BBPP1103 - Principles of Management v Dec Sem Jan 2012 | Leadership & Mentoring | Leadership


Shahrol Aman Ahmad Azhari Ramli Nasri Nalimi Azelin Aziz Assoc Prof Dr Santhi Raghavan

Project Directors:

Prof Dr Mansor Fadzil Prof Dr Zakaria Ismail Open University Malaysia Shahrol Aman Ahmad Azhari Ramli Nasri Nalimi Azelin Aziz Universiti Utara Malaysia Assoc Prof Dr Santhi Raghavan Open University Malaysia

Module Writers:


Dr Wardah Mohamad Open University Malaysia

Translated & Edited: Pearson (M) Sdn. Bhd. Reviewed by: Nik Azlina Nik Yaacob Dr Wardah Mohamad Open University Malaysia Lim Szu Ming Open University Malaysia Centre for Instructional Design and Technology Open University Malaysia Meteor Doc. Sdn. Bhd. Lot 47-48, Jalan SR 1/9, Seksyen 9, Jalan Serdang Raya, Taman Serdang Raya, 43300 Seri Kembangan, Selangor Darul Ehsan

Edited by: Developed by: Printed by:

First Printing, May 2008 Sixth Printing, October 2010 Seventh Printing, February 2011 Eighteenth Printing, November 2011 Copyright © Open University Malaysia (OUM), November 2011, BBPP1103 All rights reserved. No part of this work may be reproduced in any form or by any means without the written permission of the President, Open University Malaysia (OUM). Version November 2011

Table of Contents
Course Guide Topic 1 What is Management? 1.1 Definition of Management 1.2 Who are Managers? 1.2.1 Functions of Management 1.2.2 Roles of a Manager 1.2.3 Skills of a Manager 1.3 Types of Managers 1.4 Evolution of Management Theory 1.4.1 Classical Perspective 1.4.2 Human Perspective 1.4.3 Quantitative Management Approach 1.4.4 Contemporary Approach Summary Key Terms Planning 2.1 Definition of Planning 2.2 How to Plan Effectively? 2.3 Types of Planning 2.4 Advantages and Disadvantages of Planning 2.4.1 Advantages of Planning 2.4.2 Disadvantages of Planning Summary Key Terms Decision Making 3.1 Decision Making Environment 3.1.1 Decision Making in Certain Conditions 3.1.2 Decision Making in Uncertain Conditions 3.1.3 Decision Making in Risky Conditions 3.2 Rational Decision Making Process 3.3 Limitations in Rational Decision Making 3.3.1 Common Mistakes in Decision Making 3.3.2 Bounded Rationality 3.3.3 Risky Environment 3.4 How to Improve Decision Making 3.4.1 Using Rules and Tests xi- xvi 1 2 3 3 5 7 9 10 11 14 16 16 19 20 21 22 23 26 30 31 32 35 35 36 37 38 38 39 40 42 43 44 45 45 45

Topic 2

Topic 3



3.4.2 Using Groups 3.5 Group Decision Making Methods 3.5.1 Brainstorming 3.5.2 Nominal Group Technique 3.5.3 Delphi Technique 3.5.4 Advantages of Group Decision Making 3.5.5 Disadvantages of Group Decision Making Summary Key Terms Topic 4 Organisation Design 4.1 Factors that Influence Organisational Structures 4.1.1 Organisational Strategy 4.1.2 Size of the Organisation 4.1.3 Technology 4.1.4 Environment 4.2 Designing Organisational Structures 4.2.1 Departmentalisation 4.3 Authority 4.3.1 Chain of Command 4.3.2 Line and Staff Authority 4.3.3 Line and Staff Functions 4.3.4 Span of Control 4.4 Centralisation and Decentralisation 4.5 Work Design 4.5.1 Work Specialisation 4.5.2 Job Rotation, Enlargement and Enrichment 4.6 Organisation Process Design 4.6.1 Emerging New Organisational Designs Summary Key Terms Human Resource Management 5.1 Determining the Needs of Human Resources 5.1.1 Job Analysis 5.1.2 Forecasting 5.2 Recruitment/Hiring 5.2.1 Internal Recruitment 5.2.2 External Recruitment 5.3 Selection of Qualified Employees 5.3.1 Application Forms and Resume 5.3.2 References and Background Checking 5.3.3 Selection Tests 5.3.4 Interviews

48 48 49 50 50 51 52 55 56 57 58 58 58 59 59 60 60 64 64 65 66 66 67 68 68 69 70 71 77 77 78 79 80 81 82 83 83 84 85 85 85 87

Topic 5



Development of Qualified Employees 5.4.1 Orientation 5.4.2 Training 5.4.3 Determining the Needs for Training 5.4.4 Training Methods 5.5 Performance Evaluation 5.5.1 Who Should Evaluate? 5.5.2 Methods for Performance Evaluation 5.6 Retaining Qualified Employees 5.7 Employee Separation 5.7.1 Employee Termination 5.7.2 Downsizing 5.7.3 Retirement 5.7.4 Employee Turnover Summary Key Terms Topic 6 Communication in Organisations 6.1 Definition of Communication 6.2 Types of Communication 6.2.1 Formal Communication 6.2.2 Informal Communication 6.2.3 Non-verbal Communication 6.3 Increasing Communication Effectiveness 6.3.1 Communication Barriers 6.3.2 Measures for Overcoming Communication Barriers Summary Key Terms Motivation 7.1 Classical Model and Scientific Management 7.1.1 Approaches to Motivation 7.2 Need-based Approach 7.2.1 MaslowÊs Hierarchy of Needs 7.2.2 Two-factor Model 7.2.3 Acquired Needs Theory 7.3 Process-based Approaches 7.3.1 Expectancy Theory 7.3.2 Equity Theory 7.3.3 Goal-setting Model 7.3.4 Reinforcement Model Summary Key Terms


88 88 89 89 90 92 94 95 96 98 98 99 100 100 103 103 104 105 107 107 110 111 111 111 113 117 118 119 120 120 121 121 123 125 126 126 127 128 129 133 133

Topic 7



Topic 8

Leadership 8.1 Leadership Approaches 8.1.1 Leader-centred Approach 8.1.2 Follower-centred Approach 8.1.3 Interactive Approaches 8.2 Strategic Leadership 8.2.1 Visionary Leadership 8.2.2 Charismatic Leadership 8.2.3 Transactional Leadership 8.2.4 Transformational Leadership Summary Key Terms Controlling 9.1 Definition of Control 9.1.1 Quality Assurance 9.1.2 Preparation to Face Changes 9.2 Steps in the Control Process 9.2.1 Establishing Standards 9.2.2 Measuring Performance and Making Comparisons 9.2.3 Corrective Actions 9.3 Dynamic Process 9.4 Basic Methods of Control 9.4.1 Pre-control/Feed-forward Control 9.4.2 Concurrent Control 9.4.3 Feedback Control 9.5 Forms of Control 9.5.1 Bureaucratic Control 9.5.2 Objective Control 9.5.3 Normative Control 9.5.4 Concertive Control 9.5.5 Self Control 9.6 Factors that need to be Controlled 9.6.1 Finance 9.6.2 Human Resources 9.6.3 Internal Operations 9.6.4 Customers Summary Key Terms

134 135 135 140 141 146 147 147 147 147 150 150 151 151 152 152 153 153 154 154 154 155 155 156 156 156 157 157 157 158 158 158 159 159 159 160 162 162

Topic 9


Topic 10

Managing Teams 10.1 Differences between Teams and Groups 10.2 Advantages of Teams 10.3 Disadvantages of Teams 10.4 When is a Team Needed? 10.5 Types of Teams 10.6 Characteristics of Teams 10.6.1 Team Norms 10.6.2 Team Unity 10.6.3 Team Conflict 10.6.4 Phases of Team Development 10.7 Towards Building a High-Performance Team Summary Key Terms Innovation and Change 11.1 Why is Innovation Important? 11.1.1 Technology Cycle 11.2 Managing Innovation 11.2.1 Managing Innovation Resources 11.3 Organisational Change 11.3.1 Forces of Change 11.4 Managing Change 11.4.1 Aspects that can be changed by Change Agents 11.5 Barriers to Change 11.5.1 Individual Barriers 11.5.2 Organisational Barriers 11.6 Overcoming the Barriers to Change 11.7 Ways to Manage Change Summary Key Terms

163 164 165 166 167 169 172 172 173 173 173 176 180 181 182 183 183 184 184 186 186 189 191 193 193 194 195 197 200 201 202

Topic 11







You must read this Course Guide carefully from the beginning to the end. It tells you briefly what the course is about and how you can work your way through the course material. It also suggests the amount of time you are likely to spend in order to complete the course successfully. Please keep on referring to the Course Guide as you go through the course material as it will help you to clarify important study components or points that you might miss or overlook.

BBPP1103 Principles of Management is one of the courses offered by the Faculty of Business and Management at Open University Malaysia (OUM). This course is worth 3 credit hours and should be covered within a 15 week semester.

This is a compulsory basic course for Open University Malaysia. As an open and distance learner, you should be able to learn independently and optimise the learning modes and environment available to you. Before you begin this course, please confirm the course material, the course requirements and how the course is to be conducted.

It is a standard OUM practice that learners accumulate 40 study hours for every credit hour. As such, for a three-credit hour course, you are expected to spend 120 study hours. Table 1 gives an estimation of how the 120 study hours could be accumulated.



Table 1: Estimation of Time Accumulation of Study Hours Study Activities Briefly go through the course content and participate in initial discussion Study the module Attend 3 to 5 tutorial sessions Online participation Revision Assignment(s), Test(s) and Examination(s) TOTAL STUDY HOURS Study Hours 3 60 10 12 15 20 120

By the end of this course, you should be able to: 1. 2. 3. 4. Describe the basic concepts, functions and basic skills in management; Describe the management of an organisation including employees, and physical resources; Explain the changes in management and the current management practice of todayÊs business; and Apply the principles of management to the work place.

This course is divided into 11 topics. The synopsis for each topic is presented below: Topic 1 gives an overview on management and the roles that must be played by the manager. The management skills required at different levels of management will also be introduced. Students will be exposed to the evolution of management thoughts that explains the thinking contributed by the main management thinkers over the years. Topic 2 discusses planning as one of the most important functions in management. The processes involved in effective planning, types of planning as well as the advantages and disadvantages of planning are discussed.



Topic 3 discusses decision making – the process of identifying problems, generating alternative solutions, selecting and implementing the best solutions available. This topic also discusses the situations of decision making – certain conditions, uncertain conditions, and risky conditions – and the steps involved in rational decision making. The types of limitations in the process of decision making, which are bounded rationality, common mistakes and risky environment, will also be discussed. Finally, this topic also discusses the two methods to improve the quality of decisions to be made using specific rules and tests. Group decision making is also discussed. Topic 4 discusses the design of an organisation. Several factors that influence the structure of an organisation such as strategies, size, environment and technology will be discussed. The types of organisations such as departmentalisation based on functions, products, customers, geographical location and matrix will also be explained. This is followed by management of organisations which involves authority, chain of command, span of control, delegation, centralisation and decentralisation. This topic will also discuss work design that involves work specialisation, job rotation, job enrichment and job enlargement. Finally, this topic will also explain the mechanistic and organic organisational designs and several other types of new structures. Topic 5 focuses on human resource management. This topic discusses human resource planning, recruitment techniques and selection of employees. Also discussed is the importance of training, performance evaluation, remuneration and termination of employees. Topic 6 covers communication, where the basic elements in a communication process are described. The formal communication systems that are frequently used, such as the vertical, horizontal and diagonal communication are also presented. Also discussed are informal communication and non-verbal communication. This topic also discusses the methods to enhance communication by identifying the barriers to communication including the steps to overcome it. Topic 7 discusses motivation. Two types of motivation models that will be discussed are the needs based and process based models. These include Maslow's Hierarchy of Needs Model, HerzbergÊs Two Factor Theory, McClellandÊs Needs Achievement Model, Expectancy Model, Equity Theory, Goal-Setting and Reinforcement Theory. Topic 8 discusses leadership. This topic will discuss leadership based on three approaches which are the leader-centred approach, follower-centred approach and interactive approach. The leader-centred approach focuses on the characteristics of the leaderÊs personality, behaviour of the leader and style of



leadership. Under the behavioural approach, the researches by the Ohio State University, Michigan University and the Management Grid, will be discussed. The follower-centred approach focuses on the variables of replacement and neutralisation of leadership. In the interactive approach, the Situation Leadership Model, Fiedler Contingency Model, and the Path-Goal and the Continuum of Leadership Behaviour will also be discussed. At the end of this topic, strategic leadership will be presented. Topic 9 covers control. This topic discusses the steps in the control process. Also discussed are the three types of control methods and five forms of control. Finally, this topic will discuss the factors that must be controlled by organisations such as finance, human resource, quality and also customer. Topic 10 focuses on teams. This topic starts with the differences found between teams and groups, the advantages and disadvantages of teams and when teams are used. Also discussed are the types of teams that exist in an environment. Several features of teams and issues that can influence the performance level of teams will also be discussed. Topic 11 discusses the importance of innovation and ways to manage innovation. This topic will also discuss the forces of changes in organisations. The factors that can cause changes to organisations, ways to manage changes, resistance to change and tactics to overcome resistance to change, will also be explained.

Before you go through this module, it is important that you note the text arrangement. Understanding the text arrangement should help you to organise your study of this course. Generally, the text arrangement for each topic is as follows: Learning Outcomes: This section refers to what you should achieve after you have completely gone through a topic. As you go through each topic, you should frequently refer to these learning outcomes. By doing this, you can continuously gauge your progress of digesting the topic. Self-Check: This component of the module is inserted at strategic locations throughout the module. It is inserted after you have gone through one subsection or sometimes a few sub-sections. It usually comes in the form of a question that may require you to stop your reading and start thinking. When you come across this component, try to reflect on what you have already gone through. When you attempt to answer the question prompted, you should be able to gauge whether you have understood what you have read (clearly,



vaguely or worse you might find out that you have not comprehended or retained the sub-section(s) that you had just gone through). Most of the time, the answers to the questions can be found directly from the module itself. Activity: Like Self-Check, activities are also placed at various locations or junctures throughout the module. Compared to Self-Check, the Activity sections can appear in various forms such as questions, short case studies or it may even ask you to conduct an observation or research. The Activity may also ask your opinion and evaluation on a given scenario. When you come across an Activity, you should try to widen what you have gathered from the module and introduce it to real situations. You should engage yourself in higher order thinking where you might be required to analyse, synthesise and evaluate instead of just having to recall and define. Caselet: The management caselet for this module consists of a picture/scenario and a few questions. These are designed to test your understanding of the topic discussed. Summary: You can find this component at the end of each topic. This component helps you to recap the whole topic. By going through the summary, you should be able to gauge your knowledge retention level. Should you find points inside the summary that you do not fully understand, it would be a good idea for you to revisit the details from the module. Key Terms: This component can be found at the end of each topic. You should go through this component to remind yourself of important terms or jargons used throughout the module. Should you find terms here that you are not able to explain, you should look for the terms from the module. References: References is where a list of relevant and useful textbooks, journals, articles, electronic contents or sources can be found. This list can appear in a few locations such as in the Course Guide (at References section), at the end of every topic or at the back of the module. You are encouraged to read and refer to the suggested sources to elicit the additional information needed as well as to enhance your overall understanding of the course.

There is no prerequisite requirement for learners prior taking this subject.



Please refer to myVLE.

Bateman, T. S., & Snell, S. A. (2008). Management: Building competitive advantage. (8th ed.). Boston : Irwin-McGraw Hill. Jones, G. R., George & J. M. (2007). Contemporary management. (5th ed.). Boston. Rue, L. W., & Byars, L. L. (2004). Management: Skills and application. (11th ed.). Boston: Irwin-Mc-Graw-Hill.



What is Management?

By the end of this topic, you should be able to: 1. 2. 3. 4. 5. Describe the meaning of management; Identify the functions of management; Appraise the roles of managers; Review the main skills of managers; and Discuss the different perspectives in management.

Before we study in depth the aspects of management, we must first understand what management is. Let us look at the difference between professionals and management. Doctors, accountants, engineers, architects, lawyers etc. are good examples of the former. As an example, a doctor treats patients using his ability and expertise. He will not direct another person to perform his job functions on his behalf. A nurse acts as the doctorÊs assistant. She does not have the same qualifications and abilities as the doctor to carry out his job. So, she only assists him in examining patients. In short, the doctor cannot assign his job to the nurse or any other assistant. The same applies to other professionals.

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Professionals are indeed very different from management. The latter, in a nutshell, means directing people to perform tasks efficiently and effectively. In other words, management means ensuring that a job is carried out well until completion. This means a manager does not necessarily need to know how to perform a specific job but needs to act as a co-ordinator to ensure that the task is carried out smoothly. For example, the manager of a shoe factory does not necessarily have to know the details of how to make shoes but he needs to ensure that all resources allocated to him, including human resources i.e. the employees under him, function satisfactorily and that the objectives set by the organisation are achieved. Furthermore, the manager needs to make sure that the objectives are achieved efficiently and effectively .


In your opinion, what is the definition of management?

Management is defined as the process of overseeing and coordinating resources efficiently and effectively in line with the goals of the organisation.

Effectiveness is the attainment of goals that enables the realisation of the objectives of an organisation or, briefly, as „doing the right thing‰ whereas efficiency is performing a job using minimum effort, cost and wastage or simply put as „doing things right.‰ The end result of an efficient and effective management is the success of an organisation. A person can be described as efficient but not effective or effective but not efficient in managing a specific task. Both elements are not interdependent. LetÊs say a factory worker finds a shortcut to doing a task with lower cost but by doing so, he deviates from the ethical objectives of the organisation. For example, he disposes of production waste by dumping it into the river. But one of the organisationÊs ethical objectives is to preserve local harmony. So, the factory worker, through his action, deviated from the objective although he was efficient. In short, he was efficient but not effective. In contrast, an employee is considered effective but not efficient if he uses an old method to resolve a management issue even if it could have been resolved




efficiently without deviating from the objectives of the organisation. For example, in delivering information, the employee sends a letter via post instead of e-mail. Although it does not affect or clash with the organisationÊs objectives, the employee has wasted a part of the resources allocated to him. Both efficiency and effectiveness cannot be excluded from the definition of management as these are essential elements in defining management.



There are three ways to understand managers. A classic way of analysing the task of management is by examining management from the point of the functions performed by managers. The second approach is to observe the roles of managers while the third is to analyse the skills required by managers. A manager is an individual who is directly responsible for ensuring that tasks are performed by people or employees in an organisation.


Functions of Management

Management is defined as the process of overseeing and co-ordinating resources efficiently and effectively in line with the goals of an organisation. In short, management refers to the process of delegating tasks to employees to be performed successfully. The manager is involved in various basic activities. These activities are usually grouped as management functions. These functions are illustrated in Figure 1.1.

Figure 1.1: Main functions of management Source: Adapted from Lewis et. al. (2001). Management, Challenges in the 21st century

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Table 1.1 below describes each management function.
Table 1.1: Management Functions Management Function Planning Description Defining objectives to be achieved for a given period and what needs to be done to achieve the objectives. All management levels in an organisation need to be involved in planning. Managers need to develop objectives in line with the overall strategies of the organisation. Determining what tasks are to be done; who will implement and coordinate them; how the tasks are to be grouped; who reports to whom; and where decisions are to be made. The manager needs to logically and effectively organise the information, resources and workflow of the organisation so that he is able to react positively towards changes in the business environment. This involves motivating subordinates; selecting the most effective communication channels; resolving conflicts; and directing as well as guiding the actions of others with the intention of achieving all objectives. The effective leader of today has to be visionary in foreseeing the future, sharing the vision and encouraging employees in realising the vision. The measuring of performance in all pre-determined objectives, determining reasons for deviation and taking appropriate actions, where necessary. Controlling is an important function in the management process as it provides ways to ensure that the organisation moves towards achieving its objectives.




The management process at all levels of an organisation involves planning, organising, leading and controlling resources in an organisation. A manager does not necessarily have to know how to perform a specific job as he only acts as a coordinator to ensure the smooth running of operations. For example, the manager of a clothes manufacturing factory does not necessarily have to know in detail the techniques of making clothes. However, he needs to ensure that each resource put under his control, such as capital, factory and manpower, functions properly and that the objectives outlined by the organisation are met. Nevertheless, all the functions highlighted above are merely for classification purposes in management studies. In reality, management functions usually




overlap. Moreover, the functions in management are inter-dependent. For example, a well-structured organisation will find it impossible to advance if there is no thorough planning. The same applies to an organisation led by an efficient director but with poor control systems. Thus, all functions are equally important in an organisation.


Roles of a Manager

In your opinion, what are the roles that need to be carried out in order to become a successful manager?

As stated earlier, there are many ways to identify a manager. A manager can be identified not only through the functions he performs but through other ways as well. A professor of management, Prof Henry Mintzberg, carried out a detailed analysis of managers by walking around and observing what managers did at work. He observed that managers not only planned, organised, led and controlled but also played other important roles as detailed below (Lewis, P.S. et al; 2001): (a) Role as a Figurehead A manager must carry out ceremonial duties. For example, the vicechancellor of a university must be involved in the opening ceremony of programmes conducted at the university. The head of a department is responsible for entertaining his clients. Role as a Leader A manager indirectly functions as a leader. Each manager must function as a leader in motivating and encouraging his subordinates. The manager steers members of his unit to continuously work effectively to achieve the goals of the unit and organisation besides resolving problems and issues. Role as a Liaison Officer A manager conveys relevant information gathered to individuals outside his unit or to other relevant parties outside his organisation. The manager will allocate time for interacting with people outside his organisation. Thus, a manager acts as a channel for communications between his department and those within as well as those outside his organisation.



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For example, a human resource manager may liaise with the finance manager to check on funds allocated for the recruitment of new employees by the organisation before embarking on a recruitment drive. (d) Role as a Spokesperson The manager of an organisation usually acts as its spokesperson. For example, a supervisor will usually ensure that the operations manager is furnished with the latest information on the running of his production plant. Similarly, the general manager of a factory will lobby local authorities for a new tender. Role as a Negotiator No organisation is without problems. A manager is compelled to find a solution for each of its problems regardless of complexities. The manager needs to spend a lot of time in discussions as he plays the role of a negotiator. For example, a manager will negotiate with the trade union representative to reach an amicable agreement on salaries. Role as an Initiator Two management experts, Sumantra Ghoshal and Christopher Bartlett (Dessler, G; 2001), highlighted an additional role of a manager as the initiator of corporate actions and transformations. Moreover, an excellent manager is one who cultivates three processes that steer his employees towards achieving initiatives for change. These processes are as follows: (i) Entrepreneurship Process The manager will try to improve his unitÊs performance and when he gets a good idea, he will launch a programme to realise the idea. Researches carried out in Japan, the United States and Europe showed that a successful manager is one who focuses a lot of time and effort on steering his employees towards thinking like an entrepreneur. To meet this objective, the manager needs to empower, support and provide incentives for employees to attain self-direction. (ii) Capability Development Process In a technology-centred world, conglomerates need to fully utilise their advantage as a large establishment not only in matters of economies of scale but also in the aspects of widening and deepening the knowledge and abilities of its employees. A manager who succeeds will focus on creating a conducive environment that encourages employees to shoulder additional responsibilities. He will also focus on preparing the necessary training and guidance to build their self-confidence. The successful manager will allow employees room for making mistakes without the fear of






being penalised while undergoing training and encourage them to learn from their mistakes. (iii) Reformation Process A successful manager will identify situations that might pose challenges to the strategies of the organisation and assumptions made. In other words, the manager is capable of cultivating a querying disposition such as why something is done in a certain way and whether there are alternative ways of doing it.


Skills of a Manager

What are the skills required by a manager?

When an organisation shortlists employees for the position of a manager, it will usually select individuals with technical, interpersonal and conceptual skills. Therefore, the third approach to understanding the tasks of managers is to analyse the skills required to carry out the tasks. Figure 1.2 shows three types of essential skills required at each level of management. The arrow pointing upwards shows the type of skills that are increasingly needed by top-level management. The arrow pointing downwards shows the type of skills that are increasingly needed by lower-level management or line managers.

Figure 1.2: Skills required of a manager

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Conceptual Skills Conceptual skills refer to the ability to view the organisation as a whole, and the impact the different sections have on the organisation, as a whole and on each other. It also involves observing how an organisation adapts to or is affected by external environmental factors such as society, economic pressure, customers and competition. An efficient manager should be able to identify, understand and solve the various problems and critical perspectives. The need for conceptual skills becomes increasingly crucial when a manager climbs higher in the management hierarchy. Interpersonal Skills Interpersonal skill is the ability to work well with other people. Managers with good interpersonal skills work more effectively in a group, encouraging other employees to input their ideas and comments as well as being receptive to the needs and views of others. The manager will also, indirectly, become a good listener and speaker. Interpersonal skills are crucial, regardless of the level of management. However, a low-level manager will be more occupied in solving technical problems while a manager at the middle and higher levels will be mainly occupied with dealing directly with others. Technical Skills Technical skills are the ability to apply procedures, techniques and specialised knowledge required in a certain task. For a shoe factory supervisor, the technical skills required will include the steps involved in shoe manufacturing from the beginning until the final product is ready. A housing developerÊs technical skills will include ways to complete the development of a housing estate. Technical skills are crucial for low-level managers as they supervise employees in manufacturing or service sectors. The manager needs to have technical knowledge and the skills to train new employees and assist employees in solving problems. Skills and technical knowledge are required to solve operational problems that cannot be handled by employees. Nevertheless, the higher the position of a manager in a hierarchy, the fewer the technical skills required.



What other skills does a manager need?






Most organisations have a few types of managers. In a university, for example, there are the vice-chancellor, deputy vice-chancellors, deans, deputy deans, heads of departments and heads of courses. The same goes for other employees such as human resource managers, treasurers, heads of security, etc. Corporate sectors, on the other hand, have presidents, vice presidents, operations managers, sales managers, finance managers, supervisors, etc. All of the above-mentioned are managers as they plan, organise, lead and control employees and tasks in an organisation with the aim of achieving its organisational goals. There are many ways to categorise managers. For example, we can differentiate managers based on level, position or organisational function. Top-level managers are the highest-level managers in a firm. They are commonly known as executives. Titles given include president, chief executive officer, vice president or chief financial officer. Under top level managers are the middle-level managers. They are usually designated as managers. Lower-level managers or line managers are the lowest in the management ladder. They are usually called supervisors. They include production supervisors who oversee employees in a factory. All these levels have many similarities. Managers at all levels plan, organise, lead and control employees and tasks in an organisation. Managers also spend time with their employees through conversations and surveillance; provide influence and motivation; and attend face-to-face conferences and committee meetings. Nonetheless, there are two main differences amongst the three management levels. Firstly, top and mid-level managers have employees as managers under them. In brief, they manage other managers unlike line-managers. Managers at different levels utilise their time differently. Top-level managers spend most of their time planning and setting goals. Middle-level managers define goals in specific projects for lower-level managers to implement. Lower-level management or line-managers focus on giving directions and controlling their subordinates at work daily to ensure the success of a project.

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Based on what you have learned, identify the differences amongst the three levels and tabulate your answers.

Explain each of the management functions that you have learned about.



From the start of the 19th century until the 20th century, managers and scholars formed a theoretical framework to explain what they believed to be good practices of management. Their efforts led to five different classes of perspectives on management – classical, behavioural, quantitative, systems and contemporary. Each perspective is based on different assumptions towards the objectives of the organisation and human behaviour. Figure 1.3 will help you to understand the chronological sequence of the perspectives.

Figure 1.3: Evolution of management theory

You might be wondering why it is important and necessary to study the historical development or the evolution of management thought. Studying history enables us to learn from mistakes made in the past so as to avoid making them in the future. History also enables us to study past successes that can be emulated accordingly in the future. Most importantly, we must understand the reasons behind such occurrences in order to improve in the future.



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Classical Perspective

This perspective existed in the 19th century and early 20th century. It focused on the rational and scientific approaches to the study of management and on finding ways to mould an organisation to become more efficient. There are three subclasses in this perspective, scientific management, bureaucratic management and administrative management. (a) Scientific Management This approach existed at a time when productivity was deemed critical by businessmen. Businesses were growing rapidly but businessmen were facing a critical shortage of workers. Hence, management was continuously finding ways to improve the performance of its employees. The focus on improving employeesÊ efficiency is known as the scientific management approach. A number of researchers contributed towards the findings of scientific management, among them Frederick Winslow Taylor, Frank and Lilian Gilbreth and Henry Gantt. Frederick Taylor (1856-1915), a mechanical engineer, was of the opinion that problems arose mainly due to bad management practices and, to a lesser degree, problems with employees. He stressed that management itself needed to transform and that the transformation method could only be established through scientific research. He suggested that decisions based on „rules of thumb‰ be substituted with established procedures, after analysing each situation. TaylorÊs theory, which stated that the productivity of the labour force could be improved through scientifically-based management practices, earned him the title „Father of Scientific Management.‰ To improve the work performance of employees, Taylor conducted a research entitled „Time and Motions Study.‰ From the research findings, Taylor identified five principles of management that could boost production efficiency. The five principles were: (i) (ii) Using the scientific approach to determine best practices and not relying on „rules of thumb‰; Selecting suitable employees to perform a particular task. Suitability covers mental and physical aspects;

(iii) Training and developing an employee so that he is able to perform a given task according to established procedures; (iv) Giving monetary incentives to ensure that employees perform a task accordingly; and

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Reassigning all responsibilities pertaining to planning and organising to the manager.

Taylor was not alone in this research. Henry Gantt (1861-1919), a friend of Taylor, focused on the control system in the scheduling of production. The Gantt Chart is still used today in planning the schedule of a project and has also been adapted in computerised-scheduling applications. The husband and wife team of Frank (1868-1924) and Lillian Gilbreth (1878-1972), also strived to further expand the scientific management approach. Lillian was a pioneer in the field of industrial psychology and contributed greatly to human resource management. She believed that if scientific management was widely utilised, the abilities of each employee would grow considerably. (b) Bureaucratic Management Bureaucratic management is an approach to management that is based on guidelines, hierarchy, clear division of labour as well as rules and procedures. Max Weber (1864-1920), a German social theorist, introduced many bureaucratic concepts. Among the components of bureaucracy are: (i) (ii) Authority and clearly defined responsibilities; Positions in an organisation that are structured according to hierarchy;

(iii) Promotions based on qualifications; (iv) Records of all administrative actions and decisions to ensure continuity of organisational rules; (v) Separation of ownership and management; and

(vi) Guidelines implemented to all employees without bias. The bureaucratic approach strives to increase efficiency and ensure continuity of all operations in the organisation. This approach differs from scientific management, which only focuses on the employee as an individual. Nevertheless, this principle, used to improve efficiency, may also cause inefficiency. Rigid guidelines create red tape and slow down the decision-making process, resulting in the inability to change swiftly to adapt to the needs of the environment and, at times, create conflicts in performing a task professionally. (c) Administrative Management The administrative management approach focuses on the organisation as a whole. Among the contributors to this approach are Henri Fayol, Mary Parker Follett and Chester I. Barnard.



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Henri Fayol (1841-1925), a Frenchman, is considered the pioneer of administrative theory as he introduced the organisational principles and administrative functions. His most relevant contribution was presenting the definition and roles of an administrator. Fayol defined administration and management as planning, organising, directing, coordinating and controlling. He identified 14 principles of management: (i) Division of labour: This is a concept on specialisation of work, based on the assumptions that:    (ii) No one can do all the work; Each job requires different skills; and Repetition of work will increase efficiency.

Authority: The right to give directions and power to be complied with. Here, authority at the office has to be differentiated from personal authority.

(iii) Discipline: Based on respect and conformity. (iv) Unity of command: An employee should receive instructions from one superior only. (v) Unity of direction: One superior and one direction for a particular activity with the same objective.

(vi) Subordination of individual interests to the general interests: Personal interest should not exceed or precede over common interest. (vii) Remuneration: Salary payment based on various factors. (viii) Centralisation: The centralisation of work depends on the situation and formal communications channel. (ix) Scalar chain: This is about the line of authority and its formal communication channel. (x) Order: Resources are allocated in the right place at the right time. Where possible, people related to a specific kind of work should be assigned to the same several location.

