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BBPP1103

PRINCIPLES OF MANAGEMENT

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

BBPP1103 PRINCIPLES OF MANAGEMENT Shahrol Aman Ahmad Azhari Ramli Nasri Nalimi Azelin Aziz Assoc Prof Dr

Project Directors:

Prof Dr Mansor Fadzil Prof Dr Zakaria Ismail

Open University Malaysia

Module Writers:

Shahrol Aman Ahmad Azhari Ramli Nasri Nalimi Azelin Aziz

Universiti Utara Malaysia

Assoc Prof Dr Santhi Raghavan

Open University Malaysia

Moderator:

Dr Wardah Mohamad

Open University Malaysia

Translated & Edited:

Pearson (M) Sdn. Bhd.

Reviewed by:

Nik Azlina Nik Yaacob Dr Wardah Mohamad

Open University Malaysia

Edited by:

Lim Szu Ming

Open University Malaysia

Developed by:

Centre for Instructional Design and Technology

Open University Malaysia

Printed by:

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

First Printing, May 2008 Sixth Printing, October 2010 Seventh Printing, February 2011 Eighteenth Printing, November 2011

Copyrig ht © 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

Project Directors: Prof Dr Mansor Fadzil Prof Dr Zakaria Ismail Open University Malaysia Module Writers: Shahrol

Table of Contents

Course Guide

xi- xvi

Topic 1

What is Management?

1

1.1

Definition of Management

2

1.2

Who are Managers?

3

 

1.2.1

Functions of Management

3

1.2.2

Roles of a Manager

5

1.2.3

Skills of a Manager

7

 

1.3

Types of Managers

9

1.4

Evolution of Management Theory

10

 

1.4.1

Classical Perspective

11

1.4.2

Human Perspective

14

1.4.3

Quantitative Management Approach

16

1.4.4

Contemporary Approach

16

 

Summary

19

Key Terms

20

Topic 2

Planning

21

2.1

Definition of Planning

22

2.2

How to Plan Effectively?

23

2.3

Types of Planning

26

2.4

Advantages and Disadvantages of Planning

30

 

2.4.1

Advantages of Planning

31

2.4.2

Disadvantages of Planning

32

 

Summary

35

Key Terms

35

Topic 3

Decision Making

36

3.1

Decision Making Environment

37

 

3.1.1

Decision Making in Certain Conditions

38

3.1.2

Decision Making in Uncertain Conditions

38

3.1.3

Decision Making in Risky Conditions

39

 

3.2

Rational Decision Making Process

40

3.3

Limitations in Rational Decision Making

42

 

3.3.1

Common Mistakes in Decision Making

43

3.3.2

Bounded Rationality

44

3.3.3

Risky Environment

45

 

3.4

How to Improve Decision Making

45

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TABLE OF CONTENTS

 

3.4.2

Using Groups

48

 

3.5

Group Decision Making Methods

48

 

3.5.1

Brainstorming

49

3.5.2

Nominal Group Technique

50

3.5.3

Delphi Technique

50

3.5.4

Advantages of Group Decision Making

51

3.5.5

Disadvantages of Group Decision Making

52

 

Summary

55

Key Terms

56

Topic 4

Organisation Design

57

4.1

Factors that Influence Organisational Structures

58

 

4.1.1

Organisational Strategy

58

4.1.2

Size of the Organisation

58

4.1.3

Technology

59

4.1.4

Environment

59

 

4.2

Designing Organisational Structures

60

 

4.2.1

Departmentalisation

60

 

4.3

Authority

64

 

4.3.1

Chain of Command

64

4.3.2

Line and Staff Authority

65

4.3.3

Line and Staff Functions

66

4.3.4

Span of Control

66

 

4.4

Centralisation and Decentralisation

67

4.5

Work Design

68

 

4.5.1

Work Specialisation

68

4.5.2

Job Rotation, Enlargement and Enrichment

69

 

4.6

Organisation Process Design

70

 

4.6.1

Emerging New Organisational Designs

71

 

Summary

77

Key Terms

77

Topic 5

Human Resource Management

78

5.1

Determining the Needs of Human Resources

79

 

