107 Management Fundamentals

Basic Concepts: Manager, Managing, Workplace, Organization, Management

Functions, Mintzberg’sManagerial Roles, The Universality of Management,
Approaches to Management - Early Management, Classical Approach,
Behavioral Approach, Quantitative Approach, Contemporary Approaches.
Managerial Competencies:
Communication, team work, planning and administrative, strategic and
global competencies; Managerial Skills; How Is the Manager’s Job Changing?,
Importance of Customers to the Manager’s Job, Importance of Innovation to
the Manager’s Job, Importance of Sustainability to the Manager’s Job. (5)
2. Planning: Concept, need, nature, Management By Objectives (MBO) -
Process of MBO - Benefits of MBO,Planning and Performance, Goals and
Plans, Types of Goals, Types of Plans, Setting Goals and Developing Plans,
Approaches to Setting Goals, Developing Plans, Approaches to Planning,
Planning Effectively in Dynamic Environments.
3. Organizing: Organization, Organizing, Organizational Structures,
Principles of Work Specialization ,Departmentalization, Chain of Command,
Span of Control, Centralization and Decentralization, Formalization.
Mechanistic and Organic Structures, Factors Affecting Structural Choice -
Strategy, Size, Technology, Environmental Uncertainty. Traditional
Organizational Designs - Simple Structure, Functional Structure, Divisional
Structure, Matrix Structure, Team Structures, Project Structure, Adaptive
Organizations – Boundary less Organization, Virtual Organizations, Learning
Organization, Flexi Work, Tele-working, Global Organizations. (7)
4. Decision Making: The Decision-Making Process - Identifying a Problem -
Identifying Decision Criteria Allocating Weights to the Criteria - Developing
Alternatives - Analyzing Alternatives - Selecting an Alternative -Implementing
the Alternative - Evaluating Decision Effectiveness. Making Decisions:
Rationality, Bounded Rationality,The Role of Intuition, The Role of Evidence-
Based Management. Types of Decisions & Decision-Making Conditions.
Decision-Making approaches - Quantitative approach, Environmental
Approach, System Approach, Ethical Approach,Intuitive Approach, Case
Study Approach Decision-Making Styles - Linear–Nonlinear Thinking Style
Profile, Decision Making Biases and Errors. Effective Decision Making in
Today’s World - Correctness of decision, Decision environment, Timing of
decision, Effective communication of Decision, Participation in decision
Making-Implementation of decision.
5. Controlling: Controlling, Definition, need and Importance, The Control
Process, Managerial Decisions in Controlling, Feed-forward / Concurrent /
Feedback Controls. Financial Controls, Information Controls, Benchmarking
of Best Practices. (5)
Unit # 1
Basic Concepts: Manager, Managing, Workplace, Organization, Management
Functions, Mintzberg’s Managerial Roles, The Universality of Management,
Approaches to Management - Early Management, Classical Approach,
Behavioral Approach, Quantitative Approach, Contemporary Approaches.
Managerial Competencies:
Communication, team work, planning and administrative, strategic and
global competencies; Managerial Skills; How Is the Manager’s Job Changing?,
Importance of Customers to the Manager’s Job, Importance of Innovation to
the Manager’s Job, Importance of Sustainability to the Manager’s Job.
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An Introduction to Management
Management is a set of functions directed at the efficient and effective
utilization of resources in the pursuit of organizational goals. By efficient, we
mean using resources wisely and in a cost-effective way. By effective, we mean
making the right decisions and successfully implementing them. In general,
successful organizations are both efficient and effective.
Today's managers face a variety of interesting and challenging situations. The
average executive works sixty hours a week; has enormous demands placed
on his or her time; and faces increased complexities thanks to globalization,
domestic competition, government regulation, and shareholder pressure.
Rapid change, unexpected disruptions, and both minor and major crises
further complicate the task. The manager's job is unpredictable and fraught
with challenges, but it is also filled with opportunities to make a difference.
Kinds of Managers
Many different kinds of managers are at work in organizations today.
Levels of Management
One way to differentiate among managers is by their level in the organization.
Top managers make up the relatively small group of executives who manage
the overall organization. Titles found in this group include president, vice
president, and chief executive officer (CEO). Top managers create the
organization's goals, overall strategy, and operating policies. They also
officially represent the organization to the external environment by meeting
with government officials, executives of other organizations, and so forth.
Howard Schultz at Starbucks is a top manager, as is Deidra Wager, the firm's
senior vice president for retail operations. Top managers make decisions
about activities such as acquiring other companies, investing in research and
development, entering or abandoning various markets, and building new
plants and office facilities.
Middle management is probably the largest group of managers in most
organizations.
Common middle-management titles include plant manager, operations
manager, and division head. Middle managers are primarily responsible for
implementing the policies and plans developed by top managers and for
supervising and coordinating the activities of lower-level managers. Plant
managers, for example, handle inventory management, quality control,
equipment failures, and minor union problems. They also coordinate the work
of supervisors within the plant. Jason Hernandez, a regional manager at
Starbucks responsible for the firm's operations in three eastern states, is a
middle manager.
First-line managers supervise and coordinate the activities of operating
employees.
Common titles for first-line managers are supervisor, coordinator, and office
manager.
Positions such as these are often the first ones held by employees who enter
management from the ranks of operating personnel. Wayne Maxwell and
Jenny Wagner, managers of Starbucks coffee shops in Texas, are first-line
managers. They oversee the day-to-day operations of their respective stores,
hire operating employees to staff them, and handle other routine
administrative duties required by the parent corporation. In contrast to top
and middle managers, first-line managers typically spend a large proportion
of their time supervising the work of subordinates.
Areas of Management
Regardless of their level, managers may work in various areas within an
organization.
Marketing managers work in areas related to the marketing function-getting
consumers and clients to buy the organization's products or services (be they
