business management - myregent graduate/bcomdeg/bcgbm1... · business management, ... henri fayol,...
TRANSCRIPT
Definition and functions
All activities that are related to the management of all types of organisations
Includes various functional areas such as production, marketing, financial management, human resources management, supply chain management etc.
Business management is concerned with the management aspects of the inputs, the conversion process, and the outputs
Functions cont…
Traditionally the inputs are summarised in four categories:
Land – all natural resources used as raw materials
Capital – financial means to acquire other forms of production factors
Functions cont…
Labour – physical and mental abilities of human resources
Entrepreneurship – the initiative of putting together a range of production factors in various combinations in diverse businesses to satisfy the numerous needs of customers
Functions/value chain
The four aspects and functions are linked in a value chain where each activity needs to note the influence it may have on a variety of other aspects of the business
At every stage of the conversion process, one has to examine how value can be added to the process in the most efficient way
The entire chain of linked activities and processes, from the most rudimentary raw material to the most sophisticated end product, must be guided by adding value
Value chain
Value is not only restricted to money but also includes adding value in terms of place, time and form utilities
By adding value to these utilities, the products and services become enhanced need-satisfiers and can therefore demand higher monetary value as well.
The economic law of supply and demand is important in business management, businesses must therefore identify the needs for specific products and services and make these available to prospective customers
Adding competitive value
The concept of value chain can be used as a systematic
means of examining all of the organisation’s functional
activities and their effectiveness in creating customer value
The purpose of value chain analysis is to identify the value
that is added with each activity in the process of providing
products and or services and to compare business
performance with the performance of competitors
Value Chain
Analysing a business’s value chain can draw attention to
the organisation’s strengths and weaknesses.
A typical value chain divides activities within the business
into broad categories: primary activities and support
activities
Primary activities: line functions or core business
Support activities: Enable primary activities to take place
Primary Activities
Procurement and inbound logistic
Areas concerned with sourcing and receiving goods from suppliers, storing them until required by production/operations, and handling and transporting them within the organisation
Production/Operations
Actual production takes place/actual service provided
In some business it may be split in different departments
Primary Activities
Outbound Logistics
Distributing the final product to the customer
Marketing and Sales
Analysing the needs and wants of customers and brings the business’s products and service to the attention of the customer/client
Customer service
Before or after a product is sold there is often a need to provide a service or after sales service
Support Activities
Financial management
All activities, costs and assets related to the acquisition,
utilisation and control of the money in the organisation
required to finance its activities
Human resources management
Activities and costs associated with training, recruitment,
compensation of employees as well as labour relations
activities
Support Activities
Communication
Activities and costs associated with communicating with the
internal and external stakeholders of the organisation
Information management and e-business
Add value to total chain, often difficult to line with one
particular part of the organisation
Class Activity
Let us assume that this value chain model depicts the manufacturing of a shirt. Discuss the support activities in the model:
Infrastructure (physical and environmental structure, building etc)
Human Resources (people) Technology Development (how is technology helping us with
making the shirt) Procurement (obtaining something i.e. material in this instance)
Management theory serve to:
Guide management decisions
Shape the manager’s view of organisations
Make the manager aware of the business
environment
Provide the manager with a source of new ideas
A theory is…
A coherent group of assumptions
Put forth to explain the relationship
Between two or more observable facts
And to provide a sound basis for predicting future events
It is thus a framework of principles
Factors influencing the development of theory
Management theories does not develop in isolation, it
develops within and as a result of the dynamic
environment
The environmental factors that impacts management
theory is as follows:
Political
Economic
International
Social
Ecological
Approaches to Management
The Classical Management School – (scientific
management theory and administrative management
theory)
Behavioural Management School
Quantitative Management Approach
Contemporary Management Theories
Classical Approach
Emerged during the early 1900s and was influenced by the
economic, technical and cultural changes which was
brought about as a result of the industrial revolution and the
introduction of steam power
Steam power provided for efficient production which in turn
lead to a shift from farm work to factory work where the
principle of mass production was upheld, however this led
to a number of organisational problems such as
demotivation of workers
Classical Approach cont…
Scientific Management theory was developed by a
manufacturing manager, Frederick Taylor who
sought to increase productivity and increase
efficiency by:
Examining the ways in which workers performed their tasks
and experimenting ways of improving the manner in which the
task was performed
Recording the new methods of performing the task and the
standard operating procedures
Classical Approach – Scientific management theory
Determine an acceptable level of performance for
each task and develop a remuneration system which
rewards performance which exceeds the acceptable
level
Ensuring a match between the worker’s skills and abilities and
the task requirements. Providing training to ensure that workers
perform the task according to the rules and standard operating
procedures
Classical Approach – Scientific management theory
Frank and Lillian Gilbreth built on the work of Taylor and
focused on work simplification, which included:
Analysing each individual action required to perform a task
Identifying better ways of performing each action
Increasing the efficient performance of the whole task
through re-organising the individual actions
Classical Approach – Scientific management theory
Henry Gantt redesigned the incentive system developed by
Taylor by also paying a bonus to the worker’s supervisor
for exceptional performance.