5.1.1

Job Analysis

80

5.1.2

Forecasting

81

 

5.2

Recruitment/Hiring

82

 

5.2.1

Internal Recruitment

83

5.2.2

External Recruitment

83

 

5.3

Selection of Qualified Employees

84

 

5.3.1

Application Forms and Resume

85

5.3.2

References and Background Checking

85

5.3.3

Selection Tests

85

TABLE OF CONTENTS

v

 

5.4

Development of Qualified Employees

88

 

5.4.1

Orientation

88

5.4.2

Training

89

5.4.3

Determining the Needs for Training

89

5.4.4

Training Methods

90

 

5.5

Performance Evaluation

92

 

5.5.1

Who Should Evaluate?

94

5.5.2

Methods for Performance Evaluation

95

 

5.6

Retaining Qualified Employees

96

5.7

Employee Separation

98

 

5.7.1

Employee Termination

98

5.7.2

Downsizing

99

5.7.3

Retirement

100

5.7.4

Employee Turnover

100

 

Summary

103

Key Terms

103

Topic 6

Communication in Organisations

104

6.1

Definition of Communication

105

6.2

Types of Communication

107

 

6.2.1

Formal Communication

107

6.2.2

Informal Communication

110

6.2.3

Non-verbal Communication

111

 

6.3

Increasing Communication Effectiveness

111

 

6.3.1

Communication Barriers

111

6.3.2

Measures for Overcoming Communication Barriers

113

 

Summary

117

Key Terms

118

Topic 7

Motivation

119

7.1

Classical Model and Scientific Management

120

 

7.1.1

Approaches to Motivation

120

 

7.2

Need-based Approach

121

 

7.2.1

MaslowÊs Hierarchy of Needs

121

7.2.2

Two-factor Model

123

7.2.3

Acquired Needs Theory

125

 

7.3

Process-based Approaches

126

 

7.3.1

Expectancy Theory

126

7.3.2

Equity Theory

127

7.3.3

Goal-setting Model

128

7.3.4

Reinforcement Model

129

 

Summary

133

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TABLE OF CONTENTS

Topic 8

Leadership

 

134

8.1

Leadership Approaches

135

 

8.1.1

Leader-centred Approach

135

8.1.2

Follower-centred Approach

140

8.1.3

Interactive Approaches

141

 

8.2

Strategic Leadership

146

 

8.2.1

Visionary Leadership

147

8.2.2

Charismatic Leadership

147

8.2.3

Transactional Leadership

147

8.2.4

Transformational Leadership

147

 

Summary

150

Key Terms

150

Topic 9

Controlling

151

9.1

Definition of Control

151

 

9.1.1

Quality Assurance

152

9.1.2

Preparation to Face Changes

152

 

9.2

Steps in the Control Process

153

 

9.2.1

Establishing Standards

153

9.2.2

Measuring Performance and Making Comparisons

154

9.2.3

Corrective Actions

154

 

9.3

Dynamic Process

154

9.4

Basic Methods of Control

155

 

9.4.1

Pre-control/Feed-forward Control

155

9.4.2

Concurrent Control

156

9.4.3

Feedback Control

156

 

9.5

Forms of Control

156

 

9.5.1

Bureaucratic Control

157

9.5.2

Objective Control

157

9.5.3

Normative Control

157

9.5.4

Concertive Control

158

9.5.5

Self Control

158

 

9.6

Factors that need to be Controlled

158

 

9.6.1

Finance

159

9.6.2

Human Resources

159

9.6.3

Internal Operations

159

9.6.4

Customers

160

 

Summary

162

Key Terms

162

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Topic 10

Managing Teams

 

163

10.1

Differences between Teams and Groups

164

10.2

Advantages of Teams

165

10.3

Disadvantages of Teams

166

10.4

When is a Team Needed?

167

10.5

Types of Teams

169

10.6

Characteristics of Teams

172

 

10.6.1

Team Norms

172

10.6.2

Team Unity

173

10.6.3

Team Conflict

173

10.6.4

Phases of Team Development

173

 

10.7

Towards Building a High-Performance Team

176

Summary

 

180

Key Terms

181

Topic 11

Innovation and Change

182

11.1

Why is Innovation Important?

