Management: Theory and Practice

WHAT IS MANAGEMENT?

M

anagement, in simple terms, can be defined as the attainment of organizational goals in an effective and efficient manner through: Planning, Organizing, Leading, Controlling and Staffing. Management makes human efforts more productive and brings better technology, products and services to the society. It is a must to accomplish the desired goals through group action. It is essential to convert the disorganized resources of men, machine and materials, and methods into a useful and effective enterprise. Thus, management is the function of getting things done through people and directing the efforts of individuals towards a common objective. Managers guide and coordinate the efforts of others towards certain specified goals. The skills which are required to get things done through people consist of conceptual skills, technical skills, administrative skills, social skills, and so on. Without proper management, the resources of production (men, machine and materials) cannot be converted into production. Thus, management is a vital function concerned with all aspects of the working of an organization.

Management is the art of getting things done through and with people in formally organized groups. It is the art of creating the environment in which people can perform as individuals and yet cooperate towards attainment of group’s goals. It is the art of removing hindrances to high performance, a way of optimizing efficiency to reach goals. Henri Fayol, the father of Management Process School, has defined management as a process consisting of five functions. “To manage is to forecast and plan, to organize, to command, to coordinate and to control.” However, modern authors do not view coordination as a separate function

Management:

Theory and Practice

CHAPTER

1

1

of management. They consider it the essence of managing. The manager draws plans to translate goals into reality. But planning is of no use unless the manager organizes, directs and controls the activities of people working under him to execute the plans. Management is a distinct activity which is concerned with the effective utilization of various resources of the organization for the accomplishment of its objectives. After organizing the human and material resources, the manager actuates the manpower for the best possible use of material resources towards a certain direction. This leads to the production of certain goods and services. After this, the manager carries out the function of controlling. He compares the performance of different individuals with the standards of performance already determined by him and then takes corrective actions. Thus, management involves a series of functions which should be carried out continuously to attain the goals of the organization. Management is abstract and cannot be seen with the eyes. It can be seen by the quality of organization and results. Thus, management is result oriented and intangible.

Management is dynamic because it adapts itself to social changes and introduces innovation in methodology. It involves decision making at various levels for getting things done by others. It involves selecting the most appropriate alternative out of the several. Management is concerned with the direction and control of various activities. It deals particularly with the active direction of human effort.

As a discipline, management refers to the body of knowledge and a separate field of study. It is taught in colleges and universities like other disciplines. It entails the principles, practices, techniques and skills of management which help in achieving organizational objectives. Management has drawn concepts and principles from various areas of economics, sociology, psychology, statistics, and so on. The result is that each group has defined management differently. For example, economists see management as a factor of production; sociologists see it as a class or group of persons; practitioners of management treat it as a process. In spite of no clear unanimity, it is not difficult to identify the aforesaid meanings of the term management.

WHAT ARE THE KEY MANAGERIAL ROLES?

Henry Mintzberg has identified ten roles common to the work of all managers. The ten roles are divided into three groups: interpersonal, informational and decisional. The informational roles link all managerial work together. The interpersonal roles ensure that information is provided.

The decisional roles make significant use of the information. The activities of the manager may be categorized under the following three heads:

(i) Interpersonal Activities: Managers deal with the subordinates to get things done with their help. For this, they have to interact and maintain good relations with them.

(ii) Informational Activities: It is very important for managers to communicate effectively in order to get things done. They continuously receive information from various sources and transmit only the desired information. They exchange information with their superiors, subordinates and peers.

(iii) Decisional Activities: Decision making is inherent to the job of a manager. The Managers have to take a large number of decisions daily to run the organization. They are expected to come up with solutions to difficult problems and to follow through with their decisions, even when doing so may be unpleasant.

Roles of a manager as part of the interpersonal activities he has to perform: • Figurehead

• Leader • Liaison

Roles a manager takes up while engaged in informational activities: • Monitor

• Disseminator • Spokesperson

Roles a manager plays in relationships with other individuals both inside and outside the firm:

• Entrepreneur • Disturbance handler • Resource allocator • Negotiator

Managerial activities involve variety, fragmentation, brevity and a large volume of work to be performed quickly. The three interpersonal roles are primarily concerned with interpersonal relationships. In the figurehead role, the manager represents the organization in all matters of formality. The top level manager represents the company legally and socially to those outside of the organization. The supervisor represents the work group to higher management and higher management to the work group. In the liaison role, the manager interacts with peers and people outside the organization. The top level manager uses the liaison role to gain

favours and information, while the supervisor uses it to maintain the routine flow of work. The leader role defines the relationship between the manager and employees.