Ford automobiles, Newsweek magazines, Associated Press news reports,
flights on Southwest Airlines, or cups of latte at Starbucks). These areas
include new-product development, promotion, and distribution.
Financial managers deal primarily with an organization's financial
resources. They are responsible for activities such as accounting, cash
management, and investments.
Operations managers are concerned with creating and managing the
systems that create an organization's products and services. Typical
responsibilities of operations managers include production control, inventory
control, quality control, plant layout, and site selection.
Human resource managers are responsible for hiring and developing
employees. They are typically involved in human resource planning, recruiting
and selecting employees, training and development, designing compensation
and benefit systems, formulating performance appraisal systems, and
discharging low-performing and problem employees.
General managers are not associated with any particular management
specialty.
Probably the best example of an administrative management position is that
of a hospital or clinic administrator. Administrative managers tend to be
generalists; they have some basic familiarity with all functional areas of
management rather than specialized training in any one area.
Basic Management Functions
Regardless of level or area, management involves the four basic functions of
planning and decision making, organizing, leading, and controlling. This book
is organized around these basic functions.
Planning and Decision Making
In its simplest form, planning means setting an organization's goals and
deciding how best to achieve them. Decision making, a part of the planning
process, involves selecting a course of action from a set of alternatives.
Planning and decision making help maintain managerial effectiveness by
serving as guides for future activities.
Organizing
Once a manager has set goals and developed a workable plan, the next
management function is to organize people and the other resources necessary
to carry out the plan.
Specifically, organizing involves determining how activities and resources are
to be grouped. Although some people equate this function with the creation
of an organization chart, we will see in Part III of this book that it is actually
much more.
Leading
The third basic managerial, function is leading. Some people consider leading
to be both the most important and the most challenging of all managerial
activities. Leading is the set of processes used to get people to work together
to advance the interests of the organization. For example, Howard Schultz's
leadership skills have clearly played an important role in the success of
Starbucks.
Controlling
The final phase of the management process is controlling, or monitoring the
organization's progress toward its goals. As the organization moves toward its
goals, managers must monitor progress to ensure that the organization is
performing so as to arrive at its "destination" at the appointed time.
Fundamental Management Skills
To carry out these management functions properly, managers rely on a
number of specific skills. The most important management skills are technical
interpersonal, conceptual, diagnostic, communication, decision-making, and
time-management skills.
Technical Skills
Technical skills are the skills necessary to accomplish o understand the
specific kind of work being done in an organization. Technical skills are
especially important for first-line managers. These manager spend much of
their time training subordinates and answering question about work-related
problems. First-line managers must know how to perform the tasks assigned
to those they supervise if they are to be effective managers.
Interpersonal Skills
Managers spend considerable time interacting with people both inside and
outside the organization. For obvious reasons, then, the manager also needs
interpersonal skills-the ability to communicate with understand, and
motivate individuals and groups. As a manager climbs the organizational
ladder, she must be able to get along with subordinates, peers, and( those at
higher levels of the organization. Because of the multitude of role managers
must fulfill, a manager must also be able to work with suppliers, customers,
investors, and others outside of the organization.
Conceptual Skills
Conceptual skills depend on the manager's ability to think in the abstract.
Managers need the mental capacity to understand the overall workings of the
organization and its environment, to grasp how all the parts of the
organization fit together, and to view the organization in a holistic manner.
This skill enables them to think strategically, to see the big picture and to
make broad-based decisions that serve the overall organization.
Diagnostic Skills
Successful managers also possess diagnostic skills, or skills that enable them
to visualize the most appropriate response to a situation. A physician
diagnoses a patient's illness by analyzing symptoms and determining their
probable cause. Similarly, a manager can diagnose and analyze a problem in
the organization by studying its symptoms and then developing a solution.
Communication Skills
Communication skills refer to the manager's abilities to both effectively convey
ideas and information to others and effectively receive ideas and information
from others. These skills enable a manager to transmit ideas to subordinates
so that they know what is expected, to coordinate work with peers and
colleagues so that they work well together properly, and to keep higher-level
managers informed about what is going on. In addition, communication skills
help the manager listen to what others say and to understand the real
meaning behind e-mails, letters, reports, and other written communication.
Decision-Making Skills
Effective managers also have good decision-making skills. Decision-making
skills refer to the manager's ability to correctly recognize and define problems
and opportunities and to then select an appropriate course of action to solve
problems and capitalize on opportunities. No manager makes the right
decision all the time. However, effective managers make good decisions most
of the time. And when they do make a bad decision, they usually recognize
their mistake quickly and then make good decisions to recover with as little
cost or damage to their organization as possible Time-Management Skills
Finally, effective managers usually have good time-management skills. Time
management skills refer to the manager's ability to prioritize work, to work
efficiently, and to delegate appropriately. As already noted, managers face
many different pressures and challenges. It is easy for a manager to get
bogged down doing work that can easily be postponed or delegated to others.
When this happens, unfortunately, more pressing and higher-priority work
may get neglected.

