principles-of-management2-8-1.ppt

vikramthadeshvar@hotmail.com
Management: Definitions, Roles &
Skills
Principles of Management

Management: Definitions
 “Management is the process of designing and
maintaining an environment in which individuals,
working together in groups, efficiently accomplish
selected aim(s) viz. to create a surplus(s).” ….
Weihrich & Koontz
 “Management is not an absolute; rather it is socially
and culturally determined. Across all cultures and in
all societies, people coming together to perform
certain collective acts encounter common problems
having to do with establishing direction,
coordination and motivation. Culture affects how
these problems are perceived and resolved.” …The
Art of Japanese Management by R. Pascale & A. Athos .

Management: Definition …ctd.
 Applies to and through any kind of organization
 Applies to Managers at all levels
 Concerned with “Doing the right things right at all times”:
1. Effectiveness: Achievement of objectives (Right Things);
2. Efficiency: Achieving those objectives with least amount/
sacrifice of resources (Things Right);
3. Continuous Improvement: in creating increasing ‘surplus’
(at all times);
– “Improve or die” = survival of the fittest
– “what gets measured, gets managed and improved” e.g.
Productivity= Output / Input ratio
 Collective, cohesive and consistent human effort towards
accomplishing a common objective.

Additionally, Managers need to factor in external
environmental forces:
Organization
Economic
Political Regulatory
Societal
Technological
Globalization
For maximum benefit to the organization
Management: Definition …ctd.

 Management - what managers do:
 Fredrick Taylor’s path-breaking “scientific approach”
 Henri Fayol’s classical definition of ‘functions’, now
modified to:
 Plan -- Organize -- Lead(Command&Coordinate) -- Control
 Mintzberg’s map of managerial ‘roles’:
 Interpersonal + Informational + Decisional
 Katz’s interpretation of ‘skills’:
 Technical / Human / Conceptual
 Management – ‘get things done through others’:
 Leadership: “The ability to influence a group towards
achievement of goals”.
 Motivation: “The willingness to exert high level of effort
towards goals”
 Communication:”The transference and understanding of
meaning”
Management: Roles & Skills

Management: roles & skills …ctd.
Managerial Roles (Mintzberg)
Role Description Examples
Interpersonal
•Figurehead symbolic head; required to show Ceremonial,
‘face’ in social & legal conditions. Civic etc.
•Leader Motivating & directing subordinates project plan
•Liaison Networking outside for information Industry -
& favours group meets
Informational
•Monitor nerve centre and interpretator Reports
•Disseminator networking within the organization Meetings etc.
•Spokesperson Transmit intent to outsiders; expert Board Meets
Decisional
•Entrepreneur Opportunity finding& reacting Strategy Plan
•Trouble shooter Handling unexpected disturbance Contingency
•Resource allocator Initiating/approving changes Budgeting
•Negotiator Getting best deal for Organization Contracts

Managerial Skills(Katz & others)
 Technical Skills:
Application of specialized
knowledge or expertise
acquired though formal
training & its use.
 Human Skills:
Ability to work with people,
understand and motivate
groups & individuals.
 Conceptual Skills:
Mental ability to recognize,
analyze, diagnose and think
through complex situations.
Skills Needed
Board
Exec.
Mgr.
Supr.
Management: roles & skills

Principles of Management 2
Management: A Systems
Approach

Systems approach to Management
Organization as a System receives Input, transforms it
through a Process for Output and Operates in an
Environment (economic, regulatory and other forces)
Transformation
process
input output
Feedback (Reenergizing the system)
ENVIRONMENT
System Boundary

Systems approach to Management …ctd.
Systems Concepts
 System Boundaries and Subsystems
> Systems often consist of numerous subsystems.
> Each subsystem has elements, interactions with
other subsystems, and objectives.
> Subsystems perform specialized tasks for the
overall system.
 Subsystem Interfaces and Interface
Problems
Sub-System 2 Sub-System 3
Sub-System 1

