Management Activities PDF

Management Activities 1. Planning 2. Organising 3. Controlling Planning -the management activity of setting objectives and deciding on the strategies to achieve these objectives -a plan is a predetermined course of action eg setting a sales target is a form of planning in business -a plan gi...

Management Activities 1. Planning 2. Organising 3. Controlling Planning -the management activity of setting objectives and deciding on the strategies to achieve these objectives -a plan is a predetermined course of action eg setting a sales target is a form of planning in business -a plan gives purpose and direction to an organization -effective plans must follow specific principles under SMART guidelines -coordination is an important part of planning 34 SMART Planning Principles 1. Specific (purpose of the plan should be clearly define eg the firm may want to increase its market share by 25% by the end of the year or to increase factory output by 10% in the next 6 months) 2. Measurable (must be possible to measure the success of the plan eg can record and compare factory output change in 6 months) 3. Agreed (plan must be agreed upon by the staff, have their backing so that they can all work together) 4. Realistic (must be possible to achieve the objectives eg low possibility for small start-up to reach €100 million sales in first day) 5. Timed (plans must be capable of being achieved within a reasonable time frame eg the extension to the factory will be complete in 6 months) Types of Plans 1. Mission Statement 2. Strategic Plan 3. Tactical Plan 4. Operational Plan 5. Contingency Plan Mission Statement -this is a visionary statement -outlines who the business is, what the business does and where the business is going -overall aim is to give an insight to the stakeholders into what makes a business 'tick' -statement of intent displayed by a business usually in a public area stating the aspirations of a business as regards the quality if its service to its customers eg displayed in business reception -purpose of a mission statement is to help each member of staff to stay focused on the organizations main aims -eg mission statement of Dell states that it aims to be 'the most successful computer company in the world at delivering the best customer experience in the markets we serve' Strategic Plan -this is a major long term plan for a business 35 -period of 5 years or more -formulated by board of directors -provides a guide for where the business is going in the long run, and how it's going to get there -clearly defines the purpose of the business and establishes realistic goals that are consistent with that of the mission statement of the business -strategic plan assess the strengths and weaknesses both inside and outside the firm (SWOT analysis is a vital part of strategic planning) (Unit 2 Notes page 5) -identifies key trends and opportunities for the business -makes clear decisions which are definite about what, how and when things are to be done -useful for measuring and controlling the performance of management -management has a base from which progress can be measured (benchmarking) and they can establish a mechanism for informed change when needed -strategic plan may be to increase market share or enter the export market or diversify into other areas of activity or enter a planned merger -eg a strategic plan for an airline using SMART principles is to control 10% of the US market in 5 years’ time Tactical Plans -short term planning -period of 1 or 2 years -designed to achieve some stated short term goals -breaks the strategic plan into manageable periods, deals with the now part of the strategic plan, put in place to implement specific parts of a strategic plan -are specific and are drawn up by middle management -eg increase sales by 10% within the year or launch an advertising campaign within the next year or offer internet shopping Operational Plans -immediate short term planning -day-to-day planning of business activities -the nitty gritty actualisation of tactical plans -created by department managers 36 -eg weekly sales forecast, monthly budgets, staff roster Contingency Plans -plans for dealing with unforeseen events or emergencies -back up plans, plan B, will only be utilised if something goes wrong -an alternative course of action to be taken if a plan is disrupted or becomes inappropriate. -contingency plans deal with such things as how to deal with a new competitor entering the market, a breakdown in factory equipment or a power failure and how to deal with flood or fire -contingency plan reduces the chaos factor -eg a business may have to consider locating alternative sources of raw materials if a major supplier is crippled by strike action and unable to fulfil its orders Planning Benefits 1. Reduces Risk/Uncertainty (planning helps a business to reduce risk, forces managers to think about the future, weaknesses and threats to a business can be identified by carrying out a SWOT analysis, problems can be anticipated before they arise and steps can be taken to remedy them for eg cash flow problems or stock shortages) 2. Future Focused (planning encourages a business to look ahead and be proactive, strategic plan will lay out what direction the company is taking in the next long term 5 years, will provide a focus for management and staff and will act as a goal to be achieved eg plan to enter the foreign market or to diversify) 3. Attracts Investors (well-prepared business plan will help convince investors to provide the necessary finance to start up in business or expand an existing one, planning helps firms to predict their turnover, revenue and profits through highlighting forecasts and business visions eg business plan is necessary to qualify for bank loans) 4. Performance Assessment (business