He further devised the Gantt Chart for production
scheduling
The scientific management approach succeeded in
increasing productivity however it neglected to address the
“human” element which led to worker dissatisfaction and
distrust of management
Classical Approach – Administrative Management Theory
This theory focused on how to increase productivity at the level of the organisation whereas the scientific management theory focused on the productivity of the worker
Henri Fayol, identified 14 principles which he argued could increase the efficiency of the management process.
Many of the principles identified by Fayol form the basis of management and research today
Classical Approach – Administrative Management Theory
Fayol also identified five basic functions of administration, which corresponds with the four contemporary management functions:
Planning
Organising
Commanding
Coordinating
Controlling
Classical Approach –
Administrative Management Theory
Max Weber developed a theory of bureaucratic management and emphasized the need for a hierarchy governed by lines of authority
The administrative theory made a significant contribution to management practice however it is criticized for being more applicable to stable organisations and predictable environments of the past.
Behavioral and Human Relations Approach
This theory focus on the needs of the worker
Mary Parker Follett argued that it is the worker that knows more about his/her job and therefore should be involved in the job analysis and work development process.
Elton Mayo conducted an experiment that proved that management’s interest and concern for the workers well-being had served to enhance worker performance
Behavioral and Human Relations Approach
Douglas McGregor argued that two assumptions determine how manager’s view their subordinates and manage their departments:
Theory X managers assume that employees are inherently lazy and therefore needs to be closely supervised and controlled
Theory Y managers adopt a positive view of employees and believe that it is the manager’s task to create a climate in which employees can effectively perform their work
Quantitative Approach
Also referred to as the management science approach
Extension of Taylor’s Scientific Management Theory
Focuses on the use of rigorous quantitative techniques which enable managers to achieve productivity through the most effective and efficient use of organisational resources to produce goods and services
Quantitative Approach
Uses the following tools and techniques to increase the
effectiveness of his/her decision making:
Quantitative management
Operations management
Total Quality Management (TQM)
Management Information Systems (MIS)
Contemporary Approaches
Systems Theory The influence of the environment is not considered
One part or aspect of the organisation is focused on the neglect of all other parts and/or aspects
Views the organisation as a purposeful and unified system which is composed of interrelated elements
The principle of synergy applies in that the whole is regarded to be greater than the sum of its parts
Contemporary Approaches
Characteristics of a system
Internal interdependence: changes in one component of the system will result in changes in another component in the system
Capacity for feedback : information about the output can be used by the organisation to address problems
Equilibrium: if an event leaves the system in a state of imbalance it will react in such a way as to regain equilibrium
Contemporary Approaches
Characteristics of a system
Equifinality: the system can achieve its outputs through a number of different ways or system configurations
Adaptation: A systems survival depends on it maintaining a state of balance within the greater system in which it operates, i.e. the environment
Contemporary Approaches
The concept of congruence Refers to achieving an appropriate balance between the
parts of the organisation i.e. achieving a good “fit” between all of the organisation’s components
Nadler and Tushman’s congruence model of organisational behaviour views the organisation as a system which takes inputs from the environments and transforms them within its system to produce outputs.