Outputs and Inputs
 Systems produce Outputs from Inputs – i.e. the
Inputs are converted to Outputs.
 Outputs of one subsystem become inputs to
another subsystem.
 Outputs must adhere to standards to be useful
or acceptable to the next subsystem.
System Environment
 Environment consists of people, organizations
and other systems that supply data to or that
receive data from the system
 Managers at different levels perceive
‘Environment” differently

“Inputs”: 5 Ms of Management
 Inputs or the resources managers deal with are:
 Man: human resources, both inside and connected with an
organization;
 Materials: goods (hard & software, processed or semi-
finished) and services required to create the sellable end
product;
 Machines: technology and expertise deployed towards the
transformation process;
 Methods: systems, procedures and processes seamlessly
put together for the transformation;
 Measurement: score-keeping and in-process monitoring
continuously with due feedback to keep on-course on time.
 “Money” is required for generating all theses Ms –
managers need to acquire, deploy, generate and
distribute money as a primary need for business!

“Stake”: Something wagered or risked;
an interest in an enterprise with contingent gain or
loss …Webster ‘s dictionary
“Holders” who have stake in Business:
 Shareholders: are the owners. They have put in their
money in the enterprise, expecting better returns from it
than from other ventures;
 Society: includes the State, provincial and local
governments for the improvement of ‘quality of life’ of its
citizens;
Output for “Stake-holders” in Business:

 Suppliers: continuity of their enterprise depends on the
success of the customer enterprise;
 Customers: require the goods and services provided by
the enterprise, better than than those from its competitors.
The enterprise is, in turn, a supplier to its customers;
 Employees: livelihood depends on the progress and
success of the employing enterprise;
 There is a “freedom of choice” (for association)
between each of these stake-holders and the
enterprise in the longer term:
 But they sink or swim together in the shorter term
 Length of term definition varies with individuals!
Output for “Stake-holders” in Business …ctd.

 by the process of
Planning
+ Organizing
+ Staffing
+ Leading
+ Controlling
to accomplish certain pre-determined, (as
derived from stakeholder needs) goals or
objectives
Management as a system transforms inputs:

Inputs
(Goal
Oriented)
Outputs
(External
To
Orgnzn.)
Planning
Organizing
Staffing
Leading
Controlling
Product/Services,
Profits, Customer &
Societal satisfaction,
Other Long-term Goals
Man, Machine
Material,
Method,
Measurement
Stake holder Feedback (reenergizing the system)
EXTERNAL ENVIRONMENT(Opportunities, Constraints)
Stakeholders
Shareholders;
Society; Customers;
Employees; Suppliers

Management Process
First Step: Planning

Planning
 Planning involves selecting objectives or
goals and the course of actions to achieve
them:
 Provides the bridge to take us from where we
are to where we want to go;
 Is a rational approach to achieving pre-
selected objectives - based on innovation,
knowledge and purpose;
 Decision making in choosing the best from
alternative courses of action and is integral to
planning;

Plans as foundation of Management
Plans
What kind of
resources
needed?
What kind of people
& org. structure
to have?
How to lead them
to reach planned
goals?
How to control in
case of deviation
from plan ?
The primacy of Planning

Types of Plans
 Mission / Purpose
 The basic function or ‘reason for existence’ of
an enterprise/ organization
Case in point: Mission of Indira Institute
“To train our students to become the best business
minds and entrepreneurs today, who will lead
their companies successfully into the future
tomorrow , locally, nationally and globally.”

Type of Plans (Cont’d)
 Objectives/ Goals
 The end towards which activity of an
organization is aimed, e.g.
 For a Business enterprise – profit, surplus creation;
 For a Management Institute: The number of
employable/useful trainees;
 Strategies
 Determination of the long term objectives and
adoption of a course of action
 Gives a frame work for linked action-plans,
communicated systematically to guide
thinking and actions.

