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BBPP1103

Principles of Management

Copyright © Open University Malaysia (OUM)


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

Copyright © Open University Malaysia (OUM)


Project Director: Prof Dato’ Dr Mansor Fadzil
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: Prof Dr Wardah Mohamad


Open University Malaysia

Reviewed by: Nik Azlina Nik Yaacob


Prof Dr Wardah Mohamad
Open University Malaysia

Developed by: Centre for Instructional Design and Technology


Open University Malaysia

First Edition, May 2008


Second Edition, December 2013 (rs)
Copyright © Open University Malaysia (OUM), December 2013, 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).

Copyright © Open University Malaysia (OUM)


Table of Contents
Course Guide xiăxvi

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 15
1.4.3 Quantitative Management Approach 17
1.4.4 Contemporary Approach 17
Summary 20
Key Terms 21

Topic 2 Planning 22
2.1 Definition of Planning 23
2.2 How to Plan Effectively? 24
2.3 Types of Planning 27
2.4 Advantages and Disadvantages of Planning 31
2.4.1 Advantages of Planning 32
2.4.2 Disadvantages of Planning 33
Summary 36
Key Terms 36

Topic 3 Decision Making 37


3.1 Decision-Making Environment 38
3.1.1 Decision Making in Certain Conditions 39
3.1.2 Decision Making in Uncertain Conditions 39
3.1.3 Decision Making in Risky Conditions 40
3.2 Rational Decision-Making Process 41
3.3 Limitations in Rational Decision Making 43
3.3.1 Common Mistakes in Decision Making 44
3.3.2 Bounded Rationality 45
3.3.3 Risky Environment 46

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3.4 How to Improve Decision Making 46


3.4.1 Using Rules and Tests 47
3.4.2 Using Groups 49
3.5 Group Decision-Making Methods 49
3.5.1 Brainstorming 50
3.5.2 Nominal Group Technique 51
3.5.3 Delphi Technique 52
3.5.4 Advantages of Group Decision Making 52
3.5.5 Disadvantages of Group Decision Making 53
Summary 57
Key Terms 57

Topic 4 Organisation Design 58


4.1 Factors that Influence Organisational Structure 59
4.1.1 Organisational Strategy 59
4.1.2 Size of the Organisation 59
4.1.3 Technology 60
4.1.4 Environment 60
4.2 Designing Organisational Structures 61
4.2.1 Departmentalisation 61
4.3 Authority 65
4.3.1 Chain of Command 65
4.3.2 Line and Staff Authority 66
4.3.3 Line and Staff Functions 67
4.3.4 Span of Control 67
4.4 Centralisation and Decentralisation 68
4.5 Work Design 69
4.5.1 Work Specialisation 70
4.5.2 Job Rotation, Enlargement and Enrichment 70
4.6 Organisation Process Design 72
4.6.1 Emerging New Organisational Designs 72
Summary 78
Key Terms 78

Topic 5 Human Resource Management 79


5.1 Determining the Needs of Human Resources 80
5.1.1 Job Analysis 81
5.1.2 Forecasting 82
5.2 Recruitment/Hiring 83
5.2.1 Internal Recruitment 83
5.2.2 External Recruitment 84

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TABLE OF CONTENTS  v

5.3 Selection of Qualified Employees 85


5.3.1 Application Forms and Resume 86
5.3.2 References and Background Checking 86
5.3.3 Selection Tests 86
5.3.4 Interviews 88
5.4 Development of Qualified Employees 89
5.4.1 Orientation 90
5.4.2 Training 90
5.4.3 Determining the Needs for Training 90
5.4.4 Training Methods 91
5.5 Performance Evaluation 93
5.5.1 Who Should Evaluate? 95
5.5.2 Methods for Performance Evaluation 96
5.6 Retaining Qualified Employees 97
5.7 Employee Separation 99
5.7.1 Employee Termination 99
5.7.2 Downsizing 100
5.7.3 Retirement 101
5.7.4 Employee Turnover 101
Summary 104
Key Terms 105

Topic 6 Communication in Organisations 106


6.1 Definition of Communication 107
6.2 Types of Communication 109
6.2.1 Formal Communication 110
6.2.2 Informal Communication 113
6.2.3 Non-verbal Communication 113
6.3 Increasing Communication Effectiveness 114
6.3.1 Communication Barriers 114
6.3.2 Measures for Overcoming Communication
Barriers 116
Summary 119
Key Terms 120

Topic 7 Motivation 121


7.1 Classical Model and Scientific Management 122
7.1.1 Approaches to Motivation 122
7.2 Need-based Approach 124
7.2.1 MaslowÊs Hierarchy of Needs 124
7.2.2 Two-Factor Model 126
7.2.3 Acquired Needs Theory 128

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7.3 Process-based Approaches 128


7.3.1 Expectancy Theory 129
7.3.2 Equity Theory 130
7.3.3 Goal-setting Model 131
7.3.4 Reinforcement Model 132
Summary 136
Key Terms 136

Topic 8 Leadership 137


8.1 Leadership Approaches 138
8.1.1 Leader-Centred Approach 138
8.1.2 Follower-Centred Approach 143
8.1.3 Interactive Approaches 144
8.2 Strategic Leadership 149
8.2.1 Visionary Leadership 149
8.2.2 Charismatic Leadership 150
8.2.3 Transactional Leadership 150
8.2.4 Transformational Leadership 150
Summary 153
Key Terms 154

Topic 9 Controlling 155


9.1 Definition of Control 155
9.1.1 Quality Assurance 156
9.1.2 Preparation to Face Changes 156
9.2 Steps in the Control Process 157
9.2.1 Establishing Standards 157
9.2.2 Measuring Performance and Making
Comparisons 158
9.2.3 Corrective Actions 158
9.3 Dynamic Process 159
9.4 Basic Methods of Control 159
9.4.1 Pre-Control 159
9.4.2 Concurrent Control 160
9.4.3 Feedback Control 160
9.5 Forms of Control 161
9.5.1 Bureaucratic Control 161
9.5.2 Objective Control 161
9.5.3 Normative Control 162
9.5.4 Concertive Control 162
9.5.5 Self Control 162

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TABLE OF CONTENTS  vii

9.6 Factors that Need to be Controlled 163


9.6.1 Finance 163
9.6.2 Human Resources 164
9.6.3 Internal Operations 164
9.6.4 Customers 164
Summary 167
Key Terms 167

Topic 10 Managing Teams 168


10.1 Differences between Teams and Groups 169
10.2 Advantages of Teams 170
10.3 Disadvantages of Teams 171
10.4 When is a Team Needed? 173
10.5 Types of Teams 175
10.6 Characteristics of Teams 177
10.6.1 Team Norms 178
10.6.2 Team Unity 178
10.6.3 Team Conflict 178
10.6.4 Phases of Team Development 179
10.7 Towards Building a High-Performance Team 182
Summary 186
Key Terms 187

Topic 11 Innovation and Change 188


11.1 Why is Innovation Important? 189
11.1.1 Technology Cycle 189
11.2 Managing Innovation 190
11.2.1 Managing Innovation Resources 191
11.3 Organisational Change 192
11.3.1 Forces of Change 193
11.4 Managing Change 195
11.4.1 Aspects that Can be Changed by Change
Agents 196
11.5 Barriers to Change 199
11.5.1 Individual Barriers 199
11.5.2 Organisational Barriers 200
11.6 Overcoming the Barriers to Change 201
11.7 Ways to Manage Change 203
Summary 207
Key Terms 207

Answers 208

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viii  TABLE OF CONTENTS

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COURSE GUIDE

Copyright © Open University Malaysia (OUM)


Copyright © Open University Malaysia (OUM)
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 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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xii  COURSE GUIDE

Table 1: Estimation of Time Accumulation of Study Hours

Study
Study Activities
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

COURSE 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.

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COURSE GUIDE  xiii

Topic 2 discusses planning as one of the most important functions in management.


The processes involved in effective planning, types of planning as well as the
advantages and disadvantages of planning are discussed.

Topic 3 discusses decision making ă the process of identifying problems,


generating alternative solutions, selecting and implementing the best solutions
available. This topic also discusses the situations of decision making ă certain
conditions, uncertain conditions, and risky conditions ă 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.

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xiv  COURSE GUIDE

Topic 8 discusses leadership. This topic will discuss leadership based on


three approaches which are the leader-centred approach, follower-centred
approach and interactive approach. The leader-centred approach focuses on the
characteristics of the leaderÊs personality, behaviour of the leader and style of
leadership. Under the behavioural approach, the researches by the Ohio State
University, Michigan University and the Management Grid, will be discussed.
The follower-centred approach focuses on the variables of replacement and
neutralisation of leadership. In the interactive approach, the Situation Leadership
Model, Fiedler Contingency Model, and the Path-Goal and the Continuum of
Leadership Behaviour will also be discussed. At the end of this topic, strategic
leadership will be presented.

Topic 9 covers control. This topic discusses the steps in the control process. Also
discussed are the three types of control methods and five forms of control.
Finally, this topic will discuss the factors that must be controlled by organisations
such as finance, human resource, quality and also customer.

Topic 10 focuses on teams. This topic starts with the differences found between
teams and groups, the advantages and disadvantages of teams and when teams
are used. Also discussed are the types of teams that exist in an environment.
Several features of teams and issues that can influence the performance level of
teams will also be discussed.

Topic 11 discusses the importance of innovation and ways to manage innovation.


This topic will also discuss the forces of changes in organisations. The factors
that can cause changes to organisations, ways to manage changes, resistance to
change and tactics to overcome resistance to change, will also be explained.

TEXT ARRANGEMENT GUIDE


Before you go through this module, it is important that you note the text
arrangement. Understanding the text arrangement will help you to organise your
study of this course in a more objective and effective way. Generally, the text
arrangement for each topic is as follows:

Learning Outcomes: This section refers to what you should achieve after you
have completely covered a topic. As you go through each topic, you should
frequently refer to these learning outcomes. By doing this, you can continuously
gauge your understanding of the topic.

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COURSE GUIDE  xv

Self-Check: This component of the module is inserted at strategic locations


throughout the module. It may be inserted after one sub-section or a few sub-
sections. It usually comes in the form of a question. When you come across this
component, try to reflect on what you have already learnt thus far. By attempting
to answer the question, you should be able to gauge how well you have
understood the sub-section(s). Most of the time, the answers to the questions can
be found directly from the module itself.

Activity: Like Self-Check, the Activity component is also placed at various


locations or junctures throughout the module. This component may require you to
solve questions, explore short case studies, or conduct an observation or research.
It may even require you to evaluate a given scenario. When you come across an
Activity, you should try to reflect on what you have gathered from the module and
apply it to real situations. You should, at the same time, engage yourself in higher
order thinking where you might be required to analyse, synthesise and evaluate
instead of only having to recall and define.

Summary: You will 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 in the
summary that you do not fully understand, it would be a good idea for you to
revisit the details in 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 jargon used
throughout the module. Should you find terms here that you are not able to
explain, you should look for the terms in the module.

References: The References section is where a list of relevant and useful


textbooks, journals, articles, electronic contents or sources can be found. The list
can appear in a few locations such as in the Course Guide (at the References
section), at the end of every topic or at the back of the module. You are
encouraged to read or refer to the suggested sources to obtain the additional
information needed and 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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xvi  COURSE GUIDE

ASSESSMENT METHOD
Please refer to myINSPIRE.

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.

TAN SRI DR ABDULLAH SANUSI (TSDAS) DIGITAL


LIBRARY
The TSDAS Digital Library has a wide range of print and online resources for
the use of its learners. This comprehensive digital library, which is accessible
through the OUM portal, provides access to more than 30 online databases
comprising e-journals, e-theses, e-books and more. Examples of databases
available are EBSCOhost, ProQuest, SpringerLink, Books247, InfoSci Books,
Emerald Management Plus and Ebrary Electronic Books. As an OUM learner,
you are encouraged to make full use of the resources available through this
library.

Copyright © Open University Malaysia (OUM)


Topic  What is
1 Management?

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 managers. Doctors,


accountants, engineers, architects and lawyers are good examples of the former.
As an example, a doctor treats patients using his ability and expertise. He does
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. So, she can only assist 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.

Professionals are very different from managers. The latter, in a nutshell, direct
people to perform tasks efficiently and effectively. 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
coordinator to ensure that the task is carried out smoothly. For example, the
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2  TOPIC 1 WHAT IS MANAGEMENT?

manager of a shoe factory does not necessarily have to know the details of
shoemaking 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 DEFINITION OF MANAGEMENT

Management is the process of overseeing and coordinating resources


efficiently and effectively in line with the goals of an organisation.

Effectiveness is the attainment of goals which enables the realisation of the


objectives of an organisation or to put it briefly, „doing the right thing‰.
Efficiency is performing a job using minimum effort, cost and wastage or simply,
„doing things right.‰ The end result of an efficient and effective management is
the success of an organisation.

A person can either be described as efficient but not effective or effective but not
efficient in managing a specific task. Both elements are not interdependent. Let
us say a factory worker found a shortcut to do a task with lower cost but by
doing so, he deviated from the ethical objectives of the organisation. For example,
he disposed production waste by dumping it into the river. But one of the
organisationÊs ethical objectives was to preserve local harmony. So, the factory
worker, through his action, deviated from the objective although he was efficient.
In short, he was efficient but not effective.

In contrast, an employee is considered effective but not efficient if he uses an old


method to resolve a management issue even if it could have been resolved
efficiently without deviating from the objectives of the organisation. For example,
in delivering information, the employee chose to send a letter via post instead of
e-mail. Although it did not affect or clash with the organisationÊs objectives, the
employee had 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.

SELF-CHECK 1.1

In your words, explain what is management?

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TOPIC 1 WHAT IS MANAGEMENT?  3

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 coordinating resources
efficiently and effectively in line with the goals of an organisation. In short,
management refers to the process of delegating tasks to employees to be
performed successfully.

The manager is involved in various basic activities. These activities are usually
grouped as management functions. These functions are illustrated in Figure 1.1.

Figure 1.1: Main functions of management


Source: Adapted from Lewis et al. (2001). Management: Challenges in the 21st Century

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4  TOPIC 1 WHAT IS MANAGEMENT?

Table 1.1 describes each management function.

Table 1.1: Management Functions

Management
Description
Function
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
coordinate them; how the tasks are to be grouped; who reports to
whom; and where decisions are to be made. The manager needs to
logically and effectively organise the information, resources and
workflow of the organisation so that he is able to react positively to
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.

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TOPIC 1 WHAT IS MANAGEMENT?  5

Nevertheless, all the functions highlighted earlier are merely for classification
purposes in management studies. In reality, management functions usually
overlap. Moreover, the functions in management are interdependent. 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


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 launching 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 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.

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.

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6  TOPIC 1 WHAT IS MANAGEMENT?

(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, 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 puts in a lot of time and effort in
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 enhancing 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

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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.

ACTIVITY 1.1

Which one is the most crucial? Discuss and share your answer with
your coursemates. What kind of roles should a successful manager
play?

1.2.3 Skills of 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.

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8  TOPIC 1 WHAT IS MANAGEMENT?

Figure 1.2: Skills required of a manager

(a) Conceptual Skills


Conceptual skill 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 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 provide 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 skill is 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

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TOPIC 1 WHAT IS MANAGEMENT?  9

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 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 are required.

SELF-CHECK 1.2

1. What are the skills required of a manager?

2. What other skills does a manager need?

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 of categorising managers. For example, we can
differentiate managers based on level, position and organisational function.

(a) 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.

(b) Under top-level managers are middle-level managers. They are usually
designated as managers.

(c) 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.

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10  TOPIC 1 WHAT IS MANAGEMENT?

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.

(a) Nonetheless, there are two main differences among the three management
levels. Firstly, top and mid-level managers have managers as employees
under them. In brief, they manage other managers unlike line managers.

(b) 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.

SELF-CHECK 1.3

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

EXERCISE 1.1

Explain each of the management functions discussed earlier.

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 ă 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 understand the
chronological sequence of the perspectives.

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TOPIC 1 WHAT IS MANAGEMENT?  11

Figure 1.3: Evolution of management theory

You might wonder why it is important and necessary to study the historical
development or evolution of management thought. Studying history enables us
to learn from mistakes made in the past 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.

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 were Frederick Winslow Taylor,
Frank and Lilian Gilbreth and Henry Gantt.

Frederick Taylor (1856ă1915), 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

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12  TOPIC 1 WHAT IS MANAGEMENT?

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


here refers to 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

(v) Reassigning all responsibilities pertaining to planning and organising


to the manager.

Taylor was not alone in this research. Henry Gantt (1861ă1919), 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 (1868ă1924) and Lillian Gilbreth
(1878ă1972) 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 and clear division of labour as well as rules and
procedures. Max Weber (1864ă1920), a German social theorist, introduced
many bureaucratic concepts. Among the components of bureaucracy are:

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TOPIC 1 WHAT IS MANAGEMENT?  13

(i) Authority and clearly defined responsibilities;

(ii) Positions in an organisation that are structured according to hierarchy;

(iii) Promotions based on qualifications;

(iv) Records of all administrative actions and decisions to ensure


continuity of organisational rules;

(v) Separation of ownership and management; and

(vi) Guidelines implemented for 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 were Henri Fayol, Mary
Parker Follett and Chester I Barnard.

Henri Fayol (1841ă1925), 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.

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14  TOPIC 1 WHAT IS MANAGEMENT?

(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 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.

(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 (1868ă1933) 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

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TOPIC 1 WHAT IS MANAGEMENT?  15

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 (1886ă1961) 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 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.

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16  TOPIC 1 WHAT IS MANAGEMENT?

Three series of experiments were conducted and the results of all the
experiments contradicted what was expected. In the first experiment,
lighting radiation served 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 was brightened or dimmed, the
production output would continue to increase. This meant that there were
other factors that might 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 generated 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 produce
more milk. From the management point of view, satisfied employees will
increase their work performance. This approach combines the work
structure with the motivation theories.

Among the main motivators of this approach were Abraham Maslow and
Douglas McGregor (we will discuss this further in 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 was derived from the fields
of sociology, psychology, anthropology, economic and other disciplines to
understand the behaviour of employees and interactions in an organisation.

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.

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TOPIC 1 WHAT IS MANAGEMENT?  17

1.4.3 Quantitative Management Approach


This approach began in the era of World War Two, where quantitative
techniques were used 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 were
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 are designed to provide relevant information to
managers at the appropriate time and cost. With the creation of high-speed
digital computers, it opens up the 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
which have been discussed are still being used now. The humanity approach is
the most evident approach but there have been some changes to this approach.
The two main theories under this perspective are the systems and contingency
theories.

(a) Systems Theory


A system comprises 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 as follows:

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18  TOPIC 1 WHAT IS MANAGEMENT?

(i) Input ă Equipment, people, finance or information source that are


used to produce products or services.

(ii) Transformation process ă The use of production technology to


transform input to output.

(iii) Output ă Comprises products and services of an organisation.

(iv) Feedback ă Decisions that will influence the selection of input used in
the next process cycle.

(v) Environment ă Includes social, political and economic influences.

Ideas of systems that influence the mindset of management comprise:

(i) Open system ă A system that interacts with the external environment
to survive.

(ii) Closed system ă A system that does not interact with the external
environment to survive and often fails.

(iii) Entropy ă The tendency for a system to become obsolete.

(iv) Synergy ă Individuals, groups and organisations that can achieve


more if they cooperate compared to working alone.

(v) Sub-system ă 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.

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TOPIC 1 WHAT IS MANAGEMENT?  19

EXERCISE 1.2

TRUE (T) or FALSE (F) Statements

1. A new wave manager will not perform classical management


functions.

2. Conceptual skill is the most important skill for managers in the


lower levels.

3. A manager who has made a number of mistakes is excluded from


the momentum movement path to the higher level management
because he is not sensitive to others.

4. For most managers, the knowledge, skills and abilities that brought
early success in their careers do not necessarily help them in
becoming successful managers.

5. Scientific management focuses 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 and a current


manager?
A. Total experience gained by the manager
B. The way the manager implements traditional management
functions
C. Total number of traditional management functions
implemented
D. Only traditional managers will implement traditional
management functions

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20  TOPIC 1 WHAT IS MANAGEMENT?

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 are consistent with an


organisationÊs objectives as well as plan and implement the objectives?
A. Top management
B. Middle management
C. Lower/line level management
D. Team leader

 Management is the art of directing other people in performing work by


emphasising the aspects of effectiveness and efficiency in implementation.

 Effectiveness is achieving the objectives that enable the realisation of an


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.

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TOPIC 1 WHAT IS MANAGEMENT?  21

 The functions can be divided into planning, organising, leading and


controlling. The manager plays several roles in an organisation.

 The roles include figurehead, leader, liaison officer, spokesperson, negotiator,


idea initiator, capability developer and motivator for transformation.

 Management skills are crucial to ensure the success of a manager. These


consist conceptual, interpersonal and technical skills.

 Managers are divided into three types: top management, middle management
and lower/line management.

 Management evolved in tandem with the beginning of human civilisations in


Egypt, China and Babylon.

 The methods of management in the old days are quite different from those of
today.

 Modern management significantly expanded with the emergence of the


Industrial Revolution in Europe.

 Generally, there are two well-known systems in discussion pertaining to


trend or management of mindsets ă the rational system and the social system.

 Among renowned figures of the rational system were Henri Fayol, Max
Weber and Frederick Taylor, whereas those in the social system were Elton
Mayo, William Ouchi and Henry Mintzberg.

Conceptual skills Leading


Controlling Organising
Effectiveness Planning
Efficiency Scientific management
Interpersonal skills Technical skills

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Topic  Planning
2
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Describe the meaning of planning;
2. Explain the processes involved in effective planning;
3. Identify the types of planning; and
4. Compare the advantages and disadvantages of planning.

 INTRODUCTION
Planning is a management function, 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 protection for an 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 protect 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 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.

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TOPIC 2 PLANNING  23

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
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 DEFINITION OF PLANNING


Before discussing further on organisational planning, it is appropriate to first
analyse the definition. The following are a few 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 an organisation


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 coordinate 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.

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24  TOPIC 2 PLANNING

ACTIVITY 2.1

Based on what has been discussed, provide a definition of planning


according to your understanding. Compare your answer with your
friendÊs.

2.2 HOW TO PLAN EFFECTIVELY?


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 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 ă specific, measurable,
attainable, realistic and timely ă as illustrated in Figure 2.1.

Figure 2.1: Features to achieve good objectives

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TOPIC 2 PLANNING  25

(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, such as, 10 or 20 per cent
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. If
after calculations, it was found that there was an additional 10%
increase compared to what was assumed previously, the objective that
was planned earlier, that is, the increase of 10 per cent 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 then
decided 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, there is no guarantee that all the
individuals in the organisation will be driven to achieve them. 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 the objectives. There are four ways that can be used to establish
commitment in the members of an organisation. Please refer to Table 2.1 for
the methods and their explanation.
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26  TOPIC 2 PLANNING

Table 2.1: Methods of Establishing Commitment

Methods Explanation
Determination of Usually when a decision has been made through cooperation
objectives by between members, it will create a sense of ownership towards
cooperating with the decision made. When the members feel that the decision was
all members of made based on their agreement, it will create a sense of
the organisation commitment 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
employees.
Announcement Generally, when an objective is publicly known, we will be
of objectives to embarrassed if we fail to achieve it. Hence, we will work harder
members in the to ensure the planned objective is achieved.
organisation
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 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.

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TOPIC 2 PLANNING  27

For example, the long-term objective of Organisation A is to generate


a net profit of RM10,000 in the 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 by 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 cannot 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.
Such flexibility in 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.

SELF-CHECK 2.1

1. What are the importance of effective planning in an organisation?

2. Explain briefly the processes involved in planning.

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 forms and sizes as well as has their own
meanings. Dessler (2001) categorised planning into three main dimensions ă
planning based on format, organisation hierarchy and frequency of use. Figure
2.2 summarises the types of planning based on these dimensions.

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28  TOPIC 2 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


Apart from formats, planning is also different from the aspect of time frame.
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 ă 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 and comprises strategic planning/plans, tactical
plans and operation plans. Please refer to Table 2.2 for further details.

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TOPIC 2 PLANNING  29

Table 2.2: Planning Based on Organisational Hierarchy

Organisation
Planning Explanation
Hierarchy
Top-Level Strategic This is the overall planning of the 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 Plan This plan is prepared and implemented by the middle
Management 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 and two years.
Lower-Level Operational This is the daily planning 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 management level does its own planning, the planning
will only be effective when the objectives and actions made at the lower
level supports and is in accordance with the objectives and actions made by
the top and middle levels.

(c) Planning Based on Frequency of Use


Apart from format and organisational hierarchy, planning is also different
from the aspect of frequency of use. Some planning is only used once
whereas some are used repeatedly.

Planning that is only used once is known as one-time usage planning. It is


specifically prepared to fulfil specific purposes, such as, the opening of a
new branch. Even though the organisation may open more than one
branch, each plan made will only be applicable to that specific branch only.

This is because each branch will definitely have different resources whether
in terms of money, manpower, customersÊ distribution, size of the branch
area, etc. Therefore, planning for the opening of a new branch in Gombak,
for instance, cannot be used for the opening of another new branch in Alor
Star. Other examples of this type of planning will be the budget prepared
for a specific time frame.

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30  TOPIC 2 PLANNING

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:

(i) Policy
Policy is the general guidelines or principles to manage a situation.

(ii) Procedure
Procedure refers to the actions or processes that must be taken if a
certain situation arises. It is more specific compared to policy.

(iii) Regulations
Regulations are the specific guidelines 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 for ensuring that every product sold to customers is in good
condition. For any damaged product sold, customers can claim
compensation from the company. However, before compensation is paid,
there are several procedures that must be complied with. First, to record the
damage in the inventory system and second, to obtain prior approval from
the departmental manager for the payment of compensation. However, the
regulations state that any report on the damage must be made within a
period of 30 days from date of purchase.

Observe that all the activities involved, which are the activity of selling the
product to customers, compensation claims from customers as well as the
payment of compensation by the business, are repeated activities in a
business; hence, policies, procedures and regulations had been fixed as
guidelines to manage all these activities. Therefore, each time any of these
activities occur, the same policy, procedures and regulations will be
applied. In summary, the same planning (that is, the policy, procedures and
regulations) can be used repeatedly to manage repeated activities.

