Management (Encyclopedia of Business and Finance)
Throughout the years, the role of a manager has changed. Years ago, managers were thought of as people who were "the boss." While that might still be true today, many managers view themselves as leaders rather than as people who tell subordinates what to do. The role of a manager is comprehensive and often very complex. Not everyone wants to be a manager, nor should everyone consider being a manager.
A DEFINITION OF MANAGEMENT
Some would define management as an art, while others would define it as a science. Whether management is an art or a science isn't what is most important. Management is a process that is used to accomplish organizational goals; that is, a process that is used to achieve what an organization wants to achieve. An organization could be a business, a school, a city, a group of volunteers, or any governmental entity. Managers are the people to whom this management task is assigned, and it is generally thought that they achieve the desired goals through the key functions of (1) planning, (2) organizing, (3) directing, and (4) controlling. Some would include leading as a managing function, but for the purposes of this discussion, leading is included as a part of directing.
The four key functions of management are applied throughout an organization regardless of whether it is a business, a government agency, or a church group. In a business, which will be the focus here, many different activities take place. For example, in a retail store there are people who buy merchandise to sell, people to sell the merchandise, people who prepare the merchandise for display, people who are responsible for advertising and promotion, people who do the accounting work, people who hire and train employees, and several other types of workers. There might be one manager for the entire store, but there are other managers at different levels who are more directly responsible for the people who perform all the other jobs. At each level of management, the four key functions of planning, organizing, directing, and controlling are included. The emphasis changes with each different level of manager, as will be explained later.
Planning Planning in any organization occurs in different ways and at all levels. A top-level manager, say the manager of a manufacturing plant, plans for different events than does a manager who supervises, say, a group of workers who are responsible for assembling modular homes on an assembly line. The plant manager must be concerned with the overall operations of the plant, while the assembly-line manager or supervisor is only responsible for the line that he or she oversees.
Planning could include setting organizational goals. This is usually done by higher-level managers in an organization. As a part of the planning process, the manager then develops strategies for achieving the goals of the organization. In order to implement the strategies, resources will be needed and must be acquired. The planners must also then determine the standards, or levels of quality, that need to be met in completing the tasks.
In general, planning can be strategic planning, tactical planning, or contingency planning. Strategic planning is long-range planning that is normally completed by top-level managers in an organization. Examples of strategic decisions managers make are who the customer or clientele should be, what products or services should be sold, and where the products and services should be sold.
Short-range or tactical planning is done for the benefit of lower-level managers, since it is the process of developing very detailed strategies about what needs to be done, who should do it, and how it should be done. To return to the previous example of assembling modular homes, as the home is nearing construction on the floor of the plant, plans must be made for the best way to move it through the plant so that each worker can complete assigned tasks in the most efficient manner. These plans can best be developed and implemented by the line managers who oversee the production process rather than managers who sit in an office and plan for the overall operation of the company. The tactical plans fit into the strategic plans and are necessary to implement the strategic plans.
Contingency planning allows for alternative courses of action when the primary plans that have been developed don't achieve the goals of the organization. In today's economic environment, plans may need to be changed very rapidly. Continuing with the example of building modular homes in the plant, what if the plant is using a nearby supplier for all the lumber used in the framing of the homes and the supplier has a major warehouse fire and loses its entire inventory of framing lumber. Contingency plans would make it possible for the modular home builder to continue construction by going to another supplier for the same lumber that it can no longer get from its former supplier.
Organizing Organizing refers to the way the organization allocates resources, assigns tasks, and goes about accomplishing its goals. In the process of organizing, managers arrange a framework that links all workers, tasks, and resources together so the organizational goals can be achieved. The framework is called organizational structure, which is discussed extensively in another article. Organizational structure is shown by an organizational chart, also discussed extensively in another article. The organizational chart that depicts the structure of the organization shows positions in the organization, usually beginning with the top-level manager (normally the president) at the top of the chart. Other managers are shown below the president.
There are many ways to structure an organization, which are discussed extensively in the articles referred to previously. It is important to note that the choice of structure is important for the type of organization, its clientele, and the products or services it providesll which influence the goals of the organization.
Directing Directing is the process that many people would most relate to managing. It is supervising, or leading workers to accomplish the goals of the organization. In many organizations, directing involves making assignments, assisting workers to carry out assignments, interpreting organizational policies, and informing workers of how well they are performing. To effectively carry out this function, managers must have leadership skills in order to get workers to perform effectively.
Some managers direct by empowering workers. This means that the manager doesn't stand like a taskmaster over the workers barking out orders and correcting mistakes. Empowered workers usually work in teams and are given the authority to make decisions about what plans will be carried out and how. Empowered workers have the support of managers who will assist them to make sure the goals of the organization are being met. It is generally thought that workers who are involved with the decision-making process feel more of a sense of ownership in their work, take more pride in their work, and are better performers on the job.
By the very nature of directing, it should be obvious that the manager must find a way to get workers to perform their jobs. There are many different ways managers can do this in addition to empowerment, and there are many theories about the best way to get workers to perform effectively and efficiently. Management theories and motivation are important topics and are discussed in detail in other articles.
Controlling The controlling function involves the evaluation activities that managers must perform. It is the process of determining if the company's goals and objectives are being met. This process also includes correcting situations in which the goals and objectives are not being met. There are several activities that are a part of the controlling function.
