
o Tailor make your organization structure
o Compare the present structure with the standard. This
enables the leader to know what changes should be made
when possible.
o Modify the structure to fit individual capabilities.
o Enables you to determine to future personnel needs &
training needs
o Structure should be flexible, so that it can be changed as &
when there is a change in the environment
Guidelines for making staff work effective:
Making the staff understand the authority relationships. Insist
that the staff function should sell their recommendations, & not
just give advices
Encourage line managers to consult the staff managers who are
experts in their area.
Line managers should provide feedback to staff managers the
status of the suggestions made by them
The staff managers should provide complete solution to the
problems faced by the line managers. They should assist the line
manager in implementing the same
Make the staff & line managers’ work as team. Share the credit &
blame
Defining Culture:
General pattern of behaviour, shared beliefs, & values the
members have in common
Can be inferred from what the people say, do, & think within the
organizational setting
It is fairly stable, & does not change fast.
Seniors create the climate for the enterprise. Their values
influence the direction of the firm.
Value is a permanent belief about what is appropriate & what is
not that guides the actions & behaviours of the employees in
fulfilling the organization’s aims.
Value driven corporate leaders serve as role model., set the
standards of performance, motivate employees, make the
company special & are symbol to external environment
Changing the culture of an organization takes a long period of
time
Lesson 10
Controlling
Introduction:
The managerial function of controlling is the measurement &
correction of performance in order to male sure that the
enterprise objectives & the plans to devised to attain them are
accomplished.
Planning & control are closely related
Lesson 13
Productivity, Operations Management & TQM
Productivity:
Ratio of Input to Output within a time frame; without
compromising on Quality
Te output should always be higher than Input
If productivity is high, then efficiency is high
If productivity is high, then cost will be low
If productivity is high, delivery time is low
If productivity is high, that means process is efficient:
Easy to measure the Ability of a person, but difficult to measure
the capability of a person
Operations Research:
The application of scientific methods to the study of alternatives
in a problem situation, with a view to obtaining a quantitative
basis for arriving at the best solutions
It is use of quantitative data on goals, & on determining the best
means of reaching the goals
Value Engineering:
It consists of
o Analysing the operations of the product or service
o Estimating the value of each operation
o Attempting to improve the operation by trying to keep the
cost low at each step
Work Simplification:
It is improving work methods
Done through
o Participation of employees
o Training employees on concepts like time & motion studies,
work-flow analyses, layout of the work station
Quality Circles:
It is a group of employees from the same department who meet
regularly to solve problems they experience at work
Members are trained in applying statistical quality control, 7 to
work in teams
Total Quality Management
Organization’s long term commitment to continuous
improvement of quality through out the organization & with the
active participation of all members at all levels to meet & exceed
customer’s expectations
It is simply effective management
TQM demands free flow of information
When done effectively, it results in customer satisfaction, fewer
defects, less waste, increased productivity, reduced costs &
improved profitability
Lean Manufacturing:
The following are the characteristics:
o Continuous improvements [kaizen] with strategic
breakthrough
o Aim at zero defects
o Just-in-time inventory system
o Team performance
o Responsibility for problems rests with all
Computer-aided techniques
Computer-aided design [CAD] Computer-aided-manufacturing
[CAM] & the Manufacturing Automation Protocol [MAP] are
some of the cornerstones of the factory of future
CAD / CAM help engineers design products much more quickly
than they could with paper-&-pencil approach. This is a greatest
advantage to the organization since product life cycles are getting
shorter. Capturing markets quickly are crucial in very
competitive environment. Firms can respond rapidly to the
requests of the customers with specific requirements
Lesson 15
Overall Control & toward the future through Preventive Control
Traditional Overall Controls:
Profit & Loss Control
o Profits are a definite standard against, which firms measure
their success
o In P & L we get details of revenues & expenses
o P & L control is not applied to central staff & service
departments.
Control through Return on Investment
o It is ratio of earnings to investment of capital
o The goal is optimising returns & not profit. Make best use
of assets
Types of Control:
Direct
o Trace the cause of an unsatisfactory result back to the
persons responsible for it & get them to correct their
practices
o Standards are developed to compare the actual output with
plans
o Deviations indicates that performance is not as per plan
o The following are the causes of negative deviations from
standards:
Uncertainty
• Elements affecting a given plan are grouped
into:
o Facts
o Risk
o Uncertainty about future
Lack of knowledge, experience, or judgment
Preventive
o Develop better managers who will look at problems from a
system point of view
o The principle of preventive control are based on the
following assumptions:
Qualified managers make a minimum of errors
Managerial performance can be measured by using
principles of management as standard
The application of management fundamentals can be
evaluated
o Has the following advantages:
Greater accuracy is achieved in assigning personal
responsibility
Source of training need analysis to bridge the gap in
their performance
No wastage of time. Saves on cost