ACTIVITY 2.2

Reflect on 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 initial planning? Explain.

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TOPIC 2 PLANNING  31

ACTIVITY 2.3

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 one-time usage planning and fixed


planning?

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.

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32  TOPIC 2 PLANNING

Table 2.3: Advantages and Disadvantages of Planning

Advantages Disadvantages
 Generates intensive efforts towards  Restricts changes that occur in the
an organisationÊs objectives. organisation.
 Creates continuous efforts 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 objectives and work strategies. Work performance can be further
Efforts improved as they are aware of the direction in which they need to
move.
Continuous Planning involves a specific period. Managers who engage in
Effort planning know that the objectives can only be achieved when the
time comes. Hence, intensive efforts will continue until the planned
objectives are successfully achieved and the managers and the
employees will work more enthusiastically throughout the period
of achieving the objectives.
Unity of With planning, employees will know the objectives which need to
Direction be achieved including strategies that must be followed. Indirectly,
all members of the organisation have direction and will move
towards that same direction or objective.
Establishing 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 which will serve as
guidelines in determining the activities that need to be implemented.

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TOPIC 2 PLANNING  33

Positive Planning has been proven to be effective for organisations and


Impact on individuals. Generally, organisations that engage in planning will
Individuals obtain more profits and expand much faster compared to
and organisations that do not engage in planning. It also applies to
Organisation individuals, whether manager or employee. Normally, the work
performance is 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 achieving 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.
Separation Generally, planning is done by top-level managers while 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.

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34  TOPIC 2 PLANNING

ACTIVITY 2.4

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 Questions
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 the methods to achieve it?
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. Determine objectives
D. Build commitment towards achieving the objective

3. Which type of standing plan provides specific guidelines for taking


a particular action?
A. Rules
B. Policy
C. Procedure
D. Regulations

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TOPIC 2 PLANNING  35

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. Determine objectives
B. Build individual commitment
C. Prepare an action plan
D. Monitor 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. Standing plan is planning that is specifically made for a certain


purpose.

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36  TOPIC 2 PLANNING

 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 Organisation hierarchy


Frequency of use Strategic plan
Operational plan Tactical plan

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Topic  Decision
3 Making
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 making 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
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38  TOPIC 3 DECISION MAKING

„decision maker‰ is used, it refers to the same individual ă the person making the
decision.

3.1 DECISION-MAKING ENVIRONMENT


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 there is 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.

Figure 3.1: Decision-making environment

Let us discuss these decision-making environment further.

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TOPIC 3 DECISION MAKING  39

3.1.1 Decision Making in Certain Conditions


The decision maker obtains 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 ă 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 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, which 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 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 decision 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 has decided to introduce a
new product into its market, that is, decorative items made from ceramic. As
these ceramic decorations are new to the people of Bandar Banjau and there have
been no previous traders selling them, Company ABC cannot forecast the
response of consumers towards this product. This is because there is no previous

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40  TOPIC 3 DECISION MAKING

data that can be used as a guide. Will the residents of Bandar Banjau be
interested in ceramic products? Since the reaction of consumers is not
predictable, the result of each alternative decision made is also unpredictable.

In this case, the alternative decisions that can 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


Most managers or decision makers have actually operated in these conditions.
They have information but it is incomplete. Therefore, they will not know for
sure the situations that will occur in the future. Minimal information will only
give some insight in predicting what will occur. Whether the situation really will
happen or otherwise cannot be completely ascertained. Usually, the situations
can only be assumed to occur based on the information obtained and the
percentage of probability that the situations will occur.

For example, from the monthly sales statement, it is noticed that total sales had
increased each month. Therefore, you are able to assume that the company will
obtain net profit this year after making losses last year. Without obtaining other
information such as operational cost, change of taste in consumers and loan
interest, you can only assume that the company will obtain a profit based on the
sales trend for the past few months. Then, you state that the probability that the
company will obtain profits is 60% and the probability that the company will
make losses is 40%. With this, you make a decision to increase investment. Here,
you made a decision in a risky condition, that is, it is not known whether the
company will really be making a profit or otherwise.

SELF-CHECK 3.1

1. What are the determining factors in decision making? Explain.

2. What are the steps that you think are required of a manager in
decision making?

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TOPIC 3 DECISION MAKING  41

EXERCISE 3.1

Discuss three different decision-making environments that are faced by


managers.

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 coursemates.

3.2 RATIONAL DECISION-MAKING PROCESS


Although decision making seems simple, the decision made must be rational.
This means that the decision has to be based on facts, opinions and reasonable
reasons. Systematic evaluations have to be conducted in the overall process of
decision making. In summary, making a rational decision can be defined as a
systematic process of defining problems, evaluating decision alternatives and
selecting the best alternative decisions available.

Williams (2000) stated that six steps or processes need to be followed to make
rational decisions. These are shown in Figure 3.2.

Figure 3.2: Rational decision-making process

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42  TOPIC 3 DECISION MAKING

Now, let us discuss each process further.

(a) Defining Problems


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

For example, your office is facing delayed work problems. When analysed,
it is found that the problems originate from shortage of computers in the
office. Therefore, the management agrees to purchase more computers for
office use.

(b) Identifying Decision Criteria


After identifying the problems, the next step in rational decision making is
to establish the decision criteria. The decision criteria refer to the standards
or features that will be considered when making a decision.

Referring to the above example, since the management had decided to


purchase new computers, then what are the criteria that will be taken into
consideration when selecting new computers? Price, quality, compatibility
and warranty are the decision criteria.

(c) Allocating Weight to Each Criterion


After identifying the criteria that need to be considered when making a
decision, the next step will be to allocate weight to each of the criteria.
One method that is normally used for this purpose is to make relative
comparisons. In this method, each criterion will be compared directly with
others. This is to identify which are the most important criterion, the second
important criterion and thereafter the less important criterion for the
decision maker. Thus, decision criteria are arranged according to priorities.
The priorities of an individual might be different from those of another
individual.

Based on the example given earlier, you might place the quality factor as
the most important, followed by the compatibility factor, pricing factor and
lastly, the warranty factor.

(d) Generating Alternative Solutions


Once you have identified and allocated weights to the criteria, the next step
is to develop as many alternative solutions as possible. The more
alternatives are generated, the better is the process.

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TOPIC 3 DECISION MAKING  43

Based on the examples above, in order to purchase a new computer, the


alternatives that can be taken into consideration will be Acer, IBM, NEC,
Serindit, Compaq and others.

(e) Evaluating Alternatives


At this level, every alternative will be compared with each decision criterion.
This is to determine the extent of the alternatives to fulfil the decision criteria
that had been set. Usually, this level takes the longest time as there is a lot of
information that must be collected first before comparisons can be made. It
also involves a huge sum of money.

This means that all the alternative solutions, Acer, IBM, NEC, Serindit and
Compaq, will be evaluated from the aspects of quality, compatibility, pricing
and warranty (decision criteria). The more decision criteria that are fulfilled
by an alternative, the better the alternative will be.

(f) Selecting the Optimal Decision


The last step in the process of making rational decisions is to select the best
alternative solution available. The best alternative is the alternative that
fulfils all the decision criteria according to the importance that has been
arranged. However, if there are no alternatives that can fulfil all the decision
criteria according to the arrangement set, then the alternatives that fulfil the
most criteria will be selected.

3.3 LIMITATIONS IN RATIONAL DECISION


MAKING
Generally, decision making will become better if the manager or decision maker
follows thoroughly all the steps that have been discussed earlier. Nevertheless,
sometimes there are obstacles that confuse the decision maker.

For example, lack of information. This problem can cause difficulties in defining
the problem. Financial factors can also become another obstacle in rational
decision making.

Supposing finance is limited, maybe not all the alternative solutions can be
considered. Besides that, time limitation is another factor in making the optimal
decision. This will restrict the alternative solutions available. All these limitations
cause complications to the manager in making the best or optimal decision.

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44  TOPIC 3 DECISION MAKING

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

Figure 3.3 illustrates the three limitations.

Figure 3.3: Limitations in rational decision making

SELF-CHECK 3.2

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

3.3.1 Common Mistakes in Decision Making


Managers cannot make rational decisions as they are sometimes influenced by
intuition and biases.

Most management decisions are influenced by intuition, that is, the managersÊ
instinct. This usually happens with an experienced manager. This situation may
occur because the issue that needs to be resolved is similar to a previous situation
that had happened. Managers who depend on intuition have a tendency to neglect

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TOPIC 3 DECISION MAKING  45

information from the data available. As a result, the decisions made are not based
on facts and reasons.

Sometimes, managers also make biased decisions. This happens when a manager
assumes that an issue that will happen in the future is similar to a previous
incident he had experienced. For example, Company ABC Sdn Bhd had recruited
Ali, a graduate from Jaya University as their employee. However, Ali failed to
perform. The companyÊs management decided not to recruit any more graduates
from Jaya University. The decision was one-sided or biased. Managers should not
assume that all graduates from Jaya University are like Ali, as he does not
represent all graduates from Jaya University.

3.3.2 Bounded Rationality


Bounded rationality means that a manager tries to adopt the rational approach in
decision making but is hindered by certain limitations such as limited resources,
lack of information and the capacity to analyse limited decisions.

There are four problems that obstruct managers from rational decision making:

(a) Limited Resources


Resources consist of time, money, equipment and manpower. Resources that
are limited can influence decision making. For example, assuming that
previously the organisation had planned to set up several new branches but
its income had decreased due to an economic downturn. As a result, the plan
to set up new branches was postponed. Observe that due to the limited
financial resources, what was done is not the same with what had been
originally planned.

(b) Excessive Additional Information


Advancement in technology has caused information dumping to happen.
Some information can be easily obtained but at the same time can cause
problems to the manager. This is because the manager is unable to handle all
the information that is available. As a result, only certain information is
considered. Thus, decisions made may not be the best as not all information
is taken into consideration.

(c) Memory Problems


Memory problems can cause difficulties for the manager. Even though
information is usually recorded, sometimes information is overlooked or
unrecorded.

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46  TOPIC 3 DECISION MAKING

In order to make rational decisions, all required information need to be


obtained. To compile all these required information might involve time and
high costs. Maybe not all the information can be compiled. Therefore, an
optimal decision cannot be made.

(d) Expertise Problems


Expertise problems cause the decision maker to encounter problems in
arranging, understanding and summarising the information available. This
is because no individual is an expert in every sector. Although the
information can be analysed by computer, the decision maker will still
require specific skills to understand the results that have been obtained. As a
result of this lack of expertise, the evaluation made may not be the best.

3.3.3 Risky Environment


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

EXERCISE 3.2

What are the limitations in rational decision making? Describe the


limitations.

3.4 HOW TO IMPROVE DECISION MAKING


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

ACTIVITY 3.2

Based on your experience, state the methods to improve a decision that


you have made. Discuss your answer with your coursemates.

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TOPIC 3 DECISION MAKING  47

3.4.1 Using Rules and Tests


Decision making can be improved by using specific rules and tests.

(a) Rules of Decision Making


Decision rules refer to a set of criteria that needs to be completed to enable
an alternative solution to be accepted. Two types of rules in decision
making are:

(i) Rules of Priority


According to this rule, all decision criteria will be arranged according
to its priorities. Each alternative solution will be assessed based on the
criteria one by one. A good alternative must fulfil the most important
criteria followed by the second and subsequent criteria. The best
alternative will be the one that fulfils the most criteria highlighted.

For example, Ahmad plans to rent a shoplot to conduct his business.


The criteria that have been considered and arranged according to
priority are as follows:
(i) Located in the town area;
(ii) Large area;
(iii) Rental not exceeding RM500 per month; and
(iv) Has electricity and water utilities.

Assume that there are four alternative shops that can be considered ă
A, B, C and D. After the evaluation, it was found that Alternative A
fulfils the criteria of (i) and (iv), Alternative B fulfils the criteria of (i)
and (ii), Alternative C fulfils criteria (i), (iii) and (iv) and Alternative D
fulfils criteria (ii) and (iii). Although Alternative C fulfils three of the
four criteria mentioned, Alternative B is the best option as it fulfils the
two highest criteria.

Do remember that the best alternative does not necessarily fulfil the
most criteria but the alternative that fulfils the highest criteria or
priorities according to its arrangement.

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48  TOPIC 3 DECISION MAKING

(ii) Rules of Minimum Condition


Sometimes, managers must make decisions such as „yes‰ or „no‰ and
„accept or „reject‰. In this situation, the decision maker needs to set a
minimum condition that must be fulfilled by each of the alternative
solutions in order to enable it to be accepted. Any alternative that
cannot fulfil even one condition would be rejected.

For example, before a sponsor accepts or rejects the applications of


students for education scholarships, he will probably set some
minimum conditions such as (1) management courses; (2) education
for first degree; and (3) yearly family income not exceeding RM18,000.
The studentÊs application must pass all these conditions for it to be
approved.

(b) Various Variable Tests


Both the decision-making methods above can only make a separate
evaluation on each of the alternatives. However, there are situations that
require the decision maker to assess the effects of the implementation of
various alternatives at the same time. Sometimes, this combination provides
optimal result.

Evaluation is made through the implementation of several variable tests. It


is quite complicated and requires the decision maker to learn the methods
in designing experiments including ways to compile and analyse the
statistical data that will be generated.

The following example shows the use of various variable tests in decision
making: The management of a recreational park is drafting a strategy to
increase the number of visitors to its park every Monday, which is the day
that has the lowest number of visitors every week. Among the alternative
strategies that have been planned are (A1) Two-in-one tickets whereby one
visitor ticket can admit another visitor for free; (A2) Free food coupon for
each visitor; and (A3) Free parking for visitors.

Hence, every Monday, experiments are conducted to study the results. In


the first week, there were no changes and the income for that week was
RM1,500. In the second week when strategies A1 and A2 were initiated, the
income for that week was RM1,000. In the third week, when strategies A2
and A3 were introduced, it generated an income of RM3,800. In the fourth
week, when strategies A1 and A3 were combined, the income generated
was RM2,500. The experiments clearly showed that strategies A2 and
A3 ă free food coupons and two-in-one tickets ă were the best combination
solution.

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TOPIC 3 DECISION MAKING  49

Table 3.1: Various Variable Tests for Recreational Park

Alternative Strategy
Profit
Test Two-in-One Tickets Free Food Coupon Free Parking (RM)
(A1) (A2) (A3)
1. 1,500
2. X X 1,000
3. X X 3,800
4. X X 2,500

3.4.2 Using Groups


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

ACTIVITY 3.3

In your opinion, is a collective decision better than an individual


decision? Why? Compare your answer with your coursemates.

EXERCISE 3.3

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


improved?

3.5 GROUP DECISION-MAKING METHODS


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

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50  TOPIC 3 DECISION MAKING

Figure 3.4: Methods of making group decisions

3.5.1 Brainstorming
Brainstorming is a technique that encourages the generation of ideas as much as
possible without any criticism. It is a group decision-making process in which
negative feedback on any alternative presented is forbidden until all alternatives
have been studied (Certo, 2000). The purpose of brainstorming is to extract ideas
from each group member openly. A group brainstorming activity that is effective
usually consists of five to seven individuals (Hoe et al., 1998).

In summary, all group members will propose their own ideas according to their
turn. In the early stage, all ideas, whether good or bad, suitable or not suitable,
are accepted without being evaluated for the purpose of motivating all members
in the group to generate more ideas. This process will continue until no more
ideas are proposed. After all the ideas have been collected, evaluation will be
made by discussing the advantages and disadvantages of the ideas given. Then,
the best idea will be accepted. Figure 3.5 summarises the processes involved in
brainstorming.

This method is good for generating ideas. However, it also has weaknesses. For
example, it restricts the production of ideas. As members in the group voice their
ideas by taking turns, sometimes, an idea that had spontaneously arisen might
be lost while a member waits to speak. At times, group members may feel that
their ideas are not good enough and feel shy about expressing them to the
group.

These disadvantages restrict the actual functions of brainstorming. In order to


overcome these problems, currently, brainstorming by computers is used. In this
method, group members do not have to wait for their turn to state their
opinions. They can directly type into the computer and therefore, the loss of
ideas does not happen. At the same time, the identity of the group members will

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TOPIC 3 DECISION MAKING  51

still be unknown. Therefore, the members will not be shy or uncomfortable


when evaluation of their ideas is done.

Figure 3.5: The brainstorming process

SELF-CHECK 3.3

1. In your own words, explain brainstorming.

2. Briefly explain the processes involved in brainstorming.

3.5.2 Nominal Group Technique


The nominal group technique is a method of decision making whereby group
members propose and evaluate their ideas individually before sharing them
with the other group members. The steps involved are as follows:

Step 1 ă Each group member records his individual ideas on the decision or
problem discussed.

Step 2 ă Each member will read out his ideas to everyone in the group for
sharing. These ideas are usually written on the blackboard/whiteboard
for review and reference by all group members.

Step 3 ă A discussion is held to evaluate the advantages and disadvantages of


each idea.

Step 4 ă Members secretly vote on a piece of paper. The idea that receives the
highest number of votes is accepted and implemented.

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52  TOPIC 3 DECISION MAKING

3.5.3 Delphi Technique


The Delphi technique is a decision-making method where a panel that comprises
several experts will answer questions and work together until a solution is
reached for a specific issue. This technique does not require the panel members
to meet face to face. They might interact by mail, e-mail and others.

The steps involved in this technique are:

(a) Experts in related sectors are identified and selected as panel members.

(b) Problems are composed in the form of a questionnaire comprising open-


ended questions.

(c) The questionnaire is given to the panel members with the request for them
to propose solutions.

(d) Each expert completes the questionnaire and returns it to the manager.

(e) All the answers are summarised and bound together in the form of a report.
It is returned to all panel members together with a more specific and
detailed questionnaire form that has been reviewed.

(f) Panel members read the report to find out the opinions and proposals of the
other members relating to the problem. They also complete the second
questionnaire.

(g) This process is repeated until a unanimous decision is achieved by the


members on the best solution.

EXERCISE 3.4

State the advantages of brainstorming electronically over face to face.

3.5.4 Advantages of Group Decision Making


Group decision making offers several advantages compared to individual
decision making. Basically, these groups are formed to focus the experience and
skills possessed by specific groups of individuals on a specific problem or
situation.

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TOPIC 3 DECISION MAKING  53

This means that the group offers more knowledge and skills compared to
individuals. With this additional information, the group is able to handle the
problem better and the source of the actual problem can also be known. At the
same time, more alternative solutions can be generated.

The backgrounds of these members are varied. For instance, there are members
from the marketing section, operations section, training section and others that
enable this problem to be viewed from various perspectives.

Involvement in the group usually provides satisfaction to all the members. They
feel satisfied that the decisions made were proposed by them. Hence, they will
accept the decisions that have been made and are committed to accomplishing
its implementation.

3.5.5 Disadvantages of Group Decision Making


Although group decision making offers many advantages, it also has certain
disadvantages. The most obvious disadvantage is that it takes a long time. This
includes time for the appropriate meeting for all group members, time used for
discussions, time wasted due to a problem or conflict that may arise within the
group and others.

The discussion may also be controlled by certain individuals. This will limit the
involvement of other members in the discussion and therefore affect the quality
of the decisions made.

Sometimes, a group objective is disregarded by the group if the objective is a


personal objective.

Groupthink is another frequent problem that occurs when working in a group.


Groupthink refers to a situation where panel members try not to propose ideas
that are different from the other group members due to numerous reasons,
probably due to friendship, to avoid conflict, afraid of being boycotted and
others. In the end, the discussion cannot be made rationally and it affects
decision making.

All these are part of the advantages and disadvantages of group decision
making. The manager needs to know the advantages and disadvantages before
he can determine whether to use group or individual decision making. Figure 3.6
summarises all the earlier explanations.

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54  TOPIC 3 DECISION MAKING

Advantages

 Sharing of experience and skills among group members.


 More information, data and facts can be compiled.
 Problems can be seen from various perspectives.
 Increases acceptance of and commitment to the decision made.

Disadvantages

 Time consuming.
 Discussion might be controlled by certain individuals.
 Have to compromise.
 High costs involved if many group members meet.
 Pressure to agree with group decision.
 Groupthink.

Figure 3.6: Advantages and disadvantages of group decision making

SELF-CHECK 3.4

1. Based on your experience, state the advantages and disadvantages


of group decision making.

2. List other factors that contribute to the advantages and disadvantages


of group decision making.

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TOPIC 3 DECISION MAKING  55

EXERCISE 3.5
Multiple Choice Questions

1. Which of the following is NOT a part of rational decision making?


A. Intuition process
B. Definition of problems
C. Evaluating alternatives
D. Selecting optimal solutions

2. What is the first step in making a rational decision?


A. Identify the decision criteria
B. Allocate weights to criteria
C. Defining problems
D. Generating alternatives

3. What is the most effective method for generating as many ideas as


possible?
A. Individual analysis
B. Delphi technique
C. Face-to-face brainstorming
D. Electronic brainstorming

4. „This refers to a situation whereby group members try not to


propose ideas which are different from other group members.‰

What does the above refer to?


A. Delphi technique
B. Brainstorming
C. Groupthink
D. Nominal group technique

5. Which is not a decision-making situation?


A. Certain conditions
B. Uncertain conditions
C. Partial risk conditions
D. Risky conditions

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56  TOPIC 3 DECISION MAKING

TRUE (T) or FALSE (F) Statements

1. There are two types of decision-making environments ă certain


conditions and uncertain conditions.

2. Decision criteria are features or elements that will be taken into


consideration when making a decision.

3. The first step in the process of rational decision making is to develop


alternatives as many as possible.

4. Groupthink is one of the advantages of group decision making.

5. Brainstorming, nominal group technique and Delphi technique are


methods of group decision making.

Decision-Making Caselet

1. What does the above scenario represent?

2. What can be done to overcome this problem?

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TOPIC 3 DECISION MAKING  57

 In this topic, we learned that decision making is made in three types of


environment ă certain conditions, uncertain conditions and risky conditions.

 Decision making in a situation is determined by the adequacy of information


obtained in the process of decision making.

 Also discussed were the processes of rational decision making that


encompass the following steps: firstly, defining the problems; secondly,
identifying the decision criteria; thirdly, allocating weights to each criterion;
fourth, generating alternative solutions; fifth, evaluating each alternative; and
sixth, selecting the optimal decision.

 Nevertheless, rational decision making has specific limitations such as


rationalisation boundaries, common mistakes and making decision in a risky
environment.

 In spite of that, decision making can still be improved by several methods.

 First, making decisions using specific rules and tests such as the rules of
priorities, rules of minimum condition and conducting various variable tests;
second, making group decisions.

 There are several methods of group decision making ă brainstorming,


nominal group technique and the Delphi technique.

 Although group decision making has a lot of advantages, it also has specific
disadvantages.

Brainstorming Nominal group technique


Delphi technique Rules of minimum condition
Groupthink Rules of priority

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

 INTRODUCTION
When we discuss organisation design, we cannot avoid discussing organisational
structure. Organisational structure refers to the development of an organisationÊs
functions that are grouped and coordinated formally. Organisational structure is
the work arrangement at a section or department that directs the behaviour of
individuals and groups towards the achievement of an organisationÊs objectives.
This is a system that connects the duties, workflow and communication channels
between individuals and the various work groups in an organisation. The
purpose is to simplify the use of each resource and individual collectively as a
management system for the achievement of the objectives that have been set.

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TOPIC 4 ORGANISATION DESIGN  59

An organisational structure is usually displayed in graphical form which is called


an organisational chart. Traditionally, the organisational chart is illustrated in the
form of a pyramid chart with individuals at the top of the pyramid having higher
authority and responsibilities compared to individuals who are placed at the
lower levels of the pyramid.

4.1 FACTORS THAT INFLUENCE


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

4.1.1 Organisational Strategy


The main thing that an organisation usually pays attention to when it comes to
achieving its objectives is how the organisation has been structured. Structures
that are accurate do not guarantee success but will increase the probability of
success rates. This means that the organisational structure can assist the
management team in achieving the objectives set. Since the objectives are the
reason the organisational strategy is enacted, both the objectives and strategies
have to be interrelated. Specifically, organisational structures have to be drafted
according to the strategies that have been enacted by the organisation. In other
words, changes in the organisational strategies will lead to changes in the
organisational structure. Changes in this organisational structure will help to
facilitate and support the changes in the organisational strategy.

Even though research has stated the importance of the organisational structure to
be drafted according to the strategies that have been decided, it is clearly seen
here that strategy is not the main factor that needs to be considered. The process
to match the structure with the strategy is something complex and must be made
through in-depth understanding of the history of the current structure and other
factors such as the size of the organisation, environment and technology.

4.1.2 Size of the Organisation


There are a lot of methods to measure the size of an organisation. Measurements
that are often used are the quantum of sales and quantum of manpower. Size can
influence the structure of an organisation. Organisations that are smaller in size
have a tendency for lesser work specialisation, less standardisation and more
centralisation of decision making. Organisations that are larger in size have a

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60  TOPIC 4 ORGANISATION DESIGN

tendency towards work specialisation, standardisation and decentralisation of


decision making. This means that larger organisations emphasise more on work
specialisation, departmentalisation, expansion of charts and rules compared to
organisations that are smaller in size.

4.1.3 Technology
Technology refers to how an organisation changes its inputs to become outputs.
Each organisation will have at least one technology that changes its financial,
manpower and physical resources into products or services. The routine level is
an aspect that differentiates technology ă whether the technology is a routine
activity or non-routine activity. Activities that are non-routine are something that
are specific like the production operations of the products and services that are
specific according to the needs of consumers such as those practised by tailors,
cooks and barbers.

What is the relationship between structure and technology? The routine tasks
normally have a tendency towards departmentalisation structures that are much
bigger. Hence, routine activities create structures that are more centralised,
whereas non-routine activities depend largely on the expertise of an individual,
such as a barber; this creates a more decentralised structure.

In order to facilitate better understanding, if the operation is based on technology


that is routine, where the production of products and services are produced in
bulk such as a garment factory that operates in a more formal way, then more
departmentalisation, work specialisation and compliance towards rules and
regulations will be made. Organisations that operate on non-routine technologies
such as barbers do not need a lot of departmentalisation, work specialisation and
strict compliance to rules, as required by a factory.