Managers must first set standards of performance for workers. These standards are levels of performance that should be met. For example, in the modular home assembly process, the standard might be to have a home completed in eight working days as it moves through the construction line. This is a standard that must then be communicated to managers who are supervising workers, and then to the workers so they know what is expected of them.
After the standards have been set and communicated, it is the manager's responsibility to monitor performance to see that the standards are being met. If the manager watches the homes move through the construction process and sees that it takes ten days, something must be done about it. The standards that have been set are not being met. In this example, it should be relatively easy for managers to determine where the delays are occurring. Once the problems are analyzed and compared to expectations, then something must be done to correct the results. Normally, the managers would take corrective action by working with the employees who were causing the delays. There could be many reasons for the delays. Perhaps it isn't the fault of the workers but instead is due to inadequate equipment or an insufficient number of workers. Whatever the problem, corrective action should be taken.
To be an effective manager, it is necessary to possess many skills. Not all managers have all the skills that would make them the most effective manager. As technology advances and grows, the skills that are needed by managers are constantly changing. Different levels of management in the organizational structure also require different types of management skills. Generally, however, managers need to have communication skills, human skills, computer skills, time-management skills, and technical skills.
Communication Skills Communication skills fall into the broad categories of oral and written skills, both of which managers use in many different ways. It is necessary for a manager to orally explain processes and give direction to workers. It is also necessary for managers to give verbal praise to workers. Managers are also expected to conduct meetings and give talks to groups of people.
An important part of the oral communication process is listening. Managers are expected to listen to their supervisors and to their workers. A manager must hear recommendations and complaints on a regular basis and must be willing to follow through on what is heard. A manager who doesn't listen is not a good communicator.
Managers are also expected to write reports, letters, memos, and policy statements. All of these must be written in such a way that the recipient can interpret and understand what is being said. This means that managers must write clearly and concisely. Good writing requires good grammar and composition skills. This is something that can be learned by those aspiring to a management position.
Human Skills Relating to other people is vital in order to be a good manager. Workers come in about every temperament that can be imagined. It takes a manager with the right human skills to manage this variety of workers effectively. Diversity in the workplace is commonplace. The manager must understand different personality types and cultures to be able to supervise these workers. Human skills cannot be learned in a classroom; they are best learned by working with people. Gaining an understanding of personality types can be learned from books, but practice in dealing with diverse groups is the most meaningful preparation.
Computer Skills Technology changes so rapidly it is often difficult to keep up with the changes. It is necessary for managers to have computer skills in order to keep up with these rapid changes. Many of the processes that occur in offices, manufacturing plants, warehouses, and other work environments depend on computers and thus necessitate managers and workers who can skillfully use the technology. Although computers can cause headaches, at the same time they have simplified many of the tasks that are performed in the workplace.
Time-Management Skills Because the typical manager is a very busy person, it is important that time be managed effectively. This requires an understanding of how to allocate time to different projects and activities. A manager's time is often interrupted by telephone calls, problems with workers, meetings, others who just want to visit, and other seemingly uncontrollable factors. It is up to the manager to learn how to manage time so that work can be completed most efficiently. Good time-management skills can be learned, but managers must be willing to prioritize activities, delegate, deal with interruptions, organize work, and perform other acts that will make them better managers.
Technical Skills Different from computer skills, technical skills are more closely related to the tasks that are performed by workers. A manager must know what the workers who are being supervised are doing on their jobs or assistance cannot be provided to them. For example, a manager who is supervising accountants needs to know the accounting processes; a manager who is supervising a machinist must know how to operate the equipment; and a manager who supervises the construction of a home must know the sequence of operations and how to perform them.
There are many views of management, or schools of management thought, that have evolved over the years. What follows is a brief discussion of some of the theories of management that have greatly affected how managers manage today.
Classical Thought The classical school of management thought emerged throughout the late 1800s and early 1900s as a result of the Industrial Revolution. Since the beginning of time, managers have needed to know how to perform the functions discussed earlier. The Industrial Revolution emphasized the importance of better management as organizations grew larger and more complex. As industry developed, managers had to develop systems for controlling inventory, production, scheduling, and human resources. It was the managers who emerged during the Industrial Revolution, many who had backgrounds in engineering, who discovered that they needed organized methods in order to find solutions to problems in the workplace.
Classical management theorists thought there was one way to solve management problems in the industrial organization. Generally, their theories assumed that people could make logical and rational decisions while trying to maximize personal gains from their work situations. The classical school of management is based on scientific management which has its roots in Henri Fayol's work in France and the ideas of German sociologist Max Weber. Scientific management is a type of management that bases standards upon facts. The facts are gathered by observation, experimentation, or sound reasoning. In the United States, scientific management was further developed by individuals such as Charles Babbage (1792871), Frederick W. Taylor (1856915), and Frank (1868924) and Lillian (1878972) Gilbreth.
Behavioral Management Thought It was because the classical management theorists were so machine-oriented that the behavioralists began to develop their thinking. The behavioral managers began to view management from a social and psychological perspective. These managers were concerned about the well-being of the workers and wanted them to be treated as people, not a part of the machines.
