CLASSIFICATION OF MANAGEMENT FUNCTIONS MANAGEMENT FUNCTIONS Managerial functions

CLASSIFICATION OF MANAGEMENT FUNCTIONS • MANAGEMENT FUNCTIONS Managerial functions a) Planning b) Organizing a) Staffing b) Directing c) controlling Operational functions a) Production b) Marketing c) purchasing d) Financing e) Personnel

Management Process MANAGEMENT PROCESS CONT STAFFING PLANNING DIRECTING ORGANISING ROLL ING

MBO-Management by Objectives • The concept was introduced by Peter Drucker in 1954. • It sis a practice for accomplishing the objectives of an organization in effective way. • It is also known as management by results and goal setting approach. • It is an approach to management planning and evaluation in which specific targets for a year, or some other length of time, are established for each manager, on the basis of the results which each must achieve if the overall objectives of the company/organization are to be realized. • At the end of this period, the actual results achieved are measured against the original goals, i. e. against the expected results which each manager knows he is responsible for achieving.

SMART Principle for Defining Goals S- Simple/Specific M-measurable A-Achievable R-Realistic T- Time bound

Organizing • According to Henri fayol “To organise a business means to provide it with everything useful to its functioning-raw materials, tools, capital and personnel”

Definition of Organizing • “Organizing is the process of identifying and grouping the work to be performed • defining and delegating responsibility and authority • and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives. ” Louis Allen

Features of Organization 1. An Organization connotes group of persons: Mc. Farland has defined organization as an identifiable group Of people contributing their efforts towards attainment of goals. 2. Communication is the nervous system of organization: The organizational members are able to communicate with each other and they coordinate their activities. No organization can survive without an efficient system of communication.

3. Organizing is a basic function of mgt. : It is essential for the achievement of organizational objectives. Organizing is done in relation to all other functions of mgt. , namely, planning, staffing, directing & controlling. • Is performed by all managers. 4. Organizing is a continuous process: It is not a one step function. Managers are continuously engaged in organizing and re-organizing. 5. Organizing is always related to objectives: Whether it is organization of the entire enterprise or a part of it, organizing is influenced by objectives. • The operations are divided & authority & responsibility are determined to achieve predetermined objectives.

6. Organization connotes a structure of relationships: The structure of relationships created by mgt is referred to as ‘formal organization’. • But an org. also includes the network of social relationships that arise between people working together known as ‘Informal organization’. 7. Organization involves a network of authority & responsibility relationships: Various positions are created & specific tasks are assigned to them. • To perform the tasks, each position is delegated adequate authority. Authority & responsibility relationships must be clearly defined to avoid conflicts.

A manager performs Organizing function with the help of following steps: -

1. Identification of activities - All the activities which have to be performed in a concern have to be identified first. For example, preparation of accounts, making sales, record keeping, quality control, inventory control, etc. All these activities have to be grouped and classified into units. 2. 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.

3. 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 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.

4. Co-ordination between authority and responsibility • Relationships are established among various groups to enable smooth interaction towards the achievement 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.

Importance of organizing 1. Specialization - Organizational structure is a network of relationships in which the work is divided into units and departments. This division of work is helping in bringing specialization in various activities of concern. 2. Well defined jobs - Organizational structure helps in putting right men on right job which can be done by selecting people for various departments according to their qualifications, skill and experience. This is helping in defining the jobs properly which clarifies the role of every person.

3. Clarifies authority - Organizational structure helps in clarifying the role positions to every manager. • This can be done by clarifying the powers to every manager and the way he has to exercise those powers should be clarified so that misuses of powers do not take place. • Well defined jobs and responsibilities attached helps in bringing efficiency into managers working. This helps in increasing productivity. 4. Co-ordination - Organization is a means of creating coordination among different departments of the enterprise.

• It creates clear cut relationships among positions and ensures mutual co- operation among individuals. • Authority responsibility relationships can be fruitful only when there is a formal relationship between the two. • • Clarity should be made for having an ultimate responsibility attached to every authority. • • There is a saying, “Authority without responsibility leads to ineffective behavior and responsibility without authority makes person ineffective. ” Therefore, coordination of authority- responsibility is very important.

