HCA Management Principles July 2018

Certificate
in
Accounting
MANAGEMENT PRINCIPLES
Study Guide
Copyright© 2017
MANAGEMENT COLLEGE OF SOUTHERN AFRICA
All rights reserved, no part of this book may be reproduced in any form or by any means, including photocopying
machines, without the written permission of the publisher. Please report all errors and omissions to the following email
address: modulefeedback@mancosa.co.za
Principles of Management
Certificate in Accounting
MANAGEMENT PRINCIPLES
Table of Contents
Introduction .............................................................................................................................................. 1
Unit 1: Introduction to Management ......................................................................................................... 6
Unit 2: Evolution of Management Theory............................................................................................... 41
Unit 3: The Management Environment .................................................................................................. 77
Unit 4: The Management Process ....................................................................................................... 109
Unit 5: Contemporary Management Issues ......................................................................................... 152
BIBLIOGRAPHY .................................................................................................................................. 202
MANCOSA – Certificate in Accounting i i

Management Principles
Introduction
This module, Management Principle, forms an integral part of the MANCOSA Certificate in Business Management
Studies qualification and serves to introduce the learner to the fundamentals of management. In so doing, the
module explores the evolution of management theory, the management environment, the management process,
as well as contemporary issues in management.
Aims of this Module

The broad aims of this module are to:
 Introduce the learner to fundamental management principles and practices
 Develop the learner’s understanding of the evolution of management theory
 Develop the learner’s understanding of the management environment and its application
 Develop the learner’s understanding of the management process and its application
 Develop the learner’s understanding of contemporary management issues and their application
Contents and Structure

Section 1: Introduction to Management
This first section introduces the learner to the concept of management. In this section the nature and definition of
management are examined, as are the various levels of management, areas of management and managerial skills.
The relationship between management and organizational performance is studied and the scope of, and current
challenges for management are explored.
Section 2: Evolution of Management Theory

Section 2 explores the evolution of management theory. Here, the importance of theory is established, and various
management theories are examined.
Section 3: Management Environment

This third section examines the dynamics of the management environment. In so doing the characteristics of the
macro-environment, market environment and micro-environment are studied. The interface between the
organisation and the environment is also examined.
1 MANCOSA – Certificate in Accounting

Section 4: The Management Process

Section 4 explores the nature of the management process. In this section the four fundamental management
functions of Planning, Organising, Leading and Controlling (POLC) are examined. The various areas of
management are also studied.
Section 5: Contemporary Management Issues

This section examines certain contemporary management issues and explores the implications which these have
for the current day manager. Motivation, decision making, communication and groups and teams are the four
issues which are dealt with.
How to Use the Study Guide

Do not try to work through the Study Guide in a few long sessions. You will study more effectively if you divide your
study into regular two-hour sessions.
As you work through the Study Guide you will come across:
 Think Points
 Activities
 Reading Activities
 Self Check Activities
 Study Group Discussion Activities
 Sample Examination Questions
MANCOSA – Certificate in Accounting 2

These are designed to help you study and prepare for the examinations.
THINK POINT
Think Points require that you stop and think critically about a particular
management situation. They also may require that you apply a particular
management principle.
ACTIVITY
Activities require you to carry out specific tasks. The aim of the Activities is to
give you an opportunity to apply what you have learned.
READING ACTIVITIES
Each section contains at least one reading activity. The reading activity requires
that you read one or more of the recommended journal articles and then answer
questions relevant to the journal article. The majority of the recommended journal
articles are available from the Emerald library.
SELF TEST QUESTIONS

Occasionally you will be required to assess your grasp of concepts by applying
concepts to specific situations. Suggested answers to these activities are
provided at the end of each section.
DISCOVERING FOR YOURSELF

You will come across some activities and questions that you may have to
investigate by yourself. The aim of these exercises is to enable you to
relate what you have learnt to the real world experience.

CORE READINGS FOR THIS MODULE

The major texts for this Module are:
 Prescribed Reading
The prescribed text for this module is:
Smit, P.J., Cronjé, G.J. de J., Brevis, T. and Vrba, M.J. (2011) Management
Principles: A Contemporary Edition for Africa, Fifth Edition. Cape Town: Juta
& Co.
 Recommended Reading:
Each section has a list of recommended books and recommended journals,

which allow you to develop an understanding of the issues beyond the
perspective of the prescribed textbook and Study Guide. The majority of
recommended journal articles listed per section are available from the
Emerald online library facility.
STUDY GROUP DISCUSSION

Study Group discussion activities are provided at the end of each section of this
Study Guide. You must have worked through the relevant section and the
corresponding pages of the prescribed text before meeting as a Study Group.
The Study Group Discussion questions and activities provide an opportunity for
learners to apply what they have learnt, to share experiences with their fellow
learners and to learn from each other.
SAMPLE EXAMINATION QUESTIONS

Sample examination questions are provided at the end of each section.
These provide the learner with an understanding of the type of questions
which may be asked in the examination.

Module Assessment
Assignment
You will be required to complete and submit an assignment. This assignment is assessed as part of your
coursework. Therefore, it is very important that you complete it.
Examination
An examination will be written at the end of each semester. The assessment strategy will focus on
application of theory to practice.
Reading
Prescribed Reading
The prescribed text for this module is:
Smit, P.J., Cronjé, G.J. de J., Brevis, T. and Vrba, M.J. (2011) Management Principles: A Contemporary
Edition for Africa, Fifth Edition. Cape Town: Juta & Co.
Recommended Reading:
Each section has a list of recommended books and recommended journals, which allow you to develop
an understanding of the issues beyond the perspective of the prescribed textbook and Study Guide. The
majority of recommended journal articles listed per section are available from the Emerald online library
facility.

The overall outcome for this section is that, on its

completion, the learner should be able to demonstrate
an understanding of fundamental management issues.
This overall outcome will be achieved through the
learner’s mastery of the following specific outcomes, in
that the learner will be able to:
1. Explain the relationship between the organisation

and management.
2. Discuss the management process and explain the

relationship between the management process
Unit 1: and its environments.
3. Formulate a workable definition of management.

Introduction to
4. Identify the levels of management and critically
Management discuss the activities which are performed at each
level.
5. Identify and critically discuss the areas of

management, manager role distribution and
managerial skills.
6. Identify and critically discuss the concepts of, and

key differences between, the ‘old’ organisation
and the ‘new’ organisation.
7. Identify and critically discuss the measures of

managerial and organisational performance.
8. Identify and critically discuss contemporary

management challenges.

CORE READINGS FOR THIS CHAPTER

Prescribed Reading:
 Smit, P.J., Cronjé, G.J. de J., Brevis, T. & Vrba, M.J. (2011) Management
Principles:
A Contemporary Edition for Africa, Fifth Edition. Cape Town: Juta & Co. Chapter
1 (pp 3 – 22) and Chapter 18 (pp 488 – 506).
Books
 Botha, S., Cunningham, P., Musengi, S., Visser, K., Williams, O., Lotz, J.,
Booysen, K.,
Stewart Smith, A., Bosch, A., & Banhegyi, S. (2009) Management: Fresh
Perspectives. Cape Town:
Pearson Education South Africa. pp 1 – 18 (Chapter 1).
 George, J.M. & Jones, G.R. (2006) Contemporary Management: Creating Value
in Orgainizations.
Fourth Edition. Boston: McGraw Hill. pp 2 – 39 (Chapter 1).
 Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B.,
Louw, L. & Oosthuizen, T.
(2005) Management. Second South African Edition. Cape Town: Oxford

University Press.
pp 3 – 26 (Chapter 1), pp 331 – 355 (Chapter 12).
Journals
Arumugan, S. (2006) “Competencies for Multi-Cultural Leadership.” HR Future. June.
 Mohonathan, S. (2008) “Trends, Innovation & Skills Development: Technology is

Creating the New World of Work.” HR Future. May.
 Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard

BusinessReview, Mar – Apr, pp 163 – 170.
 Moss Kanter, R. (1989) “The New Managerial Work” Harvard Business Review
Nov - Dec, pp 13 – 20.

 Rory, D. (2006) “How ‘free’ is the free-worker? An investigation into the working
arrangements available to knowledge workers.” Personnel Review. Vol 35, No.1,
pp 78 – 97.
Journals (continued)
 Smanjak, Peter (2006) “Know Your Company’s HIV Risk.” HR Future. May.
 Wade, L. (2006) “HIV / AIDS Strategic Shift.” HR Future. March.
1.1 Introduction
This section, the first section of the Principles of Management Module, introduces the learner to the
concept of management. In so doing the following issues are examined:
 Nature of management
 Definition of management
 Levels of management
 Management and the organisation
 ‘Old’ and ‘new’ organisations
 Management and organisational performance
 The scope and challenges of management
THINK POINT
The concept of management is inextricably intertwined with the
purpose of the business organisation. In your experience….
 why do organisations exist; and
 how does the role of management support the purpose of

organisations?
Comment on Think Point

Organisations are characterised by a distinct purpose, multiple members and a systematic structure.
Organisations have emerged and exist primarily because they are more efficient than individuals
operating individually and therefore can produce items and/or provide services which an individual could

not produce or provide alone. In so doing the organisation is able to meet the needs and demands of
current day society through:
 bringing together resources to produce and provide the products and services which the society
needs; and
 creating and providing career opportunities for members of the society (Smit, Cronjé, Brevis and
Vrba, 2011).
In order to meet the needs and demands of current day society, organisations establish goals which need
to be operationalised for the purpose of the organisation to be achieved (Smit et al, 2011). Management
serves to ensure that such goals are established and operationalised, and in so doing supports the
purpose of the organisation.
1.2 The Nature of Management

Management’s task is argued to be to “The fundamental functions of a manager link up in a specific
sequence to form a process, which comprises planning, organising, leading, and controlling.” (Smit et al,
2011:6). The achievement of this task is reliant on the management process, which comprises the
functions of planning, organising, leading and controlling, as depicted in Figure 1.1 below.
Figure 1.1: The Nature of Management (adapted from Smit et al, 2011:7)
A study of Figure 1.1 reveals that the management process requires interaction with a number of
variables within different ‘environments’:

 the organisation
 the macro-environment and
 management schools of thought

1.2.1 The Organisation
Within the organisation, management achieves the goals of the enterprise through acting on its human,
financial, physical and informational resources by executing the four central management functions of
Planning, Organising, Leading and Controlling (abbreviated to POLC). These four functions comprise
the core management process:
 Planning involves determining which goals and courses of action the organisation and the various
departments should pursue
 Organising involves the structuring and arranging of work, resources, departments and the overall
organisation in a manner which will facilitate the achievement of organisational goals
 Leading involves influencing the organisation’s employees so as to ensure that they are motivated
to perform actions which are aligned with the organisation’s overall goals
 Control is necessary to determine whether the organisation’s performance is in accordance with the
predetermined goals, originally devised during the planning process (Smit et al, 2011).
ACTIVITY
Read the following short case study and then answer the questions which
follow.
Tshepo is the HR Manager at ‘Technology Incorporated’. A typical day at the office
involves a range of activities. Tshepo arrived at the office this morning and reviewed
his schedule for today which included:
08:30 – 09:30: Meet with PA to arrange Departmental Team-Building Getaway

(Tshepo is concerned that morale is low in his department and
has decided to implement the team building getaway to improve
the overall motivation of the team and give them direction for the
coming year.)
10:00 – 12:00: Restructuring Task Team Meeting (The organisation is currently

restructuring and Tshepo is the chair of the Restructuring Task
Team. Today Tshepo is going to present a proposed new structure
for the organisation.)

13:00 – 14:00: Meeting with Financial Manager and General Manager (Tsepho has
prepared the budget for the HR department for the new financial
year. He is meeting with the Financial Manager and General
Manager to present and motivate his budget).
15:00 – 16:00: Meeting with Operations Manager (Tshepo has set up the meeting
with the Operations Manager as the Operations Manager has not
been recruiting staff in line with the organisation’s Employment
Equity Plan. This is negatively impacting on the transformation of
the Operations Department.)
In the space provided below identify which of Tshepo’s meetings focus primarily on the management
functions of planning, leading, organising and/or controlling.
 Meeting with PA to arrange Departmental Team Building Getaway
 Restructuring Task-Team Meeting
 Meeting with Financial Manager and General Manager Regarding HR Budget
 Meeting with Operations Manager regarding implementation of Employment Equity Plan

Comment on Activity
Tshepo’s day at the office shows that he is involved in all of the four management functions:
 Meeting with PA to arrange Departmental Team Building Getaway: The Departmental Team
Building Getaway is primarily an example of the management function of leading as the getaway is
being implemented to improve the morale of staff, enhance working relationships and to provide staff
with a vision as to the direction of the department.
 Restructuring Task Team Meeting: This is primarily an example of the management function of
organising as Tshepo will be presenting a proposed new structure for the organisation.
 Meeting with Financial Manager and HR Manager regarding HR Budget: This is primarily an
example of the management function of planning in that the HR budget for the new year represents
an implementation plan for the department.
 Meeting with Operations Management regarding Employment Equity Implementation: This is

primarily an example of the management function of control: Tshepo has put in place an Employment
Equity Plan for the organisation which is used to inform the recruitment decisions of departmental
managers. It has been identified that the Operations Manager is not recruiting in accordance with
the Employment Equity Plan and Tshepo therefore needs to address this non-compliance.
The four management functions will be discussed further in Section 4 of this Study Guide.
1.2.2 The Environment

The organisation operates within a market environment, comprising consumers, suppliers and
competitors, as well as the macro-environment, which includes the technological, economic, social,
political and international forces. These two environments impact on the organisation and therefore affect
the nature of the organisation’s management.

ACTIVITY
follow.
Sohan is the CEO of Cellular X, a cellular communications company providing a
cellular phone service to 15 million customers in South Africa, Mozambique and
Botswana. Sohan has called in his management team to discuss Cellacom’s recent
20% price reduction as he is concerned that this will result in Cellular X’s customers
moving to Cellacom (Cellacom also operates in the same countries as Cellular X).
During the meeting Michael, the Marketing Director of Cellular X, comments that he
has heard that Cellacom has been able to offer such reduced rates due to the
discounted rates that they receive from Innovation Corp. Sohan comments, “We
spend millions on Innovation Corp.’s services every month! I think we will have to
renegotiate our contract with them so that we can get a better deal!”
In the space provided below, identify the parties which comprise Cellular X’s market
environment.
 Cellular X’s Competitor:___________________________
 Cellular X’s Consumer:____________________________
 Cellular X’s Supplier:______________________________
Comment on Activity:
Cellular X’s competitor is Cellacom, their consumer is the 15 million customers in South Africa,
Mozambique and Botswana, and their supplier is Innovation Corp. The scenario described in the case
study represents a typical competitive dynamic which organisations experience as a result of their market
environment.
The organisation’s market and macro-environment will be discussed further in Section 3 of this Study
Guide.
1.2.3 Management Schools of Thought

Management Schools of Thought (also known as Management Theories) present frameworks which
provide the manager and management student with fundamental principles to guide effective

management decisions and actions. Management theories will be addressed further in Section 2 of this
Study Guide.
1.3 Definition of Management

On the whole, a considerable degree of consensus exists within the literature, with regards to a
definition of management. Definitions include:
 “…the process of planning, organising, leading and controlling the scarce resources of the
organisation to achieve the organisation’s mission and goals as productively as possible” (Smit et
al, 2011: 8).
 “…the process of using an organisation’s human and other resources in such a way that the
organisational objectives are achieved” (Botha, S., Cunningham, P., Musengi, S., Visser, K.,
Williams, O., Lotz, J., Booysen, K., Stewart Smith, A., Bosch, A., and Banhegyi, S., 2009:11).
 “…planning, organizing, leading, and controlling the work of human and other resources to achieve
organizational goals efficiently and effectively” (George and Jones, 2006: 5).
THINK POINT
 What is common to all three definitions of management presented
above?

An analysis of the above definitions points to the essential components which should be included in a
definition of management:
 Management….
o involves a process in which …
 the management functions of planning, organising, leading and controlling are executed;
 organisational resources are utilised; and
 work is achieved through the efforts of other employees,
o so as to provide for …
 the effective and efficient achievement of the organisation’s goals.

1.4 Levels of Management

Three levels of management within an organisation may be identified:
 Top Management
 Middle Management
 Lower / First-Line / Supervisory Management
ACTIVITY
Take note of the top, middle and lower management positions within your
organisation.
From your experience, what are the distinguishing characteristics of each level of
management?
Top Management:
Middle Management:

Lower Management:
Comment on Activity
The three levels of management may be distinguished according to level of responsibility, main functions,
time orientation and positions held, as indicated in Table 1.1 on the following page.
Table 1.1: Three Levels of Management
MIDDLE LOWER
TOP MANAGEMENT
MANAGEMENT MANAGEMENT
RESPONSIBILITY Overall responsibility for Responsible for Responsible for

the organisation specific departments departmental
sections /
subsections
Strategic management Implementation of Application of rules

policies, plans & & procedures to
MAIN FUNCTION
strategies achieve high levels
of productivity
TIME Long Term Medium Term Short Term

ORIENTATION
Board of Directors, Departmental heads, Section/subsection

Managing Director, e.g. Marketing heads, e.g. Product,
POSITIONS HELD
CEO, Management Manager, HR Sales & Promotion
Committees Manager Managers within the
Marketing
Department

ACTIVITY
From your experience as a lower / middle / top level manager, what percentage of
time
would you estimate you spend on planning, organising, leading and controlling at
your particular management level (lower, middle or top)?
Comment on Activity
Evidence shows that managers at all levels spend time on all management functions. However, the
amount of time spent on each particular function differs between each level of management as indicated
in Figure 1.2.
Planning Organising Leading Controlling
Top
Managers
Middle
Managers
First-Line
Managers
Figure 1.2: Time Spent on Management Functions by Management Level (George and Jones,
2006: 15).
It is evident from Figure 1.2 that:
 Top managers spend much time organising, and a substantial amount of time planning
 Middle managers spend the most time on leading, followed by organising and planning
 Lower managers spend approximately half of their time leading

1.5 Management and the Organisation

It has already been identified, in the Introduction (subsection 1.1) to this section, that the relationship
between the organisation and management is critical in that management serves to support the
establishment of goals, implementation of actions and utilisation of resources, so as to enable the
achievement of the organisation’s purpose. This subsection serves to further highlight management’s
relation to the organisation by discussing the areas of management, role distribution of managers as well
the managerial skills required at various managerial levels.
1.5.1 Areas of Management

Managers may be classified according to the organisational function for which they are responsible. Six
functional areas of management may be identified (Smit et al, 2011):
 Marketing Management
 Financial Management
 Operations / Production Management
 Human Resource Management
 Purchasing Management
 Research and Development Management

These functional areas of management will be examined further in Section 4 of this Study Guide.
In addition to the six functional areas of management identified above, a seventh area may be identified:
that of General Management (Smit et al, 2011). This area of management involves the execution of the
four generic management functions of Planning, Organising, Leading and Controlling (POLC), already
identified in subsection 1.2, and which are to be discussed further in Section 4 of this Study Guide.
General Management is not only performed within each of the six areas of management identified above,
but at all levels of management as well.

ACTIVITY
follow.
The monthly Management Committee meeting of ‘Healthy Juices Inc.’, a fruit juice
processing organisation is to take place tomorrow. Each manager is busy
preparing for the meeting as follows:
 Indera is preparing statistics on the number of terminations and recruitments

which took place during the past month
 Sipho is preparing a presentation on a proposed new product, a ‘papaya,

mango and blueberry’ blend;
 Jason is preparing an income statement
 Meredith has arranged to bring representatives from the advertising agency

“Cool Ideas” who are to present a proposed advertisement campaign for
‘Healthy Juices Inc’ children’s range
 Lindiwe is preparing a report on production statistics for the month
From information presented in the case study, can you identify who holds the following positions:
 Marketing Manager:
 Financial Manager:
 Operations Manager:
 Human Resources Manager:
 Research and Development Manager:
Comment on Activity:
The various management positions at “Healthy Juice Inc” are held by the following people:
 Marketing Manager: Meredith

 Financial Manager: Jason
 Operations Manager: Lindiwe
 Human Resources Manager: Indera
 Research and Development Manager: Sipho

The Role Distribution of Managers

The manager’s relation to the organisation can be further explored from a role distribution perspective.
READING ACTIVITY
Read the following article and then answer the questions which follow:
Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard
Business Review, Mar – Apr, pp 163 – 170.
1. How does Mintzberg (1990) view the manager’s job in relation to the organisation?
2. How does Mintzberg’s view differ from the ‘Areas of Management’ approach examined in paragraph
1.5.1?

3. From your experience, which approach is more applicable to your position as manager?
Comment on Activity
As identified in paragraph 1.5.1 above, the area of General Management identifies the four management
functions of Planning, Organising, Leading and Controlling (POLC) as characterising the manager’s work.
However, Mintzberg (1990) argues that not only do these widely accepted management functions provide
an inadequate explanation of what managers do, they fail to provide a practical approach to
understanding and developing managerial competence as well.
It is argued that the traditional POLC approach oversimplifies the complexity of the manager’s job, which
is in effect, “enormously complicated and difficult” (Mintzberg, 1990: 167) and is characterised by brevity,
fragmentation and an overburden of tasks. Thus Mintzberg (1990) maintains that it is more useful to view
the manager’s relation to the organisation in terms of the three categories of roles which managers
perform. The three categories of roles are depicted in Figure 1.3.
Figure 1.3: The Manager’s Roles (Mintzberg, 1990: 168)

Figure 1.3 presents the three categories of managerial roles in a sequential manner. The sequence
begins with status emerging from the formal authority vested in the manager’s position. This status allows
for the formation of interpersonal relationships and the execution of Interpersonal Roles. The
interpersonal relationships in turn provide the manager with access to information and the consequent
carrying out of Informational Roles. This information consequently enables the manager’s decision
making, and his execution of Decisional Roles.
It needs to be noted that Mintzberg (1990) emphasises that although he breaks down the manager’s work
into ten different roles, his focus is on the gestalt (whole) and he argues that the roles are not separable.
In so doing the complex nature of managerial work is acknowledged. Mintzberg (1990) argues that the
managerial role approach contributes to more effective management in that, unlike the traditional POLC
approach, it provides managers with insight into the pressures and complexities of their work.
ACTIVITY
 Discuss the ten manager roles which Mintzberg identifies. Provide an example
of each.
Comment on Activity
Mintzberg’s (1990) ten managerial roles include:
 Interpersonal Roles
o Figurehead Role: the manager is involved in the performance of ceremonial duties, such as
officiating at a long-service award evening.
o Leader Role: the manager works with and through his/her subordinates in order to achieve the
work of his/her department. For example, the manager appoints, trains, motivates and promotes
his/her subordinates.
o Liaison Role: the manager makes contacts outside of the vertical chain of command to maintain
good relationships within and without the organisation, such as the forming of a sound
relationship with a supplier or distributor.
 Information Roles
o Monitor Role: the manager is involved in constantly seeking pertinent information through, for
example, scanning the environment and receiving information from his network of contacts.

o Disseminator Role: the manager passes on information that he has received to individuals
within the organisation who would benefit from it, such as subordinates and colleagues.
o Spokesperson Role: the manager communicates information to people outside the

organisation, for example, the Corporate Social Responsibility Director may ensure that the press
is kept informed about the organisation’s social responsibility initiatives.
 Decision-Making Roles
o Entrepreneur Role: the manager seeks to maintain and extend the unit’s/ organisation’s
sustainability through adapting it to changes within the environment. For example, the CEO and
the management team may decide to change strategy and re-engineer the organisation as a
result of influential changes within the organisation’s environment.
o Disturbance Handler Role: the manager is involved in involuntarily responding to pressures

and solving problems. For example, the HR Director may be required to address an unexpected
situation within the company which may lead to strike action.
o Resource Allocator Role: the manager decides what quantities of resources such as people,
equipment and money each part of the department / organisation should receive. For example,
during the company’s budgeting period, the CEO approves a budget for the Information
Technology department which is considerably larger than the other departments’ budgets.
o Negotiator Role: due to his/her authority to allocate resources and his/her access to
information, the manager is involved in negotiations within the company. For example, a
supervisor may negotiate changes to job specifications with his/her subordinates.
In closing, it needs to be noted that although Mintzberg (1990) distinguishes ten managerial roles, he
argues that all ten of these roles form an integrated whole and cannot be easily separated.
1.5.2 Managerial Skills

In order for the manager to effectively perform in his/her position, certain managerial skills are required.
THINK POINT
 In studying towards this management qualification, what specific management
skills are you expecting to acquire?
 Why are these particular skills important to the position which you hold (or are
to hold) as a manager?


George & Jones (2006: 24) identify three categories of skills which managers at all levels of the
organisation are required to possess:
 Conceptual Skills: refer to the manager’s ability to view the operation of the organisation and
its parts holistically. Conceptual skills are of particular importance for executing the management
functions of planning and organising.
 Interpersonal / Human Skills: refer to the manager’s ability to communicate and work effectively
with others.
 Technical Skills: refer to the ability to use discipline-specific skills to complete a particular
technical task. Examples of technical skills include a financial manager’s accounting skills or a
chief information officer’s information technology skills (George & Jones, 2006: 24).
Obviously managers at different hierarchical levels within the organisation will employ these skills to
varying degrees. For example, the nature of the work which top management performs requires a greater
reliance on, and employment of, conceptual skills.
READING ACTIVITY
Read the section entitled “The Educator’s Job” on page 175 of
 Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard

Business Review , Mar – Apr, pp 163 – 170. Also read pages 15 - 17
 Smit, P.J., Cronjé, G.J. de J., Brevis, T. & Vrba, M.J. (2011)
Management Principles: A Contemporary Edition for Africa, Fifth
Edition. Cape Town: Juta & Co. pp 17 - 20.
Compare and contrast Mintzberg’s (1990) view of managerial skills to that of Smit et al’s (2011).
Note your comparisons in the space below.

Comment on Reading Activity

Mintzberg (1990) identifies the following skills to be important to managerial work:
o Development of peer relationships
o Motivation of subordinates
o Conflict resolution skills
o Negotiation skills
o Establishment of information networks
o Dissemination of information
o Allocation of resources
o Decision making in conditions of extreme ambiguity
o Introspective skills which provide for learning on the job
The key difference between the managerial skills identified by Mintzberg (1990) and those identified by
Smit et al (2011) is that while the latter’s focus is on skill categories, the former emphasises important
skills necessary to cope with the complex nature of managerial work. Indeed, it may be argued that the
majority of skills identified by Mintzberg (1990) fall within Smit et al’s (2011) Conceptual and Interpersonal
Skill categories.
THINK POINT
How are managerial skills developed?

Managerial skills may be developed through both education and experience (George and Jones,
2006: 24 – 26):
 Management education, which can take the form of formal or continuous education, provides the
manager or potential manager with the opportunity to develop management skills within an
educational setting, for example, at higher education institutions and/or company in-house training
facilities.
 Practical experience provides the manager and potential manager with the opportunity to develop
management skills while performing his/her job.

With regards to the effectiveness of the two different approaches it is important to note Mintzberg’s (1990)
assertion that the development of management competence cannot be achieved from a theoretical
approach to education alone. Indeed, it has been recognised that for management development
programmes to be effective, the cognitive learning which results from education should be married with
the practical learning which results from experience.
This subsection, entitled Management and the Organisation, has served to further explore the
fundamental principles underlying the relationship between the organisation and the work of the manager.
In so doing, the Areas of Management, Managerial Roles and Managerial Skills were examined.
1.6 Management and Organizational Performance

It was indicated in the Introduction (subsection 1.1) that to meet the needs and demands of current day
society, organisations establish goals which must be operationalised for the purpose of the organisation
to be achieved (Smit et al, 2011). Management has to ensure that such goals are established and
operationalised, and in this way supports the purpose of the organisation. Thus it follows that
organisational performance has a strong relation to managerial performance.
THINK POINT
Based on your experience within organisations, what criteria do you think
would be appropriate for the measuring of organisational and managerial
performance?

The assessment of managerial and organisational performance is one characterised by much debate.
However, the criteria on which there is much agreement are those of efficiency and effectiveness:
 Efficiency (‘doing things right’) focuses on input and output. An efficient manager is regarded to be
one who is able to achieve outputs which measure up to the inputs (time, materials, labour) used to
achieve the outputs.
 Effectiveness (‘doing the right thing’) focuses on choosing the most appropriate goals and plans of
action (George and Jones, 2006: 5 - 6).

Smit et al (2011) argue that the efficiency-effectiveness approach tends to be simplistic. Rather, the
economic principle, where the organisation (and its management) should seek to achieve the highest
possible output with the lowest possible input, should be used as the measure of managerial and
organisational performance (Smit et al, 2011).
1.7 ‘Old’ and ‘New’ Organisations

The management environment has been undergoing change which has resulted in change in
organisations and managerial work. This has resulted in the emergence of the ‘new’ organisation which
provides the flexibility necessary to respond adequately to the changing environment (Smit et al, 2011).
ACTIVITY
In your experience, what changes have you observed within organisations and in
managerial work over the past ten years?
Comment on Activity
Organisations have changed, and are still changing, in a number of ways. Table 1.3 below identifies
some of the key changes, as identified by Smit et al (2011).
Table 1.3: Key Changes Within Organisations (Smit et al, 2011: 497)
‘OLD’ ORGANISATION ‘NEW’ ORGANISATION

 Physical tasks  Mental tasks
 Hierarchical  Lateral relationships
 Vertical communication  Vertical and horizontal communication
 Top down decision making  Decision making dependent on managers /

employees with expertise
 Many organisational levels (tall structure)  Few organisational levels (flat structure)
 Autocratic management style  Participative management style

READING ACTIVITY
Read the following journal article and then answer the question which
follows:
 Moss Kanter, R. (1989) “The New Managerial Work” Harvard Business

Review Nov-Dec, pages 13 – 20.
 Discuss how Moss Kanter’s ‘post-entrepreneurial’ management differs

from the more traditional managerial approach which you have
encountered thus far in this section.

Kanter (1989) argues that as a result of competitive pressures within the management environment,
organisations are adopting more flexible strategies and structures. The move to flexibility requires that
managers learn to perform new ways of managing, deal with change, implement new ways of motivating
people and accept changes in their own bases of power.
Kanter (1989) argues that the post-entrepreneurial organisation presents the traditional manager with the
following changes:
 An increased number and variety of channels (horizontal, vertical, cross-functional) exist for
exerting influence and taking action within the new organisation
 Within the new organisation, relationships of influence are emerging within horizontal peer
networks, and thus are not limited to the vertical chain of command
 The division between managers and non-managers is blurring, particularly in terms of information
accessibility, access to relationships outside of the organisation and control over assignments
 External relationships are becoming important in providing for internal power and influence, as well
as career development
 As a result of the above four factors, stable and predictable paths of career development for
managers are difficult to pre-determine and to guarantee
The above five factors demonstrate how the post-entrepreneurial manager is distinct from the traditional
manager in that his/her managerial power and success is not derived from his/her hierarchical position.

Indeed, it is asserted that managers “….must learn to operate without the crutch of hierarchy. Position,
title, and authority are no longer adequate tools, not in a world where subordinates are encouraged to
think for themselves and where managers have to work synergistically with other departments and even
other companies” (Kanter, 1989: 16).
Thus Kanter’s (1989) approach essentially differs from the traditional management approach in that while
the traditional approach is grounded in the concept of hierarchy (as shown in subsections 1.4 and 1.5),
the post-entrepreneurial approach’s focus is on relationship networks.
1.8 Scope and Challenges of Management

A number of challenges exist for management not only within the Southern African region, but globally
as well.
READING ACTIVITY
Read at least three of the following texts and then answer the question
which follows
 Rory, D. (2006) “How ‘free’ is the free-worker? An investigation into the

working arrangements available to knowledge workers.” Personnel
Review. Vol 35, No. 1, pp 78 – 97.
 Smanjak, Peter (2006) “Know Your Company’s HIV Risk.” HR Future.