Mintzberg Managerial Roles

In addition, Henry Mintzberg describes the operational work of managers in
terms of managerial roles.
Managerial Roles by Mintzberg
The activities that are carried out by those managers are key elements. The
way in which the Mintzberg Managerial Roles are carried out, are influenced
by individual and situational factors. Henry Mintzberg initially divided the ten
managerial Roles roles into three sub categories:

 Interpersonal contact
 Information processing
 Decision making
 Interpersonal contact
Interpersonal contact concerns the contact between the manager and the
people in his environment. For example, subordinates, other managers, the
board of directors, the works council, customers and suppliers.

The following Mintzberg Managerial Roles are primarily concerned with

interpersonal contact:

1. Figurehead
As head of a department or an organisation, a manager is expected to carry
out ceremonial and/or symbolic duties. A manager represents the company
both internally and externally in all matters of formality.

He is a networker but he also serves as an exemplary role model. He is the

one who addresses people celebrating their anniversaries, attends business
dinners and receptions.

2. Leader
In his leading role, the manager motivates and develops staff and fosters a
positive work environment. He coaches and supports staff, enters into (official)
conversations with them, assesses them and offers education and training
courses.

3. Liason
A manager serves as an intermediary and a linking pin between the high and
low levels. In addition, he develops and maintains an external network.

As a networker he has external contacts and he brings the right parties

together. This will ultimately result in a positive contribution to the
organization.

Information processing
According to Henry Mintzberg, the managerial role involves the processing of
information which means that they send, pass on and analyze information.
Managers are linking pins; they are expected to exchange flows of vertical
information with their subordinates and horizontal flows of information with
their fellow managers and the board of directors. Further more, managers
have the responsibility to filter and transmit information that is important for
both groups. The following Mintzberg Managerial Roles fall under process
information:

4. Monitor
As a monitor the manager gathers all internal and external information that
is relevant to the organization.

He is also responsible for arranging, analyzing and assessing this information

so that he can easily identify problems and opportunities and identify
changes.

5. Disseminator
As a disseminator the manager transmits factual information to his
subordinates and to other people within the organization.

This may be information that was obtained either internally or externally.

6. Spokesman
As a spokesman the manager represents the company and he communicates
to the outside world on corporate policies, performance and other relevant
information for external parties.

Decision-making
Managers are responsible for decision-making and they can do this in
different ways at different levels. The leadership style is important in decision-
making.

An authoritarian leader is sooner inclined to make decisions independently

than a democratic leader. The following Mintzberg Managerial Roles fall under
decision-making:

7. Entrepreneur
As an entrepreneur, the manager designs and initiates changes and
strategies.

8. Disturbance handler
In his managerial role as disturbance handler, the manager will always
immediately respond to unexpected events and operational breakdowns. He
aims for usable solutions.

The problems may be internal or external, for example conflict situations or

the scarcity of raw materials. .

9. Resource allocator
In his resource allocator role, the manager controls and authorizes the use of
organizational resources.

He allocates finance, assigns employees, positions of power, machines,

materials and other resources so that all activities can be well-executed within
the organization.

10. Negotiator
As a negotiator, the manager participates in negotiations with other
organizations and individuals and he represents the interests of the
organization.

This may be in relation to his own staff as well as to third parties. For example
salary negotiations or negotiations with respect to procurement terms.

