Fundamentals Of Management DBM1201 Past Paper PDF

Fundamentals of Management DBM1201 - FUNDAMENTALS OF MANAGEMENT (JAN-APR FT) YEAR 1 SEM 1 KEYWORD : Lecturer: Mr. Wilfred Wachira Email: [email protected] Text: Cole. G.A. (2004). Management Theory & Practice. 6th edition. Mr...

Fundamentals of Management DBM1201 - FUNDAMENTALS OF MANAGEMENT (JAN-APR FT) YEAR 1 SEM 1 KEYWORD : Lecturer: Mr. Wilfred Wachira Email: [email protected] Text: Cole. G.A. (2004). Management Theory & Practice. 6th edition. Mr.Wachira  Has an MBA from The Ohio State University and a Bsc in Finance from the University of Massachusetts in USA  Studied Accounting at Strathmore College  Professional experience in Finance, Investments, Strategy and Operations  7 years experience with Citi bank New York as Vice President of finance working in various functions including treasury, securities operations and credit card finance among others  Currently an active entrepreneur in the hospitality and furniture industries  Author of first hand true life story novel: The Slum Dreamer (available at college bookshop and amazon.com)  Mentor to young professionals  Married with 2 children Purpose of the course  To examine the process of achieving organizational goals through the use of operational strategies involving the four major management functions: planning, organizing, leading and controlling Course content  The concept of managers and management;  Theories of Management  The evolution of management; background to modern management.  Approaches to management.  Functions of management  Management strategy and Organizational Structure of Management; Expected Learning outcomes of the course At the end of this course the student will be able to: 1. To analyze the history and the basic principles of management 2. To assess the roles and functions of management 3. To apply different management strategies in different situations for results Introduction  Management : Co-ordinated activities(forecasting,planning,leading,controlling) to direct and control an organisation towards a goal.  Management as defined by Mary Parker Follet, a management theorist (1868) is the art of getting things done through the efforts of other people.  Managerial work is the lifeblood of most organizations because it serves to co-ordinate and motivate individuals to do achieve results.  Every business/organization that seek to improve must be concerned with the knowledge and application of management theories. What is an Organization  A group of people with a common purpose who work together to achieve shared goals, it is also described as the framework of management i.e without the organization they wouldn’t be a need for management. Organizations can be broadly categorized as  Formal - Work groups consciously designed by management to maximize efficiency and achieve organizational goals  Informal – Network of relationships between members of an organization formed on their own accord(choice) based on common interests and friendships hence the need to organizational theory and behavior Management vs. Organization  The relationship between management and organizational theory has therefore led to several critical components that have to be considered for effective management People Work and structure Systems and procedure The goals of the organization The technology available The culture of the organization( its values and beliefs) All six factors interact with each other and changes in one will affect others The historical evolution of management 8 The historical evolution of management  Due to the unique nature and actions of human affairs theories have kept evolving over time  The driving force behind the evolution of management is the search for better ways to use organizational resources: Efficiently- doing things right Effectively - doing the right things  This gave rise to a need for management theories to guide those managing these organizations  Hence the emergence and the evolution of management theories (also known as approaches or schools of thought) 9 What is an Organization  A group of people with a common purpose who work together to achieve shared goals, it is also described as the framework of management i.e without the organization they wouldn’t be a need for management. Organizations can be broadly categorized as  Formal - Work groups consciously designed by management to maximize efficiency and achieve organizational goals  Informal – Network of relationships between members of an organization formed on their own accord(choice) based on common interests and friendships hence the need to organizational theory and behavior  Business organizations Types of organizations Business – Exists to provide goods and services for profit Mainly found in the private sector( in some case in government e.g KQ, Hilton, Safaricom) Public Service/ Charitable  Business organizations Common Types of organizations Sole Traders It’s the simplest form of business One person in business on his own( man and wife sometimes) The Business entity which legally has no separate existence from its owner. Owners fully liable for any business debts Minimal legal requirements to set up Ownership and Control are combined( as opposed to ltds which has shareholders and directors) Profits subject to personal income tax instead of corporate tax No formal accounts published  Business organizations Sole Traders Advantages Easy to start Total control to run company according to owners wishes Profit belongs to owner Various business expenses are allowable against income tax No public disclosure of accounts( apart from tax authorities) Disadvantages Sole trader fully liable for debts Owners fully responsible for all facets of the business( sales,marketing,finance, HR, etc)  Business organizations Common Types of organizations Partnerships More than one owner Profit