Process of Management

VIVEK MEHLAWAT

Definitions of Management

• According to George R. Terry, "Management is a distinct process consisting of planning, organising, actuating and controlling, performed to determine and accomplish stated objectives by the use of human beings and other resources".

• According to Henry Fayol, "To manage is to forecast and to plan, to organise, to command, to coordinate and to control".

• According to Peter Drucker, "Management is a multi-purpose organ that manages business and manages managers and manages workers and work".

• According to Harold Koontz, "Management is the art of getting things done through and with people in formally organized groups”.

• According to Mary Parker Fallett, "Management is the art of getting things done through people".

Functions of Management

The essential elements/components of Management Process are four.

• Planning• Organizing• Directing and• Controlling.

Elements of Management Process

• Planning: Planning is the primary function of management. It involves determination of a course of action to achieve desired results/objectives.

• Planning is the starting point of management process and all other functions of management are related to and dependent on planning function.

• Planning is the key to success, stability and prosperity in business. It acts as a tool for solving the problems of a business unit.

• Planning plays a pivotal role in business management It helps to visualize the future problems and keeps management ready with possible solutions.

Organizing• Organising is next to planning. It means to bring the resources

(men, materials, machines, etc.) together and use them properly for achieving the objectives.

• Organisation is a process as well as it is a structure. Organising means arranging ways and means for the execution of a business plan.

• It provides suitable administrative structure and facilitates execution of proposed plan.

• Organising involves different aspects such as • departmentation, • span of control delegation of authority, • establishment of superior-subordinate relationship • provision of mechanism for co-ordination of various business

activities.

Staffing

• Staffing refers to manpower required for the execution of a business plan. Staffing, as managerial function, involves recruitment, selection, appraisal, remuneration and development of managerial personnel.

• The need of staffing arises in the initial period and also from time to time for replacement and also along with the expansion and diversification of business activities. Every business unit needs efficient, stable and cooperative staff for the management of business activities.

• Manpower is the most important asset of a business unit. In many organisations, manpower planning and development activities are entrusted to personnel manager or HRD manager. 'Right man for the right job' is the basic principle in staffing.

Directing (Leading)

• Directing as a managerial function, deals with guiding and instructing people to do the work in the right manner. Directing/leading is the responsibility of managers at all levels.

• They have to work as leaders of their subordinates. Clear plans and sound organisation set the stage but it requires a manager to direct and lead his men for achieving the objectives.

• Directing function is quite comprehensive. It involves Directing as well as raising the morale of subordinates.

• It also involves communicating, leading and motivating. Leadership is essential on the part of managers for achieving organisational objectives.

Coordinating• Effective coordination and also integration of activities of different

departments are essential for orderly working of an Organisation. This suggests the importance of coordinating as management function.

• A manager must coordinate the work for which he is accountable. Co-ordination is rightly treated as the essence of management. It may be treated as an independent function or as a part of organisms function.

• Coordination is essential at all levels of management. It gives one clear-cut direction to the activities of individuals and departments. It also avoids misdirection and wastages and brings unity of action in the Organisation.

• Co-ordination will not come automatically or on its own Special efforts are necessary on the part of managers for achieving such coordination.

Controlling• Controlling is an important function of management. It is necessary

in the case of individuals and departments so as to avoid wrong actions and activities.

• Controlling involves three broad aspects: (a) establishing standards of performance, (b) measuring work in progress and interpreting results achieved, and (c) taking corrective actions, if required. Business plans do not give positive results automatically.

• Managers have to exercise effective control in order to bring success to a business plan. Control is closely linked with other managerial functions. It is rightly treated as the soul of management process.

• It is true that without planning there will be nothing to control It is equally true that without control planning will be only an academic exercise Controlling is a continuous activity of a supervisory nature.

Motivating

• Motivating is one managerial function in which a manager motivates his men to give their best to the Organization.

• It means to encourage people to take more interest and initiative in the work assigned. Organizations prosper when the employees are motivated through special efforts including provision of facilities and incentives.

• Motivation is actually inspiring and encouraging people to work more and contribute more to achieve organizational objectives. It is a psychological process of great significance.

Communicating

• Communication (written or oral) is necessary for the exchange of facts, opinions, ideas and information between individual’s and departments.

• In an organisation, communication is useful for giving information, guidance and instructions. Managers should be good communicators.

• They have to use major portion of their time on communication in order to direct, motivate and co-ordinate activities of their subordinates. People think and act collectively through communication.

