Concept and Foundations of Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources.
While management has been present for millennia, several writers have created a background of works that assisted in modern management theories.
By about 1900 one finds managers trying to place their theories on what they regarded as a thoroughly scientific basis (see scientism for perceived limitations of this belief). Examples include Henry R. Towne's Science of management in the 1890s, Frederick Winslow Taylor's The Principles of Scientific Management (1911), Frank and Lillian Gilbreth's Applied motion study (1917), and Henry L. Gantt's charts (1910s). J. Duncan wrote the first college management textbook in 1911. In 1912 Yoichi Ueno introduced Taylorism to Japan and became first management consultant of the "Japanese-management style". His son Ichiro Ueno pioneered Japanese quality assurance.
The first comprehensive theories of management appeared around 1920. The Harvard Business School invented the Master of Business Administration degree (MBA) in 1921. People like Henri Fayol (1841–1925) and Alexander Church described the various branches of management and their inter-relationships. In the early 20th century, people like Ordway Tead (1891–1973), Walter Scott and J. Mooney applied the principles of psychology to management, while other writers, such as Elton Mayo (1880–1949), Mary Parker Follett (1868–1933), Chester Barnard (1886–1961), Max Weber (1864–1920), Rensis Likert (1903–1981), and Chris Argyris (1923 - ) approached the phenomenon of management from a sociological perspective.
Peter Drucker (1909–2005) wrote one of the earliest books on applied management: Concept of the Corporation (published in 1946). It resulted from Alfred Sloan (chairman of General Motors until 1956) commissioning a study of the organisation. Drucker went on to write 39 books, many in the same vein.
H. Dodge, Ronald Fisher (1890–1962), and Thornton C. Fry introduced statistical techniques into management-studies. In the 1940s, Patrick Blackett combined these statistical theories with microeconomic theory and gave birth to the science of operations research. Operations research, sometimes known as "management science" (but distinct from Taylor's scientific management), attempts to take a scientific approach to solving management problems, particularly in the areas of logistics and operations.
Some of the more recent developments include the Theory of Constraints, management by objectives, reengineering, Six Sigma and various information-technology-driven theories such as agile software development, as well as group management theories such as Cog's Ladder.
As the general recognition of managers as a class solidified during the 20th century and gave perceived practitioners of the art/science of management a certain amount of prestige, so the way opened for popularised systems of management ideas to peddle their wares. In this context many management fads may have had more to do with pop psychology than with scientific theories of management.
Evolution of Management Thoughts
Taylorism
Fundamentals of Scientific Management:
Taylor argued that the principal object of management should be to secure the maximum prosperity for the employer, coupled with the maximum prosperity for each employee. He also showed that maximum prosperity can exist only as the result of maximum productivity. He argued that the most important object of both the employee and the management should be the training and development of each individual in the establishment, so that he can do the highest class of work for which his natural abilities fit him.Taylor was writing at a time when factories were creating big problems for the management. Workmen were quite inefficient. According to Taylor, there were three reasons for the inefficiency. They were the:
1. Deceptive belief that a material increase in the output of each man or each machine in the trade would throw people out of work
2. Defective management systems, which made it necessary for each workman to soldier, or work slowly to protect his own best interests
3. Inefficient rule of thumb methods, which were almost universal in all trades, which cost much wasted effort
The Principles of Scientific Management:
In this section, Taylor explained his principles of scientific management. Taylor's scientific management consisted of four principles:
1. Replace rule of thumb work methods with methods based on a scientific study of the tasks.
2. Scientifically select and then train, teach, and develop the workman, whereas in the past the employee (or workmen) chose his own work and trained himself as best he could.
3. Provide "Detailed instruction and supervision of each worker in the performance of that worker's discrete task"
4. Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks.
According to F. W. Taylor, the above combination of the initiative of the employee, coupled with the new types of work done by the management, that makes scientific management so much more efficient than the old plans.
Under the management of "initiative and incentive", the first three elements exist in many cases, but their importance is minor. However, under the scientific management, they form the very essence of the whole system.
According to Taylor, the summary of the fourth element is: Under the management of "initiative and incentive" practically the whole problem is "up to the workman," while under scientific management fully one-half of the problem is "up to the management."
Fayolism
Fayol's work was one of the first comprehensive statements of a general theory of management.He proposed that there were six primary functions of management and 14 principles of management.
Functions of management:
1. forecasting
2. planning
3. organizing
4. commanding
5. coordinating
6. controlling
Principles of Management:
1. Division of work. This principle is the same as Adam Smith's 'division of labour'. Specialisation increases output by making employees more efficient.
2. Authority. Managers must be able to give orders. Authority gives them this right. Note that responsibility arises wherever authority is exercised.
3. Discipline. Employees must obey and respect the rules that govern the organisation. Good discipline is the result of effective leadership, a clear understanding between management and workers regarding the organisation's rules, and the judicious use of penalties for infractions of the rules.
4. Unity of command. Every employee should receive orders from only one superior.
5. Unity of direction. Each group of organisational activities that have the same objective should be directed by one manager using one plan.
6. Subordination of individual interests to the general interest. The interests of any one employee or group of employees should not take precedence over the interests of the organisation as a whole.
7. Remuneration. Workers must be paid a fair wage for their services.
8. Centralisation. Centralisation refers to the degree to which subordinates are involved in decision making. Whether decision making is centralised (to management) or decentralised (to subordinates) is a question of proper proportion. The task is to find the optimum degree of centralisation for each situation.
9. Scalar chain. The line of authority from top management to the lowest ranks represents the scalar chain. Communications should follow this chain. However, if following the chain creates delays, cross-communications can be allowed if agreed to by all parties and superiors are kept informed.
10. Order. People and materials should be in the right place at the right time.
11. Equity. Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel. High employee turnover is inefficient. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies.
13. Initiative. Employees who are allowed to originate and carry out plans will exert high levels of effort.
14. Esprit de corps. Promoting team spirit will build harmony and unity within the organisation.
Fayol's work has stood the test of time and has been shown to be relevant and appropriate to contemporary management. Many of today’s management texts including Daft have reduced the six functions to four: (1) planning; (2) organizing; (3) leading; and (4) controlling. Daft's text is organized around Fayol's four functions.
Managerial Functions –
Management operates through various functions, often classified as planning, organizing, staffing, leading/directing, controlling/monitoring and Motivation.
1. Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next 5 years, etc.) and generating plans for action.
2. Organizing: (Implementation) making optimum use of the resources required to enable the successful carrying out of plans.
3. Staffing: Job Analyzing, recruitment, and hiring individuals for appropriate jobs.
4. Leading/Directing: Determining what needs to be done in a situation and getting people to do it.
5. Controlling/Monitoring: Checking progress against plans.
6. Motivation : Motivation is also a kind of basic function of management, because without motivation, employees cannot work effectively. If motivation doesn't take place in an organization, then employees may not contribute to the other functions (which are usually set by top level management).
Planning,
Planning means looking ahead and chalking out future courses of action to be followed. It is a preparatory step. It is a systematic activity which determines when, how and who is going to perform a specific job. Planning is a detailed programme regarding future courses of action. It is rightly said “Well plan is half done”. Therefore planning takes into consideration available & prospective human and physical resources of the organization so as to get effective co-ordination, contribution & perfect adjustment. It is the basic management function which includes formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources.
According to Urwick, “Planning is a mental predisposition to do things in orderly way, to think before acting and to act in the light of facts rather than guesses”. Planning is deciding best alternative among others to perform different managerial functions in order to achieve predetermined goals.