The system consists of four main components: the informal organisation, task, individual and formal organisation
Contemporary Approaches
Contingency Theory The systems theory provides for a contingency approach
(situational approach) to management
Chaos Theory Based on the premise that very rarely can events be
controlled. Argues that relationships is complex systems, like
organisations, are nonlinear, made up of interconnections and branching choices that produce unintended consequences and render the universe unpredictable
Chaos Theory and the Present Day Organisation
Tetenbaum identifies the information age to be characterised by the following:
Technology which increases production, efficiency and consumer power
Globalisation
Competition which, as a result of technology and globalisation has become more fierce
Change, the pace of which is considerable
Speed
Complexity and paradox which has emerged as a result of the above mentioned factors
Key characteristics of the chaos theory
Focuses on the web of feedback loops present in every system
Characteristics include:
Chaos as order- chaos describes a complex, unpredictable and orderly disorder which patterns of behaviour unfold in irregular but similar forms
Chaos as a self-organising entity: systems are self-adaptive and complex
Building a chaordic organisation
Chaordic organisations has the following characteristics:
Knowledge and information sharing
Innovation and creativity
Teamwork and project orientation
Diversity
Strong core values
facilitating the move to the chaordic organisation
Manage the transition
Build resilience to change
Destabilise the system
Manage complexity and paradox i.e. the present and future
Create and maintain a learning organisation
Other contemporary theories
Total Quality Management (TQM)
Strong emphasis on the customer
Focus on continual improvement
Quality improvement in all that the organisation does
Accurate measurement
Employee empowerment
Other contemporary theories The Learning Organisation
This theory is based on the systems theory and argues that organisations should overcome their learning disabilities through:
Commitment and lifelong learning
Challenging assumptions and generalisations
Sharing the organisation’s vision
Other contemporary theories
Promoting active dialogue within the organisation
Encouraging systems thinking
Re-engineering
Involves the redesign (re-engineering) of organisational processes so as to “create and sustain value for customers while managing costs”
Class Activity
Read the case study on page 42 and 43
Get into groups of 6
Each group discuss the various theories and how it is applicable to the case study
The environment of the organisation in perspective
The organisations micro-environment encompass its strategy, business functions, management tasks, setting of goals, resource abilities and expectations of stakeholders.
Management must therefore make decisions that relate to the strengths and weaknesses of the business
Strengths are the unique capabilities of a particular organisation that gives it an advantage over its competitors whilst weaknesses is a defiency which if not addressed can negatively affect the organisations position in the market
The environment of the organisation in perspective
The market/task environment lies between the micro and macro business environment, while influenced by both serves as a buffer between the two
The macro business environment encompasses all uncontrollable variables and the implications they have for management
Management must thus make strategic decisions with regard to economic, social, technological, physical, political and institutional and international envrionments, based on the changes in the macro-environment
The environment of the organisation in perspective
Changes in the market and macro-environment give rise to either opportunities or threats
An opportunity is defined as a favourable condition in the external environment that could be exploited to the benefit of the organisation by the deliberate actions of management
A threat, is defined as an unfavourable condition in the external environment, which if not responded to by management, could seriously harm the organisation’s position in the market
Characteristics of the business environment
Interrelatedness of environmental factors – a change in one external factor may cause a change in the micro-environment or internal factors and vice versa
Increasing instability – one of the consequences of interdependence in the environment is increasing instability and change
Environmental uncertainty – the amount of information about the external environment at management’s disposal and the confidence that management has on such information
Characteristics of the business environment
Complexity of the environment – the number of external variables to which a business organisation has to react, as well as variation s in the variables themselves
The International Environment
Refer to profit-oriented activities across national borders
Organisations that is involved in imports or exports are affected on both national and international levels
Local organisations need to keep up to date with the data on inflation, exchange rates etc
Organisations involved in international trade quickly realised that success or failure greatly depends on knowledge of legislation, customers, ethics, economic systems and management practices that needs to be followed.