Types of Plans (cont’d)
 Policies
 “Plans” that are general directional statements
(or understandings) that guide/help in decision
making:
 Repeat decisions taken ‘reflexively’;
 Delegation of tasks without loss of control.
 Some discretion is permissible depending on
circumstances thus encouraging initiative within
limits and situational adjustments;
 Issues with “Policy”
 Seldom documented in writing
 Subject to interpretations

 Procedures
 Plans that are chronological sequences of
required actions: task-oriented in nature;
 Cuts across department boundaries (sub-
systems) in an organization: e.g. customer
complaint handling procedure;
 Procedures and policies are inter related: e.g.
authorization for paid leave
 Policy governs quota, responsible authority etc.
 Procedure governs application, grant and record-keeping.
 Rules
 Specific actions or non-actions allowing no
discretion
 Caution: rules (and procedures too) limit initiative!

 Programs
 Action plans (mainly non-routine or for changed
activities) including, task assignments, steps to
be taken, resources to be deployed etc. to
achieve a (new/renewed) goal;
 Primary program may require supporting programs,
spreading across the enterprise;
 Perfect coordination between supporting & primary
programs essential to avoid delays, unnecessary costs
and expected roll-out.
 Programs are a complex of (sub)goals, policies,
rules and other elements necessary for the
course of action e.g. obtaining ISO certification.

 Budgets
 A statement of expected results expressed in
“Numerical terms” e.g. financial operating
budget = “profit plan”;
 Budgets enforce precision in thinking:
 Making a budget is ‘planning’ by itself;
 Encourages innovation – a “different” way to work
 Budgets serve for ‘Control’:
 Enforces discipline in execution of plans;
 Instills cost consciousness;
 Makes people (constantly) plan!

Steps in Planning
Being aware of
challenges
Market, Customer’s
wants, Competition,
Own strengths
& weakness
Setting Goals/
Objectives
What to accomplish
& when
Planning premises
Internal & external
Environment/conditions
Identifying
alternatives
Comparing &
choosing an
alternative
Decision
making
Budgeting
(Numberizing Plans)
e.g., Sales budget
Operational Expense budget,
Capital expenditure budget
Formulating
Supporting
plans
e.g., plan to buy
Equipment, recruit & train
Employees, develop product etc

The Planning Process
 Planning Period:
 Short range plans e.g. material procurement
plan in a factory
 Long range plans e.g. product development
plan, plant/production facility installation;
 “Urgent” drives out the “Important” – mismatch
between short & long term plans!
 Planning horizon must allow for actions to
run their course – requiring ‘commitments’:
 Thus “decisions today” are key to good plans;
 Long-term plans reap benefits of good short-
term plans.

Steps in Planning
Being aware of
Opportunity
Considering, Market,
Competition, Customer’s
wants, Own strengths
&weakness
Setting Goals/
Objectives
What to accomplish
& when
Objective = Important end towards which activities
are directed; therefore needs verification at the end
of the plan period.

Hierarchy of Objectives& Org. Levels
Mission
Overall
Objectives &
Key result areas.
Divisional objectives
Departmental objectives
Individual objectives
Board of
Directors
CEO
Division
Head
Product X
Division
Head
Product Y
Sales & Mktg
Dept
Production Dept
Sales Manager A Sales Manager B
Objectives set end results – they need to be supported by a
hierarchy of sub-objectives, duly networked through the
organization to avoid discord and wasted effort.

 The Organizational Objectives is deployed
into the objectives of :
 Divisions Departments  Individual
objectives;
 The ‘cascade’ principle: seamless flow;
 Mutual support & interlocking of goals is
essential
 Managers must ensure that the components
of the network fit each other;
 Departments/divisions can be ‘blind-sided’.
Hierarchy of Objectives& Org. Levels …ctd.

Hierarchy of Objectives& Org. Levels …ctd.
Mission
Overall
Objectives &
Key result areas.
Divisional objectives
Departmental objectives
Individual objectives
While setting Objectives, ideally, Top Management should get
information / ‘buy-in’ from lower levels to set realistic goals for
a good result.
Top-down
Approach
Bottom-up
Response:
The result

Key Result Areas (KRA)
 Are areas in which performance is essential for the
success of an enterprise
 Examples of ‘generic KRA’s:
 Market share
 Return on Investment (ROI)
 Service level
 Customer satisfaction
 Peter Drucker recommends: Market standing,
innovation, productivity, physical & financial
resource, profitability, managerial performance &
development, worker performance & attitude and
public responsibility.