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

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TOPIC 4 ORGANISATION DESIGN  61

EXERCISE 4.1

List the factors that influence organisational structures.

4.2 DESIGNING ORGANISATIONAL


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

Figure 4.1: Types of departmentalisation

(a) Functional Departmentalisation


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

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62  TOPIC 4 ORGANISATION DESIGN

Figure 4.2: Example of functional departmentalisation

This type of departmentalisation has several advantages. First, it allows


work to be carried out by individuals who are qualified and skilled in the
areas concerned. The second advantage is that it reduces cost by reducing
work duplication and use of resources in the organisation. Thirdly, each
individual in the same department will acquire the same work experiences
or training, communication and coordination, thereby reducing problems
for management.

However, this type of departmentalisation also has several disadvantages,


such as difficulty in coordinating between departments. Functional
departments can cause delays in decision making and produce managers
and employees who are restricted in experience and expertise.

(b) Product Departmentalisation


This departmentalisation is based on products and employees work in
different units, each with the responsibility of producing a product or
service.

Look at Figure 4.3. Each department represents one type of organisational


output. An organisation that practises this type of departmentalisation
output has several advantages. One of the main advantages is to allow
managers and employees to expand their experience and expertise that are
related to the overall activity of the product or service produced. Apart
from that, the product department structure allows management to
evaluate the work performance of each work unit.

Product departmentalisation may also have some disadvantages. Managers


may focus on their product to the exclusion of the rest of the organisation.
Administration costs may also increase due to each product having its own
functional-area experts.

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TOPIC 4 ORGANISATION DESIGN  63

Figure 4.3: Example of product department

(c) Customer Departmentalisation


This type of departmentalisation coordinates work and employees in
different units that are responsible for specific types of consumers only. The
advantage of this consumer-based department is that the organisation will
focus all its efforts on fulfilling the needs of consumers. Therefore, an
organisation will establish different units in order to provide services to
specific consumers and also allow the organisation to specialise and adapt
its products and services to fulfil the requirements and resolve consumersÊ
problems.

Some of the disadvantages of this departmentalisation are the existence of


duplication of work and use of resources and difficulty to coordinate
between departments that provide services to different types of consumers.
Customer departmentalisation causes employees to overemphasise effort to
fulfil customer needs until it affects the organisationÊs business
performance. Refer to Figure 4.4 for a better understanding of customer
departmentalisation.

Figure 4.4: Example of consumer departmentalisation

(d) Geographic Departmentalisation


Geographic departmentalisation coordinates the work and employees of
different units that are responsible for conducting business activities in
certain geographical locations.

The advantages of this geographically based department are the abilities


of the organisation to react with speed and efficiency to the requirements
of specific markets within the scope of responsibilities of a department.

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64  TOPIC 4 ORGANISATION DESIGN

This advantage is more important when the products and services that
are produced are marketed to different countries. Besides that, it also
helps to reduce costs by positioning the organisational resources nearer to
the targeted consumers.

Its disadvantage is that it creates duplication of work and the use of the
organisationÊs resources. Besides this, difficulties will arise in coordinating
between departments as the departments are in geographical areas
that are located far from each other. Figure 4.5 illustrates geographic
departmentalisation.

Figure 4.5: Example of geographic departmentalisation

(e) Matrix Departmentalisation


This is a type of structure that combines two or more types of
departmentalisation at the same time. There are several factors that
differentiate matrix departmentalisation from the other types of structures,
that is, the employees report to two different supervisors or managers.
Apart from that, it also leads to cross interactive functions that cannot be
done in the other types of departmentalisation. The advantage of the matrix
department is that it allows the organisation to manage efficiently the
projects or activities that are large scale and complex.

The disadvantage of this matrix structure is that it requires a higher level of


coordination to manage the complexity involved in order to conduct big
projects or projects that have many phases to be completed. This situation
often causes the matrix department to focus on the conflict of authority
and confusion among employees who have to report to more than
one supervisor or manager. Besides that, the matrix department also
requires higher-level management skills compared to other types of
departmentalisation.

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TOPIC 4 ORGANISATION DESIGN  65

EXERCISE 4.2

Explain the concept of functional and geographic departmentalisation


and state one advantage and one disadvantage for these types of
departmentalisation.

SELF-CHECK 4.1

Which type of departmentalisation is practised by your organisation?


Briefly explain.

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

4.3.1 Chain of Command


Look at Figure 4.6. In this diagram, there are lines that connect the rectangles on
the top section with the rectangles that are at the lower sections. These lines are
known as the chain of command. The chain of command explains who reports to
whom in the said organisation. Individuals in the top rectangles have authority
over those in the lower rectangles, according to the lines that connect them.
Individuals at the top have the right to give directives, take actions and make
decisions on the work of individuals located below them. Individuals at the
lower levels must report all aspects of their work to the people at the level above
them according to the chain of command.

In order for the lower levels to avoid confusion and conflict of authority due to
the need to report to more than one manager, unity of command is needed in an
organisation. Unity of command is the management principle that states that
employees only report to one manager at a time. In other words, only one

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66  TOPIC 4 ORGANISATION DESIGN

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

Figure 4.6: Chain of command

4.3.2 Line and Staff Authority


The next authority dimension differentiates between line authority and staff
authority. The differences between line authority and staff authority are
illustrated in Table 4.1. The line authority and staff authority must work together
to maintain the efficiency and effectiveness of an organisation. To ensure that
both work productively, the management must ensure that both these authority
groups understand the mission of the organisation, have specific objectives and
believe that their partnership helps the organisation to achieve its objectives.

Table 4.1: Differences between Line Authority and Staff Authority

Line Authority Staff Authority


Line authority has the right to make decisions Staff authority involves the right to
and give directives to employees that are provide advice and assistance to parties
placed under its chain of command. The that have line authority and other
Director, who has line authority, has the right employees even though they are not
to give directives to the managers under him. under the chain of command. Always
Generally, line authority is related to matters remember that staff authority is only to
involving the organisationÊs management provide advice and assistance and not
system especially in all aspects related to directives like line authority. Staff
work and conduct that is linked to efforts to authority enables certain parties to assist
achieve the objectives which had been in increasing the effectiveness of the line
determined. Line authority helps those who authority to implement the duties that
accept it to work and ensure the efficiency of are under their responsibility.
the activities under their responsibility.

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TOPIC 4 ORGANISATION DESIGN  67

4.3.3 Line and Staff Functions


The term „line and staff‰ is used to explain the various functions in an
organisation. Line function is an activity that directly contributes to the
production and selling of an organisationÊs products and services to consumers.
For example, the activities that are conducted by the production and marketing
departments are known as line functions.

Staff function is an activity that contributes indirectly to the production and


selling of an organisationÊs products and services including its supporting
activities. Specifically, staff functions in an organisation are the activities that are
conducted by the accounts, human resources and legal departments. For
example, the manager of the marketing department may ask for advice from the
legal department to ensure that the words used in certain advertisements are
legal.

4.3.4 Span of Control

Span of control refers to the number of employees who report directly to a


manager or supervisor.

Members of the classical management theory such as Henri Fayol believed that
organisational structures were vertical and comprised several levels of
management that had a restricted span of control. This restricted span of control
allows the organisation to increase its efforts to monitor its employees. The
restricted span of control means that the number of employees placed under the
supervision of a manager is small, thus ensuring stringent supervision.

Nevertheless, organisations that have long organisational structures and


restricted span of control will incur higher costs especially employeesÊ salaries.
The high cost is caused by the vertical organisation structure as it requires
multiple levels of management. Besides that, the multiple levels of management
can cause delays in decision making and the staff/managers have the tendency
to refer their problems to upper management. Creativity among employees will
be limited due to stringent controls and lack of freedom given by management.

Currently, most organisations practise a broad span of control as it reduces


costs, expedites the decision-making process, increases creativity and flexibility,
narrows the gap towards consumers and imparts power to employees. At the
same time, the organisation strives to ensure that this broad span of control does
not jeopardise the organisation by providing training to all employees so that

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68  TOPIC 4 ORGANISATION DESIGN

they have a better understanding of their job requirements and use the assistance
of colleagues to resolve issues that arise.

SELF-CHECK 4.2

Based on your understanding explain the term „span of control‰.

EXERCISE 4.3

Briefly explain the following:


(a) The meaning of chain of command.
(b) The differences between line authority and line function.
(c) The meaning of span of control.

4.4 CENTRALISATION AND


DECENTRALISATION
This section will discuss the level of centralisation in an organisation.

Centralisation is a situation where almost all control is centralised, especially


the control for decision making to one party, which is the top level people in
an organisation.

Organisations that practise this method give authority to the managers to make
decisions even though it is a trivial matter.

Decentralisation is a situation where a certain amount of authority is handed


down to subordinates or employees at the lower levels of an organisation.

Organisations that practise decentralisation have more delegated authority at all


levels.

How far an organisation needs to centralise or decentralise control depends on


the situations faced by the organisation. As explained, organisations that are
large will gain more advantages by practising decentralisation. When the size of

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TOPIC 4 ORGANISATION DESIGN  69

an organisation expands, the management will have to deal with expansion and
increase in responsibilities and all kinds of duties that must be implemented.
Delegation is an effective step that can help a manager to manage the increase in
workload. In other issues, higher-level management may be of the opinion that
the organisation has become too big and has a high level of delegation. One of
the signs that an organisation has become too big is the increase in labour costs
that are higher than other costs in the organisation. Hence, increasing
centralisation in certain activities can help to reduce the need for manpower,
which will also reduce the cost of labour to a much acceptable level.

If organisations are facing a situation where the consumers of its products and
services are located at different places, then decentralisation should be practised.
Decentralisation is able to place the resources of management closer to
consumers and by doing so, the organisation will be able to react quickly to
changes in consumersÊ tastes.

If the organisation requires quick decision making in order to overcome all the
problems faced, decentralisation will be the best option. Decentralisation can
reduce red tape and allow employees at the lower levels to make decisions faster
when faced with a problem.

If creativity is required in the organisation, then decentralisation is also the best


option. Decentralisation provides delegation of authority that will give freedom
in finding the best possible option to create or resolve an issue. Besides that, the
freedom given encourages creativity and innovation in working techniques or
products.

4.5 WORK DESIGN


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

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70  TOPIC 4 ORGANISATION DESIGN

4.5.1 Work Specialisation


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

One of the disadvantages of work specialisation is that in cases where the task is
simple, the person performing the task will be easily bored. It causes low levels
of job satisfaction and high absenteeism rates and thereafter can cause the
organisation to have a high turnover.

The main reason for work specialisation is that it is more economical. When a
work activity is specialised, for example the task of packing burgers, it takes
a shorter time to learn and become skilful. If there are employees who have
resigned or absent, the organisation will only face a small drop in the
productivity rate when replacing the employee who had resigned or is absent
with a new employee. Apart from that, when the work design is simple, the wage
or salary offered is also low. Work that is simple does not require a high salary to
attract employees.

4.5.2 Job Rotation, Enlargement and Enrichment


Due to the efficiency of work specialisation, organisations find it hard to
eradicate its implementation. Hence, redesigning work is essential in order to
maintain the advantages of work specialisation. Three methods have been
introduced ă job rotation, job enlargement and job enrichment.

Job rotation is practised to overcome the disadvantages of work specialisation by


transferring employees from one type of specialisation to another periodically.
For example, employees who are responsible for packing burgers are transferred
to the activity of frying meat. The purpose of job rotation is to provide employees
with a variety of activities and opportunities to utilise different skills. Job rotation
allows the organisation to continue practising work specialisation. Apart from
that, diversification of activities can reduce boredom in employees and give more
job satisfaction.

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Job enlargement is another method to overcome the disadvantages of work


specialisation. Job enlargement adds the number of tasks in an activity. For
example, before this, the employee only needed to handle burger packaging but
when the scope of work was widened, the employee no longer only performed
packing activities but also performed other activities such as putting in the sauce
and labelling the burgers. While many employees say that they are stressed due
to job enlargement, some others feel that job enlargement gives them
opportunities to develop other skills.

Job enrichment involves an increase in the number of tasks in the activities and
gives the employees authority and control in making decisions related to their
work. Psychologists including Frederick Herzberg stated that as employees only
handle a few tasks, they are quickly bored. Simple and easy activities are not
what they are looking for. Other psychologists such as Herzberg, Maslow and
Alderfer believe that what is required by employees from their work activities is
work achievement that comes as a result of doing a job successfully and the
recognition of success that comes with the use of the skills and potential that they
have. Job enrichment tries to manage dissatisfaction issues by adding depth to
the work.

The job enrichment proposed by Herzberg is based on the two motivational


factors approach. Job enrichment refers to building the motivators in work
activities to make them more interesting and challenging. This can be done by
giving employees a little freedom and allowing them to plan and inspect, which
is usually done by their supervisors or superiors. Employees may individually be
given the responsibility of determining their own work progress levels and also
to rectify their own mistakes. When the work becomes more challenging and
employee responsibilities increase, then the motivation and interest will also
increase.

EXERCISE 4.4

Based on your understanding, briefly explain the following:


(a) Job enlargement
(b) Job enrichment
(c) Job rotation

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4.6 ORGANISATION PROCESS DESIGN


There are two types of organisation designs ă mechanistic organisations and
organic organisations. A mechanistic organisation is an organisation categorised
by work specialisation and responsibility, fixed roles and chain of command that
are rigid caused by centralised control and vertical communication. This type of
organisation is most suitable for businesses that are stable and unchanging.

An organic organisation is an organisation categorised with a wide definition of


work and responsibilities, changing roles and decentralisation, and horizontal
communication. The organic organisation is most suitable for businesses that are
dynamic and always changing. The key criterion that differentiates these two
approaches is that the mechanistic organisation focuses on organisational
structure while organic organisation focuses more on the organisation processes
which are the collections of activities in the organisation that changes its inputs
into outputs that are valuable to customers.

4.6.1 Emerging New Organisational Designs


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

(a) Team Structure


The use of teams has become more popular in coordinating work activities.

The main criteria in team structures are the disintegration of departments


and the decentralisation of decision making to the level of work teams. For
organisations that are small in size, the overall organisation is perceived as
a team. Organisations that are bigger have a team structure complementing
what we call bureaucracy. This allows the organisation to achieve efficient
standardisation that is practised by bureaucracy apart from obtaining
flexibility that comes with the team structure. The use of teams such as
stand-alone teams and cross-functional teams will increase productivity
and efficiency in the organisation.

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SELF-CHECK 4.3

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

(b) Modular Organisation


Each organisation has its advantages and uniqueness in producing products
or services to its own customers. These advantages and uniqueness are
contained in the core business activity which the organisation is able to
perform well, fast and cheap compared to other organisations.

A modular organisation outsources business activities to other organisations,


suppliers, experts or consultants.

The meaning of modular is used as business activities can be bought from


other organisations for the purpose of adding activities and can be dropped
when they are no longer required.

Modular organisations have several advantages. For example, the payment


of outsourced activity such as labour, experts or production capabilities
occur only when the transactions are required. This will cause the cost
borne to be lower if all the activities are managed on its own. Secondly, the
outsourced activity is able to focus on its own tasks thus ensuring better
performance.

Nonetheless, in order to maintain these advantages, there are a few


preconditions that must be fulfilled first. The most important condition
is that the modular organisation requires close cooperation with the
organisations that do the outsourced business activity. However, modular
organisations also have their disadvantages. The most critical weakness
of a modular organisation is the loss of control when business activity is
outsourced to other organisations. Apart from that, the organisation might
also reduce its competitive advantage unintentionally in two ways. Firstly,
the change in technology and competition can cause the situation where
the outsourced activities identified earlier as a side activity becomes a
competition. Secondly, the organisation that accepts the outsourced activity
could become a competitor one day.

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74  TOPIC 4 ORGANISATION DESIGN

(c) Virtual Organisation

A virtual organisation is an organisation that has become a part of the


business network. Virtual organisations exist is in a network that shares
expertise, costs, capabilities, markets and customers collectively to resolve
customersÊ problems or producing certain products and services.

For example, the shoe manufacturer company, Puma is a type of virtual


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

Unlike modular organisations which can be seen as stable and have long
relationship with organisations that deal with it, virtual organisations have
relationships that are shorter and temporary with the organisations that are
in its network. Thus, the virtual organisation composition often changes.
The combination of organisations that becomes its partners in the network
depends on the expertise required to resolve any problems or producing of
specific products and services to consumers.

This virtual organisation has its own advantages. One of the advantages of
a virtual organisation is that it allows organisations that are involved in the
network to share all costs involved. As the members of the network can
swiftly combine the efforts in fulfilling the needs of consumer, they will
react swiftly and flexibly. Apart from that, since the members are doing
their best, theoretically the virtual organisation would be able to produce
the best products and services in all aspects.

The disadvantages faced by modular organisations are also faced by virtual


organisations. When a business activity is outsourced, it will become
difficult to control especially from the aspect of quality of work produced
by the network partner. On the other hand, the most evident disadvantage
of virtual organisations is that the implementation of virtual organisation
requires high level of management expertise so that the organisation
networks that are involved will work better together especially if the

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TOPIC 4 ORGANISATION DESIGN  75

tendency for relationship time frame is short due to the activity conducted
or relationships based on projects.

(d) Borderless Organisation

A borderless organisation is an organisation that tries to eradicate the chain


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

This situation does not mean that the manager at the lower levels and
employees are no longer responsible to the top management but what is
meant here is the emphasis on speed, fast reactions and flexibility. This type
of organisation also removes borders that separate the internal environment
in an organisation with its external environment.

One of the advantages of a borderless organisation is that this organisation


will be able to utilise its knowledge, expertise and capabilities of employees
in a better way. In this matter, resolving of problems is no longer the
responsibilities of only individuals that are involved in the said problems.
For example, the problems in the marketing department that is supposed to
be resolved by individuals in the marketing division can be resolved by
experts in that matter either from within or outside the organisation. The
next advantage would be the close rapport between all internal divisions in
the organisation with the external components. This close rapport is formed
due to the disintegration of the borders that separates both the environments.

However, borderless organisations also have disadvantages. For a start,


the manager and employees always assume that the transition of an
organisation to a borderless structure threatens their job security. The most
obvious disadvantage is that there is no clear cut way to achieve such an
organisational structure.

SELF-CHECK 4.4

Explain the term „borderless organisations‰.

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76  TOPIC 4 ORGANISATION DESIGN

EXERCISE 4.5

Essay Question
Explain the difference between mechanistic organisations and organic
organisations.

Multiple Choice Questions

1. Which factor does not influence the structure of an organisation?


A. Technology
B. Organisational strategy
C. Type of products and services produced
D. Organisation size

2. What type of departmentalisation coordinates the work and


employees in different units based on product and services?
A. Product
B. Functional
C. Geographic
D. Virtual

3. What is the additional number of tasks in a work activity that is


carried out by employees known?
A. Job rotation
B. Job enlargement
C. Job enrichment
D. Job specialisation

4. What is TRUE regarding consumer departmentalisation?


A. Creates duplication of work.
B. Establishes departmentalisation based on functions.
C. Increases distribution cost of resources.
D. Coordination between departments is easier.

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TOPIC 4 ORGANISATION DESIGN  77

EXERCISE
5. „This 4.5
type of organisation outsources its business activities to other
organisations, supplier, experts or consultants.‰

What type of organisational structure does the above refer to?


A. Modular
B. Virtual
C. Borderless
D. Matrix

TRUE (T) or FALSE (F) Statements

1. Large organisations have organisational structures that have a tendency


specialise jobs towards specialising and reducing standardisation and
centralisation.

2. Matrix departmentalisation is a type of structure that consists of two


or more types of departmentalisation.

3. Chain of command explains the flow of authority in an organisation.

4. Henri Fayol believed that organisational structures that are vertical


will have a span of control that is restricted.

5. An employee is transferred from one work area to another work area.


This situation is called job enrichment.

Organisational Design Caselet

1. What do you understand by organisational design?

2. Which type of design would you use for your current organisation.
Why?

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78  TOPIC 4 ORGANISATION DESIGN

 Organisations need to be structured in the best possible way to promote


efficiency and effectiveness of activities.

 The organisational design needs to be adapted with the factors that influence
the effectiveness of the strategies.

 Organisational strategy influences the organisational structures as strategy


determines the types of duties that are undertaken by employees.

 Organisational structures can also help to explain authority and the transfer
of authority in the organisation. Furthermore, it will help in the design of
work involved in an organisation.

 A mechanistic organisation is usually found to be most suitable in a stable


environment, whereas an organic organisation is normally most suitable in
an environment that is turbulent.

Borderless organisation Job rotation


Centralisation Mechanistic organisation
Chain of command Modular organisation
Decentralisation Span of control
Job enlargement Virtual organisation
Job enrichment

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

 INTRODUCTION
Every organisation needs people to plan and implement all its activities to
achieve the goals that have been set. Therefore, employees are one of the
resources needed by an organisation. If an organisation uses high technology,
sophisticated tools and equipment, and has strong financial resources but lacks
skilful, knowledgeable and capable human resources, it will still not succeed in
any field ventured.

Many organisations have started to use human resources as one of the tools to
match their competitors. This method is frequently implemented by organisations
that offer products based on services to their customers. In this condition, only
human resources can provide satisfaction to the customers.

Thus, human resource in organisations must be managed properly. A properly


managed human resource will not only be a competition advantage but also help the
organisation to achieve its goals efficiently and effectively. Human resource

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80  TOPIC 5 HUMAN RESOURCE MANAGEMENT

management is a process of obtaining, developing and maintaining a sufficient


number of qualified employees in order to achieve goals that have been set.

5.1 DETERMINING THE NEEDS OF HUMAN


RESOURCES
An organisation is a system where human resource acts as one of the functions in
moving the system. Human resource management needs to have a relationship
which is in line with the organisationÊs strategies. Therefore, human resource
needs to be managed properly in order to implement the organisationÊs strategies
and this is considered as the process of human resource management. An
efficient and effective human resource management must undergo processes
such as determining the needs of human resources in organisations, obtaining
qualified candidates, developing employees and maintaining qualified employees.

Determining an organisationÊs human resource need is very important. Table 5.1


shows that the processes of obtaining (recruitment and selection), developing
(orientation, training and performance evaluation) and maintaining or separating
employees (granting of rewards and separation) are interdependent with one
another. These functions cannot be managed properly without good planning.
Hence, human resource planning is required.

Table 5.1: Processes of Human Resource Management

1. Determining the needs of human  Human resource planning


resources
2. Attracting qualified candidates  Recruitment/Hiring
 Selection
3. Development of qualified  Orientation
employees  Training
 Performance appraisal
4. Maintaining qualified employees  Financial rewards and job benefits
 Employee separation

Human resource management is a process of using the goals and strategies of


organisations to forecast the needs of human resources in recruiting, developing
and maintaining a qualified workforce. An organisation that has poor or no
human resource planning will face a surplus in the workforce and be forced to
find a way to reduce it or it will face a shortage of workforce which will lead to
increase in overtime costs and inability to fulfil the demand for the companyÊs
products or services.

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Planning human resources begins with considering the mission, strategies and
objectives of an organisation. As stated before, human resource planning is
interdependent and needs to be viewed as a part of the strategic planning of the
organisation. Fundamentally, human resource planning consists of two main
components ă job analysis and forecasting.

EXERCISE 5.1

1. Explain the term „human resource management‰.


2. State the processes involved in human resource management.

5.1.1 Job Analysis


A particular job area exists in an organisation as a result of the formation of goals
that need to be achieved. Job output or the combination of job outputs lead to the
achievement of goals. Thus, how do we ensure the success of a particular job? It
is simple ă by performing a job analysis in order to find out about the job
requirements and selecting a workforce that is capable and qualified to perform
the particular job.

Job analysis is a detailed process regarding the related tasks of a particular job
and the quality of human resources needed to perform the job. Job analysis seeks
to gather four types of information:

(a) Job activities, such as what activities employees carry out and how, when
and why they do them.

(b) Tools and equipment used to perform the job.

(c) The context of job in which it is implemented such as situation, workplace


environment or scheduling.

(d) The needs of personnel in performing the job, meaning the knowledge,
skills and capabilities required for the particular job. (William, 2000)

Information regarding job analysis can be obtained by asking employees to


make a list of the tasks that need to be performed for a particular job, and
the importance of each task; getting the employees or supervisors to fill in
questionnaire forms; through observations of jobs; through interviews or through
the method of filming the tasks being carried out by the workers when they are
performing the job.
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82  TOPIC 5 HUMAN RESOURCE MANAGEMENT

The results of the job analysis will form the job description and job specification.

(a) Job description is a written statement that clearly explains the job, duties,
responsibilities, activities and performance results required from the job
holder.

(b) Job specification is a written statement stating the qualifications required


from the job holder. Qualifications here include level of academic
achievements, work experience, skills and abilities that need to be fulfilled
by the future job holder.

Since the job analysis describes in detail the description and specifications
required, each organisation needs to provide job analysis prior to any
recruitment. It will also be used during recruitment and selection in order to
match the qualifications of the applicants to the job requirements. Job analysis
also helps managers to prepare training programmes and acts as a comparative
resource in determining wages.

SELF-CHECK 5.1

What is job analysis? What are the information gathered from job
analysis?

EXERCISE 5.2

Give a brief description of job analysis.

5.1.2 Forecasting
Forecasting is a process of predicting the total number and types of employees
with the knowledge, skills and abilities needed by an organisation in the future.
There are two types of forecasting ă internal and external.

Internal forecasting pertains to the internal factors of the organisation which


influence the level of demand and supply of human resources in the organisation.
Factors such as the organisationÊs financial performance, productivity level,
mission and change in technology, retrenchment, promotion, retirement and
mortality are some examples of internal forecasting.

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External forecasting pertains to the external factors of the organisation that affect
the level of demand and supply of its workforce in the future. The factors include
supply of labour in a particular area, economics (unemployment rate), labour
unions and demographics of the labour force (in the aspect of age), migration,
competition levels and growth in a particular business or market.

In order to forecast the demand and supply of human resources in an


organisation, a manager can use three methods of forecasting. The most
frequently used methods are best estimates, management input and statistical
ratios (historical ratios). These methods can predict how many types of skills and
abilities of employees are needed by the organisation in the future.

EXERCISE 5.3

State two types of forecasting of total number and types of employees.

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

SELF-CHECK 5.2

What are the elements that an employer should focus on when


recruiting a new employee?