(xi) Equity: All employees should be treated as equally as possible. (xii) Stability of tenure: Management should make retaining of productive employees a priority. (xiii) Initiative: Management should encourage worker initiative in new/additional activity.

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(xiv) Esprit de corps: A term, borrowed from the French language, that means loyalty and devotion in uniting the members of a group. It emphasises on harmony and unity in an organisation. Mary Parker Follet (1868-1933) was trained in the field of philosophy and political science. Her approach focused on the involvement of employees and sharing of information among managers. She stressed the importance of common goals among subordinates to reduce personal conflicts. FolletÊs ideas were contrary to the ideas in scientific management but conformed with modern management. Her approach focused on the individual and not engineering techniques. Follet stressed on issues relevant to the 1990s such as mankind, ethics, authority and leadership to inspire employees to excel in their jobs. Her main concepts included delegation of authority, leading employees and not commanding them as well as allowing employees to act according to situations. Chester I. Barnard (1886-1961) introduced the informal organisation concept. An informal organisation exists in a formal organisation. He believed that organisations were not mere machineries and that informal relations could be a powerful tool and an asset to an organisation if properly managed. He also introduced the Acceptance Theory of Authority which stated that employees have options in complying with the directives of the management. Managers should treat their employees well as the acceptance of authority by employees is critical in ensuring the success of an organisation. Overall, the classic perspective towards management is very important and has given organisations a basic skill to increase productivity and garner effective support from employees.


Human Perspective

Mary Parker Follet and Chester Barnard were the main founders of the human approach in management which emphasises the importance of understanding human behaviour, employeesÊ needs, the attitude of employees in a working environment besides social interaction and group processes. The categories of the human approach are – the movement of human relations, the human resource view and the approach to behavioural science. (a) Human Relations Movement This approach is based on the premise that effective control comes from individual employees rather than strict control by authorities. This approach originated from research that was conducted at the Western Electric CompanyÊs Hawthorne Works in Chicago between the years 1927 and 1932. The research was overseen by Elton Mayo and Fritz



 15

Roethlisberger, two psychologists from Harvard University. The research originally intended to study the relationship between physical conditions and production. Light irradiation temperature and other factors related to the working environment were selected as physical conditions. The original conclusion obtained by the researchers contradicted the results they anticipated. Three series of experiments were conducted and the results of all the experiments contradicted what was expected. The first experiment had conducted the experiment of lighting radiation as a physical situation. It assumed that levels of brightness would facilitate higher output for the employees. From this, it was found that when the lighting radiation is brightened or dimmed, the production output will continue to increase. This meant that there were other factors that may have caused the increase in productivity. It was the same for the second and third experiments where other physical situations were chosen; the results could not clearly explain the causes for increase in production. In conclusion, the Hawthorne research shows that the productivity of employees increases because they had received special treatment from management. The human relationship was connected to the increase in output. Group pressure will also affect a personÊs behaviour. Group quality is very effective in determining the output of an employee and monetary compensation is less effective if compared to group quality, sentiments and guarantee. As an overall conclusion, the Hawthorne research started a new era the awareness that humans are complex and an influential input to determining the performance of an organisation. (b) Human Resource Approach The human resource approach stresses that employees productivity will increase when the employeesÊ satisfaction of basic requirements are met. This movement is likened to a dairy farm where satisfied cows will produce more milk. From the management point of view, the pattern of satisfied employees will increase their work performance. This approach combines the work structure with the motivation theories. Among the main motivators of this approach are Abraham Maslow and Douglas McGregor. (please refer to Topic 7 on motivation) (c) Social Science Approach The social science approach developed the theories of human behaviour based on the scientific and learning methods. It is derived from the fields of sociology, psychology, anthropology, economic and other disciplines to understand the behaviour of employees and interactions in an organisation.

16 



This approach can be seen in most companies. The economic and sociology sector has significantly influenced how managers probe further into an organisationÊs strategy and structure. Psychology has influenced the management approach through motivation, communication, leadership and personnel management.


Quantitative Management Approach

This approach began in the era of World War Two, where quantitative techniques were used in the war in the handling of ships and bombs by the British army. The three main concepts of this approach are the management of science, management of operations and management of information systems. (a) Management of Science This approach was put forward to resolve the problems that arose due to World War Two. A group of mathematicians, physicists and scientists had been formed to resolve military issues. As these were recurring issues that involved the transfer of equipment and humans quickly and efficiently, these techniques were applied by large-scale firms. Management of Operations This approach refers to the management sectors that focus on the production of physical products or services. The members of operations management use quantitative techniques to resolve manufacturing issues. Among the methods usually used are forecasting, inventory modelling, linear and non-linear programming, and theories of rotation, scheduling, simulation and break-even analysis. Management of Information Systems This approach is a new sub-sector in the quantitative management approach. Systems were designed to provide relevant information to managers at the appropriate time and cost. With the creation of high-speed digital computers, it opened up potential for management to utilise this as a tool. These computer systems compile information to assist in managementÊs decision making.




Contemporary Approach

Management is naturally complex and dynamic. The elements of each approach that has been discussed is still being used till now. The humanity approach is the most evident approach, yet lately, there have been some changes to this approach.



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The two main theories under this perspective are the systems and contingency theories. (a) Systems Theory A system comprises of closely related sections that function in general to achieve the same objective. A system functions to transform input found from the external environment to output. The five components of a system are: (i) (ii) Input – equipment, people, finance or information source that are used to produce products or services. Transformation process – the use of production technology to transform input to output.

(iii) Output – comprises of products and services of an organisation. (iv) Feedback – decisions that will influence the selection of input used in the next process cycle. (v) Environment – includes social, political and economic influences.

Ideas of systems that influence the mind sets of management comprise of: (i) (ii) Open system – a system that interacts with the external environment to survive. Closed system – a system that does not interact with the external environment to survive and which often fails.

(iii) Entropy – the tendency for a system to become obsolete. (iv) Synergy – individuals, groups and organisations that can achieve more if they cooperate compared to working alone. (v) (b) Sub-system – sections of a system that are interdependent.

Contingency Approach The classical management approach is perceived as a universal observation. The management concept is perceived as universal when the management practice is the same in all situations. In business studies, an alternative observation arose. A person learns management by experiencing the problems of case studies. The Contingency approach combines the universal and case observations. Under this approach, a managerÊs action depends on the main contingencies in an organisational situation.

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TRUE (T) or FALSE (F) Statements 1. 2. 3. A new wave manager will not perform the classical management functions. The conceptual skill is the most important skill for managers in the lower levels. The number of mistakes made by the manager that had been excluded from its momentum movement path to the higher level management is because they are not sensitive to others. For most managers, the knowledge, skills and abilities that brought early success in their careers do not necessarily help in being successful as a manager. Scientific management focused on the productivity of an employee.



Multiple Choice Questions 1. Which function in management involves monitoring improvements and taking corrective actions whenever needed? A. B. C. D. 2. Planning Organisation Leadership Control

What is the difference between a traditional manager and a current manager? A. B. C. D. Total experience gained by the manager. The way the manager implements the traditional management functions. Total number of traditional management functions implemented. Only traditional managers will implement traditional management functions.



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What are the new element or elements in the current management functions that do not clarify the functions of traditional management? A. B. C. D. Realisation of work Facing competition Managing individuals, projects and processes Leading


Which of the following is NOT a step involved in the realisation of work? A. B. C. D. Determining the objectives that need to be achieved. Planning how to achieve the objectives specified. Collecting and managing the required information to make the best decision. Evaluate the competition levels in the market.


Whose responsibility is it to set objectives that is consistent with the organisationÊs objectives, planning, as well as implementing of the said objectives? A. B. C. D. Top management Middle management Lower/line level management Team leader

    

Management is an art to direct other people in performing work by emphasising the aspects of effectiveness and efficiency in its implementation. Effectiveness is achieving the objectives that enable the realisation of the organisationÊs objective or doing the job the right way. Efficiency is implementing the work by using minimum ability, cost and wastage or doing things right. In brief, managers are known for their management functions that are implemented. The functions can be divided into planning, organising, leading and controlling. The manager plays several roles in an organisation.

20 



      

The roles include figure-head, leader, liaison officer, spokesperson, negotiator, ideas initiator, developing capability and motivator for transformation. Management skills are crucial to ensure the success of a manager. It consists of conceptual, interpersonal and technical skills. The types of managers can be divided into three main sections: top management, middle management and lower/line management. The evolution of management expanded in tandem with the beginning of human civilisation in Egypt, China and Babylon. The methods of management at that time were quite different from today. Modern management significantly expanded with the emergence of the Industrial Revolution in Europe. Generally, there are two well-known systems in discussions pertaining to trend or management of mind sets, which are the rational system and the social system. Amongst the renown figures of the rational system are Henri Fayol, Max Weber and Frederick Taylor, whereas in the social system are Elton Mayo, William Ouchi and Henry Mintzberg.

Concept skills Controlling Effectiveness Efficiency Interpersonal skills Leading

Organising Planning Scientif management Technical skills Theory X Theory Y




By the end of this topic, you should be able to: 1. 2. 3. 4. Describe the meaning of planning; Apply the processes that are involved in effective planning; Identify the types of planning; and Compare the advantages and disadvantages of planning.

Planning is one of the management functions, besides organising, controlling and leading. To enable an organisation to function effectively, good planning is crucial. According to C. W. Roney (Certo, 2000), generally, planning is done for two purposes. Firstly, it is done as a protection to the organisation. This means that when planning is done, a manager can forecast the effects from each of the suggestions or alternative actions that will be carried out. In this situation, the manager will choose the alternative action that provides the best results to the organisation and protects it from any decision that is not profitable. Secondly, planning is done to increase the affirmative levels of an organisation. For example, when an organisation opens a new branch, it is not a coincidence but is the result of detailed planning. With proper planning, managers will be able to ensure what needs to be done, how to carry out the actions, why it has to be done, when to do it, where to do it, who should implement it, etc. Without good planning, an organisation will not be able to expand.


From these early discussions, we can conclude how important planning is in order to achieve success in an organisation. In the next section, we will learn in more detail the functions of planning. Topics that will be discussed are the definitions of planning, how to make effective plans, types of planning as well as the advantages and disadvantages of planning.



Before discussing further on organisational planning, it is appropriate to first analyse the definition. The following is a section on the definitions of planning that have been proposed by Western management intellectuals. (a) Planning means determining the objectives that are desired to be achieved and deciding on the actions that are needed to be taken in order to achieve the objectives (Lewis et al., 2001). Planning is a proposal of actions that need to be made by an organisation to achieve its objectives (Certo, 2000). Planning is a process to determine the objectives that it desires to achieve in the future including the actions that need to be taken in order to achieve them (Rue & Byars, 2000). Planning involves the definition of objectives, the formation of strategies and action plans to co-ordinate the organisationsÊ activities (Robbins, 1996). Planning refers to the process of determining an organisationÊs objectives and making decisions on the best way to achieve them (Bartol & Martin, 1994).

(b) (c)

(d) (e)

From the definitions highlighted, planning involves the activities of identifying the objectives that need to be achieved including determining the strategies that need to be adopted in order to achieve the objectives set. In summary, planning emphasises the end result including the means to implement the task. With planning, managers would be able to determine how to distribute the available resources efficiently in order to achieve the organisationÊs objectives.

Based on what has been discussed, provide a definition of planning according to your understanding. Compare your answer with your friendÊs.




What do you understand by effective planning in an organisation?

Effective planning involves five main processes – (a) determining the objectives that need to be achieved; (b) building individual commitment towards achieving the objectives; (c) forming action plans; (d) monitoring progress; and (e) maintaining flexibility (Williams, 2000). These processes are not only meant to establish planning but also meant to ensure that the planning is implemented correctly and effectively. (a) Determining Objectives The first step in planning is to determine the objectives to achieve. A good objective should have the S.M.A.R.T. features – specific, measurable, attainable, realistic and timely – as illustrated in Figure 2.1.

Figure 2.1: Features to achieve good objectives


Specific Objective The objective must be stated specifically. Suppose an organisation intends to increase its production this year. Then, it must state clearly how much of an increase it wants to achieve, for example, 10 or 20 percent or more. Measurable Objective A good objective is an objective that can be measured quantitatively. This measurement is important to determine whether the objective can be achieved or not. Based on the example above, the increase in production can be measured by calculating the products produced. Assuming after calculations, it was found that there was an additional 10% increase compared to what was assumed previously, the



objective that was planned earlier that is the increase of 10 percent has been achieved. (iii) Attainable Objective A good objective is an objective that is not impossible to achieve. An attainable objective will motivate employees while an unattainable objective will weaken their enthusiasm. (iv) Realistic Objective A realistic objective is reasonable. Suppose the production capacity of Company A had reached the maximum level. The management decides to set the objective of increasing production by another 30%. This objective is unrealistic as it cannot be achieved since the production capacity has already reached the maximum level. Therefore, it is important for the manager of an organisation to evaluate the capabilities of the organisation before making any plans. (v) Timely Objective A good objective usually outlines the time period for its achievement, for instance, one year or three years. With this time period, all the resources can be combined and focused towards achieving the objective.


Building Individual Commitment Even though objectives have been set, it does not guarantee that all the individuals in the organisation will be driven to achieve it. Hence, after determining the objectives, the next step that needs to be taken is to instil a sense of commitment in each of the organisationÊs individuals towards achieving that objective. There are four ways that can be used to establish commitment in the members of an organisation to achieve the objective. Please refer to Table 2.1 for the methods and their explanation.



Table 2.1: Methods of Establishing Commitment Methods Determination of objectives by cooperating with all members of the organisation Explanation Usually when a decision has been made though cooperation between members, it will create a sense of ownership towards the decision made. When the members feel that the decision was made based on their agreement, it will create a sense of commitment in them to ensure the success of its implementation. This method is the best approach and is commonly used in organisations to increase the commitment of employees. The objective set has to be reasonable so that employees will be motivated to perform their task until the planned objective is achieved. Objectives that are unrealistic with high targets are difficult to achieve while objectives that are too low will bore the employees. Generally when an objective is publicly known, we will be embarrassed if we fail to achieve the objectives. Hence, we will work harder to ensure the planned objective is achieved. To facilitate work operations, it will be good to have upper management support. This support can be in the form of money, opinion, advice and others. With this support, all dealings will be easier and indirectly motivate us to achieve the objectives.

Reasonable objectives

Announcement of objectives to members in the organisation Getting support from upper management


Preparing an Action Plan Action plans will be prepared after identifying the commitment that will be provided by members of the organisation towards achieving the objectives that have been set. This action plan will explain the steps to be taken to implement the task, the individuals involved, resources and time needed to achieve the objectives. Monitoring the Progress The fourth step in planning is to monitor progress. It aims to identify whether the plans are working well or otherwise. Two methods to monitor progress are: (i) Determining Long-term and Short-term Objectives Long-term objectives are the actual objectives that need to be achieved while short-term objectives are formed for the purpose of motivating an organisationÊs members and employees temporarily while working towards the attainment of the long-term objectives.



For example, the long-term objective of organisation A is to generate a net profit of RM10,000 in year 2010. The short-term objective that has been determined is to increase the net profit in the account every month in the year 2010. If the net profit increases every month, it will motivate employees to continue generating more profits until it reaches the targeted RM10,000 in the month of December 2010. (ii) Obtaining Performance Feedback from Participating Parties Frequent performance feedback enables employees and the manager to monitor their progress levels. Should there be any deviation from the objective or original strategy, then adaptation efforts, direction and work strategies will be immediately done. Feedback also ensures that the manager does not run away from the original objectives and identifies the mistakes made so that corrective actions are undertaken. (e) Maintaining Flexibility Good planning is planning that has flexibility or elasticity. At times, the action plan and certain objectives can not be implemented as planned. Sometimes, objectives are found to be difficult to achieve and action must be taken to modify the planning. Changes made might be from the aspect of work strategy, scope of objectives to be achieved or the resources involved. This flexibility planning is important because if there are any problems related to the planning process, then it will not damage the overall planning made and maybe only a portion needs to be improvised. Thus, good planning should include features of flexibility so that it can be modified when necessary.



Although planning is defined as the process of determining the objective and identifying the methods to achieve the objectives, planning can consist of several types. It exists in several forms and sizes as well as have their own meanings. Dessler (2001) categorised planning into three main dimensions which are planning based on format, organisation hierarchy and frequency of use. Figure 2.2 summarises the types of planning based on these dimensions.



Figure 2.2: Types of planning


Planning Based on Format Planning differs from the aspect of format, that is, the way it is presented. If planning is written in the form of statements that state what needs to be achieved and how it is achievable, it is called descriptive planning. One example is the planning of an individualÊs career. There is also planning that is stated in the form of financial statements. This type of planning is called budgeting as this plan is stated quantitatively by using financial terms. Graphic planning refers to planning that explains what needs to be achieved and how to achieve it in the form of charts. An example of graphic planning is the Gantt chart. This chart illustrates the time period required in order to implement an activity in the form of a bar chart. Planning Based on Organisational Hierarchy


Reflect upon the fates of well-known companies in Malaysia that had to liquidate or sell their shares to other companies due to their failure to maintain their position in the commercial world. Could this be because of their failure to practise their initial planning?

Apart from formats, planning is also different from the aspect of time frames. Some planning is for long-term while others are for short-term. Planning is done by management based on the hierarchy of the organisation. Generally, there are three levels in an organisation – top management, middle management and lower management. An organisationÊs objectives have to be determined at each level of the organisation. This type of planning is known as top to bottom planning that comprises strategic planning/plans, tactical plans and operation plans. Please refer to Table 2.2 for further details.


Table 2.2: Planning Based on Organisational Hierarchy Organisation Hierarchy Top-level Management Planning Strategic Plan Explanation This is the overall planning of the organisation that explains the organisationÊs general direction and how it will position itself in the market compared to its competitors (positioning). Strategic planning usually encompasses a long period of time and is made for a period of two to five years in the future. The top management will be responsible to establish this plan. This plan is prepared and implemented by the middle management level. It explains how an organisation will distribute and use the resources, funds (monetary) as well as the individuals in the organisation in order to achieve the objectives that have been determined. This tactical planning usually involves a moderate time period and is made between six months to two years. This is the daily planning which is prepared and implemented by the lower level management who are also known as the line managers. Normally this planning will explain the production and distribution of products for a period of thirty days to six months.

Middle-level Management

Tactical Plan

Lower-level Management

Operational Plan

Even though each management level does its own planning, the planning will only be effective when the objectives and actions made at the lower level supports and is in accordance with the objectives and actions made by the top and middle levels. (c) Planning Based on Frequency of Use Apart from the format and organisational hierarchy, planning is also different from the aspect of frequency of use. Some planning is only used once whereas some are used repeatedly. Planning that is only used once is known as one-time usage planning. It is specifically prepared to fulfil specific purposes, for example, the opening of a new branch. Even though the organisation may open more than one branch, each plan made will only be applicable to that specific branch only.



This is because each branch will definitely have different resources whether in terms of money, manpower, customersÊ distribution, size of the branch area, etc. Therefore, planning for the opening of a new branch in Gombak, for instance, cannot be used for the opening of another new branch in Alor Star. Other examples of this type of planning will be the budget prepared for a specific time frame. Planning that is repeatedly used is known as standing plans. This plan is used to manage situations that frequently arise in an organisation such as employeesÊ disciplinary problems. There are three types of standing plans: policy, procedure and regulations. (i) (ii) Policy Policy is the general guidelines or principles to manage a situation. Procedure Procedure refers to the actions or process that must be taken if a certain situation arises. It is more specific compared to policy.

(iii) Regulations Regulations is the specific guideline when taking an action. Regulations are normally more specific compared to procedures. The following example will facilitate the understanding of standing plans. Syarikat Suria Sdn Bhd had determined the policy that its employees are responsible to ensure that every product sold to customers is in good condition. For any damaged product sold, customers can claim compensation from the company. However, before compensation is paid, there are several procedures that must be complied with. First, to record the damage in the inventory system and second, to obtain prior approval from the departmental manager for the payment of compensation. However, the regulations state that any report on the damage must be made within a period of 30 days from date of purchase. Observe that all the activities involved, which are the activity of selling the product to customers, compensation claims from customers as well as the payment of compensation by the business, are repeated activities in a business; hence, policies, procedures and regulations had been fixed as guidelines to manage all these activities. Therefore, each time any of these activities occur, the same policy, procedures and regulations will be applied. In summary, the same planning (that is the policy, procedures and regulations) can be used repeatedly to manage repeated activities.



The cartoon above shows the presentation of objectives by a woman and a robot. In your opinion, what are the implications to the organisation if the objectives determined are inaccurate and irrational?

What is the difference between planning based on format and planning based on frequency of use?



Even though planning provides certain advantages, it also has its disadvantages. In this section, we will identify the advantages and disadvantages of planning. By understanding these, a manager will be able to assess the quality of the planning implemented. Table 2.3 summarises the advantages and disadvantages of planning.



Table 2.3: Advantages and Disadvantages of Planning Advantages   Generates intensive efforts towards an organisationÊs objectives. Creates continuous effort among managers in the organisation hierarchy. Explains the direction of the organisation to the managers and employees. Assists managers in establishing work strategies. Creates positive impacts on individuals and organisations.   Disadvantages Restricts changes that occur in the organisation. Planning does not take into consideration the uncertainties of future assumptions. Separates between the planner and implementer.

 


Advantages of Planning

Table 2.4 explains the advantages of planning.
Table 2.4: Advantages of Planning Advantages Generate Intensive Efforts Description Employees will be more hardworking if there is planning, that is, the objectives and work strategies. Besides that, work performance can be further improved as they are aware of the directions that need to be achieved. Planning involves a specific time period. Managers that engage in planning will be able to know that the objectives can only be achieved when the time comes. Hence, the intensive efforts implemented will be continued until the planned objectives are successfully achieved and the managers and the employees will work more enthusiastically throughout the period of achieving that objective. With planning, employees will know the objectives that need to be achieved including strategies that must be followed. Indirectly, all members of the organisation have a direction that must be followed and will move towards that same direction or objective.

Continuous Effort

Unity of Direction


Establishing Work Strategy

As defined, when a senior manager sets an objective to be achieved, automatically, the managers at the middle and lower level will question the ways to achieve that targeted objective. In order to achieve it, managers will establish strategies that will be the guidelines in determining the activities that need to be implemented in order for the planned objectives to be achieved. Planning has been proven to be effective to organisations as well as individuals. Generally, organisations that engage in planning will obtain more profits and expand much faster compared to organisations that do not engage in planning. It also applies to individuals, whether he is a manager or employee. Normally the work performances are much better if they have objectives and strategies when doing their work.

Positive Impact on Individual and Organisation


Disadvantages of Planning

Table 2.5 describes the disadvantages of planning.
Table 2.5: Disadvantages of Planning Disadvantages Restricting Changes and Adaptation Description Usually, planning is made for a specific time period. When changes take place in an environment, then the existing plans need to be updated again. These changes to the environment can occur from the aspect of change of taste in consumers, technology changes, legislation and others. Nevertheless, individuals or organisations are sometimes too committed to achieve the objectives that have been planned before this until they do not realise that the strategies made are no longer suitable and must be changed. The failure to realise this need for change will cause implementation failure in the present plans. Planning is usually on the assumptions of future occurrences. For example, if a manager presumes that the demand will increase in the future, then plans are made to increase the production of products in order to meet the demand. In order to accomplish a plan assumption on future issues must be accurate. A lot of uncertain elements will exist when forecasting for the future. If the forecast made is wrong, then the planning made based on that assumption will fail in the end.

Uncertainty Towards Assumptions



Separation between Planner and Implementer

Generally, planning is done by top-level managers whilst its implementation is carried out by the employees at the lower levels. This segregation can sometimes cause the plans made to be incompatible with the capabilities of the employees. This happens when the person who plans is not directly involved in the operations division. As such they do not know in detail the capability levels and constraints faced at the operation level, resulting in unsuccessful planning.

Based on what you have learned, try to describe the importance of effective planning and its implications towards your company if the planning failed to achieve the organisationÊs objectives.

Essay Question From the discussion above, list the disadvantages of planning. Multiple Choice Questions 1. Which management process determines the objective that needs to be achieved as well as identifies the methods to achieve the said objectives? A. Formulation of strategy B. Tactical implementation C. Planning D. Administration What is the first step in effective planning? A. maintain flexibility in planning B. form an action plan C. determining objectives D. build commitment towards achieving the objective




Which type of standing plan provides specific guidelines for taking a particular action? A. Rules B. Policy C. Procedure D. Regulations „Ahmad, please make sure that you explain to your staff the steps for setting up the new work process, the budget given and the people involved,‰ said Encik Ali. What step in the planning process is Encik Ali referring to? A. Determining objectives B. Building individual commitment C. Preparing an action plan D. Monitoring progress



Who is responsible for the forming of tactical plans? A. Top-level managers B. Middle-level managers C. Lower-level managers D. All the managers above

TRUE (T) or FALSE (F) Statements 1. 2. 3. Planning is made based on assumptions in the future. One of the disadvantages of planning is the restriction of changes and adaptation in an organisation. Operation planning is made to determine how an organisation can utilise the resources, budget and individuals in order to achieve a specific objective. Standing plan is planning that is specifically made for a certain purpose.




At the beginning of this topic, we were exposed to several planning concepts by management intellectuals. Effective planning processes were also discussed. There are five steps or processes to form effective planning: firstly, determine the objectives that need to be achieved; secondly, establish individual commitments towards achieving the said objectives; thirdly, establish action plans; fourthly monitor the progress of planning; and fifth ensure that the planning done is flexible. Although all planning is defined as determining the objectives including establishing the work strategies, planning can mean several types, whether it is different in the aspect of format, organisation hierarchy or even its frequency of use. At the end of this topic, the discussion also touched on the advantages and disadvantages of planning.

Format Frequency of use Operational plan

Organisation hierarchy Strategic plan Tactical plan

T op i c


Decision Making

By the end of this topic, you should be able to: 1. 2. 3. 4. 5. 6. Identify the types of environments for decision making; Discuss the processes involved in making rational decisions; Explain the limitations in the making of rational decisions; State the methods for improving decision making; Examine the methods for group decision making; and Evaluate the advantages and disadvantages of group decision making.

One of the important duties of a manager is decision making. Decision making is defined as a process to identify problems, generate alternative solutions, select the best solutions available and implement them. In other words, it is a process of selecting a solution from a few available alternatives. When discussing decision making, another important concept that needs to be taken into consideration is the making of rational decisions. Rational decision making refers to making decisions based on facts, opinions and reasonable reasons. Generally, decisions that are made based on facts and opinions are the best decisions. Nevertheless, not all decision makers can make decisions that are rational. This is due to the limitations that exist in the environment or within the decision maker. The words „decision maker‰ and „manager‰ will be used interchangeably in this topic. This is because in the context of an organisation, a manager is the person responsible for making decisions. Therefore, whether the term „manager‰ or „decision maker‰ is used, it refers to the same individual – the person making the decision.




Do you know what are the determining factors in decision making?

A good decision is not only influenced by the experience, efficiency and skills of the decision maker but also the adequacy and validity of the information obtained that are related to the business environment (Abu Mansor et. al., 1999). The information mentioned herein refers to the information that can help us in making a forecast on situations that will occur in the future. For example, is it possible for us to forecast accurately the actions of competitors in the future or what is the interest rate for next year, or what are the changes in legislations that may happen in the future and so forth? If we could obtain sufficient information, it will be easier for us to forecast situations that might occur in the future. Thereafter, the process of decision making will be easy and accurate. Generally, there are three information situations in the process of decision making, whether the information obtained is complete, incomplete or no information at all. This will create three decision making environments or situations as shown in Figure 3.1. (a) (b) (c) Certainty; Uncertainty; and Risky.

Figure 3.1: Decision making environment





Decision Making in Certain Conditions

In this situation, the decision maker obtains the complete information in order to facilitate his decision making. He is able to predict with certainty what situations will occur in the future. By knowing what will occur in the future, the results generated by each of the alternative decisions will be able to be ascertained or known with certainty. The alternatives that give the best results will be selected and implemented. An example of decision making in certain conditions is the following situation: Suppose you were offered two alternative investments – Investment A and Investment B. Investment A gives a return of 5% in two years whereas Investment B gives a return of 6% also in two years. You have sufficient information related to these investments. You are able to know the types of investment, period of investment and the rate of return. From this complete information, you are able to know the return in revenue from each investment made. A rational decision maker will definitely choose the alternative investment that gives the highest returns, that is Investment B.


Decision Making in Uncertain Conditions

In this situation, the decision maker does not have any information that would help in his decision making. Therefore, he is uncertain of the future and he also cannot predict the results of each alternative decision made. Therefore, the decision maker has to use his experience and discretion to make a decision. When making decisions in uncertain conditions, the decision maker needs to have a high propensity towards risks. Risk propensity refers to the tendency of a person to take or avoid risk. Individuals who have a high propensity towards risks dare to take risks in any decisions made. Since there is no information available to facilitate the decision making, it is important for the decision maker who operates in such situations to have higher propensity towards risk. The following example illustrates decision making in an uncertain condition: Company ABC has been conducting its rattan furniture business for a long time in the area of Bandar Banjau. Now, Company ABC decides to introduce a new product into its market, that is, decorative items made from ceramic. As these ceramic decorations are something new to the people of Bandar Banjau and there have been no previous traders selling this, Company ABC cannot forecast the response of consumers towards this product. This is because there is no previous data that can be used as a guide. Will the residents of Bandar Banjau be



interested in ceramic products? Since the reaction of consumers is not predictable, the result of each alternative decision made is also unpredictable. In this case, the alternative decisions that could be taken into consideration will be from the aspect of setting the selling price. Will the ceramic decorations be sold at a price of RM10, RM7 or RM5? Since there is no information available to be used as a guideline, then normally, the decision made will depend on the discretion of the decision maker.


Decision Making in Risky Conditions

If you are a manager, what will be the factors that enable you to make a risky decision? Discuss your answer with your friends.

Most managers or decision makers have actually operated in these conditions. They have information but this information is incomplete. Therefore, they will not know for sure the situations that will occur in the future. Minimal information will only give some insight in predicting what will occur. Whether the situation really will happen or otherwise, cannot be completely ascertained. Usually, the situations can only be assumed to occur based on the information obtained and the percentage of probability that the situations will occur. For example, from the monthly sales statement, it is noticed that total sales had increased each month. Therefore, you are able to assume that the company will obtain net profit this year after making losses last year. Without obtaining other information such as operational cost, change of taste in consumers and loan interest, you can only assume that the company will obtain a profit based on the sales trend for the past few months. Then, you state that the probability that the company will obtain profits is 60% and the probability that the company will make losses is 40%. With this, you make a decision to increase investment. Here, you made a decision in a risky condition that is, it is not known whether the company will really be making a profit or otherwise.

What are the steps that you think are required for a manager in decision making?




Discuss three different decision making environments that are faced by managers.



Although decision making seems simple, however, to ensure that the decision made is the best, it must be rational. This means the decision has to be based on facts, opinions and reasonable reasons. Systematic evaluations have to be conducted in the overall process of decision making. In summary, making a rational decision can be defined as a systematic process of defining problems, evaluating decision alternatives and selecting the best alternative decisions available. Williams (2000) stated that six steps or processes need to be followed to make rational decisions. These are shown in Figure 3.2.

Figure 3.2: Rational decision making process


Defining Problems The first step in rational decision making is to identify the problem. At this stage, a manager needs to identify the problems faced, the source of the problems and how to resolve them.



