General Management

GENERAL MANAGEMENT
J.A.A. Lazenby
(Editor)
N. Achadinha
E. Benedict
S. Boshoff
A.P. Flotman
J. Taljaard
A. van der Walt
A. van Noordwyk
W. Vermeulen
Van Schaik
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About the editor
Kobus Lazenby is an associate professor at the University of the Free State.

His focus is general management, strategic management and project
management at both undergraduate and postgraduate level, and he also
lectures in project and strategic management at the Business School at the
University of the Free State. He is the editor of the book The strategic
management process: A South African perspective.
About the authors

Naquita Achadinha is a junior lecturer in the Department of Business
Management at the University of the Free State with a passion for business
and teaching. She has been involved in presenting various business modules,
including business functions, strategic marketing management, and consumer
behaviour and branding, at both undergraduate and postgraduate level. Her
research interests include e-commerce and mobile marketing.
Ekaete Benedict is a lecturer at the University of the Free State. Her

teaching and research interests are in general management, entrepreneurship
and marketing. She also lectures in operations management and
entrepreneurship at the University of the Free State Business School. She is
involved in new venture creation and currently manages a small
entrepreneurial venture.
Salomien Boshoff is a lecturer at the University of the Free State, where she
teaches general management at the Business School and sales management in
the Department of Business Management on postgraduate level. Her research
interest is managerial competencies and she has received awards for
Teaching and Learning Excellence (2011, 2012 & 2015).
Aden-Paul Flotman is a senior lecturer in the Department of Industrial and
Organisational Psychology at the University of South Africa, where he
lectures in organisational development, change management and coaching
psychology. His research interests are in the fields of leadership coaching,
change management, systems-psychodynamic consulting, somatic intelligence
and neuropsychology.
Jacques Taljaard has lectured in Employee Relations at the Central

University of Technology Free State for the last 19 years and specialises in
employee relations. He also serves as external assessor and moderator for
the Business School of the University of the Free State. He has been in
practice as an employment relations consultant for the last 17 years, in which
capacity he supplies support services to employers in various sectors of the
economy across the broad spectrum of employee relations. He is chair of the
Free State Chamber of the Safety and Security Sector Bargaining Council and
a member of the Human Resource Committee of Free State Agriculture. His
vast experience in higher education and consulting covers aspects such as
termination of employment, workplace investigations and employment equity
plans.
Amandi van der Walt was previously a junior lecturer in Strategic

Management and Business Management at the University of the Free State
and also a lecturer in General Business Management at the Business School
of the University of the Free State. She has acted as a coordinator of general
management in the University of the Free State’s UPP programme, which was
designed to support historically disadvantaged students who do not have
access to higher education studies as a result of their low admission points
from school. Amandi has relocated to France where she is furthering her
studies in the business management field and is currently enrolled for her
MSc degree in supply chain and lean management at Toulouse Business
School, France.
Annemarie van Noordwyk is a junior lecturer at the University of the Free

State. Her focus is management and entrepreneurship at undergraduate level.
She also lectures in general management and finance for non-financial
managers at the Business School at the University of the Free State.
Werner Vermeulen is a senior lecturer and vice-chair of the Department of
Business Management at the University of the Free State, as well as a visiting
professor at Ghent University, Belgium. His focus is management, business
excellence and research methodology. He also lectures in entrepreneurship at
the Business School, University of the Free State. He is co-author of the book
Doing research and is an editorial board member of the international journal
Measuring Business Excellence.
Preface
I would like first of all to express my gratitude to all those people who
helped and encouraged me in this project. In particular, I would like to
mention Van Schaik and its publishing and editorial staff for their painstaking
visits, meetings and encouragement in finalising this project. I am also deeply
indebted to my wife, Maretha, for her encouragement, love and patience
during this project. I would also like to thank my children, Willie and Madri,
for their trust in me and their encouragement to finish this project.
A project like this would never have become a reality had it not been for
each and every colleague who contributed to this book. Thank you so much
for bearing with me and for your timely responses when something was
expected of you.
This book is an attempt to explain general management in such a way that the
reader understands exactly what it entails. It is also intended to instil respect
for the challenging field of management. The book has been primarily
designed and written for use by people who will become managers of
organisations in the future, as well as for managers in practice who are
attempting to master the art of management. Although it is not explicitly
mentioned, managers who apply these management skills should always
strive to engage the hearts and minds of their people in achieving
organisational goals and objectives.
The content of each chapter is enriched with Management in action case

studies that give examples of how some of the theory is applied in practice.
Every chapter concludes with a case study to help the reader apply the theory
contained in the chapter, and with a number of management exercises.
Chapter 1 introduces the concept of general management and explains the
importance and relevance of management for all organisations. Chapter 2
deals with the development and history of management theories and the main
contributors of these theories are introduced. The contribution these theories
make to the workplace of today and the way contemporary managers are
using these theories to build efficient and effective organisations are also
discussed. Chapter 3 deals with the organisational environment, where the
fast-paced, constantly changing world has not only affected the way in which
people live but also the way in which organisations operate.
Chapter 4 discusses ethics and social responsibility. Managing in an

environment where the distinction between right and wrong becomes blurred,
and behaving in an equivalent way, is difficult. Ethical behaviour is
discussed, which managers have to make the centre of an organisation’s
actions. In Chapter 5, planning as the central management task is introduced
because, as the saying goes, “failing to plan is planning to fail”. In this regard
it is important for the organisation to develop certain goals that will take it a
step further.
Chapter 6 deals with decision-making. Life is about choices and making

decisions. Decision-making is therefore essential at each stage of the four
basic management functions and on all the management levels. Chapter 7
describes organising as a basic management function. A plan is only as
powerful as its execution. During the planning process, the objectives the
organisation wants to achieve are determined. However during this process
it is also important to decide how resources should be organised and
coordinated in order to achieve the objectives.
Chapter 8 explores the changing world of work and the need for
organisations to be responsive to change. In order to survive and remain
competitive in an environment marked by radical and intensive change,
organisations are compelled to become flexible in their approach and
responsive to internal and external forces. Chapter 9 deals with the
management of diversity in the workplace. In South Africa, workplaces are
characterised by diversity, thus workplace diversity will have a close link
with equality or inequality. Workplace diversity is about acknowledging the
value of individual differences and making the most of these differences in
the workplace. Managers sometimes see workplace diversity as a challenge,
but it can actually be regarded as one of the greatest organisational strengths.
Chapter 10 introduces one of the most important management functions –

getting people active. With change being the only constant in today’s
organisational environment, people should be led to become committed to
achieving the organisation’s plan. This chapter emphasises the importance of
the manager’s leadership role in an organisation. Having the management
ability to ensure that everything is done in the right way is not enough;
leadership also has to ensure that while the organisation is doing things right,
it is also doing the right things.
Motivation is also sometimes called the ‘core of management’. Even with the
best plan in place and an appropriate organisational structure, organisations
can only be effective if their members are motivated to perform at a high
level. Motivating and rewarding employees are important aspects of the
activating process and are an important challenge faced by managers. This
management function is discussed in Chapter 11.
Chapter 12 explains the important skill of communication. Many people

struggle to communicate effectively and frustration may result if messages are
incorrectly sent or received. This is relevant to both personal relationships
and workplace relationships. In an organisation, effective communication is
important for improving operational activities and productivity and
increasing employee morale.
Control is the final step in the management process and is an important link in
the management cycle. All organisations have to have control processes in
place to ensure that they are progressing according to plan. In Chapter 13,
control is explained in terms of the process whereby managers monitor and
regulate how efficiently and effectively the organisation and its members are
performing the activities necessary to achieve its goals.
It is important to note that there are other issues besides the functions of
planning, organising, leading and control that managers need to be concerned
with. As can be seen from Chapter 3, today’s business environment (both
internal and external) is dynamic – ever-changing and adapting to changes.
Managers therefore have to be aware of the issues that could affect
organisational management. These issues may change from time to time
depending on the trends that are present in the business environment at any
point in time. In Chapter 14, a number of contemporary management issues
are discussed in terms of the challenges they present for managers in the
modern workplace. These challenges include managing conflict and
negotiating with various stakeholders, as well as overseeing organisational
teams. The operation of organisations in the global business environment and
the concept of Black Economic Empowerment in the South African context
are also discussed. This chapter, and indeed the book, concludes with a
discussion on the importance of health and wellness programmes in the
workplace.
I believe that this book will help the reader to understand the importance of
the main elements of the management process. There are of course many
other management issues that could have been discussed, but the purpose of
this book is to introduce the reader to general management. My sincere hope
is that this book will make a difference in the life and work of managers in
South Africa.
I thank my Almighty Father for granting me the opportunity, wisdom and

grace to present this book.
Kobus Lazenby
April 2015
Contents
About the editor
Preface
CHAPTER 1 Introduction to management
1.1 Introduction
1.2 What is an organisation?
1.3 What is management?
1.4 Who is a manager?
1.5 Management roles
1.6 Management skills
1.7 Challenges for managers
1.7.1 Building a competitive advantage
1.7.2 Maintaining ethical and socially responsible behaviour
1.7.3 Managing a diverse workforce
1.7.4 Managing in a global environment

1.8 Summary
References and recommended reading
Case study: Peter Mogorosi
Management discussion exercises
CHAPTER 2 Management theory
2.1 Introduction
2.1.1 Development of the need for management
2.2 Classical management theories
2.2.1 The scientific management approach
2.2.2 The bureaucratic approach
2.2.3 The administrative management approach
2.2.4 Common characteristics
2.3 Behavioural theories
2.3.1 The human relations approach
2.3.2 The human resources approach
2.4 Quantitative theories
2.4.1 Operations management
2.4.2 Information management

2.5 Contemporary management theories
2.5.1 Systems management
2.5.2 Contingency theory
2.5.3 Total quality management (TQM)
2.6 Summary
Case study: The mining industry of South Africa
CHAPTER 3 The organisational environment
3.1 Introduction
3.2 An organisation and its environment
3.3 The micro-environment
3.3.1 Vision, mission and goals
3.3.2 Business functions
3.3.3 An organisation’s resources
3.4 The task environment
3.4.1 Customers
3.4.2 Competitors
3.4.3 Suppliers
3.4.4 Intermediaries
3.5 The macro-environment
3.5.1 Demographic factors
3.5.2 Sociocultural factors
3.5.3 Economic factors
3.5.4 Political/legal factors
3.5.5 Technological factors
3.5.6 Natural/physical/ecological factors
3.5.7 International factors
3.6 Managing the organisational environment
3.6.1 Environmental scanning
3.6.2 SWOT analysis
3.7 Summary
Case study: Westdene Fruiterers
CHAPTER 4 Managerial ethics and social responsibility

4.1 Introduction
4.2 The forces for ethical conduct
4.2.1 Individual perspective
4.2.2 Societal norms and culture
4.2.3 Laws and regulations
4.2.4 Organisational practices and culture
4.3 Nature of managerial ethics
4.4 Ethical decision-making
4.4.1 Approaches to ethical decision-making
4.5 Importance of managers to behave ethically
4.5.1 Customer satisfaction and loyalty
4.5.2 Employees follow
4.5.3 Retain good employees
4.5.4 Develop a positive work environment
4.5.5 Improve society
4.5.6 Avoid legal problems
4.5.7 Positive stakeholders
4.5.8 Compass in a changing environment

4.5.9 Positive conscience
4.6 Code of ethics
4.7 Corporate social responsibility (CSR)
4.7.1 Approaches to corporate social responsibility
4.7.2 Criteria for evaluating corporate social responsibility
4.8 Summary
Case study: What is wrong with The Body Shop? A criticism of

“green” consumerism
CHAPTER 5 Planning
5.1 Introduction
5.1.1 What is planning?
5.2 Why do managers plan?
5.2.1 Planning and performance
5.2.2 Dysfunctional aspects of planning
5.3 How do managers plan?
5.3.1 Identify the purpose of planning
5.3.2 Establish goals

5.3.3 Develop commitment
5.3.4 Develop alternative plans
5.3.5 Evaluating the various alternative plans
5.3.6 Implementation of the plan
5.3.7 Control and evaluating the results of the plan
5.4 Important factors in planning
5.4.1 Significance
5.4.2 Increasing demand
5.4.3 Technology
5.4.4 Legal issues
5.4.5 Financing
5.4.6 Marketing
5.5 Time management
5.6 Summary
Case Study: City Lodge Hotels
CHAPTER 6 Decision-making
6.1 Introduction
6.2 Nature of decision-making
6.3 Conditions and types of decision-making
6.3.1 Routine decisions
6.3.2 Adaptive decisions
6.3.3 Innovative decisions
6.4 Factors influencing decisions
6.5 Decision-making styles
6.5.1 Individual decision-making styles
6.5.2 Group decision-making styles
6.6 Decision-making models
6.6.1 Classical model of decision-making
6.6.2 Administrative model
6.6.3 Political model
6.7 Summary
Case study: Zinging Lime

CHAPTER 7 Designing the organisation
7.1 Introduction
7.2 Why is organising important?
7.3 Basic elements of organising
7.3.1 Specialisation
7.3.2 Division of work
7.3.3 Centralisation and decentralisation
7.3.4 Authority
7.3.5 Chain of command
7.3.6 Span of control
7.3.7 Coordination
7.4 Contingency factors influencing the organisational structure
7.4.1 Strategy and structure
7.4.2 Size and structure
7.4.3 Technology and structure
7.4.4 Environmental uncertainty and structure
7.4.5 Communication and structure
7.5 Organisational designs

7.5.1 Simple structure
7.5.2 Departmentalisation
7.5.3 Other organisational designs
7.6 Summary
Case study: Stress-free work environment and organising
CHAPTER 8 Organisational change and learning
8.1 Introduction
8.2 The changing world of work
8.3 Forces for change
8.3.1 Volatile forces
8.3.2 General forces
8.3.3 Systemic forces
8.3.4 Internal organisational forces
8.4 Types of organisational change
8.5 Approaches to managing the change process
8.5.1 The Lewin model

8.5.2 The action research model
8.5.3 The positive model – appreciative inquiry
8.5.4 Criticism of planned approaches
8.6 Resistance to change
8.6.1 Individual resistance
8.6.2 Organisational resistance
8.6.3 Overcoming resistance to change
8.7 Creating a learning organisation
8.7.1 Learning organisations defined
8.7.2 Learning organisations: core values and norms
8.7.3 Learning organisations: core processes
8.7.4 Distinguishing features of learning organisations
8.8 Summary
Case study: Gender mainstreaming needs fast-tracking
CHAPTER 9 Managing diversity in the workplace
9.1 Introduction
9.2 A broader approach to workplace diversity
9.3 Diversity dimensions in the workplace
9.3.1 Physical ability
9.3.2 Gender
9.3.3 Ethnicity
9.3.4 Age
9.4 Factors effecting diversity
9.5 Implications of managing diversity in South Africa
9.5.1 Functional implications
9.5.2 Management and trade union cooperation
9.5.3 Monitoring by the Department of Labour
9.5.4 Geographic or national location
9.5.5 Different religious practices
9.6 Diversity training
9.6.1 Sensitivity and personal prejudice
9.6.2 A strategic component to diversity training
9.6.3 Diversity training programmes
9.7 Diversity management problems and challenges

9.8 Positive aspects
9.9 Diversity and the ethical challenge
9.10 Summary
Case study: The new employee
CHAPTER 10 Leadership
10.1 Introduction
10.2 The three cornerstones of leadership
10.2.1 The leader
10.2.2 The followers
10.2.3 The situation
10.3 Nature of leadership
10.3.1 Components of leadership
10.3.2 Empowerment: a key to modern management
10.4 Leadership theories
10.4.1 Trait theory
10.4.2 Behavioural theory

10.5 Contemporary leadership perspectives
10.5.1 Transformational leadership
10.5.2 Charismatic leadership
10.5.3 Servant leadership
10.6 Leadership and entrepreneurship
10.7 Gender and leadership
10.8 Leading through empowerment
10.9 Summary
Case study: The most undervalued leadership traits of women
CHAPTER 11 Motivation
11.1 Introduction
11.2 What is motivation?
11.3 The motivation process
11.4 Motivation and organisational performance
11.5 Motivation theories
11.5.1 Content theory

11.5.2 Process theory
11.5.3 Learning theory
11.6 Contemporary issues on motivation
11.6.1 Pay and motivation
11.6.2 Family-friendly workplaces
11.6.3 Flexible working hours
11.6.4 Open-book management
11.6.5 Motivating the workforce
11.7 Designing motivating jobs
11.7.1 Job enlargement
11.7.2 Job enrichment
11.7.3 Job rotation
11.8 Summary
Case study: John’s brave decisions
CHAPTER 12 Communication
12.1 Introduction
12.2 Importance of communication
12.3 The communication process
12.4 Types of communication
12.4.1 Verbal communication
12.4.2 Non-verbal communication
12.5 Organisational communication
12.5.1 Formal communication
12.5.2 Informal communication
12.6 Barriers to communication
12.6.1 Organisational barriers
12.6.2 Individual barriers
12.6.3 Noise
12.7 Skills for effective communication
12.7.1 Tactics for managers as senders of messages
12.7.2 Tactics for managers as receivers of messages
12.8 Summary
Case study: Amway – using communication to develop

organisation opportunities
CHAPTER 13 Foundations of control
13.1 Introduction
13.2 What is control?
13.3 The importance of control
13.4 Types of organisational control
13.5 Areas of control
13.6 The control process
13.6.1 Step 1: Establish performance standards
13.6.2 Step 2: Measure actual performance
13.6.3 Step 3: Evaluate deviations
13.6.4 Step 4: Take corrective action
13.7 Qualities of an effective control system
13.7.1 Integration
13.7.2 Understandability and simplicity
13.7.3 Flexibility
13.7.4 Accuracy
13.7.5 Timeliness
13.7.6 Acceptability
13.7.7 Strategic importance
13.7.8 Multiple criteria measures
13.8 When does control happen?
13.8.1 Constant control
13.8.2 Periodic control
13.8.3 Occasional control
13.9 Contingency factors in control
13.10 Contemporary issues affecting control
13.10.1 Workplace privacy
13.10.2 Employee theft
13.10.3 Workplace violence
13.11 Summary
Case study: G4S: proving smart systems can simplify even the
most complex task
CHAPTER 14 Contemporary management issues
14.1 Introduction
14.2 Managing organisational conflict and negotiation
14.2.1 Types of conflict
14.2.2 Sources of conflict
14.2.3 Conflict management strategies
14.2.4 Negotiation
14.3 Managing organisational teams
14.3.1 The advantages of teams
14.3.2 The disadvantages of teams
14.3.3 Types of teams
14.4 Management in the global environment
14.4.1 Southern African Development Community (SADC)
14.4.2 Trade with sub-Saharan Africa
14.4.3 BRICS
14.5 Black economic empowerment (BEE) in South Africa
14.6 Workplace health and wellness programmes
14.6.1 What is a workplace health and wellness

programme?
14.6.2 Benefits of workplace health and wellness

programmes
14.6.3 How to implement a health and wellness programme
14.7 Summary
Case study: Maponya: BEE kills self-reliance
Index
1 Introduction to management
KOBUS LAZENBY
Learning outcomes
After studying this chapter you should be able to do the following:
Understand what an organisation is.

Understand the definition and explanation of general management.
Differentiate between the basic and additional management tasks.
Explain the process of management.
Differentiate between the different levels and kinds of managers.
Identify and understand the different roles of a manager.
Evaluate the different skills that a manager must have to manage effectively.
Explain the different challenges that managers experience in the organisational
environment.
1.1 INTRODUCTION
When one thinks about management, different things and images come to
mind. One of the first things that come to mind is someone who is in control.
Control in an organisation determines the existence and survival of that
organisation. It is common knowledge that the organisational environment is
confronted with serious changes and obstacles, but people have developed
specific means to overcome or survive these obstacles. That is why it is safe
to say that the job of the manager has changed over the years. Although the
basic tasks of the manager has remained the same over the years, the
organisational environment has not. It is always changing and presenting new
obstacles to overcome, and managers have to find ways to adapt. More than
this, managers are increasingly working with people over whom they have
little expert authority.
So why does management matter? Well-managed organisations are more

competitive because good management makes sure that the workforce is
better trained, leading to higher levels of motivation and commitment. This in
turn leads to better service for customers and so improved customer
satisfaction. It is also a well-researched fact that organisations that practise
good management consistently have greater sales revenues, profits and stock
market performance than organisations that experience poor levels of proper
management. Lastly, as already mentioned, good management ensures better
trained employees which will lead to satisfied employees who, in turn,
provide better service to customers. Good management can improve
customer satisfaction. This is why it is important that organisations have
managers who are equipped to take responsibility for the quality and quantity
of the products or services that must be produced or rendered (see
Management in action 1.1).
Being a manager presents many challenges. It is not always easy to motivate

workers and managers may find it difficult to integrate the knowledge, skills,
ambitions and experiences of a diverse group of employees effectively. But
being a manager can also be very rewarding. A manager can help his or her
employees to find meaning and fulfilment in their work. It is through the
combined efforts of motivated and passionate people that an organisation can
accomplish its goals.
This chapter provides an introduction to what management is, why it is

important and the tasks and skills managers require. It also gives some
general perspectives on management. This book will attempt to enhance
managers’ performance and introduce the student of general management to
the wonderful world of what constitutes a good manager.
MANAGEMENT IN ACTION 1.1

What is the importance of management in the modern business world?
Sound management helps to maximise output while minimising costs. It also maintains
a dynamic balance between an organisation and its ever-changing environment. Good
management is responsible for the creation, survival and growth of an organisation and
its significance in the modern business world has increased tremendously owing to the
following:
Businesses are more complex and are growing in size.

Work demands that specialisation is becoming increasingly important.
There is tough competition in the marketplace.
Labour is organising itself into unions.
Technology is becoming more sophisticated and capital-intensive.
Organisational decisions are becoming more complex.
Organisational regulation by government is increasing.
The organisational environment is turbulent and ever changing.
Stakeholder interests must be integrated.
Scarce resources have to be utilised optimally.
Source: Adapted from http://www.preservearticles.com/201106168019/what-is-the-

importance-of-management-in-the-modern-business-world.html (accessed on
11 July 2014)
1.2 WHAT IS AN ORGANISATION?
Although it is accepted that one understands what an organisation is, it is

important that the concept is explained as it is used in this textbook.
Throughout this book, the concept of organisation will be used instead of just
referring to a business or a company. Management is applicable to all kinds
of organisations and therefore the generic concept of organisation will be
used. In the context of this book, an organisation will be defined as an
arrangement of people in a specific structure to accomplish some specific
purpose. Organisations therefore have three common characteristics:
1. Each organisation has a distinct purpose.

2. Each organisation is composed of people.
3. All organisations develop some deliberate structure so that the members

can do their work.
1.3 WHAT IS MANAGEMENT?
There are many different types and sizes of organisations, but whether a
person is a manager of a small convenience store or a multimillion rand
company, and although complexity and magnitude may differ, there are some
specific characteristics and tasks that must be fulfilled.
In general terms, management refers to getting things done through people.

Management can therefore be described as a process of coordinating work
activities through the functions of planning, organising, activating (leading)
and control so that these activities are completed efficiently and effectively
in line with the organisational goals. The phrase “coordinating work
activities” is what distinguishes a managerial position from a non-managerial
one.
The concepts of efficiency and effectiveness are very important in this

context. Efficiency refers to the proficient use of resources – using minimum
inputs to produce maximum output, i.e. doing things right. It is, however, not
enough to do things right. It is also important to do the right things. Managers
must ensure that the necessary activities are completed to achieve
organisational goals – they must be effective. For example, one could be
very efficient at manufacturing black and white televisions (minimum input
and maximum output), but it would not be effective, because there is no
demand for black and white televisions. Efficiency is thus concerned with the
means of getting things done, and effectiveness is concerned with the ends.
So actually a manager should do the right things right. Poor management is
most often due to both inefficiency and ineffectiveness. Sometimes managers
achieve effectiveness through inefficiency. This means that although they are
doing the right things, they are not doing them right – they are wasting a lot of
resources in completing the activities. This can lead to the failure of an
organisation.
There are four basic, essential management functions and six additional ones.
These are listed in Table 1.1.
Table 1.1 Management functions
Basic management functions Additional management functions

Planning Decision-making
Organising Delegation
Activating Communication
Control Motivation
Disciplining
Coordination
Planning is the function that involves the process of defining goals,

establishing strategies for achieving those goals, and developing plans to
integrate and coordinate activities. Organising involves the process of
determining what tasks are to be done, how the tasks must be done, who must
do them, how the tasks are to be grouped, who reports to whom, and where
decisions are to be made. Activating (leading) is the management function
that deals with how to get employees to do the work. It involves leadership
and how to influence employees to be as productive as possible, and dealing
with employee behaviour issues. Control is the final basic management
function. It involves monitoring the actual performance, comparing the actual
performance to what was planned and taking corrective action if necessary.
The process of management refers to the idea that management consists of a

set of ongoing decisions and actions. Management can also be seen as a
process where the above-mentioned tasks or functions must be used to
transform the inputs (resources) to outputs (products and services) as
efficiently and effectively as possible. The additional management functions
are used in combination with the basic functions, for example during
activating or leading, a manager must communicate, motivate, delegate, take
decisions, etc. The management process is illustrated in Figure 1.1.
Figure 1.1 The management process
1.4 WHO IS A MANAGER?
The ultimate purpose of an organisation is to supply quality goods or

services to its customers. A manager’s job is to make sure that the
organisation achieves this goal. In this sense, the definition of what a
manager is can be simply stated as the person in an organisation that tells
other employees what to do and how to satisfy the needs of the customers. It
is however not so simple. Another explanation of a manager is that it is
someone who works with and through other people by coordinating their
work activities in order to accomplish organisational goals. A manager must
make sure that all work activities from several different departments or
people outside the organisation are coordinated in order to achieve the goals
of the organisation. A manager can thus be defined as a person who
coordinates and integrates all the work activities of employees in an
organisation with the purpose of achieving its vision and goals. A good
manager is someone who surrounds him- or herself with competent people to
do this.
Another way of classifying managers is by identifying the different kinds and

levels of managers. The general business functions in an organisation, like
production, human resources, marketing, finances, etc. identify the different
kinds of managers and they can be classified into different levels. The kinds
and levels of managers are illustrated in Figure 1.2.
First-line managers are at the lowest level of the organisation and are
responsible for the daily supervision of non-managerial employees who are
involved with the production or creation of the organisation’s products and
services. They can be called supervisors, line managers, office managers or
even foremen. They are primarily responsible for implementing the plans of
middle management and focus on the day-to-day activities in departments. As
illustrated in Figure 1.2, they operate in all the different departments or
business functions of the organisation.
Middle managers are between the first-line level and the top level of the
organisation and manage the work of first-line managers. They are
responsible for finding the best ways, in any specific department, to achieve
organisational goals as effectively and efficiently as possible by
implementing the policies and the strategic plans formulated by top
management. They see the vision at the top of the organisation and also
experience the pain at the bottom, and are critical in improving overall
engagement and performance. They are typically the marketing manager, the
financial manager, the human resource manager, etc. Usually every
department or business function in the organisation has a manager on this
level. Middle managers may also make suggestions to top managers on how
to increase organisational performance. As a result of restructuring and
delayering in organisations, some organisations are taking away this middle
management level.
Top managers are at the highest level of the organisation and are responsible
for making decisions and establishing goals and plans that affect the entire
organisation. They are in control and have ultimate responsibility and
accountability for everything that happens in the organisation. A top manager
must decide how the different departments should interact and has to monitor
how well the middle managers in each department utilise and allocate
resources to achieve organisational goals. These individuals typically have
titles such as executive vice president, president, managing director, chief
operating officer or chief executive officer.
1.5 MANAGEMENT ROLES
Managers fulfil different responsibilities in an organisation. Apart from

direct managerial tasks or functions, they also have specific roles to perform.
Henry Mintzberg (1973) identified ten different roles or behaviours and
classified them into three sets (see Table 1.2):
Figure 1.2 Kinds and levels of management
1. Interpersonal roles involve people and other duties that are ceremonial
and symbolic in nature. These include being a figurehead, a leader and a
liaison.
2. Informational roles are related to the collecting and transfer of

information. The three informational roles include a monitor, a
disseminator and a spokesperson.
3. Decisional roles deal with decision-making and choices and include

entrepreneur, disturbance handler, resource allocator and negotiator.
The higher the level of management, the more the manager performs the roles
of disseminator, figurehead, negotiator, liaison and spokesperson. The leader
role is particularly important at a lower level of management, because the
manager is more involved with subordinates.
In reality, a manager’s job is not as straightforward and logical as suggested

by Mintzberg’s roles. Management requires specific skills, such as quick
decision-making, and the overload of responsibilities can often be
particularly challenging. To be a manager is thus not as wonderful and
glamorous as many people think and desire.
1.6 MANAGEMENT SKILLS
It is not enough for managers simply to know what their roles and tasks are.
Every manager, regardless of his or her level, also needs certain
indispensable general skills or abilities in order to perform his or her job
properly (see Figure 1.3):
Table 1.2 Mintzberg’s managerial roles
Role Description
Interpersonal
Figurehead The manager is the symbolic head and performs routine duties of a legal
or social nature, such as signing legal documents and cutting the ribbon
when opening a new building
Leader Motivates and leads subordinates to become active
Liaison Maintains good relationships with all internal and external stakeholders by
building good social and work relationships
Informational
Monitor Collects a wide variety of internal and external information to develop a
thorough understanding of the organisation and its environment
Disseminator Transmits all relevant information (both formal and informal) received from
different stakeholders (external and internal) to all members of the
organisation
Role Description
Spokesperson Conveys information to outsiders about the organisation’s plans, policies,
actions and results
Decisional
Entrepreneur Constantly searches the organisation and its environment for opportunities
to develop the organisational strategy and identify new programmes
Disturbance Takes corrective action when the organisation faces unexpected
handler disruptions and crises
Resource Makes or approves all significant organisational decisions and allocates
allocator organisational resources of all types
Negotiator Represents the organisation at major negotiations such as negotiations
with labour unions
Technical skills involve specialised knowledge and proficiency in a

specific field, for example accountancy or information technology (IT).
Managers at a lower management level need more of these skills, because
they have to show their employees how things are done during normal
operational activities.
Human or interpersonal skills refer to the ability to work well with other
people individually and in a group. Managers with good interpersonal
skills are able to get the best out of their people, because they know how
to motivate, communicate and delegate. They understand their employees.
Conceptual skills refer to the ability to think, conceptualise and analyse
abstract and complex situations. These skills are most important at top
management levels where managers need to understand how things in the
whole organisation fit together in order to make better decisions.
Different levels will require more or less of some specific skills, but
considering that the definition of a manager is “someone who gets things
done through other people”, it is clear that interpersonal skills are equally
essential across all three levels. What is more, managers must have the
ability to identify which skills are required when (see Management in action
1.2).
Figure 1.3 Managerial skills at different management levels

Management skills
Identify each management skill in the following situations:
1. The ability to see the interrelationships between the different departments in the
organisation
2. The ability to support people to do a good job
3. The ability to enter data and other information into a computer
4. The ability to write reports
5. The ability to interview people
What do organisations require from managers? Organisations need managers

with the knowledge and abilities to get the job done (technical skills), who
are able to work effectively in groups and be good listeners and
communicators (interpersonal skills), and they must be able to assess the
relationships between the different parts of the organisation and the external
environment (conceptual skills) in order to position the organisation for
success.
The question of how relevant these skills are in the life of managers today
can be asked. All skills and abilities (such as problem-solving skills) can be
linked to these three basic skills. Studies have indicated a number of skills.
In this textbook, the assumption is made that the basic skills of a manager
remain the above-mentioned skills, but a number of management abilities can
be added and obviously one can group them under these basic skills. Some of
these management abilities that will help managers to cope with their work
include the following:
Communication skills – relate to interpersonal skills

Ability to work in a team – relates to interpersonal skills
Good time management – relates to conceptual and technical skills
Problem-solving abilities and understanding the bigger picture – relate to
conceptual skills and can also be linked to technical skills if the problem
requires technical knowledge
Conflict-solving abilities – relate to interpersonal skills
1.7 CHALLENGES FOR MANAGERS
One of the biggest challenges facing any manager is managing an organisation

in an open system.
A system is a set of interrelated and interdependent parts arranged in a

manner that produces a unified whole. The organisation and its environment
can be regarded as an open system with dynamic interaction between the
two. The environment refers to the sum total of all the factors or variables
from inside and outside the organisation that may influence the continued
existence of the organisation. Within this dynamic open system, in which the
changing environment requires the manager to perform at higher and higher
levels, managers must coordinate the various work activities so that the
organisation can meet its goals. In this dynamic environment, managers are
confronted with the following challenges:
Building a competitive advantage

Maintaining ethical and social responsibility
Managing a diverse workforce
Managing in a global environment
1.7.1 Building a competitive advantage

A major challenge for management is to build the organisation’s competitive
advantage. This is the ability of an organisation to outsmart its competitors,
i.e. to do things better. Doing things better than the competition is the essence
of a manager’s job. Being more efficient and more effective will lead to
higher customer satisfaction. The components that will help in gaining a
competitive advantage are discussed below.
1.7.1.1 Cost savings

Cost savings are directly linked to efficiency, i.e. using minimum resources
to produce maximum output. By reducing resources (both human and
physical), the organisation can save money (see Management in action 1.3).
To achieve this, a manager should aim to work with fewer people who are
more productive because of their improved skills and who know exactly
what to do. Customers will value lower priced products and services, which
will mean improved customer satisfaction. For example, customers perceive
Shoprite to have higher value than other supermarkets when measuring price
of products against quality (see Management in action 1.4).

Implats considers mechanisation option
Leeuwkop mine near Brits in North West could become mechanised if Impala Platinum
(Implats) finds it is more profitable that way. “Mechanisation is one of the options we are
looking at,” says Implats corporate relations group executive, Johan Theron. Implats is
the world’s second-largest platinum producer. Its Mimosa, Two Rivers and Zimplats
operations are all mechanised.
Leeuwkop mine will take another ten years to build and in the meantime the company is
weighing up all its options. “We are doing a study and upfront work, but no decisions
have been made yet. What we have to factor in is what labour costs will be like 10 to 15
years down the line.” Theron says historically labour-intensive mining has been
considered the lower risk and cheaper option, but this has changed in the past two to
three years. “As we do design work … it is clear that a mechanised mining operation is
increasingly being seen as the lower cost, low risk option.”
Mechanisation could be more efficient, improve safety, have a more profitable life span
and cost less, he says. “If you had to go down this path, typically the mines would hire
less people but they will be higher skilled people who would be doing more sophisticated
work and earning more wages.” Theron estimates that around 10 000 people could be
hired at Leeuwkop mine once operations begin, but if mechanisation is carried out, that
number would drop to around 3 000 people.
Source: Adapted from http://www.fin24.com/Economy/Implats-considers-
mechanisation-option-20140328 (accessed on 16 July 2014)
1.7.1.2 Differentiating quality

Customers value differentiation features in products and services. To
experience competitive advantage, an organisation has to offer customers
something different. Improving the skills and competencies of employees
will contribute to this aspect. The challenge to managers is to make sure that
employees constantly deliver quality work in producing products and
services. For example, customers view Woolworths as a supermarket that
delivers differentiating quality products (see Management in action 1.4).

Woolies tops in supermarket satisfaction
Woolworths Holdings has emerged as the industry leader in a customer satisfaction

survey. This is according to the South African Customer Satisfaction Index (SAcsi).
South African consumers gave supermarkets an overwhelming vote of support with a
customer satisfaction score of 79 out of 100, the index found. The supermarkets
measured were Woolworths, Pick n Pay, Spar, Checkers and Shoprite, all of which
were selected by market share.
Woolworths is the leader of the pack, with a score measuring 6.2% above the industry
average satisfaction rate. The overall customer satisfaction score is influenced by a
number of factors, one of which is customer expectations of the brand prior to an
experience with it. Woolworths customers have the highest level of expectation among
those measured, which makes the retailer’s top satisfaction score even more of an
achievement. The customer satisfaction score recorded for Woolworths is the highest
current score for comparable supermarkets in the US (Publix: 82) and in the UK
(Waitrose: 83).
Another factor in the survey is the customer’s perceived value, which is a customer’s
perception of the quality given the price, and the price given the quality. Interestingly, a
different picture emerged on the issue of perceived value, as Checkers and Shoprite
both showed higher levels of perceived value than the other supermarkets measured.
Woolworths reported a high customer loyalty score, with Pick n Pay and Checkers also
showing high customer loyalty ratings.
Source: Adapted from http://www.fin24.com/Economy/Woolies-tops-in-supermarket-

satisfaction-20130509 (accessed on 16 July 2014)
1.7.1.3 Innovation and responsiveness

An organisation can achieve competitive advantage if it can bring new
products and services quickly to the market. Constant innovation is
important, because the competitive environment with its dynamic changes
requires managers with superior abilities who can think ahead and decide
what must be done and are able to organise the resources in such a way that
the organisation is responsive to the changing environment. Organisations
that are successful in responding to the needs of their customers will
experience competitive advantage. For example, the way Google is
constantly on the forefront of innovation explains the competitive advantage
it experiences (see Management in action 1.5).

Google to wow with smart home gadgets, wearables
An Android update, wearable gadgets and so-called smart home devices are just some
of the innovations Google was showing off at its two-day developer conference in San
Francisco. In the past, the conference has focused on smartphones and tablets, but at
the recent conference Google’s Android operating system was stretched – into cars,
homes and smart watches.
The company is trying to adjust to an ongoing shift to smartphones and tablet

computers from desktop and laptop PCs. Though mobile advertising is growing rapidly,
advertising aimed at PC users still generates more money. At the same time, Google is
angling to stay at the forefront of innovation by taking gambles on new, sometimes
unproven, technologies that take years to pay off – if at all. Driverless cars, Google
Glass, smart watches and thinking thermostats are just some of its more far-off bets.
On the home front, Google’s Nest Labs – which makes network-connected thermostats
and smoke detectors – announced that it has created a program that allows outside
developers, from tiny start-ups to large companies such as Whirlpool and Mercedes-
Benz, to fashion software and “new experiences” for its products. Integration with
Mercedes-Benz, for example, might mean that a car can notify a Nest thermostat when
it’s getting close to home, so the device can have the temperature at home adjusted to
the driver’s liking before he or she arrives.
Google was also unveiling some advances in wearable technology. In March, Google
released “Android Wear”, a version of its operating system tailored to computerised
wristwatches and other wearable devices. Although there are already several smart
watches on the market, the devices are more popular with gadget geeks and fitness
fanatics than regular consumers. But Google could help change that with Android Wear.
Android, after all, is already the world’s most popular smartphone operating system.
Source: Adapted from http://www.fin24.com/Tech/Companies/Google-to-wow-with-

smart-home-gadgets-wearables-20140625 (accessed on 16 July 2014)
To achieve a competitive advantage, organisations need managers that can

use their skills and abilities to apply resources in such a way that the
organisation will experience lower costs and improved efficiencies,
improving the quality of products and service, and to innovate continuously.
These elements will increase the organisation’s responsiveness to the needs
of customers in a changing environment. Efficient use of new information
technology and e-commerce will remain a major challenge for managers.
1.7.2 Maintaining ethical and socially responsible behaviour

As already discussed, the ultimate purpose of good management is to achieve
the goals of the organisation as efficiently and effectively as possible. This
puts a lot of pressure on managers to perform. This pressure comes from top
management to middle management, and filters down to lower levels.
Although pressure to perform can be healthy, it can also become negative if it

gets overwhelming and if goals must be achieved “at all costs”. An
organisation may, for example, decrease the quality of products and services,
while maintaining high prices, which is unethical. The organisation could
also dump its waste into the nearest river to save costs, in utter disregard for
corporate social responsibility. Corruption in the organisational world is
flourishing (see Management in action 1.6).

Gordhan – corruption is a social problem
“Corruption in South Africa has grown and become a social problem,” Finance Minister
Pravin Gordhan says. Corruption is now becoming a social phenomenon and there is
no use in pointing fingers, he tells reporters after delivering a lecture at the University of
Johannesburg. “It [corruption] is becoming a cultural problem in South Africa.”
Gordhan says that a culture of making easy money and not having to think and work
hard must be stemmed. “We need to fight the culture of corruption,” he urges. “If we
don’t get rid of the culture that we are now talking about, we will not be able to fight this
at a technical level.” Gordhan says whoever is responsible for corruption, whether in
government or the private sector, should be held to account.
Source: Adapted from http://www.fin24.com/Economy/Gordhan-Corruption-is-a-

social-problem-20130425 (assessed on 16 July 2014)
The concept of organisational ethics will be discussed in a later chapter. The

point that is emphasised in this section is that the pressure to perform puts a
lot of stress on managers, which can lead to unethical and socially
irresponsible behaviour. The challenge to managers globally is to maintain
proper standards in doing the right thing every time.
1.7.3 Managing a diverse workforce

No organisation’s employees are homogenous. Managers are confronted with
a diverse workforce in terms of age, gender, race, religion, sexual
preferences and socioeconomic make-up, and treating people in a fair and
equitable way can prove challenging. The advantage of a diverse workforce
is that different ideas, skills, preferences and experiences can increase
creativity. Managers who are sensitive to and value diversity will invest in
the development of their workforce to improve skills and competencies.
They will reap the benefits in the long run.
In South Africa, white male employees dominated the ranks of management in

the past. However, women and other race groups are now also climbing the
corporate ladder and organisations are beginning to realise the benefits of a
diverse management workforce. There is nevertheless still a lack of women
in technological industries (see Management in action 1.7).
Still too few women in top jobs
The lack of women graduates in information technology, engineering and other technical
skills is one of the reasons gender transformation is moving so slowly in South Africa,
according to Sandra Burmeister, CEO of Amrop Landelahni.
She admits that there has been progress over the past few years, but the advancement
of women into top jobs remains slow. South Africa follows the global pattern where the
number of women declines as the corporate level rises. “We need a high proportion of
women at the professional and skilled levels to boost the pipeline at senior and top
management levels,” says Burmeister. “However, as more women move into these
professions, so the gender balance of the graduate profile is changing.”
In South Africa, as well as in many other African countries, the proportion of female
university graduates now exceeds that of men. According to the 2014 Employment
Equity Report, the number of women in top management increased from 14% in 2003
to 21% in 2013.
Women in senior management increased from 22 to 30% over the same period, while
professionals increased from 36 to 43% and skilled workers from 44 to 47%. “These
increases show that more women are now represented at every level in the
organisation,” says Burmeister. She warns, however, that the need for employment
equity should not be confused with the need for gender equity. “Correlating employment
equity with gender equity simply carves up the workforce pool into ever tinier segments
so as to meet targets.”
The UK government is currently considering legislation that will see all new board
appointments having an all-female shortlist. This suggestion has however run into
opposition on the basis that it implies women need a helping hand and may in the end
achieve only token representation. “Women themselves have argued that it would also
devalue the achievements of those who reached their positions based on their
competency in open competition with male applicants,” says Burmeister.
Favouring women for technical jobs, however, makes sense only if such people are
available.
“In South Africa, a blanket target of 50% women will pose difficulties for sectors where
two-thirds of workers are technical – such as in construction, infrastructure and
information technology,” she says. “A fixed 50% target is not realistic since there simply
may not be enough women to fill half the positions in all types of jobs.” Globally, there
are significantly fewer women working in technical and engineering disciplines. Nowhere
in the world do women represent 50% of engineers or artisans.
“It is however encouraging that, according to a recent PWC survey, women are better
represented in executive management and board committees in the top South African
mining companies than in any other country,” says Burmeister.
Source: Adapted from http://www.fin24.com/Economy/Still-too-few-women-in-top-
jobs-20140520 (accessed on 16 July 2014)
The management of a diverse workforce emphasises the following

challenges:
Building an organisational culture that supports diversity. The culture in an

organisation is one of the most important issues that can support diversity
or work against diversity. The notion of “this is the way we do things
around here” can be very supportive or can be a stumbling block to
incorporating diversity in an organisation. Developing and steering the
organisation in a direction that is truly supportive of diversity in all its
dimensions is a major challenge for managers.
Putting the necessary structures, policies and systems in place that support
diversity. In this regard, it is important that organisations realise that
diversity does not only refer to race and women, but also to age, physical
abilities, sexual orientation, etc.
Complying with the law with regard to equity and BEEE (black economic
empowerment equity).
Providing training for and retaining diverse employees. In the case of
women, support needs to be given with regard to family needs, like day
care for their children, flexible working hours, etc. All these issues reflect
on policies and pose a challenge for management.
Diversity is not only a major challenge for management, but also for
employees who have to work with and relate to people and groups that are
different from themselves. Prejudices and stereotyping can negatively
influence relationships in the work environment. Diversity competency
training can help overcome this.
1.7.4 Managing in a global environment

Managing in the global environment not only means keeping up with
innovation, which has already been discussed above, but also dealing with
change. The business environment today clearly involves global competition.
For example, Amazon is presenting a big challenge to local business (see

The global challenge
Broadcasting over the internet cannot really compete with traditional television in terms
of production budgets. Big television networks can afford to spend millions on episodes
of their shows that the online-only guys have trouble matching. But the traditional
television networks are increasingly moving online too, making their shows available via
services like Apple’s iTunes which gives viewers an alternative way to get their TV
shows. This immediately makes the content international, even if the licensing of that
content does not allow it. Lying to Apple about living in America makes it possible to pay
for and download television shows, movies and other content anywhere in the world,
circumventing the release schedules of the production houses and television networks
still clinging to antiquated licensing and distribution models.
This is changing the game for local content creators and television networks because
they are competing with global providers, whether legitimately or otherwise. Even where
consumers cannot jig the system to pay for American content, they are being helped
along by pirates who make the same content available quicker, for free and at a better
quality and user experience than any local pay television provider can offer. Of course
getting content that way is illegal, but that does not prevent literally millions of people
from doing so.
It is not just broadcasters that are seeing their competitive environments go global at a
rate of knots; retailers are too. Take the Amazon Kindle as an example. Since launching
the product in South Africa and other countries, Amazon now ships it globally and goes
directly to market. After ordering one, it is delivered in Johannesburg within a week.
Amazon is good at what it does. It can get a Kindle to you in South Africa in around three
days. If your Kindle breaks, they’ll send you a replacement before you even return the
broken one. Will you find a local retailer who can claim that level of service?
Someone recently purchased a microphone on Amazon which arrived in South Africa

within two weeks. He got it for less than it is at retail in the US – yes, including shipping.
The product is not available via local distribution yet. So whether your local business
provides online content or physical products, the world is increasingly becoming a place
in which it no longer only competes with other local businesses.
There are many products the Amazons of the world will not send to South Africa – but
that is only because of licensing issues that prohibit distribution to certain territories.
Anything they are allowed to send to South Africa, they will. Manufacturers are also
increasingly rethinking their licensing and distribution models.
It is a sad fact that we readily celebrate mediocrity in South Africa. South African
consumers get ripped off and face bad service from countless local businesses. But
those organisations are increasingly going to face firms that focus on excellence and
provide first-world service quality. So what are the locals going to do about it?
Source: Adapted from http://www.fin24.com/Opinion/Columnists/Simon-Dingle/The-
global-challenge-20110201 (accessed on 16 July 2014)
Information technology and the internet are changing the business

environment so quickly that managers should realise that they have to focus
on speed. Fast is no longer fast enough and quality service and products are
indispensible components in the organisation. The challenge for managers is
to learn new things daily to keep up with the changing environment.
Management must guide and instil an organisational culture of learning.
1.8 SUMMARY
This chapter has provided an overview of management. A definition of

management has been given, the levels, skills and roles of managers have
been explained. A brief summary of the different management functions have
been discussed and these management tasks or functions will be explained in
the rest of this book. It was also pointed out in this chapter that managers
experience many challenges. The challenges of building an organisation to
experience a competitive advantage, how to maintain ethical and social
responsibility, the challenge of managing a diverse workforce and the
challenge to manage in a global environment have been discussed. Some of
these issues will be discussed in more detail in later chapters.
A case study is provided at the end of each chapter to help to apply the
theoretical knowledge discussed in the chapter.
REFERENCES AND RECOMMENDED READING
George, J.M. & Jones, G.R. 2006. Contemporary management: creating value in organisations, 4th
ed. Boston: McGraw Hill.
Google to wow with smart home gadgets, wearables. http://www.fin24.com/Tech/Companies/Google-to-

wow-with-smart-home-gadgets-wearables-20140625 (accessed on 16 July 2014).
Gordhan – Corruption is a social problem. http://www.fin24.com/Economy/Gordhan-Corruption-is-a-

social-problem-20130425 (assessed on 16 July 2014).
Implats considers mechanisation option. http://www.fin24.com/Economy/Implats-considers-

mechanisation-option-20140328 (accessed on 16 July 2014).
Hellriegel, D., Jackson, S.E. & Slocum, J.W. 2002. Management: a competency-based approach, 9th
ed. Ohio: South-Western Thomson Learning.
Lusier, R.N. 2003. Management fundamentals, 2nd ed. Ohio: Thomson South-Western.
Mintzberg, H. 1973. The nature of managerial work. New York: Harper & Row.
Robbins, S.P. & Coulter, M. 1999. Management, 6th ed. New Jersey: Prentice Hall.
Smit, P.J. & Cronjé, G.J. de J. 1997. Management principles. A contemporary edition for Africa,
2nd ed. Kenwyn: Juta.
Still too few women in top jobs. http://www.fin24.com/Economy/Still-too-few-women-in-top-jobs-

20140520 (accessed on 16 July 2014).
The global challenge. http://www.fin24.com/Opinion/Columnists/Simon-Dingle/The-global-challenge-

20110201 (accessed on 16 July 2014).
What is the importance of management in the modern business world?

http://www.preservearticles.com/201106168019/what-is-the-importance-of-management-in-the-
modern-business-world.html (accessed on 11 July 2014).
Woolies tops in supermarket satisfaction. http://www.fin24.com/Economy/Woolies-tops-in-supermarket-

satisfaction-20130509 (accessed on 16 July 2014).
CASE STUDY: PETER MOGOROSI
Peter Mogorosi has a bachelor’s degree and has worked for five years as a computer
programmer for an oil company. In four short years, he has more new software
programs to his credit than anyone else in the department. He is highly creative and
widely respected.
However, Peter is impulsive and has little tolerance for those whose work is less
creative. Peter does not offer to help co-workers and, because of this, they are reluctant
to ask. Peter is also slow to cooperate with other departments in meeting their needs,
because he works primarily to enhance his own software-writing ability. He spends
evenings and weekends working on his programs. Peter is a hard-working technical
employee, but he sees little need to worry about other people.
Peter received high merit raises, but he was passed over for promotion and does not
understand why.
Case study questions
1. Can you explain why he will not be promoted to the level of manager?
2. Explain to Peter what is necessary to pass through the ranks of manager.
3. Explain to Peter the roles he will have to perform should he be promoted to a

managerial position.
MANAGEMENT DISCUSSION EXERCISES
1. Go to the website of any SA organisation. Identify some of the managerial challenges for
this organisation.
2. You are appointed as the general manager in a newly established organisation. The CEO
expects you to draft a report on how management should be executed at the different
management levels. Write a brief executive summary of what management is all about
after you have visited some managers in organisations to get their input.
3. Investigate the top mistakes that managers make in their jobs.
4. Describe the transition that employees go through when they are promoted to
management.
2 Management theory
EKAETE BENEDICT
Learning outcomes
After studying this chapter, you should be able to do the following:
Explain the development of the need for management.

