Management and Business

7/2/2000

Books, • ‘Management (A Global Perspective)’

By Koontz & Weihrich Mc Graw Hill

• ‘Management’ By Stoner & Freeman Prentice Hill

Context Management is a necessary process when you need to make the most of your resources. Someone who is very rich does in general not need much management. When someone is in a situation where there is not great pressure on resources, simple common sense will serve them very well . However the process of management is necessary and helpful to a person or organization where resources are under great pressure. When studied there are three common elements that emerge in management.

• Goals • Responsibilit y • Resources

A French man, Fayol, produced a management model with 14 points. This has since been reduced to 5 points.

• Planning • Organising • Staff ing • Leading • Controlli ng

All these elements of the “modified Fayol model” are interdependent.

Planning There are 9 types of plan. You should ask why exactly things are done as they are. It is necessary to justify all activities. This ensures resources are not wasted. You can also anticipate problems. A plan can also be the basis of control.

Plans independent of particular situations • Purpose- “What does the organisation exist to do in the view of society” . • Missions – “How does the organisation see and rate itself now and in the future”. • Objectives – “Steps towards the mission, must be quantified and bounded by a time limit” . • Strategies – “Collections of actions designed to achieve the objective”.

Plans in connection with a collection of situations • Action Plans/Programmes.

Intensive use of resources to accomplish a specific task. • Budget.

The plan for a given task given in financial terms.

Plans for a single specific situations • Policies.

Templates for procedure that keep the organisation in check for all delegated tasks. • Rules.

These have no discrimination unlike policies. They may ensure safety. The are not always useful however.

• Standard Procedures. Ensures consistent operation for repetitive tasks.

All of these allow decisions to be made down the line.

7 steps in making a plan • Premises (as in assumptions) • Objectives • Options (different ways to do something) • Evaluate (decide which are the best/worst options) • Select (Select the best plan) • Communicate (inform others of your plan) • Budget

Objectives are often arbitrary and sometimes superfluous. The responsibilit y of evaluating options is often determine by inside politi cs and power-plays.

Effective Planning Needs • Right time scale. • Decide over what period ahead you will be committing resources. • Information

-Needed NOW! -Often mostly available straight away. -Some information is less available. Such as long range forecasts. -Need to gather information to check ideas on diff icult to predict things. With a contingency plan standing by.

• Update. Do this when it is clear that a plan will not work.

• Flexibilit y.

Organisation The need for structure in a group arises as the size and complexity of the group increases. A chart may be used to display the organisational structure of a group. Charts show the division of work in an organisation.

Charts allow us to see who are the managers and the managed. A chart also describes the work done. We can also see the levels of management. From the above, the chief exec has sole profit responsibilit y. Here is a breakdown by division.

Each division can be big enough to be a separate company. Divisions can be made in various ways, on the basis of,

• Product • Geography • Type of customer • Time • Process • Equipment

There is another type of structure too…

Matrix Organisation

For example, a consultancy may be structured in the following two-dimensional way,

Area 1

Area 2

Area 3

Man. Science

I.R. Training Work Study

14/02/2000 Another example of how a matrix organisational structure could be employed is Royals Royce with their aerospace products.

Organising brings in the concept and presence of formal authority. There are two views on formal authority. • You have the right to manage (the old view) • You have to win acceptance.

Power Power is a wider concept than formal authority. Power gives you the abilit y to make something happen. There are five bases for this. • (Give)Rewards • Punishments (this leads to unpredictalbe responses from subordinates) • Legitimate (pure acceptance) • Referent (Charismatic, guiding figure) • Expert Organisations have to be structured. From that structure there arises heirarchy. Within that heirarchy there are active control li nks, the limit of these defines the span of control. Specialisation casuses the organisation to split i nto the specific parts. Line and Staff means that when a person that doing a task, he'she needs support staff . The classical school of management was based on the church and Milit ary, which were organisations simply control, they had no driving objectives. More reciently we employ "scientific management". Problems with calssical theory • Assumptions on heirarchy and power. • No informal li nks. • Real li fe span of control (was bigger than prescribed). • Line/Staff blurring. • Effect on initiative (was negative). • Rigid.

• Status. • Rule-Following (conform rather than perform).