and losses shared between owners Minimal legal requirements to set up  But advisable to have a legal partnership agreement drawn by a lawyer Agreement can stipulate rights and obligation of each partner Changes in partnership in case of death or retirement Owners responsible for liabilities Common with Professionals (doctors, accountants and lawyers)  Business organizations Partnerships Advantages Easy to start Sharing of partners knowledge and skills Sharing of management of business No obligations to publish accounts Sharing of profits(and losses) of business More sources of capital Greater borrowing capacity High Caliber employees can be made partners Income can be split for tax savings  Business organizations Partnerships Disadvantages Each Partner liable for debts of partnership even if caused by other partners Risk of friction and disputes can easily break up partnership Death or bankruptcy of 1 partner dissolves the partnership unless otherwise provided for in a partnership agreement Actions of other partners affect the whole partnership Can’t easily change partners e.g firing and hiring  Business organizations Common Types of organizations Cooperatives Business organization that is owned, operated and controlled by a group of individuals ( members) who also use the services of the cooperative for their mutual benefit It’s a non-profit E.g chamaas in Kenya and golf clubs or social societies  Business organizations Cooperatives Advantages Provides opportunity for pooling of capital It’s a legal entity on its own( liability not extended to personal assets of members apart from what is invested) Improves bargaining power e.g in purchases Encourages active corporation between all sections of workforce due to mutual benefit to be incurred Enables decisions to be made democratically( voting) Provided limited liability( if registered)  Business organizations Cooperatives Disadvantages Less likelihood of a level profitability and growth than in a ltd company Relationships can deteriorate due to frictions among members Decision making can be lengthy Less professionally run  Business organizations Common Types of organizations Limited companies When a limited company is formed it is “incorporated” i.e given a separate body or entity separate from its members The incorporated company has rights and can sue or be sued, own properties and more Liabilities limited to company and not to personal shareholders. They can only lose their investment in the company This encourages outsiders and wealthy people to invest in companies without risking their personal wealth beyond the invested amounts Limited companies must have at least 2 members and 1 director Before incorporation limited companies require:  The Memorandum of association – stipulates the purpose of the company  Articles of Association – Regulates the internal affairs of the company  Business organizations Common Types of organizations Limited companies They fall into 2 categories Public limited companies(PLCs) – Shares available to general public for purchasing Private Limited companies – Shares not available to public but can be transferred among the private shareholders. The name of the Private company must end with the word ‘limited’ Required to file annual returns which are accessible by the public  Business organizations Limited Companies Advantages In the event of failure, shareholders are protected up to nominal value of their shareholding The separate legal person of the company exists independently of the members Shares in(plc) are easily transferable Easier to raise capital More professionally run Death of a shareholder does not spell doom to the company  Business organizations Limited Companies Disadvantages Might face difficulty raising money from banks because liability is limited to share holding More legal procedures in setting up Expensive to run as they Requires professionals to run it to keep up with statutory requirements and shareholders expectations  Business organizations Limited companies Company Directors The directors of a company are by law its agent and are accountable for the conduct of the company’s affairs. They must abide by the terms of the company’s memorandum and articles of association They are appointed by shareholders and must act on decisions made by shareholders Every directory has a fiduciary duty to act in the best interest of the company, employees and other stake holders Directors might be Executive directors – normally full time employees with operational and strategic responsibilities None –executive directors – Usually work part-time and can sit on many boards  Business organizations Limited companies Company Directors The principal director is the Chairman of the board followed by a Chief Executive Officer( sometimes both roles are held by the same person) The CEO is responsible for: Implementing policies and strategy Building and motivating senior managers Ensuring proper running of the company  Limited companies The Triple bottom line (explain bottom line) Traditionally companies had a view of just one purpose: - To maximize profits and Shareholders wealth Recently companies have expanded needs to not only care for shareholders but also for the stakeholders (those affected by the company’s operations). Stake holders include:  Shareholders  Employees  Customers  Suppliers  The environment  The general society As a result of this new approach. Companies’ effectiveness and measure of success have evolved from just profit making as the only bottom line to include:  Economic Bottom line – Financial Well being  Environmental performance – Impact and influence of the company activities on the environment  Social performance – Impact and influence of the company in improving the  Corporate Governance  A good company requires a sound Corporate governance ( The system by which companies