plan provides a basis for assessing the actual performance of the business against its goals, allows comparison between business projections and results, allows analysis of deviations from goals eg benchmark measuring of market share projections against prime competitor in strategic planning) 37 Coordination -process of harmonizing the work of different people and different departments to achieve organizational goals -all staff to work together as a team to achieve the objectives of the firm -all parts of the business plan must be compatible and all departments must work in harmony -eg production department has to liaise with purchasing department about types and quantities of raw materials needed, production department must also liaise with the marketing department to ensure that quantities produced are in line with quantities sold -coordination involves effective communication, consultation and cooperation Organising -the management activity of arranging the workplace in the most efficient way to achieve the objectives of the business -involves arranging available resources, people, equipment and finance in the most suitable form to achieve the business's objectives -involves getting things done through some form of organized structure -there are various types of business organisational structures -unless there is proper organization in a firm there will be chaos Organisational Structure Terms -chain of command -span of control -narrow span of control -wide span of control -functional/line organisational structure -matrix organisational structure -product organisational structure -geographical organisational structure Chain of Command -order in which the power in a business is distributed, the way in which authority is organised -from senior management at the top of the business hierarchy down to employees at the bottom 38 -instructions flow downwards along the chain of command -accountability flows upwards along the chain of command Span of Control -the number of subordinates that report to one specific manager within a hierarchy -size of span depends on a number of factors -narrow span of control when a manager only has a few reporting subordinates -wide span of control when a manager has a lot of reporting subordinates Span of Control Size Factors 1. Nature of Work (straightforward repetitive tasks or products/services which are easy to produce/delivery will need less supervision thus can have a wider span of control, narrow span of control may be appropriate to supervise a very valuable business project) 2. Manager Skills (experienced confident manager can more easily operate a wider span of control, inexperienced manager may need to begin with a narrower span of control to gain experience) 3. Employee Skills (highly trusted and self-motivated employees allow for a wide span of control but newly trained or unsure staff may require a narrower span of control with higher levels of help and supervision) Organisational Structure Importance -identifies different levels of authority -sets out a definite chain of command (who is responsible to whom) -improves communication by setting down channels of communication -improves efficiency and quality of work Organisational Structures 1. Functional/Line Organisational Structure 2. Matrix Organisational Structure 3. Product Organisational Structure 4. Geographical Organisational Structure 39 Functional/Line Organisational Structure -business is split into sections which have clear functions -managers are in charge of each sperate department Benefits of Functional/Line Organisational Structure 1. Department Specialisation (due to specialisation (where each department is concentrating exclusively on one function such as marketing, production, sales or finance) employees and management build up high levels of skill and expertise through repetition and practice, this leads to efficiencies as tasks get done quickly and to a high standard) 2. Clear Chain of Command (line of authority is clear, employees know who to report to, there is a person in charge of each department which improves co-ordination and motivation, as employees know what is expected of them and when) 3. Improved Communication (clear communication channels, structure helps create a clear line of communication between the top and bottom of the business, instructions flow downward from top management along the chain of command and feedback information is communicated upward, may result in important information being communicated quickly leading to quicker decision- making) 4. Clear Promotional Paths (visible hierarchical ladder, providing career paths for employees, provides scope for the promotion to the next level so businesses can promote from within etc) 5. Wider Span of Control Possibilities (are economies of scale as resources are used efficiently with no duplication of resources, wide span of control releases top management from micromanaging operations so that they can focus on the overall strategy of the business) Disadvantages of Functional/Line Organisational Structure 1. Isolation (departments may feel separate and isolated from each other, if departments don’t work with each other they may feel other departments are indifferent to their efforts) Functional Structure 40 2. Coordination Difficulties (each department is focused n achieving its own goals rather than how it can contribute to the overall company’s success, as departments don’t work together it can be hard for a company to create shared goals) 3. Communication Issues (horizontal cross-departmental communication may be difficult as department managers may be less willing to listen to feedback/instructions from other department managers with the same level of authority rather than their superiors, may lead to inefficient or lack of communication) Matrix