May
 Smit, P.J., Cronjé, G.J. de J., Brevis, T. & Vrba, M.J. (2011)
Management Principles: A Contemporary Edition for Africa, Fifth Edition.
Cape Town: Juta & Co. pp 488 – 494 (first part of Chapter 18)
 Wade, L. (2006) “HIV / AIDS Strategic Shift.” HR Future. March

From your reading of the above texts, discuss the key challenges currently
facing management.
Comment on Activity
The following key challenges have been identified for managers:

1.8.1 Globalisation and the Global Economy:

Smit et al (2011) identify that being a global organisation means “operating without the constraints or traditions of
national boundaries, and seeking to compete in any high-potential marketplace on earth. Globalisation has caused
a converging of economic and social forces, of interests and commitments, of values and tastes, and of challenges
and opportunities” (Smit et al 2011: 489-490). Managing globally increases the complexity and challenge of
managerial work.
1.8.2 Technological Advancement

The internet, mobile computing and electronic commerce (e-commerce) has impacted considerably on the manner
in which organisations function (Smit et al, 2011) and therefore the way in which they need to be managed.
Mohonathan (2008), the HR Director of Microsoft SA, speaks of an upcoming “new world of technology” and
identifies four major upcoming trends which are to impact the way in which employees work. These trends are:
 The ‘New World of Work’: This refers to technology which is always on and connected, as well as global. This
enables employees to easily and readily access and share information, while reducing IT costs
 The ‘People Ready World’: where people (rather than businesses / organisations) achieve business
outcomes, enhance operations and constantly bring about innovation through the use of technology
 Virtualisation: which provides for the simplification and consolidation of an organisation’s IT infrastructure,
resulting in cost savings and greater innovation
 Unified Communications: where various forms of communication (phone, email, fax, sms) are brought
together through PCs where employees work the most (Mohonathan, 2008)
This emerging new world of technology requires that new technological skills are developed amongst employees
within organisations operating in all types of industries (Mohanathan, 2008). The challenge for managers is to
develop their staff and themselves so as to harness the new world of technology.
1.8.3 Radical Transformation of the World of Work

In an effort to achieve and maintain competitive advantage, the organisation of today is one that is constantly
redesigning, reorganizing and reengineering itself. As a result a more fluid and flexible organisation is emerging,
relying very much on the knowledge of its workers (Smit et al, 2011). The ‘new’ organisation is one which is:
 Global, operating in a very complex management environment
 Networked and virtual, reliant on interdependence across individuals, teams and sub-units, who very often are
connected and share information electronically
 Flatter and leaner, where several layers of management have been removed

 Flexible, where the organisation is able to rapidly respond to changes in the environment; changes in customer
needs; the needs of a diverse workforce; and intense competition (Smit et al, 2011)
The transformation of the world of work has resulted in managers being presented with challenges such
as:
 having to manage multiple projects at the same time
 developing skills amongst employees to enable them to not only cope with change, but more importantly to
drive change and harness the benefits of changes
 managing their work – life balance as well as that of their employees
 being innovative
 effectively managing teams for high performance
 establishing and maintaining effective networks internally within the organisation as well as externally
 relying more on interpersonal relationships and negotiation skills to get work done through people (as the
traditional authority of management positions no longer applies within new organisations) and
 managing and networking globally (Smit et al, 2011)
1.8.4 Managing Diversity

The radical transformation of the world of work has also resulted in greater diversity amongst employees.
Arumugan (2006), the Group Leadership Development Manager at Sasol Limited, argues that the challenge for
the manager in managing diversity lies in his ability to confront his own personal and cultural assumptions, values
and beliefs. Furthermore the management of diversity is complicated by the fact that:
 cultures are not static entities, but are continuously evolving, and
 ethnic groups cannot be clearly delineated and the workplace naturally and dynamically creates its own culture
(Arumugan, 2006).
Arumugan (2006) identifies multi-cultural competencies which leaders and managers need to develop in
order to manage diversity effectively. These include:
 Valuing and respecting the diversity of employees
 Becoming aware and sensitive to one’s own cross-cultural communication style
 Developing structures and processes for on-going participation and collaboration of the workplace’s multi-
cultural stakeholders
 Ensuring that the physical environment, materials and resources are culturally and linguistically friendly

 Ensuring that policies, procedures and processes provide for inclusion and the effective management of
diversity
 Incorporating diversity competencies in in-house company training programmes for managers and leaders
(Arumugan, 2006).
1.8.5 Increased Power and Demands of Customers

Technology has had a significant impact on the manner in which business is executed and in so doing has resulted
in more powerful and demanding customers (Smit et al, 2011). Customers are empowered to compare prices,
quality and availability. As a result, managers are challenged to continuously find ways to better service their
customers.
1.8.6 Intellectual Capital and Learning

In the past, gaining and sustaining competitive advantage was dependent on management’s effective and efficient
use of land, labour and raw materials. Nowadays, however, intellectual capital is a critical resource for
organisations and the source of competitive advantage. Intellectual capital may be defined as “the sum and
synergy of an organisation’s knowledge, relationships, experience, discoveries, processes, innovations, market
presence, and influence in the community” (Smit et al, 2011: 493). The challenge for management is to effectively
provide for organisational learning while managing its intellectual capital to achieve competitive advantage.
1.8.7 New Roles and Expectations of Workers

As organisations start to compete on intellectual capital (rather than land, labour and raw materials), so job
requirements are changing. The emergence of the knowledge economy has resulted in job requirements
transforming and the consequent emergence of the ‘knowledge worker’ (Smit et al, 2011). A knowledge worker is
in essence a highly skilled and knowledgeable worker who contributes to the organisation’s competitive advantage
through applying his / her knowledge in the production of the organisation’s service or product.
The challenge which the knowledge worker presents to management is explained by Donnelly (2006): “many
knowledge workers receive high levels of remuneration and are able to extract significant concessions from their
employers as they are required to provide fee-paying clients with high-level knowledge services and the knowledge
/ expertise that is held by them tends to be highly valued in the external market place, leading to a considerable
degree of employer dependency….many [organisations] allow their employees to exercise high levels of temporal
and locational flexibility and make ‘choices’ over where and when they work, as such concessions reinforce their
organisational commitment” (Donnelly, 2006: 94). Given the demand for knowledge workers, their attraction and
retention also presents a challenge to management.

1.8.8 Health Issues: HIV & AIDS

HIV and AIDS presents a considerable challenge for management, as it can negatively impact on an organisation’s
ability to gain and sustain competitive advantage. Smanjak (2006) identifies that many companies in South Africa
have not implemented a process which objectively and scientifically measures the potential risk which HIV and
AIDS presents for their organisation. Such a process needs to be implemented so that appropriate interventions
to manage the risk may be implemented.
Wade (2006) reports that large organisations have started adopting a new strategy to manage the risk of HIV /
AIDS in the workplace. This change in strategy has resulted from an increase in absenteeism and decrease in
presenteeism (focus and attention given to work) by those infected and affected by HIV and AIDS. In the past
organisations would offer orientation and education interventions around HIV and AIDS. However, recently
interventions have changed to programmes which actively manage the health and wellbeing of employees, such
as:
 Voluntary counselling and testing (VCT)
 HIV and AIDS support programmes
 Employee wellness programmes (Wade, 2006).
1.9 Summary
This section served to introduce the learner to the fundamentals of management. The nature of management was
examined and a definition of management was formulated. Further, the levels of management, the areas of
management, management roles as well as management skills were examined. The implications which the new
organisation has for management were also explored, as were measures of management and organisational
performance. This introduction to management was concluded with an examination of the current and future
management challenges.
The next section of this Study Guide, Section 2, will examine the evolution of management theory.

SELF TEST QUESTIONS

Check your understanding of some of the principles and theory addressed in this
section by answering the following questions.
1. Juliet, the HR Director of Fashion Forward Clothing is busy preparing a presentation which she is to present
at the Annual International Retail Conference. Her presentation is entitled “Retaining Talent in the Clothing
Retail Sector” and she will be using the retention strategy which she implemented within her organisation as
the case study on which her presentation is to be based.
Which managerial role will Juliet be fulfilling?
A. Figurehead
B. Monitor
C. Disseminator
D. Both A and C
2. After preparing her presentation, Juliet meets with the Restructuring Task Team to generate a proposed
new structure for the organisation.
Which of the following management functions is illustrated by the generation of a new structure?
Management functions:
A. Planning
B. Leading
C. Organising
D. Controlling
3. Following the Restructuring Task Team meeting, Juliet joins Lindiwe, the Financial Director for lunch.
Their discussion quickly turns from their children’s achievements to the poor performance of the Marketing
Director:
“David is very good with people but he has consistently failed to perform,” says Lindiwe. “I know,” responds
Juliet, “I think his key weakness is his inability to ‘see the big picture’. The marketing strategy which he
developed certainly did not take into account our organisation’s strategy. It also totally disregarded key
aspects of the market environment!”
According to the information in the case study, which of the following skills does David, the Marketing
Director, lack:

A. Conceptual Skills
B. Interpersonal Skills
C. Technical Skills
D. Interpersonal Skills and Technical Skills
4. Late in the afternoon Juliet is busy in her office working through a proposal from an external
training provider for the delivery of management training. She is interrupted by a knock at the
door:
“Hi Juliet, can I have a moment of your time?” says Sipho.
“Yes, of course, come in” responds Juliet offering Sipho a chair.
“I won’t take up too much of your time Juliet. The reason why I am here is to find out what other career
options are available to me within the organisation,” says Sipho.
“Why Sipho, are you unhappy in your current job,” responds Juliet.
“I am just so very tired of applying rules and procedures in an attempt to achieve high levels of productivity. It is
also not great being responsible for a section of the Production department. Ideally I would like to be responsible
for the entire department!” says Sipho with a sigh.
Based on the information presented in the case study, what type of job does Sipho currently hold?
A. Executive management position
B. Middle management position
C. First Line management position
D. Artisan
5. Which of the following are characteristics of the “new” organisation?
A. Hierarchical with jobs involving physical tasks and top-down decision making
B. Lateral organisation with jobs involving mental tasks and decision making by employees / managers with
relevant expertise
C. Vertical and horizontal communication
D. B and C

Answers to Self-Check Questions

1. D 2. C
3. C 4. A
5. D

Your study group has decided to set up and run a restaurant as a new business
venture. The restaurant will be family oriented and must be able to seat 200
patrons at a time. It will be open seven days a week from 07h00 to 23h00. Each
of your group members has invested R250,000 to set up the restaurant. Today
you are holding a meeting to agree on how the restaurant will be managed.
During this meeting you need to decide on the following:
Your study group has decided to set up and run a restaurant as a new business venture. The restaurant will be
family oriented and must be able to seat 200 patrons at a time. It will be open seven days a week from 07h00 to
23h00. Each of your group members has invested R250,000 to set up the restaurant. Today you are holding a
meeting to agree on how the restaurant will be managed. During this meeting you need to decide on the following:
1. Decide on a name for your restaurant, and determine the type of cuisine your restaurant will offer.

2. Decide on the managerial hierarchy. What top, middle and lower level managerial positions are required?
Appoint members of the group into the managerial positions identified.
3. What are the most important decisions which your group, as the management team of the restaurant, needs
to make regarding the management functions of planning, leading, organising and controlling?
4. What factors in the market environment will impact on the success of your restaurant?
5. Identify potential management challenges that the management team of the restaurant could face.

Comment on Study Group Discussion

Responses will differ across study groups. Comments on each question are provided below:
 Question 1: Restaurant Name and Type of Cuisine - The restaurant name and cuisine chosen will be
at the discretion of the study group. The restaurant name should ideally be indicative of the restaurant’s family
orientation and the type of cuisine offered.
 Question 2: Managerial Hierarchy – The restaurant is a large operation in that it is open for 16 hours a
day, seven days a week and can seat up to 200 patrons at a time. Therefore sufficient management is
required. A possible managerial hierarchy could be structured as follows:
Top Management Restaurant General Manager
Assistant Restaurant Manager (x2)

Middle Management
Kitchen Manager / Chef
Dining Room Supervisor

Lower Level Management
Kitchen Shift Supervisors (x2)
 Question 3: Management Functions – Some of the most important decisions around planning,
organising, leading and controlling which need to be made relate to the following:
Vision, mission and strategic objectives
Set Up and Operational Plan including

Planning  Restaurant’s location
 Menu
 Capital and Operational Budget
Management structure
Staffing structure for kitchen

Organising Staffing structure for dining area
Staffing structure for administration
Job descriptions for all positions
Motivating staff for high performance

Leading
High level of service delivery
Control Budget Control

 Question 4: Factors in Market Environment – Some of the factors in the market environment which will
impact on the success of the restaurant include:
 Buyers: the restaurant’s primary customer to be targeted will be families. Numerous factors will
impact on the restaurant’s ability to attract families (e.g. its location, its menu, its atmosphere, etc.)
 Suppliers: the restaurant will need to source reliable suppliers who provide a good quality of service
/ produce at competitive prices.
 Competitors: the group’s restaurant will compete with other restaurants in the area. The group will
have to put in place a clear strategy to distinguish itself from its competitors and to attract customers.
 Question 5: Management Challenges – Some of the potential management challenges which the
management of the restaurant may face include:
 Technological Challenges: Many restaurants now use sophisticated software, used for example
by the waiters and waitresses to place orders. Management will have to ensure that all staff are
adequately trained in the technology that they are required to use.
 Management of Diversity: Both the kitchen staff and the front of the house staff (e.g. waiters) who
are recruited are likely to be diverse. The challenge for management will be to effectively manage
this diversity so that employees perform at a high level.
 Increased Power / Demands of Customer: The customer of today can be demanding and has
considerable power as he / she can choose to go to another restaurant if he/she is not satisfied with
the service which the group’s restaurant offers. The management team will therefore need to find
ways to at least meet, but preferably exceed their customer’s expectations.
 Health Issues - HIV / AIDS: It is probable that a number of the restaurant’s staff will either be
infected or affected by HIV / AIDS. The management team will need to find appropriate ways to
address the risk which HIV / AIDS presents to the restaurant.


Read the brief case study below and then answer the questions which
follow.
Gerard is excited. His manager has just informed him that he has been promoted
to the position of supervisor for the household cleaning products production line.
Gerard is very ambitious, his personal goals are to hold a middle management
position within the next three years and a top management position within the
next eight years.
1. Discuss the key characteristics of the work which Gerard would perform in the positions of supervisor (lower
level management), middle manager and top manager. (9 marks)
2. Discuss the three categories of skills which Gerard requires to effectively perform at all levels of management.
(6 marks)
3. Discuss the managerial roles, as identified by Mintzberg, which Gerard is likely to perform in his management
career. (10 marks)
4. Identify and discuss three management challenges which Gerard is likely to experience as a manager. (15
marks)
Guidelines for the Answering of the Examination Questions:
 The length of your answer should be guided by the mark allocation. Generally one coherent point / fact equals
one mark.
 The following sections of this Study Guide are relevant to the sample examination questions:
o Question 1: Section 1.4 (Levels of Management)
o Question 2: Section 1.5.3 (Managerial Skills)
o Question 3: Section 1.5.2 (Role Distribution of Managers)
o Question 4: Section 1.8 (Scope and Challenges of Management)

The overall outcome for this section is that, on its completion,

the learner should be able to demonstrate a holistic
understanding of the evolution of management theory. This
overall outcome will be achieved through the learner’s
mastery of the following specific outcomes:
1. Discuss the importance and relevance of

studying management theory.
2. Discuss the concept of theory and identify the

factors which influence the development of
management theory.
3. Critically discuss and apply the principles of the

Unit 2: Classical Management School of thought.
Evolution of 4. Critically discuss and apply the principles of the
Management Human Relations Management School of

Thought.
Theory 5. Critically discuss and apply the principles of the

Quantitative Management School of thought.
6. Critically discuss and apply the principles of the

Contemporary Management School of thought.
7. Critically discuss and identify the concept of a

management fad.


Prescribed Reading:
 Smit, P.J., Cronjé, G.J. de J., Brevis, T. & Vrba, M.J. (2011) Management Principles:
A Contemporary Edition for Africa, Fifth Edition. Cape Town: Juta & Co. Chapter 2
(pp 27 – 52).
Books
 Botha, S., Cunningham, P., Musengi, S., Visser, K., Williams, O., Lotz, J., Booysen,
K., Stewart Smith, A., Bosch, A., & Banhegyi, S. (2009) Management: Fresh
Perspectives. Cape Town: Pearson Education South Africa. pp 19 - 47 (Chapter 2).
 Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw,
L. & Oosthuizen, T. (2005) Management. Second South African Edition. Cape Town:
Oxford University Press. pp 45 - 66 (Chapter 3).
Journals
 Collins, D. (2003) “The Branding of Management Knowledge: Rethinking

Management “Fads”. Journal of Organisational Change Management. Vol 6, No 2,
pp 186 – 204.
 Parker, L.D. & Ritson, P. (2005) ”Fads, Stereotypes and Management Gurus: Fayol
and Follett Today.” Management Decision. Vol 43, No 10, pp 1335 – 1357.
 Schwartz, M. (2009) “The ‘Business Ethics’ of Management Theory.” Journal of

Management History. Vol 13, No 1, pp 43 – 54.
 Tetenbaum, T. (1998) “Shifting Paradigms: From Newton to Chaos” Organizational

Dynamics Spring pp 21 – 32.

2.1 Introduction
While Section 1 introduced the student to the fundamentals of management, this section examines the
Evolution of Management Theory. Management theory is argued by some to have originated with the
Egyptians in the building of the pyramids (Botha et al, 2009). However, while the Egyptians may well
have been management thinkers, it is only during the last century that management has undergone
systematic investigation and has been established as a formal discipline.
This section of the Study Guide examines the body of management knowledge which has emerged since
the early 1900s. In so doing, the following will be studied:
 Why study management theory?
 Understanding management theory
 The theories of management

o Classical Approach
 Scientific management theory
 Administrative management theory
o Human Relations Approach
o Quantitative Approach
o Contemporary Approaches
 Systems theory
 Contingency theory
 Chaos theory
 Other contemporary theories
2.2 Why Study Management Theory?

The management student may wonder why the study of management theory is necessary. As will be
shown, the study of management theory is critical in developing not only a holistic understanding of the
discipline, but professional competence as well.

THINK POINT
Think about your experience in your current organisation and/or
organisations for which you have worked in the past:
 Identify two managers, with whom you have dealt, who have
demonstrated vastly different management styles (for example, an
absolute autocrat versus a democratic manager).
 Identify the one manager as ‘Manager A’ and the other manager

‘Manager B’.
 From your experience and observations, what principles do you think

underlie Manager A’s view of, and approach to management?
 From your experience and observations, what principles do you think

underlie Manager B’s view of, and approach to management?

Each individual manager has a particular view about what management is, and how he should approach
it. This management framework, which guides the manager in his task, is based on a number of principles
which the manager has internalised as a result of his education and experiences within, and interactions
with, organisations and the world itself. In essence, therefore, each individual manager’s actions are
guided by his own unique, internalised management ‘theory’. It therefore follows that, in exposing the
manager or potential manager to the range of management theories which exist, an opportunity will be
provided to potentially challenge and/or extend the manager’s current view of management, and thus
enhance his professional competence. The study of management theory is important in that the theories
serve to:
 Guide management decisions
 Shape the manager’s view of organisations
 Make the manager aware of the business environment
 Provide the manager with a source of new ideas
2.3 Understanding Management Theory

In studying management theory it is important that the management student has an understanding of the
concept of ‘theory’, as well as the factors which influence the development of theory.

ACTIVITY
Define the concept ‘theory’.
Comment on Activity
Definition of the Concept of ‘Theory’
The definition of “theory” contained in the Concise Oxford Dictionary is the “supposition or system of
ideas explaining something”. From a management perspective, it may be argued that management theory
provides a framework of principles which serve to guide not only the manager’s understanding of
management issues, but his/her management-related actions as well.
Smit et al (2011) assert that the word “theory” often has negative connotations for some managers as
they interpret it to mean ‘impractical’ and ‘divorced from reality’. While there are some theories which are
not based on sound research, there are others which have been rigorously and scientifically developed.
These theories are explored in this section and in chapter two of your prescribed textbook.
Factors Influencing the Development of Theory

It needs to be noted that management theories do not develop in a vacuum but develop within, and as a
result of, the dynamic environment. The environmental forces which impact on the development of
management theory are depicted in Figure 2.1.
Figure 2.1: Environmental forces that shape management theory (from Smit et al, 2011: 31)

THINK POINT
 Examine Figure 2.2 (under sub-section 2.4) which provides an indication
of the periods during which the various schools of management
emerged. Are you aware of any of the environmental forces which were
influential during the periods in which these management schools of
thought emerged?

A study of the evolution of management schools of thought reveals that theories tended to emerge in
tandem with, or just after, notable environmental changes:
 The Classical Management School emerged during the early 1900s and was influenced by the
economic, technical and cultural changes which were brought about as a result of the industrial
revolution and the introduction of steam power (Smit et al, 2011).
 The Human Relations School emerged during the 1920s and 1930s and was influenced by the
Great Depression and decline in prosperity as well as failure of the Classical Management School to
provide for workplace harmony (Smit et al: 2011).
 The Quantitative Management Approach emerged during the 1940s and was influenced by World
War II during which both the British and the Americans utilised mathematical approaches and
technology to solving war-related problems (Smit et al: 2011).
 The Contemporary Management Theories began to emerge during the 1950s and were influenced
by the rapid and ongoing change which characterised the business environment after World War II
(Smit et al: 2011).
In summary, this sub-section has provided the management student with an understanding of the nature
of theory, as well as the environmental factors impacting on the development of management theory.
2.4 Theories of Management

The schools of management which will be studied in this subsection include:
 Classical Approach, including:
o Scientific Management
o Administrative Management

 Human Relations Approach
 Quantitative Management Approach
 Contemporary Approach, including:

o Systems Theory
o Contingency Theory
o Total Quality Management
o Learning Organisation
o Re-Engineering
These schools emerged in a chronological sequence, which is depicted in Figure 2.2.
Quality
Re-Engineering
Administrative
Organisation
Management
Management
Management
Management
Contingency
Quantitative
Relations
Scientific
Learning
Systems
Human
Theory
Theory
1900 1910 192 1930 1940 195 196 1970 198Total 1990 2000
0 0 0 0
Figure 2.2: Emergence of Key Management Theories (Smit et al, 2011: 32)
It must be noted that although the schools developed chronologically, later management theories did not
(and do not) serve to replace the earlier theories. Rather, each new theory which emerges tends to
complement or exist alongside those theories which have been established for some time.
2.4.1 The Classical Approach

The two major theories which comprise the Classical Management Approach are Scientific Management
Theory and Administrative Management Theory.
Figure 2.3: The Classical Management School

The emergence of the Classical Approach was influenced by the steam-engine which was a product of
the Industrial Revolution. Steam power provided for efficient production which in turn led to a shift from
farm work to factory work where the principle of mass production was upheld. This shift from the agrarian
mode to the factory system brought about a number of organisational problems, such as poor motivation
of workers (Smit et al: 2011). The classical theories emerged to address these problems.
2.4.1.1 Scientific Management Theory

Scientific Management Theory arose partly due to the need to increase productivity. Fredrick Taylor,
Henry Gantt and Frank and Lillian Gilbreth are best known for their contributions to the field of Scientific
Management.
 Frederick Taylor was a manufacturing manager (originally a mechanical engineer) who sought to
increase the productivity of the individual worker through increasing specialisation and job division of
labour. He developed four principles to increase efficiency in the work place:
o Examine the way in which workers perform their tasks and experiment with ways of improving
the way in which a task is performed
o Record the new methods of performing the task as rules and standard operating procedures
o Ensure that workers’ skills and abilities match the needs of the task, and train them to perform
the task according to the written rules and standard operating procedures
o Determine an acceptable level of performance for each task and develop a remuneration system
which rewards performance which exceeds the acceptable level (Smit et al, 2011; Botha et al:
2009)
 Frank & Lillian Gilbreth built on the work of Taylor and focused on work simplification. Their
approach included:
o Analysing each individual action required to perform a task

o Identifying better ways of performing each action
o Increasing the efficient performance of the whole task through re-organising the individual actions
(Hellriegel et al: 2005)
 Henry Gantt redesigned the incentive system developed by Taylor by providing not only for the
payment of a bonus to the worker who exceeded the daily standard, but to the worker’s supervisor

as well. He also devised a chart for production scheduling, the Gantt Chart, which is still in use today
(Hellriegel et al: 2005).
The Scientific Management Approach succeeded in its endeavour to increase productivity. However, the
approach, in focusing on work and productivity, neglected to address the ‘human’ element, which
ultimately resulted in worker dissatisfaction and distrust of management.
READING ACTIVITY
Read pages 43 – 46 of the following article and then answer the
questions which follow:
 Schwartz, M. (2009) “The ‘Business Ethics’ of Management Theory.”

Journal of Management History. Vol 13, No 1, pp 43 – 54.
1. According to Schwartz (2009) what reasons did Taylor identify for

workers not achieving maximum efficiency?
2. According to Schwartz (2009) what are the ethical implications of

Frederick Taylor’s Scientific Management approach?

From Taylor’s observations of workers at a steel mill, he identified three reasons as to why
workers do not seek to attain maximum efficiency. These reasons are:
 The belief that an increase in production per worker would result in a large number of workers
being put out of work
 Defective management systems which make it necessary for workers to work slowly to protect
one’s own best interests, and
 The use of inefficient work methods (Schwartz: 2009)
To address this, Taylor scientifically broke down each activity into its component parts and found the
most efficient way to perform a particular task. Workers were then trained in the most efficient way to
complete a task (Schwartz: 2009) and were provided with monetary incentives for performance above an
optimum daily standard.

The implications which Taylor’s approach has for business ethics include:
 His approach is cold, omits the human factor and treats the worker as a machine
 In rationalising the work process, Taylor’s approach increases the control which management
has over the workers. As a result managers can easily replace workers who are not maximising
their output (Schwartz: 2009)
 Monetary incentives for performance above the optimum daily standard leads to a competitive
environment which emphasises individual performance, and undermines team performance
 There is little emphasis on employee participation
 All of the above factors provide management with considerable opportunity for manipulation
leading to a “highly fractionalized organizational workforce” (Schwartz, 2009: 45)
Despite these ethical challenges, scientific management is still very influential. Taylor was aware of
these ethical challenges and identified ways to address such challenges through, for example,
encouraging workers to suggest improvements (Schwartz: 2009).
THINK POINT
Scientific management emerged many years ago, at the beginning of the
1900’s. Do you think that it could still be relevant to organizations today?
Justify your answer.

Scientific management is certainly still relevant today, particularly in certain industries. It is applied
frequently in the manufacturing industry as well as the fast food industry. Honda, Canon and Kentucky
Fried Chicken are just some of the companies that have successfully applied the principles of scientific
management (Hellriegel et al, 2005). Kentucky Fried Chicken (KFC) has over 9,900 restaurants serving
over 2.4 billion customers each year in over 76 countries. Through time and motion studies, KFC found
that employees took approximately two minutes to complete a customer’s order. To improve efficiency
and performance at KFC drive-through facilities the following objectives were set:
 All customers should be greeted within three seconds
 Customers’ orders should be filled within sixty seconds of arriving at the drive-through window,
and,

 The total time that it takes to service a customer should be less than 90 seconds (Hellriegel et
al, 2005)
To achieve these objectives, employee workstations were redesigned so that employees would not need
to lift anything and would not need to take more than two steps to reach what they needed (Hellriegel et
al, 2005).
2.4.1.2 Administrative Management Theory

While Scientific Management Theory focused on the productivity of the worker, Administrative
Management Theory essentially focused on how to increase productivity at the level of the organisation.
Henri Fayol and Max Weber made significant contributions to this view of management.
 Henri Fayol, recognised as Europe’s greatest management pioneer, adopted a process approach to
management. He identified 14 principles which he argued could increase the efficiency of the
management process. Many of these principles (e.g. division of labour, authority and responsibility,
unity of command, unity of direction, team spirit) form the basis of management and research today
(Botha et al, 2009).
Fayol also identified five basic functions of administration:
o Planning
o Organising
o Commanding
o Coordinating
o Controlling
Having achieved the outcomes of Section 1 (Introduction to Management) of this Study Guide, the
student of management should recognise that Fayol’s five basic functions correspond to the four
contemporary management functions of Planning, Organising, Leading and Controlling.
 Max Weber: developed a theory of bureaucratic management and emphasised the need for a
hierarchy governed by lines of authority (Smit et al, 2011).
Administrative Management Theory has made a significant contribution to the field of management in
that a considerable number of its principles are still being used in management research and applied in
management practice today.
However, there are also numerous criticisms of this theory which include the following:
 Rigid rules undermine creativity and could lead to low motivation and high turnover

 The focus on and emphasis on managerial authority may detract from issues of employee
performance and productivity
 Decision making is usually slow (Hellriegel et al, 2005)
 The rigid structure, supported by processes and procedures, makes it difficult to change
technology
 This approach may be incompatible with professional values (Hellriegel et al, 2005) especially
for knowledge workers who need scope and flexibility to apply their knowledge in the
performance of work
THINK POINT
Administrative management emerged many years ago, in the early 1900’s.
Do you think that it could still be relevant to organisations today? Justify
your answer. Can you identify some organizations which apply
Administrative Management theory?

While the application of Administrative Management can result in slow decision making, demotivated
employees and a lack of flexibility, it is still effectively used within organisations today. Administrative
Management is most applicable to organisations where:
 Large amounts of standard information need to be processed and an efficient processing method
is used
 The customer needs are known and are unlikely to change
 Technology is simple, routine and stable so that employees can be easily taught to use it, and
 The activities of a large number of employees need to be coordinated in order to deliver a

standardised product or service (Hellriegel et al: 2005)
Examples of such companies include insurance companies, banks, the post office, and fast food outlets
such as McDonald’s (Hellriegel et al: 2005)
2.4.2 The Human Relations Approach

While the focus of the Classical Management Approach was either the productivity of the worker or the
productivity of the organisation, the Human Relations Approach focuses on the needs of the worker.
Indeed, the Human Relations Approach emerged in part in reaction to the ‘inhumane’ principles of the

Classical Approach. Mary Parker Follett, Elton Mayo, Douglas McGregor and Chester Barnard are
recognized as having made significant contributions to the Human Relations Approach.
THINK POINT
Consider the following scenario: you are a management consultant
who has been contracted to conduct research within a factory
environment which involves the following two experiments:
 You decrease the lighting in the factory. How do you think this will
impact on the performance of the factory workers?
 You increase the lighting in the factory. How do you think this will
impact on the performance of the factory workers?

It is likely that your response to the above Think Point was that if you decrease the lighting in the factory,
worker performance will decrease and if you increase the lighting in the factory, worker performance will
either remain the same or increase. Elton Mayo conducted such an experiment in the 1920s at the
Western Electric Company’s Hawthorne plant in Chicago. Interestingly his findings were that the factory
workers’ performance increased when the lighting was both increased and decreased (Hellriegel et al,
2005). Mayo concluded that the increases in productivity “were not caused by a physical event but by a
complex emotional chain reaction…because employees had been singled out for special attention, they
had developed a group pride that motivated them to improve performance” (Hellriegel et al, 2005: 56).
The work of some of the key Human Relations theorists is discussed below:
 Elton Mayo: In addition to the lighting experiments at the Western Electric Company’s Hawthorne
plant, Mayo performed various other experiments which led him to conclude the following:
o When workers are given special attention, productivity will improve regardless of whether or
not the working conditions are changed
o Peer pressure has a significant influence on individual worker productivity and is much more
powerful than management demand

o The behaviour of the worker is determined by complex set of factors (and not simply by rules
of cause and effect as argued by scientific management theory and administrative
management theory)
o Managers need to give consideration to a worker’s family situation and friendships at work in
order to effectively identify his needs and factors which motivate him (Hellriegel et al: 2005)
 Mary Parker Follett: Much of Follett’s writing emerged in reaction to Taylor’s scientific approach.
Indeed, Follett argued that it is the worker who knows the most about his/her job and therefore the
worker should be involved in the job analysis and work development process. She also anticipated
the current management interest not only in self-managed teams and empowerment, but in horizontal
(as opposed to Fayol’s and Weber’s vertical) power and authority (Botha et al: 2009).
 Douglas McGregor: McGregor argued that two different sets of assumptions determine how
managers view their subordinates and manage their departments. He argued that Theory X
managers assume that employees are inherently lazy and therefore they need to be closely
supervised and controlled. On the other hand, Theory Y managers adopt a positive view of
employees and believe that it is the manager’s task to create a climate in which employees can
effectively perform their work (Botha et al, 2009).
 Chester Barnard: Barnard made significant contributions to the Human Relations Approach.
READING ACTIVITY
Read pages 46 – 47 of the following article and then answer the
 Schwartz, M. (2009) “The ‘Business Ethics’ of Management Theory.”

Journal of Management History. Vol 13, No 1, pp 43 – 54.
1. Describe Barnard’s contributions to the Human Relations Approach.

