Principles of Management
This article examines how managers execute the primary functions of management including strategy development, business planning, organization, control, and leadership. The impact of contemporary factors such as globalization and information technologies is reviewed and the new methods that managers use to execute primary functions are explained. The use of metrics as a tool to develop strategies and plan and organize business activities is examined. The use of analytics as a tool to control business processes and optimize business resources and opportunities is also examined. The importance of developing human resources is examined along with popular contemporary methods for staff development.
Keywords: Analytics; Benchmarking; Business Strategy; Business Planning; Human Resource Development; International Organization for Standardization; Metrics; Mentoring
The functions and activities of managers have remained relatively unchanged over time. Managers have always had to develop strategy, plan business activities, organize business functions, control processes, and lead and develop people, all in a manner that successfully drives businesses. However, what has changed over time is how managers have viewed and executed these functions (Hill & McShane, 2008). In addition, the challenges faced by managers have also changed as technologies and business conditions have evolved.
Technological innovation can play a significant role in determining how well a company performs. To what extent a company decides to pursue innovative methods may depend on available resources as well as competition in the business arena. From a strategic perspective, companies can commit to a high level of innovation in order to discourage new competitors from enter a business as well as to signal existing competitors that the cost of maintaining a product or service could become more costly for them (Corts, 2000).
Effects of Global Markets
Corporate Governance Systems
Corporate governance is related to corporate performance (Chun-Yao, Zong-Jhe, & Chun-Yi, 2013). Globalization certainly increases competition but it also expands the marketplace. However, increased competition and expanding markets can also strain corporate governance systems that have become accustomed to a smaller sale of operation as well as not having to contend with additional and perhaps previously unknown competitors. Corporate governance systems are also structured differently in some countries, especially those settings where the national governments control competition or are heavily invested in large corporations in those countries. Since companies in countries where the economy is largely market-oriented may be able to achieve greater degrees of efficiency and thus be more competitive over companies in settings where national government ownership or control of companies hinders economic performance, competition with these foreign firms will significantly impact firms.
Globalization of competition and of markets may also spur companies to create more decentralized management and control structures. This could result in network-like structures where central management functions may not be able to meet the needs of local operations. This could create some redundancy in functional departments in order to meet local needs, while still maintaining a central headquarters or a primary location for company operations. To a certain extent, the company's divisions or business units located in other countries can become highly independent for centralized control and the oversight of the corporate governance structure (Börsch, 2005).
Historically, corporate structures have fluctuated from highly centralized control structures to strong autonomy at the division level and sometimes back again. Globalization has contributed to shifts in these structures, but it is important to recognize that fluctuations in the level of control that corporate headquarters has over business units are likely to continue to occur.
A global economy has also led to the emergence of global standards. In December 2000, the International Organization for Standardization (ISO) issued revisions to the ISO 9000 Standard series. These revisions had a substantial change in focus, which actually makes the standard more useful for organizations seeking to improve performance and profitability (Vragel, 2001). The year 2000 revisions changed both the structure and focus of the standard. The auditable portion of the standard has changed from 20 sections to five, specifically:
- Quality management system.
- Management responsibility.
- Resource management.
- Product realization.
- Measurement, analysis and improvement (Vragel, 2001).
While it is important to observe and embrace the global quality improvement movement, the "search for competitiveness and competitive advantage appears to be endless. The pressures of the complex, unpredictable, and dynamic business environment, global market competitions, and organizational change have promoted and sustained the search for competitiveness. The factors influencing and determining competitiveness are numerous and diverse" (Mathews, 2006, p. 158).
Competitiveness is achieved by blending a wide range of processes into a winning combination. The goal is certainly to increase productivity and to operate more efficiently. A firm’s economic performance is connected to the performance of a certain sector, region or nation (Hategan, 2012). However, companies need to identify areas in which they can actually become competitive and maintain profitability. As corporate executives examine various business strategies they need to simultaneously assess productivity, efficiency and profits.
A true competitive advantage is achieved when a company develops a value-creating strategy that other competitors are not pursuing. Once the strategy is worked out it can be difficult for competitors to mimic the strategy and achieve the same level of benefits from it (Mathews, 2006).
Managers must continuously make decisions. At almost every moment during every day, most executives are involved in some phase of decision making. They collect and exchange information, review and analyze data, develop scenarios, evaluate alternative business tactics and strategies, and review results of activities that were undertaken based on previous decisions.
At lower levels, decisions focus on day-to-day operations. At higher levels, decisions are focused on long-term goals of the company (Brousseau, Driver, Hourihan & Larsson, 2006). As information technology has evolved, so has the ability of managers to use technology to help in the process of developing strategy, planning business activities, organizing business functions, controlling processes, and leading and developing people. Two new powerful technology-based tools can assist managers in the decision making process — metrics and analytics. Metrics enable managers to develop strategies and plan and organize business activities. Analytics enable managers to control business processes and optimize business resources and opportunities.
For decades corporate executives in every industry have worked to fine tune how they affect the performance of their businesses. Managers fully understand that to improve the efficiency of their operations and the effectiveness of their business strategy that they need measurement systems. One major shift in performance measurement perspectives was to go beyond just looking at financial figures and relying on a wide array of measurements to judge how well a company is performing. Customer satisfaction, cash flow, manufacturing effectiveness, and innovation are all part of the new perspective of performance measurement and management. The dissatisfaction with using solely financial measures to evaluate business performance started to develop over 50 years ago. General Electric, among others, developed high-level task forces to identify and analyze alternative corporate performance measures (Eccles, 1991).
Lack of Preventative Action
Many managers worry that income-based financial figures are better at measuring the consequences of yesterday's decisions than they are at indicating tomorrow's performance. Events of the past decade substantiate this concern. In the 1980s, some executives saw the strong financial corporate records fall behind due to declines in quality or customer satisfaction which weren't considered important, or because global competitors gained market share. Even managers who have not been hurt feel the need for preventive action. A senior executive at one of the large money-center banks, for example, grew increasingly uneasy about the European part of his business, its strong financials notwithstanding. To address that concern, he nominated several new measures (including customer satisfaction, customers' perceptions of the bank's stature and professionalism, and market share) to serve as leading indicators of the business's performance.
Discontent turns into rebellion when people see an alternative worth fighting for. During the 1980s, many managers found such an alternative in the quality movement. Manufacturers and service providers have come to see quality as a strategic weapon in their competitive battles. Thus, they have delegated significant resources to develop measures such as defect rates, response time, and delivery commitments to evaluate the performance of their products, services, and operations. Quality management has been one of the most popular research areas in the twenty-first century (Ebrahimi & Sadeghi, 2013).
In addition to pressure from global competitors, a major impetus for these efforts...
(The entire section is 4425 words.)