Basics of Business Administration Aswan 2024-2025 PDF

Professor Dr. Alaa Tag Eldin Mohamed Business Administration Department Faculty of Commerce 2024 1 2 Preface This textbook is prepared to cover the main aspects of management to introduce the reader to the importance and functions of management in organizations. It is organized in six chapters. 3 Table of Contents 5 ---------------------------- -------------------------------- Chapter One 5 ---------------------------------------- Introduction To Management 43 --------------------- -------------------------------- Planning Function 72 ------------------------- -------------------------------- Chapter Three 72 ------------------ -------------------------------- Organizing Function 97 --------------------------- -------------------------------- Chapter Four 97 -------------------- -------------------------------- Directing Function 118 ------------------------- -------------------------------- Chapter Five 118 --------------- -------------------------------- Controlling Function 133 -------------------------- -------------------------------- Chapter Six 133 -------------------- -------------------------------- Decision Making Table of Figures 15............................................. Functions of management1 Figure 18.......... Figure 2 Skills distribution at various management levels 27.................................................. Levels of management3 Figure 50............................................................. Figure 5 SWOT Analysis 57......................................................... Figure 6 Strategy Hierarchy 58........................................ Figure 7 Porter Competition Strategies 84....................................................... Figure 8 Functional Structure 85........................................................ Figure 9 Divisional structure 86............................................................Figure 10 Matrix structure 88.......................... Figure 11 methods for grouping work activities 104.............................................Figure 12 Communication Process 4 Chapter One Introduction To Management LEARNING OBJECTIVE Define management as it pertains to business functioning and organizational activities Outline the theoretical scope and basic function and managerial responsibilities within a company. Identify the main skills needed by managers. Outline the ten management roles under their three categorical headings, as devised by McGill University professor Henry Mintzberg. To define the levels of management. To compare the levels of management. To define the management functions. To link between managerial levels and functions KEY POINTS Management comprises planning, organizing, staffing, leading/directing, and controlling an organization (a group of one or more 5 people or entities) or effort for the purpose of accomplishing a goal. In for-profit work, the primary function of management is meeting the needs of various stakeholders of the organization, such as customers, debtors, and owners. In the public sector of countries that are representative democracies, voters elect politicians to public office, who then hire managers and administrators to oversee the everyday responsibilities that support those elected to office. Since an organization can be viewed as a type of system, managers provide the necessary human action, so the organizational system produces planned outcomes or goals desired by the various stakeholders. Mintzberg characterizes management using three categories and ten roles, each of which exhibits critical managerial skill sets useful for business leaders in a variety of contexts. Interpersonal roles include: figurehead, leader, and liaison. Informational roles include: mentor, disseminator, and spokesman. Decisional roles include: entrepreneur, disturbance handler, resource allocator, and negotiator. 6 It is important to recognize that no single manager can be all things to all people at once. Good management requires assessing which role is appropriate and determining if new talent is required to complement a skill set. A manager needs to be a good leader. While a manager organizes and plans, s/he must also inspire employees with a vision for the organization. A manager needs to be an effective negotiator. When organizations are developing or undergoing change, the manager is often required to negotiate with competitors, contractors, suppliers, and employees. A manager must be a good figurehead who reinforces the mission and vision of an organization to employees, customers, and other stakeholders. A manager needs to be an effective communicator and liaison between employees, customers, and other managers of the organization. An organization can have many different managers, across a variety of titles, authority levels, and levels of the management hierarchy that we illustrated above. To properly assign roles and responsibilities to all managerial positions, it is important to recognize the key differences between low- level, middle-level, and top-level management. 7 Top-level managers are responsible for controlling and overseeing the entire organization. Middle-level managers are responsible for executing organizational plans which comply with the company’s policies. They act as an intermediary between top-level and low-level management. Low-level managers focus on the execution of tasks and deliverables, serving as role models for the employees they supervise. Overview of Management Management is the act of engaging with an organization's human talent and its resources to accomplish desired goals and objectives efficiently and effectively. Another perspective regards management as equivalent to "business administration" and thus excludes management in places outside commerce, for example in charities and in the public sector. More realistically, however, every organization must manage its work, people, processes, technology, etc. to maximize effectiveness and accomplish its goals. 8 Management comprises planning, organizing, staffing, leading, directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. One of the most important duties for a manager is effectively using an organization's resources. This duty involves deploying and manipulating human resources (or human capital), as well as efficiently allocating the organization's financial, technological, and natural resources. Since organizations can be viewed as systems, management can also be defined as human action, such as product design, that enables the system to produce useful outcomes. This view suggests that we must manage ourselves as a prerequisite to attempting to manage others. Theoretical Scope At first, management may be considered as a type of function, one which measures financial metrics, adjusts strategic plans, and meets organizational goals. This applies even in situations where planning does not take place. From this perspective, Henri Fayol (1841–1925) considers management to consist of six functions: forecasting, planning, organizing, commanding, coordinating, and controlling. He was one of the most influential contributors to modern concepts of management. 9 In another way of thinking, Mary Parker Follett (1868–1933) defined management as "the art of getting things done through people." She described management as philosophy. Some people, however, find this definition useful but far too narrow. The phrase "management is what managers do" occurs widely, suggesting the difficulty of defining management, the shifting nature of definitions, and the connection of managerial practices with the existence of a managerial cadre or class. Another perspective regards management as equivalent to "business administration" and thus excludes management in places outside commerce, for example in charities and in the public sector. More realistically, however, every organization must manage its work, people, processes, technology, etc. to maximize effectiveness and accomplish its goals. What is the nature of managerial Work? In the for-profit environment, management is tasked primarily with meeting the needs of a range of stakeholders. This typically involves making a profit (for the shareholders), creating valued products at a reasonable cost (for customers), and providing rewarding employment opportunities (for employees). Non-profit management has the added importance of attracting and retaining donors. 10 In most models of management/governance, shareholders vote for the board of directors, and the board then hires senior management. Some organizations have experimented with other methods (such as employee-voting models) of selecting or reviewing managers, but this occurs only very rarely. In the public sector of countries that are representative democracies, voters elect politicians to public office. Such politicians hire managers and administrators. Several historical shifts in management have occurred throughout the ages. Towards the end of the 20th century, business management came to consist of six different branches, namely: Human resource management Operations management or production management Strategic management Marketing management Purchasing and supply chain management Financial management Information technology management (responsible for the management information systems) What are the Managers’ responsibilities? A manager’s success in becoming one of the greatest managers ever depends on understanding the managerial duties and 11 responsibilities and ensure the key managerial activities are done well and done right. It is vital for the manager to have an in depth understanding of the managerial duties and responsibilities in the scope of the Manager Job. Given the fact that every organization philosophy is not the same, the nature and kind of people are not the same, it is even more challenging to identify those key common activities of a manager’s duties that hold credible in every organization. The modern manager coaches employees of the organization to develop teamwork, which effectively fulfills their needs and achieves organizational objectives. The traditional autocratic organization with its hierarchical system of management and an overbearing "boss" that forces performance out of people is no longer needed. The modern manager provides an atmosphere of empowerment by letting workers make decisions and inspiring people to increase productivity. What a manager does a) Motivates and works with others, helping them through coaching conversations to recognize approaches to take/identify solutions 12 b) Keeps their staff informed, gives explanations and reasons for actions/changes and asks for feedback and ideas sets priorities with staff, ensuring that they are clear on their responsibilities and the authority that they have to make decisions works not only with their employees, but also with peers and superiors, other employees and customers. c) Looks outwards, considering the needs of the wider team, the department. d) Creates an environment where team members are listened to and respected and deals with conflict when necessary. e) Create a healthy and safe environment for their team. What a manager does not do a) Knows all the answers (and should not feel that they have to!) b) Uses information as power (there may be occasions where discretion is necessary, but this power should not be abused) c) Monitors each action staff take and ‘micro manage’ work in isolation. d) Takes a narrow approach which means that they and their team members cannot understand the wider ‘fit’ across the organization. e) Avoids issues in the team, in the hope that they will just go away. 13 f) Ignores or take unnecessary risks which endanger the health and safety of the team. What are the Basic Functions of management? Management operates through various functions, such as planning, organizing, staffing, leading/directing, controlling/monitoring, and motivating. Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next five years, etc.) and generating plans for action. Organizing: Implementing a pattern of relationships among workers and making optimum use of the resources required to enable the successful carrying out of plans. Staffing: Job analysis, recruitment, and hiring of people with the necessary skills for appropriate jobs. Providing or facilitating ongoing training, if necessary, to keep skills current. Leading/directing: Determining what needs to be done in a situation and getting people to do it. Controlling/monitoring: Checking current outcomes against forecast plans and adjusting when necessary, so that goals are achieved. 14 Motivating: Motivation is a basic function of management because without motivation, employees may feel disconnected from their work and the organization, which can lead to ineffective performance. If managers do not motivate their employees, they may not feel their work is contributing to the overall goals of the organization (which are usually set by top-level management). Hence managers create and maintain an internal environment, commonly called the organization, so that others can work efficiently in it. Common manager's job consists of planning, organizing, directing, and controlling the resources of the FIGURE 1 FUNCTIONS OF MANAGEMENT organization. These resources include people, jobs or positions, technology, facilities and equipment, materials and supplies, information, and money. 15 Planning involves devising a systematic process for attaining the goals of the organization. It prepares the organization for the future. Organizing involves arranging the necessary resources to carry out the plan. It is the process of creating structure, establishing relationships, and allocating resources to accomplish the goals of the organization. Directing involves the guiding, leading, and overseeing of employees to achieve organizational goals. Controlling involves verifying that actual performance matches the plan. If performance results do not match the pan, corrective action is taken. Managerial Skills needed by Managers Classical management theory structures organizational management into tiers, like a pyramid. At the base of the pyramid are supervisors, or lower-level managers, working directly with workers to coordinate the daily tasks of the organization. In the middle are middle managers. They oversee longer-term goals with the supervisors that align with strategic objectives of the organization. Who sets these strategic objectives? That's right; it's the folks at the tip of the pyramid, the top-level managers. 16 Regardless of the level of management, theorist and psychologist Daniel Katz identified three skills common to every manager. These are conceptual skills, human skills, and technical skills. Conceptual skills allow a manager to visualize the entire organization and work with ideas and the relationships between abstract concepts. Human skills, also called human relation skills, require communication and attention to relationships with others. Technical skills are needed to actually get the work done; they are the techniques, practices, tools, and processes needed by front-line employees in the manager's functional area. While all managers have these skills, the ratio of each skill to the others varies based on the industry and level of management. Do Management Skills differ by Management Level? 1. Top managers rely mostly on conceptual skills. They need conceptual skills in order to view the organization as a whole. Conceptual skills are used in planning and dealing with ideas and abstractions. They use significant human skills as well. Remember, though, they need technical skills to set a strategy that makes sense for the organization. Managers need technical skills to manage 17 their area of specialty. Top managers have the most discretion, or choice, in how they exercise any of these skills. FIGURE 2 SKILLS DISTRIBUTION AT VARIOUS MANAGEMENT LEVELS 2. Human skills are needed by most middle managers because middle managers need to communicate up, down, and across the organization in order to do their work well, but they also need conceptual skills to set the goals and achieve strategic objectives. They are expected to have more technical skill and less conceptual skill than the managers above them because they are 'closer to the ground.' 18 3. Direct supervisors do not spend as much time doing work that requires conceptual skills - the day-to-day operations of the organization are more task-minded than strategically oriented. Instead, they are the 'closest to the ground,' so they need more technical skills as the most hands-on and visible managers. They do need human relations skills. The Roles of the Managers Management is incorporated into every aspect of an organization and involves different roles and responsibilities. A manager's job is never static; it is always dynamic. At any given time, a manager may carry out some combination of these roles to varying degrees, from none of the time to 100 percent of the time. Throughout an individual's working life, a person may hold various management positions that call upon different roles. No one person can be all things to all people. While these ten roles are highly useful in framing organizational leadership, to expect one person to fill each role in a large organization is impractical. Instead, astute hiring managers will hire people with one or two specific roles in mind, thereby creating a team of managers capable of handling the wide variety of challenges in the business world today. 19 Managers play an integral part in an organization's growth and evolution. Organizational growth is a complex process, particularly in larger organizations with more inertia. Organizations are essentially a compilation of moving parts: motivating each individual, with her/his unique talents and motivation, to change direction simultaneously (and in the same direction) is extremely challenging and requires highly effective managers with highly developed communication skills. Managers must do more than accept change: they must facilitate the evolutionary process. In these situations, organizations need a manager who can fulfill several roles, including leader, negotiator, figurehead, and communicator. In each of these roles, the manager's goal is to help employees through the change with the least possible number of conflicts and issues. Henry Mintzberg (1973) has identified ten roles common to the work of all managers. The ten roles are divided into three groups: Interpersonal roles Informational roles Decisional roles The performance of managerial roles and the requirements of these roles can be played at different times by the same manager and to different degrees depending on the level and function of 20 management. The ten roles are described individually, but they form an integrated whole. Each of the three categories embraces the different roles. 1. The interpersonal roles The interpersonal roles ensure that information is provided. The three interpersonal roles are primarily concerned with interpersonal relationships. In the figurehead role, symbolic head; the manager performs a number of routine duties of a legal or social nature. He/She 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 manger interacts with peers and people outside the organization. The top level manager uses the liaison role to gain favors and information, while the supervisor uses it to maintain the routine flow of work. The manager maintains a self- developed network of outside contacts and informers who provide favors and information. 21 The leader role defines the relationships between the manger and employees. He motivates and activates subordinates; performs staffing, training, and associated duties. Table 1 The interpersonal roles of managers Role Activity Example Perform social and legal Greet visitors, sign legal Figurehead duties, act as symbolic documents, attend ribbon leader cutting ceremonies, host receptions, etc. Direct and motivate Includes almost all Leader subordinates, select and interactions with train employees subordinates Establish and maintain Business correspondence, contacts within and participation in meetings Liaison outside the organization with representatives of other divisions or organizations. 2. The informational roles The informational roles link all managerial work together. The direct relationships with people in the interpersonal roles place the manager in a unique position to get information. Thus, the three 22 informational roles are primarily concerned with the information aspects of managerial work. Mentor: seeks and receives a wide variety of special information (much of it current) to develop a thorough understanding of the organization and environment; emerges as the nerve center of internal and external information for the organization. Disseminator: transmits information received from outsiders or from other subordinates to members of the organization. Some information is factual; some involves interpretation and integration of diverse value positions of organizational influences. Disseminating what is of value, and how, is a critical informational role. The top-level manager receives and transmits more information from people outside the organization than the supervisor. Spokesman: transmits information (plans, policies, results, etc.) within and outside of the organization; serves as an expert on the organization's industry. 