2. According to Schwartz (2009), what are the ethical implications of Barnard’s approach?

Barnard’s Contributions to the Human Relations Approach
Barnard’s key contribution to the Human Relations Approach was his focus on bridging the gap between
the formal organisational system and the individual (Schwartz: 2009). He emphasised the importance of
modifying an individual’s motives and goals to align with the goals of the organisation. A match between
individual goals and organisational goals lead to cooperation and ultimately an effective organisation
(Schwartz: 2009).
Another key contribution of Barnard to the Human Relations Approach is the acceptance theory of
authority which involves the creation of a ‘zone of indifference’ where employees accept orders without
questioning authority (Schwartz: 2009). This requires that the following four conditions be met:
 “understanding of order
 consistency with purpose of the organisation
 compatibility with personal interests, and
 mental and physical ability to comply” (Schwartz, 2009:46)

Barnard’s third contribution to management theory was his identification of the three executive
management functions:
 “to provide a system of communication;
 to promote the securing of essential personal efforts, and
 to formulate and define the organisation’s purpose and objectives” (Schwartz, 2009:46)
Implications for Business Ethics
A key criticism of Barnard’s theory is that methods used by managers to align individual employee’s goals
with the goals of the organisation could be regarded as manipulation, resulting in a violation of the
employees’ personal beliefs and values. However, other than this, Barnard’s theory actually supports

and promotes ethical business practices particularly through his belief that employees and managers
need to fulfil a moral duty rather than to act in one’s self-interest (Schwartz, 2009). He emphasises the
need for leaders and managers to adhere to a moral code and to “demonstrate a high capacity for
responsibility” (Schwartz, 2009: 47). Barnard also emphasised the need to behave responsibly and
morally towards both internal and external stakeholders (Schwartz, 2009).
The Human Relations Approach has contributed to the field of management in that it has stressed the
employee’s social needs, which in turn has led to a focus on the development of people-management
skills, as opposed to technical skills alone. Further, it has provided insights into issues such as individual
motivation, group behaviour and interpersonal relationships at work (Hellriegel et al, 2005). A limitation
of the Human Relations Approach lies in the fact that human behaviour is complex in nature, which
presents challenges to its study.
ACTIVITY
Consider the organisation for which you currently work. Outline the particular
organisational and managerial practices that show evidence of a Human
Relations Approach.
Comment on Activity
Organisational and managerial practices which exhibit a Human Relations Approach could, for
example, include:
 Allowing for self-direction in employee work

 Participative decision making
 Self-managed work-teams
 Knowledge sharing at, and between, all levels
 Training and development initiatives for employees
2.4.3 Quantitative Approach
The Quantitative Approach, also referred to as the Management Science Approach, is essentially an
extension of Taylor’s Scientific Management Theory. It emerged to address some of the limitations of
the Human Relations Approach and focuses on practices which are logical and measurable (Botha et al:
2009). It involves the use of rigorous quantitative techniques which enable managers to achieve
productivity through the most effective and efficient use of organisational resources to produce goods or
services.

Tools and techniques utilised to increase the effectiveness of management’s decision making
include:
 Linear programming
 PERT / CPM
 Regression analysis (Smit et al, 2011).

The key contribution of the Quantiative Approach was techniques that can be used for effective planning
and control (Smit et al, 2011) However, a key limitation of the approach is that most of the techniques
used rely on mathematical models and statistical methods, the ‘language’ of which is not always easily
understood by managers and employees. Furthermore, the Quantitative Approach ignores the human
and social relations aspect of the organisation (Botha et al, 2009).
2.4.4 Contemporary Approaches

A considerable number of contemporary management theories exist. The following
contemporary theories will be studied in this sub-section:
 Systems Theory
 Contingency Theory
 Chaos Theory
 Other Theories
2.4.4.1 Systems Theory
The Classical Approach, the Human Relations Approach and the Quantitative Approach have two major
short-comings which Systems Theory (also known as Organisational-Environment Theory) seeks to
address. These short-comings are:
 The influence of the environment is not considered, and
 One part or aspect of the organisation is focused on the neglect of all other parts and/or aspects
(Smit et al, 2011)

THINK POINT
Give some thought to the functioning of your physical body:
 If there was no longer any oxygen in the environment for you to breathe,
what would happen to your body?
 If your heart stopped beating, what would happen to your body?
 Are there any similarities between the functioning of the human body
and the functioning of an organisation?

The human body is a system, comprising various sub-systems such as the respiratory system (lungs and
air passages), circulatory system (heart and blood vessels) and digestive system (mouth, stomach,
intestines, liver, pancreas, etc.). The body is dependent on oxygen in its external environment for its
effective functioning. If oxygen is no longer available, the body will die. If the body’s heart stopped
beating, blood would not be circulated to the various organs in the body which would in turn impact
negatively on their functioning, and ultimately the body would die.
The system of the human body may be compared to the organisational system. Just as the body is
dependent on oxygen from the external environment, so the organisation is dependent on its external
environment. Like the body, if one internal sub-system (e.g. marketing department, finance department)
within the organisation does not perform as it should then other systems will be negatively affected.
Systems theory views the organisation as a purposeful and unified system which is composed of
interrelated elements. The principle of synergy applies in that the whole is regarded to be greater than
the sum of its parts (Hellriegel et al, 2009). Figure 2.4 provides a systems theory perspective of the
organisation.
Figure 2.4: Basic Systems View of an Organisation (Hellriegel et al, 2005: 58)

As shown in Figure 2.4, the system of the organisation includes:

 Inputs which the organisation acquires from its external environment. These include human,
physical, financial and information resources (Hellriegel et al, 2005). The nature and quality of
the inputs received from the external environment will have a significant impact on the
organisation’s ability to transform these into quality outputs. For example, if there is a shortage
of qualified artisans and engineers in the external labour pool this will impact negatively on an
aircraft manufacturer’s ability to manufacture aircraft.
 Transformation Processes refer to managerial, technological and operational processes within

an organisation which are used to combine and transform inputs into outputs (Botha et al, 2009).
For example, a furniture manufacturer would transform the inputs of skilled carpenters, materials
(such as wood, glass, plastic, etc.), information about the needs and wants of its customers, as
well as financial capital to produce furniture (the output) such as dining room tables and chairs,
lounge suites, etc.
 Outputs refer to the products and services which the organisation produces or renders as a
result of implementing the transformation process (Hellriegel et al, 2009).
 Feedback is a very important component of the organisational system as it provides information

on the organisation’s performance. Feedback can include financial reports, production records,
performance reviews and marketing surveys (Hellriegel et al, 2005).
There are four basic concepts which impact on the functioning of a system:
 Open System: Systems may be ‘closed’ or ‘open’. A closed system is independent, self
sufficient and is not dependent on interaction with the external environment for survival (Smit et
al, 2011). An open system, however, is dependent on interaction with the external environment
for its survival. All organisations are open systems.
 Sub-System: Within a system are subsystems. For example, the organisation comprises the
various subsystems of individual employees and specific teams. Departments may also be
understood as subsystems (e.g. marketing department, production department, etc.). Within an
organisation a change in one subsystem will impact a variety of other subsystems. For example,
if the marketing department agrees to a customer’s request for a customised product which the
organisation does not ordinarily produce, this will have an impact on the following subsystems:

o The production department will have to change it production process to accommodate

the once-off customised product
o The human resource department may have to source contract employees with the skills
to build the customised product, and
o The finance department will have to recalculate the profit margins on the customised
product
THINK POINT
Think about the team or department in which you work. What impact would
there be on your team’s / department’s performance if one of your
colleagues, who has a key role to play in the team / department, was booked
off on sick leave for a period of a month?

The purpose of this Think Point is to show that individuals and teams are also organisational subsystems.
It is likely that if a key member of a team is booked off work on sick leave for a period of a month that the
other team members will need to carry his / her work. This may impact negatively on the individual team
members as they try to perform their own tasks as well as components of their sick colleague’s tasks.
Ultimately this may lead to below optimal performance by the team as a whole, which in turn may impact
negatively on the greater department as well as other teams / departments within the organisation. To
try and avert the negative ‘ripple effect’ brought about by the sick colleague, various strategies could be
applied, for example contracting someone with the necessary skills to “fill in” for the sick team member
while he / she is away.
 Synergy means that the whole is greater than the sum of its parts (Smit et al, 2011). For
example, if the various departments within an organisation function together cooperatively the
output that will be produced will be superior to an output which will be generated if they operate
independently in silos.
 Entropy is the opposite of synergy and is the process where a system disintegrates (Smit et al,
2011). This occurs in organisations which fail to make the necessary adjustments to keep up
with the change in their environment. For example, fast food restaurants that operate within
communities which are becoming increasingly health conscious will go out of business if they do
not augment their product offering (menus) to provide healthier options.

A particular strength of Systems Theory is that it is accommodating of all other management theories.
2.4.4.2 Contingency Theory

Systems Theory provides for a Contingency Approach (also known as a Situational Approach) to
management. The Contingency Approach emphasises the need for managerial action to be appropriate
to the situation (Botha et al, 2009).
THINK POINT
Consider the organisation where you are currently employed. To what
extent are the following approaches evident in the organisational and
management practices within your organisation?
 the Classical Approach
 the Human Relations Approach
 the Quantitative Approach
 the Systems Approach

It is likely that the student of management is able to identify practices within his/her organisation which
demonstrate elements of all four approaches to management. Indeed, given the complexity of today’s
management environment, it would be unwise for the manager to adhere to one particular school and
neglect the others. Rather, given the dynamic environment in which organisations operate, it is the
manager’s task to tailor his/her management approach to the particular situation – and this would require
drawing on a range of management theories.
The advantage of the Contingency Approach is that it is flexible and requires that managers use a
combination of approaches to best meet the needs of a particular situation (Botha et al, 2009). The
limitation of the Contingency Approach is that it requires managers to be skilled in the application of all
approaches.
2.4.4.3 Chaos Theory

For decades, managers have acted from the premise that organisational events can be controlled.
However, Chaos Theory, is based on the premise that very rarely can events be controlled, and thus
acknowledges the dynamic nature of the contemporary management environment.

READING ACTIVITY
Read the following article and then answer the questions which follow.
Tetenbaum, T. (1998) “Shifting Paradigms: From Newton to Chaos”
Organizational Dynamics Spring pp 21 – 32.
 Why is Chaos Theory appropriate to the present day organisation?
 What are the key characteristics of Chaos Theory
 How could management go about transforming the organisation for

which you work into a chaordic organization?

Chaos Theory argues that “relationships in complex systems, like organisations, are nonlinear, made up
of interconnections and branching choices that produce unintended consequences and render the
universe unpredictable (Tetenbaum, 1998: 21).
Chaos Theory and the Present Day Organisation

Tetenbaum (1998) argues that the industrial era of the past is fundamentally different to the information
age of the present. During the industrial age the environment was relatively stable and organisational
work was routine. In contrast, however, Tetenbaum (1998) identifies the information age to be
characterised by the following:
 Technology which increases production, efficiency and consumer power
 Globalisation
 Competition which, as a result of technology and globalisation, has become more fierce
 Change, the pace of which is considerable
 Speed
 Complexity and Paradox which has emerged as a result of the above five factors and presents the
manager with the challenge of conflicting choices and conditions (Tetenbaum, 1998)
Key Characteristics of Chaos Theory

Chaos Theory focuses on the “web of feedback loops present in every system” (Tetenbaum, 1998: 24).
While feedback loops are linear in certain systems, they are non-linear in systems characterised by
complexity, such as the business organisation.

The characteristics of Chaos Theory include:
 Chaos as Order: Tetenbaum (1998: 24) asserts that “chaos describes a complex unpredictable and
orderly disorder in which patterns of behaviour unfold in irregular but similar forms”. An example of
such orderly disorder is the regular irregularity of a snowflake.
 Chaos as a Self-Organising Entity: Chaos Theory views systems to be self-organising in that they
are self-adaptive and complex (Tetenbaum, 1998). Thus structure evolves and change emerges (this
differs from the Classical Approach where structure is imposed). An example of an organisation
which is managed according to chaos principles and which is thus self-organising is Visa, which has
grown by 10,000% since 1970, consists of 20,000 financial institutions and operates in more than
200 countries. However, despite its size and growth one does not know where it is located due to
the fact that it is decentralised, non-hierarchical and evolving (Tetenbaum, 1998).
Building a Chaordic Organisation

Tetenbaum (1998) identifies the following characteristics of a chaordic organisation (i.e. an
organisation which embraces the chaordic paradigm):
 Knowledge and information sharing
 Innovation and creativity
 Teamwork and project orientation
 Diversity, and
 Strong core values

The role of management in facilitating the move to the chaordic organisation is to:
 Manage the transition
 Build resilience to change
 Destabilise the system
 Manage complexity and paradox, i.e. order and disorder, the present and the future
 Create and maintain a learning organisation (Tetenbaum, 1998)

2.4.4.4 Other Contemporary Theories
Other contemporary theories which are frequently applied within organisations include:
 Total Quality Management (TQM)
 Six Sigma

 The Learning Organisation
 Re-engineering
 Total Quality Management (TQM) focuses the business on the achievement of quality through the
prevention of mistakes. The central principles of TQM, which have emerged from the work of Deming,
include:
o Strong emphasis on the customer;

o Focus on continual improvement;
o Quality improvement in all that the organisation does;
o Accurate measurement;
o Employee empowerment (Smit et al, 2011).
 The Six Sigma approach focuses on “improving quality (reducing waste) by helping organisations
produce products and services better, faster and more cheaply” (Smit et al, 2009: 44). There is an
emphasis on eliminating costs which do not provide any value to the customer – these are known as
“waste costs” (Smit et al, 2011). Six Sigma is applied not only to manufacturing processes, but also
to human resources, sales and customer service.
 The Learning Organisation approach, advocated by Peter Senge, is based on the Systems Theory
and argues that organisations should overcome their learning disabilities through:
o Commitment to lifelong learning

o Challenging assumptions and generalisations
o Sharing the organisation’s vision
o Promoting active dialogue within the organisation
o Encouraging systems thinking (Smit et al, 2011)
 Re-engineering, is an approach put forth by Hammer and Champy, and involves the redesign (re-
engineering) of organisational processes in an effort to create and sustain increased value for
customers while effectively managing costs (Smit et al, 2011).
This subsection has explored various management theories. The theories which fall within the Classical
School, the Human Relations School, the Quantitative School and Contemporary School have been
examined.

2.5 Management Theory or Management Fad?

It is important that the manager is able to identify possible management fad
THINK POINT
As you have probably noticed from your study of this section thus far, and
from your experience as a manager, a considerable number of management
theories exist.

Micklethwait & Wooldridge (cited in Collins, 2003) argue that the proliferation of management theories
can be ascribed to the existence of a management theory industry which is characterised not only by
commercial success, but also by a mixture of legitimate management approaches and damaging
management fads. They argue that “wherever we look, management theorists are laying down the law,
reshaping institutions, refreshing our language and, above all, reorganising people’s lives...indeed, at its
most extreme fringe, where management theory merges with the self-help industry, gurus are actually
ordering people’s minds, teaching them how to think about everything from organising their desk to
reassessing their love-life” (Micklethwait & Wooldridge cited in Collins, 2003: 186).
Micklethwait & Wooldridge are therefore skeptical about the value and relevance of management
theories, or ‘guru theories’ as they disdainfully refer to them. However, as argued by Collins (2003),
Micklethwait & Wooldrige’s criticism of management theories is unyielding, simplistic and not always
accurate. Collins (2003) argues that not all management theories are insubstantial and irrelevant. The
challenge for managers lies in critically reviewing and applying management theories, and utilising what
works best within the context of their work.
2.6 Summary
This section provided the learner with an understanding of the evolution of management theory. The
reasons for studying management theory were elucidated and the concept of management theory was
examined. Various approaches to management theory, including the Classical Approach, the Human
Relations Approach, the Quantitative Approach and the Contemporary Approach were explored. In
closing, the existence and relevance of ‘management fads’ was discussed.
The next section of this Study Guide, Section 3, will examine the management environment.

SELF CHECK QUESTIONS

Check your understanding of some of the principles and theory addressed
in this section by answering the questions below.
1. Sipho, a management consultant, has been contracted by Mike Sports Clothing to increase the
productivity of its factory workers.
The process which Sipho implemented included the following steps:
a) Sipho first conducted a time and motion study through observing the manner in which the factory
workers performed their jobs.
b) Based on the outcome of the time and motion study, Sipho identified the most efficient methods of
performing tasks on the production line.
c) Sipho then trained all the production line workers on the new efficient methods of performing their
tasks.
d) Sipho also introduced a daily production rate. Factory workers who performed above this production
rate would receive additional pay.
The process and practices implemented by Sipho are an example of the application of which of the
following management theories?
A. Scientific Management
B. Administrative Management
C. The Human Relations Approach
D. Systems Theory
2. The Centre for Career Advancement (CCA) provides continuing professional development courses to
managers at all levels of the organisation. Ayanda is one of the facilitators at the CCA. It is the first
day of the two-day ‘Finance for Non-Financial Managers Programme’. When she arrives at the venue
she becomes very agitated as a data projector and flipchart has not been set up as she requested.
She phones the CCA’s Operations Department who are responsible for setting up the venue.
Patience, the Course Coordinator informs Ayanda that she did not receive her email request for a

data projector or a flipchart, probably because the Operations Department’s email has been ‘down’
for the past week. The IT Department have been unable to timeously correct the problem with the
Operations Department’s email as they are understaffed and overburdened. So Ayanda has to go
ahead and present the course without the necessary training tools and as a result, when the learners
complete the course evaluation form they rate the overall course as “average”. This is disappointing
to Ayanda as the courses which she facilitates usually receive an “excellent” rating.
This scenario provides an example of:
A. Scientific Management
B. Administrative Management
D. Systems Theory
3. Eric is the newly appointed IT manager at ‘Amalgamated Cooldrinks’. When he was employed four
weeks ago, employee morale in the IT Department was at an all time low. In an attempt to improve
morale, Eric started to implement weekly departmental meetings where the employees are
encouraged to share their successes and difficulties on the projects on which they were working.
This has provided an excellent learning opportunity for all employees, while also contributing to
improved team spirit. Eric also has an open door policy of which many employees have made full
use.
Eric’s approach to improving morale within the IT Department is an example of:
A. Scientific Management Theory
B. Administrative Management Theory
D. Systems Theory
4. Excellence Consulting is a small management consultancy which was started two years ago by
Conrad and his PA, Mary. Over the past two years it has grown considerably and now has a full
time staff of 20 employees. Conrad has always been flexible and laissez faire in the management
of his staff, relying on their honesty and integrity not to abuse working hours or leave. However,
lately it has come to his attention that some staff are arriving almost two hours late for work and

that a number of staff regularly take leave without informing Conrad and without recording the
leave with Mary. This is also impacting negatively on Excellence Consulting’s ability to deliver a
superior service to its clients. To address this problem Conrad decides to draft a ‘Leave Policy’
as well as an ‘Employee Code of Conduct’ – these documents outline the processes which
employees are required to follow when applying for and taking leave and define the behaviour
which is expected from employees.
To address the problems regarding leave and hours of work within Excellence Consulting. Which of the
following theories has Colin applied?
A. Scientific Management Theory
B. Administrative Management Theory
D. Systems Theory

1. A 2. D
3. C 4. B
SELF CHECK ACTIVITY

Read the following case study and then answer the questions which follow.
Bongani Dlamini is the General Manager of the ‘Chicken-to-Go!’ fast food restaurant which also has a
drive through facility. The restaurant operates from 06h00 to 22h00, seven days a week and employs a
total of 80 staff. The restaurant is well known in the community, with the majority of customers utilising
the drive through facility rather than the sit-down restaurant.
Bongani is concerned about the poor performance of the employees at ‘Chicken-to-Go!’in general. He
has just finished a telephone conversation with an irate customer who complained about the exceedingly
long time that she had to wait for her order to be taken and to be filled. This is the seventh complaint
which Bongani has received from customers about poor levels of service within the past five days.
Bongani decides that something has to be done about thisand so he calls an urgent management
meeting.
“Hi guys, thanks for making time at such short notice to attend this meeting,” Bongani says as Lindiwe,
the Service Manager, Jason, the Kitchen Manager, and Adeline, the HR Manager from head office, walk
into the boardroom. “The reason why I have called this urgent meeting is that I am very concerned about
the poor performance of our staff – I have been inundated with calls from irate and dissatisfied customers
about our staff and the shocking level of service which they are providing. We desperately need to do
something about this!”
“Yes, I have noticed that my kitchen staff have been particularly lethargic and particularly disinterested
in their work. Many of my staff are arriving between 15 and 30minutes late. They have also been making
many mistakes over the past couple of weeks,” replies Jason.

“To address this dismal state of affairs I have tried to implement penalties – when an employee makes
a mistake he is required to pay a penalty, equivalent to10% of his daily wages. I place this money in a
kitty and it will go towards our end of year party.”
“Wow, that is quite harsh Jason!” comments Lindiwe. “Has it worked at all? I mean, has the performance
of the staff in the kitchen improved since you introduced the penalty system?”
“Sadly, not at all,” responds Jason, “we are going to have to find another method to “deal with this, I
think!”
“Instead of using negative reinforcement why don’t you rather try positive reinforcement,” suggests
Adeline, the HR Manager from Head Office. For example, you could introduce an “Employee of the
Week” system which acknowledges and recognises high performing employees.
“Hmm, that might help,” responds Bongani, “does anyone have any other ideas?”
Now that you have read the case study, answer the following question:
Describe how “Chicken-to-Go!” would go about improving the performance of its employees from the
perspectives of the following management approaches:
1. the Classical Approach
2. the Human Relations Approach

3. the Quantitative Approach
4. the Contemporary Approach
Comment on Self-Check
The different schools of management would adopt various approaches to dealing with the poor employee
performance at ‘Chicken-to-Go!’.
The Classical Approach

Scientific Management Theory maintains that employees are motivated primarily by economic and
physical needs (Hellriegel et al, 2005). To improve employee performance at ‘Chicken-to-Go!’ the
Scientific Management Approach would thus focus on:
 Scientifically identifying a daily performance standard through the analysis of work and the
identification and implementation of the most efficient manner in which to perform tasks. Such a
performance standard could be to take and fill customer orders in under two minutes.
 Implementing an appropriate wage system which would reward those employees whose
performance exceeded the daily performance standard. For example, if a particular employee
serviced customers in an average of 90 seconds he/she would receive an additional 10% of his/her
standard hourly wage for his enhanced performance.
Administrative Management Theory focuses on the improvement of organisational productivity through

the development of bureaucracy with rules, standard operating procedures and norms (Hellriegel et al,
2005). This approach also emphasises the manager’s authority, as well as discipline as a means to
promote respectful relations. Thus, according to the Administrative Management Approach the kitchen

staff that are arriving late are going against the rules and norms of the organisation and appropriate
management action needs to be taken. A system of issuing warnings, in line with the organisation’s
disciplinary code would be more appropriate than requiring employees to pay penalties equivalent to 10%
of their daily wage.
The Human Relations Approach

In contrast to the Classical Approach, the Human Relations Approach focuses on the social and self-
actualisation needs of the employee (Hellriegel et al, 2005). This approach thus emphasises the effect
that the manager’s approach can have on employee performance. Jason, the Kitchen Manager, has
implemented a penalty system which requires that employees pay a fine (equivalent to 10% of an
employee’s daily wage) for any mistakes which they make. This negative reinforcement approach has
not proven to be successful in improving the kitchen staff’s performance. In the case study Adeline, the
HR Manager from Head Office, suggests that positive reinforcement measures should rather be used
and from the perspective of the Human Relations Approach this would definitely be more beneficial in
improving employee performance. ‘Chicken-to-Go’s’ managers need to find ways to appropriately
motivate and encourage workers. For example, they could manage the employees from the perspective
of Theory Y (Botha et al, 2009), and in so doing adopt a positive view of the employees and create an
environment which promotes initiative and self-direction.
Quantitative Approach
The Quantitative Approach uses mathematical techniques to solve production problems. This
approach alone would not be sufficient to improve employee performance at ‘Chicken-to-Go!’, however,
it could be used in determining a suitable manner to improving the company’s production rate by making
more efficient use of organisational resources.
Contemporary Approaches
Systems Theory emphasises the inter-relatedness and inter-dependence of the parts of the
organisation. At ‘Chicken-to-Go’ the employee sub-system is not performing optimally in the
transformation of inputs into outputs. This in turn affects the performance of the greater organisational
system and impacts negatively on customers in the external environment system. The feedback which
Bongani received from customers in the form of complaints alerts the management sub-system to a lack
of synergy within the greater organisational system and provides them with an opportunity to correct it.

Contingency Theory
Contingency theory emphasises aligning the solution to the situation. In addressing the lack of synergy
identified by the Systems Approach, Bongani Dlamini should consider all the solutions discussed thus far
(classical, human relations and quantitative) and implement the one, or a combination, which is best
suited to the situation. In this particular case, the scientific management approach coupled with the
human relations approach appears to be the most appropriate to the situation.
Thus, as has been shown, the poor levels of employee performance at ‘Chicken-to-Go’ can be addressed
in varying ways when approached from different management schools of thought.

In your study group discussion you are required to share with your group
members examples of the application of the various management theories within
the organisation for which you work:
Work systematically through the management theories which have been

addressed in this section. For each management theory each group member
must provide one example of the actual application of the management theory in
his / her organisation.
 For each of the examples provided, the group should discuss and explore whether the application of the
management theory was appropriate to and / or optimal for the particular situation.
 Use the table below to record notes on the examples provided.

Management Approach Examples of Application of Management Approach within

Group Members’ Organisations
Scientific Management
Administrative Management
Human Relations Approach
Quantitative Approach
Management Approach Examples of Application of Management Approach within

Systems Approach
Contingency Approach
Total Quality Management
Chaos Theory

Examples of Application of Management Approach within

Management Approach
Learning Organisation
Re-Engineering

Responses will differ across study groups as they are dependent on individual learner experiences.

follow.
Productivity is down at Sipho’s Furniture, a manufacturing organisation

which produces low cost wooden and steel furniture. Sipho, the CEO, is
concerned about the low productivity level as he has recently received an
order from the national military to produce 1000 beds and 1000 pedestals
by the end of the month. With the current levels of productivity so low it is
unlikely that even 50% of the order will be completed in time.
You are the management consultant who has been contracted by Sipho’s
Furniture to assist in improving production levels. Write a brief report to
Sipho recommending how he can improve production levels from the
perspective of:
1. The Scientific Management Approach (6 marks)
2. The Human Relations Approach (6 marks)
3. The Systems Approach (6 marks)
4. The Contingency Approach (2 marks)

 The length of your answer should be guided by the mark allocation. Generally onecoherent point /
fact equals one mark.
 The following sections of this Study Guide are relevant to the answering of the sample examination
questions:
o Question 1: Section 2.4.1.1 (Scientific Management Theory)

o Question 2: Section 2.4.2 (Human Relations Approach)
o Question 3: Section 2.4.4.1 (Systems Theory)
o Question 4: Section 2.4.4.2 (Contingency Theory)

The overall outcome for this section is that, on its

completion, the learner should be able to demonstrate a
holistic understanding of the management environment
and its application. This overall outcome will be
achieved through the learner’s mastery of the following
specific outcomes:
1. Explain the relevance which the systems

understanding of the organisation as an open
system has to the study of the management
environment.
2. Identify the characteristics of the management

Unit 3: environment.
The Management 3. Explain the relevance of both systems theory and

chaos theory to the study of the management
Environment environment.
4. Describe and critically discuss the composition of,

and inter-relations within, the management
environment.
5. Critically discuss the macro-environment.
6. Critically discuss the market / task environment.
7. Critically discuss the micro-environment.
8. Identify and critically discuss the impact of

environmental change and uncertainty on the
business organisation.
9. Identify and critically discuss the approaches which

management can adopt in reacting to the
environment.


Prescribed Reading:
Principles: A Contemporary Edition for Africa, Fifth Edition. Cape Town: Juta &
Co. pp 57 – 82 (Chapter 3) and pp 100 – 102.
Books
 Botha, S., Cunningham, P., Musengi, S., Visser, K., Williams, O., Lotz, J., Booysen, K.,
Stewart Smith, A., Bosch, A., & Banhegyi, S. (2009) Management: Fresh Perspectives.
Cape Town: Pearson Education South Africa. pp 47 - 93 (Chapter 3).
 Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. &
Oosthuizen, T. (2005) Management. Second South African Edition. Cape Town: Oxford
University Press. pp 91 - 110 (Chapter 5).
 George, J.M. & Jones, G.R. (2006) Contemporary Management: Creating Value in
Orgainizations. Fourth Edition. Boston: McGraw Hill. pp 154 – 187 (Chapter 5).
Journals
 Marren, P. (2008) “Alternative Strategies: Destructive Creation.” Journal of Business
Strategy. Vol 29, No 2, pp 51 – 53.
 McPhee, W. & Wheeler, D. (2006) “Making the case for the added-value chain.” Strategy
and Leadership. Vol 34, No 4, pp 39 – 46.
 Porter, M.E. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review
March-April, pp 137 – 145.

3.1 Introduction
This section examines the Management Environment, and the focus will be on the following:
 the composition of the management environment
 the macro-environment
 the market / task environment
 the micro-environment
 the interface between the organisation and the environment
THINK POINT
Why do you think it is important for managers to understand the nature of
the environment in which they operate?

Systems Theory, which was examined in Section 2 of this Study Guide, provides an argument for the
importance of managers understanding the environment in which they operate. According to Systems
Theory, the organisation is a system operating within the greater system of its environment. Further, the
organisation is an open system and thus is dependent on the environment in which it operates and
interacts with its environment so as to survive: the organisation obtains its resources from the
environment and processes these resources so as to produce outputs required by the environment.
The concept of equilibrium or balance is an important one in Systems Theory, in that homeostasis is a
state which the organisation continually seeks to attain and maintain. Thus a change within the
environment, such as the emergence of a new technology within the IT industry, could result in an
imbalance between an IT organisation and its environment, in that the IT organisation’s processes and
products may not be aligned to the new technology. It would thus be imperative for the IT organisation,
which has achieved a state of incongruence with its environment, to restore equilibrium through making
the necessary adjustments to its subsystems.
Thus it is imperative for the manager to understand the nature of the management environment in that,
as the Systems Approach demonstrates, it is critical to not only the effectiveness of the organisation, but
its survival as well.

3.2 The Composition of the Management Environment

The Management Environment may be divided into several sub-environments.
ACTIVITY
Identify the different ‘environments’ which impact on your particular organisation
and influence your work as a manager.
Comment on Activity
The Management Environment comprises three different environments:
 The Micro-Environment
o comprises the organisation itself over which management has control
 The Market / Task environment

o also known as the industry environment and comprises the environment immediately
surrounding the organisation
 The Macro-Environment
o which refers to the greater environment, existing outside of the market and task environment
These environments, and the relationships between them are depicted in Figure 3.1.

Figure 3.1: The Composition of the Management Environment (from Smit et al, 2011: 64)

3.2.1 Main Characteristics of the Management Environment

The main characteristics of the management environment are identified below.
ACTIVITY
Systems Theory and Chaos Theory are two of the contemporary management
theories which were explored in Section 2. Both of these theories take cognisance
of the management environment. What particular characteristics of the
management environment do these theories highlight?
Comment on Activity
Systems Theory highlights the inter-relatedness of environmental factors, where a change in one
environmental factor could result in a change in another environmental factor (Smit et al, 2011). For
example, a technological innovation within the macro-environment may lead to the re-engineering of the
organisation’s structure within the micro-environment. The organisation’s new structure may ultimately
result in a more efficient production process within the micro-environment and subsequent price
reduction in the product. This price reduction could result in more customers buying the organisation’s
product in the market environment.
Chaos Theory highlights the complexity of the environment which emerges not only from the many
environmental factors to which the organisation must react (Smit et al, 2011), but also the non-linear
relationships between and within systems (Tetenbaum, 1998). Chaos Theory, in recognising the
complexity of the environment, also acknowledges the following further characteristics of the
management environment: increasing instability and environmental uncertainty (Smit et al, 2011).
Indeed, Chaos Theory acknowledges not only the rapid pace of change which characterises the
information age, but also the unintended and unpredictable consequences which emerge from the non-
linear connections within complex systems.
3.3 The Macro-Environment

The macro-environment influences the organisation directly as well as indirectly through the
organisation’s market environment (Smit et al, 2011). However, it is seldom that the organisation is able
to exert any reciprocal influence on the macro-environment. For example, when the economy of a
country slows, a clothing retailer will have to endure a decline in business. While the clothing retailer

may be able to come up with initiatives to stimulate business within his/her locality, he/she will not be
able to make a significant impact on the overall economy of the country.
The macro-environment may be divided into six sub-environments:
 Technological environment
 Economic environment
 Socio-cultural environment
 Institutional / Political environment
 International environment
 Ecological / Physical environment

The distinguishing characteristics of these six sub-environments of the macro-environment, and the
manner in which they impact the organisation, are outlined below.
3.3.1 Technological Environment

Technology is defined as “the combination of skills and equipment that managers use in design,
production and distribution of goods and services” (George & Jones, 2006: 167). Tetenbaum (1998)
identifies technology as an important characteristic of our century in that it is significant in promoting and
accelerating change. In so doing, the technological environment can have significant implications for the
organisation, in that it can present both opportunities (e.g. market leadership as a result of technological
innovation) and threats (e.g. product obsolescence). Further, not only does higher productivity result
from technological advancement, but the technological environment also provides innovations, such as
teleconferencing and electronic mail, which plays a significant role in changing the nature of work within
organisations (George & Jones, 2006).
3.3.2 Economic Environment

The factors within the economic environment which impact on the organisation include interest rates,
unemployment, inflation, consumer income and economic growth (George & Jones, 2006). Smit et al
(2011) assert that the economic environment is influenced by the other five sub-environments
(technology, social, institutional/political, international and ecological). The economic environment has
a significant impact on the organisation in that the economy’s state of growth or decline influences the
consumer’s standard of living and buying power (Smit et al, 2011).

