Principles of-management

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Management: Definitions, Management: Definitions, Roles & SkillsRoles & Skills

Principles of Management


Management: Management: Definitions Definitions ““Management is the Management is the processprocess of designing and of designing and

maintaining an maintaining an environment environment in which individuals, in which individuals, working together in groupsworking together in groups, efficiently accomplish , efficiently accomplish selected aim(s)selected aim(s) viz. to create a surplus(s).” …. viz. to create a surplus(s).” …. Weihrich & KoontzWeihrich & Koontz

““Management is not an absolute; rather it is socially Management is not an absolute; rather it is socially and culturally determined. Across all cultures and in and culturally determined. Across all cultures and in all societies, people coming together to all societies, people coming together to perform perform certain collective actscertain collective acts encounter common problems encounter common problems having to do with establishing direction, having to do with establishing direction, coordination and motivation. Culture affects how coordination and motivation. Culture affects how these problems are perceived and resolved.” …these problems are perceived and resolved.” …The The Art of Japanese Management by R. Pascale & A. AthosArt 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”:

1. Effectiveness: Achievement of objectives (Right Things);2. Efficiency: Achieving those objectives with least amount/

sacrifice of resources (Things Right); 3. 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 environmental forces:

Organization

EconomicPolitical Regulatory

Societal

Technological

Globalization

For maximum benefit to the organization

Management: Definition …ctd.


Management - what managers do:Management - what managers do: Fredrick Taylor’s path-breaking “Fredrick Taylor’s path-breaking “scientific approachscientific approach”” Henri Fayol’s classical definition of Henri Fayol’s classical definition of ‘functions’‘functions’, now , now

modified to:modified to: Plan -- Organize -- Lead(Plan -- Organize -- Lead(Command&CoordinateCommand&Coordinate) -- Control) -- Control

Mintzberg’s map of managerial Mintzberg’s map of managerial ‘roles’‘roles’:: Interpersonal + Informational + DecisionalInterpersonal + Informational + Decisional

Katz’s interpretation of Katz’s interpretation of ‘skills’‘skills’:: Technical / Human / ConceptualTechnical / Human / Conceptual

Management – ‘get things done through others’:Management – ‘get things done through others’: Leadership: “The ability to influence a group towards Leadership: “The ability to influence a group towards

achievement of goals”.achievement of goals”. Motivation: “The willingness to exert high level of effort Motivation: “The willingness to exert high level of effort

towards goals”towards goals” Communication:”The transference and understanding of Communication:”The transference and understanding of

meaning”meaning”

Management: Roles & Skills


Management: roles & skills …ctd.Managerial Roles (Mintzberg)

Role Description ExamplesInterpersonal •Figurehead symbolic head; required to show Ceremonial,

‘face’ in social & legal conditions. Civic etc.•Leader Motivating & directing subordinates project plan•Liaison Networking outside for information Industry -

& favours group meetsInformational •Monitor nerve centre and interpretator Reports•Disseminator networking within the organization Meetings etc.•Spokesperson Transmit intent to outsiders; expert Board Meets

Decisional •Entrepreneur Opportunity finding& reacting Strategy Plan•Trouble shooter Handling unexpected disturbance Contingency•Resource allocator Initiating/approving changes Budgeting•Negotiator Getting best deal for Organization Contracts


Managerial Skills(Managerial Skills(Katz & others)Katz & others)

Technical SkillsTechnical Skills::Application of specialized Application of specialized

knowledge or expertise knowledge or expertise acquired though formal acquired though formal training & its use.training & its use.

Human Skills:Human Skills:Ability to work with people, Ability to work with people,

understand and motivate understand and motivate groups & individuals.groups & individuals.

Conceptual Skills:Conceptual Skills:Mental ability to recognize, Mental ability to recognize,

analyze, diagnose and think analyze, diagnose and think through complex situations.through complex situations.

Skills NeededSkills Needed

Board

Exec.

Mgr.

Supr.

HU

MA

NC

onceptual

Technical

Management: roles & skills


Principles of Management Principles of Management 22

Management: A Systems Management: A Systems ApproachApproach


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 ManagementSystems approach to Management …ctd. …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 3Sub-System 1


Systems approach to ManagementSystems approach to Management …ctd. …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.