are directed and controlled)  The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver long-term success for the company  a governance framework –( describes whom the organization is there to serve, the purpose of the organization and the priorities of the organization)  A good corporate governance code should include Leadership- every company should be headed by an effective board which is collectively responsible for the long-term success of the company Accountability- The board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives Remuneration – Formal and transparent procedures on executive remuneration Shareholders relations – use of AGM and other methods to communicate and encourage shareholders participation Developing an organization culture  We have mentioned corporate governance as a key to successfully running a company  Good governance starts from building a successful corporate culture  Culture – Shared way of thinking and behaving (uniformity)  Culture is developed from Practices –accepted method of doing things  Corporate culture – A set of values, beliefs, goals, norms , rituals and assumptions that members of an organization share)  Corporate culture. Is learned by new recruits, and Transmitted from one generation of workers to the next  A culture becomes established when a shared understanding achieves a dominance in the collective thinking of the members of the organization  Corporate culture can be used as a way to unify employees in an organization and bring a measure of self-regulation to employees  Self-regulation can be reduce costs by reducing supervision and bureaucracies – Developing an organization culture Factors that can form/affect an organizations culture Developing an organization culture Ways of affecting corporate culture Mission statement – A statement of the overriding direction and purpose of an organization Strathmore Mission statement. “To provide all round quality education in an atmosphere of freedom and responsibility excellence in teaching, research and scholarship, ethical and social development and service to the society” Policy statement Symbols –External things that have special meaning for those who share the culture e.g pictures, logo, gestures etc such as The apple logo, Nike logo Heroes – people (dead or alive) who are looked up to in the culture as role models for acceptable behavior. E,g Gandhi, Steve Jobs Rituals – Ways of acting and interacting with others Values – The Inner invisible principles Types of Organizational Cultures Clan Culture This working environment is a friendly one. People have a lot in common, and it’s similar to a large family. The leaders or the executives are seen as mentors or maybe even as father figures.  The organization is held together by loyalty and tradition. There is great involvement. The organization emphasizes long-term Human Resource development and bonds colleagues by morals. Success is defined within the framework of addressing the needs of the clients and caring for the people. Leader Type: facilitator, The organization mentor, promotes team builder teamwork, participation, and consensus. Value Drivers: Commitment, communication, development Theory of Effectiveness: Human Resource development and participation are effective Quality Improvement Strategy: Empowerment, team building, employee involvement, Human Resource development, open communication Types of Organizational Cultures Adhocracy Culture This is a dynamic and creative working environment.  Employees take risks.  Leaders are seen as innovators and risk takers. Experiments and innovation are the bonding materials within the organization. Prominence is emphasized. The long-term goal is to grow and create new resources. The availability of new products or services is seen as success. The organization promotes individual initiative and freedom. Leader Type: Innovator, entrepreneur, visionary Value Drivers: Innovative outputs, transformation, agility Theory of Effectiveness: Innovativeness, vision and new resources are effective Quality Improvement Strategy: Surprise and delight, creating new standards, anticipating needs, continuous improvement, finding creative solutions Types of Organizational Cultures Market Culture This is a results-based organization that emphasizes finishing work and getting things done.  People are competitive and focused on goals. Leaders are hard drivers, producers, and rivals at the same time. They are tough and have high expectations. The emphasis on winning keeps the organization together.  Reputation and success are the most important. Long-term focus is on rival activities and reaching goals. Market penetration and stock are the definitions of success. Competitive prices and market leadership are important. The organizational style is based on competition. Leader Type: Hard driver, competitor, producer Value Drivers: Market share, goal achievement, profitability Theory of Effectiveness: Aggressively competing and customer focus are effective Quality Improvement Strategy: Measuring client preferences, improving productivity, creating external partnerships, enhancing competiveness, involving customers and suppliers Types of Organizational Cultures Hierarchy Culture This is a formalized and structured work environment. Procedures decide what people do. Leaders are proud of their efficiency-based coordination and organization. Keeping the organization functioning smoothly is most crucial. Formal rules and policy keep the organization together. The long-term goals are stability and results, paired with efficient and smooth execution of tasks. Trustful delivery, smooth planning, and low costs define success. The personnel management has to guarantee work and predictability. Leader Type: Coordinator, monitor, organizer Value Drivers: Efficiency, timeliness, consistency, and uniformity Theory