3.3.4 Institutional / Political Environment

George & Jones (2006) argue that political forces are the “outcomes of changes in laws and regulations,
such as the deregulation of industries, the privatization of organisations, and increased emphasis on
environmental protection” (p 170). Thus the political environment essentially impacts on the organisation
as a regulating force. The government may also impact on the organisation through the performance of
its:
 supplier function, where government decisions will affect the organisation’s accessibility to
government-owned natural resources;
 customer function, where government’s demands for various products may contribute to the
sustainability of certain organisations.
3.3.5 International Environment

In addition to technology, Tetenbaum (1998) identifies globalisation as a characteristic of the twenty-first
century. Global forces are identified to be the “outcomes of changes in international relationships,
changes in nations’ economic, political and legal systems, and changes in technology such as falling
trade barriers, the growth of representative democracies, and reliable and instantaneous communication”
(George & Jones, 2006: 172). The international environment impacts on the organisation in that it
expands the complexity of the organisation’s environment, and in so doing presents further opportunities
and threats (Smit et al, 2011).
3.3.6 Ecological / Physical Environment

The ecological (or physical) environment comprises the limited natural resources, as well as the pollution
which results from the human-ecology relationship (Smit et al, 2011). The focus is not simply on the
impact of ecological forces on the organisation, but rather on the reciprocal relationship which exists
between the ecology and business. The shortage of resources, water, air and land pollution, global
warming and damage to natural resources are some of the organisational concerns which have emerged
from the ecology-business relationship (Smit et al, 2011). The dynamics of this reciprocal relationship
impact on the organisation through the principle of eco-efficiency: organisations need to be eco-efficient
through seeking to produce more useful goods and services while continuously attempting to decrease
not only pollution but resource consumption as well.

ACTIVITY
Woolworths is a retail company selling a wide range or products including clothing,
food and homeware. Woolworths stores are found throughout South Africa as well
as in certain locations in Lesotho, Swaziland, Botswana, Namibia, Kenya,
Mauritius, the Middle East, Mozambique, Nigeria, Tanzania, Zambia and
Zimbabwe.
1. Visit Woolworths’ website – www. woolworths.co.za. What is Woolworths doing

with respect to the ecological environment?
2. How do your organisation’s ecological environment initiatives compare with

that of Woolworths?
Comment on Activity
The following information on Woolworths’ ecology-business relationship has been sourced from
www.woolworths.co.za.
Woolworths Initiatives with Respect to the Ecological Environment

Woolworths is very conscious of how they are able to affect the ecological environment. They state on
their website that they are “extremely aware of the impact our business might have on every aspect of
our environment….that includes the natural world as well as the societies and the individuals we come
into contact with in the course of what we do….we work extremely hard, first of all not to do any damage
and, secondly, to use as few resources we can” (www.woolworths.co.za, 2008).
Some of the things which Woolworths does to decrease the negative effect they have on the
environment are:
 Limit the Impact of its Business Processes on the Environment: Woolworths seeks to limit its
impact on the environment through:
o Noise Management where noise pollution is managed and reduced through managing
delivery schedules so as not to interfere with local residents and finding ways of reducing
the ambient noise emitted from refrigerated delivery trucks.
o Refrigeration & Air Control, where gases and chemicals are used which do not harm the
ozone layer and do not contribute to global warming.

o Building Design & Location, where the social and ecological impact of the building is
assessed prior to commencement of the building process. Woolworths distribution centre
in Midrand (South Africa) has been designed according to ecological principles. Some of
the ways in which the ecological environment was protected in the building and running of
this facility include:
 The building is centrally located, making delivery to stores more efficient and
reducing the consumption of fuel;
 When construction began, the 40ha of topsoil that was removed from the site is
being used for agriculture.
 There are three pools which have been built on the site to capture and store
rainwater for irrigation purposes. Water will also be recycled.
 The habitat of the African bullfrogs which were living on the site prior to construction
has been preserved.
 Office lights switch off if no motion is detected in the office. The office lights also
adjust depending on the amount of daylight (www.woolworths.co.za, 2008).
 Recycling: Woolworths has set up a company, ‘Hangerman’ which recycles hangers and sells them
back to the clothing suppliers at a discounted rate. In addition, many of Woolworths trolleys and
shopping baskets have been produced from recycled plastic. The Head Office utilises recycled
paper wherever possible for internal communication and the cardboard packaging for Woolworths’
ready made meals has an 80% recycled paper content (www.woolworths.co.za, 2008).
 Packaging: Where possible, Woolworths uses completely recyclable packaging materials such as
glass bottles and paper. Where plastic is used for packaging it is clearly identifiable so that it can
easily be resorted for recycling purposes. Woolworths also encourages its customers to recycle their
shopping bags (www.woolworths.co.za, 2008).
 Protection of Plants & Animals:

o Biodiversity: Woolworths seeks to do no harm to the natural environment. This is achieved
through:
 Not using genetically modified ingredients in their foods;
 Using wood from sustainably managed forests;

 Using honey suppliers who harvest honey without doing harm to honey badgers;
 Using non-lethal methods of capturing leopards and other predators on farms which
supply Woolworths with animal food products;
 Using and increasing the range of organic produce and organic clothing available
to the consumer.
 Animal Welfare: Woolworths has adopted the NSPCA approved Animal Welfare Code of Good
Practice, and all the animals from which Woolworths sources food produce are humanely reared and
treated. In particular, Woolworths:
o Regularly audits abattoirs;
o Does not permit animal testing for any of it goods;
o Does not sell products made from real fur;
o Does not sell eggs from caged chickens (i.e. battery chickens).
 Conservative Use of Precious Resources: In the interests of preserving the environment,

Woolworths has found ways to conservatively use the following precious resources:
o Electricity consumption has been reduced by 10% in stores through improved management
of lighting and refrigeration.
o Fuel consumption is limited through ensuring that the delivery fleet of vehicles operates as
efficiently as possible.
o Water is saved through Woolworths working closely with farmers in areas where water is
scarce. Furthermore, Woolworths ensures that none of their clothing suppliers use
materials, dyes and chemicals which present a health or ecological risk during their
manufacture or when they are disposed of as waste (www.woolworths.co.za, 2008).
Comparison of Other Organisation’s Ecological Environmental Initiatives with that of Woolworths
Woolworths is an example of an organisation which certainly has done a lot to protect and preserve its
natural environment. It is unlikely that the learner will find that his / her organisation has done more than
Woolworths in this regard. However, the comparison is worthwhile as it can provide examples to the
learner of the things which can be done within his / her organisation to protect the environment.

3.4 The Market / Task Environment

The market or task environment refers to the environment which immediately surrounds the organisation,
i.e. it comprises the industry in which the organisation operates. As Figure 3.1 shows, the market
environment has a direct influence on the organisation (or micro-environment) through, for example, its
competitors and suppliers (Smit et al, 2011).
The market environment comprises the:
 Market
o consisting of the consumers or potential consumers who have particular needs and the buying
power to satisfy these needs
 Suppliers
o provide the organisation with the ‘inputs’ required to produce the organisation’s goods and/or
services. These ‘inputs’ could take the form of materials (raw materials, equipment, energy),
capital and/or labour.
 Intermediaries
o include wholesalers, retailers and agents and serve to bridge the gap between the producer and
the consumer.
 Competitors
o are prevalent within a market economy, and compete with the organisation not only for market
share but for materials, capital and labour as well.
Much of the literature which exists on the market environment revolves around Michael Porter’s work on
competitive forces.
READING ACTIVITY
Read the following text and answer the question that follows:
 Porter, M.E. (1979) “How Competitive Forces Shape Strategy” Harvard

Business Review, March-April, pp 137 – 145.
 Discuss Porter’s configuration of the market environment. Illustrate your

discussion with examples from your organisation’s market environment.


Porter (1979) argues that the nature of competition within an industry is not only determined by competing
organisations within the industry, but is established through the prevalence of five forces:
 The threat of new entrants
 The bargaining power of the consumers
 The bargaining power of suppliers
 The threat of substitute products or services
 The jockeying for position amongst the current competitors.

These five forces are illustrated in Figure 3.2 below.
Figure 3.2: Forces Driving Industry Competition (from Porter, 1979: 137).
The profitability of an industry is determined by its strongest force or forces (Porter, 1979) and different
forces are important to different industries.
A discussion of the dynamics of each of the five forces is provided below.

Threat of Entry
The significance of a potential new entrant to the market can be reduced through the establishment of
substantial barriers to entry (Porter, 1979). Barriers to entry can be achieved when the industry has:
 established economies of scale within the existing organisations;
 differentiated products and/or services within existing organisations;
 established high capital requirements for entry into the industry;
 established cost advantages which are independent of the organisation;
 limited access to distribution channels;
 protection as a result of government policy (Porter, 1979).

Powerful Suppliers
Powerful suppliers can dominate competition within a particular industry through exercising bargaining
power by reducing the quality of the goods and services supplied and/or raising the prices of their goods
and/or services (Porter, 1979).
Powerful Buyers
Customers may have a significant impact on the nature of competition within an industry (Porter, 1979).
Customers who are powerful are able to reduce prices, play competitors off against each other and insist
on higher quality products and services.
Substitute Products
Substitute products serve to limit the profitability potential of an industry in that they impose a price ceiling
within the industry. This limitation can be overcome through the differentiation of competitors’ products
within the industry (Porter, 1979).
Jockeying for Position

Jockeying for position is the fifth competitive force and refers to intense rivalry amongst competitors
within the same industry. Such intense rivalry can be demonstrated through price cuts, aggressive
marketing and new product innovation and introduction (Porter, 1979).
Thus an assessment of the competitive forces operating within a particular industry will provide the
starting point from which the organisation may identify its strengths and weaknesses, and ultimately
develop an effective strategy which will enable the organisation to attain and sustain competitive
advantage within its market environment.

ACTIVITY
Analyse how Porter’s five competitive forces impact on the organisation in which
you work.
You may need to consult with one of your senior managers involved in the
organisation’s strategic planning to adequately complete this activity
1. Threat of Entry:
2. Powerful Suppliers:
3. Powerful Buyers:
4. Substitute Products:
5. Jockeying for Position:
Comment on Activity
Learner’s responses will differ depending on the organisation for which they work and the industry in
which the organisation operates.

3.5 The Micro-Environment

The micro-environment refers to the organisation itself. It is the environment in which the manager
operates (Smit et al, 2011) and performs the various management functions and roles at various
organisational levels, as was identified in Section 1 of this Study Guide (Introduction to Management).
SELF- CHECK ACTIVITY 1

The micro-environment is characterised by those issues discussed in
Section 1 of this
Study Guide. To consolidate your understanding of the nature of the

micro-environment, identify and briefly discuss the fundamental
management and organisational issues which were explored in Section 1
The answer to this question may be found at the end of this section.
As has been previously stated, the micro-environment is influenced both directly and indirectly (via the
market environment) by the macro-environment. However, the micro-environment is rarely able to
significantly influence the macro-environment. On the other hand, the market environment directly
impacts the micro-environment which in turn directly exerts influence on the market environment.
However, in order for the micro-environment’s influence on the market environment to provide for the
organisation’s strategic advantage, the micro-environment’s components should be strategically aligned
to the needs of the market. The following Reading Activity will serve to explore this assertion further.
READING ACTIVITY
Read the following texts and then answer the questions which follow:
 McPhee, W. & Wheeler, D. (2006) “Making the case for the added-value chain.”
Strategy and Leadership. Vol 34, No 4, pp 39 – 46.
 Smit, P.J., Cronjé, G.J. de J., Brevis, T. & Vrba, M.J. (2009) Management Principles: A
Contemporary Edition for Africa, Fourth Edition. Cape Town: Juta & Co. pp 100 – 102
–
“The Value-Chain Approach”.
1. Describe Porter’s value chain and how it is applicable to the micro-environment.
2. What changes do McPhee & Weeler (2006) suggest with respect to Porter’s value
chain?


Porter’s Value Chain
Porter’s Value Chain is a strategy tool that provides for “systematically examining all activities a firm
performs and how they interact” (Porter cited in McPhee & Wheeler, 2006: 40), and competitive
advantage results from all the activities of the firm performing in harmony. The value chain essentially
comprises the processes which take place in the micro-environment.
Porter’s value chain, which is depicted in Figure 3.3 below, may be divided into two types of value
activities:
 Primary activities, the focus of which is the provision of the product and/or service and its distribution
to the consumer;
 Secondary activities which provide the infrastructure necessary for the performance of the primary
activities (Smit et al, 2011).
General Administration
Secondary Activities
Human Resource Management
Technology Development
Procurement
Margin
Inbound Operations Outbound Marketing & Services
Primary Activities
Logistics Logistics Sales
Figure 3.3: The Organisational Value Chain (from Smit et al, 2009:93).
The organisation, in operating in the market environment, should adjust and configure the activities in its
microenvironment so as to ensure that the organisation is able to better meet the market needs than its
competitors. For example, a retailing organisation which chooses a low-cost strategy to gain competitive
advantage within the market environment would examine its value chain and focus on structuring its

activities to reduce costs (such as reducing costs related to the storing and transporting of the product -
inbound logistics).
McPhee & Wheeler’s (2006) Suggested Revision of Porter’s Value Chain

McPhee & Wheeler (2006) identify that Porter’s value chain model was developed in 1985 and since
then significant changes have taken place within business. They argue that Porter’s model is too
internally focused and that “for the value chain model to be effective for the firm, a full representation of
all available activities should be included in the model – including those activities aimed at creating value
through external relationships” (McPhee & Wheeler, 2006: 40). McPhee & Wheeler (2006) therefore
expand Porter’s value chain model to include:
 Supply Chain Management as a primary activity. This involves the organisation’s interaction with
its suppliers, particularly in terms of research and development, product quality and product
development. McPhee & Wheeler (2006) include supply chain management in the value chain due
to an organisations close and complex relationships and partnerships with suppliers. An example of
this close relationship is found in the motor vehicle industry where a company, such as Toyota has
a network of suppliers which “provide more value to the supply chain than the supplier’s of Toyota’s
competitors” (McPhee & Wheeler, 2006: 42). Another example is found in the personal computer
industry where companies such as Apple and Dell have reinvented their supply chain so that they
can deliver custom-configured products to their customers. For companies such as Toyota, Apple
and Dell the supply chain “is not a set of mundane tasks delegated to purchasing and inventory
managers [but is] the backbone of their business designs and the source of their competitive
advantage” (Bovet & Martha cited in McPhee & Wheeler, 2006: 42).
 Product Use is included in the added-value chain as a primary activity and its inclusion recognises
that “the same way that supply chain management goes beyond the purchasing department,
customer interaction goes well beyond the marketing, sales and order taking departments” (McPhee
& Wheeler, 2006: 42). Product use activities include establishing networks of product users (e.g. a
4x4 vehicle manufacturer arranging quarterly off-road weekend getaways for customers who have
purchased the vehicle) and the provision of services in the use of the product (McPhee & Wheeler,
2006).
 End of Primary Use is also included in the added value chain as a primary activity. This is
particularly applicable to leased items such as photocopiers, cars, construction equipment and
computers. Once the lease has expired and the customer has no further use for the product the

organisation needs to find a way to gain further value from it. This could be achieved through
refurbishing the product and selling it as new; reselling the used product through appropriate
channels (e.g. auctions and the internet); or using the used product for parts (McPhee & Wheeler,
2006). McPhee & Wheeler (2006) provide the example of how IBM obtains further value from used
computers returned to the organisation due to the expiry of the customer’s lease: two of the
strategies which IBM utilises in this regard are:
o to service the used computer with new parts and sell it as a used product; and
o to dismantle the computer and use it for parts.
 Externals Networks in included in the added value chain as a support or secondary activity.
External networks include customers, suppliers, institutions and shareholders According to McPhee
& Wheeler (2006) “firms must select activities which will allow them to build value from their external
networks [and].make these interactions strategic” (p 44).
McPhee & Wheeler’s (2006) additions to Porter’s value chain are in line with the move from “old” to “new”
organisations where the new organisation is flexible and “networked” and effective networking provides
for competitive advantage (Smit et al, 2011).
In summary, this subsection has examined the micro-environment, which essentially comprises the
environment within the organisation. It has been shown that much of that which was studied in Section
1 of this Study Guide, such as management roles and functions, is involved in the micro-environment.
The configuring of activities according to Porter’s value chain approach and McPhee & Wheeler’s (2006)
added value chain approach as a means of aligning the micro-environment to the macro-environment
was also examined in this subsection.
3.6 Interfaces Between the Organisation and the Environment
The organisation is an open system and thus interacts with the market environment and macro-
environment in order to survive. This subsection examines the generic ways in which the environment
interacts with the organisation.
3.6.1 Environmental Change and the Organisation

Change involves moving from a state of “…stability to instability, moving from predictable to the
unpredictable, or from the known to the unknown. It is unmeasurable and causes uncertainty…” (Smit et
al, 2011: 78).

Tetenbaum (1998) identifies change as a characteristic of the twenty-first century and claims that
“…today’s changes are discontinuous and happening at a geometric rate…” (Tetenbaum, 1998: 23).
Such change has considerable implications for the organisation that, to maintain congruence with its
environment, the organisation “…must be sufficiently agile to be instantly reconfigurable to meet new
demands…” (Tetenbaum, 1998: 23).
THINK POINT
1. Describe the changes that have taken place, not just within the
organisation in which you are employed, but within the business
environment as a whole.
2. Discuss the implications these changes have had for the managing of
the organization.

Learner’s responses will differ due to the different environments in which they work. Some learner’s
organisations may have experienced dramatic change whereas others may have only have experienced
slow and adaptive change. For an organisation to survive it is imperative that its strategy, systems,
structure and skills adapt and augment in line with the changes in the business environment (Smit et al,
2011).
3.6.2 Uncertainty in the Environment

As identified in subsection 3.2.1 the management environment is characterised by varying levels of
complexity and extent of change. Those organisations which operate within environments characterised
by high levels of complexity and dynamic change (such as the IT industry) experience high levels of
uncertainty (Smit et al, 2011). Various recommendations may be made to assist such organisations in
coping with such uncertainty. Tetenbaum (1998) argues that in order to cope with uncertainty, an
organisation should become chaordic. How to go about developing a chaordic organisation was
discussed in Section 2 (Evolution of Management Theory) of this Study Guide.

READING ACTIVITY
Read the following journal article and the answer the question which follows:
Von Oetinger, B. (2004) “A Plea for Uncertainty: Everybody Complains about

Uncertainty but it May be a Good Thing to Have.” Journal of Business Strategy.
Vol 25, No 1, pp 57 – 59.
Provide a summary of the key points made by Von Oetinger (2004) in the space
provided below.

Van Oetinger (2004) notes that uncertainty is commonplace in business functioning. He argues that
“uncertainty might not be a bad thing if you can make better use of it than your competitors” (p 59).
Making ‘good’ use of uncertainty includes:
 Being Prepared, which involves the development of scenarios, which further involves thinking
through a variety of possible future paths for the company;
 Being Fit, which requires that an organisation is efficient at the level of its people, processes and
products. As Van Oetinger (2004) asserts, “strategy without productivity renders you lame, and
productivity without strategy leaves you blind. Strategy, productivity and efficiency are
intertwined…the best strategy (based on an insightful scenario) will not help without an efficient
organisation” (p. 58).
 Being Bold, requires managers to have courage and to ‘act’ rather than ‘react’. Van Oetinger (2004)
provides the example where during a period of economic downturn, a number of organisations cut
their advertising spend. However, a few ‘courageous’ organisations maintained their advertising
spend, which ultimately resulted in these organisations strengthening their competitive position in
the market.
In summary, Van Oetinger (2004) emphasises the need to harness the potential benefits of uncertainty
through building scenarios, ensuring the organisation is efficient and having the courage to do things
which are not a trend in the industry.

Thus, in summary, this subsection has focused on the impact which environmental change and
uncertainty has on the organisation.
3.7 Ways in which Management can React to the Environment

In the reading activity in section 3.6 Van Oetinger’s (2004) approach of harnessing the potential benefits
of an uncertain environment were explored. Van Oetinger (2004) emphasised the need for organisations
to do scenario planning (be prepared), to ensure an efficient organisation (be fit) and to do things which
are not necessarily the trend of the industry during uncertain times (be bold). In this section further
methods which may be utilised by the organisation to manage its potentially changing environment will
be explored.
ACTIVITY
Consider the organisation at which you are currently employed.
1. Describe the methods that the organisation in which you are employed
implement to ensure alignment to the external environment and to anticipate
environmental changes?
2. Explain whether these methods are effective or not.
Comment on Activity
Smit et al (2011) identify three inter-related approaches which the organisation can adopt in reacting to
the environment:
 Information Management: which involves acquiring and maintaining knowledge of the

organisation’s environment through the process of environmental scanning, which serves to identify
threats and opportunities within the environment. Information obtained from environmental scanning
should be recorded in a management information system and should be utilised to aid decision
making (Smit et al, 2011).
 Strategic Response: Once sufficient information on the environment has been acquired, a
strategic response needs to be initiated (Smit et al, 2011), for example the organisation’s current
strategy may have to be adjusted and aligned to an emerging change within the environment.

 Structural Change: An adjustment to the organisation’s strategy (resulting from environmental

change) may require that the organisation’s structure be adjusted in such a way that it is aligned to
the revised strategy (Smit et al, 2011).
The effectiveness of the above approaches is dependent on the complexity and extent of change which
characterises the organisation’s environment. While the above approaches would be more effective in
a stable environment, they would not necessarily be effective in an environment characterised by
dynamic change and complexity. It may be argued that organisations operating in such environments
would benefit more from the implementation of chaordic organisational principles (Tetenbaum, 1998, as
discussed in Section 2 of this Module Guide.) and those principles highlighted by Van Oetinger (2004),
discussed in section 3.6.
3.8 Summary
This section examined the Management Environment. The characteristics and inter-relations of the
macro-environment, the market/task environment and the micro-environment were explored. The impact
of change and uncertainty on the organisation was also examined, as were the ways in which
management can respond to such uncertainty and change.
The next section of this Study Guide, Section 4, will examine the management process.
3.9 Answer to Self-Check Activity 1

Model Answer
The fundamentals of management, which were dealt with in Section 1 of this Study Guide, and which
characterise the micro-environment, include:
 The Nature of Management

Management involves utilising inputs from the environment in the process of planning, organising,
leading and controlling (POLC) to produce outputs which satisfy the needs of the market. This
process of organisational management is influenced by the external environment as well as prevalent
management schools of thought.
 Definition of Management
Management may be defined as a process in which the management functions of planning,
organising, leading and controlling are executed; organisational resources are utilised; and work is

achieved through the efforts of other employees. This process serves to provide for the effective
and efficient achievement of the organisation’s goals.
 Levels of Management
Three levels of management may be identified:
o Top management, responsible for the overall and strategic management of the organisation (e.g.
Chief Executive Officer);
o Middle management, responsible for specific departments within the organisation (e.g.
Marketing Manager);
o Lower management, responsible for departmental sections and subsections within the
organisation (e.g. Sales Manager).
 Areas of Management
In addition to the area of General Management, six functional areas of management may be
identified: Marketing Management, Financial Management, Production and Operations
Management, Purchasing Management, Human Resource Management, and Research and
Development Management.
1. The Role Distribution of Managers

Mintzberg (1990) identifies three categories of managerial roles:
o Interpersonal Roles (includes figurehead, leader, liaison role)
o Information Roles (includes monitor, disseminator, spokesperson)
o Decision-Making Roles (includes entrepreneur, disturbance handler, resource allocator,
negotiator)
 Old and New Organisations

Change within the environment has resulted in the emergence of a ‘new’ organisation, the
characteristics of which are outlined in the following table;

‘OLD’ ORGANISATION ‘NEW’ ORGANISATION
 Physical tasks  Mental tasks
 Hierarchical  Lateral relationships
 Vertical communication  Vertical and horizontal communication
 Top down decision making  Decision making dependent on managers /

employees with expertise
 Many organisational levels (tall structure)  Few organisational levels (flat structure)
 Autocratic management style  Participative management style
Table: Key Changess Within Organisations (Smit et al, 2011: 497)
 Management & Organisational Performance

Management of organisational performance should be measured not only in terms of the
achievement of effectiveness and efficiency, but also in terms of adherence to the economic
principle.

Check your understanding of some of the principles and theory
addressed in this section by answering the questions below.
The Management Team of ‘Cars Inc.’, a motor vehicle manufacturing

company which produces efficient cars for the cost conscious buyer, are
busy with their annual Strategic Management Workshop.
“I am very concerned about the economic downturn which our country is

currently experiencing and I wonder what impact it will have on our
organisation,” comments Thembi, the Operations Director.
“Never mind the economic downturn,” responds Lindiwe the Marketing

Director, “I think that we should be more concerned about the upcoming
presidential elections. If Joseph Skepu is elected as president I have no
doubt that swift changes will be made to some of this country’s legislation
and I am sure that this will have a negative impact on our business! I am

sorry but I just can’t trust that man and it really baffles me as to why he
has so many people supporting him!”
“I don’t think we need to worry about the presidential elections Lindiwe,

and in any case, changes to the current legislation would take years to
effect” responds Jyoti, the HR Director. “What is more pressing for our
business is the lack of qualified and experienced artisans. Yesterday we
were talking about increasing our productivity levels but how can we do
this if we don’t have skilled people to do the job! There is a definite
shortage of skilled artisans in our industry and we might have to ‘poach’
some from our competitors through offering them attractive remuneration
packages. And just think how we would be able to gain a significant
advantage over our competitor ‘Moyoma Cars’ if we are able to lure away
some of their very skilled artisans!”
“Come on Jyoti, be realistic! How can we possibly offer those artisans

attractive remuneration packages?” replies Thembi. “We can’t even pay
our existing staff market related packages!”
“Alright, alright!” interjects Cyril, the CEO, “let’s not argue. You have all
raised some very critical issues which we will need to address. Something
which no one has mentioned, but which I believe is a significant factor
impacting our business, is the growth in the scooter market. Have you
noticed how many business people travel to work every morning on
scooters? It looks like the scooter market is to grow even more which is
going to take away some of our potential customers! Anyway, I think that
we could all do with a tea break now. We will unpack all the issues which
you have raised after tea!”

1. Thembi is concerned about the country’s economic downturn. This is a force within the …
A. Macro-environment
B. Market environment
C. Micro-environment
D. Task environment
2. Lindiwe is concerned about the upcoming presidential elections and the candidate who is to be
elected as president. This is an example of a force within which of the following environments?
A. Technological environment
B. Ecological environment
C. Institutional / Political environment
D. International environment
6. Jyoti speaks about gaining an advantage over Cars Inc.’s competitor Moyoma Cars by
poaching some of Moyoma’s skilled artisans. This is an example of …
A. Threat of New Entrants
B. Bargaining Power of Buyers
C. Threat of Substitute Products
D. Jockeying for Position
7. Cyril, the CEO, identifies that the growing scooter market could take away some of Car Inc.’s
potential customers. This is an example of …
A. Threat of New Entrants
B. Bargaining Power of Buyers
C. Threat of Substitute Products
D. Jockeying for Position

8. Jyoti holds the position of HR Director at Cars Inc. According to Porter’s Value Chain strategy
tool Human Resources is regarded as a …
A. Primary activity
B. Secondary activity
C. Support activity
D. B and C
6. Thembi holds the position of Operations Director at Cars Inc. According to Porter’s
Value Chain strategy tool, Operations is regarded as a …
A. Primary activity
B. Secondary activity
C. Support activity
D. B and C
1. A 2. C
3. D 4. C
5. D 6. A


Your study group is the management team of a clothing retailer, Trends. Trends
has operated from a major African city over the past 20 years and has always
been a leader in its market. However, over the past year two new clothing
retailers have emerged and have steadily been taking away Trends’ customers,
so much so that your sales are down by 30%. This is negatively impacting on
the profitability of your organisation.
To find out the reason why Trends’ customers are choosing the new clothing
retailers over Trends the management team decides to conduct a customer
survey. The results of the survey show that customers perceive Trends to not
be keeping abreast of fashion changes and trends. Furthermore, both of the
new clothing retailers offer customer loyalty programmes and Trends does not.
The management team then decides to conduct an internal investigation and

finds that Trends’ buyers have been purchasing from the same clothing
suppliers for the past 10 years and that they are reluctant to try new clothing
suppliers. It is also found that Trends’ sales assistants do not follow up on
customer requests and even though the sales assistants are the contact
between the store and the customer, they do no make suggestions on how the
store could better operate and service its customers. Overall the practices of
Trends are conservative and risk aversive. (adapted from George & Jones,
2006: 185).
1. In your group discuss what the current major forces in the macro-
environment of a clothing retail store would be?
2. In your group discuss what the major forces within the task / market
environment of a clothing retail store would be.
3. How would you, as the management team, go about helping the other
managers and employees within Trends to better understand and
respond to their store’s task environment?


Responses will differ across study groups. Comments on each question are provided below.
1. Forces in the Macro-Environment Impacting Trends
Study groups’ responses to this question will be influenced by their location (e.g. Johannesburg South
Africa’s macro-environment may have different dynamics to Oranjemund Namibia’s macro-environment)
and the time (month or year) in which they complete this activity. However, it is likely that the learners
would identify the following forces:
 Technological Forces: e.g. e-commerce may impact Trends in that customers may wish to be able
to order or at least view clothing over the internet.
 Economic Forces: e.g. an economic downturn in the country would result in Trends having to
increase the price of its clothing and / or comprise on the quality of its clothing.
 Socio-Cultural Forces: e.g. Trends’ approach to fashion appears to have been quite conservative.
This seems to have been acceptable to the community for many years as Trends was a leader in
the market. However, it appears that recently the values, attitudes and opinions of Trends’ customers
may have become less conservative.
 Institutional / Political Forces: e.g. there may be legislation, such as the Employment Equity Act
and Broad Based Black Economic Empowerment Act in South Africa, which will impact on the
manner in which Trends operates as a business.
 International Forces: e.g. the global fashion industry would have a significant impact on giving
direction to the type of clothing which Trends should be stocking each season. However, Trends
has adopted a very conservative approach which seems to indicate that they have not given much
attention to global fashion trends.
 Ecological Forces: e.g. there may be trends towards clothing which is more environmentally
friendly, such as clothing made from organic cotton. Current ecological forces also require that
businesses implement more eco-friendly business practices, such as saving of electricity.

2. Forces in Market / Task Environment Impacting Trends

The forces in the market / task environment that are likely to impact a clothing retailer such as
Trends include:
 Potential Entrants: The barriers to entry into the clothing retail market were not very high as the
two new clothing retailers easily entered and established themselves in the market. To prevent
further clothing retailers from entering the market Trends could raise the barriers to entry by
establishing economies of scale and through providing differentiated products and services.
 Suppliers: Trends has utilised the same clothing suppliers for many years and has been resistant
to utilising new suppliers. As a result they have lost customers to the new entrants into the clothing
retail market.
 Buyers: Trends’ customers now have the choice to go to two new clothing stores which keep
abreast of fashion trends. They therefore have a considerable degree of power and to remain
competitive Trends will have to offer more trendy clothing and improve its customer service.
 Substitute Products: There is no real threat of a substitute product for clothing.
 Jockeying for Position: There is a competitive dynamic between Trends and the two new clothing
retailers. The new clothing retailers have succeeded in taking away 30% of Trends’ sales. The
competitive challenge for Trends now is to at least regain the lost 30% of sales and re-establish itself
as a leader in the market.
3. Helping Managers & Employees to Better Understand the Task Environment

So as to assist Trends’ managers and employees in better understanding responding to the
organisation’s environment, it is recommended that awareness is created amongst them of the
importance of environmental scanning. Certain techniques could also be taught (e.g. questions for
employees to ask the customers) to identify pertinent forces within the task environment. Some of the
mechanisms which may be used by managers and employees to constantly scan their environment
include:
 Managerial strategy sessions: These could be held every six months. They could focus on
collating information which the various managers have sourced during the course of their work about
the management environment. Strategies to address any changes in the task environment could
also be considered in these sessions.