System Environment 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 ManagementSystems approach to Management …ctd. …ctd. ““Inputs”: 5 Ms of ManagementInputs”: 5 Ms of Management

Inputs or the resources managers deal with are:Inputs or the resources managers deal with are: ManMan: human resources, both inside and connected with an : human resources, both inside and connected with an

organization;organization; Materials:Materials: goods (hard & software, processed or semi- goods (hard & software, processed or semi-

finished) and services required to create the sellable end finished) and services required to create the sellable end product;product;

Machines:Machines: technology and expertise deployed towards the technology and expertise deployed towards the transformation process;transformation process;

Methods:Methods: systems, procedures and processes seamlessly systems, procedures and processes seamlessly put together for the transformation;put together for the transformation;

Measurement:Measurement: score-keeping and in-process monitoring score-keeping and in-process monitoring continuously with due feedback to keep on-course on time.continuously with due feedback to keep on-course on time.

““Money”Money” is required for generating all theses Ms – is required for generating all theses Ms – managers need to acquire, deploy, generate and managers need to acquire, deploy, generate and distribute money as a primary need for business!distribute money as a primary need for business!



““Stake”: Something wagered or risked; Stake”: Something wagered or risked; an interest in an enterprise with contingent gain or loss …an interest in an enterprise with contingent gain or loss …Webster ‘s dictionaryWebster ‘s dictionary

““Holders” who have stake in Business:Holders” who have stake in Business: Shareholders:Shareholders: are the owners. They have put in their money in the enterprise, expecting better returns from it are the owners. They have put in their money in the enterprise, expecting better returns from it

than from other ventures;than from other ventures; Society: Society: includes the State, provincial and local governments for the improvement of ‘quality of life’ of its citizens;includes the State, provincial and local governments for the improvement of ‘quality of life’ of its citizens;

Output for “Stake-holders” in Business:



Suppliers:Suppliers: continuity of their enterprise depends on the success of the customer enterprise; continuity of their enterprise depends on the success of the customer enterprise; Customers:Customers: require the goods and services provided by the enterprise, better than than those from its competitors. The enterprise is, in turn, a 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;supplier to its customers; Employees:Employees: livelihood depends on the progress and success of the employing enterprise; 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: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 termBut they sink or swim together in the shorter term Length of term definition varies with individuals!Length of term definition varies with individuals!

Output for “Stake-holders” in Business …ctd.


by the process ofPlanning

+ Organizing

+ Staffing

+ Leading

+ Controlling

to accomplish certain pre-determined, (as derived from stakeholder needs) goals or objectives


Management as a system transforms inputs:


Inputs(Goal

Oriented)

Outputs(External

ToOrgnzn.)

Pla

nn

ing

Org

anizin

g

Sta

ffing

Leadin

g

Contro

lling

Product/Services,Profits, Customer & Societal satisfaction,

Other Long-term Goals

Man, MachineMaterial,Method,

Measurement

Stake holder Feedback (reenergizing the system)

EXTERNAL ENVIRONMENT(Opportunities, Constraints)

StakeholdersShareholders;Society; Customers;Employees; Suppliers




Management ProcessManagement Process

First Step: PlanningFirst Step: Planning


PlanningPlanning

Planning involves selecting Planning involves selecting objectivesobjectives or goals and the or goals and the course of course of actionsactions to achieve them: to achieve them: Provides the bridge to take us from Provides the bridge to take us from

where we are to where we are to where we want to gowhere we want to go;; Is a Is a rational approachrational approach to achieving pre- to achieving pre-

selected objectives - based on selected objectives - based on innovation, knowledge and purpose;innovation, knowledge and purpose;

Decision making in choosing the best Decision making in choosing the best from alternative courses of action and is from alternative courses of action and is integral to planning;integral to planning;


Plans as foundation of Plans as foundation of ManagementManagement

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 incase of deviationfrom plan ?