The direct relationship with people in the interpersonal roles place the manager in a unique position to get information. Thus, the three informational roles are primarily concerned with the information aspects of managerial work. In the monitor role, the manager receives and collects information. In his role as of disseminator, the manager transmits special information into the organization. The top level manager receives and transmits more information from people outside the organization than the supervisor. In the role of spokesperson, the manager disseminates the organization’s information into its environment. Thus, the top level manager is seen as an industry expert, while the supervisor is unit or department.

The unique access to information places the manager at the center of organizational decision making. There are four decisional roles. In the entrepreneur role, the manager initiates change. In the disturbance handler role, the manager deals with threats to the organization. In the resource allocator role, the manager chooses where the organization will expend its efforts. In the negotiator role, the manager negotiates on behalf of the organization. The top level manager makes the decisions about the organization as a whole, while the supervisor makes decisions about his or her particular work unit.

The supervisor performs these managerial roles but with different emphasis than higher managers. Supervisory management is more focused and short-term in outlook. Thus, the figurehead role becomes less significant and the disturbance handler and negotiator roles increase in importance for the supervisor. Since, leadership permeates all activities, the leader role is among the most important of all roles at all levels of management.

WHAT ARE THE MANAGERIAL SKILLS REQUIRED?

Technical skills involve process or technique knowledge and proficiency. Managers use the processes, techniques and tools of a specific areaskill. Human skills involve the ability to interact effectively with people. Managers interact and cooperate with employees.

Conceptual skills involve the formulation of ideas. Managers understand abstract relationships, develop ideas and solve problems creatively.

Thus, technical skill deals with things, human skill concerns people and conceptual skill has to do with ideas. A manager’s level in the organization determines the relative importance of possessing technical, human and conceptual skills. Top level managers need conceptual skills in order to view the organization as a whole. Conceptual skills are used in planning and dealing with ideas and abstractions. Supervisors need technical skills to manage their area of speciality. All levels of management need human skills in order to interact and communicate with other people successfully. Human Technical Conceptual Skills Top management Middle management Supervision Le vels

Skill Distribution at Various Management Levels

PRODUCTIVITY, EFFECTIVENESS AND EFFICIENCY

Productivity is the amount of output created in terms of goods produced or services rendered per unit input used.

In short,

Productivity = Output/Input

The formulation indicates that productivity can be improved: (i) by increasing output with the same input

(ii) by decreasing input but maintaining the same output

(iii) by increasing output and decreasing input to change the ratio favourably.

Peter F. Drucker, one of the most prominent writers in management, has observed: “The greatest opportunity for increasing productivity is surely to be found in knowledge work itself, and especially in management.” Another two terms which one would repeatedly come across in management are: Effectiveness and efficiency. The degree to which goals

are achieved by making the right decisions and successfully implementing them and doing the right things in the right way at the right time can be defined as Effectiveness. On the other hand, Efficiency is about using minimal resources wisely and in a cost effective way to produce the desired volume of output without any wastage of resources.

LEVELS OF MANAGEMENT

The term ‘levels of management’ refers to the arrangement of managerial positions in an organization. There is no fixed number of management levels for a particular organization. It all depends upon the size, technology and the range of production in the organization. Moreover, the number of management levels cannot be increased to an unlimited extent as (i) it makes coordination and control difficult, (ii) it increases the gap between the top management and the rank and file and (iii) it complicates the communication process.

Management levels determine the authority relationships in an organization. There are three levels of management in view of authority and responsibility relationship. They are: (i) top management, (ii) middle management and (iii) lower or supervisory management. The various positions which can be put under each level of management are shown in the figure on p. 7.

Top Management

Top Management is the head of an organization. It consists of the Board of Directors and the Chief Executive or Managing Director. In the operation of an organization, top management is the final source of authority. It establishes policies, plans and objectives. Thus, the various functions of top management may be enumerated as follows:

(i) Determining objectives of the enterprise. (ii) Preparing policies and plans for the enterprise.

(iii) Issuing instructions for the preparation of departmental budgets, schedules, procedures, and so on.

(iv) Appointing executives for the middle level. (v) Providing overall leadership.

(vi) Building and maintaining relations with the outside public. Middle Management

Middle management generally consists of heads of functional departments. It is concerned with the task of implementing the policies and plans laid down by the top management. It is also a link between

the top management and lower management. Thus, the various functions of middle management may be defined as follows:

(i) Executing plans in accordance with the policies and directives of the top management.

(ii) Selecting suitable operative and supervisory personnel. (iii) Assigning duties and responsibilities for timely execution

of plans.

(iv) Evaluating the performance of the junior managers. (v) Achieving coordination between different departments. (vi) Motivating personnel to achieve higher productivity. (vii) Collecting information on performance.

(viii) Reporting to top management.

(ix) Making recommendations to top management. Lower Management (Supervisory Level)

Supervisory management is the lowest level in the hierarchy of management. It consists of supervisors, foremen, accounts officers, sales officers and so on. They are directly concerned with the control of the performance of the operative employees. They assign specific jobs to the workers, evaluate their performance and report to the middle level management. Thus, the various functions of a supervisor may be defined as follows:

(i) To plan the activities of his section.