5.2.1 Internal Recruitment

Internal recruitment is the effort of developing a group of candidates who are


interested and qualified for a position offered from the existing employees in
the organisation.

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Internal recruitment also means promoting or moving existing employees into a


vacant position. Many organisations prefer this method because it is able to boost
the commitment, morale and motivation of the employees. It is also able to
reduce time and costs of employee development since the employee has already
understood the culture and procedures of the organisation. This will increase the
probability of the employee performing successfully in the position.

This method of internal recruitment differs from one organisation to another.


Some organisations practise closed recruitment systems where the manager
will only select a particular candidate or employee who is qualified to apply for
the position. This method is often used for promotion. The decision is made
informally and in a subjective condition and depends more on support from the
employeeÊs leader. This closed system is very much preferred especially by small
companies since it is able to reduce time, energy and costs in filling a vacant
position in the organisation.

However, there are organisations that practise internal recruitment by setting up


an open recruitment system whereby the vacant position is announced to all the
employees in that organisation. Job posting is another method where the vacant
position is advertised to all employees in the organisation. Information regarding
the position such as qualifications and requirements needed, salary, working
hours and others will be notified. This information will be circulated by
displaying it on the companyÊs bulletin board, circulation letters, intranet system
or any other communication channels which could be accessed by employees of
the company. Employees who feel that they are qualified and fulfil the
requirements of the particular position are able to submit their applications. This
method helps the organisation to discover hidden talents, allows employees to be
more responsible towards their career development and solves the problem of
maintaining talented employees who are already bored with the position they are
currently holding and considering the possibility of leaving the company.

5.2.2 External Recruitment


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

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

ACTIVITY 5.1

In some organisations in Malaysia, the employers, managers or


recruiters are more inclined towards hiring their own friends to fill job
vacancies even if there are many other qualified candidates. What is
your opinion on this? Discuss with your coursemates.

EXERCISE 5.4

List two methods of recruitment that can be implemented by


organisations.

5.3 SELECTION OF QUALIFIED EMPLOYEES


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

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5.3.1 Application Forms and Resume


The first selection method is the application form and resume. Both contain the
same information about the candidate such as personal information, academic
background, working experience and so forth.

Usually, application forms act as a tool for obtaining information about the
candidate which is prepared by the organisation itself. Meanwhile, a resume is
prepared by the candidate himself following his own format.

Many organisations prefer the use of application forms since the form prepared
only relates to the information required. The information obtained will be
incorporated into the human resource information system which will be used as
the material for selection evaluation.

5.3.2 References and Background Checking


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

5.3.3 Selection Tests


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

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TOPIC 5 HUMAN RESOURCE MANAGEMENT  87

Table 5.2: Selection Tests

Type of Test Description


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

The series of tests conducted in assessment centres include in-basket training,


role playing, small group presentation and leaderless group discussion. In-basket
training is a written test where candidates are given matters related to the task of
a manager such as memos, telephone messages, organisation policy and other
forms of communication. Candidates only have limited time to read, prioritise
items and decide on the means of dealing with each of the items. An experienced
manager will evaluate and make comments and then provide suggestions.

Leaderless group discussion is a discussion in a group comprising six candidates


and they are given two hours to solve problems but none of the members is
elected to lead the group. Trained observers will monitor and make comments
for each candidate based on how far the candidate is able to discuss, listen, lead
and deal with others.

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5.3.4 Interviews
Each of us who applies for any particular position will not be able to avoid being
interviewed. If we had attended five interviews at different organisations, it
means we have already faced five different types of interview conditions.

An interview is a method where company representatives will ask the candidate


a series of questions related to the job to determine whether he is qualified for
the job. There are a few types of interviews which are frequently used by
organisations ă unstructured, structured and semi-structured.

(a) Unstructured interview is an interview where the company representatives


ask any questions to the candidate. In this type of interview, a candidate
will face a different set of questions from other candidates.

(b) Meanwhile, structured interview is an interview where the interviewer will


ask a standard set of questions which had been earlier prepared and
drafted. Each candidate will face the same questions like any other
candidate. There are four types of questions that are frequently asked
during this type of interview:

(i) Situation-based Questions


Questions that require the candidate to provide answers on what he
will do when faced with a particular situation (For example: What will
you do if⁄)

(ii) Background-related Questions


Question that enquires about the candidateÊs work experience,
academic qualifications and other qualifications.

(iii) Behaviour-related Questions


Questions on the candidateÊs former jobs.

(iv) Job-related Questions


Questions which require the candidate to demonstrate his job
knowledge (For example, a question for a medical doctor: „A particular
medicine has been administered to a patient and he shows negative
feedback. How do you deal with the situation?‰)

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EXERCISE 5.5

State the two main processes involved in the selection of qualified


candidates.

ACTIVITY 5.2

Before attending an interview, a candidate might prepare himself with


answers to potential questions. He would already have ready answers
before going into the interview room. In this scenario, what is your
opinion regarding the effectiveness of interviews for employers?

5.4 DEVELOPMENT OF QUALIFIED


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

ACTIVITY 5.3

In order to strengthen the skills of an employee, the Malaysian Ministry


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

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5.4.1 Orientation
Orientation is the process of introducing new employees to the programmes,
policies and culture of the organisation. Orientation helps them to learn about the
organisation and get used to the new environment. Sometimes, orientation only
focuses on simple matters such as working hours, parking priority and salary
payment schedules. Employees may only undergo orientation by watching films,
reading handbooks and being introduced to their colleagues.

Orientation is conducted by teaching employees about the corporate culture and


providing guidelines to succeed with the organisation. For some organisations,
orientation is also incorporated with training programmes. This is to ensure that
new employees have the basic knowledge and skills needed to perform the job
assigned.

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

5.4.3 Determining the Needs for Training


Organisations should not hastily conduct training programmes for their
employees. If this happens, it can cause the organisations to bear high costs due
to the ineffectiveness of a particular training programme. This is because at that
point of time, training may no longer be needed. To avoid this, organisations
must determine the needs for training. This is a process of identifying and giving
priority to the learning needs of the employees. Needs for training can be carried
out by identifying performance ineffectiveness, listening to complaints from
customers, making observations on employees and managers, or assessing the
skills and knowledge of employees.

Furthermore, evaluation of training needs is an important tool in determining


who should or should not be attending the training programmes conducted. The
selection of candidates for training must be based on information related to a
particular job area.

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After training needs have been determined, training objectives must be


developed to fulfil the needs. Many training programmes are conducted without
objectives. Effective objectives must state what will happen to the organisation,
department or employees when training has been completed. The expected
results must be stated in writing. Training objectives can be categorised as shown
in Table 5.3.

Table 5.3: Categories of Training Objectives

Objective Categories Main Questions


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

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

5.4.4 Training Methods


Several training methods can be used to fulfil training needs and objectives.
Listed below are several training methods that are frequently used.

(a) On-the-job Training


This type of training is usually given by senior employees or supervisors.
Trainees will be shown how to perform a job and be allowed to perform it
under the supervision of the supervisor. One of the forms of on-the-job
training is job rotation (sometimes referred to as cross training). In job
rotation, employees will learn several different tasks in a particular unit or
department and perform the tasks in a particular period of time.

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One of the advantages of job rotation is that it allows flexibility in a


particular unit or department. When an employee is absent from work, his
job can be done by another employee. One of the advantages of on-the-job
training is that it does not need any specific facility.

Besides that, new employees are able to perform productive jobs during the
learning process. One of the disadvantages of this method of training is that
the pressure at the workplace can cause the training to be dangerous or
easily forgotten.

(b) Apprentice Training


This is a training programme system that requires an apprentice to work for
a certain period before he is allowed to perform a job or specialisation in a
particular area. Trainees are given instructions and acquire experience
during work or outside work, in every practical and theoretical aspect
needed for a job. Usually, a trainee will be placed under the supervision of
a mentor who has wide experience and has been long involved in that
particular job area. The mentor will give all the guidance and share his
experiences with the trainee, which hopefully will be able to help the
trainee progress towards a successful career.

(c) Off-the-job Training


Unlike on-the-job training, off-the-job training is done out of the location of
the job area. The location of training might be in a classroom with the same
facilities or in other different locations. This form of training allows the
demonstrator to focus on a particular education subject without any
interference and in a controlled environment. The downside of this form of
training is that it is unable to depict the real conditions of the workplace to
the trainees.

(d) Vestibule Training


The same procedure and tools used in the real working condition is
performed in a particular area known as vestibule. Trainees are taught how
to perform a job and use the relevant equipment by an experienced
employee. This will help the trainees to learn about the job areas in a
comfortable condition without any pressure from production scheduling.

The main advantage of this method is that trainers can emphasise on


theories and use the necessary techniques compared to the outputs and
trainees will learn how the real job is performed. However, this method
requires a high cost and employees still need to get used to the real
working environment. Vestibule training has been used to train word
processing operators, bank tellers, clerks and those in other related jobs.

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ACTIVITY 5.4
List the advantages and disadvantages of each training method. Present
your answers in the form of a table.

EXERCISE 5.6

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

5.5 PERFORMANCE EVALUATION

ACTIVITY 5.5

In 1992, the Malaysian government introduced the „New Remuneration


Scheme‰ for civil servants. In 2002, the government introduced the
„Malaysian Remuneration Scheme‰. The purpose of this scheme is to
evaluate the performance of their services.

You can obtain more information on this scheme at the website of the
Public Service Department of Malaysia as given below.

http://www.jpa.gov.my/ilmu/ssb/ssb.htm

After training is given to employees, they are released to perform the jobs
assigned to them, equipped with all the knowledge and guidance given. The next
step is to carry out performance evaluation. This is a process of evaluating job
performance and preparing feedback based on that evaluation. Performance
evaluation contributes towards two purposes. Firstly, the purpose of the
evaluation is to help inform employees about their performance level in
comparison to the standard. Secondly, performance evaluation can help in
personnel development and preparation of future training programmes.

Performance evaluation focuses on previous performance and measures it in


comparison to the standards fixed. The methods of performance evaluation must
fulfil the criteria of relevance and validity. In order to make it valid, the method
used must be consistent in giving results regardless of time or who the evaluator is.
What is actually being evaluated? This might be a question which frequently
plays inside the mind of a manager. Basically, evaluation is conducted on three

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sets of criteria ă job output, behaviour and attitude. Table 5.4 clarifies the three
sets of evaluation criteria.

Table 5.4: Sets of Criteria for Evaluation

Set of Criteria Description


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

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5.5.1 Who Should Evaluate?


Performance evaluation of an employee can be done by these people:

(a) Supervisors
Many organisations practise this method. An employee is evaluated by the
person who supervises him. For example, an operator is evaluated by his
supervisor; an executive is evaluated by a senior executive or manager; and,
a general manager is evaluated by the board of directors of the company.

(b) Colleagues
Evaluation by colleagues is considered a reliable approach. This is because
colleagues are close to the employee being evaluated and his daily job
performance. Daily meetings and conversations provide comprehensive
views regarding the job performance of the employee being evaluated.

Evaluation by colleagues could augment the effectiveness of evaluation


made by supervisors. However, evaluation by colleagues may be bias.

(c) Subordinates
The fourth party that can become the performance evaluator are
subordinates. Subordinates can provide important and detailed information
regarding the behaviour of their superiors due to a close relationship. The
problem is that subordinates may be afraid to provide accurate evaluation
due to the power held by their superiors and fear of retaliation.

(d) 360 Degrees Evaluation


The final approach is the 360 degrees evaluation. It provides feedback
on performance from all parties related to the job of the employee
being evaluated which covers general workers, customers, colleagues and
managers.

SELF-CHECK 5.3

In evaluating the performance of a particular employee of an


organisation, it is very important that the evaluation given is clear,
accurate and fair because the performance evaluation will become the
guidance and determinant for an employee. In your opinion, who is the
most appropriate person to conduct a performance evaluation of an
employee?

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5.5.2 Methods for Performance Evaluation


The previous discussion focused on who should conduct the performance
evaluation of an employee. Now, what are the methods that can be implemented
in making evaluations?

(a) Essay Writing


This is the simplest method in conducting performance evaluation. This
method requires the employee being evaluated to explain about the
strengths, weaknesses, earlier performances, potential and suggestions in
increasing performance. This essay writing does not require complex forms
or extensive exercises to be completed. But the results will usually portray
the ability of the writer. A good or bad performance is determined by the
writing skill and level of true performance of the evaluated employee.

(b) Critical Incidents


This is a form of evaluation that observes the behaviour that acts as the key
in differentiating between a good or bad work performance. The evaluator
will write to explain what has been done by the employee and whether his
job is effective. Evaluation here is not only directed at behaviour but also
involves the personality of the employee. Statements regarding these
critical incidents can depict the behaviour required and identify what needs
to be improved.

(c) Measurement of Objective Performance


One of the ways to increase performance through evaluation is by measuring
objective performance. This is a simple and countable performance
measurement. Objective performances that are frequently used are outputs,
scraps, wastes, sales, customer complaints or level of default.

(d) Employee Comparisons


Under this method, the evaluators rank employees according to such
factors as performance and value to the organisation. Only the employee
can occupy a particular ranking.

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ACTIVITY 5.6

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

EXERCISE 5.7

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


organisation.

5.6 RETAINING QUALIFIED EMPLOYEES


An employee works with an organisation to fulfil his personal objective, that is,
to earn money for his livelihood. An organisation can retain a talented employee
if it offers rewards that fit the job and needs of the employeeÊs personal
objectives. Employee reward refers to the payment granted to the employee as an
exchange for the job that is carried out. This reward may be financial or non-
financial. Generally, there are four types of decisions of reward granting ă
payment level, variable payment, payment structure and employee benefits.

The decision of payment level is a decision of making payment to employees


whether at a level below, above or at the same rate with the payment of salary in
the labour market. An organisation uses job evaluation to determine the payment
structure. Job evaluation determines the value or sum that must be paid for each
job by determining the market value for the knowledge, skills and needs
required to perform that particular job. After job evaluation has been carried out,
the organisation will usually make payments at the same rate as determined by
the market. There are some organisations that pay above the rate determined by
the market. This is to attract interest and retain the employees. A salary which is
higher than the level determined by the market will attract the interest of more
qualified candidates, increase the level of job acceptance, reduce recruitment
time, and increase the level of employee retention.

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The decision of variable payment is a decision that focuses on how far the
payment of salary differs from the job performance of an individual employee
and organisation. The purpose of relating payment with organisation performance
is to increase motivation, effort and job performance of employees. Piecework,
sales commissions, profit-sharing and employee share ownership plans are the
options available in variable payment.

Piecework payment plan is the payment for something that can be counted. For
example, an employee will be paid a standard rate for each item produced and
payment will increase if production is increased (for example, RM0.35 per unit
for the first 100 products, and units of products that exceeds 100 units will be
paid at the rate of RM0.45 per unit).

Sales commission is the payment a salesperson receives. It is a percentage of the


value of the goods he sold. The more sales he makes, the more commission he
will receive. For example, a car salesperson receives a sales commission of RM500
for each car that he sells. The more cars he sells, the more commission he will earn.

Since piecework and sales commission are based on individual performance, this
can reduce the incentive of employees to work in a team. Therefore, organisations
introduce group incentives to attract the interest of employees to work in a group
or team. Profit sharing is the payment taken from a part of the organisationÊs
profit. This payment is divided among the employees and is usually above the
level of reward that they normally receive. The more profit the organisation
makes, the more reward the employees will receive.

Employee share ownership plan grants employees with companyÊs shares in


addition to the rewards that they usually receive. Meanwhile, share option
provides the opportunity for employees to buy company shares at a fixed price
tier where the price is usually lower than the market value. For example, a
company offers its employees the price of RM5 per share while the market price
is RM10 per share.

Payment structure is a decision related to internal payment distribution. This


refers to how far individual employees in an organisation receive different levels
of salary. Individuals at the top level will receive a higher pay compared to those
at lower levels. For example, a director enjoys a higher payment structure than
the assistant director and a much higher structure than his subordinate officers.

Rewards granted are not only in monetary form but also in the non-monetary
form, referred to as employment benefits. These are called such because only
individuals working at a particular position or organisation will enjoy the
benefits. Employment benefit is the granting of rewards that cover anything

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other than the salary. Many organisations offer various forms of benefit choices
to employees such as retirement and pension plans, paid leave, sick leave, health
insurance, life insurance, health treatment, discounts on products and services of
the company etc.

EXERCISE 5.8

Based on your understanding, state the differences between financial


rewards and employment benefits.

5.7 EMPLOYEE SEPARATION


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

5.7.1 Employee Termination


Terminating employees may be considered as a simple act but think about the
feelings of the employee being terminated. It is definitely hard to describe the
feelings of that employee. Therefore, the manager must do a few things to
minimise problems related to employee termination.

Firstly, in most situations, termination or dismissal cannot be the first choice. The
employee must be given a chance to change his behaviour when a problem
arises. The employee should receive a series of specific warnings on the matters
of what and how serious is the problem that he caused. After warning have been
given, the problematic employee must be given time to make changes or correct
his mistakes. If the problem continues, he needs to be given consultation on
employee performance, what needs to be done to increase it and the results that
will arise if the problem continues (for example, show-cause letter, warning
letter, suspension without payment or termination).

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Secondly, the employee should be terminated based on sensible and rational


reasons. The termination of an employee without sensible reasons can result in
the employee taking court action, with a claim of wrongful discharge. This would
require the employer to state the job-related reasons for discontinuing the
services of the employee. The decision of termination needs to be done on job-
related factors such as disobeying or violating the companyÊs law or consistently
showing bad performance in the job.

Thirdly, the organisation needs to focus on the reaction of other employees when
one of them is terminated. This is because the issue of termination can affect the
performance and motivation of existing employees because it may raise the sense
of anxiety towards the security of their job.

SELF-CHECK 5.4

An employee of an organisation was imposed disciplinary action due to


an act of breach of trust. In your view, if he promised to change his
behaviour and expressed regret over his actions, should he be given a
second chance? What is the most suitable and necessary action to take
in order to ensure that he will not repeat the mistake?

5.7.2 Downsizing
Downsizing is the act of organised repealing of positions and jobs in the
organisation. Whether it is caused by the reduction of cost, decline in market
shares or being too aggressive in employing workers and growth, it is an
event that happens constantly in any organisation regardless of any economic
condition. Is downsizing effective? Theoretically, downsizing should bring an
increase in productivity and better performance profit and increase organisational
flexibility. A 15-year research on downsizing found that a company implementing
10% downsizing of its labour use is only able to produce a 1.5% reduction of its
cost and 4.7% increase in share value for three years compared to 34.3% in the
situation where downsizing is not implemented. Not only that, profitability and
productivity levels generally are not increased through downsizing. This clearly
shows that downsizing is not the best strategy to implement. Instead, effective
human resource planning is the best act. Downsizing needs to be taken as the
final step.

However, if the organisation finds that the financial condition and strategies
implemented are not effective and downsizing is necessary for the survival of the
organisation, it must train its managers to explain the needs of downsizing to the

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employees. The most important is that the top-level management must explain in
detail why downsizing is needed and choose a suitable time to inform the
employees. The news of downsizing should be delivered to the employees by the
management of the company. The employees should not have to find out from
the media such as television and newspapers. Besides that, the organisation must
truly assist the affected employees by helping them to find other jobs or
providing centres for counselling services. These centres serve to provide
counselling to ease the feelings of the downsized employees and lift their
motivation. Counselling centres could also help to retain a positive image of the
organisation from the societyÊs point of view due to the strategy of downsizing
implemented. These measures will help the employees to maintain their level of
job productivity up until their final days with the organisation.

5.7.3 Retirement
Retirement of an employee takes place when his retirement period arrives but
there are times when early retirement of employees can help the organisation. In
the effort to reduce the workforce in an organisation, implementation of early
retirement incentive programmes might help. These programmes offer financial
benefits for employees in order to encourage them to retire early. Not only does
this effort reduce the workforce but it also reduces cost by repealing a particular
position after the retirement of the employee, reduces cost by substituting a
highly paid retired employee with a lesser-paid new employee or by providing
opportunities to existing employees in the organisation.

The main problem related to this programme is in forecasting who and how
many employees are ready to accept this programme. The organisation may lose
talented employees and face a large number of employees who want to retire
early.

5.7.4 Employee Turnover


Employee turnover takes place when an employee voluntarily ends his service
with an organisation. Generally, an organisation tries to retain a low turnover
rate in order to reduce the processes of recruiting, employing, training and
replacement cost. However, not all turnovers harm the organisation. For
example, a functional turnover happens in the condition where an employee
with a bad performance level chooses to resign voluntarily. This enables the
organisation to replace an employee with poor performance with a new or better
employee.

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On the other hand, dysfunctional turnover takes place when a high-performance


employee chooses to leave voluntarily. This condition adversely affects the
organisation and it will lose a talented employee. Thus, employee turnover needs
to be analysed carefully in order to determine who really chooses to leave the
organisation ă an employee with poor performance or an employee with a good
performance. If many high-performance employees leave a company, the
managers must find out the reasons and measures to reduce it. Methods such as
salary increment and offering benefits that might encourage or increase the
working condition for these skilled employees could help. One of the best ways
to influence functional turnover and dysfunctional turnover is by relating salary
payment with the level of performance demonstrated.

EXERCISE 5.9

Essay Question

1. List four ways of employee separation frequently faced by


employees and organisations.

2. Describe the four basis of reward granting decision.

Multiple Choice Questions

1. „This is a written statement regarding the qualifications required for


holding a particular position.‰

What does the above refer to?


A. Job description
B. Job specification
C. Record system
D. Job analysis

2. What type of interview asks standard questions to all candidates,


usually questions regarding backgrounds, attitude and situation,
and job-related matters?
A. Standard interview
B. Structured interview
C. Situation interview
D. Semi-structured interview

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EXERCISE
3. What is the5.9
process of introducing the organisation to new employees
regarding organisational programmes, policies and culture?
A. Orientation
B. Vestibule training
C. Performance evaluation
D. Apprentice training programme

4. „This is a kind of payment where the salesperson receives percentage


from the price value of goods sold.‰

What does the above refer to?


A. Piecework
B. Share options
C. Sales commission
D. Profit sharing

5. What is the act of organised repealing of positions and jobs in the


organisation?
A. Retirement
B. Employee turnover
C. Termination
D. Downsizing

TRUE (T) or FALSE (F) Statements

1. Organisation strategies must be planned based on the condition of


human resource in the organisation.

2. Human resource management is a process of attracting the interest of


qualified candidates and maintaining or retaining qualified
employees.

3. Job analysis is a study process regarding the duties related to a


particular job and the human qualities needed in performing the job.

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EXERCISE
4. Forecast 5.9
towards factors such as economy, competition level
technology, residents demographic that influences the level of
demand and supply of organisationÊs workforce in the future are
considered as the internal forecasting of organisation.

5. Recruitment can be performed in two ways: internal recruitment


and external recruitment.

Human Resource Management Caselet

1. What are the main functions of human resource management?

2. Assume that you are the HRM manager of a new business


organisation. What steps would you take to recruit new staff for
your organisation?

 Human resource is the most valuable resource for an organisation. Therefore,


it must be managed properly.

 Excellent human resource management can assist in the implementation of


organisational strategies at a high level of efficiency and effectiveness.

 Human resource management is a process that comprises four main


components: determining the needs of human resource and the organisation;
attracting the interest of qualified candidates; developing qualified employees;
and retaining qualified employees.

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 These processes must be implemented with proper planning to ensure that


they make a significant contribution and fulfil the goals and objectives of the
organisation.

Apprentice training Job analysis


External recruitment Piecework payment plan
Internal recruitment Vestibule training

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Topic  Communication
6 in Organisations

LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Explain the importance of good communication in an organisation;
2. Differentiate between formal communication and informal
communication;
3. Clarify the forms of communications; and
4. Evaluate the steps for overcoming barriers to communication.

 INTRODUCTION
According to Lewit et al. (2001), there are many reasons why a manager
communicates. Managers motivate, inform, control and fulfil social needs.
Communication is used to influence employees to achieve organisational goals.

Communicating information provides facts and data to be used in making


decisions towards achieving the objectives that have been set.

Communication is used to coordinate employees and tasks.

Managers also communicate in order to fulfil social needs through interaction


that does not involve work. For example, an employee is not only required to talk
on matters related to their jobs but also on matters related to sports, weather,
entertainment, politics and others. Even though this communication will not
have direct effect on his work performance in the organisation, it can influence
the way the employee feels about his workplace and his relationship with other
employees.

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TOPIC 6 COMMUNICATION IN ORGANISATIONS  107

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

EXERCISE 6.1

Explain the main reasons why a manager communicates.

6.1 DEFINITION OF COMMUNICATION


Communication is a dynamic and complicated process which involves many
factors that affect its effectiveness. Dynamic process means that the process of
communication is not in a static or fixed condition. Meanwhile, complicated
process means that even though it is a simple interaction involving two people, it
involves numerous variables such as the individual, environment, experience of
both parties, and work conditions that determine the efficiency and effectiveness
of the process.

Communication is the process of transferring information and knowledge


from one individual or party to another person or party using meaningful
symbols. It is a method of exchanging and sharing of ideas, attitudes, values,
opinions and information.

The process of communication begins with a sender who wishes to deliver a


particular message and this process is complete when the receiver of the message
provides feedback on whether the message received is understood or otherwise.
Figure 6.1 depicts the elements in the process of communication.

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108  TOPIC 6 COMMUNICATION IN ORGANISATIONS

Figure 6.1: Process of communication


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

Communication is a process where the exchange of information takes place between


two or more people. The elements of the communication process are as follows:

(a) Information Sender


Also known as the message source, the sender is a person who has a piece
of information and wishes to deliver it to other parties.

(b) Encode
Encoding takes place when the sender translates the information to be
delivered into a series of symbols that can be identified and understood by
the receiver.

(c) Message
The message comprises symbols in the form of verbal, written or sign
language that symbolises the information to be delivered by the sender to
the receiver.

(d) Channel
Channel is the method of delivery from one person to another. The channel
must suit the message to be delivered to ensure that the communication
process occurs smoothly, effectively and efficiently.

(e) Decoding
Decoding is the process where the receiver translates the message received
into a form that can be understood and brings meaning to the receiver.

(f) Receiver
The receiver is the individual or party who receives the message delivered by
the sender. The message formed is based on the background of the receiver.