According to Koontz & O’Donell, “Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges the gap between where we are to, where we want to go. It makes possible things to occur which would not otherwise occur”.
Planning function of management involves following steps:-
Organizing,
Controlling;
According to Brech, “Controlling is a systematic exercise which is called as a process of checking actual performance against the standards or plans with a view to ensure adequate progress and also recording such experience as is gained as a contribution to possible future needs.”
According to Donnell, “Just as a navigator continually takes reading to ensure whether he is relative to a planned action, so should a business manager continually take reading to assure himself that his enterprise is on right course.”
Controlling has got two basic purposes
Decision making;
Trewatha & Newport defines decision making process as follows:, “Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem”.
As evidenced by the foregone definitions, decision making process is a consultative affair done by a comity of professionals to drive better functioning of any organization. Thereby, it is a continuous and dynamic activity that pervades all other activities pertaining to the organization. Since it is an ongoing activity, decision making process plays vital importance in the functioning of an organization. Since intellectual minds are involved in the process of decision making, it requires solid scientific knowledge coupled with skills and experience in addition to mental maturity.
Further, decision making process can be regarded as check and balance system that keeps the organisation growing both in vertical and linear directions. It means that decision making process seeks a goal. The goals are pre-set business objectives, company missions and its vision. To achieve these goals, company may face lot of obstacles in administrative, operational, marketing wings and operational domains. Such problems are sorted out through comprehensive decision making process. No decision comes as end in itself, since in may evolve new problems to solve. When one problem is solved another arises and so on, such that decision making process, as said earlier, is a continuous and dynamic.
A lot of time is consumed while decisions are taken. In a management setting, decision cannot be taken abruptly. It should follow the steps such as
Decision making under uncertainty
Managers in contemporary organizations are confronted with uncertainty and ambiguity in their everyday lives. Not only do they have to contend with rapidly changing trends and fluid situations, the data they get from the ground or from market research becomes redundant with no time. This has given rise to confusion and chaos in the way organizations approach the future. This situation can be remedied by the use of scenario based decision-making where the managers draw up possible scenarios that the company might have to contend with in the short term, medium term, and longer term.
By drawing up scenarios that consist of simulations of the best-case situation and the worst-case situation, the managers would be better able to take the right decision when the situation manifests itself . The point here is that looking into the future is impossible except for oracles and clairvoyants. Hence, some sort of grip on the future must be firmed up by planning for all possibilities.
Over the last couple of years, global businesses had to contend with multiple economic shocks starting with the bankruptcy of the investment bank, Lehmann Brothers that nearly brought down the global financial system. Next, the Eurozone crisis erupted that threatened to bring entire governments to their knees. Now, we have the specter of diminishing resources and runaway inflation. In this context, it becomes important for managers to draw up scenarios that would happen with a certain degree of probability. For instance, it would be better for managers to think of the eventuality of Greece leaving the Eurozone and then planning for it accordingly. For managers in sectors that do not have exposure to financial instruments in a major way (after all, which sector is immune from financial shocks?), they can simulate models and scenarios where a war in the Middle East is predicted and then base their strategies accordingly.
The point here is that when there is so much uncertainty, it becomes tough to anticipate events. Hence, by drawing up scenarios that simulate the worst and the best as well, decisions can be taken that would derive advantage to the organizations. When one adds complexity to the uncertainty and ambiguity that pervades the current world, one is even more muddied and muddled to take decisions. For this, managing the present, it is a challenge and hence many organizations leave future forecasts to consultants and management experts. However, this need not be the case and in-house expertise can be developed to deal with emerging scenarios.
A case in point is NASSCOM (the Apex body of IT and ITES companies in India) that has been advising IT companies in India to plan for the downturn and the possible aftershocks from the Eurozone crisis and the upcoming “fiscal cliff” in the United States. NASSCOM has also been asking IT companies to draw up scenarios for these events that if not planned for have the potential to blow up on everyone’s face. Unfortunately, many organizations are rushing into the future without any thought or idea on how they would deal with “Black Swan” events. A Black Swan event is a low probability but high impact event that can surprise people with its occurrence.
Role of Manager,
A manager wears many hats. Not only is a manager a team leader, but he or she is also a planner, organizer, cheerleader, coach, problem solver, and decision maker — all rolled into one. And these are just a few of a manager's roles.
In addition, managers' schedules are usually jam-packed. Whether they're busy with employee meetings, unexpected problems, or strategy sessions, managers often find little spare time on their calendars. (And that doesn't even include responding to e-mail!)
In his classic book, The Nature of Managerial Work, Henry Mintzberg describes a set of ten roles that a manager fills. These roles fall into three categories:
Managerial skills;
Not everyone can be a manager. Certain skills, or abilities to translate knowledge into action that results in desired performance, are required to help other employees become more productive. These skills fall under the following categories:
Although all three categories contain skills essential for managers, their relative importance tends to vary by level of managerial responsibility.
Business and management educators are increasingly interested in helping people acquire technical, human, and conceptual skills, and develop specific competencies, or specialized skills, that contribute to high performance in a management job. Following are some of the skills and personal characteristics that the American Assembly of Collegiate Schools of Business (AACSB) is urging business schools to help their students develop.
Entrepreneurship ;
Entrepreneurship is the act and art of being an entrepreneur or "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. The most obvious form of entrepreneurship is that of starting new businesses (referred as Startup Company); however, in recent years, the term has been extended to include social and political forms of entrepreneurial activity. When entrepreneurship is describing activities within a firm or large organization it is referred to as intra-preneurship and may include corporate venturing, when large entities spin-off organizations.
It has been recognized worldwide that the key to any business success and survival today is: “Driving Growth through Innovation”
In order to achieve this, the need for an entrepreneurial business culture has become the key competitive advantage of any company – small or large.
In order to implement this vision, the following has been formulated:
In simple terms this means: how to create new ideas (Creativity) and how to implement them successfully (Innovation).
This formula is supported by the Timmons Model of the Entrepreneurship Process as shown below:
Corporate Entrepreunership
Yet for corporate entrepreneurship to thrive, it needs more. It requires the structure and culture. Assuming the right people are in place, leadership must provide divisional and business unit autonomy. How can you lead your organization to a climate of corporate entrepreneurship?
So look around your organization. Are you surrounded by employees - or entrepreneurs? The difference may be not only the way they think, but they way they're being nurtured.
Social Entrepreunership
Social Entrepreneurship is the process that creates change, both economic and social, through leadership and the application of business practices while maintaining the focus on the organization’s mission.
In developing countries, social entrepreneurship focuses on creating income opportunities for many people held in the grips of poverty. Within developed nations, social entrepreneurship helps non-profit organizations explore income generating businesses that focus on the double bottom line of both the financial and social returns on their investment.
Social entrepreneurship initiatives are usually introduced and lead by the social entrepreneur. These individuals will champion the project usually taking a holistic approach to the problem. They identify the sources (or bottlenecks) that prevent change within the society. These areas sometimes relate to the basic welfare of the populations such as food, clothing, and shelter. However, they can take a community approach in areas like education, clean water, basic medical need, or major global concerns of global warming and the environment.
Sometimes new innovations are created to help address a critical need. These new products often address the “Bottom of the Pyramid.” This market is the lowest tier. It is very large, but has little resources. Social Entrepreneurs will use business skills to commercialize the product, in much the same manner as any other inventor. The difference is, they look for sustainability not Maximum Return on Investment. They may patent their product to protect the integrity of their research and prevent others from making profits on their work. They might create new and interesting alliances with for-profit companies, Non-Governmental Organizations, and/or Non-profit Organizations. They may also lobby legislator to create new business entities to help them serve the mission. One such new business is the Low-Profit Limited Liability Company (L3C), consider a hybrid, combining funding sources of a nonprofit with the management of a for-profit.
