Lecture 1 Fundamentals of Management Essential Concepts Applications

Lecture 1 Fundamentals of Management Essential Concepts & Applications Prof. Aparna Kanchan 1

Learning Outcomes ü Describe the difference between managers and operative employees. ü Explain what is meant by the term management. ü Differentiate between efficiency and effectiveness. ü Describe the four primary processes of management. ü Classify the three levels of managers and identify the primary responsibility of each group. 1– 2

Learning Outcomes ü Summarize the essential roles performed by managers. ü Discuss whether the manager’s job is generic. ü Describe the four general skills necessary for becoming a successful manager. ü Describe the value of studying management. ü Identify the relevance of popular humanities and social science courses to management practices. 1– 3

ORGANIZATION

Organizations Ø A systematic arrangement of people brought together to accomplish some specific purpose; applies to all organizations—for-profit as well as not-for-profit organizations. Ø Where managers work (manage) 1– 5

Common Characteristics of Organizations 1– 6

People Differences • Operatives Ø People who work directly on a job or task and have no responsibility for overseeing the work of others • Managers Ø Individuals in an organization who direct the activities of others 1– 7

Organizational Levels 1– 8

Identifying Managers • First-line managers Ø Supervisors responsible for directing the day-to-day activities of operative employees • Middle managers Ø Individuals at levels of management between the firstline manager and top management • Top managers Ø Individuals who are responsible for making decisions about the direction of the organization and establishing policies that affect all organizational members 1– 9

Management Defined • Management Ø The process of getting things done, effectively and efficiently, through and with other people Ø Efficiency v Means doing the thing correctly; refers to the relationship between inputs and outputs; seeks to minimize resource costs Ø Effectiveness v Means doing the right things; goal attainment 1– 10

Efficiency and Effectiveness 1– 11

Management Process Activities Management process: planning, organizing, leading, and controlling 1– 12

Management Process • Planning Ø Includes defining goals, establishing strategy, and developing plans to coordinate activities • Organizing Ø Includes determining what tasks to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made 1– 13

Management Process • Leading Ø Includes motivating employees, directing the activities of others, selecting the most effective communication channel, and resolving conflicts • Controlling Ø The process of monitoring performance, comparing it with goals, and correcting any significant deviations 1– 14

Is The Manager’s Job Universal? • Level in the organization Ø Do managers manage differently based on where they are in the organization? • Profit versus not-for-profit Ø Is managing in a commercial enterprise different than managing in a non-commercial organization? • Size of organization Ø Does the size of an organization affect how managers function in the organization? • Management concepts and national borders Ø Is management the same in all economic, cultural, social and political systems? 1– 15

Distribution of Time per Activity by Organizational Level Source: Adapted from T. A. Mahoney, T. H. Jerdee, and S. J. Carroll, “The Job(s) of Management, ” Industrial Relations 4, No. 2 (1965), p. 103. 1– 16

Importance of Managerial Roles in Small and Large Businesses 1– 17

General Skills for Managers • Conceptual skills Ø A manager’s mental ability to coordinate all of the organization’s interests and activities • Interpersonal skills Ø A manager’s ability to work with, understand, mentor, and motivate others, both individually and in groups • Technical skills Ø A manager’s ability to use the tools, procedures, and techniques of a specialized field • Political skills Ø A manager’s ability to build a power base and establish the right connections 1– 18

Specific Skills for Managers • Behaviors related to a manager’s effectiveness: Ø Controlling the organization’s environment and its resources. Ø Organizing and coordinating. Ø Handling information. Ø Providing for growth and development. Ø Motivating employees and handling conflicts. Ø Strategic problem solving. 1– 19

How Much Importance Does The Marketplace Put On Managers? • Good (effective) managerial skills are a scarce commodity. Ø Managerial compensation packages are one measure of the value that organizations place on them. Ø Management compensation reflects the market forces of supply and demand. v Management superstars, like superstar athletes in professional sports, are wooed with signing bonuses, interest-free loans, performance incentive packages, and guaranteed contracts. 1– 20

Why Study Management? • We all have a vested interest in improving the way organizations are managed. Ø Better organizations are, in part, the result of good management. • You will eventually either manage or be managed Ø Gaining an understanding of the management process provides the foundation for developing management skills and insight into the behavior of individuals and the organizations. 1– 21

How Does Management Relate To Other Disciplines? Sociology Political Science Psychology Management Economics Philosophy Anthropology 1– 22

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Historical Background of Management • Ancient Management Ø Egypt (pyramids) and China (Great Wall) Ø Venetians (floating warship assembly lines) • Adam Smith Ø Published “The Wealth of Nations” in 1776 v Advocated the division of labor (job specialization) to increase the productivity of workers • Industrial Revolution ( 18 th Century) Ø Substituted machine power for human labor Ø Created large organizations in need of management 1– 24