5. Effective administration - The organization structure is helpful in defining the jobs positions. • The roles to be performed by different managers are clarified. • Specialization is achieved through division of work. This all leads to efficient and effective administration. 6. Growth and diversification - A company’s growth is totally dependent on how efficiently and smoothly a concern works. • Efficiency can be brought about by clarifying the role positions to the managers, co-ordination between authority and responsibility and concentrating on specialization.

• In addition to this, a company can diversify if its potential grows. This is possible only when the organization structure is well- defined. This is possible through a set of formal structure. 7. Sense of security - Organizational structure clarifies the job positions. The roles assigned to every manager are clear. • Co- ordination is possible. Therefore, clarity of powers helps automatically in increasing mental satisfaction and thereby a sense of security in a concern. This is very important for job- satisfaction.

Organization Structure • An organization structure denotes the authority & responsibility relationships between the various positions in the organization by showing who reports to whom. • It is a set of planned relationships between physical factors & personnel required for the achievement of organizational goals. • The structure of an organization is generally shown on an organization chart or a job-task pyramid. It shows authority & responsibility relationships between various positions in the organization.

Developing Organization Structure • Two types of structural variables: 1. Basic Structure: involves such central issues as how the work of the org. will be divided & assigned among positions, groups, departments, divisions etc. & how the coordination necessary to achieve organizational objectives will be brought about…. ? 2. Operating Mechanism: includes such factors as information system, control procedures, rules & regulations, system of reward & punishment, etc.

The development of structures deals with two facts: i. The functions which are to be performeddetermining activities, division of these using degree of specialization. ii. The form of structure- detailed study & analysis

Determining kind of Structure • Org. structure is an indispensable means towards business objectives. • Wrong structure will seriously deter the enterprise from achieving its objectives. • Peter Drucker has suggested 4 specific ways to find out what kind of structure is needed to attain the objectives of a specific business:

1. Activity Analysis: It helps to find out what work has to be performed, what work belongs together & how each activity should be emphasized in the org. structure. • Example-marketing, personnel, finance, operations, etc. 2. Contribution Analysis: on the basis of the kind of contribution they make, activities can be grouped into 4 categories: i. Result producing activities, which directly brings revenue. ii. Support activities generate output which contribute result.

iii) Hygiene & House keeping activities contribute nothing directly to the result of the business but their malfunction can, however, damage the business. iv) Top mgt activities are those, which are carried out by higher levels of mgt. 3. Decision Analysis: It determines what kind of decisions are needed, where in the organization they should be made & how each manager should be involved in them. Basic characteristics determine the nature of any business decision: a) Degree of futurity in the decision

b) Impact of decision on other functions, areas or business as a whole. c) The number of qualitative factors that enter like political beliefs, values, ethics, etc. d) Whether decisions are recurrent or rare recurrent 4. Relations Analysis: It tells us where a specific component belongs, it is finding the contribution each manager must make to programmes, with whom he works & what contribution other manager must make to him.

Span of Management • The term span of mgt is also known as span of control, span of supervision and span of authority. • It represents a numerical limit of subordinates to be supervised and controlled by a manager. • This principle is based on theory of relationships propounded by V. A. Graicunas. • Span of control refers to the number of subordinates an executive can supervise.

Flat/Wider Span of Mgt • If a manager has more number of subordinates under him, it is called wide span of management. • It results into fewer levels of org. and gives rise to Flat Structure. Advantages 1. It can shorten the line of communication between the bottom and the top levels. 2. Communication route is simple, direct and clearly apparent to individuals. 3. Flat structure adopts mgt by results and leads to high morale of managers. 4. Flat structure puts a premium on mgt development and training programmes.

5. Due to limited number of levels of mgt there is direct & short chain. Disadvantages 1. Supervision and control may be unsatisfactory if the span of control is too large. 2. Coordination may be poor or difficult. 3. Cost of training may be high. 4. Flat structure is not suitable in large manufacturing concern or when the business has been developed vertically.