• According to Louis Allen, "Communication involves a systematic and continuing process of telling, listening and understanding".

• http://kalyan-city.blogspot.com/2010/06/management-functions-process-management.html

• Unit 1

Organising

• Functional departmentalization - Grouping activities by functions performed.

• Activities can be grouped according to function (work being done) to pursue economies of scale by placing employees with shared skills and knowledge into departments for example human resources, IT, accounting, manufacturing, logistics, and engineering.

• Functional departmentalization can be used in all types of organizations.

Product departmentalization 

• Grouping activities by product line. Tasks can also be grouped according to a specific product or service, thus placing all activities related to the product or the service under one manager.

•  Each major product area in the corporation is under the authority of a senior manager who is specialist in, and is responsible for, everything related to the product line. 

• LA Gear is an example of company that uses product departmentalization. 

• Its structure is based on its varied product lines which include women’s footwear etc.

Customer Departmentalization

•   Grouping activities on the basis of common customers or types of customers. Jobs may be grouped according to the type of customer served by the organization.

•  The assumption is that customers in each department have a common set of problems and needs that can best be met by specialists.

•  The sales activities in an office supply firm can be broken down into three departments that serve retail, wholesale and government accounts.

Geographic departmentalization 

• Grouping activities on the basis of territory. If an organization's customers are geographically dispersed, it can group jobs based on geography. 

• For example, the organization structure of Coca-Cola has reflected the company’s operation in two broad geographic areas – the North 

• American sector and the international sector, which includes the Pacific Rim, the European Community, Northeast Europe, Africa and Latin America groups.

Process departmentalization

•   Grouping activities on the basis of product or service or customer flow. 

• Because each process requires different skills, process departmentalization allows homogenous activities to be categorized.

•  For example, the applicants might need to go through several departments namely validation, licensing and treasury, before receiving the driver’s license.

Divisional departmentalization

•   When the firm develops independent lines of business that operate as separate companies, all contributing to the corporation profitability, the design is call divisional departmentalization or (M-FORM).

•  For example, the Limited. Inc., has these division: Th Limited, Express, Lerner New York, Lane Bryant and Mast Industries.

Tall Organizational Structure

• Large, complex organizations often require a taller hierarchy. In its simplest form, a tall structure results in one long chain of command similar to the military. 

• As an organization grows, the number of management levels increases and the structure grows taller. In a tall structure, managers form many ranks and each has a small area of control. 

• Although tall structures have more management levels than flat structures, there is no definitive number that draws a line between the two.

Flat Organizational Structure

• Flat structures have fewer management levels, with each level controlling a broad area or group. 

• Flat organizations focus on empowering employees rather than adhering to the chain of command.

•  By encouraging autonomy and self-direction, flat structures attempt to tap into employees’ creative talents and to solve problems by collaboration.

Decentralization 

•  Process of redistributing or dispersing functions, powers, people or things away from a central location or authority.

• Decentralization means diffusion of authority. The dispersal of authority of decision-making to the lower level management is termed as decentralization. 

• Decentralization of authority is a fundamental phase of delegation and the extent to which authority is not delegated is called centralization.

•  According to Fayol "Everything that goes to increase the importance of the subordinate's role is called decentralisation."

Advantages of Decentralisation:• Distribution of burden of top executive—Decentralization enables to its 

executive to share his burden with others at lower levels because here authority is delegated. The top executive is relieved of some burden and concentrates his activities to think for the future of the organization.

•  Increased motivation and morale — The morality of the employees are increased because of delegation of authority. Decentralization helps to increase employees morale because it involves delegation. The employees are motivated to work.

•  Greater efficiency and output—Decentralization gives emphasis on care, caution and enthusiastic approach to the work which in turn results in increased efficiency and output. This is possible because it involves delegation of authority and responsibility.

• Diversification of Activities—Decentralization helps in diversification of activities. It crests more employment opportunities because new managers are to be entrusted with new assignments.

•  Better Co-ordination—The various operations and activities are co-ordinated in a decentralised set up.

• Maintenance of Secrecy — Decentralisation enables to maintain secrecy without much cost and unnecessary trouble.

•  Facilitate effective control and quick decision-making.

• Decentralisation enables to measure the work according to standard easily and quickly. This facilitate taking up quick decision.

Line Management

• Those  which  directly  influence  the achievement of organisational objectives.

• A Line Manager • Directs others.• Delegates authority•  Trains his sub-ordinates.• Makes operating decisions• Bears final responsibility

Staff Management

• A staff manager is a specialist whose knowledge is limited only to his specialized fields.