Management By Objectives (MBO)
 A comprehensive managerial system that integrates
many key managerial activities in a systematic
manner and that is consciously directed towards the
effective and efficient achievement of organizations’
and individual objectives:
 Set-out by Peter Drucker in 1954;
 Integrated to personal performance appraisal by Douglas
McGregor in 1957;
 Has formed the basis for many theories on motivation;
 Has been criticized for introducing a short-term focus and
undesirable behaviour;
 Currently viewed as a ‘way of managing’ – not a specific
tool.

Weaknesses of MBO
 Emphasis on:
 short term at the expense of long term
 “Results” over “Process”
 Individual over collective effort
 Failure to grasp and deploy the concept of
“seamless cascade”
 Difficulty in setting agreed, harmonized
goals
 Danger of inflexibility

Planning Premises & Strategies
Setting Goals/
Objectives
What to accomplish
& when
Planning premises
Internal & external
environment
Identifying
alternatives
Comparing &
choosing an
alternative
Decision
making
Strategic Planning Process
Strategy = determination of the purpose / the basic long-term
objectives; the adoption of courses of action and
allocation of resources required to achieve the aims.

Planning Premises & Strategies …ctd.
Stakeholder
Wishes &
Shareholder
demands
Management
Orientation
Enterprise
Profile
Purpose &
Major objectives
of enterprise
Current
External
situation
Current
resource
situation
Forecast
External
situation
External
Opportunity
& Threat
Internal
Strengths &
Weakness
Key success factors &
Alternative Strategies
Strategic
choice
The Strategic Planning Process

Planning Premises
Porter’s Five Forces : an
Model for analysis of the
Externals environment.

Planning Premises: forecast of demand
 Estimate of future demand is made by qualitative methods, time-
series methods and/or causal methods:
 Qualitative  relies on judgement of experts to translate to quantities;
 Time-series  statistically interpolate demand on historical data;
 Causal method  seek co-relation on cause and effect basis between
two (or more) variables to quantify demand;
 However, all forecasting methods are limited by:
 Handling of un-quantifiable factors e.g. national pride
 Unrealistic assumptions fuelled by a desire to succeed
 Excessive data required (often unobtainable) to make accurate forecasts
 Uncertainty with environmental changes: Technology, Govt. Policy, International
alignments, New materials/sources, Climate etc.
 Coping with uncertainties require:
 Sensitivity analysis & “What if” scenarios (trust instinct!);
 Planning for contingencies – with defined cut-in milestones.

Generic Strategy
Relationship
B’marking Partnering
Company
Customer
Competitor Supplier
Ultimate competitive position:
- position w.r.t major Customers
- K.S.Fs of Competitors
- leveraging of suppliers
Competitive Advantage
1. Cost Leadership:
To continually work reducing
the cost prices of products.
Supplier Q-C-D has very high
priority.
2. Differentiation:
To constantly offer innovative
and unique solutions. Supplier
technology & quality has focus.
3. Customization:
To offer required services in the
required manner is the focus.
Speed and flexibility important.
Lean Management

Generic Strategy: BCG Matrix
Red: Marketing Perspective; Blue: Financial Perspective
Cash Source
Cash
Use
Hi
Hi Lo
Lo
Market
Growth
rate
Relative Market Share
Hi
Hi Lo
Lo
STAR
“Hold”
???
“Build”
Cash Cow
“Harvest”
DOGS
“Divest”

Planning Premises & Strategies …ctd.
Decision Making = is the core of the planning process; a plan
does not come into being unless a ‘decision’ i.e. certain
commitments of resources, managerial time and money
are made and risks are taken.
Caution: A “Plan” is not intentions and should not suffer from
“Analysis Paralysis”.
Comparing &
choosing an
alternative
Decision
making
Budgeting
( Numberizing Plans)
Say, Sales budget
Operational Expense budget,
Capital expenditure budget
Formulating
Supporting
plans
Say, plan to buy
Equipment, recruit & train
Employees, develop product etc
Deployment (MBO etc.)