23 Table 2 The informational roles of managers Role Activity Examples Seek and acquire Scan/read trade work-related press, periodicals, reports; Monitor information attend seminars and training; maintain personal contacts Communicate/ Send memos and reports; Disseminator disseminate inform staffers and information to others subordinates of decisions within the organization Communicate/transmit Pass on memos, reports and information to informational materials; Spokesperson outsiders participate in conferences/meetings and report progress 3. The decisional roles The decisional roles make significant use of the information. The unique access to information places the manager at the center of organizational decision making. There are four decisional roles: Entrepreneur: the manager initiates change, searches the organization and its environment and initiates improvement 24 projects to bring about change; supervises design of certain projects as well. In the entrepreneur role, Disturbance Handler: The manager takes corrective action when the organization faces important, unexpected disturbances. He or she deals with threats to the organization. Resource Allocator: the manager chooses where the organization will extend its efforts; allocates the organization's resources; makes or approves of all significant organizational decisions. Negotiator: represents the organization at major negotiations. Table 3 The decisional roles of managers Role Activity Example Entreprene Identify new ideas Implement innovations; ur and initiate Plan for the future improvement projects Deals with disputes Settle conflicts between Disturbance Handler or problems and takes subordinates; Choose corrective action strategic alternatives; Overcome crisis situations Allocator Resource Decide where to Draft and approve of plans, apply resources schedules, budgets; Set priorities 25 Defends business Participates in and directs Negotiator interests negotiations within team, department, and 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. In the real world, these roles overlap, and a manager must learn to balance them in order to manage effectively. While a manager’s work can be analyzed by these individual roles, in practice they are intermixed and interdependent. In order to perform the functions of management and to assume multiple roles, managers must be skilled. Managerial Levels All businesses are comprised of a vast array of different managerial tasks. When these are coordinated properly, and there 26 is a strong hierarchal manager system in place, an organization can be extremely efficient in creating value through the production of their products, services and overall workflow. Generally, there are Three Levels of Management: FIGURE 3 LEVELS OF MANAGEMENT 1. Administrative or Top Level of Management 2. Executive or Middle Level of Management. 3. Supervisory or Lower Level of Management. At each level, individual manager must carry out different roles and functions. 27 Top Level of Management The Top Level Management consists of the Board of Directors (BOD) and the Chief Executive Officer (CEO). The Chief Executive Officer is also called General Manager (GM) or Managing Director (MD) or President. The Board of Directors are the representatives of the Shareholders, i.e. they are selected by the Shareholders of the company. Similarly, the Chief Executive Officer is selected by the Board of Directors of an organization. The main role of the top-level management is summarized as follows: - a. The top-level management determines the objectives, policies and plans of the organization. b. They mobilize (assemble and bring together) available resources. c. The top-level management does mostly the work of thinking, planning and deciding. Therefore, they are also called as the Administrators and the Brain of the organization. d. They spend more time in planning and organizing. e. They prepare long-term plans of the organizing which are generally made for 5 to 20 years. f. The top-level management has maximum authority and responsibility. They are the top or final authority in the 28 organizing. They are directly responsible to the Shareholders, Government, and the General Public. The success or failure of the organizing largely depends on their efficiency and decision making. g. They require more conceptual skills and less technical Skills. Middle Level of Management The Middle Level Management consists of the Departmental Heads (HOD), Branch Managers, and the Junior Executives. The Departmental heads are Finance Managers, Purchase Managers, etc. The Branch Managers are the head of a branch or local unit. The Junior Executives are Assistant Finance Managers, Assistant Purchase Managers, etc. The Middle level Management is selected by the Top-Level Management. The middle level management emphasize more on the following tasks: - a. Middle level management gives recommendations (advice) to the top-level management. b. It executes (implements) the policies and plans which are made by the top-level management. c. It co-ordinate the activities of all the departments. d. They also have to communicate with the top-level Management and the lower-level management. 29 e. They spend more time in coordinating and communicating. f. They prepare medium plans of their departments which are generally made for 1 to 5 years. g. The middle Level Management has limited authority and responsibility. They are intermediary between top and lower management. They are directly responsible to the chief executive officer and board of directors. h. Require more managerial and technical skills and less conceptual skills. Lower Level of Management The lower-level management consists of the Foremen and the Supervisors. They are selected by the middle level management. It is also called Operative/Supervisory level or First Line of Management. The lower-level management performs following activities: a. Lower-level management directs the workers / employees. b. They develop morale in the workers. c. It maintains a link between workers and the middle level management. d. The lower-level management informs the workers about the decisions which are taken by the management. They also 30 inform the management about the performance, difficulties, feelings, demands, etc., of the workers. e. They spend more time in directing and controlling. f. The lower-level managers make daily, weekly and monthly plans. g. They have limited authority but important responsibility of getting the work done from the workers. h. They regularly report and are directly responsible to the middle level management. i. Along with the experience and basic management skills, they also require more technical and communication skills. Stakeholders of organizations: Who Are Stakeholders? A modern definition of a stakeholder is any group which has an interest in, involvement with, dependence on, contribution to, or is affected by, the organization. Individuals are stakeholders too of course, but for practical reasons most organizations will necessarily view stakeholders as groups, and for the purposes of this explanation the term 'stakeholder' here also means a stakeholder group. A stakeholder is any group of people who could lose or gain something because of the actions of the organization. This is 31 especially relevant in the context of ethics, corporate responsibility, sustainability, etc. Stakeholders can be found in any or all the following groups depending on the type of organization. Below are examples of stakeholder groups, including conventional 'investor' stakeholders, and more modern stakeholder ideas. Remember, a stakeholder is any group that is affected in one way or another by the activities of an organization. Shareholders Trustees Guarantors Investors Funding bodies Distribution partners Marketing partners Licensors Licensees Approving bodies Regulatory authorities Endorsers and 'recommenders' Advisors and consultants (yes, these people have something at stake too) Employees - staff, managers, directors, non-executive directors 32 Customers Suppliers The local population (community) The regional general public National public International communities Major Attributes to Consider in Stakeholder Analysis Four major attributes are important for Stakeholder Analysis: 1. The stakeholders’ position on the reform issue, 2. The level of influence (power) they hold, 3. The level of interest they have in the specific reform, 4. The group/coalition to which they belong or can reasonably be associated with. These attributes are identified through various data collection methods, including interviews with country experts knowledgeable about stakeholders or with the actual stakeholders directly. The level of influence depends on the quantity and type of resources and power the stakeholder can marshal to promote its position on the reform. The level of interest or salience is the priority and importance the stakeholder attaches to the reform area. 33 Stakeholders Analysis therefore provides a detailed understanding of the political, economic, and social impact of reform on interested groups, the hierarchy of authority and power among different groups and the actual perceptions of the reform among different groups, all of which are important for reform advocates to consider. 34 Questions Write short notes: 1. What is a business Organization? 2. Purpose of Firms? 3. The focus of management. 4. An effective manager is supposed to carry out four activities in any organization while handling people as team members. 5. Managers' Function. 6. Management Levels. 7. Managerial roles. 8. Managerial skills. 9. Relationship between managerial skills and management levels. 10.The relationship between managerial skills and management levels 11.The interpersonal roles. 12.The informational roles. 13.The decisional roles. 14.Nonprofit-Specific Management Skills. 35 Decide if true or false each of the following. 1. Business Organization can range in size from two people to ten thousand. 2. Profitability should be assumed to be dominant Objectives of all Organizations. 3. Profitability is the Overriding Objective for organizations. 4. Shareholder’s objective is to maximize the value of their holdings. 5. Profitability, Growth, Shareholder objectives are interests of customer. 6. Shareholders are the owners of commercial Organization. 7. Stakeholders affect and affected by Policies, decision or action within a particular system. 8. The President or CEO is the same as top management. 9. Supervisor is the name for a first-line manager. 10.The Supervisor is Located at the top of the managerial hierarchy. 11.The Vice President is Located at the bottom of the managerial hierarchy. 12.Supervisory management is less focused and more long-term than higher management roles. 13.The Supervisor’s monitor role involves receiving and collecting information. 14.Initiating Organizational change refers to a manager’s figurehead role. 36 15.In disseminating Organizational information, the Supervisor is acting in the role of spokesperson. 