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BUSINESS MANAGEMENT

Discipline

Methods of management

associate professor Kiril Dimitrov, Ph.D
University of National and World Economy,
“Industrial business” department
e-mail: kscience@unwe.eu

Learning Objectives
1. Define three main groups management methods.
2. Understand the characteristics of each group of
management methods.
3. Reveal the contents and essence of the items in
each group of management methods.

Methods of management /1/ • Managers use diverse means (instruments. • These are called human resource management methods or simply methods of management. mechanisms) for making direct or indirect impact on different organizational components. • Three management resources are used in making impact (въздействие) on people: – Power – Money (income) – Personal influence (влияние) . techniques.

• Weakness: It does not recognize important characteristics and phenomena in people management as personal interests. regulation. . keeping labor discipline. as follows: – Borrowing approaches and methods from other better- developed knowledge areas as automation. personnel training and stimulation of desired behavior. but also appraisal of employee abilities and appropriate ways of directing them to achievement of organizational goals. behavioral imitations. necessities. • Weakness: It does not recognize enough the possibilities of cohesion among people’s characteristics by means of selection. labor norming. Methods of management /2/ • Emphasizing the human aspect in methods of management widens analysis horizon which includes not only technical procedures as employee demand. etc. • Two perspectives of creating a holistic theory of management methods. computer technology. weaknesses. – It originates from personal psychology. etc. distinctions. informatics.

Methods of management /3/ • According to the type of the used management resource. as follows: – Administrative (organizational) methods – Economical (monetary) methods – Social-psychological methods . there exist three groups of management methods.

Administrative methods of management /1/ • Managers have definite rights over their subordinates that ensue from their responsibility of demonstrated behavior by their subordinates (actions and labor results). • This power bestows the manager with three interrelated rights: – The right to reward – The right to punish – The right to require . originating from the position (place in the hierarchy) of each manager in the organization. • The principle of congruence between assigned responsibilities and granted rights is enacted • This group of management methods is based on the power.

i. . requirements.e. – The subordinates are put under pressure in different forms which creates in them a feeling of fear of the managers. Administrative methods of management /2/ • Common characteristics: – They are obligatory – They are applied in hierarchical organizational structure where each supervisor has subordinates in his/her power. limits and behavioral expectations are clearly given to the subordinates. – Direct impact.

 (Sub)Objective factrors. setting limits to manager’s right to selection of subordinates.  A sequence of actions.Administrative methods of management – the list /3/ Selection of subordinates. not someone’s potential  At least several candidates to be searched for each vacant position  The situation of a new supervisor – possible actions:  Proposes to the incumbent to remain at the current position  Agrees to transfer or dismiss a definite worker  Defines a reasonable trial period for the worker. required by the supervisor /5/  Requirements  Job requirements define the appropriate incumbent. .

 Control and current appraisal.Administrative methods of management – the list /4/  Instruction of subordinates.  Periodical appraisal (attestation)  Aspect of appraisal:  Worker’s conformity with job requirements  Worker’s career development perspective  Three possible marks on the scale:  Excellent conformity  Good conformity  Insufficient conformity  The appraisal of a person’s career development perspective has three possible marks:  Ready to occupy a higher position  May be promoted in the near future (1-2 years)  Is not liable to promotion .  Developing regulations.

Administrative methods of management – the list /5/ Giving orders Delegation of authority and empowerment of subordinates  Authority – organizationally sanctioned right to make a decision. But managers retain the responsibility for the final business unit results. simply because one person cannot get all the work done.  Empowerment – giving employees who are responsible for hands-on production or service activities the authority to make decisions or take action without prior approval.  Delegation – managers delegate (assign) certain tasks to others. .

. Economic (monetary) methods of management /1/ • These methods are based on employee rational aspiration for receiving higher remuneration package from the employer organization. • The application of these methods depends on managers’ abilities to measure and appraise their subordinates’ labor and to reward it. • Two principles are enacted here: – The principle of equivalent exchange between employer and employee. – The principle of fair reward for work done.

. that is limited by employee material interests. Economic (monetary) methods of management /2/ • Common characteristics: – The impact is done and achieved through contingent monetary rewards and sanctions – The impact is long-term. because it is enacted by means of lasting systems and rules – They ensure to some degree the right to choose.

