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PRINCIPLES OF MANAGEMENT

Features of Management

Management Management Management Management Management Management Management Management Management Management

is is is is is is is is is is

universal purposeful a unifying force a social process multidisciplinary a continuous process intangible situational essentially an executive function an are as well as science

Management as an art
The main elements of art Personal skills Practical know-how Result orientation Creativity Constant practice aimed at perfection

Why mgmt is an art?

A manager applies his knowledge and skills to coordinate the efforts of his people Management seeks to achieve concrete practical results Management is creative Management is a personalized process Effective management leads to realization of organizational and other goals.

Management as a Science
The essential elements of science are: Science is a systematized body of knowledge pertaining to a particular field of inquiry It contains underling principles and theories developed thru continuous observation, experiments & research They have universal applicability It can be learnt in and out the classroom

Why mgmt is a science?

Systematized body of knowledge is available Pples of mgmt have been evolved thru practical experience and theoretical research wide and repetitive application Management theory can be taught in classrooms and in industry

Management as social science

It involves the study of human behavior Its pples are not hard and fast laws. It is flexible based on situations Validity of the pples cant be tested thru experiments It cant explain clearly why and how a human being behaves in a particular , thereby making it a soft

science.

It is an applied science. Therefore mgmt is a combination of art and science

Schools of Management Thought


Empirical Approach Human Behaviour Approach Social Systems Approach Socio technical Systems Decision Theory Management Science Systems Approach Contingency/Situational Approach Operational Approach

Empirical Approach/Case/Management experience

Management is a study of managerial experiences Experience can be passed on Studying from managers Leads to generalisations

Limitations

No significant contribution to mgmt A successful technique of the past might be of questionable use in future.

Human Behavior Approach


Developed by behavioral scientists Managers should understand human behavior Emphasis is put on increasing productivity through motivation Motivation,leadership,communication, parcipative mgmt and group dynamics are the core

Limitations

Only human problems are taken into account

Social Systems Approach

Vilfredo Paretos idea later on developed by Chester Bernard Organisation is a social system, a system of cultural relationships Relationships exist among the external as well as internal environment Co operation among group members for achieving organizational objves For effective management, harmony within various groups is necessary

Socio-Technical Systems Approach

An organization is a combination of both social and technical systems Social system is governed by social laws as well as by psychological forces Technical system consists of technological like physical setting of work, rules , procedures etc

Limitations

Scope limited to shop floor level Not a new concept

Decision Theory Approach

Management is essentially decision making The members of the organization are decision makers and problem solvers Organization can be treated as a combination of various decision centers Quality of decision affects effectiveness All factors affecting decision making are the subject matter of study of mgmt

Management Science Approach

Management is regarded as the problem solving mechanism with the help of mathematical tools and techniques Managerial activity can be quantified Covers decision making, systems analysis and some aspects of human behavior OR, mathematical tools, simulation models etc are basic methodologies

Limitations

All managerial activities cannot be quantified.

Systems Approach

A system is an assemblage of things connected or interrelated so as to form a complex unity.

Features of a system

A system is basically a combination of parts Parts and sub parts are mutually related to each other A system is not merely the totality of parts and subparts but their arrangement is more important A system has a boundary

Contd

Open & Closed system System transforms inputs into output

Management as System

Social System Open system Adaptive Dynamic Probabilistic Multilevel and multidimensional Multivariable Multidisciplinary

Implications & Limitations


Integrated Approach Organization-environment interaction

Abstract Approach Lack of universality

Pioneers of mgmt- F.W Taylor


Father of scientific management Defined management as the art of knowing exactly what you want men to do and seeing that they do it in the best and cheapest way Famous book- Principles of scientific management 1911

Pples of Taylor

Develop a true science for each element of a workers job to replace rule of thumb Scientific selection, training and development of workers for each job An equal division of responsibility between management and workers. Planning and doing should be separated Close co-operation between mgmt and labor.

Techniques developed by Taylor


Functional foremanship (specialization) Differential piece rate plan Work scheduling Time study Motion study

Criticisms against Taylor

Devoid of human touch (wageincentive) Narrow in scope ( applicable to factory jobs) Separation of planning from doing Extensive use of specialisation

Pioneers of mgmt- Henri Fayol


Famous book- Administration Industrielle et Generale Managerial skills can be taught in the class room and then at work place Contribution can be classified into 3 heads: Classification of Business Activities Functions of management Management principles

Classification of business activities


Technical ( Manufacturing) Commercial ( Buying, selling& exchange Financial ( search for & optimum utilization of capital) Security ( protection of property & persons) Accounting managerial

Functions of management

Planning Organizing Commanding Co-ordinating Controlling

Management principles
1. 2. 3. 4. 5. 6.