For example, your office is facing delayed work problems. When analysed, it is found that the problems originates from shortage of computers in the office. Therefore, the management agrees to purchase more computers for office use. (b) Identifying Decision Criteria After identifying the problems, the next step in rational decision making is to establish the decision criteria. The decision criteria refer to the standards or features that will be considered when making a decision. Referring to the above example, since the management had decided to purchase new computers, then what are the criteria that will be taken into consideration when selecting the new computers? The factors of price, quality, compatibility and warranty are the decision criteria. (c) Allocating Weights to Each Criteria After identifying the criteria that need to be taken into consideration when making a decision, the next step will be to allocate weights to each of the criteria. One method that is normally used for this purpose is by making relative comparisons. In this method, each criterion will be compared directly with each other. This is to identify which are the most important criteria, the second important criteria and thereafter the less important criteria for the decision maker. Thus, decision criteria are arranged according to priorities. The priorities of an individual might be different from another individual. Based on the example given just now, you might place the quality factor as the most important, followed by the compatibility factor, pricing factor and lastly the warranty factor. (d) Generating Alternative Solutions Once you have identified and allocated weights to the criteria decision, the next step is to develop as many alternative solutions as possible. The more alternatives generated, the better the process. Based on the examples above, in order to purchase a new computer, the alternatives that can be taken into consideration will be Acer, IBM, NEC, Serindit, Compaq and others. (e) Evaluating Alternatives At this level, every alternative will be compared with each decision criteria. This is to determine the extent of the alternatives to fulfil the decision criteria that had been set. Usually, this level takes the longest time as there is a lot of




information that must be collected first before comparisons can be made. It also involves a huge sum of money. This means, all the alternative solutions, Acer, IBM, NEC, Serindit and Compaq, will be evaluated from the aspects of quality, compatibility, pricing and warranty (decision criteria). The more decision criteria that are fulfilled by an alternative, the better the alternative will be. (f) Selecting the Optimal Decision The last step in the process of making rational decisions is to select the best alternative solution available. The best alternative is the alternative that fulfils all the decision criteria according to the importance that has been arranged. However, if there are no alternatives that can fulfil all the decision criteria according to the arrangement set, then the alternatives that fulfil the most criteria will be selected.


What are the obstacles that may complicate decision making? Compare your answer with the answer in this section.

Generally, decision making will become better if the manager or decision maker follows thoroughly all the steps that have been discussed earlier. Nevertheless, sometimes there are obstacles that confuse the decision maker. For example, lack of information. This problem can cause difficulties in defining the problem. Financial factors can also become another obstacle in rational decision making. Supposing finance is limited, maybe not all the alternative solutions can be considered. Besides that, time limitation is another factor in making the optimal decision. This will restrict the alternative solutions available. All these limitations cause complications to the manager in making the best/optimal decision.



Based on Williams (2000), generally, the limitation process of decision making can be divided into three categories: (a) (b) (c) Common mistakes Bounded rationality Risky environment

Figure 3.3 illustrates the three limitations.

Figure 3.3: Limitations in rational decision making


Common Mistakes in Decision Making

Managers cannot make rational decisions as they are sometimes influenced by intuition and biases. Most management decisions are influenced by intuition, that is, the managersÊ instinct. This usually happens with an experienced manager. This situation may occur because the issue that needs to be resolved is similar to a previous situation that had happened. Managers who depend on intuition have a tendency to neglect information from the data available. As a result, the decisions made are not based on facts and reasons. Sometimes, managers also make biased decisions. This happens when a manager assumes that an issue that will happen in the future is similar to a previous incident he had experienced. For example, Company ABC Sdn. Bhd. had recruited Ali, a graduate from Jaya University as their employee. However, Ali failed to perform. The companyÊs management decided not to recruit any more graduates




from Jaya University. The decision was one-sided or biased. Managers should not assume that all graduates from Jaya University are like Ali, as he does not represent all `graduates from Jaya University.


Bounded Rationality

Bounded rationality mean that the manager tries to adopt the rational approach in decision making but is obstructed by certain limitations such as limited resources, lack of information and the capacity to analyse limited decisions. There are four problems that obstruct managers from rational decision making: (a) Limited Resources Resources consist of time, money, equipment and manpower. Resources that are limited can influence decision making. For example, assuming that previously the organisation had planned to set up several new branches but its income had decreased due to an economic downturn. As a result, the plan to set up new branches was postponed. Observe that due to the limited financial resources, what was done is not the same with what had been originally planned. Excessive Additional Information Advancement in technology has caused information dumping to happen. Some information can be easily obtained but at the same time can cause problems to the manager. This is because the manager is unable to handle all the information that is available. As a result, only certain information is considered. Thus, decisions made may not be the best as not all information is taken into consideration. Memory Problems Memory problems can cause difficulties for the manager. Even though information is usually recorded, sometimes information is also overlooked or unrecorded. In order to make rational decisions, all required information need to be obtained. To compile all these required information, might involve time and high costs. Maybe not all the information can be compiled. Therefore, an optimal decision cannot be made. (d) Expertise Problems Expertise problems cause the decision maker to encounter problems in arranging, understanding and summarising the information available. This is because there no individual is an expert in every sector. Although the





information can be analysed by computer, the decision maker will still require specific skills to understand the results that have been obtained. As a result of this lack of expertise, the evaluation made may not be the best.


Risky Environment

As stated earlier, some managers might make decisions in a risky environment. This means that the manager has information to assist in his decision making even though the information obtained is not complete. As a result, the decision made could either be successful or otherwise.

What are the limitations in rational decision making? Please describe them.



Based on your experience, state the methods to improve a decision that you have made. Discuss your answer with your friendÊs.

The quality of a decision can be improved by the following methods: (a) (b) Using specific rules and tests in the process of decision making; and Making decisions as a group.

3.4.1 Using Rules and Tests
Decision making can be improved by using specific rules and tests. (a) Rules of Decision Making Decision rules refer to a set of criteria that needs to be completed to enable an alternative solution to be accepted. Two types of rules in decision making are:





Rules of Priority According to this rule, all decision criteria will be arranged according to its priorities. Each alternative solution will be assessed based on the criteria one by one. A good alternative must fulfil the most important criteria followed by the second and subsequent criteria. The best alternative will be the one that fulfils the most criteria highlighted. For example, Ahmad plans to rent a shoplot to conduct his business. The criteria that have been considered and arranged according to priority are as follows:     Located in the town area; Large area; Rental not exceeding RM500 per month; and Has electricity and water utilities.

Assume that there are four alternative shops that can be considered – A, B, C and D. After the evaluation, it was found that Alternative A fulfils the criteria of (i) and (iv), Alternative B fulfils the criteria of (i) and (ii), Alternative C fulfils criteria (i), (iii) and (iv) and Alternative D fulfils criteria (ii) and (iii). Although Alternative C fulfils three of the four criteria mentioned, Alternative B, is the best option as it fulfils the two highest criteria. Do remember that the best alternative does not necessarily fulfil the most criteria but the alternative that fulfils the highest criteria or priorities according to its arrangement. (ii) Rules of Minimum Condition Sometimes, managers must make decisions such as yes or no and accept or reject. In this situation, the decision maker needs to set a minimum condition that must be fulfilled by each of the alternative solutions in order to enable it to be accepted. Any alternative that can not fulfil even one condition would be rejected. For example, before a sponsor accepts or rejects the applications of students for education scholarships, they will probably set some minimum conditions such as (1) management courses; (2) education for first degree; and (3) yearly family income not exceeding RM18,000. The studentÊs application must pass all these conditions for it to be approved. (b) Various Variable Tests Both the decision making methods above can only make a separate evaluation on each of the alternatives. However, there are situations that



require the decision maker to assess the effects of the implementation of various alternatives at the same time. Sometimes this combination provides the optimal result. Evaluation is made through the implementation of several variable tests. It is quite complicated and requires the decision maker to learn the methods in designing experiments including ways to compile and analyse the statistical data that will be generated. The following example shows the use of various variable tests in decision making: The management of a recreational park is drafting a strategy to increase the number of visitors to its park every Monday, which is the day that has the lowest number of visitors every week. Among the alternative strategies that have been planned are (A1) Two-in-one tickets whereby one visitor ticket can admit another visitor for free; (A2) Free food coupon for each visitor; and (A3) Free parking for visitors. Hence, every Monday, experiments are conducted to study the results. In the first week, there were no changes and the income for that week was RM1500. In the second week when strategy A1 and A2 were initiated, the income for that week was RM1000. In the third week, when strategy A2 and A3 were introduced, it generated an income of RM3800. In the fourth week, when strategy A1 and A3 were combined, the income generated was RM2500. The experiments clearly showed that strategy A2 and A3 – free food coupons and two-in-one tickets – were the best combination solution.
Table 3.1: Various Variable Tests for Recreational Park Alternative Strategy Test Two-in-One Tickets (A1) Free Food Coupon (A2) Free Parking (A3) Profit (RM)

1. 2. 3. 4. X X X X X X

1,500 1,000 3,800 2,500





Using Groups

In your opinion, is a collective decision better than an individual decision? Why? Compare your answer with your friendÊs.

Most current organisations use groups to make decisions. For example, a university academic committee is established to evaluate the effectiveness of a programme or a group of employees are assigned to determine a new product which will be introduced to consumers. This happens because group decision making has more advantages compared to individual decision making.

Based on the discussion above, how can decision making be further improved?



The following methods are normally used in group decision making. Generally, there are three main methods that a group uses to generate results, as summarised in Figure 3.4.

Figure 3.4: Methods of making group decisions





What do you understand by brainstorming?

Brainstorming is a technique that encourages the generation of ideas as much as possible without any criticism. It is a group decision-making process in which negative feedback on any alternative presented is forbidden until all alternatives have been hard (Certo, 2000). The purpose of brainstorming is to extract ideas from each group member openly. A group brainstorming activity that is effective usually consists of five to seven individuals (Hoe et. al., 1998). In summary, all group members will propose their own ideas according to their turn. In the early stage, all ideas whether good or bad, suitable or not suitable, are accepted without being evaluated for the purpose of motivating all members in the group to generate more ideas. This process will continue until no more ideas are proposed. After all the ideas have been collected, evaluation will be made, by discussing the advantages and disadvantages of the ideas given. Then, the best idea will be accepted. This method is good for generating ideas. However, it also has weaknesses. For example, it restricts the production of ideas. As members in the group voice their ideas by taking turns, sometimes, an idea that had spontaneously arisen might be lost while a member waits to speak. At times, group members may feel that their ideas are not good enough and feel shy about expressing them to the group. These disadvantages restrict the actual functions of brainstorming. In order to overcome these problems, currently brainstorming by computers is used. In this method, group members do not have to wait for their turn to state their opinions. They can directly type into the computer and therefore, the loss of ideas does not happen. At the same time, the identity of the group members will still be unknown. Therefore, the members will not be shy or uncomfortable when evaluation of their ideas are done.




Figure 3.5: The brainstorming process


Nominal Group Technique

The nominal group technique is a method of decision making whereby group members propose and evaluate their ideas individually before sharing them with the other group members. The steps involved are as follows: Step 1 Step 2 Each group member records his individual ideas on the decision or problem discussed. Each member will read out his ideas to everyone in the group for sharing. These ideas are usually written on the blackboard/ whiteboard for review and reference by all group members. A discussion is held to evaluate the advantages and disadvantages of each idea. Members secretly vote on a piece of paper. The idea that receives the highest number of votes is accepted and implemented.

Step 3 Step 4



Delphi Technique

The Delphi technique is a decision making method where a panel that consists of several experts will answer questions and work together until a solution is reached for a specific issue. This technique does not require the panel members to meet face to face. They might interact by mail, e-mail and others. The steps involved in this technique are: (a) (b) Experts in related sectors are identified and selected as panel members. Problems are composed in the form of a questionnaire comprising openended questions.



(c) (d) (e)

The questionnaire is given to the panel members with the request for them to propose solutions. Each expert completes the questionnaire and returns it to the manager. All the answers are summarised and bound together in the form of a report. It is returned to all panel members together with a more specific and detailed questionnaire form that has been reviewed. Panel members read the report to find out the opinion and proposals of the other members relating to the problem. They also complete the second questionnaire. This process is repeated until a unanimous decision is achieved by the members on the best solution.



State the advantages of brainstorming electronically instead of face to face.


Advantages of Group Decision Making

Based on your experience, state the advantages and disadvantages of group decision making.

Group decision making offers several advantages compared to individual decision making. Basically, these groups are formed to focus the experience and skills possessed by specific groups of individuals on a specific problem or situation. This means the group offers more knowledge and skills compared to individuals. With this additional information, the group is able to handle the problem better and the source of the actual problem can also be known. At the same time, more alternative solutions can be generated.




The background of these members are varied, for instance there are members from the marketing section, operations section, the training section and others that could enable this problem to be viewed from various perspectives. Involvement in the group usually provides satisfaction to all the members. They feel satisfied that the decisions made were proposed by them. Hence, they will accept the decisions that have been made and are committed to accomplishing its implementation.


Disadvantages of Group Decision Making

Although group decision making offers many advantages, it also has certain disadvantages. The most obvious disadvantage is that it takes a long time. This includes time for the appropriate meeting for all group members, time used for discussions, time wasted due to a problem or conflict that may arise within the group and others. The discussion may also be controlled by certain individuals. This will limit the involvement of other members in the discussion and therefore affect the quality of the decisions made. Sometimes, the group decision/objectives are disregarded by the group if the objective is a personal objective. Groupthink is another frequent problem that occurs when working in a group. Groupthink refers to a situation where panel members try not to propose ideas that are different from the other group members due to numerous reasons, probably due to friendship, to avoid conflict, afraid of being boycotted and others. In the end, the discussion cannot be made rationally and it affects the decision making. All these are part of the advantages and disadvantages of group decision making. The manager needs to know the advantages and disadvantages before he can determine whether to use group or individual decision making. Figure 3.6 summarises all the explanations above.



ADVANTAGES     Sharing of experience and skills among group members. More information, data and facts can be compiled. Problems can be seen from various perspectives. Increases acceptance and commitment of members on the decision made. DISADVANTAGES       Time consuming. Discussion might be controlled by certain individuals. Have to compromise. High costs involved if many group members have to meet. Pressure to agree with the group decision. Groupthink.

Figure 3.6: Advantages and disadvantages of group decision making

Can you list other factors that contribute to the advantages and disadvantages of group decision making?

Multiple Choice Questions 1. Which of the following is NOT a part of rational decision making? A. Intuition process B. Definition of problems C. Evaluating alternatives D. Selecting optimal solutions





What is the first step in making a rational decision? A. Identify the decision criteria B. Allocate weights to criteria C. Defining problems D. Generating alternatives What is the most effective method for generating as much ideas as possible? A. Individual analysis B. Delphi technique C. Face-to-face brainstorming D. Electronic brainstorming „This refers to a situation whereby group members try not to propose ideas which are different from other group members.‰ What does the above refer to? A. Delphi technique B. Brainstorming C. Groupthink D. Nominal group technique




Which is not a decision making situation? A. Certain conditions B. Uncertain conditions C. Partial risk conditions D. Risky conditions

TRUE (T) or FALSE (F) Statements 1. There are two types of decision making environments that are certain conditions and uncertain conditions. Decision criteria are features or elements that will be taken into consideration when making a decision. The first step in the process of rational decision making is to develop alternatives as much as possible. Groupthink is one of the advantages of group decision making.







Brainstorming, nominal group technique and Delphi technique are methods of group decision making.

Decision Making Caselet

1. 2.

What does the above scenario represent? What can be done to overcome this problem?

  

In this topic, we learned that decision making is made in three types of environment – certain conditions, uncertain conditions and risky conditions. The decision making in a situation is determined by the adequacy of information obtained in the process of decision making. Also discussed were the processes of rational decision making that encompasses the following steps: firstly, defining the problems; secondly, identifying the decision criteria; thirdly, allocating weights to each criteria; fourth, generating alternative solutions; fifth is evaluating each alternative; and the sixth is selecting the optimal decision.




Nevertheless, rational decision making is limited by specific limitations such as rationalisation boundaries, common mistakes and making decision in a risky environment. In spite of that, decision making can still be improved by several methods. First, making decisions using specific rules and tests such as the rules of priorities, rules of minimum condition and conducting various variable tests and second, making group decisions. There are several methods of group decision making which are brainstorming, nominal group technique and the Delphi technique. Although group decision making has a lot of advantages, it also has specific disadvantages.

 

 

Brainstorming Delphi technique Groupthink

Nominal group technique Rules of minimum conditions Rules of priority



 Organisation


By the end of this topic, you should be able to: 1. 2. 3. 4. 5. 6. 7. Explain the concept of organisational structure; Identify the four factors that influence organisational structure; Compare the different types of organisational structures; Describe the concept of authority in organisations; Differentiate between the concepts of centralisation and decentralisation; Evaluate the different types of work design; and Discuss the emerging new organisational designs.

When we discuss organisation design, we cannot avoid discussing organisational structure. Organisational structure refers to the development of an organisationÊs functions that are grouped and coordinated formally. Organisation structure is the work arrangement at a section or department that directs the behaviour of individuals and groups towards the achievement of an organisationÊs objectives. This is a system that connects the duties, work flow and communication channels between individuals and the various work groups in an organisation. The purpose is to simplify the use of each resource and individual collectively as a management system for the achievement of the objectives that have been set. An organisation structure is usually displayed in graphical form that is called an organisation chart. Traditionally, the organisation chart is illustrated in the form of a pyramid chart with individuals at the top of the pyramid having higher authority and responsibilities compared to individuals who are placed at the lower levels of the pyramid.






There are four factors that influence the structure of an organisation. These are organisational strategies, size, technology and environmental factors. We will discuss each of these factors one by one.


Organisational Strategy

The main thing that an organisation usually pays attention to when it comes to achieving its objectives is how the organisation has been structured. Structures that are accurate do not guarantee success but it will increase the probability of success rates. This means that the organisational structure can assist the management team in achieving the objectives set. Since the objectives are the reason the organisational strategy is enacted, both the objectives and strategies have to be interrelated. Specifically, organisational structures have to be drafted according to the strategies that have been enacted by the organisation. In other words, changes in the organisational strategies will lead to changes in the organisational structure. Changes in this organisational structure will help to facilitate and support the changes in the organisational strategy. Even though research has stated the importance of the organisation structure to be drafted according to the strategies that have been decided, it is clearly seen here that strategy is not the main factor that needs to be considered. The process to match the structure with the strategy is something complex and must be made through in-depth understanding of the history of the current structure and other factors such as the size of the organisation, environment and technology.


Size of the Organisation

There are a lot of methods to measure the size of an organisation. Measurements that are often used are the quantum of sales and quantum of manpower. Size can influence the structure of an organisation. Organisations that are smaller in size have a tendency for lesser work specialisation, less standardisation and more towards the centralisation of decision making. Organisations that are larger in size have a tendency towards work specialisation, standardisation and decentralisation of decision making. This means that larger organisations emphasise more on work specialisation, departmentalisation, expansion of charts and rules compared to organisations that are smaller in size.






Technology refers to how an organisation changes its inputs to become outputs. Each organisation will have at least one technology that changes its financial, manpower and physical resources into products or services. The routine level is an aspect that differentiates technology – whether the technology is a routine activity or non-routine activity. Activities that are non-routine are something that are specific like the production operations of the products and services that are specific according to the needs of consumers such as those practised by tailors, cooks and barbers. What is the relationship between structure and technology? The routine tasks normally have a tendency towards departmentalisation structures that are much bigger. Hence, routine activities create structures that are more centralised, whereas non-routine activities depend largely on the expertise of an individual, for example, a barber; this creates a more decentralised structure. In order to facilitate better understanding, if the operation is based on technology that is routine, where the production of products and services are produced in bulk such as a garment factory that operates in a more formal way, then more departmentalisation, work specialisation and compliance towards rules and regulations will be made. Organisations that operate on non-routine technologies such as barbers do not need a lot of departmentalisation, work specialisation and strict compliance to rules, as required by a factory.



Every organisation will face external influences that affect the survival of an organisation, known as environmental influences or factors that are specific or general. Why does the environment have an impact on the structure of an organisation? This is because changes in the environment cannot be determined. Some organisations will face static environments, whereas some will face environments that are dynamic. Static environment provides less concern on uncertainties compared to a dynamic environment. As the uncertainties in the environment can threaten the effectiveness of organisations, management will try its best to reduce the threats. One of the ways of reducing uncertainties in the environment is by making changes to the organisational structure.




List the factors that influence organisational structures.



Organisational structure is established based on the types of departmentalisation. Departmentalisation means the division of work and employees to different organisational units that are responsible for resolving the duties given. Each individual in these different units will work and all the work output will be aimed towards the objectives that have been determined. There are five types of departmentalisation, which are departmentalisation based on functions, products, customers, geographical locations and matrix. Figure 4.1 illustrates the five types of departmentalisation.

Figure 4.1: Types of departmentalisation


Functional Departmentalisation Functional departmentalisation co-ordinates work and employees through different units and each unit is responsible for a specific business function or expertise area. For example, departmentalisations according to functions or areas that are common are accounts, sales, marketing, production, operations and human resource department. Departmentalisation based on functions is used widely by organisations. Figure 4.2 illustrates functional departmentalisation more clearly.




Figure 4.2: Example of functional departmentalisation

This type of department has several advantages. First, it allows work to be carried out by individuals who are qualified and skilled in the areas concerned. The second advantage is that it reduces cost by reducing work duplication and use of resources in the organisation. Thirdly, each individual in the same department will acquire the same work experiences or training, communication and co-ordination, thereby reducing problems for management. However, this type of departmentalisation also has several disadvantages, such as difficulty in co-ordinating between departments. Functional departments can cause delays in decision making and produce managers and employees who are restricted in experience and expertise. (b) Product Departmentalisation This departmentalisation is based on products and employees work in different units, each with the responsibility of producing a product or service. Based on Figure 4.3, each department represents one type of organisational output. An organisation that practises this type of departmentalisation output has several advantages. One of the main advantages is to allow managers and employees to expand their experience and expertise that are related to the overall activity of the product or service produced. Apart from that, the product department structure allows management to evaluate the work performance of each work unit. Product departmentalisation may also have some disadvantages. Managers may focus on their product to the exclusion of the rest of the organisation. Administration costs may also increase due to each product having its own functional-area experts.




Figure 4.3: Example of product department


Customer Departmentalisation This type of departmentalisation co-ordinates work and employees in different units that are responsible for specific types of consumers only. The advantage of this consumer-based department is that the organisation will focus all its efforts in fulfilling the needs of consumers. Therefore, an organisation will establish different units in order to provide services to specific consumers and also allow the organisation to specialise and adapt its products and services to fulfil the requirements and resolve consumersÊ problems. Some of the disadvantages of this departmentalisation are the existence of duplication of work and use of resources and difficulty to coordinate between departments that provide services to different types of consumers. Customer departmentalisation causes employees to overemphasise effort to fulfil customer needs until it affects the organisationÊs business performance. Please refer to Figure 4.4 below for a better understanding of customer departmentalisation.

Figure 4.4: Example of consumer departmentalisation


Geographic Departmentalisation Geographic departmentalisation co-ordinates the work and employees of different units that are responsible for conducting business activities in certain geographical locations. The advantages of this geographically based department are the abilities of the organisation to react with speed and efficiency to the requirements of specific markets within the scope of responsibilities of a department. This advantage is more important when the products and services that




are produced are marketed to different countries. Besides that, it also helps to reduce costs by positioning the organisational resources nearer to the targeted consumers. Its disadvantage is that it creates duplication of work and the use of organisationÊs resources. Besides this, difficulties will arise coordinating between departments as the departments are geographical areas that are located far from each other. Figure illustrates geographic departmentalisation. the in in 4.5

Figure 4.5: Example of geographic departmentalisation


Matrix Departmentalisation This is a type of structure that combines two or more types of departmentalisation at the same time. There are several factors that differentiate matrix departmentalisation from the other types of structures, that is, the employees report to two different supervisors or managers. Apart from that, it also leads to cross interactive functions that cannot be done in the other types of departmentalisation. The advantage of the matrix department is that it allows the organisation to manage efficiently the projects or activities that are large scale and complex. The disadvantage of this matrix structure is that it requires a higher level of coordination to manage the complexity involved in order to conduct big projects or projects that have many phases to be completed. This situation often causes the matrix department to focus on the conflict of authority and confusion among employees who have to report to more than one supervisor or manager. Besides that, the matrix department also requires higher-level management skills compared to other types of departmentalisation.




Explain the concept of departmentalisation and state one advantage and one disadvantage for the types of departmentalisation that you know.

Which type of departmentalisation is practised by your organisation?



Authority is a part of organisational structures. Authority means the right to give directives, take actions and make decisions related to activities to achieve the organisationÊs objectives. Authority refers to the right that is stated in a management position. Authority is normally channelled from top to bottom, that is, to the lower management levels. Authority is placed on a position by disregarding the personal factors of the position holder. This right exists based on the formal position in an organisation. When someone leaves that formal position, the authority remains with the position.


Chain of Command

Look at Figure 4.6. In this diagram, there are lines that connect the rectangles on the top section with the rectangles that are at the lower sections. These lines are known as the chain of command. The chain of command explains who reports to whom in the said organisation. Individuals in the top rectangles have authority over those in the lower rectangles, according to the lines that connect them. Individuals at the top have the right to give directives, take actions and make decisions on the work of individuals located below them. Individuals at the lower levels must report all aspects of their work to the people at the level above them according to the chain of command. In order for the lower levels to avoid confusion and conflict of authority due to the need to report to more than one manager, unity of command is needed in an organisation. Unity of command is the management principle that states that employees only report to one manager at a time. In other words, only one




manager is given the authority to become the leader at any one time or for any activity in an organisation.

Figure 4.6: Chain of command


Line and Staff Authority

The next authority dimension differentiates between line authority and staff authority. The differences between line authority and staff authority are illustrated in Table 4.1. The line authority and staff authority must work together to maintain the efficiency and effectiveness of an organisation. To ensure that both work productively, the management must ensure that both these authority groups understand the mission of the organisation, have specific objectives and believe that their partnership helps the organisation to achieve its objectives.
Table 4.1: Differences between Line Authority and Staff Authority Line Authority Line authority has the right to make decisions and give directives to employees that are placed under its chain of command. The Director, who has line authority, has the right to give directives to the managers under him. Generally, line authority is related to matters involving the organisationÊs management system especially in all aspects related to work and conduct that is linked to efforts to achieve the objectives which had been determined. Line authority helps those who accept it to work and ensure the efficiency of the activities under their responsibility. Staff Authority Staff authority involves the right to provide advice and assistance to parties that have line authority and other employees even though they are not under the chain of command. Always remember that the staff authority is only to provide advice and assistance and not directives like line authority. Staff authority enables certain parties to assist in increasing the effectiveness of the line authority to implement the duties that are under their responsibility.





Line and Staff Functions

The term „line and staff‰ is used to explain the various functions in an organisation. Line function is an activity that directly contributes to the production and selling of an organisationÊs products and services to consumers. For example, the activities that are conducted by the production and marketing departments are known as line functions. Staff function is an activity that contributes indirectly to the production and selling of an organisationÊs products and services including its supporting activities. Specifically, staff functions in an organisation are the activities that are conducted by the accounts, human resources and legal departments. For example, the manager of the marketing department may ask for advice from the legal department to ensure that the words used in certain advertisements are legal.


Span of Control

Before you continue reading, ponder for awhile. What do you understand by the term „span of control‰?

Span of control refers to the number of employees who report directly to a manager or supervisor. Members of classical management theory such as Henri Fayol believed that organisational structures were vertical and comprised several levels of management that have a restricted span of control. This restricted span of control allows the organisation to increase its efforts to monitor its employees. The restricted span of control means that the number of employees placed under the supervision of a manager is small, thus ensuring stringent supervision. Nevertheless, organisations that have long organisation structures and restricted span of control will incur higher costs especially employeesÊ salaries. The high cost is caused by the vertical organisation structure as it requires multiple levels of management. Besides that, the multiple levels of management cause delays in decision making and the staff/managers have the tendency to refer their problems to upper management. Creativity among employees will be limited due to stringent controls and lack of freedom given by management.




Currently, most organisations practise a broad span of control as it reduces costs, expedites the decision-making process, increases creativity and flexibility, narrows the gap towards consumers and imparts powers to employees. At the same time, the organisation strives to ensure that this broad span of control does not jeopardise the organisation by providing training to all employees so that they have a better understanding of their job requirements and use the assistance of colleagues to resolve issues that arise.

Explain briefly the following: (a) (b) (c) The meaning of chain of command. The differences between line authority and line function. The meaning of span of control.



This section will discuss the level of centralisation in an organisation. Centralisation is a situation where almost all control is centralised, especially the control for decision making to one party, which is the top level people in an organisation. Organisations that practise this method give authority to the managers to make decisions even though it is a trivial matter. Decentralisation is a situation where a certain amount of authority is handed down to subordinates or employees at the lower levels of an organisation. Organisations that practise decentralisation have more delegated authority at all levels. How far an organisation needs to centralise or decentralise control depends on the situations faced by the organisation. As explained, organisations that are large will gain more advantages by practising decentralisation. When the size of an organisation expands, the management will have to deal with expansion and increase in responsibilities and all kinds of duties that must be implemented. Delegation is an effective step that could help a manager to manage the increase in workload. In other issues, higher-level management may be of the opinion that the organisation has become too big and has a high level of delegation. One of the signs that an organisation has become too big is the increase in labour costs that are higher than other costs in the organisation. Hence, increasing




centralisation in certain activities can help to reduce the need for manpower, which will also reduce the cost of labour to a much acceptable level. If organisations are facing a situation where the consumers of its products and services are located at different places, then decentralisation should be practised. Decentralisation is able to place the resources of management closer to consumers and by doing so, the organisation will be able to react quickly to changes in consumersÊ tastes. If the organisation requires quick decision making in order to overcome all the problems faced, decentralisation will be the best option. Decentralisation can reduce red tape and allow employees at the lower levels to make decisions faster when faced with a problem. If creativity is required in the organisation, then decentralisation is also the best option. Decentralisation provides delegation of authority that will give freedom in finding the best possible option to create or resolve an issue. Besides that, the freedom given encourages creativity and innovation in working techniques or products.



Work design specifies the activities that are done by employees or a group of employees. It determines how and where the work has to be done as well as by whom. Besides that, work design also includes the tools and equipment that will be used when carrying out the work activities. The objective of work design is to achieve productivity. The success of work design takes efficiency into consideration when carrying out the activities. In other words, work design can ensure a healthy and safe working environment for employees in the short and long terms.


Work Specialisation

Work specialisation refers to the act of assigning the contents of smaller sections from the overall work or process to individuals. For example, the overall process of preparing a burger consists of small activities such as frying the meat, preparing the vegetables, preparing the bun and packing it. In this case, work specialisation is possible as the steps are easy to learn and there are less diversified activities and high repetitive activities. An employee who is responsible for doing the packaging will be handling a simple activity which is, easy to learn. Work diversification is low (only need to pack) and highly repetitive (packing).




One of the disadvantages of work specialisation is that in cases where the task is simple, the person performing the task will be easily bored. It causes low levels of job satisfaction and high absenteeism rates and thereafter can cause the organisation to have a high turnover. The main reason for work specialisation is that it is more economical. When a work activity is specialised, for example the task of packing burgers, it takes a shorter time to learn and become skilful. If there are employees who have resigned or absent, the organisation will only face a small drop in the productivity rate when replacing the employee who had resigned or is absent with a new employee. Apart from that, when the work design is simple, the wage or salary offered is also low. Work that is simple does not require a high salary to attract employees.


Job Rotation, Enlargement and Enrichment

Due to the efficiency of work specialisation, organisations find it hard to eradicate its implementation. Hence, redesigning work is essential in order to maintain the advantages of work specialisation. Three methods have been introduced – job rotation, job enlargement and job enrichment. Job rotation is practised to overcome the disadvantages of work specialisation by transferring employees from one type of specialisation to another periodically. For example, employees who are responsible for packing burgers are transferred to the activity of frying meat. The purpose of job rotation is to provide employees with a variety of activities and opportunities to utilise different skills. Job rotation allows the organisation to continue practising work specialisation. Apart from that, diversification of activities can reduce boredom in employees and give more job satisfaction. Job enlargement is another method to overcome the disadvantages of work specialisation. Job enlargement adds the number of tasks in an activity. For example, before this, the employee only needed to handle burger packaging but when the scope of work was widened, the employee no longer only performed packing activities but also performed other activities such as putting in the sauce and labelling the burgers. While many employees say that they are stressed due to job enlargement, some others feel that job enlargement gives them opportunities to develop other skills. Job enrichment involves an increase in the number of tasks in the activities and gives the employees authority and control in making decisions related to their work. Psychologists including Frederick Herzberg stated that as employees only handle a few tasks, they are quickly bored. Simple and easy activities are not what they are looking for. Other psychologists such as Herzberg, Maslow and




Alderfer believe that what is required by employees from their work activities is work achievement that comes as a result of doing a job successfully and the recognition of success that comes with the use of the skills and potential that they have. Job enrichment tries to manage dissatisfaction issues by adding depth to the work. The job enrichment proposed by Herzberg is based on the two motivational factors approach. Job enrichment refers to building the motivators in work activities to make them more interesting and challenging. This can be done by giving employees a little freedom and allowing them to plan and inspect, which is usually done by their supervisors or superiors. Employees may individually be given the responsibility of determining their own work progress levels and also to rectify their own mistakes. When the work becomes more challenging and employee responsibilities increase, then the motivation and interest will also increase.

