Business - 3.2

what managers do

1. planning - setting objectives and analysing etc.

2. directing - leading and communicating with employees

3. organising - assembly the human and other resources needed

4. controlling - reviewing and reporting on business performance

what may planning involve (managers)

1. setting objectives over which the manager has control or responsibility

2. gathering and analysing data and producing forecasts and budgets of cash flow, revenue, expenditure and profit (= consumers data like income etc.)

3. drawing up plans for functional areas like marketing, production, finance and HR

4. estimate resources necessary for future plans e.g. staff training

contingency planning

plans for unexpected events (must be flexible due to internal and external factors changing them) e.g. fire drills

what does organising involve (managers)

resources needed to fulfil plans will be available in the right quantities at the right time - crucial to be efficient and remain competitive

what does directing involve (managers)

1. ensuring staff are sufficiently motivated to achieve the targets and goals set - highly motivated employees = more productive (monetary or non-monetary methods)

2. ensure communication is effective and clear instructions are given e.g. praise

what does controlling involve (managers)

1. produce financial reports which detail revenue, costs and profits - must then report on performance

2. monitor employee performance such as productivity, absenteeism and training

3. monitor social performance like operating in an ethical manner

managers vs leaders

• MANAGERS: carefully plan and ensure all the day to day running of the business is carried out effectively to ensure objectives are met

• LEADERS: visionaries - not involved in day to day running of the organisation

McGregor’s Theory X

managers will be highly controlling (as believe employees are ‘resources’ which must be exploited

• Hard HRM

advantages of Theory X

1. decisions made quickly as told what to do

2. more likely to meet deadlines - good in high pressured environments

3. workers are clear what they need to do

disadvantages of Theory X

1. high staff turnover - recruitment costs are high

2. poor relationships between managers and employees

3. workers may feel ignored

4. no development or promotion prospects

5. can be expensive - workers only motivated by money

McGregor’s Theory Y

managers have a much more trusting approach (as thought employees enjoy work) and actively provide opportunities for workers to become involved and take responsibility - delegates

• Soft HRM

advantages of Theory Y managers

1. employees feel valued/listened to

2. works well where staff need to innovate

3. less stressful for employees

4. promotion and development prospects

disadvantages of Theory Y

1. high trust form which can be taken advantage of

2. low skilled employees may not find this management style useful

3. decision making can take time - not useful when emergency

authoritarian management and leadership

• wish to retain power and control over workers

• lines of communication likely to be one way from top to bottom

• dictatorial - formal systems and strict controls

advantages of authoriarian

1. decisions is quick - deadlines will be met

2. instructions clear - employees know what to do

3. good for high risk environments e.g. army

disadvantages of authoritarian

1. employees cannot use their own initiative - skills not used

2. no promotion or development prospects

3. bad for creative jobs or highly educated staff

4. high staff turnover so recruitment costs high

paternalistic management and leadership

• managers consult employees but ultimately resides with the managers alone

• will fully explain the reasons for their decision to the staff

• regards workforce as a family so welfare of individual workers is paramount

advantages of paternalistic

1. employees feel valued and motivated

2. low staff turnover so lower recruitment costs

3. good for family businesses

disadvantages of paternalistic

1. staff may feel overlooked

2. managers are not good at making tough decisions e.g. involving redundancies of staff

democratic management and leadership

• consultative - workers are asked to participate fully in decision making

• two way communication to provide feedback

• decisions based upon majority

advantages of democratic

1. employees feel valued - increasing motivation as opinions heard

2. decision making no longer rests on one person as it is collective

3. lower labour turnover

disadvantages of democratic

1. employees may lack experience/knowledge necessary

2. takes time as is a discussion - limitation if emergency

3. employees may feel annoyed if the decision goes against their wishes

laissez-faire management and leadership

• ‘hands-off’ approach - minimal input in decision making - left to staff

• delegation is essential but little focus or coordination

advantages of laissez faire

1. employees not micro-managed so less pressure

2. good where staff are highly educated e.g. solicitors as dealing with their own case load

disadvantages of laissez faire

1. deadlines may not be met

2. involves high trust which may be abused

3. lack of direction for new members of team

4. not good in emergency situations as no lead

5. good work not acknowledged

consultative managemet and leadership

• consults workers for their opinions and considering their viewpoints

• manager ultimately makes the final decision

advantages of consultative

1. employees feel valued/listened to

2. decision making improved as alternate viewpoints

3. labour turnover lower

disadvantages of consultative

1. time consuming

2. doesn’t work well where employees are low skilled etc.

