Module Oam
Module Oam
1
Nature and Concept of Management
Topic Outline:
1. Definition and functions of management
2. Functions roles, and skills of a manager
Definitions
Management
− the process of designing and maintaining an environment in which
individuals, working together in groups, efficiently accomplish
selected aims.
− Management is concerned with productivity, which implies
effectiveness and efficiency.
Course Module
Effectiveness: “Doing the right things”: the task that help an organization
reach its goals.
Efficiency” “Doing things right”: the efficient use of such resources as
people, money and equipment.
Managers
− the term manager is a person who has responsibility for the activities
of other people in an organization.
Management Levels
Top
Managers
Middle Managers
Non-managerial employees
Figure 1.1
Top Managers
Make decisions about the direction of the organization
Examples: President, Chief Executive Officer, Vice-President
Middle Managers
Manage the activities of other managers
Organization and Management
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Nature and Concept of Management
Course Module
Figurehead role: role which s assumed by managers when they
represent their respective units in the outside world in ceremonial and
civic activities. Managers expected to be a source of inspiration. People
look up to you as a person with authority, and as a figurehead.
Leader role - is the role played by managers when they initiate and
coordinate activities in their units. Provide leadership for the team,
department or perhaps the entire organization.
Liaison role: is needed by unit heads when they interact with persons in
other units within and outside the organizations. Managers need to be
able to network effectively on behalf of your organization.
B. Informational Roles: roles that involve handling, sharing, and analyzing
information
Monitor or recipient role (receive information about the operation of
an enterprise) - Managers regularly seek out information related to your
organization and industry, looking for relevant changes in the
environment. You also monitor your team, in terms of both their
productivity, and their well-being.
Disseminator role (passing information to subordinates) - This is where
you communicate potentially useful information to your colleagues and
your team.
Spokesperson role (transmitting information to those outside the
organization) - Managers represent and speak for their organization. In
this role you're responsible for transmitting information about your
organization and its goals to the people outside it.
C. Decisional Roles: roles that require decision-making
Entrepreneur role - As a manager, you create and control change within
the organization. This means solving problems, generating new ideas, and
implementing them.
Disturbance handler role - When an organization or team hits an
unexpected roadblock, it's the manager who must take charge. You also
need to help mediate disputes within it.
Resource allocator role - Managers need to determine where
organizational resources are best applied. This involves allocating
funding, as well as assigning staff and other organizational resources.
Negotiator role - Manager may be needed to take part in, and direct,
important negotiations within your team, department, or organization.
Management Skills
Skill - An ability or proficiency in a specific area. It is to be expected that
managers would need equally varied capabilities and skills.
Robert Katz identified three managerial skills that are essential to successful
management:
Organization and Management
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Nature and Concept of Management
References
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and
Entrepreneurial Perspective, 13th Ed."
Course Module
Organization and Management
1
Theories and Pioneering ideas in the Management
Management Theories
Behavioral
science
Pre-classical Contributors
Robert Owen (1771-1858)
− Owen's strength was that he saw his employees as every bit as
important to the success of his enterprise as the machines he owned.
By examining working methods and conditions, and seeking to
improve these, he is justifiably claimed as a father of personnel
management.
Charles Babbage (1792-1871)
Abraham Maslow
− An American, his ideas knows as Maslow's Hierarchy of Needs.
Maslow's Hierarchy of Needs (Figure 2.2)
Self-actualization
Esteem
Love/belonging
Safety
Physiological
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Self-actualization: truth, justice, wisdom, meaning
Esteem: self-respect, achievement, attention, recognition,
reputation
Social needs: friends, belonging, love
Safety: living in safe area, medical insurance, job security,
financial reserve
Physiological needs: food, shelter, air, water, nourishment,
sleep, etc.
Douglas MacGregor (1906-1964)
− Theory X and Theory Y
− Theory X : the assumption that employees dislike work, are lazy,
dislike responsibility, and must be coerced to performed.
− Theory Y: the assumption that employees like work, are creative, seek
responsibility, and can exercise self-direction.
Behavioral Science Approach
Behavioral Science Approach is an extension of the Human Relations
Approach.
It gave importance to attitudes, behavior and performance of
individuals and groups in the organizations.
Assumptions of Behavioral Science Approach
1. Organizations are socio-technical systems. The management must
integrate both the systems.
2. Work and interpersonal behavior of people in the organization is
influenced by many factors.
3. Employees are motivated not only by physiological needs but also by
social and psychological needs.
4. Different people have different perceptions, attitudes, needs and
values. These differences must be found out and recognized by
management.
5. In an organization conflicts are unavoidable.
6. Personal goals and Organizational goals must be joined together.
Quantitative Viewpoint
The quantitative approach involves the use of quantitative techniques to
improve decision making. This approach has also been labeled operations
research of management science. It includes applications of statistics,
optimization models, information models, and computer simulations.
Management Science (or Operational Research)
Management science (operational research) is an approach aimed at
increasing decision effectiveness through the use of sophisticated
mathematical and statistical methods.
Operations Management
Organization and Management
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Theories and Pioneering ideas in the Management
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Refers to the process whereby an individual or a group of individuals
uses organized efforts and means to pursue opportunities to create value
and grow by fulfilling wants and needs through innovation and
uniqueness.
C. Managing in an E-Business World.
1. E-business (electronic business): a comprehensive term describing
the way an organization does its work by using electronic (Internet-
based) linkages with key constituencies in order to efficiently and
effectively achieve its goals.
2. E-commerce (electronic commerce): is any form of business exchange
or transaction in which the parties interact electronically.
D. Need for Innovation and flexibility
The constant flow of new ideas is crucial for an organization to avoid
obsolescence or failure.
Flexibility is valuable in a context where customers needs may change
overnight, where new competitors come and go, and where
employees and their skills are shifted as need from project to project.
E. Quality Management System
Total Quality Management is a philosophy of management that is
driven by customer needs and expectations and focuses on continual
improvement in work processes.
TQM was inspired by a small group of quality experts, of whom W.
Edwards Deming was one of the chief proponents. He has also
developed and presented his quality and theory of profound
knowledge.
TQM represents a counterpoint to earlier management theorists who
believed that low costs were the only road to increased productivity.
The objective of TQM is to create organization committed to
continuous improvement.
F. Learning organizations and knowledge management.
Managers now must deal with an environment that is continually
changing. The successful organizations of the 21th century will be
flexible, able to learn and respond quickly, and be led by managers who
can effectively challenge conventional wisdom, manager the
organization's knowledge base, and make needed changes.
1. A learning organization is one that has developed the capacity to
continuously adapt and change.
2. Knowledge management involves cultivating a learning where
organizational members systematically gather knowledge and
share it with others to achieve better performance.
G. Theory Z: William Ouchi's
Theory A combines positive aspects of American and Japanese
management into a modified approach aimed at increasing managerial
effectiveness while remaining compatible with the norms and values of
society and culture.
Organization and Management
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Theories and Pioneering ideas in the Management
References
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and
Entrepreneurial Perspective, 13th Ed."
www.wikipedia.com
Course Module
Organization and Management
1
The Firm and It’s Environment
The purpose of this lesson is to help the student gain a better understanding
of the relationship between the firm and its environment with particular
emphasis on firms manage that relationship. In this lesson we analyze the
various environmental forces affecting the firm and summarize these using
Political Economic Social and Technological Analysis (PEST) and we also
discuss the Internal environment using the Strengths, Weaknesses,
Opportunities and Threats (S.W.O.T).
Topic Outline:
1. Environmental forces and environmental scanning
2. The local and international business environment of the firm
3. Phases of economic organizations
4. Forms of Business Organization
"The pessimist complains about the wind, the optimist expects it to change;
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Organizational environments are composed of forces or institutions
surrounding an organization that affect performance, operations, and
resources. It includes all of the elements that exist outside of the
organization's boundaries and have the potential to affect a portion or all
of the organization.
The organization needs to properly understand the environment for
effective management.
Figure 3.1
EXTERNAL ENVIRONMENT
− include all those factors which exists outside the firm and are often
regarded as uncontrollable.. These external forces can further be
categorized as:
1. General Environment(Macro)
2. Task Environment (Micro)
A. General Environment
− The general environment - The general environment or macro-
environment is all those forces affecting the organization indirectly.
These external forces are:
1. POLITICAL FACTORS: The political factors are related to the
management of public affairs and their impact on the business. It is
important to have a political stability to maintain stability in the trade.
Inclusive of government regulations, laws, policies and activities
designed to influence organizational performance in an indirect way.
B. Task Environment
The task environment is inclusive of those sectors that have a direct
working relationship with the organization. Critical variables in the tasks
environment are:
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INTERNAL ENVIRONMENT
− Is composed of the elements within the organization, including current
employees, management, and especially corporate culture, which defines
employee behavior
Internal factors are those factors which exist within the premises of an
organization and directly affects the different operations carried out in a
business.
SWOT Analysis
Figure 3.2
Organization and Management
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The Firm and It’s Environment
WEAKNESSES
Characteristics that place the firm at a disadvantage relative to others.
Weaknesses detract the organization from its ability to attain the core
goal and influence its growth.
Weaknesses are the factors which do not meet the standards we feel they
should meet. However, weaknesses are controllable. They must be
minimized and eliminated.
Examples - Limited financial resources, Weak spending on R & D, Very
narrow product line, Limited distribution, Higher costs, Out-of- date
products / technology, Weak market image, Poor marketing skills,
Limited management skills, Under- trained employees.
OPPORTUNITIES
Chances to make greater profits in the environment - External attractive
factors that represent the reason for an organization to exist & develop.
Opportunities arise when an organization can take benefit of conditions
in its environment to plan and execute strategies that enable it to become
more profitable.
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Organization should be careful and recognize the opportunities and grasp
them whenever they arise.
Examples - Rapid market growth, Rival firms are complacent, changing
customer needs/tastes, new uses for product discovered, Economic
boom, Government deregulation, Sales decline for a substitute product.
THREATS
External elements in the environment that could cause trouble for the
business - External factors, beyond an organization’s control.
Threats arise when conditions in external environment jeopardize the
reliability and profitability of the organization’s business.
Compound the vulnerability when they relate to the weaknesses. Threats
are uncontrollable. When a threat comes, the stability and survival can be
at stake. Examples - Entry of foreign competitors, Introduction of new
substitute products, Product life cycle in decline, Changing customer
needs/tastes, Rival firms adopt new strategies, Increased government
regulation, Economic downturn.
International Business
The international business environment can be defined as the
environment in different sovereign countries, with factors exogenous to the
home environment of the organization, influencing decision-making on
resource use and capabilities.
The buying and selling of the goods and services across the border.
The national border are crossed by the enterprises to expand their
business activities like manufacturing, mining, construction, agriculture,
banking, insurance, health, education, transportation, communication and
so on.
Differences between Domestic and International Business
Difference in currencies
Difference in natural and geographical conditions
Mobility of factors of production
Sovereign political entities
Imposition of tariffs and customs duties on imports and exports;
Quantitative restrictions like quotas;
Exchange control;
Imposition of more local taxes etc.
Organization and Management
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The Firm and It’s Environment
Course Module
Efficient circular flow of the economy - Businesses are a very
important part of the circular flow of any market economy. They buy
resources from households in the resource market and sell to households
in the product market.
Controlling inflation – Businesses improve economic sustainability and
it can help to control inflation.
Economic growth - Businesses also allow the economy to work more
efficiently. When businesses compete with one another, they improve
their efficiency and help the economy grow. They also help the economy
grow through innovations.
Reduced Social welfare system – Businesses generate wealth for
employees and business owners. As consequence it will reduce social
welfare systems.
Increase standard of living/Quality of life – Businesses increase
employment and circulation of money in the society. When people have
higher income, they tend to have higher standard of living.
Decrease poverty rate - Businesses employ people, provide income to
the working population. They generates employment at all levels across
the country.
Economic Development
− Economic development refers to process of change in the overall
economic activity.
Three core values serve as standards of development.
1. Sustenance
Meet basic necessities such as food, clothing, and shelter,
Citizens have enough or more than enough for their basic necessities,
There is growth of income;
Extreme poverty is addressed;
There is equality among members of society.
2. Self-esteem
The quality of life is good when there is respect, trust, and self-value.
A person's worth as an individual cannot simply be measured by the
ownership of material things which is often given emphasis by
progressive capitalist countries such as the United States.
In the Philippines, material wealth is not the only important thing but
the love for one's family, the family's reputation, and a person's
dignity and self-esteem. A country is developed if this unique need of
the people is addressed.
3. Freedom from Servitude
This freedom is drawn from liberation from oppressive systems in
society, poverty and abuse, slavery, ignorance, and the absence of the
freedom to choose one's culture or religion. This freedom can be seen
in the range of choices in a society.
Organization and Management
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The Firm and It’s Environment
High mass
consumption
Drive to maturity
Take-off
Pre-conditions
for take-off
Traditional
society
Advantages:
easy to organize
unlimited liability
Organization and Management
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The Firm and It’s Environment
huge resources
better management
better distribution of profits
Disadvantages:
Unlimited liability of the partners
Partners are solidarity liable
It lacks stability
Conflict arise
Classification of Partnership
General partner - one whose liability extends to his separate
property
Limited partner - one whose liability is limited to his capital
contribution
Managing partner - one who manages the affairs of the
partnership.
Industrial partner - one who contributes service only.
3. Corporation
− is an artificial being created by operation of law, having the right of
succession and the powers, attributes and properties expressly
authorized by law or incident to its existence A business’s organizational
structure influences issues, legal issues, financial concerns, and personal
concerns.
Advantages of a corporation
Generally inexpensive to register.
All members must be active in the co-operative.
Members have an equal vote at general meetings regardless of
their level of investment or involvement.
Other than directors, members can be aged under 18 years. These
members cannot stand for office and don’t have voting rights
Disadvantages of a corporation
As co-operatives are formed to provide a service to members
rather than a return on investment, it may be difficult to attract
potential members seeking a financial return.
There is usually limited distribution of profits to members and
some co-operatives may prohibit the distribution of any surplus.
Members providing greater involvement or investment than
others will still only get one vote.
Requires ongoing education programs for members.