 Decision making is a ‘rational choice’ process,
bounded by:
 Limitations: time, information and ‘logic’;
 Behaviour: Risk averseness and biases.
 A key step in the process is to identify those
limiting factors, ‘road-blocks’ to each effective
(‘right thing’) alternative – then finding a
‘solution’ with least sacrifice of resources (‘thing
right’):
 Factors: quantitative, qualitative/intangible;
 Finding solutions:
 marginal analyses – benefits with incremental inputs;
 cost-effectiveness – assessment of benefits over costs.
Decision Making

Decision Making…ctd.
How to select
Amongst the
Alternatives ?
“Experience”: good teacher and useful when
routine/repeat situations arise under similar
circumstances. Without due analysis of the
conditions, mistakes tend to repeat or a poor
fit results.
“Research & analysis”: the approach is in at first
understanding the problem (‘half the solution’!),
then finding relations between various factors
which hinder or foster goal attainment. This is a
structured, analytical approach quantitative or
otherwise.
“Experimentation”: arguably, the best technique
to use, particularly when either experience or
rationale is lacking/limited. However is expensive
and ‘success/failures’ are magnified, results are
subject to interpretational errors.

 Decision making takes place under varying degrees
of uncertain conditions and risks. Techniques used
to aid the process are:
 Risk analysis: every decision is based on interactions
amongst different factors/variables – each of which have
their own probabilities (towards ‘success’). Analysis of
these probabilities yield a risk profile for each alternative
path. In the absence of defined probabilities, estimates
can be used.
 Decision trees: the outcome (measure pre-decided e.g.
cost or time) of every step in the decision is charted and
a course selected on the most favourable outcome. Very
much like making a trip, navigating by using a road-map
(refer example in W & K, “Management – a global perspective/10th
edn. Pg. 209)

 Flow Charts: as a process-guide to taking a decision and
helps as a check-list of key variables, the sequence in
which they fall and the interrelations. Key to making a
choice or re-examining the path taken are also indicated
as risk-reduction devices.
(refer example in W & K, “Management – a global perspective/10th
edn. Figure 8-5)
 Decision Support Systems: a wide variety of (proprietary)
computer based programs are available for managers to
use their time more effectively for decision making of
semi-structured tasks – by providing alternative
evaluations. They focus on the process of decision
making, taking data provide by the management
information systems in enterprises.

Management Process:
Organizing for results

Nature of Organizing
 Organizing may be broadly defined as:
1. The identification and classification of required
activities;
2. The grouping of those activities towards attaining
their set objectives;
3. The assignment of those groupings to a responsible
manager, duly empowered;
4. The provision for coordination among, within and
across the groups in the organization.
 Organization structures are designed to:
 Clarify tasks & responsibilities,
 Remove obstacles,
 Furnish decision making & communication network
 Support attainment of enterprise objectives

Nature of Organizing …ctd.
The Business Organization Model: “Value Chain” (Porter,1985)
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Service
Primary Activities
The margin reflects the reward for the risks run by the company.
All activities together need to generate ‘value’ greater than the sum of its costs.

 Inbound Logistics: relate to receiving, storing and disseminating
inputs;
 Operations: associated with transformation of inputs into final
product form;
 Outbound Logistics: relate to collecting, storing and physically
distributing the products to buyers;
 Marketing & Sales: relate to advertising, Promotion, sales,
distribution-channel selection & management and Pricing;
 Service: associated with enhancement or maintenance of
product value over life;
The Value Chain: “Primary Activities”

 Procurement: relates to the function of purchasing inputs used
across the firm’s primary and support activities;
 Technology Development: relates to know-how, processes &
procedures, ‘technology’ embodied in the product design and
delivery. Most activities have their own sub-set of technology;
 Human Resource Management: directed at recruiting, training,
developing and compensating all personnel;
 Firm Infrastructure: associated with serving and supporting the
firm as a whole, with the company as its customer eg. Finance &
accounting, Quality;
The Value Chain: “Support Activities”

 Most practicing mangers would translate this
“value chain” to imply an organization as:
“ a formalized, intentional structure of roles and
positions”
 Thus ‘formal organization’ implies the intentional
structure of roles in an enterprise.
 However, in an enterprise ‘informal organization’
will form, not necessarily bad and is:
“ a network of personal and social relations not
established or required by formal organizations
but arising spontaneously as people associate
with each other”.