7.

Division of work Authority and responsibility Discipline Unity of command Unity of direction Subordination of Individual to General Interest Remuneration of Personnel

Contd..
8. 9. 10. 11. 12. 13. 14.

Centralization Scalar Chain Concept of Gang- Plank Order Equity Stability of tenure of personnel Initiative Esprit de Corps (Team Spirit and co operation)

Evaluation Arguments for it


Universal applicability Practical principles of management The need for formal training for wouldbe managers is important Its the core of modern management education Father of administrative management theory

Evaluation Arguments against it


Too formal Did not pay much attention to workers How to teach mgmt was not explained Some terms have vague explanation

Pioneers of mgmt- George Elton Mayo


Father of Human Relations Movement Professor at the Harward business school Leader of the Hawthorne Experiments

Outcome of the Experiment

Productivity could be increased not only by improving working conditions but thru informal social relations among the members of the group

Proof relay assembly Test Room Experiment

A small homogenous work group was selected Introduced several new elements in the work atmosphere ( Shorter working hrs, appropriate rest periods, improved physical conditions, friendly and informal supervision, free social interaction with the team) Productivity increased during the period of the experiment Productivity maintained even if improvements in working conditions were withdrawn Concluded that Socio-psychological factors held the key for higher productivity

Proof- Mass Interviewing program

Large number of workers were interviewed and the results confirmed the importance of informal relations and Socio-psychological needs

Conclusions of the Hawthorne experiments

A factory is not just a techno-economic unit Workers spontaneously form informal groups The norms and values of such group have significant influence on the behavior and performance of the workers Physical conditions of work does not influence productivity as much as Socio-psychological needs Generally workers act or react as members of a group Informal leaders play an imp role Workers are not mere economic beings Mgmt must understand and recognize interpersonal and group relations on job

Evaluation Arguments for it


Human aspects is considered Several HR concepts was developed following the experiment

Evaluation Arguments against it


Lack of scientific analysis The researchers had certain preconceived perceptions The experiments were narrow Workers were highly conscious when being observed ( Hawthorne Effect)

Pioneers of mgmt- Peter F Drucker


Management Guru Considered mgmt as the dynamic and life giving element in an orgn.

Contributions
Nature of management Managerial functions includes: To manage managers To manage workers To manage work Organization Structure Decentralization MBO Futurity

Contd..
1. 2. 3.

4.
5. 6. 7.

8.

Drucker had identified 8 key result areas in which clear objectives must be laid down: Market standing Innovation Productivity Physical and financial resources Profitability Managerial performance and development Worker performance and attitude Public responsibility

Types of business entity-Sole proprietorship


type of business entity which legally has no separate existence from its owner Limitations of liability enjoyed by a corporation and limited liability partnerships do not apply to sole proprietors All debts of the business are debts of the owner A sole proprietorship essentially refers to a individual doing business in his or her own name and in which there is only one owner it does not pay corporate taxes

Advantages

No additional work needed to start the business There are no legal formalities to forming or dissolving a business what the business makes, so does the individual owner makes all the decisions rather than consulting with a partner

Disadvantages

Will likely have a hard time raising capital Hiring employees may also be difficult This form of business will have unlimited liability, so that if the business is sued, the proprietor is personally liable The life span of the business is also uncertain The business owner must also be an allrounder

Partnerships

Partnership is a type of business entity, where you partner with other individuals to own and run the business. On a higher level, they can be viewed as collection of sole proprietors. By partnering with other individuals, you get access to a bigger pool of capital, skills and other resources to fund and run your business. All partners contribute capital equally, share profits and losses equally and have an equal say in business decisions.

Advantages

Access to larger pool of resources and capital You do not have the confidence to start the business on your own and need some one to shoulder the responsibility Access to complementary skills

Disadvantages

If your partner makes a business mistake, without your knowledge or consent, and it adversely affects your business, you are equally liable to bear the consequences even though you had no role to play in the mistake If your partner goes bankrupt, his share in the business can be seized by his creditors. Although you are not liable for his personal debts, your business may be put into jeopardy

Legal side of partnership

have a legal document that highlights the partnership agreement between partners - the profit sharing, duration of partnership, admitting-expelling additional partners, dissolving the partnership etc.