Flat Org Structure with Wide Span

Tall/Narrow Span of Mgt • The narrow span of mgt refers to less number of subordinates directly supervised by a superior. • It results into more levels in the org. and hence leads to tall org. structure. Advantages 1. Tight control and supervision. 2. More time to think of future. 3. Effective performance even by lower quality managers due to better management by the boss. Disadvantages 1. Higher executive payroll. 2. Red Tapism.

3. Too many levels in the structure chocking communication. 4. Employee morale may be low. 5. In effective, inaccurate and incomplete communication. Limited scope for management development and training.

Tall Org Structure with Narrow Span A B E C F 10/7/2020 G D H NATURE OF ORGANIZING I J K L 32

Factors Affecting Span of Control 1. Ability of the Managers- Individuals differ in various qualities like leadership, decision making & communication. The span may be wider if the manager possesses these skills in greater degree as compared to others. 2. Time Available for Supervision- The span should be narrow at higher levels because top managers have less time available for planning, organizing, directing and controlling. 3. Nature of Work- When the spans are narrowed, the levels in the organization increase. This involves delegation of authority and responsibility. If work is of routine nature it can be easily delegated.

4. Ability of Employees/Subordinates- If subordinates are skilled, efficient and knowledgeable, they will require less supervision. In such case, the supervisor may go in for a wider span. 5. Well defined Authority & Responsibility- If the authority & responsibility of each employee are properly defined and if there are clear policies and procedures, they need not make frequent calls on the supervisors for guidance and instructions. This helps a superior to manage a large number of subordinates. (wider span) 6. Geographic Location-If all or most of subordinates are located in close proximity of superior, rather than dispersed in different geographical areas, a manager can have wider span of control.

7. Effectiveness of Communication- An effective system of communication in the organization favors large number of levels because there will be no difficulty in transmission of information in spite of a large number of intervening layers. 8. Control Mechanisms- The span of control also depends upon the control mechanism being followed. Control may be followed either through personal supervision or through reporting. The former favors narrow span of control and the latter favors a wider span.

What Is Authority? • Authority is the right or power to command control the subordinates. • It is granted to a position for the achievement of organizational objectives. • The authority may be exercised through persuasion or sanctions. If subordinate does not obey, the superior has a right to take disciplinary action.

What is Responsibility? • Means the work or duties assigned to a person by virtue of his position in the org. • The person carrying the responsibility for the performance of a given task has also the authority to perform it. What is Accountability? § It is the obligation to carry out responsibility and exercise authority in terms of performance. § For accountability to be effective, the standards of performance should be determined before entrusting a task and should be understood and accepted by the subordinate.

Difference Between Authority & Responsibility

Authority 1. Responsibility

What is Delegation of Authority? • Delegation is a matter of entrusting a part of work to others. • Delegation results in the establishment of a hierarchy of tasks and authority-responsibility relationship through organization. Need for Delegation 1. Lack of time or energy- a human being has limited time & energy. The only way he can achieve more work is through delegation i. e. through dividing his workload and sharing his duties or responsibilities or tasks with other.

2. Complex and Intricate Techniques- The complexities and intricacies of org demand special expertise. The line executives delegate a part of their work to staff specialists. 3. Geographic Dispersion- large scale business has a network of branches spread over a wide area. Delegation of authority is the best way to manage the diversified and dispersed business effectively. 4. Method of Motivation- since delegation implies employee participation in decision making, therefore it invokes greater interest and enthusiasm in subordinate. They take the challenges positively. 5. Management Development- the need for training for mgt succession is one vital reason for delegation of authority in a big org. delegation offers ample scope for seld advancement and self expression.

What is Centralization & Decentralization?