Describe the classical theories of management.
Describe the behavioural theories of management.
Differentiate between the classical theories and behavioural theories of management.
Explain the use of quantitative techniques in management.
Describe the major concepts of the systems, and contingency theories.
2.1 INTRODUCTION
It is a commonly held belief that management, compared to other disciplines

such as medicine and philosophy, is a new discipline that arrived on the
scene less than 125 years ago. Actually, this is partly true as management
was not yet a field of study, neither did management jobs or careers as they
are known today exist. Moreover, no one was accorded the title “manager”
over any task or activity. Does this mean that management work was not
being done 125 years ago? No. In fact, for thousands of years, management
work was being done every day. Human tasks were being completed and
economic transactions were being conducted on a regular basis. All these
activities involved people and someone had to oversee the efficient running
of them.
The Neanderthals required managerial skills when they hunted prehistoric
animals for food. The Sumerians as far back as 5000 BC kept written records
of the management of their agricultural estates and how each estate was
taxed. The Egyptians applied the managerial functions (as introduced in
Chapter 1) of planning, organising and control to build the pyramids (see
Management in action 2.1). Furthermore, the Romans were skilful and
organised managers. They were able to create the vast Roman empire of the
old world by organising their soldiers into cohorts, managed by senior
centurions, which in turn were organised into legions and armies. Thus,
management is not a new phenomenon. Management can be said to be as old
as man. It has always existed, although not as a systematic or disciplined
science until about 125 years ago.
In this chapter, the history of management thought and theories, and the main
contributors of these thoughts and theories, are introduced. The contribution
of these management theories to the workplace of today and how
contemporary managers are making use of these theories to build efficient
and effective organisations, will also be discussed. Furthermore, this chapter
will discuss the contemporary management theories and the current
approaches that are being built on the foundation of the old management
theories.

How the Egyptians built the Pyramids
Approximately four thousand years , the Egyptians were building a civilization edge
on the rest of the world. Very few of us can comprehend the extent to which this culture
zoomed ahead of its times. If it were possible to make a reliable comparison, we would
probably find that no nation in our time is as far ahead of its contemporaries as the land
of the Pharaohs was between 4000 . and 525 .
The most obvious demonstration of Egyptian power is the construction projects that
remain even today. Without the service of cranes, bulldozers, or tea/coffee breaks, the
Egyptians constructed mammoth structures of admirable precision. The great pyramid
of Cheops, for example, covers thirteen acres and contains 2 300 000 stone blocks.
The blocks weigh about two and a half tons each and were cut to size many miles
away. The stones were transported and set in place by slave labour and precision
planning. The men who built the enduring structures of ancient Egypt not only knew how
to use of human resources efficiently but also knew how to manage 100 000 workers in
a twenty-year project.
In their business and governmental affairs, the Egyptians kept documents to show
exactly how much material was received and from whom, when it came in, and exactly
how it was used. The military, social, religious, and governmental aspects of Egyptian
life were highly organized. There were much inefficiency, but the final task was
accomplished. Three commodities, which virtually rule modern efforts, seem to have
been only minor considerations along the Nile: time, money, and the satisfaction of the
worker.
Source: http://www.zeepedia.com/read.php?
historical_overview_of_management_the_egyptian_pyramid_great_china_wall_
principles_of_management&b=54&c=1 (accessed on 29 September 2014)
2.1.1 Development of the need for management

The workplace as it is known today did not exist a century and a half ago.
Clocking in at 8 a.m. and working for eight hours until 4 p.m. is a
development in management that started in the late 19th century. Before that
time, about three centuries ago, people did not need to travel to work as
work activities were conducted at home or very close to the home. This is
because people were mostly farmers or engaged in agricultural activities for
survival. Thus, they planted crops and reared animals for food near their
homes. When they needed items that they did not produce, they traded and
exchanged their products with their neighbours in transactions known as
trade by barter. Even those who did not earn their living from agriculture
did not commute to work. In England, as early as the 9th century, family
groups of skilled artisans such as blacksmiths, furniture makers, leather
goods makers and other skilled tradespeople formed trade guilds and worked
out of shops in or next to their homes. Work groups were small, close-knit
and usually self-organised. They determined the amount and pace of their
work, and there was not a strong need for management as we know it today.
This way of doing business changed dramatically from the 18th century, as
the world experienced the advent of the Industrial Revolution (1750–1900).
The Industrial Revolution was a period in which work and production
activities previously done manually were taken over by machines. The
Industrial Revolution began in Great Britain and spread to Western Europe
and the United States within a few years. This change affected the
agriculture, textile, metal and transportation sectors of these countries. The
change also revolutionised economic policies and social structure in Western
Europe and the United States.
The creation and development of sophisticated machinery and equipment

changed the way goods were produced. Small workshops run by artisan
families or skilled crafts persons who produced hand-manufactured products
were being replaced by factories housing hundreds of unskilled workers
operating sophisticated machines that were able to produce the same product
in larger quantities and in a shorter time. This development gave rise to two
situations that changed the way work was done.
First, the ability to mass produce goods created a situation in which

production was based on division of labour, rather than one person making
the entire product by themselves by hand, as in the past with the artisans.
With division of labour, each worker using machines performed separate
specialised tasks that constituted a small part of the total steps required to
make a manufactured good. While workers focused on their singular tasks,
the need arose for a person to coordinate the different parts of the production
system and optimise its overall performance. Thus arose the need for a
manager. At the time, many of the managers and supervisors in these factories
were engineers whose work orientation was more of a technical nature.
Second, the advent of factories led to jobs being carried out or conducted in
large formal workspaces that could house hundreds to thousands of people
rather than homes or small workshops. Having so many workers under one
roof brought about new challenges to factory owners and employers. For
instance, they were faced with the social problems that occur when people
work together in large groups such as unruly behaviour, physical conflict,
lateness, absenteeism and uncooperative behaviour. There arose a need for
disciplinary rules to impose order and structure. A person who knew how to
organise large groups, work well with employees, motivate them and make
good decisions was required. Thus, the need for a manager arose again. In
essence, factory owners began to search for new ways and methods to
organise and manage their organisation and its resources and how to increase
the efficiency of workers. It was at about this time that factory owners and
supervisors experienced the need for more formalised management thoughts
and theories. This can thus be seen as the beginning of the development of
management theories.
The management theories that have developed over time can be classified as
classical, behavioural, quantitative and contemporary management theories.
These are described in Table 2.1.
Table 2.1 Management theories over time
3000 BC– Late 1700s–

1911–1947 1940s–1950s 1960s–present
1776 1950
Early Classical Behavioural Quantitative Contemporary
management approaches approaches approaches approaches
Scientific Human Operations Systems approach

relations management
Bureaucratic Contingency
Human Information approach
Administrative
resources management
Total quality
management
(TQM)
2.2 CLASSICAL MANAGEMENT THEORIES
Classical management theory, also known as the traditional view of

management, is the oldest form of management theory. It emerged during the
late 19th and early 20th century after the Industrial Revolution. The theory is
based on the school of management thought in which theorists try to find out
the best possible way for workers to perform their tasks. This theory
consists of three main approaches, namely, scientific management, the
bureaucratic approach and the administrative approach.
2.2.1 The scientific management approach

The scientific management approach focuses on improving economic
efficiency and labour productivity. Its development began in the 1880s and
1890s as manufacturing firms became larger in size and more complex in
nature. As a result, managers could no longer be directly involved with
production as they were spending more of their time on administrative
activities such as planning, organising and scheduling of work. Thus, it
became necessary for organisations to hire operations specialists whose
main job and responsibility was to focus on how to improve efficiency and
maximise productivity in the firm. One such operations specialist was
Frederick Winslow Taylor.
2.2.1.1 F. W. Taylor
Frederick Winslow Taylor (1856–1915) was an American inventor and
engineer and is widely regarded as the father of scientific management.
Taylor began his career as a worker at the Midvale Steel Company in
Philadelphia and later worked at the Bethlehem Steel Company (now
ArcelorMittal) in Pennsylvania, USA. Over the course of his career, he rose
to become the chief engineer. It was at Midvale Steel that Taylor realised that
factory processes could be optimised to maximise efficiency if he could find
the “best way” to complete a task. He continued his research at Bethlehem
Steel Company where he supervised men who unloaded iron from rail cars
and reloaded finished steel. Taylor found that with correct movement, tools
and sequencing, each man was capable of loading 47.5 tons per day
compared to the standard 12.5 tons. He also introduced an incentive system
that paid each man $1.85 per day for meeting the new quota, an increase from
the previous rate of $1.15. This caused productivity at Bethlehem Steel to
rise dramatically.
Taylor was the first management theorist to analyse an organisation, test his
theories and ideas with experiments and record his findings. He developed
four principles for increasing efficiency in the workplace, shown in Table
2.2.
Table 2.2 Taylor’s four principles of scientific management
First Develop a science for each element of a man’s work, which replaces the old
rule-of-thumb method.
Second Scientifically select and then train, teach and develop the workman, whereas in
the past he chose his own work and trained himself as best as he could.
Third Enthusiastically cooperate with the men so as to ensure all of the work being
done is in accordance with the principles of the science that has developed.
Fourth There is an almost equal division of the work and the responsibility between the
management and workmen. The management take over all the work for which
they are better fitted than the workmen, while in the past almost all of the work
and the greater part of the responsibility were thrown upon the men.
Source: Williams (2014)
For easier understanding, Taylor’s four principles are summarised in

Management in action 2.2.

Summary of Taylor’s four principles
Develop a science for each element of a worker’s job to replace the rules of thumb.
Job specialisation should be part of each job.
Ensure the proper selection, training and development of workers.
Planning and scheduling of work are essential.
Standards with respect to methods and time for each task should be established.
Wage incentives should be an integral part of each job.
Source: Barnat (n.d.)
Taylor’s scientific management theory had a significant impact on American

society, and led to increases in productivity in the workplace. His theories
earned him followers who built upon his ideas, most notably Frank and
Lillian Gilbreth and Henry Gantt.
2.2.1.2 Frank and Lillian Gilbreth

Frank (1868–1924) and Lillian (1878–1972) Gilbreth were a husband and
wife team who pioneered industrial management techniques still in use today
through the use of time and motion studies. Frank Gilbreth never went to
college but owned a bricklaying construction business and was interested in
how he could simplify the work process of bricklaying, thereby increasing
the efficiency of his workers. The Gilbreths were innovative industrial
engineers who used motion picture cameras to study the hand movement of
bricklayers in minute details. Through this process they were able to
eliminate unnecessary motions which served no purpose and were able to
reduce the number of movements needed to lay a brick from 18 to five. The
Gilbreths’ improvements raised productivity from 120 to 350 bricks per hour
and from 1000 to 2700 bricks per day.
Lillian Gilbreth is considered to be the “mother of modern management”.

While her husband never went to college, Lillian had earned a university
degree in literature in 1900 and was the first woman to receive a doctorate
degree in industrial psychology which she used to understand better the
practice of management and its effect on job satisfaction. Lillian was also the
first woman to become a member of the Society of Industrial Engineers and
the American Society of Mechanical Engineers.
While her husband was interested in the technical aspects of worker

efficiency, Lillian was interested in the human aspects of time management.
Using what she had learnt during her doctoral degree programme, Lillian was
one of the first contributors to industrial psychology, enacting ways to
improve office communication, incentive programmes, job satisfaction and
management training. Her research work also influenced the US government
to pass laws concerning workplace safety, ergonomics and child labour.
In summary, the Gilbreths developed a long-term interest in using motion

study to simplify work, improve productivity and reduce the level of effort
required to perform a job safely.
The Gilbreths’ work also had an impact on medical surgery. Through the
application of time and motion studies, surgeons were able to reduce the time
patients spent on the operating table, thereby saving many lives and
improving medical science. To understand the contribution of the Gilbreths
better, watch the study video given in Management in action 2.3.
Study video of Frank and Lillian Gilbreth’s motion studies
Watch a study video on Frank and Lillian Gilbreth’s time and motion studies at
http://education-portal.com/academy/lesson/frank-and-lillian-gilbreths-motion-study.html
lesson
2.2.1.3 Henry Gantt

Henry Gantt (1861–1919) was an American mechanical engineer and
management consultant who worked for Frederick Taylor at Midvale Steel
and Bethlehem Steel, where he learnt to apply Taylor’s scientific
management principles to improve labour productivity. However, Gantt is
best known for developing the Gantt Chart in the 1910s. A Gantt chart is a
type of horizontal bar chart that visually represents a project schedule. It was
developed as a production control tool to show the start and finish dates of
the different tasks required or the components of a project.
Today, Gantt charts are frequently used in project management and provide a
graphical illustration of a schedule that helps to plan, coordinate and track
specific tasks in a project. They are beneficial in planning the duration of a
project and helping to arrange the order in which the tasks need to be
completed. As a result, the charts are included in most project management
software and computer spreadsheets. The Gantt chart was considered a
revolutionary tool when it was first introduced in the 1910s, but one of its
drawbacks is that it does not indicate task dependencies. That is, it does not
tell how one task falling behind schedule affects other tasks.
Apart from the Gantt chart, Gantt also made other important contributions to
management such as establishing quota systems and bonuses for workers who
exceeded their quotas. In addition, Gantt advocated the training and
development of workers. During the course of his job, Gantt discovered that
workers who had undergone some form of training performed better at work.
Unfortunately, supervisors were unwilling to teach workers what they knew
because they were afraid that the workers they trained would become more
knowledgeable than them and replace them. Gantt dealt with the
unwillingness of these supervisors by offering to reward them with bonuses
if they trained their workers properly.
Gantt’s approach to training included the following three principles:
1. A detailed scientific investigation into each piece of work, and the

determination of the best method and the shortest time in which the work
could be done
2. A teacher capable of teaching the best method in the shortest time
3. Reward for both teacher and pupil/worker when the pupil/worker was
successful
To learn how to prepare a Gantt chart, see Management in action 2.4.

Study video of how to prepare a Gantt chart
Watch the following YouTube study videos on how to prepare a Gantt chart:
http://www.youtube.com/watch?v=sA67g6zaKOE
http://www.youtube.com/watch?v=TjxL_hQn5w0
2.2.2 The bureaucratic approach

At about the time scientific management was being developed as a discipline
in the US, an equally important theory about how organisations should be
managed and governed was being developed in Europe. The theory known as
the bureaucratic approach to management was formulated by German
sociologist, Maximilian Karl Emil Weber (1864–1920), popularly known as
Max Weber.
The main focus of the bureaucratic approach is the organisational structure.

The approach involves dividing the organisation into hierarchies and
establishing strong lines of authority and control. In the late 1800s, most
organisations in Europe were managed on a personal, family-like basis and
employees gave allegiance to individuals in the organisation rather than the
organisation’s mission. This dysfunctional management practice gave rise to
resources being used for individual goals rather than for organisational
goals. Weber imagined organisations that would be managed on an
impersonal, rational basis. He called these organisations “bureaucracies”
(see Management in action 2.5).

Eight principles of a bureaucratic organisation
i. Written rules
Rules and regulations must be well standardised and well defined, and in a written form.
ii. System of task relationship
In an organisation, there should be an established system to achieve the task and there
should be a relationship between the system and the task of the organisation.
iii. Specialised training
Employees should be trained according to their assigned tasks. Managers need

managerial training and workers need job training in line with their duties.
iv. Hierarchy of authority
Authority should be assigned to managers according to their positions in the

organisation’s management pyramid.
v. Clearly identified duties
There should be clearly identified duties for every worker. Each worker must know what
he/she has to do, and to whom he/she has to report.
vi. Paperwork
Everything in the organisation should be written down. In this way, every system in the
organisation will run systematically.
vii. Fair evaluation and reward
There should be a well-established system of evaluation in the organisation so that

reward may be given to the workers according to their commitment and competency.
viii. Maintenance of ideal bureaucracy

Ideal bureaucracy should be generated in organisations and this can be done through a
proper training and reward system.
Source: Adapted from Mahmood, Basharat & Bashir (2012)
2.2.3 The administrative management approach

The administrative management approach focuses on the organisation as a
whole and was developed by Henri Fayol (1841–1925), a French mining
engineer. Fayol was the managing director (CEO) of a steel company,
Comambault, that owned a couple of coal and iron ore mines and employed
about 10 000 workers. Fayol was initially hired by the board of directors to
dissolve and liquidate the steel company because it was not profitable.
However, on assuming work at the organisation, Fayol observed that if
certain management practices were changed and other practices
implemented, he could turn the negative situation of the steel company
around. Within four months, Fayol had documented his ideas and plans and
presented them to the board of directors. With nothing to lose, the board gave
him the go-ahead to implement the management practices he was advocating.
The success of Fayol’s management practices kept Comambault in business

and Fayol was its CEO for about 30 years. Fayol documented his experience
of being a CEO, and his management practices and theories in a book
Administration industrielle et générale in 1916. Because the book was
published in his native French, Fayol’s ideas and theories were not widely
known to the rest of the world until 1949 when it was translated into English
as General and industrial management.
Fayol stated that when he assumed responsibility for restoring Comambault

to productivity, he did not rely on his technical ability as a mine engineer, but
on his administrative and organising skills in handling men. Fayol further
argued that “the success of an organisation generally depends more on the
administrative ability of its leaders than on their technical ability”.
Through his experience as a CEO, Fayol discovered that managers needed to

perform five managerial functions to be successful: planning, organising,
coordinating, commanding (i.e. leading) and controlling. Furthermore, Fayol
advocated that effective management is based on 14 principles, given in
Management in action 2.6.

Fayol’s 14 principles of management
1. Division of labour. Productivity is increased when work is divided into smaller

tasks and each worker specialises in completing certain tasks.
2. Authority and responsibility. A manager should have both authority and

responsibility. Authority is the “right to give orders”, and this should be proportionate
to the manager’s responsibility. At the same time, the organisation should put
control measures in place that would prevent managers from abusing their
authority.
3. Discipline. Rules and regulations that govern acceptable behaviour in the

organisation should be clearly defined and employees must obey them.
4. Unity of command. Each employee should report to and receive orders from just
one boss to avoid conflict and confusion.
5. Scalar chain of command. A clear line of authority should run from the top to the
bottom of an organisation, demarcating hierarchies, organisational structures and
unity of command.
6. Unity of direction. Organisational efforts and plans should be directed towards a

common objective in a common direction.
7. Subordination of individual interests to the common good. The organisation’s

goals and interests should be given preference over the goals of individuals.
8. Remuneration. Employees should be fairly rewarded for what they do, i.e. do not
over- or underpay employees.
9. Centralisation. Organisations should avoid too much centralisation or

decentralisation. Rather, an appropriate balance between the two should be struck
depending on the goals of the organisation, its environment and employees.
10. Order. There should be a place for everything (employees, equipment, materials)
and everything in its place, including people doing the jobs that suit them best.
11. Equity. All employees should be treated fairly and equally.
12. Stability of staff. Organisations should invest in skills development and retention
of staff. Staff turnover should be minimised as it is disruptive and costly.
13. Initiative. Employees should be encouraged to conceive and implement new
plans when existing plans are not satisfactory.
14. Esprit de corps. Managers should promote unity and team spirit among workers.
This increases employee morale.
Source: Jones & George, 2013.
2.2.4 Common characteristics

Despite their theoretical differences, these three approaches (scientific
management, bureaucratic and administrative) share common characteristics,
as shown in Management in action 2.7.

The five characteristics of classical management theories
1. Chain of command
Management is organised into three levels: top management, middle management and
first-line management.
2. Division of labour
Complex jobs are broken down into simple tasks to be completed by workers.
3. Unidirectional downward influence
There is only one-way communication. Decisions are made at top level and flow down
the chain of command to lower levels of management.
4. Autocratic leadership style
Managers are expected to make all the decisions and perform other managerial
functions such as directing, commanding and organising on their own. In addition,
workers are strictly controlled and treated like machines to increase productivity.
5. Predicted behaviour
The behaviour of workers is predicted like a machine, i.e. if a worker performs

according to set standards (prediction) and meets the set targets, he/she is retained in
service. If not, he/she is replaced.
Source: Mahmood et al. (2012)

2.3 BEHAVIOURAL THEORIES
The behavioural approaches to management arose out of the shortcomings of

the classical approaches, which were accused of treating workers as
machines and controlling them to increase productivity without taking into
consideration their wellbeing.
Behavioural theories are concerned with the social and group interactions
that occur in the workplace, focusing on understanding human behaviours,
needs and attitudes so as to achieve high levels of performance and increase
productivity. There are two main approaches: human relations and human
resources.
2.3.1 The human relations approach

The second wave of the Industrial Revolution in the 1920s and 1930s was
characterised by the mass production of goods. This created rapid social and
cultural changes in the industrialised nations. Formerly expensive goods such
as cars and electrical appliances all of a sudden became affordable and the
standard of living rose for a large portion of the population. As a result,
society became increasingly consumer oriented and knowledgeable and
started demanding better products and better working conditions in the
workplace.
One of the important changes that took place during this period was the
formation of unions by unskilled workers. Tired of not having a say in how
their work should be organised and their sometimes appalling work
conditions in factories, workers decided to unite to influence management
decisions. When management did not listen to the workers, they threatened to
lay down their tools and stop production. (This situation is similar to events
in South Africa. See Management in action 2.8.) Management was forced to
take note of grievances and set in motion necessary changes. Thus, the human
relations approach highlights the importance of human needs in the
workplace, and how management strategies and job design could be used to
meet those needs.

The rise or fall of trade unions in South Africa: the Marikana incident
On 16 August 2012, South Africa saw the most gruesome killing of workers in Marikana
during the Lonmin mineworkers’ illegal strike. Thirty-four mine workers were gunned
down by police in what will go down in history as the “Marikana massacre”.
Demonstrators were calling for salary hikes from about R4000 to R12 500, and among
other grievances, better working and living conditions and addressing the lack of
concern for workers by management. This sad event shocked the world and stirred the
debate on the role of trade unions in the country. Such a catastrophic incident could
have been prevented by more responsible trade unionism. The Marikana incident has
also raised questions of whether this event marks the “rise” or “fall” of trade unions in
South Africa.
Historically in South Africa, the function of trade unions was primarily political as
organised labour was instrumental in advocating for democracy. The Congress of South
African Trade Unions (COSATU), after its establishment in 1985 unifying contending
unions and federations, was instrumental in the struggle against apartheid. The
federation coordinated a range of paralysing wage and general strikes and drummed up
support from factories and towns countrywide. COSATU is currently the largest trade
union federation in South Africa, boasting 21 affiliated unions and declared membership
of 2.2 million in 2012.
Trade unions now have a broader role to play in national development over and above
protecting workers’ rights and improving their economic status. Trade unions should
promote social change and justice, and harmonious industrial relations and encourage
human resource development. Disputes should be settled efficiently and effectively to
avoid conflicts and industrial action that would have adverse economic consequences.
Trade unions should ensure workers’ demands are justifiable and within reason and
also that workers’ rights are not infringed in any way. Changes in working conditions and
wages should be sustainable and should not be a financial burden to business. At the
same time, trade unions should acknowledge that there is an inherent conflict of interest
between labour and capital that can never be completely eroded; workers want higher
wages and owners higher profits. It is the role of trade unions to facilitate a balanced
consensus for the parties involved.
Source: Adapted from http://www.polity.org.za/article/the-rise-or-fall-of-trade-unions-in-

south-africa-the-marikana-incident-2012-10-11 (accessed on 30 September
2014)
2.3.1.1 The Work of Mary Parker Follet
Mary Parker Follet (1868–1933) was an American social worker and
management consultant who specialised in the disciplines of organisational
theory and organisational behaviour. She was one of two leading women
management experts in the early days of classical management theory (the
other woman being Lillian Gilbreth). It was Follet who defined management
as “getting things done by other people”, as defined in Chapter 1.
Follet’s ideas on employee participation, negotiation and power were

significant in the development of the disciplines of organisational studies,
alternative dispute resolution and the Human Relations Movement. Follet
proposed many theories that were considered radical for the time (see

Four theories of Follet
1. Authority should go with knowledge and expertise, whether it is up the line or down.
If workers have the relevant knowledge and expertise, then workers, rather than
managers, should be in control of the particular work process.
2. Managers should behave as coaches and facilitators and not as monitors and
supervisors.
3. Departments should engage in “cross-functioning”. Members of different

departments should work together in cross-departmental teams to accomplish
projects.
4. Power should be changeable and adaptable, and should flow to the person who
can best help the organisation achieve its goals.
Source: Jones & George (2013)
2.3.1.2 The Hawthorne studies: Elton Mayo

The Hawthorne studies were conducted at the Hawthorne plant of the
Western Electric Company in Illinois from 1924 to 1932. The studies
involved investigating the effects of changes in the work environment on the
productivity and performance of factory workers. The studies were carried
out in a series of experiments over a period of eight years.
In the initial experiment, company engineers separated two groups of six

female workers (an experimental group and a control group) from the rest of
the factory workers and subjected them to various lighting levels, financial
incentives and work breaks to study their effect on productivity. The
researchers expected to find that individual output in the experimental group
would directly correlate to the intensity of the light, i.e. if the lighting was
increased, productivity would increase, and if lighting was reduced,
productivity would reduce. But surprisingly, they discovered that
productivity in both groups varied with the level of lighting. Production
levels increased whether the lighting was increased or decreased, whether
workers were paid based on individual production or group production, or
whether the duration of work breaks was increased or decreased. In a bid to
explain the phenomenon, the company sought the expertise of a Harvard
professor, Elton Mayo.
Mayo came to the following conclusion about the happenings at the company.
The actual level of lighting was not a factor to the workers. The workers
were probably responding to other factors such as the attention that was
paid to them by management and the special treatment they were receiving
compared to workers in the rest of the plant. This phenomenon became
known as the “Hawthorne effect”. In addition, Mayo observed that
management consulted these workers before any changes were done in the
study. Their suggestions were listened to and discussed and sometimes
incorporated into the final decision by management. Thus, the workers
developed a sense of ownership in the organisation of their work and
became a cohesive social unit, and as a result, productivity increased.
The important findings of the Hawthorne studies can be listed as follows:
The feelings and attitude of workers affect their work.

When employees are given special attention, productivity is likely to
change in a positive way regardless of whether working conditions
change.
Social group interactions and open communication between workers and
management have a significant influence on employees’ productivity.
2.3.2 The human resources approach

The human resources approach is a combination of prescriptions for design
of job tasks with theories of motivation. This approach recognises that
workers in organisations have feelings that must be considered. Thus, the
approach holds that jobs should be organised and designed in a way that is
not degrading or demeaning to workers, but it should allow workers to use
their full potential. Two well-known contributors to this approach were
Abraham Maslow and Douglas McGregor.
2.3.2.1 Maslow’s needs theory

Abraham Maslow (1908–1970) was a psychologist who proposed that
people seek to satisfy five basic kinds of needs: physiological, safety,
belongingness, esteem and self-actualisation. He explained that these needs
were in the form of a hierarchy, shaped like a pyramid with the most basic
needs (being physiological) at the base. Maslow argued that the lowest basic
needs had to be met first before a person would attempt to satisfy needs
higher up the hierarchy. This theory will be explained in more detail in
Chapter 11.
2.3.2.2 Theory X and Theory Y

Douglas McGregor (1906–1964) based his theory on two assumptions about
human nature. There is the negative view of people that assumes that workers
dislike work and will attempt to avoid responsibility if possible, and there is
a positive view of people that assumes that workers like to work, and will
seek out and accept responsibility if offered the task. McGregor called the
negative view “Theory X” and the positive view “Theory Y”. Table 2.3
depicts the assumptions of both views. It is obvious from this theory that a
manager that believes in Theory X will be a more autocratic leader, while a
Theory Y believer will be a more democratic leader.
Table 2.3 Assumptions of Theory X and Theory Y
Assumptions of Theory X Assumptions of Theory Y

Involves an authoritarian style of management Involves a participative style of
management
The average worker dislikes work and will avoid The average worker does not dislike
it if possible work and is willing to work
When he has to work, he will do as little as He will accept work and will try to do as
possible much as he can
He prefers being directed, has little ambition He can take initiative, is creative, can
and wishes to avoid responsibility accept and seek responsibilities
Because of his dislike for work, the average Coercion and threat of punishment may
worker must be coerced, controlled and not be necessary as the worker is
directed, or threatened with punishment to get committed and will exercise self-
him to put in adequate effort to achieve discipline and self-control to achieve
organisational goals organisational goals
Source: Adapted from Daft & Marcic (2013)
2.4 QUANTITATIVE THEORIES
Quantitative theories, also known as management science, focus on the

application of mathematics, statistics, computer technology and other
quantitative techniques to facilitate management decision-making, especially
for vast and complicated problems. The approach emerged after World War
II, when mathematical and statistical solutions developed for solving military
problems during the war were adopted by business organisations.
There are four basic characteristics of the quantitative approaches:
1. The primary focus is on decision-making.
2. Alternatives are based on economic criteria like costs, sales and profits.
3. Mathematical models are used to analyse problems.

4. Computers are essential to solve complex mathematical models.
2.4.1 Operations management

Operations management involves the use of quantitative and mathematical
techniques to find ways to increase productivity, reduce costly inventory and
improve quality. Operations management techniques and tools that are
commonly used and applied in managerial situations include forecasting
techniques, capacity planning, quality control, productivity measurements and
improvement, linear programming, scheduling systems, inventory systems,
work management techniques (similar to the Gilbreths’ motion studies),
project management (similar to Gantt’s charts) and cost–benefit analysis.
Over the years, the operations management approach has benefitted from the
contributions of Eli Whitney and Gaspard Monge:
Eli Whitney (1765–1825) was an American inventor who designed the

cotton gin and proposed the use of standardised, interchangeable parts for
machinery. Today, because of Whitney’s ideas, most products from cars to
toasters are manufactured using standardised, interchangeable parts.
Gaspard Monge (1746–1818) was a French mathematician and the
inventor of descriptive geometry (the mathematical basis of technical
drawing), and the father of differential geometry. To manufacture
standardised, interchangeable parts, manufacturers had to view the
prototype of the product first. Monge’s technique and its accuracy in
drawing three-dimensional objects allowed manufacturers to make
standardised, interchangeable parts without first viewing the product.
Currently, manufacturers utilise CAD (computer-aided design) and CAM
(computer-aided manufacturing) to take three-dimensional designs straight
from the computer to the shop floor.
2.4.2 Information management

Information management is a system that provides organisations with the
relevant data they need to manage themselves efficiently and effectively. It
involves the study of how individuals and organisations assess, design,
implement, manage and operate systems to generate information to improve
the efficiency and effectiveness of decision-making. Centuries ago,
information was costly and hard to obtain. It was also slow to obtain and it
could take months or even years for important information or news to get to
the relevant people. Also, information was expensive because it was
laborious and time consuming to hand-copy books and manuscripts.
The first technologies to transform the way organisations used information

were paper and the printing press. In the 15th century, Johannes Gutenberg
invented the printing press and cut the cost of information by 99.8%. Scribes
who charged hefty prices to hand-copy one page of a document were no
longer needed as the printing press could print more than 300 pages of the
same document for the same price.
Another technology that transformed information management was the

manual typewriter. Before the mid-19th century, most business
correspondence was hand-written and copied using a word press. This was a
time-consuming process and needed expert technical skills. All that changed
by the 1870s when the manual typewriter was invented. Manual typewriters
made daily communication and the production of business correspondence
cheaper, easier and faster. A century later in the 1980s, the typewriter was
replaced by the personal computer (PC) and word processing software.
Furthermore, organisations’ ongoing quest for information technologies that
would speed up access to timely and relevant information led to the quick
adoption of the postal services, the telegraph in the 1860s, the telephone in
the 1880s and recently the internet in the 1990s.
Today, information management systems (usually computer systems) are used

for managing almost every facet of the organisation. To be current and to gain
competitive advantage, most organisations (big and small) have adopted
recent information technologies such as the internet. Through the internet,
companies can reach a wide number of customers via their website, send
emails to customers and interact socially with customers via their Facebook
page. In addition, to share and disseminate information quicker, organisations
make use of photocopiers, scanners and smartphone applications such as
WhatsApp, Twitter and Instagram.
2.5 CONTEMPORARY MANAGEMENT THEORIES
Contemporary management theories are an integration and expansion of the

key concepts of the classical management theories. The development of the
theories started in the 1960s when management researchers began to consider
the happenings in the external environment of the organisation and their
effects on the organisation itself. Contemporary management approaches
include systems management, contingency theory and total quality
management (TQM).
2.5.1 Systems management

The systems management approach represents a method for solving problems
that entails analysing them within a framework of inputs, transformation
processes, outputs and feedback, as shown in Figure 2.1. A system is a set of
interrelated and interdependent parts arranged in a manner that produces a
unified whole to achieve a common goal. A system (e.g. an organisation) is
made up of subsystems (e.g. the units and departments) which depend on each
other. Changes in one part of the system (organisation) could affect other
parts of the system.
Systems can be open or closed. A closed system functions without

interacting with its environment. Organisations are regarded as open
systems, because they are influenced by and interact with their environment.
As an open system, an organisation interacts with its internal environment,
which is made up of its workers, units and departments, and different levels
of management that are linked to achieve its goals. At the same time, an
organisation is influenced by the external environment, which consists of its
customers, suppliers, shareholders and regulatory agencies. The macro-
environmental elements also influence the organisation. This is discussed in
Chapter 3.
Whenever managers have to make decisions, they have to consider their

effect on all the elements of their environment.
Figure 2.1 The organisation as an open system
Inputs are the human, material, physical, financial and information resources
that can be transformed into outputs such as products, goods and services.
For effective and efficient operation, the system must generate feedback.
Feedback is the amount of information about a system’s performance and
status. The goal of any system is to achieve synergy which occurs when two
or more subsystems working together can produce more than they can
working apart. This is called synergy – the sum is bigger than the individual
parts (i.e. 1+1=3).
Taking a university as an example of an open system, its inputs will be the

students, lecturers and financial resources. The transformation process will
comprise the equipment and procedures used to convert inputs into outputs,
for example the lectures, assignments, tests, examinations and research
papers. The output of the university will be the graduating students. Feedback
for the university will be the information about the employment capabilities
of its alumni.

The contingency approach (or situational approach) to management states that
there are no universal management theories applicable to all situations and
that the most effective method to manage an organisation would depend on
the kinds of problems or situations that managers or organisations are facing
at a particular time. In other words, the best way to manage would depend on
the specific situation (hence, the situational approach).
The contingency theory recognises that individual organisations, employees
and situations are different and therefore require different ways of managing.
Contingency can be described with the phrase: “if … then.” For instance,
when faced with a challenge, one can say to oneself: “If this is the way the
situation is, then this is the best way to manage in this situation.”
In summary, the contingency approach requires managers to analyse and

understand the current problematic situation, generate alternative solutions to
the situation and then choose the best solution that will benefit the
organisation and assist it to achieve its goals. One of the early advocates of
contingency theory was Fred Fiedler, who studied which style of leadership
was most effective in a given situation. This theory will be discussed in more
detail in Chapter 10.
2.5.3 Total quality management (TQM)

Total quality management (TQM) is an integrated, organisation-wide strategy
for improving product and service quality. It involves a management
philosophy that focuses on managing the total organisation to deliver better
quality to meet customers’ needs and expectations. TQM involves a
continuous process of guaranteeing that quality is encouraged and built in at
every stage of production.
W. Edwards Deming (1900–1993) is considered the “father of the quality

movement”. Deming was an American whose ideas and theories on quality
were not initially accepted in America, but were adopted by the Japanese
after World War II as they sought to rebuild their country and economy. The
Japanese modified Deming’s theories and applied them to their production
and manufacturing processes. This required a movement away from an
inspection-oriented approach to quality control that emphasised the
involvement of employees in the prevention of quality problems.
TQM is characterised by some important principles:
Employee involvement means that there should be teamwork and

collaboration between management and workers, across business
functions, and between the organisation and its customers and suppliers.
The implication of this is that to achieve better quality, everyone in the
organisation has to work together to make improvements and solve
problems. Giving employees power and authority to manage problems in
their departments and to implement solutions to the problems is a way of
empowering them.
The important principle is obviously a commitment to quality. This
requires an attitude of commitment to quality. Commitment to quality
instils a prevention orientation and acts as motivation for an error-free
approach to standards.
The commitment to quality helps the organisational members to have a
clear idea of what quality means from the customer’s perspective.
Customer focus and satisfaction means that the entire organisation should
focus on meeting the needs of customers, thereby resulting in customer
satisfaction.
TQM also focuses on the organisation’s business processes and through
the use of scientific tools, technologies and methods managers make
systematic changes in processes and products.
An important principle in the total quality management approach is that
suppliers are part of the process of delivering total quality to the
customers and meeting their needs.
A basic principle of TQM is the striving for continuous improvement.
This refers to the concept of kaizen pioneered by Japanese companies that
requires the organisation and all its members to improve on something
every day.
In honour of Deming’s contribution to the Japanese economy, Japan

established the Deming prize for corporate quality in 1951. Awarded
annually, the prize recognises the organisation that has attained the highest
level of quality that year. In Europe, the International Organisation for
Standardisation (ISO) (pronounced eye-so) issues certification for
excellence to companies that adhere to high quality standards. South Africa
has adopted the requirements of the ISO 9000 series. South African
companies are expected to adhere to the requirements of these series and the
South African Bureau of Standards (SABS) does the certification.
Toyota is not perfect, but it continually strives to be
Although Toyota is regarded as a world leader in value-chain management, it would be a

mistake to believe that its record is perfect – or anything close to it. Over the years it
has made many mistakes and errors as it strives to find new methods to improve its
value chain and increase innovation, quality, efficiency and customer responsiveness. It
always seeks to learn from its mistakes, however, and keeps on tackling a problem until
it finds a solution.
On the innovation front, for example, Toyota’s Japanese engineers have often mistaken
the needs of its global customers, and the first generation of many of its new vehicles
such as pick-up trucks, minivans and SUVs were flops. Its first pick-up truck was too
small for the US market, its first minivan was clumsy compared to Chrysler’s, and its
first SUV was underpowered and lacked the comfort and features of competitors such
as Ford and Land Rover. Nevertheless, Toyota’s engineers have continually learned
from their mistakes and today, using the skills of its US and European designers, its
new generation of pick-up trucks, minivans and SUVs are market leaders.
On the quality front it has made mistakes; several times its engineers have designed
parts such as air conditioning and brake systems that proved defective and led to many
recalls. But they have learned from their mistakes and most problems have been
corrected. Even so, it was only in 2007 that Toyota realised that it could improve quality
even more if it started to collect repair information on what kinds of repair problems its
vehicles suffered from after their warranty had expired. If it had taken such a long-term
view earlier, then its engineers could have focused their attention on the specific
problems that led to poor parts quality.
On the efficiency front, cars have become more difficult to assemble because both
components and work processes have become more complex. However, in the 2000s
Toyota increasingly failed to realise the need to give employees more work training to
prevent vehicle recalls because it had been expanding so quickly around the world.
Since 2004, for example, Toyota has recalled 9.3 million vehicles in the US and Japan,
almost three times the previous rate. To solve this problem Toyota has delayed the
introduction of some of its new models by several months while it trains its workforce in
the many intricate procedures that must be followed to achieve the high quality it
demands. To help regain its high quality standards it opened “global production centres”
in Kentucky, England, and Thailand to allow its engineers to train production supervisors
in the advanced techniques, such as welding and painting, needed to maintain state-of-
the-art production quality.
Its president, Katsuaki Wantanabe, publicly apologised in 2007 for these increasing
errors and affirmed that Toyota was now back on the right track – even though it is
almost always at the top of the quality list of the best global carmakers. Even the best
companies have to strive to maintain – let alone exceed their high standards.
Source: Jones & George (2009)
2.6 SUMMARY
This chapter provided an overview of the history of management because

knowledge of management theories is essential for successful management
and leadership in an organisation. The different management theories were
discussed, highlighting their influence on contemporary management.
In brief, scientific management focuses on improving efficiency, bureaucratic

management focuses on rules and procedures, and administrative
management focuses on how and what managers should do in their jobs. The
behavioural approaches concentrate on people, especially the psychological
and social aspects of work; the quantitative approaches make use of
mathematical and statistical techniques to aid managers in decision-making,
and the contemporary approaches promote the use of contingencies and
quality for effective and efficient management.
A guide to classical management theory. http://www.business.com/business-planning/classical-

management-theory/ (accessed on 27 August 2014).
Barnat, R. Strategic management. http://www.introduction-to-management.24xls.com/en125 (accessed

on 2 March 2015).
Daft, R.L. & Marcic, D. 2013. Understanding management, 8th ed. Stanford: Cengage Learning.
Jones, G.R. & George, J.M. 2013. Essentials of contemporary management, 5th int. ed. Boston:
McGraw-Hill/Irwin.
Lillian Moller Gilbreth. https://www.sdsc.edu/ScienceWomen/gilbreth.html (accessed on 14 September

2014).
Louw, L. 2012. The development of management thought. In Hellriegel, D., Jackson, S.E., Slocum,
J.W., Louw, L., Staude, G., Amos, T., Klopper, H.B., Louw. M., Oosthuizen, T., Perks, S. & Zindiye,
S., Management, 4th South African ed. Cape Town: Oxford University Press.
Mahmood, Z., Basharat, M. & Bashir, Z. 2012. Review of classical management theories.
International Journal of Social Sciences and Education, 2(1): 512–522.
Montagna, J.A. 1980. The Industrial Revolution. Connecticut: Yale-New Haven Teachers Institute.
Robbins, S.P., DeCenzo, D.A. & Coulter, M. 2015. Fundamentals of management: essential
concepts and applications, 9th ed. Harlow, UK: Pearson.
Williams, C. 2013a. MGMT, 6th ed. USA: South-Western Cengage Learning.
Williams, C. 2013b. Principles of management, 7th ed. Canada: South-Western Cengage Learning.
CASE STUDY: THE MINING INDUSTRY OF SOUTH AFRICA
Mining in South Africa has been the driving force behind the history and development of
Africa’s most advanced and richest economy. Large-scale profitable mining started with
the discovery of a diamond on the banks of the Orange River in 1867. Other precious
stones and minerals mined in South Africa include gold, platinum, chrome, manganese,
zirconium, iron ore and coal.
Since 1867, the mining industry has continued to grow significantly. In 2010, it generated
18.7% of the country’s gross domestic product (GDP). In 2011, it generated 94% of
South Africa’s electricity, through the use of coal. In addition, mining is a major job
creator as it helped create 1.3 million jobs in 2010.
Despite the positive contributions of the mining industry to the South African economy, it
is frequently criticised for its poor safety record and high number of fatalities through
accidents that happen underground. Also, the National Union of Mineworkers (NUM) and
the Association of Mineworkers and Construction Union (AMCU) have raised the
following concerns relating to the exploitation of miners: the benefits of mining are not
reaching the workers or the surrounding communities; the lack of employment
opportunities for local youth; appalling living conditions; poor wages and growing
inequalities.
Failure of management to reach a consensus with the unions over the years has
resulted in sporadic strikes in the industry, the most recent being the Lonmin 2012 strike
in the Marikana area of the North West province, where a series of violent confrontations
occurred between platinum mine workers on strike and the South African Police Service
in August that resulted in the deaths of 44 people (miners, police and protestors), as
well as injury to 78 miners. The Lonmin strike created a ripple effect of wildcat strikes
across the South African mining industry and made 2012 the most protest-filled year in
the country since the end of apartheid.
Sources: Adapted from http://en.wikipedia.org/wiki/Mining_industry_of_South_Africa,
http://en.wikipedia.org/wiki/Marikana_miners’_strike
http://www.anglogoldashanti.co.za/NR/rdonlyres/BC6AA824-EF0F-4C9E-
380CF19BAE-BE4A7/0/November2012.pdf
1. Which management theory would be applicable to solving the problems in the South
African mining industry?
2. Highlight some of the principles of this theory that could be used to solve the
problems in the South African mining industry.
3. Briefly discuss which contemporary management theory you would suggest the
South African mining industry adopt to minimise some of the problems it is facing.
1. Identify a South African organisation. Conduct background research and determine the
type of management theory/thought that is prevalent in that organisation.
2. Go to any fast food restaurant that you know. Observe and describe the division of labour
and job specialisation it uses to produce goods and services. How might this division of
labour be improved?
3. What do you understand by the term “total quality management”?
4. Consider Toyota’s high profile safety problems that have been in the news (also read
Management in action 2.10). What would you say are the reasons why Toyota experienced
quality problems?
5. What did Toyota’s management do to solve the company’s quality problems? Discuss.
6. Assume you have been hired as a quality consultant by Toyota. Advise Toyota on ways it
can improve quality in the company.
7. Assume you are the manager of a small business organisation. Which of McGregor’s
theories (Theory X or Theory Y) would you adopt to manage your workers and why?
3 The organisational environment
NAQUITA ACHADINHA
Learning outcomes
Understand the impact of environmental changes on a business.

Identify the various stakeholders that have an impact on an organisation.
Differentiate between each of the sub-environments that make up the organisational
environment by
– describing the components of the internal business environment
– identifying the variables that form part of the task environment
– categorising the forces of the external environment.
Discuss the approaches and sources that can be used to conduct an environmental
scan.
Conduct an internal and external study using a SWOT analysis.
3.1 INTRODUCTION
Today’s fast-paced and continuously changing world has not only influenced
the way individuals live, but also how businesses operate. No business
operates in isolation. It is for this reason that businesses need to consider
the drastic changes occurring in the business environment before any goals,
plans and strategies are established and implemented. The organisational
environment, which is characterised as interrelated, uncertain, complex,
unpredictable and unstable, is made up of various sub-environments, namely
the micro-, task and macro-environments. See Figure 3.1.
The changes occurring in these various sub-environments are constantly
presenting businesses with new opportunities and threats and the only way to
capitalise on the opportunities and avoid the threats is to stay abreast of all
these changes.
This chapter therefore aims to assist in this regard by providing up-to-date

knowledge on the various sub-environments that have an impact on a
business’s progress. In addition, it gives practical insight into how the
various environmental scanning approaches and methods can be used to
understand fully the ever-changing sub-environments and how these changes
can be used to create a competitive advantage.
Figure 3.1 The organisational environment

3.2 AN ORGANISATION AND ITS ENVIRONMENT
If one looks at the following environmental occurrences, one can imagine

what influence they will have on an organisation operating in South Africa:
Employees’ four-week strike in the steel and engineering industry

Consumers’ drive towards a healthier lifestyle
High crime rates
Increased competition due to online shopping avenues
High mobile penetration rates
Unreliable suppliers
ISIS war crimes
Ebola virus outbreaks
Some of these occurrences have been the source of great organisational

opportunities. Take the consumers’ need for a healthier lifestyle, for
example. A company named Trace used this trend to introduce a distinctive,
exclusive, black-coloured beverage which tastes like still mineral water, but
contains powerful multivitamins and minerals for a consumer’s body and
mind, fully satisfying his or her health needs. Other businesses have
attempted to capitalise on the growing mobile penetration rates to
communicate to consumers as well as sell products and services. Nedbank
together with Vodacom, for example, have introduced M-Pesa, a mobile
payment initiative which allows customers to store their money safely,
access it easily, send money anywhere affordably and get airtime benefits.
This has provided these businesses with access into new markets, resulting
in new avenues for profit maximisation.
However, not all of these occurrences have benefited organisations. Strikes

in the steel and engineering industry, for example, have forced many
manufacturing businesses, such as those in the motor industry, to cease their
entire production process. With no staff, an organisation cannot produce
outputs. If there are no outputs, there can be no profit.
These factors have therefore contributed to the demise of some organisations

and to the success of others, depending on the organisation’s stakeholders.
Stakeholders include all the different people who are affected by an
organisation’s policies and decisions. In a typical organisation, stakeholders
include investors, employees, customers and suppliers. However, modern
theory goes beyond this conventional notion to embrace additional
stakeholders such as the community, government and trade associations (see
Figure 3.2).
Figure 3.2 An organisation’s stakeholders in different environments
Source: Adapted from Ehlers & Lazenby (2008: 3)
These stakeholders cannot be controlled and are constantly changing. The

only way to stay abreast of these changes is to stay informed about what is
happening not only outside an organisation, but also within the organisation
and the marketplace. Instead of resisting change, managers need to use these
changes in order to fight off competition and create a competitive edge for
the organisation. The manner in which a manager deals with these
environmental changes can either make or break an organisation.
It is important for managers to start from within, to ensure that the

business’s foundation is in place in order to survive the constant external
changes. A manager can build a foundation by establishing a solid micro-
environment.
3.3 THE MICRO-ENVIRONMENT
The micro-environment, also referred to as the internal environment, includes

all the variables within an organisation. A manager will be able to either
directly or indirectly control the following variables:
Vision, mission and goals

Business functions
Organisational resources
3.3.1 Vision, mission and goals

Figure 3.3 presents the relationship between these elements.
When an organisation addresses the questions indicated in Figure 3.3, a solid

foundation is formed, which gives the organisation direction. In order to add
value to a business, the vision and mission statements need to link to the
purpose, strategy and goals of the organisation. (See Management in action
3.1.)
Figure 3.3 Vision, mission, strategy and goals
Source: Carpenter, Bauer & Erdogan (2009).
The micro-environment
Can you identify to which organisations the following mission/vision statements belong?
1. “To bring inspiration and innovation to every athlete in the world” if you have a body,
you are an athlete
2. “To be the most admired company in the global beer industry”
3. “Organize the world’s information and make it universally accessible and useful”
4. To find out the correct answers, click here.
Sources: http://nikeinc.com/pages/about-nike-inc,
http://www.sab.co.za/sablimited/content/en/sab-vision-mission-values and
https://www.google.co.za/about/company/ (accessed 17 July 2014)
The mission, vision, strategies and goals established by an organisation are
not set in stone for eternity. These variables cannot escape the impact of the
external environment. It is therefore important for managers to track the
occurrences in the external environment and adapt where necessary. (See
how Vodacom has incorporated the external environment in their planning in
Management in action 3.2.)