(ii) To issue orders and instructions to the people who work for him. Levels of Management MANAGEMENT Top management Board of directors Chairman Sectional heads Divisional heads Department heads Middle management Chief executive Supervisory management Senior supervisors Intermediate supervisors Front-line supervisors

(iii) To provide training to the workers. (iv) To solve the problems of workers.

(v) To maintain good human relations. (vi) To maintain discipline among workers.

(vii) To act as liaison between the middle management and the rank and file workers.

(viii) To send periodical performance reports to the middle management.

MANAGEMENT A SCIENCE OR AN ART

Science has been defined as a body of systematized knowledge which establishes a relationship between cause and effect. Such systematized knowledge contains concepts, hypotheses, theories, experimentation, and principles. Mere knowledge or collection of facts is not science. The knowledge so gathered should be verifiable.

The Science of Management

• Assumes that problems can be approached using rational, logical, objective and systematic ways

• Requires technical, diagnostic and decision-making skills and techniques to solve problems.

Now management has been given the shape of an organized body of knowledge. Its study helps in gaining a rational approach to the development of means for accomplishing certain goals. That is why, management is called a science. Although management has been recognized as a science, it is not like the biological or physical sciences. It falls in the area of ‘Social Sciences’ as it is a social process and deals with complex human beings. The theories and principles of management are situation bound. It may produce different results in different situations. That is why Ernest Dale has called management a ‘Soft Science’.

Art may be defined as ‘the technique of applying the principles to actual practice so as to achieve the desired results with efficiency.’ It is concerned with the application of knowledge and skills. If science is learnt then art is practised.

The Art of Management

• Decisions are made and problems are solved using a blend of intuition, experience, instinct and personal insights.

• Requires conceptual, communication, interpersonal and time-management skills to accomplish the tasks associated with managerial activities.

The principles and techniques of management, when applied in the organization to achieve its objectives, become an ‘art’. In this manner, management is also an art on account of the following reasons:

(i) It uses know-how and skills.

(ii) Its direction is towards the accomplishment of concrete results. (iii) It creates new situation needed for further movement.

(iv) It is personalized because the success of a management task is related to the personality of the manager.

From the above discussion, it is clear that management is both a science and an art. It is considered a science because it has an organized body of knowledge. It is considered an art because managing requires certain skills. Science teaches one ‘to know’ and an art ‘to do’, hence, science and art are complimentary. A manager is a scientist as well as an artist. As a scientist, he relies heavily on the existing knowledge and develops new knowledge and principles. As an artist, he sometimes wholly depends on his intuition, guesswork and judgment. Just as a doctor uses his knowledge to cure his patients, a manager should use his knowledge to solve the problems in managing men, materials, machines, methods and money.

VARIOUS WAYS OF LOOKING AT THE MANAGEMENT PROCESS There are various viewpoints, some of which are:

1. The Traditional Viewpoint of Management focuses on what managers do. It is generally accepted that they perform the following four

functions:-Planning: This involves defining organizational goals and proposing ways to reach them.

Organizing: This is the process of creating a structure of relationships within the organization that enables employees to interact with one another, to interact with managers and to carry out management’s plans and meet its goals.

Leading: This involves communicating with and motivating others to perform the tasks necessary to achieve the organization’s goals.

Controlling: This is the process by which a person consciously monitors performance and takes corrective action. In the control process, managers:

(i) Set standards of performance

(ii) Measure current performance against those standards

(iii) Take action to correct any deviation and adjust the standard if necessary.

2. The Behavioral Viewpoint of Management focuses on the role which managers play while performing the four basic managerial functions: (i) In the figurehead role, the manager represents the organization

at ceremonial and symbolic functions.

(ii) The leader role involves responsibility for directing and co-ordinating the activities of employees in order to accomplish organizational goals.

(iii) The liaison role refers to the managers dealings with people outside the organization. Such people include clients, government officials, customers and suppliers.

(iv) In the liaison role, the manager seeks support from people who can affect the organization’s success, such as the Chamber of Commerce.

3. The Systems Viewpoint of Management recognizes that an organization is an association of interrelated and interdependent parts or sub-systems. A business organization is what might be called a “system” made up of many “sub-systems”, such as employees, teams, departments, divisions, subsidiaries and who all need to work together to achieve the organization’s goals. The organization also has to interact with various external “systems”, such as suppliers, customers, shareholders and government agencies. A manager with a systems view of management will only make decisions after identifying and analyzing how other managers, departments, or customers might be affected by the decisions.