Course Module
References
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and
Entrepreneurial Perspective“
Organization and Management
1
Planning 1
Planning 1
In this lesson we will discuss about Planning and Decision Making. The focus
of our discussion is understanding what managerial planning is, we also
identify and analyze the various types of plans and show how they relate to
each other. The discussion will move to the logical steps in planning and see
how these steps are essentially a rational approach to setting objectives and
selecting the means of reaching them. Continuation of the Planning topics
will be discussed in the next session Planning and Decision Making Part 2.
Topic Outline:
Definition and Nature of Planning
Types of Plans
Planning at different levels in the firm
Definition
Planning
− involves selecting missions and objectives as well as the actions to
achieve them, which requires decision making that is, choosing a course
of action from among alternatives.
Planning is choosing a goal and developing a method of strategy to
achieve that goal.
Planning bridges the gap from where we are to where we want to go.
Planning helps management pull the individual to achieve common
goals by provision of well-defined objectives.
Planning is first and foremost function of management.
Benefits of Planning
Provide Direction: What the organization want to accomplish and how to
reach the establish/sited goals. By planning a clear direction comes that to be
follow, in order to reach and achieve goal.
Reduce Uncertainty: Planning reduce uncertainty by look ahead to
anticipate changes.
• Manager can estimate their consider impact of changes and then they can
develop response to these changes.
Minimizes waste and redundancy: When work activities are coordinated
around established plans redundancy can be minimized.
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Provide ability in controlling: Planning helps in controlling and monitoring
the work that either this works is on its right path or not.
Types of Plans
A. Mission or Purpose
The basic purpose or function or tasks of an enterprise or agency or any
part of it.
In every social system, enterprises have a basic function or task
assigned to them by society.
Synergy means that the whole is greater than its parts.
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2. Establishing objectives
The second step in planning is to establish objectives for the entire
enterprise and then for each subordinate work unit.
Determine where we want to be and what we want to accomplish and
when
3. Developing Premises
By considering planning premises: In what environment (internal or
external) –will our plan operate?
Premises: Assumptions about the environment in which the plan is to be
carried out.
Principle of Planning premises: the more thoroughly individuals charged
with planning understand and agree to utilize consistent planning premises,
the more coordinated enterprise planning will be.
Planning Premises
External Variables:
- the rate of growth of the economy and/or the industry
- the rate of inflation and its expected impact costs and prices
- the continuance or discontinuance of certain government policies which have a
favorable or unfavorable impact on the operations of the firm (i.e., high interest
rates).
- the expected market strategies of key competitors.
Internal Variables
- the level of internally generated funds to support investments
- the level of labor productivity in the company's factories.
- the company's total staffing level.
- the continuance of certain operating policies (i.e., rate if dividend, choice of
production technology, supply source, etc.)
less profitable but may involve less risk; still another may better suit the
company’s long-range objectives.
6. Selecting a course
This is the point at which the plan is adopted - the real point of decision
making. An analysis and evaluation of alternative courses will disclose that
two or more are advisable, and the manager may decide to follow several
courses rather than the one best course.
7. Formulating derivative plans
When a decision is made, planning is seldom complete, and a seventh step is
indicated. Derivative plans are almost invariably required to support the
basic plan.
8. Quantifying plans by budgeting
After decision are made and plans are set, the final step in giving them
meaning , as was indicated in the discussion on types of plans, is to quantify
them by converting them into budgets. The overall budget of an enterprise
represents the sum total of income and expenses, with resultant profit or
surplus, and the budgets of major balance sheet items such as cash and
capital expenditures. Each department or program of a business or some
other enterprise can have its own budgets, usually of expenses and capital
expenditures, which tie into the overall budget.
Course Module
Front Level
Middle Lower Level Management
Top management
Management Management
Figure 4.2
Planning activity and the responsibility for planning at different levels in the firm.
The scope or coverage of the plans, i.e., whether it covers to the whole firm, a
department or other subunit, or just one individual, generally depends on the level
in the organization at which the planning occurs. At the top management levels, plan
generally covers the whole firm. At the middle or sub-unit levels, the plans may
cover only particular sections or departments.
Corporate Planning
Corporate Planning denotes planning activities at the top level and cover
the entire organizational activities.
Determine the long-term objectives.
Generate plans to achieve the objectives bearing in mind the probable
changes in environment.
Corporate planning includes:
The setting of objectives
Organizing the work, people, and systems to enable those objectives
to be attained.
Motivating through the planning process of the plan and developing
Functional Planning
Functional planning is segmental and it is undertaken for each major
function of the organization like:
Production/operation,
Marketing, finance,
Human resource/personnel etc.
At the second level, functional planning is undertaking for sub-functions
within each major function.
Strategic Planning
Deciding on objectives of the organization,
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Planning 1
Operational Planning
Deciding the most effective use of the resources already allocated
To develop a control mechanism to assure effective implementation of the
actions.
Long-term Planning
Long-term plans usually cover all the functional areas of the business and are
affected within the existing and long-term framework of economic, social,
and technological factors.
Analysis of environmental factors, particularly with respect to how the
organization relates to its competition and environment.
Short-term Planning
These plan are aimed at sustaining organization in its production and
distribution of current products or services to the existing markets.
Proactive and reactive Planning
Proactive planning involves designing suitable courses of action in hope of
likely changes in the relevant environment.
Reactive planning are organizations responses come after the environmental
changes have taken place.
Formal and Informal Planning
Formal planning is the form of well-structured process involving different
steps.
Informal planning process is based on managers memory of events,
perception, and got feeling rather than based on systematic evaluation of
environmental happenings.
References
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and
Entrepreneurial Perspective, 13th Ed."
Course Module
Organization and Management
1
Planning and Decision Making 2
Strategic Management
Strategic Management
− is the process through which managers formulate and implement
strategies geared to optimizing goal achievement, given available
environmental and internal conditions.
− set of managerial decisions and actions that determines the long-run
performance of an organization. It entails all of the basic management
function-planning, organizing, leading, and controlling.
Purpose of Strategic management
exploit and create new and different opportunities for tomorrow;
long-range planning, in contrast, tries to optimize for tomorrow the
trends of today.
Strategic Management is important to organizations because it
1. helps organizations identify and develop a competitive advantage, a
significant edge over the competition in dealing with competitive
forces.
2. Provides a sense of direction so that organization members know
where to expend their efforts.
Strategy
The determination of the mission or purpose and the basic long-term
objectives of an enterprise, followed by the adoption of courses of action and
allocation of resources necessary to achieve these aims.
Course Module
Strategic Planning Process
Stages in planning process:
1. Strategy Formulation
2. Strategy implementation
3. Strategy evaluation
Strategy Formulation includes:
developing a vision and mission,
identifying an organization's external opportunities and threats,
determining internal strengths and weaknesses,
establishing long-term objectives,
generating alternative strengths,
choosing particular strategies to pursue.
Strategy Implementation requires the firm to establish annual objectives,
devise policies, motivate employees, and allocate resources so that
formulated strategies can be executed. These are:
developing a strategy-supportive culture,
creating an effective organizational structure
redirecting marketing efforts,
preparing budgets,
developing and utilizing information systems,
linking employee compensation to organizational performance.
Strategy Evaluation is the final stage in strategic planning. Managers need
to know when particular strategies are not working well, strategy evaluation
is the primary means for obtaining this information.
Three fundamental strategy evaluation activities are constantly changing:
1. reviewing external and internal factors that the bases for current
strategies,
2. measuring performance;
3. taking corrective actions.
Strategy evaluation is needed because success today is no guarantee of
success tomorrow.
Strategic planning is a process undertaken by an organization to develop a
plan for achievement of its overall long-term organizational goal.
Organization and Management
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Planning and Decision Making 2
Environmental Scanning
Strategy Formulation
Strategy Implementation
Course Module
The implementation of the strategy must be monitored and adjustments
made as needed. Evaluation and Control consists of the following steps:
Evaluation and control consists of the following steps:
1. Define parameters to be measured
2. Define target values for those parameters
3. Perform measurements
4. Compare measured results to the pre-defined standard
5. Make necessary changes.
Major Planning Tools and Techniques
The planning tools and techniques that managers use are identified and
described below:
A. FORECASTING: is the process of developing assumptions about the future
that relevant to the predicted level of certain planning variables (i.e.,
company future sales).
Qualitative forecasting uses expert opinions.
Quantitative forecasting uses mathematical and statistical analysis.
All forecast rely on judgment.
Planning involves deciding on how to deal with the implications of
a forecast.
B. CONTINGENCY PLANNING: involves identifying alternative courses of
action that can be implemented, if and when an original plan proves
inadequate because of changing circumstances.
Contingency plans anticipate changing conditions.
Contingency plans contains trigger points.
C. SCENARIO PLANNING: is a long-term version of contingency planning
that involves identifying several alternative future scenarios or states of
affairs that may occur, and then making plans to deal with each scenario
should it actually occur.
Plans made for each future scenario. Increases organization’s
flexibility and preparation for future shocks.
D. BENCHMARKING: is a technique that makes use of internal and external
comparisons to better evaluate current performance and identify possible
actions to improve the future. Adopting best practices of other
organizations that achieve superior performance.
E. BRAK-EVEN ANALYSIS: this is one of the most widely used planning tools
in business. The technique can be used for analyzing the effect on profits
of different pricing strategies or different alternatives in incurring costs.
F. LINEAR PROGRAMMING: is a quantitative tools for determining the
optimal combination of resources and activities. it can be used for
production scheduling, allocation of marketing personnel to territories or
allocation of production inputs to produce an item at minimum cost.
G. SIMULATION MODEL: are mathematical representations of some aspect
of a business operation. Simulation models are used when the planning
variables, as well as their interrelationships, are so numerous and
complex that it is difficult to analytically assess the net effect of a change
in one or a number of the variables involved.
Simulation is useful in complex situations such as predicting product
demand considering the effect of changes in the pricing policies of
Organization and Management
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Planning and Decision Making 2
Strengths of MBO
1. Aids coordination of goals and plans
2. Helps clarify priorities and expectations
3. Facilitates vertical and horizontal communications
4. Fosters employee motivation
Weaknesses of MBO
1. Tends to falter without strong continual commitment from top
management.
2. Necessities considerable training of managers
3. Can be misused as a punitive device.
4. May cause overemphasis of quantitative goals.
Course Module
MBO Process
1. Superior communicate to subordinate the higher organizational goals
and the expected subordinate accomplishments;
2. Superiors discuss with subordinate
3. Subordinates goals and both parties should agree on a set of
objectives.
4. Resources required to attain goals
5. Periodic reviews should be conducted to monitor performance and to
discuss reasons for deviations of actual performance from targets.
6. Manager or superior discusses evaluation of subordinate the reward
given or punishment.
Decision making
The selection of a course of action from among alternatives.
• Decision making is the core of planning. A plan cannot be said to exist
unless a decision-a commitment of resources, direction, or reputation-
has been made.
• In decision making process managers respond to opportunities and
threats by analyzing options, and making decisions about goals and
courses of action.
Decisions in response to opportunities:
Managers respond to ways to improve organizational performance.
Decisions in response to threats:
Occurs when managers are impacted by adverse events to the organization.
Implement
Choose among Learn from
chosen
alternatives feedback
alternative
Evaluating Alternatives
Legal?
Ethical?
Economical?
Practical?
Figure 5.3
Cognitive Biases
− Suggest decision makers use heuristics to deal with bounded
rationality.
A heuristic is a rule o thumb to deal with complex situations.
If the heuristic is wrong, however, then poor decisions result from its
use
Organization and Management
9
Planning and Decision Making 2
Escalating
Prior hypothesis
commitment
Cognitive
biases
Figure 5.4
Prior hypothesis bias: manager allows strong prior beliefs about
a relationship between variables and makes decisions based on
these beliefs even when evidence shows they are wrong.
Representativeness: decision maker incorrectly generalizes a
decision from a small sample or one incident.
Illusion of control: manager over-estimates their ability to
control events.
Escalating commitment: manager has already committed
considerable resource to project and then commits more even
after indicates problems.
Course Module
Three Approaches for Selecting and Alternative
When selecting from among alternatives, managers can use three basic
approaches:
1. Experience
Reliance on past experience probably plays a larger part than it deserves in
decision making. Experienced managers usually believe, often without
realizing it, that the things they have successfully accomplished and the
mistakes they have made serve as almost infallible guides to the future. This
attitude is likely to be more pronounced the more experience a manager has
had and the higher he or she has risen in an organization.
Relying on past experience as a guide for future action can be dangerous. In
the first place, most people do not recognize the underlying reasons for their
mistakes or failures. In the second place, the lessons of experience may be
entirely inapplicable to new problems. Good decisions must be evaluated
against future events, while experience belongs to the past.
On the other hand, if a person carefully analyzes experience, rather than
blindly following it, and if he or she distills from experience the fundamental
reasons for success or failure, then experience can be useful as a basis for
decision analysis. A successful program, a well-managed company, a
profitable product promotion, or any other decision that turns out well may
furnish useful data for such distillation. Just as scientists do not hesitate to
build upon the research of others and would be foolish indeed merely to
duplicate it, managers can learn much from others.
2. Experimentation
An obvious way to decide among alternatives is to try one of them and see
what happens. Experimentation is often used in scientific inquiry. People
often argue that it should be employed more often in managing and that the
only way a manager can make sure some plans are right— especially in view
of the intangible factors—is to try the various alternatives and see which is
best.
The experimental technique is likely to be the most expensive of all
techniques, especially if a program requires heavy expenditures of
capital
and personnel and if the firm cannot afford to vigorously attempt
several alternatives. Besides, after an experiment has been tried, there may
still be doubt about what it proved, since the future may not duplicate
the present. This technique, therefore, should be used only after
considering other alternatives.
On the other hand, there are many decisions that cannot be made until
the best course of action can be ascertained by experiment. Even
reflections on experience or the most careful research may not assure
managers of correct decisions. This is nowhere better illustrated than in the
planning of a new airplane.
An airplane manufacturer may draw from personal experience and that
of other plane manufacturers and new plane users. Engineers and
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Planning and Decision Making 2
(2) intuition,
The second phase, intuition, connects the unconscious with the conscious.
This stage may involve a combination of factors that may seem
contradictory at first. Intuition needs time to work. It requires that people
find new combinations and integrate diverse concepts and ideas. Thus,
one must think through the problem. Intuitive thinking is promoted by
several techniques, such as brainstorming.
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• Members cannot absorb all information being presented during the
session and can forget their own alternatives.
Nominal group technique: provides a more structured way to generate
alternatives in writing.