Based on your understanding, explain briefly the following: (a) (b) (c) Job enlargement Job enrichment Job rotation



There are two types of organisation designs – mechanistic organisations and organic organisations. A mechanistic organisation is an organisation categorised by work specialisation and responsibility, fixed roles and chain of command that are rigid caused by centralised control and vertical communication. This type of organisation is most suitable for businesses that are stable and unchanging. An organic organisation is an organisation categorised with a wide definition of work and responsibilities, changing roles and decentralisation, and horizontal communication. The organic organisation is most suitable for businesses that are dynamic and always changing. The key criterion that differentiates these two approaches is that the mechanistic organisation focuses on organisational structure while organic organisation focuses more on the organisation processes which are the collections of activities in the organisation that changes its inputs into outputs that are valuable to customers.





Emerging New Organisational Designs

Since the early 1980Ês, organisational management had already begun thinking of a few new organisational designs. The purpose was to develop options for a new design in order for the organisation to compete more competitively. In this section, there are four new organisational designs that will be explained – team structure, modular organisation, virtual organisation and borderless organisation. (a) Team Structure

To what extent do you agree with the use of teams in carrying out work?

The use of teams has become more popular in coordinating work activities. The main criteria in team structures are the disintegration of departments and the decentralisation of decision making to the level of work teams. For organisations that are small in size, the overall organisation is perceived as a team. Organisations that are bigger have a team structure complementing what we call bureaucracy. This allows the organisation to achieve efficient standardisation that is practised by bureaucracy apart from obtaining flexibility that comes with the team structure. The use of teams such as stand-alone teams, and cross-functional teams will increase productivity and efficiency in the organisation. (b) Modular Organisations Each organisation has its advantages and uniqueness in producing products or services to its own customers. These advantages and uniqueness are contained in the core business activity which the organisation is able to perform well, fast and cheap compared to other organisations.

A modular organisation outsources business activities to other organisations, suppliers, experts or consultants.




The meaning of modular is used as business activities can be bought from other organisations for the purpose of adding activities and can be dropped when they are no longer required. Modular organisations have several advantages. For example, the payment of outsourced activity such as labour, experts or production capabilities occur only when the transactions are required. This will cause the cost borne to be lower if all the activities are managed on its own. Secondly, the outsourced activity is able to focus on its own tasks thus ensuring better performance. Nonetheless, in order to maintain these advantages, there are a few preconditions that must be fulfilled first. The most important condition is that the modular organisation requires close cooperation with the organisations that do the outsourced business activity. However, modular organisations also have their disadvantages. The most critical weakness of a modular organisation is the loss of control when business activity is outsourced to other organisations. Apart from that, the organisation might also reduce its competitive advantage unintentionally in two ways. Firstly, the change in technology and competition can cause the situation where the outsourced activities identified earlier as a side activity becomes a competition. Secondly, the organisation that accepts the outsourced activity could become a competitor one day. (c) Virtual Organisation

A virtual organisation is an organisation that has become a part of the business network. Virtual organisations exist is in a network that shares expertise, costs, capabilities, markets and customers collectively to resolve customersÊ problems or producing certain products and services.

For example, the shoe manufacturer company, Puma is a type of virtual organisation. Puma is responsible for the strategy and market in Germany. One small networking firm in Asia also handles the purchase and distribution of raw materials that will be used to produce Puma sports shoes. Different organisations in China, Taiwan and Indonesia are responsible for producing the Puma shoes. Organisation networks that are different, handle the network of sales and distribution of products that operate in Africa, Asia, Australia, Europe, North America and South America. Overall, 80 different organisations from around the world are involved in the making and selling of Puma sports shoes.




Unlike modular organisations which can be seen as stable and have long relationship with organisations that deal with it, virtual organisations have relationships that are shorter and temporary with the organisations that are in its network. Thus, the virtual organisation composition often changes. The combination of organisations that becomes its partners in the network depends on the expertise required to resolve any problems or producing of specific products and services to consumers. This virtual organisation has its own advantages. One of the advantages of a virtual organisation is that it allows organisations that are involved in the network to share all costs involved. As the members of the network can swiftly combine the efforts in fulfilling the needs of consumer, they will react swiftly and flexibly. Apart from that, since the members are doing their best, theoretically the virtual organisation would be able to produce the best products and services in all aspects. The disadvantages faced by modular organisations are also faced by virtual organisations. When a business activity is outsourced, it will become difficult to control especially from the aspect of quality of work produced by the network partner. On the other hand, the most evident disadvantage of virtual organisations is that the implementation of virtual organisation requires high level of management expertise so that the organisation networks that are involved will work better together especially if the tendency for relationship time frame is short due to the activity conducted or relationships based on projects. Borderless Organisations


What do you understand by the term „borderless organisations‰?

A borderless organisation is an organisation that tries to eradicate the chain of command and to replace departmentalisation with team authority. This means the organisation is trying to eradicate borders whether vertically or horizontally in an organisation.

This situation does not mean that the manager at the lower levels and employees are no longer responsible to the top management but what is meant here is the emphasis on speed, fast reactions and flexibility. This




type of organisation also removes borders that separate the internal environment in an organisation with its external environment. One of the advantages of a borderless organisation is that this organisation will be able to utilise its knowledge, expertise and capabilities of employees in a better way. In this matter, resolving of problems is no longer the responsibilities of only individuals that are involved in the said problems. For example, the problems in the marketing department that is supposed to be resolved by individuals in the marketing division can be resolved by experts in that matter either from within or outside the organisation. The next advantage would be the close rapport between all internal divisions in the organisation with the external components. This close rapport is formed due to the disintegration of the borders that separates both the environments. However, borderless organisations also have disadvantages. For a start, the manager and employees always assume that the transition of an organisation to a borderless structure threatens their job security. The most obvious disadvantage is that there is no clear cut way to achieve such an organisational structure.




Essay Question Explain the difference between mechanistic organisations and organic organisation. Multiple Choice Questions 1. Which factor does not influence the structure of an organisation? A. Technology B. Organisation strategy C. Type of products and services produced D. Organisation size What type of departmentalisation coordinates the work and employees in different units based on product and services? A. product B. functional C. geographic D. virtual What is the additional number of tasks in a work activity that is carried out by employees known? A. job rotation B. job enlargement C. job enrichment D. job specialisation






What is TRUE regarding consumer departmentalisation? A. Creates duplication of work. B. Established departmentalisation based on functions. C. Increases distribution cost of resources. D. Co-ordination between departments is easier. „This type of organisation outsources its business activities to other organisations, supplier, experts or consultants.‰ What type of organisation structure does the above refer to? A. Modular B. Virtual C. Borderless D. Matrix


TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. Large organisations have organisational structures that have a tendency to specialise jobs, reduce standardisation and centralisation. Matrix departmentalisation is a type of structure that consists of two or more types of departmentalisation. Chain of command explains the flow of authority in an organisation. Henri Fayol believed that organisational structures that are vertical will have a span of control that is restricted. An employee is transferred from one work area to another work area. This situation is called job enrichment.

Organisational Design Caselet

1. 2.

What do you understand by organisational design? Which type of design would you use for your current organisation. Why?




   

Organisations need to be structured in the best possible way to promote efficiency and effectiveness of activities. The organisational design needs to be adapted with the factors that influence the effectiveness of the strategies. Organisational strategy influences the organisational structures as strategy determines the types of duties that are undertaken by employees. Organisational structures can also help to explain about authority and the transfer of authority in the organisation. Furthermore, it will help in the design of work involved in an organisation. A mechanistic organisation is usually found to be most suitable in a stable environment, whereas an organic structure is normally most suitable in an environment that is turbulent.

Borderless organisation Centralisation Chain of command Decentralisation Job enlargement Job enrichment

Job rotation Mechanistic organisation Modular organisation Span of control Virtual organisation



Human Resource Management

By the end of this topic, you should be able to: 1. 2. 3. 4. 5. Describe the meaning of human resource management; Clarify the needs of human resources; Identify the methods for capturing the interests of qualified candidates; Practise the methods for developing qualified employees; and Identify methods for maintaining qualified employees in the organisation.

Every organisation needs people to plan and implement all its activities to achieve the goals that have been set. Therefore, employees are one of the resources needed by an organisation. If an organisation uses high technology, sophisticated tools and equipment, and has strong financial resources but lacks skilful, knowledgeable and capable human resources, it will still not succeed in any field ventured. Many organisations have started to use human resources as one of the tools to match their competitors. This method is frequently implemented by organisations that offer products based on services to their customers. In this condition, only human resources could provide satisfaction to the customers.


Thus, human resource in organisations must be managed properly. A properly managed human resource will not only be a competition advantage but also help the organisation to achieve its goals efficiently and effectively. Human resource management is a process of obtaining, developing and maintaining a sufficient number of qualified employees in order to achieve goals that have been set.



An organisation is a system where human resource acts as one of the functions in moving the system. Human resource management needs to have a relationship which is in line with the organisationÊs strategies. Therefore, human resource needs to be managed properly in order to implement the organisationÊs strategies and this is considered as the process of human resource management. An efficient and effective human resource management must undergo processes such as determining the needs of human resources in organisations, obtaining qualified candidates, developing employees and maintaining qualified employees. Determining an organisationÊs human resource need is very important. Table 5.1 shows that the processes of obtaining (recruitment and selection), developing (orientation, training and performance evaluation) and maintaining or separating employees (granting of rewards and separation) are interdependent with one another. These functions cannot be managed properly without good planning. Hence, human resource planning is required.
Table 5.1: Processes of Human Resource Management Determining the needs of human resources Attracting qualified candidates

     

Human resource planning Recruitment/Hiring Selection Orientation Training Performance appraisal Financial rewards and job benefits Employee separation

Development of qualified employees

Maintaining qualified employees

 


Human resource management is a process of using the goals and strategies of organisations to forecast the needs of human resources in recruiting, developing and maintaining a qualified workforce. An organisation that has poor or no human resource planning will face a surplus in the workforce and be forced to find a way to reduce it or it will face a shortage of workforce which will lead to increase in overtime costs and inability to fulfil the demand for the companyÊs products or services. Planning human resources begins with considering the mission, strategies and objectives of an organisation. As stated before, human resource planning is interdependent and needs to be viewed as a part of the strategic planning of the organisation. Fundamentally, human resource planning consists of two main components – job analysis and forecasting.

1. 2. What do you understand about the term „human resource management‰? State the stages of human resource management.


Job Analysis

What do you understand about job analysis?

A particular job area exists in an organisation as a result of the formation of goals that need to be achieved. Job output or the combination of job outputs lead to the achievement of goals. Thus, how do we ensure the success of a particular job? It is simple – by performing a job analysis in order to find out about the job requirements and selecting a workforce that is capable and qualified to perform the particular job. Job analysis is a detailed process regarding the related tasks of a particular job and the quality of human resources needed to perform the job. Job analysis seeks to gather four types of information: (a) Job activities, such as what activities employees carry out and how, when and why they do them.


(b) (c) (d)

Tools and equipment used to perform the job. The context of job in which it is implemented such as situation, workplace environment or scheduling. The needs of personnel in performing the job, meaning the knowledge, skills and capabilities required for the particular job. (William, 2000)

Information regarding job analysis can be obtained by asking employees to make a list of the tasks that need to be performed for a particular job, and the importance of each task; getting the employees or supervisors to fill in questionnaire forms; through observations of jobs; through interviews or through the method of filming the tasks being carried out by the workers when they are performing the job. The results of the job analysis will form the job description and job specification. Job description is a written statement that clearly explains the job, duties, responsibilities, activities and performance results required from the job holder. Job specification is a written statement stating the qualifications required from the job holder. Qualifications here include level of academic achievements, work experience, skills and abilities that need to be fulfilled by the future job holder. Since the job analysis describes in detail the description and specifications required, each organisation needs to provide job analysis prior to any recruitment. It will also be used during recruitment and selection in order to match the qualifications of the applicants to the job requirements. Job analysis also helps managers to prepare training programmes and acts as a comparative resource in determining wages.

Based on your understanding, give a brief description of job analysis.



Forecasting is a process of predicting the total number and types of employees with the knowledge, skills and abilities needed by an organisation in the future. There are two types of forecasting – internal and external. Internal forecasting pertains to the internal factors of the organisation which influence the level of demand and supply of human resources in the organisation. Factors such as the organisationÊs financial performance,


productivity level, mission and change in technology, retrenchment, promotion, retirement and mortality are some examples of internal forecasting. External forecasting pertains to the external factors of the organisation that affect the level of demand and supply of its workforce in the future. The factors include supply of labour in a particular area, economics (unemployment rate), labour unions and demographics of the labour force (in the aspect of age), migration, competition levels and growth in a particular business or market. In order to forecast the demand and supply of human resources in an organisation, a manager can use three methods of forecasting. The most frequently used methods are best estimates, management input and statistical ratios (historical ratios). These methods can predict how many types of skills and abilities of employees are needed by the organisation in the future.

State two types of forecasting of total number and types of employees that you know.



What are the elements that an employer should focus on when recruiting a new employee?

The process of developing a group of candidates who are interested and qualified for a position offered by an organisation is referred to as recruitment. This effort is considered as a process because it involves steps such as searching and capturing the interest of qualified candidates to apply for the position offered. Recruitment can be carried out using two methods: internal recruitment and external recruitment.



Internal Recruitment

Internal recruitment is the effort of developing a group of candidates who are interested and qualified for a position offered from the existing employees in the organisation. Internal recruitment also means promoting or moving existing employees into a vacant position. Many organisations prefer this method because it is able to boost the commitment, morale and motivation of the employees. It is also able to reduce time and costs of employee development since the employee has already understood the culture and procedures of the organisation. This will increase the probability of the employee performing successfully in the position. This method of internal recruitment differs from one organisation to another. Some organisations practise closed recruitment systems where the manager will only select a particular candidate or employee who is qualified to apply for the position. This method is often used for promotion. The decision is made informally and in a subjective condition and depends more on support from the employeeÊs leader. This closed system is very much preferred especially by small companies since it is able to reduce time, energy and costs in filling a vacant position in the organisation. However, there are organisations that practise internal recruitment by setting up an open recruitment system whereby the vacant position is announced to all the employees in that organisation. Job posting is another method where the vacant position is advertised to all employees in the organisation. Information regarding the position such as qualifications and requirements needed, salary, working hours and others will be notified. This information will be circulated by displaying it on the companyÊs bulletin board, circulation letters, intranet system or any other communication channels which could be accessed by employees of the company. Employees who feel that they are qualified and fulfil the requirements of the particular position are able to submit their applications. This method helps the organisation to discover hidden talents, allows employees to be more responsible towards their career development and solves the problem of maintaining talented employees who are already bored with the position they are currently holding and considering the possibility of leaving the company.


External Recruitment

External recruitment is a process of developing candidates from outside the organisation who are interested and qualified for the position offered. The methods for external recruitment include job advertising (newspapers, magazines, letters, radio stations and television), employee referral (asking employees whether there are any suitable candidates), walk-in (candidates themselves come to apply), outside the organisation (universities, technical and


vocational schools, colleges and learning centres), government and private employment agencies, career seminars and websites. There are many ways to recruit externally but which one should be used? Studies show that employee referrals, walk-in, newspaper advertising and government employment agencies are frequently used to recruit candidates for positions such as clerical and production operators or more popularly known as blue-collar employees. For professional/technical levels or executives, newspaper advertisements, private employment agencies and recruitment from learning centres and universities are more frequently used. For recruiting candidates to higher positions such as managers, organisations depend more on employee referrals, advertising in magazines and newspapers as well as private employment agencies.

In some organisations in Malaysia, some employers, managers or recruiters are more inclined towards hiring their own friends to fill job vacancies even if there are many other qualified candidates. What is your opinion on this? Discuss this with your friends.

Describe briefly two methods of recruitment that can be implemented by organisations.



When an organisation carries out the process of attracting the interest of candidates to apply for the positions offered and later developing a group of candidates, the process of gathering information for evaluation and then selecting the best candidate for that particular position must then be performed. This process is referred to as the process of selection. This process is very important since hiring the wrong candidate will have an adverse impact on the organisation. In order to reduce this uncertainty, human resource experts have suggested four methods of selection.



Application Forms and Resume

The first selection method is the application form and resume. Both contain the same information about the candidate such as personal information, academic background, working experience and so forth. Usually, application forms act as a tool for obtaining information about the candidate which is prepared by the organisation itself. Meanwhile, a resume is prepared by the candidate himself following his own format. Many organisations prefer the use of application forms since the form prepared only relates to the information required. The information obtained will be incorporated into the human resource information system which will be used as the material for selection evaluation.


References and Background Checking

Most organisations require applicants to prepare their job references such as former employer or colleagues, teacher or lecturers who can be contacted in order to find out and obtain more information regarding the candidate. The purpose of checking the candidateÊs background is to obtain validity and accuracy of the information provided by the candidate as stated in the application form or resume. This act of checking enables the organisation to double check any particular information, negative matters or job-related background information which is not stated by the applicant. This checking is usually conducted with learning centres, former employers, court records, police records and government agencies and other resources through telephone calls, letters or self-investigations.


Selection Tests

Why are some employees able to perform their job well while others are not? Job performance of a particular candidate can only be acknowledged after he has started working. However, selection tests help organisations in making the right decision on the most qualified person to be hired. These selection tests measure either directly or indirectly whether a particular candidate is able to perform the job well. Table 5.2 shows the seven types of selection tests used by organisations.


Table 5.2: Selection Tests Type of Test Specific Ability Test Description This test measures the abilities needed to perform a particular job. It is also referred to as aptitude test. This type of test is usually used for job areas such as mechanical, clerical, sales and physical work. The purpose of this test is to measure perceptual speed, verbal comprehension, numerical aptitude, general reasoning and spatial aptitude. This test is able to indicate how fast and how well a candidate could understand words, numbers, logic and spatial dimensions. An ability test can forecast the job performance of some job areas only but cognitive ability test can forecast the job performance for all job areas. A candidate who performs well in his cognitive or ability test is usually efficient in learning something new, able to process complex information and able to solve problems and make decisions well. Biographical Data Biographical data or better known as biodata is an extensive study on the personal background and experiences in the life of a particular candidate. The basis of this study is the past behaviour (personal background and life experiences) which is the best forecast for future behaviour. This is a test that measures the personality of the candidate towards the job. This test shows the candidates personality dimensions.

Cognitive Ability Test

Personality Test

The series of tests conducted in assessment centres include in-basket training, role playing, small group presentation and leaderless group discussion. In-basket training is a written test where candidates are given matters related to the task of a manager such as memos, telephone messages, organisation policy and other forms of communication. Candidates only have limited time to read, prioritise items and decide on the means of dealing with each of the items. An experienced manager will evaluate and make comments and then provide suggestions. Leaderless group discussion is a discussion in a group comprising six candidates and they are given two hours to solve problems but none of the members is elected to lead the group. Trained observers will monitor and make comments for each candidate based on how far the candidate is able to discuss, listen, lead and deal with others.




Before attending an interview, a candidate might prepare himself with answers to potential questions. He would already have ready answers before going into the interview room. In this scenario, what is your opinion regarding the effectiveness of interviews for employers?

Each of us who applies for any particular position will not be able to avoid being interviewed. If we had attended five interviews at different organisations, it means we have already faced five different types of interview conditions. An interview is a method where company representatives will ask the candidate a series of questions related to the job to determine whether he is qualified for the job. There are a few types of interviews which are frequently used by organisations – unstructured, structured and semi-structured. Unstructured interview is an interview where the company representatives ask any questions to the candidate. In this type of interview, a candidate will face a different set of questions from other candidates. Meanwhile, structured interview is an interview where the interviewer will ask a standard set of questions which had been earlier prepared and drafted. Each candidate will face the same questions like any other candidate. There are four types of questions that are frequently asked during this type of interview: (a) Situation-based questions Questions that require the candidate to provide answers on what he will do when faced with a particular situation (For example: What will you do if⁄) Background-related questions Question that enquires about the candidateÊs work experience, academic qualifications and other qualifications. Behaviour-related questions Questions on the candidateÊs former jobs. Job-related questions Questions which require the candidate to demonstrate his job knowledge (For example, a question for a medical doctor: „A particular medicine has been administered to a patient and he shows negative feedback. How do you deal with the situation?‰)


(c) (d)


State the two main processes involved in the selection of qualified candidates.



In order to strengthen the skills of an employee, the Malaysian Ministry of Human Resources introduced a scheme known as „Suspend and Training Scheme‰ for graduates and suspended workers. In your point of view, how far is this scheme able to help in determining the training needs and training methods needed by a particular organisation? Discuss this with your friends.

Through the process of selection, organisations will be able to obtain suitable candidates to fill the positions offered. The next step that needs to be considered by managers is to give an introduction regarding the organisation and their new job. Training must be provided to strengthen existing skills, knowledge and abilities of the employees with the job needs in the organisation. Then, performance evaluation needs to be carried out in order to evaluate the effectiveness of the training and performance of the employee. What have been discussed earlier are the aspects that need to be considered by the management in developing qualified employees in their respective organisations.



Orientation is the process of introducing new employees to the programmes, policies and culture of the organisation. Orientation helps them to learn about the organisation and get used to the new environment. Sometimes, orientation only focuses on simple matters such as working hours, parking priority and salary payment schedules. Employees may only undergo orientation by watching films, reading handbooks and being introduced to their colleagues. Orientation is conducted by teaching employees about the corporate culture and providing guidelines to succeed with the organisation. For some organisations, orientation is also incorporated with training programmes. This is to ensure that


new employees have the basic knowledge and skills needed to perform the job assigned.



Training means providing opportunity for employees to develop working skills, experience and knowledge they need in order to perform their job or upgrading their job performance. Training is not only needed by new employees but also by employees who have been working long with the organisation. Besides that, training is also not only needed by lower-level employees but also by middle and higher level management.


Determining the Needs for Training

Organisations should not hastily conduct training programmes for their employees. If this happens, it can cause the organisations to bear high costs due to the ineffectiveness of a particular training programme. This is because at that point of time, training may no longer be needed. To avoid this, organisations must determine the needs for training. This is a process of identifying and giving priority to the learning needs of the employees. Needs for training can be carried out by identifying performance ineffectiveness, listening to complaints from customers, making observations on employees and managers, or assessing the skills and knowledge of employees. Furthermore, evaluation of training needs is an important tool in determining who should or should not be attending the training programmes conducted. The selection of candidates for training must be based on information related to a particular job area. (a) Developing Training Objectives After training needs have been determined, training objectives must be developed to fulfil the needs. Many training programmes are conducted without objectives. Effective objectives must state what will happen to the organisation, department or employees when training has been completed. The expected results must be stated in writing. Training objectives can be categorised as shown in Table 5.3.


Table 5.3: Categories of Training Objectives Objective Categories Objective guidelines    Department and organisation objectives Individual growth and performance objectives  Main Questions What are the principles, facts or concepts that will be learned in the training? Who will be taught? When will the teaching begin? What is the impact towards the organisation and department when work absenteeism, turnover, cost reduction and productivity increase takes place? What are the effects of training on the behaviour and attitude of employees? What are the effects on the personnel development of the particular employee?

 

When training objectives have been stated clearly and effectively, training programmes can be implemented successfully and will be able to give results as expected. A training programme that achieves objectives will increase the level of productivity, overcome inefficiency and help employees in the future especially in career development.


Training Methods

Several training methods can be used to fulfil training needs and objectives. Listed below are several training methods that are frequently used. (a) On-the-job Training This type of training is usually given by senior employees or supervisors. Trainees will be shown how to perform a job and be allowed to perform it under the supervision of the supervisor. One of the forms of on-the-job training is job rotation (sometimes referred to as cross training). In job rotation, employees will learn several different tasks in a particular unit or department and perform the tasks in a particular period of time. One of the advantages of job rotation is that it allows flexibility in a particular unit or department. When an employee is absent from work, his job can be done by another employee. One of the advantages of on-the-job training is that it does not need any specific facility. Besides that, new employees are able to perform productive jobs during the learning process. One of the disadvantages of this method of training is that the pressure at the workplace can cause the training to be dangerous or easily forgotten.



Apprentice Training This is a training programme system that requires an apprentice to work for a certain period before he is allowed to perform a job or specialisation in a particular area. Trainees are given instructions and acquire experience during work or outside work, in every practical and theoretical aspect needed for a job. Usually, a trainee will be placed under the supervision of a mentor who has wide experience and has been long involved in that particular job area. The mentor will give all the guidance and share his experiences with the trainee, which hopefully will be able to help the trainee progress towards a successful career. Off-the-job Training Unlike on-the-job training, off-the-job training is done out of the location of the job area. The location of training might be in a classroom with the same facilities or in other different locations. This form of training allows the demonstrator to focus on a particular education subject without any interference and in a controlled environment. The downside of this form of training is that it is unable to depict the real conditions of the workplace to the trainees. Vestibule Training The same procedure and tools used in the real working condition is performed in a particular area known as vestibule. Trainees are taught how to perform a job and use the relevant equipment by an experienced employee. This will help the trainees to learn about the job areas in a comfortable condition without any pressure from production scheduling. The main advantage of this method is that trainers can emphasise on theories and use the necessary techniques compared to the outputs and trainees will learn how the real job is performed. However, this method requires a high cost and employees still need to get used to the real working environment. Vestibule training has been used to train word processing operators, bank tellers, clerks and those in other related jobs.



Now that you have learnt about the methods of training available, use your own understanding to list the advantages and disadvantages of each training method. Give your answers in the form of a table.


List the training methods that can be used by an organisation.



In 1992, the Malaysian government introduced the „New Remuneration Scheme‰ for civil servants? In 2002, the government introduced the „Malaysian Remuneration Scheme.‰ The purpose of this scheme is to evaluate the performance of their services. You can obtain more information on this scheme at the website of the Public Service Department of Malaysia as given below.

After training is given to employees, they are released to perform the jobs assigned to them, equipped with all the knowledge and guidance given. The next step is to carry out performance evaluation. This is a process of evaluating job performance and preparing feedback based on that evaluation. Performance evaluation contributes towards two purposes. Firstly, the purpose of the evaluation is to help inform employees about their performance level in comparison to the standard. Secondly, performance evaluation can help in personnel development and preparation of future training programmes. Performance evaluation focuses on previous performance and measures it in comparison to the standards fixed. The methods of performance evaluation must fulfil the criteria of relevance and validity. In order to make it valid, the method used must be consistent in giving results regardless of time or who the evaluator is. What is actually being evaluated? This might be a question which frequently plays inside the mind of a manager. Basically, evaluation is conducted on three sets of criteria – job output, behaviour and attitude. Table 5.4 clarifies the three sets of evaluation criteria.


Table 5.4: Sets of Criteria for Evaluation Set of Criteria Individual Job Output Description If a job emphasises more on the calculation of job output compared to the job purpose, the evaluation needs to be conducted on the individual job output. By using job output, a production manager needs to evaluate on criteria such as quantity produced, defaults made and cost per unit of product. This is similar to evaluating the performance of a salesperson, which is evaluating the overall total sales made based on total number of units and ringgit, and the total number of new customers generated. In most cases, it is difficult to specifically identify the output produced by an employee especially when a job is a part of a group or department task. Evaluation for a group or department can be conducted easily but evaluation of individual contribution is difficult. By using the example above, the behaviour of a production manager that can be used for the purpose of performance evaluation are the accuracy and frequency of report submission or the leadership style shown by him. Meanwhile, the performance evaluation of a salesperson may be related to the average number of calls or meetings with customers in a day or the total number of sick leaves taken for each year. This is considered a weak set of criteria but is still practised in some organisations. It is said to be weak because this type of evaluation excludes from the evaluation of the real job performance. Attitudes such as having good manners, exhibiting confidence, able to be independent or cooperative, trying to look busy or having a broad experience, are subjects that might be directly or indirectly proportional with the level of real job performance.





Who Should Evaluate?

In evaluating the performance of a particular employee of an organisation, it is very important that the evaluation given is clear, accurate and fair because the performance evaluation will become the guidance and determinant for an employee. In your opinion, who is the most appropriate person to conduct a performance evaluation of an employee? Performance evaluation of an employee can be done by these people: (a) Supervisors Many organisations practise this method. An employee is evaluated by the person who supervises him. For example, an operator is evaluated by his supervisor; an executive is evaluated by a senior executive or manager; and, a general manager is evaluated by the board of directors of the company. Colleagues Evaluation by colleagues is considered a reliable approach. This is because colleagues are close to the employee being evaluated and his daily job performance. Daily meetings and conversations provide comprehensive views regarding the job performance of the employee being evaluated. Evaluation by colleagues could augment the effectiveness of evaluation made by supervisors. However, evaluation by colleagues may be bias. (c) Subordinates The fourth party that can become the performance evaluator are subordinates. Subordinates can provide important and detailed information regarding the behaviour of their superiors due to a close relationship. The problem is that subordinates may be afraid to provide accurate evaluation due to the power held by their superiors and fear of retaliation. 360 Degrees Evaluation The final approach is the 360 degrees evaluation. It provides feedback on performance from all parties related to the job of the employee being evaluated which covers general workers, customers, colleagues and managers.





Methods for Performance Evaluation

The previous discussion focused on who should conduct the performance evaluation of an employee. Now, what are the methods that can be implemented in making evaluations? (a) Essay Writing This is the simplest method in conducting performance evaluation. This method requires the employee being evaluated to explain about the strengths, weaknesses, earlier performances, potential and suggestions in increasing performance. This essay writing does not require complex forms or extensive exercises to be completed. But the results will usually portray the ability of the writer. A good or bad performance is determined by the writing skill and level of true performance of the evaluated employee. Critical Incidents This is a form of evaluation that observes the behaviour that acts as the key in differentiating between a good or bad work performance. The evaluator will write to explain what has been done by the employee and whether his job is effective. Evaluation here is not only directed at behaviour but also involves the personality of the employee. Statements regarding these critical incidents can depict the behaviour required and identify what needs to be improved. Measurement of Objective Performance One of the ways to increase performance through evaluation is by measuring objective performance. This is a simple and countable performance measurement. Objective performances that are frequently used are outputs, scraps, wastes, sales, customer complaints or level of default. Employee Comparisons Under this method, the evaluators rank employees according to such factors as performance and value to the organisation. Only the employee can occupy a particular ranking.




You have been exposed to the methods of evaluation that are normally used by performance evaluators. In your opinion, how fair and effective are these methods to the employee being evaluated? In your view, what other methods are suitable for evaluating the performance of an employee? Discuss this with your friends.


State who should be the performance evaluator for an employee in your organisation.



An employee works with an organisation to fulfil his personal objective, that is, to earn money for his livelihood. An organisation can retain a talented employee if it offers rewards that fit the job and needs of the employeeÊs personal objectives. Employee reward refers to the payment granted to the employee as an exchange for the job that is carried out. This reward may be financial or nonfinancial. Generally, there are four types of decisions of reward granting – payment level, variable payment, payment structure and employee benefits. The decision of payment level is a decision of making payment to employees whether at a level below, above or at the same rate with the payment of salary in the labour market. An organisation uses job evaluation to determine the payment structure. Job evaluation determines the value or sum that must be paid for each job by determining the market value for the knowledge, skills and needs required to perform that particular job. After job evaluation has been carried out, the organisation will usually make payments at the same rate as determined by the market. There are some organisations that pay above the rate determined by the market. This is to attract interest and retain the employees. A salary which is higher than the level determined by the market will attract the interest of more qualified candidates, increase the level of job acceptance, reduce recruitment time, and increase the level of employee retention. The decision of variable payment is a decision that focuses on how far the payment of salary differs from the job performance of an individual employee and organisation. The purpose of relating payment with organisation performance is to increase motivation, effort and job performance of employees. Piecework, sales commissions, profit-sharing and employee share ownership plans are the options available in variable payment. Piecework payment plan is the payment for something that can be counted. For example, an employee will be paid a standard rate for each item produced and payment will increase if production is increased (for example, RM0.35 per unit for the first 100 products, and units of products that exceeds 100 units will be paid at the rate of RM0.45 per unit).