Organisational Structure -team based structure with expertise drawn from different departments -generally set up to carry out specific projects such as product development -employees are temporarily removed from their normal job and work on projects -team members are answerable to the project leader who is responsible for co-ordinating team effort and ensuring task completion -employees report to both project manager and own department manager Benefits of Matrix Organisational Structure 1. Greater Business Unity (each department has a greater understanding and appreciation for what other departments do. As people are working in teams, they share resources and ideas so there is a whole-business approach to new ideas or products) 2. Improved Decision Making (employees have a greater understanding of the organisation when working in teams with other departments. Working with team members from outside their Matrix Structure 41 department should help to generate new ideas and innovative ways of thinking, as they will share their ideas, skills and resources) 3. Improved Relationships (working in teams should help staff to feel more connected with other employees, satisfying Maslow's social needs, might help them to enjoy work more, increasing morale and reducing staff turnover) (Unit 3 Notes page 8) 4. Shared Responsibility (team leader co-ordinates the team, but all team members input into decision-making and take responsibility for the project) Disadvantages of Matrix Organisational Structure 1. Team Disagreements (teams can take longer to start work if disagreement occurs, as teams try to form and create group norms, meaning they can become all talk and no action. certain workers might try to dominate the group and refuse to compromise if they do not have the skills or experience of working well in groups. Funding for training might be needed in this case) 2. Unclear Chain of Command (employees have a department head and a team leader, this might cause confusion for the employee when prioritising their tasks and could create conflicts between management over authority, making it difficult to co-ordinate work effectively 3. Resource Allocation Disagreements (members of one department such as sales might not want to cut their funding in favour of using it for another department, such as production, especially if they are on commission from sales, even though the overall business would benefit from this, the team might not agree if it reduces funding to one department) 4. Slower Decision Making (teams need time to work well together, this means output might be low at the beginning, and lots of consultation is needed and all opinions shown to be valued, before solutions are agreed upon) Product Organisational Structure -business breaks up its organisational structure into different parts that operate like separate businesses -each part would have its own organisational structure, and all parts report to the senior management -suits companies that operate in a handful of clear markets, as it allows different sections of a business to target each market specifically 42 -eg Kerry Group is structured across three business areas (taste and nutrition, consumer foods and agribusiness) Benefits of Product Organisational Structure 1. Competition Between Products (easy to compare the different parts of the business; motivates managers and staff to work hard to be the best part of the business) 2. Resources Focused Effectively (each department only worries about its own product range, it tailors all its resources (staffing, suppliers, machinery, etc) to suit the needs of that market) 3. Improved Flexibility (departments are all focused on different parts of the business, so if there are changing market needs or trends, they are more able to react and adapt to them, unlike a functional organisational structure Disadvantages of Product Organisational Structure 1. Duplication of Resources (each product arm has its own sales, marketing and finance departments. This means an increase in facilities, staffing and resources is needed compared with a centralised department for a whole business) 2. Lack of Cohesion (there might be a fear of helping other parts of the business due to competition between different departments or products for sales, profits and results, they could see other parts of the business as rivals rather than the same company) 3. Cannibalisation (one product structure may end up introducing a new product that reduces the sales and profits from another product somewhere else in the organisation eg protein powder milk substitute is launched that reduces the sales of milk in Kerry Group PLC) Product Structure 43 Geographical Organisational Structure -business is divided based on the regions in which it operates -each region has its own organisational structure with a regional manager overseeing it -structure suits large multinational companies that operate globally so that they can focus on different regions individually -eg the coffee chain Starbucks has three geographical divisions that are based on the locations of its stores and can adjust policies to suit local market needs, but ultimately these divisions report to and follow the strategic plans set by the chief executive officer Benefits of Geographical Organisational Structure 1. React to Local Trends (if the mood of the market in one region changes, the local division can react much quicker to adapt production or marketing to suit the changes, it does not need to rely on senior management to give direction) 2. Tailor Needs to Locals (different regions have different consumer preferences, languages, cultures and ways of doing business, so operations are adjusted by the regional manager to suit, glocalization of products in which a product/service is developed and