 Departmental strategy session: These would be similar to the managerial strategy sessions, but
would provide the opportunity for employees within departments to give input and make suggestions.
 Suggestions from employees: Employees should be free to make suggestions to management,

based on their scanning of the task environment. This could take the form of an employee suggestion
box or a standard item on each departmental agenda for employee suggestions.
 Regular Customer Surveys: These should be conducted regularly (every six months). The
customer survey results should be communicated to all managers and employees so that they have
a better understanding of the needs and expectations of their customers.

follow.
The Executive Management Team of Tech Computers, a manufacturer of desktop
and laptop computers, are away at a game lodge conducting their annual Strategic
Planning Workshop. A management consultant, Roshan, has been brought in to
facilitate the process. On the first day he divides the Executive Management Team
into two groups. Group 1 is to conduct an analysis of the macro-environment,
while Group 2 is to conduct an analysis of the organisation’s market-environment.
1. Identify and describe the forces in the macro-environment which

group 1 should include in their analysis.
2. Identify and describe the forces in the market-environment which

group 2’s analysis should address.

o The length of your answer should be guided by the mark allocation. Generally
one coherent point / fact equals one mark.
o The following sections of this Study Guide are relevant to the sample
examination questions:
o Question 1: Section 3.3 (Macro-Environment)
o Question 2: Section 3.4 (Market Environment)

LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the learner should be
able to demonstrate an understanding of the management process and its
application. This overall outcome will be achieved through the learner’s mastery of
the following specific outcomes:
1. Demonstrate an understanding of the four management functions and their

application.
2. Demonstrate a practical understanding of the management function of

Planning.
2.1 Identify and explain the characteristics of the various types of plans
and discuss their application.
2.2 Critically discuss and apply the steps in the planning process.
2.3 Identify barriers to effective planning and implement means to

overcome such barriers.
2.4 Identify the various planning tools and discuss their application.

Organising.
3.1 Critically discuss the reasons for organising.
Unit 4: 3.2
3.3
Identify and apply the process of organisation design.
Critically discuss and apply the basic principles of organising.
The Management 3.4 Demonstrate a practical understanding of the contemporary factors

influencing organisation design.
Process 4. Demonstrate a practical understanding of the management function of

Leading.
4.1 Critically discuss the nature and components of leadership.
4.2 Critically discuss the leadership-management debate.
4.3 Demonstrate a practical understanding of the various leadership

models.

Controlling.
5.1 Explain and apply the control process.
5.2 Critically discuss the focus of control.
5.3 Identify and apply the characteristics of an effective control system.
6. Demonstrate a practical understanding of the various areas of management.
6.1 Demonstrate a practical understanding of the area of General

Management.
6.2 Demonstrate an understanding of the Financial Function.
6.3 Demonstrate an understanding of the Marketing Function.
6.4 Demonstrate an understanding of the Human Resources Function.
6.5 Demonstrate an understanding of the Operations Function.
6.6 Demonstrate an understanding of the Purchasing Function.


Prescribed Reading:
o Smit, P.J., Cronjé, G.J. de J., Brevis, T. & Vrba, M.J. (2011) Management Principles: A
Contemporary Edition for Africa, Fofth Edition. Cape Town: Juta & Co. pp 87 - 123 (Chapter
4), pp 129 – 157 (Chapter 5), pp 213 – 240 (Chapter 8), pp 305 – 328 (Chapter 11), pp 435 –
457 (Chapter 16).
Books
Botha, S., Cunningham, P., Musengi, S., Visser, K., Williams, O., Lotz, J., Booysen, K., Stewart
Smith, A., Bosch, A., & Banhegyi, S. (2009) Management: Fresh Perspectives. Cape Town: Pearson
Education South Africa. pp 95 – 118 (Chapter 4), pp 147 – 166 (Chapter 6), pp 167 – 200 (Chapter
7), pp 201 – 224 (Chapter 8).
Du Toit, G., Erasmus, B. & Strydom, J. (2009) Introduction to Business Management. Seventh
Edition. Cape Town: OUP Southern Africa. Chapter 9, Chapter 13, Chapter 17, Chapter 20, Chapter
22.
Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. & Oosthuizen,
T. (2005) Management. Second South African Edition. Cape Town: Oxford University Press. pp 69
– 90 (Chapter 4), pp 195 – 214 (Chapter 9), pp 215- 234 (Chapter 10), pp 285 – 310 (Chapter 13),
pp 407 – 424 (Chapter 18).
George, J.M. & Jones, G.R. (2006) Contemporary Management: Creating Value in Orgainizations.
Fourth Edition. Boston: McGraw Hill. pp 188 – 227 (Chapter 7), pp 297 – 332 (Chapter 9), pp 448 –
489 (Chapter 13), pp 490 – 525 (Chapter 14).
Journals
Van Der Colff, L. (2003) “Leadership Lessons from the African Tree.” Management Decision. Vol.
41, No. 3, pp 257 -261.
Ulrich, D. (1998) “A New Mandate for Human Resources” Harvard Business Review, January –
February, pp 124 – 134.
4.1 Introduction
This section will explore the Management Process. As identified in Section 1, Introduction to Management, the
management process entails the execution of the four management functions Planning, Organising, Leading and

Controlling (POLC). These functions are executed not only within the area of general management, but within the
functional areas of management as well.
Thus, in exploring the management process the following will be examined:
 The Four Fundamental Management Functions
o Planning
o Organising
o Leading
o Controlling
 The Areas of Management
o General management
o Financial function
o Marketing function
o Human Resources function
o Operations function
o Purchasing function
4.2 Four Fundamental Management Functions

The four fundamental management functions of Planning, Organising, Leading and Controlling (POLC) comprise
the management process, which serves to convert the organisation’s resources (or inputs) into products and
services (outputs) required by the organisation’s market. This process is depicted in Figure 4.1 .

THE ORGANISATION
ORGANISING
RESOURCES PERFORMANCE
 Human  Achieve goals
 Financial  Products
PLANNING LEADING
 Physical  Services
CONTROLLING
Figure 4.1: The Management Process (from Smit et al, 2011: 7)
Planning
This sub-section explores the first of the four fundamental management functions, Planning. In so doing, the
following will be examined:
 Types of organisational plans
 Steps in the planning process
 Barriers to effective planning
 Planning tools
THINK POINT
Discuss why planning is important within an organization.

George & Jones (2006) assert that the importance of planning revolves around four main reasons:
 It provides a means for managers to participate in decision making about organisational goals and strategies.

 It is necessary to provide the organisation with a sense of direction and purpose. Without such a sense of
direction managers would pursue conflicting goals, which would jeopardise organisational performance
(George & Jones, 2006).
 It helps to coordinate the functions of the various organisational departments.
 It serves as a means to control managers and assess performance (George & Jones, 2006).
Planning also reduces the impact of change in that it forces managers to look ahead, anticipate and prepare for
potential change (George & Jones, 2006).
4.2.1.1 Types of Organisational Plans

Various types of organisational plans are put in place within organisations.
ACTIVITY
To answer the questions below, consider the planning activities at the organisation
where you are employed.
1. What kinds of plans are generated?
2. For what purpose are these plans generated?
3. Who is involved in the generation of these plans?
4. What kind of time frame do these plans address?
Comment on Activity
A summary of the various organisational plans and their characteristics are provided in Table 4.1 below.
TACTICAL OPERATIONAL
STRATEGIC PLANNING
PLANNING PLANNING
Alternative Name Long-term planning Medium-term Short-term planning

planning
Responsibility Top management Middle management Lower management
Time-Frame 3 – 10 years 1 – 5 years Less than 1 year
Detail Focus on organization as a whole:  Establishes  Establishes day-to-day

functional goals activities

 Purpose, mission, strategies.  Determines policies,

procedures and rules
 Alignment to external Programmes budgets and
environment projects
 Future orientation
Information  Broad, general guidelines  More detailed  Fine detail

than strategic plans
 Vague and qualitative  Specific and
 More specific quantitative
Table 4.1: Characteristics of Organisational Plans (Smit et al, 2011).
4.2.1.2 Steps in the Planning Process

Smit et al (2011) identify a generic planning process consisting of eight steps. These steps include:
 Step 1 - Opportunity Awareness: which involves realistically diagnosing the opportunity in the light of
the organisation’s current capabilities.
 Step 2 - Establishing Goals: goals are formulated to provide direction to organisational plans (Smit et
al, 2011).
 Step 3 - Drawing up Premises: which involves the establishment of planning assumptions, i.e. what is
the future environment in which the plans are expected to occur (Smit et al, 2011).
 Step 4 - Developing Various Courses of Action: which serves to establish alternative ways in which
the identified goal can be achieved.
 Step 5 - Evaluating Alternatives: the alternatives established in Step 4 need to be evaluated in terms of
various factors, including the planning premises established in Step 3.
 Step 6 - Selecting a Course of Action: this step results from Step 5.
 Step 7 - Formulating Derivative Plans: this involves the drawing up of plans which support the initial
plan (Smit et al, 2011).
 Step 8 - Budgeting: this step serves to establish the resources available for the manager to carry out the
plans and achieve organisational goals (Smit et al, 2011).
4.2.1.3 Barriers to Effective Planning

Barriers exist which may mar the effectiveness of a manager’s attempts to plan.

ACTIVITY
Consider your experience within organisations.
1. Have you ever been involved in and/or observed ineffective planning? Explain.
2. How would you go about ensuring effective planning?
Comment on Activity
A number of barriers to effective planning may be identified. These include:
 Lack of environmental knowledge (such as possible economic and technology changes);
 Lack of organisational knowledge (such as a lack of understanding about the organisation’s strategy and
capabilities);
 Reluctance to establish goals (for example, due to fear of failure and lack of confidence);
 Resistance to change, as change is inherent in planning;
 Time and expense (Smit et al, 2011).
Barriers to effective planning may be overcome through:
 Top management’s commitment to the planning process, demonstrated through the provision of effective
long-term plans.
 Management should recognise the limitations of planning and understand that plans will require adjustments
on an ongoing basis (Smit et al, 2011).
 Management should ensure effective communication of organisational plans at all levels.
 The benefits of contingency planning should be recognised by organisations operating within a turbulent
environment (Smit et al, 2011).
4.2.1.4 Planning Tools

A number of scientific tools exist which can assist the manager in his/her planning efforts. These tools include:
 Forecasting: a forecast provides a projection of future conditions based on current and historical
information.
There are different types of forecasting:
o Sales forecasting predicts future sales;
 Technological forecasting predicts future technologies and determines when they should
become economically viable;

o Resource forecasting anticipates future needs for human, financial, physical and information resources;
o Economic forecasting anticipates the future economic state of the country, such as the level of
unemployment (Smit et al, 2011).
 Budgeting: a budget is a plan “that deals with the future allocation and utilisation of various resources with
regards to different organisational activities over a given period” (Smit et al, 2011: 146). It provides the
manager with a means to translate plans into quantitative terms.
 Scheduling and Monitoring:
o PERT: Programme Evaluation and Review Technique aids the planning of projects through establishing
a network of the project tasks and their inter-relationships (Smit et al, 2011).
o Gantt Chart: This chart serves to break a project down into smaller tasks. These tasks are plotted on a
chart so as to determine how much time is required for the successful completion of the tasks and the
project as a whole (Smit et al, 2011). Gantt charts are frequently used in project management
environments.
ACTIVITY
Consider your experience within organisations.
An example of a Gantt Chart for the implementation of an Employee Survey within a

management consulting firm is provided below. Review the Gantt Chart and then answer
the questions which follow.

September October
Week Week Week Week Week Week

1 2 3 4 1 2
Step 1: Consultation
Step 2: Project Planning
Step 3: Development of Survey Tools
Step 4: Implementation
o Conduct Employee Interviews
o Administer Questionnaire
Step 5: Process and Analyse Data
Step 6: Prepare Report
1. According to the Gantt Chart, how long will it take to implement the project from start to finish?
2. What is the start date and end date of the project?
3. When will the phase of “Implementation” start and finish?
4. What “sub-activities” does the phase of Implementation entail?
5. Is the Gantt Chart something that you would choose to use to facilitate your own planning in your day to
day job? Why / why not?
Comment on Activity
Answers to the questions posed in the above activity are provided below.
 Question 1 - Length of Project: It will take six full weeks to implement the project from start to finish.

 Question 2 - Commencement & End of Project: The project will start at the beginning of September
and will be completed at the end of the second week of October.
 Question 3 - Implementation: Implementation will commence at the beginning of the third week in
September and will be completed by the end of September.
 Question 4 - Sub-Activities of Implementation Phase: The sub-activities for the phase of

Implementation include the conducting of employee interviews and the administration of the survey
questionnaire.
 Question 5 – Learners’ Use of the Gantt Chart: Responses will be dependent on individual learner’s
specific job and organisational situation. One of the key advantages of the Gantt Chart is that it is graphic /
visual which aids planning and control. Furthermore it can be used effectively to plan and control both small
and very large projects.
In summary, this sub-section has examined the management function of Planning. The importance of planning
was established, the different types of organisational plans were examined, as were the planning process and
barriers to effective planning. The different planning tools available to the manager were also examined.
4.2.2 Organising
The plans which are derived for the organisation need to be supported by the management function of
organising. This sub-section will explore the management function of organising through examining the
following:
 Reasons for organising
 Process involved in designing organisations
 Basic principles of organising
 Organisational structure
THINK POINT
Consider the structure of the organisation in which you are employed. How
does the structure contribute to the organisation’s performance?

Organising is the “process of creating a structure for the organisation that will enable its people to work
together effectively toward its vision, mission and goals” (Smit et al, 2011: 216). Therefore, an

organisation’s structure should contribute to the organisation’s performance by facilitating the

achievement of the organisation’s plans through the appropriate coordination of tasks and people.
4.2.2.1 Reasons for Organising

THINK POINT
Think about the company within which you work. What are the specific
reasons behind managers executing the function of ‘organising’ within your
specific department?

Organising is an integral part of the management process and is necessary for the following reasons, as
identified by Botha et al (2009):
 Organisation structure serves to delineate employees’ responsibilities and accountabilities.
 Organising facilitates effective communication through the establishment of clear channels of

communication.
 Organisation structure provides a mechanism for the coordination of the entire company.
 Organising provides for the grouping of related tasks and activities and in so doing provides for
specialisation which results in efficiency.
4.2.2.2 Process involved in Designing Organisations

4.2.2.3 Organisation design is a process in which managers make a decision as to what type of
organisational structure is sufficiently aligned to the external environment and which is most
appropriate to the strategies and plans of the organisation. The steps involved in the process of
organisation design are depicted in Figure 4.2.
Reflect on Establish Major Design Jobs Define Worker Develop

Plans & Tasks and and Assign to Relationships Organisational
Objectives Activities Employees Design
Feedback
Figure 4.2: The Organisation Design Process (adapted from Smit et al, 2011: 220)

4.2.2.3 Basic Principles of Organising
Some of the fundamental principles of organising include unity of command and direction, chain of
command, division of work, span of control and coordination. Each of these is discussed below.
 Unity of Command & Direction: The ‘unity of command’ principle requires that employees report
to only one manager. The ‘unity of direction’ principle requires that all tasks are directed towards the
same goals (Smit et al, 2011).
 Chain of Command: This principle requires that each employee within an organisation reports to
someone higher in the organisation (Smit et al, 2011).
 Division of Work: Division of work provides for job specialisation. Jobs which are related are
grouped together into a section or department (Smit et al, 2011). Job specialisation provides the
advantages of increased productivity, reduced training costs and reduced transfer time.
THINK POINT
Consider the company within which you work.
Can you identify the jobs which are specialised? Which jobs are not
specialised?

Jobs which are specialised within an organisation are generally found in a functional area such as
human resource management, procurement, finance and marketing (Smit et al, 2011). As managers
progress within an organisation and move to higher levels of management, their jobs become less
specialised and more generalised.
 Span of Control
Span of control refers to the optimal number of subordinates who report to a manager.
THINK POINT
Consider the company within which you work.
How many employees report to you as their manager?
And how many people report to your direct manager?
In your opinion is this ratio of employees to managers optimal?


If too many employees report to a manager the manager will be unable to perform his / her job effectively.
In instances where few employees are managed this is known as a ‘narrow span of control’, and where
more employees are supervised this is known as a “wide span of control’ (Smit et al, 2011).
 Coordination
A further principle of organising is that of coordination.
THINK POINT
Ouline the problems that are likely to emerge from the division of tasks and
departmentalisation of activities brought about by the Organising
management function?

Organising, in dividing and subdividing the overall task of the organisation, presents the manager with
the problem of achieving cooperation between the parts of the organisation. Thus, coordination is
fundamental to the task of management, in that the manager must facilitate the integration of the various
tasks performed at different levels so as to ensure that the organisation achieves its ultimate goal (Smit
et al, 2011). Mechanisms to assist the manager with coordination include budgets, objectives, the
organisational chart, committees and policies and procedures (Smit et al, 2011).
4.2.2.4 Organisational Structure

The structure of the organisation is usually represented in the form of an organisational chart, in which
the division of work and departmentalisation of tasks is shown. The organisational chart also shows the
employees which report to each manager, and demonstrates each manager’s span of control (Hellriegel
et al, 2005).
There are two types of organisational structures:

 The Formal Structure comprises of the relationships between managers and subordinates, as
represented in the organisational chart (Smit et al, 2011).
 The Informal Structure is a structure which emerges naturally from the social relationships which
develop between the employees within the organisation (Smit et al, 2011).
Forces Impacting Organisational Structure

Four key forces influence the design of the organisational structure:

 Management’s perception of the organisation and organisational problems
 The task itself
 Environmental forces
 The needs and skills of subordinates.
ACTIVITY
Consider the following:
A young company, providing internet services to the corporate clients, is influenced
by the following forces affecting organisational design:
 High task complexity requiring intensive use of technology;
 Constant change within the technological environment;
 High skills levels, and a need for challenging work, amongst the company’s
staff;
 A management that views the environmental change positively and believes in

empowering employees.
In the light of these forces, what organisational design would be most appropriate
for this organisation? A flat structure or a tall structure? Provide reasons for your
answer.
Comment on Activity
A flat structure would be most appropriate for the young internet company, in that it would provide for a
wide span of management and few hierarchical levels, which would allow for empowerment of the
employees and the meeting of their needs. This in turn would provide for the flexibility necessary for the
organisation to adjust to the pace of change brought about by its environment.
Departmentalisation
The formation of departments within an organisation results from specialisation and involves the logical
grouping of activities (Hellriegel et al, 2005). The method of departmentalisation adopted provides the
organisation with a specific type of structure. The forms of organisational structure include the following:

Functional organisational structure which comprises all the functional departments which an organisation
requires to produce its products or render its services (George & Jones, 2006). Typical functional
departments include finance, marketing, operations and human resources. An advantage of the
functional structure is that:
 the grouping of similar jobs together provides for specialisation as well as cooperation within a
particular function (George & Jones, 2006).
 Product structure which is a divisional structure where each product or business line is handled by a
self contained division within the business (George & Jones, 2006). For example, a manufacturer of
home appliances may have a kitchen appliances division, a television and sound division as well as
a gardening appliances division. Within each division there will be functional departments.
 Geographic structure which is also a divisional structure with each region served by a self contained
division (George & Jones, 2006). For example, a supplier of corporate IT services may have a
European division, African division, Australian division and Middle East division. Within each division
there will be functional departments.
 Market structure which is divisionally structured according to the kind of customers the organisation
serves (George & Jones, 2006). This structure is also known as a customer structure. For example,
a computer company could be structured into divisions for large business companies, small business
companies and academic institutions.
 Matrix organisational structure which combines the advantages of a functional and product
organisational structure. Project managers are appointed to manage each organisational project
and are provided with the necessary skills from each functional area (e.g. operations, sales) and
from product managers (representing the organisation’s various product lines) (Hellriegel et al,
2005).
 Network organisational structure which “subcontracts some or all of its operating functions to other
firms, and coordinates their activities through managers and other personnel at its headquarters”
(Hellriegel 2005: 229). This enables contractors to be brought on board or dropped as required. A
particular advantage of the network organisation is that not only is it efficient but it is also very flexible
(Hellriegel, 2005).

In summary this sub-section explored the management function of Organising. The reasons for
organising, the process involved in organisation design, the principles of organisation as well as the
determination of organisation structure were explored.
4.2.3 Leading
This subsection will examine the fundamental management function of leadership, and the
following will be studied:
 The nature and components of leadership
 Leadership versus management
 Leadership models
 African leadership
4.2.3.1 The Nature & Elements of Leadership
Leadership may be defined as “the process by which an individual exerts influence over other people
and inspires, motivates, and directs their activities to help achieve group or organisational goals” (George
& Jones, 2006: 301).
Leadership is a complex process which directly impacts on the performance of an organisation. It

comprises a number of elements, which include:
 Authority: which provides the leader with the right, by virtue of his/her position within the
organisation, to give instructions and delegate work to subordinates (Smit et al, 2011).
 Influence: which involves using authority and power in a manner which inspires and motivates
subordinates to take action (Smit et al, 2011).
 Delegation: where the leader allocates a part of his/her own task to a subordinate to perform
together with the necessary authority to execute it.
 Responsibility & Accountability: where the leader is responsible for carrying out his tasks and
must account for his/her performance (Smit et al, 2011).
 Power: which refers to the leader’s ability to influence (without necessarily using his/her authority).
There are various types of power which a leader may draw from (George & Jones, 2006). These
include:
o Legitimate power: which refers to the power which the leader has as a result of the hierarchical
position which he/she possesses within the organisation (George & Jones, 2006). For example,

Tokyo Sexwale’s position as Executive Chairperson at Mvelaphanda Holdings affords him

legitimate power.
o Reward power: this refers to the leader’s ability to withhold or give tangible rewards (e.g.
incentives, pay increases, new office) and intangible rewards (e.g. respect, verbal praise).
o Coercive power: refers to the leader’s ability to punish others and in so doing instill fear (George
& Jones, 2006). The exercise of coercive power has been found to seldom result in higher
performance.
o Referent power: results from a leader’s personal characteristics and refers to his/her ability to
command respect, admiration and loyalty (George & Jones, 2006). An example of a leader who
had, and still holds, much referent power is Nelson Mandela.
o Expert power: results from the knowledge, skills and expertise of the leader (George & Jones,
2006).
4.3.2.1 Leadership vs Management

Much debate exists within the literature about the differences between leadership and
management.
THINK POINT
Consider your experience as a manager. In your opinion:
(a) is management different from leadership?
(b) can managers also be leaders?
Explain your answers.

Leadership and management are distinctive but complementary. Management is essentially about
coping with complexity whereas leadership is about coping with change (Smit et al, 2011). While
managers focus on the non-behavioural components of management, leaders focus on the behavioural
dynamics of an organisation and its employees.
Some of the key differences between management and leadership are highlighted in the table
below.

MANAGEMENT LEADERSHIP
 Planning and Budgeting (in order to  Setting a Vision (analyse broad range of data in
produce orderly results) order to create visions and strategies)
 Organising & Staffing (includes decisions related  Aligning people (extensive communication of
to job structures, placing of employees in vision to various individuals – internal and
appropriate jobs, communication of plans to external to the organisation)
workforce, etc)  Motivating People (energising staff to decide on
 Controlling & Problem Solving (ensures that own ways to achieve vision)
managerial processes are fail-safe and risk-free)
Table 4.1: Differences Between Management & Leadership (adapted from Smit et al, 2011)
While management and leadership are indeed distinctly different from each other Smit et al (2011) argues
that “a person can be a manager, a leader, both or neither” (p 277). This implies that certain managers
are able to develop into effective leaders, while others are not.
4.2.3.2 Leadership Models

A number of models exist which attempt to explain the nature of leadership.
THINK POINT
Do you agree with the assertion “leaders are born and not made”?
Provide reasons for your answers.

While those individuals who follow a trait approach to leadership believe that leaders are born and not
made, a number of research studies and other leadership theories (such as behavioural and contingency
theories) undermine this belief. These theories will be examined in greater detail below.

READING ACTIVITY
Read the following pages from your prescribed text and then answer the
Principles: A Contemporary Edition for Africa, Fifth Edition. Cape Town: Juta
& Co. pp 305 – 328.
From your readings, what are the distinguishing characteristics of following

leadership theories?
1. Trait Theory
2. Behavioural Theory
3. Contingency Theories
4. Contemporary Theories

A brief summary of the various categories of leadership theories is provided below.
LEADERSHIP
THEORIES
CONTINGENCY CONTEMPORARY
THEORIES THEORIES
BEHAVIOURAL
THEORIES
TRAIT
THEORIES  Fiedler’s  Transactional
contingency leadership
theory
 Charismatic
 Hersey & leadership
Blanchard’s
model  Transformational
leadership
Figure 4.3: Categories of Leadership Theories.
As depicted in Figure 4.3 above, there are four categories of leadership theories:
 Trait Theories: focus on the personal characteristics and traits which studies have shown leaders
to possess (George & Jones, 2006). Some of the key leadership traits which have been identified
include:
o Physical Characteristics: young to middle aged; tall and slender, energetic, striking appearance
(Hellriegel et al, 2005)
o Social Background: socially known and respected, well educated at the ‘right’ schools, upwardly
mobile.
o Personality: aggressive, adaptable, self-confident, dominant, emotionally stable and sociable

(Hellriegel et al, 2009).

Trait theory argues that the presence or absence of the identified leadership traits distinguish leaders
from non-leaders. However, research has not shown this to hold true (Hellriegel et al, 2009).
 Behavioural Theories: focus on the behaviour of successful leaders (Smit et al, 2011). Research
undertaken at the Ohio State University identified two types of leadership behaviour:
o A Considerate Leadership Style: where leaders are concerned with employee’s well being.
These leaders recognise employees who perform well and do not demand more from
employees than what they can achieve. They are also friendly towards employees and are
accessible (Hellriegel et al, 2005).
o An Initiating-Structure Leadership Style: involves the leader in planning, organising and

controlling his / her employee’s activities. Such leaders will typically focus on assigning tasks
to particular employees and establishing performance standards, as well as scheduling and
applying uniform procedures (Hellriegel, et al, 2005).
While the considerate leadership style is easily accepted by subordinates, the initiating-structure
leadership style can lead to employee grievances, absenteeism, turnover and low job satisfaction
(Hellriegel et al, 2005). However, “research suggests that effective leaders may exhibit both
considerate and initiating-structure behaviours….employees’ reactions to initiating-structure leaders
tend to depend on whether they also believe that their leaders are considerate…if so, they view the
leader as effective” (Hellriegel et al, 2005: 290).
The University of Michigan undertook a similar study to that conducted at the Ohio State University.
They found that leadership behaviour is two-dimensional and involves task-oriented leader
behaviour (where the leader is concerned with careful supervision and control) as well as employee
oriented behaviour (where the leader is concerned with participative management and motivation).
The research also showed that leadership behaviour appropriate to one situation is not necessarily
suitable for another situation (Smit et al, 2011). It was also concluded that both dimensions of
leadership may be necessary for success.
Based on the studies at Ohio State University and the University of Michigan which identified the two
divergent dimensions of leadership, the ‘leadership grid’ and ‘leadership continuum’ were developed
to assist leaders in choosing an ideal leadership style (Smit et al, 2011).
 Contingency Theories: focus on the manner in which the situation impacts on the effectiveness of
leadership (George & Jones, 2006). While Fiedler’s model focuses on congruence which exists

between the leader, the subordinates and the situation, Hersey & Blanchard’s model focuses on the
fit between the leader’s style and the maturity of his/her subordinates (Smit et al, 2011). The Vroom-
Yetton-Jago model, on the other hand focuses on the degree of group participation expected.
 Contemporary Theories: More recent leadership theories include:

o Transformational Leadership where leaders are able to initiate substantial motivation, innovation
and change (Smit et al, 2011). Examples of famous transformational leaders include Nelson
Mandela, John F. Kennedy, Joan of Arc and Martin Luther King (Hellriegel et al, 2005).
Transformational leaders demonstrate three types of behaviours which motivate employees to
follow them. These behaviours are vision (setting direction), framing (definition of purpose in
meaningful terms) and impression management (control of impressions which others form of the
leader) (Hellriegel et al, 2005).
o Female Leadership is a further contemporary approach which focuses on an interactive

leadership style which succeeds in building consensus and creating an open and inclusive
environment (George & Jones, 2006). Indeed, research has shown that female leaders “tend to
be somewhat more participative as leaders than are men, involving subordinates in decision
making and seeking their input…male [leaders] tend to be less participative than are female
[leaders], making more decisions on their own and wanting to do things their own
way….moreover research suggests that men tend to be harsher when they punish their
subordinates than do women” (George & Jones, 2006: 323).
4.2.3.3 African Leadership

African leadership is a relatively new area of focus for management theorist. Mostert (cited in Botha et
al, 2009) asserts that “African leadership – the true art of valuing people in the achievement of success
through allowing success for all – will become one of the greatest export commodities on our
continent….it will demand much courage from new African leaders to challenge both their own old ideas
as well as traditional European and American views of leadership, to create a truly and uniquely African
brand of leadership” (p 188).

READING ACTIVITY
Read the following text and then answer the question which follows:
 Van Der Colff, L. (2003) “Leadership Lessons from the African Tree.” Management
Decision. Vol. 41, No. 3, pp 257 -261.
1. According to Van Der Colff (2003), what is ‘Ubuntu’?
2. Ubuntu values ‘leadership legitimacy, communal enterprise and value sharing
Discuss the implications which each of these values have for the work of African leaders.

What is Ubuntu?
Van Der Colff (2003) asserts that “the main stem that underpins all the most important values of African
history can be traced through Ubuntu… Ubuntu can be seen as the key to all African values and involves
collective personhood and collective morality…therefore values around harmony are deeply embedded
in African communities” (p 257). The branches of the African Ubuntu tree are formed by “leadership
legitimacy, communal enterprise and value-sharing” (Van Der Colff, 2003: 258).
Leadership Legitimacy
African leadership has been built on spiritual authority, responsibility and participation, and requires
transparency, accountability and legitimacy (Van Der Colff, 2003). To be legitimate, leaders need to:
 Be effective role models for their employees, actively showing their personal commitment to the
values and goals of the organisation.
 Be productive and create an enabling environment in which employees are empowered to be

productive.
 Value their employees, convey appreciation and provide support where required (Van Der Colff,
2003).
Communal Enterprise
To increase the competitive advantage of African countries it is important that the African value system
is applied in tandem with western and eastern business practices. This can be achieved through:
 A clear vision which incorporates the values of inclusivity and community; and
 The leader’s articulation of his motivation to lead the employees towards the desired vision (Van
Der Colff, 2003).

The vision which is created must be future oriented and must be appropriate to all employees. In leading
the employees towards the vision the leader must stand by the values on which the vision is based,
encourage employees to commit to the organisational values and recognise diversity as a strategic asset
(Van Der Colff, 2003).
Value Sharing
Value sharing is seen as “interconnectedness, continuous integrated development, respect and dignity
and collectivism and solidarity” (Van Der Colff, 2003: 259). Value sharing may be achieved within
organisations in the following ways:
 If organisations could be seen as communities and not just structures of power this would facilitate
individual empowerment. For leaders to maximise commitment to organisational goals and strategy,
employee development and empowerment is a necessity, as empowered employees would be
mobilised towards the organisational vision.
 Work teams can be used within an organisation to ensure solidarity and collectivism.
 The leader must ensure a “resource rich environment” through supporting a team, while at the same
time enthusiastically telling others about the teams’ work.
 Cultivating a culture of inclusivity through respect and dignity.
Such approaches will enable employees to work cohesively and productively while providing for
organisational renewal (Van Der Colff, 2003).
In summary therefore, this subsection explored the management function of Leading. The nature and
elements of leadership were studied, the differences between management and leadership were
examined and the various leadership theories were investigated. In concluding this sub-section African
Leadership was explored.
4.3.3 Controlling
This section will explore the fourth management function, Controlling, and the following issues will be
examined:
 The control process
 The focus of control
 The characteristics of an effective control system


Control refers to the “process whereby managers monitor and regulate how efficiently and effectively an
organisation and its members are performing the activities necessary to achieve organisational goals”
(George & Jones, 2006: 493). This function adds value to the overall management process and the
organisation, in that control:
 Enables managers to achieve superior efficiency;
 Ensures, and improves, the quality of the goods/services produced/provided;
 Enhances responsiveness to customers (George & Jones, 2006).

4.1.1.1 The Control Process
The process of control comprises of four steps, and is summarised in Figure 4.4 below.
STEP 1:
ESTABLISH PERFORMANCE STANDARDS
Performance standard = projection of planned performance
 Establish during planning stage
 Performance standards should be realistic, attainable & measurable
STEP 2:
MEASURE ACTUAL PERFORMANCE
 Manage performance on an ongoing basis
 Determine deviation between actual performance and planned performance
STEP 3
EVALUATE PERFORMANCE DEVIATIONS
 Determine reasons for poor performance or over performance
 Determine significance of deviations – is further action necessary?
STEP 4:
IMPLEMENT CORRECTIVE ACTION
 Corrective action serves to achieve or better the performance
standard
Figure 4.4: The Control Process (George & Jones, 2006).