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(g) Feedback
It refers to the reaction of the receiver towards the message received from
the sender. It is a process of returning the message to the sender that
depicts the level of understanding of the receiver towards the particular
message. Providing feedback is the best way of showing that a particular
message has been received and whether the message has been understood
or otherwise.

(h) Disruption or Noise


Any factor that disrupts, confuses and restricts the delivery of message is
considered as disruption or noise. Interference may be internal or external.
Internal factors are related to the individual himself, such as a receiver who
does not pay attention to the message delivered. Meanwhile, external
factors are environmental and physical factors that cause the message
delivered not to be perfectly understood by the receiver.

ACTIVITY 6.1

Have you ever encountered a situation of misunderstanding between


your employee and yourself, or between your manager and yourself?
What was your action? Share your answer with your coursemates.

EXERCISE 6.2

Define communication and the elements involved in communication.

6.2 TYPES OF COMMUNICATION


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

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110  TOPIC 6 COMMUNICATION IN ORGANISATIONS

Figure 6.2: Types of communication


Let us now discuss the types of communication mentioned in Figure 6.2.

6.2.1 Formal Communication


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

(a) Vertical Communication


Vertical communication refers to two types of communication: downward
and upward flow of message.

(i) Downward Communication


According to Rue et al. (2000), downward communication is a part of
the communication system present in an organisation. This channel of
communication is frequently used by managers to deliver messages
to subordinates or customers. Downward vertical communication
begins from upper management and travels down along the levels of
management to middle management, lower/line management and
employees.

The purpose of downward vertical communication is to inform or


instruct other management and employees regarding policies or
organisational goals that have been set by upper management. Other
purposes of communication include advice; information, instruction
and evaluation on subordinates; and provide information on the goals
and policies of the organisation to the members of the organisation.

Problems in downward communication arise when it is misused, for


example, when managers do not provide opportunities for subordinates
to give feedback or do not provide complete information needed by
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subordinates to perform their work effectively. This might result in


the subordinates being confused, less understood and failing to
perform their jobs. This condition happens because most downward
communication is one way and does not encourage feedback from
subordinates using the information.

The choice of channel used in this system is important. Written


communication is usually difficult to alter. It provides a form of
official record but it does not allow immediate feedback. Meanwhile,
verbal communication does not provide a record and can be easily
altered but allows immediate feedback.

(ii) Upward Communication

Upward vertical communication contains messages or information from


the lower level of the hierarchy or subordinates to upper management
level.

Upward vertical communication is used by employees to deliver


suggestions, opinions or feedback to upper management. This can be
done through meetings, discussions, surveys and others.

The main function of this type of communication is to provide


information to upper management regarding what is happening at the
lower level. Ideally, organisation structures must allow for both
downward and upward communication. Communication is supposed
to flow two ways through the formal structure of the organisation.
Unfortunately, upward communication does not flow as smoothly
as downward communication. According to Rue et al. (2000), the
following are some of the barriers to upward communication:

 Management fails to react when subordinates deliver information.


This failure will cause frustration and inhibit future communication.

 Manager does not like negative information or problems. When


employees feel that this kind of attitude exists in their manager,
they will avoid giving information.

 The attitude of a manager plays a critical role in upward


communication. If a manager is concerned and listens well,
upward communication can be improved.

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(b) Horizontal Communication

Horizontal communication refers to the flow of message among members


working in the same level of hierarchy in a particular organisation.

This type of communication takes place between colleagues or among


managers. This type of communication forms coordination and relationships
among friends at the same level. For example, the sales manager discusses
with the human resource manager the number of part-time employees
needed for the next month.

Basically, upward and downward communications take place through the


chain of command of the organisation. Horizontal communication is
important for coordination among departments and to ensure the perfect
functioning of downward communication, which covers instructions from
upper management; and upward communication, which consists of feedback
from the subordinates to upper management.

Horizontal communication usually follows a work flow pattern in a


particular organisation, which takes place among colleagues, managers and
departments. The main aim is to provide a direct channel in coordination
and solve problems in the organisation. The benefit of horizontal
communication is that it allows the members of an organisation to develop
relationships with their colleagues from the same level. This will further
develop work satisfaction and cooperation.

(c) Diagonal Communication

Diagonal communication refers to the flow of message between two parties


from different hierarchies or departments in a particular organisation.

This type of communication does not follow protocol. This type of


communication is frequently used in informal organisations. For example, a
human resource manager discusses with a clerk from the accounts
department regarding incomplete information in employee records.

SELF-CHECK 6.1

What is meant by formal communication? State the different types of


formal communication channels in an organisation.

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6.2.2 Informal Communication


According to Rue et al. (2000), there are many informal paths of communication
in an organisation. Most of this communication happens outside the chain of
command. These informal communication channels are known as the grapevine.
Grapevine is an informal network of information among employees. The
grapevine in organisations does not emphasise power and rank. The grapevine
may connect members of the organisation in any direction of communication,
either vertically, horizontally or diagonally.

Even though the grapevine can be defined as rumours, they are also useful to
management. Through the grapevine, management is able to deliver information
and receive feedback faster without involving a high cost. Based on the feedback,
management can evaluate whether to carry out further investigation on the
matter at hand.

6.2.3 Non-verbal Communication


Non-verbal communication is a type of communication that does not use words,
either verbal or written. Non-verbal communication is an important addition to
verbal communication and sometimes can alter the meaning of verbal
communication. Non-verbal communication is the best method to communicate
emotions. When combined with verbal communication, it becomes a powerful
tool for a manager to send out information to employees. Non-verbal
communication consists of:

(a) Kinesics
According to Williams (2000), kinesics is a type of communication that does
not use words. Instead, it uses body language and facial expressions. A
person is able to understand the message delivered by watching the body
language or the expressions shown. For instance, a person will move his
head left to right when he does not understand a certain matter. The use of
body language always raises problems between the sender and the receiver.

(b) Paralanguage
According to Rue et al. (2000), forms of non-verbal communication involve
tone, pitch, intonation level, volume, and speech patterns such as silence or
halts in a personÊs voice which can also be considered as a form of
communication. For example, in the United States of America, a person can
raise their eyebrows as a sign of disagreement, attraction or as a sign of
giving attention. On the other hand, in Japan, raised eyebrows are
considered an obscene sign.

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SELF-CHECK 6.2

Explain what is informal communication.

6.3 INCREASING COMMUNICATION


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

6.3.1 Communication Barriers


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

Figure 6.3: Barriers to communication

(a) Selective Perception


This is the tendency to listen and receive objects and information which are
consistent with our values, beliefs and desires, but disregard or reject
information inconsistent with them. Perception is a process whereby an
individual receives, arranges, interprets and stores information obtained
from their environment. This is followed by the process of perception
filtering. Filtering of perception involves difference in personality,
psychology or basic experience that influences other people to disregard or
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TOPIC 6 COMMUNICATION IN ORGANISATIONS  115

not give attention to certain stimuli. Individuals are also inclined to fill in
the blanks of missing information by assuming what he does not know is
consistent with what he already knows.

(b) Disruption
Disruption is any factor that interrupts, confuses or restricts communication.
For example, a person talking on the telephone in a noisy environment will
face difficulty in understanding what the sender is saying. This disruption
might result in the wrong perception towards the message being delivered.

(c) Emotions
Emotional reactions such as anger, love, jealousy and fear will influence
a person in understanding the message being sent to him. Emotions
are subjective reactions when a person communicates. The emotion and
sentiment of the sender influences the message encoding and the receiver
may or may not realise the emotional condition of the sender. The emotions
of the sender and the receiver will influence the message decoding and
reaction of the receiver.

(d) Communication Skills


The skill to communicate differs from one individual to another. These
differences are caused by culture, education, training and the personality of
a particular person. For example, Americans prefer and are more talkative
compared to the Japanese.

Japanese people prefer to wait, listen and discuss a matter in detail before
making any decisions. The effectiveness of communication also depends on
the time a message is delivered. For instance, if a manager decides to give
out an instruction or message during the festive season or in the evening
when employees are preparing to leave the workplace or thinking of taking
a long vacation, the effectiveness of communication will definitely be poor.

(e) Suspicion
The reliability of a particular message will affect the effectiveness of
message acceptance. For example, in a discussion between employees and
management, employees are frequently suspicious about the claims of the
managers. In this situation, the perception towards the nature or honesty of
the sender is important. Education and experience of a person on the
subject of communication will also affect the process of communication.
Another important factor is the closeness of the receiver to the sender. A
good relationship between the two parties will promote a better and more
effective communication between one another compared to individuals
who are always in dispute with each other.

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6.3.2 Measures for Overcoming Communication


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

Figure 6.4: Measures in overcoming communication barriers

(a) Controlling the Flow of Information


There are times when a manager receives too much information that may
not be relevant or important to him. Therefore, the manager must create a
system that is able to identify and give priority only to the important
messages that requires immediate attention.

(b) Encouraging Feedback


The manager and related parties need to take measures to determine
whether the message had been understood accurately. From the feedback
received, the sender is able to find out whether the message delivered had
reached its target.

(c) Language Used


Since language can become a barrier to communication, a manager needs to
properly choose words and language that can be easily understood by the
subordinates. For example, the use of technical language is only suitable for
experts in a particular area.

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(d) Active Listening


A manager assumes that part of the responsibility to communicate
successfully is by giving non-punishing feedback or asking employees for
feedback. This means that the manager is clearly listening to what is being
told. Subordinates must act as good listeners and receivers of information.
They need to listen actively, reduce interference and develop better
communication skills through role-playing and group presentation training.

(e) Controlling Negative Emotions


Like everybody else, a manager needs to control his negative emotions
when communicating because negative emotions can alter or afflict the
contents of a particular message.

(f) Using Non-verbal Signs


Managers need to use non-verbal signs to emphasise important parts in a
particular message in order to portray their feelings.

(g) Using the Grapevine as a Communication Channel


The grapevine is a communication channel that is difficult to be removed
from any organisation. Therefore, managers must be able to use this
channel to deliver information promptly, examine reactions before making
the final decision and in getting feedback.

SELF-CHECK 6.3

After identifying the seven measures in overcoming communication


barriers, in your point of view, how far is the effectiveness of these
measures in practice? Explain.

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EXERCISE 6.3

TRUE (T) or FALSE (F) Statements

1. Each basic function of management requires effective communication


skills.

2. Communication depends on the ability to deliver messages and not


receive messages.

3. Paralanguage consists of body language and facial expressions.

4. Communication systems of organisations can move downwards,


upwards and horizontally.

5. The grapevine can become a source of information for managers.

Multiple Choice Questions

1. What is the flow of information received by the receiver from the


message sender referred to?
A. Decoding
B. Feedback
C. Perception
D. Grapevine

2. Which of the following is a form of non-verbal communication?


A. Paralanguage
B. Perception
C. Horizontal communication
D. Vertical communication

3. Which of the following is NOT considered a barrier to


communication?
A. Selected perception
B. Disruption
C. Emotion
D. Grapevine

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Communication Caselet

1. What communication skills are necessary for a manager?

2. Which do you think is the most important skill of all?

 Communication is an act of sending or spreading information. Communication


is a dynamic and complex process which involves many factors.

 There are eight elements involved in the process of communication ă the sender,
encoding, message, channel, decoding, receiver, feedback and disruption.

 Communication can be divided into two types: formal and informal.

 There are three formal communication systems which are frequently used ă
downward communication, upward communication and horizontal
communication.

 The informal communication channel in an organisation is referred to as the


grapevine.

 Verbal communication is a type of communication that uses speech or writing.

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120  TOPIC 6 COMMUNICATION IN ORGANISATIONS

 Non-verbal communication consists of kinesics and paralanguage.

 There are many barriers which interfere with the formation of effective
communication ă selected perception, disruption, emotions, communication
skills and suspicion.

 There are several measures that can be implemented in order to overcome the
barriers of communication ă controlling the flow of information, encouraging
feedback, language used, listening actively, controlling negative emotions,
using non-verbal signs and using the grapevine as a communication channel.

Diagonal communication Paralanguage


Horizontal communication Vertical communication
Kinesics

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Topic  Motivation
7
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Describe the basic process of motivation;
2. Explain the needs and processes approach to motivation;
3. Discuss the contribution of the different models of motivation; and
4. Describe how behaviour modification can be used for increasing or
reducing behaviour in organisations.

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

Work performance = Motivation  Ability  Situational constraints.

Since work performance is a function of motivation, ability and situational


constraints, work performance will decline if any one of the components is weak.

Needs are physical and psychological requirements that have to be fulfilled in


order to ensure existence and well-being. When needs are not fulfilled, a person
will experience internal tension but as soon as a need is fulfilled, a person will

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122  TOPIC 7 MOTIVATION

gain satisfaction and feel motivated. Soon, the need fulfilled can no longer
motivate the individual and when this condition occurs, the individual will shift
to other needs that have not yet been fulfilled.

SELF-CHECK 7.1

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

7.1 CLASSICAL MODEL AND SCIENTIFIC


MANAGEMENT
According to Rue et al. (2000), in his classical motivation model, employees can
be motivated by money. Frederick Taylor in his book, „The Principle of Scientific
Management (1911),‰ suggested an approach for companies and employees in
obtaining benefits based on his views on the workplace. He proposed that
employees be paid a higher salary to encourage them to produce more outputs,
which suits the opinion that employees can be motivated by money. Meanwhile
for companies, they need to analyse the job and find the best ways to produce
goods at lower costs, achieving a high level of profit and paying employees
promptly in order to motivate them.

The approach by Frederick Taylor is known as scientific management. His ideas


spread widely among managers in the early twentieth century. For example,
many factories in the United States of America hired experts to conduct studies
on time and movement. The techniques of industrial engineering are used in
every work section in determining how it can be performed effectively.

7.1.1 Approaches to Motivation


According to Lewis et al. (2001), motivation can be studied using several
approaches. Models of motivation can be categorised into two types of models:
need-based models and process-based models.

(a) Need-based models are motivation models that emphasise the specific
needs of humans or internal factors that give power to direct or stop action.
Need-based approaches explain motivation as a phenomenon that takes
place internally. There are three important models in this approach:

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TOPIC 7 MOTIVATION  123

hierarchy of needs model, two-factor model and achievement of needs


model.

(b) Process-based models are motivation models that focus on the


understanding of thinking or the cognitive process that exist in the mind of
an individual and actions that affect the behaviour of an individual.

Douglas McGregor (1906ă1964) introduced Theory X and Y about employees.


Theory X comprised of negative attitudes, while Theory Y comprised of positive
attitudes.

Theory X states that people:


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

Prioritise requirements for security rather than other requirements, that is Theory
X is of the opinion that people define work only as a necessity to live and will
avoid work whenever possible.

Theory Y states that people:


(a) Prefer to work;
(b) Will achieve the objectives that are assigned/entrusted;
(c) Will accept and seek responsibilities; and
(d) Have the intellectual ability that can be used to achieve organisational
objectives.

According to Theory Y, people will be satisfied with their jobs if the working
environment is suitable and they could implement their responsibilities well.

Although most companies use/apply Theory Y in their management, Theory X is


still being used in the management of some companies.

EXERCISE 7.1

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

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124  TOPIC 7 MOTIVATION

7.2 NEED-BASED APPROACH

7.2.1 Maslow’s Hierarchy of Needs


According to Lewis et al. (2001), MaslowÊs hierarchy of needs model is the most
famous model for motivation. According to the hierarchy of needs, an individual
has five basic needs ă physiological, safety, social, esteem and self-actualisation.
Figure 7.1 shows the five needs according to hierarchy and divided into upper
level and lower level. Physiological and safety needs are lower-level needs that
can be fulfilled externally while social needs, esteem needs and self-actualisation
needs are upper-level needs that can be fulfilled internally. Refer to Table 7.1 for
a description of each of these needs.

Figure 7.1: MaslowÊs hierarchy of needs


Source: Certo, S. C. (2000). Modern management (8th ed.). New Jersey: Prentice Hall

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TOPIC 7 MOTIVATION  125

Table 7.1: Description on MaslowÊs Hierarchy of Needs

Needs Hierarchy
Physiological This need exists at the lowest level of the hierarchy. Examples of
Needs this need are the need for food, water, air and sleep. Organisations
can help individuals to fulfil this need by preparing sufficient
income to obtain food, shelter and a comfortable working
environment. People will focus on fulfilling these needs before
fulfilling the needs in the following level.
Safety Needs This need is related closely to acquiring a safe physical and
emotional environment. Examples of this need are employment
network, health insurance and retirement plans used to fulfil the
safety needs of employees.
Social Needs After physiological and safety needs been fulfilled, social needs
will become the main source of motivation to people. This need
includes desire towards friendship, love and the feeling of
belonging. An example of social need is when an employee
establishes friendship in the workplace and feels a part of the
organisation.
Esteem Needs The needs at this level include the needs for status and
recognition. This need can be fulfilled through success. Esteem
needs are fulfilled when one is given recognition and respect by
other people. For example, organisations can help in fulfilling this
need through promotion or providing a spacious work station to
the employee. People in need of recognition want themselves to
be accepted based on their abilities and want to be known as
being capable and efficient.
Self-actualisation This need is at the highest level of the hierarchy. This need means
Needs that people value high achievement based on their self-potential
by using capability and interest to the maximum level in order to
perform work in the environment. As an example, a challenging
task can assist in satisfying a person towards the achievement of
self-actualisation needs.

According to Maslow, when a particular need has been fulfilled it will no longer
motivate the behaviour of employees. For example, when an employee has
gained confirmation in his work place, then a new retirement plan may become
less important to him compared to the opportunity of having new friends and
joining the informal group in the organisation. It is the same when the lower-
level needs are not fulfilled, most people will pay attention to those particular
needs. For example, an employee who is trying to fulfil the need for self-
recognition by holding an important position in a particular department
suddenly finds out that the department and position he is going to hold may be
eliminated, hence the employee may find that the chances of not being
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126  TOPIC 7 MOTIVATION

terminated in other organisations give more motivation to him compared to the


offer of promotion in the previous organisation.

MaslowÊs model identified that individuals have different needs which can be
motivated by different matters or activities. Unfortunately, this model can only
provide basic guidelines to managers. Many following studies conducted found
that hierarchy level differs between individuals in different cultural environments.

SELF-CHECK 7.2

Briefly explain MaslowÊs Hierarchy of Needs model.

7.2.2 Two-Factor Model


According to Rue et al. (2000), the study done by Frederick Herzberg, Bernard
Mausner and Barbara Snyderman produced an approach towards motivation
that is accepted widely in the area of management. This approach is known by
several names such as motivation and care approach, two-factor or motivation
and hygiene approach. This model relates job satisfaction with productivity for a
group of accountants and engineers. This study found that factors toward job
satisfaction are separated from the factors that incline towards dissatisfaction of
jobs. Figure 7.2 shows the two-factor model.

Figure 7.2: Two-factor model


Source: Lewis et al. (2001)

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TOPIC 7 MOTIVATION  127

(a) Motivation Factors


Motivation factors are factors related to the work performed. These factors
are related to positive feelings and attitude towards the particular work.
Motivation factors include the work itself, achievements, inner growth and
responsibility.

(b) Hygiene Factors


These factors refer to the context of work or the environment where the
work is being carried out. The factors include supervision, workplace
conditions, individual relationship, salary, safety, and the companyÊs
administration and policies. These factors are closely related to the negative
feelings towards a particular job but nevertheless they do not contribute
towards motivation. According to the researchers, these factors do not
generate motivation but instead prevent motivation from occurring.

For example, employees will feel dissatisfied if they believe that their work
place is not safe; but if the condition of the workplace is improved,
employees may not necessarily become satisfied. If employees are not given
any recognition, feelings of dissatisfaction may not exist. At the same time
although they may not feel satisfied but when recognition is given,
employees will feel more satisfied.

This theory suggests that managers should use two approaches in order to
increase motivation. Firstly, they must ensure hygiene factors such as work
environment are policies that are clearly stated and can be accepted by the
employees. This practice will reduce dissatisfaction of employees. For
second step, managers must use motivational factors such as recognition
and additional responsibilities as tools to increase satisfaction and
motivation.

In conclusion, this approach shows that motivation comes from the individual
himself. Attention towards hygiene factors will help individuals to reduce
excessive dissatisfaction. Both factors of motivation and hygiene need to exist
together to promote motivation. The result of this study found that this two-
factor model is effective in a professional workplace environment but is less
effective in a clerical or manufacturing environment.

EXERCISE 7.2

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


model.

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128  TOPIC 7 MOTIVATION

7.2.3 Acquired Needs Theory


According to Rue et al. (2000), this motivation model focuses on the three needs
that are important or related to the working environment, namely, achievement,
affiliation and power. This model was developed by David Mc Clelland. The use
of the word „needs‰ in this model differs from the hierarchy of needs approach.
In this model, needs are assumed as something that can be learnt while Maslow
viewed needs as inherited.

Need for achievement is the desire to perform much better and more efficiently
than before. The level of achievement motivation in a person depends on
factors such as childhood, personal experiences and education and the type of
organisation joined.

Need for power refers to the desire to control, influence or be responsible over
other people.

Need for affiliation relates to the desire to maintain close and personal
relationships. This need can involve personal authority or institutional authority.
Meanwhile, the need for social acceptance is the desire for creating relationships
with other people.

According to McClelland, most people have already achieved certain levels of


these needs and that they vary from one individual to another. In this model,
when the strength towards these needs has been developed, it will be able to
motivate the behaviour of individual in situations that will allow them to fulfil
highly demanding needs.

7.3 PROCESS-BASED APPROACHES


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

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7.3.1 Expectancy Theory


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

Figure 7.3 Association between expectancy, instrumentality and valence


Source: Jones, G. R., George, J. M., & Hill, C. W. L. (2000).
Contemporary management (2nd ed.). Boston: Irwin-McGraw Hill

(a) Valence ă EmployeesÊ belief regarding the value of outcome or simply how
far the particular reward or outcome is attractive or desired.

(b) Expectancy ă EmployeesÊ belief that their effort will incline towards the
level of performance desired or the assumption of the association between
effort and performance.

(c) Instrumentality ă EmployeesÊ belief that the achievement of the performance


level desired will lead to the outcome desired or the assumption of the
association between performance and rewards.

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

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130  TOPIC 7 MOTIVATION

7.3.2 Equity Theory


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

EmployeeÊs Self Comparison to Other People Perception


Reward Reward
= Equality
Input Input

Reward Reward
< Inequality
Input Input

Reward Reward
> Inequality
Input Input

Figure 7.4: Comparative situations and its association with perception


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

For example, a graduate who has just completed his studies received a job offer
to work with a company with a starting salary of RM24,000 per annum, having
the facility of a company car, and sharing an office room with another employee.
If he finds out that there is a new employee reporting for duty given the same
salary and remuneration he received, he will feel that the treatment given is
equal. But if the opposite happens, that is, if the new employee reporting for duty
is given a salary of RM30,000 per annum, a bigger company car and a specific
office room for himself, the particular employee will feel that inequality has
taken place. For an individual who experiences equal treatment, the ratio of
comparison may not necessarily be the same relatively. Based on the previous
example, the employee who initially feels that there is inequality when the new
employee receives a better remuneration will be able to alter that feeling when he
finds out that the new employee has higher work experience and qualifications
than himself hence he deserves the bigger remuneration based on his
contributions towards the company.

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TOPIC 7 MOTIVATION  131

This theory also states that the existence of inequality can result in pressure
equivalent to the level of inequality felt by the employee. This pressure will
motivate a person to achieve equality or reduce inequality. There are several
actions that can be taken to reduce inequality such as reducing inputs or
contribution if it is much higher compared to the input and outcome received by
other people, increasing input if input is much lower compared to others,
demanding compensation such as a pay rise or deciding to resign from the job.

EXERCISE 7.3

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

7.3.3 Goal-setting Model


According to Williams (2000), the goal-setting model is a motivation model
that acts by increasing the efficiency and effectiveness of individuals, groups,
departments or organisation by emphasising specifically on the outcomes
expected. Goal is the target, objective or decision that a person tries to achieve.
This model states that people will be motivated up to a certain level when they
are given a specific goal, which is challenging and obtain feedback regarding
their development towards achieving the particular goal.

The basic components for a goal-setting model are that goals must be specific,
challenging and acceptable; have performance feedback; and gives at the correct
time. As a motivation tool, goal-setting can help employees in three ways: as a
guideline and propeller of behaviour to support the goals of the organisation;
provide challenges and standards that can be used to make evaluations; and for
stating something important and preparing the framework for planning.

An important aspect of this model is the involvement of employees in goal-


setting. When the employees themselves determine the goals they want to
achieve, it will be easier for them to accept the goal and become more committed.
If employees are not involved or participation is only minimal in setting the
goals, they normally will not be that interested in achieving the goals.

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7.3.4 Reinforcement Model


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

Figure 7.5: Consequences due to behavioural actions


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

(a) Positive Reinforcement


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

(b) Negative Reinforcement


Negative reinforcement means giving an opportunity to a person in order
to avoid negative outcome or consequence through the desired behaviour.
Negative and positive reinforcements can both be used to increase the
frequency of desired behaviour. For example, making tax payment before
the month of May will prevent a person from being fined.

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TOPIC 7 MOTIVATION  133

(c) Elimination
Elimination involves the absence of positive outcome or effect, or drawing
back the positive outcome that used to give effect from the desired
behaviour.

(d) Punishment
Punishment is the negative effect that is a result from the occurrence of
undesired matters. As an example, an employee who is always late for
work can be suspended or have his pay detained. Both forms of elimination
reinforcement and punishment can be used to reduce the frequency of
undesired behaviour. There are many studies conducted that show that
rewards can increase the level of satisfaction and motivation compared to
punishment.

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

Figure 7.6: The summary of reinforcement theory


Source: Rue, L. W., & Byars, L. L. (2000). Management: Skills and application
(9th ed.). Boston: Irwin-McGraw-Hill

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134  TOPIC 7 MOTIVATION

EXERCISE 7.4

Essay Question
As a manager, you have decided to reduce the undesired behaviour of a
particular employee. What are the types of reinforcements that are
suitable to be used and why?