The macro business environment
Includes all external influences that have a bearing on the business but does not fall within its direct sphere of influence
Emphasis is on the changes the uncontrollable macro-variables bring about and its implications for business
It is essential to develop environmental scenarios because they are largely unpredictable and change constantly
The economic environment
Economic factors such as the business cycle, inflation and recession influence the demand for goods and services by compelling consumers to reassess their priorities in terms of consumer products
Each significant economic change requires appropriate reaction by the business
It is the responsibility of business to try and forecast the possible cycle of the economy for at least the following year
Inflation
The continual rise in the general price level
Demand inflation – occurs when the demand for goods and services is higher than the supply resulting in higher prices
Cost push inflation – occurs when production costs of goods and services continually increase resulting in higher selling prices
Under high inflation the management of working capital such as debtors, stock and creditors is important
The business cycle
The pattern of expansion and contraction of economic activities around a long-term growth tendency
Western economies (SA included) have to deal with inflation as well as the periods of recession which follow each other quickly and are then interrupted by short periods of economic growth
A practical measure for business is to link the business cycle to the behaviour of the real gross domestic product which will provide a combined indicator of the prevailing economic climate.
The business cycle Exogenous factors such as wars, draught, natural disasters,
inventions and drastic changes in consumer demands may lead to an increase or decrease in economic activities
This result in changes in the volume of production activities and the volume of bank credit, in interest rate patterns, in orders for and the installation of capital equipment and in price increases or decreases
Interest Rates
Interest rates is the price paid for money
The repo rate is the cost at which banks can borrow money from the reserve bank
The prime rate is the price at which banks make loans or overdraft facilities available to their clients
High interest rates means financing becomes more expensive and places liquidity under pressure, it also discourage the purchase of durable consumer products such as furniture, cars etc
Provision of employment
Unemployment is one of the biggest problems in SA
Crime is on the increase and is becoming an increasing problem for business owners in that they have to spend a considerable amount on security
PRODUCTIVITY AND PROFITABLITY
There should ideally be a positive relationship between productivity and profitability however in South Africa this is not the case due to the conduct of trade unions.
The influence of trade unions
Due to the activities of trade unions, many organisations
have been forced to close down resulting in a loss in
employment opportunities
It is imperative for management to know how to deal with
labour disputes
The technological environment
Trading – developments in electronic communication have changed business (e-trading) and also created new types of business
Labour-saving machinery
Administrative systems
Increased productivity
The social environment
The organisation is a creation of the social environment
The organisation needs to continuously adapt to changing circumstances and meet the expectations of society
The organisation contributes to social change but is also influenced by it
The organisation must therefore be aware of the culture, needs, preferences, purchasing patterns, nationality, religion and geographical location of consumers
Distribution of income
The growth of the black consumer market and buying power is already of vital importance in many branches of industry
Management must establish where its biggest buying power is located and ensure that the market is exploited and served with high quality products and service
Consumerism and employee interest
The primary responsibility of an organisation towards its consumer is protecting them, but the demands of society for greater social responsibility on the part of the organisation culminate in consumerism.
Recently the organisation has a responsibility towards its employee’s as well as the greater community and is thus required to participate in the community (social involvement) and provide certain employee wellness services as well (medical services, counseling etc)
Different Languages
In effort to inform consumers about their products and services, organisations need to communicate with their target market in a language they understand
South Africa has eleven official languages and certain languages are most commonly used in certain geographical areas
Organisations should thus, formulate a policy regarding service to prominent language groups in its market without discriminating against any other language group.
