The Nature of Management (Chapter 6)

Chapter 6: The Nature of Management

Learning Objectives

After reading this chapter, you will be able to:

• LO 6-1: Explain management’s role in the achievement of organizational objectives.

• LO 6-2: Describe the major functions of management.

• LO 6-3: Distinguish among three levels of management and the concerns of managers at each level.

• LO 6-4: Specify the skills managers need in order to be successful.

• LO 6-5: Describe different leadership styles.

• LO 6-6: Summarize the systematic approach to decision making used by many business managers.

The Importance of Management

Management is defined as a process designed to achieve an organization’s objectives by using its resources effectively and efficiently in a changing environment. The two key components of management are:

• Effectively: Achieving intended results.

• Efficiently: Accomplishing objectives with minimum resources.

Managers make decisions about resource use and are concerned with the organization's planning, organizing, directing, and controlling activities necessary to reach its objectives. Management is necessary not only in businesses but in all types of organizations (e.g., government, military, schools).

Key Resources Needed for Achievements

For an organization to achieve its objectives, it requires:

• Resources: People, services, raw materials, equipment, finances, information.

• Employees: To make and sell products.

• Financial Resources: To purchase goods and services and pay employees.

Staffing: Involves hiring individuals to carry out work, determining the skills needed for specific jobs, how to motivate and train them, and preparing them for higher-level jobs.

Downsizing: Refers to the elimination of a significant number of employees from an organization, a process that many companies had to undertake during the COVID-19 pandemic.

Functions of Management (LO 6-2)

Management involves several key functions:

1. Planning: Process of determining the organization’s objectives and deciding how to accomplish them. It lays the groundwork for other management functions. It answers the questions of what needs to be done, by whom, where, when, and how.

   • Plans can be strategic, tactical, or operational.

   • Strategic Plans define long-range objectives (1 year or longer).

   • Tactical Plans are short-range plans that support the strategic plan (usually under 1 year).

   • Operational Plans specify actions for individuals, work groups, or departments (very short term).

   • Crisis Management (Contingency Planning): Involves planning for potential disasters to maintain operations during crises.

2. Organizing: Structuring resources and activities to accomplish objectives efficiently and effectively, creating synergy, establishing lines of authority, and improving communication.

   • In modern contexts, organizations often use team structures instead of traditional departments.

3. Directing: Motivating and leading employees to achieve organizational objectives. This includes telling employees what to do, encouraging them, and providing rewards for their performance.

4. Controlling: The process of evaluating and correcting activities to keep the organization on course.

   • Involves measuring performance, comparing it with standards, identifying deviations, investigating causes, and taking corrective action.

Levels of Management (LO 6-3)

Organizations typically have three levels of management:

1. High-Level Management: Includes the president, CEO, and other top executives responsible for overall direction and key strategic decisions (e.g., whether to enter a new market).

   • CEO Tim Cook of Apple and CEOs of large firms command significant salaries and benefits packages.

2. Middle Management: Responsible for tactical planning, implementing high-level strategies. Generally covers department heads, division managers, and functional area leaders.

   • Focuses on organizing and executing plans set by high management.

3. Front-Line Management: Supervisors responsible for overseeing day-to-day operations and directly managing employees (

   • Examples include foremen and office managers.)

Each management level focuses on a mix of the management functions, but the priorities differ:

• High-Level Managers: Primarily planning and controlling.

• Middle Managers: More focused on organizing.

• Front-Line Managers: Directing and controlling.

Skills Required for Managers (LO 6-4)

Managers must possess certain skills to be effective:

1. Technical Expertise: Specialized knowledge based on training; crucial for front-line managers but less so for executives.

2. Conceptual Skills: The ability to see how parts fit into the whole and think abstractly; vital for high-level managers.

3. Analytical Skills: Critical to recognizing issues and understanding their interrelationships; essential for all managers but key for higher levels.

4. Human Relations Skills: The ability to manage people; essential for successful interactions within and outside the organization.

Leadership Styles (LO 6-5)

Leadership is about influencing employees towards achieving organizational goals. Different styles include:

1. Autocratic Leaders: Make decisions independently and enforce compliance.

   • Example: Martha Stewart.

2. Democratic Leaders: Involve employees in the decision-making process.

   • Example: Carol B. Tomé, CEO of UPS.

3. Free-Rein Leaders: Allow employees significant freedom to decide how to meet set objectives.

   • Example: Warren Buffett.

4. Authentic and Servant Leadership: Authentic leaders are committed to company values, while servant leaders prioritize the needs of their employees above their own.

The effectiveness of a leadership style can depend on factors including the skill level of employees and the situation at hand.

Decision-Making Process (LO 6-6)

A systematic approach to decision making includes the following steps:

1. Recognizing and Defining the Situation: Identifying and clearly defining the problem requiring a decision.

2. Developing Options: Brainstorming solutions and considering both standard and creative ideas.

3. Analyzing Options: Evaluating each alternative for its practicality and potential impact.

4. Selecting the Best Option: Choosing the most appropriate solution based on analysis of risks and benefits.

5. Implementing the Decision: Putting the selected option into action while planning for unforeseen issues that may arise during implementation.

6. Monitoring the Consequences: Evaluating the outcome against the desired results and making adjustments as necessary.

Effective decision-making involves both creativity and logical assessment of options, and it is essential for managers at all levels.