BCM 1205 Principles of Management Comprehensive Study Guide
Administrative Information and Exam Structure
Institution: Strathmore University, Strathmore Business School.
Program: Bachelor of Commerce.
Subject: BCM 1205: Principles of Management (Group D Nov - Mar ).
Assessment Type: End of Semester Exam.
Exam Date: March .
Duration: Hours.
Structure:
The examination consists of questions.
Question One is COMPULSORY (totaling marks).
Students must answer any other questions (totaling marks each).
Total marks for the paper: marks.
Management by Objectives (MBO) Process
Management by Objectives is a strategic management model that aims to improve the performance of an organization by clearly defining objectives that are agreed to by both management and employees.
The Systematic Process of MBO
Setting Organizational Objectives: The first step is the creation of overarching organizational goals derived from the company’s mission and vision. These are typically set for a specific period (e.g., year).
Cascading Objectives to Employees: Top-level goals are translated into specific objectives for each department and individual. This ensures alignment throughout the hierarchy.
Participative Decision Making: Managers and employees sit down together to define the objectives. This collaborative approach increases employee commitment to achieving the targets.
Continuous Monitoring and Progress Tracking: Objectives must be measurable. Management establishes a system for regular performance reviews to ensure that everyone is moving toward the goal.
Performance Evaluation: At the end of the period, the actual performance of the employee is compared against the set objectives. This is an objective analysis rather than a subjective one.
Feedback and Reward: Constructive feedback is provided. Employees who meet or exceed their objectives are rewarded with incentives, promotions, or recognition.
Henri Fayol’s Administrative Management Principles in SMEs
Henri Fayol, often known as the 'Father of Modern Management,' proposed principles. In the context of Small and Medium Enterprises (SMEs), these principles help establish structure and order.
Division of Work: Specialization allows workers to gain experience and improve skills, thereby increasing productivity. In an SME, this might mean separating accounting from sales.
Authority and Responsibility: Managers must have the authority to give orders, but this authority must come with the responsibility for the outcome.
Discipline: Employees must obey and respect the rules that govern the organization. This requires good supervision at all levels.
Unity of Command: Every employee should receive orders from only one superior to avoid conflicting instructions and confusion.
Unity of Direction: The entire organization should be moving toward a common goal under a single plan and one head.
Subordination of Individual Interest: The interests of any one employee or group should not take precedence over the interests of the business as a whole.
Remuneration: Compensation should be fair and provide maximum possible satisfaction to both employees and the employer.
Centralization: This refers to the degree to which subordinates are involved in decision-making. In many SMEs, centralization is often high as the founder makes major decisions.
Scalar Chain: The line of authority from top management to the lowest ranks. Communications should follow this chain, though 'gang planks' (direct communication) can be used for speed if authorized.
Order: Resources (human and material) should be in the right place at the right time.
Equity: Managers should be kind and fair to their subordinates.
Stability of Tenure of Personnel: High employee turnover is inefficient. Management should provide job security to improve morale.
Initiative: Employees should be encouraged to conceive and carry out plans.
Esprit de Corps: Promoting team spirit will build harmony and unity within the SME.
The Limitations and Critiques of Planning
Planning is a fundamental management function, but it is not a panacea for all organizational issues. The statement "Planning is not a solution for all organizations' problems" highlights several drawbacks:
Rigidity: Once a plan is set, managers may become inflexible, following the plan even when internal or external circumstances change.
dynamic Environment: In a rapidly shifting market, plans can become obsolete quickly. Predictions about the future are never accurate.
Stifles Creativity: Strict adherence to a plan may prevent employees from taking initiative or finding innovative solutions to problems as they arise.
Time and Cost Consumption: Planning requires significant time, effort, and financial resources for data collection and analysis, which may not always result in a proportional benefit.
False Sense of Security: Having a plan can lead managers to believe they have full control over the future, causing them to neglect real-time threats or opportunities.
Political-Legal Factors in East African Business Management
External factors heavily influence organizational success. In East Africa, managers must navigate several political-legal variables:
Taxation Policies: Variations in corporate tax, Value Added Tax (VAT), and import/export duties across the East African Community (EAC) impact profitability.
Labor Laws: Regulations regarding minimum wage, working hours, and health and safety standards must be strictly followed to avoid legal penalties.
Political Stability: Civil unrest or changes in government can lead to economic volatility, affecting investor confidence and supply chains.
Trade Agreements: The rules governing the EAC Common Market affect the movement of goods, services, and labor between countries like Kenya, Uganda, and Tanzania.
Licensing and Bureaucracy: The process of obtaining business permits and the efficiency (or lack thereof) of the legal system in enforcing contracts.
