Management and hierarchy
Management is the process of achieving organizational
objectives through people and other resources. The manager’s job is to combine
human and technical resources in the best way possible to achieve the company’s
goals.
The highest level of management is top management.
Top managers include such positions as chief executive officer (CEO), chief
financial officer (CFO) and executive vice president, as well as managing
director (MD). Top managers devote most of their time to developing long-range
plans for their organizations. They make decisions such as whether to introduce
new products, acquire other firms, or enter new geographical markets. Top
managers set a direction for their organizations and inspire the company’s
executives and employees to achieve their vision for the company’s future.
Middle management, the second tier in the management
hierarchy, includes positions such as general managers, plant managers,
division managers, and branch managers. Middle managers’ attention focuses on
specific operations, products, or customer groups within an organization. They
are responsible for developing detailed plans and procedures to implement the
firm’s strategic plans. If top management decided to broaden the distribution
of a product, a sales manager would be responsible for determining the number
of salespeople required. If top management decided to institute a company-wide
total quality management program, a quality control manager in the customer
service department might design a survey to gather feedback on customer
satisfaction.
Supervisory management, or first-line management,
includes positions such as supervisor, section chief, and team leader. These
managers are directly responsible for assigning non-managerial employees to
specific jobs and evaluating their performance. Managers at this first level of
the hierarchy work in direct and continuing contact with the employees who sell
the firm’s goods and services. They are responsible for implementing the plans
developed by middle managers- motivating workers to accomplish daily, weekly,
and monthly goals.
Skills needed for Managerial Success
Managers at every level in the management hierarchy must
exercise three basic types of skills: technical, human, and conceptual. All
managers must acquire these skills in varying proportions, although the
importance of each category of skill changes at different management levels.
Technical skills are the manager’s ability to
understand and use the techniques, knowledge, tools and equipment of a specific
discipline or department. Technical skills lose relative importance at higher
levels of the management hierarchy, but most top executives started out as
technical experts. The resume of a vice president for information systems
probably lists experience as a computer analyst and that of a vice president
for marketing usually shows a background in sales.
Human skills are interpersonal skills that enable a
manager to work effectively with and through people. Human skills include the
ability to communicate with, motivate, and lead employees to accomplish
assigned activities. Managers need human skills to interact with people both
inside and outside the organization. It would be tough for a manager to succeed
without such skills, even though they must be adapted to different forms
today-for instance, mastering and communicating effectively with staff through
e-mail, cell phones, pagers, faxes, and even instant messaging, which are
widespread in offices.
Conceptual skills determine a manager’s ability to
see the organization as a unified whole and to understand how each part of the
overall organisation interacts with other parts. These skills involve an
ability to see the big picture by acquiring, analyzing, and interpreting
information.
Managerial Functions
In the course of a typical day, managers spend time meeting
and talking with people, reading, thinking and sending e-mail messages. As they
perform these activities, managers are carrying out four basic functions
planning, organizing, directing, and controlling. Planning activities lay the
groundwork and the other functions are aimed at carrying out the plans.
Planning is the process of anticipating future events
and conditions and determining courses of action for achieving organization
objectives. Effective planning can help a business to crystallize its vision,
as well as avoid costly mistakes and seize opportunities, Effective planning
requires an evaluation of the business environment and a well designed road map
of the actions needed to lead firm forward. For Michael Dell, founder and CEO
of personal computer giant Dell, plans consist of answers to questions like
these “ How many new products can you introduce at one time? Where are the big
opportunities? What do customers most want us to do?”
Once plans have been developed, the next step in the
management process typically is organizing - the means by which managers
blend human and material resources through a formal structure of tasks and
authority. This activity involves classifying and dividing work into manageable
units by determining specify tasks necessary to accomplish organization
objectives, grouping tasks into a logical pattern or structure, and assigning
them specific personnel. Managers also must staff the organization with
competent employees capable of performing the necessary tasks and assigning
authority and responsibility to these individuals. Often, organizing involves
studying a company’s existing structure and determining whether to reorganize
it so that the company can better meet its objectives.
Once plans have been formulated and an organization has been
created and staffed, the management task focuses on directing, or
guiding and motivating employees to accomplish organizational objectives.