Skills
According to Henry Mintzberg, the skills of individual managers do not always
contribute to the success of an organization.

Effective managers develop themselves based on protocols for action. In

addition, they use their leadership roles independently and they know to use
the right role for the right situation.

The Mintzberg Managerial Roles make it easier to understand what the nature
of their work is. Mintzberg’s objective was to observe and analyze managerial
behaviour.

By studying the Mintzberg Managerial Roles, it is possible to find out in which

areas managers can improve themselves and how they can develop the right
skills.

Tool for managers

The 10 Mintzberg Managerial Roles provide a tool for managers and other
people in leading positions. By understanding their own roles, they can find
out how much time they devote to the activities below:

 Directing subordinates
 Attending meetings as a Liason
 Representing the organization
 Transmitting information
 Analyzing information
 Allocation of resources
 Negotiating resources
 Problem solving
 Developing new ideas
 Promoting the interests of the organization
Furthermore, it is important that the manager answers the following
questions. This will provide more insight into his own qualities:

Is the time distribution in sync with the manager’s own perception of it?
Is there a balance between time flow and work distribution?
Which tasks boost the manager’s energy?
Which is the most satisfying task of a manager?
Which task does the manager most unpleasant?
In practice a certain managerial role will more predominant than the other.
In addition to preference, this also has to do with the interdependence of
factors, such as the position of the manager within the organization, the
activities, the composition of the team and the size of the organization.

One of the managerial roles mentioned is always visible and in some activities,
multiple roles at the same time are possible.

Universality of Management Principles:

Different views are held on whether management principles are
universal or not. There are both opponents and proponents to the
thought that management principles are universal.

1. Arguments supporting universality of management

principles:
The following arguments support that management
principles are universal in nature:
(a) Pervasiveness of management functions:
Planning, organising, staffing, directing and controlling are
performed in all business and non-business organisations.
Managerial principles are universally performed by all managers at
all levels in all organisations. There may be differences, however, in
the intensity in application of principles depending upon the
emphasis placed on different functions of management (planning,
organising etc.) at a particular point of time.

(b) Management concepts:

Management concepts are different from management techniques.
The principle of esprit de corps holds good in all organisations in all
situations. How to achieve unity of actions in different situations is,
however, different. Management principles are, thus, management
concepts fundamentally or universally applicable in different
organisations.
However, management techniques (for example, the style of
leadership, medium of communication, the kind of motivators used
etc.,) vary depending upon need of the situation. Participative style
of management may be important in some cases and autocratic style
may be important in others. Thus, the basic management principles
remaining the same (management as science), the way these
principles are applied differ in different situations across different
countries and cultures. Management is an organised set of
knowledge practiced differently under different conditions.

2. Arguments opposing universality of management

principles:
This viewpoint supports that management principles are not
universal in nature. They change according to need of the situation.
These principles are culture specific and apply differently under
different conditions in different cultures. There are no common
principles that provide definite solution to similar management
problems at same point of time for different organisations and also
different points of time for the same organisation.

Even within the same culture, management principles differ for sub-
cultures of that culture. Companies operating in rural areas adopt
different principles than those operating in urban areas within the
same country. The following arguments oppose universality of
management principles.

(a) Nature of organisations:

Universality of management principles implies they can be applied in
all organisations. However, the nature of business organisations
differs from that of non-business organisations. Even in business
organisations, management differs for profit and non-profit
organisations. Management principles cannot, therefore, be
universally applicable in all organisations.

(b) Nature of managers:

Applying management principles depends upon the nature of
managers. Some managers regard unity of command and
centralisation as effective means of management while others prefer
functional authority and decentralisation as more effective means of
management. Autocratic managers may consider organisational
goals superior to individual goals while democratic managers
synthesise organisational goals with individual goals. Universality of
management is, therefore, subject to debate.

(c) Environmental factors:

All organisations are not affected by environmental factors in the
same way. They respond to environmental changes in different ways
and cannot, therefore, apply management principles universally.

(d) Cultural differences:

Different organisations operate in different cultures with differences
in values, beliefs, perceptions and attitudes of people. Managers of
these organisations operate differently and apply management
principles differently.

Management is a behavioural science that deals with people and

since people vary significantly in their habits, attitudes, cultural
background and value systems, different management principles are
effective in dealing with different types of people, even within the
same country and same organisation.

Thus, though management principles have scientific validity, they

cannot universally apply to organisations of different nature
operating in different cultures with different responsiveness to
external environment.