Sales commission is the payment a salesperson receives. It is a percentage of the value of the goods he sold. The more sales he makes, the more commission he will receive. For example, a car salesperson receives a sales commission of RM500 for each car that he sells. The more cars he sells, the more commission he will earn. Since piecework and sales commission are based on individual performance, this can reduce the incentive of employees to work in a team. Therefore, organisations introduce group incentives to attract the interest of employees to work in a group or team. Profit sharing is the payment taken from a part of the organisationÊs profit. This payment is divided among the employees and is usually above the level of reward that they normally receive. The more profit the organisation makes, the more reward the employees will receive. Employee share ownership plan grants employees with companyÊs shares in addition to the rewards that they usually receive. Meanwhile, share option provides the opportunity for employees to buy company shares at a fixed price tier where the price is usually lower than the market value. For example, a company offers its employees the price of RM5 per share while the market price is RM10 per share. Payment structure is a decision related to internal payment distribution. This refers to how far individual employees in an organisation receive different levels of salary. Individuals at the top level will receive a higher pay compared to those at lower levels. For example, a director enjoys a higher payment structure than the assistant director and a much higher structure than his subordinate officers. Rewards granted are not only in monetary form but also in the non-monetary form, referred to as employment benefits. These are called such because only individuals working at a particular position or organisation will enjoy the benefits. Employment benefit is the granting of rewards that cover anything other than the salary. Many organisations offer various forms of benefit choices to employees such as retirement and pension plans, paid leaves, sick leaves, health insurance, life insurance, health treatment, discounts on products and services of the company etc.

Based on your understanding, state the differences between financial rewards and employment benefits.




At one point, an organisation has to be separated from its employees voluntarily or by force. Employee separation means the loss of an employee by an organisation either voluntarily or involuntarily. This separation is caused by various reasons. Involuntary separation arises when an organisation decides to discontinue the service of an employee or retrench an employee. Voluntary separation means that the employee decides to leave or retire. Since this separation affects recruitment, selection, training and granting of rewards, the organisation must be able to forecast the number of employees who will be lost due to termination, dismissal, turnover or retirement when making human resource planning.


Employee Termination

The employee of an organisation was imposed disciplinary action due to an act of breach of trust. In your view, if he promises to change his behaviour and expresses regret over his actions, should he be given a second chance? What is the most suitable and necessary action to take in order to ensure that he will not repeat the mistake?

Terminating employees may be considered as a simple act but think about the feelings of the employee being terminated. It is definitely hard to describe the feelings of that employee. Therefore, the manager must do a few things to minimise problems related to employee termination. Firstly, in most situations, termination or dismissal cannot be the first choice. The employee must be given a chance to change his behaviour when a problem arises. The employee should receive a series of specific warnings on the matters of what and how serious is the problem that he caused. After warning have been given, the problematic employee must be given time to make changes or correct his mistakes. If the problem continues, he needs to be given consultation on employee performance, what needs to be done to increase it and the results that will arise if the problem continues (for example, show-cause letter, warning letter, suspension without payment or termination). Secondly, the employee should be terminated based on sensible and rational reasons. The termination of an employee without sensible reasons can result in the employee taking court action, with a claim of wrongful discharge. This would require the employer to state the job-related reasons for discontinuing the services of the employee. The decision of termination needs to be done on job-


related factors such as disobeying or violating the companyÊs law or consistently showing bad performance in the job. Thirdly, the organisation needs to focus on the reaction of other employees when one of them is terminated. This is because the issue of termination can affect the performance and motivation of existing employees because it may raise the sense of anxiety towards the security of their job.



Downsizing is the act of organised repealing of positions and jobs in the organisation. Whether it is caused by the reduction of cost, decline in market shares or being too aggressive in employing workers and growth, it is an event that happens constantly in any organisation regardless of any economic condition. Is downsizing effective? Theoretically, downsizing should bring an increase in productivity and better performance profit and increase organisational flexibility. A 15-year research on downsizing found that a company implementing 10% downsizing of its labour use is only able to produce a 1.5% reduction of its cost and 4.7% increase in share value for three years compared to 34.3% in the situation where downsizing is not implemented. Not only that, profitability and productivity levels generally are not increased through downsizing. This clearly shows that downsizing is not the best strategy to implement. Instead, effective human resource planning is the best act. Downsizing needs to be taken as the final step. However, if the organisation finds that the financial condition and strategies implemented are not effective and downsizing is necessary for the survival of the organisation, it must train its managers to explain the needs of downsizing to the employees. The most important is that the top-level management must explain in detail why downsizing is needed and choose a suitable time to inform the employees. The news of downsizing should be delivered to the employees by the management of the company. The employees should not have to find out from the media such as television and newspapers. Besides that, the organisation must truly assist the affected employees by helping them to find other jobs or providing centres for counselling services. These centres serve to provide counselling to ease the feelings of the downsized employees and lift their motivation. Counselling centres could also help to retain a positive image of the organisation from the societyÊs point of view due to the strategy of downsizing implemented. These measures will help the employees to maintain their level of job productivity up until their final days with the organisation.




Retirement of an employee takes place when his retirement period arrives but there are times when early retirement of employees can help the organisation. In the effort to reduce the workforce in an organisation, implementation of early retirement incentive programmes might help. These programmes offer financial benefits for employees in order to encourage them to retire early. Not only does this effort reduce the workforce but it also reduces cost by repealing a particular position after the retirement of the employee, reduces cost by substituting a highly paid retired employee with a lesser-paid new employee or by providing opportunities to existing employees in the organisation. The main problem related to this programme is in forecasting who and how many employees are ready to accept this programme. The organisation may lose talented employees and face a large number of employees who want to retire early.


Employee Turnover

Employee turnover takes place when an employee voluntarily ends his service with an organisation. Generally, an organisation tries to retain a low turnover rate in order to reduce the processes of recruiting, employing, training and replacement cost. However, not all turnovers harm the organisation. For example, a functional turnover happens in the condition where an employee with a bad performance level chooses to resign voluntarily. This enables the organisation to replace an employee with poor performance with a new or better employee. On the other hand, dysfunctional turnover takes place when a high-performance employee chooses to leave voluntarily. This condition adversely affects the organisation and it will lose a talented employee. Thus, employee turnover needs to be analysed carefully in order to determine who really chooses to leave the organisation – an employee with poor performance or an employee with a good performance. If many high-performance employees leave a company, the managers must find out the reasons and measures to reduce it. Methods such as salary increment and offering benefits that might encourage or increase the working condition for these skilled employees could help. One of the best ways to influence functional turnover and dysfunctional turnover is by relating salary payment with the level of performance demonstrated.


EXERCISE 5.9 Essay Question 1. 2. List four ways of employee separation frequently faced by employees and organisations. Make a list and describe the four basis of reward granting decision. „This is a written statement regarding the qualifications required for holding a particular position.‰ What does the above refer to? A. Job description B. Job specification C. Record system D. Job analysis 2. What type of interview asks standard questions to all candidates, usually questions regarding backgrounds, attitude and situation, and job-related matters? A. Standard interview B. Structured interview C. Situation interview D. Semi-structured interview What is the process of introducing the organisation to new employees regarding organisational programmes, policies and culture? A. Orientation B. Vestibule training C. Performance evaluation D. Apprentice training programme „This is a kind of payment where the salesperson receives percentage from the price value of goods sold.‰ What does the above refer to? A. Piecework B. Share options C. Sales commission D. Profit sharing

Multiple Choice Questions 1.





What is the act of organised repealing of positions and jobs in the organisation? A. Retirement B. Employee turnover C. Termination D. Downsizing

TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. Organisation strategies must be planned based on the condition of human resource in the organisation. Human resource management is a process of attracting the interest of qualified candidates and maintaining or retaining qualified employees. Job analysis is a study process regarding the duties related to a particular job and the human qualities needed in performing the job. Forecast towards factors such as economy, competition level technology, residents demographic that influences the level of demand and supply of organisationÊs workforce in the future are considered as the internal forecasting of organisation. Recruitment can be performed in two ways: internal recruitment and external recruitment.


Human Resource Management Caselet

(a) (b)

What are the main functions of human resource management? Assume that you are the HRM manager of a new business organisation. What steps would you take to recruit new staff for your organisation?


  

Human resource is the most valuable resource for an organisation. Therefore, it must be managed as properly as possible. Excellent human resource management can assist in the implementation of organisational strategies at a high level of efficiency and effectiveness. Human resource management is a process that comprises four main components: determining the needs of human resource and the organisation; attracting the interest of qualified candidates; developing qualified employees; and retaining qualified employees. These processes must be implemented with proper planning to ensure that they make a significant contribution and fulfil the goals and objectives of the organisation.

Apprentice training External recruitment Internal recruitment

Job analysis Piecework payment plan Vestibule training



Communication in Organisations

By the end of this topic, you should be able to: 1. 2. 3. Explain the organisation; importance of good communication in an

Differentiate between formal communication and informal communication and clarify the forms of communication; and Evaluate the steps for overcoming barriers to communication.

According to Lewit et. al (2001), there are many reasons why a manager communicates. Managers motivate, inform, control and fulfil social needs. Communication is used to influence employees to achieve organisational goals. Communicating information provides facts and data to be used in making decisions towards achieving the objectives that have been set. Communication is used to coordinate employees and tasks. Managers also communicate in order to fulfil social needs through interaction that does not involve work. For example, an employee is not only required to talk on matters related to their jobs but also on matters related to sports, weather, entertainment, politics and others. Even though this communication will not have direct effect on his work performance in the organisation, it can influence the way the employee feels about his workplace and his relationship with other employees.




According to Rue et. al. (2000), a study found that 50 to 90 percent of the time of a manager is used to communicate. Unfortunately, according to another study, almost 70 percent of business communications failed to achieve the objectives desired. According to another study, lower level managers spend 57 percent of their time communicating while for middle managers it is 63 percent, and for upper managers it is 78 percent.

Explain the main reasons why a manager communicates.



Have you ever encountered a situation of misunderstanding between your employee and yourself, or between your manager and yourself? What was your action? Communication is a dynamic and complicated process which involves many factors that affect its effectiveness. Dynamic process means that the process of communication is not in a static or fixed condition. Meanwhile, complicated process means that even though it is a simple interaction involving two people, it involves numerous variables such as the individual, environment, experience of both parties, and work conditions that determine the efficiency and effectiveness of the process. Communication is the process of transferring information and knowledge from one individual or party to another person or party using meaningful symbols. It is a method of exchanging and sharing of ideas, attitudes, values, opinions and information.

The process of communication begins with a sender who wishes to deliver a particular message and this process is complete when the receiver of the message provides feedback on whether the message received is understood or otherwise. Figure 6.1 depicts the elements in the process of communication.

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Figure 6.1: Process of communication Sources: Jones, G. R., George, J. M., & Hill, C. W. L. (2000). Contemporary management (2nd ed.). Boston: Irwin-McGraw Hill

Communication is a process where the exchange of information takes place between two or more people. The elements of the communication process are as follows: (a) Information Sender Also known as the message source, the sender is a person who has a piece of information and wishes to deliver it to other parties. Encode Encoding takes place when the sender translates the information to be delivered into a series of symbols that can be identified and understood by the receiver. Message The message comprises symbols in the form of verbal, written or sign language that symbolises the information to be delivered by the sender to the receiver. Channel Channel is the method of delivery from one person to another. The channel must suit the message to be delivered to ensure that the communication process occurs smoothly, effectively and efficiently. Decoding Decoding is the process where the receiver translates the message received into a form that can be understood and brings meaning to the receiver. Receiver The receiver is the individual or party who receives the message delivered by the sender. The message formed is based on the background of the receiver. Feedback It refers to the reaction of the receiver towards the message received from the sender. It is a process of returning the message to the sender that depicts the level of understanding of the receiver towards the particular










message. Providing feedback is the best way of showing that a particular message has been received and whether the message has been understood or otherwise. (h) Disruption or Noise Any factor that disrupts, confuses and restricts the delivery of message is considered as disruption or noise. Interference may be internal or external. Internal factors are related to the individual himself, such as a receiver who does not pay attention to the message delivered. Meanwhile, external factors are environmental and physical factors that cause the message delivered not to be perfectly understood by the receiver.

Define communication and the elements involved in communication.



In an organisation, communication is very important in order to ensure that the message to be delivered reaches the receiver. Figure 6.2 shows three types of communication that are used in organisations:

Figure 6.2: Types of communication


Formal Communication

Formal communication is a message or information delivered through the hierarchy network or job responsibility as defined by an organisation. The three systems of formal communication frequently used are:

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(a) (b) (c) (a)

Vertical communication Horizontal communication Diagonal communication Vertical Communication Vertical communication refers to two types of communication: downward and upward flow of message. (i) Downward Communication According to Rue et. al. (2000), downward communication is a part of the communication system present in an organisation. This channel of communication is frequently used by managers to deliver messages to subordinates or customers. Downward vertical communication begins from upper management and travels down along the levels of management to middle management, lower/line management and employees. The purpose of downward vertical communication is to inform or instruct other management and employees regarding policies or organisational goals that have been set by upper management. Other purposes of communication include advice; information, instruction and evaluation on subordinates; and provide information on the goals and policies of the organisation to the members of the organisation. Problems in downward communication arise when it is misused, for example, when managers do not provide opportunities for subordinates to give feedback or do not provide complete information needed by subordinates to perform their work effectively. This might result in the subordinates being confused, less understood and failing to perform their jobs. This condition happens because most downward communication is one way and does not encourage feedback from subordinates using the information. The choice of channel used in this system is important. Written communication is usually difficult to alter. It provides a form of official record but it does not allow immediate feedback. Meanwhile, verbal communication does not provide a record and can be easily altered but allows immediate feedback. (ii) Upward Communication Upward vertical communication contains messages or information from the lower level of the hierarchy or subordinates to upper management level. Upward vertical communication is used by employees to deliver suggestions, opinions or feedback to upper




management. This can be done through meetings, discussions, surveys and others. The main function of this type of communication is to provide information to upper management regarding what is happening at the lower level. Ideally, organisation structures must allow for both downward and upward communication. Communication is supposed to flow two ways through the formal structure of the organisation. Unfortunately, upward communication does not flow as smoothly as downward communication. According to Rue et. al. (2000), the following are some of the barriers to upward communication:  Management fails to react when subordinates deliver information. This failure will cause frustration and inhibit future communication. Manager does not like negative information or problems. When employees feel that this kind of attitude exists in their manager, they will avoid giving information.

The attitude of a manager plays a critical role in upward communication. If a manager is concerned and listens well, upward communication can be improved. (b) Horizontal Communication Horizontal communication refers to the flow of message among members working in the same level of hierarchy in a particular organisation. This type of communication takes place between colleagues or among managers. This type of communication forms coordination and relationships among friends at the same level. For example, the sales manager discusses with the human resource manager the number of part-time employees needed for the next month. Basically, upward and downward communications take place through the chain of command of the organisation. Horizontal communication is important for coordination among departments and to ensure the perfect functioning of downward communication, which covers instructions from upper management; and upward communication, which consists of feedback from the subordinates to upper management. Horizontal communication usually follows a work flow pattern in a particular organisation, which takes place among colleagues, managers and departments. The main aim is to provide a direct channel in coordination and solve problems in the organisation. The benefit of horizontal communication is that it allows the members of an organisation to develop

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relationships with their colleagues from the same level. This will further develop work satisfaction and cooperation. (c) Diagonal Communication Diagonal communication refers to the flow of message between two parties from different hierarchies or departments in a particular organisation. This type of communication does not follow protocol. This type of communication is frequently used in informal organisations. For example, a human resource manager discusses with a clerk from the accounts department regarding incomplete information in employee records.

What is meant by formal communication? State the different types of formal communication channels in an organisation.


Informal Communication
What do you understand about informal communication?

According to Rue et. al. (2000), there are many informal paths of communication in an organisation. Most of this communication happens outside the chain of command. These informal communication channels are known as the grapevine. Grapevine is an informal network of information among employees. The grapevine in organisations does not emphasise power and rank. The grapevine may connect members of the organisation in any direction of communication, either vertically, horizontally or diagonally. Even though the grapevine can be defined as rumours, they are also useful to management. Through the grapevine, management is able to deliver information and receive feedback faster without involving a high cost. Based on the feedback, management can evaluate whether to carry out further investigation on the matter at hand.





Non-verbal Communication

Non-verbal communication is a type of communication that does not use words, either verbal or written. Non-verbal communication is an important addition to verbal communication and sometimes can alter the meaning of verbal communication. Non-verbal communication is the best method to communicate emotions. When combined with verbal communication, it becomes a powerful tool for a manager to send out information to employees. Non-verbal communication consists of: (a) Kinesics According to Williams (2000), kinesics is a type of communication that does not use words. Instead, it uses body language and facial expressions. A person is able to understand the message delivered by watching the body language or the expressions shown. For instance, a person will move his head left to right when he does not understand a certain matter. The use of body language always raises problems between the sender and the receiver. Paralanguage According to Rue et. al. (2000), forms of non-verbal communication involve tone, pitch, intonation level, volume, and speech patterns such as silence or halts in a personÊs voice which can also be considered as a form of communication. For example, in the United States of America, a person can raise their eyebrows as a sign of disagreement, attraction or as a sign of giving attention. On the other hand, in Japan, raised eyebrows are considered an obscene sign.




The first step in forming effective communication is to identify and overcome barriers in the communication process. These barriers will interfere with the message to be delivered to the receiver.


Communication Barriers

There are five barriers in communication as depicted in the Figure 6.3.

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Figure 6.3: Barriers to communication


Selective Perception This is the tendency to listen and receive objects and information which are consistent with our values, beliefs and desires, but disregard or reject information inconsistent with them. Perception is a process whereby an individual receives, arranges, interprets and stores information obtained from their environment. This is followed by the process of perception filtering. Filtering of perception involves difference in personality, psychology or basic experience that influences other people to disregard or not give attention to certain stimuli. Individuals are also inclined to fill in the blanks of missing information by assuming what he does not know is consistent with what he already knows. Disruption Disruption is any factor that interrupts, confuses or restricts communication. For example, a person talking on the telephone in a noisy environment will face difficulty in understanding what the sender is saying. This disruption might result in the wrong perception towards the message being delivered. Emotions Emotional reactions such as anger, love, jealousy and fear will influence a person in understanding the message being sent to him. Emotions are subjective reactions when a person communicates. The emotion and sentiment of the sender influences the message encoding and the receiver may or may not realise the emotional condition of the sender. The emotions






of the sender and the receiver will influence the message decoding and reaction of the receiver. (d) Communication Skills The skill to communicate differs from one individual to another. These differences are caused by culture, education, training and the personality of a particular person. For example, Americans prefer and are more talkative compared to the Japanese. Japanese people prefer to wait, listen and discuss a matter in detail before making any decisions. The effectiveness of communication also depends on the time a message is delivered. For instance, if a manager decides to give out an instruction or message during the festive season or in the evening when employees are preparing to leave the workplace or thinking of taking a long vacation, the effectiveness of communication will definitely be poor. (e) Suspicion The reliability of a particular message will affect the effectiveness of message acceptance. For example, in a discussion between employees and management, employees are frequently suspicious about the claims of the managers. In this situation, the perception towards the nature or honesty of the sender is important. Education and experience of a person on the subject of communication will also affect the process of communication. Another important factor is the closeness of the receiver to the sender. A good relationship between the two parties will promote a better and more effective communication between one another compared to individuals who are always in dispute with each other.


Measures for Overcoming Communication Barriers

There are seven measures or steps that can be taken by managers and employees to overcome the barriers to communication. These are shown in Figure 6.4.

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Figure 6.4: Measures in overcoming communication barriers


Controlling the Flow of Information There are times when a manager receives too much information that may not be relevant or important to him. Therefore, the manager must create a system that is able to identify and give priority only to the important messages that requires immediate attention. Encouraging Feedback The manager and related parties need to take measures to determine whether the message had been understood accurately. From the feedback received, the sender is able to find out whether the message delivered had reached its target. Language Used Since language can become a barrier to communication, a manager needs to properly choose words and language that can be easily understood by the subordinates. For example, the use of technical language is only suitable for experts in a particular area. Active Listening A manager assumes that part of the responsibility to communicate successfully is by giving non-punishing feedback or asking employees for feedback. This means that the manager is clearly listening to what is being told. Subordinates must act as good listeners and receivers of information. They need to listen actively, reduce interference and develop better







communication skills through role-playing and group presentation training. (e) Controlling Negative Emotions Like everybody else, a manager needs to control his negative emotions when communicating because negative emotions can alter or afflict the contents of a particular message. Using Non-verbal Signs Managers need to use non-verbal signs to emphasise important parts in a particular message in order to portray their feelings. Using the Grapevine as a Communication Channel The grapevine is a communication channel that is difficult to be removed from any organisation. Therefore, managers must be able to use this channel to deliver information promptly, examine reactions before making the final decision and in getting feedback.



After identifying the seven measures in overcoming communication barriers, in your point of view, how far is the effectiveness of these measures in practice?

TRUE (T) or FALSE (F) Statements 1. Each basic function communication skills. of management requires effective


Communication depends on the ability to deliver messages and not in receiving messages. Paralanguage consists of body language and facial expressions. Communication systems of organisations can move downwards, upwards and horizontally. The grapevine can become a source of information for managers.

3. 4.


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Multiple Choice Questions 1. What is the flow of information received by the receiver from the message sender referred to? A. Decoding B. Feedback C. Perception D. Grapevine Which of the following is a form of non-verbal communication? A. Paralanguage B. Perception C. Horizontal communication D. Vertical communication What determines the flow of downward communication in an organisation? A. Grapevine B. Semantic C. Perception D. Chain of command What is another name for horizontal communication? A. One-way communication B. Lateral communication C. Informal communication D. Upward communication Which of the following is NOT considered as a barrier to communication? A. Selected perception B. Disruption C. Emotion D. Grapevine








Communication Caselet

(a) (b)

What communication skills are necessary for a manager? Which do you think is the most important of all?

   

Communication is an act of sending or spreading information. Communication is a dynamic and complex process which involves many factors. There are eight elements involved in the process of communication – the sender, encoding, message, channel, decoding, receiver, feedback and disruption. Communication can be divided into two types: formal and informal. There are three formal communication systems which are frequently used – downward communication, upward communication and horizontal communication. The informal communication channel in an organisation is referred to as the grapevine. Verbal communication is a type of communication that uses speech or writing. Non-verbal communication consists of kinesics and paralanguage.

  

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There are many barriers which interfere with the formation of effective communication – selected perception, disruption, emotions, communication skills and suspicion. There are several measures that can be implemented in order to overcome the barriers of communication – controlling the flow of information, encouraging feedback, language used, listening actively, controlling negative emotions, using non-verbal signs and using the grapevine as a communication channel.

Diagonal communication Horizontal communication Kinesics

Paralanguage Vertical communication




By the end of this topic, you should be able to: 1. 2. 3. 4. Describe the basic process of motivation; Explain the needs and processes approach to motivation; Discuss the contribution of the different models of motivation; and Describe how behaviour modification can be used for increasing or reducing behaviour in organisations.

According to Williams (2000), motivation consists of powers that are able to move, direct and enable a person to be diligent in their effort to achieve goals. For example, an employee might be motivated to work hard in order to produce as many outputs as possible while other employees are only motivated to perform just enough of the work required. Managers must understand the factors that form these differences. Managers are usually confused in differentiating between motivation and performance. In industrial psychology, normal work performance is represented by the following equation: Work performance = Motivation x Ability x Situational constraints.

Since work performance is a function of motivation, ability and situational constraints, work performance will decline if any one of the components is weak. Needs are physical and psychological requirements that have to be fulfilled in order to ensure existence and well-being. When needs are not fulfilled, a person will experience internal tension but as soon as a need is fulfilled, a person will gain satisfaction and feel motivated. Soon, the need fulfilled can no longer motivate the individual and when this condition occurs, the individual will shift to other needs that have not yet been fulfilled.

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After reading the segment above, do you still remember reading on the contribution by Frederick Taylor in the previous lesson? What were his contributions towards management?

According to Rue et. al. (2000), in his classical motivation model, employees can be motivated by money. Frederick Taylor in his book, „The Principle of Scientific Management (1911),‰ suggested an approach for companies and employees in obtaining benefits based on his views on the workplace. He proposed that employees be paid a higher salary to encourage them to produce more outputs, which suits the opinion that employees can be motivated by money. Meanwhile for companies, they need to analyse the job and find the best ways to produce goods at lower costs, achieving a high level of profit and paying employees promptly in order to motivate them. The approach by Frederick Taylor is known as scientific management. His ideas spread widely among managers in the early twentieth century. For example, many factories in the United States of America hired experts to conduct studies on time and movement. The techniques of industrial engineering are used in every work section in determining how it can be performed effectively.


Approaches to Motivation

According to Lewis et. al. (2001), motivation can be studied using several approaches. Models of motivation can be categorised into two types of models: need-based models and process-based models. Need-based models are motivation models that emphasise the specific needs of humans or internal factors that give power to direct or stop action. Need-based approaches explain motivation as a phenomenon that takes place internally. There are three important models in this approach: hierarchy of needs model, two-factor model and achievement of needs model. Process-based models are motivation models that focus on the understanding of thinking or the cognitive process that exist in the mind of an individual and actions that affect the behaviour of an individual. Douglas McGregor (1906 – 1964) introduced Theory X and Y about employees. Theory X comprised of negative attitudes, while Theory Y comprised of positive attitudes.



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Theory X states that people: (a) (b) (c) Dislike working and prefer to receive directives; Must be forced to work; and Prefer to avoid responsibilities and have low ambitions.

Prioritise requirements for security rather than other requirements, that is Theory X is of the opinion that people define work only as a necessity to live and will avoid work whenever possible. Theory Y states that people: (a) (b) (c) (d) Prefer to work; Will achieve the objectives that are assigned/entrusted; Will accept and seek responsibilities; and Have the intellectual ability that can be used to achieve organisational objectives.

According to Theory Y, people will be satisfied with their jobs if the working environment is suitable and they could implement their responsibilities well. Although most companies use/apply Theory Y in their management, Theory X is still being used in the management of some companies.

How do need-based models differ from process-based models?


Maslow’s Hierarchy of Needs

Have you heard about MaslowÊs Hierarchy of Needs model? What do you know about this model of needs? According to Lewis et. al. (2001), MaslowÊs hierarchy of needs model is the most famous model for motivation. According to the hierarchy of needs, an individual has five basic needs – physiological, safety, social, esteem and self-actualisation.

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Figure 7.1 shows the five needs according to hierarchy and divided into upper level and lower level. Physiological and safety needs are lower-level needs that can be fulfilled externally while social needs, esteem needs and self-actualisation needs are upper-level needs that can be fulfilled internally. Refer to Table 7.1 for a description of each of these needs.

Figure 7.1: MaslowÊs hierarchy of needs Source: Certo, S. C. (2000). Modern management (8th ed.). New Jersey: Prentice Hall Table 7.1: Description on MaslowÊs Hierarchy of Needs Needs Physiological Needs Hierarchy This need exists at the lowest level of the hierarchy. Examples of this need are the need for food, water, air and sleep. Organisations can help individuals to fulfil this need by preparing sufficient income to obtain food, shelter and a comfortable working environment. People will focus on fulfilling these needs before fulfilling the needs in the following level. This need is related closely to acquiring a safe physical and emotional environment. Examples of this need are employment network, health insurance and retirement plans used to fulfil the safety needs of employees. After physiological and safety needs been fulfilled, social needs will become the main source of motivation to people. This need includes desire towards friendship, love and the feeling of belonging. An example of social need is when an employee establishes friendship in the workplace and feels a part of the organisation.

Safety Needs

Social Needs



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Esteem Needs

The needs at this level include the needs for status and recognition. This need can be fulfilled through success. Esteem needs are fulfilled when one is given recognition and respect by other people. For example, organisations can help in fulfilling this need through promotion or providing a spacious work station to the employee. People in need of recognition want themselves to be accepted based on their abilities and want to be known as being capable and efficient. This need is at the highest level of the hierarchy. This need means that people value high achievement based on their self-potential by using capability and interest to the maximum level in order to perform work in the environment. As an example, a challenging task can assist in satisfying a person towards the achievement of self-actualisation needs.

Self-actualisation Needs

According to Maslow, when a particular need has been fulfilled it will no longer motivate the behaviour of employees. For example, when an employee has gained confirmation in his work place, then a new retirement plan may become less important to him compared to the opportunity of having new friends and joining the informal group in the organisation. It is the same when the lowerlevel needs are not fulfilled, most people will pay attention to those particular needs. For example, an employee who is trying to fulfil the need for selfrecognition by holding an important position in a particular department suddenly finds out that the department and position he is going to hold may be eliminated, hence the employee may find that the chances of not being terminated in other organisations give more motivation to him compared to the offer of promotion in the previous organisation. MaslowÊs model identified that individuals have different needs which can be motivated by different matters or activities. Unfortunately, this model can only provide basic guidelines to managers. Many following studies conducted found that hierarchy level differs between individuals in different cultural environments.


Two-factor Model

According to Rue et. al. (2000), the study done by Frederick Herzberg, Bernard Mausner and Barbara Snyderman produced an approach towards motivation that is accepted widely in the area of management. This approach is known by several names such as motivation and care approach, two-factor or motivation and hygiene approach. This model relates job satisfaction with productivity for a group of accountants and engineers. This study found that factors toward job

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satisfaction are separated from the factors that incline towards dissatisfaction of jobs. Figure 7.2 shows the two-factor model.

Figure 7.2: Two-factor model Source: Lewis et. al. (2001). Management


Motivation Factors Motivation factors are factors related to the work performed. These factors are related to positive feelings and attitude towards the particular work. Motivation factors include the work itself, achievements, inner growth and responsibility. Hygiene Factors These factors refer to the context of work or the environment where the work is being carried out. The factors include supervision, workplace conditions, individual relationship, salary, safety, and the companyÊs administration and policies. These factors are closely related to the negative feelings towards a particular job but nevertheless they do not contribute towards motivation. According to the researchers, these factors do not generate motivation but instead prevent motivation from occurring. For example, employees will feel dissatisfied if they believe that their work place is not safe; but if the condition of the workplace is improved, employees may not necessarily become satisfied. If employees are not given any recognition, feelings of dissatisfaction may not exist. At the same time although they may not feel satisfied but when recognition is given, employees will feel more satisfied. This theory suggests that managers should use two approaches in order to increase motivation. Firstly, they must ensure hygiene factors such as work environment are policies that are clearly stated and can be accepted by the employees. This practice will reduce dissatisfaction of employees. For




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second step, managers must use motivational factors such as recognition and additional responsibilities as tools to increase satisfaction and motivation. In conclusion, this approach shows that motivation comes from the individual himself. Attention towards hygiene factors will help individuals to reduce excessive dissatisfaction. Both factors of motivation and hygiene need to exist together to promote motivation. The result of this study found that this two-factor model is effective in a professional workplace environment but is less effective in a clerical or manufacturing environment.

Describe the hygiene factors and motivational factors in the two-factor model.


Acquired Needs Theory

According to Rue et. al. (2000), this motivation model focuses on the three needs that are important or related to the working environment, namely, achievement, affiliation and power. This model was developed by David Mc Clelland. The use of the word „needs‰ in this model differs from the hierarchy of needs approach. In this model, needs are assumed as something that can be learnt while Maslow viewed needs as inherited. Need for achievement is the desire to perform much better and more efficiently than before. The level of achievement motivation in a person depends on factors such as childhood, personal experiences and education and the type of organisation joined. Need for power refers to the desire to control, influence or be responsible over other people. Need for affiliation relates to the desire to maintain close and personal relationships. This need can involve personal authority or institutional authority. Meanwhile, the need for social acceptance is the desire for creating relationships with other people. According to McClelland, most people have already achieved certain levels of these needs and that they vary from one individual to another. In this model, when the strength towards these needs has been developed, it will be able to

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motivate the behaviour of individual in situations that will allow them to fulfil highly demanding needs.



