chapter 1 management

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Management and Entrepreneurship

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Chapter – 1 Management

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Objectives

• To expose the students to a number of important concepts of management

• To throw light on the complex set of roles performed by the managers

• To understand the skills required to perform various management roles

• To provide an overview of several influential approaches that have shaped managerial thinking during the past century.

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Meaning

• “Management is the art of getting things done through and with the people in formally organised groups”…..Koontz H.

• “Management is the

process of planning,

organising, actuating and

controlling to determine

and accomplish the

objectives by the use of

people and

resources”…..Terry G.

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Nature & Characteristics of Management

• Critical element in the economic growth of the country.

• Essential in all organized effort, be it a business or any other activity.

• Dynamic and life giving element in every organization.

• A process, discipline, activity.

• Intangible, goal oriented & universal.

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Scope of Management

• The scope is very wide.

• According to Herbison & Myers, it refers to three

distinct ideas.

i) as an economic resource

ii) as a system of authority

iii) as a class or elite.

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Importance of Management

• Optimum use of resources

• Effective leadership and motivation

• Establishes sound industrial relations

• Achievement of goals

• Change and growth

• Improve standard of living.

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Functions of Management

• No consensus on the classification

• No similar terminology amongst the experts

• Newman & Summer:

– Organizing, planning, leading & controlling

• Henry Fayol:

– Planning, organizing, commanding, coordinating &

controlling

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Functions of Management

• Luther Gullick: POSDCORB

P : planning

O : organizing

S : staffing

D : directing

CO: coordinating

R : reporting

B : budgeting

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Functions of Management

Planning

– The process of establishing goals and a

suitable course of action for achieving

those goals.

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Functions of Management

Organizing

– The process of engaging two or more

people in working together in a structured

way to achieve a specific goal or set of

goals.

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Functions of Management

Staffing

– Selecting and training the individuals for

specific job functions & charging them with

the associated responsibilities.

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Functions of Management

Directing

– It is the process of influencing and

motivating employees to perform essential

tasks in a n organization.

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Functions of Management

CO: coordinating

– The integration of the activities of the

separate parts of an organization to

accomplish organizational goals.

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Functions of ManagementReporting

– Process of executives keeping the

superiors and subordinates informed

about what is going on through records,

research and inspection.

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Functions of Management

Budgeting

– Formal quantitative statement of resources

allocated for planned activities over

stipulated periods of time.

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Functional areas of Management

• Production• Marketing• Finance• Human Resources• Research & Development• Industrial Engineering• MIS• Maintenance • Quality Engineering • Materials

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Management :Science or Art ? Elements of Science

• Systematic body of knowledge

• Scientific inquiry and Observation

• Experimentation

• Universal truths

Elements of Art

• Application of Knowledge

• Doing things creatively

• Personalized skill

• Perfection through practice

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Management as Science

• Distinct discipline

• Offers principles & guidelines

• Social science

• An inexact science

• Scientific & systematic.

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Management as Art

• Uses the practical knowledge acquired in

tackling problems.

• Combines human & nonhuman resources in a

creative way to achieve results.

• A personalized activity

• Constant practice leads to good management

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Management: Science as well as Art

• Art of management is as old as civilization.

• Science of management is young and developing

• Both are complementary & mutually supportive

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Management: Science as well as Art

• According to Peter Drucker:

“Every organization has the same resources to work with. It is the quality of management that spells the difference between success and failure”.

• Ability to solve problems requires sound knowledge & constant practice

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Management as a Profession

Essential features of profession:

– Well defined body of knowledge

– Formal education and training

– Minimum qualification

– Representative body

– Service above self

– Ethical code of conduct

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Management as a Profession

• Management has well defined body of

knowledge, tools and techniques, research &

consultancy

• Acquiring management education through formal

training is possible

• No representative body unlike for doctors,

lawyers, etc

• No universal code of conduct.

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Management as a Profession

• No regulatory body and code of conduct leads to

neglection of service motto.

• Not a recognized profession ,but moving in that

direction .

• Some initiatives are: separation of ownership

from management, state regulation of business

activities, proliferation of management

institutions, etc.

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Management & Administration• Controversy over the meaning of the terms

Management and Administration.

• Three schools of Thought- administration is broader than management, administration is part of management, management and administration are identical.

• American School of thought: Administrators think, managers act; administration is a top level activity, management is a lower level function. Proponents-Ordway Tead, Oliver Sheldon, W.Spriegel.

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Management & Administration

• English School of thought: Management is rule

making and rule enforcing body, Administration is

just an implementing agency. Proponents-

E.F.L.Brech, Henry Fayol, Kimball and Kimball.

• Newman, Harold Koontz, McFarland , Ernst Dale

maintain that management and administration are

identical.