Limited company

1.

2. 3.

A limited company is whose liability is limited by law There are three main types of limited companies: private company limited by shares (Ltd.) private company limited by guarantee public limited company

What are Public or Private companies?


These companies are also know as joint stock companies. The companies in India are governed by the Indian Companies Act, 1956 company is an artificial person created by law, having a separate legal entity, with perpetual succession and a common seal the company is different from the investors

Characteristics

Legal formation Artificial person Separate legal entity Common seal Perpetual existence Limited liability Democratic management

Special characteristics of Pvt Ltd Co.

These companies can be formed by at least two individuals having minimum paid-up capital of not less than Rupees 1 lakh. As per the Companies Act, 1956 the total membership of these companies cannot exceed 50. The shares allotted to its members are also not freely transferable between them. These companies are not allowed to raise money from the public through open invitation. They are required to use Private Limited after their names.

Special characteristics of Public Ltd Co.


A minimum of seven members are required to form a public limited company. It must have minimum paid-up capital of Rs 5 lakhs. There is no restriction on maximum number of members. The shares allotted to the members are freely transferable. These companies can raise funds from general public through open invitations by selling its shares or accepting fixed deposits. These companies are required to write either public limited or limited after their names.

Private company limited by guarantee

This type of Company does not have share capital but is guaranteed by its "members", who agree to pay a fixed amount in the event of the company's liquidation

Cooperative

an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democraticallycontrolled enterprise A cooperative may also be defined as a business owned and controlled equally by the people who use its services or who work at it Cooperatives may be generally classified as either consumer cooperatives or producer cooperatives.

Cooperatives are based on the values of self-help, self-responsibility, democracy and equality.

In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for

others.

Membership is open. Economic benefits are distributed proportionally according to each member's level of participation in the cooperative, for instance by a dividend on sales or purchases, rather than divided according to capital invested.

Multinational Corporations

Multinational corporation (MNC) or transnational corporation (TNC) is a corporation or enterprise that manages production or delivers services in more than one country

Many MNCs are large in relation to the national income of the countries in which they are located MNCs generate jobs and incomes MNCs help training of local workers in new and potentially transferable skills Technology transfer is also an incentive The local community would benefit since land would develop attractive both for the company and a host country's government

Multinational corporate structure

Horizontally integrated multinational corporations (example: McDonald's) Vertically integrated multinational corporations (example: Adidas or Nike, Inc.) Diversified multinational corporations (example: Microsoft )

Threats caused by MNCs


The Rise of Corporations Corporations and Human Rights Market Withdrawal Evasion of Tax and Other Responsibilities Corporations and the Environment Corporate Influence on Children Corporations and Workers Rights

Evolution of management Pre Scientific Mgmt Period


Period before Taylors Scientific era Pioneers of this era includes Robert Owen, Charles Babbage, Hendry Vernun Poor, Hendry Robinson, James Watt, Mathew Boulton and Captain HendryMetcalfe.

Robert Owen - Contributions

Manager of a group of textiles in Scotland. Workers performance was influenced by the total working atmosphere Employees are vital machines Maintenance of workers are as necessary as that for machines Co-operation between workers and management Human capital is the most worthy New ideas of human relation ( shorter working hrs, housing facilities, canteens, education of children, rest places)

Charles Babbage-Contributions

Prof of Mathematics in Cambridge University Use of science and mathematics in manufacturing operations Division of work acc to skills Avoid opinions and intuitions while decision making Emphasis on cost reduction Participative decision making and profit sharing Invention of an analytical machine

Hendry Vernun Poor


Editor of the American Railroad journal He noticed the railroads being mismanaged 3 pples to railroad managers- organisation, communication and information Need for a structured organisation structure Unity and co operation among workers

James Watt & Mathew Robinson


Applied the following management techniques in their Engineering Factory: Market research and forecasting Standardisation of components and parts Production planning Elaborate statistical records Cost accounting procedures Provision for employee welfare

Approaches to managementClassical /Traditional/Empirical approach


Management is viewed as a systematic network of inter related functions The mechanics with which each function is performed and their inter relation is the core of classical app. Principles are developed based on experiences of practicing managers Functions, principles and skills of management are considered universal. Formal education to would be managers (case study method) Emphasis is placed on economic efficiency and formal organizational structure People are motivated by economic gains