Management of innovation ;
Innovation management is the discipline of managing processes in innovation. It can be used to develop both product and organizational innovation. Without proper processes, it is not possible for R&D to be efficient; innovation management includes a set of tools that allow managers and engineers to cooperate with a common understanding of goals and processes. The focus of innovation management is to allow the organization to respond to an external or internal opportunity, and use its creative efforts to introduce new ideas, processes or products.
Importantly, innovation management is not relegated to R&D; it involves workers at every level in contributing creatively to a company's development, manufacturing, and marketing. By utilizing appropriate innovation management tools, management can trigger and deploy the creative juices of the whole work force towards the continuous development of a company.The process can be viewed as an evolutionary integration of organization, technology and market by iterating series of activities: search, select, implement and capture.
Innovation processes can either be pushed or pulled through development. A pushed process is based on existing or newly invented technology, that the organization has access to, and tries to find profitable applications to use this technology. A pulled process tries to find areas where customers needs are not met, and then focus development efforts to find solutions to those needs. To succeed with either method, an understanding of both the market and the technical problems are needed. By creating multi-functional development teams, containing both engineers and marketers, both dimensions can be solved.
The lifetime (or product lifecycle) of new products is steadily getting shorter; increased competition therefore forces companies reduce the time to market. Innovation managers must therefore decrease development time, without sacrificing quality or meeting the needs of the market.
Common tools include brainstorming, virtual prototyping, product lifecycle management, idea management, TRIZ, Phase–gate model, project management, product line planning and portfolio management.
Managing in a global environment,
International managers face intense and constant challenges that require training and understanding of the foreign environment. Managing a business in a foreign country requires managers to deal with a large variety of cultural and environmental differences. As a result, international managers must continually monitor the political, legal, sociocultural, economic, and technological environments.
Political considerations are seldom written down and often change rapidly. For example, to protest Iraq's invasion of Kuwait in 1990, many world governments levied economic sanctions against the import of Iraqi oil. Political considerations affect international business daily as governments enact tariffs (taxes), quotas (annual limits), embargoes (blockages), and other types of restriction in response to political events.
Businesses engaged in international trade must consider the relative instability of countries such as Iraq, South Africa, and Honduras. Political unrest in countries such as Peru, Haiti, Somalia, and the countries of the former Soviet Union may create hostile or even dangerous environments for foreign businesses. In Russia, for example, foreign managers often need to hire bodyguards; sixteen foreign businesspeople were murdered there in 1993. Civil war, as in Chechnya and Bosnia, may disrupt business activities and place lives in danger. And a sudden change in power can result in a regime that is hostile to foreign investment; some businesses may be forced out of a country altogether. Whether they like it or not, companies are often involved directly or indirectly in international politics.
Companies that join forces with others will be able to quicken the pace of research and development while cutting the costs connected with utilizing the latest technology. Regardless of the kind of business a company is in, it must choose partners and locations that possess an available work force to deal with the applicable technology. Many companies have chosen Mexico and Mexican partners because they provide a willing and capable work force. GM's plant in Arizpe, Mexico, rivals its North American plants in quality.
Management differences also exist. In China, a harmonious environment is more important than day-to-day productivity. In Morocco, women can assume leadership roles, but they are usually more self-conscious than American women. In Pakistan, women are not often found in management positions, if they're in the workplace at all.
In addition, the importance of work in employees' lives varies from country to country. For example, the Japanese feel that work is an important part of their lives. This belief in work, coupled with a strong group orientation, may explain the Japanese willingness to put up with things that workers in other countries would find intolerable.
Likewise, culture may impact what employees find motivating, as well as how they respond to rewards and punishments. For example, Americans tend to emphasize personal growth, accomplishment, and “getting what you deserve” for performance as the most important motivators. However, in Asian cultures, maintaining group solidarity and promoting group needs may be more important than rewarding individual achievements.
Finally, language differences are particularly important, and international managers must remember that not all words translate clearly into other languages. Many global companies have had difficulty crossing the language barrier, with results ranging from mild embarrassment to outright failure. For example, in regards to marketing, seemingly innocuous brand names and advertising phrases can take on unintended or hidden meanings when translated into other languages. Advertising themes often lose or gain something in translations. The English Coors beer slogan “get loose with Coors” came out as “get the runs with Coors” in Spanish. Coca-Cola's English “Coke adds life” theme translated into “Coke brings your ancestors back from the dead” in Japanese. In Chinese, the English Kentucky Fried Chicken slogan “finger-lickin' good” came out as “eat your fingers off.”
Such classic boo-boos are soon discovered and corrected; they may result in little more than embarrassments for companies. Managers should keep in mind that countless other, more subtle blunders may go undetected and damage product performance in less obvious ways.
In the U.S., the acceptance of bribes or payoffs is illegal; in other countries, the acceptance of bribes or payoffs may not be illegal—they may be considered a common business practice. In addition, some countries have copyright and patent laws that are less strict than those in the U.S., and some countries fail to honor these laws. China, for example, has recently been threatened with severe trade sanctions because of a history of allowing American goods to be copied or counterfeited there. As a result, businesses engaging in international trade may need to take extra steps to protect their products because local laws may be insufficient to protect them.
Flexible Systems Management;
Flexible Systems Management is an emerging paradigm that relates with management of organizations placed in a chaotic business environment. The business environment has been changing over a period of time, which at times may be fairly turbulent and dramatic. This creates uncertainties and dynamics of high order. In order to cope with it, both for survival and growth in a competitive manner, business organizations have to look for innovative strategies and mechanisms. The paradigm of ‘flexible systems management’ (the focus of this Journal) is associated with multiple perspectives such as holistic management of organizational paradoxes with systemic flexibility; business agility infused by new information and communication technologies; innovation, strategic change and risk; and
flexibility in various operations for achieving business excellence.
Social responsibility and managerial ethics;
Corporate Social Responsibility (CSR) has been defined in various ways by scholars, authors and institutions, but one of the more ideal definitions has been provided by the World Business Council for Sustainable Development, which says "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large."
CSR is not only about doing Philanthropic activities but is now growing to become an integral part of the Strategy of the company. These days all the stakeholders including Employees, Stockholders, Consumers, Suppliers, Distributors, Community, Environment expect a higher degree of accountability from businesses. There fore the way a company goes on carrying its business and other activities and how it is perceived by the various stakeholders has become paramount for the company.
In the past few years, India has been registering the 2nd highest growth levels year on year globally. To make this growth sustainable, India needs an inclusive growth strategy, considering the large social inequality/divide existing in the country. With corporate being the drivers of growth of our country, they realize that they need to play a substantial part in this inclusive growth. Government of India has already made it mandatory for Public Sector Units to spend certain % of profit on CSR.
Process and customer orientation;
The following six features and concepts are key to understanding social marketing and have been incorporated into the 'customer triangle' model below:
Managerial processes on direct and indirect value chain.
Then identify the various value-creating subactivities in your company's infrastructure. These will generally be cross-functional in nature, rather than specific to each primary activity. Again, look for direct, indirect, and quality assurance activities.