16.The relationship between the manager and employees refers to the leader role. 17.Conceptual skills are used by most Supervisors. 18. Supervisors use human skills more than top managers. 19.Interpersonal relations are a type of human skills. 20.Managerial skills are classified as Conceptual, human and technical. 21. Technical skills are used most by middle managers. 22.The ability to effectively run a machine is classified as a technical skill. 23.Working effectively with a team to resolve conflicts describes a human skill. 24.Managerial skills are classified as conceptual, informational, and decisional. 25.All levels of management need the same level of technical skills to manage their area of specialty. 26.Top level managers spend more time on short-term plans. 27.A manager’s figurehead role is related to the informational role category. 28.A manager’s decisional role involves the giving, receiving, and analyzing of information that is available to him. 29.The managerial skills are classified as conceptual, human, and technical. 37 30.There are differences across the management levels as to what extent the types of functions each does. 31.At top level management, the greatest amount of time is spent on directing and controlling. 32.Conceptual skills are concerned with manager’s ability to apply specific methods and techniques. 33.Supervisory management is less focused and more long-term than higher management roles. 34.All levels of management need the same level of technical skills to manage their area of specialty. Choose the right answer: 1. How would you classify a manager that's in charge of a department? a. Top-Level Manager b. Operational Manager c. Middle Manager d. Low-Level Manager 2. Name the function of management that involves monitoring how the business is performing. a. Leading b. Controlling c. Planning d. Organizing 3. Which of the following is NOT part of Top Level Management? a. President b. Chief Executive Officer c. Chief financial officer 38 d. Supervisor 4. Which of the following is responsible for tactical planning ? a. Top Level Management b. First Line/ Supervisory Management c. Sub Level Management d. Middle Level Management 5. What are the three levels of Management? a. Bottom Level, Low Level and Top/Senior b. Bottom level, middle level, top level c. Middle Managers, Top Managers and Senior Executives d. Operational, Middle Level and Top Level 35.For his fast-food restaurant, Salem recruits labor with different skills for different jobs. This approach is characteristic of a) rationality c) division of labor b) impersonality d) hierarchical structure. 36.The pioneer of scientific management was a) Elton Mayo c) Henri Fayol b) Frederick Taylor d) Mary Parket Follett 37.Which of the following sets of managerial roles classify Mintzberg's ten most common roles of managers? a) Controlling, planning, and directing b) Entrepreneurial, decisional, and logistical c) Figurehead, monitor, and spokesperson d) Interpersonal, informational, and decisional. 39 38. Susan periodically takes clients to lunch to reward them for being good customers. Her action exhibits what role of management? a) Decisional c) Figurehead b) Entrepreneur d) Leader 39.Corporate CEO Lew Williams had a vision that helped rally employees. His vision represented what role of management? a) Leader c) Figurehead b) Futurist d) Top manager 40.Dina manages a college bookstore. She feels that her greatest problem is related to employee motivation. This problem is related to her role as a …… a) figurehead c) monitor b) negotiator d) leader 41.Ahmed promotes team decision making and welcomes employee free expression without fear of embarrassment. What skill is he primarily using? a) Conceptual c) Interpersonal b) Functional d) Technical 42.Technical skills involve the ability to a) solve complex problems b) lead, motivate, and work with others. c) apply scientific methods, processes, and techniques. d) understand the interrelated parts of the organization. 43.Conceptual skills are concerned with a manager's ability to a) apply specific methods and techniques. b) view the organization as a whole. 40 c) lead and motivate employees. d) send and receive information. 44.The characteristics of a work group, organization, specific market, or national population is called a) culture c) collectivism b) individualism d) demographics 45.At top level management, the greatest amount of time managers spend is on planning and organizing. A) True B) False 46.All levels of management need different levels of technical skills to manage their area of specialty. A) True B) False 47.The misfortune of competitors, who are not performing well, can be considered as a threat to the organization. A) True B) False 48.Suppliers are classified as part of the external environment of an organization. A) True B) False 49.Ahmed is a manager who communicates freely with employees and welcomes employee free expression without fear of embarrassment. Ahmed is primarily using conceptual skills. A) True B) False 50.When a manager works effectively with employees to resolve conflicts in the organization describes. a) human skill b) technical skill c) conceptual skill d) all the above e) none of the above 41 51.Conceptual skills involve the ability to. a) Lead employees b) Motivate, and work with other. c) Apply techniques. d) Understand the interrelated parts of the organization. e) none of the above 52.An effective manager is supposed to carry out all activities as listed below in any organization while handling any amount of people as team members as a role of Catalyst except ……….. a. Selection of the person b. Motivate the team members c. Develop and nurture the team members d. Monitors each action staff take and ‘micro manage’ work in isolation. e. none of the above 53.When managers set a mission statement for organization, they are mainly engaged in what managerial function? a) planning b) organizing c) Directing d) controlling e) staffing 54. When managers schedule the work of employees and identifying needs for staff and resources to meet future changes, they practice……… a) Planning b) organizing c) Directing d) Controlling e) staffing 55.When a manager sets a goal for each division of the organization to be in the top two in the industry, he or she is mainly practicing what managerial function. a. TQM b. planning c. organizing d. controlling e. controlling 42 Chapter Two Planning Function OBJECTIVES Recognize the relationship between strategy and a company's mission and overall vision Understand the implications of the three key questions that define strategic planning. Define planning, strategic planning and strategic management. Summarize the steps of strategic planning Differentiate between types of strategies. Identify the critical benefits derived through utilizing business and marketing plans in strategic management KEY POINTS Strategic management seeks to coordinate and integrate the activities of the various functional areas of a business to achieve long-term organizational objectives. The initial task of strategic management is typically the compilation and dissemination of the vision and 43 the mission statement of organization. This outlines the purpose of an organization. Strategies are usually derived by the top-level management of the organization and presented to the board of directors in order to ensure they are in line with the expectations of the stakeholders. The implications of the selected strategy are highly important. These are illustrated through achieving high levels of strategic alignment and consistency relative to both the external and internal environment. All strategic planning deals with at least one of three key questions: First, "What do we do?" Second, "For whom do we do it?" and third, "How do we excel?" In business strategic planning, the third question refers more to defeating or avoiding competition. Planning is a management process concerned with defining goals for a company's future direction and determining the resources required to achieve those goals. Managers may develop a variety of plans (business plan, marketing plan, etc.) during the planning process. Achieving a vision requires coordinated efforts that adhere to a broader organizational plan. This is enabled through consistent strategies that are supported by staff at all levels. 44 Planning enables increased focus on, and coordinated action toward, competitive strategies, while minimizing wasted time and ensuring there are benchmarks for the control process. Planning typically offers a unique opportunity for information-rich and productively focused discussions between the various managers involved. The plan and the discussions that arise from it provide an agreed context for subsequent management activities. Planning Planning is the process of thinking about and organizing the activities required to achieve a desired goal. Planning involves the creation and maintenance of organizational operations. This thought processes are essential to the refinement of objectives and their integration with other plans. Planning combines forecasting of developments with preparing scenarios for how to react to those developments. An important, although often ignored, aspect of planning is the relationship it holds with forecasting. Forecasting can be described as predicting what the future will look like, whereas planning predicts what the future should look like. 45 Planning is also a management process, concerned with defining goals for a company's future direction and determining the missions and resources to achieve those targets. To meet objectives, managers may develop plans, such as a business plan or a marketing plan. The purpose may be achievement of certain goals or targets. Planning revolves largely around identifying the resources available for a given project and utilizing optimally to achieve best scenario outcomes. Strategy A strategy is a plan of action designed to achieve a specific goal or series of goals within an organizational framework. Strategy involves the action plan of a company for building competitive advantage and increasing its triple bottom line over the long-term. The action plan relates to achieving the economic, social, and environmental performance objectives; in essence, it helps bridge the gap between the long-term vision and short-term decisions. Strategic management Strategic management is critical to the development and expansion of all organizations. It represents the science of crafting and formulating short-term and long-term initiatives directed at optimally achieving organizational objectives. Strategy is inherently linked to a company's mission statement and vision; these elements constitute the core concepts that allow a company 46 to execute its goals. The company strategy must constantly be edited and improved to move in conjunction with the demands of the external environment. Strategic management is the process of building capabilities that allow a firm to create value for customers, shareholders, and society while operating in competitive markets (Nag, Hambrick & Chen 2006). It entails the analysis of internal and external environments of firms to maximize the use of resources in relation to objectives (Bracker 1980). Strategic management can depend upon the size of an organization and the tendency to change the organization's business environment. As an example, let's take a company that wants to expand its current operations to producing cars. The company's strategy may involve analyzing the cars along with other businesses producing cars. Through this analysis, the company can develop a goal for how to enter the market while differentiating from competitors' products. It could then establish a plan to determine if the approach is successful. The company then implement and monitor the plan. Strategic planning Strategic planning is an organization's process of defining its strategy or direction and making decisions about allocating its resources to pursue this strategy. To determine the direction of the organization, it is necessary to understand its current position and 47 the possible avenues through which it can pursue a particular course of action. Generally, strategic planning deals with at least one of three key questions: What do we do? For whom do we do it? How do we excel? The tasks of the strategic planning process include: 1. Define the vision, mission, and values. 