3. may resent the fact managers make final decision - over-ruled

Tannebaum-Scmidt continuum

autocratic → paternalistic → consultative → democratic → laissez faire

LEVEL 1 (Tannebaum-Schmidt continuum)

team play no active role in decision making and the manager expects the team to carry out their instructions (‘TELL’ - manager makes the decision)

• effective when team may be new/inexperienced

LEVEL 2 (Tannebaum-Schmidt continuum)

‘SELL’ - Manager makes the decision and then explains/sells it to the team so benefits from thoughts of workers but manager in control

LEVEL 3 (Tannebaum-Schmidt continuum)

‘CONSULT’ - Manager makes decision and then invites questions so can discuss rationale and listen to subordinates which provides opportunities for staff to participate

LEVEL 4 (Tannebaum-Schmidt continuum)

‘CONSULT’ - manager suggests provisional decision and then invites discussion and then manager makes final decision - team influence decision and so feel more valued and listened to

LEVEL 5 (Tannebaum-Schmidt continuum)

‘CONSULT’ - manager presents problem and then consults with team and then make decision - team have higher level of influence so useful if experienced and have detailed knowledge

LEVEL 6 (Tannebaum-Schmidt continuum)

‘SHARES’ - manager explains situation and so shares the decision making - delegated responsibility but still has some control as set limitations - team has more freedom but manager may still have the final decision

LEVEL 7 (Tannebaum-Schmidt continuum)

‘SHARES’ - allows the team to identify the problem, develop options and make decisions with no limits - team must be experienced and skilled but manager supports and helps implement decision made

How does company structure and span of control influence management and leadership styles?

• tall structure = more likely to be centralised, control is high and more likely to be autocratic (flat structure = opposite)

• narrow span of control = more likely to rest decision making with manager rather than subordinates (wide span = opposite)

How do external factors influence management and leadership styles?

• rival firms attempting to take over, natural disaster or dangerous faults etc. = authoritarian, task orientated decision making is required

• situation is stable + well trained and experienced staff = democratic styles

How does culture influence management and leadership styles?

• ‘way things are done’ - if staff used to autocratic styles then another approach may not be welcome

• hard to impose different styles of management

How does the nature of the task influence management and leadership styles?

• complex/simple/urgent/optional etc.

• e.g. extremely high risk environment = more likely autocratic styles

How do the employees (+ their skills) influence management and leadership styles?

more skilled and experienced = more independence they may want = more democratic styles

How does the group size influence management and leadership styles?

if the team is large, unskilled and inexperienced = more authoritarian

How do managers (skills/personality) influence management and leadership styles?

if poor interpersonal skills = more autocratic and task focused

How does time frame influence management and leadership styles?

emergency situation = authoritarian style of management as may be effective to ensure all staff remain focused and complete task to deadline

Stages important to decision making

1. setting objective - shows success

2. gathering + interpreting information - includes costs + revenue + adv + disadv of alternative decisions (helped by technology)

3. implementing the decision - allocate resources

4. reviewing - assess effectiveness to improve future decisions

programmed decisions

deal with familiar problems and the information required to make these decisions is readily available (usually have established rules/procedures/practices) e.g. placing a repeat order

non-programmed decisions

deal with unfamiliar situations which are unstructured, requiring unique solutions (may be risky and require a great deal of expertise)

strategic decisions

what the business is going to do - involves major commitment of resources and the risks are high (made by senior managers and generally over the longer term)

tactical decisions

how the business is going to achieve it - involve fewer resources and can simply involve reordering stock etc. so carried out by lower/middle management

strategic plans

ensure long-term effectiveness and growth (usually two or more years and primarily done by top management)

tactical plans

used as a means of implementing strategic plan over a short-term (primarily done be middle management)

opportunity cost

the benefit foregone by not choosing the next best alternative course of actions

quantitative decision making

involves numbers and structured information (scientific decision making)

• data gathered from the internet, customer surveys business records etc.

• e.g. the Nectar card - shows purchasing habits

benefits of quantitative decision making

useful when data is available and not too expensive to collect and analyse

limitations of quantitative decision making

not all data is reliable e.g. hard to gather views on unfamiliar products

qualitative decision making

where managers base their decision on a hunch/intuition which is off of opinion and experience

benefits of qualitative decision making

appropriate if not available or inaccurate and may catch customer attention

limitations of qualitative decision making

may be insufficient time to gather and analyse data and decisions involving the selection of business partner may be based on personality

decision trees

a mathematical model which can be used by managers to help them make the right decision

expected value

probability x income generated

net gain

expected value - cots associated

advantages of decision trees

• makes manages think about the different options available

• may result in a more logical and less rushed process based on evidence rather than gut feeling

• forces the manager to quantify the impact of each decision considering the forecast costs, benefits and profitability's of events

disadvantages of decision trees

• only includes financial and quantifiable data

• use estimates of the profitability of different outcomes and their financial consequences and so value of analaysis depends on this

• estimates making them open to manipulation by managers determined to achieve the desired outcome