Some of the early behavioral theorists were Robert Owen (1771858), a British industrialist who was one of the first to promote management of human resources in an organization; Hugo Munsterberg(1863916), the father of industrial psychology; Walter Dill Scott (1869955), who believed that managers need to improve workers' attitudes and motivation in order to increase productivity; and Mary Parker Follett (1868933), who believed that a manager's influence should come naturally from his or her knowledge, skill, and leadership of others.
In the behavioral management period, there was a human relations movement. Advocates of the human relations movement believed that if managers focused on employees rather than on mechanistic production, then workers would become more satisfied and thus more productive laborers. Human relations management supported the notion that managers should be paternalistic and nurturing in order to build work groups that could be productive and satisfied.
The behavioral science movement was also an important part of the behavioral management
school. Advocates of this movement stressed the need for scientific studies of the human element of organizations. This model for management emphasized the need for employees to grow and develop in order to maintain a high level of self-respect and remain productive workers. The earliest advocates of the behavioral science movement were Abraham Maslow (1908970), who developed Maslow's hierarchy of needs, and Douglas McGregor (1906964), who developed Theory X and Theory Y. These theories are discussed in depth in other articles.
Contemporary Management Thought In more recent years, new management thoughts have emerged and influenced organizations. One of these is the sociotechnical system. A system is a set of complementary elements that function as a unit for a specific purpose. Systems theorists believe that all parts of the organization must be related and that managers from each part must work together for the benefit of the organization. Because of this relationship, what happens in one part of the organization influences and affects other parts of the organization.
Another contemporary approach to managing involves contingency theories. This approach states that the manager should use the techniques or styles that are most appropriate for the situation and the people involved. For example, a manager of a group of Ph.D. chemists in a laboratory would have to use different techniques from a manager of a group of teenagers in a fastfood restaurant.
Closed Management Systems Within the classical and behavioral approaches to management, the managers look only within the organization to improve productivity and efficiency. This is a closed systemhe organization operates as though it is in its own environment. Outside influence and information are blocked out.
Open Management Systems Another perspective is the open system. As one would expect, here the organization functions in conjunction with its external environment, acting with and relying upon other systems. Advocates of an open system believe that an organization cannot avoid the influence of outside forces.
Management is a very complex process to which this article is but a brief introduction. Many other articles in this encyclopedia provide extensive insight into the many aspects of management.
Nickels, William G., McHugh, James M., and McHugh, Susan. (1987). Understanding Business. Chicago: Irwin.
Pierce, Jon L., and Dunham, Randall B. (1990). Managing. Glenview, IL: Scott, Foresman/Little, Brown Higher Education.
Management (Encyclopedia of Business)
- SCHOOL APPROACHES TO MANAGEMENT
- THE SYSTEMS APPROACH
- THE PROCESS APPROACH AND THE BASIC FUNCTIONS OF MANAGEMENT
- CONTEMPORARY ISSUES IN MANAGEMENT
Business management can be defined as the acquisition, allocation, and utilization of resources through planning, organizing, staffing, leading, and controlling. Management involves the coordination of human, financial, material, and information resources in order to realize company goals and operate a business efficiently. Managers are the employees charged with these responsibilities. Managers play a variety of roles in a company, summarized as interpersonal roles, information roles, and decision-making roles. Managing entails five functions: planning, organizing, staffing, leading, and controlling. The day-to-day tasks of management include: considering problems and making decisions in how to deal with them, implementing courses of action, and reviewing decisions and actions and making any necessary changes.
The basic elements of modern management practices can be traced to ancient times. The Egyptians, for example, developed advanced management techniques related to labor division, hierarchy of authority, and teams. They developed complex bureaucracies to measure and forecast river levels and crop yields, distribute revenues within the government, manage trade, and complete massive construction projects such as the pyramids. The Babylonians, Greeks, Romans, Chinese, and other cultures made similar contributions to management science.
Although management systems existed long before the modern era, it was not until the late 18th and 19th centuries that advanced business management techniques emerged in response to the Industrial Revolution. The Industrial Revolution resulted in the formation of extremely large organizations characterized by job specialization and the administration of large amounts of human resources. A new breed of middle-level managers were needed to plan and direct human efforts and to administer large pools of capital.
Among the most influential American contributors to management practice during the Industrial Revolution was Daniel C. McCallum (1815-1878), the superintendent of the Erie Railroad during the mid-1800s. To more efficiently manage the vast human and capital resources involved with construction of the railroad, he established a set of guiding management principles that emphasized: a specific division of labor and responsibilities, the empowerment of managers to make decisions in the field, compensation based on merit, a clearly delineated managerial hierarchy, and a detailed system of data gathering, analysis, and reporting that would foster individual accountability and improve decision making.
SCHOOL APPROACHES TO MANAGEMENT
The efforts of McCallum and other managers of his era were reflected in the first of five schools of management that emerged during the early and middle 1900s. The first of these schools was scientific management, which dominated management philosophy between the 1890s and the early 1920s. Scientific management concepts were heavily influenced by the ideas of American efficiency engineer Frederick W. Taylor (1856-1915). Taylor believed that organizational efficiency could be achieved by using statistics, logic, and detailed analysis to break jobs and responsibilities down into specific tasks. The chief contribution of scientific management was that it successfully applied modern techniques of science and engineering to the management of resources and organizational systems.