Uses and Limitations

Case study method used is very useful with future applicability Focuses more on what mangers should actually do Highlights the universal nature of management It has a scientific base

Devoid of human touch The environment dynamics and their effect on management is ignored Too much depending on past experiences Case study method is very effective in understanding the totality of the situation

Behavioral Approach

Emphasis is on the human aspects of management Developed by George Elton Mayo A developed version of HR movement An extension of Hawthorne Experiments

Basic Propositions

An organization is a socio technical system A wide range of factors influence interpersonal and group behavior There should be a fusion between organizational goals and human needs Several differences in attitudes, perceptions and values of employees exist and influence their behavior and performance Some degree of conflicts are inevitable and even desirable in organizations

Uses and Limitation

Generated the awareness of the importance of human element in organisation Lacks scientific validity Neglects the economic dimension of work satisfaction

HR v/s. Behavioral Approach


Human Relation Focus on interpersonal relations Study of individual Motivation and job satisfaction Originated from Hawthorne exp Behavioral Focus on group relation Study of groups and group behavior Group dynamics and informal organisation are main concepts Wider version of HR

Quantitative approach

Management is a series of decision making. The manger has to secure the best solution out of a series of inter related variables These variables can be presented in a mathematical model ( a prototype of the decision situation) If the model is properly formulated and equations correctly solved, the best soln can be got Organizations exist for the achievement of specific and measurable economic goals In order to achieve these goals optimal decisions must be made The quality of management is judged by the qlty of decisions made in diverse situations

Uses and Limitations

Emphasis on diverse situational changes of decision making Intuitions is replaced by factual data and logical analysis Thereby precision and perfection of decision making can be achieved Several OR techniques have been evolved from then.

Only one managerial function is given importance Underrates the supreme importance of the human element in management Not appropriate if inadequate data is available for decision making All variables need to be measurable

Systems Approach

A system is a set of distinguishable but inter dependent and inter related parts operating in a logical manner or sequence in order to achieve a goal Each part affects the others and the system as a whole Every system operates in a wider system Systems are of several types ( Static, Dynamic, Open and Closed systems)

Basic Propositions

An organization is a system consisting of several sub systems The position and function of each sub system can be analyzed only in relation with other sub systems or the organization as a whole An organizational system has a boundary which separates it from other systems An organization is a dynamic system

Uses

A new thinking Integrated thinking Stresses the dynamic and adaptive nature of organizations Environmental interaction It is against the narrow and piecemeal approach to problems Role of synergy in management

Limitations

Some concepts are vague and abstract It cant be directly applied to problems

Contingency Approach / Situation Approach


Management is entirely situational Fit the approaches acc to the situation Sharpen diagnostic skills No one best way to mange Management techniques and tools are not universal

Uses and limitations


Emphasis on situation orientation Open minded Innovation and creativity power of managers is necessary Practical Ifthen pple Lacks theoretical base

Recent trend in Management thoughts


Information Technology Professionalisation Flexible organization Situational approach HR Futurology Community Leader

Vision statement

A Vision statement outlines what the organization wants to be. It concentrates on the future. It is a source of inspiration. It provides clear decision-making criteria A vision statement should be SMART (Specific, Measurable, Achievable, Relevant and Time bound)

Features of an effective vision statement


Clarity and lack of ambiguity Vivid and clear picture Description of a bright future Memorable and engaging wording Realistic aspirations Alignment with organizational values and culture

McDonald's vision is to be the world's best quick service restaurant experience.

Mission statement
A mission statement is a brief statement of the purpose of a company, organization, or group A mission statement should :

Define what the company is Define what the company aspires to be Limited to exclude some ventures Broad enough to allow for creative growth Distinguish the company from all others Serve as framework to evaluate current activities Stated clearly so that it is understood by all

It should be brief, flexible and distinctive TCS Mission To help customers achieve their business objectives by providing innovative, best-in-class consulting, IT solutions and services, and to actively engage all stakeholders in a productive, collaborative, and mutually beneficial relationship

Values are guiding principles for the organization to achieve its vision. integrity, leading change, excellence, respect for the individual, and fostering an environment of learning and sharing TCS Values

Objectives

Goals established to guide the efforts of a company and each of its components The activities of any organization is directed towards the objectives