• Avoids the production blocking problem.
• Similar to brainstorming except that each member is given time to first
write down all alternatives he or she would suggest.
• Alternatives are then read aloud without discussion until all have been
listed.
• Then discussion occurs and alternatives are ranked.
Delphi technique: provides for a written format without having all
managers meet face-to-face.
• Problem is distributed in written form to managers who then generate
written alternatives.
• Responses are received and summarized by top managers.
• These results are sent back to participants for feedback, and ranking.
• The process continues until consensus is reached.
Delphi technique allow distant managers to participate.
References:
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and Entrepreneurial
Perspective, 13th Ed."
John Schermerhorn's. Management 11th edition, (2010), John Wiley & Sons ISBN:
Organization and Management
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Organizing 1
Organizing 1
Nature of Organizing
What is organizing?
Organizing has been defined as the process of identifying activities needed to
accomplish a goal, subdividing and grouping these activities into meaningful
units, and assigning authority and responsibility to people for their
accomplishment.
Organizing is necessary and important function of Management.
Nature of Organizing
There are two essential Concepts regarding with Organizing:
A. Organization as a Process: The concept of organizing can be considered
as a process, because a large number of events or activities are done
under the process of organizing with-a-view to accomplish the preset
goals in an appropriate way. In fact, organizing involves division of works,
determination of activities, grouping of activities, delegation of authority
and the establishment of proper co-ordination and balance among
various departments of individuals towards the attainment of
predetermined goals. On the whole it is clear that the objectives of
business firm cannot be obtained by doing single activity, so organizing is
set to be a process.
B. Organization as a Structure of Relationship: Organization refers to a
structure of relationship due to involvement of a large number of groups.
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In fact, under the process of organizing the relationship of departments to
departments, groups to groups and individuals to individuals are
analyzed carefully through the process of communication system with a
view to establish proper unity and co-ordination among them. So that
everyone can take initiative for the welfare of enterprise. Thus it is clear
that Organization can be considered as a structure of relationship.
Importance of Organizing
Facilitates Administration: Achievement of the objectives of an
enterprise by providing a framework of coordination and control. It
provides a system of authority and network for effective
communication. Individual goals can be coordinated towards group
goals. A properly balanced organization facilitated both management
and operation of the enterprise.
Encourages Growth & Diversification: It has enabled organizations
to grow and expand to giant sizes. Systematic division of work and
consistent delegation of authority facilitate taking up of new activities
and meeting new demands. It provides flexibility for growth without
losing control over various activities.
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Organizing 1
What is Organization?
An organization is a collection of people who work together and coordinate
their actions to achieve a wide variety of goals.
Organization is a formalized intentional structure of role or positions.
Organization Structure
An organizational structure represents a series of activities such as task
allocation, coordination and supervision which helps to achieve
organization’s goals.
A design of organization movement or blueprint
An organization structure should be designed to clarify who is to do what
tasks and who is responsible for what results in order to remove obstacles to
performance caused by confusion and uncertainty of assignment and to
furnish decision-making and communication networks reflecting and
supporting enterprise objectives.
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Organizational Chart
President
(Name)
VP- VP-
Marketing Production
Figure 6.1
Organizational Chart is a diagrammatic representation of organization
structure show names designation functions of personnel in the organization.
Manager
Common of control 7
• The number of people who report to one manager in a hierarchy.
• The more people under the control of one manager – the wider the span
of control.
• Less means narrower span of control.
Figure 6.3
Advantages:
• Close supervision
• Close control
• Fast communication between subordinates and superiors
Disadvantages:
• Superiors tend to get too involved in subordinates’ work
• Many levels of management
• High costs due to many levels
• Excessive distance between lowest level and top level
Flat Organization with wide spans
Advantages:
• Superiors are forced to delegate
• Clear policies must be made
• Subordinates must be carefully selected
Disadvantages:
• Tendency of overloaded superiors to become decision bottlenecks
• Danger of superior’s loss of control
• Requires exceptional quality of managers
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Some of the work is repetitive in nature and does not require special talent to
perform .In such a case the supervisor can control a large number of
subordinates
Capacity of superiors
The personnel capacity of superiors can influence the span of control.
If the superiors has more skill to control the subordinates, the span of
management may be increased and vice – versa.
Delegation of authority
If superiors delegates the authority he has to take fewer decisions, therefore
span of management can be increased.
On the other hand, if superior does not delegate the authority he has to take
more decisions, therefore span of management should be reduced.
Fixation of responsibility
In case the responsibility of the subordinate is clearly defined he need not to
contact the supervisor again and again for getting guidance and instruction.
Then supervise can supervise large number of subordinates and vice versa.
Trust of subordinates
If the superior has good faith, trust and confidence in his subordinates then
the span of control can be wider.
If the superior has no faith, trust and confidence in his subordinates then the
span of control can be narrower.
Capacity of subordinates
If the subordinates have enough talent to perform the work assigned to them,
the manager or the supervisor can control more number of subordinates and
vice versa.
Techniques of communication
If face-to-face communication is used, then the span of control will be
narrow. However, if electronic devices are used for communication then the
span of control will be wide.
Figure 6.4
All managers must bear that there are two organizations they must deal
with-one formal and the other informal.
The formal organization in usually delineated by an organizational chart and
job descriptions. The official reporting relationships are clearly known to
every manager.
Alongside the formal organization exists are informal organization which is a
set of evolving relationships and patterns of human interaction within an
organization that are not officially prescribed.
Functional structure
Figure 6.5
Structure is created based on the various functions of an organization.
Functional Structure
Consists of a chief executive officer and limited corporate staff, with
functional line managers in dominant organizational areas such as
production, accounting, marketing, R&D, engineering, and human resources .
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• The functional structure groups positions into work units based on
similar activities, skills, expertise, and resources.
• The concept of Functional organization was suggested by F.W. Taylor
who recommended the appointment of specialists at important positions.
Advantages of Functional Organization Structure
1. Specialization: Better division of labor takes place which results in
specialization of function and its consequent benefit.
2. Effective control: Management controls is simplified as the mental
functions are separate from manual functions. Checks and balances keep
the authority within certain limits.
3. Efficiency: Greater efficiency is achieved because of every function
performing a limited number of functions.
4. Economy: Specialization complied with standardization facilitates
maximum production and economical costs.
5. Expansion: Expert knowledge of functional manager facilitates better
control and supervision.
Disadvantages of Functional Organizational Structure
1. Confusion: The functional system is quite complicated to put into
operation, especially when it is carried out at low levels. Therefore,
coordination becomes difficult.
2. Lack of Co-ordination: Disciplinary control becomes weak as a worker is
commanded not by one person but a large number of people. Thus, there
is no unity of command.
3. Difficulty in fixing responsibility: because of multiple authority, it is
difficult to fix responsibility.
4. Conflicts: There may be conflicts among the supervisory staff of equal
ranks. They may not agree on certain issues.
5. Costly: Maintenance of specialist's staff of the highest order is expensive
for a concern
Divisional Structure
The divisional structure is a type of organizational structure that groups
each organizational function into a division. These divisions can correspond
to either products or geographies.
Managers in large companies may have difficulty keeping track of all their
company’s products and services, specialized departments may develop.
These departments are divided according to their organizational outputs.
President
Admin &
Product A Product B Product C Product D
Finance
Figure 6.6
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Disadvantages of Divisional Organizational Structure
there must still be a corporate organization, which adds more
overhead cost to the business.
The company as a whole may not be able to take advantage of
economies of scale, unless purchases are integrated across the entire
organization.
When there are a number of functional areas spread among many
divisions, no one functional area will be as efficient as would have
been the case if there had instead been one central organization for
each function.
Each division will tend to have its own strategic direction, which may
differ from the strategic direction of the company as a whole.
Matrix Structure
A matrix organizational structure is a company structure in which the
reporting relationships are set up as a grid, or matrix, rather than in the
traditional hierarchy. In other words, employees have dual reporting
relationships - generally to both a functional manager and a product
manager.
Guidelines for Making Matrix Management Effective
1. Define the objectives of the project or task
2. Clarify the roles, authority, and responsibilities of managers and team
members.
3. ensure that influence is based on knowledge ad information, rather than
on rank.
4. Balance the power of functional and project managers.
5. Select an experienced manager for the project who can provide
leadership.
6. undertake organization and team development.
7. Install appropriate cost, time, and quality controls that report deviations
from standards in a timely manner.
8. Reward project managers and team members fairly.
Advantages
Oriented toward end results
Professional identification is maintained
Pinpoints product-profit responsibility
Disadvantages
conflict in organization authority exists
Possibility of disunity of command
Requires manager effective in human relations
Specialization of Labor
− Focusing an individual’s efforts on a particular product or a single task.
− Devotion of resources to a specific task.
The shape of a company is often closely related to the number and
distribution of specialist roles.
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Organizing 1
People who have studied the same subject like to work with one another, as
not only can they discuss common problems but they also can learn from one
another as they professionally develop. Whilst not always necessary, it can
also be helpful if your manager understands you and your work.
In consequence, when companies split into departments, these are often
driven by specialization, and firms which have more specializations will have
more divisions (and possibly sub-divisions too).
Advantages of Specialization:
1. Increased Productivity:
Better use of scarce resources resulting in a decrease in costs
Specialized machinery or more proficient staff
2. Increased Efficiency:
Specialist workers become quicker at producing goods
Production becomes cheaper per good because of this
3. Standardization:
Product specifications are constantly met
4. Higher Profit Margins:
Customers may pay more for more specialized goods or services (for
example: laser eye surgeon; interior designers)
Disadvantages of Specialization:
1. Boredom:
Repetitive tasks can have a negative effect on employee motivation.
2. Inflexibility:
Over-specialization may deny workers the opportunity of taking on
different roles and responsibilities.
3. A Lack of Autonomy:
Results in interdependence in the production process; a breakdown
may grind the gears of business to a halt .
4. Capital Costs:
Purchasing specialized equipment may be too costly and drain the
businesses finances.
References
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and
Entrepreneurial Perspective, 13th Ed."
www.wikipedia.com
www.msg.com
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Organization and Management
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Organizing 2
Organizing 2
There are several theories which explain the organization and its structure.
(Figure 7.1)
Classical
Organization Neoclassical Modern Theory
Theory
Scientific Contingency or
Management Hawthorne Situational
Approach Studies Approach
Weber’s
bureaucratic Socio-technical
approach Approach
Administrative Systems
approach Approach
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Classical organization theory
Classical Approach
Frederick Taylor
The Gilbreths Max Weber Henry Fayol
Henry Gantt
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to achieve organizational goals. Staff personnel include those whose basic
function is to support and help line personnel.
Committees are part of the organization. Members from the same or
different hierarchical levels from different departments can form
committees around a common goal. They can be given different functions,
such as managerial, decision making, recommending or policy
formulation. Committees can take diverse forms, such as boards,
commissions, task groups or ad hoc committees. Committees can be
further divided according to their functions. In agricultural research
organizations, committees are formed for research, staff evaluation or
even allocation of land for experiments.
Functions of management: Fayol (1949) considered management as a
set of planning, organizing, training, commanding and coordinating
functions. Gulick and Urwick (1937) also considered organization in
terms of management functions such as planning, organizing, staffing,
directing, coordinating, reporting and budgeting.
Neoclassical theory
• Neoclassical theorists recognized the importance of individual or group
behavior and emphasized human relations.
• Based on the Hawthorne experiments, the neoclassical approach
emphasized social or human relationships among the operators,
researchers and supervisors (Roethlisberger and Dickson, 1943). It was
argued that these considerations were more consequential in
determining productivity than mere changes in working conditions.
Productivity increases were achieved as a result of high morale, which
was influenced by the amount of individual, personal and intimate
attention workers received.
Principles of the neoclassical approach
The classical approach stressed the formal organization. It was mechanistic
and ignored major aspects of human nature. In contrast, the neoclassical
approach introduced an informal organization structure and emphasized the
following principles:
• The individual: An individual is not a mechanical tool but a distinct social
being, with aspirations beyond mere fulfillment of a few economic and
security works. Individuals differ from each other in pursuing these
desires. Thus, an individual should be recognized as interacting with
social and economic factors.
• The work group: The neoclassical approach highlighted the social facets
of work groups or informal organizations that operate within a formal
organization. The concept of 'group' and its synergistic benefits were
considered important.
• Participative management: Participative management or decision
making permits workers to participate in the decision making process.
This was a new form of management to ensure increases in productivity.
Note the difference between Taylor's 'scientific management' - which focuses on
work - and the neoclassical approach - which focuses on workers.
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Organizing 2
Modern theories
Component
The individual
The formal and informal organization
Patterns of Behavior
Role Perception
The Physical Environment
Linking Processes
Communication
Balance
Decision Analysis
Goals of Organization
Growth
Stability
Interaction
Modern theories tend to be based on the concept that the organization is a
system which has to adapt to changes in its environment. In modern theory,
an organization is defined as a designed and structured process in which
individuals interact for objectives (Hicks and Gullet, 1975).
Some of the notable characteristics of the modern approaches to the
organization are:
a systems viewpoint,
a dynamic process of interaction,
multileveled and multidimensional,
multi-motivated,
probabilistic,
multidisciplinary,
descriptive,
multivariable, and
adaptive.
The systems approach
The systems approach views organization as a system composed of
interconnected - and thus mutually dependent - sub-systems. These sub-
systems can have their own sub-sub-systems. A system can be perceived as
composed of some components, functions and processes (Albrecht, 1983).
Thus, the organization consists of the following three basic elements (Bakke,
1959):
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1. Components: There are five basic, interdependent parts of the organizing
system, namely:
the individual,
the formal and informal organization,
patterns of behavior emerging from role demands of the
organization,
role comprehension of the individual, and
the physical environment in which individuals work.
2. Linking processes: The different components of an organization are
required to operate in an organized and correlated manner. The
interaction between them is contingent upon the linking processes, which
consist of communication, balance and decision making.
Communication is a means for eliciting action, exerting control and
effecting coordination to link decision centers in the system in a
composite form. · Balance is the equilibrium between different parts
of the system so that they keep a harmoniously structured
relationship with one another.
Decision analysis is also considered to be a linking process in the
systems approach. Decisions may be to produce or participate in the
system. Decision to produce depends upon the attitude of the
individual and the demands of the organization. Decision to
participate refers to the individual's decisions to engross themselves
in the organization process. That depends on what they get and what
they are expected to do in participative decision making.