Scientific management principles were displaced during the 1920s by the classical management school of thought. Classical management theory is largely attributable to Henri Fayol, who is also known as the father of management. Classical management emphasized the identification of universal principles of management which, if adhered to, would lead to organizational success. Universal principles encompassed two broad areas. The first was identifying business functions and the second was structuring organizations and managing workers.
In essence, classical theory holds that management is a process consisting of several related functions, such as planning and organizing. Thus, by identifying specific business functionsncluding marketing, finance, production, and subfunctions within those and other major categoriesompanies can efficiently divide an organization into departments that work as a process. Furthermore, by carefully structuring chains of authority and responsibility, an entity can successfully facilitate the performance of individuals within departments to achieve company goals.
Importantly, Fayol is credited with identifying five basic management functions: planning, organizing, commanding, coordinating, and controlling. In addition, his 14 principles of management established a framework for management that continues to influence modern management theory. Those principles included: unity of command, meaning a worker should be responsible to only one superior; unity of direction, which implies that each group of activities having a single goal should be unified in a department or work group, or at least under one manager; centralization, or centralized control and decision making; and stability of tenure of personnel, which suggests that, for efficiency reasons, employee turnover should be kept to a minimum even if that means sacrificing quality for long-term loyalty.
The classical school of management remained dominant from the 1920s until the 1940s. It was gradually supplanted, however, by theories that focused on the importance of individual needs and group interaction in organizations. Human relations management arose in the 1930s, largely as a result of studies and experiments (including the classic Hawthorne experiments) conducted by Harvard University psychologist and researcher Elton Mayo (1880-1949) and his contemporaries. To the surprise of classical theorists, Mayo's research demonstrated that mechanistic, efficiently designed processes did not necessarily create more efficient organizations. Instead, the research demonstrated that success could be attained by showing more concern for workers' psychological needs. The human relations school advocated such techniques as employee counseling, feedback, and communication with coworkers, superiors, and subordinates.
Both the classical and human relations management ideologies were eclipsed during the 1950s by the behavioral management school of thought. It also emphasized the importance of the human psyche in management. It differed, however, from the human relations approach in that it stressed behavior over interaction. It sought to rationalize and predict behavior in the workplace through scientific analysis of social interaction, motivation, the use of power and influence, leadership qualities, and other factors. Behaviorists believed that a chief goal of managers should be to increase the effectiveness of workers through motivational techniques, such as empowerment and participation in decisions, and to redesign jobs to take advantage of individuals' strengths and weaknesses.
Demonstrating the gradual transition from mechanistic management theory to a more humanistic approach was the renowned Theory X and Theory Y, which American management theorist Douglas McGregor (1906-1964) posited in the 1950s. Theory X depicts the old, repressive, pessimistic view of workers. It assumes that people are lazy and have to be coerced to produce through tangible rewards. It also presumes that workers prefer to be directed, want to avoid responsibility, and treasure financial security above all else. In contrast, Theory Y postulates that: humans can learn to accept and seek responsibility; most people possess a high degree of imagination and problem-solving ability; employees will self-govern, or direct themselves toward goals to which they are committed; and, notably, satisfaction of ego and self-actualization are among the most important needs that organizations should address.
Coinciding with the behavioral management ideology, which gained acceptance throughout the 1950s (and remained relevant into the 1990s), was the fifth school of thought, quantitative management. Quantitative management theorists believe that, while the behavioral dimension of organizations merits attention, scientific and analytical techniques related to process and structure can help organizations be much more efficient. Quantitative management entails the application of statistical analyses, linear programming, and information systems to assist in making decisions, allocating resources, scheduling processes, and tracking money. Specifically, it advocates the substitution of verbal and descriptive analysis with models and symbols, particularly those that are computer-generated. In fact, it is because of advanced electronic information systems that quantitative management techniques were broadly applied in the 1980s and 1990s.
COMPLEMENTARY MANAGEMENT APPROACHES
In addition to the school approaches that dominated much of the 20th century are three other approaches to management theory and application: systems, contingency, and process. They emerged during the mid-1900s, gained widespread appeal during the latter part of the century, and continued to influence management thought and practice through the 1990s. These approaches differ from most of the schools of management thought in that they are not posited as a wrong or right ideology, but rather are complementaryhey can exist and be applied simultaneously depending on the particular internal and external environment of individual organizations.
THE SYSTEMS APPROACH
The systems management approach emphasizes the importance of educating managers to understand the overall system so that they will realize how actions in their department affect other units. An organization can be likened to a mobile: if you touch one part, the entire apparatus swings into motion. For example, the hiring of a single individual into a marketing department is bound to have some degree of impact on other divisions of the organization over time. Similarly, incorporating behaviorist theory, if managers are given more autonomy and responsibility they are likely to perform at a higher level. As a result, subordinates in their departments are likely to perform better, which may cause other departments to be more effective, and so on.
The systems approach to management recognizes both open and closed systems. A closed system, such as a clock, is self-contained and operates relatively free from outside influences. In contrast, most organizations are open systems and are thus highly dependent on outside resources, such as suppliers and buyers. Specifically, systems are impacted by four spheres of outside influence: education and skills (of workers), legal and political, economic, and cultural. Management processes must be designed to adapt to these influences. This acknowledgment of outside factors represents a meaningful departure from the earliest school approaches that viewed management within the context of closed systems.