The primacy of Planning


Types of PlansTypes of Plans

Mission / PurposeMission / Purpose The The basic functionbasic function or ‘reason for or ‘reason for

existence’ of an enterprise/ organizationexistence’ of an enterprise/ organization

Case in point:Case in point: MissionMission of Indira of Indira InstituteInstitute

““To train our students to become the best To train our students to become the best business minds and entrepreneurs today, business minds and entrepreneurs today, who will lead their companies successfully who will lead their companies successfully into the future tomorrow , locally, nationally into the future tomorrow , locally, nationally and globally.”and globally.”


Type of Plans (Cont’d)Type of Plans (Cont’d) Objectives/ GoalsObjectives/ Goals

The The endend towards which activity of an towards which activity of an organization is aimed, e.g.organization is aimed, e.g.

For a Business enterprise – profit, surplus For a Business enterprise – profit, surplus creation;creation;

For a Management Institute: The number of For a Management Institute: The number of employable/useful trainees;employable/useful trainees;

StrategiesStrategies Determination of the long term objectives Determination of the long term objectives

and adoption of a course of actionand adoption of a course of action Gives a frame work for linked action-plans, Gives a frame work for linked action-plans,

communicated systematically to guide communicated systematically to guide thinking and actions. thinking and actions.


Types of Plans (cont’d)Types of Plans (cont’d) PoliciesPolicies

““Plans” that are general directional Plans” that are general directional statements (or understandings) that statements (or understandings) that guide/help in decision making:guide/help in decision making:

Repeat decisions taken ‘reflexively’;Repeat decisions taken ‘reflexively’; Delegation of tasks without loss of control.Delegation of tasks without loss of control.

Some discretion is permissible depending on Some discretion is permissible depending on circumstances thus encouraging circumstances thus encouraging initiative initiative within limitswithin limits and situational adjustments; and situational adjustments;

Issues with “Policy”Issues with “Policy” Seldom documented in writingSeldom documented in writing Subject to interpretationsSubject to interpretations


Types of Plans (cont’d)Types of Plans (cont’d) ProceduresProcedures

Plans that are chronological sequences Plans that are chronological sequences of required actions: task-oriented in of required actions: task-oriented in nature;nature;

Cuts across department boundaries Cuts across department boundaries (sub-systems) in an organization: e.g. (sub-systems) in an organization: e.g. customer complaint handling procedure;customer complaint handling procedure;

Procedures and policies are inter Procedures and policies are inter related: e.g. authorization for paid leaverelated: e.g. authorization for paid leave

PolicyPolicy governs quota, responsible authority etc. governs quota, responsible authority etc. ProcedureProcedure governs application, grant and record- governs application, grant and record-

keeping. keeping.

RulesRules Specific actions or non-actions allowing Specific actions or non-actions allowing

no discretionno discretion Caution:Caution: rules (and procedures too) limit initiative rules (and procedures too) limit initiative!!


Types of Plans (cont’d)Types of Plans (cont’d) ProgramsPrograms

Action plans (mainly non-routine or for Action plans (mainly non-routine or for changed activities) including, task changed activities) including, task assignments, steps to be taken, resources to assignments, steps to be taken, resources to be deployed etc. to achieve a (new/renewed) be deployed etc. to achieve a (new/renewed) goal;goal;

Primary program may Primary program may requirerequire supporting programs, supporting programs, spreading across the enterprise;spreading across the enterprise;

Perfect coordination between supporting & primary Perfect coordination between supporting & primary programs essential to avoid delays, unnecessary programs essential to avoid delays, unnecessary costs and expected roll-out.costs and expected roll-out.

Programs are a complex of (sub)goals, policies, Programs are a complex of (sub)goals, policies, rules and other elements necessary for the rules and other elements necessary for the course of action e.g. obtaining ISO certification.course of action e.g. obtaining ISO certification.


Types of Plans (cont’d)Types of Plans (cont’d)

BudgetsBudgets A statement of expected results expressed A statement of expected results expressed

in “in “Numerical terms”Numerical terms” e.g. financial e.g. financial operating budget = “profit plan”;operating budget = “profit plan”;

Budgets enforce precision in thinking:Budgets enforce precision in thinking: Making a budget is ‘planning’ by itself;Making a budget is ‘planning’ by itself; Encourages innovation – a “different” way to Encourages innovation – a “different” way to

workwork Budgets serve for ‘Control’:Budgets serve for ‘Control’:

Enforces discipline in execution of plans;Enforces discipline in execution of plans; Instills cost consciousness;Instills cost consciousness; Makes people (constantly) plan!Makes people (constantly) plan!