Approaches to Management - Early Management, Classical Approach,

Behavioral Approach, Quantitative Approach, Contemporary Approaches

Assessment of the Classical Perspective

The classical perspective served to focus serious attention on the importance
of effective management and helped pave the way for later theories and
approaches. Many of the concepts developed during this era, such as job
specialization, time and motion studies, and scientific methods are still in
use. On the other hand, these early theorists often took an overly simplistic
view of management and failed to understand the human element of
organizations.
The Behavioral Management Perspective
Early advocates of the classical management perspective essentially viewed
organizations and jobs from a mechanistic point of view-that is, they
essentially sought to conceptualize organizations as machines and workers
as cogs within those machines.
Even though many early writers recognized the role of individuals, these
management pioneers tended to focus on how managers could control and
standardize the behavior of their employees. In contrast, the behavioral
management perspective placed much more emphasis on individual attitudes
and behaviors and on group processes and recognized the importance of
behavioral processes in the workplace. The behavioral management
perspective was stimulated by a number of writers and theoretical
movements. One of those movements was industrial psychology, the practice
of applying psychological concepts to industrial set tings. Hugo Munsterberg
(1863-1916), a noted German psychologist, is recognized as the father of
industrial psychology. He suggested that psychologists could make valuable
contributions to managers in the areas of employee selection and motivation.
Industrial psychology is still a major course of study at many colleges and
universities.
Another early advocate of the behavioral approach to management was Mary
Parker Follett. Follett worked during the scientific management era, but
quickly came to recognize the human element in the workplace. Indeed, her
work clearly anticipated the behavioral management perspective, and she
appreciated the need to understand the role of human behavior in
organizations. Her specific interests were in adult education and vocational
guidance. Follett believed that organizations should become more democratic
in accommodating employees and managers.
The Hawthorne Studies
Although Munsterberg and Follett made major contributions to the
development of the behavioral approach to management, its primary catalyst
was a series of studies conducted near Chicago at Western Electric's
Hawthorne plant between 1927 and 1932.
The research, originally sponsored by General Electric, was conducted by
Elton Mayo and his associates. The first study involved manipulating
illumination for one group of workers and comparing their subsequent
productivity with the productivity. of another group whose illumination was
not changed. Surprisingly, when illumination was increased for the
experimental group, productivity went up in both groups. Productivity
continued to increase in both groups, even when the lighting for the
experimental group was decreased. Not until the lighting was reduced to the
level of moonlight did productivity begin to decline (and General Electric
withdrew its sponsorship).
Another experiment established a piecework incentive pay plan for a group of
nine men assembling terminal banks for telephone exchanges. Scientific
management would have predicted that each man would try to maximize his
pay by producing as many units as possible. Mayo and his associates,
however, found that the group itself informally established an acceptable level
of output for its members. Workers who overproduced were branded "rate
busters," and underproducers were labeled "chiselers." To be accepted by the
group, workers produced at the accepted level. As they approached this
acceptable level of output, workers slacked off to avoid overproducing.
Other studies, including an interview program involving several thousand
workers, led Mayo and his associates to conclude that human behavior was
much more important in the workplace than researchers had previously be
lieved. In the lighting experiment, for example, the results were attributed to
the fact that both groups received special attention and sympathetic
supervision for perhaps the first time. The incentive pay plans did not work
in determining output because wage incentives were less important to
theindividual workers than was social acceptance. In short, individual and
social processesplayed a major role in shaping worker attitudes and behavior.
Human Relations
The human relations movement, which grew from the Hawthorne studies and
was a popular approach to management for many years, proposed that
workers respond primarily to the social context of the workplace, including
social conditioning, group norms, and interpersonal dynamics. A basic
assumption of the human relations movement was that the manager's
concern for workers would lead to their increased satisfaction, which would
in turn result in improved performance. Two writers who helped advance the
human relations movement were Abraham Maslow and Douglas McGregor.
In 1943, Maslow advanced a theory suggesting that people are motivated by
a hierarchy of needs, including monetary incentives and social acceptance.
21 Maslow's hierarchy. Meanwhile, Douglas McGregor's Theory X and Theory
Y model best represents the essence of the human relations movement (see
Table 1.1).22 According to McGregor,Theory X and Theory Y reflect two
extreme belief sets that managers have about their workers. Theory X is a
relatively negative view of workers and is consistent with the views of scientific
management. Theory Y is more positive and represents the assumptions that
human relations advocates make. In McGregor's view, Theory Y was a more
appropriate philosophy for managers to adhere to. Both Maslow and
McGregor notably influenced the thinking of many practicing managers.
Theory X Assumptions
1. People do not like work and try to avoid it.
2. People do not like work, so managers have to control, direct, coerce, and
threaten employees to get them to work toward organizational goals.
3. People prefer to be directed, to avoid responsibility, and to want security;
they have little ambition.
Theory Y Assumptions
1. People do not naturally dislike work; work is a natural part of their lives.
2. People are internally motivated to reach objectives to which they are
committed.
3. People are committed to goals to the degree that they receive personal
rewards when they reach their objectives.
4. People will both seek and accept responsibility under favorable conditions.