The Hawthorne Experiment This was conducted at the Hawthrone plant of Western Electric by Elton Mayo from 1927 to 1932. After analysing the resulting productivity of staff after applying various positive and negative changes to the work environment, the Hawthorne effect was coined. People perform more when you show them recognition. Specific problems detailed: • Alienation • Fustration • Dependance Some Solutions proposed: • Worker Participation • Human Relations Training • Suggestion schemes • Job enlargement • Communications Some problems withe the humans realtions school of though: • Surveys were suspect • Some conflict is enevitable (which the survey didn't say) • Conflcit need not be bad (which the survey didn't say either) • Real Life situation ignored.

Quantitative School techniques from operational research abd management science.

Uses; • Model Building • Optimising • Planning • Control Problems; • Suspect Models • No definite answers • No people effect (doesn't account for real people) We have seen that there are 3 schools of organisation; 1)Classical 2)Neo-Classical human relations 3)The Contingency approach There are two methods to integrate all of these into a single system; • The systems approach • The contingency approach

The Systems approach Key concepts;

• Sub-systems Some sub-systems are separate but still effect our sub-system and other sub-systems overlap with our sub system.

• Synergy. The organisation becomes more than the sum of it's parts.

• Open/Closed systems. • System boundary • Flow • Feedback

There are 4 basic tasks to install this system: • 1) Defining organisation system • 2) Estblishing system objectives • 3) Creating formal sub-systems • 4) Systematic integration Defining the organisation Ask the following; • Who is the organisation?

Employees, Advisors, Stakeholders, 'Customers'. • What is the organisation?

Concept/mission Which needs are met? Services offered.

The aim is to answer the question "what are we now and what do we want to become?". Traditional goals can lead to problems (internal cost and profit). We need a set criteria which interrelate. Here are some wider systems of interest: • Government • Community • 'Customers' • Other agencies

21/02/2000

Formal susbsystems, Off icially extablished groups breated to carry on teh organisation's activities.

Divisions Departments Region Committees Boards Other off icial level bodies Style of organisation

Systems Integration Cheif Executive's role

The Contingency Approach

Situations differ, so it is the job of the manager to pick the approach which will work. • Work study • Direct Incentive • Automation

Staffing "The People Function" • Plan • Obtain • Train • Retrain Human resource planing. • Future need - estimate staff needed to continue operating. • Future Balance - Guess at how many staff will stay on. • ± People - Adding or removing staff .

• Development -Develip people's skill s. • Needd to consider several things when acting on the above points. • Strategic plan • Environment (ecconomic) • Technology Planning tasks; • Forecast (number, type & quality) • Audit (asses properties of staff )

Recruitment Objective: Attract a pool of good candidates.

1) Define the job (Job description) 2) Define the (desired) job holder (jon sepcifacation)

Job description + Job specifacation = Job analysis Sources of candidates:

Inside organisation: Level os seniority Advertising High flyers (always look from with where possible) Outside organisation: Advertisiing (expensive) Consultants (20%-25% of 1st year salary) Exectutive search (head hunting) (60% of 1st year salary).

Selecton Objective: Make an offer to someone who will do the job well . 7 stages;

1) Application form. • Formal request for job. • Providiing basic data to help the process. • If accepted, becomes part of personal data. • Begins the appraisel process.

2) Screening Interview. • An apraisel of both sides.

3) Testing. • Should give consistent results. • Needs to be a good predictor.

4) Background check. 5) Selection Interview.

• Practice/Reherse. • Try to be different.

6) Physical Examination. 7) Job offer.

Induction and Orientation. (training) General Routine History f the organisation Policies and Rules (health and safety) Conditions oof service.

28/02/2000

Training and Development Training: Teaching technical skill s to non-management personel. Development: Improving technical, H.R. and communication skill s of managers. The purpose of all trainging and developme outside the academic sphere, is to improce the effectiveness of the trainee are in heis/her job. Training needs must be identified first,

Sources:-

Performance Appraisal. Job Ananlysis. Organisational analysis. Attitude survey.