Characteristics of Organizational objectives

An orgn has multiple objectives Objectives have time span Objectives form hierarchy

Corp orate Obje ctive s

Departmental

Objectives

Group Objectives

Individual Objectives

Importance of Objectives

Legitimacy Direction Facilitates planning Individual motivation Performance control

Essentials of Valid objectives


Clear and specific Stated in measurable terms Result oriented and time bound Challenging but realistic Acceptable by employees Social sanction Laid down in KRAs Some flexibility

Hierarchical organization

A hierarchical organization is structured in a way such that every entity in the organization, except one, is subordinate to a single other entity Hierarchies denote a singular/group of power at the top, a number of assistants underneath and hundreds of servants beneath them

Process for forming an organization structure


A process involving decisions about six key elements: Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization

Need and significance of Organization Structure


Facilitates administration Facilitates growth and diversification Permits optimum utilization of technological improvements Greater employee satisfaction Stimulates creativity

Features of a good structure

Unity of objective Specialisation Span of control Scalar principle Functional definition Exception principle(Authority level pple) Unity of command Efficiency Flexibility Facilitation of leadership Coordination

Simple Structure characteristics

Prime co-ordinating mechanism: direct supervision Key part of organization: strategic apex Main design parameters: centralization, organic structure Situational factors: young, small, simple, non-complex technical system

Simple structures lack:

support workers, formal structures, differentiated units, behaviour formalization, hierarchies of managers, planning, training, liaison

The simple structure represented diagrammatically

Strategic apex

Operating core

Simple Structure - conditions


Simple, dynamic environment Newness many organisations start like this The entrepreneurial firm charismatic leader, compelling mission

Simple structure - limitations

Limited by the ability of one person to control everything If the leader doesnt function, neither does the organisation Restrictive and un-democratic for workers their decision making capability not called upon

Functional structure

Each basic business function is organized as a separate department When there is sound differentiation between activities homogenous activities can be grouped as one function Types of functional departments depends on the kind of business

Advantages

It exists in all organizations at some level Specialisation that leads to optimum utilization It ensures the performance of all activities It facilitates delegation of authority Avoids duplication of work It simplifies training

Disadvantages

Too much emphasis on specialisation There may be conflicts between depts There may be problems in coordinating the activities of different depatments

Functional Structure
BOD

Managing Director
Marketing Production Finance Quality Control Processing materials Packaging HR

Multi divisional structure


1.

Product departmentalisation Every major product is organized as a separate department Useful for organizations producing and marketing products of significant difference

Advantages

All activities regarding a particular product line is well integrated Facilitates product expansion and diversification The contribution of each product line to overall results can be easily evaluated

Disadvantages

There is duplication of functions Advantages of centralisation of certain activities are not available There may be under utilization of plant capacity More people are required

Product departmentalisation
BOD Managing director Plastics division Chemicals division Finance Production Sales Personnel Metals division

Multi divisional structure


2.

Territorial Departmentation When the business is spread over in large geographical areas One functional manager cannot manage efficiently Regional managers for different regions

Advantages

Local operations made easy Savings in freight charges Every regional manager can specialize in the peculiar problems of his region When business exists across borders

Disadvantages

Communication problems More number of people with managerial skills are required Control of all branches from head office can be less effective Duplication of physical activities

Territorial Departmentation
BOD Managing director Northern Division Southern Division Eastern division Branch I Finance Marketing Branch II Branch III Western

Multi divisional structure


3.

Market Departmentation Activities are grouped according to the type of customers eg: Wholesale, retail, export etc

Advantages

More attention can be given to customers The benefits of specialisation can be derived Customer needs can be more satisfied thereby more profits

Disadvantages

Departmentation is applied only to sales functions Duplication of work

Market Departmentation
BOD Managing Director Marketing Production Wholesale Exports Retail Finance HR

Matrix Structure

Combination of two structures For complex organizations

Advantages

Oriented towards end results Conflicts can arise

Disadvantages

Matrix Structure
Director

Chief of preliminary Design Project A Project B Project C Project D

Chief Mechanical Engineer

Chief Electrical Engineer

Chief Architect

MBO

Process whereby the superior and the sub ordinate managers of an enterprise jointly identify its common goals, define each individuals major areas of responsibility in terms of the results expected of him, and use these measures as guides for operating the unit and assessing the contribution of each of its members

