Transcript PRINCIPLES AND PRACTICES OF MANAGEMENT UNIT

PRINCIPLES AND PRACTICES OF
MANAGEMENT
UNIT - 2
Functions of Management
1.
2.
3.
4.
5.
Planning
Organizing
Staffing
Directing
controlling
# Planning :
Process of deciding in advance what is to be done, when
and where it is to be done, how it is to be done and by
whom.
# Organizing :
Concerned with arrangement of resources – people,
materials, technology and finance in order to achieve
enterprise objectives. Involves division of work, allocation
of authority & responsibility and coordination of tasks. As
the firm grows the importance of this function increases.
# Staffing :
Process by which organizations meet their human resource
needs including future requirements.
Man power planning, hiring, placing, training &
development, motivating & empowering, Compensating.
# Directing :
Function of guiding and supervising.
• Leadership - Process of influencing actions of a person or a
group to attain desired actions.
• Motivation - To inspire and encourage people to take
desired action.
• Communication – Transfer of information and knowledge
from one person to another.
# Controlling :
Monitoring employee activities and tracking the
performance and initiating corrective measures to
facilitate achieving organization’s goals.
Setting standards of performance,
Measuring actual performance,
Comparing with the plans
To take corrective actions.
Planning
Controlling
Directing
Managerial functions: Interrelationship
Organizing
Staffing
Planning
Everything around us is changing ! ! !
The only constant is change.
Even the rate of change is changing . . . . .
Terry said “ successful managers deal with foreseen
problems, unsuccessful managers struggle with unforeseen
problems; difference lies in planning”
Managers do not wait for future. They make the future.
They introduce original action by
removing present difficulties,
anticipating future problems,
changing the goals to suit internal & external changes,
Experiment with creative ideas,
and take initiative attempting to shape the future
and creating a more desirable environment.
Meaning –
A plan is forecast for accomplishment.
It is predetermined course of action.
It is today’s projection for tomorrow’s activity.
Based on futurity :
• Planning is a trap laid down to capture the future – Allen
• Deciding in advance what is to be done in future – Koontz
• Planning is informed anticipation of future - Haimann
• Planning is anticipatory decision making – Akhoff
As a thinking function :
• Planning is a thinking process, an organized foresight, a
vision based on facts and experience that is required for
intelligent action – Alford and Beatty
• Planning is deciding in advance what to do, how to do it,
when to do it and who is to do it. – Koontz & O’Donnel
Features of Planning:
Planning has a number of characteristics –
1. Planning is goal oriented
2. Planning is a primary function
3. Planning is all pervasive
4. Planning is a mental exercise
5. Planning is a continuous process
6. Planning involves choice
7. Planning is forward looking
8. Planning is flexible
9. Planning is an integrated process
10. Planning includes efficiency and effectiveness dimension.
Planning questions :
3. Gap ?
4. How to bridge the gap ?
( Current Status )
1. Where are we now ?
1. Where are we now ?
2. Where do we want to be ?
3. What is the gap?
4. How can we get there from here?
( Future Image )
2. Where we want to be ?
Steps in planning process:
# Planning is vital and intellectually demanding.
Requires lot of time and efforts .
Must adopt systematic approach to avoid pitfalls,
error and costly mistakes which may upset the
whole business later on.
# Systematic approach has following steps:
1. Establishing the objectives
2. Developing premises – important assumptions.
3. Evaluating alternatives and selection
4. Formulating derivative plans – plans derived for
departments, units etc
5. Securing cooperation and participation
6. Providing for follow up
- Review and course correction
- Helps develop sound plans in future
Approaches to planning :
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Top - down approach
Bottom – up approach
Composite approach
Team approach – Team of experts
Importance of planning:
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Planning provides direction
Planning provides a unifying framework
Planning is economical
Reduces risk of uncertainty
Planning facilitates decision making
Planning encourages innovation and creativity
Planning improves morale
Planning facilitates controls.
Limitations of planning:
# Planning is not panacea for all organizational ills
# Does not guarantee success because it cannot substitute for
human action and judgment.