of Effectiveness: Control and efficiency with capable processes are effective Quality Improvement Strategy: Error detection, measurement, process control, systematic problem solving, quality tools Developing an organization culture Types of Organizational Cultures The theories of management 38 Is management an art or science? But Management deals with Autonomous human beings who act differently and can even deliberately act in a way that confirms or refutes any “laws” of human Affairs. So unlike many theories and laws of science management is Unique in that:  The theory leads to practice and  The Practice is the source of Theory  Which means management theory require a constant and continuous interaction and inquiry between practice and theory  Management therefore tries to Rationally/Deliberately influence Human Affairs/actions and tries to bring change in human situations The Evolution of Management Theory  Classical Theory(Focused on Structure and mechanics of organization)  Human Relations and Social Psychological Theory ( Focused on the human factor at work e.g motivation relationships, leadership etc)  Leadership and Group Behavior Theory  Systems Theory ( focused on the total work of the organization and the interrelationships of structures and behavior)  Contingency theory – management is influenced by external forces and management has to adapt to the contingencies of the situation using tools like strategy  Modern Theories Classical Theory- Focused on Structure and mechanics of organization  Early management principles were born of necessity.  The last 20 years of the 19th century( 1880 onwards) was characterized by the industrial revolution which had given rise to new factories, plants and machinery.  Labor was also plenty which presented the problem of blending all this economic resources and factors into efficient and profitable operations  First attempt at defining management as a discipline was pioneered by Henry Fayol who was a French mining engineer  The company was in difficulty and facing bankruptcy , but Fayol was able to turn it around and make the company profitable again.  When he retired, Fayol wrote down what he’d done to save the company. He helped develop an “administrative science” and developed principles that he thought all organizations should follow if they were to run properly.  https://www.youtube.com/watch?v=90qpziPNRnY Early Management Principles  Fayol started by defining management into six key activities  Technical activities(production)  Commercial activities( buying and selling)  Financial Activities( securing capital)  Security activities( safeguarding property)  Accounting activities( proving financial information)  Managerial activities( planning and organizing)  The first 5 activities were fairly well known but none specifically was concerned with planning and organizing hence Fayol’s attempt to formalize these activities under the umbrella “managerial activities”  What is Management?  Management is essentially a transformational process(actions) to maximize results from limited resources through a process of input-throughputs- output “ to manage is to forecast and plan.to organize, to command, to coordinate and to control”( Henry Fayol 1916), Under management he identified Forecasting and planning( looking into the future and drawing a plan of action) Organizing (structural) Commanding( maintaining activities among personnel) Coordinating( unifying activities) Controlling( ensuring things happen as they are supposed to) What is Management?  Planning – deciding the objectives/goals of the organization and preparing how to meet them  Formalization of what is intended to happen ( objectives/goals)  Actions to be taken before( plans, policies)  Arranging/allocating resources to achieve desired out come What is Management?  Organizing – Translating plans into actions for the achievement of the plans  Determining activities  Allocating responsibilities  Coordinating activities and responsibilities  Coordination of tasks and resources What is Management?  Motivating/Leading– Getting the best out of employees towards implementing the plan by achieving commitment and buy-in form employees What is Management?  Controlling– Control acts as a feedback mechanism for managerial activities b ensuring plans are properly executed and organization is functioning as planned towards meeting of desired goals. It Involves : Establishing standards of performance Measuring of actual performances against standards Taking corrective actions against deviations.  What is Management?  Management is essentially a transformational process(actions) to maximize results from limited resources through a process of input-throughputs- output “ to manage is to forecast and plan.to organize, to command, to coordinate and to control”( Henry Fayol 1916), basically the accepted activities of P-L-O-C(planning, leading, organizing,control) The process of management Henry fayol’s 14 principles of management  Fayol identified 14 principles of management 1. Specialization/Division of Labor – By specializing in a limited set of activities, workers become more efficient and increase their output by Reducing the time a person performs a certain task 2. Authority/Responsibility – Managers must have the authority to issue commands, but with that authority comes the responsibility to ensure that the work gets done. 3. Discipline – Respecting formal and informal agreements between firm and employees. Workers must obey orders if the business is to run smoothly. But good discipline is the result of effective leadership: workers must understand the rules and management should use penalties accordingly if workers violate the rules. Henry fayol’s 14 principles of management 4. Unity of Command – An employee should receive orders only from one boss to avoid conflicting instructions. 