distributed globally but is also adjusted to accommodate the user or consumer in a local market eg McDonalds) 3. Logistical Improvements (if different departments are not located centrally, each location manages its own staff, resources, distribution and finance to suit the local norms and markets) 4. Competition Between Regions (senior management can set targets for each region and compare results to help motivate each region to improve sales, staff work to beat the other regions) Geographical Structure 44 Disadvantages of Geographical Organisational Structure 1. Duplication of Resources (each region has departments for sales, marketing, finance etc, this requires an increase in facilities, staffing and resources that could otherwise be provided in a centralised department) 2. Conflict Between Management (senior management might have a clear idea for a brand and strict protocols for products that do not match the demands of the regional market, leads to conflict) Controlling -the management activity of ensuring all business objectives are being met -the process of monitoring performance and comparing it targets set and correcting any deviations which arise -ensures the business stays on course to achieve its objectives as set out in its plans Control Process 1. Set Standard (reduce costs by 15%) 2. Measure Actual Performance (examine figures to measure cost reductions) 3. Compare Actual Performance with Standard Set (compare actual examined cost reduction to standard of 15%) 4. Analyse Deviations (analyse difference between 15% standard and actual reduction %) 5. Take Corrective Action (learn from mistakes in deviations, take steps to correct deviations) Benefits of Controlling 1. Goal Achievement (controlling makes sure that objectives set are being achieved, purpose of controlling is to periodically check the progress of the business to ensure that it is on target and to achieve the goals set out in planning, if the business is off target steps can be taken to correct this) 2. Reduced Costs (stock control benefits, budgetary control benefits, credit control benefits, quality control benefits) 3. Improved Cashflow (stock control benefits, budgetary control benefits, credit control benefits) 4. Higher Sales and Profits (stock control benefits, budgetary control benefits, credit control benefits, quality control benefit 45 Control Types 1. Stock Control 2. Credit Control 3. Quality Control 4. Financial/Budgetary Control Stock Control -concerned with keeping optimum stock levels so that a business doesn't have too much or too little stock -optimum stock levels lead to efficiencies because you have the right stock, in the right place, at the right time to meet production requirements and satisfy consumer demand -stock control can achieve efficiencies by eliminating the costs associated with carrying too little stock and too much stock -optimum stock level is the most economical stock level for a business -minimum stock level is the level below which it would be dangerous for stocks to fall -buffer stock is the level of stock that is maintained to avoid stockouts or shortages, also known as safety stock, and it acts as a cushion between the actual stock level and the minimum stock level -maximum stock level is the level above which stock should never go -reorder level is the level at which new orders should be made, usually just above the minimum stock level Benefits of Stock Control -firm will not lose sales, business will always have stock in the shop to satisfy customers’ needs -proper stock control ensures the business does not carry too much stock, helps the business to lower its insurance premiums -avoiding understocking means the firm will not be under-utilising existing storage space -minimising overstocking means the firm will not be wasting money on storage costs (warehouse rent, light, insurance, security) -capital will not be tied up in having too much stock on hand -no shortages of raw materials for production -firm will identify which goods are selling, which goods are subject to deterioration, obsolescence and pilferage 46 Factors in Choosing Appropriate Stock Level 1. Lead Time (average delivery time period) 2. Sales 3. Stock Costs 4. Type of Product 5. Storage Space 6. Number of Suppliers 7. Price Changes Just in Time (JIT) -a technique to control stock -aim of this system is to keep the minimum amount of stock possible in the factory while at the same time never running out -involves buying from a supplier who delivers exactly the right amount of stock at exactly the time it is going to be used in production -materials come into the factory only when needed and are used immediately to make the product -JIT requires very efficient ordering, craftsmanship, absence of machinery breakdown, steady production and delivery reliability -originated in Japan, associated with Toyota Motors Quality Control -concerned with checking, reviewing and inspecting work done to ensure it meets the required standards -effective quality control leads to efficiencies in business because it minimises the costs associated with selling faulty goods to consumers -as part of a quality control system the business may achieve a quality control symbol such as an ISO 9001 award or the Q mark 47 Quality Mark Symbols -quality symbols show consumers that a product can be trusted, the quality has been approved, products have met industry standards which should result in increased customer loyalty and satisfaction -symbol may be recognised worldwide -can be used as a marketing tool to gain a competitive advantage -can lead to increased sales -allows business to export more easily -results in savings, less wastage and less mistakes due to high quality assurances -results in better motivated employees/Job satisfaction, good for staff morale as their