Topics:
Delegation; Decision Making under certainty and uncertainty; Management styles; Leadership vs management; Stakeholders; Stakeholders network; Family management; Delegation of authority and accountability; Management by Objectives; Corporate Responsibility; Chief Executive; Management Control; Responsibility Centers; Situational Leadership; Social Responsibility; Trends in Management concepts; Innovation; Planning vs Controlling; Managerial Decisions; Management of Risk; Management Techniques; Management Fads; Fayolism;
While management has been present for millennia, several writers have created a background of works that assisted in modern management theories.
By about 1900 one finds managers trying to place their theories on what they regarded as a thoroughly scientific basis (see scientism for perceived limitations of this belief). Examples include Henry R. Towne's Science of management in the 1890s, Frederick Winslow Taylor's The Principles of Scientific Management (1911), Frank and Lillian Gilbreth's Applied motion study (1917), and Henry L. Gantt's charts (1910s). J. Duncan wrote the first college management textbook in 1911. In 1912 Yoichi Ueno introduced Taylorism to Japan and became first management consultant of the "Japanese-management style". His son Ichiro Ueno pioneered Japanese quality assurance.
The first comprehensive theories of management appeared around 1920. The Harvard Business School invented the Master of Business Administration degree (MBA) in 1921. People like Henri Fayol (1841–1925) and Alexander Church described the various branches of management and their inter-relationships. In the early 20th century, people like Ordway Tead (1891–1973), Walter Scott and J. Mooney applied the principles of psychology to management, while other writers, such as Elton Mayo (1880–1949), Mary Parker Follett (1868–1933), Chester Barnard (1886–1961), Max Weber (1864–1920), Rensis Likert (1903–1981), and Chris Argyris (1923 - ) approached the phenomenon of management from a sociological perspective.
Peter Drucker (1909–2005) wrote one of the earliest books on applied management: Concept of the Corporation (published in 1946). It resulted from Alfred Sloan (chairman of General Motors until 1956) commissioning a study of the organisation. Drucker went on to write 39 books, many in the same vein.
H. Dodge, Ronald Fisher (1890–1962), and Thornton C. Fry introduced statistical techniques into management-studies. In the 1940s, Patrick Blackett combined these statistical theories with microeconomic theory and gave birth to the science of operations research. Operations research, sometimes known as "management science" (but distinct from Taylor's scientific management), attempts to take a scientific approach to solving management problems, particularly in the areas of logistics and operations.
Some of the more recent developments include the Theory of Constraints, management by objectives, reengineering, Six Sigma and various information-technology-driven theories such as agile software development, as well as group management theories such as Cog's Ladder.
As the general recognition of managers as a class solidified during the 20th century and gave perceived practitioners of the art/science of management a certain amount of prestige, so the way opened for popularised systems of management ideas to peddle their wares. In this context many management fads may have had more to do with pop psychology than with scientific theories of management.
Evolution of Management Thoughts
Taylorism
Fundamentals of Scientific Management:
Taylor argued that the principal object of management should be to secure the maximum prosperity for the employer, coupled with the maximum prosperity for each employee. He also showed that maximum prosperity can exist only as the result of maximum productivity. He argued that the most important object of both the employee and the management should be the training and development of each individual in the establishment, so that he can do the highest class of work for which his natural abilities fit him.Taylor was writing at a time when factories were creating big problems for the management. Workmen were quite inefficient. According to Taylor, there were three reasons for the inefficiency. They were the:
1. Deceptive belief that a material increase in the output of each man or each machine in the trade would throw people out of work
2. Defective management systems, which made it necessary for each workman to soldier, or work slowly to protect his own best interests
3. Inefficient rule of thumb methods, which were almost universal in all trades, which cost much wasted effort
The Principles of Scientific Management:
In this section, Taylor explained his principles of scientific management. Taylor's scientific management consisted of four principles:
1. Replace rule of thumb work methods with methods based on a scientific study of the tasks.
2. Scientifically select and then train, teach, and develop the workman, whereas in the past the employee (or workmen) chose his own work and trained himself as best he could.
3. Provide "Detailed instruction and supervision of each worker in the performance of that worker's discrete task"
4. Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks.
According to F. W. Taylor, the above combination of the initiative of the employee, coupled with the new types of work done by the management, that makes scientific management so much more efficient than the old plans.
Under the management of "initiative and incentive", the first three elements exist in many cases, but their importance is minor. However, under the scientific management, they form the very essence of the whole system.
According to Taylor, the summary of the fourth element is: Under the management of "initiative and incentive" practically the whole problem is "up to the workman," while under scientific management fully one-half of the problem is "up to the management."
Fayolism
Fayol's work was one of the first comprehensive statements of a general theory of management.He proposed that there were six primary functions of management and 14 principles of management.
Functions of management:
1. forecasting
2. planning
3. organizing
4. commanding
5. coordinating
6. controlling
Principles of Management:
1. Division of work. This principle is the same as Adam Smith's 'division of labour'. Specialisation increases output by making employees more efficient.
2. Authority. Managers must be able to give orders. Authority gives them this right. Note that responsibility arises wherever authority is exercised.
3. Discipline. Employees must obey and respect the rules that govern the organisation. Good discipline is the result of effective leadership, a clear understanding between management and workers regarding the organisation's rules, and the judicious use of penalties for infractions of the rules.
4. Unity of command. Every employee should receive orders from only one superior.
5. Unity of direction. Each group of organisational activities that have the same objective should be directed by one manager using one plan.
6. Subordination of individual interests to the general interest. The interests of any one employee or group of employees should not take precedence over the interests of the organisation as a whole.
7. Remuneration. Workers must be paid a fair wage for their services.
8. Centralisation. Centralisation refers to the degree to which subordinates are involved in decision making. Whether decision making is centralised (to management) or decentralised (to subordinates) is a question of proper proportion. The task is to find the optimum degree of centralisation for each situation.
9. Scalar chain. The line of authority from top management to the lowest ranks represents the scalar chain. Communications should follow this chain. However, if following the chain creates delays, cross-communications can be allowed if agreed to by all parties and superiors are kept informed.
10. Order. People and materials should be in the right place at the right time.
11. Equity. Managers should be kind and fair to their subordinates.
12. Stability of tenure of personnel. High employee turnover is inefficient. Management should provide orderly personnel planning and ensure that replacements are available to fill vacancies.
13. Initiative. Employees who are allowed to originate and carry out plans will exert high levels of effort.
14. Esprit de corps. Promoting team spirit will build harmony and unity within the organisation.
Fayol's work has stood the test of time and has been shown to be relevant and appropriate to contemporary management. Many of today’s management texts including Daft have reduced the six functions to four: (1) planning; (2) organizing; (3) leading; and (4) controlling. Daft's text is organized around Fayol's four functions.
Managerial Functions –
Management operates through various functions, often classified as planning, organizing, staffing, leading/directing, controlling/monitoring and Motivation.
1. Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next 5 years, etc.) and generating plans for action.
2. Organizing: (Implementation) making optimum use of the resources required to enable the successful carrying out of plans.
3. Staffing: Job Analyzing, recruitment, and hiring individuals for appropriate jobs.
4. Leading/Directing: Determining what needs to be done in a situation and getting people to do it.
5. Controlling/Monitoring: Checking progress against plans.
6. Motivation : Motivation is also a kind of basic function of management, because without motivation, employees cannot work effectively. If motivation doesn't take place in an organization, then employees may not contribute to the other functions (which are usually set by top level management).