183

 

11.1.1

Technology Cycle

183

 

11.2

Managing Innovation

184

 

11.2.1

Managing Innovation Resources

184

 

11.3

Organisational Change

186

 

11.3.1

Forces of Change

186

 

11.4

Managing Change

189

 

11.4.1

Aspects that can be changed by Change Agents 191

 

11.5

Barriers to Change

193

 

11.5.1

Individual Barriers

193

11.5.2

Organisational Barriers

194

 

11.6

Overcoming the Barriers to Change

195

11.7

Ways to Manage Change

197

Summary

 

200

Key Terms

201

Answers

202

COURSE GUIDE
COURSE GUIDE

ii

COURSE GUIDE

COURSE GUIDE

xi

COURSE GUIDE DESCRIPTION

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.

INTRODUCTION

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.

COURSE AUDIENCE

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.

STUDY SCHEDULE

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.

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COURSE GUIDE

Table 1 : Estimation of Time Accumulation of Study Hours

Study Activities

Study

Hours

Briefly go through the course content and participate in initial discussion

3

Study the module

60

Attend 3 to 5 tutorial sessions

10

Online participation

12

Revision

15

Assignment(s), Test(s) and Examination(s)

20

TOTAL STUDY HOURS

120

LEARNING OUTCOMES

By the end of this course, you should be able to:

  • 1. Describe the basic concepts, functions and basic skills in management;

  • 2. Describe the management of an organisation including employees, and physical resources;

  • 3. Explain the changes in management and the current management practice of todayÊs business; and

  • 4. Apply the principles of management to the work place.

COURSE SYNOPSIS

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.

COURSE GUIDE xiii

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

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COURSE GUIDE

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.

TEXT ARRANGEMENT GUIDE

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 sub- section 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,

COURSE GUIDE

xv

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.

PRIOR KNOWLEDEGE

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

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COURSE GUIDE

ASSESSMENT METHOD

Please refer to myVLE.

REFERENCES

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.

TTooppiicc

1 1

  • What is Management?

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

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.

2

  • TOPIC 1

WHAT IS MANAGEMENT?

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 .

1.1
1.1

DEFINITION OF MANAGEMENT

SELF-CHECK 1.1 In your opinion, what is the definition of management?
SELF-CHECK 1.1
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

TOPIC 1

WHAT IS MANAGEMENT?

3

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.

1.2
1.2

WHO ARE MANAGERS?

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.

  • 1.2.1 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.

TOPIC 1 WHAT IS MANAGEMENT?  efficiently without deviating from the obje ctives of the organisation.

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

4

  • TOPIC 1

WHAT IS MANAGEMENT?

Table 1.1 below describes each management function.

Table 1.1: Management Functions

Management

 

Function

Description

Planning

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.

Organising

Determining what tasks are to be done; who will implement and co- ordinate 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.

Leading

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.

Controlling

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

TOPIC 1

WHAT IS MANAGEMENT?

5

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.

  • 1.2.2 Roles of a Manager

ACTIVITY 1.1 In your opinion, what are the roles that need to be carried out in
ACTIVITY 1.1
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 vice- chancellor 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.

  • (b) 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.

  • (c) 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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  • TOPIC 1

WHAT IS MANAGEMENT?

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.

  • (e) 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.

  • (f) 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

TOPIC 1

WHAT IS MANAGEMENT?

7

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.

  • 1.2.3 Skills of a Manager

SELF-CHECK 1.2 What are the skills required by a manager?
SELF-CHECK 1.2
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.

TOPIC 1 WHAT IS MANAGEMENT?  being penalised while undergoing training and encourage them to learn

Figure 1.2: Skills required of a manager

8

  • TOPIC 1

WHAT IS MANAGEMENT?

  • (a) 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.

  • (b) 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.

  • (c) 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.

SELF-CHECK 1.3 What other skills does a manager need?
SELF-CHECK 1.3
What other skills does a manager need?

TOPIC 1

WHAT IS MANAGEMENT?