Directing includes explaining procedures, issuing orders, and seeing that
mistakes are corrected. Managers may also direct in other ways, such as getting
employees to agree on how they will meet objectives and inspiring them to
enquire about customer satisfaction or their contribution to the company. The
directing function is a vital responsibility of supervisory managers. To
fulfill their responsibilities to get things done through people, supervisors
must be effective leaders. In addition, middle and top managers must be good
leaders and motivators, and they must create an environment that fosters such
leadership.
Controlling is the function of evaluating an
organization’s performance to determine whether it is accomplishing its
objectives. This basic purpose of controlling is to assess the success of the
planning function. Controlling also provides feedback for future rounds of
planning. The four basic steps in controlling are to establish performance
standards, monitor actual performance, compare actual performance with
established standards, and take corrective action if required.
Under the provisions of the 2002 Sarbanes-Oxley Act, for
example, CEOs and CFOs must monitor the performance of the firm’s accounting
staff more closely. They must personally attest to the truth of financial
reports filed with the Securities and Exchange Commission.
Setting a Vision and Ethical Standards for the Firm
Business success almost always begins with a vision, a
perception of marketplace needs and the methods an organization can use to
satisfy them. Vision serves as the target for a firm’s actions, helping to
direct the company toward opportunities and differentiating it from its competitors.
Vision must be focused and yet flexible enough to adapt to
changes in the business environment.
Also critical to a firm’s long-term success are the ethical
standards that top executives set. A company’s top managers can take an
organization down a slippery slope to bankruptcy if they operate unethically.
Avoiding that path requires executives to focus on the organization’s success,
not merely personal gain.
Holding the welfare of the company’s
constituency’s—customers, employees, investors, and society in general—as the
top priority can build lasting success for a firm.
Setting a high ethical standard does not merely restrain
employees from doing evil, but it encourages, motivates, and inspires them to
achieve goals they never thought possible. Such satisfaction creates a more
productive, stable workforce—one that can create a long-term competitive
advantage for the organization. Still, a leader’s vision and ethical conduct
are only the first steps along an organization’s path to success. Turning a
business idea into reality takes careful planning and actions.
Importance of Planning
Types of Planning
Planning can be categorized by scope and breadth. Some plans
are very broad and long range, focusing on key organizational objectives. Others
specify how the organization will mobilize to achieve these objectives.
Planning can be divided into the following categories: strategic, tactical,
operational, and contingency. Each step in planning includes more specific
information than the last. From the mission statement to objectives to specific
plans, each phase must fit into a comprehensive planning framework.
The framework also must include narrow, functional plans
aimed at individual employees and work areas relevant to individual tasks.
These plans fit within the firm’s overall planning framework, allowing it to
reach objectives and achieve its mission.
Strategic Planning:
The most far-reaching level of planning is strategic
planning—the process of determining the primary objectives of an organization
and then adopting the courses of action and allocating resources to achieve
those objectives.
Tactical Planning:
Tactical planning involves implementing the activities
specified by strategic plans. Tactical plans guide the current and near-term
activities required to implement overall strategies.
Operational Planning:
Operational planning creates the detailed standards that
guide implementation of tactical plans. This activity involves choosing
specific work targets and assigning employees and teams to carry out plans.
Unlike strategic planning, which focuses on the organization as a whole,
operational planning deals with developing and implementing tactics in specific
functional areas.
Contingency Planning:
Planning cannot foresee every possibility. Major accidents,
natural disasters, and rapid economic downturns can throw even the best-laid
plans into chaos. To handle the possibility of business disruption, many firms
use contingency planning, which allows a firm to resume operations as quickly
and as smoothly as possible after a crisis while openly communicating with the
public about what happened. This planning activity involves two components:
business continuation and public communication.
A contingency plan usually designates a chain of command for
crisis management, assigning specific functions to particular managers and
employees in an emergency. Contingency planning also involves training workers
to respond to emergencies, improving communications systems, and using advanced
technology.
