Management Functions and Science

Management Functions

• Planning involves setting goals and objectives for the future.
• Organizing is the process of arranging resources, tasks, and people to achieve the set goals.
• Leading inspires and guides people to work towards the common goal.
• Controlling involves monitoring progress, making adjustments, and ensuring everything stays on track.

Management as a Science

• Cause & Effect Relationship: Changes in one variable can be observed to affect another.
• Test of Validity: Observations and conclusions can be tested and validated.
• Experimentation & Observation: Managers can analyze data, conduct experiments, and make informed decisions based on evidence.

Coordination

• Early Beginning: Coordination should start early in the planning process and involve all stakeholders from the beginning.
• Continuity: Consistent communication and ongoing cooperation are essential for smooth coordination.
• Self-coordination: Individuals and teams should be empowered to work together and take ownership of their roles.

Leadership

• A manager's leadership style is dependent on the situation at hand.

Agency Theory

• Suggests that managers, especially in large public companies, may have different goals than shareholders.
• Profit Maximization is one of the main objectives of the shareholder theory.

Agency Problem

• When the goals of managers (agents) and those of the shareholders (principals) do not align.
• Example: Managers maximizing their personal gain at the expense of shareholder value.

Reducing Agency Problems

• Stock Options: Giving managers stock options can align their interests with the shareholders by rewarding them when the company performs well.

Stewardship Theory

• Managers who are stewards of the company will act in the best interests of all stakeholders, prioritizing the long-term success of the company.
• They will try to protect and maximize shareholder wealth and stakeholder wealth.

Key Contributors to Agency Theory

• Jensen and Meckling: Identified the principle-agent problem and how to mitigate it.
• Alchian and Demsetz: Contributed to the theory by explaining the separation of ownership and control in corporations.

Explore the fundamental aspects of management functions such as planning, organizing, leading, and controlling. Understand management as a science through cause and effect relationships, validity tests, and the importance of early coordination among stakeholders. Assess your knowledge with this comprehensive quiz.