• A staff manager• Assists others • Serves authority• Investigates problems related to his field• Supports Line efforts• Provides ideas to Line Managers. 

Major structural alternatives

• Functional Structure• Divisional structure• Hybrid structure• Matrix structure• Strategic Business Unit

Functional Structure

• Positions are grouped according  to their main functional areas

• Positions are combined into units on the basis of  similarity  of  expertise,  skills  and  work activities. 

• Relevant specialised areas that are crucial  for the organisations are considered.

Examples of Functional Structure

• Eg manufacturing enterprise• Production,Engineering,Marketing,Sales,

Finance • Eg Wholesaler • Buying , selling, finance• Eg Airlines• Operations , Air traffic control , Finance.

Advantages of Functional Structure

• Clarity of career paths• Specialisation• In-depth skill development• Economies of scale – reduces duplication

Divisional Structure

• Positions are grouped according to similarity of products, services or markets.

• Three main types of Divisional structure• Product Division• Geographic Division • Customer Division

Product Division

• Concentrate on a single or a homogeneous set of products.

• Suitable for extremely large type of organisations

• Every product department may have a Functional structure within it.

• Some organisations combine Functional and Product division

Geographic Division

• Designed to serve different geographic areas• Territory or Location is taken as the basis of

Organising• Adopted when it is important to provide

products and services customised to the needs of a region.

• Often used in Sales and Production

Customer Division Hybrid Division

• Activities are grouped around customers• Address differing needs of customers• Hybrid division adopts both Functional and

Divisional Structures at the same time.• IBM Functional Departments • Communication , finance , Human

Resource,Research • The company also has major Product Divisions.

Matrix Structure

• Superimposes a horizontal set of divisional reporting relationships onto a hierarchical functional structures

• Functional and Product patterns are combined in the same organisation structure.

• Functional and Divisional at the same time.• Has 2 chain of commands- vertical and horizontal• Violates the Principle of Unity of Command and is

complicated.;

Principles of Directing

• (1) Principle of Maximum Individual Contribution:• According to this principle, management should adopt that

directing policy through which the employees get motivated and give their maximum individual contribution for the achievement of organisational objective.

• (2) Principle of Harmony of Objectives:• According to this principle, there must be full coordination

between organisational and individual objectives. Employees work in an organisation with an objective to get better remuneration, promotion, etc. On the other hand, organisational goal can be to earn more profits and to increase market share.

• 3) Principle of Unity of Command:• According to this principle, a subordinate should get

directions from one officer at a time. If the subordinate gets directions from more than one officer, the subordinate will be unable to priorities his work.

• As a result, situation of confusion, conflict and disarrangement is created. By following this principle, effective direction takes place.

• (4) Principle of Appropriateness of Direction Technique:

• According to this principle, appropriate direction techniques should be used, e.g., to supervise effectively, to provide able leadership, to adopt free communication and to motivate through right medium.

(5) Principle of Managerial Communication:• According to this principle, it should be monitored by

the management that the subordinates get the same meaning for what has been said. This simplifies the job of the subordinates and they need not go to the managers repeatedly for enquiring.

(6) Principle of Use of Informal Organisation:• According to this principle, there must be a free flow of

information between the seniors and the subordinates. The success of direction depends upon effective exchange of information to a great extent.

• Information should be given both through formal and informal mediums. Special attention should be given to the informal organisation. This strengthens the formal organisation.

(7) Principle of Leadership:• According to this principle, while giving directions to the

subordinates a good leadership must be provided by the managers. By this, subordinates get influenced by the managers. In this situation, subordinates act according to the wish of the managers.

(8) Principle of Follow Through:• According to this principle, it must be monitored by management as

to what extent the policies framed and issued directions have been enforced. Thus, it must be seen whether the employees are following the management or not.

• If yes, then to what extent. As per this principle, the job of managers is not to sit idle after framing policies or issuing directions but to continuously take feedback. The advantage of this will be that if there is any problem in implementing a policy or a direction it can be removed then and there.

Directing - Process• (1) Supervision:• It refers to monitor the progress of routine work of one’s subordinates

and guiding them properly. Supervision is an important element of the directing function of management. Supervision has an important feature that face-to-face contact between the supervisor and his subordinate is a must.

• (2) Communication:It refers to an art of transferring facts, ideas, feeling, etc. from one person to another and making him understand them. A manager has to continuously tell his subordinates about what to do, how to do, and when to do various things.