Vodacom’s micro-environment
Take a look at how Vodacom’s management has incorporated the changing external
environments in their micro-environmental planning:
Figure 3.4 Vodacom’s micro-environmental planning
Source: http://www.vodacom.com/com/aboutus/ourstrategy (accessed 7 August

2014)
3.3.2 Business functions

Business functions include all the functional departments within an
organisation, such as marketing, human resources, financial management,
public relations, operations, purchasing and administration. The decisions
made by these functional departments are continually influenced by the
external environment in which the organisation operates. For example:
The marketing function is influenced by consumer buying patterns and

competitors’ strategies.
The financial function needs to keep an eye on the fluctuating tax and
interest rates.
The human resource function is influenced by the country’s employment
policy, labour laws, various trade unions and strikes.
It is essential for the various functional areas within an organisation to stay

informed, in order to deal efficiently with the various environmental changes
and operate productively. These functions will assist the organisation in
achieving its desired vision, mission, strategy and goals. None of these
functional departments can operate in isolation and they all require certain
resources to function efficiently and effectively.
3.3.3 An organisation’s resources

An organisation has various tangible and intangible resources which
contribute to an organisation’s overall production:
Tangible resources include raw materials (wood, water and minerals),

capital, machinery and property.
Intangible resources include aspects such as patents, trademarks, brand
names, staff morale and even overall staff experience.
Regardless of their size, organisations have access to only a limited number

of resources to accomplish their objectives. With this in mind, managers need
to plan how these various tangible and intangible resources can be used
effectively and efficiently. An organisation should also use these resources to
maximise external opportunities or eliminate possible threats presented by
the external organisational environment.
Not all organisations successfully adapt their use of resource and their
business functions to the changes in the macro- and task environments. To
understand fully the impact of poor adaptation, take a look at what happened
to Kodak (see Management in action 3.3).

A few years ago Kodak was the “flavour” of the month. It was known for its creative
technology and innovative marketing. Until the 1990s it was regularly rated as one of the
world’s five most valuable brands. The introduction of digital photography, however,
replaced film and the development of smartphones replaced cameras. Fujifilm of Japan
also saw its traditional business become obsolete. But in comparison with Kodak,
Fujifilm adapted quickly to the changes in the business environment and has
transformed itself into a profitable business.
Both Kodak and Fujifilm saw the changes coming, but Kodak was slow to change.
Although Kodak thought that they could change the thousands of chemicals its
researchers had created for use in film into drugs, its pharmaceutical operations also
failed. On the other hand, Fujifilm was fast to diversify successfully. By using their
chemicals more successfully, they launched a line of cosmetics. They also make
optical films for LCD flat-panel screens. Fujifilm was successful in mastering new
tactics and they survived. Kodak, however, like many other great companies before it,
appears simply to have run its course. After 132 years it is fading away like an old photo.
Unfortunately, despite how brilliant an organisation’s vision, mission,

strategic plans, business functions and resources may be, success is not
guaranteed. Changes occurring in the task and macro-environments are
unavoidable and have either a direct or indirect impact on an organisation.
An organisation’s success therefore depends on how well management
adapts its micro-environment to the changing task and macro-environments.
A manager must therefore have insight into both environments.
3.4 THE TASK ENVIRONMENT
The task environment is the link between the organisation and the macro-
environment and comprises variables such as consumers (customers),
intermediaries, suppliers and competitors. These variables directly influence
the growth and existence of the organisation and cannot be controlled by
management. Although it cannot be controlled, it is still important for
management to regularly observe the occurrences within this environment.
3.4.1 Customers
Customers play a crucial role in an organisation’s task environment, as no
organisation can survive without them. Customers are the people who have
particular needs to satisfy and who have the financial capacity to do so. It has
become increasingly important for organisations to satisfy their customers’
needs in order to survive today’s competitive marketplace. To do this,
management must gain a clear understanding of consumers and their
behaviour as this determines their unique needs.
Various customer classifications have been made:
The consumer market: individuals, families or households that purchase

products and services for own consumption or use
The industrial market: individuals or organisations that purchase goods
and/or services for use in their own production of other goods and
services. These produced products are then sold to other parties, at a
profit.
The resale market: parties that buy products and sell them, without any
further processing, in order to make a profit
The institutional market: large-scale users (such as schools, hospitals,
nursing homes, government agencies and non-profit organisations). The
buying behaviour and needs of this market are similar to those in the
industrial market.
The international market: foreign buyers like customers, manufacturers,
resellers and governments
Each of these markets has its own set of needs and demands. Before deciding
which ones to satisfy, a business must consider its internal goals, resources
and capabilities. In addition, an organisation should calculate the overall
market demand and the feasibility of entering a particular market.
Once all these bases have been checked, an organisation can then implement
strategies that focus on satisfying the particular market’s need and, in turn,
enhance an organisation’s profitability.
3.4.2 Competitors
“Keep your friends close, but your enemies closer”
An organisation will not be alone in aiming to satisfy the market’s needs.

There will undoubtedly be a number of organisations providing similar
offerings and also competing for the market’s support. To deal effectively
with this variable, managers should develop a competitive advantage, as
explained in Chapter 1. Take a look at the modern-day competitive
advantages shown in Figure 3.5.
To develop a sustainable uniqueness, sound competitive analysis is required.

This analysis begins with the identification of the real competitive threats to
an organisation. The four different types of competition are summarised in
Table 3.1.
Figure 3.5 Examples of competitive advantages
Sources: http://www.mytopbusinessideas.com/example-companies-competitive-advantage/
and http://sopinion8ed.wordpress.com/2012/11/23/the-coca-cola-business-model-and-their-
competitive-advantage/ (accessed on 1 August 2014)
Table 3.1 Different types of competition

Types of
Practical example
competition
Brand Other brands of the SAME type of product. Classified as direct competitors
competition because they are very similar. Samsung vs iPhone/Diet Coke vs Diet Pepsi
Product Different types of product within a particular product category. Also referred
competition to as product-type/product-form competition. Touch-screen vs keypad
smartphones/ice tea vs a soda
Generic Alternative product lines that are able to satisfy the same customer need.
competition Smartphone vs tablet vs laptop/drinking water from the tap vs buying a drink
Need Different kinds of needs for which the consumer is willing to pay. Buying
competition textbooks vs buying a smartphone/buying a drink vs buying something to eat
Once the competitors have been identified, management can then evaluate the
competitors’ strengths and weaknesses, estimate their costs and profit
numbers and monitor their activities within the market. Managers should
remain vigilant towards competitors’ actions as these impact directly on an
organisation. An informed organisation is able to adapt and, in turn, combat
potential threats or maximise opportunities presented by the competitors.
Take a look at how Wimpy used its competitors’ actions as a source of
inspiration (see Management in action 3.4).
Dealing with competition
On 28 December 2011, a blind woman by the name of Sanet Gouws was chased out of
a McDonald’s outlet in South Africa as she was accompanied by her two-year-old black
Labrador guide-dog. McDonald’s staff requested that she and her family sit outside.
Sanet stated that “we would have, but there wasn’t shade outside”. McDonald’s
management was not available for comment after the matter, which resulted in bad
publicity for the company.
Wimpy decided to use their competitors’ actions as an opportunity to let visually

impaired people know that they are welcome in any Wimpy branch, by introducing
braille menus in all of their restaurants. To spread the word, the company introduced
braille burger buns that blind people could actually read.
With the help of skilled chefs, Wimpy used sesame seeds to write braille messages on
their buns. They then delivered the Braille Burgers to three of South Africa’s biggest
blind institutions. These three companies have access to most of the 1 200 000 visually
impaired people living in South Africa.
The Wimpy Braille Burger project has rapidly moved through the global market and
achieved a massive amount of public support. By making just 15 braille burgers, the
company’s message was passed on to over 800 000 visually impaired South Africans
informing them that Wimpy has braille menus in all restaurants. In doing this, not only
did Wimpy increase their foothold amongst the visually impaired, but also built up their
brand affinity amongst all South Africans. The campaign was written and spoken about
in over 100 local newspapers, websites and radio stations. From there the international
media picked up on it and spread it all over the world. Wimpy received over two million
dollars’ worth of free media for a campaign that cost only $302. Which means their
return on investment covered their total cost 6 000 times over.
Click here to view the braille burger advertisement created by Wimpy:
Sources: Adapted from http://www.sowetanlive.co.za/news/2011/12/28/blind-woman-

guide-dog-chased-out-of-mcdonalds and
http://www.metropolitanrepublic.com/wimpy-braille-burger-case-study/ (accessed 12
August 2014)
3.4.3 Suppliers
An organisation has the power to decide what offering it will introduce into
the market. However, in order to deliver these offerings successfully,
organisations depend on various suppliers. Practically every type of
organisation like trading, manufacturing or contracting is dependent on some
or other form of suppliers. Managers need to be meticulous when selecting
these suppliers, as approximately 60% of every rand spent by an organisation
goes towards supplier purchases. Organisations may need supplies such as
the following:
Water, electricity and communication services, which can be purchased
from external suppliers such as Eskom, Telkom and Vodacom.
External sources of capital, which can be supplied by various
commercial banks such as Standard Bank, Absa, Nedbank and First
National.
Material of final products, which can be sold to customers, or used to
produce products and services.
Management should select suppliers that add value to an organisation and, in

turn, develop long-term sustainable relationships with the selected suppliers.
3.4.4 Intermediaries
Most organisations do not sell their goods directly to the end user. Between
the organisation and the end users stands a set of intermediaries that performs
a variety of functions. These intermediaries become important role-players in
an organisation’s success, as they are able to perform certain tasks more
efficiently than the organisation itself, thereby alleviating the organisation’s
load of responsibilities. There are various types of intermediaries that
businesses can make use of, depending on the roles the organisation would
like them to fulfil:
Merchants. These include wholesalers and retailers that buy, take title to
and resell merchandise.
Agents. These include brokers and sales agents that search for customers
and negotiate on the organisation’s behalf, but do not take title to the
goods.
Facilitators. These include transportation companies, independent
warehouses and so on that assist in the distribution process, but do not take
title to goods nor negotiate purchases or sales.
Since intermediaries serve as indispensable middlemen, organisations

should select intermediaries that really add value by bridging the gap
between organisation production and consumer consumption.
3.5 THE MACRO-ENVIRONMENT
The macro-environment consists of a number of different factors, as

summarised in Table 3.2. A manager will need to ask critical questions
regarding each of these environmental factors to develop a clear
understanding of their impact.
Table 3.2 Macro-environmental factors
Demographic What demographic trends will affect the market size of the industry?
What demographic trends present opportunities or threats?
Sociocultural What are the current or emerging trends in lifestyle, fashions and other
aspects of culture? What are the implications thereof?
Economic What are the trends in interest and inflation rates, trade cycles and
unemployment rate for the countries in which the organisation operates?
How will these affect an organisation’s strategy?
Political/legal What regulations are in place that will affect a business operating in
South Africa? Are there any changes to governmental regulations? What
will be the impact of these changes?
Technological To what extent are existing technologies maturing? What technological
trends or new developments are affecting or could perhaps affect the
industry?
Natural/physical What are the natural resources being used by an organisation? Are there
any shortages of natural resources which could affect an organisation’s
productivity?
International What international trends and occurrences will affect the industry? How
will these alter the competitive arena?
These different elements will now be discussed in more detail.

3.5.1 Demographic factors
Demographic factors “paint a picture” of the market in terms of age, race,
ethnicity and location of consumers. When investigating these factors,
managers often consult census reports. In South Africa, a census is conducted
every 10 years and the latest results are referenced to the 2011 census report.
The better a manager understands the market, the easier it is to recognise
potential opportunities and threats and, in turn, develop appropriate
communication techniques and business strategies. It is possible to download
the 2011 census report (see Management in action 3.5).
Census report
Click here to download the 2011 census report, compiled by Statistics South Africa
(StatsSA).
3.5.1.1 Population growth

The South African population, which consists of four main groups, black,
coloured, Indian and white, has experienced a notable increase from 40.6
million in 1996 to 51.8 million in 2011 (Statistics SA, 2011). Table 3.3
indicates the population growth of these different groups. Unfortunately,
population growth is highest in countries and communities that can least
afford it, so an increasing growth rate does not automatically mean growing
market potential, unless there is sufficient purchasing power. These
population size changes are triggered by fertility, mortality and migration
processes. Managers should therefore stay informed with regard to these
processes, by reviewing various trend reports and statistics, such as those
indicated in Table 3.4.
Table 3.3 South Africa’s Population, 1991–2011

Population Group 1991 1996 2001 2011
Asians/Indians Number 986 600 1 045 596 1 115 467 1 286 930
% 2.6 2.6 2.5 2.5
Black/African Number 28 396 700 32 127 631 35 416 166 41 000 938
% 75.3 76.7 79.0 79.2
Coloured Number 3 285 600 3 600 446 3 994 505 4 615 401
% 8.7 8.9 8.9 8.9
Whites Number 5 068 300 4 437 697 4 293 640 4 586 838
% 13.4 10.9 9.6 8.9
Other Number – 375 203 – 280 454
% – 0.9 – 0.5
TOTAL Number 37 737 200 40 583 573 44 819 778 51 770 560
% 100.0 100.0 100.0 100.0
Source: De Bruyn & Kruger (2014: 36). Based on the Census 2011 report.
Table 3.4 Trends in total fertility rate and female life expectancy at
birth in South Africa, 1970–2007
Total fertility rate (average Life expectancy at

number of children) birth (years)
1970 4.9 57.6
1975 4.6 59.1
1980 4.3 60.6
1985 3.5 62.0 Advances in
1990 3.3 63.4 medical care
allow an aging
1995 3.2 64.5 population to
2001 3.0 64.8 live longer.
2006 – 59.9
2007 2.7 –
Source: Joubert, Udjo & Jansen van Rensburg (2009: 36)

3.5.1.2 Population age–gender composition
Managers can use age–gender distribution information in their planning and
decision-making. This information is valuable to managers because it is
intrinsically linked to all aspects of the consumer’s lifecycle, for example
education, marriage, childbearing, retirement, mortality, etc. Based on the
Census 2011 report (Statistics SA, 2011), the proportion of females is
reported to be greater than males, in the majority of age groups, except within
the younger age groups, where the reverse is true. Overall, the South African
population comprises 51.3% females and 48.7% males. See Management in
action 3.6 for an organisation using this distribution to their advantage.

Using population changes as a business opportunity
With reports indicating that females make up the majority of the South African
population and have an increasing life expectancy, an opportunity was introduced for
businesses to target this growing market. One organisation that successfully managed
to do so was 1st for women, which has introduced insurance solutions specifically
tailored to the needs of South Africa women.
When considering the age of the population, the median age is consulted, as it
indicates whether the population is young, old or intermediate. A population
with a median age of less than 20 (meaning that 50% of the population is
younger than 20) is classified as young. Those with medians of 30 and above
are referred to as old, while the range of 20–29 is classified at intermediate.
South Africa’s median age has shifted from 22 (1996), to 23 (2001), to 24
(2007), to 25 (2011), so it has remained in the intermediate stage over the
years (Statistics SA, 2011).
3.5.1.3 LSM trends

To understand the demographic environment in more detail, managers can
also refer to the population’s LSM® (Living Standards Measurement). The
South African Advertising Research Foundation (SAARF) developed the
LSM® as a means to segment the South African market according to standard
of living, which cuts across race and other outmoded techniques. Criteria
such as degree of urbanisation and ownership of major appliances are used.
The LSM® allows managers to monitor various trends in three broad
socioeconomic classes and range from 1–10:
LSM® 1–4 indicates people living in relative poverty.

LSM® 5–7 indicates an emerging middle class.
LSM® 8–10 indicates the middle to upper class.
The AMPS research report indicates an increase of 45% in the LSM® 7 and
8 group, as well as an increase of 21% in the 9 and 10 LSM® groups. This
signifies an improvement in the education levels, financial circumstances
and purchasing power of South African consumers (Joubert, Udjo & Jansen
van Rensburg, 2009: 55). This is good news for organisations wishing to
exploit opportunities in the market.
3.5.1.4 Urbanisation
One of the primary trends influencing the world’s population is that of
urbanisation. This trend refers to the movement of people from rural areas
towards cities. The percentage of people living in the urban areas had
increased and is expected to rise to 70% (6.4 billion people) by the year
2050 (Strydom, 2013: 123). This trend has resulted in many organisations
situated in rural areas having to shut down due to depopulation. In addition,
this trend has greatly affected organisations in the areas of housing,
sanitation, slum control and health services. In many of the rural settlements
and small towns, customers do not find any financial facilities anymore, as
banks have closed their branches.
Keeping up to date with various demographic changes will reveal various

opportunities and threats. Managers are therefore required to use this
information to adapt their plans accordingly.
3.5.2 Sociocultural factors

One of the most difficult things to forecast is the changes that can and may
occur in the social and cultural dimension of the macro-environment. This is
attributed to the fact that sociocultural factors revolve around people’s social
behaviour. This will always be difficult to manage as there is constant
transformation in people’s culture, values, lifestyle and expectations. These
factors affect organisations both directly and indirectly, through staff
behaviour and consumer behaviour respectively. A few sociocultural trends
in South Africa which could have an impact on an organisation are as
follows:
Changing family structures. The “traditional” family structure has

transformed as a result of many societal changes, including people getting
married at an older age, fewer children per family, increased divorce rates
and more women taking on full-time careers.
Changing role of women. An increasing number of South African women
are being appointed to high-status positions at large institutions. This has
resulted in larger disposable incomes per family as well as men now
taking on household responsibilities. Organisations have therefore begun
targeting men when advertising household purchase items.
Changing lifestyles. People’s lifestyles are changing drastically, from
being ordered and predictable to being fast-paced and cluttered.
Consumers are now driven by shortcuts, instant results, “me” time,
community connections and time management. Many organisations have
tapped into these lifestyle changes by introducing pre-prepared
convenience meals, one-stop shopping centres, mobile apps, e-books and
“instant fixes”. In addition, consumers are in pursuit of wellness and
balance. They are looking for tangible benefits for their body and soul,
through balanced health and weight management, better access to nature’s
best and more fully integrated leisure time. This has given rise to new
organisational offerings such as cross-fit and Zumba workouts, Salomon’s
athletic performance gear and even the Tim Noakes diet (see Management
in action 3.7).
Need for personalisation. Modern-day consumers want something that is
unique and reflects their personality. Retailers understand this and are now
introducing personalised products from customised cars, furniture and
even build-your-own salads and sandwiches to order.
Consumerism. Consumerism is a growing trend that has affected many
organisations as it revolves around consumer protection. The South
African Consumer Protection Act which was initiated on 1 May 2011 has
placed legal, moral, economic and even political pressure on management.

Cauliflowers are high in demand
One of the biggest industries in the world is the slimming industry. People always want
to lose weight and every new slimming diet and piece of advice is tried with enthusiasm.
The same is happening now with Professor Tim Noakes’ “food revolution”. It would
seem that the future is rosy for cauliflower producers and not so great for potato
growers. People are replacing potato with cauliflower mash and making cauliflower rice
and pizza bases.
When asked about this, a number of supermarket managers explained that their
supermarkets have experienced an increase in the sales of cauliflower since Noakes’
book was published. The price of cauliflowers has increased and wealthier consumers
in particular have a new appetite for cauliflowers as they follow the Noakes diet, aka the
Banting diet.
* Author’s own research.
3.5.3 Economic factors

Economic factors include all aspects which either directly or indirectly
influence the disposable income and purchasing behaviour of businesses
and consumers. These aspects include the following:
Interest rates. This refers to the price of lending money. It is linked to the
repo rate and is set by the South African Reserve Bank. An increase in the
repo rate will result in an increase in interest rates. An increase in the
interest rate affects organisations and consumers who make use of
borrowed funds (e.g. hire-purchase financing, property bonds etc.) as it
influences their ability to meet their financial repayment commitments.
Inflation. This refers to the continual rise in the prices of products and
services. An increase in inflation has a depressing effect on the economy,
as it decreases the purchasing power of the rand, which reduces the
consumer’s purchasing power. Inflation also increases the costs of
exporting industries and makes it difficult for local industries to compete
against cheaper imported products. Owing to the hazardous effect of high
inflation rates, the South African government decided to set the South
African Reserve Bank an inflation target of between 3 and 6% (see
Business cycle. All economies are subject to cyclical changes, ranging
from prosperity, recession and depression to recovery. Each phase
imposes its own set of demands on an organisation:
– Prosperity: opportunity to manufacture and market new products, reach

new markets and expand current market share
– Recession/depression: less disposable income is available.

Consumers buy less, resulting in a decrease in demand and fewer
growth opportunities. Businesses then buy less from manufacturers.
– Recovery: opportunity for economic growth. Prospects for an

organisation to increase its sales and income.
Value adjustments need to be made by both managers and consumers

during the different economic phases, in order to adapt appropriately.
Unemployment. This is one of the biggest problems in the South African

economy. The unemployment rate in South Africa increased to 25.5% in
the second quarter of 2014 from 25.2% in the first quarter of 2014. This is
the official figure, but it may be that the figure is closer to 35%, because
many people have given up looking for employment. This aspect has a
direct effect on consumers’ demand for products and services as well as
expenditure. In a state of unemployment, people cut back on more
expensive products and postpone durable product purchases.

Consumer spending
Take a look at the initiative implemented by Sanlam, aimed at

providing consumers with a perspective on their spending habits,
taking into consideration the effect of interest rates and credit etc.
Click here to view the Sanlam One Rand Man episodes.
Source: https://www.youtube.com/results?
search_query=sanlam+one+rand+man (accessed on 1 August
2014)
3.5.4 Political/legal factors

Political/legal factors include the regulations, legislation and court decisions
that govern and regulate business and management practices. Management’s
decisions are constantly affected by the course of politics and various
legalities. Uncertainty and instability within the political/legal dimension of
the macro-environment can have a detrimental effect on organisations and
countries alike, as it may result in a halt in investments and even reduce
tourism rates. This may cause a ripple effect, resulting in inflation, higher
interest rates and lower credit ratings.
Although South African organisations operate in a free-market system,

government still has the final say, which affects an organisation and the
manner in which its staff and customers are managed. Figure 3.6 indicates
various political and legal factors that have an impact on an organisation
operating in South Africa.
No matter what decisions are taken by politicians (nationalisation of banks

and mines, reclaiming of land etc.), individual organisations will have to
comply if these decisions are passed by parliament and become law.
Figure 3.6 Political and legal factors that influence an organisation
3.5.5 Technological factors

Technological factors include all the scientific and technological
advancements which occur within a specific industry as well as in society at
large. These factors are synonymous with revolutionary changes, which have
the greatest impact on the macro-environment. Organisations that fail to adapt
in time could be left high and dry.
Technological advancements and innovations, such as those indicated in

Table 3.5, can affect the entire organisation, from its product lifecycle,
operational processes, supply chain and management approach, to its
position in the market. Managers need to remain vigilant in order to select
and incorporate relevant new technologies that will ultimately enhance the
organisation’s overall functionality.
Table 3.5 Technological inventions that affect business functioning

Effect on
Product
Brief description organisation’s
name
functioning
SnapScan To use SnapScan, consumers download the app, add their Efficient
credit card details by taking a picture of their card and finally distribution
create a pin. They then use the app to scan a QR (quick Better service
response) code – a type of barcode – in a store to make delivery
automatic payments. The retailer can get a voucher code for
all SnapScan payments at the end of the day. This voucher
code can be punched in at any Standard Bank ATM, or
handed over at a Spar, in order to receive physical cash.
IRI Scan All-in-one scanner and mouse. When you are not scanning, Improvements
Mouse it works as a regular mouse. When you would like to scan a to existing
document, a scan button is pressed. The mouse can then products
be swiped in any direction on a paper document and text
and images appear instantaneously on your computer
screen.
Power Power Felt is an amazing new thin and inexpensive fabric Development
Felt that generates electricity from the warmth of body heat. It of new
can be used to charge a cell phone, and run home products New
appliances, car radios and air conditioners. Researchers markets
are hopeful that the technology will be available within the
next two to three years and, once they are successful, this
technology will offer a convenient, eco-friendly power
source.
The The Payment Pebble is a compact mobile device that simply New markets
Payment plugs into the audio jack of your compatible smartphone or Efficient
Pebble tablet and, once set up, allows you to immediately start distribution
making and receiving card payments. This device enables systems Better
small, medium and large business owners to accept service
MasterCard and Visa debit or credit card payments through
a smartphone or tablet – anytime, anywhere.
Sources: Adapted from http://www.techcentral.co.za/inside-snapscan-sas-app-of-the-

year/43230/; http://www.irislink.com/c2-2827-189/IRIScan-Mouse–-Scanner–-Mouse-at-
a-time-.aspx; http://www.businessinsider.com/power-felt-feeds-off-your-body-heat-to-
generate-electricity-2012-8 ixzz3AkSOi8bA and http://www.absa.co.za/Absacoza/Small-
Business/Supporting/Payment-Pebble (accessed on 17 August 2014)
3.5.6 Natural/physical/ecological factors

Natural/physical factors include the earth’s natural resources which are used
by people and businesses to support life and development. These resources
include water, air, coal, oil, plants, animals, gold and other minerals. With
approximately seven billion people all relying on the earth’s diminishing
natural resources, governments and businesses have realised that this
excessive use is unsustainable. Organisations, ranging from major
corporations to SMMEs, are seeking new ways to provide for today’s needs
and wants without depleting valuable resources. Below are some initiatives
that can be implemented by organisations, in order to solve natural/physical
problems:
• Problem: The increasing cost of energy

Solution: Investing in technological innovations to find alternative
sources of energy. These include fracking (shale gas extraction in the
Karoo area), ethanol production (using maize yield) as well as solar,
wind, nuclear and hydroelectric power. Nedbank, for example, has opened
Africa’s first wind-powered branch. Unfortunately, not all these energy
innovations have a positive impact on the environment – take a look at the
fracking research conducted by Jolynn Minnaar (available online at
http://www.un-earthed.com/category/jolynn-minnaar-2/).
• Problem: Growing cost of pollution

Solution: Pollution destroys living and working space. The costs involved
with remedying, preventing and legally complying on the matter can be
costly to an organisation. Many organisations have therefore formed new
methods for producing and packaging products to keep pollution to a
minimum. The soap industry, for example, is researching the use of less-
harmful chemicals.
• Problem: Scarce resources

Solution: A range of resources is becoming increasingly scarce (such as
oil) and these shortages affect the supply of products, which can lead to
severe price hikes. Organisations are thus searching for different
production methods and substitute products.
Management in action 3.9 shows how organisations can do a lot towards

preserving the physical environment.
Levi’s fight against pollution
Levi’s Waste<Less jeans are the company’s latest design innovation. Each of the
Waste<Less Levi’s denim pieces features a minimum of 20% recycled content, from an
average of 8 plastic bottles. During the spring of 2013, the company repurposed over
3.5 million recycled plastic bottles. Levi’s is committed to making more Waste<Less
products in seasons to come to help minimize impact on the planet.
Click here to access more information, regarding this initiative.
Source: Adapted from http://explore.levi.com/news/sustainability/introducing-levis-

wasteless-8-bottles-1-jean/ (accessed on 20 August 2014)
3.5.7 International factors

It is almost impossible for a country to be completely self-sufficient and
economically independent. Even nations with the strongest economies in the
world still rely on other countries for innovations, technologies, resources
and support. This has resulted in one big global market, where national
borders have become blurred due to advances in technology, the internet, e-
commerce and communication technologies. Businesses can now operate
within a country, while accessing resources from or selling products/services
to another country. It is also much easier to find product suppliers than it was
in the past and competition is no longer limited to local stores, with online
shopping having created a whole new playing field. Managers need to keep
track of international trends in terms of technologies, exchange rates,
legislation, customs, ethics, culture, shortages of raw materials and political
events in order to identify threats and opportunities and develop competitive
advantages when it comes to international trade. The better an organisation
understands its competitive advantage, the easier it becomes to maximise its
full potential. For example, South Africa’s competitive advantages lie in the
exporting of agricultural products, wine, natural mineral resources and other
locally manufactured goods such as Sasol’s synthetic fuel and oil-from-coal
technology.
The international trade industry is constantly influenced by international

occurrences, which, in turn, may create threats and/or opportunities for an
organisation. The following international occurrences could have an impact
on an organisation operating in South Africa:
The US ban on oil exports from Iran

Terrorist attacks and political instability in Nigeria, Egypt, Iraq, Ukraine
and Russia
South African businesses encountering fewer tariff and protective
measures against foreign competition than in the past
Brazil, Russia, India, China and South Africa having formed the BRICS
partnership, an economic alliance for development, integration and
industrialisation
Support from the Industrial Development Corporation (IDC) as well as the
Department of Trade and Industry (DTI)
3.6 MANAGING THE ORGANISATIONAL ENVIRONMENT
As previously mentioned, the variables and factors within the business

environment cannot be controlled. Sudden changes occurring in the task and
macro-environments can throw any organisation off course. It is therefore
important for managers to implement various tools and strategies to prevent
crisis management situations. The more informed a manager is about the
environment, the easier it becomes to manage the changes. This is where
environmental scanning and analysis systems come into play.
3.6.1 Environmental scanning

Environmental scanning is the process of gathering recent information about
occurrences within the business environment to assist managers in identifying
opportunities and threats as well as to help in the planning process (Wiid,
2014: 26). There are three approaches that managers can use to conduct an
environmental scan:
Ad hoc or irregular approach: only conducting an analysis once an

incident takes place which directly affects the organisation
Periodical or regular approach: conducting regular, up-to-date studies on
specific issues that are relevant and important to the business
Continuous approach: constantly assessing all key environmental factors
that could affect an organisation
Table 3.6 lists some sources and technologies that can be used by a manager
to stay updated and informed.
Table 3.6 Sources and technologies about environmental changes
General media such as Research reports Private organisational

newspaper and magazine compiled by an libraries and data banks,
articles organisation’s own staff or which store historical data
consultants
Economic data published by Trade shows and Online sources such as:
Statistics South Africa and the conferences internet forums, blogs,
South African Reserve Bank Google Alerts etc.
Managers need to find suitable information sources and an environmental

scanning approach that will work best for their particular organisation and
the industry in which it operates. The information obtained can be used to
draft a SWOT analysis.
3.6.2 SWOT analysis

One of the best-known tools for scanning and managing the environment is a
SWOT analysis. It is used to identify internal strengths and weaknesses as
well as the external opportunities and threats of the organisation:
Strengths: an organisation’s resources, skills, expertise, knowledge,

superior service or other advantages relative to competitors
Weaknesses: limitations or deficiencies in an organisation’s resources,
skills and capabilities that negatively affect the organisation’s
performance
Opportunities: favourable element/s within the external business
environments (task and macro) that can be used by management for
profitability, survival or growth
Threats: a major unfavourable element within the external business
environments (task and macro) that can lead to the failure of a product,
service or the organisation itself
Managers should develop a culture of continually staying informed about

various environmental changes. This will empower them to make better
decisions, spot threats and opportunities early on and, in turn, develop a
competitive edge.
It is not the strongest or the most intelligent who will survive, but those
most adaptable to change [emphasis added] ~ Charles Darwin.
3.7 SUMMARY
No organisation can operate in isolation because no organisation is 100%

self-sufficient. An organisation depends on various stakeholders to achieve
business success.
An organisation and its stakeholders form part of a complex and ever-
changing business environment, which comprises three sub-environments,
namely, the micro-, market and macro-environments.
The micro-environment is the only environment which managers can control

as it includes all internal organisational variables. The market environment
serves as the “buffer”, which consists of suppliers, competitors,
intermediaries and consumers, which are industry specific. The macro-
environment includes all external variables such as demographic,
sociocultural, economic, political-legal, international, natural/physical and
technological.
Since these environmental changes occur outside a manager’s control, all a

manager can do is to stay informed in order to adapt appropriately. The
relevant knowledge can be obtained through environmental scanning and
SWOT analysis.
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CASE STUDY: WESTDENE FRUITERERS
Westdene Fruiterers is a family-owned business run by brothers Carlos and Francisco

Achadinha situated in the Free State’s capital city, Bloemfontein. The business started
out as a conventional fruit and vegetable store located in a residential area, which
provided fresh fruit and vegetables to the end consumer market. After 18 years of
operation, the managers began to realise that many of the larger franchise competitors
(such as Pick n Pay, Checkers, Spar and Fruit&Veg City) were dominating the market.
Local competitors also served as a threat, wanting to take advantage of the growing
healthy lifestyle trend. In addition, the location in which the business was situated had
transformed from a residential area into a business centre hub.
Taking all this into account, the managers decided to adapt their initial business strategy
and model to suit the modern consumers’ needs for organic, healthy and cultural-based
cuisine goods. The owners shifted away from being a conventional fruit and vegetable
store into a business that specialised in natural, good-quality offerings. The business
then expanded further to offer bakery and deli sections as well as convenience goods. A
variety of speciality goods were added to the business’s product range. These included:
Greek desserts
South African, Spanish, Italian, Greek and Portuguese olive oils
Cold meats and fish including delicacies such as Parma ham, cod fish and tuna fish
Imported cheeses such as Gorganzola and mozzarella balls
Local and imported spices and seasoning
Specially made in-house pastries, such as freshly baked bread, steak and kidney
pies and sausage rolls, which were a local favourite
The partners brought this new strategy to life through their customer-centred
employees, supplier relationships and hands-on approach to management.
One strategy will not stand the test of time, as industry change is inevitable. The
Westdene Fruiterers management team have developed a culture of continuous
research in order to identify gaps in the market and, in turn, strengthen their competitive
advantage. The brothers study newspapers and journals, consult with suppliers,
customers and employees and monitor their competitors’ actions. This research nature
has helped the business spot additional business opportunities that have resulted in
new strategies, including the following:
The identification of a brand new target market that was originally neglected
by larger competitors. This new market includes local restaurants, catering
companies and hotel and catering schools in the region. Westdene Fruiterers has
come to the realisation that these target markets have specific product, delivery and
payment needs, and has therefore introduced tailor-made services for them. These
services include importing products, delivering goods and offering credit payment
options.
Taking advantage of being situated in the business-city hub. Westdene
Fruiterers caters to many working-class consumers from surrounding office areas
by offering lunch-time specials and snack meals.
Catering to the growing need for convenience. More people are leaving the rural
surrounding areas to work and study in the Bloemfontein region. Limited time is
available to these individuals, owing to full-time work/study obligations. Westdene
Fruiterers has therefore decided to offer ready-made meals in their deli. In addition,
washed and sliced fruit and vegetables have been pre-prepared in smaller packages
to aid in meal preparation for the health-conscious market.
Incorporating technology into their business strategy. The business has used
various technological advancements to assist in product manufacturing, store
security and stock control and to connect and communicate with their Bloemfontein
audience.
Carlos and Francisco state that it is vital to remain humble and always willing to adapt
where necessary. Although the original vision and mission set by Carlos Achadinha Sr
has evolved over the years, one aspect has remained constant: the pursuit to keep their
customers happy.
Source: Adapted from http://westdenefruits.co.za/ (accessed on 27 August 2014)
1. Identify which macro-environmental variables triggered the creation of Westdene

Fruiterers’ new business strategies. Justify your answer from the case study.
2. Classify the stakeholders which have contributed towards Westdene Fruiterers’
success. Substantiate your answer by referring to the case study.
3. Explain which micro-environmental variables have been implemented by the

company.
4. Discuss the sources and approaches used by Westdene Fruiterers in order to stay
abreast of the environmental changes.
5. Conduct a SWOT analysis for Westdene Fruiterers.
1. Discuss the role of the micro-environment and its components in an organisation’s

success.
2. As a manager, do you think it’s important for an organisation to develop a competitive

advantage in today’s business times? Substantiate your answer.
3. Provide recommendations to your educational institution as to how they can make use of
technological innovations to deliver better quality service.
4. What challenges do you think the macro-environment will present for businesses
operating in South Africa in the next five years?
5. Why is it important for managers to invest in environmental scanning?

4 Managerial ethics and social
responsibility
SALOMIEN BOSHOFF
Learning outcomes
Define ethical concepts.

Explain the four forces that influence ethical conduct.
Discuss the nature of managerial ethics.
Differentiate between the different approaches to ethical decision-making.
Define ethical decision-making.
Illustrate the importance of ethical behaviour.
Summarise the codes of ethics.
Discuss corporate social responsibility (CSR).
Differentiate between the two approaches to corporate social responsibility.
Demonstrate the four criteria to evaluate effective corporate social responsibility.
4.1 INTRODUCTION
Even though philosophers have been discussing ethics for at least 2500
years, since the time of Socrates and Plato, there are still some grey areas
when it comes to this topic. It is not always easy to identify what is right and
wrong. At other times it is easy to identify what is right and wrong, but to
behave in an equivalent way is difficult. Also, “the right thing” is not nearly
as straightforward as some books make it out to be, because in an ethical
dilemma there are often grey areas when it comes to applying ethical
principles. People also like to bend the rules in certain situations. Many
individuals decide situationally whether something is right or wrong, or are
not even aware that they are facing an ethical dilemma.
Ethics and ethical behaviour are thus an essential part of good management:
Ethics is the set of moral principles or values that defines right and wrong
for a person.
Ethical behaviour is behaviour that matches society’s accepted principles
of right and wrong.
An ethical issue is a situation where the actions of a manager can harm or
benefit a person or group.
The ethical dilemma discussed in Management in action 4.1 illustrates how

complex and difficult ethical behaviour is.

Ethical dilemma
As sales manager, you host an exciting competition for your sales representatives
where the one who sells the most in the month will win a trip to Rio.
Tyron, a trustworthy sales representative, needs to sell another R100 000 of

merchandise to beat his strongest opponent, Precious. One of Tyron’s clients, with
whom he has an excellent relationship, has always allowed Tyron free access to his
inventory. Each month, Tyron counts the stock and writes out his own order. His client
has never queried anything as Tyron has always done an excellent and honest job,
ensuring that he has never been out of stock or overstocked. Tyron realises that by
doubling this client’s order for the month, he can get the extra R100 000, which he does.
As usual, no one queries the order or his judgement. Tyron makes his target and wins
the trip to Rio. He has the time of his life, but when he returns, he finds out that his client
has returned all the extra stock and requested credit for it. More than this, he never
wants to do business with Tyron again.
Tyron is quite offended as he feels that his client knew about the competition and no real
damage was done. The stock would have lasted a bit longer, but they would have used
it all anyway. When you call him in to discuss the case, he argues that there was no rule
stating that he could not do that.
What are the ethical issues in this case and how would you as manager sort out this
problem?
Organisational ethics is the application of ethics in the organisation. Being

ethical in the organisation means applying the principles of trustworthiness,
respect, responsibility, fairness and caring to relationships with colleagues,
customers and other organisation-related relationships in the long term.
Ethical behaviour should be at the centre of an organisation’s actions and is
applicable to all types of organisations in all the different industries.
Organisational ethics has different meanings for different people, but in

general it is about doing the right thing and this chapter is concerned with the
behaviour of managers at all levels in the organisation. Organisational ethics
is an art and a science for maintaining harmonious relationships with the
society in which an organisation operates, as well as the moral responsibility
for conducting the right actions and behaviour when it comes to the
employees and stakeholders of the organisation.
4.2 THE FORCES FOR ETHICAL CONDUCT
Ethical conduct within an organisation is influenced by four forces:

individual perspective, societal norms and culture, societal laws and
regulations, and organisational practices and culture (Hellriegel et al, 2008:
145).
4.2.1 Individual perspective

Some people believe that ethics is rooted in the moral principles of society,
while others believe it depends on the situation, but ultimately it is up to the
individual to decide. Each individual has his or her own sense of what is
right and wrong. There are some core concepts, known as internal factors,
which underlie the foundation of this individual perspective of right and
wrong, namely, values, morals, integrity and character.
In their book The power of ethical management, Kenneth Blanchard and Norman
Vincent Peales write that it helps to ask yourself three questions when facing an ethical
dilemma:
1. Is my proposed action legal?
2. Is it balanced?
3. How will it make me feel about myself?
The first of these concepts is about the individual’s value system and
morals, which include the actions and behaviour that an individual regards
as favourable. From childhood, one is punished and rewarded for certain
actions and behaviour which builds one’s values and morals. The
organisation is a composite of individuals and the values of an organisation
are a derivative and inference of their collective values. There are four
levels of morals (Trevino & Brown, 2004: 70):
Moral awareness – recognising an issue as an ethical issue

Moral judgement – deciding that a specific action is right
Moral motivation – the commitment or intention to take the moral action
Moral character – persistence or follow-through to take the ethical action
despite challenges
Integrity is the second concept relating to an individual’s ethical perspective

and refers to a consistent commitment to live out the right values and morals
as seen by the individual. This refers to the honesty and truthfulness of an
individual’s actions, i.e. not saying one thing and then doing another. In her
book Integrity: doing the right thing for the right reason, Barbara Killinger
defines integrity as “a personal choice, an uncompromising and predictably
consistent commitment to honour moral, ethical, spiritual and artistic values
and principles” (Killinger, 2010: 12).
The third concept is character. Character is that thing that drives one’s
actions when no one is looking and is the sum total of one’s values and
morals, ethical standards, principles and integrity.
Then there are some external factors that influence an individual’s

perspective of right and wrong. Even if one makes the right decision, or
knows right from wrong, it is often difficult to follow through as a result of
external factors, such as the environment, peers, leaders and managers,
family, social groups and culture. Many people are followers of ethical
behaviour and are influenced by superiors. Research shows that many
employees may not report misconduct as they fear being judged and
ostracised by co-workers. Thus, the social context plays a crucial role in the
acting out of one’s ethical standards.
4.2.2 Societal norms and culture

Ethical standards develop mainly from surrounding society. What is ethical
in Nigeria may be poles apart from what is ethical in America, China or
Switzerland, owing to differing local standards. Managers working for
international organisations should take this into account when developing and
applying the organisation’s ethical standards. What applies in South Africa
may not apply in Dubai, for example. Furthermore, what is ethical and legal
in any society may change over time. Today one cannot imagine that people
were once allowed to smoke in shopping malls, in restaurants or on
airplanes. These changes in societal views are followed by legal
requirements or vice versa – as a result of a change in legal requirements, the
societal view changes. Another example is that in order to increase
environmental awareness, supermarkets are no longer allowed to give out
free plastic bags.
Societal norms are also influenced by belief systems. In the 19th century,
everyone accepted the Christian code of ethical behaviour, but today there
are competing religious and social moral codes, especially for multinational
organisations that operate in different countries and regions.
Culture also affects societal norms. In South Africa one of the challenges is
the diverse cultural groups and their acceptable norms and behaviour. It
becomes more complicated when an organisation’s employees not only come
from different cultural groups but also from different countries.
4.2.3 Laws and regulations

Some will argue that ethics begins where the law ends, and that it is
primarily concerned with the issues not covered by the law. Of course laws,
rules and regulations influence managers’ and individuals’ behaviour to be
more ethical. Laws usually stipulate what is right or wrong through a series
of rules and regulations formed over time and guide managers’ and
individuals’ behaviour accordingly. However, making something illegal does
not necessarily stop people from doing it (e.g. committing fraud), just as
operating within the limits of the law does not automatically make an action
ethical (e.g. withholding vital information). A country’s legal system
nevertheless does give an indication of its ethical standards.
4.2.4 Organisational practices and culture

Organisational practices and culture are the system of shared meaning and
beliefs held by members that distinguish the organisation from other
organisations. Each organisation has its own culture based on the values that
its founder wants to transmit in the workplace and can define and influence
the ethical behaviour of the employees. An organisational culture should
encourage ethical behaviour and discourage unethical behaviour. A strong
organisational culture that supports high ethical standards may have a
positive influence on the ethical behaviour of managers and employees,
whilst a weak culture may do the opposite, with managers and employees
relying on subcultural norms to guide their decisions and actions.
Research has shown that organisational culture has the largest influence on
employees’ individual ethical behaviour. Organisations can guide employees
formally or informally. Formal guidance happens through rules, rituals and
regulations, the organisational code of conduct, the organisation’s set of
values, publications, content of the training programmes, reward systems or
the disciplinary actions by the organisation (see Management in action 4.2).

Tata Steel
Tata Steel is committed to tackling the challenges of sustainability, thus taking

responsibility for both the environment and its communities through its decisions and
actions. The Tata Steel sustainability policy states: “Our policy is to conduct our
activities in relation to economic progress, social responsibility and environmental
concerns in an integrated way in order to be more sustainable and to meet the
expectations of our stakeholders.”
Tata Steel has five core values which define the ethics of the organisation and are
evident in its daily activities, namely, integrity, understanding, excellence, unity and
responsibility. Tata Steel builds ethical and sustainable practices into all areas of its
operations. It has continued to invest effort and resources in relation to the five key
priorities that underpin its vision with regard to climate change. These priorities are to 1.
continue to achieve emission reductions, 2. invest in longer-term breakthrough
technologies for producing low-carbon steels, 3. develop new products and services
that generate lower CO2 emissions through the life cycle, 4. actively engage the entire
workforce in this challenge and 5. lead by example within the global steel industry. Tata
Steel’s employees are guided by these principles and regulations when making a
decision or taking an action.
Source: Adapted from http://businesscasestudies.co.uk/tata-steel/business-ethics-
and-sustainability-in-the-steel-industry/axzz3TtWmfXp2 (accessed on 4
October 2014)
Informal influences happen through the actions and example of the managers,
especially top management. Middle and lower management’s actions and
ethical approaches can influence a department or team positively or
negatively. Employees are also influenced by their colleagues and peers and
the norms of the group. Management in action 4.3 shows how a manager can
influence the culture of an organisation.

Pep Stores’ organisational culture
Managing director André Labuschaigne, appointed in 1998 and a believer in General

Patton’s remark that “If you tell your people where to go, but not how to get there, you
will be amazed at the results”, helped initiate a new approach to his predominately black
customers and staff. The vehicle he chose was Sikhula Kun Ye (we are growing
together), a motto made up of green “people branches” that would permeate every
aspect of Pep culture. Organisational songs were written and sung at Pep gatherings,
the staff was encouraged to greet each other with a customary “high five” and new
uniforms were issued. Pep also embarked on a massive retraining programme and
staff members who made a difference in sales and morale were called “dynamos”.
Labuschaigne also began a process of motivating the staff through various

communication media: face to face meetings, workshops, email, videos, conferences,
monthly information sessions, newsletters and regional and national conventions. The
Pep newsletter was changed from the dreary Pep News to the Africanised Kw@PEP
(at the home of Pep) – the “@” being a nod to a commitment to existing comfortably in
the dot-com world. As Labuschaigne points out: “By involving all our people in
formulating our vision, mission and value system, we got a lot of people on board and
they helped to create the change. All future programmes stem from Sikhula Kun Ye.”
What values and norms are emphasised in this culture? How are ethics addressed?
Who seems to play an important role in creating the culture? How does the culture
address the needs of the different stakeholder groups?
Source: Adapted from Irwin (2002)
4.3 NATURE OF MANAGERIAL ETHICS
The principles of organisational ethics emphasise that the means and

techniques adopted to serve the organisational ends must be sacred and pure.
To be seen as an ethical leader, a manager should be two things: a moral
person and a moral manager. A moral person is one of good character who
is honest, trustworthy and respected by employees for doing the right thing.
Being a moral person will show a manager what to do when faced with an
ethical dilemma, not what is expected of him or her. A moral manager will
lead his or her employees to make ethical decisions and to follow through
with them. This will make him or her an ethical leader.
Trevino and Brown (2004) identify four guidelines that will help managers to
manage ethics:
1. Understand the existing ethical culture of the organisation and society.
2. Communicate the ethical standards to all role-players.

3. Use the reward system to enhance ethical behaviour.
4. Promote ethical leadership throughout the organisation.
Managers are under a lot of pressure and therefore are sometimes tempted to
engage in unethical behaviour. An employee or manager may not have the
courage to stand up for what is right. Sometimes people behave unethically
out of greed, pressure to perform and the pressure to appear successful. Ego
also plays a part in the way people behave.
4.4 ETHICAL DECISION-MAKING
Ethics guides decision-making and managers have to consider the impact of

their decisions in the long term. The principles of business ethics can help
improve ethical decision-making by providing managers with the appropriate
knowledge and tools to allow them to identify, diagnose, analyse and provide
solutions to the ethical problems and dilemmas with which they are
confronted correctly.
All decisions should be legal, fair and effective, and if a manager cannot
answer yes to all three questions, the next step should not be taken. Nestlé is
an example of an organisation that uses its ethical principles to guide its
decisions. One of Nestlé’s principles states that Nestlé recognises that its
consumers have a sincere and legitimate interest in the behaviour, beliefs and
actions of the organisation behind its brands in which they place their trust
and that without its consumers, the organisation would not exist.
4.4.1 Approaches to ethical decision-making

An ethical dilemma is seldom simple. Consider Management in action 4.4.