Types of economic (monetary) methods of management /1/  Compensation system – the personal employee compensation is determined by:  Individual results .(second preferred option!)  Proven capabilities (employee potential) .(the most preferred option!)  Exerted efforts .(last choice!) Salary B A Zone 1 Zone 2 Zone 3 (independent) (of increase) (bonus) Base of determination .

 Advantages of Japanese premium system:  Bonus is directly related to the final financial result that is the most generalized indicator of organization’s efficiency  Internally integrates the personnel members – equal percent for everyone  Simple calculations .Types of economic (monetary) methods of management /2/ Premium system – the amount of paid additional reward (bonus) to each employee is determined according to the achieved financial result of the whole organization or a certain self- supporting unit for a period of 6 or 12 months.

Types of economic (monetary) methods of management /3/ Employee stock ownership  Appropriate conditions for application  The organization achieves or will achieve in the near future large higher profitability on equity  The personnel may improve greatly organization’s results  The personnel members possess effective means of influencing organization’s management  One-time (target) pay – for high labor results. propositions with great economic effect or actions. preventing great losses for the workers:  Bonus pay  Profit-sharing pay  Loss prevention pay .

as follows:  Well pay  Safety pay Gain-sharing pay  Tasks to be solved:  Settingnorms of incurred expenses  Choosing the scheme of gain distribution  The Scanlon Plan:  20% of gain are reserved (for greater security in the future)  The residue: 75% of it goes to the worker and 25% remains in the firm .Types of economic (monetary) methods of management /4/ Rewards for desired behavior – for consecutive keeping of important work behavior rules and norms for a definite time period.

realized under the protection of the company.Types of economic (monetary) methods of management /5/ Rewards for intrapreneurship – the workers are given the option of investing their own funds in risky undertakings.  Example:  AT&T: the workers may invest up to 15% of their salaries in projects. They are granted the right to receive a preliminary negotiated portion of the potential profit. . They are given the right to receive a fair portion of the potential profit later. resulting from the project. in which they participate.

• The successful application of this group of methods depends on managers’ capability of creating attractive behavioral images for their subordinates. . Social-psychological methods of management /1/ • This group of methods is based on the natural human inclination to appraise and approve or blame other people’s behavior.

because the usual punishments are not expected – They do not include control and measurement • Socio-psychological methods = soft management . Social-psychological methods of management /2/ • Common characteristics: – The impact is directed to worker’s value system – The impact is long-term as features and result (values are slowly formed. but are durable) – They provide great freedom for making personal choices.

Types of social-psychological methods of management /1/  Manager’s leading example  Appraisal of one’s behavior  Imitation of one’s behavior that is considered good  This method is used by the manager in spite of his/her wish.  Its impact frequently is stronger than manager’s written or oral orders and advises .

Types of social-psychological methods of management /2/  Professional work attitude (professionalism)  Higher extent of development of human ethics  Moral category  Its qualification and moral dimensions:  Faithfulness to profession overrides loyalty to a firm (whistle blower!)  High continuous proven and developed qualification of the person  High own standards of work quality  Steadiness to external hindrance and disturbance  Pursuit of high appraisal of one’s own work  A desire to develop followers .

Creating of all necessary prerequisites.Types of social-psychological methods of management /3/  Provoking of desired labor behavior (job behavior modification)  Steps: 1. Suppressing obstacles b. Define clearly desired behavior of the subordinates. 3. Creating opportunities . Functional analysis of the semantic chain: “prerequisites – behavior – consequences”. 2. Two kinds of prerequisites: a.

at the beginning – continuous. not punishments for undesired behavior. flexible working time). after stabilization of required behavior on intermittent intervals – constant or variable .  Rules for determination of consequences:  Each behavioral improvement is supported. assigning of desired project or task. not only the ends  Different accomplishments correspond to different stimuli  Natural rewards are preferred (commendation.Types of social-psychological methods of management /4/  Provoking of desired labor behavior (job behavior modification)  Steps: 4. demonstrated by subordinates  Consequences follow certain schedule. Human behavior monitoring and appraisal and supplying the expected consequences on schedule. not material rewards  Each possibility of objective behavioral appraisal is utilized  Stimuli for good behavior are preferred.

Types of social-psychological methods of management /5/  Creation of conditions for behavioral self- regulation  The method of great expectations  Creation of self- managing (autonomous) groups  Developing a specific (target) firm culture .

Ladies and Gentlemen. THANK YOU FOR THE ATTENTION! .