Fundamentals of management

Management

Using resources in an efficient and effective way so that the end product is worth more than the initial resources

Activity of getting other people to transform resources so the results add value to organisational goals

Advantages of management

• enables big achievement

• Increases efficiency

• Reduces waste

Disadvantages of management

• Consumes working time

• Expensive

• Pursuit of selfish goals

Ways to distinghuish managers

• By ownership - owner managers, entrepreneur

• By levels/seniority

• By relation to operations - line, specialist, project, functional

Owner managers

common but often inefficient, mainly in small firms, some have neither skills or training to manage, many start as entrepreneurs

Entrepreneurship

Identifies business opportunities in markets and exploits it, have to find resources on their own, e.g. Elon Musk

Intrapreneur

Similar to entrepreneurs but work within/for large organisations

Have access to resources through the organisation they are in, e.g. Ken Kutaragi developed playstation whilst still an engineer at Sony

Sources of obtaining money

1. Debt finance = borrowing money but it needs to be paid back with interest

2. Equity finance = raising money for a business by selling shares in the company to investors in exchange for ownership

3. Crowdfunding = directly speaking to potential customers and getting them to contribute small amounts of money to fund the business

Levels of seniority

• First line managers

• Middle

• Senior/Top

• Line manager

• Specialist manager

• Project manager

First line managers

Narrow range of responsibility, with clear objectives e.g. team leader

Middle managers

Largely responsible for liaison and coordination e.g. department heads, district manager

Senior/Top managers

Make decisions about direction of organisation e.g. president, CEO

Line manager

Directly responsible for producing particular goods/services

Specialist manager

Have line managers as their internal clients and provides services or advice, e.g. HR

Project managers

In charge of a team formed for discrete development. Once project is complete, team is disformed

Management skills

• Differs on level of seniority

• For first line managers, technical skills are necessary

• For middle managers, some human/interpersonal skills are needed

• For senior manager, conceptual/strategic/political skills are needed

Managerial motives

• Need for achievement (must win at any cost, fears failure)

• Need for power (desires control)

• Need for affiliation (demands loyalty, doesn’t tolerate disagreement)

Psychometric profiles of managers

• Intelligence tests (cognitive ability, IQ, good predictors of managerial performance)

• Personality tests (complex, difficult to measure, good predictors of managerial performance)

Organisational culture

The pattern of basic assumptions that a given group has invented/developed and therefore taught to new members as the correct way to think and feel in relation to problems

Why does org. culture matter?

• culture shapes employee behaviour and motivation

• culture affects how people interpret management actions

ASA model

• Argues that organisations are not random collections of people

• they become defined by the kinds of people who join, stay and leave

• overtime this creates and reinforces a consistent organisational culture

ASA Model : Attraction, Selection, Attrition

Attraction - people are differently attracted to careers

Selection - organisations choose those who share common attributes

Attrition - compatibles remain longer than ‘misfits’. this leads to increased homogeneity

Strong culture

• values and beliefs are consistent and coherent

• values and beliefs are comprehensive and cover most things

Weak culture

• people within an organisation have values and beliefs that are different

• values are vague or contradictory

• values are patchy

Scientific management

increased importance of management after industrial revolution. larger units, greater demand for specialised labour, costly factories and machines

Frederick W. Taylor

• father of scientific management

• workers seen as mere parts of a large machine

Lilian and Frank Gilbreth

• time and motion study

• studied hand movements of bricklayers

• eliminating repetitive or meaningless moves

• training bricklayers

• improving materials

Fordism

• known for its assembly/production line technology

• standardisation, precision

• simplicity and specialisation

• synchronisation and conveyor belt production

Processes that all managers perform

• planning

• organising

• staffing

• deciding

• controlling

• reporting

• budgeting

Principles to guide early ‘best practices’

• division of labour

• unity of command

• order

• authority and responsibility

• centralisation

• equity

Classical theorist

Max Webber

Max Webber

Provided guidelines for a rational organisation.

• specialised, clearly defined jobs

• written records of acts and decisions - equality

• increasing authority and control

• merit based selection and promotion

• management is separate from ownership

• comprehensive rules to cover all eventualities

Human relations key idea

productivity depends on social needs and informal relationships, not just money or rules

Limitations of human relations

• ignoring conflict, power and structure

• treating organisations as small, self constrained social systems

• not explaining how organisations adapt to changes in tech, markets or environments

Systems theory

the whole organisation can only work effectively if the individual parts work effectively and co-operate

Closed system

• operates in isolation to its environment

• predictable environment

Open system

• interacts with its environment via feedback loops

• complex loops

• considered as a modern theory

Contingency theory

the style of management in an organisation is contingent on organisations environment

Planning

process of specifying a future sequence of resources and actions in order to achieve organisational goals in an efficient way

Types of planning

1. mission statement

2. vision statement

3. strategy

Mission statement

• clearly describing the reason for the organisation’s existence

• often contains core values or ethics, growth expectations, targets customers/markets, products or services

• 3 or 4 sentences

• factual

Vision statement

• detail the picture of what the organisation is likely to be in the future when efficiently following its mission

• often contains core ideology, sense of direction, timeline of the vision

• 5 or more sentences

• inspirational rather than factual

Strategy

• overall master plans that outline the direction of an organisation based on its vision

• aims to guide the organisation to effectively achieve its objectives while resisting challenges from competitors

Competitive advantages

factors that place an organisation in a favourable/superior business position, e.g. cost leadership, brand recognition