2. Conduct a situation or SWOT analysis by assessing strengths and weaknesses and identifying opportunities and threats. 3. Set goals and objectives. 4. Develop related strategies (tactical and operational). 5. Monitor the plan. 1. Define the vision, mission, and values. The key components of strategic planning include an understanding of the firm's vision, mission, values, and strategies. (Often a "vision statement" and a "mission statement" may encapsulate the vision and mission ) 1. Vision: This outlines what the organization wants to be or how it wants the world in which it operates to be (an "idealized" view of the world). It is a long-term view and concentrates on the future. It can be emotive and is a source 48 of inspiration. For example, a charity working with the poor might have a vision statement that reads "A World without Poverty." 2. Mission: It defines the fundamental purpose of an organization or an enterprise, briefly describing why it exists and what it does to achieve its vision. For example, the charity above might have a mission statement as "providing jobs for the homeless and unemployed." 3. Values: These are beliefs that are shared among the stakeholders of an organization. Values drive an organization's culture and priorities and provide a framework in which decisions are made. For example, "knowledge and skills are the keys to success," or "give a man bread and feed him for a day but teach him to farm and feed him for life." These example values place the priorities of self-sufficiency over shelter. 2. Conduct a situation or SWOT analysis: A SWOT analysis allows businesses to assess internal strengths and weaknesses in relation to external opportunities and threats. 49 FIGURE 4 SWOT ANALYSIS A method of analyzing the environment in which businesses operate is referred to as a context analysis. One of the most recognized of these is the SWOT (strengths, weaknesses, opportunities, and threats) analysis. Performing a SWOT analysis allows a business to gain insights into its internal strengths and weaknesses and to relate these insights to the external opportunities and threats posed by the marketplace in which the business operates. The main goal of a context analysis, SWOT or otherwise, is to analyze the business environment in order to develop a strategic plan. Components of SWOT Strengths: internal characteristics of the business that give it an advantage over competitors 50 Weaknesses: internal characteristics that place the business at a disadvantage against competitors Opportunities: external chances to improve performance in the overall business environment Threats: external elements in the environment that could cause trouble for the business 3. Set goals and objectives. Strategic goals and objectives are developed to bridge the gap between current capability and the mission. They are aligned with the mission and form the basis for the action plans. A goal is an end that the organization strives to attain. An objective is the object or aim of an action. It implies an explicit direction for the action to take and a specific quality of work to be accomplished within a given period of time. Objectives are the driver of planning processes. It is imperative that top managers safeguard the intention of their goals to facilitate middle and lower management's effective translation and implementation of them. Objectives guide managerial activities such as budgeting, the development of action plans, staffing, and 51 the purchasing of equipment. The organization's success ultimately depends on the combined outcomes of its objectives. Objectives reflect the desired outcomes for individuals, groups and organizations. They provide direction for decision- making and a criterion against which outcomes are measured. Thus, objectives are the foundation of planning. Objectives are sometimes referred to as performance goals. Generally, organizations have long-term objectives for such factors as return on investment, earnings per share, or size. Furthermore, they set minimum acceptable standards or common-sense minimums. In addition, certain limitations, either explicit or implicit, such as "must provide jobs for existing employees" may exist. Objectives elaborate on the mission statement and constitute a specific set of policy, programmatic, or management objectives for the programs and operations covered in the strategic plan. They are expressed in a manner that allows a future assessment of whether an objective has been achieved. Writing Objectives 52 Most managers set objectives, but not with equal skill. Few, who do not correctly write objectives, will reap MBO's full benefits. An objective is simply a statement of what is to be done and should be stated in terms of results. A mnemonic aid to write objectives is SMART (Specific, Measurable, Attainable, Result-oriented, Time- limited). Specific An objective must be specific with a single key result. If more than one result is to be accomplished, more than one objective should be written. Just knowing what is to be accomplished is a big step toward achieving it. What is important to you? Once you clarify what you want to achieve, your attention will be focused on the objective that you deliberately set. You will be doing something important to you. Measurable An objective must be measurable. Only an objective that affects behavior in a measurable way can be optimally effective. If possible, state the objective as a quantity. Some objectives are more difficult to measure than others are. However, difficulty does not mean that they cannot be measured. 53 Treatment of salespeople might be measured by looking at the absenteeism and turnover rates among the sales force. Also, salespeople could be asked to fill out a behavioral questionnaire anonymously giving their observations of the supervision they receive. Customer service could be measured by such indices as the number of complaints received, by the number of customers lost, and by customer interviews or responses to questionnaires. Development of subordinates could be measured by determining the number of tasks the subordinate has mastered. Cooperation with other functions could be measured by length of delay in providing requested information, or by peer ratings of degree of cooperation. Avoid statements of objectives in generalities. Infinitives to avoid include to know, to understand, to enjoy, and to believe. Action verbs are observable and better communicate the intent of what is to be attempted. They include to write, to apply, to recite, to revise, to contrast, to install, to select, to assemble, to compare, to investigate, and to develop. How will you know you have progressed? 54 Attainable An objective must be attainable with the resources that are available. It must be realistic. Many objectives are realistic. Yet, the time it takes to achieve them may be unrealistic. For example, it is realistic to want to lose ten pounds. However, it is unrealistic to want to lose ten pounds in one week. What barriers stand between you and your objective? How will each barrier be overcome and within what time frame? Result-oriented The objective should be central to the goals of the organization. The successful completion of the objective should make a difference. How will this objective help the organization move ahead? Is the objective aligned with the mission of the organization? Time-limited The objective should be traceable. Specific objectives enable time priorities to be set and time to be used on objectives that really matter. 55 Are the timelines you have established realistic? Will other competing demands cause delay? Will you be able to overcome those demands to accomplish the objective you've set in the time frame you've established? 4. Develop related strategies Strategy: Strategy, narrowly defined, means "the art of the general"—a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there. A strategy is sometimes called a roadmap, which is the path chosen to move towards the end vision. The most important part of implementing the strategy is ensuring the company is going in the right direction, which is towards the end vision. In most corporations, there are several levels of management. Strategic management is the highest of these levels in the sense that it is the broadest—it applies to all parts of the firm and incorporates the longest time horizon. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under the broad corporate strategy are business-level competitive strategies and functional unit strategies. 