TRUE (T) or FALSE (F) Statements


1. The scientific management approach assumes that money is the
main inducer to motivation.
2. The experience of an employee is an example of outcome or result in
the equity model.
3. In the two-factor model, hygiene factors need to exist for true
motivation to take place but motivation factors do not need to exist
for true motivation to happen.
4. Valence in expectancy model refers to employeesÊ belief regarding
the value of outcomes or consequences.
5. The key to a successful positive reinforcement is that rewards must
be the result of performance.

Multiple Choice Questions

1. „This model assumes that people are motivated towards lower level
needs that have not yet been fulfilled.‰
What model of motivation is referred to above?
A. Goals
B. Reinforcement
C. Hierarchy of needs
D. Two-factor

2. Which motivation model states that needs are assumed as being


learnt rather than being inherited?
A. Two factor theory
B. Maslow hierarchy
C. Achievement of needs model
D. Expectancy model

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TOPIC 7 MOTIVATION  135

3. Which is not a component of the expectancy model?


A. Valence
B. Instrumentality
C. Forecasting
D. Expectancy

4. What is the negative effect that is a result of undesired behaviour under


the behaviour reinforcement model?
A. Elimination
B. Positive reinforcement
C. Negative reinforcement
D. Punishment

5. According to the view of the two-factor model researcher, what factor


can prevent motivation from occurring but does not actually produce
motivation?
A. Hygiene factors
B. Motivation factors
C. Equity factors
D. Expectancy factors

Motivation Caselet

1. What do you understand by the term „motivation‰?


2. Differentiate between intrinsic and extrinsic motivation?

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136  TOPIC 7 MOTIVATION

 There are two main approaches for explaining the aspects of motivation.

 Need-based approaches explain motivation that exists and takes place


internally or explains what truly motivates people.

 Meanwhile, process-based approaches explain the cognitive process that


affects human behaviour.

 The three needs-based models discussed were the hierarchy of needs model,
two-factor model and achievement of needs model.

 In the process-based approach, there are four main models discussed,


namely, the expectancy model, equity model, goal-setting model and
behaviour reinforcement model.

Equity model MaslowÊs hierarchy of needs


Expectancy Reinforcement model
Goal-setting model Valence
Instrumentality

Copyright © Open University Malaysia (OUM)


Topic  Leadership
8
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Describe leadership;
2. Differentiate between the role of a manager and a leader;
3. Compare the three leader-centred approaches;
4. Describe the meaning of follower-centred leadership;
5. Explain the approaches and models related to interactive leadership;
and
6. Discuss the styles of contemporary leadership.

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

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138  TOPIC 8 LEADERSHIP

Figure 8.1: Differences between a manager and a leader


Source: Williams, C. (2000). Management. South Western: Thomson Learning

8.1 LEADERSHIP APPROACHES


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

8.1.1 Leader-Centred Approach


This approach focuses on the personality features of a leader, the behaviour of a
leader and leadership style.

(a) Personality Features of a Leader


According to Lewis et al. (2001), the personality features of a leader are
among the earliest approach in the study of leadership. Early studies on
leadership theory tried to identify the specific personality features related
to an excellent leader. The focus on personality is based on the assumption
that some leaders have certain physical features (height, weight and self
appearance), personality aspects (self-appreciation, economic stability,
knowledge, initiative and diligence) and abilities (creativity, articulate,
patience and sympathy).

For example, physical form, intelligence and the skill of public speaking at
one time were considered the personality features of a leader. Moreover,
there are beliefs that taller people are better leaders than shorter ones. This
type of personality approach was proven to be a weak determinant of
leadership potential.

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TOPIC 8 LEADERSHIP  139

Generally, there are several personality features that show the difference
between a leader and a follower. However, the difference is insignificant.
Studies related to personality features generally are not very successful. The
main reason is that the personality features of a particular leader are not
necessarily similar to those of other leaders. In fact, personality features
alone are not enough to create a successful leadership.

ACTIVITY 8.1

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

(b) Focus Towards Leadership Behaviour


This approach to leadership behaviour is conducted through studies on
what had been done by an effective leader and not based on the features
possessed by the particular leader. There are three studies on leadership
behaviour those conducted in the Ohio State University and Michigan
University and the study of leadership behaviour using the Managerial
Grid.

(i) Studies by Ohio State University


According to Rue et al. (2000), several series of studies on leadership
were conducted by this university to obtain a summary regarding the
most important and effective behaviour to successful leaders. They
wanted to obtain information related to successful leaders regardless
of the organisation involved. These studies found that two consistent
and important behaviours of leaders are consideration behaviour and
structural behaviour.

Consideration behaviour refers to the behaviour of leaders that


show feelings of consideration towards members of the group or
subordinates and fulfilling their needs. Meanwhile, structural
behaviour refers to the behaviour of leaders in forming the work
procedures of subordinates and guiding them towards goal
achievement.

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140  TOPIC 8 LEADERSHIP

This study found that leaders with a high level of consideration are
more inclined to have satisfied subordinates compared to leaders with
a low level of consideration. For example, the appointment and
termination of employees are at the lowest level while work
satisfaction is at the highest level under the supervision of a leader
with a high level of consideration behaviour. Leaders who are
assumed to have a high level of structural behaviour but are low in
terms of consideration will face a high frequency of complaints and
resignation among employees.

The correlation between consideration behaviour and the effectiveness


of a leader depends on the groups led. A high achievement for
consideration behaviour correlates positively with the effectiveness of a
leader such as managers and office staff in a large industrial firm, while
a high achievement for consideration behaviour correlates negatively
with the effectiveness of leaders such as production engineers.

There is no consistent association or relationship between structural


behaviour and the effectiveness of a leader but the relationship is
dependent on the group led.

Figure 8.2 illustrates the relationships between consideration behaviour


with structural behaviour.

Figure 8.2: Association between consideration behaviour and structural behaviour


Source: Certo, C. S. (2000). Modern management (8th ed.). New Jersey: Prentice Hall

(ii) Studies by Michigan University


According to Rue et al. (2000), the purpose of the study conducted by
The Institute of Social Studies, Michigan University, led by Rensis
Likert, was to identify basic principles that contribute towards
productivity and satisfaction of the members of a group. The study
found that consideration behaviour (work-oriented) and structural
behaviour (task-oriented) are exclusive and separated behaviours. Both
these behaviours are on the same continuum but at opposite ends.
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TOPIC 8 LEADERSHIP  141

The conclusion from this study was that leaders who are inclined
towards the feeling of consideration must reduce the structural
behaviour and vice versa. For leaders who are inclined towards work,
they need to reduce their consideration behaviour. The result of the
Michigan UniversityÊs study also found that consideration behaviour
or employee-oriented behaviour has a close association with successful
leadership.

EXERCISE 8.1

The results of the study by Michigan University are almost similar to


those of the study by Ohio State University. State the similarities.

(iii) The Managerial Grid by Blake and Mouton


According to Rue et al. (2000), Robert Blake and Jane Mouton
produced a method for classifying the styles of leader management
referred to as the Managerial Grid. It is also known as the leadership
grid. This managerial grid uses a two-dimensional framework in
providing status to leaders based on consideration towards people
with consideration towards production in forming the five different
styles of leadership. Both behaviours are on the scale of 1 to 9, with 1
representing the lowest and 9 representing the highest, as depicted in
Figure 8.3.

Blake and Mouton suggested that the position of leadership at the


matrix 9-9 is the best. They named this style of leadership as team
management. Leaders at the matrix 9-1 show the style of authoritarian
management that of workers following orders when they have high
consideration on production and low consideration on people.

Leaders who are at the matrix 1-9 are leaders who are very concerned
in creating a happy and friendly working condition but do not give
important focus towards production or performance. This is known as
the leadership style of country club management. The weakest
leadership style based on this grid is the impoverished leadership
style that is at matrix 1-1. The leaders at this position do not care
about the employees and production but instead, he only performs
his work at a minimal level.

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142  TOPIC 8 LEADERSHIP

Finally, the leadership style that is in the middle at the matrix 5-5 is a
leader who shows moderate consideration towards the employees
and production. Figure 8.3 illustrates the leadership styles in the
leadership grid.

ACTIVITY 8.2

To obtain a clearer picture on what is meant by the Managerial Grid by


Blake and Mouton, go to the following website:

http://www.nwlink.com/~donclark/leader/bm_model.html

Look for the word „questionnaire,‰ click on it and choose the article and
read the instructions.

5,5 Middle of the road

Figure 8.3: Managerial grid


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

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TOPIC 8 LEADERSHIP  143

ACTIVITY 8.3

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

(iv) Leadership Styles


After the three studies that focused on the personality features of
leaders, researchers shifted their focus by conducting studies related
to the behaviour of leaders or leadership styles. Leadership style
refers to the behaviour exhibited by a leader when dealing with
subordinates and this leadership style can be differentiated in decision
making.

There are three types of leadership styles, namely, autocratic, laissez-


faire and democratic. Generally, autocratic leaders make more
decisions for the group. Meanwhile, laissez-faire leaders allow the
members of the group to make all the decisions. A democratic leader,
on the other hand, guides and encourages the group to make
decisions. Normally, most leaders do not follow just one type of
leadership style. These three styles of leadership will have different
feedback from problems relating to human relationships.

8.1.2 Follower-Centred Approach


According to Lewis et al. (2001), self-leadership is a paradigm for creating leaders
of organisations who are ready to lead themselves. Even though leadership is
important, the successor variables to leadership and leadership neutralisation
create a situation where leadership is no longer needed or the presence of
leadership will not bring significant effect on performance.

The leader successors are variables such as individuals, tasks and organisation
features that can cause leaders to be unnecessary or in other words, those
variables are able to exceed the abilities of leaders in affecting satisfaction and
performance of subordinates. Meanwhile, leadership neutralisations are variables
such as employees, tasks and organisation features that intervene with the work
actions of a leader or create a difficult situation for leaders to influence the
performance of the followers.

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8.1.3 Interactive Approaches


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

Figure 8.4: Four models of interactive approach

(a) Situational Leadership Model


According to Rue et al. (2000), this model is also known as leadership life-
cycle model. It was introduced by Paul Hersey and Kenneth Blanchard.
This model is based on the assumption that leadership styles should
portray the maturity level of subordinates. This model studies the
interaction between behaviour, leadership, situation or condition and
competency of followers.

Competency here is defined as the ability of subordinates and their


commitment towards completing specific tasks. There are two types of
behaviour in this model, namely, the task behaviour and relationship
behaviour. In this model, when the level of maturity of followers increases,
task behaviour must be reduced while relationship behaviour must be
increased and later gradually reduced.

Subordinate maturity portrays their ability in performing tasks on their


own, accepting responsibilities and their level of motivation to succeed.
This model suggests that when maturity level of followers changes from
immature to matured, the behaviour of leaders must also change from
high-task behaviour to low-relationship behaviour, that is, the first
quadrant, to the high-task behaviour to high-relationship behaviour, until
the fourth quadrant that is low-task behaviour to low-relationship
behaviour.

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TOPIC 8 LEADERSHIP  145

This model then combined the task behaviour and relationship behaviour
to create four different leadership styles: telling or directing style, selling or
coaching style, participating or supporting style, and delegating style.
These styles are used based on the different level of maturity of employees.
According to Williams (2000), maturity of followers consists of task
maturity and psychological maturity.

The telling or directing style of leadership is suitable for employees having


the lowest level of maturity. For a higher level of maturity, leaders only
have to give encouragement to the employees in completing their tasks. The
suitable leadership style for this situation is the style of selling or coaching.
For employees who are more matured, involvement in making decisions
together and two-way communication, then the participating or supporting
style of leadership is considered the most suitable. Meanwhile, the
delegating style of leadership is suitable for employees having the highest
level of maturity. Figure 8.5 illustrates the situational leadership model.

Figure 8.5: Situational leadership model

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146  TOPIC 8 LEADERSHIP

ACTIVITY 8.4

Based on your understanding of the previous discussion, draw a figure


that represents the Situational Leadership Model according to what you
have just learned.

(b) FiedlerÊs Contingency Theory


According to Williams (2000), this theory is one of the earliest studies
using the contingency approach. It was introduced by Fred Fiedler. He
studied the favourableness between the leaderÊs personality features with
situational conditions. Fiedler suggested two personality features, namely
task motivation and relations motivation. Fiedler viewed situational
leadership on a continuum of favourableness and unfavourableness based
on the three main dimensions: leader-subordinate relations, task structure
and position power.

Leader-member relations refer to the degree to which the leader feels


accepted by the followers. Task structure is the degree to which the goals
and other factors are outlined clearly. Position power is the extent to which
the leader has control over the rewards and punishments that his followers
receive.

Figure 8.6: FidlerÊs contingency theory


Source: Williams, C. (2000). Management. South Western: Thomson Learning

This theory is based on several assumptions: leaders will become effective


when their task group moves successfully; leaders are not capable of
changing their leadership styles; leadership style must be suited to the
correct situation; and favourable situations will help leaders to influence the
members of the group. This model used a survey known as Least Preferred
Co-worker (LPC) to measure leadership styles. According to the LPC scale,
there are two types of styles that are basic to the leader. Employees giving
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TOPIC 8 LEADERSHIP  147

views of positive LPC were found to have a relation-oriented leadership


style. Meanwhile, employees with negative LPC were found to be having
task-oriented leadership style.

A favourable situation occurs when leaders are able to influence their


followers and this is determined by leader-member relations, task structure
and position power. Generally, leaders with relations orientation and a high
LPC mark are considered as better leaders in intermediate favourable
situations. Leaders who are task-oriented with low LPC marks are better
leaders in very highly favourable situations or in unfavourable situations.

In conclusion, since this theory assumed that leaders are not able to alter
their leadership styles, therefore organisations must measure and accurately
match leaders to situations or alter situational factors to suit the leaders.

(c) Path-goal Theory


According to Williams (2000), this theory was introduced by Martin Evans
and Robert House. This theory stated that a leader is able to increase the
satisfaction and performance of his subordinates by explaining and setting
up the path towards behavioural goals by increasing the number and forms
of rewards towards the achievement of goals. Figure 8.7 illustrates the
framework for path-goal.

Figure 8.7: Path-goal theory


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

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

You will find that in this theory, there are four types of behaviour for a leader.
These four types of behaviour will be discussed in Table 8.1.

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148  TOPIC 8 LEADERSHIP

Table 8.1: Types of Behaviour of a Leader

LeaderÊs Behaviour Description


Directive behaviour Leadership behaviour with the leader allowing employees to
recognise clearly what is expected of them, clarifying the
guidelines to perform their tasks, work schedule, setting up
achievement standards, and making them abide by the
standards of rules and regulations.
Supportive behaviour Leadership behaviour that allows employees to be close to
the leader. The leader exhibits feelings of concern, care for
the employeesÊ welfare and treats them fairly and equally,
forming a happy and friendly environment.
Participative Leadership behaviour where the leader holds discussions
behaviour with the employees in order to obtain views and inputs
before making decisions.
Achievement Leadership behaviour where the leader sets up challenging
behaviour goals and sets high standards on the employees and show
confidence that the employees are competent and responsible.

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

ACTIVITY 8.5

For further information on FiedlerÊs Contingency theory, visit:

http://courses.washington.edu/inde495/lecf.htm

After you have read this article, try to obtain important notes which can
be used as your references when answering the essay questions later.

EXERCISE 8.2

Explain what is meant by favourable situation in FiedlerÊs Contingency


theory.

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(d) Continuum of Leader Behaviour


According to Rue et al. (2000), Robert Tannenbaum and Warren Schmidt
believed that different situations required different leadership styles. They
considered three important forces that are related to finding the most
effective leadership styles: forces within the leader, forces within the
subordinates and forces within the situation.

In the continuum produced, the leader behaviour on the left refers to a


leader having high control and only giving slight freedom to his
subordinates. Leader behaviour in the middle of the continuum depicts a
change in leadership style from autocratic style to democratic style. The
leader behaviour on the right shows that leaderÊs control is scarce with
subordinates having more freedom in making decisions.

8.2 STRATEGIC LEADERSHIP


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

SELF-CHECK 8.1

In your point of view, what are the leadership characteristics that need
to be exhibited by a manager? Explain.

8.2.1 Visionary Leadership


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

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8.2.2 Charismatic Leadership


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

8.2.3 Transactional Leadership


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

8.2.4 Transformational Leadership


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

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TOPIC 8 LEADERSHIP  151

EXERCISE 8.3

Essay Question

In what way does a transactional leader differ from a transformational


leader?

TRUE (T) or FALSE (F) Statements

1. Leaders emphasise more for a task to be performed efficiently.

2. The study conducted by the Ohio State University and Michigan


University are slightly similar based on the task dimension and
relation dimension.

3. The path-goal model assumes that leadership style is stable and


cannot be altered.

4. FiedlerÊs contingency model states that leadership style is stable and


fixed.

5. Transactional leadership is based on the process of exchange.

Multiple Choice Questions

1. Which leadership model states that an effective leader possesses a


set of specific characteristics?
A. Contingency
B. Behavioural
C. Personality
D. Goal

2. What is the best combination for leadership style according to Blake


and Mouton?
A. Moderate consideration towards human and productions
B. High consideration towards human
C. High consideration towards production
D. High consideration towards human and production

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152  TOPIC 8 LEADERSHIP

3. According to Fiedler, when do leaders become effective?


A. Have high consideration towards human and productions
B. Explain LPC in a positive form
C. Find that a situation is favourable
D. Obtain a leadership style that suits the situation

4. Which leadership style suits an employee who is confident, committed


and capable of receiving responsibilities?
A. Directing
B. Selling
C. Participating
D. Delegating

5. Leadership neutralisation is one of the variables related to which style of


leadership?
A. Contingency
B. Self
C. Visionary
D. Behavioural

Leadership Caselet

1. Evaluate the above scenario according to the leadership theories that


you have learnt in this topic.

2. What can you infer from this regarding leadership?

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TOPIC 8 LEADERSHIP  153

 Leaders are different from managers. The main differences are that leaders
emphasise more on performing tasks effectively while managers emphasise
more on performing tasks efficiently or correctly.

 Leader-centred approach focuses on personality features of leaders, leader


behaviour and leadership styles.

 The main results from the studies on personality features of a leader found
that successful leaders usually have certain personal features that are better
when compared to followers.

 On leadership behaviour, three important studies were discussed, namely,


the studies conducted by the Ohio State University, Michigan University and
Managerial Grid.

 These three studies lined the two main dimensions portraying the behaviour
of a leader, namely, task dimension and relations dimension.

 Other than that, leadership styles associated with decision making gave rise
to three forms of leadership styles that are popularly known: autocratic style,
laissez-faire and democratic style.

 The follower-centred approach or also referred to as self-leadership is a


paradigm that is based on the presence of leaders in organisations who are
ready to lead their own selves.

 Meanwhile, interactive approach is related to the studies between leader


behaviour with the situation and favourableness of the followers.

 In this approach, four main models such as leadership situational model,


path-goal model, FiedlerÊs contingency model and continuum of leader
behaviour model had been discussed.

 Finally, several contemporary leadership styles ă the strategic leadership


involving visionary leadership, charismatic leadership, transactional leadership
and transformational leadership were also discussed in detail.

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154  TOPIC 8 LEADERSHIP

Autocratic Transactional
Democratic Transformational
Laissez-faire Visionary leadership

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Topic  Controlling
9
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Explain the term „controlling‰ and the main purpose of control;
2. Examine the steps involved in the process of control;
3. Describe the forms of control; and
4. Analyse the perspectives and activities that need to be controlled.

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

9.1 DEFINITION OF CONTROL


Management control is a systematic effort to fix or establish the standard of
performance through planning objectives, designing information feedback
systems, comparing true performance with the fixed standard, determining
whether there are any disadvantages or weaknesses and taking suitable actions
to ensure all resources within the organisation can be used in the most effective
and efficient way in achieving the objective of the organisation.

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156  TOPIC 9 CONTROLLING

According to Rue et al. (2000), control is the process of ensuring that


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

The main purpose of control in management is to prepare managers to face


future or existing problems before they turn critical. In general, an organisation
with a good control mechanism will have the advantage of competing strength
compared to organisations without a good control system. The following are
several examples of the importance of control for organisations:

9.1.1 Quality Assurance


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

9.1.2 Preparation to Face Changes


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

SELF-CHECK 9.1

What is control within a particular organisation? Explain.

EXERCISE 9.1

What is meant by controlling as a process?

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TOPIC 9 CONTROLLING  157

9.2 STEPS IN THE CONTROL PROCESS


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

Figure 9.1: Control process


Source: Lewis et al. (2001). Management

9.2.1 Establishing Standards


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

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

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158  TOPIC 9 CONTROLLING

9.2.2 Measuring Performance and Making


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

9.2.3 Corrective Actions


It is often found that managers establish standards and monitor decisions but do
not take suitable actions. The first and second steps in control will be
meaningless if corrective actions are not taken. Before taking any steps in
correcting, detailed analysis must be carried out in order to find out the factors
that caused the particular deviation.

This corrective action may involve change in one or more operation activities of
the organisation such as modification, repairing of machines, preparation of
certain courses and others, or it might also involve a change in the fixed
standard. Corrective action is a process of identifying the distorted performance,
analysing the distortion and developing and implementing programmes in order
to rectify it.

SELF-CHECK 9.2

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

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TOPIC 9 CONTROLLING  159

9.3 DYNAMIC PROCESS


According to Williams (2000), the running of a control process is a continuous
act. This process cannot be done only once in order to gain the achievement
expected. This is considered as a dynamic process. This dynamic process begins
with looking at the true performance and measuring the achievement level of
that particular performance.

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

9.4 BASIC METHODS OF CONTROL


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

Pre-control

Figure 9.2: Three basic methods of control


Adapted from: Jones, G. R., George, J. M., & Hill, C. W. L. (2000).
Contemporary management (2nd ed.). Boston: Irwin McGraw Hill

Let us discuss the three basic methods of control.

9.4.1 Pre-control
This type of control is also known as preventive control or feed-forward control.
This involves the use of information, including information from the latest
results, is to forecast what will happen in the future so that preventive measures
can be taken. It is implemented to prevent the occurrence of deviation between
what had really happened with what is expected to happen. Prevention is carried
out through detailed analysis on the input before it is accepted into the process of
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160  TOPIC 9 CONTROLLING

organisation transformation. Input is ensured to comply with the quality


standards established so that the results obtained are as expected.

One example of the use of this control is when a manager ensures that the sample
of raw material that is going to be used complies with the standard established
by the organisation or based on certain specifications to avoid damage towards
the product in the future.

9.4.2 Concurrent Control


Concurrent control is carried out during the process of transformation. When this
control is carried out, restoration actions, corrective actions or modifications are
done after distortion is detected. For a production-oriented organisation, this
controlling action is taken while input is being processed while for service-
oriented organisations, it is taken while service is being provided.

Through this method of control, organisations will monitor their operations and
simultaneously take the necessary corrective actions before the transformation
process is completed. This will help to reduce mistakes in the outputs being
produced. Examples of this method of control are mid-term examinations,
control of accounts, control of inventories and others.

9.4.3 Feedback Control


Feedback control involves gathering information related to the weaknesses of
controlling measures after an incident takes place. This type of control is
implemented after the transformation process has been completed with the
purpose of finding out whether the whole activity ran properly with results as
expected.

This control is also able to determine whether the plan that is going to be carried
out has the continuity with the previous programme. It is also able to evaluate
the effectiveness and efficiency of the involved parties in performing the
activities of the organisation. An example of this method of control is the use of
low-quality raw materials that resulted in the production of low-quality
products. The act of changing the raw materials used is one of the examples of
feedback control.

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TOPIC 9 CONTROLLING  161

9.5 FORMS OF CONTROL


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

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

Let us further our discussion on the forms of control.

9.5.1 Bureaucratic Control


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

9.5.2 Objective Control


This method uses the measurement of observation towards the behaviour of
employees or output produced to evaluate work performance. Managers are
more focused on the observation or measurement towards the behaviour of
employees or outputs rather than the policies or rules. Objective control consists
of two forms of control; behaviour control and output control.

Behaviour control is the rule of behaviour and actions that controls the behaviour
of employees in their tasks. Output control is the form of control that controls
the output of employees by granting rewards and incentives. Important features
in the implementation of output control are reliability, fairness and accuracy,
convincing employees and managers to achieve the expected results while
rewards and incentives depend on the performance standard that has been
established.
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162  TOPIC 9 CONTROLLING

9.5.3 Normative Control


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

9.5.4 Concertive Control


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

9.5.5 Self Control


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

EXERCISE 9.2

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

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TOPIC 9 CONTROLLING  163

9.6 FACTORS THAT NEED TO BE CONTROLLED


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

SELF-CHECK 9.3

In managing an organisation, a manager is responsible for ensuring the


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

9.6.1 Finance
One of the important areas that need to be controlled is finance. There are times
when the financial performance does not reach the expected standard. If this
condition remains undetected and relevant actions are not taken, the existence of
the company might be in jeopardy. Financial perspective is generally related to
activities such as sales, purchases and others.

Financial statements are important sources of financial information for an


organisation. A balance sheet shows how strong the financial position, assets,
liabilities and the position of the equity holder for a certain financial period. A
profit-loss statement or income statement shows the summary of the operational
activities and the relationship between expenditure and revenue for a particular
financial year.

According to Williams (2000), there is a new approach in the financial


perspective known as economic value added. Economic value added is the total
profit of a company which exceeds the capital cost in a particular year. In this
perspective, a manager must impose control so that the total profit of a company
always exceeds the capital cost for the company to continuously gain economic
value added.

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164  TOPIC 9 CONTROLLING

9.6.2 Human Resources


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

9.6.3 Internal Operations


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

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

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TOPIC 9 CONTROLLING  165

EXERCISE 9.3

Essay Question

Why does the perspective of finance need to be controlled?

TRUE (T) or FALSE (F) Statements

1. Control is the process of finding out what is happening compared to


the standards established.

2. Decision on control does not affect decision on future planning.

3. Organisations practising bureaucratic control are very difficult to


change.

4. Future control is also known as prevention control.

5. Economic value added is the total profit of a company which


exceeds its capital cost in a year.