Level of Education
The low levels of productivity and skill in the South African labour force are to some degree attributable to the relatively low level of education in the broader society
It is rather difficult to develop a sophisticated industrial work ethic
The treat of HIV/AIDS
The costs associated with Aids affects the following:
Loss of trained manpower
Recruitment costs
Loss of productivity
Loss of efficiency due to the loss of skills and expertise
Direct and indirect costs associated with health care
Interruptions in the production process
Increased costs of employee benefits
Decline in consumer base
Decline in disposable income of consumers as a result of higher health care costs
Population Growth & Urbanisation
The size of the market, the labour force and unemployment are closely related to population growth
Urbanization along with the expectant population growth , has far reaching social implications and consequences on the economy
The physical environment
Includes the availability, conservation, improvement and utilisation of the limited natural resources the country possesses
The business contains its raw materials from the physical environment in order to place a product on the market in combination with other factors of production
The shortage of basic factors of production influences supply of goods and contributes to large price increases which results in high inflation rates
The physical environment
Consideration must be given to different and more sophisticated methods of production, and even a reorientation in marketing thinking.
The availability of suitably, qualified personal is also another critical factor for consideration and training interventions can help alleviate the skills shortage problem
The political environment
Management needs to ensure that it is familiar with the government policy with regard to the acceptance of a free market system as the key to economic activity as well as being informed of government standpoints such as monopolistic laws, environmental conservation, employment policies and tax laws.
The effect of political decision making on the economy as a whole needs to form part of strategy formulation in all organisations
The institutional environment
Encompasses all the government, semi-government and other institutions with which the organisation is directly or indirectly involved.
The market environment
The ability of a business to be competitive is determined by its interaction with its immediate environment, which is the market environment
The market environment is the link between the organisation and the macro-environment
It is the responsibility of management to see to the needs of the consumer in the market, identify opportunities and possible threats and convert threats into opportunities and to develop specific strategies to counteract competition
The market environment
Interest groups
Groups that has an interest in the existence of the business with each group placing a different emphasis on the activities of the business
These groups lace the power of government agencies but they can exert considerable influence by using the media to their advantage
The market environment
Consumers They have a major effect on the organisation’s
performance through purchasing its products and services
Effective managers offers the consumer value for money, which if often the primary responsibility of the marketing department
Through continual market research the business stays in touch with the needs, motives and behaviour with the consumer which may offer opportunities and threats
The market environment
Competition
Effective managers develop strategies that offer a unique advantage over the competition in the market
The market strategies of the business is continuously adjusted in order to ensure an advantage over competitors
A sound competitive strategy is thus required to ensure that business stay competitive
The market environment
Suppliers
They affect the organisation’s performance hence close working relationships with them is important
Labour Force
The organisations mission, structure, systems and processes are major determinants of the capability levels employees need in order to achieve objectives
The market environment
Strategic alliances
Two or more companies working together in joint ventures
Allows organisations to supplement skills that they lack internally
Management needs to look outside the organisation and be aware of trends in the market environment in order to utilise opportunities and counteract threats
The micro environment
Also known as the decision making environment
Incorporates the goals of the organisation, management of the functions of the organisation of the organisation, its entrepreneurial ability, interest groups and all other aspects controllable by management
The micro environment
The functional division of the organisation
Encompass all functions of the organisation
Functions complement each other and does not operate in isolation
Each function forms part of the entrepreneurial ability of the organisation
The micro environment
Entrepreneurial ability
Encompass an analysis of the potential availability of the means of production, as well as of possibilities for the creative utilisation of these means of production
Resources that contribute to the entrepreneurial capacity of the organisation are:
Capital –
Labour expertise
Raw materials
Management skill
Expert management at all levels
The micro environment
Interest groups
Shareholders
Employees
General public
Authorities
Competitors
Clients
Suppliers
Environmental analysis and scenario development
Environmental analysis is essential for the formulation of a corporate strategy
A corporate strategy is a deliberate decision of management to adapt to the current and anticipated change in the market and micro-environments in a timeous, economical and effective manner
It is important for management to be aware of all external powers, opportunities, threats, strengths and weaknesses of the organisation
Environmental analysis and scenario development
Steps in the development of a typical scenario:
Determine the internal and or external factors which scenarios have to be developed
Select critical indicators for each factor
Determine the nature, occurrence and trend of the indicators of the past
Verify potential future trends
Forecast or extrapolate in order to form idea of what might happen in future
Write the scenario on the basis of the information gleaned
Scenario development
By comparing the organisations strengths, weaknesses, opportunities and threats (SWOT) a logical framework for the systematic analysis of the organisation can be obtained.