5. People have the capacity to be innovative in solving organizational
problems.
6. People are bright, but under most organizational conditions their potentials
are under- utilized.
Contemporary Behavioral Science in Management
Munsterberg, Mayo, Maslow, McGregor, and others have made valuable
contributions to management. Contemporary theorists, however, have noted
that many assertions of the human relationists were simplistic and
inadequate descriptions of work behavior. Current behavioral perspectives on
management, known as organizational behavior, acknowledge that human
behavior in organizations is much more complex than the human relationists
realized. The field of organizational behavior draws from a broad,
interdisciplinary base of psychology, sociology, anthropology, economics, and
medicine.
Organizational behavior takes a holistic view of behavior and addresses
individual, group, and organization processes. These processes are major
elements in contemporary management theory. Important topics in this field
include job satisfaction, stress, motivation, leadership, group dynamics,
organizational politics, interpersonal conflict, and the structure and design of
organizations. A contingency orientation also characterizes the field
Assessment of the Behavioral Perspective
The primary contributions of the behavioral perspective relate to ways in
which this approach has changed managerial thinking. Managers are now
more likely to recognize the importance of behavioral processes and to view
employees as valuable resources instead of mere tools. On the other hand,
organizational behavior is still imprecise in its ability to predict behavior and
is not always accepted or understood by practicing managers. Hence, the
contributions of the behavioral school have yet to be fully realized.
The Quantitative Management Perspective
The third major school of management thought began to emerge during World
War II. During the war government officials and scientists in England and the
United States worked to help the military deploy its resources more efficiently
and effectively. These groups took some of the mathematical approaches to
management that Taylor and Gantt had developed decades earlier and applied
them to logistical problems during the war.
These officials and scientists learned that problems regarding troop,
equipment, and submarine deployment, for example, could all be solved
through mathematical analysis.
After the war, companies such as Du Pont and General Electric began to use
the same techniques for deploying employees, choosing plant locations, and
planning warehouses. Basically, then, this perspective is concerned with
applying quantitative techniques to management. More specifically, the
quantitative management perspective focuses on decision making, economic
effectiveness, mathematical models, and the use of computers. There are two
branches of the quantitative approach: management science and operations
management.
Management Science Unfortunately, the term management science appears
to be related to scientific management, the approach developed by Taylor and
others early in this century. But the two have little in common and should
not be confused. Management science focuses specifically on the development
of mathematical models. A mathematical model is a simplified representation
of a system, process, or relationship.
At its most basic level, management science focuses on models, equations,
and similar representations of reality. For example, managers at Detroit
Edison use mathematical models to determine how best to route repair crews
dur ing blackouts. The Bank of New England uses models to figure out how
many tellers need to be on duty at each location at various times throughout
the day. In recent years, paralleling the advent of the personal computer,
management science techniques have become increasingly sophisticated. For
example, automobile manufacturers Daimler-Benz and Chrysler use realistic
computer simulations to study collision damage to cars. These simulations
give them precise information and avoid the costs of "crashing" so many test
cars.
Operations Management Operations management is somewhat less
mathematical and statistically sophisticated than management science and
can be applied more directly to managerial situations. Indeed, we can think
of operations management as a form of applied management science.
Operations management techniques are generally concerned with helping the
organization produce its products or services more efficiently and can be
applied to a wide range of problems.
For example, Rubbermaid and The Home Depot use operations management
techniques to manage their inventories. (Inventory management is concerned
with specific inventory problems such as balancing carrying costs and
ordering costs and determining the optimal order quantity.) Linear
programming (which involves computing simultaneous solutions to a set of
linear equations) helps United Air Lines plan its flight schedules, Consolidated
Freightways develop its shipping routes, and General Instrument Corporation
plan which instruments to produce at various times. Other operations
management techniques include queuing theory, breakeven analysis, and
simulation. All these techniques and procedures apply directly to operations,
but they are also helpful in such areas as finance, marketing, and human
resource management.
Assessment of the Quantitative Perspective
Like the other management perspectives, the quantitative management
perspective has made important contributions and has certain limitations. It
has provided managers with an abundance of decision-making tools and
techniques and has increased their understanding of overall organizational
processes. It has been particularly useful in the areas of planning and
controlling. On the other hand, mathematical models cannot fully account for
individual behaviors and attitudes. Some people believe that the time needed
to develop competence in quantitative techniques retards the development of
other managerial skills. Finally, mathematical models typically require a set
of assumptions that may not be realistic.
Contemporary Management Theory
Recognizing that the classical, behavioral, and quantitative approaches to
management are not necessarily contradictory or mutually exclusive is
important. Even though each perspective makes specific assumptions and
predictions, each can also complement the others. Indeed, a complete
understanding of management requires an appreciation of all three
perspectives. In addition, contemporary management theory based on
systems and contingency perspectives builds from these earlier perspectives
in a variety of ways.
Unit # 2