3. Goals of organization: The goals of an organization may be growth,
stability and interaction. Interaction implies how best the members of an
organization can interact with one another to their mutual advantage.
Socio-technical approach
The socio-technical systems approach is based on the premise that every
organization consists of the people, the technical system and the
environment (Pasmore, 1988). People (the social system) use to ols,
techniques and knowledge (the technical system) to produce goods or
services valued by consumers or users (who are part of the organization's
external environment). Therefore, an equilibrium among the social system,
the technical system and the environment is necessary to make the
organization more effective.
The contingency or situational approach
The situational approach (Selznick, 1949; Burns and Stalker, 1961;
Woodward, 1965; Lawrence and Lorsch, 1967) is based on the belief that
there cannot be universal guidelines which are suitable for all situations.
Organizational systems are inter-related with the environment. The
contingency approach (Hellriegel and Slocum, 1973) suggests that different
environments require different organizational relationships for optimum
effectiveness, taking into consideration various social, legal, political,
technical and economic factors.
Delegation
"Delegation is the dynamics of management, it is the process a manager
follows in dividing the work assigned to him so that he performs that part
Organization and Management
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Organizing 2
which only he, because of his unique organizational placement, can perform
effectively, and so that he can get others to help him with what remains,
Louis A.Allen "
A manager alone cannot perform all the tasks assigned to him. In order to
meet the targets, the manager should delegate authority.
Delegation is about entrusting someone else to do parts of your job
Elements or Delegation
1. Authority
2. Responsibility
3. Accountability
Authority
In context of a business organization, authority can be defined as the
power and right of a person to use and allocate the resources
efficiently, to take decisions and to give orders so as to achieve the
organizational objectives.
Authority must be well- defined. All people who have the authority
should know what is the scope of their authority is and they shouldn’t
misutilize it. Authority is the right to give commands, orders and get
the things done. The top level management has greatest authority.
Concept of Authority
Authority in the organization is the power in a position( and through it,
the person occupying the position) to exercise discretion in making
decisions affecting others.
Responsibility
• is the obligation or expectation to perform and carry out duties and
achieve goals related to a position.
• A person who is given the responsibility should ensure that he
accomplishes the tasks assigned to him. If the tasks for which he was
held responsible are not completed, then he should not give
explanations or excuses. Responsibility without adequate author ity
leads to discontent and dissatisfaction among the person.
Responsibility flows from bottom to top. The middle level and lower
level management holds more responsibility. The person held
responsible for a job is answerable for it. If he performs the tasks
assigned as expected, he is bound for praises. While if he doesn’t
accomplish tasks assigned as expected, then also he is answerable for
that.
Accountability
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Is the requirement of being able to answer for significant deviations
from duties or expected results.
The fact that managers remain accountable for delegated work may
cause them to resist delegation.
Delegation of Authority
Allowing someone to act on your behalf to perform tasks (consume
resources) that are available to you.
Delegator should be empowered to delegate to anyone he needs to,
subject to certain organization controls.
Delegation of authority is one vital organizational process. It is
inevitable along with the expansion and growth of a business
enterprise.
Delegation means assigning of certain responsibilities along with the
necessary authority by a superior to his subordinate managers.
Delegation does not mean surrender of authority by the higher level
manager. It only means transfer of certain responsibilities to
subordinates and giving them the necessary authority, which is
necessary to discharge the responsibility properly.
Authority moves downward, while accountability move upward
within the organization.
Nature of Delegation
• Two-sided relationship
• Act of trust
• Dependency relationship
• A challenging task- on senior’s side mostly
• Forward thinking principle- opens a new chapter for senior subordinate
relationship
Steps in Delegation
1. Assignment of Duties -Clarity of duty as well as result expected has to be
the first step in delegation.
2. Granting of authority - superior divides and shares his authority with
the subordinate.
3. Creation of an obligation- accountability is the liability for the proper
discharge of duties by the subordinates.
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Organizing 2
Authority Responsibility
Centralization
is the systematic and consistent reservation of authority at central points
in the organization.
The important and key decisions are taken by the top management and
the other levels are into implementation .
Advantages of centralization
1. It is easier to coordinate the activities of various units and individuals.
2. Top managers have more experience and may therefore make better
decisions.
3. Top managers have a broader perspective on decisions situations.
4. Duplication of effort by various organization units can be avoided.
5. Strong leadership is promoted.
Decentralization
Is a systematic effort to delegate to the lowest level authority except that
which can be controlled exercised at central points.
Advantages of Decentralization
1. Less burden on the Chief Executive as in the case of centralization.
2. The subordinate get a change to decide and act independently which
develop skills and capabilities. This way the organization is able to
process reserve of talents in it.
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3. Diversification and horizontal can be easily implanted.
4. Concern diversification of activities can place effectively since there is
more scope for creating new departments. Therefore, diversification
growth is of a degree.
5. In decentralization structure, operations can be coordinated at
divisional level which is not possible in the centralization set up.
6. There is greater motivation and morale of the employees since they
get more independence to act and decide.
7. Co-ordination to some extent is difficult to maintain as there are lot
many department divisions and authority is delegated to maximum
possible extent.
Delegation and Decentralization
Principle of Delegation
There are few guidelines in form of principles which can be a help to the
manager to process the delegation.
1. Principle of result expected – Manager should be able clearly define the goals
as well as results expected from them. The goals and targets should be
completely and clearly defined and standards of performance should also be
notified clearly.
2. Principle of Parity of Authority and Responsibility – Manager should keep a
balance between authority and responsibility. Both of them should go hand
and hand.
3. Principle of absolute responsibility – Manager is always responsible to his
superior for carrying out his task by delegating the powers. It does not means
that he can from his responsibility. He will always remain responsible till the
completion of task. Every superior is responsible for the acts of their
subordinates and are accountable to their superior therefore the superiors
cannot pass the blame to the subordinates even if he has delegated certain
powers to subordinates example if the production manager has been given a
work and the machine breaks down.
4. This principle that a manager should exercise his authority within the
jurisdiction/framework given. The manager should be forced to consult their
superiors with those matters of which the authority is not given that means
before a manager takes any important decision, he should make sure that he
has the authority to do that on the other hand, subordinate should also not
frequently o with regards to their complaints as well suggestions to their
superior if they are not asked to do. This principle emphasizes on the degree
of authority and the level up to which it has to be maintained.
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A formal organization is the literal structure of the organization including
its organization chart, hierarchical reporting relationships and work
processes.
Informal Organization
It is a network of personal and social relations which aroused spontaneously
as people associate with one another.
A network of interpersonal relationships that arise when people associate
with each other.
It is the outcome of personal, social and friendly relationship and it
develops spontaneously.
It arises naturally on the basis of friendship or some common interest
which may or may not with work.
Characteristics of Informal Organization
Informal group is created by the member of the organization for their
social and psychological satisfaction.
Informal organizations are unstable in nature, it is not permanent.
Informal organizations(groups) are greater in number than the formal
organizations.
Free interaction.
Rules responsibilities are written and Just unwritten rules and regulations
clearly defined
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Organization and Management
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Staffing
Staffing (Part 1)
Topic Objectives
• Definition and nature of staffing
• Recruitment
• Selection
• Training and development
Staffing
Staffing is the process of acquiring, deploying, and retaining a workforce of
sufficient quantity and quality to create positive impacts on the organizations
effectiveness.
• The managerial function of staffing is defines as filling and keeping filled,
positions in the organization structure.
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Nature of Staffing
The following points describe the nature of the staffing function.
• Staffing is an important managerial function. Staffing function is normally
the sub function of the organizing function. All the five functions of the
management viz. planning, organizing, directing, coordinating, and
controlling depend upon the employees of the organization which are
made available through the staffing function.
• Staffing is a pervasive activity. It is carried out in every organization and
at all the levels of the management in the organization.
• Staffing is a continuous activity. This is due to the fact that the function of
staffing continues throughout the life of the organization.
• The basis of staffing function is the efficient management of
personnel. The process involved in the staffing function in the
organization is efficiently managed by a system or with well-tried
procedures.
• The function of staffing helps in placing right men at the right job. It can
be done effectively through proper recruitment procedures and then
finally selecting the most suitable candidate as per the job requirements.
• All the levels of management are involved in the function of staffing
though the personnel department coordinates it.
Main objectives of staffing:
• To understand all function of in an organization.
• To understand manpower planning so that people are available at right
time and at right place.
• To understand issues related to job analysis and to overcome the
problem.
Importance of staffing
The staffing function is a very important function of the management due to
the following reasons.
• Staffing helps in discovering and obtaining competent personnel for
various jobs.
• It helps in the optimum utilization of the human resources.
• It helps in developing professionals in every field of organizational
activity.
• It helps to improve the quantity and quality of the output by putting the
right person on the right job.
• It helps in developing competencies in the organization to face the
challenges.
• It helps to improve job satisfaction of the employees and hence their
morale.
Organization and Management
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Staffing
Placement and
Manpower Recruitment Selection
orientation
Appraisal Remuneration
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The process of the staffing function involves human resource planning i.e.
estimating the size and nature of the personnel required for the recruitment
and selection of the best candidates to train, to induct, to reward and to have
regular and effective communication with them. The process of staffing
consists of the following steps (Figure 8.1).
Manpower planning –It involves in creating and evaluating the
manpower inventory after considering the development of the required
talents among the existing employees through their promotion and
advancement.
Determining manpower needs from company plans and programs.
determining available manpower resources.
Analyzing, training needs of present employees.
Recruiting manpower from external sources for those positions
that cannot be filled up by present employees.
Planning training and development of manpower resources.
Recruitment – Recruitment is the process of attracting the appropriate
number of qualified individuals to apply for vacant positions in an
organization.
Selection – It is the screening step of staffing in which the solicited
applications of those candidates which are not found suitable as per the
requirements of the notified post are screened out. It is the process of
elimination of the candidates who appear unpromising for the post.
Placement and orientation –Once selection process is over, the selected
candidates are appointed. It means putting the appointed employee on
the job for which he is selected. Orientation is the introduction of the
appointed employee with the job. He is made familiar to the work units
and work environment through the orientation programs.
Training – is defined as an attempt to improve performance by the
attainment of specific skills such as computing, typing, encoding,
designing, driving, and so forth to do the current job. The goal of training
is to ensure that a number of job skills will be performed at prescribed
quality levels by trained employees.
Development – this is more general than training and refers to learning
opportunities designed to help employees grow. It provides employees
broader learning which may be utilized in a variety of settings and for
future jobs. As global competition increases, training programs for
management are becoming more educational in scope.
Promotion – it involves the assignment of an employee to a higher level
job. This also refers to the upward or vertical movement of employees in
a organization from lower level jobs to higher level jobs involving
increases in duties and responsibilities, higher pay and privileges.
Transfer –Employees of the organization who have been identified for
taking up of higher positions in the organization are being transferred to
different departments so that they can learn intricacies of the functioning
of different departments. This helps them when they take up positions in
the higher management.
Organization and Management
5
Staffing
Selection process
The Employee selection Process takes place in following order:
Preliminary Interviews- It is used to eliminate those candidates who do not
meet the minimum eligibility criteria laid down by the organization. The
skills, academic and family background, competencies and interests of the
candidate are examined during preliminary interview.
Application blanks- The candidates who clear the preliminary interview are
required to fill application blank. It contains data record of the candidates
such as details about age, qualifications, reason for leaving previous job,
experience, etc.
Employment interviews - it provides the opportunity to review candidates'
qualifications and to determine their suitability for the position. It also
provides candidates with the chance to learn about the position and its
requirements and to present information on their skills and experience.
Written Tests- Various written tests conducted during selection procedure
are aptitude test, intelligence test, reasoning test, personality test, etc. These
tests are used to objectively assess the potential candidate. They should not
be biased.
Background testing - this is to verify the accuracy of factual information
previously provided by the applicant and to uncover damaging background
information such as criminal records, and suspended driver's licenses.
Medical examination- Medical tests are conducted to ensure physical
fitness of the potential employee. It will decrease chances of employee
absenteeism.
Organization and Management
7
Staffing
Course Module
Types of Training
Orientation training- It is a systematic and planned introduction and it’s
concerned with inducting or orienting a new employee to the organization
and it’s procedure, Rules and regulations.
– The main purpose is to give a ‘bird’s eye view ‘ of the organization where he
has to work .
– It’s very short informative training given immediately after recruitment
– It’s creates a feeling of involvement in the mind of newly appointed
employees.
– It reduce anxiety and employee turnover.
Apprenticeship training- is one of the traditional method of training and is
meant to give trainees sufficient knowledge and skill in technical jobs.
– This types of training is very common in skilled trades such as electricians,
plumbers, carpenters, etc.
Internship training
– Under this method, the vocational or educational institute enters into
arrangement with an industrial enterprise for providing practical knowledge
to it’s students.
On job training- is a training technique that involves allowing the person to
learn the job by actually performing it own the job.
Off-job training - Off the job types of training is imparted off the job outside
the work premises.
References
Rodriguez, R.A., Echanis, E.S., "Fundamentals of management"
Weihrich, H., Cannice, M.V., Koontz, H., "Management. A global and Entrepreneurial
Perspective, 13th Ed."
Corpuz, C.R. "Human Resource Management, 2006 Revised Ed."
www. managementstudyguide.com
Organization and Management
1
Staffing Part II
Staffing Part II
This lesson is continuation of our previous discussion about Staffing. We will
discuss the concepts of wages and salary administration. Base wages and
salaries are defined as the hourly, weekly and monthly pay that employees
receive for their work in an organization.
In a capitalistic system, employees are supposed to be compensated fairly for
services that they render to the firm. Total compensation earned by
employees may consist of wages, salaries, fringe benefits and a form of profit-
sharing. Compensation levels of companies may differ even if they are in the
same type of business.
then our discussion will move to performance evaluation and appraisal,
employee relation, employee movements and reward.
Topic Outline:
1. Concepts of wages and salary administration
2. Performance evaluation and appraisal
3. Employee relations
4. Employee movements (promotion and transfer)
5. Rewards systems
Compensation
Compensation is the set of rewards that organizations provide to
individuals in return for their willingness to perform various jobs and tasks
within the organization.
• The person receiving a salary is not paid a smaller amount for working
fewer hours, nor is he paid more for working overtime. Someone who is
paid wages receives a pay rate per hour, multiplied by the number of
hours worked. This person is considered to be a "non-exempt" employee.