56 FIGURE 5 STRATEGY HIERARCHY Corporate strategy refers to the overarching strategy of the diversified firm. Business strategy refers to the aggregated strategies of a single business firm or a strategic business unit (SBU) in a diversified corporation. Functional strategies include marketing strategies, new- product development strategies, human resource strategies, financial strategies, legal strategies, supply-chain strategies, and information-technology management strategies. The emphasis is on short-term and medium-term plans and is limited to the domain of each department's 57 functional responsibility. Each functional department attempts to do its part to meet overall corporate objectives, so to some extent their strategies are derived from broader corporate strategies. Porter Competition Strategies Porter simplified the scheme by reducing it to the three most effective strategies: cost leadership, differentiation, and market segmentation (or focus). He characterizes each as the following: FIGURE 6 PORTER COMPETITION STRATEGIES Cost leadership pertains to a firm's ability to create economies of scale though 58 extremely efficient operations that produce a large volume. Cost leaders include organizations like Procter & Gamble, Walmart, McDonald's and other large firms generating a high volume of goods that are distributed at a relatively low cost (compared to the competition). Differentiation is less tangible and easily defined, yet still represents an extremely effective strategy when properly executed. Differentiation refers to a firm's ability to create a good that is difficult to replicate, thereby fulfilling niche needs. This strategy can include creating a powerful brand image, which allows the organization to sell its products or services at a premium. Market segmentation is narrow in scope (both cost leadership and differentiation are relatively broad in scope) and is a cross between the two strategies. Segmentation targets finding specific segments of the market which are not otherwise tapped by larger firms. 5. Monitor the plan. A systematic method of monitoring the environment must be adopted to continuously improve the strategic planning process. To develop an environmental monitoring procedure, short-term 59 standards for key variables that will tend to validate the long-range estimates must be established. Although favorable long-range values have been estimated, short-term guidelines are needed to indicate if the plan is unfolding as hoped. Next, criteria must be set up to decide when the strategy must be changed. Feedback is encouraged and incorporated to determine if goals and objectives are feasible. This review is used for the next planning cycle and review. Benefits of Strategic Planning The planning process is concerned with defining a company's goals and determining the resources necessary to achieve those goals. Achieving a vision requires coordinated efforts that adhere to a broader organizational plan. This is enabled through consistent strategies that are supported by staff at all levels. To meet business goals, managers develop business plans not only to reach targets but also to strengthen and change public perception of the company's brand. Benefits of Planning Since they have achieved defined goals through the planning process, managers and employees can focus and control their efforts and their resources, follow determined plans of action, 60 coordinate activities between divisions, and use time management to meet specific goals. Planning helps to achieve these goals or targets by efficiently and effectively using available time and resources. In short, planning, if executed properly, should lead to the following benefits: Focus: There are a wide variety of activities an organization (or the individuals within the organization) might viably pursue. While there is value in the pursuit of many activities, understanding which ones the organization should focus on to leverage organizational competencies and align with market research requires careful planning and delegation. This is how planning achieves focus. Coordinated action: If department A is reliant on inputs from department B, department A cannot utilize department B's work without coordination. If department B has too much work and department A too little, there is poor interdepartmental coordination. This is alleviated through detail-oriented planning processes. Control: The control process is based on benchmarks, which is to say that controlling requires a standard of comparison when viewing the actual operational results. Control relies on 61 the planning process to set viable objectives, which can then be worked towards through controlling operations. Time management: Time management underlines the importance of maximizing the use of time to minimize the cost of production. If a full-time employee can accomplish their work within 32 hours, the planning process can find meaningful use for their remaining time. Costs can be lowered and productivity increased by ensuring that each element in the operational process functions according to ideal time constraints. Benefits of the process: Perhaps the most important benefit of developing business and marketing plans is the planning process itself. This typically offers a unique opportunity, a forum, for information-rich and productively focused discussions between the various managers involved. The plan and the discussions that arise from it provide an agreed context for subsequent management activities, even those not described in the plan itself. 62 Questions Write short notes 1. Definition of planning & strategic planning. 2. The strategic planning processes. 3. The difference between strategic plans, tactical plans and operational plans. True or false? 1- Tactical plans have shorter time frames & narrower scope than operational plans. 2- In strategic planning, the company should diagnose threats and opportunities after implementing the company mission and goals. 3- A business plan is important for businesses seeking funding. 4- A business plan is a written document that describes all the steps necessary for opening and operating a successful business. Choose the right answer 1- In what specific sequence do managers perform their functions to help achieve company goals? a) controlling, planning, organizing, directing b) directing, controlling, planning, organizing c) organizing, directing, controlling, planning d) planning, organizing, directing, controlling 2- Formulating Vision Statements is part of which managerial function? a) Planning b) Organizing c) Directing d) Controlling 63 3- Planning is a dynamic decision-making function that focus on a) past performance b) future performance c) zero base budgeting d) stock market performance 4- ………. is the process of developing and analyzing the organization's mission, overall goals, general strategies, and allocating resources? a) Long term planning b) Tactical planning c) Operational planning d) Strategic planning 5- When an organization CEO sets a goal for each division to be in the top two in the industry, she or he is mainly engaged in what managerial function a) TQM b) planning c) organizing d) controlling 6- A business plan………… a. is useful once your business is operational but not much help during the startup phase b. is not usually needed to secure financing in your business c. can serve as a tool for managing your business to help it get up and running d. All of the above 7- Devising Strategies is part of which managerial function? a. Planning b. Organizing c. Staffing d. Controlling 8- This plan outlines steps for achieving a goal over a year's time a. operational b. tactical c. strategic d. directing 64 9- Which function of management involves creating goals, objectives, and ways to achieve them? a. Organizing b. Planning c. Controlling d. Directing 10- This plan outlines steps for achieving short term goals a. operational b. tactical c. strategic d. directing 11- Which one of the following is not the step in the process of controlling? a. Measurement of actual performance b. Establishing reporting relationship c. Setting performance standards d. Taking corrective action 12- If deviations are minor, it should a. Be taken seriously b. Be ignored c. Be reported to top level d. None of the above 13- Planning provides a. Direction to Controlling b. Base of Controlling c. Standard for Controlling d. All of the above 65 Case studies: Planning Go to the webpage and answer the casses using the following link https://studyresearch.in/2018/03/11/case-study- planning/ Case Study1 SWOT 1 http://marketingteacher.com/ 66 67 68 69 70 71 Chapter Three Organizing Function OBJECTIVES To understand the concept of organizing. Differentiate between formal and informal organization Differentiate between bureaucratic and organic structure. To list and summarize the steps of organizing process. To differentiate between the types of departmentalization. KEY POINTS The organizing function deals with all those activities that result in the formal assignment of tasks and authority and a coordination of effort. The manager staffs the work unit, trains employees, secures resources, and empowers the work group into a productive team. Organizational structure is the formal decision-making framework by which job tasks are divided, grouped, and coordinated. 72 According to Max Weber, bureaucracy is a form of organization characterized by a rational, goal-directed hierarchy, impersonal decision making, formal controls, and subdivision into managerial positions and specialization of labor. The organic structure is more flexible, more adaptable to a participative form of management, and less concerned with a clearly defined structure. Organizational structure can be classified in different ways. Important characteristics of an organization's structure include span of control, departmentalization, centralization, and decentralization. What is organizing? Organizing involves arranging the necessary resources to carry out the plan. It is the process of creating structure, establishing relationships, and allocating resources to accomplish the goals of the organization. A key issue in accomplishing the goals identified in the planning process is structuring the work of the organization. Organizations are groups of people, with ideas and resources, working toward common goals. The purpose of the organizing 73 function is to make the best use of the organization's resources to achieve organizational goals. Organizing essentially consists of establishing a division of labor. The managers divide the work among individuals and group of individuals. And then they coordinate the activities of such individuals and groups to extract the best outcome. Organizing also involves delegating responsibility to the employees along with the authority to successfully accomplish these tasks and responsibilities. One major aspect of organizing is delegating the correct amounts of responsibilities and authority. Organizational structure Organizational structure is the formal decision-making framework by which job tasks are divided, grouped, and coordinated. Formalization is an important aspect of structure. It is the extent to which the units of the organization are explicitly defined, and its policies, procedures, and goals are clearly stated. It is the official organizational structure conceived and built by top management. a) The formal and informal organization The formal organization can be seen and represented in chart form. An organization