Limitations are many –
a) Rigidity
b) Costly and time consuming
c) Employee resistance
d) False sense of security
e) Managerial deficiencies
f) Planning prevents innovation
g) External Limitations –
• Difficult to predict
• Projected too far into the future
• Environmental turbulence
• Emergency situations
Effective Planning:
Koontz and O’Donnel suggest the following steps
1. Climate
2. Top management support
3. Participation
4. Communication
5. Integration
6. Monitoring
Six rules of planning in learning organizations:
Learning organization is one – everybody is engaged in
identifying problems and solving problems enabling
organization to continuously experiment, change and
improve.
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Strong Mission
Stretch Goals
Learning Environment
Vital Information
Improvement; a way of life
Planning starts and stops at the top
Forms of planning:
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Long – range planning
Short - range planning or Operational planning
Strategic planning
Tactical planning
Formal and informal planning
Functional and corporate planning
Proactive and reactive planning
Types of planning:
Basically two types of planning –
1. Standing Plans
2. Single use plans
PLANS
STANDING PLANS
SINGLE-USE PLANS
•Objectives
•Policies and strategies
•Procedures
•Methods
•Rules
•Programs
•Schedules
•Projects
•Budget
Forecasting
A systematic way to probe the future to recognize problems
and opportunities and turn them into action plans.
Business forecasting helps in analyzing the economic,
political and market information to reduce the risks in
making business decisions.
Attempt is made to look into all the influential factors
( past and present ) effecting the organization. Based
on the analysis of these factors through statistical and
econometric techniques a reliable calculation of
probabilities about the future is made.
Essential Elements of Business forecasting:
Redfield – identified four essential elements –
1. Developing the ground work – Known and available
information regarding the growth of the company ,
industry, product lines etc are put to investigation in the
first stage. This prepares the ground work on which
future projections can be based.
2. Estimating future business –Trends are, then,
projected after careful scrutiny and analysis. Probable
trends should not be taken as absolute guides. At this
stage they are only intelligent guess.
3. Comparing with actual with estimated results - To
ward off dangers, a periodic comparison of actuals with
estimated numbers is made. Track down the reasons for
major differences unanticipated gains or losses.
4. Refining the forecast process – Above three step
process helps managers in gaining proficiency in
constructing dependable forecasting. Over a period of time
they will be able to refine, sharpen and adjust the
forecasting technique to meet the changing needs of
business.
Advantages of forecasting :
1. Forecasting is essence of planning. Forecasts are premises
or basic assumptions on which decision making and
planning are based. They supply vital facts and pertinent
information for successful planning.
2. Forecasting forces executives to look ahead, think through
the future and improve their mental faculties.
3. Helps in achieving better coordination by focusing
attention on the future. Ensures singleness of purpose to
planning and objectives
4. Reveals the weak spots of the organization and helps in
controlling where ever it lacks and improves
5. Helps identifying the environmental forces and helps in
providing for those. With out business forecasting , you
will be under mercy of future events.
Limitations :
# Forecasts are only estimates of future conditions and not
indicators of actual position.
# Future is shrouded by shadow of uncertainty.
# Because of uncertainties, a bad plan can lead to good results
and good may lead to bad results.
# It is extremely difficult to map out all future possibilities
1. Rule of thumb forecasts only : A successful forecast is
something of a miracle and often occurs for wrong
reasons.
2. Unreliable : In spite of perfection, cannot eliminate the
margin of error. That is why it often remarked “ The only certain thing about forecast is that it will be
wrong”
Techniques of Forecasting:
According to L.S.Silk three techniques are in use –
1. Deterministic technique – Assumes there is a close causal
connection between present and future. Used to forecast
elements like Capital spending, Consumer expenditure,
general business conditions etc. Following techniques are
used –
# Latest information.
# Knowledge of programs or limits.
# Spotting the beginning of a lengthy process.
# Diagnosing people’s expectations.
2. Symptomatic technique - based on assumption that
turning point in economic activity are spotted out from the
information collected on national and industry indices.
Based on these significant changes in business activity over a
period of time and based on the information collected, future
trends are predicted.
3. Systematic technique – Based on classical theory,
the cause and effect relations among different economic
factors, which hold relevance for past, present and fututre
are ascertained and forecasts then are constructed.
This method calls for training, knowledge, statistical facts,
technical skills and social and political insight. Here two
approaches are employed.
i) Intuitive Approach – Various economic factors are collected
and analyzed. The analyst, using judgment and experience,
summarizes the main factors draws inferences and then
constructs various forecasts.
ii) The econometric approach – Economic models are more
rigorous and scientific. Wisdom in economics, mathematics,
statistics and accounting is required. These models express
relationship among number of variables.