Course Module
Employee Movement
Transfer
This is the reassignment of employee to a job with similar pay, status, duties,
and responsibilities. It also involves horizontal movement from one job to
another.
Reasons for Transfer
• Because personnel placement practices are not perfect, an employee -job
mismatch may have resulted.
• An employee becoming unsatisfied with his job for one or a variety of
reasons
• Organizations sometimes initiate transfers to further the development
and advancement of the employee especially at management and staff.
• Due to business expansion, retrenchment erroneous placement, the need
to meet departmental requirement during peak season.
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• For personal enrichment/greater convenience and for more interesting
jobs.
• For employee to be better suited or adjusted to his job (remedial
transfer)
There are 2 Kinds of Transfer
Permanent – made to fill vacancies requiring the special skills or abilities of
the employee being transferred.
Temporary – made due to the temporary absence of an e employee, e.g., in
case of sick, leave, vacation leave, or shifts in the work load during peak
periods.
Employee Separation
Different kinds of separation occur depending on whether the employee or
the employee decides to terminate the employment relationship.
Layoff
The separation of an employee initiated by the employer due to business
reverses, the introduction of labor saving devices, or the reduction in the
demand for particular skills. Management as temporary measures during
periods of business recession, industrial depression or seasonal fluctuation
resorts
Resignation
This is when employees voluntarily decide to end their employment with an
organization.
Causes of Resignation
• Dissatisfaction about wages and working conditions
• Misunderstandings with supervisors or fellow workers
• Inconvenient work hours are among the chief reasons employee
resignation.
Retirement
This is when employees having satisfied certain conditions under existing
laws and/or provisions of the collective bargaining agreements or upon
reaching the age of 65 are separated from employment with entitlement to
retirement benefits. This is given either in a lump sum amount or in a form of
a monthly pension for life.
Termination/Discharge or Dismissal
The practice of putting an end to the employer- employee relations initiated
by the employer with prejudice to the worker. A discharge is due to some
fault of the employee such as inability to meet the company’s standards of
performance, incompetence, violation of company rules, insubordination, etc.
Rewards Systems
• Each element of compensation and benefits, is known as reward.
Organization and Management
7
Staffing Part II
- Salaries
Direct (cash) - Incentives
- bonuses
Financial
-insurance
-holidays
Indirect (benefits) -Medical and health
- Child care
- Employee assistance
Total Rewards
Non-Financial
- Interesting work
- Challenge
Job - Responsibility
- Recognition
advancement
Figure 9.1
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Total Rewards
• All of the tools available to the employer those may be used to attract,
motivate and retain employees.
• Total rewards include everything the employee perceives to be of value
resulting from the employment relationship.
• There are five elements of total rewards, each of which includes
programs, practices, elements & dimensions
• Those collectively define an organization's strategy to attract, motivate
and retain employees.
Five Elements of Total Rewards
Compensation - Pay provided by an employer to an employee for services
rendered (i.e., time, effort and skill)
Benefits - Programs an employer uses to supplement the cash compensation
that employees receive. - These programs are designed to protect the
employee and his or her family from financial risks.
Work-Life - A specific set of organizational practices, policies, programs,
plus a philosophy, which actively supports efforts to help employees achieve
success at both work and home. - Work-life strategies address the key
intersections of the worker, his or her family, the community and the
workplace.
Performance - Alignment of organizational, team and individual
performance is assessed in order to understand what was accomplished, and
how it was accomplished. - Performance involves the alignment effort
toward the achievement of business goals and organizational success.
Recognition - Acknowledges or gives special attention to employee efforts
or performance. - It meets an intrinsic psychological need for appreciation
and can support business strategy by reinforcing certain behaviors that
contribute to organizational success. - Awards can be cash or non-cash (e.g.,
verbal recognition, trophies, certificates, plaques, dinners, tickets, etc.).
Developmental Opportunities —A set of learning experiences designed to
enhance employees’ applied skills and competencies;
Development engages employees to perform better and leaders to
advance their organizations’ people strategies.
Career Opportunities A plan for an employee to advance their own career
goals and may include advancement into a more responsible position in an
organization.
The organization supports career opportunities internally so that
talented employees are deployed in positions that enable them to deliver
their greatest value to their organization.
Organization and Management
9
Staffing Part II
References
Rodriguez, R.A., Echanis, E.S., "Fundamentals of management"
Weihrich, H., Cannice, M.V., Koontz, H., "Management. A global and Entrepreneurial
Perspective, 13th Ed."
Corpuz, C.R. "Human Resource Management, 2006 Revised Ed."
www. managementstudyguide.com`
www.accountingtools.com
Course Module
Organization and Management
1
Leading (Part1)
Leading (Part 1)
Topic Outline:
1. Scope of directing and leading
2. Characteristics of a good leader
3. Leadership function
4. Leadership styles
5. Motivation
6. Theories of motivation
7. Leadership theories
4. Creative function. Direction makes things happen and converts plans into
performance it is the process around which all performance revolves.
Without direction, human forces in an organization become inactive and
consequently physical factors become useless. It breathes life into
organization.
Leading:
• The process of influencing people so that they will contribute to
organizational and group goals.
• Managing requires the creation and maintenance of an environment in
which individuals work together toward the accomplishment of common
objectives.
Leading function has three basic components:
• Motivating Employees – They motivate their employees and
subordinates.
• Influencing Employees – They influence their employees and
subordinates to reach the desired goals of the organization.
• Forming Effective Groups – They form effective groups in the
organization.
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The leading function helps any organization go forward to attain its goals and
objectives.
Leadership
Leadership – The art or process of influencing people so that they will strive
willingly and enthusiastically toward the achievement of group goals.
Peter Ducker stated – “Management is doing the right things and Leadership
is doing the things right”
Ideally people should be encouraged to develop not only willingness
to work but also willingness to work with zeal and confidence.
Leaders act to help a group attain objectives through the maximum
application of its capabilities.
Characteristics of a Good Leader
Honesty – your business and its employees are a reflection of yourself, and if
you make honest and ethical behavior a key value, you team will follow suit.
Ability to delegate – Trusting your team with your idea is a sign of strength,
not weakness. Delegating tasks to the appropriate departments is one of the
most important skills you can develop.
Communication – Being able to clearly describe what you want done is
extremely important. If you can’t relate your vision to your team, you won’t
all be working towards the same goal.
Sense of humor – If you are constantly learning to find the humor in the
struggles, your work environment will become a happy and healthy space,
where your employees look forward to working in.
Organization and Management
5
Leading (Part1)
Confidence – Assure everyone that setbacks are natural and the important
thing is to focus on the larger goal. By staying calm and confident, you will
help keep the team feeling the same.
Commitment – If you expect your team to work hard and produce quality
content, you’re going to need to lead by example.
Positive attitude – Keep your team motivated towards the continued
success of the company, and keep the energy levels up.
Creativity – it is during these critical situations that your team will look to
you for guidance and you may be forced to make a quick decision. It is
important to learn to think outside the box.
Ability to inspire – Being able to inspire your team is great for focusing on
the future goals. It is your job to keep spirits up, and that begins with an
appreciation for the hard work.
Intuition – When leading a team through uncharted waters. There is no
roadmap on what to do. Everything is uncertain, and the higher the risk, the
higher the pressure.
Leadership Functions
Following are the important functions of a leader:
1. Setting Goals:
A leader is expected to perform creative function of laying out goals and
policies to persuade the subordinates to work with zeal and confidence.
2. Organizing:
The second function of a leader is to create and shape the organization on
scientific lines by assigning roles appropriate to individual abilities with the
view to make its various components to operate sensitively towards the
achievement of enterprise goals.
3. Initiating Action:
The next function of a leader is to take the initiative in all matters of interest
to the group. He should not depend upon others for decision and judgment.
He should float new ideas and his decisions should reflect original thinking.
4. Co-Ordination:
A leader has to reconcile the interests of the individual members of the group
with that of the organization. He has to ensure voluntary co -operation from
the group in realizing the common objectives.
5. Direction and Motivation:
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It is the primary function of a leader to guide and direct his group and
motivate people to do their best in the achievement of desired goals, he
should build up confidence and zeal in the work group.
6. Link between Management and Workers:
A leader works as a necessary link between the management and the
workers. He interprets the policies and programmes of the management to
his subordinates and represents the subordinates’ interests before the
management. He can prove effective only when he can act as the true
guardian of the interests of his subordinates.
Theories of Motivation
• Maslow’s Hierarchy Of Needs Theory
• McGregor’s Theory X and Theory Y
• Herzberg’s Two-Fact Theory
• McClelland’s Three-Needs Theory
Organization and Management
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Leading (Part1)
Self-esteem
(achievement, status,
responsibility,
reputation)
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Comparison:
Labeled theory X (Negative)
• Employees inherently dislike work and, whenever possible, will attempt
to avoid it.
• Since employees dislike work, they must be coerced, controlled, or
threatened with punishment to achieve goals.
• Employees will avoid responsibilities and seek formal direction whenever
possible.
• Most workers place security above all other factors associated with work
and will display little ambition.
Labeled theory Y (Positive)
• Employees can view work as being as natural as rest or play.
• People will exercise self-direction and self-control if they are committed
to the objectives.
• The average person can learn to accept, even seek, responsibility.
• The ability to make innovative decision is widely dispersed throughout
the population and is not necessarily the sole province of those in
management positions.
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and control. Such individuals generally are seeking positions of leadership;
they are frequently good conversationalists, though often argumentative;
they are forceful, outspoken, hardheaded, and demanding, and they enjoy
teaching and public speaking.
Need for Affiliation: people with a high need for affiliation usually derive
pleasure from being loved and tend to avoid the pain of being rejected by a
social group. As individuals, they are likely to be concerned with maintaining
pleasant social relationships, to enjoy a sense of intimacy and understanding,
to be ready to console and help others in trouble, and to enjoy friendly
interaction with others.
Leadership Theories
Great Man Theory
Leaders are born, not made.
This approach emphasized that a person is born with or without the
necessary traits of leaderships.
Early explanations of leadership studied the “traits” of great leaders
“Great man” theories (Gandhi, Lincoln, Napoleon)
Belief that people were born with these traits and only the great
people possessed them
Great Man Theory (1840s)
The Great Man theory evolved around the mid 19th century. Even though no
one was able to identify with any scientific certainty, which human
characteristic or combination of, were responsible for identifying great
leaders. Everyone recognized that just as the name suggests; only a man
could have the characteristic (s) of a great leader.
The Great Man theory assumes that the traits of leadership are intrinsic. That
simply means that great leaders are born...
they are not made. This theory sees great leaders as those who are destined
by birth to become a leader. Furthermore, the belief was that great leaders
will rise when confronted with the appropriate situation. The theory was
popularized by Thomas Carlyle, a writer and teacher. Just like him, the Great
Man theory was inspired by the study of influential heroes. In his book "On
Heroes, Hero-Worship, and the Heroic in History", he compared a wide array
of heroes.
In 1860, Herbert Spencer, an English philosopher disputed the great man
theory by affirming that these heroes are simply the product of their times
and their actions the results of social conditions,
Great Man approach actually emphasis “charismatic” leadership.
charisma being the Greek word for gift.
No matter what group such a natural leader finds himself in, he will
always be recognized for what he is.
Organization and Management
11
Leading (Part1)
Trait Theory
Theories that consider personality, social, physical, or intellectual traits to
differentiate leaders from non-leaders.
Leadership Traits are include of:
Ambition and energy
The desire to lead
Honesty and integrity
Self-confidence
Intelligence
Job-relevant knowledge
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Trait Theories Limitations:
No universal traits that predict leadership in all situations.
Traits predict behavior better in “weak” than “strong” situations.
Unclear evidence of the cause and effect of relationship of leadership
and traits.
Better predictor of the appearance of leadership than distinguishing
effective and ineffective leaders.
Behavioral Theory
Theories proposing that specific behaviors differentiate leaders from non
leaders.
Pattern of actions used by different individuals determines leadership
potential
Examples
− Autocratic, democratic and laissez-faire
− Michigan Studies: Employee centred versus task centred
Behavioural Theories (1940's - 1950's)
In reaction to the trait leadership theory, the behavioural theories are
offering a new perspective, one that focuses on the behaviours of the leaders
as opposed to their mental, physical or social characteristics. Thus, with the
evolutions in psychometrics, notably the factor analysis, researchers were
able to measure the cause an effects relationship of specific human
behaviours from leaders. From this point forward anyone with the right
conditioning could have access to the once before elite club of naturally
gifted leaders. In other words, leaders are made not born.
The behavioural theories first divided leaders in two categories. Those that
were concerned with the tasks and those concerned with the people.
Throughout the literature these are referred to as different names, but the
essence are identical.
Behavioural Theory In contrast with trait theory, behavioural theory
attempts to describe leadership in terms of what leaders do, while trait
theory seeks to explain leadership on the basis of what leaders are.
Leadership according to this approach is the result of effective role
behaviour. Leadership is shown by a person’s acts more than by his traits.
This is an appropriate new research strategy adopted by Michigan
Researchers in the sense that the emphasis on the traits is replaced by the
emphasis on leader behaviour (which could be measured).
Theories that attempt to isolate behaviors that differentiate effective
leaders from ineffective leaders.
Behavioral studies focus on identifying critical behavioral determinants
of leadership that, in turn, could be used to train people to become
leaders.
Organization and Management
13
Leading (Part1)
Path-goal theory
The main function of the leader is to clarify and set goals with subordinates,
help them find the best path for achieving the goals, and remove obstacles.
The Path-Goal model is a theory based on specifying a leader's style or
behavior that best fits the employee and work environment in order to
achieve a goal (House, Mitchell, 1974). The goal is to increase your
employees' motivation, empowerment, and satisfaction so they become
productive members of the organization.
Path-Goal is based on Vroom's (1964)expectancy theory in which an
individual will act in a certain way based on the expectation that the act will
be followed by a given outcome and on the attractiveness of that outcome to
the individual. The path-goal theory was first introduced by Martin Evans
(1970) and then further developed by House (1971).
The path-goal theory can best be thought of as a process in which leaders
select specific behaviors that are best suited to the employees' needs and the
working environment so that they may best guide the employees through
their path in the obtainment of their daily work activities (goals)
(Northouse, 2013).