• Centralization and Decentralization refers to a degree of delegation of authority-responsibility to lower levels of org. • Centralization is the systematic and consistent reservation or withholding of authority at control points within an org. • If authority is not delegated, it is centralized. If those doing work cannot decide but the decisions are made at point higher in the org. It denotes centralization of authority. Advantages of Centralization 1. Better coordination-in centralization the authority is used at one point only, therefore coordination becomes easy. 2. Quick decision making- authority is concentrated at the top , therefore, quick decision making is possible.

3. Economy of time & cost- helps to eliminate overlapping or duplication of activities. It can thus lead to sufficient saving of time & money. 4. Talent Utilization- centralization helps in fuller utilization of talents of outstanding executives for the enterprise as a whole. 5. Enforcement of Policies-in centralization the decisions and controls are largely centralized, therefore uniformity of policies and procedures can strictly be enforced. Decentralization: when the org is large and complex, mgt cannot centrally control all information necessary for decision. The practical solution is to divide the org into semi-autonomous decision making units and we have multiple decision centers spread over in the org. structure.

Advantages of Decentralization: 1. Frees Top Management 2. Executive Development 3. Better and Speedier Decisions 4. Possibilities of Diversification 5. Improvement of Morale 6. Permits Mgt by Objectives

Departmentation • Departmentation represents the pattern of grouping activities. • Similar activities intimately related with a distinct function are grouped to form larger administrative units such as departments & divisions. • It aims at achieving unity of direction, effective communication, achieving, coordination and control. Bases of Departmentation a. Functional b. Geographical c. Product d. Process

Departmentalization by Type • Functional – Grouping jobs by functions performed • Product – Grouping jobs by product line • Geographical – Grouping jobs on the basis of territory or geography • Process – Grouping jobs on the basis of product or customer flow • Customer – Grouping jobs by type of customer and needs

Exhibit 10– 2 Functional Departmentalization • Advantages • Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations • Coordination within functional area • In-depth specialization • Disadvantages • Poor communication across functional areas • Limited view of organizational goals

Exhibit 10– 2 (cont’d) Geographical Departmentalization • Advantages • More effective and efficient handling of specific regional issues that arise • Serve needs of unique geographic markets better • Disadvantages • Duplication of functions • Can feel isolated from other organizational areas

Exhibit 10– 2 (cont’d) + + + – – Product Departmentalization Allows specialization in particular products and services Managers can become experts in their industry Closer to customers Duplication of functions Limited view of organizational goals © 2007 Prentice Hall, Inc. All rights 10– 50

Exhibit 10– 2 (cont’d) Process Departmentalization + More efficient flow of work activities – Can only be used with certain types of products

Exhibit 10– 2 (cont’d) Customer Departmentalization + Customers’ needs and problems can be met by specialists - Duplication of functions - Limited view of organizational goals

Types of Organization Structure

A) Formal Organizations- The formal organization is a system of well-defined jobs, each bearing a definite measure of authority, responsibility and accountability. • Formal organization is a system of consciously coordinated activities or two or more persons toward a common objective. Features of Formal Organizations • Deliberately planned and created • Concerned with the co-ordination of activities • Hierarchically structured with stated objectives • Based on the specification of tasks and defined relationships of authority & responsibility. • It lays down rules & procedures needed to achieve the objectives.

• Efforts of various departments are coordinated, interlinked and integrated. Advantages of Formal Organizations • Easy to fix accountability. • No ambiguity in the role; avoids duplication of efforts. • Behavior of employee is predictable. • Established chain of command. • Stability to the org. Limitations of Formal Organizations • Formal communication leads to procedural delays. • Less recognition to creative talent. • More emphasis on structure & work. Interpersonal relationships are ignored.

Types of Formal Org Structures 1. Line Organization 2. Functional Organization 3. Line & Staff organization 4. Matrix Organization 5. Virtual Organization

Common Organizational Designs • Traditional Designs Ø Simple structure v Low departmentalization, wide spans of control, centralized authority, little formalization Ø Functional structure v Departmentalization by function – Operations, finance, human resources, and product research and development Ø Divisional structure v Composed of separate business units or divisions with limited autonomy under the coordination and control the parent corporation.