4.1.1.2 The Focus of Control

Control mechanisms should be focused on activities relating to the organisation’s resources at strategic
control points.
Strategic Control Points

The organisation’s activities should be controlled at strategic control points (George & Jones, 2008). As
depicted in Figure 4.5 below, three strategic points exist at different stages of the management process:
CONCURRENT
FEEDBACK
FEEDFORWARD CONTROL
CONTROL
CONTROL
INPUTS ORGANISING OUTPUTS

 Human  Achieve goals
 Financial  Products
 Physical  Services
 Productivity
 Information PLANNING LEADING
 Profit
CONTROLLING
Figure 4.5: Strategic Control Points
Input Stage: during this stage feedforward control must be implemented, where management should
seek to anticipate problems before they occur. Feedforward controls may also be referred to as
preventive controls. An example of a feedforward / preventive control would be the measures that a 24-
hour petrol station’s management would take to minimise the possibility and effect of a robbery –
preventative measures would include at least two attendants on duty throughout the night, a well lit petrol
station, only R500 available in the cash register, a surveillance camera and panic buttons linked to an
armed response security company (Hellriegel et al, 2005).
 Conversion Stage: during this stage, concurrent control, or steering control, must be exercised,
where management should deal with problems as they occur. Concurrent control is frequently used
in production line set ups where each completed task in the production chain must be up to a certain
standard or else it will negatively affect the final product. An example would be in the fashion industry
where fashion designers who are to show their designs at fashion show (e.g. International Fashion

Week) need to ensure that their garments perfectly fit the model assigned to wear them. This
requires regular fittings, as the concurrent control, throughout the process of constructing the
garment (Hellriegel et al, 2005).
 Output Stage: during this stage, feedback control (also known as post-control or reactive control)
should be implemented, where problems are addressed by management after they have arisen
(George & Jones, 2006). For example, should an aircraft crash when landing at an airport, the air
traffic company would need to investigate the accident and determine the reasons for the crash. It
will not be possible to recover the passenger lives lost and damages incurred, but the feedback
control provides a means to minimise the recurrence of such an accident (Hellriegel et al, 2005).
Organisational Resources
The control of the organisational resources should occur at strategic points within the
management process.
ACTIVITY
1. Describe the types of control mechanisms which you have encountered within
your workplace.
2. Discuss the resources that these mechanisms attempt to control.
Comment on Activity
Smit et al (2011) identify various mechanisms to control the organisation’s physical, financial, information
and human resources.
 Physical Resource Control Systems include:

o Inventory control which refers to the reserves of materials held in readiness to produce products
and services. Inventory control systems include economic ordering quantity system, materials
requirements planning (MRP) and just-in-time (JIT).
o Operational control which includes techniques such as PERT, linear programming and break-
even analysis.
o Quality control which includes techniques such as Total Quality Management (TQM) (Smit et al,
2011).
 Financial Resource Control Systems include:

o The budget

o Financial analysis
 Information Resource Control Systems
 Human Resource Control Systems include

o Performance measurement
o Ratio analyses, to determine for example, labour turnover, absenteeism and work force
composition (Smit et al, 2011)
A further control system which Smit et al (2011) identify is that of strategic control, which involves the
organisation’s top management in the study of the total organisation with respect to its productivity,
effectiveness, management effectiveness and alignment to the environment.
4.2.4.3 Characteristics of an Effective Control System

As was seen in the above subsection, a considerable number of control systems and techniques are
available for the organisation to implement. However, it is important that the organisation implements its
control systems in a manner which ensures their effectiveness. Smit et al (2011) identify five
characteristics of effective control systems:
 Integration: it is important to integrate the management functions of planning and controlling in that
the latter provides information which stimulates the revision of organisational plans.
 Flexibility: it has emerged throughout this Study Guide that environmental change has a
considerable impact on the current day organisation. Thus the organisation’s control systems should
be sufficiently flexible to accommodate adjustments to the organisation’s plans.
 Accuracy: it is imperative that the control system provides an objective and accurate picture of the
organisation’s situation.
 Timeliness: control data should be available to management on a regular basis.
 Simplicity: the control system should not be unnecessarily complex. A system which is too complex
is likely to hamper the manager’s utilisation of the system (Smit et al, 2011)
In summary, this subsection explored the fourth management function, Control. In so doing, the
importance of control, the control process, the focus of control as well as the characteristics of an effective
control system were examined.

4.3 Areas of Management

The four fundamental management functions of Planning, Organising, Leading and Controlling discussed
in subsection 4.2 above comprise the area of General Management. As identified in Section 1
(Introduction to Management) of this Study Guide, various functional areas of management exist in which
the activities of General Management are applied. This sub-section will examine a number of the
functional areas of management, and will address:
 The Financial Function
 The Marketing Function
 The Human Resources Function
 The Operations Function
 The Purchasing Function

4.3.1 The Financial Function
The Financial Function is concerned primarily with the flow of funds within the business (Du Toit,
Erasmus, Strydom, 2009). In particular a financial manager concerns himself with:
 Financing, i.e. acquiring funds for the business to use;
 Investing, i.e. applying funds in the acquisition of assets; and
 Administering and reporting on financial matters (Du Toit et al, 2009).
ACTIVITY
Explain what you think the relationship of the “Financial Function” is to:
 the organisation’s external environment?

 related disciplines such as Accounting and Economics?
 other areas of management?

The relationship between the Financial Function, other functional management areas, related disciplines
and the environment is depicted in Figure 4.6 below.

Financial
SUBJECT
DISCIPLINES
 Accounting
ENVIRONMENTAL  Cost accounting
FACTORS TASKS
 Form of business  Financial analysis, Support  Economics
reporting, planning &
 Financial institutions control
& markets Influence
 Management of
 Incentive measures financing structures
 Legislation OTHER AREAS
 Management of asset
structure Mutual MANAGEMENT
 Taxation Support  General
 Purchasing
 Marketing
 Public
Relations
Business
 HR
Figure 4.6: The Relationship Between the Financial Function and Related Disciplines, the
Organisation’s Environment and Other Management Areas (Du Toit et al, 2009)
4.3.2 The Marketing Function

The focus of the Marketing Function is to find means to transfer an organisation’s products and services
to the market (Du Toit et al, 2009). It involves conducting market research for the purposes of
environmental scanning, as well as the development of a market offering (either a product or a service)
which is offered to the market at a specific price at a convenient location (Du Toit et al, 2009). The
Marketing Function also involves providing the potential consumer with sufficient information about the
organisation’s product or service offering.
ACTIVITY
Consider the organisation for which you work. Identify the specific activities and
initiatives for which the Marketing Function is responsible.
Comment on Activity
The Marketing Function is involved in formulating a marketing strategy, which will enable the organisation
and its particular products and services to ‘reach’ the target market, through making decisions about the
four marketing instruments (four Ps):

 Product: this refers to the item or service which is designed to satisfy the target market’s needs.
Decisions about products include brand decisions, packaging decisions, and decisions about how to
go about differentiating a product (Du Toit et al, 2009).
 Price: refers to the exchange value of the product or service. Various factors influence the
determination of the price of a product (Du Toit et al, 2009).
 Place: refers to the manner in which the product or service is to be distributed. Decisions about
place (distribution) include the choice of distribution channel and type of market coverage.
 Promotion: refers to the process of marketing communication which involves informing a

potential consumer about a product or service and persuading him / her to buy it (Du Toit et al,
2009). This is achieved through advertising, personal selling, sales promotion and publicity.
4.3.3 The Human Resources Function

The Human Resources Function includes all “the activities that managers engage in to attract and retain
employees and to ensure that they perform at a high level and contribute to the accomplishment of
organisational goals” (George and Jones, 2006: 529).
ACTIVITY
Consider the organisation in which you are currently employed. Identify the specific
activities and initiatives for which the Human Resource Function is responsible.
Comment on Activity
Du Toit et al (2009) identify the task of the Human Resource (HR) Function within an organisation as
being to assist line managers in optimally utilising the human resources allocated to them. In so doing,
the Human Resource Function engages in three central activities:
 Attracting human resources: which involves the process of human resource planning, recruitment,
selection, placement and induction.
 Retaining human resources: which involves the management of employee performance,

remunerating employees, providing for health and safety and promoting positive labour relations.
 Developing human resources: which involves training and educating employees both on and off the
job (Du Toit et al, 2009)

READING ACTIVITY
1. From your experience, what challenges do you think the current day Human
Resources Manager is faced with?
Now read the following article and then answer the question which follows:
 Ulrich, D. (1998) “A New Mandate for Human Resources” Harvard Business

Review, January – February, pp 124 – 134.
2. How does Ulrich’s (1998) view about the challenges for the Human Resources
Function differ from those which you expressed in your answer to question 1
above?

Ulrich (1998) argues that despite HR’s generally poor reputation within organisations, given the
competitive forces which exist in the current day, “achieving organisational excellence must be the work
of HR” (Ulrich, 1998: 124). According to Ulrich (1998), the importance of HR is due to the following
organisational challenges:
 Globalisation: which requires that organisations improve their learning capabilities and manage
complexity and diversity;
 Profitability through Growth: companies seeking revenue growth need to be innovative and creative
and encourage the sharing of information amongst employees;
 Technology: managers need to learn how to remain ahead of the information curve and effectively
utilise information to attain business results;
 Intellectual Capital: managers are presented with the challenge of attracting, assimilating,
compensating and retaining talented individuals;
 Change: in order to survive within an environment characterised by change, organisations will need
to develop the capacity to cope with change (Ulrich, 1998).
For the HR Function to facilitate the manner in which the organisation deals with the above challenges,
the function needs to change its role by becoming a/an
 Partner in strategy execution (to guide strategy discussions and decisions);

 Administrative expert (to improve efficiency within both the HR department and the entire
organisation);
 Employee champion (to ensure employee commitment to the organisation); and
 Change agent (to build the organisation’s capacity to embrace and cope with change) (Ulrich, 1998).
Thus, in essence, HR needs to focus “more on deliverables of their work and less on just getting their
work done” (Ulrich, 1998: 134).
4.3.4 The Operations Function

The Operations Function focuses on the utilisation of resources to manufacture products or provide
services (Du Toit et al, 2009).
ACTIVITY
Consider the organisation for which you currently work. In what particular activities
is the Operations Function involved?
Comment on Activity
The Operations Function influences the organisational transformation process where inputs are
converted into organisational outputs, as indicated in Figure 4.7 below :
THE ORGANISATION
Operations Management
INPUTS Strategies & Objectives OUTPUTS
 Human
 Products
 Financial
 Services
 Physical TRANSFORMATION PROCESS
Operations Operations Operations

Design Planning & Improvement
Figure 4.7: The Operations Function (adapted from Du Toit et al, 2009)

As shown in Figure 4.7, the following components of the Operations Function influence the
organisational transformation process:
 Operations Design: which addresses the integration of the design of products and/or services and
the design of processes to produce these products and/or services (Du Toit et al, 2009).
 Operations Planning and Control: which involves activities which aim to reconcile supply of, and
demand for, products and services in terms of volume, timing and quality.
 Operations Improvement: which involves the implementation of various activities and techniques to
improve operations performance (Du Toit et al, 2009).
4.3.5 The Purchasing Function

The Purchasing Function efficiently procures the necessary materials for the manufacture of the
organisation’s product and / or the rendering of the organisation’s service (Du Toit et al, 2009).
ACTIVITY
Consider the Purchasing Function within the organisation where you are currently
employed. Desribe the activities that constitute this function.
Comment on Activity
Du Toit et al (2009) identify that the activities of the Purchasing Function include:
 The selection of suppliers
 The purchasing of materials
 The transport of materials to the business
 Deciding what prices are acceptable
 Determining quality and quantity of materials and/or services
 Expediting and receiving materials
 Controlling warehousing and inventory holding (Du Toit et al, 2009)

4.4 Summary
This section explored The Management Process. The four fundamental management functions of
Planning, Organising, Leading and Controlling (POLC) were examined, as were the areas of
management where the General Management, Financial Function, Marketing Function, Human
Resources Function, Operations Function and Purchasing Function were explored.
The next section of this module, Section 5, will examine various contemporary management
issues.

1. The Executive Committee of ‘The Home Appliance Company’, a home appliance retailer with 20
stores operating across the country are meeting at a conference centre away from the office for
their annual visionary workshop. At this workshop they are to review and revise the organisation’s
vision, mission and objectives.
The planning which the Executive Committee is engaging in is an example of which of the
following types of planning:
A. Strategic Planning
B. Tactical Planning
C. Operational Planning
D. None of the above
2. On completion of their visionary workshop, The Home Appliance Company’s Executive Committee
returns to the workplace. The CEO drafts a memo to the four regional managers who are each
responsible for the stores in their respective regions. The purpose of the CEO’s memo is to provide
the regional managers with the organisation’s new vision, mission and objectives. The CEO also
requires that each regional manager develop a plan which will provide for the implementation of
the vision, mission and objectives within their respective regions.

The plans which the regional managers are to prepare are:
A. Strategic Plans
B. Tactical Plans
C. Operational Plans
3. The Home Appliance Company’s organisational chart is as follows:
CEO
Executive
Managers
Southern Northern Eastern Western

Region Region Region Region
The Home Appliance Company’s organisational design is a:
A. Matrix orgaisational structure
B. Functional organisational structure
C. Geographical organisational structure
D. Network structure
4. At the Home Appliance Company each store manager reports to only one manager, their respective
regional manager.
This is an example of which of …
A. Unity of Command
B. Span of Control
C. Division of Work
D. Coordination
5. Which type of power does the CEO hold as a result of his hierarchical position within The
Home Appliance Company?

A. Legitimate Power
B. Reward Power
C. Coercive Power
D. Referent Power
6. The Home Appliance Company is in the process of recruiting a suitable candidate for the position
of regional manager for the southern region. The CEO (Craig) and the Human Resource
Executive Manager (Kyra) have just completed an interview with Thomas, one of the applicants
for the position.
“So Kyra, what did you think of Thomas,” asks Craig, the CEO.
“Hmm,” responds Kyra, “we need someone with leadership skills, and Thomas came across as self
confident and stable. He is also tall, slender and quite striking in his appearance it is said that such
characteristics are an indicator of leadership abilities I think he is an ideal candidate for the job!”
Based on Kyra’s assessment of Thomas’s leadership abilities, which of the following leadership
approaches do you think she subscribes to?
A. Trait Theory
B. Behavioural Theory
C. Contingency Theory
D. Contemporary Approaches
6. In response to Kyra’s comments about her perceptions of Thomas’s leadership abilities, Craig, the
CEO responds, “Really, Kyra, I think that is nonsense! Even when I did my MBA all those years
ago we determined whether someone was a leader through the behaviour that they exhibited -
leadership behaviour can be task-oriented, employee oriented or a combination of both. We
certainly did not use a person’s physical characteristics to assess his leadership potential!”
Craig’s comments about leadership indicate that he subscribes to the …
A. Trait Theory
B. Behavioural Theory
C. Contingency Theory
D. Contemporary Approach

7. The northern region in which five of The Home Appliances Company stores are located is the
wealthiest region in the country. As a result stores in this region have recently experienced a
spate of robberies. Fortunately none of The Home Appliances Company’s stores have been
robbed as yet. So as to minimise the possibility of a robbery the regional manager for the northern
region has arranged for all five stores to be linked up with a reputable armed response company.
There are also surveillance cameras in store and each store is manned with three security guards.
These preventative measures are an example of which of the following types of control?
A. Feedforward Control
B. Concurrent Control
C. Steering Control
D. Feedback Control
Answers to Self Check Activity
1. A 2. B
3. C 4. A
5. A 6. A
7. B 8. A

The Study Group Discussion exercise for this section of your Study Guide
is quite a lengthy one and comprises four components. It is therefore
recommended that the activities are addressed over two or more Study
Group sessions.
ACTIVITY1: Planning
1.1 Each group member should try to get a copy of their organisation’s strategic plan. Share these
strategic plans with your Study Group. Compare and contrast the contents of the strategic plans.

1.1.1 Are there any similarities across strategic plans?

1.1.2 Are there any differences?
1.1.3 What is the single most important learning that has emerged from this comparison?
1.2. Each group member must provide a sample of a plan which he / she develops and regularly uses
within his / her department. The plan must be presented to the Study Group and relevant
background information must be provided. The Study Group must then review each of the plans
presented by group members and comment on the plans’ strengths and weaknesses and make
recommendations for their improvement.
ACTIVITY 2: Organising
Select an organisation with which all members of your Study Group are very
familiar. The organisation may be a corporate, a retailer, and NGO or a school.
Before answering the questions below, it would be useful to visit the organisation’s
website to gather further information on the organisation. It would also be useful, if
possible, to have a management representative from your chosen organisation to
meet with your Study Group to provide background information on the organisation
and its design.
1.1 What type of organisational structure does your chosen organisation use?
2.2. Which of the other organisational structures with which you are familiar may
allow the your chosen organisation to operate more effectively? Provide
reasons for your choice.
1.3 What is the span of control of the top managers and of the middle managers?
Is this span of control optimal?
ACTIVITY 3: Leadership
For this activity your Study Group needs to identify and think about a situation in
which a well known leadership figure was very ineffective (the leadership figure
could be a CEO, a political figure, or a celebrity).
3.1 Identify the sources of power which this leader had.
3.2 Did the leader have sufficient power to influence his / her followers?

3.3 What behaviours did the leader exhibit? Were these behaviours appropriate to
the situation?
3.4 Was the leader task-oriented or employee-oriented? What impact did this have
on his / her leadership effectiveness?
3.5 How did this leader go about motivating his / her followers? Were his motivation
initiatives appropriate?
3.6 Could this leader be classified as a transformational leader? Provide reasons

for your answer.
(this activity has been adapted from George & Jones, 2006: 327)
ACTIVITY 4: Control
Before meeting as a Study Group, individual group members are required to reflect
on the control mechanisms implemented within their organisation. Control
mechanisms which occur at the input stage, conversion stage and output stage
must be identified.
4.1 When you meet as a Study Group each group member must present his / her
findings on control mechanisms implemented within his / her organisation.
4.2 Once all group members have presented, the group should discuss:
 Commonalities in control mechanisms used
 Differences in the various organisation’s approaches to control and

the reasons for these differences
 Suggestions for improvement for each organisation

Responses will differ across study groups, and there are no model answers as responses are based on
the learners’ chosen organisation or the organisation for which they work.
The four Study Group Discussion activities provide the study group with opportunities to reflect on and
analyse the application of the four management functions within their organisation and other

organisations. Group members, in sharing their experiences will learn from each other which in turn will
enable them to better implement the management functions within their respective organisations in the
future.

Instructions:
Read the brief case study below and then answer the questions which follow.
‘Progress Pharmaceuticals’ is a pharmaceutical company which researches and
develops medicine for the whole range of human ailments. Krishnie is Progress
Pharmaceuticals’
Marketing Manager for the paediatric range of over the counter medicines. She has
only worked for Progress Pharmaceuticals for a period of three months. Prior to
Progress Pharmaceuticals she held a Marketing Manager position at Innovate, an
organisation which provides IT services to corporates.
At a departmental meeting Kagiso, the Marketing Director, informs his staff that
Progress Pharmaceutical’s Executive Committee has recently updated the
organisations strategic plan. Kagiso, requests that all Marketing Managers attend a
Tactical Planning workshop in the following week so that they may develop a
departmental plan which supports the implementation of the strategic plan.
During the departmental meeting, Kagiso also provides his staff with an overview of
the new strategic plan. He informs the staff that the Executive Committee is still
considering change in organisational structure, possibly to a matrix organisational
structure or to a network organisational structure. Krishnie is not sure what these
two possible new structures entail, but instead of asking Kagiso, she decides to
research them on the internet after the meeting.
The departmental meeting concludes at 13h00, and Krishnie retreats to her office.
It is lunch time, so she closes her door and calls her good friend and past colleague,
Busi, who still works at Innovate.
“It is so nice to hear from you Krishnie! So how are you enjoying working at
Progress Pharmaceuticals?” asks Busi.

“Well,the work is very interesting and challenging, and you know that I enjoy a
challenge Busi!” responds Krishnie. “However, the Marketing Director to whom I
report can be a bit difficult – his leadership style is very different to Jason’s, my
previous boss at Innovate.”
“Why, what don’t you like about your new boss?” questions Busi.
“Well, he can be very domineering, overly self confident and he comes across as
quite aggressive at times. He doesn’t seem to be concerned at all with his staff’s
well being and he never asks how we enjoyed our weekend or how our family is
doing. He sets high performance standards and tight deadlines which are not
negotiable. As a result I have been working 16 hour days and through the
weekends. It is surprising that he is not a better leader as he has an MBA from
Harvard!”
1. Krishnie holds the position of Marketing Manager within the Marketing

Department of Progress Pharmaceuticals. Name and describe the function
of at least three other functional departments which are likely to operate
alongside and interact with the Marketing Department. (6 marks)
2. The Marketing Director and Marketing Manager are to meet to establish a

tactical plan for the Marketing Department. Distinguish between tactical,
strategic and operational plans. (10 marks)
3. Progress Pharmaceuticals could potentially restructure to a matrix

organisational structure or a network organisational structure. Describe the
key characteristics of both of these organisational structures and identify their
key advantages and disadvantages. (10 marks)
4. Krishnie is unhappy with the leadership style of Kagiso, the manager to whom
she reports. Based on the information provided in the case study, analyse
Kagiso’s leadership style from the perspective of:
4.1 Trait Theory

4.2 Behavioural Theory
4.3 Contingency Theory (15 Marks)


 The length of your answer should be guided by the mark allocation. Generally one coherent point
/ fact equals one mark.
o Question 1: Section 4.3 (Areas of Management)
o Question 2: Section 4.2.1 (Planning), particularly section 4.2.1.1
o Question 3: Section 4.2.2. (Organisation), particularly section 4.2.2.4
o Question 4: Section 4.2.3 (Leadership), particularly section 4.2.3.2

LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the
learner should be able to demonstrate a holistic and practical
understanding of contemporary management issues. This overall
outcome will be achieved through the learner’s mastery of the following
specific outcomes:
1. Critically discuss and apply the principles of

managerial decision making.
1.1 Demonstrate a critical understanding of types of

managerial decisions and decision making
conditions.
1.2 Demonstrate a critical understanding of decision

making models.
1.3 Critically discuss and apply the principles of group

decision making.
1.4 Identify and explain the various quantitative decision

making tools.
2. Critically discuss and apply the principles of motivation.

Unit 5: 2.1 Demonstrate an understanding of the motivation process.
Contemporary 2.2 Critically discuss and apply the various motivation theories.
Management Issues
2.3 Debate the motivating potential of money.
2.4 Critically discuss and design jobs that motivate.
3. Critically discuss and apply the principles of

communication.
3.1 Demonstrate an understanding of the

communication process.
3.2 Demonstrate an understanding of organisational

communication.
3.3 Identify and critically discuss barriers to

communication.
3.4 Apply appropriate techniques to improve

communication.
4. Critically discuss and apply the principles of groups

and teams.
4.1 Critically discuss types of groups and the

reasons for group formation.
4.2 Demonstrate an understanding of the group

development process.
4.3 Demonstrate an understanding of group

dynamics.
4.4 Critically discuss and apply the principles to

develop groups into effective teams.

Prescribed Reading:
 Smit, P.J., Cronjé, G.J. de J., Brevis, T. & Vrba, M.J. (2011) Management Principles: A
Contemporary Edition for Africa, Fifth Edition. Cape Town: Juta & Co. pp 163 - 185 (Chapter
6), pp 355 – 378 (Chapter 13), pp 383 – 401 (Chapter 14), pp 409 – 428 (Chapter 15).
Books
 Botha, S., Cunningham, P., Musengi, S., Visser, K., Williams, O., Lotz, J., Booysen, K., Stewart
Smith, A., Bosch, A., & Banhegyi, S. (2009) Management: Fresh Perspectives Cape Town:
Pearson Education South Africa. pp 108 – 111 (Chapter 4), pp 169 – 175 (Chapter 7), pp 227 –
253 (Chapter 9).
 Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. &
Oosthuizen, T. (2005) Management. Second South African Edition. Cape Town: Oxford
University Press. pp 141 – 162 (Chapter 7), pp 165 – 190 (Chapter 8), pp 261 – 281 (Chapter
12), pp 311 – 331 (Chapter 14), pp 333 – 352 (Chapter 15).
 George, J.M. & Jones, G.R. (2006) Contemporary Management: Creating Value in
Orgainizations. Fourth Edition. Boston: McGraw Hill. pp 231 – 262 (Chapter 7), pp 337 – 370
(Chapter 10), pp 375 – 407 (Chapter 11), pp 413 – 446 (Chapter 12).
Journals
 Bassett-Jones, N. & Lloyd, G.C. (2005) “Does Herzberg’s Motivation Theory Have Staying
Power?” Journal of Management Development. Vol. 24, No. 10, pp 929 – 943.
 Denton, D.K. (2006) “Making Changes within a Team.” Team Performance Management.Vol. 12,
No. 3 / 4, pp 82 – 90.
 Hoogervorst, J., Van Der Flier, H. & Koopman, P. (2004) “Implicit Communication in
Organisations.” Journal of Managerial Psychology. Vol. 19, No. 3, pp 288 -311.
 Jenewein, W. & Morhart, F. (2008) “Navigating Toward Team Success.” Team Performance
Management. Vol 14, No 1 / 2, pp 102 – 108.

 Larson, J. & Kleiner, B.H. (2004) “How to Read Non-Verbal Communication in Organisations.”
Management Research News. Vol. 27, No. 4 / 5, pp 17 – 22.
 Milne, P. (2009) “Motivation, Incentives and Organisational Culture.” Journal of Knowledge

Management. Vol. 11, No. 6, pp 28 – 38.
 Pina, M.I.D., Martinez, A.M.R. & Martinez, L.G. (2008) “Teams in Organisations: A Review on
Team Effectiveness.” Team Performance Management. Vol. 14, No. 1/ 2, pp 7 – 21.
 Ross, T.M. & Jones, E.C. (2008) “Can team effectiveness be predicted?” Team Performance
Management. Vol. 14, No. 5 / 6, pp 248 - 268
 Schwarber, P.D. (2005) “Leaders and the Decision Making Process.” Management Decision. Vol.
43, No. 7 / 8, pp 1086 – 1092.
 Sheridan, F. (2009) “Gender, Language and the Workplace: An Exploratory Study.” Women in
Management Review. Vol. 22, No. 4, pp 319 – 336.
1 Introduction
This section will explore a number of Contemporary Management Issues. Those issues which will be
examined are:
 Decision Making
 Motivation
 Communication
 Groups and Teams
5.2 Decision Making

Decision making is central to the work of the manager and may be defined as the “process by which
managers respond to opportunities and threats by analysing options and making determinations about
specific organisational goals and courses of action” (George & Jones, 2006: 231). This sub-section will
explore the concept of managerial decision making, and will examine the following:
 Types of managerial decisions and decision making conditions
 Decision making models
 Group decision making
 Quantitative tools for decision making

5.2.1 Types of Managerial Decisions And Decision Making Conditions

Managers are required to make different types of decisions under different conditions.
In your position as manager, what types of decisions are you faced with and under what conditions are
these decisions made?
Comment on Activity
The types of managerial decisions which managers are required to make may be classified as either
programmed or non-programmed decisions. The characteristics of each of these decision types are
outlined in Figure 5.1.
TYPES OF
PROGRAMMED NONPROGRAMMED
DECISIONS DECISIONS
 Repetitive & routine  Decisions are novel & ill-

structured
 Definite methods for obtaining a
solution  Have not occurred previously
 Handled by means of rules,  Complex & elusive – no definite
policies & standard operating method for dealing with them
procedures
Figure 5.1: Characteristics of Programmed and Non-Programmed Decisions (George & Jones, 2006)
An office manager’s decision to order more office stationery whenever the stationery inventory falls below
a particular level, is an example of a programmed decision. Top management’s decision to enter into a
new market is an example of a non-programmed decision.
Decisions may be made under conditions of certainty, risk & uncertainty, as depicted in Figure 5.2.

CERTAINTY UNCERTAINTY
RISK
Outcomes of Outcomes of
options options
predictable unpredictable
Figure 5.2: Decision-Making Conditions (from Smit et al, 2011: 167).
A discussion of the various decision making conditions follows:

 Conditions of Certainty involve knowledge of all available options and consequences, as well as
the costs of implementing each of the options (Smit et al, 2011). It is very rare that a manager is able
to make decisions under absolute certainty.
 Conditions of Risk exist when the manager has knowledge of the options available and the
probability of their occurrence. Two types of probability may be identified:
o Objective probability involves the use of historical evidence to determine the likelihood that an
event will occur
o Subjective probability involves the reliance on personal belief to determine the likelihood of
an event occurring (Smit et al, 2011)
A manufacturer’s decision to increase the price of a product or product range is an example of a
decision made under conditions of risk.
 Conditions of Uncertainty exist when the availability of options and the probability of occurrence
are not known. Managerial decisions are quite often made under conditions of uncertainty (George
& Jones, 2006). An example of such a decision would be if an electronics company decides to
launch a new kind of electronic product into the market. Since a similar type of product does not
exist within the market as yet, the manager has no data on which to determine the market’s probable
reaction to the launch of the product.
In summary, managerial decisions can be classified as programmed and non-programmed, and can be
made under conditions of certainty, risk and uncertainty.
5.2.2 Decision Making Models

There are two types of decision making models:
 Bounded Rationality Model, which focuses on satisficing (rather than optimising), In this approach
limited alternatives are explored (Hellriegel et al, 2005) and the alternative which is chosen is one

which appears to be an acceptable or satisfactory response to the problem at hand. This approach,
therefore, would be most relevant to the making of programmed decisions in conditions of low risk.
 Rational Model, which focuses on optimising, where the manager seeks to attain the best possible
solution. Such an approach would be most suitable for non-programmed decisions which are made
in conditions of high-risk and uncertainty (Smit et al, 2011). The process involved in making
decisions according to the principle of optimisation is outlined below.
Define & Diagnose Compare &

Search for
Set Goals Evaluate
Alternative
the Problem Alternative
Solutions
Solutions
Choose Among
Follow Up and Implement the
Alternative
Control Selected Solution
Solutions
Figure 5.3: Rational Decision Making Model (Hellriegel et al, 2005: 155)
It important that the manager is able to select and use the decision making model which is most
appropriate to the situation at hand.
5.2.3 Group Decision Making

Many organisational decisions are made not by individual managers alone, but by groups of managers.
ACTIVITY
Consider the effectiveness of group decision making compared to individual
decision making.

There are advantages and disadvantages to both group and individual decision making. Group decision
making can be advantageous in that groups:
 provide an increased diversity of views (which in turn contributes to creativity)
 produce more holistic information

 generate decisions which are of a higher quality than individual decisions
 provide for greater acceptance of the decision (George & Jones, 2006)
On the other hand, however, the following disadvantages of group decision making exist:
 group decision making is time-consuming
 group members may conform to group pressures
 the discussion of the problem can be dominated by a few controlling group members (George &
Jones, 2006)
A further weakness that may emerge from group decision making is the phenomenon of ‘group think’
which refers to “a pattern of faulty and biased decision making that occurs in groups whose members
strive for agreement among themselves at the expense of accurately assessing information relevant to
a decision”(George & Jones, 2006: 249). Groupthink thus undermines the quality of the decision made
by the group.
5.2.3.1 Techniques for Improving Group Decision Making

The disadvantages of group decision making identified above can be overcome through the use of a
number of formal group decision making techniques. These techniques include:
 Brainstorming, which provides for idea generation by focusing on the quantity of alternatives
generated, rather than the quality (George & Jones, 2006). Members of the group generate as many
ideas as possible without criticism from the other group members.
 Nominal Group Technique, in which alternatives are generated in a systematic fashion. Discussion
and interpersonal communication is restricted during the decision making process (George & Jones,
2006).
 Delphi Technique, which does not require individuals to meet face to face, but generates
alternatives through the systematic administration of a confidential questionnaire (Hellriegel, et al,
2005). It enables experts participating in the decision making process to refine their opinions through
a step by step process until they reach consensus.
 Group Decision Support Systems, which refers to computer technology which can be used to
support the group’s decision making process (Smit et al, 2011).

