Nature and Significance of Management Study Guide

Learning Objectives

  • Describe the characteristics and importance of management in an organisation.
  • Explain management as an art, science, and profession.
  • Outline the various functions of management.
  • Appreciate the nature and significance of coordination in business.

Case Study: The Tata Group Legacy

  • Founding and History: Founded in 1868 by Jamsetji Nusserwanji Tata. The Tata Group is a global business conglomerate operating in over 100 countries across 5 continents.
  • Core Legacy: Jamsetji Tata's sense of values, innovation, and entrepreneurship continue to guide the group.
  • Initial Life Goals of Jamsetji Tata:
    • Setting up an iron and steel company.
    • Establishing a world-class learning institution.
    • Building a unique hotel.
    • Opening a hydro-electric plant.
  • The Taj Mahal Hotel: Built for 11 million (valued at 11 billion11\,billion in 2015 prices), it opened at the Colaba waterfront in Mumbai on 3 December 1903. It was the only hotel in India at the time to have electricity.
  • Labor Philosophy: Jamsetji believed satisfied workers create satisfied workers. He provided gratuity and provident funds voluntarily before they were legally mandated.
  • Management Evidence: His skills were evident in the minute planning and construction of the city of Jamshedpur.
  • Modern Scope (2016-17): The group includes 29 publicly-listed enterprises, including Tata Steel, Tata Motors, Tata Consultancy Services, Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan, Tata Communications, and Indian Hotels.
  • Financial Stature: The combined market capitalisation was approximately $103.51bn\$103.51bn for 2016-17.
  • Social Responsibility Examples:
    • Tata Steel Thailand: One of the first 30 companies to join UNICEF's "Child Friendly Business" in "The Children Sustainability Forum."
    • Tata Steel Europe: Operates the 'Future Generations' Community Partnership Programme focusing on education, environment, and health in the UK.
    • Environmental Standards: Manufacturing sites meet ISO 14001 standards; focus on carbon footprint reduction and high-performance steels for fuel efficiency.

Introduction to Management through Entrepreneurship

  • Case Example: Namchi Designer Candles:
    • Founder: Smita Rai, a 38-year-old from Namchi, South Sikkim.
    • Background: Skilled in wax moulds; converted a hobby into a venture to solve unemployment for local women.
    • Support: Established in August 2012 with help from Abishek Lama (Branch Manager of NEDFI, Namchi Branch) and financial institutions.
    • Workforce: 100 percent women employees.
    • Key Success: Produced customized Diwali-themed candles which saw high demand in Sikkim.
    • Awards: North East Women Entrepreneur of the Year 2015-2016; Sreemanta Shankar Mission award in New Delhi (26 April 2018).
  • The Managerial Role: Smita's daily activities (planning collections, organizing funds, recruiting, supplier communication, customer feedback) are interrelated managerial functions.

Definitions and Concept of Management

  • General Definition: Management is the process of designing and maintaining an environment in which individuals, working in groups, efficiently accomplish selected aims.
  • According to Harold Koontz and Heinz Weihrich: "Management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims."
  • According to Robert L. Trewelly and M. Gene Newport: "Management is defined as the process of planning, organising, actuating and controlling an organisation’s operations in order to achieve coordination of the human and material resources essential in the effective and efficient attainment of objectives."
  • According to Kreitner: "Management is the process of working with and through others to effectively achieve organisational objectives by efficiently using limited resources in the changing environment."
  • Three Key Terms in Management:
    • Process: Refers to the primary functions of planning, organising, staffing, directing, and controlling.
    • Effectiveness: Concerned with doing the right task and achieving goals (the end result).
    • Efficiency: Concerned with doing the task correctly at minimum cost; focuses on the input-output relationship.

Effectiveness versus Efficiency

  • Interdependence: They are two sides of the same coin but must be balanced by management.
  • Scenario 1 (Effective but not Efficient): A manager produces 5000 units target but uses double shifts and higher electricity costs due to power failure. The goal is met, but the cost is too high.
  • Scenario 2 (Efficient but not Effective): A business cuts costs significantly but fails to reach production targets, leading to a loss of market demand and competitor entry.
  • Ultimate Goal: Managers aim for high efficiency associated with high effectiveness. Poor management results from ineffectiveness, inefficiency, or both.

Characteristics of Management

  • Goal-oriented Process: Organizations exist for a basic purpose (e.g., a retail store aims to increase sales; The Spastics Society of India aims to educate children with special needs).
  • All Pervasive: Required in all types of organizations (economic, social, or political) regardless of country. Culture/tradition may change how it is done, but the essence remains.
  • Multidimensional:
    • Management of Work: Translates goals into tasks, plans, budgets, and responsibilities.
    • Management of People: Involves dealing with employees as individuals and as a group. Aims to make people's strengths effective and weaknesses irrelevant.
    • Management of Operations: Managing the production process (inputs to outputs), interlinking work and people.
  • Continuous Process: A series of composite but separate functions (POSDC) performed simultaneously and ongoingly.
  • Group Activity: Requires teamwork and coordination; aligns diverse individual needs with a common organizational goal.
  • Dynamic Function: Must adapt to external social, economic, and political factors. (e.g., McDonalds modified its menu for the Indian market).
  • Intangible Force: Cannot be seen but manifest in orderliness, target achievement, and employee satisfaction.

Leadership Insights: Jack Welch (GE)

  • Success Metrics: Appointed CEO in 1981 (13 billion13\,billion market cap); stepped down in 2000 (500 billion500\,billion turnover).
  • The Welch "Pointers":
    • Create a vision and ignite passion.
    • Focus on strategic issues and big pictures rather than minute details.
    • Involve everyone; "The hero is the person with a new idea."
    • Lead by example.
  • The Four E's of Leadership: Energy, Energise, Edge, and Execution.