Employee motivation is a complex matter. Managers need to have a complete perspective regarding methods that can be implemented to face the particular situation. They need to understand the reasons why people have different needs and goals, why individuals need change and how employees change in order to satisfy their needs through various methods. The need for understanding these aspects of motivation is crucial since organisations face various management issues that are caused by changes in the global environment. Several models that can be used to understand the complex motivation process are expectancy model, equity model, goal-setting model and behaviour reinforcement model.


Expectancy Theory

According to Rue et. al. (2000), this model was developed by Victor H. Vroom. The expectancy theory was based on the idea that employee believes in the association between effort, performance and result are the consequence of the value and performance that they have fixed on the result. Expectancy plays the role of determining their level of motivation. This theory assumed that the motivation level of employees depends on three basic beliefs which are expectancy, valence and instrumentality. Figure 7.3 shows the association between expectancy, instrumentality and valence.

Figure 7.3 Association between expectancy, instrumentality and valence Source: Jones, G. R., George, J. M., & Hill, C. W. L. (2000). Contemporary management (2nd ed.). Boston: Irwin-McGraw Hill



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(a) (b)

Valence – EmployeesÊ belief regarding the value of outcome or simply how far the particular reward or outcome is attractive or desired. Expectancy – EmployeesÊ belief that their effort will incline towards the level of performance desired or the assumption of the association between effort and performance. Instrumentality – EmployeesÊ belief that the achievement of the performance level desired will lead to the outcome desired or the assumption of the association between performance and rewards.


This model suggests that in order to become a highly motivated person, the three factors or beliefs must also be high. If any one of the factors declines, the overall motivation will also decline. Managers are able to use this model to motivate employees through systematic gathering of information regarding what employees want out of their job by creating a clear and simple association between rewards and individual performance, and also granting power or authority for the employee to make decisions. The measures mentioned will increase the expectancy of employees that hard work and effort will bring about excellent performance.


Equity Theory

According to Rue et. al. (2000), this theory was proposed by J. Stacey Adams. This motivation model was based on the idea that people want to be treated equally in their relationship with other people. Inequality exists when an employee regards that his inputs or contributions in the form of time, effort, education, experience, skill, knowledge and all the efforts given to the work together with the outcome or rewards given by the organisation in the form of salary, benefits, recognitions and others are less compared to the contribution towards work and rewards received by other people. Figure 7.4 illustrates the situation of comparison and its association with perception.
EmployeeÊs Self Comparison to Other People = < > Perception Equality Inequality Inequality

Reward Input Reward Input Reward Input

Reward Input Reward Input Reward Input

Figure 7.4: Comparative situations and its association with perception Source: Bateman, T. S., & Snell, S. A. (1999). Management: Building competitive advantage (4th ed.). Boston: Irwin-Mc-Graw Hill

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For example, a graduate who has just completed his studies received a job offer to work with a company with a starting salary of RM24,000 per annum, having the facility of a company car, and sharing an office room with another employee. If he finds out that there is a new employee reporting for duty given the same salary and remuneration he received, he will feel that the treatment given is equal. But if the opposite happens, that is, if the new employee reporting for duty is given a salary of RM30,000 per annum, a bigger company car and a specific office room for himself, the particular employee will feel that inequality has taken place. For an individual who experiences equal treatment, the ratio of comparison may not necessarily be the same relatively. Based on the previous example, the employee who initially feels that there is inequality when the new employee receives a better remuneration will be able to alter that feeling when he finds out that the new employee has higher work experience and qualifications than himself hence he deserves the bigger remuneration based on his contributions towards the company. This theory also states that the existence of inequality can result in pressure equivalent to the level of inequality felt by the employee. This pressure will motivate a person to achieve equality or reduce inequality. There are several actions that can be taken to reduce inequality such as reducing inputs or contribution if it is much higher compared to the input and outcome received by other people, increasing input if input is much lower compared to others, demanding compensation such as a pay rise or deciding to resign from the job.

Explain the main differences between the expectancy theory and the equity theory.


Goal-setting Model

According to Williams (2000), the goal-setting model is a motivation model that acts by increasing the efficiency and effectiveness of individuals, groups, departments or organisation by emphasising specifically on the outcomes expected. Goal is the target, objective or decision that a person tries to achieve. This model states that people will be motivated up to a certain level when they are given a specific goal, which is challenging and obtain feedback regarding their development towards achieving the particular goal. The basic components for a goal-setting model are that goals must be specific, challenging and acceptable; have performance feedback; and gives at the correct time. As a motivation tool, goal-setting can help employees in three ways: as a



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guideline and propeller of behaviour to support the goals of the organisation; provide challenges and standards that can be used to make evaluations; and for stating something important and preparing the framework for planning. An important aspect of this model is the involvement of employees in goalsetting. When the employees themselves determine the goals they want to achieve, it will be easier for them to accept the goal and become more committed. If employees are not involved or participation is only minimal in setting the goals, they normally will not be that interested in achieving the goals.


Reinforcement Model

According to Rue et. al. (2000), the growth of the motivation reinforcement model was pioneered by B. F. Skinner. There are two assumptions for this theory which are that the behaviour of humans is determined by the environment and is associated with related laws that can be expected and altered. The basic idea that forms the core of this theory is the assumption that the outcomes or consequences of a personÊs behaviour at present will affect his behaviour in the future. The behaviour that results in positive outcomes will be repeated while the behaviour that results in negative outcomes normally will not be repeated. The outcomes or consequences of the behaviour of an individual are referred to as reinforcements. Basically, there are four types of reinforcements – positive reinforcement, negative reinforcement or avoidance, punishment and elimination. Figure 7.5 illustrates how behaviour can affect outcomes.

Figure 7.5: Consequences due to behavioural actions Source: Bateman, T. S., & Snell, S. A. (1999). Management: Building competitive advantage (4th ed.). Boston: Irwin-Mc-Graw Hill


Positive Reinforcement Positive reinforcement is the contribution of positive outcome or consequence based on the desired behaviour. For example, organisations that pay cash bonus to salespeople who exceed the sales quota will encourage them to work more diligently in the future.

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Negative Reinforcement Negative reinforcement means giving an opportunity to a person in order to avoid negative outcome or consequence through the desired behaviour. Negative and positive reinforcements can both be used to increase the frequency of desired behaviour. For example, making tax payment before the month of May will prevent a person from being fined. Elimination Elimination involves the absence of positive outcome or effect, or drawing back the positive outcome that used to give effect from the desired behaviour. Punishment Punishment is the negative effect that is a result from the occurrence of undesired matters. As an example, an employee who is always late for work can be suspended or have his pay detained. Both forms of elimination reinforcement and punishment can be used to reduce the frequency of undesired behaviour. There are many studies conducted that show that rewards can increase the level of satisfaction and motivation compared to punishment.



Figure 7.6 below illustrates a summary of the reinforcement theory that was discussed above.

Figure 7.6: The summary of reinforcement theory Source: Rue, L. W., & Byars, L. L. (2000). Management: Skills and application (9th ed.). Boston: Irwin-McGraw-Hill



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Essay Question As a manager, you have decided to reduce the behaviour of a particular employee. What are the types of reinforcements that are suitable to be used and why? TRUE (T) or FALSE (F) Statements 1. 2. 3. The scientific management approach assumes that money is the main inducer to motivation. The experience of an employee is an example of outcome or result in the equity model. In the two-factor model, hygiene factors need to exist for true motivation to take place but motivation factors do not need to exist for true motivation to happen. Valence in expectancy model refers to employeesÊ belief regarding the value of outcomes or consequences. The key to a successful positive reinforcement is that rewards must be the result of performance.

4. 5.

Multiple Choice Questions 1. „This model assumes that people are motivated towards lower level needs that has not yet been fulfilled.‰ What model of motivation is referred to above? A. goals reinforcement B. C. hierarchy of needs D. two-factor 2. Which motivation model states that needs are assumed as being learnt rather than being inherited? A. Two factor theory B. Maslow hierarchy C. Achievement of needs model D. Expectancy model

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Which is not a component of the expectancy model? A. Valence Instrumentality B. C. Forecasting D. Expectancy What is the negative effect that is a result of undesired behaviour under the behaviour reinforcement model? A. Elimination Positive reinforcement B. C. Negative reinforcement D. Punishment According to the view of the two-factor model researcher, what factor can prevent motivation from occurring but does not actually produce motivation? A. Hygiene factors Motivation factors B. C. Equity factors D. Expectancy factors



Motivation Caselet

1. 2. 3.

What do you understand by the term motivation? Differentiate between intrinsic and extrinsic motivation? Which do you think is more important?



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    

There are two main approaches for explaining the aspects of motivation. Need-based approaches explain about motivation that exists and takes place internally or explains about what truly motivates people. Meanwhile, process-based approaches explain the cognitive process that affects human behaviour. The three needs-based models discussed were the hierarchy of needs model, two-factor model and achievement of needs model. In the process-based approach, there are four main models discussed namely the expectancy model, equity model, goal-setting model and behaviour reinforcement model.

Equity model Expectancy Goal-setting model Instrumentality

MaslowÊs hierarchy of needs Reinforcement model Valence




By the end of this topic, you should be able to: 1. 2. 3. 4. 5. 6. Describe the term „leadership‰; Differentiate between the role of a manager and a leader; Compare between the three leader-centred approaches; Describe the meaning of follower-centred leadership; Explain the approaches and models related to interactive leadership; and Discuss the styles of contemporary leadership.

Leadership is a process of influencing other people to achieve group or organisation goals. Leaders are different from managers. According to Williams (2000), the main differences are that a leader emphasises on the quality of work so that the treatment given is fair, has a long-run focus, is more inclined towards changes, gives inspiration and is able to motivate other people in overcoming their problems. Meanwhile, a manager emphasises more on performing a matter in the correct way, has a short-run focus, maintains the status quo and acts to solve other peopleÊs problems. Figure 8.1 illustrates the differences between a manager and a leader.



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Figure 8.1: Differences between a manager and a leader

Source: Williams, C. (2000). Management SouthWestern-Thomson Learning



Approaches to leadership can be divided into three categories namely the leadercentred approach, follower-centred approach and interactive approach.


Leader-centred Approach

This approach focuses on the personality features of a leader, the behaviour of a leader and leadership style. (a) Personality Features of a Leader According to Lewis et. al. (2001), the personality features of a leader are among the earliest approach in the study of leadership. Early studies on leadership theory tried to identify the specific personality features related to an excellent leader. The focus on personality is based on the assumption that some leaders have certain physical features (height, weight and self appearance), personality aspects (self-appreciation, economic stability, knowledge, initiative and diligence) and abilities (creativity, articulate, patience and sympathy). For example, physical form, intelligence and the skill of public speaking at one time were considered the personality features of a leader. Moreover, there are beliefs that taller people are better leaders than shorter ones. This type of personality approach was proven to be a weak determinant of leadership potential. Generally, there are several personality features that show the difference between a leader and a follower. However, the difference is insignificant. Studies related to personality features generally are not very successful. The main reason is that the personality features of a particular leader is

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necessarily similar to other leaders. In fact, personality features alone are not enough to create a successful leadership.

You are one of the interviewers for the position of marketing manager. Candidate A is articulate, well-built, tall and has the qualifications required by your company. Meanwhile, Candidate B is articulate and confident but is also short and bald. He also has qualifications which exceed your companyÊs requirements. What are the weaknesses of Candidate B that limit your choice in selecting him to become marketing manager? Discuss your views with your friends.


Focus Towards Leadership Behaviour This approach to leadership behaviour is conducted through studies on what had been done by an effective leader and not based on the features possessed by the particular leader. There are three studies on leadership behaviour those conducted in the Ohio State University and Michigan University and the study of leadership behaviour using the Managerial Grid. (i) Studies by Ohio State University According to Rue et. al. (2000), several series of studies on leadership were conducted by this university to obtain a summary regarding the most important and effective behaviour to successful leaders. They wanted to obtain information related to successful leaders regardless of the organisation involved. These studies found that two consistent and important behaviours of leaders are consideration behaviour and structural behaviour. Consideration behaviour refers to the behaviour of leaders that show feelings of consideration towards members of the group or subordinates and fulfilling their needs. Meanwhile, structural behaviour refers to the behaviour of leaders in forming the work procedures of subordinates and guiding them towards goal achievement. This study found that leaders with a high level of consideration are more inclined to have satisfied subordinates compared to leaders with a low level of consideration. For example, the appointment and termination of employees are at the lowest level while work satisfaction is at the highest level under the supervision of a leader with a high level of consideration behaviour. Leaders who are assumed to have a high level of structural behaviour but are low in



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terms of consideration will face a high frequency of complaints and resignation among employees. The correlation between consideration behaviour and the effectiveness of a leader depends on the groups led. A high achievement for consideration behaviour correlates positively with the effectiveness of a leader such as managers and office staff in a large industrial firm, while a high achievement for consideration behaviour correlates negatively with the effectiveness of leaders such as production engineers. There is no consistent association or relationship between structural behaviour and the effectiveness of a leader but the relationship is dependent on the group led. Figure 8.2 illustrates the relationships between consideration behaviour with structural behaviour.

Figure 8.2: Association between consideration behaviour with structural behaviour Source: Certo, C. S. (2000). Modern management (8th ed.). New Jersey: Prentice Hall


Studies by Michigan University According to Rue et. al. (2000), the purpose of the study conducted by The Institute of Social Studies, Michigan University, led by Rensis Likert, was to identify basic principles that contribute towards productivity and satisfaction of the members of a group. The study found that consideration behaviour (work-oriented) and structural behaviour (task-oriented) are exclusive and separated behaviours. Both these behaviours are on the same continuum but at opposite ends. The conclusion from this study was that leaders who are inclined towards the feeling of consideration must reduce the structural behaviour and vice versa. For leaders who are inclined towards work, they need to reduce their consideration behaviour. The result of the Michigan UniversityÊs study also found that consideration behaviour or employee-oriented behaviour has a close association with successful leadership.

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The results of the study by Michigan University are almost similar to those of the study by Ohio State University. State the similarities.

(iii) The Managerial Grid by Blake and Mouton According to Rue et. al. (2000), Robert Blake and Jane Mouton produced a method for classifying the styles of leader management referred to as the Managerial Grid. It is also known as the leadership grid. This managerial grid uses a two-dimensional framework in providing status to leaders based on consideration towards people with consideration towards production in forming the five different styles of leadership. Both behaviours are on the scale of 1 to 9, with 1 representing the lowest and 9 representing the highest, as depicted in Figure 8.3. Blake and Mouton suggested that the position of leadership at the matrix 9-9 is the best. They named this style of leadership as team management. Leaders at the matrix 9-1 show the style of authoritarian management that of workers following orders when they have high consideration on production and low consideration on people. Leaders who are at the matrix 1-9 are leaders who are very concerned in creating a happy and friendly working condition but do not give important focus towards production or performance. This is known as the leadership style of country club management. The weakest leadership style based on this grid is the impoverished leadership style that is at matrix 1-1. The leaders at this position do not care about the employees and production but instead, he only performs his work at a minimal level. Finally, the leadership style that is in the middle at the matrix 5-5 is a leader who shows moderate consideration towards the employees and production. Figure 8.3 illustrates the leadership styles in the leadership grid.



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To obtain a clearer picture on what is meant by the Managerial Grid by Blake and Mouton, go to the following website: Look for the word „questionnaire,‰ click on it and choose the article and read the instructions.

5,5 Middle of the road

Figure 8.3: Managerial grid Source: Bateman, T. S., & Snell, S. A. (1999). Management: Building competitive advantage (4th ed.). Boston: Irwin-Mc-Graw Hill

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You have already learnt about the results of the studies conducted by the two universities and the Managerial Grid by Blake and Mouton. Based on your understanding of these three studies, identify the differences and similarities, if there are any, between the three studies and give your answers in the form of a table. Discuss your answers with your friends.

(iv) Leadership Styles After the three studies that focused on the personality features of leaders, researchers shifted their focus by conducting studies related to the behaviour of leaders or leadership styles. Leadership style refers to the behaviour exhibited by a leader when dealing with subordinates and this leadership style can be differentiated in decision making. There are three types of leadership styles, namely, autocratic, laissezfaire and democratic. Generally, autocratic leaders make more decisions for the group. Meanwhile, laissez-faire leaders allow the members of the group to make all the decisions. A democratic leader, on the other hand, guides and encourages the group to make decisions. Normally, most leaders do not follow just one type of leadership style. These three styles of leadership will have different feedback from problems relating to human relationships.


Follower-centred Approach

According to Lewis et. al. (2001), self-leadership is a paradigm for creating leaders of organisations who are ready to lead themselves. Even though leadership is important, the successor variables to leadership and leadership neutralisation creates a situation where leadership is no longer needed or the presence of leadership will not bring significant effect on performance. The leader successors are variables such as individuals, tasks and organisation features that can cause leaders to be unnecessary or in other words, those variables are able to exceed the abilities of leaders in affecting satisfaction and performance of subordinates. Meanwhile, leadership neutralisations are variables such as employees, tasks and organisation features that intervene with the work actions of a leader or create a difficult situation for leaders to influence the performance of the followers.



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Interactive Approaches

In order to study the effectiveness of leadership in a particular organisation, another method used is by looking at the way a particular leader interacts with his followers, either directly or indirectly. Please refer to Figure 8.4 and you will find that there are four models used in organisational leadership, namely, the Situational Model, FiedlerÊs Contingency Model, Path-goal Model and Leader Behaviour Model.

Figure 8.4: Four models of interactive approach


Situational Leadership Model According to Rue et. al. (2000), this model is also known as leadership lifecycle model. It was introduced by Paul Hersey and Kenneth Blanchard. This model is based on the assumption that leadership styles should portray the maturity level of subordinates. This model studies the interaction between behaviour, leadership, situation or condition and competency of followers. Competency here is defined as the ability of subordinates and their commitment towards completing specific tasks. There are two types of behaviour in this model, namely, the task behaviour and relationship behaviour. In this model, when the level of maturity of followers increases, task behaviour must be reduced while relationship behaviour must be increased and later gradually reduced. Subordinate maturity portrays their ability in performing tasks on their own, accepting responsibilities and their level of motivation to succeed. This model suggests that when maturity level of followers changes from immature to matured, the behaviour of leaders must also change from high-task behaviour to low-relationship behaviour, that is, the first quadrant, to the high-task behaviour to high-relationship behaviour, until the fourth quadrant that is low-task behaviour to low-relationship behaviour.

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This model then combined the task behaviour and relationship behaviour to create four different leadership styles: telling or directing style, selling or coaching style, participating or supporting style, and delegating style. These styles are used based on the different level of maturity of employees. According to Williams (2000), maturity of followers consists of task maturity and psychological maturity. The telling or directing style of leadership is suitable for employees having the lowest level of maturity. For a higher level of maturity, leaders only have to give encouragement to the employees in completing their tasks. The suitable leadership style for this situation is the style of selling or coaching. For employees who are more matured, involvement in making decisions together and two-way communication, then the participating or supporting style of leadership is considered the most suitable. Meanwhile, the delegating style of leadership is suitable for employees having the highest level of maturity. Figure 8.5 illustrates the situational leadership model.

Figure 8.5: Situational leadership model



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According to your understanding of the previous discussion, draw a figure that represents the Situational Leadership Model according to what you have just learned.


FiedlerÊs Contingency Theory According to Williams (2000), this theory is one of the earliest studies using the contingency approach. It was introduced by Fred Fiedler. He studied the favourableness between the leaderÊs personality features with situational conditions. Fiedler suggested two personality features, namely task motivation and relations motivation. Fiedler viewed situational leadership on a continuum of favourableness and unfavourableness based on the three main dimensions: leader-subordinate relations, task structure and position power. Leader–member relations refers to the degree to which the leader feels accepted by the followers. Task structure is the degree to which the goals and other factors are outlined clearly. Position power is the extent to which the leader has control over the rewards and punishments that his followers receive.

Figure 8.6: FidlerÊs contingency theory Source: Williams, C. (2000). Management. SouthWestern-Thomson Learning

This theory is based on several assumptions: leaders will become effective when their task group moves successfully; leaders are not capable of changing their leadership styles; leadership style must be suited to the correct situation; and favourable situations will help leaders to influence the members of the group. This model used a survey known as Least Preferred Co-worker (LPC) to measure leadership styles. According to the LPC scale, there are two types of styles that are basic to the leader. Employees giving views of positive LPC were found to have a relation-oriented leadership

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style. Meanwhile, employees with negative LPC were found to be having task-oriented leadership style. A favourable situation occurs when leaders are able to influence their followers and this is determined by leader-member relations, task structure and position power. Generally, leaders with relations orientation and a high LPC mark are considered as better leaders in intermediate favourable situations. Leaders who are task-oriented with low LPC marks are better leaders in very highly favourable situations or in unfavourable situations. In conclusion, since this theory assumed that leaders are not able to alter their leadership styles, therefore organisations must measure and accurately match leaders to situations or alter situational factors to suit the leaders. (c) Path-goal Theory According to Williams (2000), this theory was introduced by Martin Evans and Robert House. This theory stated that a leader is able to increase the satisfaction and performance of his subordinates by explaining and setting up the path towards behavioural goals by increasing the number and forms of rewards towards the achievement of goals. Figure 8.7 illustrates the framework for path-goal.

Figure 8.7: Path-goal theory Source: Bateman, T. S., & Snell, S. A. (1999). Management: Building competitive advantage (4th ed.). Boston: Irwin-Mc-Graw Hill

Subordinates will accept the behaviour of a leader when it becomes the source of current and future satisfaction. The behaviour of a leader influences the motivation of subordinates since satisfaction towards the needs of subordinates is associated closely with performance success, guidance preparation, support and rewards required to achieve an effective performance.



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You will find that in this theory, there are four types of behaviour for a leader. These four types of behaviour will be discussed in Table 8.1.
Table 8.1: Types of Behaviour of a Leader LeaderÊs Behaviour Directive behaviour Description Leadership behaviour with the leader allowing employees to recognise clearly what is expected of them, clarifying the guidelines to perform their tasks, work schedule, setting up achievement standards, and making them abide by the standards of rules and regulations. Leadership behaviour that allows employees to be close to the leader. The leader exhibits feelings of concern, care for the employeesÊ welfare and treats them fairly and equally, forming a happy and friendly environment. Leadership behaviour where the leader holds discussions with the employees in order to obtain views and inputs before making decisions. Leadership behaviour where the leader sets up challenging goals and sets high standards on the employees and show confidence that the employees are competent and responsible.

Supportive behaviour

Participative behaviour

Achievement behaviour

In conclusion, this theory assumes that a leader is able to change and suit his style of leadership according to the subordinates led, or even the work environment of the subordinates.

For further information on FiedlerÊs Contingency theory, visit: After you have read this article, try to obtain important notes which can be used as your references when answering the essay questions later.

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Explain what is meant by favourable situation in FiedlerÊs Contingency theory.


Continuum of Leader Behaviour According to Rue et. al. (2000), Robert Tannenbaum and Warren Schmidt believed that different situations required different leadership styles. They considered three important forces that are related to finding the most effective leadership styles: forces within the leader, forces within the subordinates and forces within the situation. In the continuum produced, the leader behaviour on the left refers to a leader having high control and only giving slight freedom to his subordinates. Leader behaviour in the middle of the continuum depicts a change in leadership style from autocratic style to democratic style. The leader behaviour on the right shows that leaderÊs control is scarce with subordinates having more freedom in making decisions.



It is undeniable that managing a particular organisation with employees of variable races, culture and attitudes is not an important task for a manager. He must have the leadership characteristics that are important for controlling the smooth running of his organisation. In your point of view, what are the leadership characteristics that need to be exhibited by a manager?

According to Williams (2000), strategic leadership refers to the competency of a leader in making predictions, retaining flexibility, thinking strategically, having visionary ideas and co-operating with others in forming a positive future for the organisation. Strategic leadership refers to the way leaders are able to change the attitude of employees in order to achieve the goals that have been set.



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Visionary Leadership

Visionary leadership is a leadership style that is able to create a positive image for the future of the organisation by motivating employees and is able to depict the direction of the organisation based on the planning and goals that have been set.


Charismatic Leadership

Charismatic leadership refers to the features of leaders in creating a strong relationship between themselves and subordinates. A charismatic leader is a leader having high levels of reference force. Half of the force comes from his need to influence others. This type of leader has a high level of self-confidence, is dominant and believes in the truth of everything that he does. He is capable of convincing followers that he is right. He is also able to channel their visions to be shared together with his subordinates.


Transactional Leadership

Transactional leaders will determine what should be done by employees to achieve their own objectives and the objectives of the organisation. They also classify and aid employees to be confident so that they are able to achieve the objectives through certain efforts. This type of leadership is based on the process of exchange, where subordinates are given rewards for good achievements and punished for unsatisfying achievements.


Transformational Leadership

Transformational leaders are capable of enlightening and accepting suggestions and visions of the group and are able to encourage employees to look beyond their own needs and own interest for the well-being of the group. Transformational leaders will motivate their employees to perform more than expected by initiating feelings of importance and value of the task in each individual. This can be done by creating interest in employees to perform for the sake of the group and the organisation besides fulfilling their own needs of self-achievement.

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Essay Question In what way does a transactional leader differ from a transformational leader? TRUE (T) or FALSE (F) Statements 1. 2. Leaders emphasise more for a task to be performed efficiently. The study conducted by the Ohio State University and Michigan University are slightly similar based on the task dimension and relation dimension. The path-goal model assumes that leadership style is stable and cannot be altered. FiedlerÊs contingency model states that leadership style is stable and fixed. Transactional leadership is based on the process of exchange.




Multiple Choice Questions 1. Which leadership model states that an effective leader possesses a set of specific characteristics? A. Contingency B. Behavioural C. Personality D. Goal What is the best combination for leadership style according to Blake and Mouton? A. Moderate consideration towards human and productions B. High consideration towards human C. High consideration towards production D. High consideration towards human and production




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According to Fiedler, when do leaders become effective? A. Have high consideration towards human and productions B. Explain LPC in a positive form C. Find that a situation is favourable D. Obtain a leadership style that suits the situation Which leadership style suits an employee who is confident, committed and capable of receiving responsibilities? A. Directing B. Selling C. Participating D. Delegating Leadership neutralisation is one of the variables related to which style of leadership? A. Contingency B. Self C. Visionary D. Behavioural



Leadership Caselet

1. 2.

Evaluate the above scenario according to the leadership theories that you have learnt in this topic. What you can infer from this regarding leadership?

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Leaders are different from managers. The main differences are that leaders emphasise more on performing tasks effectively while managers emphasise more on performing tasks efficiently or correctly. Leader-centred approach focuses on personality features of leaders, leader behaviour and leadership styles. The main results from the studies on personality features of a leader found that successful leaders usually have certain personal features that are better when compared to followers. On leadership behaviour, three important studies were discussed, namely the studies conducted by the Ohio State University, Michigan University and Managerial Grid. These three studies lined the two main dimensions portraying the behaviour of a leader, namely task dimension and relations dimension. Other than that, leadership styles associated with decision making gave rise to three forms of leadership styles that are popularly known: autocratic style, laissez-faire and democratic style. The follower-centred approach or also referred to as self-leadership is a paradigm that is based on the presence of leaders in organisations who are ready to lead their own selves. Meanwhile, interactive approach is related to the studies between leader behaviour with the situation and favourableness of the followers. In this approach, four main models such as leadership situational model, path-goal model, FiedlerÊs contingency model and continuum of leader behaviour model had been discussed. Finally, several contemporary leadership styles, that is, the strategic leadership involving visionary leadership, charismatic leadership, transactional leadership and transformational leadership was also discussed in detail.

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Autocratic Democratic Laissez-faire

Transactional Transformational Visionary leadership




By the end of this topic, you should be able to: 1. 2. 3. 4. Explain the term controlling and the main purpose of control; Examine the steps involved in the process of control; Describe the forms of control; and Analyse the perspectives and activities that need to be controlled.

Controlling is one of the four main functions in management. It is important to managers in order to ensure all planning, organising and leading run as smoothly as desired. If managers are able to ensure that each plan made and every task given to the employees are carried out perfectly, and the results expected is what had been planned, control is not required. Unfortunately, managers are not able to ensure these conditions will run smoothly without the occurrence of any problems since most planning is done by humans and humans are known to be diverse in terms of abilities, motivation and others. In a rapidly changing business environment, not only the expected results must be controlled, planning must also be monitored and controlled.



What do you understand about control within a particular organisation?

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Management control is a systematic effort to fix or establish the standard of performance through planning objectives, designing information feedback systems, comparing true performance with the fixed standard, determining whether there are any disadvantages or weaknesses and taking suitable actions to ensure all resources within the organisation can be used in the most effective and efficient way in achieving the objective of the organisation. According to Rue et. al. (2000), control is the process of ensuring that organisational activities are running according to plan. This process can be carried out by comparing the true performance with the standard that has been established and taking corrective actions in order to rectify any distortion that does not comply with the standard. The main purpose of control in management is to prepare managers to face future or existing problems before they turn critical. In general, an organisation with a good control mechanism will have the advantage of competing strength compared to organisations without a good control system. The following are several examples of the importance of control for organisations:


Quality Assurance

The smooth running of a particular process can be monitored and problems can be avoided by having control. Control is able to stimulate the organisation to monitor and increase the quality of products and services offered. Through the activities related to the control process, members of the organisation will always be driven to act according to the plans that have been established.


Preparation to Face Changes

Change cannot be avoided. Change in environmental factors such as markets, competitors, technology and legislation makes the control process important for managers in responding towards opportunities and threats. Control helps the organisation to suit its products to the needs and wants of consumers in the market.

What is meant by controlling as a process?



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According to Rue et. al. (2000), a control process has three basic needs: fixing of standards to be used in measuring the level of growth; monitoring decisions and comparing it to the standards, that is, the comparison of the organisationÊs true performance with the planned performance; and finally, taking corrective actions in rectifying any disadvantages and weaknesses that occurred in achieving the performance that has already been set. Figure 9.1 illustrates the steps involved in the process of control.

Figure 9.1: Control process Source: Lewis et. al. (2001). Management


Establishing Standards

You must have heard about standards used in measuring the level of performance of a particular company. What do you understand about this term and do you know how a particular standard is formed?

Standard is the base for comparison to measure the level of performance of a company in order to find out whether the company is compliant. Standard is the point of reference in making comparisons to another value. Standard can be defined as what is required out of a particular job or an individual. In management control, standards are usually derived from the objectives. Standards should be easy to be measured and interpreted. A specific objective that can be measured makes it more suitable to be used as a standard. If this standard is not clearly and specifically stated, it may be interpreted in a different way and will then raise various difficulties that can affect the goals of the organisation.

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In general, there are three types of standards: physical standard such as quantity of products and services, number of customers and quality of products and services; financial standard which is stated in the form of money, and this includes labour cost, sales cost, material cost, sales revenue, profit margin and others; and lastly, time standard which includes the performance rate of a particular task or the time period required to complete a particular task.


Measuring Performance and Making Comparisons

Performance measurement is a type of control. Actual results need to be monitored to ensure that output produced is according to the specific standard. The main purpose of performance monitoring is to gather data and detect deviation and problem areas. Measurement has no meaning if it is not compared to the standard. The next step is performing the comparison of standards. Comparison of standard is a process where comparison is made between the true performances with the standard set. This step is important because it allows any deviation or distortion to be detected and corrective actions can be taken in order to achieve the goals that have been set.


Corrective Actions

It is often found that managers establish standards and monitor decisions but do not take suitable actions. The first and second steps in control will be meaningless if corrective actions are not taken. Before taking any steps in correcting, detailed analysis must be carried out in order to find out the factors that caused the particular deviation. This corrective action may involve change in one or more operation activities of the organisation such as modification, repairing of machines, preparation of certain courses and others, or it might also involve a change in the fixed standard. Corrective action is a process of identifying the distorted performance, analysing the distortion and developing and implementing programmes in order to rectify it.



According to Williams (2000), the running of a control process is a continuous act. This process cannot be done only once in order to gain the achievement expected. This is considered as a dynamic process. This dynamic process begins



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with looking at the true performance and measuring the achievement level of that particular performance. Managers will then compare the performance achieved with the performance that has been fixed. If there happens to be any difference, it must be analysed in order to identify the cause of the differences and this is followed by the correcting act. This process must be done repeatedly and must be given full attention by the manager in order to achive the performance goals set.