By making use of a SWOT analysis, management can convert threats into opportunities and weaknesses into strengths
Results of environmental scanning and scenario development
The purpose of environmental scanning and scenario development is to provide a basis for the formulation of a strategy regarding the activities of the organisation
Some possible strategic decisions may be taken including the following:
A maintenance strategy where the organisation continues along the route taken and attempts to maintain the current profit situation
Results of environmental scanning and scenario development
A growth strategy involving an extension of activities
A combination strategy, which may be a combination of the maintenance and growth strategy and is mainly used where the organisation serves a variety of markets
Class activity
Mrs. Stock would like to open a hair salon in Rosebank, using your knowledge about the business
environment what factors would you take into account if you were her?
Planning
Planning is the first primary management task
Strategic planning – developing the vision, mission and long-terms goals of the organisation as a whole
Functional planning – focus on medium term objectives and is conducted by middle management
Operational planning – setting short term objectives and determining in advance how they will be accomplished
Strategic Planning
Steps in strategic planning:
1. Develop the organisation’s vision (dream), mission (reason for existence) and long-term goals
Vision – a proactive ideal business situation, the driving force or passion directing the organisation’s future and gives the employees direction on what the organisation strives for
Mission – what is our business?
Strategic Planning
2. Analyse the business environment (market, micro and
macro environment)
SWOT analysis conducted, considering the organisation’s products and services, financial position, marketing and sales, HR, organisational structure
3. Set long-term goals
Indicates the desired results when pursuing the organisation’s mission statement
Strategic Planning
Develop strategies at corporate level which is applicable for the overall performance of the organisation which includes growth, stability, turn-around and combination strategies
Growth strategies are concentration, integration, diversification, mergers and acquisitions
A stability strategy attempts to hold or maintain the organisation’s present size or grow slowly
A turn-around strategy is an attempt to reverse a declining business as soon as possible
Strategic Planning
At business level, generic strategies as identified by Porter include cost leadership, differentiation and focus strategy
Generic strategies allow the organisation to create or maintain a competitive advantage
At functional level, strategies are developed for each management function and must be aligned with the business unit generic strategy and the corporate grand level strategy to ensure success and competitive advantage
Functional Planning
Medium term planning performed by middle managers for the various functional departments to realise their objectives
Includes HR strategy on employment equity
Operational Planning
Short term objectives that should be met in less than one year
Middle and first-level managers develop operational plans
E.g.. Plans that reflect the day-to-day activities of the organisation
Some organisation’s combine tactical plans with strategic and operational plans depending on the size of the organisation
Levels of planning
Corporate level strategy – plan for multiple businesses
Business level strategy – managing one line of business, focused on the product line or service provided by one of the enterprises
Functional level strategy – the plan for managing one functional area of the business e.g. the marketing division
The importance of planning
It gives direction to the organisation and its employees
It allows for the use of advanced technology in all business processes
It ensures all related entities (departments, teams) interact effectively in order to establish synergy in practice
Forces all manager to look towards the future
Steps in the planning process
1. Objectives and setting objectives
An objective is a particular future state of things to be achieved by the organisation and its employees
Objectives should be precise, accurate, consistent with other objectives, accepted and understood by those implementing the objectives and those influenced by it
Employee involvement is important in setting objectives
Steps in the planning process
2. Develop plans: The choice of alternatives
The objectives must include the combination of resources required and ways or plans that have to be followed to fulfill the objectives
Role clarification is important
This step also considers alternatives
Steps in the planning process
3. The implementation of the selected plan
Includes the development of a framework for its execution, necessary leadership to activate the set plan, and the exercising of control to determine whether the performance has, according to the set standards, been achieved.