Planning,
Planning means looking ahead and chalking out future courses of action to be followed. It is a preparatory step. It is a systematic activity which determines when, how and who is going to perform a specific job. Planning is a detailed programme regarding future courses of action. It is rightly said “Well plan is half done”. Therefore planning takes into consideration available & prospective human and physical resources of the organization so as to get effective co-ordination, contribution & perfect adjustment. It is the basic management function which includes formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources.
According to Urwick, “Planning is a mental predisposition to do things in orderly way, to think before acting and to act in the light of facts rather than guesses”. Planning is deciding best alternative among others to perform different managerial functions in order to achieve predetermined goals.
According to Koontz & O’Donell, “Planning is deciding in advance what to do, how to do and who is to do it. Planning bridges the gap between where we are to, where we want to go. It makes possible things to occur which would not otherwise occur”.
Steps in Planning Function
Planning function of management involves following steps:-
Establishment of objectives
- Planning requires a systematic approach.
- Planning starts with the setting of goals and objectives to be achieved.
- Objectives provide a rationale for undertaking various activities as well as indicate direction of efforts.
- Moreover objectives focus the attention of managers on the end results to be achieved.
- As a matter of fact, objectives provide nucleus to the planning process. Therefore, objectives should be stated in a clear, precise and unambiguous language. Otherwise the activities undertaken are bound to be ineffective.
- As far as possible, objectives should be stated in quantitative terms. For example, Number of men working, wages given, units produced, etc. But such an objective cannot be stated in quantitative terms like performance of quality control manager, effectiveness of personnel manager.
- Such goals should be specified in qualitative terms.
- Hence objectives should be practical, acceptable, workable and achievable.
Establishment of Planning Premises
- Planning premises are the assumptions about the lively shape of events in future.
- They serve as a basis of planning.
- Establishment of planning premises is concerned with determining where one tends to deviate from the actual plans and causes of such deviations.
- It is to find out what obstacles are there in the way of business during the course of operations.
- Establishment of planning premises is concerned to take such steps that avoids these obstacles to a great extent.
- Planning premises may be internal or external. Internal includes capital investment policy, management labour relations, philosophy of management, etc. Whereas external includes socio- economic, political and economical changes.
- Internal premises are controllable whereas external are non- controllable.
Choice of alternative course of action
- When forecast are available and premises are established, a number of alternative course of actions have to be considered.
- For this purpose, each and every alternative will be evaluated by weighing its pros and cons in the light of resources available and requirements of the organization.
- The merits, demerits as well as the consequences of each alternative must be examined before the choice is being made.
- After objective and scientific evaluation, the best alternative is chosen.
- The planners should take help of various quantitative techniques to judge the stability of an alternative.
Formulation of derivative plans
- Derivative plans are the sub plans or secondary plans which help in the achievement of main plan.
- Secondary plans will flow from the basic plan. These are meant to support and expediate the achievement of basic plans.
- These detail plans include policies, procedures, rules, programmes, budgets, schedules, etc. For example, if profit maximization is the main aim of the enterprise, derivative plans will include sales maximization, production maximization, and cost minimization.
- Derivative plans indicate time schedule and sequence of accomplishing various tasks.
Securing Co-operation
- After the plans have been determined, it is necessary rather advisable to take subordinates or those who have to implement these plans into confidence.
- The purposes behind taking them into confidence are :-
- Subordinates may feel motivated since they are involved in decision making process.
- The organization may be able to get valuable suggestions and improvement in formulation as well as implementation of plans.
- Also the employees will be more interested in the execution of these plans.
Follow up/Appraisal of plans
- After choosing a particular course of action, it is put into action.
- After the selected plan is implemented, it is important to appraise its effectiveness.
- This is done on the basis of feedback or information received from departments or persons concerned.
- This enables the management to correct deviations or modify the plan.
- This step establishes a link between planning and controlling function.
- The follow up must go side by side the implementation of plans so that in the light of observations made, future plans can be made more realistic.
Organizing,
| Organizing
is the function of management which follows planning. It is a function
in which the synchronization and combination of human, physical and
financial resources takes place. All the three resources are important
to get results. Therefore, organizational function helps in achievement
of results which in fact is important for the functioning of a concern.
According to Chester Barnard, “Organizing is a function by which
the concern is able to define the role positions, the jobs related and
the co- ordination between authority and responsibility. Hence, a
manager always has to organize in order to get results. A manager performs organizing function with the help of following steps:-
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- Departmentally organizing the activities - In this step, the manager tries to combine and group similar and related activities into units or departments. This organization of dividing the whole concern into independent units and departments is called departmentation.
- Classifying the authority - Once the departments are made, the manager likes to classify the powers and its extent to the managers. This activity of giving a rank in order to the managerial positions is called hierarchy. The top management is into formulation of policies, the middle level management into departmental supervision and lower level management into supervision of foremen. The clarification of authority help in bringing efficiency in the running of a concern. This helps in achieving efficiency in the running of a concern. This helps in avoiding wastage of time, money, effort, in avoidance of duplication or overlapping of efforts and this helps in bringing smoothness in a concern’s working.
- Co-ordination between authority and responsibility - Relationships are established among various groups to enable smooth interaction toward the achievment of the organizational goal. Each individual is made aware of his authority and he/she knows whom they have to take orders from and to whom they are accountable and to whom they have to report. A clear organizational structure is drawn and all the employees are made aware of it.
Controlling;
What is Controlling?
Controlling consists of verifying whether everything occurs in confirmities with the plans adopted, instructions issued and principles established. Controlling ensures that there is effective and efficient utilization of organizational resources so as to achieve the planned goals. Controlling measures the deviation of actual performance from the standard performance, discovers the causes of such deviations and helps in taking corrective actionsAccording to Brech, “Controlling is a systematic exercise which is called as a process of checking actual performance against the standards or plans with a view to ensure adequate progress and also recording such experience as is gained as a contribution to possible future needs.”
According to Donnell, “Just as a navigator continually takes reading to ensure whether he is relative to a planned action, so should a business manager continually take reading to assure himself that his enterprise is on right course.”
Controlling has got two basic purposes
- It facilitates co-ordination
- It helps in planning
Features of Controlling Function
Following are the characteristics of controlling function of management-- Controlling is an end function- A function which comes once the performances are made in confirmities with plans.
- Controlling is a pervasive function- which means it is performed by managers at all levels and in all type of concerns.
- Controlling is forward looking- because effective control is not possible without past being controlled. Controlling always look to future so that follow-up can be made whenever required.
- Controlling is a dynamic process- since controlling requires taking reviewal methods, changes have to be made wherever possible.
- Controlling is related with planning- Planning and Controlling are two inseperable functions of management. Without planning, controlling is a meaningless exercise and without controlling, planning is useless. Planning presupposes controlling and controlling succeeds planning.
Decision making;
Definition of Decision Making
According to the Oxford Advanced Learner’s Dictionary the term decision making means - the process of deciding about something important, especially in a group of people or in an organization.Trewatha & Newport defines decision making process as follows:, “Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem”.
As evidenced by the foregone definitions, decision making process is a consultative affair done by a comity of professionals to drive better functioning of any organization. Thereby, it is a continuous and dynamic activity that pervades all other activities pertaining to the organization. Since it is an ongoing activity, decision making process plays vital importance in the functioning of an organization. Since intellectual minds are involved in the process of decision making, it requires solid scientific knowledge coupled with skills and experience in addition to mental maturity.