According to Williams (2000), a control process consists of three basic methods which are identified as future control, concurrent control and feedback control.


Figure 9.2: Three basic methods of control Adapted from: Jones, G. R., George, J. M., & Hill, C. W. L. (2000). Contemporary management (2nd ed.). Boston: Irwin McGraw Hill


Pre-control / Feed-forward Control

This type of control is also known as preventive control or feed-forward control. This involves the use of information, including information from the latest results, is to forecast what will happen in the future so that preventive measures can be taken. It is implemented to prevent the occurrence of deviation between what had really happened with what is expected to happen. Prevention is carried out through detailed analysis on the input before it is accepted into the process of organisation transformation. Input is ensured to comply with the quality standards established so that the results obtained are as expected. One example of the use of this control is when a manager ensures that the sample of raw material that is going to be used complies with the standard established by the organisation or based on certain specifications to avoid damage towards the product in the future.

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Concurrent Control

Concurrent control is carried out during the process of transformation. When this control is carried out, restoration actions, corrective actions or modifications are done after distortion is detected. For a production-oriented organisation, this controlling action is taken while input is being processed while for serviceoriented organisations, it is taken while service is being provided. Through this method of control, organisations will monitor their operations and simultaneously take the necessary corrective actions before the transformation process is completed. This will help to reduce mistakes in the outputs being produced. Examples of this method of control are mid-term examinations, control of accounts, control of inventories and others.


Feedback Control

Feedback control involves gathering information related to the weaknesses of controlling measures after an incident takes place. This type of control is implemented after the transformation process has been completed with the purpose of finding out whether the whole activity ran properly with results as expected. This control is also able to determine whether the plan that is going to be carried out has the continuity with the previous programme. It is also able to evaluate the effectiveness and efficiency of the involved parties in performing the activities of the organisation. An example of this method of control is the use of low-quality raw materials that resulted in the production of low-quality products. The act of changing the raw materials used is one of the examples of feedback control.



According to Williams (2000), there are five forms of control that can be used by managers in implementing the process of control – bureaucratic, objective, normative, concertive and self. Figure 9.3 illustrates these five forms of control.



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Figure 9.3: Five forms of control that can be used by managers in organisations


Bureaucratic Control

This method uses hierarchy authority to influence employees. Rewards are given to employees who obey and punishment is meted out to employees who do not obey the policies, regulations and procedure of the organisation.


Objective Control

This method uses the measurement of observation towards the behaviour of employees or output produced to evaluate work performance. Managers are more focused on the observation or measurement towards the behaviour of employees or outputs rather than the policies or rules. Objective control consists of two forms of control; behaviour control and output control. Behaviour control is the rule of behaviour and actions that controls the behaviour of employees in their tasks. Output control is the form of control that controls the output of employees by granting rewards and incentives. Important features in the implementation of output control are reliability, fairness and accuracy, convincing employees and managers to achieve the expected results while rewards and incentives depend on the performance standard that has been established.


Normative Control

Normative control is a method that arranges the behaviour of employees and results through norms and beliefs shared together among all the members within the organisation. There are two main substances in this type of control which are, sensitivity towards selection of employees based on their attitude and norms, and obtaining inspiration based on experience and observation of employees.

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Concertive Control

This is a method that uses the norms and behaviour discussed, formed and agreed by the work group. This form of control plays a role in an autonomous work group. An autonomous work group is a work group that operates without the presence of a manager and is fully responsible for the control of process, task group, output and behaviour. Autonomous work groups gradually grow through two stages of concertive control. First, members work and learn from each other, supervising the work of each member and develop norms and beliefs that guide and control them. Secondly, the appearance and acceptance of objectives as guide and control of behaviour.


Self Control

It is a system where managers and employees control their own behaviour by establishing their own goals; monitor their own progress and their own achievements of goals, and reward themselves when goals have been achieved.

State the three basic methods in a control process and the five forms of control that can be implemented within an organisation.



In managing an organisation, a manager is responsible for ensuring the smooth running of the management process. He has to ensure that detailed control is carried out. What do you think are the factors that need to be controlled by a manager in his organisation?

Determining the matters to be controlled is as important as making decisions on whether to control or in what method should control be done. There are several areas that need to be controlled by a manager in order for the organisation to be able to achieve the goals expected.



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One of the important areas that need to be controlled is finance. There are times when the financial performance does not reach the expected standard. If this condition remains undetected and relevant actions are not taken, the existence of the company might be in jeopardy. Financial perspective is generally related to activities such as sales, purchases and others. Financial statements are important sources of financial information for an organisation. A balance sheet shows how strong the financial position, assets, liabilities and the position of the equity holder for a certain financial period. A profit-loss statement or income statement shows the summary of the operational activities and the relationship between expenditure and revenue for a particular financial year. According to Williams (2000), there is a new approach in the financial perspective known as economic value added. Economic value added is the total profit of a company which exceeds the capital cost in a particular year. In this perspective, a manager must impose control so that the total profit of a company always exceeds the capital cost for the company to continuously gain economic value added.


Human Resources

The control towards human resources is vital for organisations. If an organisation is unable to control its human resources properly such as losing expert workforce hence it will jeopardise the performance and achievement of the company. Organisations need to have planning that is able to motivate the employees. For example, organisations need to be concerned regarding the problems faced by the employees by creating harmonious discussions between the management and the employees union.


Internal Operations

Internal operations of organisations are usually measured through quality. Operations control is very important for every organisation especially for manufacturing firms. This is because efficiency and effectiveness of operations control will determine the level of production and organisational performance as fixed by the standard. The quality value of products and services produced based on the standard will be able to strengthen the perception of the customers towards the quality of goods that they had purchased. For example, the control of product quality is able to reduce waste and product defects and this will

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further save cost. Inventory control is also effective in reducing the costs of investments related to inventory.



According to Williams (2000), in order to measure the performance of customers, an organisation needs to impose control on customers who leave the organisation and not based on the survey of customer satisfaction. Here, the manager will make evaluation by measuring the percentage rate of customers who left the organisation. By controlling customers from leaving the organisation, a company will be able to increase profits. For example, the cost in obtaining a new customer is five times more compared to the cost of retaining an existing customer.

Essay Question Why does the perspective of finance need to be controlled? TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. Control is the process of finding out what is happening compared to the standards established. Decision on control does not affect decision on future planning. Organisations practising bureaucratic control are very difficult to change. Future control is also known as prevention control. Economic value added is the total profit of a company which exceeds its capital cost in a year.

Multiple Choice Questions 1. What are the most methods of control based on? A. Future control B. Feedback control C. Concurrent control D. Dynamic control



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What type of control is a method that uses norms and behaviour that have been discussed, formed and agreed by the work group? A. Concertive B. Bureaucratic C. Normative D. Self Which type of control is implemented during the occurrence of the transformation process? A. Concurrent B. Prevention C. Objective D. Feedback Which is not a basic need of the control process? A. Establish standard B. Comparing true performance with standard C. Controlling objectives D. Taking corrective actions if necessary What perspective is usually used to measure operational performance in an organisation? A. Finance B. Quality C. Human resource D. Customers




Controlling Caselet

1. 2.

What is controlling? Do you agree with the type of control used by the manager in the above scenario? Why? Why not?

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The main purpose of management control is to prepare managers to face existing or future problems before it becomes critical. Management control has three basic needs: establishing standards; monitoring decision and comparing it to the standard; and making corrections on any distortion that occurred between the true decision and the standard. Control is a dynamic process because it is a continuous process. Control process consists of three basic methods: future control which is also known as prevention control; concurrent or present control; and feedback control. There are five forms of control that can be used by managers in implementing the control process: bureaucratic, objective, normative, concertive and self. In order to ensure that the organisation can achieve its goals, several important perspectives must be controlled – finance, human resource, quality and customers.

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Autonomous work group Behaviour control Bureaucratic Concertive Corrective action

Normative Objective Output control Prevention control


1. 2. 3. 4. 5. 6.

Managing Teams

By the end of this topic, you should be able to: Examine the differences between groups and teams; Identify the strengths and weaknesses of teams; Appraise the best time to form teams; Distinguish the types of teams available in the current environment; Evaluate the characteristics of teams; and Discuss the factors involved in building high-performance teams.

For the past 20 years, organisations such as Volvo and Toyota have introduced the concept of teams in their production tasks processes. This condition is considered as something new since there were no other organisations that were willing to do so before. Nowadays, organisations that do not implement the concept of teamwork are considered outdated. The technique of teams is implemented nowadays because there is evidence showing that teams are more efficient in performing tasks compared to individuals when dealing with tasks that require a variety of skills, considerations and experiences. Many organisations have altered their structures in order to develop teams to utilise the talents of the employees optimally. Besides that, some management have discovered that a team is more flexible and responsive towards changes in the environment compared to traditional structures. A team can be instantly formed, moved and disbanded whenever needed. This discussion will try to provide understanding and clarify matters related to teams.

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In an organisation, a particular task is carried out in a group or a team. In your opinion, what is the difference between a team and a group?

Teams and groups are not the same entities. This section will clarify the differences between teams and groups and the differences between group work and teamwork. A group is defined as two or more individuals who interact and are independent of each other towards achieving a certain objective. A work group is generally a group that shares information and makes decisions in order to assist the members to perform their jobs well in the relevant field. Work groups do not need to or do not have the opportunity to be involved in task collection which involves merging and integrating efforts. Performance will be assessed based on individual contribution to the group. In other words, the performance of the group is the total contribution of each member of the group. A team is an interdependent and complementary entity in all aspects among the members, with a partnership commitment towards achieving the same goals. Moreover, teamwork generates positive synergy through co-ordination efforts. Thus, a team is an entity that exceeds a group. Performance is not based on individual contribution but instead it depends on the performance of the team. The definition above clarifies that the success of a team depends on the interdependent relationships and collective effort of the team members. Therefore, team members have mutual influence and significant impact on each other when working together.

Based on what has been explained to you, apply your understanding in identifying the differences between groups and teams in the form of a table. Discuss your answer with your friends.



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Describe briefly the differences between teamwork and group work.

Organisations these days are inclined towards the concept of teams since teams are able to enhance customersÊ satisfaction, quality of products and services, speed and efficiency in product development, job satisfaction of employees or workers, and in making quality decisions. One of the ways teams help to enhance customersÊ satisfaction towards organisations is by forming a team that is specially trained to fulfil certain needs of the customers. Through this method, customers are directly connected to the team in order to fulfil their needs. Organisations also form problem-solving teams, and teams that involve employees who conduct research in order to boost customersÊ satisfaction and prepare suggestions for enhancement. This type of teams usually hold weekly or monthly meetings. Teams also assist organisations to increase the quality of products and services. Unlike organisations with traditional structures where the management is fully responsible towards decisions and performances, teams take direct responsibility regarding the quality of products and services produced. One thing that makes the concept of teams popular these days is the need for speed and efficiency in designing and producing products. In the present business environment, prompt changes in customersÊ preferences demand that an organisation has speed and efficiency. In traditional organisational structures, product development and production take a long time. Since teams have members with various functions, speed and efficiency in designing and producing products are achieved. The implementation of teams can also increase the levels of job satisfaction. It gives employees the opportunity to enhance their skills. This is done by cross training. Cross training is an exercise that trains team members to perform all or most of the work done by other workers. This exercise allows teams to function under normal conditions with no interruptions even with the absence or resignation of a team member. The advantage for the employees is that they are able to broaden their skills and become more competent and confident in performing their jobs.

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Team members always enjoy job satisfaction due to leadership responsibility which cannot be gained from traditional organisations. Teams are allowed to determine their working manner, scheduling, maintenance, equipment, leave schedule, quality control and others. This freedom is very meaningful to the workers. Besides that, due to the rotation of leadership responsibility among team members, each member has the opportunity to develop their leadership skills. Teams share various advantages especially in the aspect of decision making. Problems can be viewed from various perspectives since a team consists of individuals having different knowledge, skills, abilities and experience. Diversity from this angle is able to increase the probability of solving the real problem. Increase in knowledge and information makes it easier for teams to generate various choices of solutions that can lead to quality solutions. Since each member is involved in the process of decision making, they are considered as being more committed to achieving the solution to a particular problem. In many cases, a team is able to perform better compared to an individual worker.

The implementation of teams brings numerous benefits to an organisation but the organisation also has to face a few disadvantages of teams. Some of the disadvantages are high turnover rate at the initial stages, social loafing and the behaviour of self-restriction. Table 10.1 exposes you to the disadvantages of teams.
Table 10.1: Disadvantages of Teams Disadvantages of Teams Disadvantages High turnover rate Description Turnover rate is high especially at the initial stage of a team formation. A team is not necessarily accepted by everyone. Inability to adapt to other members and the internal environment of a team are the main factors for high turnover rates at the initial stage of team formation. Besides that, inability to take responsibility, inability to contribute effort and lack of experience are some other factors that contribute to this disadvantage.



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Social loafing

This happens when employees fail to contribute towards job sharing. In other words, social loafing means that a person becomes a sleeping partner in the team. Social loafing usually takes place in a large team where it is difficult to identify and monitor the efforts contributed by each member of the team. In other words, members that practice social loafing will try hard to hide their activities and this condition causes the phenomenon of social loafing difficult to be detected. The condition that leads to the behaviour of self-restriction is when there are team members who do not have their own opinions or views and donÊt take part in discussions. All these can diminish the performance levels of the team. This matter is seen to be similar to the condition of social loafing but actually it is not. Social loafers try to ensure that other members do not know about their activities but the behaviour of self-restriction does not.

The behaviour of self-restriction

You are clear about the advantages and disadvantages of an organisation practising teamwork. Using your own understanding, identify the five advantages and give your answer in the form of a table. Discuss your answer with your friends.

List the advantages and the disadvantages of teams that you know.

In your opinion, how important are teams in organisations? Why canÊt a task be carried out by an individual?

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This section will discuss the time and conditions when a team must be used in order to maximise its benefits. Firstly, a team can be used when the objective or meaning of usage is clear. Many organisations implement the concept of teams because it is popular or due to the assumption that a team is able to solve all kinds of problems. However, a team will only succeed when team members know the reason why the team is formed and what they are required to do. Secondly, a team is needed for tasks that cannot be carried out individually but through the merging of these individuals. This means that a team is needed when a task is complex, needing diversity of perspectives or requiring repetitive interaction with other people in order to complete it. Nevertheless, if a task is simple and does not require diversity of perspectives or repetitive interaction with other people, a team is not required. Thirdly, a team can be used when rewards can be provided for team work or team performance. Team rewards depend on the team performance rather than individual performance. This is the key to providing rewards for the team behaviour or effort. If the level of reward is not in line with the level of performance, the team will not be able to function as required. If a particular task is more inclined towards individual work rather than teamwork, the following problems will arise. Fast workers will give pressure to slow workers in order to increase the speed of production. Since payment is determined by team performance, fast workers will find that their payment declines compared to before while slow workers will find that their payment increases. This condition can result in the reduction of overall productivity. Fourthly, a team can be used when there are many resources readily available. Resources needed by teams include training, time, place and collaboration methods, equipment and consistent information and feedback regarding teamwork processes and work performance. Failure in obtaining these resources, such as lack of training to support the transition from individual work to teamwork, and insufficient time to learn the methods of operating machines, will result in the failure of team implementation. The most perceptible problem is the difficulty faced by management in helping or transferring resources to a team that causes the team not to be able to function as required. Finally, a team is needed when it has a clear authority in managing and modifying the working method. This means the team is given the freedom to determine the working method, making the work schedule, training and maintenance, or ways to solve customersÊ problems. A team with clear authority will be able to manage and perform the task better compared to teams having no authority.



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Table 10.2 shows when teams can or cannot be used.
Table 10.2: When Teams Can or Cannot be Used Use Teams When⁄      The objectives and reasons of its formation are clear Work cannot be carried out individually Rewards can be given based on team work Plenty of resources available Team has the power to manage and alter the working methods carried out      Do Not Use Teams When⁄ The objectives and reasons of its formation are not clear Work can be carried out individually Rewards are only given based on individual effort and performance Resources needed are not available The management is still monitoring and influencing the working methods being carried out

Based on your understanding, describe the condition where the use of a team is unnecessary.

An organisation can choose the type of team to be formed. What should be kept in mind is the reason why the team needs to be formed. The type of team must be suitable for the reason and type of tasks that need to be carried out. Figure 10.1 illustrates the seven types of teams which exist in our environment today.

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Figure 10.1: Types of teams in a particular organisation


Employee Involvement Team This is a team that provides advice and suggestions to management relating to certain matters. Meetings among members of the team are held during working hours and are done periodically. Issues such as safety at the workplace, customer relations or quality of product are often raised by this team. This team can only give advice and suggestions but does not have the power to make decisions. Membership in this team is voluntary but selection is from the circle of experts. The idea of forming this type of team is that the person closest to a particular problem or the real working situation is the best person to give advice and suggestions. These advice and suggestions are given to management and it is up to management to make its decisions. Semi-autonomous Team This team has the authority to make decisions and solve problems relating to the main tasks of product and services production is known as a semiautonomous team. This team receives information regarding budgets, work quality, performance and also information regarding products produced by competitors. Team members are trained in various skills and tasks. This team has the power to make decisions just like a supervisor or a manager but the authority received is not complete. The management still plays a role but lesser compared to the traditional work group. Self-managed Team A self-managed team differs from a semi-autonomous team. A selfmanaged team is a team that manages and controls the overall main tasks in the production of products and services. This team can do anything related to production without having to refer to or wait for instructions from management. This includes matters in managing and controlling the allocation of materials, product making, providing services, ensuring the accuracy of delivery and others.





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Self-designed Team This is a team that possesses the characteristics of a self-managed team but also controls the design of the team, work activities and team memberships. This type of team is involved in operational matters related to the team which exceeds the self-managed team. This team has the power to determine the work schedule, leave, how and when a task should be performed, besides determining the membership in the team by conducting interviews and other activities. Cross-functional Team This team consists of employees from different fields or functions in the organisation. Since team members have different functions, knowledge and experiences, a cross-functional team is able to identify the real problems and see them through various perspectives, and are able to generate more ideas and alternatives. This type of team can be used in any organisation and can be formed whether part-time, temporarily or permanently. Virtual Team A virtual team has members in different geographical areas or organisations and uses telecommunications and information technology to carry out activities of the organisation. Meetings among team members are not conducted face to face but instead use a combination of communication and information technology. This type of team is still new and can become a reality with the development of communication technology such as email, the Internet, video conferencing and more. Since members do not meet in physical locations, entry of suppliers, customers and influential groups can be carried out. The advantage of this team is that it is a flexible team. Team members can work with one another without having to meet face to face, without considering the time limit or organisation. The weakness of this team is that team members have to learn how to voice out new approaches since physical meetings in this group no longer exists.




Project Team Project team is a team formed to carry out a task or project in a particular time period. This type of team is usually used for the purpose of developing new products, upgrading existing products, developing new information systems or in building new offices and factories. A project team is usually led by a project manager who has full responsibility for planning, membership and team management. A project team is made up of members from different functions and also involves members from suppliers and customers. The advantage of this team is that it is able to eliminate communication barriers among functional areas since its membership consists of members having

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different functional areas. Besides that, this team is flexible where it can be disbanded or moved to a new project after the completion of a particular project.

From the description below, state the type of team based on the characteristics given: (a) (b) A team having the authority to determine the memberships in the team. A team where its members are in different geographical areas or organisations.

To ensure the smooth running of tasks and prolonged level of motivation in a team, team members must unite and cooperate with each other. In your opinion, how can unity be developed in a team? The understanding of characteristics of teams is crucial to ensure the success of a particular team formation in an organisation. The four characteristics you need to know are team norms, team unity, team conflict and phases of team development.

10.6.1 Team Norms
Team norms are informal rules or standards which are agreed upon in order to control the behaviour of team members. Team norms have a strong influence on work behaviour. An effective work team develops norms that are related to work quality and accuracy, presence, safety and sincerity in giving opinions or ideas. Besides that, it is able to develop commitment towards team work, trust in management and job satisfaction. Usually, team norms are related to positive decisions but team norms can also bring negative influences towards the team. Teams having negative norms can influence team members to become more inclined towards behaving negatively.



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10.6.2 Team Unity
Team unity refers to how far team members are attracted to becoming members of the team and motivated to stay permanently in the team. Team unity is able to sustain and reduce the turnover rate of team membership. When teams possess high unity levels, each member is more motivated to contribute to the team and expect guarantees from other team members. This will accelerate the achievement of high performance. In order to develop unity in teams, organisations must ensure the involvement of each member in the team activities or meetings. Secondly, the organisation must create opportunities so that team members can cooperate with each other by modifying work schedules or work place layouts. Thirdly, get the team members to be involved in off-work activities.

10.6.3 Team Conflict
Conflicts and misunderstandings do exist in any teams. What causes conflicts to arise? Conflicts can be caused by fighting over limited resources, arguments regarding certain issues, discrepancy in opinions, and others. Usually, conflict is viewed as a negative matter. The key here is that, rather than trying to avoid conflicts in a team, try to ensure that a team faces a suitable conflict instead.

10.6.4 Phases of Team Development
Development and growth of a team will undergo four phases. The phases consist of forming, storming, norming and performing as depicted in Figure 10.2. However, not all teams who undergo these four phases are able to produce high levels of performance. If a team is not perfectly managed, the team will face a downturn and go through the phases of de-norming, de-storming and deforming.

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Figure 10.2: Phases of team development Source: Williams, C. (2000). Management. SouthWestern-Thomson Learning


Forming is the first phase in the development process of a particular team. This is the beginning of the first meeting among team members, forming the first perceptions and trying to discover the feelings and conditions if they continue to become members of the team. This phase also forms several team norms where team members start searching for behaviours that will be accepted or rejected by the team. The team leader must provide time frames for team members to get to know each other, and set up the basic rules and team structure.


Storming is the second development phase that is characterised by conflicts and disagreement where team members have different opinions regarding with, what and how a task should be carried out. This situation takes place when team members start working together, resulting in a clash of personalities and work styles. Besides that, as team members, they have to sacrifice a lot of their own personal needs. In this phase, team members will start voicing their opinions and needs besides trying to build up positions or roles they desire in the team. Moreover, team members will start to show an attitude of uneasiness towards what needs to be done by the team and how it should be done. Team performance at this level is low and there are some who are totally ineffective. At this point, the role of the team leader is very much needed in order to generate the teamÊs focus towards the goals and performance levels. Team members need to be more patient and more tolerant towards each other too.



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Norming is the third phase in the development of a team. Each member will start to resolve any conflict or misunderstanding as one of their roles as a member of the team. Positive norms will begin to bloom and team members should know what is expected from each member of the team. Misunderstandings start to be resolved, team spirits start to build up and unity becomes stronger. At this level, members will start to accept the goals of the team, move together as a unit and start to show increase in performance and work together effectively. There are certain conditions where teams will face repetition of the storming and norming phase until they truly find the suitable norms and start to shift to the next phase. Performing is the final phase in the team development process. During this phase, performance will start to increase since the team becomes more matured and fully functional. At this stage, members must be fully committed and start thinking as a member of the team. Members become loyal to one another and start to feel responsible towards the success and failure of the team. At this phase, members already feel the joy of being part of the team.


After a certain time gap, if a team is not perfectly managed, performance will start to decline and the team will go through the phases of de-norming, destorming and de-forming. (a) In de-norming, which is the repetition of the norming phase, team performance starts to decline in terms of time, size, scope, goal and membership. For example, when there are new members joining the team, existing members will become defensive when matters regarding the methods of performing certain tasks are questioned by the new members. Expression of ideas and opinions are no longer open. This is further added by the condition of new members actively or passively rejecting the roles and behaviour of the team which was formed before. De-storming is a condition where the team comfort starts to decline. Team unity becomes weaker when team members refuse to follow the team norms and do not participate in team activities. Feelings of anger will rise when the team falls into conflicts and the team starts to move into the final stage known as de-forming. In the de-forming phase, members of the team will position themselves in order to control fragmentation in the team. Thus, factions start to form in the team. Members will avoid meeting each other and the team leader. Team performance decreases at a maximum level when members no longer think about team performance.



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If a team is managed as properly as possible, the decline in team development will not arise. A manager needs to identify the influences that can lead to the downturn of the team. He can take initial steps to prevent bad influences from continuing to threaten the team.

Based on your understanding, state the phases involved in team development.

We have already identified the phases of formation and the downturn of a team. Based on your understanding of what you have learned so far, what are the factors that influence the level of performance in teamwork? There are seven issues related to teams that you need to know in detail. These issues can influence the level of performance of teamwork. This can be seen in Figure 10.3.

Figure 10.3: The seven issues that influence the performance levels of teamwork



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Team Size The best team is the one made up of a small number of members. When the number of members exceeds 10 or 12, it is difficult to perform tasks successfully. This is because the team will face interaction problems on issues related to the job. A large number of members might also fail to develop the necessary unity, commitment and accountability needed to achieve a high level of performance. Hence, in forming a team, the manager needs to ensure that the number of team members does not exceed 12 people. Capability of Team Members In order to perform a task efficiently, a team needs three types of different skills. The first type comprises technical skills related to the job. The second type comprises skills in solving problems and making decisions that can be identified from the actual problem by generating alternatives, evaluating each alternative and choosing the best alternative. The third type involves good listening skills, ability to solve conflicts and other interpersonal skills. No team can achieve its actual potential without developing these three skills. Providing Role Models and Promoting Diversification A team possesses different needs and team members must be chosen based on their personalities and priorities. A high-performance team is a team that is able to match its team members to suitable roles. Matching members with suitable positions based on what they have provides opportunity for the members to contribute their best to the teamÊs overall performance. Therefore, teams need a diversity of skills and this can be achieved by diversifying members of the team without the existence of any form of discrimination. Having a Commitment Towards the Same Purpose A successful team provides direction, momentum and commitment to its members. The same purpose will result in members knowing their roles, direction and guidance in contributing efforts towards the purpose agreed upon together. Building Specific Goals A successful team is able to change its purpose into specific goals which can be measured and achieved. These specific goals provide clear communication space and assist the team in maintaining their focus. Suitable Performance Evaluation and Reward Systems Traditionally, performance evaluation and granting of rewards are only dedicated to individuals but when a team is formed, the system of performance evaluation and reward scheme needs to be modified. Suitable performance evaluation systems and reward schemes which are based on






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teamwork rather than individuals will generate effort and commitment among the members of the team. (g) Developing Absolute Beliefs A successful team is a team that has absolute beliefs among its members. Team members believe in integrity, characters and the capability of the other members. These developed beliefs will assist members to perform their work better. This is because each member believes that the other members have the capability and ability in solving the assigned tasks. Therefore, the result from this combination of beliefs and contribution will assist in the success of the team.

Essay Question 1. 2. Explain briefly why the number of members in a team should be kept small. Explain the meaning of team work and give your comments on why this concept is becoming more popular these days.

Multiple Choice Questions 1. Which process refers to the training of team members on how to perform all or most of the tasks performed by other members? A. Cross training B. Job enlargement C. Horizontal training D. Job enrichment Which is TRUE regarding the characteristics of a high-quality team? A. Having members with technical skills related to the job. B. Having a large number of members. C. Having members who can afford to be independent to perform the job individually. D. Having members who become social loafers.




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Which of the following is NOT applicable to teams? A. B. C. D. A team with a large number of members will not be able to show good performance. The strategies of organisations must be drafted according to the conditions of the teams. Teams are needed when the goals are clear. A team will become weak if there are members who restrict themselves from participating in team activities.


What is TRUE about teams? A. A team is the same entity as a group. B. Teams cannot be used when resources are limited. C. Semi-autonomous teams possess more power compared to selfmanaged teams. D. Project team is the type of team that is the most difficult to be disbanded. In which phase of team development does high turnover rates occur? A. Forming B. Storming C. Norming D. Performing


TRUE (T) or FALSE (F) Statements 1. 2. Teams can help organisation in increasing the quality of products and services produced by the organisation. Team members with the behaviour of self-restriction will try to ensure that no other members of the team know about their activities but this does not occur for a social loafer. A team that can only give advice and suggestions but does not have the power in making decisions is referred to as an employee involvement team. Team unity is considered as informal in the aspect of the agreed upon rule or standard that regulates the behaviour of team members. A large-sized team made up of between 15 to 20 people is considered as a good team because it is able to generate diversity in contributing views and opinions.


4. 5.

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Managing Teams Caselet

1. 2.

What is the problem in the above scenario? What would your advise be to the team leader?

    

A team is an entity that is able to provide synergy to the development of organisations. It has its own advantages and disadvantages. If a team is formed at the right time, the advantages gained might exceed the disadvantages. The formation of a team must be carried out with proper planning to maximise its advantages. Therefore, knowledge regarding the types of teams and understanding on the team characteristics are very important for the purpose. Besides that, organisations also need to have knowledge regarding the issues that will help towards forming high-performance teams.



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De-norming De-storming Forming Norming Social loafing

Storming Team norms Team unity Teamwork

Topic pi

1. 2. 3. 4.

Innovation and Change

By the end of this topic, you should be able to: Describe the importance of innovation in organisations; Explain the ways to manage innovation effectively; Discuss four factors that cause change and ways to manage the changes in organisations; and Examine the obstacles to change in organisations and ways to overcome them.

This section will begin by discussing the issues related to organisational innovation. Organisational innovation means success in the implementation of creative ideas in the organisation. Where do the ideas come from? Creative ideas come from creativity, that is, the creation of ideas that are useful for the organisation. Innovation can bring about many advantages and benefits to the organisation but the main benefit is that it is able to create and retain the competition advantage of the organisation. The second part of this topic will explain the change in organisations. Organisational change means the modification or alteration of organisations from one structure, quality or condition into another form from time to time. Organisations need to change due to several reasons; the most important is environmental change. This section will explain the environmental factors that affect organisations, how important change is to an organisation and how to manage organisational change effectively.



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There are several matters that we need to know when discussing innovation. The following explains matters related to innovation and from there we will be able to know why innovation is crucial for organisations these days.

In your opinion, with the rapid development in information technology nowadays, how far does innovation play an important role in an organisation? Discuss this with your friends.

11.1.1 Technology Cycle
According to Williams (2000), technology refers to knowledge, tools and equipment, and also the techniques and methods used to change inputs into outputs. Technology cycle begins with the founding of a certain new technology and ends when the technology achieves certain limits, becomes outdated and is replaced with new technology that is more sophisticated. The S-pattern innovation curve is a curve that represents the life cycle of technology.

Figure 11.1: Technology life-cycle chart Source: Williams, C. (2000). Management. SouthWestern-Thomson Learning

At the early stage of the existence of technology (denoted by point A), there is still a lot more to be learned from the technology in order to develop it and this results in a slightly slow progress. From point A to point B, there is a slight curve which indicates increase in effort (in the form of finance, research and development) that only provides a slight increase in the performance of the technology.

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When this technology matures (indicated by point B), researchers have identified the methods to obtain better performance from that particular technology. The curve from point B to point C indicates that the injection of effort in a small quantity is already enough to increase the performance of the technology to a stimulating level. Point C indicates that additional effort in developing the technology will only result in a slight increase in performance. More importantly, point C denotes that the technology has reached its maximum level. This means that additional efforts will no longer bring any benefits or increase the performance of that particular technology. After the technology has achieved its maximum limit, that is, at the end of the S-curve, increase in performance usually comes from new or the latest technology. The second S-curve is the curve that represents the new technology replacing the old technology.

List the phases involved in the life cycle of technology.

Innovation must be managed properly for organisations to enjoy its benefits. If not properly managed, it will not bring any benefit and may bring about bad results for the organisation. The next section will explain the methods implemented to manage innovation in organisations.

Why must innovation that is a result of ideas and staff be managed and administered?