Training Methods: On the job: • Unstructured • Job Rotation Off the job: • Training schools • Programmed learning Combined: • 'Sandwich' • Apprenticeship Management development needs must also be idnetified. Sources: As for 'taining' but more emphasis on the individual. Development Methods (1) :

Coaching Job rotation Training positions Planned work activities

All of thess are done with the manager at his/her place of work. Development Methods (2):

Training Schools University programmes Behavioural Approaches

Mostly done away from the work place. [Missing Text] B.C. View:- (3 elements) • Performance, training, needs, potential. • Rewards • Career Councelli ng Who should approve this? There are 4 possibilit es:-

• Superior alone • Group of superiors • Peers • Suborndinates Possible pitfalls; • Exaggeration • Imprecise standards • Appraising the wrong things • Rater differences • Rater bias • 'HALO' effect

Overcoming Problems • Set corporate goals • Develop with employee his/her goals • Appraise continuously • Train Appraisers There are four ways an employee can move in an organisations; • Prmotion • Transfer • Demotions • Seperation (firing)

• Constructive dismissal; • Someone resigns and claims they were pushed out. • Redundancy • Incapabilit y for the job • Misconduct (gross seriousness)

Leading There are two parts to this section; leading and being led. Factors necessary for performance; • Abilit y • Knowledge • Motiviation There are 3 ways to look at motiviation, 3 theories. 1) Content 2) Process 3) Reinforcement "Content"

Some problems with content theory; • Individuals vary • Same needs leads to different response

• Same person can have different responses • Reactions to sucess varies "Process" Which goals/rewards motiviate? Inherent in "Process" are ideas of: • Expectancy • Valence (how strong is the drive?) Implications for management are' • Determine: Rewards values & performance required • Link performance level attainable • Link rewards to performance • Analyse reward effectiveness • Reward must be adequate Some important lessons • Organisatiosn get what they reward • Job itself can be rewarding • Superior's role is rimportant "Reinforcement" How can consequences of past actions be used to influence future behaviour through a learning process? This leads to... ...Behaviour Modification/Operant Conditioning • Positive reinforcement

Primary Rewards (consumable) Secondary Rewards (promotion/praise)

• Avoidance learning (condition to penalties) • Extenction (not to respond to attention seeking) • Punishment (negative reward, unpredictable response) Some early views on motivation; • Scientific management model • Human relations model • Human resources model A further model is... ... A SYSTEMS APPROACH

"The Individual" Moslow's "Hierachy of needs"

Atkinson & McClelland defined three basic drives: • Ned for achievment (nACH) • Need for power (nPOW) • Need for aff ili ation (nAFF) "The Job" Herzberg's 2 factor approach. He took 200 engineers and asked for instances when they felt good and and bad about their job. • Satisfiers

(job content with positive feeling about job) • Dissatisfiers

(to do with dissatisfactory things to do with job conditions/environment). Flaw to methodology are that anecdotes are biased. "The Work Situation" Depends on immediate work environment & organisational 'slimate'.

Leadership "The process of directing & influencing the task related activities of group members". Implications:- • Involves others • Unequal power distrobution • Leaders can influence aswell as direct There are 3 approachex to study of leadership. • Traits • Behaviour • Contingency (manage given a particular situation effectively) "Traits" 2 lines of research: Traits of leaders Vs non-leaders Traits of effective leaders Vs ineffective leaders. Basic leadership functions. • Task related or problem solving • Group maintenence or social functions McGregor's2 basic styles, • THEORY X • THEORY Y Theory X Assumptions;

• Most people dislike work • They must therefore be coerced and directed • Most people avoid responsibilit y Theory Y Assumptions; • Work is as natural as play • Self direction is possible • Commitment is a function of reward • People seek responsibilit y • Creativity is widely distributed • Intellect is under-utili sed McGregor postulated that theory Y was better than theory X. Ohio State University analysed management techniques & came uup with this matrix.

This is known as Blake's grid,

Blake's Styles 1,1 Impoverish 1,9 Country club 9,1 Task for authoritarian 5,5 Middle of the road 9,9 Team Blake (& Muton) postulated that 9,9 was best.

13/3/2000

Liket's 4 leadership systems; • System 1 - Exploitive Authoritive

Managers have littl e trust in staff & staff f ear management • System 2 - Benevolent Authouritative

Management is condescending and workers are weary • System 3 - Consultative

Managers trust subbordinates, subbordinates feel free to come forward with problems.

• System 4 - Participative Managers very supportive to staff . Staff take part in descisions.

Likert goes for System 4. Systems 3 andd 4 are most eff icient.

Reddin

"It's the mangaers job to be effective. It si his only job". Basic personal styles; RO=Relationships orientation, TO=Task orientated.