The theory categorizes leader behavior into four groups:
Supportive leadership behavior gives consideration to the needs of
subordinates, shows concern for their well-being, and creates a pleasant
organizational climate.
Participative leadership allows subordinates to influence the decisions of
their superiors, which may increase motivation.
Instrumental leadership gives subordinate rather specific guidance and
clarifies what is expected of them. It involves aspects of planning, organizing,
coordinating, and controlling by the leader.
Achievement-oriented leadership involves setting challenging goals,
seeking improvement of performance, and having confidence that
subordinates will achieve high goals.
Types of Leaders:
Transactional leaders identify what needs to be done to achieve goals,
including clarifying roles and tasks, rewarding performance, and providing
for the social needs of followers.
Transactional leadership Theories (1970's)
Transactional theories, also known as exchange theories of leadership, are
characterized by a transaction made between the leader and the followers. In
fact, the theory values a positive and mutually beneficial relationship.
Organization and Management
15
Leading (Part1)
References
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and Entrepreneurial
Perspective, 13th Ed."
John Schermerhorn's. Management 11th edition, (2010), John Wiley & Sons ISBN:
Course Module
Other sources:
www.wisdomjobs.com
www.gotabout.info
http://visual.ly/characteristics-good-leader
www.utwente.nl
http://smallbusiness.chron.com
http://www.yourarticlelibrary.com
http://www.leadership-central.com
http://www.slideshare.net/kesarinandan96
http://nwlink.com
Organization and Management
1
Leading (Part 2)
Leading (Part 2)
Definition of Communication
Communication
The transfer of information from a sender to a receiver, with the information
being understood by receiver.
What is Managerial Communication?
Managerial communication enables people to exchange information and
feedbacks within the organization and enables people to pursue the
organizational goals.
Why communication is needed in management?
To establish and disseminate the goals of an enterprise;
To develop plans for their achievement;
To organize human and other resources in the most effective and efficient
way;
To select, develop, and appraise members of the organization;
To lead, direct, motivate, and create a climate in which people want to
contribute; and
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To control performance.
Course Module
Types of Communication
Oriented towards goals and task of the Directed towards goals and need
enterprise satisfaction of individual
Table 11.1
Organization and Management
5
Leading (Part 2)
Figure 11.3
1) Preparing for change (Assessment)
Identifying the problem: Opportunity that necessitates change
(symptoms)
Data collection: Gathering structural, technological and people
information and effects of these elements on the process
Data analysis: Summarizing the data ( advantages, dis-advantages, risks,
and consequences)
Strategic determination: Identifying possible solutions, barriers,
strategies
Decide if the change is necessary.
Make others aware of the need for the change.
Swot analysis and basic 4 forces models: (environmental forces
,organizational forces , task demand , personal need.)
2) Managing change (Planning and Implementation)
State goal and specific measurable objectives and also the time allotted.
Establishing the who, how, what, and when of change.
Allocating resources, budget and evaluation methods.
Plan for resistance management.
Identify areas of support & resistance.
Include everyone in the planning that will be affected.
Establish target dates for implementation.
Develop appropriate strategy for alteration.
Be available to support others through the process.
Evaluate the change then modify if necessary.
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3) Reinforcing change (Evaluation)
Determining effectiveness of change.
Achieved objectives and benefits - qualitative as well as financial and the
documented evidences of being achieved.
Stabilize the change: - taking measures to reinforce and maintain the
change.
Moving
Unfreezing
Refreezing
Creating the Designing and Reinforcing and
motivation and implementing stabilizing new
desire for change actual change methods,
procedures and
behaviors
Figure 11.4
Unfreeze
The existing equilibrium. Motivate persons by getting them ready for
change and increase willing to change.
Build trust and recognition for the need to change.
Actively participate in identifying problems and generate alternative
solutions.
Is the development through problem awareness of a need for change.
Moving
Work toward change by identifying the problem or the need for change.
Explore the alternatives,
Defining goals & objectivities
Plan how to accomplish the goal &
Implement the plan for change.
Get persons to agree that the status quo is not beneficial to them.
Refreezing
Does the integration of the change happened into ones personality &
consequently stabilization of the change happened?
Then reinforce the new patterns of behavior. (Positive change)
New level of equilibrium.
Frequently person tries to return to old behavior after the change effort
ceases.(Negative change)
Steps for Successful Change Management
Increase urgency: inspire people to move
Organization and Management
9
Leading (Part 2)
Types of Change
There are two types of change in an organization:
Planned change - refers to initiatives that are driven “top-down” in an
organization.
“Emergent” change - refers to a situation in which change can originate from
any level in the organization.
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Process‐oriented change is often related to an organization's production
process or how the organization assembles products or delivers services.
The adoption of robotics in a manufacturing plant or of laser‐scanning
checkout systems at supermarkets are examples of process‐oriented
changes.
People‐centred Change
This type of change alters the attitudes, behaviors, skills, or performance
of employees in the company.
Changing people‐centered processes involves communicating,
motivating, leading, and interacting within groups.
This focus may entail changing how problems are solved, the way
employees learn new skills, and even the very nature of how employees
perceive themselves, their jobs, and the organization.
Some people‐centered changes may involve only incremental changes or
small improvements in the process.
Culture Shock
A sense of confusion and uncertainty sometimes with feelings of anxiety that
may affect people exposed to an alien culture or environment without
adequate preparation.
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References
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and Entrepreneurial
Perspective, 13th Ed."
Other sources:
www.communicaid.com
www.slideshare.net
www.study.com
www.internationalstudentinsurance.com
Organization and Management
1
Controlling
Controlling
Topic Outline:
• Definition and nature of management control
• The link between planning and control
• Control methods and systems
• Application of management control in accounting and marketing concepts
and techniques
• Role of budgets in planning and control.
Course Module
The Basic Control Process
Control techniques and systems are essentially the same for controlling cash,
office procedures, morale, product quality, and anything else. The basic
control process involves three steps:
1. Establishing standards
Standards are simply criteria of performance. They are the selected points in
an entire planning program at which measures of performance are made of
that managers can receive signals about how things are going and thus do
not have to watch every step in the execution of plans.
Measurement of performance
The measurement of performance against standards should ideally be done
on a forward-looking basis so that deviations may be detected in advance of
their occurrence and avoided by appropriate actions. The alert, forward-
looking manager can sometimes predict probable departures from
standards. In the absence of such ability, however, deviation should be
disclosed as early as possible.
Correlation of deviations
Standards should reflect the various positions in an organization structure. If
performance I measured accordingly, it is easier to correct deviations.
Managers know exactly where, in the assignment of individual or group
duties, the corrective measures must be applied.
Correction of deviations is the point at which control can be seen as a part of
the whole system of management and can be related to the other managerial
functions.
Importance of Controlling:
The significance of the controlling function in an organization is as follows:
1. Accomplishing Organizational Goals:
Controlling helps in comparing the actual performance with the
predetermined standards, finding out deviation and taking corrective
measures to ensure that the activities are performed according to plans.
Thus, it helps in achieving organizational goals.
2. Judging Accuracy of Standards:
An efficient control system helps in judging the accuracy of standards. It
further helps in reviewing & revising the standards according to the changes
in the organization and the environment.
3. Making Efficient Use of Resources:
Controlling checks the working of employees at each and every stage of
operations. Hence, it ensures effective and efficient use of all resources in an
organization with minimum wastage or spoilage.
4. Improving Employee Motivation:
Employees know the standards against which their performance will be
judged.
Organization and Management
3
Controlling
Course Module
Different types of critical points standards:
1. Physical standards
Physical standards are nonmonetary measurements and are common at the
operating level, where materials are used, labor is employed, services are
rendered, and goods are produced. They may reflect quantities, such as
labor-hours per unit of output, units of production per machine-hour, or feet
of wire per ton of copper. Physical standards may also reflect quality, such as
hardness of bearings, durability of a fabric, or fastness of color.
2. Cost standards
Cost standards are monetary measurements, and like physical standards, are
common at the operating level. They attach monetary values to specific
aspects of operations. Illustrative of cost standards are such widely used
measures as direct and indirect costs per unit produced, labor cost per unit
or per hour, material cost per unit, machine-hour costs, and cost per seat-
mile.
3. Capital standards
There are a variety of capital standards, all arising from the application of
monetary measurements to physical items. They have to do with the capital
invested in the firm rather than with operating costs and are therefore
primarily related to the balance sheet rather than to the income statement.
Perhaps the most widely used standard for new investment, as well as for
overall control, is return on investment. The typical balance sheet will
disclose other capital standards, such as the ratios of current assets to
current liabilities, debt to the net worth, fixed investment to total investment,
cash and receivables to payables, and bonds to stocks, as well as the size and
turnover of inventories.
4. Revenue standards
Revenue standards arise from attaching monetary values to sales. They may
include such standards as revenue per bus passenger-mile, average sales per
customer, and sales per capita in a given market area.
5. Program standards
A manager may be assigned to install a variable budget program, a program
for formally following the development of new products, or a program for
improving the quality of sales force. Although some subjective judgment may
have to be applied in appraising program performance, timing and other
factors can be used as objective standards.
6. Intangible standards
More difficult to set are standards not expressed in either physical or
monetary measurements. What standard can a manager use for determining
whether the advertising program meets both short and long-term objectives?
Or whether the public relations program is successful? Are supervisors loyal
to the company’s objectives? Such questions show the difficulty of
establishing standards or goals for clear quantitative or qualitative
measurement.
7. Goals as standards
Organization and Management
5
Controlling
Benchmarking
Benchmarking is an approach for setting goals and productivity measures
based on best industry practices.
There are three types of benchmarking:
Strategic benchmarking – compares various strategies and identifies the
key strategic elements of success.
Operational benchmarking – compares relative costs or possibilities for
product differentiation.
Management benchmarking – focuses on support functions such as market
planning and information systems, logistics, human resource management,
and so on.
Course Module
Management control
Management control is usually perceived as a feedback system similar to the
common household thermostat.
4. Collect data on input variables regularly, and put them into the system.
5. Regularly assess variation of actual input data from planned-for inputs,
and evaluate the impact on the expected end results.
6. Take action.
Table 12.1
Stock cards
− in the production area, the internal control system should focus on the
protection of raw materials, work-in process inventory, finished
goods inventory, factory supplies, and machine spare parts. Inventory
records, (i.e., stock cards, should be maintained). Stock cards show the
record of all receipts and releases for each items in the inventory. The
balance shown in the stock card can be compare with the physical
count from time to time.
Economic Order Quantity
− Economic Order Quantity (EOQ): identify the optimal order quantity
by minimizing the sum of certain annual cost that vary with order
size.
Annual ordering cost is a function of the number of orders per year and the
ordering cost per order.
Formula:
Total Cost = Annual carrying cost + Annual Ordering cost
𝑸 𝑫
𝑻𝑪 = 𝑯 + 𝑺
𝟐 𝑸
where:
Q = Order quantity in units
H = Holding (carrying) cost
D = Demand, usually in units per year
Organization and Management
11
Controlling
S = Ordering cost
Course Module
Safety stock tends to be used in MRP where uncertainty about
quantities is the problem-scarp.
o Safety stock reduce the risk of running out of inventory (a
stockout) during lead time.
o Safety stock challenges
Safety stock set because of a onetime event.
Safety stock still active on an obsolete item
Safety stock levels inconsistent.
o ROP = Expected demand during lead time + safety stock
Linear Programming
− typically deals with the problem of allocating limited resources among
competing activities in the best possible way or optimal way.
− LP could be used by a manufacturing firm in allocating production
facilities to products or in allocating common raw materials use in
several products.
− The control function of linear programming is to optimize the
objectives by the simultaneous solution to a set of linear equations
representing objectives and constraints.
Gantt Chart
− it developed by Henry L. Gantt. The Gantt chart can be use to compare
actual progress in production with scheduled progress.
− is popular tool for planning and scheduling simple projects. It enables
a manager to initially schedule project activities and then to monitor
progress over time by comparing planned progress to actual progress.
The advantage of Gantt chart is its simplicity. However, Gantt chart
fail to reveal certain relationships among activities that can be crucial
to effective project management.
Figure 12.3
B, 4 D, 6
A, 0 F, 2 G, 1 A, 0
C, 3 E, 5
Critical Path
Figure 12.5 - Critical Path Chart
PERT
Course Module
PERT(Program Evaluation and Review Techniques) was developed by the
United States Navy for the Planning and control of the Polaris Weapon
System in 1958.
− it is reinforcement of the Critical Path Method (CPM) in the sense that
three time estimates are made for each task:
1. the earliest possible time of completion,
2. the target completion time, and
3. the latest possible time of completion.
These estimates are made because it is not possible to determine
accurately the exact time of completing a task, especially for new
projects. The average time, te, is computed using the three time estimates
as follows:
te = 𝑎 +4𝑚+𝑐
6
Where:
a = earliest completion time
m = target completion time
c = latest possible time
The "critical path" for the project is then determined by using the
computed "average" times for each task - the sequence of events which
takes the longest time and which involves, therefore, zero slack time.
Voucher System
this system requires that every liability should be recorded as soon as it is
incurred and that only checks be used in payment of approved liabilities.
− a voucher is prepared for each expenditure assuming that every
expenditure is systematically reviewed and verified before payment is
made.
− the verification process includes the examination of documents like
Purchase Orders, Sales Invoices and Delivery Receipts.
Table 12.3
Balance sheet
as a Financial Accounting report is a statement of the company's financial
condition as of the date of the statement. this report consists of the total
assets of the firm and the corresponding claims against these assets as
represented by the liabilities and stockholder's equity.
Course Module
Balance sheet as a control tool can be used to appraise performance of
managers by comparing the current statement with those of the
corresponding period of previous years.
XYZ Company
Balance Sheet
As of December 31, 2015
Assets
Current assets:
Cash Pxxx
Inventories Xxx
Stockholder's Equity
Table 12.4
Income Statement
− summarize the results of operations of the company for a period of
time.
− This statement reports the revenues and expenses of the company for
that period. Revenues are the amount earned by the company from
the goods and services that the company provides to each customers.
Expenses are the cost of the resources used in providing the goods
and services. Net income (net loss) is the most important item
reported in the income statement. Net income (net loss) is the
difference between revenues and expenses.