Further, decision making process can be regarded as check and balance system that keeps the organisation growing both in vertical and linear directions. It means that decision making process seeks a goal. The goals are pre-set business objectives, company missions and its vision. To achieve these goals, company may face lot of obstacles in administrative, operational, marketing wings and operational domains. Such problems are sorted out through comprehensive decision making process. No decision comes as end in itself, since in may evolve new problems to solve. When one problem is solved another arises and so on, such that decision making process, as said earlier, is a continuous and dynamic.
A lot of time is consumed while decisions are taken. In a management setting, decision cannot be taken abruptly. It should follow the steps such as
- Defining the problem
- Gathering information and collecting data
- Developing and weighing the options
- Choosing best possible option
- Plan and execute
- Take follow up action
Decision making under uncertainty
Managers in contemporary organizations are confronted with uncertainty and ambiguity in their everyday lives. Not only do they have to contend with rapidly changing trends and fluid situations, the data they get from the ground or from market research becomes redundant with no time. This has given rise to confusion and chaos in the way organizations approach the future. This situation can be remedied by the use of scenario based decision-making where the managers draw up possible scenarios that the company might have to contend with in the short term, medium term, and longer term.
By drawing up scenarios that consist of simulations of the best-case situation and the worst-case situation, the managers would be better able to take the right decision when the situation manifests itself . The point here is that looking into the future is impossible except for oracles and clairvoyants. Hence, some sort of grip on the future must be firmed up by planning for all possibilities.
Over the last couple of years, global businesses had to contend with multiple economic shocks starting with the bankruptcy of the investment bank, Lehmann Brothers that nearly brought down the global financial system. Next, the Eurozone crisis erupted that threatened to bring entire governments to their knees. Now, we have the specter of diminishing resources and runaway inflation. In this context, it becomes important for managers to draw up scenarios that would happen with a certain degree of probability. For instance, it would be better for managers to think of the eventuality of Greece leaving the Eurozone and then planning for it accordingly. For managers in sectors that do not have exposure to financial instruments in a major way (after all, which sector is immune from financial shocks?), they can simulate models and scenarios where a war in the Middle East is predicted and then base their strategies accordingly.
The point here is that when there is so much uncertainty, it becomes tough to anticipate events. Hence, by drawing up scenarios that simulate the worst and the best as well, decisions can be taken that would derive advantage to the organizations. When one adds complexity to the uncertainty and ambiguity that pervades the current world, one is even more muddied and muddled to take decisions. For this, managing the present, it is a challenge and hence many organizations leave future forecasts to consultants and management experts. However, this need not be the case and in-house expertise can be developed to deal with emerging scenarios.
A case in point is NASSCOM (the Apex body of IT and ITES companies in India) that has been advising IT companies in India to plan for the downturn and the possible aftershocks from the Eurozone crisis and the upcoming “fiscal cliff” in the United States. NASSCOM has also been asking IT companies to draw up scenarios for these events that if not planned for have the potential to blow up on everyone’s face. Unfortunately, many organizations are rushing into the future without any thought or idea on how they would deal with “Black Swan” events. A Black Swan event is a low probability but high impact event that can surprise people with its occurrence.
Role of Manager,
A manager wears many hats. Not only is a manager a team leader, but he or she is also a planner, organizer, cheerleader, coach, problem solver, and decision maker — all rolled into one. And these are just a few of a manager's roles.
In addition, managers' schedules are usually jam-packed. Whether they're busy with employee meetings, unexpected problems, or strategy sessions, managers often find little spare time on their calendars. (And that doesn't even include responding to e-mail!)
In his classic book, The Nature of Managerial Work, Henry Mintzberg describes a set of ten roles that a manager fills. These roles fall into three categories:
- Interpersonal: This role involves human interaction.
- Informational: This role involves the sharing and analyzing of information.
-
Decisional: This role involves decision making.
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Managerial skills;
Not everyone can be a manager. Certain skills, or abilities to translate knowledge into action that results in desired performance, are required to help other employees become more productive. These skills fall under the following categories:
- Technical: This skill requires the ability to use a special proficiency or expertise to perform particular tasks. Accountants, engineers, market researchers, and computer scientists, as examples, possess technical skills. Managers acquire these skills initially through formal education and then further develop them through training and job experience. Technical skills are most important at lower levels of management.
- Human: This skill demonstrates the ability to work well in cooperation with others. Human skills emerge in the workplace as a spirit of trust, enthusiasm, and genuine involvement in interpersonal relationships. A manager with good human skills has a high degree of self-awareness and a capacity to understand or empathize with the feelings of others. Some managers are naturally born with great human skills, while others improve their skills through classes or experience. No matter how human skills are acquired, they're critical for all managers because of the highly interpersonal nature of managerial work.
- Conceptual: This skill calls for the ability to think analytically. Analytical skills enable managers to break down problems into smaller parts, to see the relations among the parts, and to recognize the implications of any one problem for others. As managers assume ever-higher responsibilities in organizations, they must deal with more ambiguous problems that have long-term consequences. Again, managers may acquire these skills initially through formal education and then further develop them by training and job experience. The higher the management level, the more important conceptual skills become.
Although all three categories contain skills essential for managers, their relative importance tends to vary by level of managerial responsibility.
Business and management educators are increasingly interested in helping people acquire technical, human, and conceptual skills, and develop specific competencies, or specialized skills, that contribute to high performance in a management job. Following are some of the skills and personal characteristics that the American Assembly of Collegiate Schools of Business (AACSB) is urging business schools to help their students develop.
- Leadership — ability to influence others to perform tasks
- Self-objectivity — ability to evaluate yourself realistically
- Analytic thinking — ability to interpret and explain patterns in information
- Behavioral flexibility — ability to modify personal behavior to react objectively rather than subjectively to accomplish organizational goals
- Oral communication — ability to express ideas clearly in words
- Written communication — ability to express ideas clearly in writing
- Personal impact — ability to create a good impression and instill confidence
-
Resistance to stress — ability to perform under stressful condition
Entrepreneurship ;
Entrepreneurship is the act and art of being an entrepreneur or "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response to a perceived opportunity. The most obvious form of entrepreneurship is that of starting new businesses (referred as Startup Company); however, in recent years, the term has been extended to include social and political forms of entrepreneurial activity. When entrepreneurship is describing activities within a firm or large organization it is referred to as intra-preneurship and may include corporate venturing, when large entities spin-off organizations.
It has been recognized worldwide that the key to any business success and survival today is: “Driving Growth through Innovation”
In order to achieve this, the need for an entrepreneurial business culture has become the key competitive advantage of any company – small or large.
In order to implement this vision, the following has been formulated:
Entrepreneurship = Creativity + Innovation
In simple terms this means: how to create new ideas (Creativity) and how to implement them successfully (Innovation).
This formula is supported by the Timmons Model of the Entrepreneurship Process as shown below:
Corporate Entrepreunership
Yet for corporate entrepreneurship to thrive, it needs more. It requires the structure and culture. Assuming the right people are in place, leadership must provide divisional and business unit autonomy. How can you lead your organization to a climate of corporate entrepreneurship?
- Like innovation, Define what entrepreneurship means. The phrase "Corporate Entrepreneurship" must mean the same thing organization-wide. Moreover, leadership must delineate objectives and point the way as part of its vision and mission.
- Incubate and nurture. Corporate entrepreneurship doesn't flourish without guidance. It starts small - and grows through encouragement. Begin with small projects heavily supported by leadership. Those success stories should be heavily communicated as such. They then will become the lead project to pull the rest of the group or other entrepreneurial-minded teams along.