5.2.4 Quantitative Tools for Decision Making

Various quantitative tools may be used by the manager to assist him/her with his/her decision
making.
ACTIVITY
As a manager, what kinds of quantitative decision making tools have you
encountered in your workplace?
Comment on Activity
Quantitative management tools to aid decision-making include:
 Linear Programming
This approach is appropriate for conditions of certainty (Smit et al, 2011). It uses algebraic graphical
techniques to increase profitability through the solving of resource allocation problems.
 Queueing Theory
This approach is also appropriate for conditions of certainty (Smit et al, 2011). Queueing theory analyses
the costs of waiting in a queue, and provides a means to achieve an optimal balance between the amount
of time customers, materials and machines stand in a queue (i.e. wait for service) and the cost of
increasing / improving the service.
 Pay-off Matrix & Decision Tree

The pay-off matrix and decision tree are suitable tools to utilise in conditions of risk. Both techniques are
based on probability analysis (Smit et al, 2011). While pay-off matrix serves to indicate the possible
returns of various courses of action, the decision tree provides a graphical illustration of the possible
solutions to a problem.
 Simulation
This technique is useful in conditions of uncertainty. In imitating a set of real conditions, it provides the
manager with indications as to the likely outcomes which will result from various courses of action (Smit
et al, 2011). Computers are used to create and / or aid the simulation. The typical three questions which
are asked during a simulation are:

o What effect will a change in the economy have on an organisation if the organisation’s strategies are
to remain the same? (examples of changes in the economy include a decrease in interest rate by
5%; a 1% increase in inflation; etc.)
o What effect will a change to a specific strategy (e.g. low cost, differentiation, etc) have on the
organisation in anticipation of the changes in the economy?
o What combination of strategies would enable the organisation to gain competitive advantage given
the anticipated economic changes? (Hellriegel et al, 2005).
In summary, this subsection examined the issue of managerial decision making. The different types of
decisions and conditions for decision making were examined, as were the decision making models, group
decision making and quantitative decision making tools.
5.3 Motivation
Motivation is the second contemporary management issue to be explored in this section of the Study
Guide. The following issues relating to motivation and delegation will be examined in this sub-section:
 What motivation encompasses
 Motivation theories
 Money as a motivator
 Jobs that motivate.
THINK POINT
Explain why the concept of ‘motivation’ is an issue of concern for managers
and Organizations.

While motivated employees will contribute to the effective performance of an organisation, a demotivated
workforce will contribute to poor organisational performance. Thus, motivation is central to management
because it not only provides managers with explanations as to why employees behave, and perform in
their jobs, the way that they do, but also provides the manager with strategies to improve the motivation
of his subordinates. However, as was identified in Section 2, motivation is not as simple as the father of

Scientific Management, Frederick Taylor, argued: workers are not simply motivated by money. Indeed,
the issue of motivation is much more complex.
5.3.1 What Does Motivation Encompass?

The word motivation may be defined in a number of ways.
ACTIVITY
How would you define ‘motivation’?
Comment on Activity
There are many definitions for the concept of motivation. These include:
o “the willingness of an employee to achieve organizational goals” (Smit et al, 2011: 384).
o “any influence that triggers, directs or maintains goal-directed behaviour” (Hellriegel et al, 2005:
263);
o “Psychological forces that determine the direction of a person’s behaviour in an organisation, a
person’s level of effort, and a person’s level of persistence” (George & Jones, 2009: 337).
The diagram below provides an overview of the elements and dynamics involved in motivation:
Need Motive Behaviour Consequence Satisfaction /
Feedback
Figure 5.4: The Motivation Process (from Smit et al, 2011: 385)
ACTIVITY
Apply the motivation process, diagrammatically depicted above, to a particular
motivation-related situation which you have experienced in the workplace.

Comment on Activity
 The motivation process starts with a need, which is essentially a psychological or physiological
imbalance. In the context of the workplace this could be a need for an individual to acquire recognition
from his/her supervisor and colleagues.
 This need will give rise to a motive which will drive the individual to take action which he/she believes
will be effective in satisfying his/her need. For example, the individual may decide to volunteer to
take on a project within his/her department which most of his/her colleagues are hesitant about
tackling because of the challenge it presents.
 The individual’s need and motive will then lead to specific behaviour. For example, the individual
may start working long hours to cope with the demands of the project.
 Your behaviour will have consequences, which may be positive or negative. For example, the work
which the individual did on the challenging project may be a success and it would be likely then that
his/her supervisor and colleagues would hold him/her in high esteem.
 The consequences of the individual’s behaviour would determine his/her level of satisfaction of
his/her need (which emerged at the beginning of the motivation process). In the example under
discussion, should the success of the individual’s project attract the attention of his/her supervisor
and colleagues, this would result in the satisfaction of his/her need for recognition.
 However, the satisfaction experienced would only be temporary, and therefore the motivation
process includes a feedback loop which serves to initiate the process again. For example, the
individual may find that after a month the success of his/her project has been forgotten and thus
his/her need for recognition initiates the motivation process once again.
5.3.2 Motivation Theories

A considerable number of theories attempt to explain the concept of motivation.
THINK POINT
What motivates you to perform your job effectively and efficiently?


If one considers the many theories which exist on motivation, it becomes clear that a number of factors
could influence an employee’s motivation in his/her job. Certain theorists focus on ‘what’ motivates the
employee (content theories), others focus on ‘how’ the employee is motivated (process theories), while
there are those which focus on reinforcement as a means to promote certain behaviours (Hellriegel et
al, 2005). The three categories of motivation theories are illustrated in Figure 5.5.
Figure 5.5: Motivation Theories
5.3.2.1 Content Theories of Motivation

The content theories focus on the ‘what’ of motivation (Hellriegel et al, 2005). The most frequently used
theories in this category are Maslow’s Hierarchy of Needs Theory, Herzberg’s Two-Factor Theory and
McClelland’s Achievement Motivation Theory.
Maslow’s Hierarchy of Needs

Maslow explains human motivation from a needs-fulfilment perspective. He argues that a hierarchy of
needs exists where human needs are arranged in order of importance. The unfulfilled need, which
carries the most importance in terms of its position in the hierarchy, will serve to motivate an individual’s
behaviour (Smit et al, 2011).

Figure 5.6: Maslow’s Hierarchy of Needs

As Figure 5.6 demonstrates, Maslow’s hierarchy of needs is arranged as follows:
o Physiological needs: these represent the most basic level of the hierarchy and comprise the
need for water, food, warmth and shelter. Employees are motivated to work for wages which
will satisfy this first level of needs (Hellriegel et al, 2005).
o Security needs: these include the need for physical security and protection as well as job
security, pension and medical aid schemes.
o Social needs: these include the need to be loved, to develop friendships and to have fulfilling
social interactions with individuals. Within organisations, some employees will have high social
needs and will enjoy working closely with their colleagues. On the other hand, other employees
may have low social needs and are happy to work on their own. If an organisation does not
address employees’ social needs high absenteeism, productivity and stress-related behaviours
may result (Hellriegel et al, 2005).
o Esteem needs: these are higher-order needs and represent the individual’s need for recognition
from others, self-respect and a sense of personal achievement. To fulfill an employee’s esteem
needs, managers should provide exciting and challenging work as well as recognition (Hellriegel
et al, 2005).

o Self-actualisation needs: these needs comprise the highest level of Maslow’s hierarchy and
include the need for the individual to reach his full potential. Training and development
opportunities as well as career growth opportunities are important in addressing an employee’s
self-actualisation needs (Hellriegel et al, 2005).
ACTIVITY
Discuss how you would go about applying Maslow’s Hierarchy of Needs Theory to
motivate the employees within your particular department/team.
Comment on Activity
Maslow’s Hierarchy of Needs Theory may be applied by the manager within the workplace to assist
him/her in identifying the factors which motivate particular employees. For example, in the case where
employees have unfulfilled physiological needs, the manager should seek to motivate using monetary
incentives. On the other hand, employees who have successfully satisfied the lower four need levels
will experience an unfulfilled need for self-actualisation. In this instance, the manager should aim to
provide the employee with challenges and development opportunities to assist him/her in realising his/her
full potential.
However, it may strike the student of management that the application of Maslow’s theory simplifies the
work motivation issue. Indeed, although Maslow’s theory is valuable from the point of view that it is easy
to understand (Smit et al, 2011), it has a number of shortcomings, including:
 The theory fails to recognise that people reorder the levels of the hierarchy during their life span, and
the fulfillment of any particular level of need is not necessarily permanent
 The determining of an employee’s level of unsatisfied need is not an easy endeavour (Smit et al,
2011)
 The theory fails to recognise that different employees place different values on the same need
Herzberg’s Two-Factor Theory

Herzberg identifies two factors which impact on job satisfaction:
 Hygiene Factors: when absent, this set of factors will result in job dissatisfaction. However, when
present, hygiene factors will not lead to job satisfaction, but will provide the employee with no job
dissatisfaction (George & Jones, 2006). Examples of hygiene factors are provided in Table 5.1.

 Motivators: this set of factors essentially serves to enhance the challenge inherent in the employee’s
job (George & Jones, 2006). The presence of motivators results in job satisfaction for the employee.
Examples of motivators are provided in Table 5.1.
Thus, according to Herzberg, to motivate employees, managers must give attention to both hygiene
factors and motivators.
HYGIENE FACTORS MOTIVATORS

 Company policy & administration  Achievement
 Supervision  Recognition
 Relationship with supervisor  The work itself
 Work conditions  Responsibility
 Salary  Advancement
 Relationship with co-workers  Growth
 Relationship with sub-ordinates
 Status
 Security
Table 5.1: Herzberg’s Hygiene Factors & Motivators (George & Jones, 2006)
READING ACTIVITY
Read the following text and then answer the questions which follow:
 Bassett-Jones, N. & Lloyd, G.C. (2005) “Does Herzberg’s Motivation Theory Have
Staying Power?” Journal of Management Development. Vol. 24, No. 10, pp 929
– 943.
1. According to Bassett-Jones & Lloyd (2005), why was Herzberg’s two-factor
theory “one of the most strenuously contested areas of management theory”
(p932)?
2. Herzberg distinguishes ‘motivation’ and ‘movement’. Explain the distinction
between these two concepts.
3. What do the findings of Bassett-Jones & Lloyd’s (2005) research say about
Herzberg’s applicability to the organisation of today?

Contention Around Herzberg’s Theory
According to Bassett-Jones & Lloyd (2005) Herzberg’s theory was vigorously contested because of the
“assertion that there was a weak correlation between financial reward and job satisfaction…at the crudest

level, Herzberg’s results have been translated into the axiom that while inadequate financial reward can
demotivate, nevertheless, beyond a limited threshold, money is a hygiene factor and does not motivate”
(Bassett-Jones & Lloyd, 2005: 932). Herzberg’s theory was particularly contentious as it challenged the
dominant theoretical assumptions about motivation and money which prevailed at the time that his theory
emerged.
Herzberg’s Distinction Between Motivation and Movement

In defending his theory that money is a hygiene factor rather than a motivator, Herzberg distinguished
between the concepts ‘motivation’ and ‘movement’. He claimed that very often managers confuse
‘motivation’ and ‘movement’. To illustrate the difference between these two concepts Herzberg
“suggested that if he wished his dog to move, he could kick it or reward it with a candy…the motivation
for movement, however, is his, not the dog’s, and what we observe is movement not motivation in the
dog….similarly, if employees are asked to do something in return for an incentive, managers tend to
argue that employees are motivated, when in fact it is management that is motivated to promote
employee movement” (Bassett-Jones & Lloyd, 2005: 933). Herzberg also compared motivation to an
internal self-charging battery, and emphasised that motivators are internally generated drives (and not
external incentives which simply stimulate movement).
Herzberg’s Applicability to the Organisation of Today

Bassett-Jones & Lloyd (2005) conducted research to determine whether Herzberg’s two-factor theory
still has applicability to the contemporary organisation. In particular, the findings of the research showed
that “motivators associated with intrinsic drivers outweigh movers linked to financial inducement”
(Bassett-Jones & Lloyd, 2005: 941). Managerial recognition was an important motivator for Herzberg.
However, Bassett-Jones & Lloyd’s (2005) findings show that the importance of managerial recognition
has declined within the organisation of today. This is argued to be partly due to the flatter organisational
structures of today.
Bassett-Jones & Lloyd (2005) sum up their findings by asserting that “whilst inducements can move
some employees to contribute ideas, the numbers involved are significantly less than those who are
motivated through a desire to overcome frustration, and contribute to organisational success. So long as
the Taylorist paradigm persists, the organisational aspiration to create a high commitment culture is likely
to prove elusive. In such contexts, one of the value adding contributions that an organisation can make,
is to develop systems and processes that enable employees to work together to define problems and
overcome needless frustrations, and encourage managers to promulgate good practice in common
interest of both” (p 941).

McClelland’s Achievement Motivation Theory

McClelland, like Maslow and Herzberg, also focused on the content of motivation and argued that
different individuals vary with regards to their dominant needs (Hellriegel et al, 2005). He identified three
needs:
 The need for achievement (nAch)
 The need for affiliation (nAff)
 The need for power (nPow)

From a management perspective McClelland’s theory indicates that it is best for an organisation to
employ mostly individuals with a high need for achievement, as such individuals are challenged by
opportunities and are motivated to work hard to achieve goals which are moderately difficult (Hellriegel
et al, 2005).
In summary, therefore, the motivation theories which focus on content include Maslow’s Hierarchy of
Needs Theory, Herzberg’s Two-Factor Theory and McClelland’s Achievement Motivation Theory.
5.3.2.2 Process Theories

The process theories of motivation, which focus on how the employee is motivated, include Equity Theory
and Expectancy Theory.
Equity Theory
Equity Theory focuses on “people’s perceptions of the fairness of their work outcomes, relative or in
proportion to, their work inputs” (George & Jones, 2006: 349).
THINK POINT
Consider the following hypothetical situation:
You are the product manager for the cereal food product line at a food manufacturer.
Your qualifications include an undergraduate and a postgraduate degree. Your
counterpart, the product manager for the processed food product line, has only an
undergraduate qualification. On the whole you tend to contribute more to the
company than the processed food product manager – you generally work longer
hours and achieve more than he does.
Recently you found out that your counterpart’s salary package is 30 % higher than
yours.


A likely reaction to the above hypothetical situation would be the perception of inequity, in that the cereal
food product manager could perceive his/her outcome/input ratio to be unequal to the processed food
product manager’s outcome/input ratio. This perception of inequity will result in tension which would
motivate the cereal product manager to restore balance. Such balance could be achieved through
adjusting his/her inputs, such as reducing the contribution which he/she makes to the organisation in
terms of time, effort and achievement. Alternatively, the cereal product manager could focus on restoring
the balance through adjusting the outcome – this would involve negotiating a higher salary package with
the organisation.
Expectancy Theory
Expectancy Theory argues that “motivation is high when workers believe that high levels of effort lead to
high performance and high performance leads to the attainment of desired outcomes (George & Jones,
2006: 339). This process is demonstrated in Figure 5.7 below.
EFFORT PERFORMANCE OUTCOMES
EXPECTANCY INSTRUMENTALITY VALENCE

Person’s perception Person’s perception about the How desirable each of
about the extent to extent to which performance the outcomes available
which his/her effort will at a certain level will result in from a job or
result in a certain level the attainment of outcomes organisation is to a
of performance person
Figure 5.7: Expectancy Theory (from George & Jones, 2006: 340) Comment on Activity
ACTIVITY
Apply the process of Expectancy Theory to your decision to pursue the MANCOSA
MBA.

According to Expectancy Theory, the student of management may be motivated to pursue the Mancosa
MBA study programme because:
 The student’s belief (or expectancy) was reasonably high that his/her efforts (completion of
assignments, study of the material, etc.) would result in his/her good performance (attaining a pass
mark for each of the modules);
 The student’s belief (or instrumentality) was very high that his/her good performance (passing all the
modules) would result in the attainment of a qualification which would not only provide him/her with
prestige and status, but would improve his/her career opportunities as well (outcome of significant
value).
The high levels of expectancy and instrumentality would significantly enhance the student’s motivation
to achieve the outcome.
5.3.2.3 Reinforcement (Learning) Theories

Reinforcement theories of motivation are based on the premise that if there are pleasant consequences
to behaviour (positive reinforcement), it is likely that the behaviour will be repeated. However, if
behaviour results in unpleasant consequences (negative reinforcement), the behaviour is not likely to be
repeated (Hellriegel et al, 2005).
ACTIVITY
Discuss why you think it is preferable for managers to use positive reinforcement
rather than negative reinforcement in motivating and shaping an employee’s
behaviour.

Punishment entails the administering of a negative consequence, for example a verbal reprimand or
written warning. While punishment may succeed in discouraging an employee’s undesirable behaviour,
it is not regarded to be the most effective form of behaviour modification. Indeed, it may result in loss of
self-respect, resentment and retaliation tactics (George & Jones, 2006). Further it does not provide a
long term solution in that the undesirable behaviour tends to return when punishment is no longer
administered (Smit et al, 2011).

In summary, this subsection explored the various prominent motivation theories. In so doing, the content
theories, process theories and reinforcement theories were examined.
5.3.3 Money as a Motivator

The debate as to whether or not money motivates employees has been a topic of much deliberation.
Indeed, it has already been shown in section 5.3.2.1 that Herzberg’s theory does not regard money to
be a motivator.
ACTIVITY
Discuss whether or not each the following theories view money as a motivator:
1. Maslow’s Theory of Needs
2. Herzberg’s Two Factor Theory
3. Equity Theory
4. Expectancy Theory
5. Reinforcement Theory

In considering the debate as to whether money motivates employees, Smit et al (2011) point out that
most of the management theories recognise the influence which money has on employees:
 Maslow’s theory points out that lower order needs (particularly physiological needs) may be
satisfied by money (Smit et al, 2011).
 Herzberg identifies money as a hygiene factor, and therefore it contributes to no job dissatisfaction.
However, according to Herzberg’s theory, money is not a motivator and therefore cannot promote
job satisfaction.
 Equity theory identifies that need for pay (as an output) to be distributed in proportion to an
employee’s input levels (George & Jones, 2006).
 Expectancy theory recognises that money may serve as a motivator (if, for example, performance
is believed to result in generous remuneration).
 Reinforcement theory recognises money as a positive reward (Smit et al, 2011).

Therefore, a number of theories support the motivating influence of money.
5.3.4 Designing Jobs That Motivate

As indicated in the above discussion on the motivating power of money, and as highlighted by Herzberg’s
Two-Factor Theory, it is important that employees’ jobs are designed in such a way that they promote
the motivation of the employee.
Smit et al (2011) identify three key ways in which the quality (and motivational power) of a job can be
enhanced:
 Job Enlargement which provides for the horizontal extension of the job (Smit et al, 2011), i.e.
additional tasks of the same complexity as existing tasks are added to the job. This provides the
worker with increased variety. For example, a corporate trainer could be asked to facilitate a
supervisor development programme in addition to the end user IT programmes which he currently
facilitates.
 Job Enrichment which is effected through the vertical extension of the job (Smit et al, 2011). This
thus provides the worker with increased task complexity and responsibility. For example, a corporate
trainer’s job could be expanded vertically to include the management and coordination of the training
programmes which he was previously only facilitating.
 Job Characteristics Model which enhances the job through ensuring variety, task identity, task
significance, autonomy and feedback are present within the job.
In summary, subsection 5.3 explored the concept of motivation. A definition, elements and process of
motivation have been examined; various content, process and reinforcement theories of motivation have
been studied; the relationship between money and motivation has been debated; and the design of jobs
to promote motivation has been examined.
5.4 Communication
This section will explore the contemporary management issue of Communication, and the following will
be examined:
 The communication process

 Organisational communication
 Barriers to effective communication
 Gender and communication in the workplace

THINK POINT
“Communication is to an organisation as the bloodstream is to a person”
(Hellriegel, 2005: 313)

Communication is central to the work of the manager in that:
 It is the process which provides for the manager’s accomplishment of the four management
functions: planning, leading, organising and controlling; and
 It is an activity to which managers devote a considerable amount of their time. Smit et al (2011)
assert that the manager is involved in communicating for 60% - 80% of the workday. Communication
takes place between the manager and his/her subordinates, peers, suppliers, customers and
superiors face-to-face, via email, business letters and/or over the telephone.
Thus, given that communication is central to the work of the manager, it is imperative that managers
strive to constantly improve their communication abilities.
5.4.1 The Communication Process

Communication can be defined as the “sharing of information between two or more individuals or groups
to reach a common understanding” (George & Jones, 2006: 413). Communication involves a process,
which is diagrammatically represented in Figure 5.8.
Transmit Message Message Receive
Encoding Decoding
Sender Channel Receiver
Transmit
Receive
Noise / Barriers
Feedback
Figure 5.8: The Communication Process (from Smit et al, 2011:411)

The communication process illustrated in Figure 5.8 represents a series of steps. It is important to note
that although these steps are arranged sequentially, they do not necessarily occur in sequential order
The process occurs as follows:
 Sender: the sender is the source of the message and initiates the communication. For example,
within an organisation, the CEO may wish to communicate the company’s revised mission and
strategy to the employees.
 Encoding: this involves the sender of the message translating the message into a symbolic format
(George & Jones, 2006). For example, the CEO will translate his understanding of the company’s
revised mission and strategy into words and diagrams. The message may be encoded in English,
should this be the organisation’s official language of business.
 Channel: This refers to the means by which the message is transmitted (e.g. oral, non-verbal or
written). For example, the words and diagrams which the CEO uses to outline the company’s revised
mission and strategy may take the form of a memo – a written message on a piece of paper.
 Receiver: the receiver senses or perceives the sender’s message (George & Jones, 2006). For
example, all the employees to whom the memo is addressed will receive the CEO’s memo.
 Decoding: involves the receiver in interpreting the sender’s encoded information (George & Jones,
2006). For example, the employees who receive the CEO’s memo will read it and will decode its
meaning. It may happen that some employees, in decoding the CEO’s message, may interpret his
actions to be distanced and impersonal due to the manner in which he chose to communicate the
message.
 Noise: refers to anything which disturbs or interferes with the communication. For example, it may
happen that an employee receives and attempts to quickly skim through the memo as a result of a
commitment to get to a particular meeting for which he is already late. Such noise would interfere
with the employee’s interpretation of the contents of the memo.
 Feedback: involves the receiver responding to the sender (George & Jones, 2006). For example,
the Marketing Manager may object to the revised company mission which the CEO has
communicated, and will provide the CEO with his opinion in this regard.

In summary therefore, communication involves a process in which the sender encodes a message which
is communicated to the receiver via a channel. In order for the receiver to understand the message,
he/she must decode it.
5.4.2 Organisational Communication

Managers are involved in intrapersonal communication (to and with themselves) and interpersonal
communication (to and with other individuals) (Smit et al, 2011). Managers are also instrumental in
promoting organisational communication, i.e. communication between departments and units within the
organisation.
Smit et al (2011) identify two forms of organisational communication networks:
 Informal communication networks
 Formal communication networks
THINK POINT
Identify one informal communication network and one formal communication
network in the organisation in which you are currently employed.

Descriptions and examples of the informal and formal communication networks are provided below.
 Informal Communication
The informal communication network involves communication which does not follow the organisational
hierarchy, but rather provides for communication which emerges from the social relationships established
between employees. It is commonly referred to as the grapevine, which may be defined as “an informal
communication network along which unofficial information flows” (George & Jones, 2006:427). The
grapevine may be of benefit to the organisation in that it provides for speedy and relatively accurate
spread of information (George & Jones, 2006).
 Formal Communication
The flow of communication within the organisation’s formal communication network is subject to the
organisation’s hierarchy and the rules which govern such a hierarchy (Smit et al, 2011). Thus
communication occurs in accordance with the chain of command where lines of contact are official and
established.

The organisational hierarchy provides for four types of information flows:

o Downward communication: which refers to the flow of information from top management through
middle and lower management, and eventually to the workers. The main purpose of this form of
communication is to provide for communication of the organisation’s goals, strategies and policies
(Smit et al, 2011)
o Upward communication: involves the communication of a message from the employees to

management. Upward communication serves primarily to inform management about what is
happening at the lower levels (Smit et al, 2011).
o Horizontal communication: does not follow the chain of command but provides for communication
between employees on the same level of the hierarchy. This communication serves essentially to
improve departmental coordination (Smit et al, 2011).
o Lateral communication: occurs between employees at different levels of the hierarchy. It serves to
provide either or both employees with helpful information and assistance (Smit et al, 2011).
5.4.3 Barriers to Effective Communication

Barriers to effective communication can undermine managerial and organisational performance.
ACTIVITY
Consider an incident at your workplace where you experienced very ineffective
communication.
1. Describe the incident. Why was the communication ineffective?

2. Which stages of the communication process were particularly problematic?
3. How could the situation have been handled differently? How could effective
communication have been achieved?
Comment on Activity
Smit et al (2011) identify four factors which can serve as barriers to effective communication. The
characteristics of these four factors are summarised in Figure 5.9 .

Figure 5.9: Barriers to Effective Communication (from Smit et al, 2011:417).
THINK POINT
Now that you know the key barriers to effective communication within organisations,
what methods and practices do you think could be used to address these barriers?
Comment on Think Point\
Addressing Barriers to Effective Communication
Smit et al (2011) point out that barriers to communication can occur between each of the steps in the
communication process. The manager therefore needs to be aware of the potential barriers to
communication when:
 Encoding a message and selecting the communication channel (e.g. information overload would be
a barrier to communication)
 Transmitting the message (e.g. timing and noise may serve as barriers to communication)

 Decoding a message (e.g. trust, credibility, emotional differences and differences in communication
skills could serve as barriers to communication)
Hellriegel et al (2005) identifies the following methods for overcoming barriers to communication:
 Regulate the flow of information so as to avoid information overload.
 Feedback should be encouraged, especially for important messages, so as to enable the manager
(sender) to ensure that they have been accurately understood.
 The language used should be as simple as possible. Jargon should be avoided.
 In addition to being a good message sender, the manager should also be a good listener. He / she
should use active listening skills which include not interrupting while the message is being delivered,
maintenance of good eye contact while the sender is delivering the message, and asking questions
for clarification once the message has been delivered (George & Jones, 2006). The receiver should
also paraphrase the important points made by the sender to check and confirm one’s understanding.
 Negative emotions should be restrained when delivering a message as these tend to distort the
message.
 Non-verbal cues should be used to reinforce the verbal message (Hellriegel et al, 2009).
 The grapevine can be used by managers quite effectively to send information and to test reactions.
5.4.4 Gender and Communication in the Workplace
READING ACTIVITY
1. Before reading the journal article listed below, have you noticed differences
in the way in which men and women communicate in the workplace? If you
have, please record these differences in the space provided below.
2. Now read the following journal article and then answer the question which
follows.
 Sheridan, F. (2009) “Gender, Language and the Workplace: An

Exploratory Study.” Women in Management Review. Vol. 22, No. 4, pp 319 – 336.
What does Sheridan’s research reveal with respect to differences in the manner in
which male and female employees communicate?

Sheridan (2009) asserts that “the ritual nature of men’s and women’s conversations is such that they
speak different languages that they assume are the same, using similar words to encode disparate
experiences of self and social relationships…since these languages share an overlapping vocabulary,
they contain a propensity for systematic mistranslation, creating impasses, which impede communication
and limit the potential for cooperation in decision making and advancement” (pp 319 - 320).
Sheridan’s (2009) research found that:
 The glass ceiling, which blocks the advancement of women within organisations, has remained due
to gendered speech patterns.
 Women are often judged less confident than they actually are due to female speech patterns: as a
result of their socialisation, girls are often taught not to boast about their achievements and are often
encouraged to downplay their achievements. Such language patterns continue into the workplace
resulting in misunderstandings and the lack of promotion of women (Sheridan, 2009).
 There are men who talk using the general female language patterns and as a result their
advancement in the workplace is limited.
 There are women who emulate typical male language patterns. However, this does not necessarily
lead to their advancement, but rather results in them being perceived as too aggressive and not
sufficiently feminine (Sheridan, 2009).
 Leadership has “typically been linked with masculine models of communications: dominance,
assertiveness, independence, competitiveness and confidence, whereas prioritisation in female
speech communities comprise respect, inclusiveness, collaboration and co-operation” (Sheridan,
2009: 332). However, female communication styles are compatible with the leadership and
management of change within the modern day organisation – supportive listening and mutual sharing
of emotions is important when a response to change is required (Sheridan, 2009).
 Listening is “seen to be a prototypical female skill….women value listening as a way of making others
feel comfortable, important and as a means of encouraging others to find their own voices and grow”
(Sheridan, 2009: 333). This is an important skill for the detection of potential problems within an
organisation and for the empowerment of employees. In contrast to women, the listening skills of
men tend to be unilateral (Sheridan, 2009).

 So as to achieve greater equity between men and women in organisations, Sheridan (2009)
recommends that “men and women need to work in mixed gender groups as both a team member
and a leader, to interpet work group values for men and women, to influence both interpersonally
and in groups, to increase participation in decision-making capabilities and to work in flexible
networks instead of hierarchical organisations where male norms are maintained and perpetuated”
(Sheridan, 2009: 333). Sheridan also identifies the need for both men and women to extend their
linguistic styles “so that they can embrace the needs of the other if mutual empowerment is to be
achieved” (Sheridan, 2009: 333).
In summary, sub-section 5.4 explored the contemporary management issue of communication. The
communication process was examined, as were forms of organisational communication, barriers to
effective communication as well as the impact of gender on communication in the workplace.
5.5 Groups & Teams

This subsection will examine a further contemporary management issue: Groups and Teams within the
organisation. In so doing, the following issues will be explored:
 Types of groups and reasons for group formation
 Stages in group development
 Group dynamics
 Developing groups into teams
 High performance teams
THINK POINT
Both groups and teams exist within the organisation. How is a group different from
a team?

The terms ‘group’ and ‘team’ are often used interchangeably. However, recent management literature
tends to distinguish between these two concepts (Hellriegel et al, 2005):

 A Group: is generally seen to have a definite leader, and members work independently and are
evaluated on, and rewarded for, the work which they produce individually.
 A Team: is regarded to be self-directing and self-managed, where members perform work

interdependently and are evaluated on, and rewarded for, work which they produce together (Smit
et al, 2011).
5.5.1 Types of Groups and Reasons for Group Formation

Various types of groups form within organisations for various reasons.
ACTIVITY
Consider the groups which exist in the organisation at which you are currently
employed.
1. What types of groups can you identify?
2. What do you think motivates the formation of these groups?
Comment on Activity
Types of Groups
George & Jones (2006) identify both formal and informal groups which exist within organisations. Formal
groups are created by managers and include:
 Command Groups, which include a manager and his subordinates. Command groups are also
referred to as ‘departments’ or ‘units’. An example of a command group would be the Sales
Attendants at a large clothing department store who all report to the Sales Manager.
 Task Groups, which are created for the purpose of performing a particular project. They may also
be referred to as ‘ad hoc committees’. Once the project has been completed the group will disband
(George & Jones, 2006). An example of a task group would be the general managers of a chain of
clothing stores who are put together to determine whether it would be competitively viable to extend
the product offering of the store to include foodstuffs in addition to clothing. Such a task group would
commission research regarding the extension of the product offering, they would interpret the results
of the research, and would then make a recommendation to the CEO regarding the way forward.
Following this, the task group would disband.

Informal groups are not created by managers and include:
 Friendship Groups: which are composed of employees who enjoy each other’s company and
socialise together (George & Jones, 2006). Members of friendship groups may, for example, take
lunch together or go to gym together after work.
 Interest Groups: which comprise employees who seek to achieve a common goal within the
organisation for which they work (for example, a childcare interest group which seeks to achieve the
establishment of a childcare facility within the organisation) (George & Jones, 2006).
Reasons for Group Formation
The motivation for individuals to form groups within organisations is based on:
 Group members’ needs (such as the need for social interaction or self-realisation)
 Proximity and attraction
 Group goals which may appeal to a particular individual
 Economics (where the efficiency and effectiveness which the group enables provides for greater
satisfaction of economic needs)
5.5.2 Stages in Group Development
Group development involves a process which consists of a number of stages.
ACTIVITY
Consider a group, such as a task group, of which you were a member. Describe
the process of the group’s development, i.e. describe what characterised the group
from the time of group formation to the time of group disbandment.
Comment on Activity
Hellriegel et al (2005) present Tuckman’s five stage process of group development. Tuckman’s model of
group development identifies the following stages:
 Stage 1 – Forming: the members are involved in getting to know one another and establishing an
understanding about the purpose of the group (Hellriegel et al, 2005). At this stage many of the

group members will be anxious about what the team is to do and what their individual contribution
will be.
 Stage 2 – Storming: during this stage disputes are prevalent and the members express conflict
and disagreement (Hellriegel et al, 2005). The conflict may take the form of the team members
challenging the leader or isolating themselves from the team discussion.
 Stage 3 – Norming: close ties emerge within the group during this stage. An understanding of
appropriate behaviours is established and belongingness and commitment is fostered (Hellriegel et
al, 2005). The view amongst team members at this stage is ‘we are in this together, let’s make the
most of it!’
 Stage 4 – Performing: during this stage the work necessary to achieve the goals of the group is
performed. Members usually trust each other at this stage and a diversity of views is accepted
(Hellriegel et al, 2005).
 Stage 5 – Adjourning: on achievement of the group’s goal, the group is disbanded (Hellriegel et
al, 2005).
5.5.3 Group Dynamics
The way in which a group functions and its effectiveness is dependent on both the characteristics of the
group, as well as the group’s interaction with other organisational groups.
5.5.3.1 Characteristics of a Group
Group characteristics emerge during the process of group development. These include:
 Status: This refers to a socially defined position given to groups or group members. The status of
group members can result from a number of factors, such as, level of expertise and/or seniority (Smit
et al, 2011). For example, when travelling overseas on business, a marketing director may be
allowed to fly business class, while his marketing managers may have to fly economy class.
 Group Roles: a group role refers to “a set of behaviours and tasks that a member of a group is
expected to perform because of his / her position in the group” (George & Jones, 2006: 389).
Individuals within a particular group are expected to behave in a manner which is appropriate to their
role, for example, a task group’s leader should ensure that he/she adequately performs the planning,
leading, organising and controlling tasks associated with his/her role.

