CHANGE & RELATED STRESS MANAGEMENT

CHANGE & STRESS

 

 

Whenever managers implement changes, they should be concerned about the stress they may be creating.

 

If the stress is significant enough, it may well cancel out the improvement that was anticipated from the change.

 

In fact, stress could result in the organization being less effective than it was before the change was attempted.

 

STRESS:

 

The bodily strain that an individual experiences as a result of coping wit some environmental factor is stress.

 

Hans Selye, an expert on this subject, said that Stress constitutes the factors affecting wear and tear on the body.

 

In organizations, this wear and tear is caused primarily by the body’s unconscious mobilization of energy when an individual is confronted with organizational or work demands.

 

Why Study Stress?

  • Stress can have damaging psychological and physiological effects on employees’ health and on their contributions to organizational effectiveness. It can cause hear disease and it can prevent employees from concentrating or making decisions.

                                                                                                                                 

  • Stress is a major cause of employee absenteeism and turnover. Certainly such factors severely limit the potential success of an organization.

 

  • A stressed employee can affect the safety of other workers or even the public.

 

  • Stress represents a very significant cost to organizations.

 

 

MANAGING STRESS IN ORGANIZATIONS:

 

Since stress is felt by all employees in the organizations, managers must do the following:

 

  1. Understand how stress influences worker performance
  2. Identify where unhealthy stress exists in organizations
  3. Help Employees handle stress

 

Understand how Stress Influences Worker Performance:

To deal with stress among employees, managers must understand the relationship between the amount of stress felt by a worker and the impact on the worker’s performance.

 

Extremely high and extremely low levels of stress tend to have negative effects on production. While increasing stress tends to bolster performance up to some point, when the level of stress increases beyond that point, performance levels begin to deteriorate.

 

Certain amount of stress among employees is generally considered to be advantageous for the organization because it tends to increase productivity, however when the employees experience too much or too little stress, it is generally disadvantageous for the organization because it tends to decrease productivity.

 

 

SYMPTOMS OF UNHEALTHY STRESS IN ORGANIZATION:

 

Symptoms are as follows:

 

1.      Constant Fatigue

2.      Low Energy

3.      Moodiness

4.      Increased Aggression

5.      Excessive use of Alcohol

6.      Temper outbursts

7.      Compulsive Eating

8.      High Levels of Anxiety

9.      Chronic Worrying

 

A manager who observes one or more of these symptoms in employees should investigate to determine if those exhibiting the symptoms are indeed under too much stress. If so, the manager should try to help those employees handle their stress and/or should attempt to reduce stressors in the organization.

 

Helping Employees Handle Stress:

 

  • Create an organization climate that is supportive of individuals.
  • Make jobs interesting
  • Decision and operate career counselling programs

Factors for Change Management

FACTORS TO CONSIDER WHEN CHANGING AN ORGANIZATION

 

The following factors should be considered whenever change is being contemplated:

 

  1. The Change Agent
  2. Determining What should be Changed
  3. The kind of Change to Make
  4. Individuals affected by the Change
  5. Evaluation of the Change

 

THE CHANGE AGENT:

 

The change agent might be a self designated manager within the organization or an outside consultant hired because of a special expertise in a particular area.

 

This individual might be responsible for making very broad changes, like altering the culture of the whole organization; or more narrow ones, like designing and implementing a new safety program or a new quality program.

 

Special skills are necessary for success as a change agent. Among them are the ability to determine how a change should be made, the skill to solve change related problems, and facility in using behavioural science tools to influence people appropriately during the change process.

 

Perhaps the most overlooked skill of successful change agents, however, is the ability to determine how much change employees can withstand.

 

Managers should choose agents who have the most expertise in all these areas. A potentially beneficial change might not result in any advantages for the organization if a person without expertise in these areas is designated as a change agent.

 

 

DETERMINING WHAT SHOULD BE CHANGED:

 

Organizational effectiveness depends on 3 classes of factors:

  1. People
  2. Structure
  3. Technology

 

People Factors are attitudes, leadership skills, communication skills, and all other characteristics of the human resources within the organization; Structural Factors are organizational controls, such as policies and procedures; and Technological Factors are any type of equipment or processes that assist organization members in the performance of their jobs.

 

For an organization to maximize its effectiveness, appropriate people must be matched with appropriate technology and appropriate structure.

 

 

THE KIND OF CHANGE TO MAKE:

Most changes can be categorized into one of the 3 kinds:

 

  1. Technological
  2. Structural
  3. People

 

These 3 kinds of change correspond to the 3 main determinants of the organizational effectiveness – each change is named for the determinant it emphasizes.

 

STRUCTURAL CHANGE:

 

Structural change emphasizes increasing organizational effectiveness by changing controls that influence organization members during the performance of their jobs.

 

Structural change is aimed at increasing the organizational effectiveness through modifications to the existing organizational structure like:

 

  1. Clarifying and Defining Jobs
  2. Modifying Organizational Structure to fit the communication needs of the organization
  3. Decentralizing the organization to reduce the cost of coordination, increase the controllability of subunits, increase motivation, and gain greater flexibility.

 

Although structural change must take account of people and technology to be successful, its primary focus is obviously on changing organization structure.

 

Managers choose to make structural changes within an organization if information they have gathered indicates that the present structure is the main cause of organizational ineffectiveness.

 

The precise structural changes they choose to make will vary from situation to situation, of course. After changes to organizational structure have been made, management should conduct periodic reviews to make sure the changes are accomplishing their intended purposes.

 

                        Matrix Organization:

 

Matrix Organizations is a traditional organization that is modified primarily for the purpose of completing some kind of special project.

 

Essentially, a matrix organization is one in which individuals from various functional departments are assigned to a project manager responsible for accomplishing some specific task.

 

The project itself may be either long term or short term, and the employees needed to complete it are borrowed from various organizational segments.

 

 

PEOPLE CHANGE:

 

Although successfully changing people factors necessarily involves some consideration of structure and technology, the primary emphasis is on people.

 

Organization Development (OD): People Change emphasizes increasing organizational effectiveness by changing certain aspects of organization members.

The focus of this kind of change is on such factors as employee’s attitudes and leadership skills.

The process of people change can be referred to as organization development (OD). Although OD focuses mainly on changing certain aspects of people, these changes are based on an overview of structure, technology, and all other organizational ingredients.

 

GRID OD:

 

One traditional used OD techniques for changing people in organizations is called Grid Organizational Development, or Grid OD.

 

The managerial grid, a basic model describing various managerial styles, is used as the foundation for grid OD. The managerial grid is based on the premise that various managerial styles can be described by means of two primary attitudes of the manager: concern for people and concern for production.

 

 

 

INDIVIDUAL AFFECTED BY THE CHANGE:

 

To increase the chances of employee support, one should be aware of the following factors:

 

  1. The usual employee resistance to change
  2. How this resistance can be reduced

 

Resistance to Change:

 

Resistance to change within an organization is as common as the need for change.

After managers decide to make some organizational change, they typically meet with employee resistance aimed at preventing that change from occurring.

 

Behind this resistance by organization members lies the fear of some personal loss, such as a reduction in personal prestige, a disturbance of established social and working relationships, and personal failure because of inability to carry out new job responsibilities.

 

Reducing Resistance to Change:

 

1.      Avoid Surprises

2.      Promote Real Understanding

3.      Set the Stage for Change

4.      Make tentative Change

 

 

EVALUATION OF THE CHANGE:

 

One must evaluate the change one makes. The purpose of this evaluation is not only to gain insight into how the change itself might be modified to further increase its organizational effectiveness, but to determine whether the steps taken to make the change should be modified to increase organizational effectiveness, next time around.

 

Evaluation of change often involves watching for symptoms that indicate that further change is necessary. But the decision to change must not be made only based on the symptoms. Additional Change is justified if it will accomplish any of the following goals:

 

1.      Further improve the means for satisfying someone’s economic wants

2.      Increase Profitability

3.      Promote human work for human beings

4.      Contribute to individual satisfaction and social well being.

CHANGE MANGEMENT BASICS

FUNDAMENTALS OF CHANGING AN ORGANIZATION

 

Changing an Organization is the process of modifying an existing organization to increase the overall organizational effectiveness.

 

These modifications can involve any organizational aspect, but typically it affects the lines of authority, the levels of responsibility held by various organization members, and the established lines of organizational communication.

 

IMPORTANCE OF CHANGE:

 

Most managers agree that if the organization is to thrive, it must change continually in response to significant developments in the environment, such as changing customer needs, technical breakthroughs, and new regulations.

 

Managers who can determine appropriate changes and then implement such changes successfully enable their organizations to be more flexible and innovative. Because change is such a fundamental part of the organizational existence, such managers are very valuable to organizations of all kinds.

 

Many managers consider change to be so critical to organizational success that they encourage employees to continually search for areas in which beneficial changes can be made.

 

CHANGE Vs. STABILITY:

 

Along with Change, some amount of stability is a prerequisite for long term organizational success.

 

The organization without enough stability to complement change is a definite challenge. When stability is low, the probability of organization survival and growth declines.

 

Change after Change without regard for the essential role of stability typically results in confusion and employee stress.

 

Performance Appraisals

PERFORMANCE APPRAISAL

 

Performance Appraisal is the process of reviewing individual’s past productive activity to evaluate the contribution they have made towards attaining the organization’s objectives.

 

Performance Appraisal is a continuous review that focuses on both established human resources within the organization and new comers.

 

Its main purpose is to furnish feedback to organization members about how they can become more productive and useful to the organization in its ambitions and growth plans.

 

Advantages of Appraisal Systems:

 

  1. They provide systematic judgements to support salary increases, promotions, transfers, and sometimes even demotions & terminations.      

                                                                            

  1. They are a means of telling subordinates how they are doing and of suggesting needed changes in behaviour, attitudes, skills or job knowledge; they let subordinates know where they stand with the boss.

 

 

  1. They furnish a useful basis for the coaching and counselling of individuals by their seniors.

 

 Several Methods used for Performance Appraisals are:

 

  • Rating Scale
  • Employee Comparisons
  • Free form Essay
  • Critical form Essay

 

Guidelines for Handling Performance Appraisals:

 

  • Performance Appraisals should stress both Performance in the Position the individual holds and the success with which the individual is attaining organizational objectives.

 

  • Although conceptually separate, performance and objectives should be inseparable topics of discussion during performance appraisals.

 

 

  • Appraisals should emphasize how well the individual is doing the job, not the evaluator’s impression of the individual’s work habits. The goal is an objective analysis of performance rather than a subjective evaluation of habits.

 

  • Appraisals should be acceptable to both the appraiser and the appraisee, on the benefits for the individual as well as the organization.
  • Performance appraisals should provide a base for improving individual’s productivity within the organization by making them better equipped to produce.

 

 

Pitfalls in Performance Appraisals:

 

  1. Performance appraisals focus employees on short term rewards rather than on issues that are important to the long run success of the organization.
  2. Individuals involved in the performance appraisal view them as reward- punishment situation.
  3. The emphasis is wrongly placed on completing paper work, rather than really critiquing individual performance.
  4. Individuals view the process as unfair or biased.
  5. Subordinates react negatively when evaluators offer unfavourable comments.

Training – Need Analysis, Design, Deliver and Evaluat

TRAINING

 

After recruitment and selection, the next step in providing appropriate human resources to the organization is Training.

 

Training is the process of developing qualities in human resources that will enable them to be more productive and thus to contribute more to organizational goal attainment.

 

The purpose of training is to increase the productivity of employees by influencing their behaviour.

 

The training of individuals in an organization is essentially a 4 step process:

 

  1. Determining the Training Needs
  2. Designing the Training Program
  3. Administering the Training Program
  4. Evaluating the Training Program

 

DETERMINING THE TRAINING NEEDS:

 

The 1st step of the training process is determining the organization’s training needs.

 

Training Needs are the information or skill areas of an individual or group that require further development to increase the productivity of that individual or group.

Only if the training focuses on these needs, it can be productive for the organization.

 

Training is a continuous activity. Even employees who have been with the organization for some time and who have undergone initial orientation and skills training need continued training to improve their skills.

 

            Determining the Needed Skills:

 

There are several methods of determining which skills to focus on with established human resources. One method calls for evaluating the production process within the organization. Factors like excessive rejections, missed deadlines, high labour costs are clues to deficiencies in the production related expertise. Similar activities for various departments can be carried out.

 

Another method for determining training needs includes getting direct feedback from employees on what they believe are the training needs of the organization. Organization members are often able to verbalize clearly and accurately exactly what types of training they require to do a better job.

 

A third way of determining training needs involves looking into the future. Future company plans and industry trends also provide inputs on likely training requirements.

 

 

DESIGNING OF THE TRAINING PROGRAM:

Designing a training program entails assembling various types of facts and activities designed to meet the identified training needs.

 

ADMINISTERING THE TRAINING PROGRAM:

 

Various techniques exist for both transmitting necessary information and developing needed skills in training programs like:

 

  1. Lectures – for knowledge transfer
  2. Programmed Learning – for knowledge transfer
  3. On the Job Training  – for skill development
    1. Coaching
    2. Position rotation
    3. Special Project Teams

 

 

EVALUATING THE TRAINING PROGRAMS:

 

Training programs have various costs including materials, trainer time and production loss while employees are being trained rather than doing their jobs – a ROI  is essential.

 

Management should evaluate the training program to determine if it meets with the needs for which it is developed.

E.g.: Has the sales increased, Has the customer complaints reduced, Has production gone up etc.

HR : Selection, Testing and Assessment Centers

SELECTION

 

The 2nd major step in providing human resource for the organization is SELECTION.

Selection is choosing an individual to hire from all those who have been recruited (short listed).

 

Selection is obviously dependent on the 1st step which is recruitment.

Selection is a series of stages through which job applications must pass in order to be hired. Each stage reduces the total group of prospective employees until, finally, the required no. of individuals are hired.

 

Stages of the Selection Process:

 

  1. Preliminary Screening from Records, Data Sheets etc.,
  2. Preliminary Interview
  3. Intelligence Tests
  4. Aptitude Tests
  5. Personality Tests
  6. Performance References
  7. Diagnostic Interview
  8. Physical Examination
  9. Personal Judgement

 

Two tools often used in the selection process are Testing and Assessment Centres.

 

TESTING:

 

Testing is examining human resources for qualities relevant to performing available jobs. 4 categories of testing include:

 

  1. Aptitude Tests
  2. Achievement Tests
  3. Vocational Interest Tests
  4. Personality Tests

 

Testing Guidelines:

 

  • Care must be taken to ensure that the test being used in both valid and reliable.
  • A test is valid if it measures what it is designed to measure and reliable if it measures similarly at all times.
  • Test Results should not be used as the sole determinant of a hiring decision.
  • People change over time, and someone who doesn’t score well on a particular test might still develop into a productive employee. Such factors as potential and desire to obtain a position should be assessed subjectively and used along with test scores in the final selection decision.
  • Test should be non discriminatory.

 

ASSESSMENT CENTERS:

 

Assessment Centres are used both for the purpose of selection and also for continued training and development over time.

 

An assessment centre is a program (not a place) in which participants engage in a no. of individual and group exercises constructed to stimulate important activities at the organizational levels to which they aspire.

 

These exercises can include activities like Participating in groups, giving presentations, team work in problem solving. The participants are observed by mangers and/or trained observers who will evaluate both the ability and the potential.