Steps in PlanningSteps in Planning

Being aware of challenges

Market, Customer’s wants, Competition,Own strengths & weakness

Setting Goals/Objectives

What to accomplish& when

Planning premises

Internal & externalEnvironment/conditions

Identifyingalternatives

Comparing & choosing analternative

Decisionmaking

Budgeting(Numberizing Plans)

e.g., Sales budgetOperational Expense budget,Capital expenditure budget

Formulating Supporting

plans

e.g., plan to buyEquipment, recruit & trainEmployees, develop product etc


The Planning ProcessThe Planning Process Planning Period:Planning Period:

Short range plans e.g. material procurement Short range plans e.g. material procurement plan in a factoryplan in a factory

Long range plans e.g. product development Long range plans e.g. product development plan, plant/production facility installation;plan, plant/production facility installation;

““Urgent” drives out the “Important” – Urgent” drives out the “Important” – mismatch between short & long term plans!mismatch between short & long term plans!

Planning horizon must allow for actions to Planning horizon must allow for actions to run their course – requiring run their course – requiring ‘commitments’:‘commitments’: Thus “decisions today” are key to good plans;Thus “decisions today” are key to good plans; Long-term plans reap benefits of good short-Long-term plans reap benefits of good short-

term plans.term plans.


Steps in PlanningSteps in Planning

Being aware of Opportunity

Considering, Market,Competition, Customer’s wants, Own strengths &weakness



Objective = Important end towards which activities are directed; therefore needs verification at the end of the plan period.


Hierarchy of Objectives& Org. Hierarchy of Objectives& Org. LevelsLevels

Mission

Overall Objectives &Key result areas.

Divisional objectives

Departmental objectives

Individual objectives

Board ofDirectors

CEO

DivisionHead

Product X

Division Head

Product Y

Sales & MktgDept

Production Dept

Sales Manager A Sales Manager B

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.


The Organizational Objectives is The Organizational Objectives is deployeddeployed into the objectives of : into the objectives of : Divisions Divisions Departments Departments Individual Individual

objectives;objectives; The ‘cascade’ principle: seamless flow;The ‘cascade’ principle: seamless flow;

Mutual support & interlocking of goals Mutual support & interlocking of goals is essentialis essential Managers must ensure that the Managers must ensure that the

components of the network fit each other;components of the network fit each other; Departments/divisions can be ‘blind-Departments/divisions can be ‘blind-

sided’.sided’.

Hierarchy of Objectives& Org. Levels …Hierarchy of Objectives& Org. Levels …ctd.ctd.


Hierarchy of Objectives& Org. Levels Hierarchy of Objectives& Org. Levels …ctd.…ctd.

Mission

Overall Objectives &Key result areas.

Divisional objectives

Departmental objectives

Individual objectives

While setting Objectives, ideally, Top Management should get information / ‘buy-in’ from lower levels to set realistic goals for a good result.

Top-downApproach

Bottom-upResponse:The result


Key Result Areas (KRA)Key Result Areas (KRA) Are areas in which performance is essential Are areas in which performance is essential

for the success of an enterprise for the success of an enterprise Examples of ‘generic KRA’s:Examples of ‘generic KRA’s:

Market share Market share Return on Investment (ROI)Return on Investment (ROI) Service levelService level Customer satisfactionCustomer satisfaction

Peter Drucker recommends: Market standing, Peter Drucker recommends: Market standing, innovation, productivity, physical & financial innovation, productivity, physical & financial resource, profitability, managerial resource, profitability, managerial performance & development, worker performance & development, worker performance & attitude and public performance & attitude and public responsibility. responsibility.