11.2.1 Managing Innovation Resources
Innovation begins with creativity. Therefore, an organisation needs to establish a creative work environment in order to generate creativity. A creative work environment means a workplace culture where employees believe that new ideas are evaluated, appreciated and encouraged. There are five factors that encourage creativity in the workplace: challenging work; encouragement from the



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organisation; encouragement from supervisors; encouragement from the work groups; and freedom (Williams, 2000). Work will become challenging when it requires hard work, focus and attention, and viewed as important by other people in the organisation. Challenging work will encourage creativity since it is able to create a reward of experience in terms of the psychology of the executor. When accepting challenging work, an employee will try to figure out the methods or ideas that can assist in performing the particular job. The success in performing the challenging job will give satisfaction to the employee. A creative work environment requires three types of encouragement, namely encouragement from the organisation, encouragement from supervisors and encouragement from the workgroups. (Refer to Figure 11.2)

Figure 11.2: Factors that encourages creativity in the work place


Encouragement from the organisation Encouragement from the organisation is present when the management encourages risk-taking and new ideas, supporting and making good evaluation towards particular ideas, grant rewards and recognition towards creativity and encourages the sharing of new ideas among the sections within the organisation. Encouragement from supervisors Encouragement from supervisors or managers is the form of encouragement given by those who are in the chain of command of an employee. This type of encouragement is given by the managers in order to provide clear goals to encourage open interaction with subordinates and actively show support towards the development of new ideas. Encouragement from the workgroups Meanwhile, encouragement from the workgroups exists when members of the group have diversity of experience, education and background, and when there is openness in the contribution and sharing of ideas.



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Freedom here means providing a slight amount of power or authority to the employee towards his work activities. The power given can provide space for the employee to be able to make decisions. The process of decision making will produce useful ideas that are able to assist the employee to perform his work successfully. However, control must also be given to avoid any occurrence of unwanted issues, for example, the employee takes the opportunity to do something negative as a result of the authority given.

Based on your understanding, describe briefly the following: (a) (b) (c) Innovation Technology Creative working environment

Organisations normally face two types of environments: stable and dynamic. It is almost difficult nowadays to find a business environment that is completely stable. Organisations nowadays face a dynamic environment where the environmental factors, either specific or general, change rapidly. If an organisation is not capable of handling environmental changes, it has a poor chance of maintaining its position in its area of business. Therefore, the organisation must always monitor and view the effect of each of the changes. Any change may bring either opportunity or threat for the organisation. It is because of these effects that the organisation needs to make changes. What is meant by organisational change? Organisational change is the need for an organisation to change from one condition to another to take the opportunity or avoid a threat caused by environmental changes in order to retain the survival of the organisation.

11.3.1 Forces of Change
As you already know, organisations nowadays face environments that are dynamic and continually changing. What are the forces that demand an organisation to change? One of the forces is the change in the conditions of the workforce. The condition of workforce nowadays requires the organisation to be



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suited to the various cultures in the environment. This is because the current environment provides a diversity of workforce, either diversity from an obvious angle up to something that can hardly be detected. Therefore, the policies of human resource and its practices must be changed in order to attract interest and retain a diverse workforce besides trying to avoid any court action. Technology is viewed as one of the forces that can change the work methods and the organisation itself. For example, the use of computers as one of the tools to monitor and control employees causes the managerÊs span-of-control to become wider and the structure of organisation to become more open. The sophistication of information technology has caused organisations to be more sensitive. Consequently, some organisations now can develop, produce and distribute products faster than before.

From your point of view, what are the ways to make changes in the morals and attitude of staff in their areas of employment?

Starting from the early 1970Ês, due to the rise of the world petroleum price, the world economy has continuously affected organisations. The most obvious example is when the economic downturn took place in Malaysia somewhere around the middle of 1997. The value of the ringgit fell, leading to the collapse of the stock exchange and to the downfall of several of the countryÊs most significant industries. It is the effect of this fall in ringgit value that also caused Malaysia to lose its competitive force in the international market and later forced the government to peg the ringgit to the US dollar. Besides that, the loan interest rates that had gradually increased forced many organisations to retrench their employees and worse, some of them were forced to close their businesses. From the examples above, it is clear that the economy is also one of the factors why an organisation needs to change. Competition also results in change especially in the aspect of quantity and quality. As a result of global trading, competition not only comes from inside the country but also involves overseas organisations. Competition not only involves organisations in the same industry but also those in other industries. Due to this competition, organisations must retain their survival from the threat of competition. Successful organisations are those that are able to adapt to the current flow of competition. They are the organisations that are fast and capable of developing new products and services and selling them in the market.

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Organisations need to adapt to changes in social trends. Changes in social trends could change the preferences and wants of customers.

This change will definitely alter the level of demand towards products and services of the organisation. Not only that, the products and services that were once in high demand become outdated due to this change. Therefore, the organisation needs to make changes in order to adapt to the current condition of social trends. The countryÊs internal and global political conditions affect organisations. If there is any change of government in a country, it will also cause change in terms of the business rules and regulations of that particular country.

Table 11.1: Forces of Change and Their Effects Forces of Change Workforce conditions Examples

           

Increase in the number of professionals Increase in cost of workforce Use of computer and automation TQM Programmes Increase in interest rates Crisis in currency value Global competition Mergers and acquisitions Increase in educated groups of people Change in preferences Downfall of communist countries Change to new government




Social trend chart


The transfer of power from the Prime Minister of Malaysia to his deputy causes surprise and worry for foreign investors in Malaysia. Is this good for the country? Discuss.



 189

Other than the examples given in Table 11.1, give one example of effects for each of the forces of change.



Initiating change refers to carrying out something using new ways and methods compared to before. Making changes in organisations without any planning can lead to the destruction of a particular organisation. Therefore, organisation must make planned changes. Planned changes means changing activities that are necessary and required and these changes have to be goaloriented.

What is your opinion on the differences between changes that are planned with changes that are carried out without proper planning?

According to Robbin (1998), there are two goals for changes, that is: (a) (b) To increase the capability of the organisation in order to be able to accept challenges and changes in the environment; and To change the behaviour of individuals within the organisation.

If an organisation wishes to stay in the business, it must respond to the changes in the environment. When competitors produce new products and services, the government starts to implement new rules, the supply of resources becomes scarce and any other changes that take place, organisations must be able to adapt to these conditions. Generating innovation, granting power to employees and introducing teamwork are some of the examples of planned changes activities that are directed as a response towards the changes in the environment. Since the success of an organisation depends on the efficiency and effectiveness of employees, planned changes are also concerned with changing the behaviour of individuals or groups within an organisation.

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In implementing changes within the organisation, there are two types of changes, that is: (a) (b) Change of first order; and Change of second order.

First order change is a linear change, slow in nature and implemented in stages. This change is made without any apparent change in the basic structure of the organisation. It is also conducted that way if there is no strong pressure from the environment. Besides that, if the particular organisation has a strong culture, changes must be implemented slowly and in stages. The second order change is a change that is radical in nature, multidimensional and multilevel. This type of change needs high levels of leadership in order to realise the changes. It takes place when there is intense pressure from the environment that disrupts the survival of the organisation. This demands the organisation to make drastic changes.

Do you agree that second order change requires a leader who is charismatic and has a clear vision in order to ensure the continuity of the organisation? State your reasons. We have already discussed what is meant by planned changes, its objectives and the types of changes that can happen in an organisation. Now the question rises on who will be responsible for managing the activities of change in organisations. The answer is the change agents. Change agents are anyone, managers, nonmanagers, employees or external negotiators. In the effort to make a significant change in the organisation, the management is more inclined to use external negotiators who have more knowledge regarding theories and methods of changes.

Try to explain briefly the two types of changes in organisations.



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11.4.1 Aspects that Can be Changed by Change Agents
There are aspects in organisations that can be changed by change agents, which are structure, technology, physical layout and employees. (Refer to Figure 11.3)

Figure 11.3: Aspects that can be changed by change agents


Change of Structure Structure for an organisation is not something that is absolute. Structure must be changed to adapt to the conditions in the environment. Thus, change agents might need to change the structure of the organisation if necessary. The structures of organisation explain the methods of work divisions, combined and coordinated. Change agents can change one or more of the important elements in designing the organisation. For example, widening the span-of-control, combining the responsibilities of departments and others. Rules and procedures can be implemented to increase standards or the level of decentralisation can be increased to accelerate the process of decision making. Change agents can introduce significant modification in the true design of organisations. This can include the change of form from a simple structure into a team-based structure or in other words, changing the form of departmentalisation. Change agents can also take into consideration the redesigning of work and work schedules. Another example of modification is the reward system for employees. Motivation can be increased by making improvements in the employeesÊ rewards system. For example, by introducing the system of bonus based on performance and profit sharing between organisation and employees.

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„Change in the structure of an organisation can increase the moral of the staff.‰ Do you agree with this statement? Give your reasons.


Change of Technology Technology is another aspect in the organisation that can be changed or modified by change agents. Nowadays, changes in the technological environment involves introduction to tools, equipments or methods that can either be new automation or computerisation. Competitive factors or innovation in industry requires the change agents to introduce the new tools, equipment and operation methods. In order to maintain the survival of the organisation, the introduction of new technology will be able to assist the organisation in accelerating product development and distribution to customers. It can also help build the competitive advantage of the organisation. The use of this technology also can ensure the ability and effectiveness of the organisation in the industry.

The change of a particular technology in an organisation will give rise to substantial risk. What are the factors that must be considered to minimise this risk?


Change of Physical Layout Physical layout comprises space and arrangement of tools, equipment and other things in the workplace. This physical layout can influence the work productivity, efficiency and effectiveness of employees. For example, removing walls or partitions or creating an open workspace area in the workplace will facilitate communication among employees. For instance, the management can also change the quantity or types of lighting, level of heat and cold, level of sound, cleanliness of the workplace and the interior design dimensions such as furniture, decorations, and colour. Change of Employees The final aspect that can be changed by change agents is the employees. Change agents can assist individuals or groups within an organisation to work more efficiently. This involves changing the attitude and behaviour of




 193

the members of the organisation through communication, making decisions and solving problems.

Do you agree if a series of developmental training are conducted for the employees in order to help them gain new skills and exposure towards new technologies? Discuss this with your friends.

List organisational aspects that can be changed by change agents.

When change is needed, the ones that are involved will be the organisation and its members. Based on past experiences, if a change happens, we will not be able to avoid facing barriers. In this case, an organisation will face obstacles of change from two parties: the individual employees and the organisation itself. Below is the explanation regarding the sources of obstructions from both the parties.

A change frequently has good and bad implications for an organisation. In your opinion, what is the most difficult barrier to be changed? Discuss this with your friends.

11.5.1 Individual Barriers
The source of change barrier for individuals comes from basic human characteristics itself, such as perception, personality and needs. The following are five reasons why an individual opposes change. One of the reasons is due to human habits. Habit is a behaviour performed by an individual periodically. The inability of individuals to carry out the behaviour known as habit (for instance, not being able to have coffee before reporting for duty) will result in the individual feeling uneasy or anxious. Individuals feel that

194 



if changes are to be made, then they will no longer be able to satisfy their habits. Besides that, individuals feel anxious towards change due to their feeling of fear towards the guarantee and security of their employment. For example, if an organisation introduces the use of robotic equipment in the production process, individuals will develop the feeling that their work is no longer secure. Economics is also one of the factors that cause individuals to oppose change. Individuals have the assumption that change will affect their income. Changes in work activities or developing a new work routine can raise the feelings of fear in the individuals. Individuals become worried that they are no longer able to perform the work following the new standards, particularly if payment made is based on productivity. Besides that, the anxiety towards something that is unknown causes individuals to oppose changes. They do not know whether they can perform under the new approach. This causes the individuals to think only of negative aspects. Other than that, the reason that contributes towards change barriers is the selective nature in processing information. Individuals only want to hear and process information that they desire or information that are equal to their assumptions. Therefore, when this condition rises, individuals are usually inclined to have negative thoughts.

11.5.2 Organisational Barriers
There are several sources that are identified as being organisational barriers. Organisations usually have built in mechanisms that are able to provide stability. When an organisation faces the need for change, the organisation fears that the stability felt all this while will be severely affected. This condition is referred to as structure inertia. Restriction of change focus refers to the condition where an organisation makes changes on a certain sub-system only. An organisation is formed from the combination of interdependent sub-systems. Therefore, modification cannot be made towards one sub-system without involving the other sub-systems. Thus, if changes are made towards one sub-system only, the changes may neither be acceptable nor successful. Group inertia is one of the sources of organisational barriers. It is inertia in the form of a group that creates barriers towards change. For example, individuals have already agreed to accept the changes that will be made but the employee union does not want any change, which then causes individuals to be forced to oppose the change and this is referred to as group inertia.



 195

Organisational change may be a threat to the expertise of certain groups. These groups are worried that if change takes place, their expertise may no longer be needed and this will further jeopardise the security of their employment. Besides that, changes are also viewed as a threat towards the authority of some groups. For example, the introduction of involvement in decision making and the formation of self-managed teamwork are the types of changes that can threaten the authority of managers. Other than that, changes are also assumed to become a threat towards the existing allocation of resources. Some groups in the organisation that have control over the resources usually view change as a threat to their position. These groups fear that change will result in scarcity or permanent loss of resources that have been enjoyed all this while.

List the differences between individual barriers and organisational barriers.

There are six tactics that can be implemented by change agents to overcome change barriers. (a) Communication and Learning Barriers can be reduced through communication with employees in order to help them to see the logical aspect of a particular change. This tactic is based on the assumption that the source of barrier is caused by obtaining the wrong information, or interpreting information in the wrong condition, or through a bad communication condition. This tactic is used to provide clarification and accurate information regarding the changes which can help in reducing barriers. Communication can be implemented through face-to-face discussions, memos, group presentation or reports. Involvement This tactic assumes that it is difficult for a person to oppose change if he himself is also involved in the effort and activities of change. With this involvement, the involved parties will contribute their expertise and involvement and this will reduce barriers. Not only that, commitment can also be obtained and this will enable an increase in the quality of change.


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Facilities and Support Change agents can offer forms of facilities and support to reduce barriers. When employees have a high level of anxiety, counselling services and therapy, new skills training or paid leaves are forms of facilities and support that can be given to employees. Negotiation Change agents can also deal with change barriers by making valuable exchange in order to reduce barriers. For example, if the barriers come from some individuals having power, reward packages can be used as negotiation substance. Besides that, this reward packages and offers will be able to fulfil the needs of the individuals. Negotiation tactics are most suitable when change barriers are caused by powerful individuals in the organisation. Manipulation and Co-optation Manipulation refers to the effort of changing the standpoint of a person. Altering or changing facts to make them interesting, restricting bad information and creating rumours are some of the ways to obtain employeesÊ agreement. Co-optation is the combination of manipulation and involvement. The act of co-optation will try to ÂbuyÊ group leaders who cause barriers by providing these leaders important roles in making change decisions. Advices from these leaders are required, not to find the best solution but as confirmation. By ÂbuyingÊ these leaders and successfully changing their standpoint, indirectly it will also change the perception and standpoint of their followers. Force This is the final tactic that can be implemented by change agents. This is an application that uses threat towards the person who is a barrier. For example, threat to be moved to another department, losing the chance of a promotion, and a bad performance evaluation are threats imposed if the person does not want to abide by the changes that will be made.




If you are the general manager of an organisation, what are the factors needed to overcome barriers towards change?

Give the differences between negotiation, co-optation and force.



 197

Change to be made by a particular organisation must be managed as properly as possible in order to avoid the occurrence of any negative matters especially from groups that obstruct change. Change can be managed using several ways: (a) (b) (c) Liquidation: Refers to getting individuals who are affected by the changes to believe the need for these changes. Change intervention: Refers to the processes used towards employees and managers in order to change their behaviour and work practices. Freezing: Refers to supporting and strengthening the changes that were successfully carried out in order for it to continue. Table 11.2 explains several suggestions that can be used by managers when there are groups who are barriers to change by using the suggestions by Kurt Lewin.
Table 11.2: Things that need to be Done When Employees form Barriers towards Change Source: Williams (2000) Liquidation  Sharing thoughts with employees on why change is needed. Exhibits sympathy towards the difficulties faced by the managers and employees due to the change.  Changes Explaining the benefits that can be gained from changes. Identifying respected individuals in the organisation to manage the efforts of changes. Allowing individuals to accept the suitable effect from the changes, for example while the employees are busy carrying out their work. Freezing  Upper management needs to give support by providing consistent messages and resources.  Let everyone know about where and when changes had taken place successfully.

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Communication regarding the changes in a context that is simple, clear, widely verbal or written.

If possible, ensure that no employees are being terminated to reduce fear towards change. Offer training to ensure employees are confident and capable in performing the needs of the new task.

 Offer counselling or other services that can assist the employees in overcoming the pressure due to the change.

What is the importance in managing a particular change that wants to be carried out by a particular organisation? Discuss this with your friends.

Give a brief description on the theory proposed by Kurt Lewin.



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Multiple Choice Questions 1. Which of the following is NOT a method suggested for managing change barriers? A. Education and communication B. Participation C. Test D. Negotiation 2. Which stage in the S-pattern innovation curve indicates that slight effort will produce obvious progress in the technology performance? A. Initial stage of cycle B. Intermediate stage of cycle C. Final stage of cycle D. Initial and final stage of cycle Which tactic for overcoming barriers to change uses threat towards the employee posing the barrier? A. Negotiation B. Manipulation C. Co-optation D. Force What does the method of „buying‰ group leaders who cause barriers towards change referred to? A. Negotiation B. Force C. Co-optation D. Involvement „Change that is radical in nature, multidimensional and multilevel‰ refers to which order of change? A. Fourth B. Third C. Second D. First




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Innovation Caselet

1. 2. 3.

What does innovation mean? What factors would encourage innovation in an organisation? What are some of the barriers to change?

 

Innovation helps organisations to build their own competition advantages. Therefore, it is the duty of every organisation to create a creative work environment to encourage the emergence of creative ideas from its human resources. It is these creative ideas that assist organisations in discovering new technologies. In order to guarantee the survival of the organisation, changes must be made from time to time in order for it to be in line with the changes of the business environment. Organisation changes must be planned as properly as possible in order for it to give benefit instead of detriment to the organisation.

 



 201

Change intervention Co-optation Creativity Encouragement

Freezing Liquidation Manipulation S-pattern innovation


Exercise 1.1
1. Planning is to set and determine the objectives that need to be achieved in the future and what should be done in order to achieve that objectives. Organising is a group of activities, delegation of activities and arranging the suitable authority to carry out the said activities. Leading is an art in directing and channelling human conduct with the aim to achieve all objectives that have been determined. Controlling by performance evaluation for all the objectives set in order to determine the reasons for deviation and taking appropriate action whenever necessary.

Exercise 1.2
TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. F F T T T

Multiple Choice Questions 1. 2. 3. 4. 5 D B A C B


Exercise 2.1
Essay Question 1. One-time usage planning is a planning made to fulfil one particular purpose only. Fixed planning is a planning made for managing events that occurs repeatedly in an organisation.

Exercise 2.2
Essay Question 1. The disadvantages of making plans are: (a) (b) (c) it restricts changes and adaptations in an organization. an incorrect prediction of the future will result in the planning done also being incorrect. separation between the planner and the executor causes the planning made to be ineffective.

Multiple Choice Questions 1. 2. 3. 4. 5. C C D C B

TRUE (T) / FALSE (F) Statement 1. 2. 3. 4. T T F F


Exercise 3.1
1. Certainty condition – where the decision maker has the complete information in assisting him to make decisions. With this complete information, the decision maker will be able to know for certain on the results that will be generated by each decision alternatives, and later choosing the alternative that will bring the most optimum result to be executed. Uncertainty condition – a condition where the decision maker does not has any information to be used in assisting him to make decisions. Thus, the decisions made depend most on the experience and consideration of the decision maker. Risk condition – in this condition, the decision maker has the information needed to make decisions but the information is incomplete and insufficient. Therefore, the results generated from each decision alternatives are not able to be predicted for certain.

Exercise 3.2
Bounded rationality, that is, decision making is bounded by certain problems such as limited resources, excess information, memory problem and expertise problem of the decision maker. The general mistakes in decision making are: making biased decisions or making decisions purely based on intuition alone without taking into consideration the available facts. Decision making in risk environment also will limit the rational decision making. This is because incomplete information can result in not making the best decision.

Exercise 3.3
1. Decision making can be improved through these methods in the process of making decisions: (a) Implementing the rules of decision making namely the law of priority and rule of minimum condition; (b) Conducting the test of variable; and



Making decision in groups.

Exercise 3.4
1. There are two advantages of electronic brainstorming compared to face-toface brainstorming: (a) (b) Group members are able to state their respective ideas at any times without having to wait for their turns to give out the opinions. Able to avoid the feeling of shame or low self-esteem if the suggestions were rejected since the identity of the contributor is not featured on the computer screen.

Exercise 3.5
Multiple Choice Questions 1. 2. 3. 4. 5. A C D C C

TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. F T F F T

Exercise 4.1
The factors that can influence the structure of an organisation are: (a) (b) (c) (d) Organisation strategy Organisation size Technology Environment


Exercise 4.2
1. (a) Functional Departmentalisation The type of departmentalisation where all jobs and employees are divided into separated units that are responsible towards a particular function of business or area of expertise. Advantage Functional departmentalisation is able to avoid multiplication of work and resource usage in organisation. Disadvantage Functional departmentalisation can delay the process of decision making and produce managers and employees with limited experience and expertise. (b) Geographic Departmentalisation The type of departmentalisation that coordinates the job and employee into separated units responsible in conducting business activities in certain geographical area. Advantage The advantage of geographic based department is that it can help the organisation to act faster and more efficiently towards demand from certain markets within the responsibility of the particular department. Disadvantage The disadvantage of this type of departmentalisation is that it can cause multiplication of work and resource usage in organisation.

Exercise 4.3
1. (a) Chain of Command Chain of command explains who needs to report to whom, that is, individuals who are at the top level are more powerful compared to the individuals at the lower level. Chain of directives also shows the flow of directive path or authority in organisation. Difference between Line Authority and Line Function Line authority is related to the rights of making decision and giving directives to employees who are in the chain of directives of a particular manager. Meanwhile, line function means the activities that




directly contribute in the aspect of invention and sales of organisationÊs products and services to the customers. Span of Control Span of control gives details on the number of employees placed under the supervision of a manager.

Exercise 4.4
1. (a) Job Enlargement Job enlargement means addition of activities or tasks into a particular area of work. Job Enrichment Job enrichment means increasing the depth of job; not only there is an addition in the number of tasks in a particular area but employees are also given the authority and control to make decisions on their job. Job Rotation Job rotation means employees shifted from one area of job specification to another area of job specification either periodically or non-periodically.



Exercise 4.5
1. Mechanistic organisation is an organisation that has a high level of job specification, high level of formality, a rigid chain of directives, practices centralisation of control and vertical or upwards communication. Meanwhile, an organic organisation is an organisation that has a chain of directives that is not rigid, a low formality level, a low level of job specification, practices decentralisation of control and horizontal communication.

Multiple Choice Questions 1. 2. 3. 4. 5. C A B A A


TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. F T T T F

Exercise 5.1
1. Human resource management is a process of obtaining, developing and retaining qualified employees sufficiently towards achieving goals that have been set. Stages involved in the process of human resource management are as follows: (a) (b) (c) (d) Determining the needs of human resource Attracting the interest of qualified candidates Development of qualified employees Retaining qualified employees


Exercise 5.2
Job analysis is a process of detailed study regarding tasks related to a particular work area and human qualities needed in performing the particular job. The result of study will form the job description and job specification. Job description is a written statement that clearly explains the job, duties, responsibilities, activities and performance result required from the job holder. Meanwhile, job specification is a written statement regarding qualifications such as level of academic achievement, work experiences and other skills required from the job holder.

Exercise 5.3
The two types of forecasting of the total number and types of employee are external forecasting of organisation and internal forecasting of organisation.


Exercise 5.4
Organisation can implement two methods of recruitment: internal recruitment and external recruitment.

Exercise 5.5
In the process of selecting qualified candidates, organisation must perform two main processes, which are the process of gathering information to be evaluated and the process of selecting the best candidate for the position offered.

Exercise 5.6
Training methods that can be implemented by an organisation are as follows: (a) (b) (c) (d) On-the-job training Vestibule training Apprentice training Off-the-job training

Exercise 5.7
1. The following are the individuals or groups having potential in becoming the job performance evaluator for an employee: (a) (b) (c) (d) Supervisors/managers Colleagues Subordinates Other parties who are related to the particular employee such as customers, suppliers and others.

Exercise 5.8
Financial rewards are rewards in terms of money such as pay of wage, commission, bonus, share ownership, and dividend payment given to employees as a return for their contribution of energy and effort towards the organisation. Meanwhile, employeesÊ benefits are non-financial rewards given to the employees such as medical facilities, travelling, life insurance, discounts on products and services of the company, paid leaves and sick leaves.


Exercise 5.9
1. The four ways of employee separation that are usually faced by employees and organisations are: (a) (b) (c) (d) 2. Employee termination Organisation downsizing Retirement Employee turnover

There are four basic to the decision of reward granting which are levelled payment, variable payment and payment structure and employment benefits. The decision of levelled payment means determining the decision in making payment to employee at the level higher or lower or at the same level with the wage payment tier in the labour market. Variable payment is the payment decision made in variable from one individual to another based on the individual performance and the organisation. Meanwhile, payment structure refers to how far employees in the organisation receive different levels of payment. Employment benefits cover rewards other than the direct salary given to the employees.

Multiple Choice Questions 1. 2. 3. 4. 5. A B A C D

TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. F F T F T


Exercise 6.1
Among them is to motivate, inform, control and to fulfil social needs. Communication in the form of motivation has the purpose of influencing the behaviour of the members of an organisation. Communication also has the role of a control function. Communication will coordinate and unite work and tasks. Managers need to communicate to fulfil social needs. Communication has a role in fulfilling social needs through interactions that are not related to work and emotions.

Exercise 6.2
Communication is an act of sending or spreading information. Communication is a dynamic and complex process and involves many factors. There are eight elements involved in the communication process which are, sender, encoding, message, channel, decoding, receiver, feed back and disruption/Noise.

Exercise 6.3
TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. F T T F T

Multiple Choice Questions 1. 2. 3. 4. 5. B A D B D


Exercise 7.1
Need-based models are motivation models that emphasise on the specific needs of human and internal factors that give the power to direct and stop actions. Need-based models explain motivation as a phenomenon that takes place internally. Process-based models are motivation models that focus on the understanding of thinking or cognitive process in the mind of individuals and affect behaviour.

Exercise 7.2
Motivation factors are factors related to the work being carried out and it is related to the positive feeling towards the work. Motivation factors consist of the work itself, achievement, career growth and responsibilities. Hygiene factors refer to the context of work and the environment where the work is being carried out. These factors are supervision, workplace condition, individual relationship, salary, safety and administration and policies of the company.

Exercise 7.3
Expectancy theory has the purpose of predicting and describing the relations between task and effort. It suggests that work motivation is determined by perception and beliefs of individuals towards the relationship between effort and performance and beliefs towards result expectation related to the different levels of performance. The equity theory focuses on the feelings of individual regarding equality in the treatment given compared to other people. This theory suggests that individuals will try to reduce the inequalities felt if it exists.

Exercise 7.4
Two types of reinforcements used are elimination and punishment. Elimination involves the absence of positive outcome or effect, or drawing back the positive outcome that affects the desired behaviour. Punishment is the giving of negative effect as the result of the occurrence of undesired matters. As an example, an employee who is always late for work can be suspended or have his pay confiscated. Both forms of elimination reinforcement and punishment can be used to reduce the frequency of undesired behaviour. There are many studies conducted had shown that rewards can increase the level of satisfaction and motivation compared to punishment.


TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. T F F T T

Multiple Choice Questions 1. 2. 3. 4. 5. C C D D A

Exercise 8.1
From both studies, the results achieved are quite similar. Both have given two main dimensions which are task dimension and relation dimension.

Exercise 8.2
Favourable situations occur when leaders are able to influence their followers and this is determined by leader-subordinate relations, task structures and position power. Generally, a leader with relations orientation and a high LPC grade are considered as better leaders in intermediate favourable situations. Leaders that are task-oriented with low LPC grade are better leaders in very highly favourable situations or in unfavourable situations.

Exercise 8.3
Transformational leaders will motivate their employees to perform more than what have been expected by initiating the feelings of importance and value of the task in each individual. This can be done by creating interest in employees to perform every matter for the sake of the interest of the group and the organisation besides fulfilling their own needs of self-achievement. Transactional leadership is based on the process of exchange, where subordinates are given rewards for good achievement and punished for unsatisfying achievement.


TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. F T F T T

Multiple Choice Questions 1. 2. 3. 4. 5. C D D D B

Exercise 9.1
Control is a process in ensuring that organisational activities are running according to the plan. This process can be carried out by comparing the true performance with the standard that had been established and taking corrective actions in order to rectify any distortion that does not comply with the standard.

Exercise 9.2
Control process consists of three basic methods which are future control which is also known as prevention control, concurrent or present control, and feedback control. There are five forms of control that can be used by managers in implementing control process; bureaucratic control, objective control, normative control, concertive control and self control.

Exercise 9.3
One of the important areas that need to be controlled is the area of finance. There are times when financial performance does not reach the standard or not as expected. If this condition remains undetected and relevant actions are not taken, the existence of the company might be in jeopardy.


Exercise 9.4
TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. T F T T T

Multiple Choice Questions 1. 2. 3. 4. 5. B A A C B

Exercise 10.1
Team work is the task performed through coordinated effort among team members where team members contribute towards the implementation of the same objective. Meanwhile, group work is a task performed without coordinated effort.

Exercise 10.2
Team strengths are the ability to increase customer satisfaction, increase the quality of products and services of the organisation, and also the ability to increase job satisfaction. Team weaknesses are such as a high level of turnover during the initial stage of team formation, social loitering and behaviour of self-restriction.

Exercise 10.3
Team does not need to be formed when the job performed does not involve combination or coordinated effort among the employees; rewards towards performance are only based on individual effort and performance; and resources needed are unavailable.


Exercise 10.4
1. (a) (b) Self-designed team Virtual team

Exercise 10.5
1. Team will undergo development phases: (a) (b) (c) (d) (e) (f) (g) Forming Storming Norming Performing De-norming De-storming De-forming

Exercise 10.6
1. A small number of team members are necessary in order to avoid the situations of social loitering and behaviour of self-restriction. Besides that, a small number of team members will strengthen the interaction among the members and speed up the process of decision making. Team work consists of a small number of team members with skills that are complimentary to each other, being responsible and had agreed in achieving the same goals. Team work is becoming more popular because it can help the organisation to react fast and properly towards a certain problem and challenge, and able to increase the performance of the organisation compared to the traditional approach.


Multiple Choice Questions 1. 2. 3. 4. 5. A A A B B


TRUE (T) or FALSE (F) Statements 1. 2. 3. 4. 5. T F T F F

Exercise 11.1
The life-cycle of technology will undergo the phases of birth, increase in development and maturity before it is substituted by a new technology.

Exercise 11.2
1. (a) (b) (c) Innovation is good ideas that begin with creativity. Technology is the knowledge, tools, equipment and techniques and methods used to change input into output. Creative work environment means workplace culture where employees believe that new ideas are valued, appreciated and encouraged.

Exercise 11.3
Try to think of the examples and discuss them with your friends or tutor.

Exercise 11.4
There are two types of change in organisations: first order change that is linear in nature, slow and happens in stages; and second order change that is radical in nature, multidimensional and multilevel.

Exercise 11.5
1. Aspects that can be changed by change agents are: (a) (b) Organisation structure Technology in organisations


(c) (d)

Physical layout in organisations Employees within the organisation

Exercise 11.6
Negotiation is an approach that fulfils the wants of those who are causing barriers by granting those rewards in exchange for the cooperation given. Co-optation is the approach of ÂbuyingÊ the leader of group who is a barrier towards change so that this leader will influence his followers to change their minds and then cooperating towards the change. Force is an approach using threat to instill fear to the parties causing barriers in order for them to cooperate.

Exercise 11.7
Kurt Lewin proposed a theory related to the management of organisation change. This theory involves the process of liquidation, change intervention and freezing. Liquidation refers to getting individuals who are affected by the changes in believing the needs towards changes. This process tries to liquidate the culture or other matters that can bring obstruction towards changes. Change intervention means the processes used towards employees and managers in order to change their behaviour and work practices (that had been liquidated). Meanwhile, freezing refers to supporting and strengthening the change that was successfully carried out in order for it to prolong.

Exercise 11.8
Multiple Choice Questions 1. 2. 3. 4. 5. C B D C C

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