chart displays the organizational 74 structure and shows job titles, lines of authority, and relationships between departments. The informal organization is the network, unrelated to the firm's formal authority structure, of social interactions among its employees. It is the personal and social relationships that arise spontaneously as people associate with one another in the work environment. Managers must realize that the informal organization affects the formal organization. The informal organizations can pressure group members to conform to the expectations of the informal group that conflict with those of the formal organization. This can result in the generation of false information or rumors and resistance to change desired by management. Manager should recognize the existence of informal groups, identify the roles member play within these groups, and use knowledge of the groups to work effectively with them. The informal organization can make the formal organization more effective by providing support to management, stability to the environment, and useful communication channels. Even though the differences among organizations are enormous, there are many similarities that enable them to be classified. One widely used classification is the two-fold system (mechanistic versus organic forms of organizational structure) 75 developed by Tom Burns and G. M. Stalker in their study of electronics firms in the United Kingdom. b) Mechanistic structure: The mechanistic structure is the traditional or classical design, common in many medium- and large-size organizations. Mechanistic organizations are somewhat rigid in that they consist of very clearly delineated jobs, have a well-defined hierarchical structure, and rely heavily on the formal chain of command for control. Bureaucratic organizations, with their emphasis on formalization, are the primary form of mechanistic structures. According to Max Weber, bureaucracy is a form of organization characterized by a rational, goal-directed hierarchy, impersonal decision making, formal controls, and subdivision into managerial positions and specialization of labor. Bureaucratic organizations are tall consisting of hierarchies with many levels of management. In a tall structure, people become relatively confined to their own area of specialization. Bureaucracies are driven by a top-down or command and control approach in which managers provide considerable direction and have considerable control over others. 76 Other features of the bureaucratic organization include functional division of labor and work specialization. c) Organic structure: On the other hand, the organic structure is more flexible, more adaptable to a participative form of management, and less concerned with a clearly defined structure. The organic organization is open to the environment in order to capitalize upon new opportunities. Organic organizations have a flat structure with only one or two levels of management. Flat organizations emphasize a decentralized approach to management that encourages high employee involvement in decisions. The purpose of this structure is to create independent small businesses or enterprises that can rapidly respond to customers' needs or changes in the business environment. Managers tends to have a more personal relationship with his or her employees. The steps in the organizing process 1. Review plans and list all tasks to be accomplished Organizational plans and their goals affect organizing and its outcome, the organization. The purposes and activities that 77 organizations have at present or are likely to have in future are dictated by plans. Certain basic purposes and some general activities are likely to remain constant in the long run. For example, from its very inception a business firm will continue to seek profit, as a result, it will continue to employ human and non-human (material) resources 2. Divide tasks into groups one person can accomplish a job. It is necessary to determine those work activities which are necessary to accomplish organizational objectives. Prima facie, it is essential to prepare a list of tasks to be done. Therefore, there is the need to classify the tasks into two categories: on-going tasks and once-for-all tasks. Examples of the former are hiring, training, and record-keeping. Such tasks may also include assembling, machining, shipping, storing, inspecting, selling, advertising etc. 3. Classifying and Grouping Activities: This stage demands three processes to be performed by managers: Examine each activity identified to determine its general nature (marketing, production, finance, personnel, etc.). 78 Grouping those activities into these interrelated functional areas. Establishing the basic department design for the organization structure. In practice, the first two processes go hand in hand. True enough, selling, advertising, shipping and storing can be considered as marketing-related activities, and can be grouped under the broad heading ‘marketing’ without any loss of generality. Likewise, assembling, cutting, machining, welding, painting and inspecting are treated as manufacturing process and can thus be grouped as production. In a similar way, activities like hiring, training, developing, recruiting and compensat-ing can be grouped under personnel-related activities. Classifying and grouping similar activities using the guidelines of homogeneity are based on the concept of division of labor and specialization. For accomplishing works which are similar in nature different tasks, processes or skills required are to be placed together so as to achieve organizational objectives. As soon as the tasks are classified and grouped into related work units (production, marketing, accounting and personnel) the third process, viz., departmentation, is being 79 finalized, i.e., a decision is being made on the basic organizational format or departmental structure for the enterprise. Groups, departments and divisions are being formed on the basis of the objectives of the organization. Management will choose a departmental type of organizational format from functional, geographic or territorial, customer, product line, or matrix options. 4. Assigning Work and Delegating Appropriate Authority: After identifying activities necessary to achieve objectives, classifying and grouping these into major operational areas, and selecting a departmental structure, management has to assign the activities to individuals who are simultaneously given the appropriate authority to accomplish the task. This step is a crucial one in both the initial and ongoing organizing processes. The foundation of this step lies in the principle of functional definition. The principle basically suggests that in estab-lishing departments, the nature, purpose, tasks, and performance of the department must first of all be determined as a basis for authority. 80 The strategic implication of this principle for business is that the activities determine the type and quantum of authority necessary. 5. Designing a Hierarchy of Relationships: This final step necessitates the determination of both vertical and horizontal operating relationships of the organization as a whole. In effect this step is ‘putting it all together’. Vertical Structuring: The vertical structuring of the organization results in a decision-making hierarchy specifying the respective roles of managers at different levels in the organizational hierarchy. It shows who is in charge of each task, of each specialty area, and of the organization as a whole. Different levels of management (such as the lower level, middle level, and the top level) are established in the organization — from bottom to top. From these levels emerge the chain of command or hierarchy of decision- making levels, in the company. Essentially the chain of command depicts the authority- responsibility relationships that establish links between supervisors and subordinates throughout the whole 81 organization. It flows from the chief executive officer down to the lowest worker in the organization. From the chain of command emerges a new principle, unity of command, originally advanced by Henri Fayol. According to this principle, each employee in an organization should report to and be accountable to only one immediate superior. The implication of this principle is simple enough: the chain of command should be so clear that a subordinate will receive order from one superior and be accountable to him (her) only, hi this case also authority is delegated from the superior to the subordinate. According to Fayol, unity of command is desirable because it simplifies communication and the assignment of responsibility. However, in today’s complex organizations, this principle is hardly followed. Instead, most employees receive instructions from several managers, especially when there is functional authority. This practice, although found necessary in large organizations, leads to certain undesirable consequences. Horizontal Structure: Two important effects of horizontal structuring are listed below: Firstly, it defines the working relationships 82 among operating departments. Secondly, it makes the final decision on the span of control (the number of subordinates under the supervision and direction) of each manager. Organizational Structure Types Functional Structure The organization is divided into segments based on the functions when managing. This allows the organization to enhance the efficiencies of these functional groups. As an example, take a software company. Software engineers will only staff the entire software development department. This way, management of this functional group becomes easy and effective. Functional structures appear to be successful in large organization that produces high volumes of products at low costs. The low cost can be achieved by such companies due to the efficiencies within functional groups. In addition to such advantages, there can be disadvantage from an organizational perspective if the communication between the functional groups is not effective. In this case, organization may find it difficult to achieve some organizational objectives at the end. 83 FIGURE 7 FUNCTIONAL STRUCTURE Divisional Structure These types of organizations divide the functional areas of the organization to divisions. Each division is equipped with its own resources in order to function independently. There can be many bases to define divisions. Divisions can be defined based on the geographical basis, products/services basis, or any other measurement. As an example, take a company such as General Electrics. It can have microwave division, turbine division, etc., and these divisions have their own marketing teams, finance teams, etc. In that sense, each division can be considered as a micro-company with the main organization. 