Sick days
You work in an organisation where other employees regularly take sick leave although
they are not really sick. They feel it is something that the organisation owes them and
everyone else is doing it, so why shouldn’t they. Organisational policy, however, states
that sick leave is only for legitimate illness. Would you
1. stick to the policy yourself, even if your colleagues do not?
2. discuss your colleagues’ dishonest behaviour with your manager?
3. cover for your colleagues so that everyone gets the most possible time off?
4. try to get the rule changed so that a formal doctor’s certificate is required to stay
away from work?
In ethical decision-making, different issues and parties may be involved and

the decision-makers may have different views. Various approaches to ethical
decision-making have been developed over the years. These models explain
and describe the philosophy that an organisation or an individual (manager)
may believe in and follow. Each model has a set of principles in terms of
which a manager can make ethical decisions. There are six known
approaches and understanding these different approaches can help a manager
to assess the benefits and problems associated with these different ways of
managing ethics.
4.4.1.1 Long-term self-interest

A manager following this approach believes one should never make a
decision or take an action that is not in the organisation’s long-term self-
interest and he or she will inspire their team to give great service to
customers, leading to greater customer satisfaction and, in the long term,
customer retention. A short-term self-interest approach, on the other hand,
would only be concerned with making the sale, even if the customer was not
happy afterwards.
4.4.1.2 Personal virtue

“Do not do anything that you do not want the world to know.” A manager
following the personal virtue approach will do the right and honest thing to
avoid bad publicity.
4.4.1.3 Religious injunction
These managers are religious and carry this aspect of themselves over into
the organisation. They will never take a decision that is heartless or harmful
to the community or individual in any way. They believe in working together
in harmony as a team to accomplish goals and that all decisions must benefit
other people. They follow a people-focused approach.
4.4.1.4 Utilitarian benefits

The utilitarian approach states that whatever one decides, the outcome must
increase the happiness or decrease the misery of the greatest number of
people over the long term. Thus, a decision made in terms of the utilitarian
approach will benefit the majority, but may harm the minority.
A manager following this approach will inspire his or her employees to use
the organisation’s resources in the most effective and efficient way for the
organisation to be profitable while keeping to the rules and standards. All
decisions will be taken in such a way that the greatest number of people
(stakeholders) will receive a long-term benefit. This type of approach
supports maximising profits, receiving rewards based on abilities and
achievements, sacrifice and hard work. According to this approach a
manager should judge whether a decision is right or wrong based on the
economic consequences for the organisation.
4.4.1.5 Moral rights

According to the moral rights model, a decision should be in line with the
rights of the society as set out in the South African Constitution, with mutual
respect as the foundation. Employees, customers and other stakeholder
groups have the right not to have their lives and safety endangered or to be
intentionally deceived, to have control over their privacy and to have
freedom of speech. This approach places more emphasis on what an
organisation should not do rather than what it should do.
4.4.1.6 Justice
Justice is an elusive, yet powerful concept that is important to organisational
ethics. The way a manager makes judgements about fair employee treatment
will determine his or her moral authority and how much he or she is
respected. Managers following the justice approach will make decisions and
take actions that equally distribute the benefits and costs among individuals
and groups. When taking action, it should never harm the least fortunate, like
the poor, uneducated or unemployed.
People should not be treated differently based on their characteristics, be

they physical, biological or mental. According to the Employment Equity Act
of South Africa, employers may not discriminate between employees based
on gender, race, pregnancy, marital status, family responsibility, ethnic or
social background, age, disability, HIV status, religion, beliefs, political
opinions, culture, language or birthplace.
This approach pertains to equality and fairness in the distribution of

economic and social benefits. In an organisation, as in life in general,
decisions resting on judgements of what is fair can result in a great deal of
turmoil and unhappiness.
4.4.1.7 Combination of approaches

Each of the six approaches discussed above has pros and cons. None can be
regarded strictly as being the right approach and therefore the better
approach would be to use a combination. For example, managers could
follow the utilitarian approach in terms of maximising profits, but also
believe in justice and doing the right thing for the majority of people.
4.5 IMPORTANCE OF MANAGERS TO BEHAVE

ETHICALLY
Operating in an ethical manner may lead to extra costs for the organisation
when compared to the opposition who do not act in the same way. There are
costs involved in conducting audits and working with ethical partners, and
costs concerning employee and partner training. Despite these costs,
managers have to be constantly aware of the value of operating ethically
within the organisation. Whether an organisation operates in an office setting,
a factory, a boardroom or a construction site, ethical behaviour is important.
Ethics does not depend on the type of organisation. A few reasons why
ethical behaviour is important are discussed below.
4.5.1 Customer satisfaction and loyalty

In today’s increasingly competitive and uncertain consumerism environment,
organisations have to walk the extra mile to satisfy customers’ high
expectations. A good ethical reputation can lead to a positive image in the
marketplace. Reasons why organisations should maintain a good ethical
reputation include the following:
To maintain a good reputation

To keep existing customers and to attract new ones
To avoid lawsuits
To reduce employee turnover
To avoid government intervention in the form of new laws and regulations
controlling business activities
To please customers, employees and society
Simply to do things right
Customers may be fooled once by being overcharged or treated unfairly, but

they will not let history repeat itself. Therefore an organisation’s unethical
behaviour may ruin its chances of a positive image in the marketplace. In this
age of social networking where dissatisfied and unfairly treated customers
can quickly spread information about a negative experience, organisations
need to focus even more on their ethical reputation. Once customers realise
that an organisation does not have high ethical ideals, they will take their
business elsewhere. Unfortunately, it is easier to notice unethical actions and
behaviours than ethical ones.
4.5.2 Employees follow
People follow what managers do rather than listening to what they say.
Organisational ethics thus begins with an ethical manager with strong
leadership and moral influence. Employees who do not believe an
organisation is fair will not be as dedicated to their job as they should be and
might also try to cut corners wherever there is a gap. Organisations with high
ethical standards take the time to train their employees about the conduct that
is expected of them. Attention to ethics in the workplace helps to ensure that
in times of crisis and confusion, employees retain a strong moral compass.
4.5.3 Retain good employees

It is a known fact that human resources are one of the most valuable
resources an organisation can have, as people buy from people.
Organisations with a good ethical reputation will get talented individuals
with high integrity and work ethics to work for them. These talented and
ethical individuals will want to be part of an organisation that can advance
their careers, where they will be promoted on a fair basis, where the
organisation’s management team tells the truth and are open and fair in all
dealings with the employees.
4.5.4 Develop a positive work environment

Talented and ethical employees are perceived as team players that develop
positive relationships with others which lead to a more positive work
environment. Ethical behaviour improves the atmosphere at work and helps
motivate employees. It sets a good example and evokes a sense of pride in
the organisation, improving its image in the eyes of both employees and the
public. An ongoing focus on the values of the organisation leads to openness,
integrity and a sense of community within the organisation.
4.5.5 Improve society

Not only can an organisation with good ethical principles influence
employees at work, but also when they are at home or in society.
Furthermore, managers trying to be ethical will take actions that are
beneficial to the majority of the people. Organisations acting in an ethical
manner can contribute to the community by producing good quality products
and services, providing employment, paying taxes and acting as an engine for
economic development. This will also help to reduce evils in society such as
child labour, unscrupulous price fixing and employee harassment.
4.5.6 Avoid legal problems

There are legal consequences for some ethical infractions in the workplace,
such as penalties, legal fees and fines or sanctions against the organisation.
Good ethical behaviour will also reduce the risk of bad publicity and
negative word of mouth.
4.5.7 Positive stakeholders

When an organisation acts in an ethical manner, the confidence in the brand
grows. This leads to a good reputation and stakeholders are happy to be
associated with the organisation. An organisation must always remember that
a positive image is vital for its continued existence.
4.5.8 Compass in a changing environment

During times of fundamental change in an organisation, there is often no clear
compass to guide managers in their decision-making. A continuous focus on
the ethical code of conduct of the organisation can guide managers and
employees during these challenging times.
4.5.9 Positive conscience

Building an organisation on strong and sound ethical principles will not only
lead to better growth and profitability, but also the satisfaction of being able
to sleep soundly at night.
4.6 CODE OF ETHICS

There will always be unethical behaviour, but organisations can reduce it by
having a set of ethical standards, policies and regulations that indicates
acceptable and unacceptable behaviour for employees across all the different
levels within the organisation.
A code of ethics is a formal document that states an organisation’s primary

values and the ethical rules it expects employees to follow. It can be seen as
an organic instrument that changes with the needs of society and the
organisation. The beliefs and values stipulated in the code of ethics should
become internalised by management and the employees and used in all
business practices. By developing a code of ethics, an organisation prevents
employees and organisational members from claiming ignorance as a defence
for unethical behaviour.
Organisations develop codes of ethics to address their unique business

situation and also to inform the public about what the organisation stands for.
The law and government policies are the starting point for any business code
of ethics (see Management in action 4.5). Research suggests that formal
ethics and legal compliance programmes can have a positive impact on
ethical behaviour. When executives and superiors emphasise ethics, keep
promises and model ethical conduct, misconduct is much lower than when
employees perceive that the ethics walk is not consistent with the ethics talk.

Anglo American
The current South African government has a policy of transferring a share of the
ownership, management and benefits of the country’s mining industry to people
previously excluded from the economy. Anglo American is backing the South African
government in this process. This includes supporting black economic empowerment
(BEE) deals. Through this process, Anglo American has sold (usually at a small
discount) 26% of its assets in South Africa to BEE groups. For example, Anglo
American was instrumental in the creation of Exxaro. This is now the largest black-
owned and managed mining organisation listed on the Johannesburg Stock Exchange.
It also aims to have at least 40% of its managers drawn from the ranks of previously
disadvantaged ethnic groups.
Source: Adapted from http://businesscasestudies.co.uk/anglo-american/business-

ethics-and-corporate-social-responsibility/why-should-a-business-act-
ethically.html axzz3FRtLFdi3 (accessed on 4 October 2014)
Where management is more directly involved in defining and implementing
the codes of ethical conduct, there is better transparency and so greater
public trust in the organisation. The role of top management is crucial in
developing an ethical culture as they set the tone for the whole organisation.
The code of ethics must be maintained during all four management functions
(planning, organising, leading (activating) and control) by incorporating the
organisation’s policies, rules and standards into all systems. A good code of
ethics is just as important for an organisation as its marketing or business
plan, or its financial strategy.
Many organisations fail because their code of ethics is too vague and
general, and gives no specific directives. The code of ethics should be
concise and properly enforced to achieve objectives. To remain ethical is an
ongoing process and requires that the organisation review and evaluate its
code of ethics on a continuous basis.
An ethics committee is formed in many organisations, especially bigger

organisations, to raise concerns of an ethical nature, prepare the code of
ethics and to resolve ethical dilemmas by following the policies and
standards developed over time. Members of such a committee should be
selected from people who know their industry, know the ethical code of the
organisation and have a good understanding of the community’s ethical
standards as well. Members should have a reputation of credibility, integrity,
honesty and responsibility.
The ethical committee should develop a system that deals with unethical
behaviour, since if unethical behaviour is not properly dealt with, it will
threaten the entire organisation’s ethical behaviour. This committee should
also monitor the code of ethics on a regular basis.
4.7 CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate social responsibility (CSR) is one aspect of the overall discipline
of organisational ethics. CSR has an influence on society and necessitates
developing a code of conduct, updating policies and procedures, and
resolving ethical dilemmas. This responsibility is reflected by ethical
practices. CSR can be defined as an organisation’s sense of responsibility
towards the community and the environment (economic, ecological and
social) in which it operates and the obligation to maximise its positive
impact on society. Social responsibility is often a way for an organisation to
show its commitment to ethical behaviour and its responsibility to society.
CSR became popular in the 1960s and since then organisations are no longer
judged solely on their products and services, but also on their ability to have
a positive impact on the environment and society in an ethical manner. Henry
Ford Sr (1863–1947) summarises it in this statement: “For a long time
people believed that the only purpose of industry was to make a profit. They
are wrong. Its purpose is to serve the general welfare” (Daft, 2015: 172). It
is part of an organisation’s responsibility to take on some of the social
problems in society. This core issue has dominated the marketplace in the
past few years and, like ethics, the definition is simple, but the application
and implementation is much more complex. Commitment to CSR is important
in managing a successful organisation and should be aligned with the
organisation’s strategy and engaged with all the stakeholders.
The Iron Law of Responsibility, created by Keith Davis, a pioneer of CSR,

states that if an organisation does things in the long term that are not
acceptable to society, it will lose its power. Research suggests that ignoring
society’s demands may destroy customer trust and prompt government
regulations. In June 2010, the Integrated Reporting Committee (IRC) was
established in South Africa and all organisations listed on the JSE are now
required to produce a report reviewing their environmental, social and
economic performance along with their financial performance.
4.7.1 Approaches to corporate social responsibility

The most difficult question when it comes to CSR is: to whom is the
organisation responsible? There are two main approaches to this, namely, the
shareholder approach and the stakeholder approach.
4.7.1.1 Shareholder approach
The main focus of an organisation that follows this approach is to maximise
profit. It may raise the share prices and increase the dividends that will be
paid out to the shareholders. According to this approach, spending time on
social causes and charity diverts time from an organisation’s main focus –
making money to maximise profit.
Organisations that follow this approach are Royal Dutch Shell and Falcon
Oil & Gas, which are responsible for the attempt to extract gas from the
Karoo through fracking (a mining process that uses chemicals toxic to both
people and animals). They do not mind that the process is harmful to broader
society (other stakeholders) as long as they maximise their profits.
Times have changed, however, and people are becoming much more aware
of the impact that certain actions may have on the environment and society.
4.7.1.2 Stakeholder approach

Stakeholders are all the parties and groups that have a stake in the
organisation, such as employees, customers, investors, community and the
environment. Table 4.1 presents some of the stakeholders and their concerns
when they evaluate the organisation’s performance.
Table 4.1 Examples of stakeholders’ concerns when evaluating organisational

performance
Stakeholder group Examples of concerns

Owners and Financial soundness
investors Sustained profitability
Average return on investment
Timely and accurate disclosure of financial information
Customers Product/service quality, innovativeness and availability
Responsible management of defective or harmful
products/services
Pricing policies and practices
Honest, accurate and responsible advertising
Stakeholder group Examples of concerns
Employees Non-discriminatory, merit-based hiring and firing
Workforce diversity
Wage and salary levels
Availability of training and development
Workplace safety and privacy
Community Environmental sensitivity in product design and packaging
Recycling of products
Pollution prevention
Donations
Availability of facilities for community use
Source: Adapted from Hellriegel et al. (2008: 124)
Being socially responsible toward employees refers to treating employees

fairly and meeting all legal standards, like minimum wages, a safe
workplace, protection against sexual harassment, and so on. Furthermore, it
means paying attention to the problems and concerns of employees.
Employee-focused organisations develop a competitive advantage, as human
resources are valuable and can really distinguish one organisation from
another. Organisations that have a reputation for equal employment and non-
discriminatory practices perform well on the JSE and have higher profits.
Socially responsible employers create a workplace environment that values
their employees and rewards them according to their efforts.
Organisations should also be socially responsible towards customers. The

consumerism movement advocates being consumercentric, communicating
honestly with customers and delivering the best possible value. The pursuit
of high standards and investment in social responsibility initiatives
influences customer value and retention. Consumers have a range of rights,
such as the right to safety, the right to choose, the right to be informed and the
right to be treated fairly.
Shareholders are also important in this approach, but the focus is not on
them alone. Remember that focusing on the investors is actually following the
shareholder approach. CSR extends beyond the organisation’s role to the
community as organisations are expected to be good corporate citizens. Part
of CSR is producing products that do not harm the natural environment. In
the past decade, organisations such as Toyota, Nissan and Ford have
launched hybrid cars that are more fuel efficient and produce less air
pollution. LG Electronics’ environmental policy is centred on its “Life’s
good when it’s green” programme (see Management in action 4.6).

Importance of natural environment
LG’s “Life’s good when it’s green” programme focuses on two areas, namely,
preproduction and post-production. By 2020 LG Electronics wants to reduce
greenhouse gases during both the production stages with 150 000 tons during the pre-
stage and 30 000 000 tons during the post stage.
Source: Adapted from http://www.lg.com/za/press-release/new-faces-for-lg-new-
strides-for-the-environment (accessed on 10 April 2015)
Another example is the outdoor wear organisation Timberland’s Green Index™ rating.
This shows the customers the organisation’s environmental footprint of all its products,
as many of its products contain recycled content. Timberland products have a nutrition
label and product icon to show the impact that the production of the product had on the
climate, and the amount of chemicals and resources used. Since 2006 Timberland has
planted more than 1 000 000 trees and reduced its direct carbon emissions by 27%.
Source: Adapted from http://www.mnn.com/money/green-workplace/stories/10-eco-
friendly-retailers (accessed on 10 April 2015)
4.7.2 Criteria for evaluating corporate social responsibility

The following criteria are used to evaluate CSR:
1. Economic. These criteria focus on profit maximisation and producing

products and services that are profitable. However, it can be harmful to
the organisation to focus solely on economics.
2. Legal. The organisation has an obligation to obey the law. It should fulfil
its economic goals within the legal requirements of the country in which
it is doing business.
3. Ethical. The organisation should be ethically responsible, which refers

to behaviour that is not codified by the law or direct economic interests.
Managers should make decisions that enhance trustworthiness, respect,
responsibility, fairness and caring with all stakeholders in the long term.
4. Discretionary responsibility. This refers to generous, good-hearted

actions that offer no remuneration and are unexpected. These actions are
not mandated by economics, law or ethics. Examples of discretionary
responsibility include making contributions to charitable organisations,
providing benefits to employees and improving quality of life in the
workplace, and using resources to operate a programme to address
social problems like poverty, unemployment and HIV and AIDS.
There is also another approach to corporate social responsibility, referred to

as the triple bottom line: organisations should be (1) economically
responsible (sustainable in economic terms), (2) socially responsible (do no
harm to the community with their decisions and behaviour) and (3) use the
physical environment in such a way that future generations will experience
the same benefits as they experience now.
4.8 SUMMARY
Ethical behaviour is defined as the right and wrong of performing activities

in an organisation. The four main forces that influence ethical behaviour are a
manager’s individual perspective, societal norms and culture, laws and
regulations, and organisational practices and culture. Different approaches
are followed by different managers and influence how they will make
decisions regarding ethical issues. Making these ethical decisions is to the
advantage of the organisation for several reasons.
Organisations operate in a social environment where they have a

responsibility to a range of stakeholders, including the wider community.
Corporate social responsibility refers to the responsibility that modern
organisations have to create a healthy and prosperous society. Part of this
responsibility is protecting the natural environment.
The benefits for an organisation of enhancing its ethical behaviour and

corporate social responsibility cannot be overemphasised.
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CASE STUDY: WHAT IS WRONG WITH THE BODY SHOP? A

CRITICISM OF “GREEN” CONSUMERISM
The Body Shop has successfully manufactured an image of being a caring organisation
that is helping to protect the environment and indigenous peoples, and preventing the
suffering of animals – whilst selling ‘natural’ products. But behind the green and cuddly
image lies the reality – The Body Shop’s operations, like those of all multinationals, have
a detrimental effect on the environment and the world’s poor. They do not help the plight
of animals or indigenous peoples (and may be having a harmful effect), and their
products are far from what they’re cracked up to be. The Body Shop has put itself on a
pedestal in order to exploit people’s idealism.
Organisations like The Body Shop continually hype their products through advertising
and marketing, often creating a demand for something where a real need for it does not
exist. The message pushed is that the route to happiness is through buying more and
more of their products. The increasing domination of multinationals and their
standardised products is leading to global cultural conformity. The world’s problems will
only be tackled by curbing such consumerism – one of the fundamental causes of world
poverty, environmental destruction and social alienation.
Fuelling consumption at the earth’s expense
The Body Shop has over 1 500 stores in 47 countries, and aggressive expansion plans.
Their main purpose (like all multinationals) is making lots of money for their rich
shareholders. In other words, they are driven by power and greed. But The Body Shop
tries to conceal this reality by continually pushing the message that by shopping at their
stores, rather than elsewhere, people will help solve some of the world’s problems. The
truth is that nobody can make the world a better place by shopping.
Twenty per cent of the world’s population consumes 80% of its resources. A high
standard of living for some people means gross social inequalities and poverty around
the world. Also, the mass production, packaging and transportation of huge quantities of
goods is using up the world’s resources faster than they can be renewed and filling the
land, sea and air with dangerous pollution and waste. Those who advocate an ever-
increasing level of consumption, and equate such consumption with personal wellbeing,
economic progress and social fulfillment, are creating a recipe for ecological disaster.
Rejecting consumerism does not mean also rejecting our basic needs, our stylishness,
our real choices or our quality of life. It is about creating a just, stable and sustainable
world, where resources are under the control of local communities and are distributed
equally and sparingly – it’s about improving everyone’s quality of life. Consuming even
more things is an unsatisfying and harmful way to try to be happy and fulfilled. Human
happiness is not related to what people buy, but to who we are and how we relate to
each other. LET’S CONSUME LESS AND LIVE MORE!
Misleading the public
Natural products? – The Body Shop gives the impression that its products are made
from mostly natural ingredients. In fact like all big cosmetic organisations it makes wide
use of non-renewable petrochemicals, synthetic colours, fragrances and preservatives,
and in many of its products it uses only tiny amounts of botanical-based ingredients.
Some experts have warned about the potential adverse effects on the skin of some of
the synthetic ingredients. The Body Shop also regularly irradiates certain products to try
to kill microbes – radiation is generated from dangerous non-renewable uranium which
cannot be disposed of safely.
Helping animals? – Although The Body Shop maintains that it is against animal testing, it
does not always make clear that many of the ingredients in its products have been
tested on animals by other organisations, causing much pain and suffering to those
animals. It accepts ingredients tested on animals before 1991, or those tested since
then (if they were animal-tested for some purpose other than for cosmetics). There
continue to be concerns about the enforcement of its policy. Also, some Body Shop
items contain animal products such as gelatine (crushed bone).
Caring for our bodies? – The cosmetics industry, which includes The Body Shop, tries
to make women – and increasingly now also men – feel inadequate and insecure about
their bodies, and pushes the message that people need ‘beautifying’. Women especially
are often put under pressure to conform to the impossible physical ideals set by money-
oriented industries and the media. Let’s appreciate everyone’s natural beauty and
dignity.
Low pay and against unions
The Body Shop pays its store workers low wages at or near the expected minimum
wage and well below the official European ‘decency threshold’ for pay. The organisation
is opposed to trade unions, ensuring that it keeps labour costs down and that
employees are not able to organise to improve their working conditions. None of its
workers are unionised so employees are forced to channel their grievances and
demands through procedures completely controlled by the organisation. This isolates
workers and denies them collective bargaining power.
Exploiting indigenous people
The Body Shop claims to be helping some third-world workers and indigenous peoples
through so-called ‘Trade Not Aid’ or ‘Community Trade’ projects. In fact, these are
largely a marketing ploy as less than 1% of sales go to ‘Community Trade’ producers,
and it has been shown that some of these products have been sourced from
mainstream commercial markets. One such project, which has been the centrepiece of
the organisation’s marketing strategy for years, is with the Kayapo Indians in Brazil. The
Body Shop has claimed that by harvesting brazil nut oil (used in hair conditioner), the
Indians are able to make sustainable use of the forest thereby preventing its destruction
by mining and logging organisations. But only a small number of the Kayapo are
involved, creating resentment and internal divisions within the community. As The Body
Shop is the sole buyer of the oil, it can set any price it likes. The project does nothing to
safeguard the Indians’ future interests. Furthermore, the organisation has used them
extensively for PR purposes for which they have not been compensated.
Such projects take attention away from the need to oppose the threats to the survival of
indigenous peoples. Rather than encouraging them to be tied into the market economy
controlled by foreign organisations, people should be supporting their freedom to control
their own land and resources and therefore their future.
One recent Body Shop advertisement extolled its commitment to indigenous peoples
and the American Express card (the ultimate symbol of consumerism). At the time
American Express was a major backer of a massive hydroelectric scheme due to flood
vast areas of Cree Indian land in Quebec against Cree opposition.
Censorship
As The Body Shop relies so heavily on its ‘green’, ‘caring’ image, it has threatened or
brought legal action against some of those who have criticised it, trying to stifle
legitimate public discussion. It’s vital to stand up to intimidation and to defend free
speech.
What can you do?
Together we can fight back against the institutions and the people in power who
dominate our lives and our planet. Workers can and do organise together to fight for
their rights and dignity. People are increasingly aware of the need to think seriously
about the products we use, and to consume less. People in poor countries are
organising themselves to stand up to multinationals and banks which dominate the
world’s economy. Environmental and animal rights protests and campaigns are growing
everywhere. Why not join in the struggle for a better world? London Greenpeace calls
on people to create an anarchist society – a society without oppression, exploitation and
hierarchy, based on strong and free communities, the sharing of precious resources
and respect for all life. Talk to friends and family, neighbours and workmates about these
issues.
Source: Adapted from http://oikos-international.org/wp-
content/uploads/2013/10/oikos_Cases_2007_Body_Shop.pdf (accessed on 10
April 2015)
1. Identify the ethical issues in this case study.
2. Write a report on how The Body Shop could be more stakeholder focused than
shareholder focused.
3. Evaluate The Body Shop on the four criteria for CSR.
4. Explain to The Body Shop the advantages of being ethical and socially responsible
in terms of its line of business.
1. Think of ways that an organisation can be socially responsible towards its employees.
Programmes like on-site baby care centres, sponsored day camps, services for the
elderly, etc.
2. Organisations communicate their ethical principles in a variety of ways: through the

behaviour of their leaders, in writing, by offering training programmes, through performance
assessment methods. Choose an organisation and suggest five ways in which it could
improve its way of communicating its ethical principles.
3. Research Old Mutual’s code of ethics and write a short paper listing or describing its code.
How much of it relates specifically to the organisation’s business or industry? How much is
related to basic human morality?
4. Find all the South African banks’ CSR policies and compare them. Determine how each
bank’s CSR programme is aimed at the stakeholders involved.
5. Develop an elementary ethics game. The game can take any format (board game, quiz
game, video game).
6. Identify major social responsibility issues currently in the news.
7. Go to the website of Starbucks at http://www.starbucks.com/aboutus/csr.asp. Answer the

following questions: (a) Which areas do Starbucks target as important parts of its social
responsibility? (b) Why do you think the organisation has chosen these areas? (c) How do
these differ from other coffee restaurant chains?
8. One way that organisations can contribute to the community is by encouraging employees
to participate in community activities. Pick n Pay is an example of an organisation that
takes this approach. Investigate the specific types of community activities that Pick n Pay
supports. Does the organisation’s approach to corporate social responsibility represent a
sincere concern about its role in society or are the motives behind the activities primarily
commercial? Evaluate Pick n Pay’s CSR programme based on the four criteria of CSR.
5 Planning
KOBUS LAZENBY
Learning outcomes
Understand the importance of planning.

Understand the planning process.
Identify the importance of goals and the specifications for goal setting.
Explain some important contemporary factors and issues in planning.
Realise the importance of time management and its role in planning.
5.1 INTRODUCTION
In Chapter 1, planning was introduced as one of the basic management tasks

that must be performed by all managers on all levels and is an integral part of
all management tasks. It is a central management task because as the saying
goes “failing to plan, is planning to fail”. It is important that the organisation
develop certain goals that it wants to achieve in order to take the
organisation a step further. This means that managers should develop a plan
(strategy) for achieving these goals. The essence of planning involves
managers deciding on a plan of action in order to achieve certain goals of the
organisation. It is impossible to imagine that there are still managers who do
not realise the importance of planning.
5.1.1 What is planning?

The process of planning involves defining what the organisation wants to
achieve in the near future. This is known as the organisation’s goals. Once
these goals are known, it is important to establish an overall strategy (plan)
for achieving these goals. This involves a comprehensive set of plans to
integrate and coordinate the organisational work. What is planning then? In
short, planning can be defined as the consideration and visualisation of what
the organisation or departments in the organisation should achieve within a
particular time span as well as the development of a plan (or set of plans) to
achieve these goals. As already stated, planning is concerned with both the
ends (what must be done) and the means (how it must be done).
Another important issue about planning is whether planning should be formal

or informal. In some cases it can be informal. If you plan your day, you do not
always write it down and do not share it with others. So with informal
planning, nothing is put in writing and there is little or no sharing of goals
with others in the organisation. This is more likely to happen in some smaller
organisations where the entrepreneur or business owner may have a clear
idea of where he or she wants to take the business in the future, but it is not
written down and not always shared with the other employees. In formal
planning, on the other hand, the specific goals covering a specific time
period are defined and written down. All organisational members are aware
of what the goals are that the organisation wants to achieve. To answer the
question of whether planning should be formal or informal is difficult.
Formal planning has the advantage that the goals are written down and it is
shared with others; however, if the plan is not realised, then more people
will be aware of the failure. In this chapter, planning will be discussed as a
formal process.
Formal planning involves three different phases. Without going into the
details of the phases, reference is made to the activities involved. In formal
planning, it is important that the organisation
1. consider the internal environment of the organisation and align it with the
opportunities and threats from the external environment
2. develop goals (long term) and objectives (short term) in each area of the
organisation where performance and results are expected
3. draft a feasible plan of action that indicates the activities, resources,
policies, schedules, procedures and other methods that are necessary to
achieve the stated goals and objectives.
Planning is a therefore a thought as well as an action process. The thought

process reflects on what should happen, while the action process implements
the plans made during the thought process. It is also clear that planning is
directed towards the future. What must be done in the future to achieve the
goals? It is also clear that planning constitutes a systematic procedure. Lastly,
the development of goals and objectives, as an inherent and fundamental part
of the whole planning process, requires information about important
variables that may possibly have an influence on the functioning of the
organisation. The gathering of such information enables management to bring
about changes to plans if there is a drastic change in the environment (see
Figure 5.1).
Figure 5.1 Relationship between the past, present and future in planning
5.2 WHY DO MANAGERS PLAN?
Managers may ask why they should plan. Obviously this is a relevant
question. If there is no substantive reason for planning, why should they go
through the effort of formal planning? Is gut feeling not enough? Is experience
not enough to base decisions on? Yes, in some instances it may be enough,
but in the long term it will not.
Perhaps the most important reason to plan is to take the organisation to a

higher level and to obtain a competitive advantage. Competitive advantage
is achieved when the organisation has, or does, something better that its
competitors. To achieve this position is one thing, but it has to be sustained.
This once again underlines the importance of planning. There are four
reasons why planning is an important management task:
1. Planning gives direction. It does this by establishing coordinated efforts

in the organisation. Planning provides the map of where the organisation
is going. Every employee knows that his or her efforts will contribute to
achieving the goals and objectives.
2. Planning reduces the impact of uncertainty. Circumstances sometimes

indicate that an organisation must move in a new direction. When such
changes are anticipated, uncertainty and resistance from employees are
lessened.
3. Planning minimises lost time, wasted resources and redundancy.

Clear objectives are determined with clear action plans so employees
know exactly what to do and when to do it.
4. Planning is necessary for control. It sets the standards against which

real performance is evaluated so that adjustments can be made if
required.
5.2.1 Planning and performance

Organisations operate in an unstable, dynamic and continuously changing
environment. Decisions that managers make today will have specific
consequences for the future.
Various factors influence the relationship between planning and performance.

The question can thus be asked whether it is worthwhile spending hours and
hours on planning when organisations operate in changing environments. Is
planning worthwhile? This is a relevant question because so many managers
feel that they are not going to waste any time on planning. In Management in
action 5.1, a number of good reasons are presented for planning.
Studies have been done to determine whether there is any relationship

between planning and performance. If there was no relationship, it would
strengthen the question of whether planning is a worthwhile exercise. These
studies however show that formal planning is associated with higher profits
and other positive financial results. It makes financial sense to plan.
Obviously the quality of the planning process and the appropriate and
effective implementation of the plans play an important role in their success.
Environmental issues also affect the outcome, as it was found that the
relationship between planning and performance is influenced by such issues.
If there is an unforeseen increase in the interest rate, for example, an
organisation with a lot of long-term debt will be negatively influenced. An
unexpected political decision could also harm an organisation. It can thus be
argued that such occurences can sometimes nullify the best possible plan.
5.2.2 Dysfunctional aspects of planning

The reasons given for planning can also be seen as advantages or functional
aspects of planning. There are however some points of criticism against
planning. According to some people, the following arguments can be used
against planning. These arguments can also be regarded as so-called
dysfunctional aspects of planning.
One of the most pertinent criticisms directed at formal planning is that it may
create rigidity in organisational decisions and actions. The argument is that
planning creates specific goals and specific time periods in which things
must happen. The most important points of criticism are that
plans cannot be developed for a dynamic environment

formal plans cannot replace intuition and creativity
planning focuses managers’ attention on today’s competition, not on
tomorrow’s survival
formal planning reinforces success and this success groove may ultimately
lead to failure.
When organisations are successful, they think that things that worked in the
past will continue to work in the future. So the thinking is that it is not
necessary to plan.
It is also important to note that organisations need a couple of years of

systematic formal planning before the trend of improved performance is
noticed. However, given the positive reasons for and advantages of planning,
it seems that it makes sense for organisations to engage in planning.
However, it is clear from Management in action 5.1 that the positives far
outweigh the negatives.

Why planning is important
Increases efficiency. Planning makes optimum utilisation of all available resources. It

helps to reduce wastage and avoids duplication. It aims to give the highest returns at
the lowest possible cost.
Reduces business-related risks. Planning helps to forecast business-related risks
and thus take the necessary precautions to avoid them.
Facilitates proper coordination. The plans of all the departments of an organisation
must be well coordinated. Similarly, the short-term, medium-term and long-term
plans of an organisation must be coordinated with each other. Such proper
coordination is possible only with efficient planning.
Assists with organising. Organising means bringing together all available resources.
Organising cannot be done without planning, because planning tells us how many
resources are required, when they are required.
Gives direction. Direction means giving correct information, accurate instructions
and the right guidance to subordinates. Direction cannot be done without planning,
because planning tells us what to do, how to do it and when to do it.
Keeps good control. With control, the actual performance of an employee is
compared with the plans, and deviations (if any) are found and corrected. It is
impossible to achieve control without planning.
Helps to achieve objectives. Every organisation has goals, objectives or targets that
it works hard to fulfil. Planning helps to achieve these objectives more quickly and
easily.
Motivates personnel. A good plan provides various financial and non-financial
incentives to both managers and employees. These incentives motivate them to
work hard and achieve the objectives of the organisation.
Encourages creativity and innovation. Planning encourages managers to express
and/or use their creativity and innovation. This brings satisfaction to the managers
and success to the organisation.
Helps in decision-making. A manager can make a decision based on his plans.
Source: Adapted from http://kalyan-city.blogspot.com/2012/02/importance-of-planning-

why-planning-is.html (accessed on 1 October 2014)
5.3 HOW DO MANAGERS PLAN?
Planning establishes the basis for all the other functions of the manager
because, without plans, there would be nothing to organise, lead or control.
Therefore proceeding to the planning process will be a logical next step.
Although one could explain the strategic planning process here, that is,
determining the direction (vision and mission), doing environmental analysis,
developing strategic goals and strategies and then implementing these
strategies, the purpose here is to explain the planning process in general
terms that are applicable to all organisational levels.
Planning can be divided into the following practical steps, irrespective of the
level of management and the complexity of the situation:
Identify the purpose of planning.

Establish goals.
Develop commitment.
Develop alternative plans.
Evaluate the different plans and choose the best alternative.
Implement the plan.
Control and evaluate the results of the plan.
5.3.1 Identify the purpose of planning
The organisation must know what it wants to achieve with its planning, for
example increase organisational performance or improve competitive
advantage. The first step in the planning process is thus to make a realistic
diagnosis of why planning is necessary. This requires that the organisation
understand its capabilities, future opportunities and challenges, and what the
end result will be if it makes use of these opportunities.
It is also important to anticipate what is going to happen in the external and

internal environments of the organisation and plan accordingly. There must
be agreement on both these expectations and the purpose of planning to
ensure that all levels of management plan according to the same end result.
5.3.2 Establish goals

Once the organisation is clear about the problem or purpose, it must
determine the goals. Goal-setting gives direction to the organisation because
it gives the organisation something to work towards. Goals are the desired
outcomes for individuals, groups or an entire organisation (see Management
in action 5.2).

Custom-made for success
Setting high but realistic goals and staying hungry is what entrepreneurs need to
achieve success. This is according to Bertus Coetzee, managing director of Dolphin
Bay, a company that manufactures wood preservatives for the agriculture and
construction industries. Dolphin Bay started off with just a small industrial building, five
employees and second-hand salvaged industrial chemical equipment. The company
now boasts two fully operational factories and is a major supplier of timber
preservatives in South Africa. It has grown substantially since Coetzee took over the
reins in 2009 from his father Flip Coetzee, who founded the company.
The business started off extremely small, 100% financed by his father, Flip Coetzee. He
was keen to own, rather than rent, his factories. He bought an industrial property with a
small industrial building. Initially the company produced in small quantities. Profits were
reinvested and more money – from finance as well as personal capital – was invested
until the company grew to the point where it became self-sustaining, and its profits
could finance its growth.
Dolphin Bay supplies a product, and revenue comes from sales of this product. The
company provides a custom-made service at no extra cost. The business is based on a
few principles, which have made a large contribution to its achievements. Here are
some of the secrets for success:
Be innovative in meeting clients’ needs.

Hire the right people.
Maintain integrity.
Track industry trends.
Form strategic partnerships.
Turn challenges into opportunities.
Dolphin Bay caters to clients’ very specific needs, and structures its business to
respond to them. Coetzee’s advice for young, aspiring entrepreneurs is
don’t spend it – invest it. The younger generation is too eager to achieve a certain
lifestyle, instead of ploughing money back into new business development and
getting a return on their investment;
be realistic and don’t be greedy. Greed puts you in a position where you stand to lose
it all;
stay away from debt if possible.
The lessons he would like to share with fellow-entrepreneurs are
stay hungry – always be on the lookout to improve, and don’t stay satisfied with
current service levels. Challenge yourself and your staff and set high, but realistic,
standards;
set goals – break these into smaller goalposts, so you don’t get discouraged. Rather
set smaller, more frequent goals which are achievable;
always ensure you lead by example.
Source: Adapted from http://www.fin24.com/Entrepreneurs/Profiles/Custom-made-for-

success-20130805 (accessed on 19 August 2014)
A goal is defined as a future desirable state of an organisation and is

usually long-term oriented. This does not mean that short-term goals or
objectives are not relevant in the planning process. In terms of planning, the
first step in goal-setting is to determine what the organisation wants to
achieve in the long term. This means that a certain future outcome is stated
and everything is being done to achieve it. To achieve the long-term goal, a
number of short-term goals or objectives are determined to achieve the long-
term goals. Goals state the general targets the organisation wants to
accomplish, for example to increase the revenue of the organisation, while
objectives state what is to be accomplished in specific and measurable
terms, for example to increase the net profit of the organisation by 5%.
Goals are called the foundation of planning, because they provide the
direction for all management decisions and form the criterion against which
actual work accomplishments are measured. One of the most important things
when determining goals is the follow-up and achievement of goals. A goal is
no more than just words on a piece of paper if there is not a person identified
to be accountable for achieving those goals.
One way to describe goals is in terms of whether they are real or stated.
Stated goals are official statements of what an organisation says, and what it
wants its various stakeholders to believe, its goals are. An example of a
stated goal is the mission statement of an organisation. Real goals are those
goals that an organisation actually pursues, as defined and visible by the
actions of its members. A real goal can be to improve the profitability of the
organisation by 5% in the next financial year.
5.3.2.1 Approaches to establishing goals

Goals can be established by traditional goal setting or by management by
objectives. Traditional goal setting is an approach in which goals are set at
the top organisational level and then broken down into sub-goals for each
lower management level, where individual managers define the goals,
applying their own interpretations and biases as they translate them into more
specific objectives for their departments. Figure 5.2 presents an example of
the goal hierarchy in an organisation.
Management by objectives (MBO) is a management system in which

specific performance goals are jointly determined by employees and their
managers. The progress toward accomplishing those goals is periodically
reviewed, and rewards are allocated on the basis of this progress. An
important requirement with regard to MBO is that employees and
management must be committed and management must have a follow-through
approach. The steps in the MBO programme also highlight the essential
features of it:
Identify the employee’s tasks and job.

Establish challenging objectives for each task.
The employee must participate in this process.
Prioritise these objectives.
Build in a feedback mechanism to assess the progress toward achieving
the objectives.
Link rewards to achieving the objectives.
Figure 5.2 Hierarchy of goals

5.3.2.2 Criteria for goals and objectives
An important requirement in terms of goal-setting is the well-known SMART
principle. Goals and objectives must be specific, measurable, achievable
(acceptable), and realistic and there must be a timeframe for them. These are
known as the so-called “must” criteria. See Management in action 5.3 for
good examples of goals.

Examples of SMART organisational goals
1. Reduce overall operational costs by 10% by 20XX.
2. Increase market share by 5% by 20XX.
3. Increase revenue by 20% by 20XX.
4. Increase customer satisfaction by 5 pts by 20XX.
The SMART principle can be described as follows:
• Specific. Goals and objectives must be specific and should indicate clearly
what they are related to. In this sense they should refer to a single end
result. This will help to avoid any confusion, because only one thing
should be achieved. When looking at the first goal in the examples given in
Management in action 5.3, it is clear that operational costs must be
reduced – nothing more and nothing less. The goal is also specific with
regard to the percentage mentioned. There is no doubt that operational
costs must be reduced by 10%.
• Measurable. Goals and objectives must be measurable. They should

therefore be stated in a way that they can be evaluated or quantified
objectively. “To minimise operational costs” is not a measurable goal – it
is too general. If operational costs were then reduced by a mere 1%, the
goal would have been achieved. Stating “by 10%” is specific and the
progress towards achieving this goal can be measured.
• Achievable (acceptable). Goals and objectives should be achievable.
They must however still provide a challenge to management and the
employees, but they should be able to achieve them. They must have a
motivating effect on the employees. Goals must therefore be set “high”
enough so that they will present a challenge for managers and employees,
but they must still be within reach and not be demotivating. Therefore it is
important that a participatory process of setting goals is followed in order
to ensure that goals are experienced as a challenge and are motivational by
nature.
If the goal was “to reduce costs by 20%”, it could prove to be too difficult
to attain and employees would become demotivated. Using a participatory
process of setting goals, i.e. getting input from employees, will ensure that
employees accept an objective and commit to achieving it. If an objective
is achievable, it motivates people because it is not so high that it is
frustrating, but it is a challenge to strive for. To decrease the costs by 10%
is achievable and acceptable.
• Realistic. Goals and objectives should be realistic. This requirement is

linked to achievability, because an unrealistic goal will not be achievable.
• Time. A specific target date should be determined for accomplishing the

goal. When employees have a deadline, they work harder to get the task
done by the set time. If employees are simply told to complete a task when
they can, they will procrastinate. People have a tendency to postpone
anything that does not have a due date and will fill their time with anything
else, except the task that has to be achieved. In this example employees
know that the cost reduction of 10% must be achieved by 20XX.
There are also other criteria that can be applied for goal-setting. One
important requirement is that goals and objectives should be
congruent with one another. The attainment of one objective should not
eliminate the possibility of achieving another. For example, if the
marketing department has an objective to sell 1000 units of a product, the
production department should not have an objective to decrease the
production of the units from 1000 to 800. This will lead to friction and
conflict.
flexible. Organisations do not operate in static markets and fixed
environmental circumstances. The external environment constantly changes
and the organisation’s goals must be able to adapt.
5.3.2.3 Types of goals

Goals are usually formulated in each different business function, for example
the marketing function determines the marketing goals and objectives, the
financial department determines the financial goals and objectives, and so
on.
Top management are responsible for determining the strategic goals for the
organisation as a whole in terms of the following:
Profitability. An organisation wants to survive over the long term and this
will depend on its ability to generate sustainable profits.
Productivity. An organisation must constantly strive to use scarce
resources more efficiently and so improve productivity.
Market share. An organisation needs to increase market share by
positioning itself better relative to other organisations and interest groups
in the industry.
Human resources. An organisation must develop its employees.
Improving their competency levels has a positive effect on productivity
and creates a healthier work relationship and culture.
Technology. An organisation must make sure that it keeps up with relevant
technological advances if it wants to increase its market share and
improve its competitive position.
Social responsibility. Organisations do not exist in a vacuum. They depend
on inputs from the environment to produce outputs. In South Africa, the
King III report on corporate governance requires organisations to be
socially, environmentally and economically responsible.
5.3.3 Develop commitment

Everyone in an organisation must be committed to the planning process and
to achieving the goals once they are set. It does not help to set the goals for
the organisation if managers and employees are not committed to achieving
them. Although one can argue that this is not really a step that contributes to
better planning, it is nevertheless an important step in the planning process.
This step, which entails of inspiring commitment, has a strong link to the
management functions of leadership and motivation. If managers do not lead
and motivate employees to get their commitment to really accomplish the
goals and objectives, they will not work harder to achieve the goals.
To get commitment and buy-in from the employees to really achieve the
goals, they need to understand the necessity of the goals. Only then will
they be determined to achieve them. For example, if they know that the
organisation is experiencing financial challenges, they will understand
why it is necessary to increase the marketing efforts in order to save the
organisation. If they don’t save the organisation, it could cost them their
jobs.
Another approach to getting commitment from employees is allowing
employees to participate in goal-setting. If employees are part of the
process of goal-setting, they will be more committed to accomplishing the
goals.
One approach to really getting commitment is to make some of the goals
public. If some of the organisation’s goals are known to the public,
employees will be more committed to work hard to achieve these goals if
failure to do so will be public knowledge (see Management in action 5.4).