Management By Objectives Management By Objectives (MBO)(MBO)

A comprehensive managerial system that A comprehensive managerial system that integrates many key managerial activities in a integrates many key managerial activities in a systematic manner and that is consciously directed systematic manner and that is consciously directed towards the effective and efficient achievement of towards the effective and efficient achievement of organizations’ and individual objectives:organizations’ and individual objectives: Set-out by Set-out by Peter DruckerPeter Drucker in 1954; in 1954; Integrated to personal performance appraisal by Integrated to personal performance appraisal by Douglas Douglas

McGregorMcGregor in 1957; in 1957; Has formed the basis for many theories on motivation;Has formed the basis for many theories on motivation; Has been criticized for introducing a short-term focus Has been criticized for introducing a short-term focus

and undesirable behaviour;and undesirable behaviour; Currently viewed as a ‘way of managing’ – not a specific Currently viewed as a ‘way of managing’ – not a specific

tool.tool.


Weaknesses of MBO Weaknesses of MBO Emphasis on:Emphasis on:

short term at the expense of long termshort term at the expense of long term ““Results” over “Process”Results” over “Process” Individual over collective effortIndividual over collective effort

Failure to grasp and deploy the Failure to grasp and deploy the

concept of “seamless cascade”concept of “seamless cascade” Difficulty in setting agreed, Difficulty in setting agreed,

harmonized goalsharmonized goals Danger of inflexibility Danger of inflexibility


Planning Premises & Planning Premises & StrategiesStrategies



Planning premises

Internal & externalenvironment

Identifyingalternatives


Decisionmaking

Strategic Planning ProcessStrategic Planning Process

StrategyStrategy = 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 Planning Premises & Strategies …ctd.

StakeholderWishes &Shareholderdemands

ManagementOrientation

EnterpriseProfile

Purpose &Major objectivesof enterprise

CurrentExternalsituation

Currentresourcesituation

ForecastExternalsituation

ExternalOpportunity& Threat

InternalStrengths &Weakness

Key success factors & Alternative Strategies

Strategicchoice

The Strategic Planning Process


Planning PremisesPlanning Premises

Porter’s Five Forces : an Model for analysis of theExternals environment.


Planning Premises: forecast of Planning Premises: forecast of demanddemand

Estimate of Estimate of future demandfuture demand is made by qualitative methods, time- is made by qualitative methods, time-series methods and/or causal methods:series methods and/or causal methods: QualitativeQualitative relies on judgement of experts to translate to quantities; relies on judgement of experts to translate to quantities; Time-seriesTime-series statistically interpolate demand on historical data; statistically interpolate demand on historical data; Causal methodCausal method seek co-relation on cause and effect basis between seek co-relation on cause and effect basis between

two (or more) variables to quantify demand;two (or more) variables to quantify demand; However, all forecasting methods are limited by:However, all forecasting methods are limited by:

Handling of un-quantifiable factors e.g. national prideHandling of un-quantifiable factors e.g. national pride Unrealistic assumptions fuelled by a desire to succeedUnrealistic assumptions fuelled by a desire to succeed Excessive data required (often unobtainable) to make accurate forecastsExcessive data required (often unobtainable) to make accurate forecasts Uncertainty with environmental changes: Technology, Govt. Policy, International Uncertainty with environmental changes: Technology, Govt. Policy, International

alignments, New materials/sources, Climate etc.alignments, New materials/sources, Climate etc. Coping with uncertainties require:Coping with uncertainties require:

Sensitivity analysis & “What if” scenarios (trust instinct!);Sensitivity analysis & “What if” scenarios (trust instinct!); Planning for contingencies – with defined cut-in milestones.Planning for contingencies – with defined cut-in milestones.


Generic Strategy Generic Strategy

Relationship

B’marking Partnering

Company

Customer

Competitor Supplier

Ultimate competitive position: - position w.r.t major Customers - K.S.Fs of Competitors - leveraging of suppliers

Competitive Competitive AdvantageAdvantage

1. Cost Leadership: To continually work reducing the cost prices of products. Supplier Q-C-D has very high priority.

2. Differentiation:To constantly offer

innovativeand unique solutions.

Supplier technology & quality has

focus.

3. Customization:To offer required services in

the required manner is the

focus. Speed and flexibility

important.