Objectives of Management

  • Organisational Objectives:
    • Survival: Earning enough revenue to cover costs.
    • Profit: A vital incentive to cover risks and maintain operations.
    • Growth: Measured by sales volume, employee count, product variety, or capital investment.
  • Social Objectives: Creating economic value for society via environmental methods, employment for the underprivileged, and amenities like schools.
    • Example: ITC E-Choupal: An IT-based intervention for rural Indian farmers to eliminate middlemen and provide real-time market data.
  • Personnel (Individual) Objectives: Reconciling personal goals (salary, recognition, growth) with organizational objectives to ensure harmony.

Importance of Management

  • Achieving Group Goals: Gives direction to individual efforts.
  • Increases Efficiency: Reduces costs and increases productivity through better planning and execution.
  • Creates a Dynamic Organisation: Helps employees adapt to environmental changes and maintain a competitive edge.
  • Achieving Personal Objectives: Motivating the team to succeed collectively while meeting personal needs.
  • Development of Society: Providing quality products, creating jobs, and adopting new technology.

Nature of Management

Management as an Art

  • Definition: The skillful and personal application of knowledge to achieve results.
  • Features met by Management:
    • Existence of theoretical knowledge: Extensive literature exists on marketing, finance, etc.
    • Personalised application: Managers apply theories uniquely based on their style.
    • Based on practice and creativity: Managers gain perfection through long-term practice and innovative problem-solving.

Management as a Science

  • Definition: A systematized body of knowledge explaining general truths or laws.
  • Features Comparison:
    • Systematized body of knowledge: Uses concepts from Economics, Sociology, and Psychology.
    • Principles based on experimentation: Evolved through observation, though not perfectly predictable due to the human factor.
    • Universal validity: Management principles are not absolute laws; they are flexible and situational. It is often called an "inexact science."

Management as a Profession

  • Features:
    • Well-defined body of knowledge: Met (taught in institutes like IIMs).
    • Restricted entry: Not strictly met (no mandatory degree for all managers).
    • Professional association: Partial (AIMA exists but membership is not compulsory).
    • Ethical code of conduct: Limited statutory backing compared to law or medicine.
    • Service motive: Transitioning from pure profit-maximization to serving society.

Levels of Management

  • Top Management (Chairman, CEO, COO, President): Responsible for organizational survival, welfare, and overall strategy. It is complex and stressful.
  • Middle Management (Division Heads, Production Managers): The link between top and lower levels. Responsible for implementing plans, interpreting policies, and organizing their departments.
  • Supervisory or Operational Management (Foremen, Supervisors): Directly oversee the workforce. Maintain quality, minimize wastage, and ensure safety standards. They interact with the actual workers.

Functions of Management

  • Planning: Determining in advance what is to be done and by whom; setting goals and preparing for contingencies.
  • Organising: Assigning duties, grouping tasks, establishing authority, and allocating resources.
  • Staffing: Finding the right people for the right job (recruitment, selection, training).
  • Directing: Leading, influencing, and motivating employees to perform tasks. Key components are motivation and leadership.
  • Controlling: Monitoring performance against standards and taking corrective actions.

Coordination: The Essence of Management

  • Definition: The process by which a manager synchronizes the activities of different departments (the force that binds all functions).
  • Nature: Implicit and inherent in all functions; begins at the planning stage and ends at controlling.
  • Definitions of Coordination:
    • E.F.L. Brech: Balancing and keeping the team together through task allocation and harmony.
    • McFarland: Developing an orderly pattern of group efforts and securing unity of action.
    • Theo Haimann: Synchronizing subordinates' efforts regarding amount, timing, and quality.
  • Characteristics:
    • Integrates group efforts.
    • Ensures unity of action.
    • Continuous process.
    • All-pervasive function.
    • Responsibility of all managers.
    • Deliberate function (requires conscious effort, distinct from simple cooperation).
  • Importance of Coordination:
    • Growth in Size: Integrating the efforts of increasing numbers of diverse employees.
    • Functional Differentiation: Overcoming barriers between departments (e.g., Marketing wanting discounts vs. Finance wanting margins).
    • Specialisation: Reconciling the differing opinions and approaches of various specialists.

Case Study: Mumbai Dabbawallas

  • Achievement: Recognized as a "SIX SIGMA" business enterprise.
  • System: A complex, well-coordinated exercise starting from kitchens to office delivery using cycles and local trains.
  • Coordination Points:
    • First Dabbawalla picks up tiffin.
    • Second sorts them at the railway station.
    • Third travels with them to destinations.
    • Fourth delivers to offices.
  • Values: Punctuality and time management are primary; negligible technology usage; reliance on practice and senior guidance.

Management in the Twenty-First Century

  • Global Village: Communication technology and blurred boundaries require a global perspective.
  • The Global Manager: Needs both "hard" skills (strategy, engineering) and "soft" skills (teamwork, cultural understanding). Productivity must be maintained across diverse countries (e.g., Malaysia, Kenya, USA).

Applied Exercises: Specific Scenarios

  • Indian Railways Case: Launching solar power DEMU trains (saving 21,000 liters21,000\,liters of diesel and Rs 12,00,000Rs\,12,00,000/year) achieves social objectives (environmentally friendly) and organizational objectives (cost saving).
  • Ashita and Lakshita Performance:
    • Ashita: Produced 500 bracelets at Rs 110Rs\,110 each (Total Rs 55,000Rs\,55,000). Effective (met target) but not efficient (exceeded Rs 100Rs\,100 unit cost).
    • Lakshita: Produced 450 units at Rs 90Rs\,90 each. Efficient (low cost) but not effective (missed 500 unit target).