Importantly, the systems approach also recognizes that all large organizations are comprised of multiple subsystems, each of which receives inputs from other subsystems and turns them into outputs for use by other subsystems. At least five types of subsystems, according to systems theory, should be incorporated into management processes in larger organizations. Production subsystems are the components that transform inputs into outputs. In a manufacturing company this subsystem would be represented by activities related to production. In most business organizations all other subsystems are built around the production subsystem.
Supportive subsystems perform acquisition and distribution functions within an organization. Acquisition activities include securing resources, such as employees and raw materials, from the external environment. Human resources and purchasing divisions would typically be included in this group. Distribution (or disposal) activities encompass efforts to transfer the product or service outside of the organization. Supportive subsystems of this type include sales and marketing divisions, public relations departments, and lobbying efforts.
Maintenance subsystems maintain the social involvement of employees in an organization. Activities in this group include providing employee benefits and compensation that motivate workers, creating favorable work conditions, empowering employees, and other forms of satisfying human needs. Similarly, adaptive subsystems serve to gather information about problems and opportunities in the environment and then respond with innovations that allow the organization to adapt. A firm's research lab or a product development department would both be part of an adaptive subsystem. Finally, managerial subsystems direct the activities of other subsystems in the organization. These managerial functions set goals and policies, allocate resources, settle disputes, and generally work to facilitate the efficiency of the organization.
THE CONTINGENCY APPROACH
Like the systems approach, the contingency approach to management views the organization as a set of interdependent units operating in an open system. It differs from all other management approaches, though, in that it is based on the idea that every organization and situation is unique. Its situational perspective implies that there is no single best way to manage. Therefore, specific techniques and managerial concepts must be applied in different ways and in different combinations to achieve organizational or departmental effectiveness. In fact, the contingency theory has been described as a sort of amalgam of all other ideologies. Its chief contribution to modern management theory is its identification of critical internal and external variables that affect management processes.
THE PROCESS APPROACH AND THE BASIC FUNCTIONS OF MANAGEMENT
Perhaps the most widely accepted organizational management theory is the process approach. It also serves as a descriptive overview of the various tasks and responsibilities management faces, and it draws on many of the theories contained in the five schools of management as well as the systems approach and contingency approach described above. For example, the process approach derives from Fayol's ideas, particularly his five management functions. And, like the systems approach and the later schools of management thought, the process approach emphasizes the point that management is an ongoing series of interrelated activities rather than a one-time act.
The process approach also recognizes other management theories that have gained acceptance in the late 1900s. Of import is the generally accepted management pyramid model, which is comprised of three hierarchies based on experience and education. At the top of the pyramid is top management, or the executive level that handles long-term strategy. At the center is middle management, which translates top management objectives into more specific goals for individual work units. Finally, line managers and supervisors fill the bottom of the pyramid. They handle the day-to-day management of employees and operations.
Adherents to the process approach have altered and elaborated on Fayol's original functions, usually in an attempt to incorporate behaviorist philosophies. Management theorists commonly recognize five management functions: planning, organizing, staffing, leading, and controlling. The five process management functions are linked together by communication and decision-making activities common to all of them.
Planning is the development of specific strategies designed to achieve organizational goals. Forward-looking managers use planning to develop strategies, policies, and methods for achieving company objectives. Moreover, managers who rely on planning can anticipate problems before they even arise and therefore can implement solutions quickly. In addition, planning serves as the foundation for the other management functionsrganizing, staffing, leading, and controllingy providing direction for a company; and increases a company's potential for success in accomplishing its goals.
Planning occurs at all three management levels: top, middle, and line. As indicated earlier, top managers are charged with making long-term plans that define the mission and policies of the organization while lower level managers implement them. In the planning process, top-level managers concentrate on the questions of what and how much. Middle managers implement mission and policy objectives, usually by focusing on the where and when. Finally, line managers effect the specific plans of the middle managers by addressing the pressing questions of who and how.
For example, top executives at a nail factory may decide that the company should become the most productive, highest-quality, largest-volume producer in the world. Middle managers in the production division may decide that accomplishment of this goal requires that over the next 12 months they cut costs by 20 percent, decrease flaws to. 01 percent, and increase capacity 40 percent. Likewise, managers in the marketing department may decide that they need to increase sales by 80 percent during the next year. Finally, line managers would have to figure out how to achieve those goals and who would do the actual work. They might increase bonuses for salespeople who boosted volume, for instance, or lower profit margins (and prices) to increase sales. Or, production line managers might implement a new quality management program and increase investments in cost-saving automation.
Another way of viewing the planning process in an organization is by categorizing planning activities as strategic (top management), tactical (middle), or operational (bottom). The overall process usually entails at least six steps: setting goals, analyzing the external and internal environment to identify problems and opportunities, identifying and evaluating alternatives, choosing a plan, implementing the program, and controlling and judging the results of the implementation. Different stages of the process should ideally overlap management hierarchies, thus fostering organizational unity and informed planning.