9

1.3
1.3

TYPES OF MANAGERS

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.

10  TOPIC 1 WHAT IS MANAGEMENT? SELF-CHECK 1.4 Based on what you have learned, identify
10
TOPIC 1
WHAT IS MANAGEMENT?
SELF-CHECK 1.4
Based on what you have learned, identify the differences amongst the
three levels and tabulate your answers.
EXERCISE 1.1 Explain each of the management functions that you have learned about. 1.4 EVOLUTION OF
EXERCISE 1.1
Explain each of the management functions that you have learned
about.
1.4
EVOLUTION OF MANAGEMENT THEORY

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.

10  TOPIC 1 WHAT IS MANAGEMENT? SELF-CHECK 1.4 Based on what you have learned, identify

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.

TOPIC 1

WHAT IS MANAGEMENT?

11

  • 1.4.1 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 sub- classes 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)

Using the scientific approach to determine best practices and not relying on „rules of thumb‰;

(ii)

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

12

  • TOPIC 1

WHAT IS MANAGEMENT?

(v)

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)

Authority and clearly defined responsibilities;

(ii)

Positions

in

an

organisation

that

are structured according to

(iii)

hierarchy; 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.

TOPIC 1

WHAT IS MANAGEMENT?

13

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:

No one can do all the work; Each job requires different skills; and Repetition of work will increase efficiency.

 

(ii)

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.

14

  • TOPIC 1

WHAT IS MANAGEMENT?

(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.

  • 1.4.2 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

TOPIC 1

WHAT IS MANAGEMENT?

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

  • TOPIC 1

WHAT IS MANAGEMENT?

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.

  • 1.4.3 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.

  • (b) 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.

  • (c) 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.

    • 1.4.4 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.

TOPIC 1

WHAT IS MANAGEMENT?

17

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)

Input – equipment, people, finance or information source that are

(ii)

used to produce products or services. Transformation process – the use of production technology to

(iii)

transform input to output. 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)

Open system – a system that interacts with the external environment to survive.

(ii)

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)

Sub-system – sections of a system that are interdependent.

  • (b) 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.

18  TOPIC 1 WHAT IS MANAGEMENT? EXERCISE 1.2 TRUE (T) or FALSE (F) Statements 1.
18
TOPIC 1
WHAT IS MANAGEMENT?
EXERCISE 1.2
TRUE (T) or FALSE (F) Statements
1.
A new wave manager will not perform the classical management
functions.
2.
The conceptual skill is the most important skill for managers in
the lower levels.
3.
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.
4.
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.
5.
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.
Planning
B.
Organisation
C.
Leadership
D.
Control
2.
What is the difference between a traditional manager
current manager?
and
a
A.
Total experience gained by the manager.
B.
The way the manager implements the traditional
management functions.
C.
Total number of traditional management functions
implemented.
D.
Only traditional managers will implement traditional
management functions.

TOPIC 1

WHAT IS MANAGEMENT?

19

  • 3. What are the new element or elements in the current management functions that do not clarify the functions of traditional management?

    • A. Realisation of work

    • B. Facing competition

    • C. Managing individuals, projects and processes

    • D. Leading

  • 4. Which of the following is NOT a step involved in the realisation of work?

    • A. Determining the objectives that need to be achieved.

    • B. Planning how to achieve the objectives specified.

    • C. Collecting and managing the required information to make the best decision.

    • D. Evaluate the competition levels in the market.

  • 5. Whose responsibility is it to set objectives that is consistent with the organisationÊs objectives, planning, as well as implementing of the said objectives?

    • A. Top management

    • B. Middle management

    • C. Lower/line level management

    • D. Team leader

  • TOPIC 1 WHAT IS MANAGEMENT?  3. What are the new element or elements in

    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

    • TOPIC 1

    WHAT IS MANAGEMENT?

    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

    Concept skills Controlling Effectiveness Efficiency Interpersonal skills Leading

    Organising Planning Scientif management Technical skills Theory X Theory Y

    TTooppiicc

    2 2

    • Planning

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

    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.

    22

    TOPIC 2 PLANNING

    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.