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Roles of Management• Management roles refers to specific categories

of managerial behavior.• Mintzberg identifies ten management roles

grouped under three major heads namely – interpersonal roles( roles that involve people and

other duties that are ceremonial and symbolic in nature),

– informational roles( roles that involve receiving , collecting and disseminating information)

– decisional roles( roles that revolve around making choices).

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Roles of Management

• Interpersonal roles include: Figure head, Leader,

Liaison

• Informational roles include: Monitor,

Disseminator, Spokesperson

• Decisional roles include Entrepreneur,

Disturbance handler, Resource allocator,

Negotiator

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Roles of Management

• According to Robert Katz, the following skills are

required for managers job:

– Technical skills( knowledge and proficiency in a specialized

field),

– Human skills( ability to work well with other people

individually and in a group),

– Conceptual skills( ability to think and to conceptualize about

abstract and complex situations).

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Levels of Management

• Three levels exist in Management –

– first line managers( responsible for the overall

direction and operations of an organization),

– middle managers( translate the broad

strategies into specific goals for

implementation)

– top line managers( responsible for the

production of goods and services).

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Levels of Management

• First line managers: foremen, white collar

supervisors, Section heads.

• Second line managers : Functional heads and

immediate subordinates.

• Top line managers : CEO, President, Chairman,

MD, COO, CIO .

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Relative Skills Needed for Effective Performance at different levels of

Management

CONCEPTUAL

HUMAN

TECHNICAL

Top Management

Middle Management

First-line Management

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Development of Management thought

Venetian business

enterprises and their

management practices

1400

Adam Smith division

of labor

1700

Industrial Revolution

1800

Early management approaches

1900- 1950

Modern management approaches

Post 1950

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Key Management Theories – An Overview

1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

Labour Shortage

“Muckrakers” begn exposes of business

(1902)

World War I

(1914-1918)

The Great Depression Begins

Deming lectures on quality in Japan Apple Corp.

Formed (1977) Baldrige Award initiated (1987)

In search of Excellence becomes bestseller (Mid-1980s)

World War II

(1941-1945)

Protest Movemenets

(1960s to early 1970s)

IBM PC Introduced

(1981)

AT & T divestiture

takes effect (Jan 1, 1984)

Scientific Management School Classical Organizational Theory School

The Behavioral School

Management Science

The System Approach

The Contingency Approach

Dynamic Engagement Approach Source: Management by Stoner

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Development of Management thought

• Management is as old as human civilization. Ex:

Egyptian pyramids, Great Wall of China.

• During 1400’s: Venetian business enterprises and

their management practices

• During 1776: Adam Smith described the advantages

of division of labor and specialization.

• Beginning of 18th century: Industrial Revolution

resulted in the advent of machine power , mass

production and efficient transportation.

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Development of Management thought

• Evolution of management thought can be studied in two broad categories:

• Early management approaches (Scientific management, administrative management theory and human relations movement)

• Modern management approaches (behavioral, quantitative, systems and contingency approaches) .

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Scientific Management

• Fredrick W.Taylor (1856-1915) – father of scientific management

• An approach that emphasizes the scientific study of work in order to improve worker efficiency.

• Contributions by Taylor: Scientific task planning, Time and Motion study, Standardization, Differential Payment , functional foremanship.

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Scientific Management• Basics of Scientific Management ( 4

principles)Each task must be scientifically designed so

that it can replace the old, rule of thumb methods.

Workers must be scientifically selected and trained so that they can be more productive .

Bring the scientifically designed jobs and workers together so that there will be a match between them.

Division of labor and cooperation between management & workers.

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Scientific Management

Taylor summed up his approach in these words:

i. Science, not rule of thumb

ii. Harmony, not discord

iii. Cooperation , not individualism

iv. Maximum output in place of restricted output

v. Development of each man to his greatest efficiency

vi. Equitable division of work

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Scientific Management

Limitations:

i. Exploitative device

ii.Depersonalized work

iii.Unpsychological

iv.Undemocratic

v.Antisocial

vi.Unrealistic

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Administrative Management Theory

• Henry Fayol(1841-1925) developed this theory.• Focuses on principles that can be used by

managers to coordinate the internal activities of organizations.

• Explains the process of managing an organization from the top managerial perspective.

• Five functions to be performed by managers: planning, organizing, Commanding, Coordination, Controlling.

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Administrative Management Theory

• Managers should apply 14 principles at the operational level:

Division of work

Authority and Responsibility

Discipline

Unity of Command

Unity of direction

Subordination of individual interest to the common

good

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Administrative Management Theory

Remuneration of Personnel Order Centralization Scalar Chain Equity Stability of tenure Initiative Espirit de Corps

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Administrative Management Theory

Limitations:

Lack of empirical evidence

Neglect of human factors

False assumptions

Pro-management bias

Historical significance

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Human Relations Theory

• Elton Mayo(1880-1949) contributed to this theory.