Nampak to invest $10m in Zim business
Nampak, Africa’s biggest packing firm, will invest $10m in the next 12 months to expand
its Zimbabwean business after consolidating the operations under one company, the
local chief executive said on Thursday.
Nampak consolidated its shares in three Zimbabwean packaging firms, Hunyani

Holdings, MegaPak and Carnaud Metalbox under a new company, Nampak Zimbabwe
Ltd, in which it will own 51.43%. John van Gend, Nampak Zimbabwe chief executive,
said the government two weeks ago approved the company’s plan to comply with
Zimbabwe’s black economic empowerment laws that require foreign firms to sell at
least 51% shares to blacks.
Van Gend told Reuters after a shareholders meeting: “We are looking at (investing)
$10m in the next 12 months for projects that we want to be involved in.”
Source: Adapted from http://www.fin24.com/Companies/Industrial/Nampak-to-invest-
10m-in-Zim-business-20140821 (accessed on 21 August 2014)
5.3.4 Develop alternative plans

The organisation is now ready to develop a selection of alternative plans for
achieving the goals and objectives that have been identified. This is done by
considering the questions who, what, where, when and how. Programming
will provide the answers to who, what and where, scheduling will answer
the when and budgeting will answer the how, that is, what resources will be
required to implement the plan. The budget will indicate whether the plan is
feasible in financial terms and it ensures that resources are available to
achieve the stated objectives and goals. In operational planning specifically,
these questions are very important. This is the level where things must start
to happen. Plans are described by their breadth, time frame, specificity and
frequency of use.
There is a general relationship between a manager’s level in the organisation

and the type of planning done. The different levels of planning will now be
discussed, but it is important to remember that different alternative plans can
be developed at the different management levels.
Strategic plans are applicable to the entire organisation. They establish

the organisation’s overall goals, and their main purpose is to optimally
position the organisation in terms of its environment. Strategic plans are
the responsibility of top management. They are designed to meet the
organisation’s broad goals and objectives in line with the business’s
vision and mission. A plan can, for example, be designed to increase
market share, as a result of the strategic long-term goal of increasing
market share by 5% by the year 20XX. This can be achieved by
developing a plan to open new branches of the organisation in new
geographical areas. Another option is to increase the marketing budget and
spend more on branding. Strategic plans have an extended time frame,
usually three to five years. Obviously the time frame issue is debatable. In
some industries, like information technology, long term can refer to six
months or even shorter. The point is however that strategic plans have a
longer-term focus than tactical and operational plans. It is also obvious
that environmental uncertainty is high in the long term and that is why plans
should be specific but flexible. Managers must be prepared to rework and
amend plans as they are implemented.
Tactical plans are designed by middle management. They have a specific
focus within a functional area of the business, i.e. they define what
departments and major subunits must do to implement the strategic plan.
The environment for tactical planning is more stable and the time frame is
shorter than for strategic planning. The research and development
department could develop, for example, a tactical plan to conduct market
research on the best possible areas to open a new branch. The marketing
department could develop tactical plans on how to increase the sales of
their products, because that will also help to increase market share.
Operational plans describe the actual “doing” part, i.e. the day-to-day
activities that need to take place to achieve the organisational goals. They
tend to cover short periods and are the responsibility of first-line
managers. The short-term objective to help sell more products (to help
achieve the overall goal of increasing market share) is, for example, to
process 150 sales applications each day. The supervisors, first-line
managers and employees must now develop an operational plan that
specifically states how to process the 150 sales applications per day. A
plan to reduce overtime in the next month is also an example of a short-
term (operational) plan.
There is also the so-called single-use plan that is a one-time plan

specifically designed to meet the needs of a unique situation. The opening of
a new branch could be a once-off happening and therefore a single-use plan
could be designed.
Standing plans are ongoing plans that provide guidance for activities
performed repeatedly. Policies, procedures and rules are examples of
standing plans:
A policy is a general guideline, for example the leave policy defines the
boundaries within which to make leave decisions.
A rule defines the specific action to perform, for example there is a rule
not to smoke in the building.
A procedure is also sometimes called a “standard operating procedure”
and describes a precise series of steps to achieve something, for example
the procedure to apply for leave.
5.3.5 Evaluating the various alternative plans

During the previous step, various alternative plans were developed. Now is
the time that they must be evaluated in the light of the assumptions and goals.
One possible plan may appear to increase profitability, but the cost of
machinery replacement may be too high. Evaluating the various alternative
plans can be a difficult task. There are various qualitative and quantitative
techniques available to assist in this regard but these are beyond the scope of
this book.
Once evaluation has been done, the manager must select that alternative that
will best achieve the stated goals and objectives.
5.3.6 Implementation of the plan

The above steps demonstrate the thought process. Once the different plans
have been evaluated, the best alternative must be selected and implemented.
The implementation of the plan demonstrates the action process. The other
management tasks now take over from planning. The work must be organised
and the employees must be rallied through leadership, motivation and
communication to work the plan. This is the most important step, because a
plan means nothing if it is not implemented.
5.3.7 Control and evaluating the results of the plan
The implementation of the plan and the results achieved must be monitored
continuously and corrective action should be taken if something is not right. If
the plans do not achieve the desired results, the managers must have a look at
the plans and perhaps revise some of the plans (strategic, tactical and/or
operational) to achieve the desired results. Control will be discussed in
more detail in Chapter 13.
5.4 IMPORTANT FACTORS IN PLANNING
Effective and efficient planning in a dynamic environment means developing

plans that are specific but flexible, and being able to change direction if
environmental conditions necessitate it. Below are some of the contemporary
issues and factors that managers must consider during planning.
5.4.1 Significance
The purpose or reason for an organisation’s existence is to survive and grow
in its specific industry. Plans are essential to guide the entire organisation to
accomplish its vision (future state). The significance of planning can never
be underestimated in an organisation. Planning takes owners and managers
through the process of determining exactly what needs to be done to
accomplish the organisation’s goals and objectives.
5.4.2 Increasing demand

As was discussed in Chapter 3, organisations face a good deal of uncertainty
related to macro-environmental factors, in particular the shifting economic
and sociopolitical conditions around the world and the growing population.
Predicting the demand patterns of customers becomes more challenging in the
face of such economic uncertainty. This affects growth and expansion plans.
Proper planning is more important for organisations than ever before to
ensure meeting the increasing, ever-changing demand.
5.4.3 Technology
Over the past few years, new technology has been a game changer in
organisations and this trend is likely to accelerate in the future. The game
played yesterday looks totally different from the one that organisations have
to play today. This is true in all aspects of the organisation – operations,
marketing, finance, human resources, etc.
New technological developments can make an established industry or

organisation obsolete almost overnight. Contemporary organisations must
plan to stay ahead of the technology curve. It is important that organisations
have a standing plan to adapt in time to changes in technology that will affect
their organisations. Good owners and managers of organisations keep abreast
of new developments in technology, because they know that technology can
give an organisation a competitive edge over its competitors or a
disadvantage if they struggle to adapt to new customer preferences.
5.4.4 Legal issues

The legal landscape has been in a state of flux since the turn of the century, as
a result of new tax laws, new consumer protection legislation, new credit
laws and new labour laws. These are just a few of the issues that modern
organisations have to cope with and make allowances for in their operations.
Organisations that do thorough environmental scanning and plan early for
changes in the legal environment may be in a better position to benefit from
any changes.
5.4.5 Financing
The shifting economic and sociopolitical conditions around the world make
financing, whether in the form of debt or investment, harder to come by than
it was in the late 20th century. Today owners and managers of organisations
must place a greater emphasis on planning for obtaining financing. They have
to plan thoroughly to appeal to lenders and investors. Financial planning in
general is thus an important issue for an organisation to survive in a turbulent
economic environment.
5.4.6 Marketing
An important factor and issue in today’s organisational world is the
importance of marketing. The marketing issues of yesteryear are no longer
important today. Today’s marketers must make innovation and true creativity
the order of the day. Customers’ tastes and preferences are changing at an
enormous rate and managers and owners of organisations must plan for these
changes, as well as predict the future strength of existing and emerging
industries and products. Being on the cutting edge of a new marketing
technology or methodology can help the organisation to stand out in the eyes
of potential customers, as well as potential investors in the organisation.
5.5 TIME MANAGEMENT
One of the most important resources to deal with in management in general,

is time. The saying “time is money” is very pertinent to the organisation’s
day-to-day activities. Time is perhaps one of the most important aspects of
competitive advantage. A quick response from an organisation in terms of the
delivery of products and services can create a competitive advantage as a
result of customers that value this quality in a service or product.
Managers experience many demands on their time and have many

responsibilities. Good personal time management is essential if goals and
objectives are to be achieved – managers need to get more done in less time
with better results. It is important that managers do some personal planning.
When one evaluates the schedule of managers, and especially top managers,
it is clear that there are far more demands on their time than they actually
have time available. For example, meetings, phone calls, paper work, trips,
etc. actually swallow all their available time. Why is it important to discuss
this issue? The answer is clear, if managers are not successful in time
management, they will experience difficulty in achieving the goals and
objectives of the organisation.
The important issue is then to determine how well managers use their time. It
is important to remember that time is actually a scarce and unique resource.
If time is wasted, it can never be replaced. Although people sometimes talk
about methods and approaches that will save time, time cannot be saved.
What actually happens is that one can do a piece of work in a shorter time. It
is also important that managers identify their discretionary time and use it
effectively and efficiently. Discretionary time is that time available to
manage and does not include time spent responding to demands and problems
from customers and/or employees.
What is time management then? It refers to the techniques that a manager

can apply to get more done in less time with better results. One technique that
a manager can apply is keeping a daily diary or journal of his or her
activities to enable him or her to track the time spent on them. Doing it for a
week or two will give a good indication of what activities are the time
absorbers.
In this analysis of activities it is important to identify the importance and

urgency of activities and the time spent on them. Table 5.1 provides a
guideline on how to rate activities in terms of their urgency and importance,
and prioritise them accordingly. This will help the manager to use his or her
time more effectively. Obviously if an activity is rated very urgent and very
important, for example, it must be done immediately. Sometimes managers
keep themselves busy with very important issues, but which are not urgent.
Although these activities must be done, they can happen at a later stage.
Proper time management will help with prioritising activities according to
their importance and urgency.
Table 5.1 Importance and urgency of activities
Importance Urgency
Very important – activity must be done Very urgent – must happen

now
Important – activity should be done
Urgent – should happen now
Not so important – activity may be done because it
may be useful Not so urgent – can be done
later
Not important – activity will not help to accomplish
anything Not urgent – time is really not
a factor
The following process should be applied for good time management:
Be clear about the objectives that must be achieved.

Rank the objectives in terms of importance and urgency (Table 5.1).
List the activities that are necessary to achieve these objectives.
Assign priorities to the activities in terms of their importance and urgency.
Schedule the activities that must be done according to the priorities
determined in the previous step.
By following this process, managers may be successful in applying the 80–20

principle. They can produce 80% of their results in 20% of their time. It is
obvious that time management is an important issue in organisations and
managers must learn how to manage their time efficiently and effectively.
Disruptions must be minimised and this means that managers must try to
insulate themselves from interruptions and use their time effectively.
5.6 SUMMARY
Although planning is the fundamental management function, managers are

sometimes reluctant to plan. The reason for this may be a lack of knowledge
about the importance of planning. It is important that managers realise why
planning is important for any organisation that is serious about improving
competitive position in the marketplace. Planning is a systematic procedure
and therefore the steps in the planning process are helpful. During the
planning significance of planning and that it must help the organisation to
meet the increasing demands of customers and to stay on the leading edge of
technology.
The only resource that is equally distributed and available to all managers is
time. All managers have 24 hours per day in which to do their job. That is
why effective and efficient time management is paramount for any manager.
The identification and prioritisation of important and urgent tasks will help a
manager to get more things done in a shorter time.
Akrani, F. Importance of planning – Why planning is important? http://kalyan-

city.blogspot.com/2012/02/importance-of-planning-why-planning-is.html (accessed on 1 October
2014).
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20130805 (assessed on 19 August 2014).
ed. Boston: McGraw Hill.
Hedley, N. City Lodge to expand in East Africa.

http://www.bdlive.co.za/business/transport/2014/08/18/city-lodge-to-expand-in-east-africa (accessed
on 19 August 2014).
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planning-organization-1137.html (accessed on 2 October 2014).
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issues-planning-business-2547.html (accessed on 27 August 2014).
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10m-in-Zim-business-20140821 (accessed on 21 August 2014).
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http://www.yourarticlelibrary.com/planning/what-is-the-importance-of-planning-in-management/903/
(accessed on 1 October 2014).
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Smit, P.J. & Cronjé, G.J. de J. 1997. Management principles: a contemporary edition for Africa,
Stack, L.M. The importance of planning and prioritizing.

http://www.theproductivitypro.com/FeaturedArticles/article00017.htm (accessed on 1 October 2014).
CASE STUDY: CITY LODGE HOTELS
Through the vision of the City Lodge Hotel Group founder, Swiss-born Mr Hans Enderle,
and the financial backing of the Mine Pension Funds, City Lodge Randburg became the
catalyst for what today is one of South Africa’s large hotel chains. From the beginning,
emphasis was placed on quality accommodation, homely ambience and friendly
service. The City Lodge Hotel group was incorporated in July 1986 and has since
substantially grown and diversified its product offering to meet different travellers’ needs.
Since its inception in 1985, City Lodge Hotel Group has grown from a small industry
challenger to a classic South African brand. Wherever you go in the country you see
their iconic tree logo emblazoned on one of their 53 City Lodge, Town Lodge, Road
Lodge or Courtyard hotels. No matter which hotel group is chosen by travellers for their
stay in cities throughout South Africa, the City Lodge Family of Hotels provide great
value for money while enjoying central locations in South Africa’s major cities. City
Lodge invented the concept of ‘selected services’ hotels in South Africa – value-for-
money accommodation you can trust. The individual hotels provide leisure, family and
business travellers with comfortable accommodation and hotel services such as
transfers, concierge, room service, housekeeping and others.
They place emphasis on providing quality accommodation, friendly service and a

homely ambience – core reasons why guests choose City Lodge hotels. Commitment
to service excellence from highly motivated and dedicated staff is a common thread
throughout the group´s hotels, which have developed a loyal base of regular guests over
the years and an ever-growing number of new guests.
In 1990, the second-tier Town Lodge concept was started and has proved highly
popular. On 18 November 1992, the group successfully listed on the Johannesburg
Stock Exchange. In 1995, the City Lodge Hotel Group in South Africa acquired a 50%
interest in the companies associated with the upmarket Courtyard Suite Hotel chain and
also opened its first Road Lodge, which is a concept targeted mainly at budget
conscious travellers.
With 6 Courtyard Hotels (451 suites), 11 City Lodge Hotels (1 797 rooms), 9 Town
Lodge Hotels (1041 rooms) and 17 Road Lodges (1570 rooms), the City Lodge group
has a total of 4 859 rooms and suites and ranks amongst the 250 largest hotel chains in
the world.
City Lodge Hotels are located in major cities throughout South Africa and offer guests
comfortable rooms. Certain rooms provide facilities for families so that the parents can
share the same room with their young children. Each room at a City Lodge Hotel
provides an en-suite.
Room facilities at City Lodge Hotels:
Spacious air-conditioned room with double bed or twin beds

Television with M-Net and selected DStv channels
Bathroom with bath and separate shower
Tea and coffee-making facilities
Rooms with sleeper-sofa available at selected hotels on request
Electronic safe large enough to accommodate a laptop
Desk with lighting and plugs for easy connectivity
One in fifty rooms is designed to meet the special needs of the physically disabled.
Services provided at City Lodge Hotels, South Africa:
Wireless Internet in restaurant and most rooms

Mini gym
Coffee shops
Boardrooms
Convenient locations, close to major routes
24-hour reception and check-in
Sundowner bar
24-hour vending machines stocked with snacks and cold beverage items
Fax and photocopy services available
Same-day laundry and dry cleaning
Sparkling swimming pool
Complimentary and convenient parking
City Lodge Hotels vision
We will be recognised as the preferred Southern African hotel group. Through dedicated
leadership, teamwork and kindness we will demonstrate our consistent commitment to
delivering caring service with style and grace. We will constantly enhance our guest
experience through our passionate people, ongoing innovation and leading edge
technology. Our integrity, values and ongoing investment in our people and hotels will
provide exceptional returns to stakeholders and ensure continued, sustainable growth.
Through acts of kindness we will make a positive difference to our guests, our
colleagues, our communities and our environment.
City Lodge Hotels credo
Our credo represents the character of City Lodge Hotels. It represents the collective
qualities, mental and moral, that distinguish us in our marketplace. Whilst our hotels are
constructed with bricks and mortar, it is our people, and the relationships that they build
with other people, that provide the real strength that allows us to grow and prosper.
City Lodge Hotels Caring
We care for our country, for the property of our guests, for our company, and for our
environment, with which we have been entrusted by future generations.
But above all, we care for people! To care for people means that we are emotionally
connected, that we feel concern and that we are sincerely interested in people’s well
being and success.
We care for our guests, for one another and for the communities in which we live.
We care about being hospitable, about the safety and well being of our guests whom
we warmly welcome into our ‘homes from home’.
We care for our employees, whose work we value, respect and recognise for its
worth and contribution.
We care for our families and especially for our children who will represent us in the
way they live out their future.
We care for our shareholders, for the hard earned money that they invest in our
company and for the trust that they have placed in us to grow their money wisely.
We care for and respect our suppliers whom we trust to provide us with goods and
services of the highest quality.
Caring comes from the heart – that’s why we are passionate about what we do. That’s
why we are also passionate about serving.
City Lodge Hotels has also set aside R475m to build two new hotels in East Africa, and
is looking for other opportunities to add hotels in capital cities across East and Southern
Africa, the company said on Friday. The company last year opened its 104-room Town
Lodge Gaborone, and it recently bought the 50% it did not already own in two hotels in
Nairobi.
Occupancies in the company’s domestic hotels rose slightly to 63% from 62%,
continuing a gradual trend of improving occupancies after a post-2010 World Cup
hangover in the industry. Vestact portfolio manager Byron Lotter said “the numbers look
good and their expansion plans are quite exciting”. Mr Lotter said City Lodge’s Kenyan
hotels generated far higher profits per room compared with its South African hotels. The
company’s occupancies were historically closer to 80%, and it was “expanding in
tougher times”. He expected City Lodge to reap the benefits of its expansions as
occupancies recovered with a healthy tourism industry, despite competition in the hotel
sector.
City Lodge said in addition to buying the remaining 50% of its Kenyan joint venture, “we
have made significant progress towards growing our presence in East Africa”. The
company had concluded an agreement to buy land in Nairobi for the development of a
170-room City Lodge Hotel at a cost of $23m. It expected construction to start in the first
quarter of 2015 and to open in mid-2016.
It said it had also concluded a long-term land lease to develop a 147-room City Lodge
Hotel in Dar es Salaam, Tanzania, subject to regulatory approval. The development was
expected to cost $22m and was also expected to start in the first quarter of 2015. “We
continue to explore additional opportunities in Nairobi as well as Kampala, Uganda.
Investigations are also continuing into acquiring suitable sites in Maputo, Mozambique;
in Windhoek, Namibia; and Lusaka, Zambia.”
City Lodge is still developing in South Africa, where occupancies are beginning to reach
more attractive levels for both South African and international hotel chains.
Sources: Adapted from http://www.bdlive.co.za/business/transport/2014/08/18/city-
lodge-to-expand-in-east-africa (accessed on 19 August 2014;
http://www.south-african-hotels.com/groups/city-lodge/ (accessed on 1
October 2014); https://clhg.com/company-profile (accessed on 1 October
2014); Hedley, N. City Lodge to expand in East Africa. Available online at
http://www.bdlive.co.za/business/transport/2014/08/18/city-lodge-to-expand-in-
east-africa (accessed on 19 August 2014).
1. Explain why you think City Lodge Hotels are experiencing such success.
2. If you had to formulate some goals for City Lodge Hotels, what would they be?
3. What do you think is the role of the vision of City Lodge Hotels in its expansion plans
in East Africa?
1. Go to the website of any South African organisation and identify some of its planning
challenges.
2. Write a report on how you would explain planning as a management function to a new
entrepreneur.
3. Visit an organisation of your choice. Ask the manager whether it is possible to provide you
with some examples of their strategic, tactical and operational goals to familiarise yourself
with the different levels of goals.
4. Explore the internet and contrast formal with informal planning.
5. Write a report and explain why organisations in South Africa cannot be successful without
proper planning.
6 Decision-making
SALOMIEN BOSHOFF
Learning outcomes
Explain the nature of decision-making.

Identify the different types of decisions made on different management levels.
Evaluate the four types of conditions under which a manager makes decisions.
Explain the three types of decisions a manager can make.
Identify the factors that influence decision-making.
Differentiate between the three decision-making models.
Apply the six steps of the decision-making process.
6.1 INTRODUCTION
People often find it difficult to make decisions. Everyone inevitably has to

make decisions some time or another. Some people try to avoid making
decisions by endlessly searching for more information, or getting other
people to help or offer recommendations. Sometimes a decision is made by
taking a vote, tossing a coin or even closing one’s eyes and jabbing a pen at a
written list.
Regardless of the effort that is put into making a decision, it has to be

accepted that some decisions will not be the best possible choice, and almost
any decision involves some conflict or dissatisfaction. The difficult part is to
pick one solution where the positive outcome outweighs possible losses.
Avoiding making decisions often seems easier. Perhaps this is also a
decision – to avoid making a decision. Yet, making decisions and accepting
the consequences are the only way to stay in control of one’s time, one’s
success and one’s life.
During each stage of all four management functions and on all the
management levels, decision-making is an essential and fundamental
additional management function for managers. Decision-making can be
defined as a process of choosing the best course of action from all the
available alternatives. It can also be defined as an act of choosing between
two or more courses of action. During this cognitive process a manager has
to go through a deliberate process of following some steps to arrive at a
decision. Even if a manager does not go through the different steps of the
decision-making process, he or she is actually taking the decision to do
nothing about the problem. Thus, every decision-making process becomes a
decision even if the manager decides to do nothing. It is also important to
remember that the values and preferences of decision-makers play an
important role in the decision-making process.
Decision-making involves some effort both before and after the actual choice
and action, thus it is not an easy task. Despite the fact that good decision-
making is a vital part of good management in an organisation and is expected
of all managers, studies have shown that most people are not as good as they
think they are at decision-making. The good news is that decision-making is a
skill and skills can usually be acquired and improved. As one gains more
experience in making decisions, and as one becomes more familiar with the
tools and structures needed for effective decision-making, one’s confidence
in making decisions will improve. Watch the video about decision-making
given in Management in action 6.1.

Ellen’s monologue on making decisions
Watch the following YouTube video on decision-making:

http://www.youtube.com/watch?v=BatqV3B9hiU
Discuss the following:

What are some of the most difficult decisions that you have had to make today?
Is it better to have choices, or would you prefer the life of a caveman, where minimal
choices are necessary?
6.2 NATURE OF DECISION-MAKING
Each level of management is responsible for different decisions – from

strategic to operational:
Top-level managers look at and create strategic plans and need to make
strategic decisions. They have to decide on which strategy the
organisation must follow in order to enhance the long-term performance of
the organisation. These decisions will be influenced by the organisation’s
vision, goals and values, and the specific environment in which the
organisation is operating.
Middle managers create tactical plans with specific steps and actions that
need to be executed to meet the strategic objective. Tactical decisions are
medium term and are more changeable than strategic decisions.
The first-line managers are responsible for creating and executing
operational plans. Operational decisions occur on a daily basis, are often
administrative in nature, can be implemented quickly and tend to carry
little risk.
6.3 CONDITIONS AND TYPES OF DECISION-MAKING
Managers cannot control or foresee what is going to happen in the future as a

result of external, internal or personal forces. These forces can influence
decisions in both the present and the future (see Management in action 6.2).

External and internal forces
Whenever we are involved in making decisions, a number of factors can affect the
process we follow and ultimately the decision we make. We can organise the factors
affecting decision-making into three major groups:
Perception. This can vary according to the perceiver, the object and the situation.
Organisational issues. These include policies and procedures, hierarchy and
organisational politics.
Environmental issues. These are the external factors that affect the organisation,
such as the market in which the organisation operates, the economy, government
legislation and customer reaction to the organisation’s products and services.
Managers and employees must make decisions under different circumstances.

Based on the environmental factors that influence the circumstances under
which a manager makes a decision, four conditions can be identified,
namely, certainty, risk, uncertainty and ambiguity. These conditions result in
three types of decisions: routine, adaptive and innovative.
From Table 6.1 it is clear that the conditions under which a person makes a
decision will determine the type of the decision they make. One should ask
three questions and the responses (yes or no) to these questions will
determine under which condition a decision is being taken. The questions
are:
1. Do I know what the problem is?
2. Do I know what the alternative solution to this problem is?
3. Do I know the outcomes of the action I am taking?
Table 6.1 Types of conditions and decisions

Question Certainty Risk Uncertainty Ambiguity
Do I know what the problem is? Yes Yes Yes No
Do I know what the alternative solution Yes Yes No No
to this problem is?
Do I know the outcomes of the action I Yes No No No
am taking?
Type of decision made under this Routine Adaptive Innovative Innovative
condition
The resulting decisions taken under the different conditions will be discussed
next.
6.3.1 Routine decisions

When managers are fully informed about the problem and know the solution
as well as the outcome, they make decisions under a condition of certainty.
However, despite the fact that a manager can have information on operating
conditions, resource costs, constraints and possible problems, few decisions
in organisations are made under conditions of complete certainty.
When situations occur regularly, a manager can take a decision (i.e. choose
the best solution) based on past experience. For example, a manager knows
to reorder inventory when stock gets below a certain level and also how
much will probably be needed. A university has to decide who will receive
a bursary and will follow specific criteria and procedures for allocating the
bursary. These types of decisions are usually routine decisions made daily,
monthly or yearly without too much thought going into them. The problems
have familiar, clear-cut and obvious solutions, and a manager can anticipate
them and plan to prevent or solve them. These days routine decisions are
increasingly being made by computers.
Routine decisions are usually directed by policies, rules and procedures that
have already been put in place:
Policies are a set of guidelines that direct a manager to think in a specific

way.
Rules are a set of clear statements of what a manager must and must not
do.
Procedures are a series of interrelated sequential steps that a manager can
use when responding to a structured problem under certain conditions.
When an employee applies for leave, for example, the manager can make a
routine decision based on the leave policy and the procedures to be
followed. However, managers should be careful not to make a routine
decision when the problem actually needs an adaptive or innovative solution.
6.3.2 Adaptive decisions

Risk is a fairly common decision condition for managers. Under risk
conditions, the manager has access to good information and the alternative
solutions to the problem are known, but the outcome of each alternative is not
clear, owing to external influences. The decision usually needs human
judgement, whereas decisions under other conditions will sometimes be
supported or done by computers.
Under risk conditions, managers make adaptive decisions. An adaptive

decision is a routine decision that needs improvement. This type of decision
is usually made by managers on higher levels and demands conceptual skills
to solve the problem. For example, when Vida e Cafe wants to open a new
outlet, the owners can analyse the potential customer demographics, traffic
potential, supply logistics and competitors close by and the management team
can come up with a reasonably good decision about where to open their new
coffee shop.
6.3.3 Innovative decisions

Managers face uncertainty every day. Many problems have no clear-cut
solution and managers have to rely on their experience, creativity and
intuition to decide what to do. In the case of uncertain conditions, managers
are aware of the goal they want to achieve, but they do not have a lot of
information on all the different alternatives and have to make some
assumptions about the outcome.
Ambiguity is when a manager has to make a decision, but the goal or the
problem has not yet been identified, alternatives to solve the problem have
not yet been defined and information about the outcome of each alternative is
unavailable. Uncertainty and ambiguity are the most difficult conditions
under which decisions have to be made. These unstructured problems need
novel and creative solutions. For example when Andrew Mason founded his
online store, Groupon, he made decisions under uncertain ambiguous
conditions. When the solutions to the problem are ambiguous and unusual,
managers are to make innovative decisions. Innovative decisions are
difficult as they are often made with incomplete and fast-changing
information, and results can be vastly different to what is expected. In order
to obtain a creative solution, managers usually make a stream of decisions
over a period of time.
Management in action 6.3 provides examples of innovative decisions that

were taken with outcomes unknown at great risk because a lot of money was
involved.

The wisdom to take a decision
The ability to make good decisions is arguably the single most important executive skill.
Anything leaders can do to increase their ability to make good decisions will help. Yet
decisions are often the outcome of wisdom, the hardest skill to learn.
In 1993, Lee Kun-Hee, son of the founder of the South Korean group, Samsung, took
over as chairperson. At the time, Samsung’s products were everywhere but uninspiring;
they were copycat products selling at extremely thin margins. Then chairperson Lee
made a decision that would reshape his organisation and create a blueprint for
globalisation. He decided to send some of its brightest young employees overseas.
There they were to immerse themselves in the culture, learn the language and build
networks so that someday Samsung would know how to supply those markets. His
executives opposed this, not only on the grounds of cost – which was close to $100 000
per candidate – but because it meant losing their finest talent for 15 months. This was
significant for any company, especially one that was not particularly successful.
The selected talent first spent three months in “boot camp” training for the assignment.
This was followed by 12 months abroad alone; no family members were allowed to join
them. Park Kwang Moo was one of the first to go on the programme. He spent a year in
the former Soviet Union, “living, eating, and drinking with Russians”, learning how bribes
smoothed the way for everything from airplane tickets to gasoline.
In his 80-page report on the sabbatical, his manager reported: “There is nothing in this
about business. It is only about their drinking and culture. But in 20 years, if this man is
representing Samsung in Moscow, he will have friends and he will be able to
communicate, and then we will get the payoff.” Seventeen years later, Samsung was
the best-selling brand in Russia.
Since 1990, some 4 700 employees have served year-long sabbaticals in 80 nations
across the globe. Samsung is the best-selling brand in France and Ukraine, and the
17th most valuable brand in the world. Lee Kun-Hee’s decision reshaped his
organisation and created its blueprint for globalisation.
The second example is Jack Welsh, who was General Electric’s (GE’s) youngest
chairperson and CEO. The global company was struggling with many underperforming
companies in the group. Welsh made the decision that all GE’s companies would either
be number one or two in their field, or on their way there, or be sold or closed. This led
to the termination of over 100 000 employees, a decision which created outrage from
many quarters.
For decades, GE had operated a training centre near Crotonville, NY. Over time,
Crotonville was used as little more than the venue for delivering technical instruction or
companywide messages.
Managers were being housed in barren quarters, four to a suite and this had the feel of a
roadside motel. Welsh said: “We needed to make our own people and our customers
who came to Crotonville feel that they are working for and dealing with a world-class
company.” He decided to create a world-class internal business university for GE
managers, and spent $50m on it at the same time as he was dismissing 100 000
employees.
James Baughman, a professor from Harvard, was brought in to establish the university.
All attendance at Crotonville was now by invitation only. The executive development
course was so exclusive that nobody could attend without the approval of the head of
human resources, the vice-chairmen and Welch. The lecturers at Crotonville are now
predominantly GE insiders, who themselves were educated in GE’s methods, values
and strategy at Crotonville. They were taught – as they now teach others – openness,
directness, responsiveness and the GE way of doing business.
Today Crotonville is rated the finest corporate university in the world, a model for others
(including that of Apple) and the engine of GE’s success. This was a brilliant business
decision, but it was also a tough decision.
Many of the great decisions in business history were not taken once, they were
decisions that had to be adhered to for a quarter-century and more. Or, put differently,
remade consistently. The wisdom required for decision-making is best learned from
studying the decisions of others. The more one is exposed to decision-making, the
better one becomes at it – and the better an executive.
Source: Mann (2013)

6.4 FACTORS INFLUENCING DECISIONS
Decisions are influenced by a number of factors, such as a manager’s

personal experience and decision-making style, the structure and culture of
the organisation or even some decision-making biases or errors that slip in.
Personal experience influences a managers decision-making behaviour, as
experienced managers make decisions with more openness, diverse
viewpoints and interactions with other, whereas a new manager may start
with more directive, decisive and command-oriented behaviour. It is a
known fact that about 50% of managers rely more on their intuition than on
formal analysis.
Owing to personal decision-making styles, managers do not make decisions

in the same way. Managers should be aware of their personal decision-
making style and how it will affect the employees they work with each day.
Understanding how decision-making styles affect others will help a manager
to make the serious leadership calls that will define him or her as a
successful leader and manager. There are four types of decision-making
styles that will be discussed in more detail in the next section.
Another factor that will influence decision-making is biases. Some common

errors or biases when making decisions are as follows: immediate
gratification, anchoring effect, selective perception, confirmation, framing,
availability, representation, self-serving, hindsight and overconfidence.
A manager’s immediate gratification bias may lead to a decision that can

save costs in the short term or lead to immediate rewards, but in the long
term may be harmful to the organisation.
Managers may make decisions based on the initial information that they
receive about the problem, but they may exercise the anchoring effect
bias if they do not value new information that follows later.
Selective perception bias is when a manager makes a decision based on
his own perception of the problem and alternative solutions. This is one
reason why teamwork is so important, to get a broader view of the
situation.
With confirmation bias, managers tend to look for information that
confirms their past decisions and ignore information that contradicts them.
They accept and value opinions and information that confirm their ideas
and disregard any opposing views.
With framing bias, a manager ignores some aspects and focuses on others
in a specific situation, which may lead to inaccurate reference points.
Availability bias happens when managers rely on recent memory and refer
solely to information that is immediately at hand when making a decision.
Representation bias happens when a manager compares similar events
and then bases the decision on that.
Self-serving bias is when a manager is happy to take the credit when
experiencing success, but refuses to take responsibility for failure, rather
blaming it on outside factors.
Hindsight bias occurs when a manager believes he or she “knew it all
along” once the outcome of a decision becomes clear, thereby
overestimating his or her predictive abilities.
Sometimes a manager starts to believe in his or her opinion so much that
he or she does not carefully examine all possibilities before making a
decision. Being confident is important for a manager to be able to lead a
team, but being overconfident can lead to mistakes.
The structure and culture of an organisation have a strong influence on

decision-making as they influence how and when information is
communicated, and determine who gets involved in which decisions. The
type of organisational design and hierarchy in the organisation influences
how decisions are made.
6.5 DECISION-MAKING STYLES

Strong decision-making requires the ability to assess a situation, determine
the best style of decision-making and apply that style to come to a positive
solution. By consistently using the correct style of decision-making, a
manager will prove to be a valuable asset as a leader in an organisation. The
various individual and group decision-making styles are discussed below.
6.5.1 Individual decision-making styles

Individual decision-making styles have an influence on the way managers
make decisions. Decision-making can be grouped into four main styles,
namely, directive, analytic, conceptual and behavioural. Although no
manager has a style that fits completely into just one category, he or she may
have characteristics that fit, more or less, into one or two styles. Most
managers use a combination of styles, but usually each manager has a
dominant style. Managers with different decision-making styles look at
decisions in somewhat different ways and deal with processing the
information on which the decision is based differently.
6.5.1.1 Directive style

Managers that have this style regard structure as very important. Such
managers take charge of a situation, make quick decisions and expect those
“under” them to carry out those decisions immediately, with no questions
asked. This style is aggressive and expects immediate results. Managers with
this style rely on their own information, knowledge, experience and
judgement, and tend to follow the policies, rules and procedures. They are
also excellent verbal communicators.
On the negative side, with this type of style managers act quickly and often
without all of the facts. They fail to consider other options when addressing a
problem and focus only on short-term results instead of long-term solutions.
6.5.1.2 Analytic style

An analytic decision-maker enjoys solving problems and puzzles. He or she
is innovative and makes use of large sets of data and information to make
decisions. Alternatives are carefully considered and the best course of action
is chosen based on all the information available. He or she is adaptable and
can function well even under unique or challenging situations.
On the negative side, managers with this style of decision-making are slow
and take a lot of time because they want to use direct observation, data and
facts when coming to a decision. They also tend to want to control every
aspect of the process.
6.5.1.3 Conceptual style

Managers with a more conceptual decision-making style prefer to have a
large amount of information available. They tend to look at problems from an
artistic angle and they may ask the people involved for their inputs and base
their decisions not only on the data sets, but also on the people’s opinions.
Conceptual style decision-makers are extremely creative and like to look for
solutions that are outside the box. They are achievement oriented and try to
take a broad view, thinking far into the future when making important
decisions.
On the negative side, a conceptual style decision-maker may take some risks
in decision-making.
6.5.1.4 Behavioural style

Managers with a behavioural style are concerned about people’s opinions
and so talk to people, consider their feelings and make a decision that is best
for them. They are interested in making sure that everyone works well
together and avoiding conflict. They can be very persuasive and are good at
getting people to see things their way. They like working with a group and
tend to reconcile differences and negotiate a solution that is acceptable to all
parties.
On the negative side, managers with this style can sometimes be too
accommodating. When overdoing this style, they keep people happy, rather
than focusing on task completion.
6.5.2 Group decision-making styles

Group decision-making has its own set of styles. Each decision-making style
affects the group in a unique way. Knowing which style to use in a particular
situation can be the difference between success and failure, especially in a
business environment.
6.5.2.1 Autocratic group decision-making

An autocratic decision-making style is one in which the leader takes
complete control and ownership of the decision. The leader is completely
responsible for the outcome that results from the decision, whether that
outcome is positive or negative. The autocratic leader does not ask for
suggestions or ideas from the team and makes a decision that is based on his
or her own internal information and perception of the situation. This will
produce a fast decision for which the leader is personally responsible.
While this would be the best type of decision-making in an emergency

situation, it can sometimes result in less-than-desired effort from the people
that must carry out the decision. If an employee or group member is affected
by the decision, but he or she was not included in the decision-making
process, morale may suffer. If the outcome of the decision is also not
positive, group members may begin to feel aggrieved and believe that they
could have done a better job themselves. This can cause the leader to lose
credibility.
6.5.2.2 Democratic group decision-making

Democratic group decision-making can be useful when a quick decision is
needed and where it is possible to use a minimum amount of group
participation. The leader in this situation gives up the ownership and control
of a decision and allows the group to vote for the best course of action. In a
democratic situation, majority vote will decide what action is taken.
The disadvantage of this style can be a lack of individual responsibility.

There is no one person in the group that can claim responsibility for the
decision reached by the group. Since there is no requirement for consensus, it
opens up the possibility that someone will deny responsibility for the
outcome, because he or she voted against the group’s decision.
6.5.2.3 Collective group decision-making
In collective group decision-making, the leader will involve the members of
the organisation or group in all aspects of the decision-making process, but
he or she will make the final decision alone. The leader deliberately asks
and encourages group members to participate by giving their ideas,
perceptions, knowledge and information concerning the situation. This gives
the leader an accurate understanding of the situation and allows for better
overall decision-making. Although the leader gets other perspectives on the
situation, he or she maintains complete control of the final decision and is
completely responsible for the decision and the results, whether they be
positive or negative. This style of group decision-making requires the leader
to be an excellent communicator, as well as an excellent listener.
The advantage of this style is the involvement and participation of the group.
The disadvantages are that this can be a very slow decision-making process
and it offers less security owing to the number of people involved in the
process.
6.5.2.4 Consensus group decision-making

In consensus group decision-making, the leader gives up complete control of
the decision. The whole group is totally involved and invested in the
decision and there is no individual responsibility for the leader, because
everyone has a stake in the decision’s success or failure.
This style differs from the democratic style in that everyone must agree and
reach consensus on the decision. If group members cannot reach total
agreement, the decision becomes democratic – they vote for the best course
of action. Involving everyone completely fosters strong group commitment
and creates a high probability of success. It is, however, a very slow process
and it can be difficult for a group to learn to work together in this manner. A
group that has already been together for a long period of time and has
developed a strong, long-term, professional relationship, on the other hand,
will find this decision-making style advantageous.
Understanding these different decision-making styles makes it possible to

make adjustments according to the situation and the results the manager is
working towards. Strong decision-making requires the ability to assess the
situation, determine the best style of decision-making, and apply that style to
come to a positive solution. By consistently using the correct style of
decision-making, a manager will prove to be a valuable asset as a leader in
the organisation. Try to do the exercise in Management in action 6.4.

Decision-making styles
Consider the four management styles. Which one do you think explains your decision-
making style the best and explain why you think so.
6.6 DECISION-MAKING MODELS
There are three types of decision-making models, namely, classical,

administrative and political (see Figure 6.1). The three factors that influence
which one a manager chooses are his or her personal preference, the type of
decision and the conditions involved.
Figure 6.1 The different models of decision-making

6.6.1 Classical model of decision-making
The classical model is also known as the rational model, as it is based on
rational economic assumptions along with the manager’s beliefs about what
an ideal decision should be. It may seem unattainable by people in real-life
situations, but if a manager follows this model, he or she may make a better
rational decision and minimise the influence of personal views. The
underlying assumptions of this model are that decision-makers know the
problem and the goals, as well as the alternative solutions and their
outcomes. Decision-makers using this model choose the alternative that will
lead to maximum goal achievement. This model is applicable for routine as
well as adaptive decisions and makes use of the six-step decision-making
process.
It is true that managers mostly make decisions without considering the actual
decision-making process. However, the steps in the rational decision-making
process are as follows:
1. Identify the problem or objectives.
2. Set the goals and decision criteria.
3. Search, evaluate and select the best course of action.
4. Implement the decision.
5. Compare the actual and planned outcomes, objectives or goals.
6. Respond to divergences from the plan.
How does this process link with the management functions? The first three
steps are part of the planning phase. During the implementation step (step 4),
a manager should organise his resources and lead his team in putting into
action what was decided. The last two steps (5 and 6) happen during the
control phase.
Sometimes this process is short and easy, while at other times is may take
weeks or even months. The process depends very much on the right
information being available to the right person at the right time. A logical and
systematic decision-making process helps one to address the critical
elements that result in a good decision. By taking a systematic approach,
managers are less likely to miss important factors, and they can build and add
to the approach to make their decisions better and better.
The rational decision-making model describes how decisions should be

made in an ideal world without constraints. To make good decisions, a
manager should have the ultimate resources such as correct information, time,
personnel, equipment and supplies available. In practice, however, most
managers have to make the best possible decision with limited resources,
including budget constraints or a lack of willing and competent personnel.
Managers should not begin the decision-making process unless they are
aware of the gap, problem or opportunity, are motivated to reduce it and
possess the necessary resources to fix it. A more detailed discussion of the
six steps in the decision-making process follows.
6.6.1.1 Step 1: Identify, diagnose and analyse the problem

When there is a difference between the desired state and the actual state, a
problem occurs. The first step in the decision-making process is to identify
that problem. If a manager identifies this incorrectly, it may cost the company
a lot of time, effort and money, like Coca-Cola in 1985 when they introduced
New Coke (see Management in action 6.5).

New Coke
In April 1985, the management of Coca-Cola Co. announced its decision to change the
flavour of the company’s flagship brand. Coca-Cola marketing vice president and
president launched Project Kansas. They went into the field with samples of new
possible drinks with taste tests, surveys and focus groups. The results of the taste tests
were strong – the sweeter mixture overwhelmingly beat both regular Coke and Pepsi.
Then tasters were asked if they would buy and drink it if it were Coca-Cola. Most said
yes, they would, although it would take some getting used to. The end result was that
they stayed with the original Coke recipe. Watch this YouTube video to find out more
about whether Coca-Cola identified the real problem or not:
http://www.youtube.com/watch?v=W6t7deaplgY.
Source: Adapted from Schindler (1992)
A successful manager should identify the problem and not its symptoms.
The symptoms will show that there is a problem, but the root cause must be
identified and analysed. For example, the symptom could be low employee
morale, but the cause could be a lack of communication between management
and employees. The lack of some important factors (Herzberg calls them
hygiene factors) in the workplace are perhaps caused by systems that do not
work that led to the low morale. This may be the result of employees’
interpersonal problems or the fact that they are not able to make a target as it
is too ambitious. To solve a problem, the cause of the problem – the real
problem – should be identified. (See Management in action 6.6).

Dog food
After noticing that people were spending more money on their pets, a new dog food
company created an expensive, high-quality dog food. To emphasise its quality, the dog
food was sold in cans and bags with gold labels, red letters and detailed information
about its benefits and nutrients. Yet the product did not sell very well, and the company
went out of business in less than a year. Its founders didn’t understand why. When they
asked a manager at a competing dog food company what their biggest mistake had
been, the answer was: “Simple! You did not have a picture of a dog on the package!”
Being aware of the problem or the gap is the first step to making a decision.
Source: Williams (2014: 99)
After managers have identified the problem, they have to diagnose and
analyse the situation to determine the underlying causes or factors leading to
the problem or opportunity. The real issue is often hidden behind the problem
managers think they have. A number of questions can be asked to get to the
root cause:
What situation is affecting the organisation? (The answer to this question

will identify the disequilibrium that exists in the organisation.)
When did it occur?
Where did it occur?
How did it occur? (This question needs deeper analysis to get to the real
root of the problem.)
To whom did it occur?
How urgent is the problem?
How are the events interconnected?
What are the results of these events or activities?
Managers cannot solve problems if they do not know about them or if they
are not addressing the right issues. These questions can help a manager to
identify what happened and why, in order to address the correct problem and
find alternative solutions. For example, a CEO of a large company identifies
the gap in his organisation as the inability to hire enough qualified people to
serve their global clients. By asking the eight questions listed above, the real
problem is identified as a lack of internal collaboration and communication.
The CEO finds that he can actually reduce staff if he has more efficient and
effective systems in place.
6.6.1.2 Step 2: Set the goals and decision criteria

Goals are what a manager wants to achieve and indicate the direction of the
decisions and actions to be taken. This goal-setting step in the decision-
making process simply involves finding the end result that will minimise or
solve the problem, or will help to close the gap or use the opportunity
identified.
It is also important to identify the criteria that must be used to solve the
problem. Decision criteria are the standards used to guide judgements and
decisions, and managers should decide which criteria are more or less
important. If the organisation has to decide on a new supplier, the criteria that
will be used can include the reliability of the supplier, the price and quality
of its products, and speed of delivery (see Management in action 6.7). The
criteria are important to close the gap or resolve the problem.
New computers
The operational manager has to purchase a new set of computers for his organisation.
He should firstly identify the goal: what do the users really need – a laptop, a PC or
would a tablet do? He should then decide which criteria are important, such as reliability,
price, warranty, onsite services and compatibility with existing software.
After identifying the criteria, the manager should decide which of these
criteria are the most important, i.e. they should be weighted. In the case of
selecting a new supplier, if the reliability of a supplier is more important
than the price of its products, reliability must receive a higher weight.
Weights are calculated using the following three factors:
1. The costs that will be incurred and how much the organisation is
prepared to invest
2. Risks likely to be encountered and the chance of failure
3. Outcomes that are desired and their fit with the goals of the organisation
See Management in action 6.8.

Franchise options
An entrepreneur must decide whether she is going to buy a franchise or not. After
careful analysis, she decides that the best option will be to buy a franchise. The problem
is, however, which one?
She identifies five criteria that are important:
1. Financial qualifications
2. Franchisor history
3. Start-up costs
4. Open geographical locations

5. Franchisor support
Help her to determine how important each of these criteria is by giving them a score out
of 10 (with 10 being very important and 1 not at all important).
If an organisation does not set a goal to achieve and then select the decision
criteria, it will be difficult to continue to the next step.
6.6.1.3 Step 3: Search, evaluate and select the best course of

action
The third step is to search for, evaluate and select the best alternative that
may close the identified gap, problem or opportunity. This step may take
longer than all the other steps owing to the amount of information that needs
to be processed. The conditions under which a manager should make
decisions and the type of decision also play a huge role here. Routine
decisions already have a list of feasible alternatives which are available
according to the policies and procedures of the organisation. However, an
innovative decision needs innovative solutions.
The best course of action is the one that fits best with the goals, vision and
mission of the organisation and will achieve the desired result using the
fewest resources, leading to increased effectiveness and efficiency. During
this step, the manager’s own personality and willingness to accept risk and
uncertainty comes into play. For example, Daniel L. Vasella, CEO of
pharmaceutical giant Novartis, decided that the risk was too great to develop
an experimental vaccine for Alzheimer’s. He felt that the disease should be
better understood before he would be willing to invest time and money in
such a venture.
A primary cause of decision failure is limiting the search for solutions.

Successful managers identify as many alternatives as possible and investigate
all of them carefully before making a decision. A manager should identify
real alternatives – “do it” or “don’t do it” is not a set of alternatives. The
decision criteria identified in the previous step should then be used to select
the best option.
Managers can use qualitative methods (such as interviews, observations
and group discussions) and quantitative methods (such as breakeven
analysis, return on investment and the game theory) to evaluate alternative
solutions. In pure quantitative decision methods, managers can use breakeven
analysis, return on investment, game theory and a number of other
quantitative methods to arrive at a decision. However, these methods are
beyond the scope of this book and will not be discussed here.
Managers should be able to compute the best decision. The idea is to use
qualitative judgements to score each possible solution according to each
criterion. The alternative with the best score should then “win”. Quantitative
methods are used to calculate the weighted average of each option, but the
decision-maker still decides on the importance of each criterion (by making
qualitative judgements). Typically, the more criteria a potential solution
meets, the better that solution should be.
Managers can use decision criteria in one of two ways: as either absolute or
relative comparisons. With absolute comparisons, managers compare each
criterion to a standard or rank it on its own merits. Conversely, relative
comparisons allow managers to prioritise the overall list of decision criteria.
For example, managers could decide that criterion A is twice as important as
B but only half as important as C.
Weights are assigned to each criterion and then a score is computed for each
alternative solution (see Management in action 6.9 – how a decision is
reached by applying steps 2 and 3 in the decision-making process).

Buying a new car
Consumer reports have identified nine criteria that may be important when buying a new
car: predicted reliability, current owner’s satisfaction, predicted depreciation (the price
you could expect if you sold the car), ability to avoid an accident, fuel economy, crash
protection, acceleration, ride, front seat comfort and interior design.
The first step is to identify the importance of each of these criteria. The criteria must be
rated out of 10, with 10 being critically important and 1 completely unimportant. This
involves giving a weight (W) to each criterion:
Predicted reliability: 9
Current owner’s satisfaction: 8
Predicted depreciation: 6
Ability to avoid an accident: 7
Fuel economy: 9
Crash protection: 4
Acceleration: 3
Ride: 2
Front seat comfort: 7
Interior design: 9
Five different car models are identified as possible alternatives, based on these 10
criteria. Now they also have to be scored out of 10, with 10 being excellent and meeting
the criterion completely and 1 being poor in terms of meeting that criterion.
To identify the best car, multiply W (weight, i.e. importance of criterion) by P

(performance, i.e. meeting of the criterion) of each car and add these totals to get the
car with the highest score, which is the best choice.
Car A Car B Car C Car D Car E

Wx Wx Wx Wx Wx
Criteria W P P P P P
P P P P P
Predicted reliability 9 7 63 7 63 9 81 6 54 4 36
Current owner’s satisfaction 8 9 72 8 64 9 72 4 32 3 24
Predicted depreciation 6 4 24 3 18 8 48 8 48 8 48
Ability to avoid an accident 7 8 56 6 42 4 28 3 21 4 28
Fuel economy 9 5 45 7 63 6 54 8 72 5 45
Crash protection 4 8 32 9 36 9 36 6 24 4 16
Acceleration 3 9 27 6 18 5 15 7 21 7 21
Ride 2 1 2 5 10 2 4 9 18 6 12
Front seat comfort 7 6 42 3 21 1 7 4 28 9 63
Interior design 9 4 36 6 54 8 72 9 81 4 36
Total 399 389 417 399 329
Car A Car B Car C Car D Car E
Wx Wx Wx Wx Wx
Criteria W P P P P P
P P P P P
Car model C is the best choice.
Unfortunately managers do not always have the time or money to make

extensive lists of important criteria and alternatives before making a
decision. They often have to rely on their instincts and whatever information
is available. Most of the time, managers decide on a solution that is “good
enough”. Good managers will tap into the knowledge of different people
within and outside the organisation.
6.6.1.4 Step 4: Implement the decision

The decision is made, but if managers fail during the implementation phase,
the decision may still be unsuccessful even if it was a well-chosen solution.
During this step, a manager needs credibility and competency to carry out the
chosen solution. The success of making a decision depends on doing it.
Another crucial part of this step is to convey the decision to everyone that
will be affected by it, in such a way that these individuals will buy in.
Participation during the decision-making process by the parties that are
affected helps a manager to get their commitment. Communication,
motivation and leadership are essential management activities in this step. In
a research study done, it was shown that when managers follow up on their
decisions by tracking the implementation of the decision, employees are
more committed to positive action.
6.6.1.5 Step 5: Compare the actual and planned outcomes,

objectives or goals
Implementation of the chosen course of action does not always lead to the
planned outcome, objective or goal. Managers should follow up to ensure
that the results are satisfactory and, if not, they should decide on a new
course of action. Changing environmental factors, for example, may affect
decisions and change the goals. Feedback is just as important as choosing
and implementing the best course of action.
6.6.1.6 Step 6: Respond to divergences from the desired
outcome
As a result of environmental (internal and external) factors that change
constantly, a chosen course of action may fail. When this happens, a manager
should investigate the situation and decide on a new course of action. This
may mean starting over, or changing just one or two things, but corrective
action must be taken if needed.
To really understand the steps of the decision-making process, do the

exercise in Management in action 6.10.