 Group Norms: group norms emerge from interactions between group members and specify
standards of behaviour and work expected in the group (Smit et al, 2011). For example, group norms
could specify how customers should be treated, what is acceptable clothing for team members, how
much work members should do and what jokes are acceptable in the group (Hellriegel et al, 2005).
 Leadership: good leadership, where the group’s leader provides direction and motivates his/her
subordinates, is necessary for the group to be effective. In self managed work teams, group
members often choose their own leaders, while in other self managed work teams the role of leader
is often rotated (George & Jones, 2006).
 Cohesiveness: refers to the “degree to which members are attracted to or [are] loyal to their group
or team” (George & Jones, 2006: 394). Studies have found that in groups where performance norms
exist, the greater a group’s cohesiveness, the greater its productivity. Various strategies can be
employed to enhance group cohesiveness, such as reducing the size of the group and increasing
the time which group members spend with each other (George & Jones, 2006).
 Group Size: the size of a group can impact on the group’s overall performance. Indeed, it has been
found that smaller groups complete tasks more quickly than larger groups, although larger groups
have been found to be more effective than smaller groups in problem solving (George & Jones,
2006). In determining team size at Amazon (a very successful web based online store) Jeff Bezos,
the founder and CEO of the company, asserts that it should not take more than two pizzas to feed
the members of a team. As a result the teams at Amazon comprise no more than five to seven
members. This size has proven to be optimal as the teams have come up with some very innovative
ideas (George & Jones, 2006).
5.5.3.2 Intergroup Dynamics

Intergroup dynamics refers to the interaction of a group with other organisational groups and the impact
that this has on group effectiveness. The bases of interaction include:
 Task Interdependence: which refers to the degree to which the work performed by one group (e.g.
sales department) influences the work performed by another group (e.g. production department).
There are three types of task interdependence:

o Pooled interdependence
o Sequential interdependence
o Reciprocal interdependence (George & Jones, 2006)

 Task Uncertainty: results due to a group’s uncertainty about the direction of the organisation, or
due to significant pending change.
 Time & Goal Interdependence: where the achievement of one group’s work (e.g. production
department) is partially dependent on the timing and goals of another group’s work (e.g. purchasing
department) (George & Jones, 2006).
 Resources: the organisation has a limited supply of resources. The challenge therefore is to
achieve fair allocation of resources across all groups.
 Proximity of Groups: the proximity of groups will influence their level of interaction (Smit et al,
2011).
In summary, therefore, groups possess a number of distinguishing characteristics which serve to

distinguish them from an unorganised mob. These groups interact with each other within the organisation
in order to achieve not only their respective goals, but the goals of the organisation as a whole.
5.5.4 Developing Groups Into Teams

Given the dynamic environmental change with which a number of organisations are faced (as discussed
in Section 2 and Section 3 of this Study Guide), a tendency exists for management to implement teams
to enable the organisation to cope with the environmental change and in so doing achieve higher levels
of productivity and empower its employees (Smit et al, 2011).
5.5.4.1 Types of Teams
THINK POINT
It is probable that you have heard of the term “self-managed teams”. Perhaps you
have even been a member or a leader of a “self-managed team”.
What is your understanding of the term “self-managed team”?

Self-Managed Teams are being used more and more frequently within organisations as one of the
means to assist the organisation in responding to the rapid pace of environmental change. Self managed
teams function autonomously and the management functions of planning, organising, leading and
controlling become the team’s responsibility. For the implementation of self-managed teams to be
effective, appropriate changes need to be made to the organisational system (e.g. performance
management, flattening of organisational structure, employee empowerment) (Smit et al, 2011).

So as to ensure that self managed teams are effective, the following guidelines should be adhered
to:
 Teams should have sufficient responsibility and autonomy to self manage. Managers should
not interfere with the work of the team
 Members of the self managed team should be carefully selected and should have a diversity of
skills to ensure that the work of the team is effectively completed. Team members often require
high levels of both interpersonal and technical skills (George & Jones, 2006).
 The role of the manager is to coach and support the self managed team (rather than supervise).
 Team members should be provided with the necessary training to effectively perform their work
Johnson Wax, a manufacturer of household products, provides an example of the effective

implementation of self managed teams. In the past Johnson Wax used assembly line production to
produced its household products, and the production line required limited thinking and input from
employees. More recently Johnson Wax has successfully replaced the production line with self managed
teams. An example is the nine-member self managed team which moulds plastic containers, the
members of which actively seek to cut costs and save money (George & Jones, 2006). Such cost
conscious behaviour was not possible on Johnson Wax’s previous production line approach.
In addition to the self managed team, three other types of teams are frequently found in
organisations.
These include:
 Problem Solving Teams: which are composed of employees from the same work environment.
They meet for a couple of hours a week to discuss and solve problems particular to their work-
environment. For example, kitchen staff at a hotel could meet every week to share ideas about how
they could improve the breakfast offering and service (Smit et al, 2011).
 Cross Functional Teams: which comprise functional managers (or employees) from the same
hierarchical level within the organisation (Smit et al, 2011) These teams serve to address complex
organisational problems.
 Virtual Teams: “whose members rarely or never meet face-to-face but, rather, interact by using
various forms of information technology such as email, computer networks, telephone, fax and

videoconferences” (George & Jones, 2006: 384). A key advantage of the virtual team is that they
overcome the challenge of geographic distances between team members. It is important, however,
for managers to actively monitor the functioning of a virtual team as it may occur that certain team
members do not communicate as often or as frequently as they should (George & Jones, 2006). It
may also be necessary to schedule face-to-face time with team members when the team is
experiencing difficulties or is not performing optimally.
5.5.4.2 High-Performance Teams

A number of factors influence a team’s performance.
READING ACTIVITY
Read the following text and then answer the question which follows:
 Jenewein, W. and Morhart, F. (2008) “Navigating Toward Team Success. ” Team

Performance Management. Vol 14, No 1 / 2, pp 102 – 108.
How do Jenewein and Morhart (2008) suggest organisations go about creating high
performance teams.

Jenewein & Morhart (2008) extract lessons from the Swiss Alignhi sailing team’s win of the 2003 America
Cup for high performance work teams. The significance of the Alignhi team’s win was that firstly it was
the first time that a landlocked nation had won the event, and secondly it was the first time that a team
won the event on the first attempt. Jenewein & Morhart (2008) argue that the “lead crew’s unique
handling of its human resources was the decisive factor in securing the team’s competitive edge” (p 102).
The lessons that Jenewein & Morhart (2008) extract from the Alignhi team’s success for the creation of
high performance work teams include:
 The ‘right’ people for the jobs that the team is to perform must be selected.
 Team members must take responsibility for their own actions
 There should be productive competition within the team.
 Problems should not be complained about, but should rather be solved.
 Team managers and team leaders should set an example to the team members – words should be
followed by action.

 Team members should be in close proximity so that natural processes of team building may take
place.
 Team members must be encouraged to communicate regularly and provide constructive feedback
(Jenewein & Morhart, 2008).
In summary, therefore, this sub-section explored the contemporary management issue of Groups and
Teams. The difference between a team and a group was determined, types of groups and reasons for
group formation were examined, as was the process of group development and group dynamics. The
development of groups into teams was also studied as was the creation of high performance work teams.
5.6 Summary
This, the final section of the Principles of Management Study Guide explored the Contemporary
Management Issues of Decision Making, Motivation, Communication and Groups and Teams:
 In exploring the contemporary issue of Decision Making, the various types of managerial decisions,
decision making conditions, decision making models, group decision making and quantitative
decision making tools were examined.
 The discussion on Motivation focused on the motivation process, the various motivation theories,
money as a motivator and designing jobs that motivate.
 The section on Communication identified and discussed the communication process, organisational
communication, barriers to effective communication, ways in which managerial communication can
be improved, as well as the impact of gender on communication.
 In the discussion on Groups and Teams the types of groups and reasons for group formation, the
group development process, group dynamics and the development of a group into a team were
examined.

Check your understanding of some of the principles and theory addressed in this
section by reading the case study and then answering the questions which follow.
The case study is divided into four parts.

Toys Inc (Part 1 – Decision Making)

Dikeledi Mabena is the Product Development Manager at ‘Toys Inc.’ a toy manufacturing company. She
manages department of 20 employees and of these 20 employees, 15 are responsible for coming up
with innovative ideas for new children’s toys.
It is 10am on a Monday morning and already Dikeledi is stressed out. Graham, the Marketing Director,
has just come past her office to show her the poor sales figures for the recently released “Robo-Man”, a
toy which the company had developed at a considerable cost in terms of materials and labour, at the
advice of Dikeledi’s ‘Technology Toys’ Product Development Team.
“Oh dear!” says Dikeledi as she slumps back into her chair, “I really don’t know what to say to you,
Graham. My ‘Technology Toys’ Product Development Team has made consistently poor decisions for
the last four toys that they have been commissioned to develop. I really don’t know why they are making
such poor choices!”
“It sounds to me like a case of groupthink Dikeledi,” responds Graham, “I would recommend that you call
in an Organisational Development consultant to help you address it. Anyway, I am late for my
departmental meeting, I will chat to you later.”
Later that day Dikeledi is busy responding to her emails when her PA, Angela, reminds her that two of
the departments senior product developers will be leaving at the end of the month.
“Are we just going to leave the positions vacant?” asks Angela.
“No, no,” responds Dikeledi, “those two positions have been approved by the Exco and there is sufficient
budget to fill them. Please will you set up an appointment with Ayanda, our HR Consultant, so that I can
get the recruitment process moving.”
At 18h00 Dikeledi is about to leave the office and is glad that what has been a rather difficult day has
come to an end. However, just before she is able to leave her office her phone rings. It is Allan, the
CEO.
“Hi Dikeledi, I know that you are probably on your way out, but I just wanted to personally inform you
about a decision which the Exco has taken which is going to impact your department directly!” says Allan
excitedly. “We have decided to enter into the European market – we want to produce toys that can be
sold in the UK, France, Italy and Greece!”

“Wow, that is exciting Allan,” replies Dikeledi, “but with due respect are you certain that we will be able
to compete in the European market! I mean our focus right now is on Africa only, which is very different
to Europe!”
“I understand your apprehension, Dikeledi” responds Allan, “but we have been as thorough as possible
in making this decision – our Marketing Team did some extensive market research and yes, part of the
decision was based on our ‘gut’. There is a considerable degree of risk and uncertainty involved.
Dikeledi, would it be possible for you to meet with me at 11h00 tomorrow as you will be a critical to the
successful implementation of our expansion strategy into Europe.”
“Sure Allan,” responds Dikeledi, “see you tomorrow!”
Note: Questions 1 – 4 are based on the case study Toys Inc. (Part 1 – Decision Making))
1. Dikeledi has decided to fill the two vacant posts for the position of ‘senior product developer’. This
is an example of:
A. Programmed Decisions
B. Non-Programmed Decisions
C. Subjective Decision
2. Exco’s decision to expand into the European market is an example of:
A. Programmed Decisions
B. Non-Programmed Decisions
C. Subjective Decision
3. Graham, the Marketing Director, comments that the ‘Technology Toys’ Product Development
Team may be suffering from ‘groupthink’. Groupthink is:
A. A creative and innovative approach to the generation of group ideas
B. A pattern of faulty decision making as a result of hostility and conflict between group members
C. A pattern of faulty decision making as a result of group members striving for agreement
amongst themselves.

4. Which of the following techniques may be used to address groupthink?
A. Brainstorming
B. Delphi Technique
C. Nominal Group Technique

D. All of the above
Toys Inc (Part 2 - Motivation)
After having a good nights rest, Dikeledi returns to work on Tuesday at ‘Toys Inc.’ As she enters her
office, Angela, her PA asks if she can speak with her. Angela explains that she has recently found out
that the HR Manager’s PA (Lindiwe) is paid approximately 20% more than she is.
“I do think it is unfair,r Dikeledi, especially as I am at the office at 07h00 every day and never leave here
before 17h30, while Lindiwe waltzes in as she pleases often after 09h00. She also leaves by 16h00. To
add to the insult, I have a much heavier workload than Lindiwe, but she still gets paid more than me!”
complains Angela.
Dikeledi promises Angela that she will look into her remuneration and then rushes off to a meeting with
Ayanda, the HR Consultant. The purpose of the meeting with Ayanda is for Dikeledi to receive feedback
on the results of the recent organisational climate survey. Ayanda hands Dikeledi a document with a
summary of the results for the Product Development Department.
Ayanda explains, “On the whole, Dikeledi, the results of the climate survey show that employees within
your department are happy with their working conditions, with their remuneration package and with their
relationship with you as their supervisor. However, the results also show us that your employees feel that
there are limited opportunities for advancement and growth.”
“That is not good news Ayanda,” replies Dikeledi, “how do you propose I address the limited opportunities
for advancement and growth?”
“You might consider job enlargement or job enrichment Dikeledi,” answers Ayanda, “I will email you some
guidelines on how you could go about enlarging and enriching the jobs in your department.”
“Thank you Ayanda, I’ll appreciate that!” says Dikeledi. Note: Questions 5 – 9 are based on the case
study entitled Toys Inc. – Part 2 (Motivation).

5. Angela’s complaint about Lindiwe receiving higher remuneration than her is an example of the
application of:
A. Maslow’s Hierarchy of Needs

B. Herzberg’s Two-Factor Theory
C. Equity Theory
D. Expectancy Theory
6. The results of the climate survey shows that Dikeledi’s staff are happy with their working conditions,
remuneration package and the supervisor relationship. These are examples of:
A. Herzberg’s hygiene factors

B. Herzberg’s motivators
C. Maslow’s self-actualisation needs
D. Both B and C
7. The results of the climate survey show that Dikeledi’s staff are not happy with the limited opportunities
for advancement and growth. These are examples of:
A. Herzberg’s hygiene factors

B. Herzberg’s motivators
C. Maslow’s self-actualisation needs
D. Both B and C
8. To address the limited opportunities for growth and development, Ayanda suggests that Dikeledi
consider job enlargement. Job enlargement refers to:
A. Horizontal extension of a job

B. Vertical expansion of a job
C. Providing greater responsibility in a job
D. Both B and C
9. Ayanda also suggests that Dikeledi consider job enrichment. Job enrichment refers to:
A. Horizontal extension of a job
B. Vertical expansion of a job
C. Providing greater responsibility in a job
D. Both B and C

Toys Inc (Part 3 – Communication)

After receiving the feedback from Ayanda, the HR Consultant, on the results of the organisational climate
survey, Dikeledi returns to her office where she drafts a memo to all of her staff.
INTERNAL MEMORANDUM
TO: All Staff of the Product Development Department
FROM: Dikeledi Mabena
Product Development Manager
SUBJECT: Results of the Organisational Climate Survey
Dear All
I am pleased to inform you that the long awaited results of the Toys Inc. Organisational Climate Survey have
finally been released.
The key findings for our department were:
 Employees are generally happy with the working conditions, remuneration package and supervisor
relationship.
 Employees are dissatisfied with the limited opportunities for advancement and growth.
I have attached the full report on results of the Climate Survey for your review.
To try to find a way to address our department’s unhappiness around the limited opportunities for advancement
and growth, I have set up a special meeting for 13h00 on Friday which must be attended by all staff. The purpose
of this meeting is to discuss your particular concerns and to find ways of improving the advancement and growth
opportunities within our department.
Thank you
Dikeledi Mabena

Note: Questions 10 – 13 are based on the case study entitled ‘Toys Inc. – Part 3 (Communication)’
10. The internal memorandum which Dikeledi drafts to her departmental staff is an example of which of:
A. Downward communication
B. Upward communication
C. Horizontal communication
D. Lateral communication
11. The meeting which Dikeledi has set up with her staff to discuss ways of improving advancement and
growth opportunities within the department is primarily an example of:
A. Downward communication
B. Upward communication
C. Horizontal communication
D. Lateral communication
12. Dikeledi’s message to her employees is drafted using English language words. This is an example
of:
A. Encoding
B. Decoding
C. Feedback
13. Dikeledi uses a written internal memorandum to communicate her message to her staff. The written
memorandum is an example of :
A. Noise
B. Decoding
C. Channel

Toys Inc (Part 4 – Groups and Teams)
In her position of Product Development Manager, Dikeledi is busy planning for the development of ducts
for the European market which Toys Inc. has recently decided to expand into. Dikeledi has decided that
the best way to tackle product development for the European market is through a self managed team.
Some of the team members will need to be based in Europe, while others will have to be based at the
African head office. The team would have to work primarily through email and video conferencing.
Note:
14. Dikeledi is the manager of the Product Development Department. Her department is an example of:
A. Task group
B. Command group
C. Self managed group
D. Interest group
15. The European Product Development Team which Dikeledi is putting together is primarily an example
of a:
A. Cross functional team
B. Problem solving team
C. Virtual team
16. The European Product Development Team is to be a self managed team. This means that:
A. Team members will have high levels of technical and interpersonal skills
B. It is likely that team members will rotate the team’s leadership
C. The team will function autonomously and may only take guidance and support from Dikeledi as
and when required
D. All of the above

1. A 2. B
3. C 4. D
5. C 6. A
7. D 8. A
9. D 10. A
11. A 12. A
13. C 14. B
15. C 16. D

The Study Group Discussion exercise for this section of your Study Guide
is quite a lengthy one and comprises four components. It is therefore
recommended that the exercises are addressed over two or more Study
Group sessions.
Activity 1: Decision Making

You and the members of your Study Group have recently undertaken the decision to study towards the
Certificate in Business Management at Mancosa, which has significant implications for both your
personal and professional life. For the purposes of this exercise your Study Group is required to review
the decision making process which you and your fellow group members executed which ultimately led
you to choosing the MANCOSA Certificate in Business Management Studies as your choice of study.
The following questions will assist you in your review.
1.1 Identify the criteria that you used to guide your decision making.
1.2 What were the alternatives which you considered?
1.3 How much information did you have about each alternative? Did you have complete or incomplete
information for each alternative?

1.4 How did you ultimately reach your decision? Did you carefully think through the implications of
each of the alternatives that you had identified, or was a degree of intuition involved?
5. Having answered the previous four questions, do you believe that the decision that you reached was
reasonable? What would you do differently next time?
(This activity on decision making has been adapted from George and Jones, 2006: 258)
Activity 2: Motivation
“You and your partners own a chain of 15 dry-cleaning stores in a medium-size town. All of you are
concerned about a problem in customer service that has surfaced recently. When any one of you spends
the day, or even part of the day, in a particular store, clerks seem to provide excellent customer service,
spotters are making sure all stains are removed from garments, and pressers are doing a good job of
pressing difficult items such as silk blouses. Yet during those same visits customers complain to you
about such things as stains not being removed and items being poorly pressed in some of their previous
orders; indeed several customers have brought garments in to be redone. Customers also sometimes
comment on having waited too long for service on previous visits. You and your partners are meeting
today to address this problem” (from George and Jones, 2006: 366).
2.1 To what extent do you believe you have a motivation problem within your dry-cleaning stores?
2.2 How could you go about improving the motivation of clerks to provide prompt and efficient service to
customers even when they are not being watched by a partner?
2.3 How could you go about improving the motivation of spotters to effectively remove stains from
garments, even when the are not being watched by a partner?
2.4 How could you motivate the pressers to do an excellent job when pressing garments, even when
they are not being watched by a partner?
Activity 3: Communication
3.1 Each group member must share at least one to three communication problem(s) which they
experience on a regular basis at the workplace.
3.2 Discuss strategies to address the communication problems raised by your fellow group members.

Activity 4: Groups and Teams

Based on the knowledge that you have developed about groups and teams through studying this section
of the Study Guide, critically analyse the performance of your Study Group through answering the
following questions.
4.1 Identify and discuss the particular strengths of your Study Group.
4.2 Identify and discuss the key weaknesses in the functioning of your Study Group.
4.3 Discuss and agree to actions to address the weaknesses of your Study Group going forward.

Responses will differ across study groups. Comments on each question are provided below.
Study Group Discussion Activity One: Decision Making

This activity provides the Study Group with an opportunity to reflect on and analyse a decision making
process which was common to all group members. Group members, in sharing the process which they
went through in making the decision to enrol for Mancosa’s Certificate in Business Management, will
learn from each other which will enable them to implement better decision making processes in the future.
Study Group Discussion Activity Two: Motivation

Model answers to the four questions are provided below.
Question 1 – Motivation Problem or Not?
The problem at the dry-cleaning stores does indeed appear to be one of motivation. It is evident that
employees are quite capable of effectively performing their jobs – indeed, they perform well when a
partner is present in a store. Performance problems only emerge when a partner is not present.
A factor other than motivation which could potentially impact on the employees’ performance may be
that there are too few staff to service customers at peak times.
Question 2- Motivation of Clerks to Service Customers Promptly and Efficiently

Clerks should be given clear criteria as to what is expected of them. For example, one of the criteria
could be “serve customers within 20 seconds of arriving in the store”. The clerks should be involved in
the setting of the criteria. The criteria then become goals which direct the clerks’ behaviour. Clerks
should be positively reinforced, recognized and rewarded for meeting the agreed criteria (e.g. through a
“clerk of the week” recognition scheme). Clerks should also be encouraged and positively reinforced for
making suggestions regarding the provision of better service to customers. The partners of the business

should also check that there are no perceptions of inequity amongst the clerks as this would undermine
effective performance.
Question 3 – Motivation of Spotters

As with the clerks, criteria could be set for the spotters. An example of such a criterion could be “remove
5 stains from one garment in one minute.” Such criteria would function as goals to direct the behaviour
of the spotters. Those spotters who meet and exceed the criteria should be positively reinforced. Positive
reinforcement measures could include weekly merit bonuses for exceeding the set criteria. The principles
of Expectancy Theory may also be applied – partners could try to increase expectancy by expressing
confidence in the spotters’ ability to effectively remove stains even when the partners are not present.
Question 4 – Motivation of Pressers

Customers have complained about garments being poorly pressed, which indicates that pressers need
to focus on improving the quality of their work. Criteria should therefore be developed to address the
quality of pressing garments rather than the quantity of garments. The principles of Expectancy Theory
could be applied where expectancy can be raised through the partners expressing confidence in the
pressers’ abilities. Performance standards could be set and pressers who meet or exceed these
standards should be rewarded with recognition as well as a monetary incentive. Both recognition and a
monetary incentive should have valence for the pressers.
Study Group Discussion Activity Three: Communication

Responses will be dependent on each individual group member’s experiences with communication
problems in their respective organisations. This activity presents a useful opportunity for group members
to share ideas and learn from each other.
Study Group Discussion Activity Four: Groups & Teams

Responses will be dependent on the dynamics of each particular Study Group. This activity not only
provides group members with an opportunity to apply what they have learnt with respect to groups and
teams, but it also provides an opportunity to improve the functioning of the Study Group.


Instructions:
follow.
Jabu is a Project Manager at Advance IT, a global organisation providing IT
services to corporates in Africa, Australia and the Middle East. Jabu has been
assigned as project manager to the InvestBank contract which Advance IT has
only recently been awarded.
It has now been only two weeks into the implementation of the twelve month
project and Jabu notices that morale within his project team is low. Jabu cannot
understand this as all the members of his team are being very well remunerated.
He calls in some of the IT engineers working on the project to try and determine
the reason for the low morale.
Many of the IT engineers indicate that they are bored with the work involved on
the project as it does not present any challenge – it is exactly the same as the
work that they did for New African Investment Bank six months ago. Many of the
IT engineers express that they had actually hoped that they were going to be
assigned to the Telecom Project as this would have presented them with the
challenge of working with new technology.
1. Critically discuss the poor motivation levels within the InvestBank project team from the
perspective of:
1.1 Maslow’s hierarchy of needs (5 marks)
1.2 Herzberg’s two factor theory (5 marks)
1.3 McClelland’s theory (5 marks)
1.4 Expectancy theory (5 marks)
Provide recommendations as to how Jabu could go about improving the morale in his team.
(5 marks)

2. In executing its work, the project team is likely to experience certain barriers to effective
communication.
2.1 Describe five barriers to effective communication which the project team is likely to experience.
(5 marks)
2.2 What strategies and methods could be used to assist the project team in overcoming barriers to
effective communication? (5 marks)
3. Discuss the stages of team development which Jabu’s project team is likely to go through.
(10 marks)
4. One of the means which Jabu could use to improve morale within the project team is to allow it to
operate as a self managed work team. Discuss some of the key characteristics of a self managed
team. (5 marks)
 The length of your answer should be guided by the mark allocation. Generally one coherent point /
fact equals one mark.
 Make sure that you answer all the requirements of the question.
o Question 1: Section 5.3 (Motivation) particularly section 5.3.2, 5.3.3 and 5.3.4.
o Question 2: Section 5.4 (Communication), particularly section 5.4.3
o Question 3: Section 5.5.2. (Group Development)
o Question 4: Section 5.5.4.1 (Self Managed Work Teams)

BIBLIOGRAPHY
 Arumugan, S. (2006) “Competencies for Multi-Cultural Leadership.” HR Future. June.
 Bassett-Jones, N. and Lloyd, G.C. (2005) “Does Herzberg’s Motivation Theory Have Staying Power?”
Journal of Management Development. Vol. 24, No. 10, pp 929 – 943.
 Botha, S., Cunningham, P., Musengi, S., Visser, K., Williams, O., Lotz, J., Booysen, K., Stewart Smith, A.,
Bosch, A., and Banhegyi, S. (2009) Management: Fresh Perspectives. Cape Town: Pearson Education South
Africa.
 Collins, D. (2003) “The Branding of Management Knowledge: Rethinking Management “Fads”. Journal of
Organisational Change Management. Vol 6, No 2, pp 186 – 204.
 Denton, D.K. (2006) “Making Changes within a Team.” Team Performance Management. Vol. 12, No. 3 / 4,
pp 82 – 90.
 Du Toit, G., Erasmus, B. and Strydom, J. (2009) Introduction to Business Management. Seventh Edition.
Cape Town: OUP Southern Africa.
 George, J.M. and Jones, G.R. (2006) Contemporary Management: Creating Value in Orgainizations. Fourth
Edition. Boston: McGraw Hill.
 Hellriegel, D., Jackson, S.E., Slocum, J., Staude, G., Amos, T., Klopper, H.B., Louw, L. and Oosthuizen, T.
(2005) Management. Second South African Edition. Cape Town: Oxford University Press.
 Hoogervorst, J., Van Der Flier, H. and Koopman, P. (2004) “Implicit Communication in Organisations.”
Journal of Managerial Psychology. Vol. 19, No. 3, pp 288 -311.
 Jenewein, W. and Morhart, F. (2008) “Navigating Toward Team Success.” Team Performance Management.
Vol 14, No 1 / 2, pp 102 – 108.
 Larson, J. & Kleiner, B.H. (2004) “How to Read Non-Verbal Communication in Organisations.” Management
Research News. Vol. 27, No. 4 / 5, pp 17 – 22.
 Marren, P. (2008) “Alternative Strategies: Destructive Creation.” Journal of Business Strategy. Vol 29, No 2,
pp 51 – 53.
 McPhee, W. & Wheeler, D. (2006) “Making the case for the added-value chain.” Strategy and Leadership.
Vol 34, No 4, pp 39 – 46.

 Milne, P. (2009) “Motivation, Incentives and Organisational Culture.” Journal of Knowledge Management. Vol.
11, No. 6, pp 28 – 38.
 Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard BusinessReview, Mar – Apr, pp 163 –
170.
 Mohonathan, S. (2008) “Trends, Innovation & Skills Development: Technology is Creating the New World of
Work.” HR Future. May.
 Moss Kanter, R. (1989) “The New Managerial Work” Harvard Business Review Nov - Dec, pp 13 – 20.
 Parker, L.D. & Ritson, P. (2005) ”Fads, Stereotypes and Management Gurus: Fayol and Follett Today.”
Management Decision. Vol 43, No 10, pp 1335 – 1357.
 Pina, M.I.D., Martinez, A.M.R. & Martinez, L.G. (2008) “Teams in Organisations: A Review on Team
Effectiveness.” Team Performance Management. Vol. 14, No. 1/ 2, pp 7 – 21.
 Porter, M.E. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review March-April, pp 137
– 145.
 Rory, D. (2006) “How ‘free’ is the free-worker? An investigation into the working arrangements available to
knowledge workers.” Personnel Review. Vol 35, No. 1, pp 78 – 97.
 Ross, T.M. and Jones, E.C. (2008) “Can team effectiveness be predicted?” Team Performance Management.
Vol. 14, No. 5 / 6, pp 248 - 268
 Schwarber, P.D. (2005) “Leaders and the Decision Making Process.” Management Decision. Vol. 43, No. 7 /
8, pp 1086 – 1092.
 Schwartz, M. (2009) “The ‘Business Ethics’ of Management Theory.” Journal of Management History. Vol
13, No 1, pp 43 – 54.
 Sheridan, F. (2009) “Gender, Language and the Workplace: An Exploratory Study.” Women in Management
Review. Vol. 22, No. 4, pp 319 – 336.
 Smanjak, Peter (2006) “Know Your Company’s HIV Risk.” HR Future. May.
 Smit, P.J., Cronjé, G.J. de J., Brevis, T. and Vrba, M.J. (2011) Management Principles: A Contemporary
Edition for Africa, Fifth Edition. Cape Town: Juta & Co.
 Tetenbaum, T. (1998) “Shifting Paradigms: From Newton to Chaos” Organizational Dynamics Spring pp 21
– 32.

 Ulrich, D. (1998) “A New Mandate for Human Resources” Harvard Business Review, January – February, pp
124 – 134.
 Van Der Colff, L. (2003) “Leadership Lessons from the African Tree.”Management Decision. Vol. 41, No. 3,
pp 257 -261.
 Wade, L. (2006) “HIV / AIDS Strategic Shift.” HR Future. March.s

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Certificate

Unit 1: Introduction to Management ......................................................................................................... 6

Unit 2: Evolution of Management Theory............................................................................................... 41

Unit 3: The Management Environment .................................................................................................. 77

Unit 4: The Management Process ....................................................................................................... 109

Unit 5: Contemporary Management Issues ......................................................................................... 152

BIBLIOGRAPHY .................................................................................................................................. 202

MANCOSA – Certificate in Accounting i i

Aims of this Module

 Develop the learner’s understanding of the evolution of management theory

Contents and Structure

Section 2: Evolution of Management Theory

Section 3: Management Environment

1 MANCOSA – Certificate in Accounting

Section 4: The Management Process

Section 5: Contemporary Management Issues

How to Use the Study Guide

 Self Check Activities

 Study Group Discussion Activities

 Sample Examination Questions

MANCOSA – Certificate in Accounting 2

SELF TEST QUESTIONS

DISCOVERING FOR YOURSELF

3 MANCOSA – Certificate in Accounting

CORE READINGS FOR THIS MODULE

The prescribed text for this module is:

Each section has a list of recommended books and recommended journals,

STUDY GROUP DISCUSSION

SAMPLE EXAMINATION QUESTIONS

MANCOSA – Certificate in Accounting 4

5 MANCOSA – Certificate in Accounting

The overall outcome for this section is that, on its

1. Explain the relationship between the organisation

2. Discuss the management process and explain the

Unit 1: and its environments.

3. Formulate a workable definition of management.

5. Identify and critically discuss the areas of

6. Identify and critically discuss the concepts of, and

7. Identify and critically discuss the measures of

8. Identify and critically discuss contemporary

MANCOSA – Certificate in Accounting 6

CORE READINGS FOR THIS CHAPTER

Pearson Education South Africa. pp 1 – 18 (Chapter 1).

Fourth Edition. Boston: McGraw Hill. pp 2 – 39 (Chapter 1).

(2005) Management. Second South African Edition. Cape Town: Oxford

 Mohonathan, S. (2008) “Trends, Innovation & Skills Development: Technology is

 Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard

7 MANCOSA – Certificate in Accounting

 Wade, L. (2006) “HIV / AIDS Strategic Shift.” HR Future. March.

 Management and the organisation

 ‘Old’ and ‘new’ organisations

 Management and organisational performance

 The scope and challenges of management

 why do organisations exist; and

 how does the role of management support the purpose of

Comment on Think Point

MANCOSA – Certificate in Accounting 8

1.2 The Nature of Management

9 MANCOSA – Certificate in Accounting

 the macro-environment and

 management schools of thought

08:30 – 09:30: Meet with PA to arrange Departmental Team-Building Getaway

10:00 – 12:00: Restructuring Task Team Meeting (The organisation is currently

MANCOSA – Certificate in Accounting 10