Multiple Choice Questions

1. What are the most methods of control based on?


A. Future control
B. Feedback control
C. Concurrent control
D. Dynamic control

2. What type of control is a method that uses norms and behaviour


that have been discussed, formed and agreed by the work group?
A. Concertive
B. Bureaucratic
C. Normative
D. Self

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166  TOPIC 9 CONTROLLING

3. Which type of control is implemented during the occurrence of the


transformation process?
A. Concurrent
B. Prevention
C. Objective
D. Feedback

4. Which is not a basic need of the control process?


A. Establish standard
B. Comparing true performance with standard
C. Controlling objectives
D. Taking corrective actions if necessary

5. What perspective is usually used to measure operational


performance in an organisation?
A. Finance
B. Quality
C. Human resource
D. Customers

Controlling Caselet

1. What is controlling?

2. Do you agree with the type of control used by the manager in the
above scenario? Why? Why not?

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TOPIC 9 CONTROLLING  167

 The main purpose of management control is to prepare managers to face


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

Autonomous work group Normative


Behaviour control Objective
Bureaucratic Output control
Concertive Prevention control
Corrective action

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Topic  Managing
10 Teams
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Examine the differences between groups and teams;
2. Identify the strengths and weaknesses of teams;
3. Appraise the best time to form teams;
4. Distinguish the types of teams available in the current environment;
5. Evaluate the characteristics of teams; and
6. Discuss the factors involved in building high-performance teams.

 INTRODUCTION
For the past 20 years, organisations such as Volvo and Toyota have introduced
the concept of teams in their production tasks processes. This condition is
considered as something new since there were no other organisations that were
willing to do so before. Nowadays, organisations that do not implement the
concept of teamwork are considered outdated.

The technique of teams is implemented nowadays because there is evidence


showing that teams are more efficient in performing tasks compared to
individuals when dealing with tasks that require a variety of skills,
considerations and experiences. Many organisations have altered their structures
in order to develop teams to utilise the talents of the employees optimally.
Besides that, some management have discovered that a team is more flexible and
responsive towards changes in the environment compared to traditional
structures. A team can be instantly formed, moved and disbanded whenever
needed. This discussion will try to provide understanding and clarify matters
related to teams.

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TOPIC 10 MANAGING TEAMS  169

10.1 DIFFERENCES BETWEEN TEAMS AND


GROUPS
Teams and groups are not the same entities. This section will clarify the
differences between teams and groups and the differences between group work
and teamwork.

A group is defined as two or more individuals who interact and are


independent of each other towards achieving a certain objective.

A work group is generally a group that shares information and makes


decisions in order to assist the members to perform their jobs well in the
relevant field.

Work groups do not need to or do not have the opportunity to be involved in


task collection which involves merging and integrating efforts. Performance will
be assessed based on individual contribution to the group. In other words, the
performance of the group is the total contribution of each member of the group.
A team is an interdependent and complementary entity in all aspects among the
members, with a partnership commitment towards achieving the same goals.
Moreover, teamwork generates positive synergy through co-ordination efforts.
Thus, a team is an entity that exceeds a group. Performance is not based on
individual contribution but instead it depends on the performance of the
team. The definition above clarifies that the success of a team depends on the
interdependent relationships and collective effort of the team members. Therefore,
team members have mutual influence and significant impact on each other when
working together.

SELF-CHECK 10.1

In an organisation, a particular task is carried out in a group or a team.


In your opinion, what is the difference between a team and a group?

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170  TOPIC 10 MANAGING TEAMS

ACTIVITY 10.1

Based on what has been explained to you, apply your understanding in


identifying the differences between groups and teams in the form of a
table. Discuss your answer with your coursemates.

EXERCISE 10.1

Describe briefly the differences between teamwork and group work.

10.2 ADVANTAGES OF TEAMS


Organisations these days are inclined towards the concept of teams since teams
are able to enhance customersÊ satisfaction, quality of products and services,
speed and efficiency in product development, job satisfaction of employees or
workers, and in making quality decisions.

One of the ways teams help to enhance customersÊ satisfaction towards


organisations is by forming a team that is specially trained to fulfil certain needs
of the customers. Through this method, customers are directly connected to the
team in order to fulfil their needs. Organisations also form problem-solving
teams, and teams that involve employees who conduct research in order to boost
customersÊ satisfaction and prepare suggestions for enhancement. This type of
teams usually holds weekly or monthly meetings.

Teams also assist organisations to increase the quality of products and services.
Unlike organisations with traditional structures where the management is fully
responsible towards decisions and performances, teams take direct responsibility
regarding the quality of products and services produced.

One thing that makes the concept of teams popular these days is the need for
speed and efficiency in designing and producing products. In the present
business environment, prompt changes in customersÊ preferences demand that
an organisation has speed and efficiency. In traditional organisational structures,
product development and production take a long time. Since teams have
members with various functions, speed and efficiency in designing and producing
products are achieved.

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TOPIC 10 MANAGING TEAMS  171

The implementation of teams can also increase the levels of job satisfaction. It
gives employees the opportunity to enhance their skills. This is done by cross
training. Cross training is an exercise that trains team members to perform all or
most of the work done by other workers. This exercise allows teams to function
under normal conditions with no interruptions even with the absence or
resignation of a team member. The advantage for the employees is that they are
able to broaden their skills and become more competent and confident in
performing their jobs.

Team members always enjoy job satisfaction due to leadership responsibility


which cannot be gained from traditional organisations. Teams are allowed to
determine their working manner, scheduling, maintenance, equipment, leave
schedule, quality control and others. This freedom is very meaningful to the
workers. Besides that, due to the rotation of leadership responsibility among
team members, each member has the opportunity to develop their leadership
skills.

Teams share various advantages especially in the aspect of decision making.


Problems can be viewed from various perspectives since a team consists of
individuals having different knowledge, skills, abilities and experience. Diversity
from this angle is able to increase the probability of solving the real problem.
Increase in knowledge and information makes it easier for teams to generate
various choices of solutions that can lead to quality solutions. Since each member
is involved in the process of decision making, they are considered as being more
committed to achieving the solution to a particular problem. In many cases, a
team is able to perform better compared to an individual worker.

10.3 DISADVANTAGES OF TEAMS


The implementation of teams brings numerous benefits to an organisation but
the organisation also has to face a few disadvantages of teams. Some of the
disadvantages are high turnover rate at the initial stages, social loafing and the
behaviour of self-restriction. Table 10.1 exposes you to the disadvantages of
teams.

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172  TOPIC 10 MANAGING TEAMS

Table 10.1: Disadvantages of Teams

Disadvantages Description
High turnover Turnover rate is high especially at the initial stage of a team
rate formation. A team is not necessarily accepted by everyone. Inability
to adapt to other members and the internal environment of a team
are the main factors for high turnover rates at the initial stage of
team formation. Besides that, inability to take responsibility,
inability to contribute effort and lack of experience are some other
factors that contribute to this disadvantage.
Social loafing This happens when employees fail to contribute towards job
sharing. In other words, social loafing means that a person becomes
a sleeping partner in the team. Social loafing usually takes place in
a large team where it is difficult to identify and monitor the efforts
contributed by each member of the team. In other words, members
that practice social loafing will try hard to hide their activities and
this condition causes the phenomenon of social loafing difficult to
be detected.
The behaviour of The condition that leads to the behaviour of self-restriction is
self-restriction when there are team members who do not have their own opinions
or views and donÊt take part in discussions. All these can diminish
the performance levels of the team. This matter is seen to be
similar to the condition of social loafing but actually it is not.
Social loafers try to ensure that other members do not know about
their activities but the behaviour of self-restriction does not.

ACTIVITY 10.2

You are clear about the advantages and disadvantages of an organisation


practising teamwork. Using your own understanding, identify the five
advantages and give your answer in the form of a table. Discuss your
answer with your coursemates.

EXERCISE 10.2

List the advantages and the disadvantages of teams.

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TOPIC 10 MANAGING TEAMS  173

10.4 WHEN IS A TEAM NEEDED?

ACTIVITY 10.3

In your opinion, how important are teams in organisations? Why canÊt a


task be carried out by an individual?

This section will discuss the time and conditions when a team must be used in
order to maximise its benefits.

(a) Firstly, a team can be used when the objective or meaning of usage is clear.
Many organisations implement the concept of teams because it is popular
or due to the assumption that a team is able to solve all kinds of problems.
However, a team will only succeed when team members know the reason
why the team is formed and what they are required to do.

(b) Secondly, a team is needed for tasks that cannot be carried out individually
but through the merging of these individuals. This means that a team is
needed when a task is complex, needing diversity of perspectives or
requiring repetitive interaction with other people in order to complete it.
Nevertheless, if a task is simple and does not require diversity of
perspectives or repetitive interaction with other people, a team is not
required.

(c) Thirdly, a team can be used when rewards can be provided for team work
or team performance. Team rewards depend on the team performance
rather than individual performance. This is the key to providing rewards
for the team behaviour or effort. If the level of reward is not in line with the
level of performance, the team will not be able to function as required. If a
particular task is more inclined towards individual work rather than
teamwork, the following problems will arise. Fast workers will give
pressure to slow workers in order to increase the speed of production. Since
payment is determined by team performance, fast workers will find that
their payment declines compared to before while slow workers will find
that their payment increases. This condition can result in the reduction of
overall productivity.

(d) Fourthly, a team can be used when there are many resources readily
available. Resources needed by teams include training, time, place and
collaboration methods, equipment and consistent information and feedback
regarding teamwork processes and work performance. Failure in obtaining
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174  TOPIC 10 MANAGING TEAMS

these resources, such as lack of training to support the transition from


individual work to teamwork, and insufficient time to learn the methods of
operating machines will result in the failure of team implementation. The
most perceptible problem is the difficulty faced by management in helping
or transferring resources to a team that causes the team not to be able to
function as required.

(e) Finally, a team is needed when it has a clear authority in managing and
modifying the working method. This means the team is given the freedom
to determine the working method, making the work schedule, training and
maintenance, or ways to solve customersÊ problems. A team with clear
authority will be able to manage and perform the task better compared to
teams having no authority.

Table 10.2 shows when teams can or cannot be used.

Table 10.2: When Teams Can or Cannot be Used

Use Teams When ⁄ Do Not Use Teams When ⁄


 The objectives and reasons of its  The objectives and reasons of its
formation are clear formation are not clear
 Work cannot be carried out  Work can be carried out individually
individually
 Rewards can be given based on team  Rewards are only given based on
work individual effort and performance
 Plenty of resources available  Resources needed are not available
 Team has the power to manage and  The management is still monitoring
alter the working methods carried out and influencing the working methods
being carried out

EXERCISE 10.3

Based on your understanding, describe the condition where the use of a


team is unnecessary.

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10.5 TYPES OF TEAMS


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

Figure 10.1: Types of teams in a particular organisation

(a) Employee Involvement Team


This is a team that provides advice and suggestions to management relating
to certain matters. Meetings among members of the team are held during
working hours and are done periodically. Issues such as safety at the
workplace, customer relations or quality of product are often raised by this
team. This team can only give advice and suggestions but does not have
the power to make decisions. Membership in this team is voluntary but
selection is from the circle of experts. The idea of forming this type of team
is that the person closest to a particular problem or the real working
situation is the best person to give advice and suggestions. These advice
and suggestions are given to management and it is up to management to
make its decisions.

(b) Semi-Autonomous Team


This team has the authority to make decisions and solve problems relating
to the main tasks of product and services production is known as a semi-
autonomous team. This team receives information regarding budgets, work
quality, performance and also information regarding products produced by
competitors. Team members are trained in various skills and tasks. This
team has the power to make decisions just like a supervisor or a manager
but the authority received is not complete. The management still plays a
role but lesser compared to the traditional work group.

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(c) Self-Managed Team


A self-managed team differs from a semi-autonomous team. A self-
managed team is a team that manages and controls the overall main tasks
in the production of products and services. This team can do anything
related to production without having to refer to or wait for instructions
from management. This includes matters in managing and controlling the
allocation of materials, product making, providing services, ensuring the
accuracy of delivery and others.

(d) Self-Designed Team


This is a team that possesses the characteristics of a self-managed team but
also controls the design of the team, work activities and team memberships.
This type of team is involved in operational matters related to the team
which exceeds the self-managed team. This team has the power to
determine the work schedule, leave, how and when a task should be
performed, besides determining the membership in the team by conducting
interviews and other activities.

(e) Cross-Functional Team


This team consists of employees from different fields or functions in the
organisation. Since team members have different functions, knowledge and
experiences, a cross-functional team is able to identify the real problems
and see them through various perspectives, and are able to generate more
ideas and alternatives. This type of team can be used in any organisation
and can be formed whether part-time, temporarily or permanently.

(f) Virtual Team


A virtual team has members in different geographical areas or organisations
and uses telecommunications and information technology to carry out
activities of the organisation. Meetings among team members are not
conducted face to face but instead use a combination of communication and
information technology. This type of team is still new and can become a
reality with the development of communication technology such as e-mail,
the Internet, video conferencing and more. Since members do not meet in
physical locations, entry of suppliers, customers and influential groups can
be carried out.

The advantage of this team is that it is a flexible team. Team members


can work with one another without having to meet face to face, without
considering the time limit or organisation. The weakness of this team is that
team members have to learn how to voice out new approaches since
physical meetings in this group no longer exists.

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(g) Project Team


Project team is a team formed to carry out a task or project in a particular
time period. This type of team is usually used for the purpose of developing
new products, upgrading existing products, developing new information
systems or in building new offices and factories. A project team is usually
led by a project manager who has full responsibility for planning,
membership and team management.

A project team is made up of members from different functions and also


involves members from suppliers and customers. The advantage of this
team is that it is able to eliminate communication barriers among functional
areas since its membership consists of members having different functional
areas. Besides that, this team is flexible where it can be disbanded or moved
to a new project after the completion of a particular project.

EXERCISE 10.4

State the type of team based on the characteristics given:


(a) A team having the authority to determine the memberships in the
team.
(b) A team where its members are in different geographical areas or
organisations.

10.6 CHARACTERISTICS OF TEAMS


The understanding of characteristics of teams is crucial to ensure the success
of a particular team formation in an organisation. The four characteristics you
need to know are team norms, team unity, team conflict and phases of team
development.

SELF-CHECK 10.2
To ensure the smooth running of tasks and prolonged level of
motivation in a team, team members must unite and cooperate with
each other. In your opinion, how can unity be developed in a team?

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10.6.1 Team Norms


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

10.6.2 Team Unity


Team unity refers to how far team members are attracted to becoming members
of the team and motivated to stay permanently in the team. Team unity is able to
sustain and reduce the turnover rate of team membership. When teams possess
high unity levels, each member is more motivated to contribute to the team
and expect guarantees from other team members. This will accelerate the
achievement of high performance.

In order to develop unity in teams, organisations must ensure the involvement of


each member in the team activities or meetings. Secondly, the organisation must
create opportunities so that team members can cooperate with each other by
modifying work schedules or work place layouts. Thirdly, get the team members
to be involved in off-work activities.

10.6.3 Team Conflict


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

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10.6.4 Phases of Team Development


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

Figure 10.2: Phases of team development


Source: Williams, C. (2000). Management. South Western: Thomson Learning

(a) Forming is the first phase in the development process of a particular team.
This is the beginning of the first meeting among team members, forming
the first perceptions and trying to discover the feelings and conditions if
they continue to become members of the team. This phase also forms
several team norms where team members start searching for behaviours
that will be accepted or rejected by the team.

The team leader must provide time frames for team members to get to
know each other, and set up the basic rules and team structure.

(b) Storming is the second development phase that is characterised by conflicts


and disagreement where team members have different opinions regarding
with, what and how a task should be carried out.

This situation takes place when team members start working together,
resulting in a clash of personalities and work styles. Besides that, as team
members, they have to sacrifice a lot of their own personal needs. In this

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180  TOPIC 10 MANAGING TEAMS

phase, team members will start voicing their opinions and needs besides
trying to build up positions or roles they desire in the team. Moreover, team
members will start to show an attitude of uneasiness towards what needs to
be done by the team and how it should be done. Team performance at this
level is low and there are some who are totally ineffective. At this point, the
role of the team leader is very much needed in order to generate the teamÊs
focus towards the goals and performance levels. Team members need to be
more patient and more tolerant towards each other too.

(c) Norming is the third phase in the development of a team. Each member
will start to resolve any conflict or misunderstanding as one of their roles as
a member of the team. Positive norms will begin to bloom and team
members should know what is expected from each member of the team.
Misunderstandings start to be resolved, team spirits start to build up and
unity becomes stronger. At this level, members will start to accept the goals
of the team, move together as a unit and start to show increase in
performance and work together effectively. There are certain conditions
where teams will face repetition of the storming and norming phase until
they truly find the suitable norms and start to shift to the next phase.

(d) Performing is the final phase in the team development process. During this
phase, performance will start to increase since the team becomes more
matured and fully functional. At this stage, members must be fully
committed and start thinking as a member of the team. Members become
loyal to one another and start to feel responsible towards the success and
failure of the team. At this phase, members already feel the joy of being part
of the team.

After a certain time gap, if a team is not perfectly managed, performance will
start to decline and the team will go through the phases of de-norming, de-
storming and de-forming.

(a) In de-norming, which is the repetition of the norming phase, team


performance starts to decline in terms of time, size, scope, goal and
membership. For example, when there are new members joining the team,
existing members will become defensive when matters regarding the
methods of performing certain tasks are questioned by the new members.
Expression of ideas and opinions are no longer open. This is further added
by the condition of new members actively or passively rejecting the roles
and behaviour of the team which was formed before.

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(b) De-storming is a condition where the team comfort starts to decline. Team
unity becomes weaker when team members refuse to follow the team
norms and do not participate in team activities. Feelings of anger will rise
when the team falls into conflicts and the team starts to move into the final
stage known as de-forming.

(c) In the de-forming phase, members of the team will position themselves in
order to control fragmentation in the team. Thus, factions start to form in
the team. Members will avoid meeting each other and the team leader.
Team performance decreases at a maximum level when members no longer
think about team performance.

If a team is managed as properly as possible, the decline in team development


will not arise. A manager needs to identify the influences that can lead to the
downturn of the team. He can take initial steps to prevent bad influences from
continuing to threaten the team.

EXERCISE 10.5

Based on your understanding, state the phases involved in team


development.

SELF-CHECK 10.3

We have already identified the phases of formation and the downturn


of a team. Based on your understanding of what you have learned so
far, what are the factors that influence the level of performance in
teamwork?

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182  TOPIC 10 MANAGING TEAMS

10.7 TOWARDS BUILDING A


HIGH-PERFORMANCE TEAM
There are seven issues related to teams that you need to know in detail. These
issues can influence the level of performance of teamwork. This can be seen in
Figure 10.3.

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

(a) Team Size


The best team is the one made up of a small number of members. When the
number of members exceeds 10 or 12, it is difficult to perform tasks
successfully. This is because the team will face interaction problems on
issues related to the job. A large number of members might also fail to
develop the necessary unity, commitment and accountability needed to
achieve a high level of performance. Hence, in forming a team, the manager
needs to ensure that the number of team members does not exceed 12
people.

(b) Capability of Team Members


In order to perform a task efficiently, a team needs three types of different
skills. The first type comprises technical skills related to the job. The second
type comprises skills in solving problems and making decisions that can be
identified from the actual problem by generating alternatives, evaluating
each alternative and choosing the best alternative. The third type involves
good listening skills, ability to solve conflicts and other interpersonal skills.
No team can achieve its actual potential without developing these three
skills.

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(c) Providing Role Models and Promoting Diversification


A team possesses different needs and team members must be chosen based
on their personalities and priorities. A high-performance team is a team
that is able to match its team members to suitable roles. Matching members
with suitable positions based on what they have provides opportunity for
the members to contribute their best to the teamÊs overall performance.
Therefore, teams need a diversity of skills and this can be achieved by
diversifying members of the team without the existence of any form of
discrimination.

(d) Having a Commitment Towards the Same Purpose


A successful team provides direction, momentum and commitment to its
members. The same purpose will result in members knowing their roles,
direction and guidance in contributing efforts towards the purpose agreed
upon together.

(e) Building Specific Goals


A successful team is able to change its purpose into specific goals which can
be measured and achieved. These specific goals provide clear communication
space and assist the team in maintaining their focus.

(f) Suitable Performance Evaluation and Reward Systems


Traditionally, performance evaluation and granting of rewards are only
dedicated to individuals but when a team is formed, the system of
performance evaluation and reward scheme needs to be modified. Suitable
performance evaluation systems and reward schemes which are based on
teamwork rather than individuals will generate effort and commitment
among the members of the team.

(g) Developing Absolute Beliefs


A successful team is a team that has absolute beliefs among its members.
Team members believe in integrity, characters and the capability of the
other members. These developed beliefs will assist members to perform
their work better. This is because each member believes that the other
members have the capability and ability in solving the assigned tasks.
Therefore, the result from this combination of beliefs and contribution will
assist in the success of the team.

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184  TOPIC 10 MANAGING TEAMS

EXERCISE 10.6

Essay Questions

1. Briefly explain why the number of members in a team should be


kept small.

2. Explain the meaning of teamwork and give your comments on why


this concept is becoming more popular these days.

Multiple Choice Questions

1. Which process refers to the training of team members on how to


perform all or most of the tasks performed by other members?
A. Cross training
B. Job enlargement
C. Horizontal training
D. Job enrichment

2. Which is TRUE regarding the characteristics of a high-quality team?


A. Having members with technical skills related to the job.
B. Having a large number of members.
C. Having members who can afford to be independent to
perform the job individually.
D. Having members who become social loafers.

3. Which of the following is NOT applicable to teams?


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

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TOPIC 10 MANAGING TEAMS  185

EXERCISE
4. What 10.6
is TRUE about teams?
A. A team is the same entity as a group.
B. Teams cannot be used when resources are limited.
C. Semi-autonomous teams possess more power compared to
self-managed teams.
D. Project team is the type of team that is the most difficult to be
disbanded.

5. In which phase of team development does high turnover rates


occur?
A. Forming
B. Storming
C. Norming
D. Performing

TRUE (T) or FALSE (F) Statements

1. Teams can help organisation in increasing the quality of products


and services produced by the organisation.

2. Team members with the behaviour of self-restriction will try to


ensure that no other members of the team know about their
activities but this does not occur for a social loafer.

3. A team that can only give advice and suggestions but does not have
the power in making decisions is referred to as an employee
involvement team.

4. Team unity is considered as informal in the aspect of the agreed


upon rule or standard that regulates the behaviour of team
members.

5. A large-sized team made up of between 15 to 20 people is


considered as a good team because it is able to generate diversity in
contributing views and opinions.

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186  TOPIC 10 MANAGING TEAMS

EXERCISE
Managing 10.6
Teams Caselet

1. What is the problem in the above scenario?

2. What would your advice be to the team leader?

 A team is an entity that is able to provide synergy to the development of


organisations.

 It has its own advantages and disadvantages. If a team is formed at the right
time, the advantages gained might exceed the disadvantages.

 The formation of a team must be carried out with proper planning to


maximise its advantages.

 Therefore, knowledge regarding the types of teams and understanding on the


team characteristics are very important for the purpose.

 Besides that, organisations also need to have knowledge regarding the issues
that will help towards forming high-performance teams.

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TOPIC 10 MANAGING TEAMS  187

De-norming Storming
De-storming Team norms
Forming Team unity
Norming Teamwork
Social loafing

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Topic  Innovation
11 and Change
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Describe the importance of innovation in organisations;
2. Explain the ways to manage innovation effectively;
3. Discuss four factors that cause change and ways to manage the
changes in organisations; and
4. Examine the obstacles to change in organisations and ways to
overcome them.

 INTRODUCTION
This section will begin by discussing the issues related to organisational
innovation. Organisational innovation means success in the implementation of
creative ideas in the organisation. Where do the ideas come from? Creative ideas
come from creativity, that is, the creation of ideas that are useful for the
organisation. Innovation can bring about many advantages and benefits to the
organisation but the main benefit is that it is able to create and retain the
competition advantage of the organisation.

The second part of this topic will explain the change in organisations.
Organisational change means the modification or alteration of organisations from
one structure, quality or condition into another form from time to time.
Organisations need to change due to several reasons; the most important is
environmental change. This section will explain the environmental factors that
affect organisations, how important change is to an organisation and how to
manage organisational change effectively.

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TOPIC 11 INNOVATION AND CHANGE  189

11.1 WHY IS INNOVATION IMPORTANT?


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

ACTIVITY 11.1

In your opinion, with the rapid development in information technology


nowadays, how far does innovation play an important role in an
organisation? Discuss with your coursemates.

11.1.1 Technology Cycle


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

Figure 11.1: Technology life-cycle chart


Source: Williams, C. (2000). Management. South Western: Thomson Learning

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

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190  TOPIC 11 INNOVATION AND CHANGE

development) that only provides a slight increase in the performance of the


technology.

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

After the technology has achieved its maximum limit, that is, at the end of the S-
curve, increase in performance usually comes from new or the latest technology.
The second S-curve is the curve that represents the new technology replacing the
old technology.

EXERCISE 11.1

List the phases involved in the life cycle of technology.

11.2 MANAGING INNOVATION


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

SELF-CHECK 11.1

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

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TOPIC 11 INNOVATION AND CHANGE  191

11.2.1 Managing Innovation Resources


Innovation begins with creativity. Therefore, an organisation needs to establish a
creative work environment in order to generate creativity. A creative work
environment means a workplace culture where employees believe that new ideas
are evaluated, appreciated and encouraged. There are five factors that encourage
creativity in the workplace: challenging work; encouragement from the
organisation; encouragement from supervisors; encouragement from the work
groups; and freedom (Williams, 2000).

Work will become challenging when it requires hard work, focus and attention,
and viewed as important by other people in the organisation. Challenging work
will encourage creativity since it is able to create a reward of experience in terms
of the psychology of the executor. When accepting challenging work, an
employee will try to figure out the methods or ideas that can assist in performing
the particular job. The success in performing the challenging job will give
satisfaction to the employee.

A creative work environment requires three types of encouragement, namely


encouragement from the organisation, encouragement from supervisors and
encouragement from the workgroups. (Refer to Figure 11.2)

Figure 11.2: Factors that encourages creativity in the work place

(a) Encouragement from the Organisation


Encouragement from the organisation is present when the management
encourages risk-taking and new ideas, supporting and making good
evaluation towards particular ideas, grant rewards and recognition towards
creativity and encourages the sharing of new ideas among the sections
within the organisation.