    2.1
    2.1

    DEFINITION 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).

    • (b) Planning is a proposal of actions that need to be made by an organisation to achieve its objectives (Certo, 2000).

    • (c) 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).

    • (d) Planning involves the definition of objectives, the formation of strategies and action plans to co-ordinate the organisationsÊ activities (Robbins, 1996).

    • (e) Planning refers to the process of determining an organisationÊs objectives and making decisions on the best way to achieve them (Bartol & Martin, 1994).

    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.

    ACTIVITY 2.1 Based on what has been discussed, provide a definition of planning according to your
    ACTIVITY 2.1
    Based on what has been discussed, provide a definition of planning
    according to your understanding. Compare your answer with your
    friendÊs.

    TOPIC 2 PLANNING

    23

    2.2
    2.2

    HOW TO PLAN EFFECTIVELY?

    SELF-CHECK 2.1 What do you understand by effective planning in an organisation?
    SELF-CHECK 2.1
    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.

    TOPIC 2 PLANNING  2.2 H OW TO PLAN EFFECTIVELY? SELF-CHECK 2.1 What do you

    Figure 2.1: Features to achieve good objectives

    • (i) 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.

    (ii)

    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

    24

    TOPIC 2 PLANNING

    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.

    • (b) 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.

    TOPIC 2 PLANNING

    25

    Table 2.1: Methods of Establishing Commitment

    Methods

    Explanation

    Determination of objectives by cooperating with all members of the organisation

    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.

    Reasonable

    The objective set has to be reasonable so that employees will be

    objectives

    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.

    Announcement of objectives to members in the organisation

    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.

    Getting support

    To facilitate work operations, it will be good to have upper

    from upper

    management support. This support can be in the form of money,

    management

    opinion, advice and others. With this support, all dealings will be easier and indirectly motivate us to achieve the objectives.

    • (c) 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.

    • (d) 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.

    26

    TOPIC 2 PLANNING

    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.

    2.3
    2.3

    TYPES OF PLANNING

    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 fo rms 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.

    TOPIC 2 PLANNING

    27

    TOPIC 2 PLANNING  Figure 2.2: Types of planning (a) Planning Based on Format Planning

    Figure 2.2: Types of planning

    • (a) 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.

    • (b) Planning Based on Organisational Hierarchy

    SELF-CHECK 2.2 Reflect upon the fates of well-known companies in Malaysia that had to liquidate or
    SELF-CHECK 2.2
    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.

    28

    TOPIC 2 PLANNING

    Table 2.2: Planning Based on Organisational Hierarchy

    Organisation

       

    Hierarchy

    Planning

     

    Explanation

    To p-level

    S trategic

    This is the overall p

    lanning of th

    e organisation that

    Management

    Plan

    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.

    Middle-level

    Tactical

    This plan is prepared and implemented by the middle

    Management

    Plan

    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.

    Lower-level

    Operational

    This is the daily planni ng which is prepared and

    Management

    Plan

    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.

    Even though each mana gement 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 a nd organisational hierarchy, planning is also different from the aspect of frequenc y 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.

    TOPIC 2 PLANNING

    29

    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)

    Policy

    Policy i s the general guidelines or principles to manage a situation.

     

    (ii)

    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.

    O bserve 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.

    30

    TOPIC 2 PLANNING

    ACTIVITY 2.2 The cartoon above shows the presentation of objectives by a woman and a robot.
    ACTIVITY 2.2
    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?
    EXERCISE 2.1 What is the difference between planning based on format and planning based on frequency
    EXERCISE 2.1
    What is the difference between planning based on format and planning
    based on frequency of use?
    2.4
    ADVANTAGES AND DISADVANTAGES OF
    PLANNING

    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.

    TOPIC 2 PLANNING

    31

    Table 2.3: Advantages and Disadvantages of Planning

     

    Advantages

       

    Disadvantages

    Generates intensive efforts towards an organisationÊs objectives.

    Restricts changes that occur in the organisation.

    Creates continuous effort among

    Planning does not

    take into

    managers in

    the

    organisation

    consideration the uncertainties of

    hierarchy.

    future assumptions.