Exa. – Demand for new cars in coming year might be a
function of current year income levels, development of new
cars in the previous years, cost of existing models during last
two or three years, duty structures etc. Such relations can be
stated in mathematical terms demand and sales forecast for
new cars can be made.
Economic Forecasting Methods:
Economic forecasting is common type of external
forecasting. The basic aim is to predict business
fluctuations i.e. fluctuations in general economic activity.
Depending on the nature of business these fluctuations
affect the business.
How to do economic forecast ? Indicators such as interest
rates, stock prices, level of employment etc. are used for
forecasting economic activity of the nation.
Single most important indicator is GNP, which is value of
goods, services produced in the country in a year.
Following methods are used –
1. Extrapolation – Extending the past trends into future.
These forecasts ignore factors like fluctuations and abrupt
changes.
2. Lead and lag method – Historic behavior of various
indicators are studied. Purpose is to find out whether the
indicator regularly moved in advance (lead group), has
moved simultaneously ( Coincident group), or has lagged
behind ( lag group).On this basis forecasts are made
3. Econometrics – Variable are joined in a series of
mathematical equations. Then forecasts are made on the
basis of assumptions developed from these equations.
Decision Making
# Decision Making is an important part of management
process.
# All managers take decisions and therefore covers every part
of the organization.
# Managers look for problems and make decisions for solving
them. Good decision making is vital for good management
because performance of the organization depends on the
quality of decision making.
# Decision making is not easy due to ever changing factors,
unclear & incomplete information and conflicting point of
views.
A decision is a choice made from available
alternatives.
Characteristics of decision making
# Goal oriented
# Alternatives – Search and Choice
# Analytical & intellectual - It is both intuitive and
deductive logic. Contains conscious and unconscious
aspects. Part of it can be learned, but part of it depends upon
personal characteristics of decision maker.
# Dynamic process – Characterized as process, rather than
as an event. – exa: Hiring people.
# Pervasive function – Covers every part of an enterprise.
# Continuous activity – not a one time deal. Manager
decides things on a continual and regular basis
# Commitment of time, effort and money
# Human and social process – Involves intellectual
abilities, intuition and judgment. Exa: during hard times
firing employees.
# Integral part of planning – Koontz says “ decision
making is the core of planning”
Types of decisions
• Basic and routine decisions - Basic decisions are
concerned with unique problems or situations. Such as
launching new product/ technology, large investments are
non routine nature. Requires creativeness, intuition and
good judgment. They are strategic decisions affect future
of the organization.
Routine decisions repetitive in nature. Generally
concerned with short time commitments.
• Personal vs Organizational decisions - Personal
decisions are to watch TV, to study or retire early etc.
They effect the organization in an indirect way. Sudden
decision of a popular singer may effect film industry.
Organizational decisions are made by managers in their
official capacity. Unlike personal decisions, organizational
decisions can be delegated. These decisions are aimed at
furthering the interests of the organizations. Managers
operate in open environment and so the results are open to
public view.
• Programmed and unprogrammed decisionsProgrammed is the one that is routine and repetitive. Rules
and policies are established to solve recurring problems. As
per pre-established set of alternatives, programmed
decisions can be made. Routine procedures leave little
room for choice. Judgment cannot be used and freedom is
affected.
Non programmed decisions deal with unique/ unusual
problems. Decisions are taken in a poorly structured
situation, where no pre existing ready solutions.
Decisions such as Acquiring sick units, locating new
companies etc.
They are novel and non-recurring
They are made by higher level managers only.
They need be creative when solving infrequent problems.
Decision making process
Awareness
of Problem
Diagnose &
state the
problem
Develop the
alternatives
Evaluate the
Alternatives
Select the
best
alternative
Internal Environment
Feedback
External Environment
Basic steps of Decision Making
Implement
and verify
the decision
Organizing
“Organization” the term used in many ways.
• A group of people united by a common purpose
• An Entity, on going business unit engaged in utilizing
resources to create a result
• A structure of relationships between various positions in an
enterprise
• A process by which employees, facilities, tasks are related to
each other, with a view to achieve a specific goal.