- Create a reward system. Risk and reward, when properly aligned, can foster accountability. Rewards - whether in the form of praise from immediate managers, attention from leadership, or the chance to lead future projects or task forces - are powerful motivators. They also can help solidify the creation of stronger corporate entrepreneurs.
So look around your organization. Are you surrounded by employees - or entrepreneurs? The difference may be not only the way they think, but they way they're being nurtured.
Social Entrepreunership
Social Entrepreneurship is the process that creates change, both economic and social, through leadership and the application of business practices while maintaining the focus on the organization’s mission.
In developing countries, social entrepreneurship focuses on creating income opportunities for many people held in the grips of poverty. Within developed nations, social entrepreneurship helps non-profit organizations explore income generating businesses that focus on the double bottom line of both the financial and social returns on their investment.
Social entrepreneurship initiatives are usually introduced and lead by the social entrepreneur. These individuals will champion the project usually taking a holistic approach to the problem. They identify the sources (or bottlenecks) that prevent change within the society. These areas sometimes relate to the basic welfare of the populations such as food, clothing, and shelter. However, they can take a community approach in areas like education, clean water, basic medical need, or major global concerns of global warming and the environment.
Sometimes new innovations are created to help address a critical need. These new products often address the “Bottom of the Pyramid.” This market is the lowest tier. It is very large, but has little resources. Social Entrepreneurs will use business skills to commercialize the product, in much the same manner as any other inventor. The difference is, they look for sustainability not Maximum Return on Investment. They may patent their product to protect the integrity of their research and prevent others from making profits on their work. They might create new and interesting alliances with for-profit companies, Non-Governmental Organizations, and/or Non-profit Organizations. They may also lobby legislator to create new business entities to help them serve the mission. One such new business is the Low-Profit Limited Liability Company (L3C), consider a hybrid, combining funding sources of a nonprofit with the management of a for-profit.
Management of innovation ;
Innovation management is the discipline of managing processes in innovation. It can be used to develop both product and organizational innovation. Without proper processes, it is not possible for R&D to be efficient; innovation management includes a set of tools that allow managers and engineers to cooperate with a common understanding of goals and processes. The focus of innovation management is to allow the organization to respond to an external or internal opportunity, and use its creative efforts to introduce new ideas, processes or products.
Importantly, innovation management is not relegated to R&D; it involves workers at every level in contributing creatively to a company's development, manufacturing, and marketing. By utilizing appropriate innovation management tools, management can trigger and deploy the creative juices of the whole work force towards the continuous development of a company.The process can be viewed as an evolutionary integration of organization, technology and market by iterating series of activities: search, select, implement and capture.
Innovation processes can either be pushed or pulled through development. A pushed process is based on existing or newly invented technology, that the organization has access to, and tries to find profitable applications to use this technology. A pulled process tries to find areas where customers needs are not met, and then focus development efforts to find solutions to those needs. To succeed with either method, an understanding of both the market and the technical problems are needed. By creating multi-functional development teams, containing both engineers and marketers, both dimensions can be solved.
The lifetime (or product lifecycle) of new products is steadily getting shorter; increased competition therefore forces companies reduce the time to market. Innovation managers must therefore decrease development time, without sacrificing quality or meeting the needs of the market.
Common tools include brainstorming, virtual prototyping, product lifecycle management, idea management, TRIZ, Phase–gate model, project management, product line planning and portfolio management.
Managing in a global environment,
International managers face intense and constant challenges that require training and understanding of the foreign environment. Managing a business in a foreign country requires managers to deal with a large variety of cultural and environmental differences. As a result, international managers must continually monitor the political, legal, sociocultural, economic, and technological environments.
The political environment
The political environment can foster or hinder economic developments and direct investments. This environment is ever-changing. As examples, the political and economic philosophies of a nation's leader may change overnight. The stability of a nation's government, which frequently rests on the support of the people, can be very volatile. Various citizen groups with vested interests can undermine investment operations and opportunities. And local governments may view foreign firms suspiciously.Political considerations are seldom written down and often change rapidly. For example, to protest Iraq's invasion of Kuwait in 1990, many world governments levied economic sanctions against the import of Iraqi oil. Political considerations affect international business daily as governments enact tariffs (taxes), quotas (annual limits), embargoes (blockages), and other types of restriction in response to political events.
Businesses engaged in international trade must consider the relative instability of countries such as Iraq, South Africa, and Honduras. Political unrest in countries such as Peru, Haiti, Somalia, and the countries of the former Soviet Union may create hostile or even dangerous environments for foreign businesses. In Russia, for example, foreign managers often need to hire bodyguards; sixteen foreign businesspeople were murdered there in 1993. Civil war, as in Chechnya and Bosnia, may disrupt business activities and place lives in danger. And a sudden change in power can result in a regime that is hostile to foreign investment; some businesses may be forced out of a country altogether. Whether they like it or not, companies are often involved directly or indirectly in international politics.
The technological environment
The technological environment contains the innovations, from robotics to cellular phones, that are rapidly occurring in all types of technology. Before a company can expect to sell its product in another country, the technology of the two countries must be compatible.Companies that join forces with others will be able to quicken the pace of research and development while cutting the costs connected with utilizing the latest technology. Regardless of the kind of business a company is in, it must choose partners and locations that possess an available work force to deal with the applicable technology. Many companies have chosen Mexico and Mexican partners because they provide a willing and capable work force. GM's plant in Arizpe, Mexico, rivals its North American plants in quality.
Consumer safety in a global marketplace
The United States leads the world in spending on research and development. As products and technology become more complex, the public needs to know that they are safe. Thus, government agencies investigate and ban potentially unsafe products. In the United States, the Federal Food and Drug Administration has set up complex regulations for testing new drugs. The Consumer Product Safety Commission sets safety standards for consumer products and penalizes companies that fail to meet them. Such regulations have resulted in much higher research costs and in longer times between new product ideas and their introduction. This is not always true in other countries.The sociocultural environment
Cultural differences, which can be very subtle, are extremely important. An organization that enters the international marketplace on virtually any level must make learning the foreign country's cultural taboos and proper cultural practices a high priority. If a business fails to understand the cultural methods of doing business, grave misunderstandings and a complete lack of trust may occur.Management differences also exist. In China, a harmonious environment is more important than day-to-day productivity. In Morocco, women can assume leadership roles, but they are usually more self-conscious than American women. In Pakistan, women are not often found in management positions, if they're in the workplace at all.
In addition, the importance of work in employees' lives varies from country to country. For example, the Japanese feel that work is an important part of their lives. This belief in work, coupled with a strong group orientation, may explain the Japanese willingness to put up with things that workers in other countries would find intolerable.
Likewise, culture may impact what employees find motivating, as well as how they respond to rewards and punishments. For example, Americans tend to emphasize personal growth, accomplishment, and “getting what you deserve” for performance as the most important motivators. However, in Asian cultures, maintaining group solidarity and promoting group needs may be more important than rewarding individual achievements.
Finally, language differences are particularly important, and international managers must remember that not all words translate clearly into other languages. Many global companies have had difficulty crossing the language barrier, with results ranging from mild embarrassment to outright failure. For example, in regards to marketing, seemingly innocuous brand names and advertising phrases can take on unintended or hidden meanings when translated into other languages. Advertising themes often lose or gain something in translations. The English Coors beer slogan “get loose with Coors” came out as “get the runs with Coors” in Spanish. Coca-Cola's English “Coke adds life” theme translated into “Coke brings your ancestors back from the dead” in Japanese. In Chinese, the English Kentucky Fried Chicken slogan “finger-lickin' good” came out as “eat your fingers off.”