• Also, it is very essential to know their reactions. To do all this it becomes essential to develop effective telecommunication facilities. Communication by developing mutual understanding inculcates a sense of cooperation which builds an environment of coordination in the organisation.

(3) Leadership:• It refers to influence others in a manner to do

what the leader wants them to do. Leadership plays an important role in directing. Only through this quality, a manager can inculcate trust and zeal among his subordinates.

(4) Motivation:• It refers to that process which excites people to

work for attainment of the desired objective. Among the various factors of production, it is only the human factor which is dynamic and provides mobility to other physical resources.

Controlling Process4 Main Steps in Control Process in Management

1. Establishing Standards:

• Standards are criteria against which results are measured. They are norms to achieve the goals. Standards are usually measured in terms of output. They can also be measured in non-monetary terms like loyalty, customer attraction, goodwill etc. Some of the standards are as.

a. Time standards:

• The goal will be set on the basis of time lapse in performing a task.

b. Cost standards:

• These indicate the financial expenditures involved per unit, e.g. material cost per unit, cost per person, etc.

c. Income standards:

• These relate to financial rewards received due to a particular activity like sales volume per month, year etc.

d. Market share:

• This relates to the share of the company's product in the market.

e. Productivity:

• Productivity can be measured on the basis of units produced per man hour etc.

f. Profitability:

• These goals will be set with the consideration of cost per unit, market share, etc.

2. Measuring Performance• Measurement involves comparison between

what is accomplished and what was intended to be accomplished. The measurement of actual performance must be in the units similar to those of predetermined criterion. The unit or the yardstick thus chosen be clear, well-defined and easily identified, and should be uniform and homogenous throughout the measurement process.

The performance can be measured by the following steps:

(a) Strategic control points:• It is not possible to check everything that is being done. So it is necessary to pick strategic control points

for measurement. Some of these points are:• (i) Income:• It is a significant control point and must be as much per unit of time as was expected. If the income is

significantly off form the expectation then the reasons should be investigated and a corrective action taken.• (ii) Expenses:• Total and operational cost per unit must be computed and must be adhered to. Key expense data must be

reviewed periodically.• (iii) Inventory:• Some minimum inventory of both the finished product as well as raw materials must be kept in stock as a

buffer. Any change in inventory level would determine whether the production is to be increased or decreased.

• (iv) Quality of the product:• Standards of established quality must be maintained especially in food processing, drug manufacturing,

automobiles, etc. The process should be continuously observed for any deviations.• (v) Absenteeism:• Excessive absenteeism of personnel is a serious reflection on the environment and working conditions.

Absenteeism in excess of chance expectations must be seriously investigated.• (b

• b) Meclzanised measuring devices:• This involves a wide variant of technical

instruments used for measurement of machine operations, product "quality for size and ingredients and production processes. These instruments may be mechanical, electronic or chemical in nature.

• (c) Ratio analysis:• Ratio analysis is one of the most important

management tools. It describes the relationship of one business variable to another.

(d) Comparative statistical analysis:• The operations of one company can be usefully

compared with similar operations of another company or with industry averages. It is a very useful performance measuring device.

(e) Personal observation:• Personal observation both formal and informal can be

used in certain situation as a measuring device for performances, specially, the performance of the personnel. The informal observation is generally a day-to-day routine type. A manager may

3) Comparing the Actual Performance with Expected Performance• This is the active principle of the process. The previous two, setting

the goals and the measurement format are the preparatory parts of the process. It is the responsibility of the management to compare the actual performance against the standards established.

• This comparison is less complicate if the measurement units for the standards set and the performance measured are the same and quantified. The comparison becomes more difficult when these require subjective evaluations

• Ralph C. Davis identifies four phases in the comparison.1. Receiving the raw data.2. Accumulation, classification and recording of this information.3. Periodic evaluation of completed action to date.4. Reporting the status of accomplishment to higher line authority.

• At the third phase, deviations if any are noted between standards and performance. If clear cut deviations are there, then management must study the:-

• (i) Causes for deviation• (ii) Effect of deviation• (iii) Size of deviation• (iv) Positive or negative deviation.

4. Correcting Deviations:• The final element in the process is the taking corrective

action. Measuring and comparing performance, detecting shortcomings, failures or deviations, from plans will be of no avail if it does point to the needed corrective action.

• Thus controlling to be effective, should involve not only the detection of lapses but also probe into the failure spots, fixation of responsibility for the failures at the right quarters, recommendation of the best possible steps to correct them. These corrective actions must be applied when the work is in progress. The primary objective should be avoidance of such failures in future.