5. Unity of Direction – Each unit or group has only one boss and follows one plan so that work is coordinated. 6. Interest prioritization – Firm’s interests come above individuals interests 7. Remuneration –Workers must be fairly paid for their services Henry fayol’s 14 principles of management 8. Centralization – Centralization refers to decision making: specifically, whether decisions are centralized (made by management) or decentralized (made by employees). Fayol believed that whether a company should centralize or decentralize its decision making depended on the company’s situation and the quality of its workers. 9. Line of Authority – The line of authority moves from top management down to the lowest ranks. This hierarchy is necessary for unity of command. – A clear chain of command/authority from top to bottom of firm 10.Order – Orderliness refers both to the environment and materials as well as to the policies and rules. People and materials should be in the right place at the right time. A place for everything and everything in place, the right man in the right place Henry fayol’s 14 principles of management 11. Equity – Fairness (equity), dignity, and respect should pervade the organization. Bosses must treat employees well, with a “combination of kindliness and justice.” 12. Stability of Tenure – Organizations do best when tenure is high (i.e., turnover is low). People need time to learn their jobs, and stability promotes loyalty. High employee turnover is inefficient. 13. Initiative – Allowing everyone in the organization the right to create plans and carry them out will make them more enthusiastic and will encourage them to work harder. 14. Team Work (Esprit de Corps) – Harmony and team spirit across the organization builds morale and unity.  Fayol is created by being the first person to achieve a genuine theory of management based on this principles that could be passed on to others and improved upon Scientific management theory  Fredrick Taylor (1856-1915) A pioneer of the “scientific Management” model  He worked as a laborer and later a manager/superintendent in a factory. He set out to achieve  Efficiency – Doing things right  Productivity – A measure of efficiency that compares the value of outputs relative to the values of inputs used  He believed the key to this was the systematic analysis of work ( carefully studying a process)  he observed that people mostly gave the minimum effort required in their daily work. A tendency he referred to as Soldiering.  Natural soldering – Humans’ natural tendency to take things easy  Systematic Soldiering - employees deliberately working slowly to prolong jobs and job security 53 Scientific management theory  To address this issues he came up with the practice of “ scientific management ”A classical management theory that seek to design Jobs in a very specific manner that stressed  Short repetitive cycles, - Each job should be divided into small well controlled tasks  Detailed prescribed task sequences, - There should be specific procedures for each task  The procedures must be followed with no exceptions.  separation of task conception from task execution  Motivation based on economic rewards 54 The Principles of scientific management To achieve this method Taylor argued for the following steps  Develop a science for each operation to replace opinion and rule of thumps that was based on findings and facts ( work study)  From the science determine accurately the correct time and method for each Job that eliminated unnecessary tasks and movements  Free workers to just perform actual task and separate them responsibility of final product  Select and Training of workers  Effectively Taylor advocated for the responsibility of how a certain job should be achieved be taken away from workers and given to managers. Workers were to follow a specific set of rules for every job. He argued that the average worker preferred to be given defined tasks with clear cut standards 55 The Principles of scientific management   The Case of the “ first class Shovellers” The study  He studied 2 workers using their own shovels  Study found the average shovel load to be 17kgs  Each man handled about 25tonnes a day  The Experiment  shovel load was reduced for each men  Each man handled about 30 tonnes a day  The Solution  Ideal shovel load was found to be 10kg  Every worker was given a 10kg shovel  Workers were trained in the “science of shovelling  The Results  The work of 500 workers was done by 140 workers  Handling Costs per tonne was reduced by 50%  Due to increased productivity, workers increased wages by 60%  All this was achieved without “Slave-Driving”( excessive authority and supervision of56workers) Scientific management theory  Advantages?  Setting of wages could be standardized  Improved methods led to increased productivity and hence expanded the pie instead of sharing a smaller pie  Workers could earn more due to increase productivity  Workers were freed from worrying about methods of doing jobs  Measurement of results would be more objective and lead to less conflict between workers and managers  Managers adapted more of a leadership role  Led to improved working conditions for workers  Provided a basis for modern work study and other quantitative techniques 57 Scientific management theory  Disadvantages?  Workers feeling like robots  Dislike of work  Rise in education to get better jobs which led to more frustration  Most managers did not understand scientific method and resulted into arbitrary setting of standards( sometimes unrealistic) which could not be met  Lack of initiative  Development of theory X  Alienation of employees from managers 58 Theory X Figure 2-59 2.3 Scientific management theories Conclusion Many aspects of the scientific method have been improved upon and still used to date Video: https://youtu.be/vNfy_AHG-MU 60