New social media strategy
As the marketing manager of an organisation, you have to develop a new social media
strategy for the organisation. Owing to budget constraints, you only get one chance to
choose a strategy that will work.
Using the steps in the decision-making process, determine the best strategy possible.
6.6.2 Administrative model

By recognising human limitations and the influences of the business
environment, the administrative model describes how managers do make
decisions, rather than how managers should make decisions under perfect
circumstances. This model emphasises two key concepts: bounded rationality
and satisficing.
Bounded rationality refers to the limits and boundaries that managers have
when it comes to rationality. These are a result of the complexity of the
organisation and the decision, the external environment, limited time, and a
lack of resources and information. These limits cause managers to select a
good enough goal or course of action that satisfies minimal decision criteria.
They do not try to optimise, but rather to satisfy, also known as satisficing.
Managers using this model during decision-making engage in a limited
search for the best course of action. As a result of time, money, resources
and informational constraints, managers identify the goal or solution that
appears to solve the problem. Some managers may choose the first best
solution and others continue their search for a while longer, but eventually
they will just go with the best possible course of action without exploring all
possible solutions that may exist.
Managers sometimes misinterpret or have insufficient information when

making a decision. A manager may decide to start a social media campaign
on Twitter, but does not know that the target market prefers Facebook.
Managers may also make decisions based on information from the previous
year when consumer behaviour has already changed.
Managers may use their intuition when making decisions. Research has
shown that people make good decisions under extreme uncertainty and time
pressure, but this does not always work out. A manager’s intuition tends to
become more accurate with experience and knowledge in the field. For
example, a trauma surgeon sometimes uses his or her intuition when making
an urgent decision about a patient.
The first two models, the rational and the administrative models, are the two
extremes in decision-making. A manager can, however, create a balanced
approach, using some intuition and some rational decision-making elements.
The third model is useful for unknown problems and goals.
6.6.3 Political model

Decisions are made in a complex environment of diverse goals, values and
interests. The political model is closest to real-life decision-making as it
involves interaction with other managers and subordinates while taking the
environmental factors and other events into consideration. In a business
setting, information, resources, time and mental capacity are limited, which
makes it difficult to follow a rational decision-making process.
Coalition building is the essence of the political decision-making model.

Often managers engage in coalition building by forming an informal alliance
with other managers with similar goals, values and interests. A manager who
supports a specific course of action, consults others informally and tries to
convince them to support the decision. Coalition building may lead to faster
decision-making as a consensus is obtained without too many formal
meetings and discussions.
6.7 SUMMARY
Managers want to make good decisions because it is in the best interests of

the organisation. Decision-making is part of the everyday life of managers on
all management levels and it is also essential during each of the management
functions.
For managers to make good decisions, they should be aware of the three
different types of decisions, the conditions under which these decisions are
made and the factors influencing decision-making. Understanding these and
the three different models of decision-making can help managers to make
better and more effective decisions.
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CASE STUDY: ZINGING LIME
Zinging Lime needs an extensive marketing campaign for its products. Terry Thompson
realises that several media options are available to introduce a new product to the
market. Instead of trusting his gut feeling, he realises that he should objectively and
rationally decide on the most appropriate type of media. The possible types of media
where advertisements can be placed to encourage trial of the product are cellphones
(SMS), TV, magazines and radio.
When deciding on advertising media, the following aspects are important for Terry and
the marketing team:
Reach – the number of people reached

Frequency – the number of times the market can be reached
Cost – the cost of placing an advertisement
Suitability – the appropriateness of the type of media for the market
Options within the media – the possibility of using “exciting” special effects to
appeal to the market
The above aspects are all important, but not to the same degree. Grading them on a
scale of 1 to 10, the aspects receive the following weights in terms of importance:
Reach 8
Frequency 8
Cost 6
Suitability 8
Options within the media 7
When evaluating every type of media according to the above criteria, they scored the
following. The ratings scored by the alternatives on the above criteria are given next to
the alternatives in the same order they are listed above:
Cellphone (SMS) 9, 8, 8, 8, 3
TV 8, 7, 5, 9, 9
Magazines 6, 6, 7, 7, 8
Radio 6, 8, 8, 6, 6
Although Terry realises that a mix of the above media options can be used, he needs to
know which one will be the most appropriate if only one needs to be selected.
1. Explain and identify the different conditions under which Terry has to make a
decision.
2. Use the weighted average method to select the best media option on paper.
3. Recommend a specific individual decision-making style for Terry that will best suit
decisions in his organisation.
1. Ask a manager to recall the best and the worst decisions he or she ever made in his or her
organisation. Try to determine the reason why these decisions were so good or bad.
2. Why do capable managers sometimes make bad decisions? What can individual
managers do to improve their decision-making skills?
3. Interview a manager and ask him or her to identify a problem or gap in the organisation and
let him or her answer the eight relevant questions.
4. Analyse three decisions that you have made over the past six months. (At least one with a
positive and one with a negative outcome.) Under which conditions did you make these
decisions and what types of decision were they?
7 Designing the organisation
AMANDI VAN DER WALT
Learning outcomes
Understand the role of organising in the organisation.

Explain the basic elements or principles of organising.
Understand each of the contingency factors influencing the organisational structure.
Describe the different organisational designs.
7.1 INTRODUCTION
Once the management function of planning is complete, the next step is

implementing the formulated plans. This entails organising resources and
coordinating activities in the most efficient way. A plan is only as powerful
as the execution of it. Organising can be defined as combining activities in
an orderly manner so that goals can be achieved. This management function
includes classifying activities, allocating activities to specific divisions,
creating job roles in these divisions, assigning employees the applicable
responsibilities for their specific jobs and giving them the necessary
authority to help execute plans.
Every employee and manager has to know exactly what he or she needs to
deliver to ensure that what was planned (the vision, mission and objectives)
is achieved. This knowledge is important, because organisational resources
need to be used efficiently and duplication of activities should be avoided.
The importance of organising in an employee’s work environment is
explained in Management in action 7.1.

Scientists find physical clutter negatively affects the ability to focus and process
information
Researchers at the Princeton University Neuroscience Institute published the results of

a study they conducted in the issue of The Journal of Neuroscience that relates directly
to uncluttered and organized living.
Their study found that when your environment is cluttered, the chaos restricts your
ability to focus. The clutter also limits your brain’s ability to process information. Clutter
makes you distracted and unable to process information as well as you would have
done in an uncluttered, organized, and serene environment.
The clutter competes for your attention in the same way a toddler might stand next to
you annoyingly repeating, “candy, candy, candy, candy, I want candy, candy, candy,
candy, candy, candy, candy, candy, candy, candy …” Even though you might be able to
focus a little, you would still be aware that a screaming toddler is also vying for attention.
The annoyance also wears down your mental resources and you’re more likely to
become frustrated.
The researchers used different tools to map the brain’s responses to organized and
disorganized stimuli and to monitor task performance. The conclusions were strong – if
you want to focus to the best of your ability and process information as effectively as
possible, it is important to clear the clutter from your work environment. This research
shows also that you will be less irritable, more productive, distracted less often, and
able to process information better with an uncluttered and organized office.
Source: Adapted from http://unclutterer.com/2011/03/29/scientists-find-physical-

clutter-negatively-affects-your-ability-to-focus-process-information (accessed
on 2 September 2014)
7.2 WHY IS ORGANISING IMPORTANT?
Organising is one of the four management functions. Without it, the

organisation would not achieve its plan efficiently and effectively.
Organising is important for the following reasons:
It clarifies who reports to whom and who is responsible for what.

It makes employees accountable for their actions and the outcomes of the
task that has been assigned to them, whether they are positive or negative.
It divides the total workload into sections, and clarifies what activities
should be performed by whom.
It creates synergy since everyone knows what his or her role is.
It enhances efficient resource deployment since managers will know which
activities need what resources and when they will be needed.
Departmentalisation is created where employees’ activities are grouped
together. This then ensures that people with the required skills perform
specific, assigned duties in each form of departmentalisation.
It ensures coordination which results in activities taking place in harmony
so that the vision, mission and objectives of the organisation is achieved.
McDonald’s is so successful because it is structured in such a way as to

enhance its efficiency and effectiveness (see Management in action 7.2).

How McDonald’s is structured and operated
McDonald’s is one of the biggest franchises in the world. It takes a lot of organising and
proper management to achieve success on such a level. The function of organising is
well implemented in the structure of McDonald’s.
The McDonald’s executive organisational areas are organised as follows:
At the top are the chairman and chief executive officer, and the chief operating officer.
Below that, the departments are broken down into corporate affairs, marketing,
human resources, national operations, regional managers, finance, information and
strategic planning.
Other departments within McDonald’s are legal, customer services, franchising,
security, hygiene and safety, property and construction, supply chain and restaurant
services.
All of these areas needs to be coordinated by McDonald’s to maintain its level of

excellence.
Source: Adapted from

http://www.mcdonalds.co.uk/ukhome/whatmakesmcdonalds/questions/running
-the-business/business-operations/what-is-the-structure-of-mcdonalds-and-
how-each-department-in-the-organisation-interact.html (accessed on 21
October 2014)
7.3 BASIC ELEMENTS OF ORGANISING
Organisations are growing constantly in size and this is accompanied by an

increase in the complexity of management. Making use of good elements of
organising and establishing them in the organisation’s structure may simplify
the management of the organisation for years to come. With the growth in the
organisation, the work environment also changes (demographically, globally
and technologically, for example) and this must be managed to stay effective.
Therefore it is important that leaders and managers be innovative in their
approach to organising.
Organising must be seen as an ongoing process through which managers

create structure. Through this structure, resources will be deployed and
employees will perform all the tasks needed to work effectively to attain the
vision, mission, goals and objectives of the organisation. The organising
management function helps managers to assign tasks and responsibilities, and
ensures that they are conducted in an orderly and effective manner.
Organising helps with coordination, which prevents duplication. Duplication
adds costs, wastes resources and decreases productivity.
There are a few basic elements or principles that managers must apply to be
effective at organising:
Specialisation
Division of work
Centralisation and decentralisation
Authority
Chain of command
Span of control
Coordination
These are discussed below.
7.3.1 Specialisation
Through specialisation, work is divided into areas of experience or expertise
to improve the way in which goals are achieved. This ensures that employees
with distinct skills or knowledge work in a division where they can apply
their knowledge and ability to the advantage of that division and the
organisation as a whole.
Through specialisation, jobs are broken down into steps and each step is
completed by a different person who is fit to do that specific task. An
example of how specialisation is applied in organising is illustrated in
Figure 7.1. The marketing specialist is separate from the other functions.
Figure 7.1 Specialisation of work

7.3.2 Division of work
As an organisation grows in size and also geographically, the organisation
will have more work to do, more products to offer, more employees to do the
work and, therefore, more diversity and complexity. To simplify things,
managers must introduce division of work.
Dividing work into specific sections will make it easier to manage a wide
variety of products, customers and geographical areas. Creating divisions for
work means creating self-managing units within an organisation. Each
division will have its different departments, but they will still work towards
a common goal. This is also called departmentalisation and will be
discussed in more detail later in the chapter.
7.3.3 Centralisation and decentralisation

The way decisions are made differs from organisation to organisation. In
some organisations, top management alone are responsible for decision-
making. In other organisations, employees are also involved in decision-
making. Decision-making responsibilities can be delegated down from top
management to managers who are more directly involved.
When an organisation is centralised, it means that decision-making authority

remains with top management. Managers and lower-level employees have
little or no say.
An organisation is decentralised if decision-making power also lies with

managers and lower-level employees, not solely with top management.
Decentralisation of authority is related to the task of delegation. Top
management might not be directly involved in the day-to-day work situations
of front-line staff, therefore in some organisations, if employees are skilled
and competent to make decisions, it is better if decision-making is
decentralised. However, first-line managers may not always be competent to
make decisions themselves, in which case decision-making will need to stay
with top management.
As an organisation grows, it becomes more difficult for top management to

take all the decisions. Therefore organisations may need to decentralise some
of the decision-making power to lower levels of the organisation.
It is not possible for an organisation to be completely centralised or

decentralised. Organisations would not be able to function effectively if all
decisions were made only by top managers or only by lower management
levels. Integration of centralisation and decentralisation must take place,
based on the type and needs of an organisation.
Decentralisation has the following advantages:
Decisions are made faster. It is not necessary to wait for top management
to make a decision, which can take a while as a result of their busy
schedules. This is helpful in a rapidly changing environment.
The quality of decisions improves. The managers who are making the
decisions are closer to the problem and the specific situation, so more
accurate decisions can be made.
The workload for top-level management is lessened. It frees them to
spend more time on strategic decisions instead of solving day-to-day
problems.
The sense of responsibility and initiative among lower-level
management improves. They feel their inputs are valued and trusted, and
therefore experience a greater responsibility for results. Lower levels of
management will also feel more motivated to solve problems since they
are directly involved.
There are, however, also some drawbacks to decentralisation:
Managers need to be trained more intensively before they can be given the
authority to make decisions themselves.
Too much decentralisation might cause top management to lose control
over certain decision-making aspects. This might result in decisions being
made that stray from the foundation of decision-making in the organisation.
Constant feedback must be given to top management since they are still
accountable for the decisions being made and the goals being attained.
Therefore proper reporting lines and administrative channels must be put
in place for decentralisation to work effectively.
7.3.4 Authority
Authority gives someone the right to make a decision and act in situations.
Authority is part of organising. By giving managers and employees authority,
responsibility is delegated, productivity increases and work can be
coordinated more effectively. In a centralised organisation, authority lies
with top management to make decisions and it is then communicated to
lower-level employees. If an organisation is decentralised, authority will be
given to employees and managers to make decisions themselves.
7.3.4.1 Different types of authority in organising

There are different types of authority in an organisation. This is an important
concept to understand if the principle is to be applied correctly in organising:
Line authority. This is the direct right to give orders that a manager has
over an employee or immediate subordinates. It is authority delegated
down through the chain of command. For example, the marketing manager
has line authority over the advertising manager and the sales people.
Staff authority. This type of authority will most likely be found among
middle managers. It is the right of one manager to advise, but not to
command, another employee who is not subordinate in the chain of
command. For example, the manager responsible for legal matters can give
legal advice to employees in different functional areas. This is a
supporting function as a result of a person’s special knowledge in a
particular field. It also links to the concept of staff function. A secretary in
an organisation has a staff function. She supports the manager, but does not
have any line authority over subordinates.
Line-and-staff authority. This authority is found in a combined
partnership between line managers and staff managers. Line departments
need the support of staff departments to be successful. Activities that take
place in manufacturing and marketing are classified under line functions.
For line functions to operate properly and sell the organisation’s products,
they need the support of staff functions. For example, the human resource
staff function does not contribute directly to selling and manufacturing the
organisation’s products, but they give an indirect form of support to the
line activities that are needed for the organisation to be successful, such as
organising annual leave.
7.3.4.2 Delegation of authority

Delegation of authority takes place when a manager who is normally
responsible for a task assigns direct authority and responsibility to a
subordinate to complete it instead. The subordinate must have the same
necessary tools and information available as the manager would have had, as
well as equal authority and accountability. Successful delegation = authority
+ responsibility + accountability.
Ultimate accountability can, however, never be delegated. The CEO of an

organisation, for example, retains final accountability for what is happening
in his or her organisation as a whole.
Table 7.1 demonstrates the direction of delegation, responsibility and

accountability in an organisation.
Table 7.1 The direction of delegation, responsibility, authority and accountability
Manager Subordinate
Delegation
Responsibility
Authority
Accountability
There are some guidelines that a manager can follow to be effective in

delegation:
Set SMART goals and ensure that subordinates support and understand the
goals and their role in achieving them.
Be clear about the level of authority and responsibility assigned to the
subordinate.
Involve the subordinate in decision-making and daily activities.
Trust and encourage employees to complete their tasks and responsibilities
on their own.
Train subordinates to empower themselves with the skills and knowledge
to take responsibility.
Give regular and accurate feedback to enable the subordinate to compare
his or her performance against the set standard and to improve his or her
actions where needed.
Delegating work is an important management activity. The success of

delegation depends on the trust between the manager and the subordinate. If
there is no trust, the manager will be reluctant to delegate, because he or she
will be afraid to accept ultimate accountability in the case where a
subordinate is not competent to do the work. Some managers find it difficult
to delegate, because they believe that only they can do the job properly. If
this is the case, the manager will be overloaded with work, causing the
productivity and effectiveness of the organisation to suffer.
7.3.5 Chain of command

The chain of command refers to who reports to whom throughout the
organisation, i.e. how the authority and power in an organisation is exerted
and delegated from top management down to the lower levels in the
organisation. Instructions flow downward along the chain of command and
accountability flows upward. The more clarity there is in the organisation
regarding the chain of command, the more effective the decision-making
process will be and the greater the efficiency.
When studying the chain of command, there is one aspect that is very
important. It is the concept of unity of command. Each employee should
have only one immediate supervisor, i.e. report to just one boss. This is
called unity of command and ensures that each employee understands
exactly what is expected of him or her and to whom he or she is accountable.
7.3.6 Span of control

The “span of control” is the number of subordinates a supervisor or
manager has and depends on the number of levels and managers in an
organisation. The larger the span of control, the more efficient (cost-
effective) the organisation will be. A basic example is illustrated in Table
7.2.
Table 7.2 Span of control
Span of control of 5 means = 156 Span of control of 25 means = 26

managers and 625 non-managerial managers and 625 non-managerial
employees employees
Managers 1 Managers 1
5 25
25 VS
125
Non-managerial employees 625 Non-managerial employees 625

Less efficient More efficient
From Table 7.2 it is clear that a larger span of control of 25 means fewer
hierarchical levels of management for the same number of non-managerial
employees as a span of control of five. This is more cost-effective for an
organisation.
The type of work that takes place in an organisation will determine the span
of control needed to be more effective and efficient. When the work that
takes place is complex and variable, the span must be less than when work is
fixed and involves mainly routine. The most efficient span of control will
also depend on the manager. If he or she is capable of managing and
supervising a large number of employees, it will improve efficiency. If a
manager cannot handle the responsibilities of having a larger number of
subordinates under his or her supervision, effectiveness will drop. Assigning
too many subordinates to a manager can lead to poor performance and lack of
control. Therefore it is important to look at the type of work and the
manager’s competency before determining the span of control used in the
organisation.
There are five key factors that will influence the span of control in an
organisation:
1. The competence of the managers and the employees
2. The complexity of tasks being supervised
3. The frequency of new problems in the manager’s department, and the

skills and knowledge of the manager regarding how to deal with them
4. The clarity of procedures, rules and standards
5. The complexity of the subordinate’s job
Although the tendency is to have a wider or larger span of control in an

organisation, it is important to determine what span of control will be most
effective and ultimately most efficient in a particular organisation. A larger
span will lead to reduced costs and quicker decision-making, but may be
difficult for a manager to cope with, thus influencing its effectiveness. A
larger span of control will benefit the organisation if the employees are
properly trained and empowered.
7.3.7 Coordination
Managers should ensure that coordination takes place to integrate the
different tasks and thus help achieve the primary objectives of the
organisation. Coordination forms part of structuring. It ensures that the right
employees are doing the right job in the right way. It also prevents
duplication of activities between different departments. Basically, managers
divide all the tasks of the organisation into smaller units, ensuring that
specialisation takes place to achieve the goals more effectively. To make
sure that there is still cohesion amongst the different departments,
coordination is used to link the activities of the different departments in the
organisation into a single, integrated unit.
Coordination creates congruence by integrating goals and tasks throughout

the organisation. Departments need to share resources and information, and
work together to achieve organisational goals. The greater the
interdependence between departments, the more important effective
coordination will be.
Coordination is needed to ensure that all departments work to each other’s

strengths and stay focused on the vision and mission of the organisation.
Management in action 7.3 demonstrates using a simple example why
coordination is important in an organisation.

Coordination in sport
The basic principle of coordination can be understood when looking at sport. All the
muscles and senses of someone playing sport must work together in order to be
effective. The brain is controlling the physical actions and it will be impossible to perform
some actions without the control of the brain. For example a golf player must hit the little
ball. The concentration and all the actions must take place in an organised manner. If
coordination of all the muscles does not take place, the player will miss the ball. The
same principle is found in coordination in an organisation. The manager (the brain) must
make sure that all the different departments work together fulfilling their role at the right
time in the correct manner for the organisation to “hit the ball”. If this coordination does
not take place, the organisation will not achieve its goals and objectives.
7.4 CONTINGENCY FACTORS INFLUENCING THE

ORGANISATIONAL STRUCTURE
It is impossible to fulfil the function of organising if the structure of the
organisation is not developed in such a way that it optimises strategy
execution. Organisational structure should enable the execution of the plans
formulated during the planning phase in the organisation. Structure is the map
of all the formal relationships between responsibilities, tasks and individuals
in the organisation, and there are a few contingency factors that influence
these relationships. These are discussed below.
7.4.1 Strategy and structure

An organisational structure can be defined as the vertical and horizontal
configuration of departments, authority and jobs within an organisation.
Figure 7.2 illustrates all the aspects that need to be fulfilled when designing
organisational structure. It is important to have the foundational aspects of the
organisation in place, i.e. vision, mission, objectives and strategic plans.
This will indicate the direction the organisation wants to go. The structure
must fit the strategy to ensure that it is possible for the organisation to move
in this direction. After the plans have been set, each individual should
understand which tasks he or she will have to perform toward this end. As
soon as employees know what activities and tasks will be their
responsibility, jobs must be created and assigned. Relationships and
dependencies between employees and jobs must also be clarified. Once this
has been done, the organisational structure must be designed. It is during this
activity that the organigram is developed. This includes grouping employees
into departments that will function as a whole. Coordination will then glue
the different work groups (departments) together in order to work towards
the achievement of the vision, mission, objectives and strategy.
Figure 7.2 Activities in creating structure
Without people working together purposefully in efficiently designed work

groups in a coordinated manner, the organisation will not achieve its desired
goals. The important lesson to be learnt is that “Structure follows
strategy”. An organisation’s direction (strategy) will determine the type of
organisational structure.
7.4.2 Size and structure

The bigger an organisation, the more complex it is to manage. With more
employees, more things can go wrong and more tasks must be managed and
coordinated. Therefore the size of an organisation plays an important role
when designing its structure. As the organisation grows, more divisions will
be created and more coordination will be needed to create synergy.
Managers should design their organisational structure in such a way that it
increases the efficiency of the organisation without draining resources.
Structure should be strategically planned and designed to optimise resources
and allow for growth.
Organisational structure is thus influenced by the scale, scope and complexity

of operations in an organisation. A smaller organisation, for example, will
not benefit from functional, product or matrix departmentalisation since it
will not be needed, but a larger organisation will.
7.4.3 Technology and structure
Never before in history have businesses been influenced so much by
technology. Technology constantly changes the way an organisation produces
products, delivers services, communicates with customers and evaluates the
changing environment. It is constantly shifting the goal posts. The business
world has become boundary-less and global. An organisation’s competitors
are no longer only national, but international as well – market share is
influenced by competitors worldwide.
Technology is therefore an ever-changing force that needs to be taken into

consideration. An organisation should embrace technology and incorporate it
into its structure to ensure that it remains flexible enough to adapt to changes
in the environment.
7.4.4 Environmental uncertainty and structure

The main purpose of structure is to facilitate the implementation of strategies
and plans. Because strategy is affected by the ever-changing external
environment, daily operations will be as well. The value of structure will
therefore lie in its ability to adapt activities in the organisation to cope with
this uncertainty.
The external environment creates uncertainty and it is important that an

organisation is able to cope with this uncertainty. There is, however, no one
structure that is better than another; the value of a structure is determined by
the way it matches the uncertain environmental situation and the activities in
the organisation. The environment in which an organisation operates is
definitely an important determining factor when designing an organisational
structure, because the environment has an influence on the organisation’s
strategy, and as already mentioned, structure must follow strategy.
7.4.5 Communication and structure

The success of any plan depends largely on communication, because it is
through communication that the coordination of tasks and activities will
happen. The structure of an organisation will influence the efficiency with
which the communication process takes place.
A complex hierarchy will hinder effective communication from lower-level
employees to top management. Top management will not be able to make
informed decisions regarding the strategy of the organisation unless they have
all the facts.
Managers face problems on a daily basis. Low-complexity problems are

those that are routine and predictable, and are managed by using a standard
set of procedures that lead to programmed decisions. Communication to top
management is less important and, in some cases, unnecessary.
Communication becomes vital, however, in situations where problems are
more complex and may influence restructuring and strategy. This type of
information has to reach top management quickly and accurately. Delays will
mean that timely decisions cannot be made or that decisions are made
according to wrong information. The structure of the organisation must
enable and ensure the fast and efficient flow of information.
7.5 ORGANISATIONAL DESIGNS
An organisation’s structure will define how the organisation will function. It

will dictate how employees, departments and divisions work with each
other, and how work will be channelled through the organisation. Some
organisational structures work better than others when applied to different
organisations. Therefore it is important to consider how well the structure
will work in a specific organisation, taking the influencing factors and
principles into consideration. Part of creating a structure in an organisation is
forming different departments. Organisational design refers to the creation of
the organisational structure for the whole organisation.
There are many challenges that accompany organisational design. Methods of

control must be decided on, coordination of tasks through the different
departments must take place and people must be motivated to perform these
tasks to the best of their ability to create value. Decisions like these and the
division of work have to be made on a daily basis. It is also important that
managers re-evaluate the design of the organisation based on changes in the
environment and technology. In Management in action 7.4 it is clear that the
organisational structure will have a big influence on the effective and
efficient functioning of an organisation.

McDonald’s
The organisational structure of McDonald’s has a big impact on helping the restaurant
maintain an effective performance and also by helping it meet its objectives. McDonald’s
is serving thousands of customers every day. It is important that it is well equipped with
food products and packaging for the food so that it can run successfully and not have
customers complain about the lack of food. If McDonald’s does not have an effective
organisational structure, this ideal will not be achieved. The production department
helps McDonald’s by ensuring that there is enough food products, packaging for food
(cups, boxes, bags etc.) in order for the restaurant to operate each day. The different
departments must work together to make sure that McDonald’s orders the food that it
needs from the suppliers in bulk whenever needed and on time. This way the
customers’ needs are met because they would get the food they order.
Source: Adapted from http://www.markedbyteachers.com/gcse/business-

studies/how-the-organisational-structure-of-mcdonalds-affects-its-
performance-and-helps-it-to-meet-its-objectives.html (accessed on 10 October
2014).
The different organisational designs will now be discussed.
7.5.1 Simple structure

In a simple structure the managers have a large span of control. Authority is
usually centralised to a single person, most often the owner of the
organisation. A simple structure is often a flat structure where direct control
and supervision are found. Another characteristic of this structure is that it is
most widely practised in smaller businesses where the coordination of work
is easily structured. The simplicity of a simple structure makes it easier to
predict and react to changes in the environment and to coordinate activities in
the organisation. As the organisation grows bigger, this structure becomes
less effective, since it will be no longer possible to coordinate work around
a narrow set of activities and decision-makers.
An organisation that operates in dynamic and turbulent environments needs to
specialise and formalise the organisational structure to spread the
coordination responsibilities of top management. As an organisation grows
in size and complexity, it becomes important to differentiate activities and
products into subtasks and to ensure that specialised people are employed to
manage and perform the required tasks, in these sub-areas, in the place of
what used to be the owner’s responsibility. Figure 7.3 illustrates the design
of a simple structure.
Figure 7.3 The simple structure
7.5.2 Departmentalisation
Departmentalisation is created when the activities of employees are grouped
together according to the skills needed to perform specific assigned duties.
Departmentalisation can therefore be defined as an organising action where
jobs, based on their characteristics and the specific skills required, are
grouped together to accomplish the organisational goals. A short description
of the different types of departmentalisation is given in Table 7.3.
Table 7.3 The focus of the different forms of departmentalisation
Type of
Focus
departmentalisation
Functional Different business functions or expertise (e.g. marketing)
Product Specific skills needed to produce different products (e.g. children’s
clothing vs women’s clothing under the same label)
Customer Customer needs (e.g. individual customers vs large companies)
Type of
Focus
departmentalisation
Geographic Geographical areas being served (e.g. regional offices)
Matrix Combination of different departmentalisation types
7.5.2.1 Functional departmentalisation

Functional departmentalisation organises work and workers into separate
units which are responsible for particular business functions or areas of
expertise. This includes areas such as production, human resources,
marketing and finance. For example, tasks like consumer behaviour analysis,
market research, advertising, public relations and sales will be grouped
together under marketing. This increases efficiency, because it means that the
organisation is doing things right.
This form of departmentalisation is often used by organisations that focus

only on one product and therefore the tasks are divided into specific
specialist functional areas. The challenge for a general manager is to ensure
coordination between the different departments. Each department will look at
opportunities and threats only from their perspective, but a combined effort is
required.
The different functions vary from organisation to organisation based on

scope, product and size. A service-oriented organisation does not have a
production department, but it will need at least a marketing department, a
finance department and a human resource department. An example of
functional departmentalisation is illustrated in Figure 7.4, and Table 7.4 lists
some advantages and disadvantages.
Figure 7.4 An example of functional departmentalisation
Table 7.4 Advantages and disadvantages of functional departmentalisation
Advantages Disadvantages
It reduces duplication and costs. Cross-departmental coordination
can be difficult.
It gives superiors and subordinates the opportunity Conflict regarding product priorities
to share expertise. can develop.
It makes communication and coordination easier. It may lead to slower decision-
making.
It centralises decision-making. Managers become specialists in
specific fields.
It allows work to be done by highly qualified Emphasis is on routine tasks.
specialists.
7.5.2.2 Product departmentalisation

Product departmentalisation organises work and workers into separate units
that are responsible for producing specific products or services. As an
organisation grows, more product lines will be added to the organisation and
coordinating all these associated activities can become challenging. During
product departmentalisation, each major product is grouped and placed in
control of a manager who is a specialist in that specific product line. This
manager will be responsible for everything that is linked to that product.
Table 7.5 lists some advantages and disadvantages to this form of
departmentalisation.
Table 7.5 Advantages and disadvantages of product departmentalisation
Employees can specialise in one area of There can be duplication.
expertise.
It simplifies the process of performance Coordination across different product
assessment. departments is difficult.
It creates a focus on the customer’s It limits problem-solving to a single product.
demands.
Decision-making is faster. Employees are not specialised in other product
lines.
The logic behind dividing the organisation based on products is that

marketing, manufacturing and the type of employee involved in the different
types of products differ. This way, the decisions regarding these products are
made by individuals who are specialists in that product category. For
example, children’s clothing will have a different marketing approach to
women’s clothing and will therefore need different specialists (see Figure
7.5).
Figure 7.5 Example of product departmentalisation
During product departmentalisation, activities are structured around the

production of the different products. It is mostly used by larger organisations
where products and/or services are varied and big enough to benefit from the
greater efficiency that product departmentalisation provides.
7.5.2.3 Customer departmentalisation

This method of departmentalisation organises work and workers into
separate units according to responsibility for the organisation’s different
kinds of customers and their needs, which are the focus of the organisation.
The different customer groups of the organisation have different needs and it
therefore makes business sense to focus on these customers and their special
needs. For example, it would make sense for Eskom to have customer
departmentalisation, because an agricultural business has different needs to
residential customers. An example of customer departmentalisation is
illustrated in Figure 7.6.
Figure 7.6 Example of customer departmentalisation
Although each department has its own goals for profits and for satisfying
customers, these different goals must still be aligned to the overall goals and
strategic plans of the organisation.
Some advantages and disadvantages of this form of departmentalisation are

given in Table 7.6.
Table 7.6 Advantages and disadvantages of customer departmentalisation
Customers experience greater satisfaction Duplication of resources may occur.
since the organisation focuses on
customer needs.
Key customers are identified. Problem-solving is restricted to a single type
of customer.
It allows companies to specialise in Workers might become too focused on
products and services that customers pleasing the customers, at the expense of the
need. organisation.
7.5.2.4 Geographic departmentalisation

Geographic departmentalisation organises employees and their work into
separate units responsible for doing business in specific geographical areas.
This type of departmentalisation is suited for an organisation that
manufactures and sells goods in various cities or provinces. Some larger
organisations have regional offices in different provinces, for example (see
Figure 7.7). Managers of the various geographic areas get autonomy, which
is needed for decision-making and customising. Table 7.7 gives some
advantages and disadvantages of this form of departmentalisation.
Table 7.7 Advantages and disadvantages of geographical departmentalisation
It helps organisations to respond to There is duplication of resources since every area
different geographical markets. has its own functional departments.
Managers develop skills to solve Coordinating the goals of different geographical
problems that may occur in that locations with the overall corporate goals can be
specific area. challenging.
Managers are informed and aware It is difficult to coordinate departments.
about customers’ problems.
It reduces costs and saves time,
since equipment used is all in the
same place.
Figure 7.7 Example of geographical departmentalisation
7.5.2.5 Matrix departmentalisation

Matrix departmentalisation make use of a combination of methods to meet the
requirements of the organisation. It has the big advantage of being able to
overcome the drawbacks of any single method. For example, geographical
departmentalisation might mean that each area’s specific customer needs are
properly addressed, but there is duplication within the organisation as a
whole. Having one central human resources department in the organisation
instead of one in each geographical area (i.e. functional departmentalisation)
could help overcome this.
Matrix departmentalisation incorporates two structures, functional and

product departmentalisation, to benefit from the advantages of both
simultaneously. It may be created for a once-off project or be permanent. For
example, a motorcycle manufacturer may develop and create certain models
as projects using specialist project managers so that the advantages of
functional specialisation are gained without affecting the rest of the
organisation.
In matrix departmentalisation, a project manager, or matrix manager, is

appointed and backed with the necessary skills from another functional area.
The only barrier here is that there will be more than one manager who can
exercise authority, the project manager (matrix manager) and the manager of
the functional department. This could create a unity-of-command problem,
with subordinates finding themselves trying to please two bosses. The
advantages and disadvantages of this form of departmentalisation are
presented in Table 7.8.
Table 7.8 Advantages and disadvantages of matrix departmentalisation
It enables an organisation to manage Each employee reports to two superiors, leading
complex projects. to divided authority.
More skills, experience and knowledge It increases overhead costs as it creates more
are combined to manage a project. management positions.
It makes good use of functional There can be confusion about who is ultimately
expertise. responsible for strategy implementation.
It enhances creativity and diversity.
An example of matrix departmentalisation is illustrated in Figure 7.8.
Figure 7.8 Example of matrix departmentalisation
7.5.3 Other organisational designs

7.5.3.1 Team-based structure
Team-based structures have become more and more popular as a method of
organising. The reason for this is that teams provide an easier way to
delegate authority, allocate responsibility and empower lower-level
management and employees. Team-based structures make an organisation
more flexible. Decision-making happens faster because the organisation
becomes more horizontal, breaking the long vertical chain of command and
the departmental barriers. Teams take full responsibility for operational
issues and all of this enables the organisation to respond to the competitive
environment more accurately and effectively. Figure 7.9 illustrates a team-
based structure.
Figure 7.9 The team-based structure
7.5.3.2 Boundary-less structure

A boundary-less organisation is a modern approach in organisational design.
A boundary-less organisation is not defined by, or limited to, the horizontal,
vertical or external boundaries imposed by a predefined structure. Boundary-
less organisations transcend the rigid lines of bureaucracy and divisional
boundaries and ignore the borders where the organisation itself is separated
from its markets, customers and stakeholders. This type of structure
welcomes and thrives on change, focusing on fluid and adaptive behaviour.
An informal managerial style is well suited for complex and non-standard

work. There are no barriers between the organisation and the external
environment. A boundary-less organisation is highly adaptable, creates
rapid innovation and is a perfect structure for an organisation that finds
itself in the growing technology industry.
A boundary-less organisational structure may also involve eliminating the

barriers separating employees, such as traditional management layers or
barriers between different departments. Structures such as self-managing
teams create an environment where employees coordinate their efforts and
change their own roles to suit the demands of the situation, as opposed to
insisting that something is “not my job”.
There are different types of boundary-less organisations. The first type is the
virtual organisation (also sometimes called the network or modular
organisation) where all the major and/or non-essential supplementary
functions are outsourced. The purpose with this format is to preserve only the
value-generating and strategic functions in-house, while the rest of the
operations are given over to suppliers. Organisations like Nike and Reebok
are just two of the thousands of organisations worldwide that do business
without owning manufacturing facilities. A typical bureaucratic
organisational structure has many vertical levels of management, while the
virtual organisation outsources many of its functions and focuses only on its
core competencies. The advantage of the virtual organisation is its flexibility.
An organisation can become a major competitor without owning all the
different activities in its value chain. The disadvantage is that virtual
organisation reduces management control over some of the activities of its
business, because it has to rely on outsiders. Figure 7.10 illustrates a virtual
organisation.
Figure 7.10 A virtual organisation

The second type of virtual organisation is the strategic alliance. This is
similar to a joint venture, where two or more companies find an area of
collaboration and combine their efforts to create a partnership that is
beneficial for both parties, except there is no sharing of ownership. This may
result in the traditional boundaries between two competitors being broken.
7.6 SUMMARY
For the management function of planning to realise its full capacity,

organising must be done to create structure. Through this structure, tasks and
activities must be performed in order for goals and objective to be
accomplished. These tasks and activities must be controlled and coordinated
in various ways by creating departments. Without proper and accurate
organising activities, the organisation will not be coordinated and driven to
achieve its goals.
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Griffin, D. The structure of a boundaryless organisation. http://smallbusiness.chron.com/organisational-

structure-communication-3815.html (accessed on 10 October 2014).
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http://www.healthierwork.act.gov.au/__data/assets/pdf_file/0004/309280/Guide_to_Promoting_Healt
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business/business-operations/what-is-the-structure-of-mcdonalds-and-how-each-department-in-the-
organisation-interact.html (accessed on 21 October 2014).
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CASE STUDY: STRESS-FREE WORK ENVIRONMENT AND

ORGANISING
A happy employee is usually a productive employee. Many things play a role in whether
employees are happy or not. It begins with employees having a healthy job environment.
A healthy job is likely to be one where the pressures on employees are appropriate in
relation to their abilities and resources, to the amount of control they have over their
work, and to the support they receive from people who matter to them. A healthy
working environment is one in which there is not only an absence of harmful conditions
but an abundance of health-promoting ones. If the work environment does not support
employees, it may cause work-related stress. This will have a negative effect on an
employee’s productivity.
What is work-related stress?
Work-related stress is the response people may have when presented with work
demands and pressures that are not matched to their knowledge and abilities and
which challenge their ability to cope.
Stress is often made worse when employees feel they have little support from
supervisors and colleagues, as well as little control over work processes.
There is often confusion between pressure or challenge and stress, and sometimes
it is used to excuse bad management practice.
Work-related stress can be caused by poor work organisation, poor work design, poor
management, unsatisfactory working conditions, and lack of support from colleagues
and supervisors.
Research findings show that the most stressful type of work is that which values
excessive demands and pressures that are not matched to workers’ knowledge and
abilities, where there is little opportunity to exercise any choice or control, and where
there is little support from others. Employees are less likely to experience work-related
stress when
demands and pressures of work are matched to their knowledge and abilities
control can be exercised over their work and the way they do it
support is received from supervisors and colleagues
participation in decisions that concern their jobs is provided.
Pressure at the workplace is unavoidable owing to the demands of the contemporary

work environment. Pressure perceived as acceptable by an individual may even keep
workers alert, motivated, able to work and learn, depending on the available resources
and personal characteristics. However, when that pressure becomes excessive or
otherwise unmanageable it leads to stress. Stress can damage an employee’s health
and business performance.
Source: Adapted from http://www.who.int/occupational_health/topics/stressatwp/en/
(accessed on 21 October 2014)
1. What can managers do to create a save and healthy work environment in their
organisations? Base your answer on the theory of organising.
2. Can an organised work environment decrease stress? Substantiate your answer.
3. What can employees do to improve their work environment and be more

productive?
4. Explain the impact of the centralisation of authority and the decentralisation of

authority on creating a healthy work environment.
1. What are the different forms of departmentalisation? Explain the types and draw diagrams
to illustrate how they are structured.
2. Why is it important for an organisation to be organised? Discuss your answer referring to

theory on organising.
3. Why would you prefer to work in a virtual organisation?
4. Visit an organisation. Ask the manager/owner why he or she has decided on the specific
organisational structure of the organisation, and what influenced his or her decision.
8 Organisational change and
learning
ADEN-PAUL FLOTMAN
Learning outcomes
Understand and explain the changing world of work.

Discuss the concept of the organisation as a dynamic social system.
Diagnose various types or areas of change.
Identify and discuss the triggers and forces of change within a multidimensional
environment.
Describe and contrast three major models of planned change.
Explore the nature of organisational change and the reasons for resistance to change at
a personal and organisational level.
Outline the definition, evaluate the benefits and discuss the characteristics and the
relationship between organisational learning and performance.
8.1 INTRODUCTION
Organisations find themselves in an environment marked by radical and

intensive change. In order to survive and remain competitive, organisations
are compelled to become flexible in their approach, and responsive to
internal and external forces. After organisations have planned, they have to
develop an organisational structure that supports the plan. This can also mean
that change will or must happen in the organisation – changing the existing
organisational structure may mean that people are moved to new positions in
the organisation or lose their jobs. Restructuring the organisation often lies
at the heart of change.
This chapter commences by exploring the changing world of work and the
need for organisations to be responsive to change. Forces exerting pressure
on organisations to change present themselves in the form of volatile,
general, systemic and internal organisational forces. It has therefore become
incumbent on managers to be able to manage change. Three major theoretical
approaches to planned change are explored, namely, Lewin’s three-step
model of change, the action research approach, and the positive model of
change.
Resistance is a normal human response to change. This phenomenon is

discussed both from an individual and an organisational perspective.
Strategies that managers can use to manage resistance constructively are also
explored. One way of becoming resilient, and change fit, is to strive to
become a learning organisation. The ability of the organisation to learn has
become the new competitive edge. This chapter thus concludes with an
overview of a learning organisation and its distinguishing features.
8.2 THE CHANGING WORLD OF WORK
The rapid pace of technological, socioeconomic, political and global

development has resulted in change becoming an all-encompassing,
inevitable and persistent distinguishing feature of organisational life. It is
evident that the unpredictability, impact and magnitude of change will
become greater than ever before. The premise is that organisations will have
to acquire the capacity to anticipate and become responsive to internal and
external influences, in order to remain sustainable over the long term. The
inability or reluctance of some organisations to be responsive to change
implies that they will be relegated to the periphery of the business world,
where they will ultimately perish.
Organisations have to continually find ways of renewing themselves in an
attempt to enhance productivity, contain operating costs and increase their
competitive agility. All organisations are influenced by internal and external
forces in a unique way. These factors originate from both inside and outside
the organisation. External influences range from political and economic, to
technological and sociocultural. Notable external forces are illustrated in
Figure 8.1 and include fierce and innovative competitors, sophisticated
suppliers, increasing consumer demands, higher stakeholder expectations,
stringent government regulations, increasing intergovernmental agreements,
communities, trade union movements and society at large. The different
organisational environments were discussed in detail in Chapter 3.
Organisations are also being confronted by industry-specific technological

advances and a change in the demographics of the workforce. There has
been a shift from a workforce dominated by baby-boomers, to one which is
younger, in the form of generation X and Y employees. While developing
economies like South Africa have a relatively young workforce, developed
economies are confronted with the challenge of a rapidly shrinking and
ageing workforce. One of the advantages of globalisation in this regard is the
opportunity for labour mobility. Employees with a specific skill set and
experience are prepared to leave their country of birth, to exploit
employment opportunities across the globe, sometimes holding more than one
job at the same time. This ever-changing world of work is having a direct
impact on individual, team and organisational behaviour, the level of
uncertainty, anxiety and control, managerial decision-making and
philosophies, the need for work–life balance, and the importance of life-long
learning as a critical survival mechanism within this turbulent work and
However, research suggests that organisations invest heavily – through

power, emotion and resources – in the existing organisational status quo, and
are more likely to fine-tune those structures than engage in complete
transformational change. Large-scale change occurs as a result of the
following disruptions:
Industry discontinuities – revolutionary changes in political, economic or

technological conditions
Product life cycle shifts – requiring different business strategies or
models
Internal company dynamics – changes in the size, strategy or turnover
Figure 8.1 The organisational environment
These “winds of change” blowing through organisations are being

exacerbated by the notion of the organisation as an open system. A typical
definition of an organisation is that it is a
social entity, that has

a specific purpose, with a
set boundary (inside vs outside),
governed by patterns of processes and activities, resulting in a
recognisable structure.
Figure 8.2 reflects this notion of the organisation as a system of dynamically
connected subsystems, which is situated and functions within the context of
other systems such as the environment, providing inputs and subsequent
outputs to deliver on its purpose (also refer to Chapter 1). Most
organisations consist of a formal subsystem (organisational strategy,
management groupings, organisational goals, structure, operations and
technology), as well as an informal subsystem (political behaviour,
leadership and followership, culture, etc.). Within the context of the internal
and external forces discussed above, these subsystems dynamically interact
with one another, which often results in an unpredictable, complex social
system exhibiting a unique pattern of individual and organisational
behaviour.
Figure 8.2 The organisation as a dynamic social system

8.3 FORCES FOR CHANGE
Change happens. It is a normal feature of social and organisational life and

cannot be studied in isolation. Change has a cognitive, emotional and
behavioural component, and should be managed at different levels. It can be
planned or imposed, dramatic or it can gradually sneak up on the
organisation. Such is its pervasive nature that it has been observed that
“Change is alive and well!”. Change is real, it is radical and it is applicable
to every organisation every day.
In the following sections, forces of change are discussed according to their

nature and potential impact.
8.3.1 Volatile forces

These forces are primarily external to the organisation and create ever-
changing conditions. It is important that organisations are aware of their
influence:
Unpredictable economic and business environment. Changes on the

economic front, in the form of increased inflation or an economic
recession, could force organisations to rethink the way in which business
is done.
Fierce competition, challenges and opportunities presented by
globalisation. Transportation, advances in information technology and the
rise of multinationals have resulted in more competition for markets,
clients and resources, with the accompanying opportunities to be
exploited.
Government intervention in the economy. An example of government
intervention is its involvement in competitive and critical industries, such
as the mining and pharmaceutical industries.
Demanding labour union agendas, particularly in the SA context.
Unions have to ensure that the rights and interests of their constituencies
are always protected.
Divergent political interests. Sociopolitical interest groups with
divergent needs and expectations exercise pressure to ensure that their
interests are met.
Fight for scarce, limited resources. In the context of limited, particularly
natural resources, such as coal, organisations need to manage current
energy needs and think about more sustainable energy sources.
The rapid advances in technology. Today’s technology could be obsolete
tomorrow. This has resulted in more agile organisations, in order to be
more responsive to rapid technological advances.
8.3.2 General forces
Consumers are becoming more knowledgeable, more demanding and

more quality conscious. Organisations rely on consumers to buy their
products. Competition for the loyalty of customers has become extremely
fierce.
More flexible work structures have resulted in varied patterns of
management. Another influence on organisations is how work is structured
and the subsequent impact on managerial practices.
Change in the composition (demographics) of the workforce has an
influence on the organisation. A younger workforce has placed increasing
emphasis on generational values, expectations and attitudes toward work
(see Management in action 8.1).
Organisations are diverse, living, dynamic systems which often leads to
internal tension and conflict.

Influence of changing demographics
Change is the only constant. It is a fact that projections for Africa are indicating that 1.8
billion babies will be born in the next 35 years and that Africa’s population is expected to
double from 1.2 billion people in 2015 to 2.4 billion by 2050. This changing demographic
situation in Africa can transform the continent into an economic force to be reckoned
with, given that this youthful population will be educated and entrepreneurial. This kind of
population will be attractive as an investment destination for the rest of the world
because of its natural resources, but Africa will also be attractive as a consumer
market. These changing demographics will demand from African countries the use of
their labour forces to drive economic growth and to increase their prosperity.
In South Africa, organisations are already experiencing the influence of the changing
composition of the work force as they experience the changes of organisational values
and general attitudes towards work. The different values of the different generations
cannot be ignored by managers of organisations.
8.3.3 Systemic forces
The variety of outsourcing models available. Certain outsourcing models

have a direct impact on workflow, structures and processes.
A consistent struggle to determine the “core business” of the organisation.
Changes in the external environment could also have an impact on the
strategic intent of the organisation.
Fragmentation of work and its subsequent impact of alienation and
meaninglessness. The way in which work is divided can also lead to a
change in the status quo.
Managing the negative impact of technology on employment. Adopting
technology may lead to the loss of employment.
8.3.4 Internal organisational forces
The challenge of ageing organisations. This could be in the form of

buildings, equipment, employees, etc. thus compelling the need for change.
Inadequate human resource planning as well as inadequate training and
staff development. Organisations are obliged to respond to these
challenges.
The temptation of “doing more with less”. This often happens when
employees have been retrenched or dismissed, and the employer refuses to
appoint new employees.
Change fatigue in the absence of change flexibility. Organisations will
then become unsustainable. Survival compels them to bring about realistic
changes.
8.4 TYPES OF ORGANISATIONAL CHANGE
Organisational change is an attempt to enhance organisational efficiencies.