Planning: Concept, need, nature, Management By Objectives (MBO) - Process

of MBO - Benefits of MBO,Planning and Performance, Goals and Plans, Types
of Goals, Types of Plans, Setting Goals and Developing Plans, Approaches to
Setting Goals, Developing Plans, Approaches to Planning, Planning Effectively
in Dynamic Environments
---------------------------------------------------------------------------------------------
Concept
Planning is the first primary function of management that precedes all other
functions. The planning function involves the decision of what to do and how
it is to be done? So managers focus a lot of their attention on planning and
the planning process. Let us take a look at the eight important steps of the
planning process.
Need of planning
Developing strategy takes time and resources. It requires the time and commitment of
some of the most highly paid and highly experienced people in your organization. So, if
your team isn’t willing to invest what is needed, I recommend that you don’t do it. Poor
planning is often worse than no planning at all.

So, why do you need a strategy? Why take time for planning? There are many reasons.
But the Drivers Model focuses on five in particular.

1) To set direction and priorities:

First and foremost, you need a strategy because it sets the direction and establishes
priorities for your organization. It defines your organization’s view of success and
prioritizes the activities that will make this view your reality. The strategy will help your
people know what they should be working on, and what they should be working on first.

Without a clearly defined and articulated strategy, you may very well find that your priority
initiatives—the ones that will drive the highest successare being given secondary
treatment.

2) To get everyone on the same page:

If you find that you have departments working to achieve different aims, or going in
different directions, you need a strategy.

Once you define your strategic direction, you can get operations, sales, marketing,
administration, manufacturing, and all other departments moving together to achieve the
organization’s goals.

3) To simplify decision-making:

If your leadership team has trouble saying no to new ideas or potential initiatives, you
need a strategy. Why? Your strategy will have already prioritized the activities necessary
for success. Priorities make it easier to say no to distracting initiatives.
4) To drive alignment:

Many organizations have hard-working people putting their best efforts into areas that
have little to no effect on strategic success. They’re essentially majoring in the minors—
because their activities aren’t aligned with the priorities. Your strategy serves as the
vehicle for answering the question, “How can we better align all our resources to maximize
our strategic success?”

5) To communicate the message:

Many leaders walk around with a virtual strategy locked in their heads—they know where
their organization needs to be and the key activities that will get it there. Unfortunately,
the strategy isn’t down on paper and hasn’t been communicated thoroughly. As a result,
few people are acting on it.
When your staff, suppliers, and even customers know where you’re going, you allow even
greater opportunities for people to help you maximize your success in getting there.

Once you recognize the need to plan, you now have the role of becoming the catalyst: for
facilitating the buy-in and commitment of your leadership team and the rest of your
organization. I’ve found that very few executives truly understand how to maximize their
role in facilitating strategy. This chapter is focused on you, the leader of the organization,
and on the vital role you play in facilitating strategy throughout your organization.

Nature of planning

The nature of planning can be understood by examining its four major

aspects. They are;

1. It is a contribution to objectives,
2. It is primacy among the manager’s tasks.
3. It is pervasiveness, and
4. The efficiency of resulting plans.