• It is a movement in management thinking and practice that emphasized satisfaction of employees’ basic needs as the key to increased worker productivity.

• Compensated the deficiencies in scientific management and administrative management.

• Gained popularity after studies of human behavior at work situations during 1924-33.

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Human Relations Theory

• Hawthorne Studies: A group of studies

conducted at the Hawthorne plant of

Western Electric company whose results

ultimately led to the human relations view of

management.

• Illumination Experiment: Test group Vs

Control group, Illumination Vs Productivity.

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Human Relations Theory

• Hawthorne Effect: The possibility that individuals singled out for a study may improve their performance simply because of the added attention they receive from the researchers, rather than because of any specific factors being tested.

• Bank wiring Experiment: Group norms influencing individual behavior Vs Economic incentives.

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Human Relations Theory

• Key Concepts:

The individual-not only motivated by economic factors but also by social & psychological factors.

The work group-workers find satisfaction in the member ship of social groups.

Work environment-to be conducive for both organizational and personal growth.

The leader-should provide participative climate.

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The Human Relations Movement Pyramid

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Human Relations Theory

Criticisms:

Philosophy preaches collaboration not

competition-cow psychology

Concerned only with operative employees

Over concern on happiness – productivity

link

Anti individualistic

Not a scientifically designed experiment.

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Behavioral Approach

• Developed as a natural evolution to Hawthorne Experiments.

• Hawthorne studies stressed on emotional elements to explain human behavior and performance.

• Behavioral approach emphasizes on scientific research as the basis for developing theories about human behavior in the organizations that can be used to develop practical guidelines for managers.

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Behavioral Approach• Contributors: Abraham Maslow, Chris Argyris,etc• Also called as Human Resources approach. • Contributions:

Individual motivation, group behavior Foundation to HRM Job enrichment MBO Positive reinforcement

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Behavioral Approach

• Limitations:

Self actualizing view

Compatibility of individual & organization

Discounted the non human aspects of

organization

Best of managing is humanizing organizations

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Quantitative Approach• Features

Offers quantitative aids to decision making, develops quantitative tools to assist in providing products and services.

Managerial Choices depend on criteria such as costs, revenues, ROI, etc

Emphasis on computers and their assistance in decision making alternatives.

Promotes holistic view of factors influencing decision making

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Quantitative Approach

Eliminates subjective thinking in decision making

Minimizes bias in decision makingAids in objective rational decision making.

• Limitations:All variables influencing decision can’t be

identified.Less importance to human relationshipsDecision quality depends on the data inputted

to the computer.

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Systems Approach

• Integrated approach to management problem solving and decision making

• Advocates: Chester Barnard, George Homans

• Key Concepts of this approach:System is a set of interdependent partsConcept of holismSystem can be open or closedSystem has a boundary

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Systems Approach

• Tries to solve problems by diagnosing them with in a frame work of inputs, transformation processes, outputs and feed back

• Good balance between the needs of various functional parts of the enterprise and goals of the firm as a whole.

• Conceptual frame work to understand organization is too abstract.

• Does not identify situational differences and factors

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C

BD

A

E

Sub-systems

Environment

Environment

System Approach

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Contingency Approach• Also termed as Situational approach• Based on the premise that situations dictate

managerial action• Advocates: Selznic, Woodward, James

Thompson• Appropriate managerial action depends on the

particular parameters of the situation• Spells out the relationship of the organization to

its environment• Concerned with structural adaptations of

organizations to its task environment.

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Contingency Approach

• More pragmatic and action oriented. Integrates theory and practice in a systems framework

• Advocates the managers to develop skills for situational analysis

• Limitations:– Paucity of literature & Complex

– Defies empirical testing

– Reactive

– Not holistic in nature

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References• Principles of Management-P C Tripathi, P N Reddy; 3rd Edn.,TMH

• Management-Stephen Robbins; 8th Edn.,PHI

• Management-VSP Rao, V H Krishna; Excel

• Essentials of Management-Koontz,Weihrich;5th Edn.,TMH

• Management – James A F Stoner, R Edward Freeman, Daniel R

Gilbert;6th Edn., PHI

• Principles of management: a modern approach-Henry Albers, 4th

Edn,,John Wiley & sons

• Fundamentals of management-Donnelly, Gibson,Ivancevich ,10th

Edn,.Irwin Mc Graw

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Web References

• www.12manage.com• www.cliffsnotes.com• www.swlearning.com• www.gutenburg.org• www.cheathouse.com• en.wikipedia.org• www.business.com• www.businessmanagement.suite101.com• www.greatmanagement.org• unpan1.un.org• www.harehall.co.uk

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Question Bank

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Case Study