84 FIGURE 8 DIVISIONAL STRUCTURE Matrix Structure When it comes to matrix structure, the organization places the employees based on the function and the product. The matrix structure gives the best of both worlds of functional and divisional structures. In this type of an organization, the company uses teams to complete tasks. The teams are formed based on the functions they belong to (ex: software engineers) and product they are involved in (ex: Project A). This way, there are many teams in this organization such as software engineers of project A, software engineers of project B, QA engineers of project A, etc. 85 FIGURE 9 MATRIX STRUCTURE Characteristics of an Organization's Structure Important characteristics of an organization's structure include span of control, departmentalization, centralization, and decentralization. Span of Control Span of control—or the number of subordinates a supervisor has—is used as a mean of ensuring proper coordination and a sense of accountability among employees. It determines the number of levels of management an organization has as well as the number of employees a manager can efficiently and effectively manage. In the execution of a task, hierarchical organizations usually have different levels of task processes. Workers at various levels send reports on their progress to the next levels until the work is completed. 86 In the past it was not uncommon to see average spans of one to four (one manager supervising four employees). With the development of inexpensive information technology in the 1980s, corporate leaders flattened many organizational structures and caused average spans to move closer to one to ten. As this technology developed further and eased many middle-managerial tasks (such as collecting, manipulating, and presenting operational information), upper management found they could save money by hiring fewer middle managers. Departmentalization Departmentalization is the process of grouping individuals into departments and grouping departments into total organizations. After reviewing the plans, usually the first step in the organizing process is departmentalization. Once jobs have been classified through work specialization, they are grouped so those common tasks can be coordinated. Departmentalization is the basis on which work, or individuals are grouped into manageable units. There are five traditional methods for grouping work activities (see the following figure). 87 FIGURE 10 METHODS FOR GROUPING WORK ACTIVITIES Departmentalization by function organizes by the functions to be performed. The functions reflect the nature of the business. The advantage of this type of grouping is obtaining efficiencies from consolidating similar specialties and people with common skills, knowledge and orientations together in common units. 88 Departmentalization by product assembles all functions needed to make and market a particular product are placed under one executive. For instance, major department stores are structured around product groups such as home accessories, appliances, women's clothing, men's clothing, and children's clothing. Departmentalization by geographical regions groups jobs on the basis of territory or geography. For example, Merck, a major pharmaceutical company, has its domestic sales departmentalized by regions such as Northeast, Southeast, Midwest, Southwest, and Northwest. Departmentalization by process groups jobs on the basis of product or customer flow. Each process requires particular skills and offers a basis for homogeneous categorizing of work activities. A patient preparing for an operation would first engage in preliminary diagnostic tests, then go through the admitting process, undergo a procedure in surgery, receive post-operative care, be discharged and perhaps receive out-patient attention. These services are each administered by different departments. 89 Departmentalization by customer groups jobs on the basis of a common set of needs or problems of specific customers. For instance, a plumbing firm may group its work according to whether it is serving private sector, public sector, government, or not-for-profit organizations. A current departmentalization trend is to structure work according to customer, using cross- functional teams. This group is chosen from different functions to work together across various departments to interdependently create new products or services. For example, a cross-functional team consisting of managers from accounting, finance, and marketing is created to prepare a technology plan. Centralization Centralization occurs when decision-making authority is located in the upper organizational levels. Centralization increases consistency in the processes and procedures that employees use in performing tasks. In this way, it promotes workplace harmony among workers and reduces the cost of production. Centralization is usually helpful when an organization is in crisis and/or faces the risk of failure. Centralization allows for rapid, department-wide decision- making; there is also less duplication of work because fewer employees perform the same task. However, it can limit flexibility 90 and natural synergies. Autonomy in decision-making is reserved for only a small number of individuals within the workforce, potentially limiting creativity. Decentralization Decentralization occurs when decision-making authority is dispersed among the lower organizational levels. With decentralized authority, important decisions are made by middle- level and supervisory-level managers. Because there are fewer hierarchical layers to navigate, this kind of structure helps to enable adaptability, quick reactions to lower-level issues, and more empowered employees. However, making organization-wide changes that are implemented homogeneously can become quite difficult in this system. 91 Questions Question one: write short notes 1. The formal & informal organization 2. Steps in organizing process 3. Bureaucratic & organic organization 4. Functional & divisional organization 5. Centralization & decentralization Question two choose the right answer: 1. Functional structure of organization groups the employees who work in the same product or process, serve similar customers and are located in the same area or geographic region. a) True b) False 2. Divisional structure of organization groups the employees who work in the same product or process, serve similar customers and are located in the same area or geographic region. a) True b) False 3. Management that emphasizes rules, procedures and division of labor is called administrative management. a) True b) False 92 4. A weakness of divisional structure is the tendency to duplicate activities among divisions. a) True b) False 5. The primary form of mechanistic structure is bureaucratic organization. a) True b) False 6. In functional organization, divisions operate as relatively autonomous business under the large corporate umbrella. a) True b) False 7. Once managers define future performance goals, they must translate these goals to reality via the function of a) Planning b) organizing c) controlling d) social responsibility 8. When a manager divides work into manageable components and coordinate results to serve a purpose, he is practicing a) Leadership b) organizing c) setting objectives d) forecasting 9. The system of communication and authority that lines people and groups together to accomplish the organizational purpose is 93 a) The organizational function b) organization structure c) integrated system d) coordination 10.The structure of organization in its official state is called the organization's ………….. a) Informal structure b) formal structure c) levels of management d) hierarchy of authority 11.An organization which relies on rules and has a set hierarchy of authority is using what type of management a) Bureaucratic b) contingency c) administrative d) scientific 12.An organization having a well-defined structure in which each person knows where he or she stands in relation to everyone else is a characteristic of a) Network design b) division of labor c) charismatic authority d) hierarchical structure 94 13.Which of the following characteristics is NOT related to bureaucratic management? a) Short-term career commitment b) Highly formal system of rules c) Division of labor d) Impersonality 14.……… is more flexible, more adaptable to a participative form of management, and less concerned with a clearly defined structure a) Functional structure b) Formal structure c) Organic structure d) Bureaucratic structure 15.For his fast-food restaurant, Salem recruits labor with different skills for different jobs. This approach is characteristic of a) rationality c) division of labor b) impersonality d) hierarchical structure. 16.A regional vice president lets local store managers operate each store as if it were a separate business. In this effort to better coordinate company human and material resources, the VP was seeking to improve what managerial function? a) Controlling c) Organizing b) Directing d) Planning 95 17.Ordering Materials is part of which managerial function? a. Planning b. Organizing c. Directing d. Controlling 18.Allocating Staff to Tasks is part of which managerial function? a. Planning b. Organizing/staffing c. Directing d. Controlling Go to the following webpage and answer the organizing case studies: https://studyresearch.in/2018/03/11/organising/ 96 Chapter Four Directing Function OBJECTIVES To define directing function. To summarize the component of directing function. To be aware of the importance of directing function for all organizations. KEY POINTS Directing is influencing people's behavior through motivation, communication, group dynamics, leadership and discipline. The purpose of directing is to channel the behavior of all personnel to accomplish the organization's mission and objectives while simultaneously helping them accomplish their own career objectives. Highly motivated people perform better than unmotivated people. Motivation covers up ability and skill deficiencies in employees. The directing function includes motivation, communication, performance appraisal, discipline and conflict management. 97 Three ways of looking at motivation are: needs, rewards, and effort. Communication is the process of passing information and understanding from one person to another. Communication plays a major role in organization. Communication requires a sender, a message, a form and channel, and a recipient. Barriers to effective communication distort, obscure, or misrepresent the message and fail to achieve the desired effect. Definition of Directing Directing is influencing people's behavior through motivation, communication, group dynamics, leadership, and discipline. Directing means giving inst

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