Five forces of competition

• threat of new entrants

• bargaining power of buyers

• threat of substitute products or services

• bargaining power of suppliers

Methods to identify a strategy

1. SWOT Analysis (strength, weakness, opportunity, threat)

• about pairing your capabilities with external conditions to generate strategic options

2. PESTEL Analysis

• more comprehensive list of key strategic factors

• can be used to identify all SWOT features

Criticism of strategic plans

• consume time and induce rigidity

• only useful with hindsight

• psychological commitment may have detrimental consequences

• Fallacious assumptions (Mintzberg, 1994) : future can be predetermined, objectivity of the planners, the best plans come from the standard procedures. also known as directional plans

Tactical plans

• translate strategic plans into specific goals for organisational subunits, e.g. functional/intermediate plans

• a primary tool: gantt charts

Operational plans

• specify the actions or results in which individuals or small groups must achieve

• often use rules and SOPs

PERT Chart

• program evaluation and review technique

• useful when projects are complex and involve many interrelated activities

• specify and activity’s start, duration and completion point

Other plans

• single use plans: when meeting unique situations, never to be used again

• standing plans: when a task reoccurs

• contingency plans: two or more parallel plans placed in case of eventualities

Management by objectives

a system which aims to integrate all types of plans into a coherent system. key features include:

• every persons objectives are linked to those of their superior

• goals are specific

• key results are not unilaterally imposed

• action plans are produced

• performance is reviewed on a regular basis

Weaknesses of management by objectives

• distorts and organisation - less measurable aspects are equally important

• requires excessive managerial effort

• encourages lower goals due to MBO cycle

• cultural differences, e.g. work ethics

• norm of rapid change

Planning and strategy advantages

• direction and focus

• standards of performance

• speedy decisions

• context

• minimise waste

• focus on future

Planning and strategy disadvantages

• hindsight bias

• consumes management time

• induces rigidity

Practical hints

• ensure plans exist in a flexible environment which values learning and continuous improvement

• set ambitious but continuous goals

• consider realistic timescales, e.g. sick days/holidays, training, seasonal peaks, staff rotation

Organising

the process of determining who will perform the tasks needed to achieve organisational objectives, the resources to be used and the way that tasks will be managed

Job design

deciding what people are required to do as part of their job

Specialisation and division of labour

• each worker only does one part of what is needed to make a product

• develop specialised skills quickly

• no time wasted when changing tasks

• simplified jobs

Motivating job design and key characteristics

• skill variety

• task design

• task significance

• autonomy

• feedback

Authority

formal power to make decisions

empowerment

pushing authority down the organisational hierarchy

Responsibility

domain of resources over which one has authority

span of control

number of employees directly supervised

ergonomics (human factors)

• aim is to ensure jobs are suitably designed for humans to perform

• achieving safety and efficiency

Team

collection of people who invest coordinated effort towards shared common task goals by fulfilling their specified roles

Advantages of a team

• facilitates greater achievements

• allows learning of new skills from others

• satisfies affiliation/belongness needs

Disadvantages of a team

• time

• energy

• social loading (free riders)

Functional structures advantages

• high operational efficiency

• similar jobs are grouped

• clear career structure

• economies of scale

Functional structure disadvantages

• lack of loyalties to the organisation

• may create ‘functional chimneys’ and silos: don’t communicate effectively with other departments

Divisional structures advantages

• clear identification of costs, profits and products’ contribution

• dedicated facilities

• easy coordination

• managerial training ground

Divisional structures disadvantages

• duplicated facilities

• excessive autonomy

• ‘divisional chimneys’, communication problems

Matrix structues advantages

• increased coordination without duplication

• varied work allowing wide experiences

• cohesive organisation

• adaptability and flexibility due to rich contacts

Matrix structures disadvantages

• confusions with multiple bosses

• time to plan and coordination

• feelings of isolation

Network structure features

• small core team responsible for main business functions

• other functions are subcontracted

• coordination between core and outside suppliers

• rapid changes of network

• common industries include clothing, computer and publishing

Network structure advantages

• enable global manufacturing and marketing

• enable efficiency through low cost and flexibility

Network structure disadvantages

• loss of control due to the involvement of subcontractors

• employee loyalty may decrease

Why is selection important?

• performance differences are large. people in the same job do not perform equally

• cost of errors is asymmetric, false positive (hire wrong person). false negatives (reject a good candidate)

Job analysis

• systematic study of a job’s tasks, duties and responsibilities, and the knowledge, skills and abilities needed to perform the job

• produces job description

• used in selection, training, performance appraisal

Job description

what workers need to do, key results to be achieved

Personnel specification

based on the job description, specify the ‘ideal person’

employee resourcing

supply of suitable employees via recruitment and selection

recruitment

process by which companies attract qualified applicants

selection

process of choosing applicants for employment, information is obtained via screening process

what determines good selection methods

• sensitivity - ability to distinguish relevant differences between candidates

• reliability - consistency

• validity - how well scores predict relevant job performance

• fairness - not discriminating against certain groups

CVs application advantages and disadvantages

Advantages:

• easy to use

• easy to compare

• can be used repeatedly

Disadvantages

• time bound

• may not be accurate

• biased (e.g. candidates’ names)

References advantages and disadvantages

Advantages

• positive reactions

• method’s popularity

Disadvantages

• extremely full of bias

• creates expectations of candidates if read before meeting

Types of interviews

1. unstructured interviews

2. semi-structures interviews

3. structured interviews

Advantages and disadvantages of Interviews

Advantages

• widely accepted by candidates

• can extract lots of information

Disadvantages

• costly

• candidates may lie

• may induce stress

• full of bias