 

Generally, participants are assessed according to the following criteria:

 

  1. Leadership
  2. Organizing and Planning Ability
  3. Decision Making
  4. Oral and Written Communication Skills
  5. Initiative
  6. Energy
  7. Analytical Ability
  8. Resistance to Stress
  9. Use of Delegation
  10. Behaviour Flexibility
  11. Human Relations Competence
  12. Originality
  13. Controlling
  14. Self Direction
  15. Overall Potential

HR: Recruitment Basics

Appropriate Human Resource refers to individuals within the organization who make a valuable contribution to management system goal attainment. This contribution results from their productivity in the positions they hold.

 

Inappropriate Human Resource refers to organization members who do not make valuable contribution to the attainment of management system objectives.

For one reason or the other, they are ineffective in their jobs.

 

Productivity in all organizations is determined by how human resources interact and combine to use all other management system resources. Such factors as background, age, job related experience, and the level of formal education all play a role in determining how appropriate the individual is for the organization.

 

STEPS IN PROVIDING HUMAN RESOURCES:

 

To provide appropriate human resources to fill both managerial and non managerial openings, managers follow 4 sequential steps:

 

  1. Recruitment
  2. Selection
  3. Training
  4. Performance Appraisal

 

RECRUITMENT:

 

Recruitment is the initial attraction and screening of the supply of prospective human resources available to fill a position.

 

Its purpose is to narrow a large field of prospective employees to a relatively small group of individuals from which someone eventually will be hired.

 

To be effective, recruiters must know the following:

 

  1. The Job they are trying to fill
  2. Where Potential human resources can be located
  3. How the law influences recruiting efforts.

 

KNOWING THE JOB:

 

Recruitment activities must begin with a thorough understanding of the position to be filled so the broad range of potential employees can be narrowed intelligently.

 

The technique commonly used to gain the understanding of the job is Job Analysis.

Job Analysis is aimed at determining a Job Description ( the activities a job entails) and a Job Specification (the characteristics of the individual who should be hired for the job).

 

KNOWING SOURCES OF HUMAN RESOURCES:

 

Besides a thorough knowledge of the position the organization is trying to fill, recruiters must be able to pinpoint sources of human resources.

 

Since the supply of individuals from which to recruit is continually changing, there will be times when finding appropriate human resources will be tougher than some other times.

 

Human resource specialists in organizations continually monitor the labour market so they will know where to recruit suitable people and what kind of strategies and tactics to use to attract job applicants in a competitive marketplace.

 

Sources inside the Organization:

 

The pool of employees within the organization is one source of human resources. Some individuals who already work for the organization may be well qualified for an open position.

Some lateral movements do happen, but most of the times, internal movements are promotions.

 

Advantages of Promotion:

 

          Building Employee Moral

          Encouraging employee to work order

          Inspiring Employees to stay longer

 

Human Resource Inventory:

 

Human Resource Inventory consists of information about the characteristics of organization members. This focuses on the past performance and future potential and the objective is to keep management up to date about the possibilities for filling a position from within.

 

This inventory should indicate which individuals in the organization would be appropriate for filling a position if it becomes available.

 

Walter S. Wikstrom proposed that organizations keep 3 types of records that can be combined to maintain a useful human resources inventory.

 

Management Inventory Card

It includes both an organizational history of the employee and cues on how she might be used in the future. It can include details like :

  1.  
    1.  
      • Age,
      • Year of Employment,
      • Present Position,
      • Duration of current Posting,
      • Performance Ratings,
      • Strengths and Weaknesses,
      • Positions to which the employee can be moved,
      • By when would she be able to take the new role,
      • What new training and development required for the same.

Position Replacement Form

 

This record focuses on position centred information rather than people centred information. The position information form is helpful in determining what would happen to a present position, if the current incumbent is moved to some other post or leaves the organization.

 

Management Manpower Replacement Chart

 

This Chart presents a composite view of the individual’s management considers significant for human resource planning.

 

The current incumbent’s performance rating and promotion potential  can be easily compared with those of the other employees when a company is trying to determine which individual would most appropriately fill a particular position

 

All these 3 forms together help the management answer the questions:

 

  1. What is the organizational history of an individual and what potential does the person possess?
  2. If a position becomes vacant, who might be eligible to fill it?
  3. What are the merits of one individual being considered for a position compared to those of another individual under consideration?

 

SUCCESSION PLANNING:

 

Succession planning is the process of outlining who will follow whom in various organizational positions.

 

 

Sources outside the Organization

 

      Various Sources include:

  1. Competitors
  2. Employment Agencies
  3. Readers of Certain Publications
  4. Educational Institutions

 

Competitors:

            There are several advantages to luring human resources away from competitors including:

·         The individual knows the business

·         The competitor will have paid for the individual’s training up to the time of hire.

·         The competing organization will probably be weakened somewhat by the loss of the individual.

Once hired, the individual will be a valuable source of information about how to best compete with the other organization.

Centralization and Decentralization

The terms Centralization and Decentralization describe the general degree to which delegation exists in the company.

Decentralizing an Organization:

 

The appropriate degree of decentralization for an organization depends on the unique situation of that organization.

 

Relevant Questions will be:

 

  1. What is the present size of the organization?
  2. Where are the Organization’s customers located?
  3. How homogeneous is the organization’s product line?
  4. Where are the Organizational Suppliers?
  5. Is there a need for quick decisions in the Organization?
  6. Is creativity a desirable feature of the Organization?

 

SIZE:

 

The larger the organization, the more the chance that decentralization will be advantageous. Delegation is an effective means for helping managers manage their increasing workload in big organizations.

 

But in some cases, the Organization may be too large and decentralized.

 

If the proportionate manpower costs are very high, then that organization may actually benefited by centralization of some of the aspects of the organization.

 

 

CUSTOMER LOCATIONS:

 

The more physically separated the organization’s customers are, the more viable a significant amount of decentralization is. This is less valid in the ecommerce business but most other cases, it makes complete sense.

 

 

HOMOGENEOUS PRODUCT LINE:

 

Generally, as the product line becomes more heterogeneous, or diversified, the appropriateness of decentralization increases.

 

 

SUPPLIER LOCATION:

 

Decentralization of some functions becomes a requirement, in case of high geographic diversity in the suppliers.

 

 

 

 

QUICK DECISION MAKING:

 

If speedy decision making is essential, then decentralization of the relevant functions can be critical.

 

 

CREATIVITY:

 

Decentralization generally fosters creativity.

Obstacles in the Delegation Process

Obstacles that can make delegation within an organization difficult or even impossible can be classified into 3 general categories:

 

  1. Obstacles related to the Supervisor
  2. Obstacles related to Subordinates
  3. Obstacles related to Organizations

 

Obstacles related to the Supervisor:

 

A supervisor who resists delegating his authority to subordinates because he cannot bear to part with any authority.

 

Two other supervisor related obstacles are the fear that the subordinates will not do a job well and the suspicion that surrendering some authority may be seen as a sign of weakness.

 

If supervisors are insecure in their jobs or believe certain activities are extremely important to their personal success, they may find it hard to put the performance of these activities into the hands of the others.

 

Obstacles related to Subordinates:

 

Subordinates may be reluctant to accept delegated authority because they are afraid of failing, lack self confidence, or feel the supervisor doesn’t have the confidence in them.

These obstacles will be especially apparent in subordinates who have never before used delegated authority.

 

Other subordinate related obstacles are the fear that the supervisor will be unavailable for guidance when needed and the reluctance to exercise authority that may complicate comfortable working relationships.

 

Obstacles related to the Delegation Process:

 

In organizations, where few job activities and little authority have been delegated in the past, an attempt to initiate the delegation process may make employees reluctant and apprehensive, for the supervisor would be introducing a significant change in procedure and change is often strongly resisted.

 

 

 

ELIMINATING OBSTACLES IN THE DELEGATION PROCESS:

 

 

Advantages of Delegation are:

 

  1. Enhanced Employee Confidence
  2. Improved Subordinate Involvement and Interest
  3. More free time for the supervisor to accomplish tasks
  4. Assistance from subordinates in completing tasks the manager simply wouldn’t have time for otherwise.

 

What can managers do to eliminate obstacles to the delegation process?

 

Firstly uncover the obstacles to delegation.

 

Then taking actions to eliminate these obstacles with the understanding that they may be deeply ingrained and therefore required much time and effort to overcome.

 

Among the most effective management actions that can be taken to eliminates obstacles to delegation are building subordinate confidence in the use of delegated authority on established working relationships, and helping delegates cope  with problems whenever necessary.

 

MANAGERIAL CHARCTERISITICS REQUIRED:

 

  • Willingness to consider the ideas of others seriously
  • The insight to allow subordinates the free rein necessary to carry out their responsibilities,
  • Trust on abilities of subordinates
  • The wisdom to allow people to learn from their mistakes without suffering unreasonable price for making them.

 

ACCOUNTABILITY & DELEGATION

Accountability refers to the management philosophy whereby individuals are held liable, or accountable, for how well they use their authority and live up to their responsibility of performing predetermined activities.

The concept of accountability implies that if an individual does not perform predetermined activities, some type of penalty, or punishment is justifiable.

The punishment theme of accountability has been summed by one company executive ” Individuals who do not perform well simply will not be around too long.

The accountability concept also implies that some kind of reward will follow if predetermined activities are performed well.

 

DELEGATION:

Delegation is the actual process of assigning job activities and corresponding authority to specific individuals within the organization.

Important Dimensions of Delegation include:

  1. Steps in the Delegating Process
  2. Obstacles to the delegation Process
  3. Elimination of obstacles to the delegation process.
  4. Centralization and Decentralization

STEPS IN THE DELEGATION PROCESS:

According to Neman and Warren, the delegation process consists of 3 steps:

  1. Assign Specific duties to the individual. Manager must be sure that the subordinate assigned to specific duties has a clear understanding of what these duties entail. Whenever possible, the activities should be stated in operational terms so the subordinate knows exactly what action must be taken to perform the assigned duties.                                             
  2.  The delegation process involves granting appropriate authority to the subordinate -i.e. the subordinate must be given the right and power within the organization to accomplish the duties assigned.                                
  3. The subordinate must be aware of the responsibility to complete the duties assigned and must accept the responsibility.

GUIDELINES FOR MAKING DELEGATION EFFECTIVE:

  1. Give employees task to pursue tasks in their own way.                                       
  2. Establish Mutually agreed upon results and performance standards for delegated tasks.                                                                                                                 
  3. Encourage employees to take an active role in defining, implementing and communicating progress on tasks.                                                                       
  4. Entrust employee with completion of whole projects or tasks whenever possible.                                                                                                                   
  5. Explain the relevance  of delegated tasks to larger projects or to department or organizational goals.                                                                         
  6. Give employees the authority necessary to accomplish tasks.                        
  7. Allow employees access to all information, people and departments necessary to perform delegated tasks.                                                                           
  8. Provide training and guidance necessary for employees to complete delegated tasks satisfactorily.                                                                                     
  9. When possible, delegate tasks on the basis of employee interests.

TYPES OF AUTHORITY : LINE & STAFF ROLES

Authority is the right to perform or command. It allows its holder to act in certain designated ways and to directly influence the actions of others through orders.

It also allows its holder to allocate the organization’s resources to achieve organizational objectives.

AUTHORITY ON THE JOB :

Barnard  defines authority as the character of communication by which an order is accepted by an individual as governing the actions that individual takes within the system.

Barnard maintains that authority will be accepted only under the following conditions:

  1. The individual can understand the order being communicated.
  2. The individual believes the order is consistent with the purpose of the organization.
  3. The individual sees the order as compatible with his or her personal interests.
  4. The individual is mentally and physically able to comply with the order.

The fewer of these 4 conditions that are present, the lower the probability that authority will be accepted and obedience be exacted.

Barnad offers some guidance on what managers can do to raise the odds that their commands will be accepted and obeyed. He maintains that more and more of a manager’s commands will be accepted over the long term if:

  1. The manager uses formal channels of communication and these are familiar to all organization members.                                                                            
  2. Each organization member has an assigned formal communication channel through which orders are received.                                                              
  3. The line of communication between manager and subordinate is as direct as possible.                                                                                                                 
  4. The complete chain of command is used to issue orders.                                     
  5. The manager possesses adequate communication skills.                                     
  6. The manager uses formal communication lines only for organizational business.                                                                                                                                
  7. A command is authenticated as coming from a manager.

TYPES OF AUTHORITY:

3 main types of authority can exist within an organization:

  1. Line Authority
  2. Staff Authority
  3. Functional Authority

Each type exists only to enable individuals to carry out the different types of responsibilities with which they have been charged.

LINE AUTHORITY:

The most fundamental authority within an organization, reflects existing superior-subordinate relationships. It consists of the right to make decisions and to give order concerning the production,sales or finance related behaviour of subordinates.

In general, line authority pertains to matters directly involving management system production, sales, finance etc., and as a result with the attainment of objectives.

People directly responsible for these areas within the organization are delegated line authority to assist them in performing their obligatory activities.

 

STAFF AUTHORITY:

Staff authority consists of the right to advise or assist those who possess line authority as well as other staff personnel.

Staff authority enables those responsible for improving the effectiveness of line personnel to perform their required tasks.

 

Line and Staff personnel must work together closely to maintain the efficiency and effectiveness of the organization. To ensure that line and staff personnel do work together productively, management must make sure both groups understand the organizational mission, have specific objectives, and realize that they are partners in helping the organization reach its objectives.

Size is perhaps the most significant factor in determining whether or not an organization will have staff personnel. The larger the organization, the greater the need and  ability to employ staff personnel.

As an organization expands, it usually needs employees with expertise in diversified areas. Although small organizations may also require this kind of diverse expertise, they often find it more practical to hire part time consultants to provide it is as needed rather than to hire full time staff personnel, who may not always be kept busy.

 

LINE – STAFF RELATIONSHIPS :

e.g. A plant manager has line authority over each immediate subordinate, human resource manager, the production manager and the sales manager.

However, the human resource manager has staff authority in relation to the plant manger, meaning the human resource manager has staff authority in relation to the plant manager, meaning the human resource manager possesses the right to advise the plant manager on human resource matters.

Still final decisions concerning human resource matters are in the hands of the plant manager, the person holding the line authority.

ROLE OF STAFF PERSONNEL:

Harold Stieglitz has pinpointed 3 roles that staff personnel typically perform to assist line personnel:

  1.  The Advisory or Counseling Role :   In this role, staff personnel use their professional expertise to solve organizational problems. The staff personnel are, in effect, internal consultants whose relationship with line personnel is similar to that of a professional and a client.                  
  2. The Service Role : Staff personnel in this role provide services that can more efficiently and effectively be provided by a single centralized staff group than by many individuals scattered throughout the organization. This role can probably best be understood if staff personnel are viewed as suppliers and line personnel as customers.                
  3. The Control Role : Staff personnel help establish a mechanism for evaluating  the effectiveness of organizational plans.

The role of staff in any organization  should be specifically designed to best meet the needs of that organization.

CONFLICT IN LINE – STAFF RELATIONSHIP:

From the view point of line personnel, conflict is created  because staff personnel tend to 

  • Assume Line Authority
  • Do not give Sound Advice
  • Steal Credit for Success
  • Fail to Keep  line personnel  informed of their activities
  • Do not see the whole picture.

From the view point of Staff Personnel, conflict is created because line personnel do not make proper use of staff personnel, resist new ideas and refuse to give staff personnel enough authority to do their jobs.