Lean Management


Generic Strategy: BCG MatrixGeneric Strategy: BCG MatrixRed: Marketing PerspectiveRed: Marketing Perspective; Blue: Financial Perspective; Blue: Financial Perspective

Cash SourceC

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Hi

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Mar

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Relative Market Share

Hi

Hi Lo

Lo

STAR

“Hold”

???

“Build”

Cash Cow

“Harvest”

DOGS

“Divest”


Planning Premises & Strategies 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”.


Decisionmaking

Budgeting( Numberizing Plans)

Say, Sales budgetOperational Expense budget,Capital expenditure budget

Formulating Supporting

plans

Say, plan to buyEquipment, recruit & trainEmployees, develop product etc

Deployment (MBO etc.)


Decision making is a ‘rational choice’ Decision making is a ‘rational choice’ process, bounded by:process, bounded by: Limitations: time, information and ‘logic’;Limitations: time, information and ‘logic’; Behaviour: Risk averseness and biases.Behaviour: Risk averseness and biases.

A key step in the process is to identify A key step in the process is to identify those limiting factors, ‘road-blocks’ to each those limiting factors, ‘road-blocks’ to each effective (‘right thing’) alternative – then effective (‘right thing’) alternative – then finding a ‘solution’ with least sacrifice of finding a ‘solution’ with least sacrifice of resources (‘thing right’):resources (‘thing right’): Factors: quantitative, qualitative/intangible;Factors: quantitative, qualitative/intangible; Finding solutions: Finding solutions:

marginal analyses – benefits with incremental inputs; marginal analyses – benefits with incremental inputs; cost-effectiveness – assessment of benefits over costs.cost-effectiveness – assessment of benefits over costs.

Decision MakingDecision Making


Decision Making…ctd.Decision Making…ctd.

How to selectAmongst 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…ctd.Decision Making…ctd. Decision making takes place under varying Decision making takes place under varying

degrees of uncertain conditions and risks. degrees of uncertain conditions and risks. Techniques used to aid the process are:Techniques used to aid the process are: Risk analysis:Risk analysis: every decision is based on every decision is based on

interactions amongst different factors/variables – interactions amongst different factors/variables – each of which have their own probabilities (towards each of which have their own probabilities (towards ‘success’). Analysis of these probabilities yield a risk ‘success’). Analysis of these probabilities yield a risk profile for each alternative path. In the absence of profile for each alternative path. In the absence of defined probabilities, estimates can be used.defined probabilities, estimates can be used.

Decision trees:Decision trees: the outcome (measure pre-decided the outcome (measure pre-decided e.g. cost or time) of every step in the decision is e.g. cost or time) of every step in the decision is charted and a course selected on the most charted and a course selected on the most favourable outcome. Very much like making a trip, favourable outcome. Very much like making a trip, navigating by using a road-map navigating by using a road-map (refer example in W & (refer example in W & K, “Management – a global perspective/10K, “Management – a global perspective/10thth edn. Pg. 209) edn. Pg. 209)


Decision Making…ctd.Decision Making…ctd.

Flow Charts:Flow Charts: as a process-guide to taking a as a process-guide to taking a decision and helps as a check-list of key variables, decision and helps as a check-list of key variables, the sequence in which they fall and the the sequence in which they fall and the interrelations. Key to making a choice or re-interrelations. Key to making a choice or re-examining the path taken are also indicated as examining the path taken are also indicated as risk-reduction devices.risk-reduction devices.(refer example in W & K, “Management – a global (refer example in W & K, “Management – a global perspective/10perspective/10thth edn. Figure 8-5) edn. Figure 8-5)

Decision Support Systems:Decision Support Systems: a wide variety of a wide variety of (proprietary) computer based programs are (proprietary) computer based programs are available for managers to use their time more available for managers to use their time more effectively for decision making of semi-structured effectively for decision making of semi-structured tasks – by providing alternative evaluations. They tasks – by providing alternative evaluations. They focus on the process of decision making, taking focus on the process of decision making, taking data provide by the management information data provide by the management information systems in enterprises.systems in enterprises.