    Explains

    the

    direction

    of

    the

    Separates between the planner and

    organisation to the managers and

    implementer.

    employees.

       

    Assists

    managers

    in

    establishing

    work strategies.

    Creates

    positive

    impacts

    on

    individuals and organisations.

    • 2.4.1 Advantages of Planning

    Table 2.4 explains the advantages of planning.

    Table 2.4: Advantages of Planning

    Advantages

    Description

    Generate

    Employees will be more hardworking if there is planning, that is,

    Intensive

    the objectives and work strategies. Besides that, work performance

    Efforts

    can be further improved as they are aware of the directions that need to be achieved.

    Continuous

    Planning involves a specific time period. Managers that engage in

    Effort

    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.

    Unity of

    With planning, employees will know the objectives that need to be

    Direction

    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.

    32

    TOPIC 2 PLANNING

    Establishing

    As defined, when a senior manager sets an objective to be achieved,

    Work

    automatically, the managers at the middle and lower level will

    Strategy

    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.

    Positive

    Planning has been proven to be effective to organisations as well as

    Impact on

    individuals. Generally, organisations that engage in planning will

    Individual

    obtain more profits and expand much faster compared to

    and

    organisations that do not engage in planning. It also applies to

    Organisation

    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.

    • 2.4.2 Disadvantages of Planning

    Table 2.5 describes the disadvantages of planning.

    Table 2.5: Disadvantages of Planning

    Disadvantages

    Description

    Restricting

    Usually, planning is made for a specific time period. When

    Changes and

    changes take place in an environment, then the existing plans

    Adaptation

    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.

    Uncertainty

    Planning is usually on the assumptions of future occurrences. For

    Towards

    example, if a manager presumes that the demand will increase in

    Assumptions

    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.

    TOPIC 2 PLANNING

    33

    Separation

    Generally, planning is done by top-level managers whilst its

    between

    implementation is carried out by the employees at the lower

    Planner and

    levels. This segregation can sometimes cause the plans made to be

    Implementer

    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.

    ACTIVITY 2.3 Based on what you have learned, try to describe the importance of effective planning
    ACTIVITY 2.3
    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.
    EXERCISE 2.2 Essay Question From the discussion above, list the disadvantages of planning. Multiple Choice Questions
    EXERCISE 2.2
    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
    2.
    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

    34

    TOPIC 2 PLANNING

    • 3. Which type of standing plan provides specific guidelines for taking a particular action?

      • A. Rules

      • B. Policy

      • C. Procedure

      • D. Regulations

  • 4. „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

  • 5. 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. Planning is made based on assumptions in the future.

    • 2. One of the disadvantages of planning is the restriction of changes and adaptation in an organisation.

    • 3. Operation planning is made to determine how an organisation can utilise the resources, budget and individuals in order to achieve a specific objective.

    • 4. plan

    Standing

    is

    planning

    that

    is specifically made for a certain

    purpose.

    TOPIC 2 PLANNING

    35

    TOPIC 2 PLANNING   At the beginning of this topic, we were exposed to

    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

    Format Frequency of use Operational plan

    Organisation hierarchy Strategic plan Tactical plan

    TTooppiicc

    3 3

    • Decision Making

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

    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.

    TOPIC 3 DECISION MAKING

    37

    3.1
    3.1

    DECISION MAKING ENVIRONMENT

    SELF-CHECK 3.1 Do you know what are the determining factors in decision making?
    SELF-CHECK 3.1
    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) Certainty;

    • (b) Uncertainty; and

    • (c) Risky.

    TOPIC 3 DECISION MAKING  3.1 D ECISION MAKING ENVIRONMENT SELF-CHECK 3.1 Do you know

    Figure 3.1: Decision making environment

    38

    • TOPIC 3

    DECISION MAKING

    • 3.1.1 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.

    • 3.1.2 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

    TOPIC 3 DECISION MAKING

    39

    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.

    • 3.1.3 Decision Making in Risky Conditions

    ACTIVITY 3.1 If you are a manager, what will be the factors that enable you to
    ACTIVITY 3.1
    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.