Reddin called this the 3D Approach. If the system is used less eff iciently, it can be drawn out as,

If the system is used more eff iciently, it can be drawn out as,

The 'situation' affects a leader's behaviour. • Personality/Experiance • Superior's expectations • Subbordinates expectations • Task requirements • Organisational climate • Peers expectations Now we go into the field of CONTINGENCY Fielder's 3 factors: • Leader/Member relations • Task Structure • Leader's position power Path/Goal Approach Subbordinates can be influenced in a number of ways. Most important, abilit y to; • Provide a suitable reward • Clarify what must be done to earn the reward Life Cycle Theory Hersey & Blanchard (based on Reddin)

Being effective requires; • Decide what sutuation needs • Adjust basic stule to match need

• Manage the situation effectively MOTIVATION + LEADERSHIP + COMMUNICATION = EFFECTIVE TEAM WORKING Let us now focus on communication.

Communication

"Formal transmission of ideas from a sender to a reciever". Implications; • Person to Person • Ideas are converted to words • There is a medium of transmission

Common communication problems; • Transmission looses occur • Moise gets added • Retention is low This also leads us to the idea that TWO WAY COMMUNICATION HELPS! Some other barriers; • Encoding/Decoding discrepancy. • Other factors can distort • Face value not accepted • Imperfect recpetion • Hearing what we want to hear • Preconceived ideas • Communicating too quickly

Guidelines for effective communications; • Decide purpose • choose medium • Arrange feedback • Think like reciever • Control the speed • Repeat the message • Use simple language

Controling

4 steps in the control process:

Budgetary control 2 broad approaches; • Top down • Bottom up and 2 forms of budget; • Operational • Financial

4 stages to make budgetary control effective; • Setting budget • Collecting actual/real data • Comparing actual Vs budget • revising the plan (can take 18 months)

Setting budgets; • Prepare organisational chart

(Responsabilit y costing) This leads to 'Budget' & 'Cost' centres. Budget Centre - "A centre of management responsabilit y; a physical unit established as a point of management control". Cost Centre - "A location, person, or item(s) of equipment in relation to which costs may be collected for the purpose of analysis and control"

• Select suitable coding system • Budget Period • Control Period (how often for control reports) • Budget control • Budget levels • Set 'master' budget Collection of actual costs • 2 part coding

(1-what type of expense, 2-where should we post it) • Accurances & Pre-payments

(Accurance - put money away to pay for something - virtual payment)

Comparing Actual Vs Budget • The Budget statement • Analysis of variance

eg,

20/03/2000

Comparing Actual Vs Budget • The budget statement • Analysis of variance • Revising the paln

Budgets

For an example, consider an small engineering business. The first colum is an example of a typical 'good month'. The second colum takes the situation where all quantities go 5% against us. Some problems with budgetary control. • Conflicts at budget setting (can't agree on targets) • Rigid • Used by senior management as a control tool. • Manipulation (people manipulate figures to give the right results) • Last year is the basis for this year Let's look at the same engineering business and look at managing cash. In this situation we see that there is a time lag between expenditure and any sales proceeds coming in.

Standard Costing

Often we would use a table as below to show this, Quantity Value Direct labour Direct Material Overhead recoverey factors Reporting using standard costs, Take actual output x Appropriate standards & Total For this we must use labour and material costs which should have been incurred. Then Compare with actual totals.

Managemet by Objectives (MBO)

Drucker, Odiorne and Humble wrote about this. Key results areas Performance standards.

Reddin's effective MBO • Effectiveness areas • Effectiveness standards • Objectives eg, for a salesman, EA Sales of X ES Tonnes PA £ PA Market share OBJ 850 to 1000 tonnes PA £3500 to £11000 PA 17% to 19% (market share)

Ratio Analysis

ROI = Proff its / Assets employed. There are many others; • Added value/Employees • Sales cost/œ sales • Admin cost/œ sales • Debter/Creditors • Stock sales • Gearing (borrowed cash to own cash) Break even anaylsis, • Fixed Costs • Varialbe Costs

The Z chart,

Work Study

"A standard labour hour" (SH) That amount of work produced by a skill ed and motivated person working under incentive conditions. Suppose we produce 6 SH, the clock time is 8 hours, then teh performance is 100x(6/8) = 75%. Typically, pay is laid out as,

Labour cost control

Implications for management; • Control Indirects • Keep % of measured work high • Audit Standards • Analyse 'excess' items (wasted/non-productive time)