4. The Contingency Viewpoint of Management: The underlying principle of the Contingency Viewpoint of Management is that different situations require different practices. The Contingency Viewpoint really means “it all depends”. The Contingency Viewpoint recommends using the other three management viewpoints, namely the Traditional, the Behavioral and the Systems Viewpoints, independently or in combination, as necessary and appropriate, to deal with various situations. Managers are required to determine which of these three approaches is likely to be more effective than others in a given situation.

Applying the contingency viewpoint requires the development and use of conceptual skills. Managers must be able to diagnose and understand a situation thoroughly - to determine which approach is most likely to succeed - before making a decision. Thereafter, the manager must apply a variety of other managerial skills to ensure that the decision is carried out in the most effective and efficient way possible. Amongst the most important of these managerial skills are: decision-making, interpersonal skills, communication, negotiating skills and delegating.

The overall discipline of management also involves the study of the key functional areas of an organization in which the general principles of management outlined above are applied. Clearly, however, in each key functional area, specific functionally-related skills and tasks will be practised and carried out in addition.

CONDUCTING BUSINESS ETHICALLY

Many companies only demonstrate environmental responsibility when they are pushed into a corner. This is not the case with Extravagant, a 20 year old company specializing in outdoor apparel based in Mukund, Bangalore, founded by Ram Parmeshwar to provide an outlet for his handmade mountain climbing equipment. The few outdoor apparel items added to the catalogue were so well received that he started designing his own rugged innovative clothing for white water kayaking, back country skiing, climbing and sailing.

Vishwas Singh, Marketing Director of Extravagant, says, “The key or hallmark of Extravagant’s success from a product development point of view is the fact that the company has a relentless pursuit of quality in the development of it's products.” The reason for this passionate pursuit is that the people who design and develop the products, including Parmeshwar, are serious users of the products themselves and rely on them in extreme condition. This passion and pursuit of quality permeate what Extravagant does today.

The work environment of this company mirrors Parmeshwar’s relaxed philosophy. The surfboards sitting beside office desks, lunchtime volleyball matches and cafeteria fairs prove this. The progressive company was also one of the first to establish on-site child care, making employees’ children an important part of the company’s corporate culture. Extravagant’s high quality products soon made their way from mail order distribution to thousands of speciality shops around the country. This was followed by an era of style, image and brand consciousness for

the company. Interestingly, this company donates one per cent of sales or ten per cent of pretax profits, whichever amount is greater, every year, to the grassroots environmental groups throughout the country.

For almost a decade it seemed that sales were sure to continue soaring. But riding the high waves means an occasional spill. Its growth was brought to a halt by a harsh recession. One of the traditional solutions for such a crisis is to create new markets, i.e., to expand product distribution, but Parmeshwar was already appalled at what rapid growth had done to its company. Pushing more of the same was not his idea of salvation. By choosing to tighten its belt and return to its grassroots of high quality products for its loyal customers, this company became a classic example.

One of the most intriguing aspects of Extravagant is the fact that it is not solely driven by a need to row. It is much more interested in supporting a philosophy that allows the company to grow naturally. The company has certain values which it adheres to in all adverse situations. For example, it is very much concerned about its impact on the environment and so every decision process, including the product development, looks at the environmental equation.

The company tries to balance profits and environmental goals while building the best quality products for the market.

Such a firm adherence to its set organizational ethics has helped Extravagant’s sales rebound dramatically, proving that bigger is not necessarily better.

QUESTIONS

1. How does Extravagant demonstrate its sense of responsibility to its stakeholders?

2. What effect does its organizational culture have on its profits? 3. Apart from limiting growth rate what other strategies would you suggest to ensure the legacy of this company to survive for many years?

WHAT IS ETHICS?

E

thics simply involves learning and understanding what is right or wrong, and then doing the right thing. “The right thing” is not as straightforward as conveyed in a great deal of literature.

Ethicists assert that there is always a right thing to do based on moral principle, and others believe the right things to do depend on the situation-ultimately it is up to the individual.

Many philosophers consider ethics to be the ‘science of conduct’. Philosophers have been discussing ethics for ages now, since the time of Socrates and Plato. Many ethicists consider emerging ethical beliefs to be “state of the art” legal matters, i.e., what becomes an ethical guideline today is often translated to a law, regulation or rule tomorrow. Values which guide how we ought to behave are considered as moral values, e.g., values such as respect, honesty, fairness and responsibility. Statements around how these values are applied are called moral or ethical principles.

THE ETHICS IN MANAGING

The concept of ethics is applicable everywhere whether personal life or professional. Personal Ethics can be referred to as ‘the rules by which an individual lives his or her personal life’. Accounting Ethics is concerned with the code that guides the professional conduct of accountants.

The concept of Business Ethics implies different things to different people, but it generally means to knowledge of what is right or wrong at the workplace and doing what’s right; this is in regard to the effects of products/services and in relationships with stakeholders. Attention

Management Ethics

and Social Responsibility

CHAPTER

2

2