Staff Personnel can often avert line-staff conflicts if they strive to emphasize the objectives of the organization as a whole, encourage and educate line personnel in the appropriate use of staff personnel, obtain any necessary skills they do not already possess, and deal intelligently with the resistance to change rather than view it as an immovable barrier.

Line personnel can do their part to minimize line staff conflict by sing staff personnel wherever possible, making proper use of the staff abilities, and keeping staff personnel appropriately informed.

 

*****

FUNCTIONAL AUTHORITY:

Functional authority consists of the right to give orders within a segment of the organization in which this right is normally non existent.

This authority is usually assigned to individuals to complement the line or staff authority they already possess.

Functional Authority generally covers only specific task areas and is operational only for designated amounts of time. It is given to individuals who, in order to meet responsibilities in their own areas, must be able to exercise some control over organization members in other areas.

 

 

 

 


MANAGEMENT RESPONSIBILITY GUIDE

7 Responsibility Relationships among Managers, as used in the Management Responsibility Guide:

  1. General Responsibility: The individual who guides and directs the execution of the function through the person accepting operating responsibility.                                                                                                                            
  2. Operating Responsibility: The individual who is directly responsible for the execution of the Function.                                                           
  3. Specific Responsibility: The individual who is responsible for executing a specific or limited portion of the function.                                          
  4. Must be Consulted: The individual whose area is affected by a decision who must be called on to render advice or relate information before any decision is made or approval is granted. This individual does not, however, make the decision or grant approval.                                  
  5. May Be Consulted: The individual who may be called on to related information, render advice, or make recommendations before the action is taken.                                                                                                                       
  6. Must be Notified: The individual who must be notified of any action that has been taken.                                                                                                               
  7. Must Approve: The individual,other than persons holding general and operating responsibility who must approve or disapprove the decision.

RESPONSIBLE MANAGERS:

Managers can be described as responsible if they perform the activities they are obligated to perform. 

Since managers have more impact on an organization than non managers, responsible managers are a pre requisite for managemetn system success.

 

The degree of responsibility that a manager possesses can be determined by appraising the manager on the following 4 dimensions:

  1. Attitude toward and conduct with subordinates.
  2. Behaviour with Upper Management
  3. Behaviour with Other Groups
  4. Personal Attitudes and Values

4 Key Dimensions of Responsible Management Behaviour 

Attitude toward and conduct with subordinates.

  • Responsible Managers take complete charge of their work groups.
  • They Pass Praise and credit along to subordinates.
  • They stay close to problems and activities.
  • They take actions to maintain productivity and are willing to terminate poor performers if necessary.

Behaviour with Upper Management:

  • Responsible Managers accept criticism for mistakes and buffer their groups from excessive criticism.                                                                                  
  • Responsible managers ensure that their groups meet management expectations and objectives.

Behaviour with Other Groups :

  • Responsible Managers make sure that any gaps between their areas and those of other managers are securely filled.

Personal Attitudes & Values:

  • Responsible managers identify with the group.
  • Put organizational goals ahead of personal desires or activities.
  • Perform tasks for which there is no immediate reward but that help subordinates, the company or both.
  • Conserve corporate resources as if the resources were their own.

RESPONSIBILITY

Responsibility is the obligation to perform assigned activities. It is the self assumed commitment to handle a job to the best of one’s ability.

The source of responsibility lies within the individual.

A person who accepts a job agrees to carry out a series of duties or activities or to see that someone else carries them out.

The act of accepting the job means that the person is obligated to a superior (relationship management) to see that job activities are successfully completed.

THE JOB DESCRIPTION:

An individual’s job activities within an organization are usually summarized in a formal statement called a job description – a list of specific activities that must be performed by whoever holds the position.

Unclear job descriptions Can confuse employees and may cause them to lose interest in their jobs. On the other hand, a clear job description can help employees to become successful by focusing their efforts on  the issues that are important for their position.

When properly designed, job descriptions communicate job content to employees, establish performance levels that employees must maintain, and act as a guide that employees should follow to help the organization reach its objectives.

Job activities are delegated by management to enhance the accomplishment of  management system objectives.

Management analyzes its objectives and assigns specific duties that will lead to reaching those objectives. A sound organizing strategy delineates specific job activities for every individual in the organization.

The following 3 areas are related to responsibility:

  1. Dividing Job Activities
  2. Clarifying Job activities of managers
  3. Being Responsible

DIVIDING JOB ACTIVITIES:

One person cannot be responsible for performing all of the activities that take place within an organization. Since so many people work in a given management system, organizing necessarily involves dividing job activities among a no. of individuals.

Some method of distributing these job activities is essential.

THE FUNCTIONAL SIMILARITY METHOD:

The functional similarity method is the most basic method of dividing job activities.

Management should take 4 basic interrelated steps to divide job activities in the following sequence:

  1. Examine management system objectives.
  2. Designate Appropriate activities that must be performed to reach those objectives.
  3. Design specific jobs by grouping similar activities.
  4. Make specific individuals responsible for performing those jobs.

 

FUNCTIONAL SIMILARITY & RESPONSIBILITY:

3 additional guides can be used to supplement the functional similarity method.

  1. Overlapping Responsibility should be avoided when making job activity divisions.                                                                                                                                                                                                                                        Overlapping responsibility refer to a situation in which more than one individual is responsible for the same activity.                                                                                                                                                                                           Generally speaking, only one person should be responsible for completing one activity.                                                                                    When 2 or more employees are unclear about who should do a job because of overlapping responsibility, it usually leads to conflict and poor working relationships. Often the Job does not get done because each employee assumes the other will do it.                                                                       
  2. RESPONSIBILITY GAP:                                                                                                                                                                                                                                                                                                                                                                                A responsibility gap exists when certain tasks are not included in the responsibility area of an individual organization member. This results in a situation in which nobody within the organization is obligated to perform certain necessary activities.                                                                                                                                       
  3. Management should avoid creating job activities for accomplishing tasks that do not enhance goal  attainment. Organization members should be obligated to perform only those activities that lead to goal attainment.

Chain of Command

Departmentalization, Division of Labour, Span of Control and the 4th aspect of organizing effort is SCALAR RELATIONSHIPS – The Chain of Command.

Every organization is built on the premise that the individual at the top possesses the most authority and that other individual’s authority is scaled downward according to their relative position on the organization chart.
The lower a person’s position on the organization chart, then, the less authority that person possesses.
The Scale Relationship or Chain of Command is related to the unity of command.
UNITY OF COMMAND is the management principle that recommends that an individual  have only 1 boss.
If too many bosses give orders, the result will probably be confusion, contradiction and frustration –  a sure recipe for ineffectiveness and inefficiency in an organization.
Although the unity of command principle is 75 years old, it is still considered as a valid and critical one.
******
Fayol recommends that a gangplank be created for a peer level communication within and across departments with structures to keep the organization updated on the information shared. 

SPAN OF MANAGEMENT

After Departmentalization and Division of Labour, the third main consideration of any organizing effort is Span of Management – the no. of individuals a manger supervises.

The more individuals a manger supervises, the greater the span of management.

Span of management is also called the span of control, span of authority, span of supervision and span of responsibility.

The central concern of span of management is to determine how many individuals a manager can supervise effectively.

To use the company’s human resources most productively, managers should supervise as many individuals as they can best guide towards meeting the organization’s targets. Too few – wasting their capacity. Too many – losing effectiveness.

DESIGNING SPAN OF MANAGEMENT : A CONTINGENCY VIEWPOINT

As reported by Harold Koontz, several important situational factors influence the appropriateness of the size of an individual’s span of management:

  • SIMILARITY OF FUNCTIONS:                                                                                                                                                                                                                   The degree to which activities performed by supervised individuals are similar or dissimilar. As the similarity of the subordinates activity increases, the span of management increases and vice versa.                                                                          
  • GEOGRAPHIC CONTINUITY:                                                                                                                                                                                                                           The degree to which subordinates are  physically separated. In general, the closer subordinates are physically, the more of them managers can supervise effectively.                                                                              
  • COMPLEXITY OF FUNCTIONS:                                                                                                                                                                                                                       The degree to which worker’s activities are difficult and involved. The more difficult and involved the activities are, the more difficult it is to manage a large no. of individuals effectively.                                                                      
  • COORDINATION :                                                                                                                                                                                                                                                The amount of time managers must spend synchronizing the activities of their subordinates with the activities of other workers. The greater the amount of time must be spent on such coordination, the smaller the span of management can be.                                                                                                                       
  • PLANNING:

              The amount of time  managers must spend developing management                   system objectives and plans and integrating them with the activities                   of their subordinates. The more time managers must spend on the                       planning activities, the fewer individuals they can manage effectively.

 

GRAICUNAS and SPAN OF MANAGEMENT:

V.A.Graicunas developed a formula for determining the no. of possible relationships between a manager and subordinates when the no. of subordinates is known.

Graicunas’s Formula is as follows:

C = n a (2^n)/2 + n – 1 b

C is the total no. of possible relationships between manager and subordinates, and n is the known no. of subordinates.

As the no. of subordinates increases, arithmetically, the no. of possible relationships between the manager and those subordinates increases geometrically.

DIVISION OF LABOUR & Guidelines on Coordination

After Departmentalization, the second main consideration of any organizing effort is how to divide labour.

Division of Labour is the assignment of various portions of a particular task among a no. of organization members. Rather than one individual doing the entire job, several individuals perform different parts of it.

Production is divided into a no. of steps, with the responsibility for completing various steps assigned to specific individuals.

The essence of division of labour is the individuals specialize in doing part of a task rather than the entire task.

 

Advantages & Disadvantages of Division of Labour:

Several explanations are available for the usefulness of division of labour.

  • When workers specialize in a particular task, their skill at performing that task tends to increase.                                                                                            
  • Workers who have 1 job and 1 place in which to do it, do not lose valuable time changing tools or locations.                                                                 
  • When workers concentrate on performing only one job, they naturally try to make their job easier and more efficient.                                                        
  • Division of labour creates a situation in which workers need only to know how to perform their part of the work task rather than the entire process for producing the end product.

Dis Advantages of Excessive Division Of Labour:

Division of labour focuses solely on  efficiency and economic benefit and overlooks the human variable in organizations.

Work that is extremely specialized tends to be boring and therefore will eventually cause production rates to go down as workers become resentful of being treated like machines.

Managers need to find a reasonable balance between specialization and human motivation.

COORDINATION:

In a division of labour situation, the importance of effective coordination of the different individuals doing portions  of the task is obvious.

Coordination is the orderly arrangement of group effort to provide unity of action in the pursuit of a common purpose. Coordination is the means for achieving any and all organizational objectives.

Coordination involves encouraging the completion of individual portions of a task in a synchronized order that is appropriate for the overall task.

Groups need coordination for maintaining productivity.

Establishing and maintaining coordination may required close supervision of employees. Managers can establish and maintain coordination through bargaining, formulating a common purpose for the group, or improving on specific problem solutions so the group will know what to do when it encounters those problems.

 

Mary Parker Follett’s Guidelines on Coordination:

  1. Coordination can be attained with least difficulty through direct horizontal relationships and personal communications. When a coordination problem arises, peer discussion may be the best way to resolve it.                                                                                                                                     
  2. Coordination be a discussion topic throughout the planning process. Managers should plan for coordination.                                                                        
  3. Maintaining coordination is a continuing process and should be treated as such. Managers cannot assume that because their management system shows coordination today, it will show coordination tomorrow.                                                                                                       
  4. Human element is important and the communication process is an essential consideration in any attempt to encourage coordination.               
  5. Employee skill levels and motivation levels are also primary considerations for the coordination activity.

ORGANIZATIONAL STRUCTURE

STRUCTURE:

In any organizing effort, managers must choose an appropriate structure.

Structure refers to the designated relationships among resources of the management system. Its purpose is to facilitate the use of each resource, individually and collectively, as the management system attempts to attain its objectives.

ORGANIZATIONAL CHART:

An organizational chart is constructed in pyramid form, with individuals toward the top of the pyramid having more authority and responsibility than those toward the bottom.

The relative positioning of individuals within boxes on the chart indicates broad working relationships, and lines between boxes designate formal lines of communication between individuals.

AUTHORITY & RESPONSIBILITY:

The dotted line is not part of the organization chart but has been added to emphasize the chart’s pyramid shape. The locations of the positions also indicate broad working relationships.

FORMAL & INFORMAL STRUCTURE:

Formal structure is defined as the relationships among organizational resources as outlined by Management. It is represented primarily by the Organization Chart.

Informal Structure is defined as the patterns of relationships that develop because of informal activities of organization members. It evolves naturally and tend to be molded by individual norms and values and social relationships.

DEPARTMENTALIZATION & FORMAL STRUCTURE:

Department is a unique group of resources established by management to perform some organizational task. The process of establishing departments within the management system is called DEPARTMENTALIZATION.

FUNCTIONAL DEPARTMENTALIZATION:

The most widely used basis for establishing departments within the formal structure is the type of work functions (activities) being performed within the management system.

Functions are typically divided into major categories like  marketing, production and finance, etc.,

 

PRODUCT DEPARTMENTALIZATION:

Organization structure based primarily on product departmentalizes resources according to the products being manufactured. As the company grows and as their product range grows, it becomes increasing difficult for management to coordinate activities across the organization.

Organizing on the lines of products and product groups permits the logical grouping of resources across the organization.

GEOGRAPHICAL DEPARTMENTALIZATION:

Structure based primarily on territory departmentalizes according to the places where the work is being done or the geographic markets on which the management system is focusing.

The physical distances can range from quite short (between 2 points in the same city) to quite long ( between 2 points in the same state or different states or countries or continents).

As market areas expand and the work locations increase, the physical distances between places can make the management task extremely cumbersome. To minimize this problem, resources can be departmentalized according to the territory.

 

CUSTOMER DEPARTMENTALIZATION:

Structure based primarily on the customer establishes departments in response to the organization’s major customers.

This structure,of course, assumes that major customers can be identified and divided into logical categories.

 

MANUFACTURING PROCESS DEPARTMENTALIZATION:

Structure based primarily on manufacturing process departmentalizes according tot he major phases of the process used to manufacture products.

 

*** FORCES INFLUENCING FORMAL STRUCTURE***

According to Shetty & Carlisle, the formal structure of a management system is continually evolving.

4 Primary forces influences this evolution:

  1. Manager
  2. Task
  3. Environment
  4. Subordinates

The evolution of a particular organization is actually the result of a complex and dynamic interaction among these forces.

MANAGER:

Each manager perceives the organizational problem in a unique way. Naturally, knowledge, experience, background and values influence the manager’s perception of what the organization’s formal structure should be or how it should be changed.

TASK:

Task includes the degree of technology involved in performing the task and the task’s complexity. As task activities change, a force is created to change the existing organization.

ENVIRONMENT:

Environment include the customers and suppliers of the management system, along with existing political and social structures.

SUBORDINATES:

Sub ordinates include the needs and skill  levels of subordinates.

Changes in the environment or subordinate dynamics can effect a change in the organization.

ORGANIZING – 16 General guidelines by Henri Fayol

Organizing is the process of establishing orderly uses for all resources within the management system.

Here, Orderly signifies the emphasis on the attainment of management system objectives and assist managers not only in making objectives apparent but in clarifying which resources will be used to attain them.

IMPORTANCE OF ORGANIZING:

The organizing function is extremely important to the management system because it is the primary mechanism mangers use to activate plans.

Organizing creates and maintains relationships between all organizational resources by indicating which resources are to be used for specified activities and when,where, and how they are to be used.