Planning at Different Organizational Levels
Table 8.1 shows how much and what type of planning
each level of management does.
|
Type
|
Managerial Level
|
Examples
|
|
Strategic
|
Top Management
|
Organization objectives, strategies and long-term plans
|
|
Tactical
|
Middle Management
|
Semi-annual plans, departmental policies
|
|
Contingency
|
All levels
|
Plans for emergency situations
|
The Strategic Planning Process
Successful strategic planners
typically follow the six steps shown in Figure 8.2: defining a mission,
assessing the organisation’s competitive position, setting organizational
objectives, creating strategies for competitive differentiation, implementing
the strategy, and evaluating the results and refining the plan.
Defining the Mission
The first step in strategic
planning is to translate the firm’s vision into a mission statement. A mission
statement is a written explanation of an organisation’s business intentions and
aims. The mission statement should be widely publicized with employees,
suppliers, partners, shareholders, customers, and the general public. Mission statements can vary in complexity and length.
Assessing your Competitive Position
A frequently used tool is SWOT
analysis. A SWOT analysis is an organized approach to assessing a company’s internal
strengths and weaknesses and its external opportunities and threats. The SWOT
analysis should allow managers to select an appropriate strategy to accomplish
their organization’s objectives. The framework for a SWOT analysis appears in
figure 8.3. Usually planners attempt to look at their strengths and weaknesses
in relation to those of other firms in the industry.
Establishing Objectives for the Organization
Objectives set guideposts by which managers define the
organisation’s desired performance in such areas as profitability, customer
service, and employee satisfaction. The mission statement delineates the
company’s goals in general terms, but objectives are more concrete statements.
Creating Strategies for Competitive Differentiation
The underlying goal of strategy development is competitive
differentiation, the unique combination of a company’s abilities and
approaches that places it ahead of competitors. Common sources of competitive
differentiation include product innovation, technology, and employee
motivation.
The Implementation Phase of Planning
Once the first four phases of the strategic planning process
are complete, managers face even bigger challenges. They must begin to put
strategy into action by identifying the specific methods to do so and deploying
the resources needed to implement the intended plans.
Monitoring and Adapting Strategic plans
The final stage in the strategic planning process, closely
linked to implementation, consists of monitoring and adapting plans when actual
performance fails to match expectations. Monitoring involves establishing
methods of securing feedback about actual performance. Common methods include
comparisons of actual sales and market share data with forecasts, information received
from supplier and custom surveys, complaints received on the firm’s customer
hot line, and reports prepared by production, finance, marketing, and other
company units. Ongoing use of such tools as SWOT analysis and forecasting can
help managers adapt objectives and functional plans as changes occur.
MANAGERS AS DECISION MAKERS
Decision-making is the process of recognizing a problem or
opportunity and then dealing with it. The types of decisions that managers make
can be classified as programmed and non-programmed.
Programmed and Non-programmed Decisions
Programmed and non-programmed differ in whether they have
unique elements. A programmed decision involves simple, common, and frequently
occurring problems for which solutions have already been determined. For these
types of decisions, organizations develop rules, policies, and detailed
procedures that managers apply to achieve consistent, quick, and inexpensive
solutions to common problems.
A non-programmed decision involves a complex and unique problem
or opportunity with important consequences for the organization. Examples of
non-programmed decisions include entering a new geographical market, acquiring
another company, or introducing a new product.
How Managers make decisions
Decision-making involves a systematic, step-by-step process
that helps managers make effective choices. This process begins when someone
recognizes a problem or opportunity; it proceeds with developing potential
courses of action, evaluating the alternatives, selecting and implementing one
of them, and assessing the outcome of the decision.
MANAGERS AS LEADERS
The most visible component of a manager’s responsibilities
is leadership, directing or inspiring people to attain organizational goals.
Much research has been done to find out the characteristics of a good leader.
Great leaders do not all share the same qualities, but the top three are
empathy, self-awareness and objectivity. Many great leaders share other traits,
including courage, ability to inspire others, passion, commitment, flexibility,
innovation, and willingness to experiment. Leadership involves the use of
influence or power. This influence may come from many sources, such as position
in an organization, or it may come from expertise and experience. Some leaders
derive their power from their charismatic personalities.