Objectives

To measure and judge performance To relate individual performance to organizational goals To clarify what is to be achieved To foster the increasing competence and growth of the sub ordinates To serve as a basis for judgements about salary and promotion To stimulate the sub ordinates motivation To serve as a device for organizational control and integration

Features

Goal oriented rather than work oriented Involves participation of subordinate managers in goal setting MBO stresses measurable and verifiable goals in KRAs MBO is a dynamic system Maximum utilization of resources is the overall philosophy Linkage between organizational goals and individual goals Continuous process It sets an evaluative mechanism

Steps in MBO process


Preliminary goal setting Setting subordinates goals Recycling objectives Action planning Periodic performance reviews Final appraisal

Benefits of MBO

Improved planning Team work Effective self control Objective appraisal Motivation and morale

Limitations of MBO

Goal setting problems Time consuming Increased paper work Pressure oriented Undermining leadership Participation problem

How to make MBO effective


Purpose Top management support Orientation and training Adequate time and resources Decentralization Timely feedback

PLANNING

A function that determines in advance what should be done. It consists of selecting enterprise objectives, policies, programmes, procedures and other means of achieving these objectives.

Nature of planning

Goal oriented Planning is a primary function Planning is all pervasive Planning is an intellectual or rational process. It is a continuous process Planning is forward looking Planning involves choice It is directed towards efficiency

Importance of planning

Focuses attention on objectives and results Reduces uncertainty and risk Provides sense of direction Encourages innovation and creativity Helps in coordination Guides decision making Provides a basis fro decentralization Improves efficiency Facilitates control

Problems in planning (Limitations)


Lack of accurate info Time and cost Inflexibility Lack of ability to plan False sense of security Environmental constraints

Principles of planning

Contribution to objectives Efficiency of plans Primacy of planning Principle of timing Principle of alternatives Principle of limiting factor Principle of commitment Principle of flexibility

Hierarchy of planning (Scope)


Cor pora te plan ning

Divisional or functional planning

Group or sectional planning

Hierarchy of planning (Time)


Long range strategic planning Medium term or Intermediate planning Short term operational planning

Steps in planning

Identify goals Develop planning premises Determine alternative courses of action Evaluate the alternatives Select a course of action Formulate derivative plans

Line and staff organization


i.

ii.

iii.

iv.

Line organization- Features Lines of authority are vertical flowing from top to bottom The command is through a straight , unbroken line All persons at the same level are independent of each other The authority and responsibility of each position is clearly defined

Advantages

Simple Prompt decision Effective discipline Orderly communication Unity of command Economical Fixed responsibility Co ordination

Disadvantages

Lack of specialization Overloading Autocratic approach Low morale Succession problems

Suitability

Small scale business Routine nature of work Where machines are used more than expertise of foremen

Line and staff

Decision Making

A decision is a course of action which is consciously chosen from among a set of alternatives to achieve a desired result. The process of doing it is decision making

Features of decision making


Goal oriented process Set of alternatives are available Dynamic Environment related Implies freedom to the decision maker Continuous process Intellectual process

Types of decisions

Programmed and non programmed decisions Organisational and personal decisions Individual and group decisions

Decision making process


Identify the problem Diagnose the problem Discover alternatives Evaluation of alternatives Risk Economy of effort Timing Limitation of resources

Contd..
Select the best alternative Implementation and follow up Summed to 3 phases: Intelligence activity Decision activity Choice activity

The Environment for decision making


Certainty Risk Uncertainty

Limitations of scientific decision making


Inadequate goal formulation Vaguely defined problems Imperfect knowledge Limited time and resources Human limitations Power politics Environmental dynamics Group think

Objectives- Strategies and Policies

A complex plan for bringing the organization from a given posture to a desired position in a future period of time A response to external environment forces

Importance of strategies

Helps in facing environmental challenges Provides direction Optimum utilization of resources Facilitates coordination and control Competitive strength

Essentials of a good strategy

Internal consistency Consistency with environment Appropriate time horizon Realistic Acceptable degree of risk Feasibility Social sanction

Steps in strategy formulation


Mission and objectives SWOT analysis (Self appraisal & Environmental analysis) Strategic decision making Strategy implementation and control

Types of strategies

Stability strategy Growth strategy Retrenchment strategy Combination strategy Competitive strategy Grand or master strategy

Policies

A broad statement formulated to provide guidance in decision making at lower levels of management

Importance of policies

Operationalise objectives Save time and effort Facilitate delegation of authority Speed up decision making

Types of policies

Originated policy Appealed policy Imposed policy

Steps in policy formulation


Defining the policy area Identification of policy alternatives Evaluation of alternatives Choice of policy Communication of policy Policy application Policy review and appraisal

Delegation

Assigning work to others and giving them authority to do it. The work is divided so that the manager does the part which only he can do and get others to do what remains.