contribution to the firm's attainment of the quality symbol is recognized -ISO 9001 is the international standard that specifies requirements for a quality management system (QMS), organisations use the standard to demonstrate the ability to consistently provide products and services that meet customer and regulatory requirements, it is administered in Ireland by the National Standards Authority of Ireland (NSAI) -Q Mark is awarded to businesses that focus on continuous improvement and deliver high standards in quality and excellence to every consumer Quality Assurance -a system that guarantees customers that detailed systems are in place to govern quality at every stage in production from design right through sales -refers to the maintenance of a desired level of quality in a service or a product, by means of attention to every stage of the process of delivery or production Benefits of Quality Control 1. Increased Sales (quality control ensures that the business's products are consistently of the highest standard, ensures repeat purchases, leads to higher sales for the business) 2. Reduced Costs (improved quality leads to lower costs because the business does not waste money on repairing faulty products, less production wastage, reduced administration costs and less refunds) 3. Strong Reputation (firm maintains its reputation and may charge higher prices as the business may become a market leader) 48 Credit Control -aim of credit control is to make sure that all of the business's customers (debtors) pay their bills in full and on time -involves checking credit worthiness of customers, setting credit limits and periods, deciding penalties for late payments, reducing bad debts -goods are sold and payment is not made until sometime into the future thus a trade debtor is created, leading to possible risk of bad debts in which no payment is received -poor credit control leads to an increase in administrative expenses to the business and there will be shortages of cash because the business is not getting paid by customers on time -credit should only be extended to people who are regarded as good payers -a credit worthiness investigation should be carried out to establish creditworthiness Benefits of Credit Control -firm controls the amount of goods sold on credit -debtors pay debts on time -bad debts are kept to a minimum -credit worthiness of potential customers is checked in advance -good credit control will ensure that maximum cash is collected from debtors -firms will not have to rely on bank overdrafts to deal with cash shortages cash shortages Checking Credit Worthiness 1. Bank Reference 2. Trade Reference 3. Credit Bureau (a company which collects information relating to the credit ratings of individuals and makes it available to banks, finance companies) 4. Stubbs Gazette (publication that provides details of insolvencies and court actions taken against businesses and individuals in Ireland) 5. Central Credit Register (provides credit reports to borrowers and lenders, a database that stores personal and credit information on loans of €500 or more from June 30th 2017, operated by the Central Bank of Ireland) 49 Credit Control Methods 1. Assess Credit Worthiness (check credit worthiness of potential customers in advance of sales on credit) 2. Set Credit Limits (set appropriate credit limits and credit periods, draw up clear terms and conditions controlling the amount of credit and ensuring that payments are made on time eg credit limit of €5,000 and a time limit of one month) 3. Offer Payment Incentives (offer incentives such as a cash discount for early or prompt payment) 4. Efficient Credit Control (when invoicing ensure payment demands, follow up phone calls and debtor visits occur promptly to ensure payment, take legal action or threaten legal action to ensure payment, put credit facility on hold until account is cleared) 5. Bad Debt Insurance 6. Payment Policies (adopt a cash sales only policy with certain customers eg cash on delivery COD, cash with order CWO) Financial/Budgetary Control -used to monitor the financial affairs of the business to ensure it is profitable and always has enough money to pay its bills, if it cannot pay its bills it will go bankrupt -ensures overall business profitability and liquidity -being profitable will attract more shareholders and generate retained earnings that can be put back into the business so that it can expand further, this can be achieved by employing cost- control measures such as sourcing cheaper utilities and renegotiating lower wages -liquidity means ensuring the business will not run out of cash to pay off short-term debts as they arise -a business can control its finances by drawing up a budget for each department, showing the amount of money that it will be allowed to spend in the year -budget is a plan showing expected income for a period matched against estimated expenditure -projections in budgets are compared with performance to establish variances -the cause of all budgetary variances should be investigated -all business costs should be actively monitored to ensure they are minimised -cash flow forecasts can also be used to see if there are likely to be any cash deficits in the future that the business needs to arrange finance for or reduce expenditure to avoid 50 -ratio analysis can be used to measure financial performance for profit and liquidity, like the current ratio that shows a firm's ability to pay off short term debts as they arise -good financial control provides a business with an early warning of possible financial problems, so the business can avoid cash shortages as and when they arise -if the business creates a cash flow, it can try to sort out an overdraft or reduce spending before it encounters a cash deficit, reducing the risk of running out of cash