Leadership Styles
The way a person uses power to lead others determines his or
her leadership style. At one end is autocratic
leadership, where bosses make decisions on their own without consulting
subordinates. On the other hand, democratic leaders involve workers in
decision-making. Democratic leaders
delegate assignments, ask employees for suggestions, and encourages
participation.
An important trend that has developed in business during the
past decade is the concept of empowerment, a practice in which managers lead
employees by sharing power, responsibility, and decision making with them.
At the other extreme is free-rein
leadership (laissez faire style). Here, leaders believe in minimal
supervision. Employees are left to make own decisions but communication with
managers occur as required.
Which leadership style is best?
The most appropriate leadership style depends on the
function of the leader, the subordinates and the situation. Some leaders do not
like to involve subordinates in decision-making. Democratic leaders often ask
for suggestions from employees. Experts agree they cannot agree on a single
best style of leadership.
CORPORATE CULTURE
A company’s corporate culture is its system of
principles, beliefs, and values. Managerial philosophies, workplace
environments and practices all influence corporate culture. A corporate culture
is typically shaped by the leaders who founded and developed the company and by
those who have succeeded them. One generation of employees passes on a
corporate culture to newer employees. Companies with strong cultures include
McDonalds and Hewlett-Packard, who want to maintain a ‘small company’
atmosphere and a culture to promote innovation. Corporate cultures can change.
UPS was once known for its rigid style but now has become more flexible.
ORGANIZATIONAL STRUCTURES
An organization is a structured grouping of people working
together to achieve common objectives. An organization features three key
elements: human interaction, goal-directed activities, and structure.
The steps involved in the organizing process are shown in
Fig. 8.5.
Managers must first determine the specific activities needed
to implement plans and achieve goals. Next, they group these work activities
into a logical structure. Then they assign work to specific employees and give
the people the resources they need to complete it. Managers must coordinate the work of
different groups and employees within the firm. Finally, they must evaluate the
results of the organizing process to ensure effective and efficient progress
toward planned goals. Evaluation often results in changes to the way work is
organized.
As a company grows, its structure increases in complexity.
With increased size comes specialization and growing numbers of employees. To
help employees understand how their work fits within the overall operation of
the firm, managers prepare an organization chart, which is a visual representation
of a firm’s structure that illustrates job positions and functions. (See fig.
8.6.)
Departmentalization
Departmentalization is the process of dividing work
activities into units within the organization. This departmentalization
arrangement lets employees specialize in certain jobs to promote efficient
performance. The marketing effort may be headed by a sales and marketing vice
president, who directs the work of salespeople, marketing researchers, and
advertising and promotion personnel. A human resource manager may head a
department made up of people with special skills in such areas as recruiting
and hiring, employee benefits, and labor relations.
The five major forms of departmentalization subdivide work
by product, geo graphical area, customer, function, and process:
- Product departmentalization. This approach organizes work units based on the goods and services a company offers
- Geographical departmentalization. This form organizes units by geographical regions within a country or, for a multinational firm, by region throughout the world.
- Customer departmentalization. A firm that offers a variety of goods and services targeted at different types of customers might structure itself based on customer departmentalization. Management of 3M’s 50,000 products is divided among six business units: health care; transportation, graphics, and safety; consumer and office; industrial; electro and communications; and specialty materials.
- Functional departmentalization. Some firms organize work units according to business functions such as finance, marketing, human resources, and production. An advertising agency may create departments for creative (say, copywriters), media buyers, and account executives.
- Process departmentalization. Some goods and services require multiple work processes to complete the production. A manufacturer may set up separate departments for cutting material, heat—treating it, forming it into its final shape, and painting it.
Delegating Work Assignments
After grouping activities into departments, managers assign
this work to employees. The act of assigning activities to employees is called delegation. Managers delegate work to
free their own time for planning and decision making. Subordinates to whom
managers assign tasks thus receive responsibility or obligations to perform
those tasks. Along with responsibilities, employees also receive authority, or
the power to make decisions and to act on them so they can carry out their
responsibilities. Delegation of responsibility and authority makes employees
accountable to their supervisor or manager.