Such classic boo-boos are soon discovered and corrected; they may result in little more than embarrassments for companies. Managers should keep in mind that countless other, more subtle blunders may go undetected and damage product performance in less obvious ways.
The economic environment
Managers must monitor currency, infrastructure, inflation, interest rates, wages, and taxation. In assessing the economic environment in foreign countries, a business must pay particular attention to the following four areas:-
Average income levels of the population. If
the average income for the population is very low, no matter how
desperately this population needs a product or service, there simply is
not a market for it.
-
Tax structures. In some countries, foreign
firms pay much higher tax rates than domestic competitors. These tax
differences may be very obvious or subtle, as in hidden registration
fees.
-
Inflation rates. In the U.S., for example,
inflation rates have been quite low and relatively stable for several
years. In some countries, however, inflation rates of 30, 40, or even
100 percent per year are not uncommon. Inflation results in a general
rise in the level of prices, and impacts business in many ways. For
example, in the mid-1970s, a shortage of crude oil led to numerous
problems because petroleum products supply most of the energy required
to produce goods and services and to transport goods around the world.
As the cost of petroleum products increased, a corresponding increase
took place in the cost of goods and services. As a result, interest
rates increased dramatically, causing both businesses and consumers to
reduce their borrowing. Business profits fell as consumers' purchasing
power was eroded by inflation. High interest rates and unemployment
reached alarmingly high levels.
-
Fluctuating exchange rates. The
exchange rate, or the value of one country's currency
in terms of another country's currency, is determined primarily by
supply and demand for each country's goods and services. The government
of a country can, however, cause this exchange rate to change
dramatically by causing high inflation—by printing too much currency or
by changing the value of the currency through devaluation. A foreign
investor may sustain large losses if the value of the currency drops
substantially.
The legal enviroment
The American federal government has put forth a number of laws that regulate the activities of U.S. firms engaged in international trade. However, once outside U.S. borders, American organizations are likely to find that the laws of the other nations differ from those of the U.S. Many legal rights that Americans take for granted do not exist in other countries; a U.S. firm doing business abroad must understand and obey the laws of the host country.In the U.S., the acceptance of bribes or payoffs is illegal; in other countries, the acceptance of bribes or payoffs may not be illegal—they may be considered a common business practice. In addition, some countries have copyright and patent laws that are less strict than those in the U.S., and some countries fail to honor these laws. China, for example, has recently been threatened with severe trade sanctions because of a history of allowing American goods to be copied or counterfeited there. As a result, businesses engaging in international trade may need to take extra steps to protect their products because local laws may be insufficient to protect them.
Flexible Systems Management;
Flexible Systems Management is an emerging paradigm that relates with management of organizations placed in a chaotic business environment. The business environment has been changing over a period of time, which at times may be fairly turbulent and dramatic. This creates uncertainties and dynamics of high order. In order to cope with it, both for survival and growth in a competitive manner, business organizations have to look for innovative strategies and mechanisms. The paradigm of ‘flexible systems management’ (the focus of this Journal) is associated with multiple perspectives such as holistic management of organizational paradoxes with systemic flexibility; business agility infused by new information and communication technologies; innovation, strategic change and risk; and
flexibility in various operations for achieving business excellence.
Social responsibility and managerial ethics;
Corporate Social Responsibility (CSR) has been defined in various ways by scholars, authors and institutions, but one of the more ideal definitions has been provided by the World Business Council for Sustainable Development, which says "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large."
CSR is not only about doing Philanthropic activities but is now growing to become an integral part of the Strategy of the company. These days all the stakeholders including Employees, Stockholders, Consumers, Suppliers, Distributors, Community, Environment expect a higher degree of accountability from businesses. There fore the way a company goes on carrying its business and other activities and how it is perceived by the various stakeholders has become paramount for the company.
In the past few years, India has been registering the 2nd highest growth levels year on year globally. To make this growth sustainable, India needs an inclusive growth strategy, considering the large social inequality/divide existing in the country. With corporate being the drivers of growth of our country, they realize that they need to play a substantial part in this inclusive growth. Government of India has already made it mandatory for Public Sector Units to spend certain % of profit on CSR.
Process and customer orientation;
A group of actions taken by a business to support its sales and service staff in considering client needs and satisfaction their major priorities. Business strategies that tend to reflect a customer orientation might include: developing a quality product appreciate by consumers; responding promptly and respectfully to consumer complaints and queries; and dealing sensitively with community issues.
The following six features and concepts are key to understanding social marketing and have been incorporated into the 'customer triangle' model below:
- Customer or consumer orientation: A strong 'customer' orientation with importance attached to understanding where the customer is starting from, their knowledge, attitudes and beliefs, along with the social context in which they live and work
- Behaviour and behavioural goals: A clear focus on understanding existing behaviour and key influences upon it, alongside developing clear behavioural goals. These can be divided into actionable and measurable steps or stages, phased over time
- 'Intervention mix' and 'marketing mix': Using a mix of different methods to achieve a particular behavioural goal. When used at the strategic level this is commonly referred to as the 'intervention mix', and when used operationally it is described as the 'marketing mix'
- Audience segmentation: Clarity of audience focus using audience segmentation to target effectively
- 'Exchange': Use of the 'exchange' concept - understanding what is being expected of people, and the real cost to them
- 'Competition': Use of the 'competition' concept - understanding factors that impact on people and that compete for their attention and time
Managerial processes on direct and indirect value chain.
Using Porter's Value Chain
To identify and understand your company's value chain, follow these steps.Step 1 – Identify subactivities for each primary activity.
For each primary activity, determine which specific subactivities create value. There are three different types of subactivities:- Direct activities create value by themselves. For example, in a book publisher's marketing and sales activity, direct subactivities include making sales calls to bookstores, advertising, and selling online.
- Indirect activities allow direct activities to run smoothly. For the book publisher's sales and marketing activity, indirect subactivities include managing the sales force and keeping customer records.
- Quality assurance activities ensure that direct and indirect activities meet the necessary standards. For the book publisher's sales and marketing activity, this might include proofreading and editing advertisements.
Step 2 – Identify subactivities for each support activity.
For each of the Human Resource Management, Technology Development and Procurement support activities, determine the subactivities that create value within each primary activity. For example, consider how human resource management adds value to inbound logistics, operations, outbound logistics, and so on. As in Step 1, look for direct, indirect, and quality assurance subactivities.Then identify the various value-creating subactivities in your company's infrastructure. These will generally be cross-functional in nature, rather than specific to each primary activity. Again, look for direct, indirect, and quality assurance activities.
Step 3 – Identify links.
Find the connections between all of the value activities you've identified. This will take time, but the links are key to increasing competitive advantage from the value chain framework. For example, there's a link between developing the sales force (an HR investment) and sales volumes. There's another link between order turnaround times, and service phone calls from frustrated customers waiting for deliveries.Step 4 – Look for Opportunities to Increase Value.
Review each of the subactivities and links that you've identified, and think about how you can change or enhance it to maximize the value you offer to customers (customers of support activities can internal as well as external).Topics:
Delegation; Decision Making under certainty and uncertainty; Management styles; Leadership vs management; Stakeholders; Stakeholders network; Family management; Delegation of authority and accountability; Management by Objectives; Corporate Responsibility; Chief Executive; Management Control; Responsibility Centers; Situational Leadership; Social Responsibility; Trends in Management concepts; Innovation; Planning vs Controlling; Managerial Decisions; Management of Risk; Management Techniques; Management Fads; Fayolism;
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