Sales P350,596.00
Cost of sales 207,811.00
Gross Profit P142,785.00
Operating Expenses
General Administrative Expenses 46,950.00
Selling expenses 10,984.00
Depreciation 12,235.00 70,269.00
Course Module
Pro-Forma Statement of Cash Flows (Table 12.6)
XYZ Company
Statement of Cash Flows
For the Year Ended December 31, 2015
Cash flow from operating activities:
Cash flow received from client P560,750
Cash paid for operating expenses (320,445) P240,305
Cash flow from investing activities:
Proceeds from sale of equipment at a gain of P5,000 P25,500
Purchase of tools and equipment (37,540) (12,040)
Cash flow from financing activities:
Payment of loan to the bank P(151,200)
Additional Investment of the proprietor 100,00
Withdrawals of the proprietor (150,000) (201,200)
Net income in cash balance P27,065
Cash balance, January 1,2015 48,260
Cash balance, December 31, 2015 P75,325
References
Rodriguez, R.A., "Fundamentals of Management"
Wiehrich, H., Cannice, M.V., Koontz, H., "Management, A Global and Entrepreneurial
Perspective, 13th Ed."
Other sources
http://www.businessmanagementideas.com
http://www.slideshare.net
http://www2.ivcc.edu
http://www.smetoolkit.org
Organization and Management
1
Introduction to the Different Functional Areas of Management
There are five main functional areas of management viz., human resource,
marketing, operations, financial and information & communication
technology. These topics are discussed in this lesson.
Topic Outline:
• Human Resource Management
• Marketing Management
• Operations Management
• Financial management
• Information and Communication technology management
HRM Discipline
• The discipline of HRM is based on a unique integration of: psychology,
economic, and system theories, and has undergone a change since the
early days of the Hawthorne experiment.
Course Module
HR Departments' Organization Charts and Structures
Organization historically divided into two groups, line management and staff
management, and HRM was traditionally considered to be a staff function.
Line Managers were directly responsible for the production of goods and
services.
Staff Managers were responsible for an indirect or support function that
would have cost but whose bottom line contributions where less direct.
Centralization
Some organizations centralize HR. A centralized strategy locates design and
administration responsibility in a single organizational unit. Administration
generally will fall to those working in various units, who often HR generalist.
Generalist handle all HR activities rather than specializing in a single
area, such as: compensation or recruiting.
Decentralization
Decentralization gives each organization unit the responsibility to design and
administer each own personnel system.
Organization Chart
Organization can use chart for a number of purposes. For example, HR
administrator, as well as Chief Executive Officers, Corporate Planners,
Marketing Representative, and others, can use such organization charts to:
1. Design their department or division charts.
2. Monitor reporting relationships.
3. Gain access to information about newly created job titles, staff duties,
and reporting relationships.
4. Find out how leading agencies organize their management teams and
work forces.
5. Assess industry patterns.
6. Examine the competition.
7. Use in business presentations and to facilitates placement decisions.
Human Resource and Information Technology
The advent of "computer age" has greatly altered, not only the
availability of information but also the manner in which it is identified
and acquired.
Information technology deals with how information is accessed,
gathered, analyzed, and communicated.
The Beginning
the Philippines has all the potential to be an active player in the digital
domain At present, join government and private sector groups such as the
Information Technology and Electronic Commerce Council (ITECC) are
unified in pushing for the development of E-commerce in the Philippines. It
is seen as an important driving force that could fuel the country's economic
growth and development.
Organization and Management
3
Introduction to the Different Functional Areas of Management
IT Application in HR
1. Use of job boards and other similar recruitment web-based
application to provide accessibility to applications for the job usually
communicate job vacancies and applicant processing.
2. Employee kiosks provide updates in employee status and other
pertinent information initiated and made by the employee themselves
via theses kiosks.
3. E-learning facilitate the learning process by providing a just-in-time
learning opportunities. the use of a learning management system (LMS)
will allow the HRD manager to focus on the more important aspects of his
job rather than being concerned with course registration and following
up attendance to training programs.
4. Electronic Performance Support System (EPSS) will provide on-line
coaching and mentoring services. managers and employees can access
organizational knowledge through an EPSS application.
5. Salary and Payroll Administration for some companies this is now a
link to performance management systems, time and attendance, and
other employee benefits to the pay systems. This ensures timely pay-out
of salaries, wages, bonuses, and other similar compensation. An example
of this is the timesheets.
6. Telecommuting/Teleworking - Teleworking is any form of substitution
of information technologies (such as: telecommunications and/or
computers) for normal work related travel moving the work to the
workers instead of moving the workers to work.
7. HR and the Internet the Internet is an excellent source for finding many
types of information related to HRM and for keeping up with new
development in the field. Cyberspace and the Internet are changing the
way many Human Resource managers operate. Today, a growing number
of HR managers are using the internet to recruit personnel, conduct
research, access electronic databases, send email, conduct training and
network with colleagues. The real value of Internet to manager is the
information that is makes available.
8. e-Enterprise Human Resources provides a comprehensive solution for
managing applicant and employee information, paying employees, and
tracking payroll information that is as easy to implement and to use as it
is powerful.
9. Intranets this is a private computer network that uses internet products
and technologies to provide multimedia applications within the
organizations. (Paul, Barker, Telecommunications, December, 1997). An
internet connect people to people and people to information and
knowledge within the organization.
10. Client/Server Networks this is a new system that uses personal
computers linked together to process information in a very efficient
manner (Samuel, Greengard. "The Netxt generation". Personnel Journal,
March 1994.) At the hub of each network is a computer that controls the
traffic on the network and stores data in a rational database. This central
Course Module
computer, called the server, maybe anything from a large main frame to a
powerful PC. The clients are desktop PCs used by individuals to enter or
extract data or to do analysis.
Implementing an HRIS (Human Resource Information System): Albert
Leaderer, Information Technology: Planning and Developing a Human
Resource Information System, Personnel Journal. May 1994).
As with any major change, proper planning and communications are absolute
necessities for the successful implementation or major upgrade of an HRIS.
The steps outlined below described the specific procedures when attempting
to implement or upgrade an HRIS.
1. Inception of idea prepare a preliminary report showing the need for an
HRIS and what it can do for the organization. This must illustrate how an
HRIS can assist management in making certain decisions.
2. Feasibility study evaluate the present system and details the benefits of
an HRIS, with comparison of the costs and benefits.
3. Top management support once the FS recommends going ahead with
an HRIS, it is essential to obtain the support of top management.
4. Selecting a project team should consist of an HR representative who is
knowledgeable about the organization's HR functions and activities.
5. Defining the requirements specify in details exactly what the HRIS will
do including the reports that will be produced by the system.
6. Software/Hardware selection when evaluating available systems, used
the same cost benefit analysis that would be used for any significant
purchase.
7. Training all the personnel that will make use the system.
8. Tailoring the system involves making changes to the system to best fit
the specific needs of the organization.
9. Collecting the data - data must collected and entered into the system.
10. Testing the system
11. Starting-up
12. Running in parallel even with the new HRIS comma it is desirable it is
desirable to run the new system in parallel with the old system for a
period of time to be compared and examined for any accuracies.
13. Maintenance
14. Evaluation should be done to find out if it is right for the organization
and if it is being properly used.
All of the above mentioned continue to dramatically change the human
resource profession.
Human Resource Management Activities
The central focus for HR management must be on contributing to
organizational success. Key to enhancing organizational performance is
ensuring that human resources activities support organizational efforts
focusing on productivity, service, and quality.
Productivity: As measured by the amount of output per employee,
continuous improvement of productivity has become even more
important as global competition has increased. The productivity of the
Organization and Management
5
Introduction to the Different Functional Areas of Management
Course Module
Compliance with equal employment opportunity (EEO) laws and regulations
affects all other HR activities and is integral to HR management. For
instance, strategic HR plans must ensure sufficient availability of a diversity
of individuals to meet affirmative action requirements. In addition, when
recruiting, selecting, and training individuals, all managers must be aware of
EEO requirements.
3. Staffing
The aim of staffing is to provide an adequate supply of qualified individuals
to fill the jobs in an organization. By studying what workers do, job analysis
is the foundation for the staffing function. From this, job descriptions and job
specifications can be prepared to recruit applicants for job openings. The
selection process is concerned with choosing the most qualified individuals
to fill jobs in the organization.
4. HR Development
Beginning with the orientation of new employees, HR training and
development also includes job-skill training. As jobs evolve and change,
ongoing retraining is necessary to accommodate technological changes.
Encouraging development of all employees, including supervisors and
managers, is necessary to prepare organizations for future challenges. Career
planning identifies paths and activities for individual employees as they
develop within the organization. Assessing how employees perfor m their
jobs is the focus of performance management.
5. Compensation and Benefits
Compensation rewards people for performing organizational work through
pay, incentives, and benefits. Employers must develop and refine their basic
wage and salary systems. Also, incentive programs such as gain sharing and
productivity rewards are growing in usage. The rapid increase in the costs of
benefits, especially health-care benefits, will continue to be a major issue.
6. Health, Safety, and Security
The physical and mental health and safety of employees are vital concerns.
The traditional concern for safety has focused on eliminating accidents and
injuries at work. Additional concerns are health issues arising from
hazardous work with certain chemicals and newer technologies.
Through a broader focus on health, HR management can assist employees
with substance abuse and other problems through employee assistance
programs (EAP) in order to retain otherwise satisfactory employees.
Employee wellness programs to promote good health and exercise are
becoming more widespread.
Workplace security has grown in importance, in response to the increasing
number of acts of workplace violence. HR management must ensure that
managers and employees can work in a safe environment.
7. Employee and Labor/Management Relations
The relationship between managers and their employees must be handled
effectively if both the employees and the organization are to prosper
together. Whether or not some of the employees are represented by a union,
employee rights must be addressed.
Organization and Management
7
Introduction to the Different Functional Areas of Management
Course Module
promote a healthy and balanced relation between the employee and the
employer. It is the key for the organization to be successful.
5. Training and development
Training and development are the indispensable functions of human
resource management. It is the attempt to improve the current or future
performance of an employee by increasing the ability of an employee
through educating and increasing one’s skills or knowledge in the particular
subject.
Marketing Management
According to Philip Kotler,
“Marketing Management is the process of planning and executing the
conception, pricing and promotion and distribution of goods, services and
ideas to create exchanges with target groups that satisfy customer and
organizational objectives.”
Promotional activities and advertising are the best ways to communicate
with your target customers for them to be able to know the company’s
products and services. Effective marketing and promotional activities will
drive long-term success, profitability and growth in market shares. This
department is responsible for promoting the business to generate sales and
help the company grow. Its function involves creating various marketing
strategy and planning promotional campaigns. They are also responsible for
monitoring competitor’s activities.
Objectives of Marketing Management
• Creating New Customers.
• Satisfying the Needs of Customers.
• Enhancing the Profitability of Business.
• Raising the standards of living People.
• Determining the Marketing Mix.
Steps in Marketing Management Process
• Setting the Marketing Objectives.
• Analyzing Marketing Opportunities.
• Researching and selecting Targets Markets.
• Designing Marketing Strategies.
• Planning Marketing Programs.
• Organizing, Implementing and Controlling the Marketing Efforts.
Selling
Financing Storage
Grading Grading
Course Module
Transportation is the physical means through which products are moved
from the places where they are produced to those places where they are
needed for consumption. It creates location utility.
Transportation is very important from the procurement of raw material to
the delivery of finished products to the customer’s places. Transportation
depends mainly on railroads, trucks, waterways, pipelines and airways.
Storage
It includes holding of products in proper, i.e., usable or saleable, condition
from the time they are produced until they are required by customers in case
of finished products or by the production department in case of raw
materials and stores.
Storing protects the products from deterioration and helps in carrying over
surplus for future consumption or usage in production.
Standardization and Grading
Standardization means setting up of certain standards or specifications for
products based on the intrinsic physical qualities of any item. This may
include quantity like weight and size or quality like color, shape, appearance,
material, taste, sweetness etc. A standard gives rise to uniformity of products.
Grading means classification of standardized items into certain well defined
classes or groups. It includes the division of products into classes made of
units possessing similar features of size and quality.
Grading is very essential for raw materials; agricultural products like fruits
and cereals; mining products like coal, iron and manganese and forest
products like timber.
Financing
Financing involves the application of the capital to meet the financial
requirements of agencies dealing with various activities of marketing. The
services to ensure the credit and money needed and the costs of getting
merchandise into the hands of the final user are mostly referred to as the
finance function in marketing.
Financing is required for the working capital and fixed capital, which may be
secured from three sources — owned capital, bank loans and advance &
trade credit. In other words, different kinds of finances are short-term,
medium-term, and long-term finance.
Risk Taking
Risk means loss due to some unforeseen situations. Risk bearing in
marketing means the financial risk invested in the ownership of goods held
for an anticipated demand, including the possible losses because of fall in
prices and the losses from spoilage, depreciation, obsolescence, fire and
floods or any other loss that may occur with the passage of time.
They may also be due to decay, deterioration and accidents or due to
fluctuation in the prices induced by changes in supply and demand. The
different risks are usually termed as place risk, time risk, physical risk, etc.
Market Information
Organization and Management
11
Introduction to the Different Functional Areas of Management
Operations Management
Operations Management
OM is the process which combines and transforms various resources used in
the production of the organization into value added products/services in a
controlled manner as per the policies of the organization
Operations Management affects:
Companies’ ability to compete
Nation’s ability to compete internationally
The Operations department is held responsible for overseeing, designing and
controlling the process of production and redesigning business operations if
necessary. In a manufacturing company, operations department designs
processes to produce the product efficiently. They also have to acquire
materials and maintenance of equipment, supplies and more.
Operations function: The operations function includes many interrelated
activities, such as forecasting, capacity planning, scheduling, managing
inventories, assuring quality, motivating employees, deciding where
to locate facilities, and more. The operations function consists of all activities
directly related to producing goods or services.
Objectives of production management may be amplified as under:
• Producing the right kind of goods and services that satisfy customers’
needs (effectiveness objective).
• Maximizing output of goods and services with minimum resource inputs
(efficiency objective).
• Ensuring that goods and services produced conform to pre-set quality
specifications (quality objective).
• Minimizing throughput-time- the time that elapses in the conversion
process- by reducing delays, waiting time and idle time (lead time
objective).
• Maximizing utilization of manpower, machines, etc. (Capacity utilization
objective).
• Minimizing cost of producing goods or rendering a service (Cost
objective).