• The required corrective action can be determined from the qualified data as per the standards laid out and the performance evaluation already done. This step should be taken promptly, otherwise losses may be cumulative and remedial action will be all the more difficult to take.

• Corrective action must be well balanced, avoiding over controlling and at the same time letting not things to drift.

Some of the important techniques are:Financial Control:Finance is related with mobilization of funds and their utilization and the return on them. Financial control is exercised through the following:1. Financial Statements:Income statement (telling about expenses, segmental incomes, overall income and expenses, and the net profit/loss), and Balance Sheet (shows the net worth at a single point of time and the extent to which the debt or equity finance the assets)2. Financial Audits:Financial audits, either internal or external are conducted to ensure that the financial management is done in line with the generally accepted policies, procedures, laws, and ethical guidelines. Audits may be internal (by Organisation’s own staff), external (statutory audit by chartered accountants), and management audit (by experts).

• 3. Ratio Analysis:• Ratio analysis monitors liquidity, profitability, debt, and activity related

aspects.• 4. Budgetary Controls:• Budgetary control is the process of constructing budgets, comparing

actual performance with the budget one and revising budgets or activities in the light of changed conditions.

• Budgetary control is as such not related only to finance area, but all functional areas do take help of budgetary control. Budgets help not only in planning but also help to keep a tab on overall spending.

• Budgeting may be top-down (managers prepare the budget and ask subordinates to use); bottom-up (figures come from lower levels and adjusted at upper levels); zero-based (justifying allocation of funds on the basis of activities or goals); and flexible budgeting (varying standards and varying allocations).

• 5. Break-even Analysis:• It is a tool of profit planning and deals with cost-volume-profit

relationships.

6. Accounting:Accounting includes responsibility accounting, cost accounting, standard cost approach, direct costing, and marginal costing.Marketing Control:In the field of marketing, to see that customer gets right product at the right price at the right place and through right communication, the control is exercised through the following:Market Research:It is to assess customers’ needs, expectations and the delivery; and the competitive scenario.Test Marketing:To assess consumer acceptance of a new product, a small-scale marketing is done. HUL uses Chennai for most of its test marketing.Marketing Statistics:Marketing managers control through marketing ratios and other statistics.

• Information Control:• All organizations have confidential and sensitive information to be kept

secret. How to control access to computer databases is very important. This has become a key contemporary issue in control. Organizations keep a watch on employee’s computer usage in general and internet in particular.

• Production Control:• To ensure quality production in right quantity at right time economically

production controls are required. Two of the important techniques include: Inventory control (ABC Analysis, Economic Order Quantity, Just-in time inventory control), and quality control (through inspection, statistical quality control).

• Project Control:• Network analysis is most suitable for the projects which are not routine

in minimizing cost and completing project well in time. Network analysis makes use of two techniques – Programme Evaluation and Review Technique (PERT), and Critical Path Method (CPM).

The following techniques are usually called problem-solving strategies'

• Abstraction: solving the problem in a model of the system before applying it to the real system

• Analogy: using a solution that solves an analogous problem• Brainstorming: (especially among groups of people) suggesting a

large number of solutions or ideas and combining and developing them until an optimum solution is found

• Divide and conquer: breaking down a large, complex problem into smaller, solvable problems

• Hypothesis testing: assuming a possible explanation to the problem and trying to prove (or, in some contexts, disprove) the assumption

• Lateral thinking: approaching solutions indirectly and creatively• Means-ends analysis: choosing an action at each step to move

closer to the goal

• Method of focal objects: synthesizing seemingly non-matching characteristics of different objects into something new

• Morphological analysis: assessing the output and interactions of an entire system

• Proof: try to prove that the problem cannot be solved. The point where the proof fails will be the starting point for solving it

• Reduction: transforming the problem into another problem for which solutions exist

• Research: employing existing ideas or adapting existing solutions to similar problems

• Root cause analysis: identifying the cause of a problem

• Trial-and-error: testing possible solutions until the right one is found

Decision-making process

• Define and clarify the issue - does it warrant action? If so, now? Is the matter urgent, important .

• Gather all the facts and understand their causes.• Think about or brainstorm possible options and

solutions. (brainstorming process)• Consider and compare the pros and cons of each

option - consult if necessary - it probably will be.• Select the best option - avoid vagueness or 'foot in

both camps' compromise.• Explain your decision to those involved and affected,

and follow up to ensure proper and effective implementation.