The contribution of Planning to the Attainment of

Objectives
Since plans are made to attain goals or objectives, every plan and all its
support should contribute to the achievement of the organization’s purpose
and objectives.
An organized enterprise exists to accomplish group objectives through
willing and purposeful co-operation.
Primacy of Planning
That planning is the prime managerial function is proved by the fact that all
other functions such as organizing, staffing, leading and controlling are
designed to support the accomplishment of the enterprise’s objectives.
Planning quite logically, therefore, comes first before executing all other
managerial functions as it involves establishing the objectives necessary for
all group efforts. Also, all the other managerial functions must be planned if
they are to be effective.
Likewise, planning and controlling are inextricably bound up. Control without
a plan is meaningless because the plan provides the basis or standard of
control.
Pervasiveness of Planning
Planning is a unique and universal function of all managers.
The character and scope of planning may vary with each manager’s authority
and with the nature of the policies and plans outlined by superiors, but all
managers must have some function of planning.
Because of one’s authority or position in the managerial hierarchy, one may
do more or less planning, but some kind or amount of planning a manager
must do.
According to Weihrich and Koontz; “All managers, from presidents to first-
level supervisors – plan.”
The Efficiency of Plans
Plans should not only be effective, but also efficient. The effectiveness of a
plan relates to the extent to which it accomplishes the objectives.
The efficiency of the plan, however, means its contribution to the purpose
and objectives, offset by the costs and other factors required to formulate
and operate it.
Plans are efficient if they achieve their objective at a reasonable cost when
such a cost is the measure not only in terms of time, money or production
but also in terms of satisfaction of the individual or group.
Both conceptual and practical reasons are put forward in support of planning.
Two conceptual reasons supporting systematic planning by managers are
limited resources and an uncertain environment.
Meeting the Challenge of Resource Scarcity
Resource scarcity is a very important consideration for any organization
today. There would be no need for planning if material, financial and human
resources were unlimited and cheap.
Planners in both private business and public agencies are challenged to
stretch their limited resources through intelligent planning.
Otherwise, wasteful inefficiencies would give rise to higher prices, severe
shortages, and great public dissatisfaction.
Facing Environmental Uncertainty
The second most important conceptual reason is that organizations
continually face environmental uncertainty in the course of accomplishing
the tasks.
Organizations meet this challenge largely through planning safeguards.
Some organizations do this job better than others partly because of their
different patterns of response to environmental factors beyond the
organization’s immediate control.
Besides, managers have several practical reasons for formulating plans for
themselves, their employees, and various organizational units, viz.,

1. to offset uncertainty and change;

2. to focus organizational activity on a set of consciously created objectives;
3. to provide a coordinated, systematic roadmap for future activities;
4. to increase, economic efficiency via efficient operation; and
5. to facilitate control by establishing a standard for subsequent activities.

Planning and Performance

Although organizations that use formal planning do not always outperform
those that do not plan, most studies show positive relationships between
planning and performance.
Effective planning and implementation play a greater part in high
performance than does the amount of planning done.
Studies have shown that when formal planning has not led to higher
performance, the external environment is often the reason.
The Role of Goals and Plans in Planning
Planning is often called the primary management function because it
establishes the basis for all other functions.
Planning involves two important elements: goals and plans. Goals (often
called objectives) are desired outcomes for individuals, groups, or entire
organizations.

An effective management goes a long way in extracting the best out of employees and make them
work as a single unit towards a common goal.
The term Management by Objectives was coined by Peter Drucker in 1954.

What is Management by Objective ?

The process of setting objectives in the organization to give a sense of direction to the
employees is called as Management by Objectives.

It refers to the process of setting goals for the employees so that they know what they are supposed
to do at the workplace.

Management by Objectives defines roles and responsibilities for the employees and help them chalk
out their future course of action in the organization.

Management by objectives guides the employees to deliver their level best and achieve the targets
within the stipulated time frame.

Need for Management by Objectives (MBO)

 The Management by Objectives process helps the employees to understand their duties at
the workplace.
 KRAs are designed for each employee as per their interest, specialization and educational
qualification.
 The employees are clear as to what is expected out of them.
 Management by Objectives process leads to satisfied employees. It avoids job mismatch and
unnecessary confusions later on.
 Employees in their own way contribute to the achievement of the goals and objectives of the
organization. Every employee has his own role at the workplace. Each one feels
indispensable for the organization and eventually develops a feeling of loyalty towards the
organization. They tend to stick to the organization for a longer span of time and contribute
effectively. They enjoy at the workplace and do not treat work as a burden.
 Management by Objectives ensures effective communication amongst the employees. It
leads to a positive ambience at the workplace.
 Management by Objectives leads to well defined hierarchies at the workplace. It ensures
transparency at all levels. A supervisor of any organization would never directly interact with
the Managing Director in case of queries. He would first meet his reporting boss who would
then pass on the message to his senior and so on. Every one is clear about his position in the
organization.
 The MBO Process leads to highly motivated and committed employees.
 The MBO Process sets a benchmark for every employee. The superiors set targets for each
of the team members. Each employee is given a list of specific tasks.

Limitations of Management by objectives Process

 It sometimes ignores the prevailing culture and working conditions of the organization.
 More emphasis is being laid on targets and objectives. It just expects the employees to
achieve their targets and meet the objectives of the organization without bothering much
about the existing circumstances at the workplace. Employees are just expected to perform
and meet the deadlines. The MBO Process sometimes do treat individuals as mere
machines.
 The MBO process increases comparisons between individuals at the workplace. Employees
tend to depend on nasty politics and other unproductive tasks to outshine their fellow workers.
Employees do only what their superiors ask them to do. Their work lacks innovation, creativity
and sometimes also becomes monotonous.

Goals and Plans

Types of Goals
Types of Plans

Setting Goals and Developing Plans

Approaches to Setting Goals

Developing Plans

Approaches to Planning

Planning Effectively in Dynamic Environments