Hierarchical levels
Span of control
The building block of an organization
is the Department: a group charged
with independent task & responsibility.
#
#
#
#
#
# Office Bridge Team
$ $ $
$ Car pool

 Grouping activities & people into departments makes
it conceptually possible to expand organizations to
an infinite degree.
 Different patterns have been successfully used to
group activities:
 By simple nos. is a simple method – works well for the
lowest levels where work is routine, uniform and non-
specialized; time-grouping is an extension of this method
where shift-working is required;
 By enterprise functions – embodies what enterprises
typically do e.g. Production, Engineering, Sales etc. This
method, defined by F.W.Taylor, is arguably the most
prevalent method still used.
“Departmentation”

 By territory or geography – is very common when the
geographical spread is wide. It was a device introduced to
speed up management in similar units for easy and swift
communication e.g. Sales: N/E/W/S; Fire Brigade: Camp,
Hinjewadi, Aundh etc.
 By Customer/Account orientation – reflecting the primary
interest in nature of markets/business/customer e.g.
Banks: Institutional banking, Small Savings etc.
 By Process groups – encountered primarily in specialized/
manufacturing operations where processes are vital e.g.
Advertising: Copy-writing, Creative etc.; Manufacturing:
Steel Melting, Wire-drawing etc.
 By Product Lines – has evolved with enterprises becoming
“multi-line” with ‘function’ needing adaptation/integration
to suit specific products e.g. Tata Motors: Passenger
Vehicles / Commercial vehicles
“Departmentation” …ctd.

 By ‘grid’ control – in essence combining the ‘functional’
and the ‘product-line’ patterns to best effect. Functional
excellence is not subjugated to Operational ease.
In ‘projects’, this serves to bring together the diversity
of skills required into one team.
 The Strategic Business Unit: companies today are
organizing themselves as ‘companies within a company’
to allow for maximum flexibility and freedom of
operations, especially when the products/businesses are
unconnected e.g. General Electric. Generally, SBU’s
have:
 Their own Missions, Goals and Strategies;
 Distinct and definable set of competitors;
 Deploy and manage resources in key areas;
 A reasonable ‘size’.

C.E.O
Finance Qual. HRM BU 1 BU 2
I.R.M
Recr.
T&D
G/H.R
Plant 1
G/H.R
Ind.
Sin.
I.S.O
Example of “Grid Control” & S.B.U’s

 The purpose of organizing is to make human cooperation
effective and is limited by:
 the number of persons a manager can ‘supervise’ effectively and
efficiently;
 while the total number is dictated by the quantum of work/
nature of task/spread etc. Thus the two dimensions, “Level”
(depth) and “Span of control” (width) are interrelated .
 The reason for creating Levels of organization is the limitation in
the span of control. “Effective span” is influenced by:
 Training/skill of subordinates and personal contact required;
 Clarity of delegation of authority;
 Clarity of plans, use of objective standards and communication
techniques;
 Rate of change;
 Maturity and experience of the manager and organization.
Span-of-Management

 Levels, per se, are not desireable:
 They are expensive – as they increase, both infrastructure costs
and staffing tends to increase;
 Real work is accomplished at the ‘gemba’ (Japanese: workplace)
where the actual value-addition/transformation takes place. The
contribution of levels on top are not directly co- relatable, thus
best avoided;
 Communication become complicated – omissions, filterations
and misinterpretations lead to wasted and misdirected effort;
 Planning and control become tortuous, requiring complicated
coordination and alignment between levels.
 Studies reveal that between 8 to 10 people at ‘higher’ levels
and upto 15 at lower levels is a good “span”. Increasingly,
enterprises are attempting to cut back levels to 5 or less.
Span-of-Management …ctd.

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