In addition to the stages of the planning process and hierarchical responsibilities, most planning activities and responsibilities can be categorized, according to Corporate Planning: An Executive Viewpoint, into one of four planning roles: (1) resource allocation, (2) environmental adaptation, (3) internal coordination, (4) and organizational strategic awareness. Resource allocation entails decisions related to the distribution of funds, expertise, labor, and equipment. For instance, a chief executive officer (CEO) might decide to not pay shareholder dividends as a way to increase funds for new product development. Or, a production line manager may elect to shift laborers from one product line to another to better match fluctuating output requirements.
Environmental adaptation planning activities are those that serve to improve the company's relationship to its external environment, including such influences as governments, suppliers, customers, and public opinion. These activities address problems and opportunities that arise from such external factors. For example, gas station company managers that choose to attach point-of-sale (credit card) machines to their pumps are reacting to a public demand for convenience. Similarly, a CEO of a coal mining company might have to plan to reduce toxic emissions in an effort to satisfy government regulators or to appease public sentiment.
Internal coordination planning activities are those that respond to internal influences. They coordinate internal strengths and weaknesses in an effort to maximize profitability (in the case of for-profit companies). Finally, planning activities categorized as organizational strategic awareness strategies create systematic management development systems that allow an organization to evaluate the effects of past plans.
In order to be effective, plans and goals developed and executed at any level will generally exhibit basic characteristics. The plans should be specific and measurable, for example, meaning that they will have definite goals that can be measured against definite results. Plans should also be time-oriented, or should be devised with deadlines for accomplishing parts of the entire goal and a final deadline for completion. Plans should also be attainable. Insufficient resources or impossible goals can thwart motivation and result in underperformance. Finally, plans should be mutually supportive, meaning that plans made in or for one part of an organization should complement other plans and objectives.
Organizing is the second major managerial function. It is the process of structuring a company's resourcests personnel and materialsn a way that will allow it to achieve its objectives. Specifically, organizing entails a fundamental three-step process: developing tasks, labor units, and positions. First of all, managers must determine the exact actions that have to be taken to implement plans and achieve objectives. Second, they must divide personnel into teams with areas of responsibility. Third, managers must delegate authority and responsibility to individuals and establish decision-making relationships. Once management accomplishes the first step, it can take a number of different routes to organize teams and delegate authority. Most organizations are arranged by either function or division.
The most common approach to organizing teams and delegating authority in organizations is by function. Under the functional approach, activities are broken down into primary business functions, such as finance, operations, and marketing. Within each major functional group are numerous subfunctions. In the marketing division, for example, might be the sales and promotions departments. The functional approach results in a comparatively efficient division of labor and an authority hierarchy that is easy for workers to understand. It may lead, however, to internal rivalries between departments or myopia because different divisions are not aware of the goals and actions of other parts of the company.
In addition to functions, many companies are organized by division. There are several different divisional approaches to structuring teams and delegating power to managers. For example, some companies take a product line approach, whereby the company is broken down into different product or service groups. For instance, an appliance producer may break its organization down into dishwashers, clothes washers and dryers, and vacuum cleaners. Other companies might use a customer approachndustrial products, consumer products, government products, etc. The advantage of both approaches is that they allow managers and the entire company to be focused on the product or customer rather than on support functions, such as marketing. This organizational approach may result, however, in an inefficient division of labor (i.e., overlap) because each group is forced to supply their own support functions.
Another common means of organizing a company by divisions is the geographic approach, whereby activities or groups are divided by region. For instance, a multinational bank may have three major divisions: North America, Asia, and Europe. Those divisions, then, might be divided into sub-regions, such as northeast, south, and west. The geographic approach is often used by companies that specialize in marketing, finance, or some other major business function and operate in a number of different geographic areas. It allows flexibility in relation to different laws, exchange rates, and cultures, and fosters a responsiveness to local markets not attainable under other divisional approaches. The chief drawback of geographic organizations is that they can be relatively expensive to maintain.
A less conventional and increasingly popular approach to structuring organizations is known as the matrix system. In essence, a matrix system creates both functional and divisional groups to form multidisciplinary, integrated teams that combine staff and line authority. The main advantage of the matrix is that it reduces myopia in an organization, fosters cooperation, and promotes a free flow of information. But the matrix approach may also create an ambiguous power structure and may have limitations for many types of companies.
In addition to the basic structure, management authority and responsibility will also be dictated by the level of centralization in a company. In general, companies with more centralized management will be figuratively tall, meaning that power flows down through a chain of command. Decisions are made by a few people and handed down to the masses. In contrast, decentralized, or flat, organizations push management authority down. In flat organizations, many managers (and subordinates) are empowered to independently make decisions within their area of expertise in the company. Because of the trend toward flatter organizations during the 1980s and 1990s, traditional middle levels of management have become obsolete in many companies. Effectively, all workers become managers to some degree in the flattest organizations.
Staffing, the third major organizational function, encompasses activities related to finding and sustaining a labor force that is adequate to meet the organization's objectives. First, managers have to determine exactly what their labor needs are and then go into the labor force to try and recruit those skills and characteristics. Second, managers must train workers. Third, they have to devise a method of compensating and evaluating performance that complements objectives. This includes designing pay and benefits packages, conducting performance appraisals, and promoting employees. Finally, managers usually must devise a system of firing ineffective employees or reducing the workforce. In addition, management duties related to staffing often entail working with organized labor unions and meeting federal and state regulations.