A thorough  organizing efforts helps managers to minimize costly weaknesses, such as duplication of effort and idle organizational resources.

If there were to be an organizing department, it’s responsibilities will include:

  • Reorganization plans that make the management system more effective and efficient.
  • Plans to improve managerial skills to fit current management system Needs.
  • An advantageous Organizational climate within the Management System.

 

Henri Fayol developed 16 general guidelines for organizing resources:

  1. Judiciously prepare and execute the operating plan.                        
  2. Organize the human and material facets so that they are consistent with objectives, resources and requirements of the concern.                                                                                                                 
  3. Establish a single component, energetic guiding authority i.e. a Formal Management Structure.                                                                    
  4. Co-ordinate all activities and efforts.                                                                     
  5. Formulate clear, distinct and precise decisions.                                          
  6. Arrange for efficient selection so that each department is headed by a component, energetic manager and all employees are placed where they can render the greatest service.                                   
  7. Define duties.                                                                                                               
  8. Encourage initiative and responsibility.                                                         
  9. Offer fair and suitable rewards for services rendered.                              
  10. Make use of sanctions against faults and errors.                                       
  11. Maintain discipline.                                                                                           
  12. Ensure that individual interests are consistent with the general interests of the organization.                                                                            
  13. Recognize the Unity of Command.                                                              
  14.  Promote both material and human coordination.                                                                                                                  
  15.  Insitute and Effect Controls.                                                                          
  16.  Avoid regulations, red tape and (excessive) paper work.                                                   

 

5 Step Organizing Process:

  1. Reflect on Plans and Objectives.
  2. Establish major Tasks.
  3. Divide major tasks into subtasks
  4. Allocate resources and directives for subtasks.
  5. Evaluate the results of implemented organizing strategy.

METHODS OF SALES FORECASTING

Modern Managers have several different methods available for Sales Forecasting.

Popular methods are:

  1. Jury of Executive Opinion Method
  2. The Salesforce Estimation Method
  3. Time Series Analysis Method

Jury of Executive Opinion Method:

In the Jury of executive opinion method of Sales Forecasting, appropriate managers within the organization assemble to discuss their opinions on what will happen to sales in the future.

Since these discussion sessions usually resolve around hunches or experienced guesses, the resulting forecast is a blend of informed opinions.

A similar, forecasting method, which has been developed recently is called the DELPHI Method. Delphi Method also gathers, evaluates, and summarizes expert opinions as the basis for a forecast, but the procedure is more formal than that for the jury of executive opinion method.

The Delphi Method has the following steps:

  1. STEP 1 – Various Experts are asked to answer, independently and in writing, a  series of questions about the future of sales or whatever other area is being forecasted.                                                      
  2. STEP 2 – A summary of all the answers is then prepared. No expert knows, how any other expert answered the questions.       
  3. STEP 3 – Copies of summary are given to the individual experts with the request that they modify their original answers if they think it necessary.                                                                                                    
  4. STEP 4 – Another summary is made of these modifications, and copies again are distributed to the experts. This time,however, expert opinions that deviate significantly from the norm must be justified in writing.                                                                                        
  5. STEP 5 – A third summary is made of the opinions and justifications, and copies are once again distributed to the experts. Justification in writing for all answers is now required.   
  6. STEP 6 – The forecast is generated from all of the opinions and justifications that arise from step 5.

 

SALES FORCE ESTIMATION METHOD:

The Sales Force Method is a sales forecasting technique that predicts future sales by analyzing the opinions of sales people as a group.

Salespeople continually interact with customers, and from this interaction they usually develop a knack for predicting future sales.

As with the jury of executive opinion method, the resulting forecast normally is a blend of the informed views of the group.

The sales force estimation method is considered very valuable management tool and is commonly used in business and industry throughout the world.

This method can be further improved by providing sales people with sufficient time to forecast and offering incentives for accurate forecasts.

Companies can make their sales people better forecasters, by training them to better interpret  their interactions with the customers.

 

TIME SERIES ANALYSIS METHOD:

The time series analysis method predicts the future sales by analyzing the historical relationship between sales and time.

Although the actual number of years included in a time series analysis will vary from company to company, as a general rule, managers should include as many years as possible to ensure that important sales trends do not get undetected.

 

Other complex sales forecasting methods include:

  • Statistical Correlation Method
  • Computer Simulation Method

 

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PLANNING TOOLS

The planning tools are techniques managers can use to help develop plans.

2 of the most important tools are:

  1. Forecasting
  2. Scheduling

FORECASTING:

Forecasting is the process of predicting future environmental happenings that will influence the operation of the organization.

Although sophisticated forecasting techniques have been developed only rather recently, the concept of forecasting can be traced at least as far back as Fayol.

The importance of forecasting lies in its ability to help managers understand the future makeup of the organizational environment, which, in turn, helps them formulate more effective plans.

HOW FORECASTING WORKS:

e.g: William C. House in describing the Insect Control Services Company, has developed an excellent illustration of how forecasting works.

In general, Insect Control Services forecasts by attempting to do the following:

  1. Establish relationships between Industry Sales and National Economic and Social Indicators.                                                                      
  2. Determine the impact government restrictions on the use of chemical pesticides Will have on the growth of Chemical, biological and electromagnetic energy pest control markets.       
  3. Evaluate Sales Growth Potential, profitability, resources required, and risks involved in each of its market areas (Commercial, industrial, institutional, governmental and residential)                                                                                                            
  4.  Evaluate the potential for expansion of marketing efforts in geographical areas of the country and abroad.                                          
  5. Determine the likelihood of technological breakthroughs that would make existing product lines obsolete.

TYPES OF FORECASTS:

Various types of forecasts includes:

Economical, Technological, Social  Trends, Sales Forecasting etc.,

Although a company’s complete forecasting process should, and usually does, include all these types of forecasting, sales forecasting is considered the key forecast for a company.

A Sales forecast is a prediction of how high or low sales of the organization’s products and/or services will be over the period of time in reference.

It is the Key forecast for organizations because it serves as the fundamental guideline for planning.

Only after the sales forecast has been completed can managers decide, for example, if more salespeople should be hired, if more money for plant expansion must be borrowed, or if layoffs and cutbacks in certain areas are necessary.

Managers must continually monitor forecasting methods to improve them and to reformulate plans based on inaccurate forecasts.

SCHEDULING:

Scheduling is the process of formulating a detailed listing of activities that must be accomplished to attain an objective, allocating the resources necessary to attain the objective, and setting up and following timetables for completing the objective.

Scheduling is an integral part of every organizational plan.

Two popular scheduling techniques are Gantt Charts and PERT – Program Evaluation and Review Technique.

PLANNING AREAS: INPUT PLANNING

Organizational inputs,process, outputs and environment are major factors in determining how much the organization will be successful.

Planning in areas, such as plant facilities planning or human resource planning, is called INPUT PLANNING – the development of proposed action that will furnish sufficient and appropriate organizational resources for reaching established organizational objectives.

e.g.: Human Resource Planning

Kind of questions personnel planners  should try to answer are:

  1. What types of people does the organization need to reach its objectives?                                                                                                                    
  2. How many of each type are needed?                                                                
  3. What steps should the organization take to recruit and select such people?                                                                                                         
  4. Can present employees be further trained to fill future needed positions?                                                                                                                   
  5. At what rate are employees being lost to other organizations?

WHY PLANS FAIL?

A study by K.A. Ringbakk determined that plans fail when:

  1. Corporate Planning is not integrated into the total management system.                                                                                                                     
  2. There is a lack of understanding of the different steps of the planning process.                                                                                                    
  3. Management at different levels in the organization has not properly engaged in or contributed to planning activities.               
  4. Responsibility for planning is wrongly vested solely in the planning department.                                                                                              
  5. Management expects that plans developed will be realized with little effort.                                                                                                              
  6. In starting formal planning, too much is attempted at once.          
  7. Management fails to operate by the plan.                                                      
  8. Financial projections are confused with planning.                                    
  9. Inadequate inputs are used in planning.                                                   
  10. Management fails to grasp the overall planning process.

 

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TYPES OF PLANS

STANDING PLANS are used over and over again because they focus on organizational situations that occur repeatedly.

SINGLE USER PLANS are used only once, or at most, couple of times, because they focus on unique or rare situations within the organization.

STANDING PLANS:

Policies, Procedures and Rules:

A POLICY is a standing plan that furnishes broad guidelines for taking action consistent with reaching organizational objectives.

A PROCEDURE is a standing plan that outlines a series of related actions that must be taken to accomplish a particular task.

Procedures outline more specific actions than policies do.

Organizations usually have many different sets of procedures covering the various tasks to be accomplished.

Managers must be careful to apply the appropriate organizational procedures for the situations they face and apply them properly.

A RULE is a standing plan that designates specific required action. A rule indicates what an organization member should or should not do and allows no room for interpretation.

 

SINGLE USE PLANS:

Programs & Budgets:

A PROGRAM is a single use plan to carry out a special project within an organization. The Project itself is not intended to remain in existence over the entire life of the organization. Rather, it exists to achieve some purpose, that if accomplished, will contribute to  the organization’s long term success.

A BUDGET is a single user financial plan that covers a specificed length of time. It details how funds will be spent on labour, raw materials, capital goods, information systems, marketing and so on, as well as how the funds will be obtained.

WHAT IS A PLAN?

A Plan is a specific Acton proposed to help the organization achieve its objective.

A crucial part of the management of any organization is developing logical plans and then taking the steps necessary to put the plans in to action.

Regardless of how important experience related intuition may be to managers, successful management actions and strategies typically are based on reason.

Rational managers are crucial to the development of an organizational plan.

4 Dimensions of Plans:

  1. REPETITIVENESS
  2. TIME
  3. SCOPE
  4. LEVEL

REPETITIVENESS:

The repetitiveness dimension of a plan is the extent to which the plan is used over and over again. 

Some plans are specially designed for one situation that is relatively short term in nature.

Plans of this sort are essentially non repetitive.

Other Plans, however, are designed to be used time after time for long term recurring situations. These plans are basically repetitive in nature.

TIME:

The Time dimension of a plan is the length of time the plan covers.Strategical Plans cover relatively long periods of time4 and tactical plans cover relatively short periods of time.

SCOPE:

The Scope dimension of a plan is the portion of the total management system at which the plan is aimed.

Some plans are designed to cover the entire open management system: the organizational environment, inputs, process and outputs. Such a plan is often referred to as a master plan.

Other Plans are developed to cover only a portion of the management system. e.g.: A plan that covers the recruitment of new workers.

The greater the portion of the management system that a plan covers, the broader is the plan’s scope.

LEVEL:

The level dimension of a plan is the level of the organization at which the plan is aimed.

Top Level Plans are those designed for the organization’s top management; whereas the middle level and the lower level plans are designed for middle and lower management, respectively.

Since all the parts of the organization are interdependent, plans developed at any level of the organization have effect on the plans at other levels.

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TACTICAL PLANNING Vs. STRATEGIC PLANNING

Tactical Planning is Short range planning that emphasizes the current operations of various parts of the organization.

Short Range is  defined as a period of time extending about one year or less in the future.

Managers use tactical planning  to outline what the various parts of the organization must do for the organization to be successful at some point 1year or less into the future.

Tactical plans are usually developed in the areas of production, marketing, personnel, finance and plant facilities.

COMPARING AND COORDINATING STRATEGIC & TACTICAL PLANNING:

Basic differences between strategic planning and tactical planning:

  1. Since upper managers generally have a better understanding of the organization as a whole than lower level managers do, upper management generally develops the strategic plans and because lower level managers generally have better understanding of the day to day organizational operations, generally the lower level managers develop the tactical plans.           
  2. Because Strategic  Planning emphasizes analyzing the future and tactical planning emphasizes analysing the everyday functioning of the organization,facts on which to base strategic plans are usually more difficult to gather than are facts on which to base tactical plans.                                                                                                                       
  3. Because strategic plans are based primarily on a prediction of the future and tactical plans on known circumstances that exist within the organization, strategic plans are generally less detailed than tactical plans.                                                                             
  4. Because strategic planning focuses on the long term and tactical planning on the short term, strategic plans cover a relatively long period of time whereas tactical plans cover a relatively short period of time.

Despite their differences, tactical and strategic planning are integrally related. Manager need both tactical and strategic planning program, and these program must be closely related to be successful.

Tactical planning should focus on what to do in the short term to help the organization achieve the long term objectives determined by strategic planning.

STRATEGY IMPLEMENTATION & STRATEGIC CONTROL

Strategy Implementation, the 4th step of the strategy management process, is putting formulated strategies into action.

Without successive implementation, valuable strategies deeloped by managers are virtually worthless.

The successful implementation of strategy required 4 basic skills:

  1. INTERACTING SKILL
  2. ALLOCATING SKILL
  3. MONITORING SKILL
  4. ORGANIZING SKILL

INTERACTING SKILL:

Interacting Skill is the ability to manager people during implementation. Managers who are able to understand the fears and frustrations others feel during the implementation of a new strategy tend to be the best implementers. These managers empathize with organization members and bargain for the best way to put a strategy into action.

ALLOCATING SKILL :

Allocating skill is the ability to provide the organizational resources necessary to implementing a strategy. 

Successful implementers are talented at scheduling jobs, budgeting time and money, allocating other resources that are critical for implementation.

MONITORING SKILL:

Monitoring skill is the ability to use information to determine whether a problem has arisen that is blocking implementation.

Good Strategy Implementers set up feedback systems that continually tell them about the status of strategy implementation.

ORGANIZING SKILL :

Organizing skill is the ability to create throughout the organization a network of people who can help solve implementation problems as they occur.

Good implementers customize this network to include individuals who can handle the special types of  problems anticipated in the implementation of a particular strategy.

Overall , the successful implementation of a strategy requires handling people appropriately, allocating resources necessary for implementation, monitoring and implementing progress, and solving implementation problems as they occur.

Perhaps the most important requirements are knowing which people can solve specific implementation problems and being able to involve them when those problems arise.

 

STRATEGIC CONTROL:

Strategic Control, the last step of the Strategy Management Process, consists of monitoring and evaluating the strategy management process as a whole to ensure that it is operating properly.

Strategic Control focuses on the activities involved in environmental analysis, organizational direction, strategy formulation, strategy implementation, and strategy control itself – checking that all steps of the strategy management process are appropriate, compatible and functioning properly.

SAMPLE ORGANIZATIONAL STRATEGIES

SAMPLE ORGANIZATIONAL STRATEGIES

Analyzing the organizational environment and applying one or more of the strategy tools i.e. Critical Question Analysis, SWOT Analysis, Business Portfolio Analysis and the Porter’s Model; will give the managers a foundation on which to formulate organizational strategy.

The 4 common organizational strategies that evolve this way are:

  1. Growth
  2. Stability
  3. Retrenchment
  4. Divestiture.

GROWTH STRATEGY:

Growth Strategy is adopted by management to increase the amount of businsess that an SBU is currently generating.

The growth strategy is  generally applied to star SBUs or question mark SBUs who have the potential to become stars.

Management generally invests substantial amounts of money to implement this strategy and may even sacrifice short term profit to build long term gain.

Managers can also pursue a growth strategy by purchasing an SBU from another organization.

STABILITY:

Stability is a strategy adopted by management to maintain orslightly improve the amount of business that an SBU is generating.

This strategy is generally applied to cash; cows, since these SBUs are already in an advantageous position.

Management must be careful,however, that in its pursuit of stability it does not turn cash cows into dogs.