Management Process:Management Process:

Organizing for resultsOrganizing for results


Nature of OrganizingNature of Organizing OrganizingOrganizing may be broadly defined as: may be broadly defined as:

1.1. The identification and classification of required The identification and classification of required activities;activities;

2.2. The grouping of those activities towards The grouping of those activities towards attaining their set objectives;attaining their set objectives;

3.3. The assignment of those groupings to a The assignment of those groupings to a responsible manager, duly empowered;responsible manager, duly empowered;

4.4. The provision for coordination among, within The provision for coordination among, within and across the groups in the organization.and across the groups in the organization.

Organization structuresOrganization structures are designed to: are designed to: Clarify tasks & responsibilities,Clarify tasks & responsibilities, Remove obstacles,Remove obstacles, Furnish decision making & communication Furnish decision making & communication

network network Support attainment of enterprise objectives Support attainment of enterprise objectives


Nature of Organizing …ctd.Nature of Organizing …ctd.The Business Organization Model: “Value Chain” (Porter,1985)

Margi

n

Margin

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

Inbound Logistics Operations

Outbound Logistics

Marketing& Sales Service

Supp

ort A

ctivi

ties

Primary Activities

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.


Nature of Organizing …ctd.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”



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 Most practicing mangers would translate this “value chain” to imply an this “value chain” to imply an organization as:organization as:“ “ a formalized, intentional structure of roles and a formalized, intentional structure of roles and

positions” positions” Thus ‘formal organization’ implies the Thus ‘formal organization’ implies the

intentional structure of roles in an enterprise.intentional structure of roles in an enterprise. However, in an enterprise ‘informal However, in an enterprise ‘informal

organization’ will form, not necessarily bad organization’ will form, not necessarily bad and is:and is:

“ “ a network of personal and social relations not a network of personal and social relations not established or required by formal established or required by formal organizations but arising spontaneously as organizations but arising spontaneously as people associate with each other”.people associate with each other”.



Nature of Organizing …ctd.Nature of Organizing …ctd.Hierarchical levels

Span of control

The building block of an organization is the Department: a group charged with independent task & responsibility.

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$ $ $

$ Car pool


Grouping activities & people into Grouping activities & people into departmentsdepartments makes it conceptually possible to expand makes it conceptually possible to expand organizations to an infinite degree.organizations to an infinite degree.

Different patterns have been successfully used Different patterns have been successfully used to group activities:to group activities: By simple nos. is a simple method – works well for By simple nos. is a simple method – works well for

the lowest levels where work is routine, uniform and the lowest levels where work is routine, uniform and non-specialized; time-grouping is an extension of this non-specialized; time-grouping is an extension of this method where shift-working is required;method where shift-working is required;

By enterprise By enterprise functionsfunctions – embodies what enterprises – embodies what enterprises typically do e.g. Production, Engineering, Sales etc. typically do e.g. Production, Engineering, Sales etc. This method, defined by F.W.Taylor, is arguably the This method, defined by F.W.Taylor, is arguably the most prevalent method still used.most prevalent method still used.

Nature of Organizing …ctd.Nature of Organizing …ctd.“Departmentation”“Departmentation”


By territory or geography – is very common when the By territory or geography – is very common when the geographical spread is wide. It was a device introduced geographical spread is wide. It was a device introduced to speed up management in similar units for easy and to speed up management in similar units for easy and swift communication e.g. Sales: N/E/W/S; Fire Brigade: swift communication e.g. Sales: N/E/W/S; Fire Brigade: Camp, Hinjewadi, Aundh etc.Camp, Hinjewadi, Aundh etc.

By Customer/Account orientation – reflecting the By Customer/Account orientation – reflecting the primary interest in nature of markets/business/customer primary interest in nature of markets/business/customer e.g. Banks: Institutional banking, Small Savings etc.e.g. Banks: Institutional banking, Small Savings etc.

By Process groups – encountered primarily in By Process groups – encountered primarily in specialized/ manufacturing operations where processes specialized/ manufacturing operations where processes are vital e.g. Advertising: Copy-writing, Creative etc.; are vital e.g. Advertising: Copy-writing, Creative etc.; Manufacturing: Steel Melting, Wire-drawing etc.Manufacturing: Steel Melting, Wire-drawing etc.