Leading, or motivating, is the fourth basic managerial function identified by the process approach to management. It is defined as the act of guiding and influencing other people to achieve goals. Leading involves leadership, communication, and motivation skills. In addition, the leadership role for most managers entails four primary duties: educating, evaluating, counseling, and representing. Educating includes teaching skills and showing workers how to function within the company and how to perform their assigned tasks. They do so through both formal and informal means. Examples of informal education are attitudes, work habits, and other behavior that sets an example for subordinates to follow.
Evaluating activities that are part of a manager's leadership responsibilities include settling disputes, creating and enforcing standards and policies, evaluating output, and dispensing rewards. In fact, much of the respect and esteem that a manager gets from subordinates is contingent upon the ability to evaluate effectively.
A manager's ability to counsel will also impact his or her effectiveness. Counseling involves giving advice, helping workers solve problems, soliciting feedback from subordinates, and listening to voluntary input or employee problems. Finally, managers lead through representation by voicing the concerns and suggestions of their subordinates to higher authorities. In other words, managers must show a willingness to back their workers and represent their needs and goals.
Numerous theories have been posited to explain the leadership function and to describe the traits of successful leaders. For example, John P. Kotter, author of The Leadership Factor, identified six traits considered necessary for managers in large organizations to be effective leaders: (1) motivation, (2) personal values, (3) ability, (4) reputation and track record, (5) relationships in the firm and industry, and (6) industry and organizational knowledge. Contrary to traditional beliefs about leadership, which hold that leadership ability is innate, these trait groups are acquired through combinations of early childhood experiences, education, and career experiences.
In addition to developing leadership traits, effective managers must adopt a style of leadership that complements their position, personality, and environment. In general, managers practice some combination of four recognized leadership styles: directive, political, participative, and charismatic. The directive leadership style emphasizes the use of facts, sound strategy, and assertiveness. This type of manager focuses on gathering information, establishing objectives through a careful assessment of data, devising strategies to accomplish goals, and then directing subordinates and coworkers to achieve those ends. Managers who subscribe to a directive leadership style are less concerned about building a consensus for their vision than they are about motivating others to achieve it. They are more likely to confront resistance to their goals and to have less patience in pursuing objectives than other types of leaders.
In contrast, managers who embrace a political leadership style believe that their ability to lead requires the power to manipulate forces within the entity toward common objectives. Importantly, they assume that the company is a political arena fraught with deception, in-fighting, and selfish goals. Therefore, they often must push, bargain, and manipulate to advance the interests of their departments and themselves. Although such leaders may be well-intentioned, honest, and acting in the best interests of the company, they may be willing to deceive others and act selfishly in order to achieve a desired result. Common tactics include keeping goals flexible or vague, advancing their agendas patiently, and manipulating channels of influence and authority.
The participative, or values-driven, style of leadership emphasizes joint decision making, decentralization, the sharing of power, and democratic management. Managers who are participative leaders assume that their subordinates are highly motivated by work that challenges them, builds skills, and is accomplished with teams of people that they respect. Thus, unlike directive leadership, the participative style focuses on building a consensus during the decision-making process. It also stresses bottom-up managementnformation and expertise is gleaned from workers in lower levels of the organization and used to direct decisions and goalsnd the empowerment of subordinates to make decisions.
The fourth basic managerial style of leadership, charismatic leadership, differs from the other three styles in that it is more suited to realizing radical visions or handling crises. It is less concerned with influencing behavior toward the attainment of long-term goals or day-to-day management activities. Charismatic leadership in business organizations is a style often used by entrepreneurs who are starting new companies, or by transformational managers seeking to revitalize established organizations.
The fifth major managerial function, controlling, is comprised of activities that measure and evaluate the outcome of planning, organizing, staffing, and leading efforts. Controlling is an essential part of management because it helps managers determine the fruitfulness of the other functions (planning, organizing, etc.); helps guides employee efforts towards company goals; and helps a company distribute its resources efficiently and effectively. Controlling is typically viewed as an ongoing management process that ensures that the organization is moving toward its goals. The process includes establishing performance standards, evaluating ongoing activities, and correcting performance that deviates from the standards.
Managers begin by establishing specific criteria outlining how they want a company's tasks performed. Based on company objectives, managers determine the performance standards in order for the company to attain its goals. Performance standards may take the form of qualitative and quantitative criteria. Examples of performance standards are budgets, projections, pro forma statements, and production, sales, or quality initiatives. Successful managers usually rely on a feedback system to see how employees are responding to performance standards; this allows managers to identify problems before they develop into crises.
During the second stage of the control process, evaluation, managers determine how closely their subordinates' or department's performance matched up with preset standards. Of import is the manager's acceptable range of deviation, or the degree to which actual performance can vary from the standard before corrective action is necessary. In addition, managers must factor into the performance comparison influences outside of the control of their unit. They must also devise a means of communicating results to subordinates in a constructive manner.
If measured results deviate outside of an acceptable range, the manager must take corrective action. Corrective action may mean simply readjusting the preset standards to reflect more realistic goals. Or, the manager may have to analyze the process that lead to the deviation and then act to make changes. For instance, if a production line fails to meet quality goals the manager may choose to rearrange work teams or change the financial incentive system to emphasize quality. The manager may also determine that the departmental budget needs to be revised to increase spending on quality control.