RETRENCHMENT:

Retrenchment is to defend or fortify.

Through Retrenchment strategy, mangement attempts to strengthen or protect the amount of business an SBU is generating.

This strategy is generally applied to cash cows or stars that are beginning to lose market share.

DIVESTITURE:

Divestiture is a strategy adopted to eliminate an SBU that is not generating a satisfactory amount of business and that has little hope of doing so in the near future.

In essence, the organization sells or closes down the SBU in question. This strategy is usually applied to SBUs that are dogs or question marks that have failed to increase market share but still require significant amounts of cash.

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STRATEGY FORMULATION TYPES

Understanding the forces that determine competitiveness within an industry should help managers develop strategies that will make their companies more competitive within the industry.

Porter has developed 3 generic strategies to illustrate the kind of strategies managers might develop to make their organizations more competitive:

  1. Differentiation
  2. Cost Leadership
  3. Focus

DIFFERENTIATION:

Differentiation, the first of Porter’s Strategies,focuses on making an organization more competitive by developing a product or products that consumers perceive as being different from products offered by competitors.

Differentiation includes uniqueness in such areas as product quality, design and level of after sales service.

COST LEADERSHIP:

Cost Leadership is a strategy that focuses on making an organization more competitive by producing products more cheaply than competitors can.

According to the logic behind this strategy, by producing products more cheaply than its competitors do, an organization will be able to offer products to customers at lower prices than competitors can, and thereby increase its market share.

Examples of tactics managers might use to gain cost leadership are obtaining lower prices for product parts purchased from suppliers and using technology to increase organizational productivity.

Similar strategies are also used in the service industry.

FOCUS:

Focus is a strategy that emphasizes making an organization more competitive by targeting a particular customer segment.

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Strategy Forumulation: GE Multifactor Portfolio Matrix

GE Multifactor Portfolio Matrix:

GE Multifactor Portfolio Matrix is a tools that helps managers develop organizational strategy that is based primarily on market attractiveness and business strengths.

The GE Multifactor Portfolio was deliberately designed to be more complete than the BCG Growth Share Matrix.

Each of the organization’s SBUs are plotted on a 2 dimensional matrix of Industry Attractiveness and Business Strength.

Each of these 2 dimensions are a composite of  a variety of factors that each firm must determine for itself, given its own unique situation.

As examples, Industry Attractiveness might be determined by such factors as:

  • No. of Competitors in the Industry
  • Rate of Industry Growth
  • Weakness of Competitors within an Industry

Business Strengths might be determined by such factors as:

  • Company’s Financial Solid Position
  • Its Good Bargaining Position over Suppliers
  • Its high level of Technology Use.

Specific strategies for a company are implied by where their businesses fall on the matrix.

STRATEGY FORMULATION TOOLS

After the managers involved in the strategic management process have analyzed the environment and determined organizational direction through the development of a mission statement and organizational objective, they are ready to formulate strategy.

STRATEGY FORMULATION is the process of determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organizational purpose.

Managers formulate strategies that reflect environmental analysis, lead to fulfillment of organizational mission, and result in reaching organizational objectives.

Special tools they can use to assist them in formulating strategies include the following:

  1. CRITICAL QUESTION ANALYSIS
  2. SWOT ANALYSIS
  3. BUSINESS PORTFOLIO ANALYSIS
  4. PORTER’S MODEL FOR INDUSTRY ANALYSIS.

These 4 strategy development tools are related but distinct. Managers should use the tools or combination of tools that seems most appropriate for them and  their organizations.

CRITICAL QUESTION ANALYSIS:

The 4 critical questions to be answered here are:

  1. What are the purposes and objectives of the Organization?
  2. Where is the Organization presently going?
  3. In what kind of environment does the organization now exist?
  4. What can be done to better achieve organizational objectives in the future?

 

SWOT ANALYSIS:

SWOT Analysis is a strategic development tool that matches internal organizational strengths and weaknesses with external opportunities and threats.

SWOT is an acronym for the organization’s Strengths, Weakness, Opportunities and Threats.

It is based on the assumption that if managers carefully review such strengths, weaknesses, opportunities and threats, a useful strategy for ensuring organizational success will become evident to them.

 

BUSINESS PORTFOLIO ANALYSIS:

Business Portfolio Analysis is an organizational strategy formulation technique that is based on the philosophy that Organizations should develop strategy much as they handle investment portfolios.

In the way, in which the sound financial investments should be supported and unsound ones discarded, sound organizational activities should be emphasized and unsound ones deemphasized.

2 Business Portfoilo tools are:

  1. The BCG Growth Share Matrix by Boston Consulting Group.
  2. GE Multifactor Portfolio Matrix by General Electric Company.

BCG Growth-Share Matrix:

The Boston Consulting Group, a leading consulting firm, developed and popularized a portfoilo analysis tools that helps managers develop organizational strategy based on market share of businesses and the growth of markets in which businesses exist.

The 1st step in using this model is identifying the organization’s strategic business units (SBUs). A Strategic business Unit is a significant organization segment that is analysed to develop organizational strategy aimed at generating future business or revenue.

Exactly what constitutes as SBU varies from company to company. In bigger organizations, and SBU could be a company division, a single product or a complete Product Line.

In smaller organizations, it might be the entire company.

Eventhough they vary drastically in form each SBU has the following characteristics:

  1. It is a single business or collection of related businesses.
  2. It has its own competitors.
  3. It has a manager who is accountable for its operation.
  4. It is an area that can be independently planned for within the organization.

After identifying the SBUs, the next step is to categorize each SBU within one of the 4 Matrix Quadrants:

  1. STARS – Star SBUs have a high share of a high growth market and typically need large amounts of cash to support their rapid and significant growth. Stars also generate large amounts of cash for the organization and are usually segments in which management can make additional investments and earn attractive returns.
  2. CASH COWS: SBUs that are Cash Cows have a large share of a market that is growing only slightly. Naturally, these SBUs provide the organization with large amounts of Cash, but since their market is not growing significantly, the cash is generally used to meet the financial demands of the organization in other areas, such as the expansion of a STAR SBU.
  3. QUESTION MARKS: These category of SBUs have a small share of a high growth market. These are “question marks” because it is uncertain whether management should invest more cash in them to gain a larger share of the market or deemphasize or eliminate them. Management will choose the 1st option when it believes it can turn the question mark into a star, and the 2nd option when it thinks that future investments would be fruitless.
  4. DOGS : SBUs that are dogs have a relatively small share of a low-growth market. They may barely support themselves; in some cases, they actually drain off cash resources generated by other SBUs. These are the SBUs which are likely to be shortlisted for deemphasize or elimination.

PITFALLS of the BCG Growth Matrix Model:

The matrix does not consider factors like:

  • Various types of Risk associated with product development
  • Threats that inflation and other economic conditions can create in the future.
  • Social,Political and Ecological Pressures.

 

GE Multifactor Portfolio Matrix:

GE Multifactor Portfolio Matrix is a tools that helps managers develop organizational strategy that is based primarily on market attractiveness and business strengths.

The GE Multifactor Portfolio was deliberately designed to be more complete than the BCG Growth Share Matrix.

Each of the organization’s SBUs are plotted on a 2 dimensional matrix of Industry Attractiveness and Business Strength.

Each of these 2 dimensions are a composite of  a variety of factors that each firm must determine for itself, given its own unique situation.

As examples, Industry Attractiveness might be determined by such factors as:

  • No. of Competitors in the Industry
  • Rate of Industry Growth
  • Weakness of Competitors within an Industry

Business Strengths might be determined by such factors as:

  • Company’s Financial Solid Position
  • Its Good Bargaining Position over Suppliers
  • Its high level of Technology Use.

Specific strategies for a company are implied by where their businesses fall on the matrix.

 

While portfolio models are useful frameworks and reference points, no model is yet designed that will deal with all the various dynamics involved in an organization and an industry and the changing environment. Hence Portfolio models should never be applied in a mechanistic fashion and sound managerial judgement and experience is to be applied alongwith.

 

PORTERS MODEL FOR INDUSTRY ANALYSIS:

Perhaps the best known tool for formulating strategy is the model developed by Michael E. Porter, an internationally acclaimed strategic management expert.

Essentially, Porter’s model outlines the primary forces that determine competitiveness within an industry and illustrates how those forces are related.

The model suggests that in order to develop effective organizational strategies, managers must understand and react to those forces within an industry that determine an organization’s level of competitiveness within that industry.

According to these model, competitiveness within an industry is determined by the following factors:

  1. New Entrants or New Companies within the Industry
  2. Substitute Products or Services – for goods or services that the companies within the industry produce/provide.
  3. Supplier’s Ability to control issues like costs of material/ inputs that industry companies use to manufacture their products or provide their services.
  4. Competition level among the firms in the industry.

According to the model, buyers, product substitutes, supplier and potential new companies within an Industry all contribute to the level or rivalry among industry firms.

 
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ORGANIZATIONAL DIRECTION: MISSION & OBJECTIVES

DETERMINING ORGANIZATION DIRECTION:

Through an interpretation of information gathered during environmental analysis, managers can determine the direction in which an organization should move.

2 important ingredients of organizational direction are Organizational Mission and Organizational Objectives.

DETERMINING ORGANIZATIONAL MISSION:

The most common initial act in establishing organizational direction is determining an organizational mission.

ORGANIZATIONAL MISSION is the purpose for which the Organization exists.

The firms organizational mission reflects such information as what types of products or services it produces, who its customers tend to be, and what important values it holds.

Organizational Mission is a very broad statement of organizational direction and is based on a thorough analysis of information generated through environmental analysis.

DEVELOPING A MISSION STATEMENT:

A MISSION STATEMENT is a written document developed by management, normally based on input by managers as well as non managers, that describes and explains what the mission of an organization actually is.

The mission is expressed in writing to ensure that all organization members will have easy access to it and thoroughly understand exactly what the organization is trying to accomplish.

IMPORTANCE OF ORGANIZATIONAL MISSION:

An organization mission is very important to an organization because it helps management increase the probability that the organization will be successful.

There are several reasons why it does this.

First, the existence of an organizational mission helps management focus human effort in a common direction.

The mission makes explicit the major targets the organization is trying to reach and helps managers keep these targets in mind as they make decisions.

Second, an organizational mission serves as a sound rationale for allocating resources.

A properly developed mission statement gives managers useful guidelines about how resources should be used to best accomplish organizational purpose.

Third, a mission statement helps management define broad but important job areas within an organization and therefore critical jobs that must be accomplished.

RELATION BETWEEN MISSION & OBJECTIVES:

Sound organizational objectives reflect and flow naturally from the purpose of the organization.

The organization’s purpose is expressed in its mission statement.

Thus organizational objectives must reflect and flow naturally from an organizational mission that, in turn, was designed to reflect and flow naturally from the results of an environmental analysis.

STRATEGY PLANNING – ENVIRONMENTAL ANALYSIS

The 1st step of the strategy management process is environmental analysis. An organization can only be successful if it is appropriately matched to its environment.

ENVIRONMENT ANALYSIS is the study of the organizational environment to pinpoint environmental factors that can significantly influence organizational operations.

MANAGERS commonly perform environmental analyses to help them understand what is happening both inside and outside their organizations and to increase the probability that the organizational strategies they develop will appropriately reflect the organizational environment.

In order to perform an environmental analysis efficiently and effectively, a manager must thoroughly understand how organizational environments are structured.

For purposes of environmental analysis, the environment of an organization is generally divided into 3 distinct levels:

  1. General Environment
  2. Operating Environment
  3. Internal Environment

Managers must be well aware of these 3 organizational environmental levels, understand how each level affects organizational performance and then formulate organizational strategies in response to this understanding.

THE GENERAL ENVIRONMENT:

The components normally considered part of the general environment are:

  • Economic
  • Social: Including Demographics and Social Values
  • Political
  • Legal
  • Technological

THE OPERATING ENVIRONMENT:

The operating Environment includes various components like:

  • Customer
  • Competition
  • Labour
  • Supplier
  • International Issues.

THE INTERNAL ENVIRONMENT:

The level of an organization’s environment that exists inside the organization and normally has immediate and specific implications for managing the organization is the internal environment.

It includes marketing, finance and accounting,planning,organizing, influencing and controlling within the organization.

FUNDAMENTALS OF STRATEGIC PLANNING

STRATEGIC PLANNING:

Strategic Planning is  the long range planning that focuses on the organization as a whole. In doing strategic planning, managers consider the organization as a total unit and ask themselves what must be done in the long term( 3 to 5 years) to attain organizational goals.

In strategic planning, managers try to determine what their organization should do to be successful 3 – 5 years from now. The most successful managers tend to be those who are capable of encouraging innovative strategic thinking within their organization.

STRATEGY:

Strategy is defined as a broad and general plan developed to reach long term objectives.Organizational strategy can and generally does focus on many different organizational areas such as Finance, Sales,Marketing,Production, Research and Development and PR.

It gives broad direction to the organization.

Strategy is actually the end result of strategic planning. Although larger organizations tend to be more precise in  developing organizational strategy than smaller organization, every organization must have a strategy.

For a strategy to be worthwhile, it must be consistent with organizational objectives, which, in turn, must be consistent with organizational purpose.

STRATEGY MANAGEMENT:

Strategy management is the process of ensuring that an organization possesses and benefits from the use of an appropriate organization strategy. An appropriate strategy is one best suited to the needs of an organization at a particular time.

The strategy management process is generally thought to consist of 5 sequential and continuing steps:

  1. Environmental Analysis
  2. Establishment of an Organizational Direction.
  3. Strategy Formulation
  4. Strategy Implementation
  5. Strategic Control

PROCESSES FOR MAKING GROUP DECISIONS

3 Famous Processes for Group level Decision Making are:

  1. Brainstorming
  2. Nominal Group Technique
  3. Delphi Technique

BRAINSTORMING:

Brainstorming is a group decision making process in which negative feedback on any suggested alternative by any group member is forbidden until all members have presented alternatives that they perceive as valuable.

Brainstorming is carefully designed to encourage all group members to contribute as many viable decision alternatives as they can think of.

Its premise is that if the evaluation of alternatives starts before all possible alternatives have been offered, valuable alternatives may be overlooked.

During brainstorming, group members are encouraged to state their ideas, no matter how wild they may seem, while an appointed group member records all ideas for discussion.

NOMINAL GROUP TECHNIQUE:

The nominal group technique is another useful process for helping groups make decisions. This process is designed to ensure that each group member has equal participation in making the group decisions.

It involves the following steps:

  1. STEP 1: Each group member writes down individual ideas on the decision or problem being discussed.
  2. STEP 2: Each member presents individual ideas orally. The ideas are usually written on a board for all other members to see and refer to.
  3. STEP 3: After all members present their ideas, the entire group discussed these ideas simultaneously. Discussion tends to be unstructured and spontaneous.
  4. STEP 4: When discussion is completed, a secret ballot is taken to allow members to support their favourite ideas without fear. The idea receiving the most votes is adopted and implemented.

DELPHI TECHNIQUE:

The Delphi technique involves circulating questionnaires on a specific problem among group members, sharing the questionnaire results with them, and then continuing to recirculate and refine individual responses until a consensus regarding  the problem is reached.