This is done by applying a number of change types or strategies. Change can
be effected by implementing a new strategy, structure, technology or
behaviour, or a combination of these (an integrated approach):
Strategic change can emanate from a need for the organisation to

reposition itself in the face of changing market conditions. Major strategic
changes often have an impact on the organisation’s structure, systems,
processes and even culture.
Structural change involves the organisation’s design, workflow,
reporting relationships, etc. Examples of structural changes are
downsizing, decentralisation by providing smaller organisational entities
(departments) with more decision-making autonomy, or centralisation,
where critical decision-making takes place at head office level.
Technological change introduces new technologies, such as manufacturing
equipment and computerised information systems. For example, a
university could implement a new computerised information system to
expedite online application and registration processes.
Behavioural (or people) change involves the optimal use of human
resources in the form of optimising an organisation’s talent. Organisational
performance is enhanced by raising people’s job satisfaction, motivation
and commitment levels.
An integrated approach to organisational change involves a revised
strategic, structural, technological and behavioural strategy. These
strategies target the organisation’s purpose, structures, design,
manufacturing or service methodologies, attitudes and values. The focus is
on a new strategic direction, relationships, processes and behaviours,
which result in improved organisational performance.
8.5 APPROACHES TO MANAGING THE CHANGE

PROCESS
Organisations are always evolving and effective change management has

therefore become closely linked to the organisation’s ability to compete
successfully. To this end, the concept of planned change has dominated
organisation development literature. However, planned change has also come
under severe criticism in the current world of rapid and turbulent fluctuation
and evolution.
This section will explore some of the major theories of planned change,
namely, Lewin’s three-step model, the action research approach, and the
more recent positive appreciative model.
8.5.1 The Lewin model

Lewin attempted to resolve primarily social tension through behavioural
change. At the centre of Lewin’s theory is the interaction of dynamic forces
which result in stable systemic behaviour. Two sets of behavioural forces are
always at play: (1) those working against change to maintain the status quo,
and (2) those working against the status quo to bring about change. A “quasi-
state equilibrium” is achieved when these forces are equal in strength.
Change is therefore effected by the following:
Enhancing the forces pushing for change

Undermining the forces maintaining the status quo, or
A combination of both
An effective change strategy, according to Lewin, is to decrease the

restraining forces (striving to maintain the status quo), rather than increasing
the pushing forces (striving for change). The assumption is that an increase in
the pushing forces would result in higher levels of resistance to change.
Lewin’s fundamental contribution to organisational change is his three-step
model:
STEP 1: UNFREEZING
The first step involves reducing the forces in favour of the current
situation. This is often achieved by communicating information indicating a
discrepancy between the current state of the organisation and its desired
state; in other words, by making it known that the current way of operating is
no longer viable and would result in the organisation becoming less
competitive, unproductive and unsustainable over the long term. The desired
behaviours and modified organisational activities would make the
organisation more competitive, more productive and more sustainable. This
would be beneficial to individuals and the organisation as a whole. This kind
of thinking would result in members becoming inspired to engage in new
organisational behaviours and activities.
STEP 2: MOVING
This step involves the alteration of individual, group and organisational
behaviour to new behaviours in line with the desired state. This
intervention could involve the introduction of a new strategy, values,
attitudes, ways of working, structures, technology, etc. One of the key
challenges of this phase is learning to live with the discomfort introduced by
these changes by unlearning and relearning new sets of thinking and
behaving. However, without reinforcement, the new state cannot stick, hence
the importance of the last phase.
STEP 3: REFREEZING
This is the final step and involves the stabilisation of the organisation at
the new level. Regression is always a possibility, so the refreezing will
ensure that the change is not short-lived. It is critical that the environment of
the individual in the form of group norms and activities reflect the new way
of doing things. Other forms of refreezing to be considered are management
setting the example through their behaviour; recognising and rewarding new
behaviours; instituting supporting structures, and providing ongoing training
to entrench the new competencies required. In the absence of significant
support, people will simply return to the comfort of their “old behaviours”.
A notable extension of Lewin’s three-step model is Kotter’s eight-step

process which involves the following:
8.5.2 The action research model

Action research has been modified to become more applicable to planned
change within an organisational context. It involves a collective,
collaborative, yet iterative process with all stakeholders, from data
collection and analysis to action planning, implementation and evaluation.
Initial research findings are assessed and then applied to inform subsequent
activities. There are eight main steps to action research.
STEP 1: PROBLEM IDENTIFICATION

This stage commences when there is an awareness of certain challenges, also
expressed as a “felt need” that the organisation can no longer proceed in the
same fashion. An intervention is therefore required to assess the presenting
problem and to address the underlying causes.
STEP 2: CONSULTATION WITH A RELEVANT EXPERT
This awareness leads to a consultation with a relevant expert. In the first
meeting, client and consultant will build a relationship by sharing
experiences, histories, expectations and frames of references. It is critical
that a transparent, credible relationship is formed. This will result in an
atmosphere of trust and collaboration, which is invaluable to the success of
the project.
STEP 3: DATA COLLECTION AND INITIAL ASSESSMENT

The practitioner, for example an organisation development (OD) consultant,
normally takes the lead during this phase, with the support of all relevant
stakeholders. It is critical to note that the intervention has already started in
terms of influence and impact. Data is collected through observation,
interviews, surveys and the scrutiny of organisational records. This
information will help to determine the underlying causes of the presenting
problem.
STEP 4: FEEDBACK TO CLIENT

A feedback session is arranged and the data is discussed with the client or
client grouping. This will give the client an idea of the current status of the
organisation. New observations may have been uncovered and existing
perceptions could be confirmed. Confidentiality should be protected at all
times and the information should be conveyed with consideration for ethical
and other implications. Sometimes the client is not ready for the “news” and
could become resistant to the process. This phase should be handled in a
sensitive, yet firm manner.
STEP 5: JOINT PROBLEM DIAGNOSIS
This phase relies heavily on the client–consultant relationship. Data is further
diagnosed and interpreted, problems are identified and priorities decided
upon. The consultant must not enter with a preconceived solution. The
diagnosis must be approached as a collaborative process. It is critical that
the client understands and accepts (i.e. buys into) the final diagnosis.
STEP 6: JOINT ACTION PLANNING

The nature of the problem, the current organisational internal and external
environment, and the desired end-state will determine the actions in the form
of interventions to be implemented. This is done collaboratively between
the consultant and the client grouping/stakeholders.
STEP 7: ACTION
A transition period is entered where specific actions are initiated in the form
of new methods, technologies, procedures, behaviours, structures, etc. Action
is thus taken to implement the change.
STEP 8: POST ACTION DATA COLLECTION
To close the process, data is collected to assess the impact, gaps are
identified, and feedback is presented. This reflects the iterative nature of
the model, resulting in a process of re-diagnosis and new actions to be
initiated.
This model can be applied in small entrepreneurial settings to large multi-

corporate settings, and is increasingly being applied in social settings. The
attractiveness of this model lies in its collaborative nature, resulting in
clients feeling involved which inspires ownership and learning throughout
the process. Multidisciplinary collaboration is also nurtured by the pooling
of diverse expertise.
8.5.3 The positive model – appreciative inquiry

Lewin’s model and the action research approach are primarily deficit based,
i.e. they focus on what is wrong, what the problems are and how these
negatives can be eliminated. The positive model emphasises what is going
right in the organisation. What are its strengths? What does the organisation
look like when it functions optimally? Positive expectations create an
anticipation of positive outcomes. This in turn generates energy, excitement
and motivation. This approach feeds off the positives of the organisation to
strengthen it even more.
The appreciative inquiry (AI) process is an application of the positive

model. AI looks at change through a positive lens and stresses collaborative
engagement, a shared vision and positive potential. The five phases of the AI
process are discussed below.
PHASE 1: INITIATE THE INQUIRY
This phase involves the identification of the subject of change. It must be an
issue that is real and critical to members and which they are eager to
address. The nature of the change will spark positive energy throughout the
process.
PHASE 2: INQUIRE INTO BEST PRACTICES
This phase involves the collection of data regarding the organisation when it
functions at its peak. Individual stories and anecdotes are collected via
interviews regarding experiences when individuals felt highly engaged and
appreciated. These individual findings are then collated to provide a
colourful description of the characteristics of an organisation which values
its members.
PHASE 3: DISCOVER THE THEMES
This phase involves the scrutiny of the stories from phase 2, which are then
translated into themes. Examples of themes could be authentic engaging
leadership nurturing trust, consistent organisational support which leads to
innovative thinking, organisational recognition and the willingness to walk
the extra mile, etc. These themes are reflective of attractive future
possibilities.
PHASE 4: ENVISION A PREFERRED FUTURE
Stakeholders subsequently explore the themes, collectively envision the
organisation’s future, describe a compelling future in the form of
“provocative possibility propositions”, and identify processes to be aligned
and support to be championed in order to “give birth” to this envisioned
future.
PHASE 5: DESIGN AND DELIVER WAYS TO CREATE THE FUTURE
The final phase involves the identification and description of plans and
activities to deliver this new future. Actions are monitored and adjustments
made by engaging in positive conversations about the imminent compelling
future.
8.5.4 Criticism of planned approaches

Planned approaches to change have been criticised because of their
questionable application to organisations within a rapidly changing
environment. Newer perspectives on change, such as continuous
improvement and organisational learning, have been suggested as being more
effective under dynamic conditions and circumstances. There is also a strong
argument that downplays these approaches to change and rather emphasises
the creation of an organisational climate and structure that facilitates
experimentation, learning and a positive appetite for change, known as
change resilience. Table 8.1 lists some actions for effective change.
Table 8.1 Actions to introduce effective change
1. Analyse the organisation and its need for change. Stakeholders need to understand
the nature and rationale for the change.
2. Create a shared vision and a common direction. A credible, competent team must
provide inspirational leadership in support of the change.
3. Separate from the past. Stakeholders need to move out of and away from their
comfort zone. It cannot be business as usual.
4. Create a sense of urgency. What is in it for me? What are the consequences of not
changing?
5. Support a strong leader role.
6. Line up political sponsorship. One of the critical contributors to successful change is
effective sponsorship.
7. Craft an implementation plan. Adopt a project management approach to change.
8. Develop enabling structures. In the absence of structures to contain anxieties and
provide support during this uncertain phase, people will tend to return to the familiarity
of the comfort zone.
9. Communicate, involve people and be honest.
10. Reinforce and institutionalise change. Make change stick by celebrating successes
and rewarding positive behaviours.
8.6 RESISTANCE TO CHANGE

Change has the capacity to unleash waves of resistance, not only in people
but also in organisations. Resistance is generated by fear and anxiety,
irrespective of whether it stems from perception, or is firmly grounded in
objective evidence. Resistance to change (i.e. the thinking processes
regarding the impact of the change) has become a common characteristic of
organisational life. Fears could emanate from perceptions around job
security, working conditions, the instability associated with uncertainty (not
knowing), power and influence, remuneration, the acquisition of new
competencies, or simply discomfort as a result of potential inconvenience
and disruption.
On an organisational level, there is also a vested interest in the status quo.

The way in which current arrangements operate (such as current work flow
and reporting lines, policies and procedures) are often beneficial to certain
powerful stakeholders. Changes in these arrangements create tension. When
tension arises, managers are more familiar with the operational component of
the business and not necessarily the human side of the business. An effective
change strategy is necessary and should make provision for this eventuality.
8.6.1 Individual resistance

As creatures of habit, change can generate significant anxiety for people
when they have to move from the security and comfort of the known, to the
insecurity and discomfort presented by the unknown. Research has revealed
some reasons for individual resistance to change in an organisational setting.
8.6.1.1 Change uncertainty

Human beings do not tolerate uncertainty well. The status quo brings comfort
and predictability. So anything that poses a threat to routine and the familiar
will be met with resistance. People often say: “If it ain’t broke, don’t fix it.”
Uncertainty regarding change therefore creates insecurity. However, a certain
degree of discomfort needs to be created in order to effect critical changes in
organisations.
8.6.1.2 Selective perception

People interpret environmental stimuli in a unique way. These interpretations
can be accurate or inaccurate. What is critical is that this view or perception
becomes “reality” for an individual. The change that follows a period of
industrial action could quite easily be interpreted as “punishment for our
actions”.
8.6.1.3 Fear of the unknown

Closely associated with the uncertainty regarding change is fear of the
unknown. The insecurity of the unfamiliar, for example the introduction of
new technology, creates anxiety, the defence against which is being resistant
to the new changes. This is why communication is so critical during a change
process. People fill any information vacuum with speculation, paranoia and
scepticism.
8.6.1.4 Attraction of habit and the disruption of routine

Habits provide comfort, familiarity, confidence and security. Changes
without any clear benefits are likely to be resisted. Resistance will be even
stronger if habitual routines have resulted in positive, successful outcomes.
Under these circumstances, change will be viewed as an inconvenience and
an annoying disruption.
8.6.1.5 Loss of freedom and other benefits

If the change is likely to result in the reduction of freedom, the loss of control
and rewards, or any other significant benefit, it is likely to be resisted. The
change must be seen to be of benefit to the recipients. Only then will it be
accepted. People often want to know: “What is in it for me?” The more the
personal benefits that are derived, the better the chances of the project being
supported and accepted.
8.6.1.6 Threat to power, social networks or security

Any change that results in the loss of influence, jobs, opportunities for
advancement, friendships and other networks will be strongly resisted.
People often have a vested interest in group cohesion, status and prestige.
Change may also be beneficial at organisational level, but perceived as a
threat at personal and individual level.
8.6.2 Organisational resistance

Resistance is not only confined to the individual level. Organisations often
have a vested interest in the status quo, and will resist any perceived efforts
aimed at disrupting its routine. Organisational culture is also created over
time in order to deal satisfactorily with certain factors in its internal and
external environment. This culture is sustained because things are done in a
particular fashion in the organisation which has worked well in the past.
There are some common reasons for organisational resistance to change.
These are discussed below.
8.6.2.1 Political resistance: threats to power, influence and

stability
Groups of people often invest and become comfortable with the way in
which things are done in the organisation. This later becomes the norm, or
their “undisputed right” to specific resources, responsibilities, decision-
making or organisational intelligence. Change may therefore be perceived as
a threat to their power and influence, thereby disrupting the status quo. This
status quo provides stability and predictability, particularly in large
bureaucratic organisations. These dynamics will make organisations less
responsive to change.
8.6.2.2 Cultural resistance: organisational norms and culture

Sometimes an existing organisational culture, commonly expressed as “the
way things are done around here”, can also facilitate resistance to change.
Organisational norms, value systems, patterns of behaviour, language,
attitudes and interactions develop gradually over time, and the nature of these
organisational idiosyncrasies is difficult to change. Individuals and
subgroups are subsequently coerced to behave in a certain way.
8.6.2.3 Technical resistance: mutual trade, working

arrangements and agreements
To enter into contracts and other forms of agreement is a normal feature of
organisational life. The nature of these agreements could inhibit the
introduction of certain changes. In the South African context, a notable
example could be agreements with trade unions regarding technologies and
restructuring practices.
8.6.2.4 Dynamic resistance: long-term investments

Long-term investments in, for example, infrastructure and technology could
also serve as an inhibitor of change. Organisation-wide change projects often
require significant financial and other resources. Prior commitments would
make it difficult for organisations to alter an existing approach, or to divert
resources to alternative projects in the short term.
8.6.3 Overcoming resistance to change

As change unfolds, the coping capacity and resilience of employees,
managers and the organisation as a whole are relentlessly tested. This
emotionally changed environment can evolve into an overwhelmingly
unsettling experience. Resistance will manifest through covert and overt
conflict, disagreements, hostility, questions regarding the nature and
consequences of the change, passive-aggressive behaviours and even
sabotaging of the change initiative. Often managers are expected to deal with
this resistance when they also have to come to terms with the change, and are
therefore ill-equipped from an emotional and change management
perspective to deal with the human side.
The following strategies can be considered to manage resistance to change

positively.
8.6.3.1 Motivate commitment

Central to the challenge of resistance to change is motivating commitment to
the change. A felt need for change must be created by making people
uncomfortable with the status quo. This will motivate employees to explore
new ways of behaving. Individuals need to know and experience that the
current state is no longer viable, and that a new desired state should be
embraced. Staff therefore need to understand fully the reasons for the change
and “what is in it for me”.
8.6.3.2 Understand the human response to change

Organisations need to understand that human beings tend to deal with change
in an emotional way. Resistance should be viewed as a normal human
response, and it should to be welcomed as an opportunity for engagement and
learning. Space therefore needs to be created for people to “voice” their
emotions, by processing their unique, subjective experiences of the change
process on an emotional and cognitive level. When people feel understood,
and that their experience of the change is regarded as important, it is likely
that their resistance to change will diminish.
8.6.3.3 Show empathy and support

An environment of relative safety and trust is created by displaying genuine
empathy and proactive support. This is done by showing interest (remaining
close to people), identifying the areas of concern, suspending judgement
(since people are dealing with situations in their own unique way) and
ensuring that management delivers on their promises.
8.6.3.4 Ensure consistent communication

Uncertainty creates speculation, anxiety and defensive, paranoid behaviours.
Managers must find effective ways of delivering information. These can
range from emails and posters, to more personal forms of communication
such as departmental meetings, short presentations and “coffee and muffin”
sessions. These sessions provide individuals with the opportunity to engage,
ask questions, eliminate misconceptions and receive support from their
colleagues. It is often said that even if there is “nothing” to communicate, say
it. The importance of honesty in communication can never be overstated.
8.6.3.5 Foster individual involvement

Organisations do not change, people change. The focus should therefore be
on individual involvement throughout the change programme. Full
participation of members in the organisation must be encouraged right from
the inception and conception of the whole change process. People often
identify critical details, innovative ideas and unforeseen pitfalls. By
involving people, trust, motivation and commitment are instilled.
8.6.3.6 Management must play a containing role

Change can be a painful, uncomfortable, disruptive process. This is when
management is expected to play an invaluable containing function. Fears and
anxieties are limited through appropriate management of expectations and by
supporting individuals in the roles they have to take up during this turbulent
time. Organisational realities such as structures, guidelines, information,
checklists, roles, etc. often create comfort. When the things to which people
have become accustomed are suddenly dismantled and they have to move
into the unknown, fear and anxiety are created. Management should limit this
through effective communication. Managers, however, often wrestle with the
dilemma of what to communicate, how much and when.
Leadership requires being honest with your people. Trust is irrevocably

damaged when people discover that they have been lied to and deceived by
management (see Management in action 8.2). This in itself could be a source
of resistance. Management needs to set the tone in terms of what is
prioritised, how it is communicated and what must be rewarded. Conditions
need to be created that will minimise the threat and discomfort of change, and
maximise the level of acceptance. People need to feel that they are included
and respected and are the co-owners of the change, as opposed to being
bullied into a change project.

Honest leadership
We have a huge trust deficit in our country, or perhaps in society at large. Labour does
not trust business; business does not trust labour; business and labour does [sic] not
trust government; many employees do not trust management; and frankly far too many
managers do not trust their employees; many of our compatriots do not trust the
President of our country; and there is probably a strong case for the President not
trusting his people; most would attest that they simply do not trust politicians.
The unnecessary outcome is that decisions are questioned, surreptitiously or even

blatantly; buy-in to decisions are [sic] therefore slow and much needed action is
delayed, and when implemented, it is not necessarily with the best attitude and even full
grasp of the original message, because why will someone listen effectively when there
is little or no trust. There are more consequences to distrust, but as a leader carefully
consider the dire implications of just this alone.
While distrust may result from several reasons, one clear cause is the perception or
reality of dishonesty, in whatever guise, shape or form. Truly great leaders are authentic
– their behaviour predominantly matches their words; their motives generally are also in
sync with their actions; their actions reflect their values.
Let’s be honest, many political, corporate and other leaders struggle to be authentic;
they are ‘boxed’ in, saying what is politically correct rather than what they really believe;
following agenda’s [sic], rules, procedures, plans that are forced upon them rather than
what they believe will truly lead to success.
Hence, it is reasonable to question whether or not we still have a lot of good leaders left
in South Africa, and perhaps globally. History and our own experience seem to counter
this though, because it reflects that inside a difficult environment great leaders emerge.
South Africa is a very difficult place to lead in and should therefore by default be
breeding great leaders.
You see, being honest in every respect makes one authentic – honest with yourself;
honest with others; honest about what is happening around you; honest in how you
address the reality; honest in your agenda. If we therefore want an authentic
environment it must be honest! Then the ground will be fertile to grow leaders that are
real and that will rise to the occasion to achieve the extraordinary.
Source: Adapted from Groenewald (2014)
8.7 CREATING A LEARNING ORGANISATION
The global competitive environment has forced organisations to change their

approach to doing business by being responsive to what is required. The
current competitive edge has often been defined as the ability to anticipate
change and to be responsive.
8.7.1 Learning organisations defined

In order to remain competitive and sustainable, organisations therefore need
to be flexible and responsive. They need to be transformed into learning
organisations. The need for life-long learning has been contextualised as
follows:
This imperative for continual change and improvement translates into one
key capability, the need for continuous organisational learning. It is
something every business needs to excel at and the lessons come from
making mistakes, learning from industry leaders and from competitors,
customers, suppliers, academic partners, and other sectors (Modena,
2003: 34–35).
Organisational learning has been defined in a variety of ways. It is aimed at

creating a culture in which all employees are ready, willing and able to
engage in continuous learning. Brown (2014: 395) defines a learning
organisation as: “A continuous state of self-directed learning that will lead
toward positive change and growth in the individual, team, and
organisation.” Another notable contribution comes from Senge (1990), who
defines it as a place where people continuously expand their capacity to meet
organisational objectives, where new and expansive patterns of thinking are
encouraged and nurtured, where collective organisational aspiration is set
free, and where people are continually learning together.
Knowledge is continually created in the interest of organisational objectives.

Organisational processes are also geared towards knowledge acquisition,
sharing and general application. In this context, it is critical for managers to
set the tone by being active learners themselves. At the centre of the learning
organisation are a shared vision, systems thinking, team learning and a
heightened consciousness of how and why things are done in a particular
fashion. This inevitably results in a deep sense of confidence and capability.
Learning organisations know that it is about managing variables and

activities which are within their sphere of influence. Entrenched in a learning
organisation is that a “blaming culture” is replaced with a “culture of
ownership”, a culture of learning, identifying challenges and opportunities.
Thinking therefore becomes a collective organisational activity.
Learning is organisational in so far as it is done to result in organisational

purpose and objectives, it is distributed throughout the organisation and the
outcomes are entrenched in the organisation’s processes, structures and
systems, thereby eventually becoming part of its culture.
8.7.2 Learning organisations: core values and norms

Organisational theorists agree that at the centre of learning organisations is a
set of values and behavioural norms. These characteristics have become part
of the culture of the organisation and are responsible for its continued
competitive edge and sustainability. These core values have a positive role
to play in a learning organisation:
They support the firm belief that every member of the organisation has
untapped human potential.
They appreciate the diverse forms of knowledge and learning styles.
They support the explicit development of creative thinking.
They adopt a non-judgemental approach to others and their ideas.
They actively break down traditional barriers.
They reduce the distinctions made between organisation members (leaders
vs followers).
They encourage dialogue between stakeholders with different
perspectives.
They support the firm belief that everyone is a leader – lead from where
you stand.
This kind of approach breaks down traditional silos and discourages

unhealthy competition and rivalry. It also increases the thinking capacity of
the organisation and values ownership as a core leadership characteristic.
Learning organisations are able to apply learning more effectively than their
competitors. What is unique to learning organisations is that the learning
remains in the organisation, even if members should decide to continue their
careers elsewhere. This emphasises the direct relationship between
organisational learning and organisational outcomes.
8.7.3 Learning organisations: core processes
The relationship between organisational learning and performance also
reflects the interrelated activities that are at the core of organisational
learning. These activities are discovery, invention, production and
generalisation:
Discovery is when a discrepancy between the actual and the desired state
is detected. For example, evidence may suggest that there is a significant
gap between actual and projected sales targets throughout the organisation.
An invention (intervention) is then devised to address this discrepancy.
The problem must be diagnosed and an appropriate strategy put in place to
solve it.
Solutions are implemented through the process of production.
Finally, the beauty of learning organisations is that lessons learnt from
specific initiatives are reflected upon and applied to similar situations in
other areas throughout the organisation. This is known as generalisation
and lies at the core of learning organisations.
8.7.4 Distinguishing features of learning organisations

There is a set of common characteristics at the core of the learning
organisation that is responsible for its ongoing success and profitability.
Knowledge is disseminated throughout the organisation, all employees feel
empowered and resources are deployed in the interest of organisational
learning and performance. Some of these common characteristics are as
follows:
There is consistent, deliberate collaboration throughout the organisation

and across all boundaries.
There is constant action, structured reflection, and modifications are made,
informed by evaluations.
There is active thinking, collective contribution and improvised
implementation.
There is access to real-time data, and therefore the best possible
knowledge, to effect relevant changes.
There is continuous planning, re-examination of planning and the changing
of plans, which is made known to all throughout the organisation.
There is value in learning, so all employees are encouraged to learn.
The concept of organisational learning is opposed to the kind of thinking that

proclaims that “some people think and others simply execute”. Thinking
becomes an organisational activity. Notable examples of organisations that
have successfully implemented aspects of the learning organisation are
General Electric (GE), Lafarge, SABMiller and the South African Revenue
Service. The advantages are that there is inevitable growth on individual,
team and organisational level. The result is a positive influence on the
performance of the organisation and its sustainability over the long term. In
Management in action 8.3, it is clear that BMW SA realised the importance
of becoming a learning organisation.

A learning organisation: BMW SA’s competitive edge
“The only thing that gives an organisation a competitive edge, is what it knows, how it
uses what it knows, and how fast it can know something new.” This drives BMW to
become a learning organisation and has focused our efforts to:
Ensure complete integration of training and development with organisational

objectives.
Ensure managers have the tools and incentives to actively develop staff.
Ensure everyone has access to development.
We promote co-responsibility for development, an empowering partnership entrenched

in our values system “We at BMW”. We also aim to have all our training initiatives
accredited as either externally recognised qualifications or contributing towards these
qualifications.
Source: Adapted from
http://www.bmw.co.za/products/automobiles/bmw_insights/learning.asp
(accessed on 14 August 2014)
8.8 SUMMARY
In this chapter, the dynamic intricacies of the modern world of work were
presented. As a result of rapid technological changes, traditional sources of
competitive advantage are no longer sustainable.
Internal and external forces pushing organisations to change were discussed

as well as the approaches to manage planned organisational change, notably
Lewin’s three-step model, the action research approach and the more recent
positive model.
As creatures of habit, change evokes fear and anxiety in people. This

phenomenon of individual and organisational resistance was discussed as
well as ways to manage the resistance to change. The chapter concluded with
a discussion on the importance of creating and nurturing learning
organisations.
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Pearson Higher Education.
Burnes, B. 2009. Managing change, 5th ed. New York: Prentice Hall.
Cummings, T.G. & Worley, C.G. 2015. Organisation development and change, 10th ed. Mason, Ohio:
South-Western Cengage Learning.
Edmonson, J. 2008. The learning organisation. New York: Harcourt.
Greiner, L. & Cummings, T. 2009. Dynamic strategy making: a real-time approach for the 21st
century leader. San Francisco: Jossey-Bass.
Groenewald, A. 2014. Honest Leadership = Authentic Leadership.
http://www.leadershipplatform.com/honest-leadership-authentic-leadership/ (accessed on 22 October
2014).
Jamieson, D. & Worley, C. (Eds). 2008. Handbook of organisation development. Thousand Oaks,
CA: Sage.
Kotter, J. 2012. Leading change. Boston: Harvard Business School Press.
Marais, J. 2014. Could Africa be the next China? Sunday Times, 17 August: 12.
McKenna, E. 1994. Business psychology and organisational behaviour. Newark: Doubleday.
Modena, M. 2003. A matter of balance. Professional Manager, 12(4): 34–35.
Mullins, L.J. 2010. Management and organisational behaviour, 9th ed. Portsmouth: Prentice Hall.
Robbins, S.P. & Judge, T.A. 2009. Organisational behaviour, 13th ed. New York: Pearson Prentice
Hall.
Schreyogg, G. & Sydow, J. 2010. Organising for fluidity? Dilemmas of new organisational forms.
Organization Science, 21: 251–262.
Senge, P. 1990. The fifth discipline. New York: Doubleday.
Senior, B. & Swailes, S. 2012. Organisational change, 4th ed. New York: Prentice Hall.
CASE STUDY: GENDER MAINSTREAMING “NEEDS FAST-

TRACKING”
According to Unesco, Gender Mainstreaming was defined by the United Nations

Economic and Social Council in 1997 as “a strategy for making women’s as well as
men’s concerns and experiences an integral dimension of the policies and programmes
in all political, economic and societal spheres so that women and men benefit equally
and inequality is not perpetuated”.
SA women make up 45% of entry-level professionals, against 53% in the US, but
representation is the same at executive level. Although women are making a significant
contribution to the economy, more could be done to fast-track their progress through
companies, says an expert in the recruitment industry.
“The business case for gender diversity must be recognised and supported from the
very top of the organisation,” said Sandra Burmeister, CEO of Landelahni Recruitment
Group, earlier this week. “Management needs to recognise that companies that
celebrate diversity are best-placed to develop a flexible organisation that can maximise
business opportunities. Transformation and diversity are not a ‘nice-to-have’. They are a
business imperative.”
A recent report by advisory firm McKinsey on women in the economy found that in the
US, structural blocks and embedded institutional mindsets play a major role in limiting
women’s opportunities. Lifestyle issues such as the desire for work–life balance and
individual mindsets also tended to hold women back. “SA’s legislative framework in
terms of black economic empowerment and the advancement of women has had a
significant effect in addressing structural issues and influencing corporates to be more
gender and equity sensitive,” Ms Burmeister said.
Although many barriers had been addressed by legislation, when it came to lifestyle
issues and personal beliefs, women themselves needed to make the shift, she said.
“Women need to recognise and value their own capabilities and experience, and keep
their knowledge current through training and leadership development programmes.
They need to seek sponsors who can help them further their career, and to take
advantage of any coaching and mentoring opportunities.”
She said it was also important for them to want to feel that their development as
professionals was as important to their organisations as it was to them. “They want to
feel part of a team, they want to be acknowledged for the work they do, and they want to
feel they are being paid what they are worth.”
Yusuf Boda, a legal manager at legal insurance company Legal & Tax, said that the laws
had undoubtedly helped to change life for the better for SA’s women. Yet the realities
that many women lived with day-to-day did not reflect the progressive laws that were in
place to protect women and their rights. Women needed to inform themselves of the
rights they had under the law, Mr Boda said. He said there were too many women who
worked in companies where they were discriminated against or were unaware of their
rights or too scared to enforce them.
“Mainstreaming” most generally refers to a comprehensive strategy that involves both

women-oriented programming and the integration of women/gender issues into overall
existing programmes, throughout the programme cycle.
The critical success factors in implementing any Gender Mainstreaming process

involve a political and technical process with an obligation to produce results, not merely
provide the means, calling for:
Political will at the highest level;

Support and commitment, including at the individual level;
The existence of specific policies relating to equality of the sexes and egalitarian
laws;
The involvement of women in the decision-making process;
Partnership with and the involvement of NGOs which defend women’s interests
Time-bound strategies to implement the policy;
HR practices that are sensitive to gender interests.
Source: Adapted from Business Day, 3 August 2011

You are approached by Legal & Tax to implement a pilot gender mainstreaming project
in the company. This pilot will act as a benchmarking exercise to show how gender
mainstreaming should be applied in practice.
1. What are some of the political, economic, social, technological, legal and ecological
factors which are exerting pressure on Legal & Tax as an organisational system?
2. What type of change (strategic, structural, technological, people, etc.) is applicable

to Legal & Tax? Substantiate your answer.
3. You have been approached by the managing director at Legal & Tax. She informs
you that she is experiencing resistance to her latest change initiatives, both from a
personal and an organisational perspective. What advice would you give her to
manage the resistance?
4. Select any of the models of planned change. Discuss the model, and explain what
you would do at each phase/step of the model you have selected.
1. What is management’s role during the implementation of a change programme?
2. What are the common mistakes managers make during organisational change?
3. Identify any South African organisation. Identify its change philosophy, approach, strategy
and lessons learnt from recent organisational change initiatives.
4. Discuss the forces pushing for organisational change within the South African context.
Provide relevant examples.
5. Give examples of forces that will significantly influence the way organisations operate over
the next 10 years.
6. What are the implications of having a young workforce from a managerial perspective?
7. What strategies might be considered by management in gaining acceptance for a change

programme?
8. Think of a time when you had to change (in your personal or work life). How did this
change situation make you feel? Why was it such a daunting experience/welcoming
experience?
9. Identify a South African organisation which has successfully implemented some aspects
of a learning organisation. Which features of a learning organisation are applicable to this
organisation?
9 Managing diversity in the
workplace
JACQUES TALJAARD
Learning outcomes
Understand the broader approach to diversity management.

Identify and discuss the different dimensions of diversity.
Evaluate the factors that affect diversity.
Comprehend the implications of diversity management in South Africa.
Understand and comprehend the importance of diversity training in the workplace.
Distinguish between the different diversity training models.
Comprehend the possible problems and challenges of diversity management and
training.
Explain the positive aspects of diversity in an organisation.
Understand the relationship between diversity and the ethical challenge.
9.1 INTRODUCTION
When observing people, one thing is evident: while people may look more or
less the same in terms of number of limbs or fingers and toes, there are also a
lot of differences between them. This realisation is fundamental to the
concept of diversity. Diversity could therefore be described as the
realisation and understanding of the individual differences that exist between
people.
Workplace diversity is about acknowledging the value of individual
differences and making the most of these differences in the workplace.
Managers sometimes see this as a problem or challenge, but it can actually
be regarded as one of the greatest strengths of an organisation. Embracing
diversity in the workplace means creating an environment that values and
supports the contributions of all people.
South Africa, like many countries in the world, has a diverse population.
Eleven languages are recognised by the Constitution, representative of the
different ethnic groups found here. However, the diverse nature of South
Africa is not limited to the classification of the population as recognised by
the Employment Equity Act, i.e. African or black (79.6% of the population),
coloured people (8.9%), Indian/Asian people (2.5%) and white people
(8.9%). Statistics SA reports that according to the 2011 census, about 2% of
South Africa’s population is made up of migrants in terms of the United
Nations definition, which considers an international migrant as being a
person who changes his country of permanent residence for a period of 12
months or more.
To manage diversity in the workplace, a manager should understand how the

workplace population is compiled. The workplace population will be a
product of the community, area or region from where it is drawn (see

Awareness of diversity in the community
Divide participants into groups to discuss the occurrence of diversity in the community
where they grew up, with emphasis on the cultural groups/population groups
represented in the organisation’s immediate external environment.
9.2 A BROADER APPROACH TO WORKPLACE

DIVERSITY
In terms of the Employment Equity Act, the workplace must reflect the
demography of the community and this has become the subject of many
provincial and national debates in terms of the application of Employment
Equity principles (discussed later in the chapter). However, workplace
diversity is not only limited to the demographic composition of society.
Workplace diversity in South Africa has been influenced by the historical

development of the country and is therefore strongly linked to issues of
equality. Section 6 of the Employment Equity Act (55 of 1998) states that “no
person may unfairly discriminate, directly or indirectly, against an employee
in any employment policy or practice, on one or more of the arbitrary
grounds including race, gender, pregnancy, marital status, family
responsibility, ethnic or social origin, colour, sexual orientation, age,
disability, religion, HIV status, conscience, belief, political opinion, culture,
language, and birth”. These factors represent the core of the diverse
environment of organisations and can present significant challenges for
managers (see Management in action 9.2).
Although humans are the same in terms of some common traits, they are
fundamentally different when referring to the arbitrary grounds mentioned in
the act. This creates major individual differences. These fundamental
individual differences must be managed in the diverse work environment in
an organisation and it poses significant challenges for managers.

Defining the elements of diversity
To gain a better understanding, do some internet research on each of the elements of

diversity mentioned in the Employment Equity Act: race, gender, pregnancy, marital
status, family responsibility, ethnic or social origin, colour, sexual orientation, age,
disability, religion, HIV status, conscience, belief, political opinion, culture, language, and
birth.
Individual tolerance and the willingness to accept the differences between

people are the first step towards successful diversity management in South
Africa, commonly known as the “rainbow nation”. Successful diversity
management will be evident if staff retention is good and it will lead to
increased motivation, creativity and innovation from employees.
Acknowledging that people are different is a personal attitude towards

diversity and the first successful step on a journey to personally
understanding and managing diversity. Recognising different internal and
external factors that contribute to individual differences will be the
foundation of this understanding of diversity. An organisation is an open
system, in constant interaction with its environment. Not only does the
organisation serve a diverse community, but its very existence is directly
related to how well it does so.
9.3 DIVERSITY DIMENSIONS IN THE WORKPLACE
In order to be able to manage diversity in the workplace it is firstly important

to be able to identify the diversity dimensions in the workplace. Workforce
diversity implies that an organisation will include different people with
different qualities belonging to different cultural groups. Race, gender,
ethnicity, age, culture, physical ability and sexual orientation are aspects
about themselves that people cannot control or influence. These are the
primary dimensions of diversity. They are the inborn differences that will
have an ongoing effect on a person’s life. These are also the basic elements
through which people shape their self-image and develop a worldview.
The primary dimensions of diversity are influenced by the secondary

dimensions of diversity, namely, education, religion, income, parental status,
marital status, difference in geographical locations and work experience.
These factors have an influence on the beliefs, orientation and viewpoints of
an individual.
The challenge for a manager is to synergise these dimensions in the diverse

work team to ensure that all role players contribute towards the shared
objective and vision of the organisation. Some of the primary dimensions are
discussed below.
9.3.1 Physical ability

Physical ability is considered a primary dimension of diversity. It relates to
seeing, hearing, walking, communicating, self-care, remembering and/or
concentrating. The World Health Organization (WHO) defines disability as a
physical or mental handicap that lasts for six months or more, and which
prevents the person from carrying out his or her daily activities
independently or from participating fully in educational, economic or social
activities. Measuring disability can, however, be difficult because it in many
cases relies on subjective opinion (e.g. saying that one cannot remember or
concentrate) rather than science.
Another aspect of disability is employability. The inherent requirements of

the position could disqualify a person with a disability for employment. A
visually impaired person will have difficulty in a data-capturing position and
a hearing-impaired person will have difficulty in a receptionist position
where telephone use is essential. Management must therefore be well
acquainted with the requirements of a position when determining who to
employ. The disability can become the major consideration for employment
and not the skills required when selection is done.
9.3.2 Gender
The 2011 South African census indicates that about 51% of the population is
female. More than this, women are specifically identified as a designated
group in terms of the Employment Equity Act. However, the Employment
Equity Commission reports of 2013 indicate that only 45.2% of the
workforce in South Africa is female, which is demographically incorrect.
As part of diversity and affirmative action interventions, managers will

therefore have to place specific emphasis on recruitment of women in the
workplace in the near future if equity targets are to be met. The higher levels
in organisations also show a significant under-representation of women (see
Women, diversity “key” to SA’s tech industry
More women need to be actively supported to pursue careers in the male-dominated

South African technology scene, says an industry expert. “Creating a greater
awareness of the career opportunities for woman in tech is important, however a
supportive environment and forums which provide a platform for networking and support
can be very effective,” CiTi CEO Ian Merrington told Fin24.
Merrington is concerned about the lack of women and diversity in the ICT industry. “Our
VeloCiTi Woman in Business programme is focused on getting female entrepreneurs to
grow their business through the effective use of technology.”
According to advocacy organisation Women in Tech, only 23% of tech jobs in SA are
held by women. Gender patterns in SA mirror those in Silicon Valley where a number of
tech firms including Facebook, Google, Yahoo and Microsoft have made commitments
to expand diversity in the sector. Merrington said that the VeloCiTi Woman in Business
programme was part of a broader strategy for the organisation.
Source: Adapted from Alfreds (2015)
9.3.3 Ethnicity
Ethnicity is fundamental to diversity in the workplace and is the one
dimension of diversity that is most commonly experienced. Every day, as part
of the interaction between employees, the “language barrier” and differences
in culture are evident during the execution of work.
According to South African statistics, isiZulu is the most spoken first

language in the country (22.7%), while English is only the fifth most spoken
home language (9.6%). Despite this, English is the generally accepted
business language in South Africa. This means that many employees are
forced to communicate in what could be their second or even third language.
This creates challenges in the workplace.
9.3.4 Age
Difference in age is an important primary dimension of diversity. A 55-year-
old white male and grandfather of two is perceived very differently to a
black female aged 25 with one young child. Their career expectations will
probably differ and organisations should value the unique strengths and
contributions that each person, despite these differences, might bring to the
workplace.
The employment of the youth in South Africa has received a lot of attention in
recent time. In 2013, the national government passed the Employment Tax
Incentive Act, commonly known as the youth subsidy, to make it attractive for
employers to generate positions for young employees under certain
conditions for a period of two years. The aim of this was to encourage the
employment of young workers and to create capacity in specifically
identified economic zones. This tax incentive will take some time to filter
into the workplace and for any effects on the labour force in general to show.
From a diversity point of view, it can be anticipated that the effect will be
twofold in nature: (1) the number of young people in specific economic zones
could increase dramatically, but because the tax incentive is only applicable
for a maximum period of two years, it is possible that (2) employers will
hire people for two years and then replace them with new employees. This
may lead to a high employee turnover that will also have an impact on
diversity in an organisation.
9.4 FACTORS EFFECTING DIVERSITY
The following factors have an effect on diversity:
Geographical origin of workers. Managing diversity can become that

much harder when people from different countries are also part of the
work team. Migrant workers can have a completely different perception of
what is expected of them, and they often differ from South African workers
in terms of their life orientations and viewpoints. This will have to be
carefully managed so that people understand each other’s roles and
perceptions.
Diverse compilation of work teams. Constant interaction between
members of the same work team requires members to be tolerant of each
other. Members will need to understand diversity and how it influences
their work.
The diverse compilation of other work teams. Although workers might
not have direct contact with people from other sections or work teams on a
regular basis, it will still be necessary to be considerate toward other
people working in the organisation.
Personality. Managers need to be sensitive toward personal differences
between members of their own work group as well as those of members of
different work groups or sections. Personality and personal position are
major determinants of behaviour. Management will be required to make
colleagues aware of the different ways people respond in different
situations based on their diverse nature.
Stereotyping. Stereotyping is a personal impression, belief or
predisposition that is formed as a result of previous experiences or
upbringing. It influences the way an individual responds to a situation. For
example, it is a common belief that short managers tend to be more
dominant in their behaviour in the workplace, so any manager who
happens to be short will automatically be assumed to be like this, whether
or not it is true in his or her individual case (see Management in action
9.4).
Prejudice. This is a negative feeling associated with a specific group on
the basis of, for example, gender, race or sexual orientation. In an
organisation, one section might be prejudicial towards another because
they think that they are better qualified, for example. Prejudice is based on
attitude and consists of three components, namely, belief, judgement and
behaviour (see Table 9.1).

More men happy to be “house husbands”
More than four in ten women are now the main breadwinner in their home and they
claim that the men in their lives are happy to merely stay at home. A survey done shows
that about 41% of women now earn more than the men in their lives.
It is also interesting to note in this survey that more than 70% of women believe more
men are happy to take on the role of house husband or stay-at-home dad. Interestingly,
6% of men openly resent earning less than their female partners and about 10% of
those men who earn less than their partners actually still tell other people that they earn
more. An important reason for men being unemployed is the economic crisis. It seems
that the steoreotype that men should always be the breadwinner and that women should
stay at home to raise the children is changing.
In South Africa the 2011 census showed that the number of women breadwinners is
increasing, but that the average South African household is still headed by a man.
Source: Adapted from http://www.fin24.com/Economy/More-men-happy-to-be-house-

husbands-20130719 (accessed on 5 March 2015)
Table 9.1 Components of prejudice
Evaluative judgemental
Belief Behavioural predisposition
predisposition
Negative A negative feeling towards the Unwillingness to approach a
stereotype, e.g. short manager on a continuous manager because the employee
short managers are basis expects a negative response
dominant and from the manager concerning a
autocratic specific work-related matter
Positive stereotype, Employees equate the shirt with Over-consciousness in the
e.g. when a the manager being in a good business unit relating to the
manager wears a mood, so on the day the specific colour of the shirt that a
specific blue shirt shirt is worn, the manager is manager is wearing at a given
he or she is in a approached to obtain certain time
good mood favours
It is obvious that prejudice can be a source of serious conflict between

colleagues. Prejudicial attitudes could also lead to negative consequences
for people’s careers. As a result of prejudicial attitudes, either blatant or
subtle, people could be overlooked for promotion or not even hired at all.
9.5 IMPLICATIONS OF MANAGING DIVERSITY IN
SOUTH AFRICA
Some of the key aspects of the implications that diversity, stereotyping and
prejudice can have in the workplace are highlighted below.
9.5.1 Functional implications

Management of the organisation must focus on the efficient functioning of the
organisation’s business. As part of this process, managing the diverse
internal community of the business must be a high priority. Not only will
management have to manage the composition of the workforce in relation to
the external community, but he or she will also have to be able to identify
which interventions are required in the business to increase efficiency. Top
organisations make assessing and evaluating their diversity process an
integral part of their management system.
The steps to follow in order to increase functional efficiency are as follows:
Identification of the problem. The functionality of the organisation and

possible negative consequences attached to diversity issues will become
evident as the members of a workgroup or different sections interact with
each other during daily activities.
Compilation of a plan for intervention. After the nature of the problem
has been identified, the intervention activity can be determined. Members
to participate in the intervention activity, as well as the implications for
the work performance and deadlines, can be determined during the
preparation phase. Thereafter the actual intervention activity can be
compiled to ensure that the intervention is properly planned. If an
intervention needs to be made between different workgroups, the
compilation of the plan could be more complicated. As a safe rule, the
intervention plan should first involve one group as an isolated group and
then later the intervention could be between the different groups.
The actual intervention. This is the step in which the actual intervention
will take place.
Monitoring the implementation and consequences after the
intervention. As in every management activity, monitoring and control are
important for identifying whether the desired outcome has been achieved.
The aim of the intervention is to improve the performance of a single work
group or alternatively to increase cooperation between different work
groups. A single question needs to be answered: “What is the result of the
intervention – is it positive or negative?” If the monitoring process
identifies limitations or room for improvement, further steps can be taken.
9.5.2 Management and trade union cooperation

Employment Equity and subsequent diversity management in the workplace is
a matter of great importance for any trade union. Workplace regulation and
training are also high priorities. The setting of targets for an organisation’s
employment equity plan is to be done in consultation with trade unions as
stipulated by the Employment Equity Act. The handling of these issues will
impact heavily on cooperation between management and trade unions.
9.5.3 Monitoring by the Department of Labour

Organisations in South Africa have to report annually on the status of its
employment equity targets to the Department of Labour. Provision is made in
the legislation for high monetary penalties if a business is seen to be lagging.
This is an ever-present external organisational issue that will be on the minds
of management and a constant consultation matter between the union and
management.
9.5.4 Geographic or national location

The population composition from one province/region to the next differs
substantially and according to the employment equity principles it is to be
reflected in the workplace. It must be noted that at the time of the compilation
of this chapter a Constitutional Court ruling was pending regarding the
national versus geographical population numbers to serve as a basis for the
implementation of equity principles and affirmative action. However, this is
not only a numbers game.
For an organisation to manage workplace diversity, especially on a national
basis, the intricacies of the differences in the population composition from
one region to the next is significant. As an example, KwaZulu-Natal has a
higher number of Indian people in a workplace, as opposed to the Free State,
which has a higher number of Africans, and the Western Cape which has a
higher representation of coloured people. The management of any diversity
programme in an organisation must account for these differences in the
population composition.
9.5.5 Different religious practices

Workplace procedures and rules can be formulated to accommodate certain
religious practices, but this can lead to conflict. Some people in the
workplace may perceive it as favouritism if people are given time off to
practise their religion. On the other hand, if management takes a non-adaptive
approach to specific religious groups, it can be regarded as religious
discrimination. Management must therefore try to be as fair as possible when
dealing with this issue.
9.6 DIVERSITY TRAINING
Training may help employees to gain a better understanding of the concept of

diversity and how people with differences should be treated. It will increase
cooperation and understanding between the members of a work team and also
lessen any individual prejudices that might exist. This will in turn lead to a
shift in organisational culture as sensitivity to diversity factors and dignity
awareness increases.
9.6.1 Sensitivity and personal prejudice

The aim of any diversity training programme is to address the problems or
challenges inhibiting organisational performance. A comprehensive need
analysis will lay the foundation for the content included in the training
programme. A very important element to ensure the success of training will
be the willingness of the parties to be forthcoming about personal prejudice
and then dealing with it with sensitivity.
Personal prejudice that leads to problems in the workplace will require

employees to do some serious introspection. Internal tension will be
generated when the employee is in the process of addressing a personal
belief or prejudice that has existed for a long time. Only when an employee
comes to this realisation will diversity training be successful. Sensitivity in
addressing these challenges will be extremely important as the aim of the
training is to erase the inhibiting factors of cooperation within an
organisation and not to strengthen them. If the training goes in the wrong
direction, it could further damage interpersonal relationships instead of
improving them.
9.6.2 A strategic component to diversity training

The success of any strategy is vested in the contribution that human resources
make towards achieving it. During implementation, the human resource
department must ensure that the correct people are at the correct place at
the correct time doing the correct things in order to ensure that
organisational units achieve their objectives and contribute to the attainment
of the strategic goals.
Diversity training can play an important role in the organisational strategic

human resource strategy. The ideal situation is to use talent management as
the driving force, because an over-emphasis on employment equity targets
does not always contribute to the correct talent being recruited. Without in
any way trying to undermine the importance of equity targets within the
existing legal framework of the Employment Equity Act, the importance of
hiring the right people at the right time to do things right should always be
the ultimate goal of human resource management.
9.6.3 Diversity training programmes

Diversity training can primarily be divided into awareness training, inter-
workgroup training and skills-based training. A person must first attend to his
or her own personal issues before cooperation within and between
workgroups can be addressed.
9.6.3.1 Awareness-based diversity training
Awareness-based training aims at addressing the personal underlying
assumptions that people may have about other people on a cognitive level. It
makes people aware of their own prejudices and where they originate. The
training model is presented in Figure 9.1.
Figure 9.1 Awareness-based diversity training model
Each person has certain assumptions that could limit interpersonal

interaction. Once a person has acknowledged these limiting factors and
worked through them, improved interaction will follow. A clearer
understanding of people and why they behave as they do will increase
morale in the workplace. The end result will be renewed commitment to
achieving strategic goals.
9.6.3.2 Inter- and intra-workgroup diversity training