To be effective, managers must design control systems that are based on meaningful and accepted standards. If standards are too high, subordinates are likely to lose motivation or become frustrated. Standards should also be based on the overall goals of the organization rather than on the narrow objectives of one department or division. The control process should emphasize two-way communication so that controls are understood by subordinates and managers are able to effectively set standards and evaluate performance, taking into account the workers' perspective. In addition, standards and controls should be flexible enough to accommodate emerging problems and opportunities. Most importantly, controls should be used only when necessary so that they don't unnecessarily obstruct creativity and drive.
MANAGERIAL ROLES AND SKILLS
In addition to the five basic managerial functions defined by the process approach, a number of ancillary roles can be identified (depending on the position and responsibilities of individual managers) that are necessary to perform the functions. These roles take the form of interpersonal roles, information roles, and decision maker roles. As part of their interpersonal roles, managers are generally expected to act as figureheads and leaders for their units or organizations, which entails performing ceremonial duties or entertaining associates. Managers also act as liaisons, working with peers in other departments or contacts outside of the organization. The liaison role requires managers to have contact with peers, customers, executives, and others.
As part of their information role, managers monitor the business environment and gather information that affects their departments. In addition to gathering information, managers also distribute it among their employees. Managers play the information role by acting as spokespersons by providing information about the company to the public. Furthermore, top-level managers often must interact with the government, consumer groups, industry associations, and other organizations.
As part of the decision maker role, managers constantly oversee and observe their units, resolving problems and disturbances, and developing a big picture of the department and its place in the organization. Likewise, managers must be negotiators to help secure resources for their team or group and to elicit cooperation from other groups or individuals inside and outside the company. As decision makers, managers also allocate resources, determining how to distribute limited resources within specific units to achieve maximum effectiveness. This role also involves entrepreneurial skills, because managers must generate ideas about improving their units' performance.
To succeed in their various roles, managers must possess a combination of skills from three broad groups: technical, conceptual, and relationship. Technical skills refer to knowledge of processes, tools, and techniques particular to a company or industry. For instance, sales managers who have never worked as field representatives might lack knowledge that would be important in setting sales goals and compensations systems. Conceptual skills allow managers to view each unit as part of the entire organization, and the company as part of a larger industry. Conceptual skills are particularly important for developing long-range goals and solving problems. Finally, relationship skills are those that the manager uses to communicate effectively and work with others.
Effective managers at all levels typically possess an advanced set of relationship skills, particularly in management structures that stress communication and cooperation (e.g., matrix). In general, managers at the top of the management pyramid require a higher degree of conceptual skills. In fact, as managers assume more responsibility and become less involved with day-to-day activities, technical knowledge becomes secondary. Middle managers, on the other hand, usually must possess a roughly equal amount of conceptual and technical knowledge. Finally, line managers near the bottom of the pyramid depend primarily on technical, rather than conceptual, skills.
CONTEMPORARY ISSUES IN MANAGEMENT
In the 1990s, two different types of senior manager began to emerge in response to the general trend toward specialization and downsizing: the specializing generalist and the generalizing specialist. Because of the stock market crash in 1987, companies in the 1990s sought upper-level specializing generalist managers, that is, general managers who specialized in one area, corporate restructuring and cost cutting, in particular. These managers focused largely on implementing policies that led to reducing costs, such as closing plants and laying off workers. Entrepreneurs who launch multiple businesses sometimes are referred to specializing generalists. Entrepreneurs often learn an array of general business skills because they perform a variety of tasks during the company start-up phase.
Alternatively, generalizing specialist managers generalize an area of expertise across the various management functions. For example, a senior manager with a marketing background might generalize the marketing management approach across an entire company. As a consequence, for example, such a manager might allocate funds only for research projects that have a proven potential market.
Moreover, with the globalization of many industries in the 1980s and 1990s, managers increasingly must possess a global perspective as well as the skills to work with managers and employees from other countries. More and more managers must be able to collaborate with companies from other countries when U.S. companies form multinational alliances with other companies. Consequently, managers must be able to perform their five basic functionslanning, organizing, staffing, leading, and controllingn multinational settings. Economic globalization makes skills such as influence, negotiation, and conflict resolution indispensable.
Other contemporary issues in management include productivity, quality, innovation, and ethics, some of which also stem from globalization. Since other countries such as Japan have surpassed the United States in productivity, managers of companies of all sizes must address the problem of productivity in order to remain competitive. International competition also has caused renewed concern for quality, forcing managers of a variety of companies, such as automobile, computer, and electronics manufactures, to strive for greater quality. In addition, innovation became a key issue in management in the 1990s in response to a host of factors, including changes in the economy, various industries, consumer preferences, and international relations. Finally, because of the growing demand from customers and workers that companies act in a socially responsible manner, managers must make sure that a company's actions and policies are ethical, particularly in the areas of the environment and human rights.
SEE ALSO: Human Resource Management; Management Science; Managerial Economics; Matrix Management and Structure; Operations Management; Organization Theory; Organizational Development; Problem-Solving Styles; Supervision
updated by Karl Heil]
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