By Product Lines – has evolved with enterprises By Product Lines – has evolved with enterprises becoming “multi-line” with ‘function’ needing becoming “multi-line” with ‘function’ needing adaptation/integration to suit specific products e.g. Tata adaptation/integration to suit specific products e.g. Tata Motors: Passenger Vehicles / Commercial vehiclesMotors: Passenger Vehicles / Commercial vehicles

““Departmentation” …ctd.Departmentation” …ctd.


By ‘grid’ control – in essence combining the By ‘grid’ control – in essence combining the ‘functional’ and the ‘product-line’ patterns to best ‘functional’ and the ‘product-line’ patterns to best effect. Functional excellence is not subjugated to effect. Functional excellence is not subjugated to Operational ease. Operational ease. In ‘projects’, In ‘projects’, this serves to bring together the diversity of skills this serves to bring together the diversity of skills required into one team. required into one team.

The The SStrategic trategic BBusiness usiness UUnit: companies today are nit: companies today are organizing themselves as organizing themselves as ‘companies within a ‘companies within a company’company’ to allow for maximum flexibility and to allow for maximum flexibility and freedom of operations, especially when the freedom of operations, especially when the products/businesses are unconnected e.g. General products/businesses are unconnected e.g. General Electric. Generally, SBU’s have:Electric. Generally, SBU’s have:

Their own Missions, Goals and Strategies;Their own Missions, Goals and Strategies; Distinct and definable set of competitors;Distinct and definable set of competitors; Deploy and manage resources in key areas;Deploy and manage resources in key areas; A reasonable ‘size’. A reasonable ‘size’.

““Departmentation” …ctd.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.Departmentation” …ctd.Example of “Grid Control” & S.B.U’s


The purpose of organizing is to make human The purpose of organizing is to make human cooperation effective and is limited by:cooperation effective and is limited by: the number of persons a manager can ‘supervise’ the number of persons a manager can ‘supervise’

effectively and efficiently; effectively and efficiently; while the total number is dictated by the quantum of while the total number is dictated by the quantum of

work/ nature of task/spread etc. Thus the two work/ nature of task/spread etc. Thus the two dimensions, “Level” (depth) and “Span of control” dimensions, “Level” (depth) and “Span of control” (width) are interrelated .(width) are interrelated .

The reason for creating Levels of organization is the The reason for creating Levels of organization is the limitation in the span of control. “Effective span” is limitation in the span of control. “Effective span” is influenced by:influenced by:

Training/skill of subordinates and personal contact Training/skill of subordinates and personal contact required;required;

Clarity of delegation of authority;Clarity of delegation of authority; Clarity of plans, use of objective standards and Clarity of plans, use of objective standards and

communication techniques;communication techniques; Rate of change;Rate of change; Maturity and experience of the manager and organizationMaturity and experience of the manager and organization..


Span-of-ManagementSpan-of-Management


Levels, Levels, per se, per se, are not desireable:are not desireable: They are expensive – as they increase, both They are expensive – as they increase, both

infrastructure costs and staffing tends to increase;infrastructure costs and staffing tends to increase; Real work is accomplished at the ‘gemba’ (Real work is accomplished at the ‘gemba’ (Japanese: Japanese:

workplaceworkplace) where the actual ) where the actual value-addition/transformation takes place. The value-addition/transformation takes place. The contribution of levels on top are not directly co- contribution of levels on top are not directly co- relatable, thus best avoided;relatable, thus best avoided;

Communication become complicated – omissions, Communication become complicated – omissions, filterations and misinterpretations lead to wasted and filterations and misinterpretations lead to wasted and misdirected effort;misdirected effort;

Planning and control become tortuous, requiring Planning and control become tortuous, requiring complicated coordination and alignment between levels.complicated coordination and alignment between levels.

Studies reveal that between 8 to 10 people at ‘higher’ Studies reveal that between 8 to 10 people at ‘higher’ levels and upto 15 at lower levels is a good “span”. levels and upto 15 at lower levels is a good “span”. Increasingly, enterprises are attempting to cut back Increasingly, enterprises are attempting to cut back levels to 5 or less.levels to 5 or less.

Span-of-Management …ctd.Span-of-Management …ctd.