Development of Major Management Theories 25

The Evolution of Management Theory 26

Major Approaches to Management • Scientific Management • General Administrative Theory • Quantitative Management • Organizational Behavior • Systems Approach • Contingency Approach 27

Scientific Management Theory • Evolution of Modern Management Ø Began in the industrial revolution in the late 19 th century as: v Managers of organizations began seeking ways to better satisfy customer needs. v Large-scale mechanized manufacturing began to supplant small-scale craft production in the ways in which goods were produced. v Social problems developed in the large groups of workers employed under the factory system. v Managers began to focus on increasing the efficiency of the worker-task mix. 28

Job Specialization and the Division of Labor • Adam Smith (18 th century economist) Ø Observed that firms manufactured pins in one of two different ways: v Craft-style—each worker did all steps. v Production—each worker specialized in one step. Ø Realized that job specialization resulted in much higher efficiency and productivity v Breaking down the total job allowed for the division of labor in which workers became very skilled at their specific tasks. 29

Scientific Management • Fredrick Winslow Taylor Ø The “father” of scientific management Ø Published Principles of Scientific Management (1911) v The theory of scientific management – Using scientific methods to define the “one best way” for a job to be done: • Putting the right person on the job with the correct tools and equipment. • Having a standardized method of doing the job. • Providing an economic incentive to the worker. 30

Taylor’s Five Principles of Management 1. Develop a science for each element of an individual’s work, which will replace the old rule-of-thumb method. 2. Scientifically select and then train, teach, and develop the worker. 3. Heartily cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed. 4. Divide work and responsibility almost equally between management and workers. 5. Management takes over all work for which it is better fitted than the workers. 31

Frank and Lillian Gilbreth • Refined Taylor’s work and made many improvements to the methodologies of time and motion studies. Ø Time and motion studies v Breaking up each job action into its components. v Finding better ways to perform the action. v Reorganizing each job action to be more v efficient. • Also studied worker-related fatigue problems caused by lighting, heating, and the design of tools and machines. 32

Henry Gantt (1861 -1919) • Originated a unique pay arrangement in which all workers were entitled to a basic daily wage, compared with Taylor's differential piece rate pay system, which paid according to output. • In Gantt's task and bonus system, if employees completed their tasks on time they earned a bonus, and if they performed beyond expectations they were again rewarded, as were their supervisors. Gantt wanted to encourage supervisors to coach employees rather than drive them to perform. • Gantt believed that humanitarian management was the key to achieving organizational goals. 33

Administrative Management Theory • Administrative Management Ø The study of how to create an organizational structure that leads to high efficiency and effectiveness. • Max Weber Ø Developed the concept of bureaucracy as a formal system of organization and administration designed to ensure efficiency and effectiveness. 34

Weber’s Ideal Bureaucracy 35

Weber’s Five Principles of Bureaucracy • Authority is the power to hold people accountable for their actions. • Positions in the firm should be held based on performance, not social contacts. • Position duties are clearly identified so that people know what is expected of them. • Lines of authority should be clearly identified such that workers know who reports to who. • Rules, standard operating procedures (SOPs), and norms guide the firm’s operations. 36

Fayol’s 14 Principles of Management 1. Division of work. 7. Remuneration. 2. Authority. 8. Centralization. 3. Discipline. 9. Scalar chain. 4. Unity of command. 10. Order. 5. Unity of direction. 11. Equity. 6. Subordination of individual interest to the interests of the organization. 12. Stability of tenure of personnel. 13. Initiative. 14. Esprit de corps. 37

Fayol’s Principles of Management • Division of Labor: allows for job specialization. Ø Fayol noted jobs can have too much specialization leading to poor quality and worker dissatisfaction. • Authority and Responsibility Ø Fayol included both formal and informal authority resulting from special expertise. • Unity of Command Ø Employees should have only one boss. 38

Fayol’s Principles of Management (cont’d) • Line of Authority Ø A clear chain of command from top to bottom of the firm. • Centralization Ø The degree to which authority rests at the top of the organization. • Unity of Direction Ø A single plan of action to guide the organization. 39

Fayol’s Principles of Management (cont’d) • Equity Ø The provision of justice and the fair and impartial treatment of all employees. • Order Ø The arrangement of employees where they will be of the most value to the organization and to provide career opportunities. • Initiative Ø The fostering of creativity and innovation by encouraging employees to act on their own. 40

Fayol’s Principles of Management (cont’d) • Discipline Ø Obedient, applied, respectful employees are necessary for the organization to function. • Remuneration of Personnel Ø An equitable uniform payment system that motivates contributes to organizational success. • Stability of Tenure of Personnel Ø Long-term employment is important for the development of skills that improve the organization’s performance. 41