In contrast to the nominal group technique or brainstorming, the Delphi technique does not have group members meet face to face. The formal steps followed in the Delphi Technique are:

  1. STEP 1: A problem is identified.
  2. STEP 2: Group members are asked to offer solutions to the problem by  providing anonymous responses to a carefully designed questionnaires.
  3. STEP 3: Responses of all group members are compiled and sent out to all group members.
  4. STEP 4: Individual group members are asked to generate a new individual solution to the problem after they have studied the individual responses of all other group members.
  5. STEP 5: Step 3 and 4 are repeated until a consensus problem solutions is reached.

 

Brainstorming offers the advantage of encouraging the expression of as many useful ideas as possible, but the disadvantage of wasting the group’s time on ideas that are wildly impractical.

The nominal group technique, with its secret ballot, offers a structure in which individuals can support or reject an idea without fear of recrimination. Its disadvantage is that there is no way of knowing why individuals voted the way they did.

The advantage of the Delhi Technique is that ideas can be gathered from group members who are too geographically separated or busy to meet face to face.Its disadvantage is that members are unable to ask questions of one another.

Managers must carefully weigh the advantages and disadvantages of these 3 group decision making tools and adopt the one or some combination of the three – that best suits their unique organizational circumstances.

TYPES OF DECISIONS & DECISION MAKING PROCESS

A decision is a choice made between 2 or more available alternatives.

Decision Making is the process of choosing the best alternative for reaching objectives.

Managers make decisions affecting the organization daily and communicate those decisions to other organizational members.

Some decisions affect a large number of organization members, cost a great deal of  money to Carry out, or have a long term effect on the organization. Such significant decisions can have a major impact, not only on the management systems itself, but on the career of the manager who makes them.

Other decisions are fairly insignificant, affecting only a small member of organization members, costing little to carry out, and producing only a short term effect on the organization.

TYPES OF DECISIONS:

PROGRAMMED DECISIONS

Programmed decisions are routine and repetitive, and the organization typically develops specific ways to handle them. A programmed decision might involve determining how products will be arranged on the shelves of a supermarket. For this kind of routine, repetitive problem, standard arrangement decisions are typically made according to established management guidelines.

NON PROGRAMMED DECISIONS:

Non programmed decisions are typically one shot decisions that are usually less structured than programmed decision.

5 ELEMENTS  OF THE DECISION SITUATION:

  1. The Decision Makers
  2. Goals to be served
  3. Relevant Alternatives
  4. Ordering of Alternatives
  5. Choice of Alternatives

DECISION MAKING PROCESS:

Decision making steps this model depicts are as follows:

  1. Identify an existing problem                                                                      
  2. List possible alternatives for solving the problem                       
  3. Select the most beneficial of these alternatives.                           
  4. Implement the selected alternative.                                                        
  5. Gather feedback to find out if the implemented alternative is solving the identified problem.

THE PLANNER: Qualification and Evaluation

The planner is probably the most important input in the planning subsystem. This individual combines all other inputs and influences the subsystem process so that its output is effective organizational plans.

The planner is responsible not only for developing plans but also for advising management on what actions should be taken to implement those plans.

Regardless of who actually does the planning or what organization the planning is being done in, the qualification, duties, and evaluations of the planner are all very important considerations for an effective planning subsystem.

QUALIFICATIONS OF PLANNERS:

Planners should have four primary qualifications:

  1. They should have considerable practical experience within their organization. Preferably, they should have been executives in one or more of the organization’s major departments.This experience will help them develop plans that are both practical and tailor made for the organization.                   
  2. Planners should be capable of replacing  any narrow view of the organization they may have acquired while holding other organizational positions with an understanding of the organization as a whole. They must know how all parts of the organization function and interrelate. They must have an abundance of conceptual skills.                                                                     
  3. Planners should have some knowledge of and interest in the social,political, technical and economic trends that could affect the future of the organization. They must be skillful in defining those trends and possess the expertise to determine how the organization should react to the trends to maximize its success. This qualification can be overemphasized.                                             
  4. They should be able to work well with others. Their position will inevitably require them to work closely with several key members of the organization, so its is essential that they possess the personal characteristics necessary to collaborate and advise effectively. The ability to communicate clearly, both orally and in writing, is one of the most important of these characteristics.

EVALUATION CRITERIA FOR PLANNERS:

  1. Organizational Plan is in writing.
  2. Plan is the result of all elements of the management team working together.
  3. Plan defines present and possible future business of the organization.
  4. Plan specifically mentions organizational objectives.
  5. Plan identifies future opportunities and suggests how to take advantage of them.
  6. Plan emphasizes both internal and external environments.
  7. Plan describes the attainment of objectives in operational terms whenever possible.
  8. Plan includes both long and short term recommendations.

Over and above all these, the subjective considerations include how well planners get along with key members of the organization, the amount of organizational loyalty they display and their perceived potential.

MBO – Management by Objectives

MBO – Management by Objectives was popularized mainly through the writings of Peter Drucker.

Some Managers find organizational objectives such an important and fundamental part of management that they use a management approach based exclusively on them.

Although mostly discussed in the context of profit oriented companies, MBO is also a valuable management tool for non profit organizations.

MBO Strategy has 3 basic parts:

  1. All individuals within an organization are assigned a specialized set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers.                                                 
  2. Performance reviews are conducted periodically to determine how close individuals are to attaining their objectives.                    
  3. Rewards are given to individuals on the basis of how close they come to reaching their goals.  

The MBO  process consists of 5 steps:

  1. Review Organizational Objectives: The manager gains a clear understanding of the organization’s overall objectives.                     
  2. Set Worker Objectives: The manager and worker meet to agree on worker objectives to be reached by the end of the normal operating period.                                                                                               
  3.  Monitor Progress:  At intervals during the normal operating period, the manager and worker check to see if the objectives are being reached.                                                                                             
  4. Evaluate Performance: At the end of the normal operating period, the worker’s performance is judged by the extent to which the worker reached the objectives.                                               
  5. Give Rewards: Rewards given to the worker are based on the extent to which the objectives were reached.

CRITICAL SUCCESS FACTORS:

  1. Top Management must be committed to the MBO process and set appropriate objectives for the organization.
  2. Managers and subordinates together must develop and agree on each individuals goals.
  3. Employee performance should be conscientiously evaluated against established objective.
  4. Management must follow through on employee performance evaluations by rewarding employees accordingly.

ADVANTAGES:

  1. MBO programs continually emphasize what should be done in an organization to achieve organizational goals.
  2. MBO process secures employee commitment to attaining organizational goals.

DISADVANTAGES:

  1. One is that the development of objectives can be time consuming, leaving both managers and employees less time in which to do their actual work.
  2. Increased Paper Work

GUIDELINES FOR ESTABLISHING OBJECTIVES

In general an organization should have 3 types of Objectives:

  1. Short Term Objectives : Targets to be achieved in 1 year or less.
  2. Intermediate Term Objectives: Targets to be achieved in 1 to 5 years.
  3. Long Term Objectives: Targets to be achieved in 5 to 7 years.

The necessity of predetermining appropriate organizational objectives has led to the  development of a management guidelines called the PRINCIPLE OF OBJECTIVE.

This principle states that  before managers take any action, they should clearly determine, understand and state organizational objectives.

SUB OPTIMIZATION:

Sub optimization is a condition where sub objectives are conflicting ro not directly aimed at accomplishing the overall organizational objective.

GUIDELINES FOR ESTABLISHING OBJECTIVES:

  1. Let the people responsible for attaining the objectives have a voice in setting them.
  2. State Objective as specifically as possible.
  3. Relate objectives to specific actions whenever necessary.
  4. Pinpoint expected results.
  5. Set goals high enough that employees have to strive to meet them, but not so high that employees give up trying to meet them.
  6. Specify when goals are expected to be achieved
  7. Set objectives only in relation to other organizational objectives.
  8. State Objectives clearly and simply.

PLANNING CHARACTERISTICS

4 Aspects of Planning are :

  1. Definition of Planning
  2. Purposes of Planning
  3. Advantages and Potential disadvantages of planning
  4. Primacy of Planning

DEFINING PLANNING:

Planning is the process of determining how the organization can get where it wants to go, and what it will do to accomplish its objectives.

Planning is the systematic development of action porgrams aimed at reaching agreed business objectives by the process of analysing, evaluating, and selecting among the opportunities which are forseen.

PURPOSES OF PLANNING:

The protective purpose of planning is to minimize risk by reducing the uncertainities surrounding business conditions and clarifying the consequences of related management actions.

The affirmative purpose is to increase the degree of organizational success.

The fundamental purpose of planning, however, is to help the organization reach its objectives.

PLANNING: ADVANTAGES & DISADVANTAGES

A vigorous planning program produces many benefits.

First, it helps managers to be future oriented. They are forced to look beyond their everyday problems to project what situations may confront them in the future.

Second, a sound planning porgram enhances decision coordination. No decision should be made today without some idea of how it will affect a decision that might have to be made tomorrow.

The planning function pushes managers to coordinate their decisions.

Third, planning emphasizes organizational objectives. Because organizational objectives are the starting points for planning, managers are continually remind of exactly what their organization is trying to accomplish.

DISADVANTAGES:

The downside is that if the planning function is not well executed,planning can have several disadvatnages for the organization.

e.g.: An overemphasized planning program can take up too much managerial time. Managers must strike an appropriate balance between time spent on planning and time spent on organizing, influencing, and controlling.

PRIMACY OF PLANNING:

Planning is the primary managerial function- the one that precedes and is the absis for the organizing, influencing and controlling functions of managers.

Only after manaers have developed their plans can they determine how they went to structure their organization, place their people and establish organizational controls.

FIRST STEP : PLANNING

SECOND STEPS: ORGANIZING, INFLUENCING, CONTROLLING

RESULTS: ACHIEVING OBJECTIVES

***********************************************************

 

STEPS IN THE PLANNING PROCESS:

The planning process consists of the following 6 steps:

  1. State Organizational Objective
  2. List alternative ways of reaching objectives
  3. Develop premises on which to base each alternative
  4. Choose the best alternative for reaching objectives
  5. Develop plans to pursue the chosen alternative
  6. Put the plans into action.

ORGANIZATIONAL OBJECTIVES:

Organizational objectives are the targets toward which the open management system is directed. Organizational input,process and output all exist to reach organizational objectives.

Properly developed organizational objectives reflect the purpose of the organization.

ORGANIZATIONAL PURPOSE:

Organizational Purpose is what the organization exist to do, given a particular group of customers and customer needs. If an organization is accomplishing its objectives, it is accomplishing its purpose and thereby justifying its reason for existence.

Organizations exist for various purposes and thus have various types of objectives.

Therefore, its objectives are aimed at furnishing this assistance. The primary purpose of a business organization, in contrast, is usually to make a profit.

6 variables in International Systems

IMPORTANT VARIABLES IN THE INTERNATIONAL SYSTEM:

  1. Different National Sovereignties.                                                         
  2. Disparate National Economic Conditions
  3. Different National Values and Institutions
  4. Difference in timing of National Industrial Revolution
  5. Geographical Distance
  6. Different Areas and Population

Diversity Management: Ethnocentrism and other negative dynamics

The changing demographics set in motion certain social dynamics that can interfere with workforce productivity. If an organization is to be successful in diversifying, it must neutralize these dynamics. 

ETHNOCENTRISM:
Our natural tendency is to judge other groups less favourably than our own.
These tendency is the source of ethnocentrism.
Ethnocentrism is the belief that one’s own group, culture,country or customs are superior to others.                                                                                      
PREJUDICE
A prejudice is a preconceived judgement,opinion, or assumption about an issue,behaviour or group of people.                                                    
STEREOTYPE:
Stereotype is a positive or negative assessment of members of a group or their perceived attributes.
It is important for managers to know about these negative dynamics so they can monitor their own perceptions and help their employees view diverse coworkers more accurately.
DISCRIMINATION:
Discrimination is the act of treating an issue, person, or behaviour unjustly or inequitably on the basis of stereotypes and prejudices.
TOKENISM:
Tokenism refers to being one of very few members of your group in the organization.
“Token” employees are given either very high or very low visibility in the organization.
PROMOTING DIVERSITY THROUGH HUDSON INSTITUTE STRATEGIES:
6 major issues:
  1.  Stimulate Balanced World Growth
  2. Accelerate Productivity increases in Service Industries
  3. Maintain the dynamsism of an Aging Workforce.
  4. Reconcile the conflicting needs of women, work and families.
  5. Fully integrate all groups of workers into the economy.
  6. Improve the education and skills of all workers. 

VARIOUS APPROACHES TO MEETING SOCIAL RESPONSIBILITY

Lipson, a desirable and socially responsive approach to meeting social obligations does the following:

  1. Incorporates social goals into the annual planning process.
  2. Seeks comparative industry norms for social programs.
  3. Presents reports to organization members, the board of directors, and stockholders on social responsibility progress.
  4. Experiments with different approaches for measuring social performance.
  5. Attempts to measure the cost of social programs as well as the return on social program investments.

S. Prakash Sethi presents 3 management approaches to meeting social obligations:

  1. Social Obligation Approach: It considers business as having primarily economic purposes and confines social responsibility activity mainly to existing legislation.                            
  2. Social Responsibility Approach: It sees business as having both economic and societal goals.                                                                    
  3. Social Responsive Approach: It considers business as having both societal and economic goals as well as the obligation to anticipate potential social problems and work actively toward preventing their occurrence.

CONVERTING ORGANIZATION POLICIES ON SOCIAL RESPONSIBILITY INTO ACTION:

A policy is a management tool that furnishes broad guidelines for channeling management thinking in specific directions.

To be effective, social responsibility policies must be converted into appropriate action.

PHASE 1: It consists of the recognition by Top Management that the organization has some social obligation. Top Management then must formulate and communicate some policy about the acceptance of this obligation to all organization members.

PHASE 2: It involves staff personnel as well as Top Management. In this phase, top management gathers information related to meeting the social obligation accepted in phase 1. Staff Personnel are generally involved at this point to give advice on technical matters related to meeting the accepted social obligation.

PHASE 3: It involves division management in addition to the organization personnel already involved from the first 2 phases.

During this phase, top management strives to obtain the commitment of organization members to live up to the accepted social obligation and attempts to create realistic expectations about the effects of such a commitment on organizational productivity.

Staff specialists encourage the responses within the organization necessary to meet the accepted social obligation properly; and division management commits resources and modifies existing procedures so that appropriate socially oriented activities can and will be performed within the organization.

OUTCOMES OF SOCIAL RESPONSIBILITY INVOLVEMENT EXPECTED BY EXECUTIVES

POSITIVE OUTCOMES:

  1. Enhanced corporate reputation and goodwill.
  2. Strengthening of the social system in which the corporation functions.
  3. Strengthening of the economic system in which the corporation functions.
  4. Greater Job satisfaction among all employees.
  5. Avoidance of issues with government regulations.
  6. Greater job satisfaction among executives
  7. Increased chances for survival of the firm.
  8. Ability to attract better managerial talent.
  9. Increased long term profitability.
  10. Strengthening of the pluralistic nature of American Society.
  11. Maintaining or gaining Customers
  12. Investor Preference for socially responsible firms
  13. Increased short term profitability

 

NEGATIVE OUTCOMES:

  1. Decreased Short term profitability
  2. Conflict of economic or financial and social goals.
  3. Increased prices for consumers
  4. Conflict in criteria for assessing managerial performance
  5. Disaffection of stock holders.
  6. Decreased Productivity
  7. Decreased Long term profitability
  8. Increased Government Regulation
  9. Weakening of the economic system in which the corporation functions.
  10. Weakening of the social system in which the corporate functions.