Organising
Structuring activities of the organisation to facilitate the attainment of its objectives
Developing mechanisms to put the strategy or plan into effect
Making arrangements to determine what activities can be carried out
Determining what resources will be employed and who will perform the various activities
Organising
Involves the distribution of tasks amongst employees
The allocation of resources to persons and departments
Giving the necessary authority to certain people to ensure that tasks are carried out
It is important to have communication, cooperation and coordination between the people and the departments performing the tasks
Organising
Unity of command: each employee should only have one direct line of reporting
Chain of command: Vertical separation between levels based on differences in authority and responsibility
Span of control: Number of employees reporting to a manager
Organising
Division of labour: Employees have specialised jobs and related functions are grouped together under a single manger
Coordination: All departments working together to achieve common organisational goals and objectives
Responsibility and authority : all employees have the authority to meet their responsibilities.
Authority is the right to make decisions, issue orders or utilise resources
Accountability ensures that individuals meet their responsibilities
Organising
Delegation: the process of assigning responsibility and authority for accomplishing objectives
Organisational design
Organisational structure: a formal system of working relationships that both separates and integrates tasks
Separation of tasks clearly indicate who should do what and integration of tasks indicates how efforts should interact and interrelate
Organising
The interaction of organising as a management task, with planning, leading and controlling is based on:
Planning can be implemented and leading can take place only once human resources are assigned to tasks
Leading can be effective only once clear responsibilities and authority are allocated to employees
Controlling can take place once procedures are established for collecting and evaluating information to help managers make decisions, evaluate performance and solve problems
Organising
Departmentalisation: grouping of related activities into units with an internal or external focus.
An internal focus would result in functional departementalisation whereas an external focus would result in product, customer or geographic departmentalisation
Leading
Leadership is the process by which an individual exerts influence over other people and inspires, motivates and directs their activities to help achieve group or organisational goals
Charismatic leaders have the ability to enable ordinary leaders to achieve extra-ordinary results. Some of their qualities are self-confidence, clear vision, extra ordinary behaviour and environmental sensitivity
Leading
Elements of leadership
Authority: right to give instructions and delegate work to subordinates
Power: ability to influence
Influence: using authority and power in a manner which inspires and motivates
Delegation: where the leader allocates a part of his/her work to a subordinate with the necessary authority
Leading
Responsibility and Accountability: where the leader is responsible for carrying out tasks and must account for his/her performance
Types of power
Legitimate power: Based on a leader’s formal position
Reward power: power to give or withhold rewards such as a salary increase, bonus, recognition, interesting assignments
Leading
Coercive Power: Ability to obtain compliance through fear of punishments such as official reprimands, less desirable work assignments, pay cuts, demotions, suspensions or termination
Referent Power: Personal power, where subordinates admire the leader
Expert Power: Special knowledge or expertise
Controlling
Three types of control:
Pre-control focus on inputs (HR, material, capital etc)
Steering control focus on the transformation process (production and service process)
Post control focus on outputs (goods and services)
Criteria for effective control
Control systems should be linked to the desired objectives of the organisation
The control process must be objective in order to eliminate subjectivity
The control process must be completed by considering all relevant factors and evaluating what is supposed to be evaluated
Criteria for effective control
Timely control provides information when it is needed most
Acceptable control is recognised by employees as necessary and appropriate for establishing and maintaining good performance
All individuals exposed to a control system must fully understand the meaning of the system and specifically the implications of the set standards
Criteria for effective control
The cost-benefit scenario regarding control must be clearly evaluated in order to establish the economic viability of the measure
Control is of no use if the control measure indicate deviations but no applicable corrective action follows
Managerial decision making
Routine decisions: selection or choice in response to a relatively well defined and common problems and alternative solutions
Adaptive decisions: made in order to continuously adapt to changes and can involve improving past routine decisions and practices.
Innovative decisions: choices under conditions of high risk and uncertainty
Decision making process steps
Definition and diagnosis of the problem
Setting of goals and objectives
Searching for alternative solutions
Comparing and evaluating alternative solutions
Choosing from among alternative solutions
Implementing the solutions selected
Follow up and control