Accountability means that employees are responsible
for the results of the ways they perform their assignments; they must accept
the consequences of their actions.
Authority and responsibility tend to move downward in
organizations, as managers and supervisors delegate work to subordinates.
However, accountability moves upward, as managers assume final accountability
for performance by the people they manage.
Span of Management
The span of management, or span of control, is the number of
sub ordinates a manager supervises. First-line managers have wider spans of
management, monitoring the work of many employees. The span of management
varies considerably depending on many factors, including the type of work
performed and employees’ training. In recent years, a growing trend has brought
ever wider spans of control, as companies have reduced their layers of
management to flatten their organization structures, in the process increasing
the decision- making responsibility they give employees.
Centralization and Decentralization
How widely should managers disperse decision- making
authority throughout an organization? A company that emphasizes centralization
retains decision making at the top of the management hierarchy. A company that
emphasizes decentralization locates decision making at lower levels. A trend
toward decentralization has pushed decision making down to operating employees
in many cases. Firms that have decentralized believe that the change can
enhance their flexibility and responsiveness in serving customers.
Types of Organization Structures
The four primary types of organization structures are line,
line-and-staff, committee, and matrix structures. These terms do not specify
mutually exclusive categories, though. In fact, most modern organizations
combine elements of one or more of these structures.
Line Organizations: A line organization, the oldest
and simplest organization structure, establishes a direct flow of authority
from the chief executive to subordinates. The line organization defines a
simple, clear chain of command—a set of relationships that indicates who gives
direction to whom and who reports to whom. Decisions can be made quickly
because the manager has authority to control subordinates’ actions. The line
organization is an ineffective model in any but the smallest organizations.
Line-and-Staff Organizations: A line-and staff
organization combines the direct flow of authority a line organization with
staff departments that support the line departments. Line departments participate directly in
decisions that affect the core operations of the organization. Staff
departments lend specialized technical support. Examples of staff departments
include labor relations, legal counsel, and information technology.
A line manager forms part of the primary line of authority
that flows throughout the organization. Line managers interact directly with
the functions of production, financing, or marketing—the functions needed to
produce and sell goods and services. Staff manager provides information,
advice, or technical assistance to aid line managers. The line – and - staff
organization is common in midsize and large organizations. It is an effective
structure because it combines the line organization’s capabilities for rapid
decision making and direct communication with the expert knowledge of staff
specialists.
Committee Organizations: A committee organization is
a structure that places authority and responsibility jointly in the hands of a
group of individuals rather than a single manager. Committees also work in
areas such as new-product development. A new-product committee may include
managers from such areas as accounting, engineering, finance, manufacturing,
marketing, and technical research. By including representatives from all areas
involved in creating and marketing products, such a committee generally
improves planning and employee morale because decisions reflect diverse
perspectives. Committees tend to act slowly and conservatively, however, and
they often make decisions by compromising conflicting interests rather than by
choosing the best alternative.
Matrix Organizations: Some organizations use the matrix,
or project management, structure. This structure links employees from different
parts of the organization to work together on specific projects. For a specific
project, a project manager assembles a group of employees from different
functional areas. Upon completion of a project, employees return to their
“regular” jobs. In the matrix structure, each employee reports to two managers:
one line manager and one project manager. Employees who are selected to work on
a special project, such as development of a new product, receive instructions
from the project manager (horizontal authority), but they continue as employees
in their permanent functional departments (vertical authority). The term matrix
comes from the intersecting grid of horizontal and vertical lines of authority.
The matrix structure has become popular at high-technology
and multinational corporations, as well as hospitals, consulting firms, and
aerospace firms. Dow Chemical and P&G have both used matrix structures. The
National Aeronautics and Space Administration used the matrix structure for its
Mercury and Apollo space missions. The major benefits of the matrix structure
come from its flexibility’ in adapting quickly to rapid changes in the
environment and its capability of focusing resources on major problems or
products. It also provides an outlet for employees’ creativity and initiative,
giving them opportunities that their functional jobs may deny them. However, it
challenges the project manager to integrate the skills of specialists from many
departments into a coordinated team. Another disadvantage is that employees may
be confused and frustrated in reporting to two bosses.
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