 

STAKEHOLDERS:

 

SOCIAL OBLIGATIONS OF THE MANAGERS TO VARIOUS STAKEHOLDERS :

  1. STOCKHOLDERS: To increase the value of the organization.
  2. SUPPLIERS : To deal with them fairly
  3. BANKS & LENDERS: To replay debts
  4. GOVERNMENT AGENCIES: To abide laws.
  5. EMPLOYEES & UNIONS: To provide safe working environment and to negotiate fairly with union representatives.
  6. CONSUMERS: To provide Safe Products
  7. COMPETITORS: To compete fairly and to refrain from restraints of trade.
  8. LOCAL COMMUNITIES & SOCIETY: To avoid business practices that harm the environment.

KEITH DAVIS MODEL OF CORPORATE SOCIAL RESPONSIBILITY

Davis’s model is a list of 5 propositions that describe how and why businesses should adhere to the obligation to take action that protects and improves the welfare of society as well as of the organization:

Proposition 1: SOCIAL RESPONSIBILITY  ARISES FROM SOCIAL POWER.

This proposition is derived from the understanding that a business has significant amount of  influence on and power over various critical issues like Environment, Minority Employment, Neighbourhood Development etc.,

All business in the country primarily determines the various situations like employment,environment and overall atmosphere that the citizens get to live in.

Since business has power and influence over the society, the society can and should hold the businesses responsible for social conditions that result from the exercise of the power.

Proposition 2: BUSINESS SHALL OPERATE AS A 2 WAY OPEN SYSTEM, WITH OPEN RECEIPT OF INPUTS FROM SOCIETY AND OPEN DISCLOSURE OF ITS OPERATIONS TO THE PUBLIC.

Business must be willing to listen to what must be done to sustain or improve social welfare. In turn, the society must be willing to listen to business reports on what is is doing to meet its social responsibilities.

DAVIS suggests that there must be ongoing, honest and open communications between business and society’s representatives if the overall welfare of society’s representatives if the overall welfare of society is to be maintained or improved.

Proposition 3: THE SOCIAL COSTS AND BENEFITS OF AN ACTIVITY, PRODUCT or SERVICE, SHALL BE THOROUGHLY CALCULATED AND CONSIDERED IN DECIDING WHETHER TO PROCEED WITH IT.

The technical feasibility and economic profitability and the shot term and long term consequences of all business activities should be considered before undertaking them.

Proposition 4: THE SOCIAL COSTS RELATED TO EACH ACTIVITY, PRODUCT OR SERVICE SHALL BE PASSED ON TO THE CUSTOMER:

The proposition states that business cannot be expected to completely finance activities that may be socially advantageous but economically disadvantageous. The costs of maintaining socially desirable activities within business should be passed on to consumers through higher prices for the goods or services related to these activities.

Proposition 5: BUSINESS INSTITUTIONS, AS CITIZENS, HAVE THE RESPONSIBILITY TO BECOME INVOLVED IN CERTAIN SOCIAL PROBLEMS THAT ARE OUTSIDE THEIR NORMAL AREAS OF OPERATION: –

If a business possesses the expertise to solve a social problem with which it may not be directly associated, it should be held responsible for helping society solve that problem.

Since the business eventually will reap an increased profit from a generally improved society, businesses should share in the responsibility of all citizenry to generally improve society.

THE SYSTEM APPROACH

The system approach to management is based on general system theory founded by Scientist Ludwig Von Betalanffy.

The main context of this theory is that to be able to fully understand the operations of an entity, the entity must be viewed as a system.

A system is a number of interdependent parts functioning as a whole for some purpose.

The concept of WHOLENESS is very important in general system analysis. The system must be viewed as a whole and modified only through changes in its parts.

L. Thomas Hopkins suggested 6 guidelines for system analysis:

  1. The whole should be the main focus of the analysis. Parts to receive secondary attention.
  2. Integration is the key variable in wholeness analysis. It is defined as the interrelatedness of the many parts within the whole.
  3. Possible modifications in each part should be weighed in relation to possible effects on every other part.
  4. Each part has some role to play so that the whole cam accomplish its purpose.
  5. The nature of the part and its function is determined by its position in the whole.
  6. All analysis starts with the existence of the whole. The parts and their interrelationships should then evolve to best suit the purpose of the whole.

 

THE MANAGEMENT SYSTEM:

The main parts of the management system  are:

  • Organizational Input
  • Organizational Process
  • Organizational Output

The management system is an open system, which interacts with its environment.

The factors which the management system interact with are:

  • Government
  • Suppliers
  • Customers
  • Competitors

Each of these factors represents a potential environment influence that significantly change the future of the organization and thus the management system.

MANAGEMENT SCIENCE

The Scientific Method of problem solving dictates that one should:

  1. Systematically observe the system whose behaviour must be explained to solve the problem.
  2. Use these specific observations and from which consequences of changing the system can be predicted.
  3. Use the model to deduce how the system will behave under conditions that have not been observe but could be observed if the changes were made.
  4. Finally, test the model by performing an experiment on the actual system to see if the effects of changes predicted using the model actually occur when the changes are made.

The OR ( Operations Research) groups proved very successful at using the scientific method to solve the problems.

 

THE CONTINGENCY APPROACH:

The contingency approach to management emphasizes that what managers do in practice depends on, or is contingent upon, a given set of circumstances – a situation.

In essence, this approach emphasizes “if-then” relationships.

“If” this situational variable exists,”then” this is the action a manager probably would take.

In general, the contingency approach attempts to outline the conditions or situations in which various management methods have the best chance of success.                                                                                        

This approach is based on the premise that, although there is probably no one best way to solve a management problem in all organizations, there probably is one best way to solve any given management problem in any one organization.

MAIN CHALLENGES OF USING THE CONTINGENCY APPROACH

  1. Perceiving organizational situations as they actually exist.
  2. Choosing the management tactics best suited to those situations.
  3. Competently implementing those tactics.

The notion of a contingency approach to management is a popular discussion topic for contemporary management thinkers.

THE SYSTEM APPROACH:

The system approach to management is based on general system theory. Ludwign von Bertalanffy as scientist is recognised as the founder of the general system theory.

The main premise of the theory is that to understand fully the operation of an entity, the entity as viewed as a system.

A system is a number of interdependent parts functioning as a whole for some purpose.

HENRI FAYOL’S 14 Principles of Management

Management Principles developed by Henri Fayol: 

  1. DIVISION OF WORK: Work should be divided among individuals and groups to ensure  that effort and attention are focused on special portions of the task. Fayol presented work specialization as the best way to use the human resources of the organization.                                                                                                                   
  2. AUTHORITY: The concepts of Authority and responsibility are closely related. Authority was defined by Fayol as the right to give orders and the power to exact obedience. Responsibility involves being accountable, and is therefore naturally associated with authority. Whoever assumes authority also assumes responsibility.                                                              
  3. DISCIPLINE: A successful organization requires the common effort of workers. Penalties should be applied judiciously to encourage this common effort.                                                                              
  4. UNITY OF COMMAND: Workers should receive orders from only one manager.                                                                                              
  5. UNITY OF DIRECTION: The entire organization should be moving towards a common objective in a common direction.                                                                                                        
  6. SUBORDINATION OF INDIVIDUAL INTERESTS TO THE GENERAL INTERESTS: The interests of one person should not take priority over the interests of the organization as a whole.                                                                                                                                        
  7. REMUNERATION: Many variables, such as cost of living, supply of qualified personnel, general business conditions, and success of the business, should be considered in determining a worker’s rate of pay.                                                                                                  
  8. CENTRALIZATION: Fayol defined centralization as lowering the importance of the subordinate role. Decentralization is increasing the importance. The degree to which centralization or decentralization should be adopted depends on the specific organization in which the manager is working.                                                                                                                  
  9. SCALAR CHAIN: Managers in hierarchies are part of a chain like authority scale. Each manager, from the first line supervisor to the president, possess certain amounts of authority. The President possesses the most authority; the first line supervisor the least. Lower level managers should always keep upper level managers informed of their work activities. The existence of a scalar chain and adherence to it are necessary if the organization is to be successful.                                                                                                    
  10. ORDER: For the sake of efficiency and coordination, all materials and people related to a specific kind of work should be treated as equally as possible.                                                                          
  11. EQUITY: All employees should be treated as equally as possible.                                                                                                                 
  12. STABILITY OF TENURE OF PERSONNEL: Retaining productive employees should always be a high priority of management. Recruitment and Selection Costs, as well as increased product-reject rates are usually associated with hiring new workers.                                                                                                 
  13. INITIATIVE: Management should take steps to encourage worker initiative, which is defined as new or additional work activity undertaken through self direction.                                                    
  14. ESPIRIT DE CORPS: Management should encourage harmony and general good feelings among employees.

 

MANAGEMENT INNOVATIONS

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UNIVERSALITY OF MANAGEMENT & MANAGEMENT SKILL

Management principle are universal; that is why, the apply to all types of organizations including but not limited to FOR PROFIT AND NOT FOR PROFIT ones like businesses, churches,sororities, athletic teams, hospitals and so on.

Manager’s jobs vary somewhat from one type of organization to another because each organizational type requires the use of specialized knowledge, exists in a unique working and political environment, and uses different technology. However, there are job similarities across organizations because the  basic management activities – planning, organizing, influencing, and controlling are common to all organizations.

The basic ingredients of successful management are applicable to all organizations.

MANAGEMENT SKILL:

Management skill is the ability to carry out the process of reaching organization goals by working with and through people and other organizational resources.

Learning about management skill and focusing on developing it are of critical importance since possessing such skill is generally considered to be the prerequisite for management success.

Katz indicates that 3 types of skills are important for successful management performance: technical, human and conceptual skills.

* TECHNICAL SKILLS:

Technical skills are skills involving the ability to apply specialized knowledge and expertise to work related techniques and procedures.

Examples of these skills are engineering, computer programming, and accounting. Technical skills are mostly related to working with “things” – processes or physical objects.

HUMAN SKILLS:

Human skills are skill that build cooperation with the team being led. They involve working with attitudes and communication, individual and group interests – in short, working with people.

CONCEPTUAL SKILLS:

Conceptual Skills involve the ability to see the organization as a whole. A manager with conceptual skills is able to understand how various functions of the organization complement one another, how the organization relates to its environment, and how changes in one part of the organization affect the rest of the organization.

As a manager grows, the need for conceptual skills increases.

Human skills are required at all levels.

 

MANAGEMENT SKILL: A contemporary View:

The major activities that the modern managers typically perform are of 3 basic types:

  1. Task Related Activities:                                                                                                Task related activities are management efforts aimed at carrying out critical management related duties in organizations. Such activities include short term planning, clarifying objectives of jobs in organizations, and monitoring operations and performance.                                                                       
  2. People Related Activities:                                                                                                    People related activities are management efforts aimed at managing people in organizations. Such activities include providing support and encouragement to others, providing recognition for achievements and contributions,developing skill and confidence or organization members,consulting when making decisions, and empowering others to solve problem.                                                                                         
  3. Change Related Activities:                                                                                                    Change related activities are management efforts aimed at modifying organizational components. Such activities include monitoring organization’s external environment, proposing new strategies and vision, encouraging innovative thinking, and taking risks to promote needed change.

To increase the probability of being successful, managers should have competence in :

  • Clarifying Roles
  • Monitoring Operations
  • Short term Planning
  • Consulting
  • Supporting
  • Recognizing
  • Dveloping
  • Empowering
  • Envisioning Change
  • Taking risks for Change
  • Encourge Innovative Thinking
  • External Monitoring

 

 

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com; 919375970812

MANAGERIAL EFFECTIVENESS & EFFICIENCY

ORGANIZATIONAL RESOURCES:

 

  1. Human Resources
  2. Monetary Resources
  3. Raw Materials
  4. Capital

 

Organizational resources are used,combined and transformed into finished products during the production process.

Human resources are people who work for an organization.Their skills and their knowledge are leveraged by the managers.

Monetary resources are amounts of money that managers use to purchase goods and services for the organization.

Raw materials are ingredients used directly in the manufacturing of products.

 

Managers must become both efficient and effective.

MANAGERIAL EFFECTIVENESS:

The effectiveness of the managers is measured in the effectiveness of the organization in achieving the organizational goals.

MANAGERIAL EFFICIENCY:

Managerial efficiency is the proportion of total organization resources that contribute to productivity during the manufacturing process. The higher this proportion, the more efficient the manager. The more resources wasted or used during the production process, the more efficient the manager.

Managers can be efficient but not effective and vice versa.

If managers achieve the organization goals they are effective, but if they end up using or wasting a high amount of resources, then definitely, the concerned manager is not being efficient.

On the other hand, if the manager is very efficient by using the resources in a limited manner, but misses accomplishing the organizational goals and objectives.

MANAGEMENT INNOVATION

managementinnovations2020@gmail.com; manojonkar@gmail.com; 919375970812

DEFINE MANAGEMENT & ITS FUNCTIONS

Management is the process of reaching organizational goals by working with and through people and other organizational resources. 

Management has the following 3 characteristics:

  1. It is a process or series of continuing and related activities.
  2. It involves and concentrates on reaching organizational goals.
  3. It reaches these goals by working with and through people and other organizational resources.

 

MANAGEMENT FUNCTIONS:

The 4 basic management functions that make up the management process are described in the following sections:

  1. PLANNING
  2. ORGANIZING
  3. INFLUENCING
  4. CONTROLLING.

PLANNING: Planning involves choosing tasks that must be performed to attain organizational goals, outlining how the tasks must be performed, and indicating when they should be performed.

Planning activity focuses on attaining goals. Managers outline exactly what organizations should do to be successful. Planning is concerned with the success of the organization in the short term as well as in the long term.

ORGANIZING:

Organizing can be thought of as assigning the tasks developed in the planning stages, to various individuals or groups within the organization. Organizing is to create a mechanism to put plans into action.

People within the organization are given work assignments that contribute to the company’s goals. Tasks are organized so that the output of each individual contributes to the success of departments, which, in turn, contributes to the success of divisions, which ultimately contributes to the success of the organization.

INFLUENCING:

Influencing is also referred to as motivating,leading or directing.Influencing can be defined as guiding the activities of organization members in he direction that helps the organization move towards the fulfillment of the goals.

The purpose of influencing is to increase productivity. Human-oriented work situations usually generate higher levels of production over the long term than do task oriented work situations because people find the latter type distasteful.

CONTROLLING:

Controlling is the following roles played by the manager:

  1. Gather information that measures performance
  2. Compare present performance to pre established performance norms.
  3. Determine the next action plan and modifications for meeting the desired performance parameters.

Controlling is an ongoing process.

 

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com; 919375970812

ROLE & IMPORTANCE OF MANAGEMENT

IMPORTANCE OF MANAGEMENT:

Managers influence all the phases of modern organizations. Sales Managers maintain a sales force that markets goods. Personnel managers provide organizations with a competent and productive workforce. Plant managers run manufacturing operations that produce the clothes we wear, the food we eat, and the automobiles we drive.

Our society could never exist as we know it today nor improve without a steady stream of managers to guide its organizations. The well known management author Peter Drucker highlighted this point when he said that Effective Management is probably the main resource of developed countries and the most needed resource of developing ones.

In short, all societies, whether developed or developing, need a huge lot of good managers.

THE ROLE OF MANAGEMENT:

Essentially, the role of managers is to guide the organizations toward goal accomplishment. All organizations exist for certain purposes or goals,and managers are responsible for combining and using organizational resources to ensure that their organizations achieve their purposes.