Fayol’s Principles of Management (cont’d) • Subordination of Individual Interest to the Common Interest Ø The interest of the organization takes precedence over that of the individual employee. • Esprit de corps Ø Comradeship, shared enthusiasm foster devotion to the common cause (organization). 42

Quantitative Approach to Management • Quantitative Approach Ø Also called operations research or management science Ø Evolved from mathematical and statistical methods developed to solve WWII military logistics and quality control problems Ø Focuses on improving managerial decision making by applying: v Statistics, optimization models, information models, and computer simulations 43

Understanding Organizational Behavior • Organizational Behavior (OB) Ø The study of the actions of people at work; people are the most important asset of an organization • Early OB Advocates Ø Robert Owen Ø Hugo Munsterberg Ø Mary Parker Follett Ø Chester Barnard 44

The Hawthorne Studies • A series of productivity experiments conducted at Western Electric from 1927 to 1932. • Experimental findings Ø Productivity unexpectedly increased under imposed adverse working conditions. Ø The effect of incentive plans was less than expected. • Research conclusion Ø Social norms, group standards and attitudes more strongly influence individual output and work behavior than do monetary incentives. 45

Early Advocates of OB 46

The Systems Approach • System Defined Ø A set of interrelated and interdependent parts arranged in a manner that produces a unified whole. • Basic Types of Systems Ø Closed systems v Are not influenced by and do not interact with their environment (all system input and output is internal). Ø Open systems v Dynamically interact to their environments by taking in inputs and transforming them into outputs that are distributed into their environments. 47

The Organization as an Open System 48

Implications of the Systems Approach • Coordination of the organization’s parts is essential for proper functioning of the entire organization. • Decisions and actions taken in one area of the organization will have an effect in other areas of the organization. • Organizations are not self-contained and, therefore, must adapt to changes in their external environment. 49

The Contingency Approach • Contingency Approach Defined Ø Also sometimes called the situational approach. Ø There is no one universally applicable set of management principles (rules) by which to manage organizations. Ø Organizations are individually different, face different situations (contingency variables), and require different ways of managing. 50

Mintzberg’s Managerial Roles • Interpersonal Ø Figurehead Ø Leader Ø Liaison • Informational • Decisional Ø Entrepreneur Ø Disturbance hander Ø Resource allocator Ø Negotiator Ø Monitor Ø Disseminator Ø Spokesperson Source: Adapted from The Nature of Managerial Work (paperback) by H. Mintzberg, . 1– 51

Popular Contingency Variables • Organization size • Routineness of task technology • Environmental uncertainty • Individual differences 52

Current Trends and Issues • Globalization • Ethics • Workforce Diversity • Entrepreneurship • E-business • Knowledge Management • Learning Organizations • Quality Management 53

Current Trends and Issues (cont’d) • Globalization Ø Management in international organizations Ø Political and cultural challenges of operating in a global market • Ethics Ø Increased emphasis on ethics education in college curriculums Ø Increased creation and use of codes of ethics by businesses 54

A Process for Addressing Ethical Dilemmas Step 1: What is the ethical dilemma? Step 2: Who are the affected stakeholders? Step 3: What personal, organizational, and external factors are important to my decision? Step 4: What are possible alternatives? Step 5: Make a decision and act on it. 55

Current Trends and Issues (cont’d) • Workforce Diversity Ø Increasing heterogeneity in the workforce v More gender, minority, ethnic, and other forms of diversity in employees Ø Aging workforce v Older employees who work longer and do not retire v The increased costs of public and private benefits for older workers v An increasing demand for products and services related to aging. 56

Current Trends and Issues (cont’d) • Entrepreneurship Defined Ø The process whereby an individual or group of individuals use organized efforts to create value and grow by fulfilling wants and needs through innovation and uniqueness. • Entrepreneurship process Ø Pursuit of opportunities Ø Innovation in products, services, or business methods Ø Desire for continual growth of the organization 57

Current Trends and Issues (cont’d) • E-Business (Electronic Business) Ø The work preformed by an organization using electronic linkages to its key constituencies Ø E-commerce: the sales and marketing component of an e-business • Categories of E-Businesses Ø E-business enhanced organization Ø E-business enabled organization Ø Total e-business organization 58

Categories of E-Business Involvement 59

Current Trends and Issues (cont’d) • Knowledge Management Ø The cultivation of a learning culture where organizational members systematically gather and share knowledge with others in order to achieve better performance. • Learning Organization Ø An organization that has developed the capacity to continuously learn, adapt, and change. 60

Learning Organization versus Traditional Organization 61

Current Trends and Issues (cont’d) • Quality Management Ø A philosophy of management driven by continual improvement in the quality of work processes and responding to customer needs and expectations Ø Inspired by the total quality management (TQM) ideas of Deming and Juran Ø Quality is not directly related to cost 62

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