Exhibit 10– 7 Strengths and Weaknesses of Traditional Organizational Designs

§Line organization: -is the most oldest and simplest method of administrative organization. -According to this type of organization, the authority flows from top to bottom in a concern. -The line of command is carried out from top to bottom. - This is the reason for calling this organization as scalar organization which means scalar chain of command is a part and parcel of this type of administrative organization. -In this type of organization, the line of command flows on an even basis without any gaps in communication and coordination taking place.

Features of Line Organization -It is the most simplest form of organization. -Line of authority flows from top to bottom. -Specialized and supportive services do not take place in these organization. -Unified control by the line officers can be maintained since they can independently take decisions in their areas and spheres. -This kind of organization always helps in bringing efficiency in communication and bringing stability to a concern.

Staff Authority • Staff refers to those elements which have responsibility and authority for providing advice and services to line in attainment of objectives. • In practice distinction between line and staff gets blurred • Staff advice or service may be accepted by others much the same as the line authority is. • The demarcation between line and staff may be possible during initial stages of the org; but when it grows, its functions become more and more complex and the demarcation between line and staff becomes progessively fuzzier.

Line & Staff Organization

Types of staff • Personal staff • Specialized staff • General staff

Conflict between line and staff • Line and staff concept on the assumption that they should support each other and work unitedly for the achievement of organizational objectives. • The major source of conflict is the difference in their viewpoints & perceptions. • Conflict arises when either of them fails to appreciate the viewpoints of other. • Line members view themselves as important and first class members of the org. because they directly accomplish the objectives. • And staff members are often treated as second class members. The line members ignore the staff advice.

Line’s Viewpoint • Undermining of line authority • Academic approach of staff • Lack of accountability • Limited outlook of staff • Stealing of credit Staff’s Viewpoint • Ignoring the staff • Resistance to New ideas • Lack of enough authority

Organizational Designs (cont’d) • Contemporary Organizational Designs Ø Team structures v The entire organization is made up of work groups or selfmanaged teams of empowered employees. Ø Matrix and project structures v Specialists from different functional departments are assigned to work on projects led by project managers. v Matrix v In and project participants have two managers. project structures, employees work continuously on projects; moving on to another project as each project is completed.

Exhibit 10– 8 Contemporary Organizational Designs Team Structure • What it is: A structure in which the entire organization is made up of work groups or teams. • Advantages: Employees are more involved and empowered. Reduced barriers among functional areas. • Disadvantages: No clear chain of command. Pressure on teams to perform. Matrix-Project Structure What it is: A structure that assigns specialists from different functional areas to work on projects but who return to their areas when the project is completed. Project is a structure in which employees continuously work on projects. As one project is completed, employees move on to the next project. • Advantages: Fluid and flexible design that can respond to environmental changes. Faster decision making. • Disadvantages: Complexity of assigning people to projects. Task and personality conflicts.

Exhibit 10– 9 An Example of a Matrix Organization

• Virtual Organization Ø An organization that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise.

2. Informal Organizations- An informal organization is an aggregate of interpersonal relationships without any conscious purpose but which may contribute to joint results. • Informal organization is a network of interpersonal relationships that arise when people associate with one another. Features of Informal Organization • Originates from within the formal organization as a result of personal interaction among employees. • The standards of behavior evolve from group norms. • Independent channels of communication without specified direction of flow of information are developed by group members. • .

• Emerges spontaneously and is not deliberately created by the management Advantages of Informal Organizations • It helps to fulfill the social needs. • Sense of belongingness in the org. • Faster spread of information & quick feedback • It contributes towards fulfillment of organizational objectives Disadvantages • It spreads rumors. • The management may not be successful in implementing changes. • It forces members to conform to group expectations.

Reasons for Formation of Informal groups 1. 2. 3. 4. 5. 6. 7. Companionship Sense of Identification Source of Information Job Satisfaction Protection of Members Outlet of Frustration Generation of New Ideas

Importance of Informal Organizations/groups • • Filling in gap’s in managers abilities Solving work problems Better coordination Channel of communication Better relations Norms of behavior Developing future executives