Financial Management
Course Module
Financial management is generally defined as those activities that create or
preserve the economic value of the assets of an individual, small business, or
corporation.
• Financial management comes down to making sound financial decisions.
Financial management is primarily concerned with investment and
financing decisions.
Investment decision making involves the preparation of long-range plans
and budgets for major investment such as plant expansion and replacement
of existing production facilities. The investment decision determines the total
amount of assets held by the firm, the composition of these assets and the
business risk complexion of the firm as perceived by suppliers of capital. The
capital budgeting process is one example of investment decisio n making. In
the financing decision, the finance manager determines the financing mix and
sources appropriate for the requirements of the firm. This involves decisions
on when to issue common stocks, preferred stocks or bonds or when to
borrow long-term or short-term.
Capital budgeting is an important financial policy area of concern in all
businesses. It is primarily a top-level management concern because it
involves the allocation of funds. The capital budgeting process involves the
choice of capital projects to the undertaken by the firm. It aids business firms
in evaluating capital investments in relation to future benefits.
The critical steps in capital budgeting are the identification and the
prioritization of various capital expenditure proposals given specific
acceptance criteria. Several tools of analysis are available in the final
selection of projects that should be undertaken by the firm. All these tools for
analysis attempt to find the difference between the net benefits that accrue
for each project and the financial burden incurred to secure the benefits.
In the performance of day-to-day finance activities, the chief finance officer
and other managers of the department are concerned with employee
motivation in order to influence employee behavior toward the attainment of
department, the ultimately, company goals. This is why directing aspect of
the management process is integrated with planning, organizing, staffing and
controlling.
Finance
It is a body of facts, principles and theories relating to raising and using
money by individuals, business and government.
It can be divided to:
• Corporate form
• Individuals/government
Goals of Financial Management
• Profit-oriented businesses: Make money and value for the owners
• Financial manager acts in the owners or shareholder’s “best interest”.
Organization and Management
13
Introduction to the Different Functional Areas of Management
Course Module
References
http://www.slideshare.net/kashifse1
http://foundersguide.com
http://bloghresources.blogspot.com
https://www.keka.com/5-major-functions-human-resource-management/
https://www.tutorialspoint.com/marketing_management/
http://www.mbaknol.com
https://prezi.com
http://ictdefitionmanavmatai.blogspot.com
Organization and Management
1
Special Topics in Management
Course Module
By Asset Size
Micro: Up to P3,000,000
Small: P3,000,001 - P15,000,000
Medium: P15,000,001 - P100,000,000
Large: above P100,000,000
Alternatively, MSMEs may also be categorized based on the number of
employees:
Micro: 1 - 9 employees
Small: 10 - 99 employees
Medium: 100 - 199 employees
Large: More than 200 employees
Agency: Philippine Congress.
Legal Definition:
“Magna Carta for Micro, Small and Medium Enterprises (Republic Act 6977,
as amended by RA 8289 and further amended by RA 9501 in 2008).
SEC. 3. Micro, Small and Medium Enterprises (MSMEs) as Beneficiaries. —
MSMEs shall be defined as any business activity or enterprise engaged in
industry, agribusiness and/or services, whether single proprietorship,
cooperative, partnership or corporation whose total assets, inclusive of those
arising from loans but exclusive of the land on which the particular business
entity’s office, plant and equipment are situated, must have value falling
under the following categories:
micro : not more than P3,000,000
small : P3,000,001 - P 15,000,000
medium : P15,000,001 - P100,000,000
“The above definitions shall be subject to review and adjustment by the
Micro, Small and Medium Enterprises Development (MSMED) Council under
Section 6 of this Act or upon recommendation of sectoral organizations
concerned, taking into account inflation and other eco nomic indicators. The
Council may use other variables such as number of employees, equity capital
and assets size. “The Council shall ensure that notwithstanding the plans and
programs set for MSMEs as a whole, there shall be set and implemented
other plans and programs varied and distinct from each other, according to
the specific needs of each sector, encouraging MSMEs to graduate from one
category to the next or even higher category.” (RA 9501 through Sec. 3
amended Sec. 3 of RA 6977, as amended by RA 8289)”
What is Entrepreneurship?
Entrepreneurship – the process of starting and operating your own
business.
Entrepreneur – the people who create, launch, organize and manage a new
business and take the risk of business ownership.
Organization and Management
3
Special Topics in Management
Types of Entrepreneur
According to the type of business:
Business entrepreneurs: who start business units after developing ideas
for new products/services.
Trading entrepreneurs: who undertake buying & selling of goods, but not
engage in manufacturing.
Corporate entrepreneurs: who establish and manage corporate form of
organization which has separate legal existence.
Agricultural entrepreneurs: who undertake activities like raising and
marketing of crops, fertilizers and other allied activities.
Spending time effectively can actually save you money and even earn you
more revenue.
3. Lack of Knowledge/Skills
This is one of the top most mistakes made by entrepreneurs. It is important
that you have ample knowledge about the industry you are entering, your
competitors, your target market, current trends, advertising and marketing
techniques as well as financial know-how. You must possess the skills needed
to start up a new business. If you are not prepared, educate yourself. Do
proper research, ask other business owners, read relevant books and
websites. You may end up with a huge loss if you start your business without
having the required knowledge and skills.
4. Information Overload
The only thing constant is change! This phrase is true as well as change is
continuous and we witness it happening all around us. Today, information
keeps changing. New facts and data keeps emerging and replacing old beliefs
and trends. Due to this information overload, it gets difficult to find effective
solutions. It becomes a challenge for a new business to sort through this data
and come up with good decisions. However, one easy solution is to look for
the authenticity of the data. Check its references, and the writer. Learn to use
keywords to narrow a research topic. Start asking successful businessmen
about their experiences. Learn from them.
5. Lack of Direction and Planning
This problem prevails because of not creating a thorough and detailed
business plan. Many young entrepreneurs are so excited about setting up
their very own business that they fail to prepare a proper business plan. It
helps in focusing on the goal and mission of the business. It determines the
financial situation of the business, the roadmap to follow, market research
and analysis of the competition. A business plan is basically an investment to
your business.
6. Working in the Business rather than Working on the Business
Usually entrepreneurs get so worked up with the paperwork, satisfying
customers and doing all the necessary things in keeping the business
running. They fail to fulfill some other equally crucial tasks. It is important
that you take a day or even a few hours to analyze your business. Determine
which area needs attention, do an inventory review, review cash flow of your
business, review payrolls and employee benefits. It is also important to
update your corporate minutes, your contracts and your agreements with
stakeholders annually. Hold meetings with your managers and other
employees to connect with them.
7. Innovation
Unfortunately, there are many new start-up companies that stick to the age
old book rules. They don’t try to create an innovative culture, even majority
of the big businesses struggle with innovation. People get accustomed to the
work culture and they don’t think outside the box. Businessmen and
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employees stay away from change and resist whatever changes that take
place in the company. The best thing to do is to be open to innovation. When
bringing a change, ensure that all your employees are prepared for it. Discuss
it with them in a meeting, tell them how important it is to be innovative,
make them understand how beneficial it will be.
8. Trying to Do It Alone
Coping with everything alone is also one of the most common mistake new
business owners make. They believe that they can manage everything and
don’t need any advice or help form anyone. Initially, they do seem to be
successful in this strategy as the cost is low since they handle everything.
However, as the work starts growing gradually, the workload takes a toll on
the new entrepreneur. Mistakes start being made and the quality of work
starts decreasing. You may even start losing customers soon. This is why this
strategy is not successful in the long run. Hiring two to three employees is
more beneficial for a start up business. It is better to pay a small amount to
your workers than lose double the amount in the future.
9. Getting Clients
For a new business, it is difficult to attract prospects and retain customers.
With a small marketing and advertising budget, new entrepreneurs are
unable to reach out to a wider audience. Potential customers are usually
hesitant to going for a new business. They prefer going for companies that
have experience and a large customer following. However, the good news is
big companies charge more. There are many clients and customers who are
looking for companies that provide cheaper, but good quality service.
Providing excellent service to them will ensure that they remain your
customers and even recommend you to others.
10. Poor Marketing
Apart from a detailed business plan, a marketing plan is also important for
any business. Once you have a clear idea about your target market and your
competition, you can allocate a budget for advertising and promoting your
business and decide which medium to advertise through. You can also decide
your product pricing through target market analysis. Make sure you that
your pricing can be easily afforded by your target market and that your
advertising effectively reaches them.
What Causes Small Businesses to Fail?
The short answer is, regardless of the industry, failure is the result of either
the lack of management skills or lack of proper capitalization or both.
Eleven Common Causes of Failure:
Choosing a business that isn't very profitable. Even though you generate
lots of activity, the profits never materialize to the extent necessary to
sustain an on-going company.
Inadequate cash reserves. If you don't have enough cash to carry you
through the first six months or so before the business starts making money,
your prospects for Success are not good. Consider both business and
personal living expenses when determining how much cash you will need.
Failure to clearly define and understand your market, your customers,
and your customers‘ buying habits. Who are your customers? You should
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be able to clearly identify them in one or two sentences. How are you going
to reach them? Is your product or service seasonal? What will you do in the
off-season? How loyal are your potential customers to their current supplier?
Do customers keep coming back or do they just purchase from you one time?
Does it take a long time to close a sale or are your customers more driven by
impulse buying?
Failure to price your product or service correctly. You must clearly define
your pricing strategy. You can be the cheapest or you can be the best, but if
you try to do both, you'll fail.
Failure to adequately anticipate cash flow. When you are just starting out,
suppliers require quick payment for inventory (sometimes even COD). If you
sell your products on credit, the time between making the sale and getting
paid can be months. This two-way tug at your cash can pull you down if you
fail to plan for it.
Failure to anticipate or react to competition, technology, or other
changes in the marketplace. It is dangerous to assume that what you have
done in the past will always work. Challenge the factors that led to your
Success. Do you still do things the same way despite new market demands
and changing times? What is your competition doing differently? What new
technology is available? Be open to new ideas. Experiment. Those who fail to
do this end up becoming pawns to those who do.
Overgeneralization. Trying to do everything for everyone is a sure road to
ruin. Spreading yourself too thin diminishes quality. The market pays
excellent rewards for excellent results, average rewards for average results,
and below average rewards for below average results.
Overdependence on a single customer. At first, it looks great. But then you
realize you are at their mercy. Whenever you have one customer so big that
losing them would mean closing up shop, watch out. Having a large base of
small customers is much preferred.
Uncontrolled growth. Slow and steady wins every time. Dependable,
predictable growth is vastly superior to spurts and jumps in volume. Going
after all the business you can get drains your cash and actually reduces
overall profitability. You may incur significant up-front costs to finance large
inventories to meet new customer demand. Don't leverage yourself so far
that if the economy stumbles, you'll be unable to pay back your loans. When
you go after it all, you usually become less selective about customers and
products, both of which drain profits from your company.
Believing you can do everything yourself. One of the biggest challenges for
entrepreneurs is to let go. Let go of the attitude that you must have hands -on
control of all aspects of your business. Let go of the belief that only you can
make decisions. Concentrate on the most important problems or issues
facing your company. Let others help you out. Give your people responsibility
and authority.
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Putting up with inadequate management. A common problem faced by
Successful companies is growing beyond management resources or skills. As
the company grows, you may surpass certain individuals' ability to manage
and plan. If a change becomes necessary, don't lower your standards just to
fill vacant positions or to accommodate someone within your organization.
Decide on the skills necessary for the position and insist the individual has
them.
So, the founder's attitude, ability to be objective, willingness to bring in
needed help, and share power are all crucial to success. "Most start-ups
make the mistake of falling in love with their product or service," says
Shukla. "Ultimately, it is this lack of self-criticism that causes many
companies, start-ups and their more mature counterparts, to fail. Start-ups
suffer this fate more often because there are more dreamers than doers."
I think that fact speaks for itself," says Jonathan Goldhill, a small-business
consultant and former director of an economic development center in
California's San Fernando Valley. "I would say that the primary reason for
failure of start-ups within three years is usually...management's failure
to act, or management's failure to react, or management's failure to
plan."
Other reasons why businesses fail in their early years include: poor business
location, poor customer service, unqualified/untrained employees, fraud,
lack of a proper business plan, and failure to seek outside professional
advice.
While poor management is cited most frequently as the reason
businesses fail, inadequate or ill-timed financing is a close
second. Whether you're starting a business or expanding one, sufficient
ready capital is essential. It is not, however, enough to simply have sufficient
financing; knowledge and planning are required to manage it well. These
qualities ensure that entrepreneurs avoid common mistakes like securing the
wrong type of financing, miscalculating the amount required, or
underestimating the cost of borrowing money.
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Types of Family Business
Business Plan:
Document that describes a business along with it’s objectives, strategies, the
market in which it operates and the businesses’ financial forecasts.
A business plan is a blue print of step by step process that would be followed to
convert business idea into successful business venture.
Business Plan Purposes:
• Plans for future
• Allocate resources
• Identify and prepare for problems and opportunities
• Useful for start up businesses applying for finance or growth
• Improves entrepreneur’s understanding of business and the market
Audience
• Banks, Financial lenders.
• Venture Capitalists: people who invest for a share of the business.
• Business Angels: people who invest in start up businesses which are high
risk, high growth market.
• Providers of grants
• Potential purchaser of the business
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Business Plan Process :
Idea generation: is the first step in the business planning process. This step
differentiates entrepreneur from usual business. An entrepreneur may come up
with new business idea or may bring in value addition to existing product in the
market. Sources of new idea for entrepreneurs are:
Consumers/ customers
Existing companies
Research and development
Employees
Dealers, retailers.
Environmental scanning: once the entrepreneur is through the idea generation
stage, next entrepreneur is required to conduct environmental scanning which
includes analyzing external and internal environment that affects business idea.
1. External environment comprises of :
Socio cultural appraisal : it gives brief overview about the culture and
tradition existing in society. It is comprised of values and beliefs of people
which determines the acceptance of product by customer in the market.
Technological appraisal : it assess various technological options available
to convert an idea to product. It also provides an brief overview about
technological updates.
Economic appraisal : it assess the status of the society in terms of economic
development, per capita income, national income, consumption pattern in
the business.
Demographic appraisal : it assess the population pattern of given
geographic area. Which includes sex, age profile, distribution etc.
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the government’s laws and regulations from registration, to operation, and until
cessation
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