Characteristics

Superior grants a discretion to the sub ordinate Entire authority cannot be delegated The extent of delegation depends upon several factors Delegation is not reduction in authority Delegation does not mean abdication of responsibility Delegation is an art

Importance of delegation

Distribution of routine work Quick decision making Improves the work life of sub ordinates Increases interaction Helps to ensure continuity in business

Process of delegation

Determination of results expected Assignment of duties Granting of authority Creating accountability for performance

Obstacles to delegation

On the part of Superior On the part of sub ordinate On the part of organization

Decentralization

Dispersal of authority throughout the organization

Delegation

Decentralization

It is a process Denotes relationship b/w a superior and subordinate It is essential for mgmt process Delegation can happen without decentralization

It is the end result of delegation Denotes relationship b/w the top mgmt and various depts It is optional Decentralization cant happen without delegation

Degree of decentralization a measure


Number of decisions Importance of decisions Effects of decisions Checking of decisions

Advantages of decentralization

Relief to top executives Motivation of sub ordinates Quick decisions Growth and diversification Executive development

Factors determining decentralization


Size and complexity of the orgn Dispersal of operations Degree of diversification Outlook of the top mgmt Availability of competent personnel Nature of functions Communication system

Span of management

Number of sub ordinates that report directly to a single manager

Factors determining span


Nature of work Type of technology Ability of manager Capacity of sub ordinates Degree of decentralization Policies and procedures Staff assistance Time available for supervision

Empowerment

giving employees power and authority to make decisions on their own When people are allowed to work with minimal interference from their superiors and are given the authority and responsibility to make decisions, they are said to be empowered Employees can be empowered by ensuring their participation in decision-making

Participation

improves the quality and quantity of output improves the motivation levels of employees decreases the rate of attrition and absenteeism improves communication within the organization decreases in the number of conflicts lower stress levels greater commitment to goals lower resistance to change

Pre-requisites essential for participation


adequate time potential benefits of participation should be greater than the costs involved the employees must also have the relevant abilities and skills should be interested in that particular area of work

Effectiveness

doing "right" things, i.e. setting right targets to achieve an overall goal Effectiveness is a quality metrics meaning how good a person is at doing a task. Efficiency Vs Effectiveness Efficiency is a quantity metrics Efficiency = output (number of customer service calls taken per hour) Effectiveness = outcome (customers who are satisfied with the answers received)

Management by restructuringBenchmarking

process of comparing the cost, time or quality of what one organization does against what another organization does Its a continuous process Involves measurement Comprehensive Self examination Goal oriented

Types

Internal benchmarking Functional benchmarking Competitive benchmarking

Phases and steps in benchmarking process


Planning Analysis Integration Action Maturity

Steps

Identify what is to be benchmarked Identify best competitor Determine data collection methodology Determine current performance GAP Project future performance levels Communicate benchmark findings Establish functional goals Implement specific action and monitor progress Recalibrate benchmarks Maturity

Management by restructuringBPR

The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed

Fundamental rethinking: Why does the company Radical Redesign: Discard all existing old Dramatic improvements: No marginal
improvements only quantum leaps

do what it does? Why does it do it the way it does? It concentrates on what should be done.

structures and procedures and invent new ways of doing things

Key processes

Companies that go for it


Companies that are in deep trouble Companies that foresee trouble Companies that are aggressive and ambitious

Objectives of BPR

Redesigning the key business process to improve quality and reduce cost Flattening the organization and encouraging teamwork Training and developing HR Improving information technology Identifying core competencies and managing environmental changes

Entrepreneurship

Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities

Advantages of entrepreneurship

Self-employment, offering more job satisfaction and flexibility of the work force Employment for others, often in better jobs Income generation and increased economic growth More goods and services available

Entrepreneurs...Traits

Self-confident and optimistic Able to take calculated risk Respond positively to changes Flexible and able to adapt Knowledgeable of markets Able to get along well with others Independent minded