The role of the Management is to move an organization towards its purposes or goals by assigning activities that organization members perform.

If Management ensures that all the activities are designed effectively, the production of each individual worker will contribute to the attainment of the organizational goals.

Management strives to encourage individual activity that will lead to reaching organizational goals and to discourage individual activity that will hinder the accomplishment of the organization objectives. 

There is no idea more important than managing the fulfillment of the organizational goals and objectives. The meaning of the Management is given by its goals and objectives.

All managers, must have a single minded focus on the fulfillment of the organizational goals.

 

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com, 919375970812

ETHICS OF CONSUMER PRODUCTION AND MARKETING – Theories and Definitions

How far must manufacturers and their representatives go to make their products and services completely safe?

WHAT Is the relationship between a business and its customers? a contract, or is there more to it than that?

Hos does the fact that companies usually know more about their products than their customers IMPACT their duty to protect customers from injury or harm?

What responsibility do businesses have for customer injuries no one could reasonably have foreseen or prevented?

What about customer’s privacy – what obligations do companies have?

 

MARKET APPROACH TO CONSUMER PROTECTION:

Consumer safely is seen as a good that is most efficiently provided through the mechanism of the free market whereby sellers must respond to consumer demands.

PROBLEMS WITH THE ASSUMPTION OF FULL INFORMATION:

 

  • Many products are too complex for consumers to understand
  • Markets cannot provide consumers with product information.

 

FREE RIDERS:

individuals who enjoy the benefits of a good without paying their share of its costs.

RATIONAL UTILITY MAXIMIZER:

A person who has a well defined and consistent set of preferences, and who knows how personal choices will affect those preferences.

PROBLEMS WITH THE ASSUMPTION OF RATIONAL UTILITY MAXIMIZATION:

 

  • Few people are good at estimating probabilities.
  • People are irrational and inconsistent when weighing choices.
  • Many consumer markets are monopolies or oligopolies.

 

CONTRACT VIEW OF THE FIRM’S DUTIES TO ITS CUSTOMERS:

The view that the relationship between a business firm and its customers is relationship, and the firm’s moral duties to the customer are those created by this contractual relationships.

RELIABILITY:

The probability that a product will function as the consumer is led to expect that it will function.

SERVICE LIFE:

The period of time during which the product will function as effectively as the consumer is to led to expect it to function.

MAINTAINABILITY:

The ease with which the product can be repaired and kept in operating condition.

PRODUCT SAFETY:

The degree of risk associated with using a product.

MORAL DUTIES TO CONSUMERS UNDER CONTRACTUAL THEORY:

 

  • Duty to comply with express and implied claims of reliability, service life, maintainability, and safety.
  • Duty of disclosure
  • Duty not to misrepresent
  • Duty not to coerce

 

DUE CARE THEORY OF THE MANUFACTURER’S DUTIES TO CONSUMERS:

The view that because manufacturers are in more advantaged position, they have a duty to take special care to ensure that consumers’ interests are not harmed by the products that they offer them.

CAVEAT EMPTOR:

Let the buyer take care.

CAVEAT VENDOR:

Let the seller take care.

 

AREAS OF PRODUCER RESPONSIBILITY ACCORDING TO DUE CARE THEORY:

 

  • Design
  • Production
  • Information

 

SOCIAL COSTS VIEW OF THE MANUFACTURER’S DUTIES TO CONSUMERS:

The view that a manufacturer should pay the costs of any injuries sustained through any defects in the product, even when the manufacturer exercised all due care in the design and manufacture of the product and has taken all reasonable precautions to warn users of every foreseen danger.

 

  • Manufacturer should pay the costs of all injuries caused by defect in a product even if exercised due care.
  • Argues that injuries are external costs that should be internalized.

 

STRICT LIABILITY:

A legal doctrine that holds that manufacturers must bear the costs of injuries resulting from product defects regardless of fault.

CRITICISMS OF THE SOCIAL COST VIEW:

 

  • Unfair to manufacturers since it forces them to compensate unforeseeable injuries.
  • Assumption that adherence to the social cost view will prevent accidents is false.
  • Leads to successful consumer lawsuits in cases where manufacturers took all due care.

 

COMMERCIAL ADVERTISING:

Communication between a seller and potential buyers that is publicly addressed to a mass audience and is intended to induce members of this audience to buy the seller’s products.

 

  • Public communication aimed at mass audience
  • Intended to induce members of its audience to buy the Sellers’s products
  • Succeeds by creating a desire for the seller’s product or a belief that a product will satisfy a pre existing desire.

 

PRODUCTION COSTS:

The costs of the resources consumed in producing or improving a product.

SELLING COSTS:

The additional costs of resources that do not go into changing the product, but are invested instead in getting people to buy the product.

DECEPTIVE ADVERTISING:

 

  • Is a function of the author’s intent to make the audience believe what is known to be false.
  • OR a function of The media’s communication of the false message.
  • OR a function of The audience’s vulnerability to deception.

 

RIGHT TO PRIVACY:

The right of persons to determine what, to whom, and how much information about themselves will be disclosed to other parties.

PSYCHOLOGICAL PRIVACY:

Privacy with respect to a person’s inner life.

PHYSICAL PRIVACY:

Privacy with respect to a person’s physical activities.

IMPORTANCE OF PRIVACY:

 

  • Protects individuals from interference, shame, embarrassment, hurting loved ones, self-incrimination
  • Enables the development of personal relationships,professional relationships, distinct social roles and self determination.

BUSINESS & ENVIRONMENT

The process of producing goods forces businesses to engage in exchanges and interactions with 2 main environments ie. the customer environment and the natural environment.

It is from the natural environment that business ultimately draws the raw materials that it transforms into it the finished products, which are then promoted and sold to the customers. 

Thus, the natural environment provides the raw material input of business, whereas the consumer environment absorbs it finished output.

POLLUTION:

The undesirable and unintended contamination of the environment by the manufacture or use of commodities.

RESOURCE DEPLETION:

The consumption of finite or scarce resources.

GLOBAL WARMING:

The increase in temperatures around the globe due to rising levels of greenhouse gases.

GREENHOUSE GASES:

Carbon dioxide, nitrous oxide, methane and chlorofluorocarbons – gases that absorb and hold heat from the sun,preventing it from escaping back into space, much like a greenhouse absorbs and holds the sun’s heat.

OZONE DEPLETION:

The gradual breakdown of ozone gas in the stratosphere above us caused by the release of chlorofluorocarbons (CFCs) in to the air.

ACID RAIN:

Acid rain occurs when sulfur oxides and nitrogen oxides are combined with water vapour in clouds to form nitric acid and sulfuric acid.

These acids are then carried down in rainfall.

PHOTOCHEMICAL SMOG:

A complex mixture of gases and particles manufactured by sunlight out of the raw materials- nitrogen oxides and hydrocarbons – discharged to the atmosphere chiefly by automobiles.

MAJOR TYPES OF AIR POLLUTION:

  • Global Warming Gases
  • Ozone depleting Gases.
  • Acid Rain
  • Airbone Toxics
  • Air Quality

ORGANIC WASTES:

Largely untreated human wastes,sewage,and industrial wastes from processing various food products,from the pulp and paper industry and from animal feedlots. 

ECOLOGICAL SYSTEM:

An interrelated and interdependent set or organisms and environments.

ECOLOGICAL ETHICS:

The view that nonhuman parts of the environment deserve to be preserved for their own sake, regardless of whether this benefits human beings.

PRIVATE COST:

The cost an individual or company must pay out of its own pocket to engage in a particular economic activity.

SOCIAL COST:

The private internal costs and wider external costs of engaging in a particular economic activity.

 

KINDS OF ETHICAL APPROACHES TO ENVIRONMENTAL PROTECTION:

  • Ecological approach: non humans have intrinsic value.
  • Environmental Rights Approach: Humans have a right to a livable environment.
  • Market Approach: External costs violate utility, rights and justice.

INTERNALIZATION OF THE COSTS OF POLLUTION:

Absorption of costs by the producer, who takes them into account when determining the price of goods.

ENVIRONMENTAL INJUSTICE:

The bearing of external costs of pollution largely by those who do not enjoy a net benefit from the activity that produces the pollution.

SOCIAL AUDIT:

A report of the social costs and social benefits of the firm’s activities.

CONSERVING:

The saving or rationing of neutral resources for later uses.

Arguments against the Existence of the Rights of Future Generations:

  • Future generations do not now exist and may never exist.
  • The potential argument that the present must be sacrificed fot he future.
  • Our ignorance of the interests of future generations.

CONSERVATION BASED ON JUSTICE:

  • Rawls: Leave the world no worse than we found it.
  • Care: Leave our children a world no worse than we received.
  • Attfield: Leave the world as productive as we found it.

ETHICS IN THE MARKET – Theories and Definitions

PERFECT COMPETITION:

A free market in which no buyer or seller has the power to significantly affect the prices at which goods are being exchanged.

PURE MONOPOLY:

A market in which a single firm is the only seller in the market and which new sellers are barred from entering.

OLIGOPOLY:

A market shared by a relatively small number of large firms that together can exercise some influence on process.

MARKET:

Any forum in which people come together for the purpose of exchanging ownership of goods or money.

EQUILIBRIUM POINT:

The point at which the amount of goods buyers want to buy exactly equals the amount of goods sellers want to sell, and at which the highest price buyers are willing to pay exactly equals the lowest prices sellers are willing to take.

DEMAND CURVE:

A line on a graph indicating the most that customers would be willing to pay for a unit of some product when they buy different quantities of those products.

SUPPLY CURVE:

A line on a graph indicating the prices producers must charge to cover the average costs to supplying a given amount of a commodity.

PRINCIPLE OF DIMINISHING MARGINAL UTILITY:

Each additional item a person consumes is less satisfying than each of the earlier items the person consumed.

PRINCIPLE OF INCREASING MARGINAL COSTS:

After a certain point, each additional item a seller produces costs more to produce than earlier items.

POINT OF EQUILIBRIUM:

The point at which the supply and demand curves meet, so amount buyers want to buy equals amount suppliers want to sell and price buyers are willing to pay equals price sellers are willing to take.

Perfectly Competitive Free Markets are characterized by the following 7 features:

  1. There are numerous buyers and sellers, none of whom has a substantial share of the market.
  2. All buyers and sellers can freely and immediately enter or leave the market.
  3. Every buyer and seller has full and perfect knowledge of what every other buyer and seller is doing, including knowledge of prices, quantities, and quality of all goods being bought and sold.
  4. The goods being sold in the market are so similar to each other that no one cares from which each buys or sells.
  5. The costs and benefits of producing or using the goods being exchanged are borne entirely by those buying or selling the goods and not by any other external parties.
  6. All buyers and sellers are utility maximizers. Each tries to get as much as possible for as little as possible.
  7. No external parties(such as government) regulate the price, quantity, or quality of any of the goods being bought and sold in the market.

MORAL OUTCOMES OF PERFECTLY COMPETITIVE MARKETS:

  • Achieve a certain kind of justice.
  • Satisfy a certain version of utilitarianism.
  • Respect certain kinds of moral rights.

MONOPOLY MARKET CHARACTERISTICS:

  • One Seller
  • High Entry Barriers
  • Quantity below Equilibrium
  • Prices above equilibrium and Supply Curve
  • Can extract monopoly profit.

OLIGOPOLISTIC COMPETITION:

IMPERFECTLY COMPETITIVE MARKETS:

Markets that lie somewhere between the two extremes of the perfectly competitive market with innumerable sellers and the pure monopoly market with only one seller.

HIGHLY CONCENTRATED MARKETS:

Oligopoly markets that are determined by a few large firms.

HORIZONTAL MERGER:

The unification of two or more companies that were formerly competing in the same line of Business.

PRICE FIXING:

An agreement between firms to set their prices at artificially high levels.

MANIPULATION OF SUPPLY:

When firms in an oligopoly industry agree to limit their production so that prices rise to levels higher than those that would result from free competition.

EXCLUSIVE DEALING ARRANGEMENTS:

When a firm sells to a retailer on condition that the retailer will not purchase any products from other companies and/or will not sell outside of a certain geographical area.

TYING ARRANGEMENTS:

When a firm sells a buyer a certain good only on condition that the buyer agrees to purchase certain other goods from the firm.

RETAIL PRICE MAINTENANCE AGREEMENTS:

A manufacturer sells to retailers only on condition that they agree to charge the same set retail prices for its goods.

PRICE DISCRIMINATION:

To charge different prices to different buyers for identical goods or services.

UNETHICAL PRACTICES IN OLIGOPOLY INDUSTRIES:

  • Price – Fixing
  • Manipulation of supply
  • Exclusive dealing arrangements
  • Tying Arrangements
  • Retail Price Maintenance Agreements
  • Price Discrimination

PRICE LEADER:

  • The firm recognized as the industry leader in oligopoly industries for the purpose of setting prices based on levels announced by that.

TRUST:

An alliance of previously competitive oligopolists formed to take advantages of monopoly powers.

MAIN VIEWS OF OLIGOPOLY POWER:

  • Do-Nothing View
  • Anti trust View
  • Regulation View

THINGS TO CHECK IN A BUSINESS PLAN

We have been consulting an investor ( a strategic VC Operations) on investing in various projects.

Common findings:

  • The entrepreneurs who had approached the investors were operating more from their gut feelings than from data.
  • They are very optimistic about their future prospects, even though they have been facing tough times for a long time.
  • The data of the best possible scenario is generally referred to as the standard expected scenario, which is never even remotely close.
  • Expenditures are considered on a very loose levels and always underestimated.
  • Lot of challenges are discounted and overlooked till the time they become big and unconfrontable.
  • Competition is never given its dues in terms of considering market share, marketing, sales and talent retention challenges.
  • Sweeping generalities become the business plan instead of data oriented thought through strategies.
  • Cash Flow is expected to be taken care of, by the expected business revenue – which generally fail to be as per the expectations.
  • Challenges faced by the industry as a whole, are not fully considered and rarely brainstormed to create innovative solutions.
  • Scant respect for Financial Planning, strategy, HR, training and development are seen in many cases.
  • Employees are expected to be automatically aligned to the vision that is hidden in the mind of the promoters.

These are some of the observations, but definitely not applicable to everyone.

Many entreprenuers have demonstrated that they do not fall in the above pitfalls and they steer their organizations to great success and sustained performance standards by combining the entreprenuers fire in the belly, with the strategy and systems.

WHAT WORKS:

  1. Have accurate data of the past and realistic data about the future.
  2. Have all industry related information handy.
  3. Have your financial data impeccable and ready to discuss.
  4. Have your competition and various factors affecting your organization performance detailed out.
  5. Have a strong strategy and marketing plan.
  6. What are the Key requirements for success in your industry, is it technolgoy, manpower, skills, market converage? Have all the bases worked out.
  7. Realistic Growth Plans.
  8. Detailed SWOT Analysis or the reverse TOWS Analysis.
  9. Create a realistic picture of the Opportunites and Challenges and your plans for dealing with them.
  10. Clearly identify the areas where you have not yet sorted out things or you would like inputs or are working out external inputs.
  11. Have guidance from professionals like CAs, Management Consultants, Govt. liasoning officers etc., as required.
  12. Create 3 plans , worst scenario, best scenario and realistic scenario.

To discuss more, contact:

MANAGEMENT INNOVATIONS

managementinnovations2020@gmail.com; manojonkar@gmail.com; 919375970812