(b) Encouragement from Supervisors


Encouragement from supervisors or managers is the form of encouragement
given by those who are in the chain of command of an employee. This type
of encouragement is given by the managers in order to provide clear goals
to encourage open interaction with subordinates and actively show support
towards the development of new ideas.

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192  TOPIC 11 INNOVATION AND CHANGE

(c) Encouragement from the workgroups


Meanwhile, encouragement from the workgroups exists when members of
the group have diversity of experience, education and background, and
when there is openness in the contribution and sharing of ideas.

Freedom here means providing a slight amount of power or authority to


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

EXERCISE 11.2

Based on your understanding, briefly describe the following:


(a) Innovation
(b) Technology
(c) Creative working environment

11.3 ORGANISATIONAL CHANGE


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

Organisational change is the need for an organisation to change from one


condition to another to take the opportunity or avoid a threat caused by
environmental changes in order to retain the survival of the organisation.

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TOPIC 11 INNOVATION AND CHANGE  193

11.3.1 Forces of Change


As you already know, organisations nowadays face environments that are
dynamic and continually changing. What are the forces that demand an
organisation to change? One of the forces is the change in the conditions of the
workforce. The condition of workforce nowadays requires the organisation to be
suited to the various cultures in the environment. This is because the current
environment provides a diversity of workforce, either diversity from an obvious
angle up to something that can hardly be detected. Therefore, the policies of
human resource and its practices must be changed in order to attract interest and
retain a diverse workforce besides trying to avoid any court action.

Technology is viewed as one of the forces that can change the work methods and
the organisation itself. For example, the use of computers as one of the tools to
monitor and control employees causes the managerÊs span-of-control to become
wider and the structure of organisation to become more open. The sophistication
of information technology has caused organisations to be more sensitive.
Consequently, some organisations now can develop, produce and distribute
products faster than before.

Starting from the early 1970Ês, due to the rise of the world petroleum price, the
world economy has continuously affected organisations. The most obvious
example is when the economic downturn took place in Malaysia somewhere
around the middle of 1997. The value of the ringgit fell, leading to the collapse
of the stock exchange and to the downfall of several of the countryÊs most
significant industries. It is the effect of this fall in ringgit value that also caused
Malaysia to lose its competitive force in the international market and later forced
the government to peg the ringgit to the US dollar. Besides that, the loan interest
rates that had gradually increased forced many organisations to retrench their
employees and worse, some of them were forced to close their businesses. From
the examples above, it is clear that the economy is also one of the factors why an
organisation needs to change.

Competition also results in change especially in the aspect of quantity and


quality. As a result of global trading, competition not only comes from inside the
country but also involves overseas organisations. Competition not only involves
organisations in the same industry but also those in other industries. Due to
this competition, organisations must retain their survival from the threat of
competition. Successful organisations are those that are able to adapt to the
current flow of competition. They are the organisations that are fast and capable
of developing new products and services and selling them in the market.

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194  TOPIC 11 INNOVATION AND CHANGE

Organisations need to adapt to changes in social trends. Changes in social


trends could change the preferences and wants of customers.

This change will definitely alter the level of demand towards products and
services of the organisation. Not only that, the products and services that were
once in high demand become outdated due to this change. Therefore, the
organisation needs to make changes in order to adapt to the current condition of
social trends.

The countryÊs internal and global political conditions affect organisations. If


there is any change of government in a country, it will also cause change in
terms of the business rules and regulations of that particular country.

Table 11.1: Forces of Change and Their Effects


Forces of Change Examples
Workforce conditions  Increase in the number of professionals
 Increase in cost of workforce
Technology  Use of computer and automation
 TQM Programmes
Economy  Increase in interest rates
 Crisis in currency value
Competition  Global competition
 Mergers and acquisitions
Social trend chart  Increase in educated groups of people
 Change in preferences
Politics  Downfall of communist countries
 Change to new government

EXERCISE 11.3

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

SELF-CHECK 11.2

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

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TOPIC 11 INNOVATION AND CHANGE  195

11.4 MANAGING CHANGE

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

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

If an organisation wishes to stay in the business, it must respond to the changes


in the environment. When competitors produce new products and services, the
government starts to implement new rules, the supply of resources becomes
scarce and any other changes that take place, organisations must be able to adapt
to these conditions. Generating innovation, granting power to employees and
introducing teamwork are some of the examples of planned changes activities
that are directed as a response towards the changes in the environment.

Since the success of an organisation depends on the efficiency and effectiveness


of employees, planned changes are also concerned with changing the behaviour
of individuals or groups within an organisation.
In implementing changes within the organisation, there are two types of changes,
that is:
(a) Change of first order; and
(b) Change of second order.

First order change is a linear change, slow in nature and implemented in stages.
This change is made without any apparent change in the basic structure of the
organisation. It is also conducted that way if there is no strong pressure from the
environment. Besides that, if the particular organisation has a strong culture,
changes must be implemented slowly and in stages.

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196  TOPIC 11 INNOVATION AND CHANGE

The second order change is a change that is radical in nature, multidimensional


and multilevel. This type of change needs high levels of leadership in order to
realise the changes. It takes place when there is intense pressure from the
environment that disrupts the survival of the organisation. This demands the
organisation to make drastic changes.

ACTIVITY 11.2

Do you agree that second order change requires a leader who is


charismatic and has a clear vision in order to ensure the continuity of
the organisation? State your reasons.

We have already discussed what is meant by planned changes, its objectives and
the types of changes that can happen in an organisation. Now the question rises
on who will be responsible for managing the activities of change in organisations.
The answer is the change agents. Change agents are anyone, managers, non-
managers, employees or external negotiators. In the effort to make a significant
change in the organisation, the management is more inclined to use external
negotiators who have more knowledge regarding theories and methods of
changes.

EXERCISE 11.4

Briefly explain the two types of changes in organisations.

SELF-CHECK 11.3

What is your opinion on the differences between changes that are


planned and changes that are carried out without proper planning?

11.4.1 Aspects that Can be Changed by Change


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

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TOPIC 11 INNOVATION AND CHANGE  197

Figure 11.3: Aspects that can be changed by change agents

(a) Change of Structure


Structure for an organisation is not something that is absolute. Structure must
be changed to adapt to the conditions in the environment. Thus, change agents
might need to change the structure of the organisation if necessary.

The structures of organisation explain the methods of work divisions,


combined and coordinated. Change agents can change one or more of the
important elements in designing the organisation. For example, widening
the span of control and combining the responsibilities of departments.
Rules and procedures can be implemented to increase standards or the level
of decentralisation can be increased to accelerate the process of decision
making.

Change agents can introduce significant modification in the true design of


organisations. This can include the change of form from a simple structure
into a team-based structure or in other words, changing the form of
departmentalisation. Change agents can also take into consideration the
redesigning of work and work schedules. Another example of modification
is the reward system for employees. Motivation can be increased by making
improvements in the employeesÊ rewards system. For example, by
introducing the system of bonus based on performance and profit sharing
between organisation and employees.

ACTIVITY 11.3

„Change in the structure of an organisation can increase the moral of


the staff.‰ Do you agree with this statement? Give your reasons.

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198  TOPIC 11 INNOVATION AND CHANGE

(b) Change of Technology


Technology is another aspect in the organisation that can be changed or
modified by change agents. Nowadays, changes in the technological
environment involves introduction to tools, equipments or methods that
can either be new automation or computerisation. Competitive factors or
innovation in industry requires the change agents to introduce the new
tools, equipment and operation methods.

In order to maintain the survival of the organisation, the introduction of


new technology will be able to assist the organisation in accelerating
product development and distribution to customers. It can also help build
the competitive advantage of the organisation. The use of this technology
also can ensure the ability and effectiveness of the organisation in the
industry.

(c) Change of Physical Layout


Physical layout comprises space and arrangement of tools, equipment and
other things in the workplace. This physical layout can influence the work
productivity, efficiency and effectiveness of employees. For example,
removing walls or partitions or creating an open workspace area in the
workplace will facilitate communication among employees. For instance,
the management can also change the quantity or types of lighting, level of
heat and cold, level of sound, cleanliness of the workplace and the interior
design dimensions such as furniture, decorations, and colour.

(d) Change of Employees


The final aspect that can be changed by change agents is the employees.
Change agents can assist individuals or groups within an organisation to
work more efficiently. This involves changing the attitude and behaviour of
the members of the organisation through communication, making decisions
and solving problems.

ACTIVITY 11.4

The change of a particular technology in an organisation will give rise


to substantial risk. What are the factors that must be considered to
minimise this risk?

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TOPIC 11 INNOVATION AND CHANGE  199

ACTIVITY 11.5

Do you agree if a series of developmental training are conducted for the


employees in order to help them gain new skills and exposure towards
new technologies? Discuss with your coursemates.

EXERCISE 11.5

List organisational aspects that can be changed by change agents.

11.5 BARRIERS TO CHANGE


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

ACTIVITY 11.6

A change frequently has good and bad implications for an organisation.


In your opinion, what is the most difficult barrier to be changed? Share
your opinion with your coursemates.

11.5.1 Individual Barriers


The source of change barrier for individuals comes from basic human
characteristics itself, such as perception, personality and needs. The following are
five reasons why an individual opposes change.

One of the reasons is due to human habits. Habit is a behaviour performed by an


individual periodically. The inability of individuals to carry out the behaviour
known as habit (for instance, not being able to have coffee before reporting for
duty) will result in the individual feeling uneasy or anxious. Individuals feel that
if changes are to be made, then they will no longer be able to satisfy their habits.
Besides that, individuals feel anxious towards change due to their feeling of fear
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200  TOPIC 11 INNOVATION AND CHANGE

towards the guarantee and security of their employment. For example, if an


organisation introduces the use of robotic equipment in the production process,
individuals will develop the feeling that their work is no longer secure.

Economics is also one of the factors that cause individuals to oppose change.
Individuals have the assumption that change will affect their income. Changes in
work activities or developing a new work routine can raise the feelings of fear in
the individuals. Individuals become worried that they are no longer able to
perform the work following the new standards, particularly if payment made is
based on productivity.

Besides that, the anxiety towards something that is unknown causes individuals
to oppose changes. They do not know whether they can perform under the new
approach. This causes the individuals to think only of negative aspects.

Other than that, the reason that contributes towards change barriers is the
selective nature in processing information. Individuals only want to hear and
process information that they desire or information that are equal to their
assumptions. Therefore, when this condition rises, individuals are usually
inclined to have negative thoughts.

11.5.2 Organisational Barriers


There are several sources that are identified as being organisational barriers.
Organisations usually have built in mechanisms that are able to provide stability.
When an organisation faces the need for change, the organisation fears that the
stability felt all this while will be severely affected. This condition is referred to as
structure inertia.

Restriction of change focus refers to the condition where an organisation


makes changes on a certain sub-system only.

An organisation is formed from the combination of interdependent sub-systems.


Therefore, modification cannot be made towards one sub-system without
involving the other sub-systems. Thus, if changes are made towards one sub-
system only, the changes may neither be acceptable nor successful.

Group inertia is one of the sources of organisational barriers. It is inertia in the


form of a group that creates barriers towards change. For example, individuals
have already agreed to accept the changes that will be made but the employee

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TOPIC 11 INNOVATION AND CHANGE  201

union does not want any change, which then causes individuals to be forced to
oppose the change and this is referred to as group inertia.

Organisational change may be a threat to the expertise of certain groups. These


groups are worried that if change takes place, their expertise may no longer be
needed and this will further jeopardise the security of their employment. Besides
that, changes are also viewed as a threat towards the authority of some groups.
For example, the introduction of involvement in decision making and the
formation of self-managed teamwork are the types of changes that can threaten
the authority of managers.

Other than that, changes are also assumed to become a threat towards the
existing allocation of resources. Some groups in the organisation that have
control over the resources usually view change as a threat to their position. These
groups fear that change will result in scarcity or permanent loss of resources that
have been enjoyed all this while.

SELF-CHECK 11.4

List the differences between individual barriers and organisational


barriers.

11.6 OVERCOMING THE BARRIERS TO


CHANGE
There are six tactics that can be implemented by change agents to overcome
change barriers.

(a) Communication and Learning


Barriers can be reduced through communication with employees in order to
help them to see the logical aspect of a particular change. This tactic is
based on the assumption that the source of barrier is caused by obtaining
the wrong information, or interpreting information in the wrong condition,
or through a bad communication condition. This tactic is used to provide
clarification and accurate information regarding the changes which can
help in reducing barriers. Communication can be implemented through
face-to-face discussions, memos, group presentation or reports.

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202  TOPIC 11 INNOVATION AND CHANGE

(b) Involvement
This tactic assumes that it is difficult for a person to oppose change if he
himself is also involved in the effort and activities of change. With this
involvement, the involved parties will contribute their expertise and
involvement and this will reduce barriers. Not only that, commitment can
also be obtained and this will enable an increase in the quality of change.

(c) Facilities and Support


Change agents can offer forms of facilities and support to reduce barriers.
When employees have a high level of anxiety, counselling services and
therapy, new skills training or paid leaves are forms of facilities and
support that can be given to employees.

(d) Negotiation
Change agents can also deal with change barriers by making valuable
exchange in order to reduce barriers. For example, if the barriers come
from some individuals having power, reward packages can be used as
negotiation substance. Besides that, this reward packages and offers will be
able to fulfil the needs of the individuals. Negotiation tactics are most
suitable when change barriers are caused by powerful individuals in the
organisation.

(e) Manipulation and Co-optation


Manipulation refers to the effort of changing the standpoint of a person.
Altering or changing facts to make them interesting, restricting bad
information and creating rumours are some of the ways to obtain
employeesÊ agreement. Co-optation is the combination of manipulation and
involvement. The act of co-optation will try to ÂbuyÊ group leaders who
cause barriers by providing these leaders important roles in making change
decisions. Advices from these leaders are required, not to find the best
solution but as confirmation. By ÂbuyingÊ these leaders and successfully
changing their standpoint, indirectly it will also change the perception and
standpoint of their followers.

(f) Force
This is the final tactic that can be implemented by change agents. This is an
application that uses threat towards the person who is a barrier. For
example, threat to be moved to another department, losing the chance of a
promotion, and a bad performance evaluation are threats imposed if the
person does not want to abide by the changes that will be made.

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TOPIC 11 INNOVATION AND CHANGE  203

SELF-CHECK 11.5

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

EXERCISE 11.6

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

11.7 WAYS TO MANAGE CHANGE


Change to be made by a particular organisation must be managed as properly as
possible in order to avoid the occurrence of any negative matters especially from
groups that obstruct change. Change can be managed using several ways:

(a) Liquidation: Refers to getting individuals who are affected by the changes
to believe the need for these changes.

(b) Change intervention: Refers to the processes used towards employees and
managers in order to change their behaviour and work practices.

(c) Freezing: Refers to supporting and strengthening the changes that were
successfully carried out in order for it to continue. Table 11.2 explains
several suggestions that can be used by managers when there are groups
who are barriers to change by using the suggestions by Kurt Lewin.

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204  TOPIC 11 INNOVATION AND CHANGE

Table 11.2: Things that Need to be Done


When Employees form Barriers towards Change
Source: Williams (2000)

Liquidation Changes Freezing

 Sharing thoughts with  Explaining the benefits  Upper management


employees on why that can be gained from needs to give support
change is needed. changes. by providing
 Exhibits sympathy  Identifying respected consistent messages
towards the individuals in the and resources.
difficulties faced by organisation to manage  Let everyone know
the managers and the efforts of changes. about where and
employees due to the  Allowing individuals to when changes had
change. accept the suitable effect taken place
from the changes, for successfully.
example while the
employees are busy
carrying out their work.
 Communication  If possible, ensure that no  Offer counselling or
regarding the changes employees are being other services that can
in a context that is terminated to reduce fear assist the employees
simple, clear, widely towards change. in overcoming the
verbal or written.  Offer training to ensure pressure due to the
employees are confident change.
and capable in
performing the needs of
the new task.

ACTIVITY 11.7

What is the importance in managing a particular change to be carried


out by a particular organisation? Discuss with your coursemates.

EXERCISE 11.7

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

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TOPIC 11 INNOVATION AND CHANGE  205

EXERCISE 11.8

Multiple Choice Questions

1. Which of the following is NOT a method suggested for managing


change barriers?
A. Education and communication
B. Participation
C. Test
D. Negotiation

2. Which stage in the S-pattern innovation curve indicates that


slight effort will produce obvious progress in the technology
performance?
A. Initial stage of cycle
B. Intermediate stage of cycle
C. Final stage of cycle
D. Initial and final stage of cycle

3. Which tactic for overcoming barriers to change uses threat towards


the employee posing the barrier?
A. Negotiation
B. Manipulation
C. Co-optation
D. Force

4. What does the method of „buying‰ group leaders who cause


barriers towards change referred to?
A. Negotiation
B. Force
C. Co-optation
D. Involvement

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206  TOPIC 11 INNOVATION AND CHANGE

5. „Change that is radical in nature, multidimensional and


multilevel‰ refers to which order of change?
A. Fourth
B. Third
C. Second
D. First

Innovation Caselet

1. What does innovation mean?

2. What factors would encourage innovation in an organisation?

3. What are some of the barriers to change?

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TOPIC 11 INNOVATION AND CHANGE  207

 Innovation helps organisations to build their own competition advantages.

 Therefore, it is the duty of every organisation to create a creative work


environment to encourage the emergence of creative ideas from its human
resources.

 It is these creative ideas that assist organisations in discovering new


technologies.

 In order to guarantee the survival of the organisation, changes must be made


from time to time in order for it to be in line with the changes of the business
environment.

 Organisation changes must be planned as properly as possible in order for it


to give benefit instead of detriment to the organisation.

Change intervention Freezing


Co-optation Liquidation
Creativity Manipulation
Encouragement S-pattern innovation

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208  ANSWERS

Answers
TOPIC 1: WHAT IS MANAGEMENT?
Exercise 1.1
Planning is to set and determine the objectives that need to be achieved in the
future and what should be done in order to achieve those objectives.

Organising is delegating activities and assigning the suitable authority to carry


out the said activities.

Leading is an art in directing and channelling human conduct with the aim to
achieve all objectives that have been determined.

Controlling is carried out through performance evaluation of all the objectives set
in order to determine the reasons for deviation and take appropriate action
whenever necessary.

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

Multiple Choice Questions


1. D
2. B
3. A
4. C
5 B

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ANSWERS  209

TOPIC 2: PLANNING
Exercise 2.1
One-time usage planning is a planning made to fulfil one particular purpose
only.

Fixed planning is a planning made for managing events that occur repeatedly in
an organisation.

Exercise 2.2
The disadvantages of making plans are:
(a) It restricts changes and adaptations in an organisation.
(b) An incorrect prediction of the future will result in the planning done also
being incorrect or unsuitable.
(c) Separation between the planner and the executor causes the planning made
to be ineffective.

Multiple Choice Questions


1. C
2. C
3. D
4. C
5. B

TRUE (T)/FALSE (F) Statement


1. T
2. T
3. F
4. F

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210  ANSWERS

TOPIC 3: DECISION MAKING


Exercise 3.1
Certain condition ă where the decision maker has complete information in
assisting him to make decisions. With this complete information, the decision
maker will be able to know for certain the results that will be generated by each
decision alternative, and later choosing the alternative that will bring the most
optimum result.

Uncertain condition ă a condition where the decision maker does not have any
information to assist him to make decisions. Thus, the decisions made depend
most on the experience and consideration of the decision maker.

Risky condition ă under this condition, the decision maker has the information
needed to make decisions but the information is incomplete and insufficient.
Therefore, the results generated from each decision alternative are not able to be
predicted for certain.

Exercise 3.2
Bounded rationality occurs when decision making is bounded by certain
problems such as limited resources, excess information, memory problem and
expertise problem of the decision maker.

The general mistakes in decision making are: making biased decisions or making
decisions purely based on intuition alone without taking into consideration the
available facts.

Decision making in a risky environment will also limit rational decision making.
This is because incomplete information can result in not making the best
decision.

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

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

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

TRUE (T) or FALSE (F) Statements


1. F
2. T
3. F
4. F
5. T

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212  ANSWERS

TOPIC 4: ORGANISATION DESIGN


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

Exercise 4.2
1. (a) Functional Departmentalisation
The type of departmentalisation where all jobs and employees are
divided into separate units that are responsible towards a particular
function of business or area of expertise.

Advantage
Functional departmentalisation is able to avoid multiplication of work
and resource usage in organisation.

Disadvantage
Functional departmentalisation can delay the process of decision
making and produce managers and employees with limited experience
and expertise.

(b) Geographic Departmentalisation


The type of departmentalisation that coordinates the job and employee
into separate units responsible for conducting business activities in
certain geographical area.

Advantage
The advantage of geographic based department is that it can help the
organisation to act faster and more efficiently towards demand from
certain markets within the responsibility of the particular department.

Disadvantage
The disadvantage of this type of departmentalisation is that it can cause
multiplication of work and resource usage in organisation.

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ANSWERS  213

Exercise 4.3
1. (a) Chain of Command
Chain of command explains who needs to report to whom, that is,
individuals who are at the top level are more powerful compared to the
individuals at the lower level. Chain of directives also shows the flow of
directive path or authority in organisation.

(b) Difference between Line Authority and Line Function


Line authority is related to the rights of making decision and giving
directives to employees who are in the chain of directives of a particular
manager. Meanwhile, line function means the activities that directly
contribute in the aspect of invention and sales of an organisationÊs
products and services to the customers.

(c) Span of Control


Span of control gives details on the number of employees placed under
the supervision of a manager.

Exercise 4.4
1. (a) Job Enlargement
Job enlargement means addition of activities or tasks into a particular
area of work.

(b) Job Enrichment


Job enrichment means increasing the depth of job; not only there is an
addition in the number of tasks in a particular area but employees are
also given the authority and control to make decisions on their job.

(c) Job Rotation


Job rotation means employees are shifted from one area of job
specification to another area of job specification either periodically or
non-periodically.

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214  ANSWERS

Exercise 4.5
Mechanistic organisations are organisations that have a high level of job
specification, high level of formality, a rigid chain of directives, practice
centralisation of control and vertical or upwards communication. Meanwhile,
organic organisations are organisations that have a chain of directives that are
not rigid, a low formality level, a low level of job specification, practice
decentralisation of control and horizontal communication.

Multiple Choice Questions


1. C
2. A
3. B
4. A
5. A

TRUE (T) or FALSE (F) Statements


1. F
2. T
3. T
4. T
5. F

TOPIC 5: HUMAN RESOURCE MANAGEMENT


Exercise 5.1
1. Human resource management is a process of obtaining, developing and
retaining qualified employees sufficiently towards achieving goals that have
been set.

2. Stages involved in the process of human resource management are as follows:


(a) Determining the needs of human resource
(b) Attracting the interest of qualified candidates
(c) Development of qualified employees
(d) Retaining qualified employees
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ANSWERS  215

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

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

Exercise 5.4
The two methods of recruitment that can be implemented: internal recruitment
and external recruitment.

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

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

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216  ANSWERS

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

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

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

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

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ANSWERS  217

Multiple Choice Questions


1. A
2. B
3. A
4. C
5. D

TRUE (T) or FALSE (F) Statements


1. F
2. F
3. T
4. F
5. T

TOPIC 6: COMMUNICATION IN ORGANISATIONS


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

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

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218  ANSWERS

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

Multiple Choice Questions


1. B
2. A
3. D
4. B
5. D

TOPIC 7: MOTIVATION
Exercise 7.1
Need-based models are motivation models that emphasise on the specific needs
of human and internal factors that give the power to direct and stop actions.
Need-based models explain motivation as a phenomenon that takes place
internally. Process-based models are motivation models that focus on the
understanding of thinking or cognitive process in the mind of individuals and
affect behaviour.

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

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ANSWERS  219

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

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

TRUE (T) or FALSE (F) Statements


1. T
2. F
3. F
4. T
5. T

Multiple Choice Questions


1. C
2. C
3. D
4. D
5. A

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TOPIC 8: LEADERSHIP
Exercise 8.1
From both studies, the results achieved are quite similar. Both have given two
main dimensions which are task dimension and relation dimension.

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

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

TRUE (T) or FALSE (F) Statements


1. F
2. T
3. F
4. T
5. T

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ANSWERS  221

Multiple Choice Questions


1. C
2. D
3. D
4. D
5. B

TOPIC 9: CONTROLLING
Exercise 9.1
Control is a process to ensure that organisational activities are running according
to the plan. This process can be carried out by comparing the true performance
with the standard that had been established and taking corrective actions in
order to rectify any distortion that does not comply with the standard.

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

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

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222  ANSWERS

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

Multiple Choice Questions


1. B
2. A
3. A
4. C
5. B

TOPIC 10: MANAGING TEAMS


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

Exercise 10.2
Team strengths are the ability to increase customer satisfaction, quality of
products and services of the organisation, and job satisfaction.

Team weaknesses are a high level of turnover during the initial stage of team
formation, social loitering and behaviour of self-restriction.

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ANSWERS  223

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

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

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

Exercise 10.6
1. A small number of team members are necessary in order to avoid the
situations of social loitering and behaviour of self-restriction. Besides that, a
small number of team members will strengthen the interaction among the
members and speed up the process of decision making.

2. Teamwork consists of a small number of team members with skills that


are complimentary to each other, being responsible and had agreed in
achieving the same goals. Teamwork is becoming more popular because
it can help the organisation to react fast and properly towards a certain
problem and challenge, and increase the performance of the organisation
compared to the traditional approach.

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224  ANSWERS

Multiple Choice Questions


1. A
2. A
3. A
4. B
5. B

TRUE (T) or FALSE (F) Statements


1. T
2. F
3. T
4. F
5. F

TOPIC 11: INNOVATION AND CHANGE


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

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

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

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ANSWERS  225

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

Exercise 11.5
1. Aspects that can be changed by change agents are:
(a) Organisation structure
(b) Technology in organisations
(c) Physical layout in organisations
(d) Employees within the organisation

Exercise 11.6
Negotiation is an approach that fulfils the wants of those who are causing
barriers by granting those rewards in exchange for the cooperation given.

Co-optation is the approach of „buying‰ the leader of group who is a barrier


towards change so that this leader will influence his followers to change their
minds and then cooperating towards the change.

Force is an approach using threat to instil fear to the parties causing barriers in
order for them to cooperate.

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

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226  ANSWERS

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

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