• not effective when broad range of possible outcomes or cannot be easily quantified

• less useful for non-programmed or strategic decisions where it is unfamiliar

How do objectives influence decision making?

mission sets out broad purpose so decisions must follow this + must help achieve objectives in specified time scales

How do ethics influence decision making?

do what is morally right and don’t simply choose a course of action which maximises profits - may attract bad publicity

How does risk influence decision making?

non-programmed decisions are high risk and so managers may want to limit these by gathering data and analysing results whereas low risk programmable decisions are more likely to be done quickly

How does the external environment influence decision making?

includes competition, consumers’ income, interest rates, demographic factors and environmental issues which can all increase uncertainty so may delay until situation improves

How do resource constraints influence decision making?

all decisions need resources like time, labour, money and equipment so must ensure these are available

• if huge financial risk - manager more likely to take time analysing the correct decision

stakeholders

individuals or groups within society who have an interest in the organisation’s operation and performance e.g. local communities, suppliers, government agencies, shareholders, employees, customers

primary stakeholders

individuals or groups that are affected by a particular business activity e.g. suppliers, customers, employees

secondary stakeholders

groups of individuals or organisations with an indirect functional or financial relationship with the business e.g. local communities

internal stakeholders

those who are considered to be part of the organisation e.g. managers, employees, shareholders

stakeholder map

stakeholder mapping uses

• help managers consider which stakeholders will be affected by a decision made and then how to address these needs

• allows the manager to consider whether or not certain stakeholders need to be consulted or involved in the decision making process itself

STAGE A of stakeholder mapping

minimal effort (LOW INTEREST, LOW POWER) → not powerful meaning managers do not have to worry about this group and only need to update stakeholders using general communications like company website

STAGE B of stakeholder mapping

keep informed (HIGH INTEREST, LOW POWER) → e.g. local communities → managers only need to keep this group informed but careful management may enhance reputation

STAGE C of stakeholder mapping

keep satisfied (LOW INTEREST, HIGH POWER) → e.g. institutional shareholders → managers must enhance and consult to try increase interest, generate positive publicity and gain their different perspectives and expertise

STAGE D of stakeholder mapping

key players (HIGH INTEREST, HIGH POWER) → e.g. key managers → must be consulted and involved in discussions as have the power to directly influence the outcomes of decisions

How do business objectives influence relationships with stakeholders?

e.g. a company committed to pursuing ethical or social objectives would give a high priority to meeting the objectives of as many stakeholders as possible whereas one that focuses on maximising profits may drive to minimise costs which would result in outsourcing production, upsetting employees etc.

How do management and leadership styles influence relationships with stakeholders?

• autocratic = unlikely to consider the needs of employees when making decisions and unlikely to foster good relationships with the local community

• democratic = likely to receive more support from employees as open two-way communication

How does size and ownership of the business influence relationships with stakeholders?

• small businesses = easier to communicate and involve stakeholders in decisions as fewer of them (sole traders)

• large businesses (PLCs) = different relationships which if upset, may lead to a poor reputation

How do market conditions influence relationships with stakeholders?

• the potential for growth may mean businesses deliberately opt to engage more with customers, employees etc. to gain a competitive advantage and improve reputation

• dominant businesses may also be able to exploit businesses by high prices e.g. the big 6 suppliers of gas + electricity and suppliers by threatening withdrawal of their custom

How does the power of stakeholder groups influence relationships with stakeholders?

influence activities and success of a business e.g.

• large shareholders may make managers consider the outcomes of decisions more

• actively seek to avoid becoming too reliant on a certain customer or supplier for fear that could gain too much influence

How do government policies influence relationships with stakeholders?

uses laws and less formal codes of conduct to ensure relationships wit stakeholders are as harmonious as possible e.g. during privatisation made customers weren’t overcharged

stakeholder engagement advantages

may reduce stakeholder conflict through managers effectively communicating and involving stakeholders in decision making (use stakeholder mapping)

partnership as a way of stakeholder management

involves the stakeholder group in decision making (sharing responsibility) meaning a high amount of two-way communication - most suitable for stakeholders that have high volume of resources

participation as a way of stakeholder management

stakeholders part of the relevant team in decision making and have responsibility to implement that part of a decision or activity - suitable for high power, low interest and high power, high interest

consultation as a way of stakeholder management

finding out the views of the relevant stakeholder groups within guidelines set by the business - expected to respond to questions but have limited power to influence decisions

push communication as a way of stakeholder management

one way communication from the business to the relevant stakeholder groups through emails, podcasts, letters etc.

pull communication as a way of stakeholder mapping

the business communicates with the stakeholder groups only if they choose to communicate with the business e.g. may have details of stakeholders on their database and ‘pull’ info out of system and send letters etc. to them but requires stakeholders to reply