Non-Financial Motivation Strategies
When employees are paid well but remain demotivated, managers should look beyond financial compensation to improve performance:
Job Enrichment: Adding higher-level responsibilities to a job to make it more challenging and rewarding.
Autonomy and Empowerment: Giving employees the freedom to make decisions regarding their own work processes.
Recognition and Praise: Implementing 'Employee of the Month' programs or simple verbal/written acknowledgments of good work.
Flexible Working Arrangements: Allowing for remote work or flexible hours to help employees achieve a better work-life balance.
Opportunities for Training and Development: Showing employees a path for career growth through seminars, workshops, or mentorship programs.
The Organizational Control Process
Control is the process of monitoring activities to ensure that they are being accomplished as planned. It involves four key steps:
Establishing Standards: Defining the benchmarks or performance targets that need to be met (e.g., a sales target of units per month).
Measuring Actual Performance: Collecting data on the current state of operations. This can be done through personal observation, statistical reports, or oral/written reports.
Comparing Actual Performance Against Standards: Identifying deviations. If the actual performance matches the standard, no action is needed.
Taking Corrective Action: If there is a significant negative deviation, managers must intervene to fix the problem or, in some cases, revise the standard if it was unrealistic.
The Hawthorne Studies by Elton Mayo
The Hawthorne Studies, conducted at Western Electric's Hawthorne Plant in the late and early , revolutionised management theory.
Major Findings
The Hawthorne Effect: The discovery that workers' productivity increased simply because they were being observed and felt that management cared about their well-being.
Social Factors: Work is a group activity. Social norms and informal group dynamics have a greater impact on productivity than physical working conditions (like lighting).
Non-Economic Rewards: Workers are not solely motivated by money; social status and belongingness are critical drivers.
Relevance to Modern Management
It shifted focus from the Scientific Management (industrial) approach to the Human Relations movement.
Modern HR practices, such as team-building and employee wellness programs, are rooted in these findings.
Matrix Organization Structure
A matrix structure is a hybrid organizational form that overlays a divisional or project-based structure onto a functional one.
Structure Characteristics
Dual Reporting: Employees report to two managers—a functional manager (e.g., Head of Engineering) and a project or product manager.
Diagram Concept: A grid where columns represent functions (Marketing, Finance, HR) and rows represent projects (Project A, Project B).
Advantages
Resource Sharing: Specialists can be moved between projects as needed.
Expertise: Combines the benefits of functional expertise with the focus of project management.
Communication: Facilitates efficient information flow across different functions.
Disadvantages
Role Confusion: Having two bosses can lead to conflicting orders and stress.
Power Struggles: Competition for resources between functional and project managers.
Meeting Heavy: Requires significant coordination and frequent meetings.
Qualities of Transformational Leaders
Transformational leaders inspire followers to transcend their self-interests for the good of the organization and are capable of having a profound effect on their followers.
Inspirational Motivation: They communicate a clear, compelling vision of the future that inspires and motivates others to perform.
Idealized Influence (Charisma): They act as role models, earning the trust and respect of their followers through high ethical standards.
Intellectual Stimulation: They encourage followers to be creative and innovative, challenging the status quo and existing assumptions.
Individualized Consideration: They treat each employee as an individual, acting as a mentor or coach to help them reach their full potential.
Visionary Thinking: The ability to see long-term trends and prepare the enterprise for future challenges.
Fundamental Management Terminology Distinctions
Efficiency vs. Effectiveness:
Efficiency: Refers to doing things right; the ratio of outputs to inputs (). It focuses on minimizing resource waste.
Effectiveness: Refers to doing the right things; the degree to which an organization achieves its goals.
Responsibility vs. Accountability:
Responsibility: The obligation to perform assigned tasks or duties.
Accountability: The requirement to report and justify task outcomes to those higher in the chain of command; the "buck stops here."
Span of Control vs. Chain of Command:
Span of Control: The number of subordinates a manager can effectively and efficiently supervise.
Chain of Command: The continuous line of authority that extends from upper organizational levels to the lowest levels and clarifies who reports to whom.
Job Enlargement vs. Job Enrichment:
Job Enlargement: Increasing the scope of a job by adding more tasks at the same level of difficulty (horizontal expansion).
Job Enrichment: Increasing the depth of a job by adding planning and evaluating responsibilities (vertical expansion).
Formal vs. Informal Organizations:
Formal Organization: The officially sanctioned structure of an organization, characterized by a set of rules and a hierarchical chart.
Informal Organization: The social structure that forms naturally within the formal structure, based on personal relationships, shared interests, and social networks.