Organization as structure :
# Structure is essential for achieving goals.
#The manager determines the work activities, writes job
descriptions, puts people into groups and assigns them to
superiors. Then goals are fixed, time lines are decided and
establishes performance standards. Controlled through a
reporting system. The structure takes the shape of pyramid.
# It reveals the pattern of relationships among the parts of the
organization.
Organization has following features:
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Two or more persons
Common goals
Cooperative efforts
Division of work
Communication
Rules and regulations
Pyramidal shape
Organization as a process:
# Organizing is a process by which employees,
facilities and tasks are related to each other.
# According to Allen Organizing is the process of
identifying and grouping the work, defining and
delegating responsibility and authority and
establishing relationships for the purpose of
enabling people to work effectively to accomplish
objectives.
The process of organizing involves following steps –
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Identify the work.
Grouping the work
Establishing relationships
Delegating authority
Providing for coordination and control
There are many types of organizations Economic, Political, business, Service,
Government, Religious, social organizations.
Organization structures:
# Graphic representation of a firm’s structure. A
plan of working relationship.
# It shows who to do work, who is to supervise and
direct.
# Also shows division of work. Flow of work and
responsibility for its achievement.
The Charts :
# Depict organization’s formal structure &
relationship.
# Do not insure good organization or good
management.
# Essentially illustrates who reports to whom
# Shows designation of individuals and no names
appear.
# Do not show human relationships. Like a snapshot
and a static model of dynamic and living process.
Types of organization charts:
Basically three types of charts exist –
1. Vertical charts –
CEO
2. Horizontal Charts.
CEO
3. Circular Charts
CEO
Organization Design and Classical theory
# Organization design refers to managerial decisions
that determine the structure and processes. Those
in turn coordinate and control the jobs in an
organization.
# Design is system of jobs and work groups including
the processes linking them. These processes
include authority relationships and
communication networks.
# In effect, organization design implies the creation
of super structure within which the work of the
organization takes place.
Classical Theory ( Taylor, Fayol, Weber ) :
• Organization to be build around the work to be
done.
• The work must be logically divided into simple,
routine and repetitive tasks – division of labor.
• These tasks must be grouped according to similar
work characteristics – departmentation
• Departments arranged in an organization
structure in which executive has subordinates
reporting directly to him- span of control
• Command should flow top to bottom in a chain –
Scalar chain
• Every one should have only one boss – unity of
command
• Work must be assigned to individuals based on job
demand and the individuals ability – delegation and
decentralization
Organizations must rely on these universal design
principles while structuring activities.
Challenges to Classical approach
# Classical approach for organizing and managing may not
work in all situations.
• Fayol’s principles do not guarantee success.
• Organizing more than just following rules that Taylor has
stressed.
• Weber’s bureaucracy source of inefficiency.
Other challenges are
• Bottom – up authority : Further studies have opened up
new ideas – upward communication informal relations
based on friendship.
• Closed system - lead to open organizations.
CLASSICAL ORGANIZATIONS
MODERN ORGANIZATIONS
•Closed system
•Stable environment
•Division of labor and specialization
•Centralization
•Use of authority to get results
•Rigid rules and precise role
requirement
•Command to extract obedience
•Communication: one way street
•Maintenance needs
•Tight control – to achieve goals
•Autocratic approach
•Negative environment: robs
employee of freedom and motivation
to work
•Open system
•Dynamic environment
•Job enlargement and job enrichment
•Decentralization
•Free form of org. structure
•Consensus
•Flexibility and adaptability
•Participation to achieve ends
•Communication: open and
multidirectional
•Motivational needs
•Emphasis on goals: MBO
•Democratic approach
•Positive work environment : supportive
of the feelings, beliefs and values of
people.
Contingency theory and org. Structure
# Puts emphasis on organizing on a number of
variables.
# This theory says there is no best way to organize.
And there is no one pattern of organization style
that universally appropriate.
# The design is conditional.
Therefore the organization may be contingent
(Something uncertain, may happen)upon many
factors – product of many forces internal and
external
Forces in the manager
(strategy)
Forces in the
task
Forces in the
subordinates
Forces in the
environment
Contingency Theory - Factors
# Strategy and structure
# Size and structure
# Technology and structure
# Environment and structure
# People and structure
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