After awareness training has taken place, employees should have a much
better understanding of their own beliefs, stereotypes and orientations as
well as those of others. The next step is to give them the skills to cope with
diversity in group settings. During training, individual members will need to
confront their own personal issues while at the same time learning to respect
those of other people within the same workgroup (intra-workgroup training)
and deal with conflict with people from other groups (inter-workgroup
training).
In intra-workgroup training, everybody gets an opportunity to present their
views on diversity-related aspects that could inhibit cooperation between
group members. Problem identification is done and a session of
“brainstorming” for solutions follows. The facilitator should not to be too
active in the discussion as it is important for the group members to identify
their own solution and accept ownership and responsibility for it.
Implementation follows after a solution has been identified and the success
or limitation(s) of the solution must then be monitored. The facilitator needs
to keep control over the session, because if not correctly managed, it could
create more conflict instead of resolving the problems.
Inter-workgroup training is much more complex (see Figure 9.2). It also

starts with individual workgroup members confronting their own issues of
orientation, prejudice or stereotypes. A group session with each workgroup
is then separately facilitated following the process described above. The aim
is to identify what each workgroup regards as the inhibiting factors that
impact negatively on cooperation between the workgroups. The facilitator
initially fulfils a passive role by merely collecting information from each
workgroup. This information is then analysed and when the two (or more)
workgroups meet, forms the centre of discussion. The number of participants
can differ, but the bigger the groups are, the more difficult it will be for the
facilitator to maintain control. Problems with interaction identified during the
sessions with each workgroup are put on the table for discussion to identify
potential solutions. Once the most acceptable solutions are found, methods
for implementation are determined. Again it will be important to monitor the
implementation in order to facilitate any shortcomings or new problems.
9.6.3.3 Skills-based diversity training

It is common in a workplace to have employees from various cultural and
racial backgrounds working together in one department. Skills-based
diversity training aims at developing people’s abilities to manage these
differences, and its benefits are not confined to the workplace because
people have to interact every day with diverse members of society in their
private lives as well.
Figure 9.2 Inter-workgroup diversity training model
The starting point is, once again, awareness-based diversity training,

followed by sensitivity training with regard to different cultural habits and
beliefs. See Figure 9.3.
Figure 9.3 Sensitivity training model
Diversity is a fact of life and a reality in all organisations. Harmonious

relationships contribute to increased morale, a feeling of belonging and
mutual caring. The above training models have the objective of improving
positive interaction between people in the workplace with the ultimate goal
of enhancing efficiency and effectiveness.
9.7 DIVERSITY MANAGEMENT PROBLEMS AND

CHALLENGES
It is important to highlight some problems and challenges with regard to

diversity management. Although it is impossible to accommodate all the
challenges that exist in diversity training, some problems and barriers
directly linked to the diversity training models will be discussed. Problems
and barriers in diversity training are usually personal in nature and are
trainee or trainer related. These include the following:
Commitment. People may go through the motions during training, but fail
to follow through with applying what they have learnt in their immediate
workplace owing to work pressure or lack of support. People could also
lack commitment during training because they have a high workload and
are stressed about being away from the workplace.
Communication. Perceptual, cultural and language barriers need to be
overcome for diversity programmes to succeed. Ineffective communication
of key objectives results in confusion, lack of teamwork and a low morale.
Resistance to change. There are always employees who will refuse to
accept the fact that the social and cultural make-up of their workplace is
changing. The “we’ve always done it this way” mentality silences new
ideas and inhibits progress towards accepting the advantages of a diverse
workforce. This can be overcome by involving employees in formulating
and executing diversity initiatives in the workplace. Employees must be
encouraged to express their ideas and opinions to instil a sense of equal
value for all employees.
Prejudice. Trainees may feel as if they have done something wrong and
are being labelled troublemakers. This is especially true if training is
being done as a remedial action and can lead to a lack of commitment to
implementing what has been learnt. Training must never have an “I am
right and you are wrong” approach. This can alienate employees and
increase conflict in the workplace.
Politics. Little attention was placed on the politicising of diversity.
Unfortunately it is a fact that diversity will always have a close link with
people’s political interpretation. Allegations of politically orientated
discrimination are often the reason why diversity training becomes a
necessity. Discrimination and so-called “reverse discrimination” are
issues that are bound to be thrown into the discussion during training. This
will raise conflict levels and may impact negatively on future work
relationships between colleagues. Both trainers and trainees must do their
utmost to prevent any training session from turning into a political debate.
Implementation. Diversity training alone is not enough. Armed with all
the results of employee assessments and research data, managers still need
to build and implement a customised strategy to maximise the effects of
diversity in the workplace itself.
9.8 POSITIVE ASPECTS
There are however also positive outcomes of diversity in an organisation. As

working populations are getting older, the numbers of women and people
from different cultural and ethnic backgrounds entering the workforce are
increasing and it becomes more important to value diversity. An
organisation’s success and competitiveness largely depends on its ability to
embrace diversity and to realise its benefits, which include the following:
Maximising productivity. Organisations that encourage diversity in the

workplace inspire all their employees to perform to their highest ability.
Having a variety of different skill sets increases productivity.
Enhancing creativity. A diverse workforce means a broader range of
perspectives, ideas and insights.
Increase in the loyalty of employees. Feeling part of an organisation and
appreciated within an organisation increases loyalty and a feeling of
belonging.
Obtaining a competitive advantage. Attracting and retaining diverse
talent in an organisation can give it a competitive edge. Different talents
(think language abilities and cultural understanding) propel an organisation
towards competing more successfully globally, as well as increasing the
diversity of its customer base.
Decision-making is improved. Individuals will bring in their own way of
thinking, operating and solving problems which will lead to more viable
solutions and better decision-making.
Satisfaction of diverse needs of customers. A workforce that reflects the
diversity of the community it serves understands the needs of its clients
better, enabling more efficient and responsive service delivery.
9.9 DIVERSITY AND THE ETHICAL CHALLENGE
Personal culture is bound to create an organisational culture challenge

because a person is brought up with a set of moral perceptions and
judgements that do not always align with those of the organisation. “I am the
most important person in my own world” makes it sometimes difficult to fit
into the organisation. The diversity dimensions discussed earlier in this
chapter are responsible for the creation of the moral perception and moral
judgement of an individual. When a person enters the organisation as an
employee, he or she is confronted with the alignment of his or her own
perceptions and judgement with what the organisation requires.
Organisations formulate an ethical code that is responsible for the

establishment of core values, such as responsibility, integrity, respect and
competence. These are the “easy” values, because they form the fundamental
expectations of most people. The stickier issues are religion, sexual
orientation, cultural diversity and the presence of foreigners in the workplace
(diversity dimensions) which can create conflict between personal
perception and judgement, and organisational expectations.
Continued employment at an organisation requires the matching of personal

and organisational values. A perfect fit will never be achieved, but the
closer the fit, the easier it will be to ensure continued employment. Within a
diverse workgroup, the different perceptions of people lead to different
perceptions of ethical behaviour. This creates a challenge for an organisation
and its managers, who are tasked with dealing with these perceptions in such
a way that there is cohesion with the ethical code.
9.10 SUMMARY
Diversity in the workplace will always be present and will require specific
attention from managers. Interaction between people is imperative and
necessitates mutual understanding. South Africa has a very diverse society.
The need to focus more on diversity in the workplace is paramount because
diversity is legally imposed and managed through the Employment Equity Act
and annual equity reports that are expected of large organisations.
Diversity challenges can be better managed if employees understand the

advantages of a diverse workforce. Diversity training must always focus on
addressing the problems directly related to a particular diverse workgroup
or the interactions between diverse workgroups, while being careful not to
aggravate these issues. It is also a manager’s task to deal with the challenges
and the perceptions of employees in such a way that there is cohesion with
regard to the ethical code of the organisation.
The personal commitment of executive and managerial teams is imperative

because attitudes toward diversity originate at the top and filter downward.
Leaders and managers must incorporate diversity policies into every aspect
of the organisation’s function and purpose. Management cooperation and
participation is required to create a culture conducive to strategic success.
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happy-to-be-house-husbands-20130719 (accessed on 5 March 2015).
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CASE STUDY: THE NEW EMPLOYEE
Everything at Honest Joe’s Retailers was going well. The workgroups in the different
departments of the retail store were functioning with very few problems. The employer
had very strict rules regulating the basic conditions of employment and employees knew
that they had to work according to the rules governing time off. And then the new
employee Ali was appointed.
Ali was Muslim. On the first Friday after he was appointed, he went to the supervisor
and asked to have time off from 11:30 to 14:00 because he had to go to the mosque for
the weekly prayer. The supervisor refused, saying that Ali was only allowed 45 minutes
for lunch per day. Ali was very disturbed by this.
After deliberations between Ali and the management of Honest Joe’s Retailers, it was
decided that Ali would only take 30 minutes for lunch Monday to Thursday so that he
could make up the time to go to the mosque on Fridays from 11:30 to 14:00. The other
employees were very unhappy and decided to approach their trade union about this.
1. Discuss the conduct of the supervisor who refused to allow Ali time off work to go to
the mosque.
2. As the trade union official, how would you advise the employees?
1. From a personal perspective, critically evaluate your own prejudices and stereotypes that
influence your impressions and opinions about other groups. Critically consider their
sources.
2. Visit an organisation of your choice. Ask the manager about their diversity training
programmes and the challenges they experience. Develop a report on your findings.
10 Leadership
AMANDI VAN DER WALT
Learning outcomes
Understand what leadership is.

Understand what the components of leadership are.
Understand the nature of leadership.
Differentiate between and explain the different leadership theories.
Explain some contemporary perspectives on leadership.
Understand various leadership issues.
10.1 INTRODUCTION
Managing an organisation involves the four management functions of

planning, organising, activating (leading) and control, as introduced in
Chapter 1. The ability to manage is crucial at all levels in the organisation.
However, for an organisation to truly excel, the execution of the different
management functions will not happen without good leadership.
Management focuses on doing things right while leadership focuses on doing

the right things. The importance of management has clearly been stated
earlier in this book, but why is leadership so important in an organisation?
Why is the role of management alone not enough? The idea that a leader will
do the right things makes it clear that being a leader in today’s turbulent
organisational environment with the many diverse factors that influence and
change the playing field, is making leadership a challenge. With change being
the only constant in today’s organisational environment, leading the
organisation to achieve its plan can be challenging. It is not enough to have
only management abilities that ensure that everything is done in the right way,
leadership is also needed to ensure that while the organisation is doing things
right, the organisation is also doing the right things.
All organisations need a leader who can steer the organisation through the
storms in the organisational world to a place of sustainable competitiveness.
The difficulty lies in the fact that being a manager does not automatically
make a person a good leader.
The role of good managers who are also good leaders is more important
today than ever before. A great leader is someone who possesses social
intelligence, an enthusiasm for change, and above all, a vision that enables
him or her to make choices based on things that are truly important in the
midst of a turbulent organisational environment.
Leadership can have different definitions in different societies, but in general

it can be defined as influencing others to achieve the organisation’s goals by
inspiring them and directing their actions toward reaching the goals of the
organisation. An organisation will only succeed if the workforce is led
effectively. To ensure employees follow the leadership in the organisation,
there must be an interpersonal relationship based on trust and a mutual
understanding of where the organisation is heading and what each and every
employee’s role is.
Leaders are not only found in senior management; they are found at all levels
of an organisation. A leader does not need to be in top management to
influence others. Some people are natural leaders who have the ability to
influence others from any level in the organisation. Leadership can also be
developed through training and education. Although management is different
from leadership, organisations need them both. Management in action 10.1
discusses what makes a good or a great leader.

What makes a good or a great leader?
There are leaders all around us; in class, at the university, at home, on the sports field
and in government. Leaders have a responsibility to lead their followers well and to be a
good example to them. When we study leaders, their achievements and their mistakes,
we can learn from them to be better leaders ourselves. Throughout history, there have
been many leaders who have influenced people and events. When we study history, we
often study the people who were important leaders. It is important to know about the
leaders of your country, and those who were important in history. But it is also important
to remember that it is not only the most obvious leaders who make history happen the
way it does. There are and have been many other men and women who played an
important role in history. Their names might not be on the list of the greatest leaders in
history, but in a small or big way their lives could have influenced others to make a
difference. When we study them, we can learn a lot from them. Their actions and
values can serve as an example to us. So it is important to know what makes a good
leader, so that we can recognise good leaders and learn from them.
What makes a good leader?
There is no a specific set of rules for good leaders, or pointers as to what a good leader
should be and do. But there are some basic principles that many people feel a good
leader should follow. A good leader:
1. Listens to people
2. Is a servant of the people and works for the good of others
3. Works with a team
4. Has courage
5. Is brave
6. Is dedicated and is wholeheartedly committed to his or her beliefs
7. Is dedicated and is wholeheartedly committed to others
8. Is prepared to sacrifice or give up something for the sake of others.
So being a leader does not only mean people have to listen to you, or that you are
popular and important. These things may be true, but being a leader also means that
you have to work hard and live a life of integrity.
Source: Adapted from http://www.sahistory.org.za/article/leaders-grade-4-south-

african-history-online (accessed on 11 August 2014)
10.2 THE THREE CORNERSTONES OF LEADERSHIP
Leadership is a complex process with three cornerstones of interacting

components in a system of give and take (see Figure 10.1). These
cornerstones are discussed below. Some theories that will be discussed in
this chapter will take all three aspects into consideration when studying
leadership, while other theories will look at some of the aspects
individually.
Figure 10.1 The interactive framework of leadership
10.2.1 The leader

The leader is the person who is active in the leadership process and starts
the process of taking the lead and influencing followers. Every leader is
different in terms of personality, experience, interest, position in the
organisation and his or her approach, i.e. each has his or her own style
(leadership styles will be discussed later in the chapter). A person will not
be a leader if he or she does not influence someone to follow in a given
direction.
10.2.2 The followers

Followers are the subordinates in the organisation who perform the actions
required for goal achievement. Leaders influence their subordinates to
achieve the organisational goals and implement the plan. Leadership is
therefore not a one-way process, but rather an interaction between leader and
followers.
A leader will not be effective if the follower is not willing or ready to

follow. Some of the variables that will influence the way followers respond
to leaders include the following:
Perception of the situation and the ability of the leader

The values that will guide followers’ actions
The motivational level of followers
Expectations about the situation and outcome
Experience and ability of the follower
The interaction between the leader and the followers takes place in a
specific context.
10.2.3 The situation

This refers to the set of circumstances in which the leader must lead the
followers. Factors that influence the situation can be both internal (inside the
organisation) and external (outside). A leadership style that is highly
effective in one situation will not necessarily be effective in another. A
leader therefore must be able to “read” the situation in order to apply
effective leadership.
10.3 NATURE OF LEADERSHIP
There are many different definitions of leadership. The most common

definition explains leading as the process of influencing employees to such
an extent that they willingly work towards the achievement of the
organisational goals. The components of leadership and the role of
empowerment in leadership are discussed below.
10.3.1 Components of leadership

There are five components to leadership: authority, power, responsibility,
delegation and accountability. Authority and power are regarded as the two
basic components of leadership.
10.3.1.1 Authority
It is the responsibility of managers to make sure that employees work
together towards achieving the organisational goals. Authority gives
managers the right to instruct, delegate work and perform certain actions
within specific guidelines. Authority gives the right to influence the
behaviour of employees. Without authority, managers will not be able to
evaluate the work done by employees or discipline them if they lack
performance.
Authority is based on a manager’s level in the organisational hierarchy. The

higher the level, the more authority the manager has. The final authority
always lies with the owners or the shareholders.
10.3.1.2 Power
Power is the leader’s ability to influence his or her followers to achieve
organisational goals. In order to influence others, leaders need to exercise
power in a way that motivates followers because any suggestion of abuse of
power can result in an unwillingness to follow the leader. There are five
types of power:
1. Legitimate power. Legitimate power is given to a leader based on the

leader’s formal position in the organisation’s hierarchy. The CEO of an
organisation has certain powers because of the office he or she holds.
Legitimate power, like most other powers, is based on both reality and
perception: the reality that an individual is in a specific position in the
organisation, and the perception of employees of this person’s authority
over them. The power of the position the manager holds will always be
regulated and controlled by organisational rules, which adds to
legitimate power. Possessing legitimate power ensures compliance with
a manager’s instructions, but it does not guarantee that an employee will
have loyalty towards the manager or the organisation. To help build
loyalty and enhance legitimate power, a leader must combine it with
other forms of power.
2. Reward power. This power develops if the leader has the ability to
satisfy a follower’s needs through tangible or intangible rewards.
Leaders can influence behaviour if followers believe that they will be
rewarded if they achieve the desired results. Tangible rewards include
monetary awards in the form of wage or salary increases and bonuses,
plaques, certificates and gifts. Examples of intangible rewards are
praise, positive feedback, recognition and more responsibility.
3. Coercive power. When a leader obtains obedience from his or her

subordinates through threat of punishment or fear, the leader is exerting
coercive power. For example, employees may think that they will be
retrenched if they do not perform according to set standards. The fear can
be psychological or emotional. True commitment and loyalty towards an
organisation and the leader cannot develop by using this kind of power.
4. Referent power. This power is based on the followers’ personal

respect and relationship with the leader. The influence of the leader is
determined through the pleasant characteristics that make him or her
attractive to employees. These can include integrity, good interpersonal
skills, work-related skills or prior achievements or may simply be
admirable personal characteristics. Managers with referent power have
the power to influence others more effectively, because followers have a
positive connection with them.
5. Expert power. If a leader has distinct expertise, knowledge or

specialised skills, this will give him or her expert power. Followers
will rarely follow someone who is incompetent and who does not have
any knowledge in the field. Part of earning respect from followers and
setting the foundation to influence them is having expert power. Expert
power can be found all over an organisation. Any employee who is an
expert in his or her field or who has a high level of knowledge possesses
expert power.
10.3.1.3 Responsibility
A leader is responsible for ensuring that the organisation is doing what it is
meant to do, and that the employees are doing the right things, in the right
way, i.e. performing the right activities, to achieve organisational goals. A
leader is responsible for everything that takes place in an organisation and
will therefore be held accountable for everything that happens, good or bad.
10.3.1.4 Delegation
Delegating entails giving employees tasks and responsibilities. This is not
always easy for a manager, because it means giving some control and
responsibility over to someone else. A manager cannot be effective and
efficient without delegation because he or she simply cannot do everything.
To ensure that delegation is accurate and effective, it should be done

according to the chain of command. Employees should be assigned
responsibility and authority for achieving organisational goals with the
support of their leader. One way to develop an employee’s competence and
confidence is to delegate responsibility to him or her.
10.3.1.5 Accountability
Managers are accountable for the outcomes of the departments or sections
they are managing. If the department or section is performing badly, the
manager in charge is accountable. Managers can delegate authority and
responsibility within their different departments, but they can never delegate
their accountability. At the end of the day, it is the manager who will have to
explain why his or her department is succeeding or failing. Accountability
must be driven from the top of the organisation.
10.3.2 Empowerment: a key to modern management

An important function of being a leader is to activate employees toward
achieving organisational goals. Part of this process involves empowering
employees by increasing their decision-making discretion. The right to make
decisions increases the responsibility that employees feel toward the role
they play in organisational success. An example of empowerment is giving
front-line employees the authority to make decisions once set aside only for
managers. Delegation goes hand in hand with empowerment.
Empowerment typically results in employees feeling a stronger sense of
ownership and value. When they are entrusted to make important decisions
themselves, their sense of self-worth increases, which in turn leads to an
increase in productivity because decisions can be made faster. This decision-
making discretion gives employees the freedom to judge situations
themselves and manage their own list of priorities. This is important since
the leader cannot take sole responsibility for all actions and outcomes.
In today’s modern approach to management, organisations want employees to

be more involved in the organisational processes and take more
responsibility. This must, however, be approached with care. Giving more
power and responsibility to an unmotivated and insensitive employee can do
more harm than good to an organisation. Management in action 10.2
illustrates how empowering employees leads to an increase in customer
satisfaction and employee engagement.

Employee empowerment at Google
It’s all well and good to promote employee innovation in your company, but without
engaged personnel you won’t get very far. Empowering employees improves employee
engagement. Motivated, engaged and active personnel are the key success factor of
innovative companies since they are involved in all stages. The most perfect example of
employee engagement is Google.
The way Google engages its employees has been remarkable from the start of the
company and it is ever expanding. One of the reasons that Google became such a huge
company with extremely motivated and happy personnel is because of the many perks
that the company offers. Employees get breakfast and lunch of good quality. Other
perks are free fitness with personal trainers, a free birthday massage, sleeping pods,
volleyball courts, a free on-campus doctor, free laundry and free use of cars at work.
This freedom however does come with an expectation of delivering innovative ideas.
If that is not enough, Google offers its employees so-called “20% time”, which is an
informal methodology that allows the employees to work on something they are really
passionate about. This leads to motivated and creative employees that feel empowered
and thus work better. According to a Google employee, “just about all the good ideas
have bubbled up from 20% time, like Google News, Google AdSense and Gmail”.
As a company you need to challenge the individual in order for them to release their
creativity. Freedom in the innovative process leads to higher creativity than when the job
is narrow. This is because people work better and with higher productivity when they are
challenged and feel supported. It is not an individual’s level of creativity, but rather the
organisational expectations that have a crippling effect on the employee’s innovative
drive. Companies that allow employees to judge situations themselves are more
successful than companies that keep their employees on a short leash with little to no
leeway. In the service industry in particular, it is almost unavoidable to empower
employees to make decisions because they constantly need to change their behaviour
for each service encounter in order to meet the customer’s need. Employee
empowerment does not only take pressure off the manager, but also shows trust in the
employees, leading to an increase in engagement.
Source: Adapted from http://employee-driven-innovation.weebly.com/employee-
empowerment–incentives.html (accessed on 11 August 2014)
The benefits associated with empowering employees include the following:
Relief of management stress. There are fewer worries for managers if

employees help with decision-making.
Less chance of employees looking externally to unions for support.
Empowered employees will have more say in everyday operations and
therefore they will feel more valued. Employees who feel they are
empowered do not need to look to labour unions for support.
The following risks may be present during employee empowerment:
Ineffective empowerment. Empowering employees must be seen in the

actions of managers and not only in their words. Some organisations
believe they are empowering employees when in fact they are not.
Employee empowerment should be implemented properly by all levels of
management.
Unclear management roles. Empowering employees does not mean that
managers have a less important role to play. Managers still have certain
responsibilities that need to be fulfilled and must still play distinctive
value-adding roles throughout the organisation.
Employees not ready for empowerment. Not all individuals are seeking
more responsibilities and some employees may simply not be ready.
Employees must be completely prepared for and properly informed about
their new responsibilities before they are empowered.
10.4 LEADERSHIP THEORIES
Throughout history various studies have been conducted to try and define a
leader based on characteristics, leadership style, behaviour patterns, etc. The
major leadership theories established and developed over time to define
leadership are trait theory, behavioural theory and contingency theory
(see Figure 10.2).
Figure 10.2 Leadership theories
10.4.1 Trait theory

Trait theory is also known as the “great person” theory, because early forms
state that leaders are born, not made – a person either has what it takes to be
a leader, or not. Trait theory is based on the inherent characteristics needed
to be a successful leader, such as psychological motives or consistent
patterns of behaviour. The theory assumes that if a person is not born with
these characteristics, there is no way to acquire them later. These traits can
be defined as relatively stable characteristics.
Many studies have been done to try and define the “blueprint” of a leader.
These studies have tried to identify and link the following characteristics
with a leader’s effectiveness:
Physiological (appearance, height and weight)

Demographic (age, education and socioeconomic background)
Personality (self-confidence and aggression)
Intellectual (intelligence, decisiveness, judgement and knowledge)
Task-related (achievement drive, initiative and persistence)
Social (sociability and cooperativeness)
While successful leaders definitely have different personalities and outlooks

on life to less effective leaders, it is still difficult to make any accurate
assumptions based on the above variables. People are too complex and
diverse to determine a standard picture of what a leader should be like and
what specific characteristics he or she should have.
Nevertheless, a few characteristics have been identified as being found in

most successful leaders and are thus seen as prerequisites for leadership
potential:
Drive. Most leaders are success driven. They exert high levels of effort to
achieve organisational goals. This drive leads to high levels of motivation,
energy, resilience and a die-hard attitude towards goal achievement.
Desire to lead. Leaders want to lead others; they want to be in charge and
influence others in terms of what should and should not be done.
Honesty. People will not follow a leader whom they cannot trust.
Followers tend to overlook other shortcomings if they feel their leader is
trustworthy.
Integrity. This is about “walking the talk”. Leaders may have all the other
characteristics, but if they do not deliver on what they have promised,
followers will not trust them or have respect for them.
Self-confidence. If leaders do not believe in themselves, neither will
followers. Self-confidence leads to decisiveness, assertiveness and the
ability to convince others to follow. Being self-confident does not imply
arrogance, however. It also means being able to admit to making mistakes
and learning from them.
Emotional stability. Things will not always go according to plan. In
challenging situations, leaders must remain calm, confident and optimistic.
They must never try to lay blame elsewhere because this will damage their
credibility. This characteristic refers to emotional intelligence – the ability
to be in control of one’s emotions at all times.
Strong cognitive abilities. A leader must have the ability to analyse and
make sense of large amounts of complex information. He or she must see
patterns, opportunities and threats, and make accurate assumptions based
on this information.
Good knowledge of the organisation’s environment. Leaders must
understand the industry and the macro-environment and how these will
influence their organisations.
Once it became clear that traits vary from one leader to another and cannot
really be used to define a good leader, attention turned instead towards the
behaviour (leadership styles) of people who make good leaders.
Management in action 10.3 shows what we can learn about leadership when
looking at athletics.

What athletics can teach about the characteristics of great leaders
A retired basketball coach and corporate public speaker realised that after 44 years of
coaching basketball, there are lessons learned in athletics that can be valuable for
leaders in any organisation. Among the many lessons athletics can teach about
leadership, three stand out: setting an example, listening and developing a strong
failure quotient (or FQ).
1. Setting an example.
The saying “Preach the Gospel; if necessary, use words” may convey the most
important lesson any manager can learn about leadership: Certainly what the coach
says to his team is important, but the values he stands for and the daily example he
sets far outweigh his words.
A coach will never sell his team on hard work if he is not prepared for practice every
day. He may address the importance of hard work, but if he’s not demonstrating that
value, his words will fall on deaf ears. The example set by the leader of any team or in
any organisation will always be pre-eminent.
2. Listening.
Athletics is a great venue to learn how to listen. Both coaches and players must develop
the ability to listen. Critical information must be absorbed by players during time-outs,
particularly at the end of a game.
A team he coached once had a championship game that was tied with 2 seconds to go.
If one player did not listen attentively during the time-out and therefore didn’t execute his
responsibility on the play diagrammed, the team would have lost. The players did listen
and scored, sending the game into overtime, only to lose in double overtime. But he
could not have been more proud of the team. They listened and they executed.
Leaders in organisations must develop the ability to listen if their teams are to execute.
Listening can be examined at another level. Listening is respect. When someone is
actively listening to another person, he or she is bestowing the highest form of respect.
Great leaders are great listeners.
3. Developing the failure quotient.
One of the greatest lessons of sport is that a player’s failure quotient or FQ is more
important than the IQ. How often does an athlete fail and still have the resiliency to get
back up? Athletes have to develop short memories when it comes to failure. They
simply have to get back up and perform. The coach has put a tremendous amount of
time preparing for the game – watching film work, readying for practices, developing a
game plan – only to lose. Naturally, the coach is down, but he knows if the team is to
perform better, he must arrive at practice after that loss prepared and passionate.
Organisation leaders also fail sometimes. Leaders must develop strong failure quotients
with the resiliency to get back up from failure. Setting an example, listening and a strong
FQ are essential qualities leaders can learn from athletics.
Source: Adapted from http://www.entrepreneur.com/article/236922 (accessed on 29
August 2014)
10.4.2 Behavioural theory

Subsequently, attention in leadership studies moved from trait theory to the
behaviour of leaders with the focus on trying to identify what types of
leadership behaviour successful leaders display. Behavioural theories of
leadership focus on the study of specific behaviours of a leader and make the
assumption that leaders can be distinguished from non-leaders when
examining their behaviour (leadership style). Amongst some of the
behaviours they examined, was how successful leaders delegate,
communicate, motivate and act in certain situations. Various studies are
discussed below. Research on leaders’ behaviour tried to identify the kinds
of behaviour that differentiate effective leaders from ineffective leaders.
Researchers conducted research on what specific behaviour a leader would
use to help improve subordinate satisfaction and performance. Hundreds of
leadership behaviours were examined and two distinct behaviours stood out
in all these studies. Two of these studies at different universities identified
two basic leader behaviours that are central to effective leadership –
initiating structure and consideration. It is important to note that these two
basic behaviours form the foundation of many of the leadership theories
discussed in this chapter.
10.4.2.1 Ohio State University studies

Researchers at Ohio State University asked employees to describe the
behaviour of their leaders. Based on the information they received, they
defined two types of leadership style: the initiating structure leadership
style and the considerate leadership style.
INITIATING STRUCTURE LEADERSHIP STYLE
This style refers to the degree to which a leader is likely to define and
structure his or her role, and the roles of group members in the process of
goal attainment. This includes setting deadlines, giving directions, setting
goals and assigning tasks. This style is characterised by an active execution
of the four management functions of planning, organising, leading and control.
Some of the behaviours of a leader who initiates structure include the
following:
Standardising of job performance

Good communication with employees about job requirements
Scheduling the responsibilities of employees
Encouraging the use of uniform procedures
Good organising by specifically placing employees in particular positions
This leadership style is focused mainly on what should be done and not on
who is doing it. If this style is used as the only approach, it may lead to an
increase in employee turnover, low motivation and low satisfaction in
employees. However, if employees perceive the leader to be considerate
towards them, they may yet be satisfied, because they feel the leader cares
about their needs. If employees perceive their leaders to be focusing only on
initiating structure without being concerned for their wellbeing, this
leadership style becomes ineffective. Employees may feel as if they are
being micro-managed and evaluated continuously.
CONSIDERATE LEADERSHIP STYLE
This leadership style is characterised by a concern by the leader for the

people who are his or her followers. A leader with this style is concerned
for the wellbeing of employees. He or she wants employees to be happy and
to feel they are valued. Some of the behavioural actions of a leader with this
style include the following:
Concern for employees’ personal problems (they try to help where they
can)
Friendliness and openness
Giving rewards for a job well done
Showing appreciation and gratitude for employees who do their job well
Realistic expectations from employees
Leaders with a considerate leadership style create a pleasant atmosphere of

friendliness. They assume that there is no need to implement strong
structures, since they believe employees are willing to give their best for the
organisation. These leaders try to avoid micro-managing their employees.
They treat employees with respect and believe the best of employees.
Followers are more willing to follow a leader with this leadership style and
they are usually more motivated and productive when they work under this
type of leadership, because they have a good working relationship with the
leader.
10.4.2.2 University of Michigan studies

The University of Michigan determined two dimensions of leadership
behaviour, namely, employee-oriented and production-oriented behaviour:
Leaders who are employee-oriented are described as being focused on

interpersonal relationships. They have a personal awareness of the needs
of their followers and lead followers with consideration for these
differences. They also accept and show respect for individual differences
among group members. Their employees have higher productivity and
higher job satisfaction.
Production-oriented leaders tended to focus more on the technical or task
aspects of the job. These leaders set clear standards and expectations.
They closely evaluate employees’ work and are results driven. These
leaders focus mainly on accomplishing their groups’ tasks, and regard
group members as a means to that end.
10.4.2.3 University of Iowa studies

Three leadership styles were identified in a study done by Kurt and Lewin at
the University of Iowa in 1939:
Autocratic leadership style. When a leader has this type of style, the
leader wants to be in full control at all times. The leader dominates
employees or his or her team members and uses unilateralism to achieve
an objective. Leaders with this style centralise authority, set out clear
guidelines for work methods and limit employee participation.
Participative leadership style. A leader with this style is much more
engaged with employees and makes decisions by consulting the team. The
leader will delegate authority and encourages participation from
employees in all areas.
Laissez-faire leadership style. A leader with a laissez-faire leadership
style exercises little control over followers. These leaders give the group
complete freedom to make decisions and complete the work in whatever
way they see it fit.
Although the researchers at all three universities agreed with the assumption
that initiating structure and consideration were basic leader behaviours, they
could not come to an agreement about how these behaviours related to one
another and which one was necessary for effective leadership. The
differences in the conclusions of Ohio State University and the University of
Michigan are illustrated in Table 10.1.
Table 10.1 Differences in the conclusions of Ohio State University and the University
of Michigan
Ohio They found that consideration and initiating structure were not dependent on
State one another. In other words, a leader can initiate structure and be considerate
University at the same time. They found that strong leaders are effective in initiating
structure and being considerate.
vs
University Their studies indicated that the two main behaviours of consideration and
of initiating structure were mutually exclusive. If a leader wanted to be more
Michigan considerate, it would entail decreasing structure and vice versa. They
concluded that only employee-centred (consideration) behaviours would result
in effective leadership.
10.4.2.4 Blake and Mouton’s managerial grid

The Blake and Mouton managerial grid identifies two leadership behaviours,
namely, concern for people (i.e. consideration) and concern for production
(i.e. initiating structure). Their two-dimensional grid of these leadership
behaviours and five resultant leadership styles is shown in Figure 10.3.
Figure 10.3 Blake and Mouton’s managerial grid
Source: http://www.lacpa.org.lb/Includes/Images/Docs/TC/TC409.pdf (accessed on 21

October 2014)
On this managerial grid, both behaviours were rated on a 9-point scale, with
1 representing “low” and 9 representing “high”. The scores of the five
different leadership styles are summarised in Table 10.2.
Table 10.2 Scores of the five leadership styles
Team management style (9, 9 score): This is identified as the best leadership style.
Leaders having this style show a high concern for production (9) and for people (9).
Authority compliance leadership style (9, 1 score): Leaders with this style have a high
concern for production and a low concern for people.
Country-club leadership style (1, 9 score): These leaders create a friendly, enjoyable
work environment. However, they do not pay much attention to production or performance in
the organisation.
Impoverished leadership style (1, 1): This is the worst leadership style. This leader will
show little concern for production and people. He or she takes no initiative and only does
what is necessary to keep his or her job.
Middle-of-the-road leadership: This style is found in leaders when they show a
reasonable amount of concern for both people and production. They do not have a definite
preference for either.
10.4.2.5 Theory X and Theory Y

Assumptions about employees and what will motivate them influence the way
leaders will behave towards them. Theory X and Theory Y, developed by
Douglas McGregor, contrast the conventional view of leadership in
organisations.
McGregor suggested that a Theory X manager takes a command-and-

control view of management. Because people are by nature lazy, lack
ambition, dislike responsibility and prefer to be led, a manager will take
responsibility for directing the employee’s efforts. Subordinates must be
persuaded, rewarded and punished and have their activities controlled at all
times.
A Theory Y manager takes a leadership-and-empowering view of

management. People are not by nature lazy and passive, and a manager
should create opportunities, thus releasing the potential of employees and
encouraging growth. The task of the manager is to arrange conditions in the
organisation so that employees can achieve their own goals by directing their
efforts to achieving the organisational objectives.
After nearly 50 years of research into what the best leadership style is, it is
evident that there is no single best leadership style. A leadership style is the
best if it fits the situation. Therefore the situation must be considered in
determining the best leadership style to use.

Contingency theory takes the view that there is no one best leadership style
and that the effectiveness of any leader is found in the way that he is able to
match his own leadership style to the specific requirements of a situation.
The three contingency approaches that will be discussed in more detail
below are Fiedler’s contingency theory, path-goal theory and Hersey and
Blanchard’s situational leadership theory. These leadership theories assume
that the effectiveness of a leader is found in the way that he generally
behaves towards his followers in a given situation. These theories also
assume that a leader will only be effective if his or her leadership style
matches the specific requirements of a situation.
Fiedler assumes that a leader’s leadership style is consistent and change will
be a challenge. His theory therefore says that because leaders cannot change
their leadership style, they need to be matched to the right situation to be
effective. Path-goal theory and Hersey and Blanchard’s theory, in contrast,
assume that leaders are capable of changing and adapting their leadership
style to fit the specific situation.
10.4.3.1 Fiedler’s contingency theory

This theory proposes that performance is dependent on a proper match
between the leader’s leadership style and the extent to which the situation
allows the leader to take control and to influence his or her followers.
Leaders will thus be more effective if they are matched to the right situation.
Fiedler’s theory also proposes that it is not possible for a leader to change or
adapt his or her leadership style to a specific position because it is tied to his
or her underlying needs and personality.
When Fiedler refers to a leadership style, he means the way that leaders
normally behave towards their followers. He believes that leaders have
either a task-oriented or a relationship-oriented leadership style.
Leadership style refers to the way the leader behaves towards his or her
followers. As mentioned earlier, Fiedler assumes that a leader’s style is
linked to his or her personality and a person’s personality is usually very
stable. Therefore leaders are usually incapable of changing their leadership
style. If a leader is someone who blames the employees for everything that
goes wrong, and screams and shouts at them, that is probably the way the
leader will always behave. The same can be said about a leader who micro-
manages the work of others and insists that all decisions must first be
approved by him or her – that is probably the way the leader will behave in
all situations.
To measure a leader’s style, Fiedler developed the least preferred co-worker
(LPC) questionnaire. The questionnaire is based on the principle that a
person considers all the people with whom he or she has ever worked and
then chooses the one person with whom he or she worked least well. This
does not mean that the person is not liked; it refers to the person with whom
one had the most difficulty getting the work done. The questionnaire then asks
a few questions that must be answered keeping that person in the back of
one’s mind. See Management in action 10.4.

Fiedler’s least preferred co-worker (LPC) measure
Instructions
Think of the person with whom you work least well. He or she may be someone you
work with now or someone you knew in the past. That person does not have to be the
person you like the least, but should be the person with whom you had the most
difficulty in getting a job done. Describe this person as he or she appears to you by
circling the appropriate number for each of the following items:
1. Pleasant 87654321 Unpleasant

2. Friendly 87654321 Unfriendly
3. Rejecting 12345678 Accepting
4. Tense 12345678 Relaxed
5. Distant 12345678 Close
6. Cold 12345678 Warm
7. Supportive 87654321 Hostile
8. Boring 12345678 Interesting
9. Quarrelsome 12345678 Harmonious
10. Gloomy 12345678 Cheerful
11. Open 87654321 Closed
12. Backbiting 12345678 Loyal
13. Untrustworthy 12345678 Trustworthy
14. Considerate 87654321 Inconsiderate
15. Nasty 12345678 Nice
16. Agreeable 87654321 Disagreeable
17. Insincere 12345678 Sincere
18. Kind 87654321 Unkind
Scoring interpretation
Your final LPC score is the sum of the numbers you circled on the 18 scales. If your
score is 57 or below, you are a low LPC, which suggests that you are task motivated. If
your score is within the range of 58 to 63, you are a middle LPC, which means you are
independent. People who score 64 or above are called high LPCs, and they are thought
to be more relationship motivated. Because the LPC is a personality measure, your
score is believed to be quite stable over time and not easily changed. Low LPCs tend to
remain low, moderate LPCs tend to remain moderate, and high LPCs tend to remain
high. Research shows that the test–retest reliability of the LPC is very strong.
Source: Fiedler & Garcia (1987)
A score of 64 on the questionnaire describes a least preferred co-worker in a

positive way which indicates that the person has a relationship-oriented
leadership style. In other words, despite the fact that this co-worker
prevented that person from doing his or her job effectively, he or she could
still find it possible to not develop a dislike of the co-worker. A score of 57
or less describes the least preferred co-worker in a negative way – meaning
a dislike for working with this co-worker because he or she makes it difficult
to do a job effectively. This indicates a task-oriented leadership style.
The second important element in Fiedler’s model is the situation. The

situation must allow the leader to take control and have an influence over the
employees. If a situation is highly favourable, leaders will find that their
actions positively influence employees. On the other hand, leaders will have
little or no success in influencing employees in highly unfavourable
situations. Fiedler identified three situational dimensions that have an
influence on a leader’s effectiveness:
Leader–member relations. This refers to the degree of confidence, trust

and respect employees have for their leader. Positive leader–member
relations will result in followers trusting their leader. This factor is the
most important situational factor.
Task structure. This refers to the degree to which employees’ job
responsibilities are official and clearly specified. If there is high task
structure, it is easier to influence followers, because they know what is
expected from them and they have clarity about the responsibilities, rules
and procedures.
Position power. This refers to the power to influence. Power-based
activities include hiring, firing, disciplining, promoting and giving salary
increases. The more influence leaders have in these areas, the greater their
power and efficiency will be.
Table 10.3 illustrates some scenarios or situations where specific leadership

styles will be effective.
Table 10.3 Situations of leader effectiveness
LPC Leadership
The situation
score style
High Relationship Moderately favourable
oriented The leader is somewhat liked, tasks are partly structured and the
(RO) leader has some position power. In this situation, the leader will
improve leader–member relations, morale and performance.
Low Task Highly favourable Unfavourable
orientated
(TO)
Leaders are liked, tasks Leaders are disliked, tasks are
are structured, and the unstructured and the leader does not
leader has power. In this have the power to hire, fire, reward
situation, the leader and punish. In this situation, the
focuses on performance leader sets goals, brings in structure
and sets the goal for the and turns the attention to
group which then performance and goal achievement
motivates employees. and overcomes low task structure.
Moderate Somewhat All types of situations
relationship These leaders will do fairly well in all situations because they can
oriented and adapt their leadership style to the situation. They will not perform
somewhat quite as well as a leader whose style is well matched to the
task situation, but at least they can meet the situation half way.
oriented
Leaders need to be matched to the right situation or develop the skills to
change the situation because, as stated above, Fiedler believes that it is not
possible for leaders to change their leadership styles.
10.4.3.2 House’s path-goal theory

This theory states that the responsibility lies with the leader to assist his
followers in the path to achieve the goal. Leaders should provide direction
or support, because employees will find only the leadership style of the
leader acceptable if they view it as an immediate source of satisfaction or as
a means of future satisfaction.
There are two situations that will determine how followers experience the
leader’s behaviour:
1. The leader’s behaviour makes the satisfaction of subordinates’ needs

dependent on their effective performance. This means that the leader
expects effective performance, and effective performance is a
prerequisite for employees to experience needs satisfaction.
2. The leader’s behaviour provides the instruction, guidance, support and

rewards necessary for the effective performance of employees.
House identifies four leadership styles which help employees to achieve

their goals:
Directive leadership style. Leaders with this style are clear about what is
expected from subordinates. They have work schedules and give direct
guidance as to what tasks are to be accomplished and how to accomplish
them.
Supportive leadership style. Leaders with this style are concerned with
the needs of their followers and have a good, friendly relationship with
most of them. Employees feel supported, which leads to improved
satisfaction and performance. Followers experience less job stress and
there is a relationship based on trust between leaders and followers.
Participative leadership style. Leaders with this style consult employees
and use their inputs before making decisions. If employees participate in
decision-making, they understand the goals better and what they have to do
(the paths) to accomplish them. They are also more committed to them
since they had inputs in them.
Achievement-oriented leadership style. A leader with this style
challenges followers to perform to their highest possible ability. He or she
expects and believes that employees will give their best and focus in
achieving the challenging goals he or she has set for them. These leaders
are focused on achievement.
The following factors or characteristics will influence the behaviour of

employees and indicate the leadership style with which they are most
comfortable:
Perceived ability. If employees believe that they have the ability and
competency to do what is required, they will be dissatisfied with a
directive leadership style.
Experience. If employees are experienced and know how to do their jobs,
they do not need a manager with a directive leadership style. On the other
hand, if employees have little experience, directive leadership is needed.
Locus of control. If an employee believes he or she has control over what
happens in his or her life (internal locus of control), a participative
leadership style will be more effective, because he or she will want to
contribute to the outcome. However, if an employee believes he or she has
no control over what happens in his or her life (external locus of control),
a directive leadership style will work better since it will provide the
needed structure and guidance.
The following environmental factors play a role in the relationship between a

follower and a leader:
Task structure. In a high task structure, the requirements of the tasks are
specified and there is clarity about how the task must be performed.
Directive leadership is not needed. If task structure is low, on the other
hand, directive leadership will be needed to set the structure and to guide
employees. If tasks are difficult and stressful, a leader who is supportive
will be more effective.
The formal authority system. When procedures, rules and policies are
unclear in the organisation, directive leadership will be needed to guide
and to set boundaries. If the formal authority system is clear and
employees are aware of all the procedures, rules and policies, directive
leadership will be ineffective.
Work group. If members of a workgroup provide little emotional support
to each other and there is no participation, supportive leadership from the
manager’s side will be needed. If tasks are complex and there is little
participation between employees, participative leadership will be
effective. If tasks are stressful and frustrating, supportive leadership will
be more effective.
The influence of all these factors will identify what subordinates will
experience. The leader’s leadership style, together with the influencing
environmental factors and the subordinate’s characteristics must lead to
higher performance and higher satisfaction.
10.4.3.3 Hersey and Blanchard’s theory

Hersey and Blanchard believe that the level of directive and supportive
leadership behaviour should be based on the level of maturity or readiness
of the followers, and a leader can and should adapt his or her leadership
style accordingly. This is in contrast to Fiedler, who believes a leader cannot
change his or her leadership style.
Hersey and Blanchard identify two behaviour types:
1. Directive or task behaviour (production centred). The leader sets out

clear guidelines, duties and responsibilities. Followers know exactly
what is expected from them, when and how they should do it.
2. Supportive or relationship behaviour (people centred). The leader
communicates with followers and followers give their input. Followers
are involved in decision-making.
This theory states that the followers’ level of readiness or maturity will
determine which one of the above-mentioned leadership behaviours will be
most effective in leading. Level of readiness or maturity refers to the ability
to set task-related goals that are challenging and attainable (i.e. task-related
ability) and the willingness to accept responsibility to achieve these goals.
People are on different levels of readiness based on their goals and
experience.
The four quadrants shown in Figure 10.4 indicate the level of directive
and/or supportive leadership that is needed to lead a specific follower. The
readiness of the follower ranges from low to high.
A new employee will not be able to perform the tasks needed to the standard
that is expected from him or her immediately, will first need to be trained and
led in the right direction. A directive or task behaviour leadership style will
be required to clarify what is expected and to set clear guidelines until the
employee becomes more mature. When employees have this lower level of
maturity, decision-making should at all times be in the hands of the leader.
Employees are not ready to make decisions by themselves (R1). In this case
the leader’s approach is a telling approach (S1).
It is important that leaders adopt the right leadership style in these early
stages to ensure that followers learn the necessary skills to perform at the
expected level. Leaders need to praise employees for every step they take in
the right direction. When employees feel they are growing in their position,
they become more confident and willing to accept responsibility, but they are
still unable to do the job unsupervised (R2). Here the leader’s approach is a
selling approach (S2).
Figure 10.4 Hersey and Blanchard’s theory
High maturity Modest maturity Low maturity

R4: Followers are R3: Followers R2: Followers are unable, R1: Followers are
talented (able), self- are able, but but they are self-confident unable, not confident
assured and willing not confident or willing to accept and unwilling to accept
to accept and willing. responsibilities. Leaders responsibilities.
responsibilities. Ideas are explain decisions and also Leaders need to
They take shared and provide the opportunity to provide specific
responsibility for they gain clarity about the instructions and
decisions and participate in decisions. supervise
implementation. decision- performance closely.
making.
The moment employees are ready to make decisions themselves they can
move over to the other side of the diagram. At first the employee might not
feel ready to take on so much responsibility (R3) and therefore might need
some supportive behaviour from the leader to increase confidence. The
leader will therefore follow a participating approach (S3). As the
follower’s confidence increases, he or she will need less supportive
behaviour from the leader (R4). The leader now needs to ensure that the
employee has all the necessary resources to get the job done without
obstacles. This is where delegating leadership behaviour happens (S4).
10.5 CONTEMPORARY LEADERSHIP PERSPECTIVES
Leaders are increasingly described as those who are responsible for

articulating a vision and leading followers toward that vision no matter how
difficult it might be to achieve. Leaders who have the skill to communicate
the vision to their employees or followers and have the ability to inspire and
motivate their followers beyond the normal levels of performance can be
classified as charismatic and transformational leaders.
10.5.1 Transformational leadership

There are many factors that make leadership a challenge. A transformational
leader has the ability to instil trust, admiration, loyalty and respect among
followers and to “transform” a situation, because followers are willing to go
above and beyond what the leader expects them to do. Abraham Lincoln and
Martin Luther King were transformational leaders. Not only were they
successful within their different environments, but they transformed their
worlds. Transformational leaders raise their followers to a higher level of
morality and motivation.
Transformational leaders lead with trust, which is the lubricant for continued
smooth and effective interactions. To be trusted, leaders must have character
(respect, honesty, service, fairness, quest for truth, integrity) and competence
(task related, interpersonal and organisational). Trust allows leaders to
inspire employees to excel in their work.
Some advantages of transformational leadership are that it increases

employee satisfaction and motivation and therefore productivity, decreases
employee turnover and creates a culture of trust.
10.5.2 Charismatic leadership
With charismatic leadership, the leader uses his or her charm to get the
admiration of his or her followers. These leaders show concern for their
people and look after their people’s needs. A manager with charismatic
leadership characteristics creates a comfortable and friendly atmosphere for
his or her employees by listening to them and making them feel that they have
a voice in the decision-making. Famous examples of charismatic leaders are
Winston Churchill, Bill Clinton, Mother Teresa and Ronald Reagan (see

Ronald Reagan as an exemplar of charismatic leadership
Reagan was able to capture the trust and admiration of his followers. Reagan is ranked
as one of the top three charismatic American presidents in the twentieth century.
Followers believed in him and expressed admiration for his candid honesty. Reagan
displayed courageous convictions and was willing to sacrifice his own political career in
order to pursue what he perceived (and his followers likewise) as right and true.
Reagan’s ideas were perceived by his followers to be genuine and deeply held. Reagan
did deeply believe in his own ideals and often told advisors not to mention “political risks”
when advising on options or consequences related to a pending decision.
Perhaps his most memorable act of integrity was when he addressed the nation from
the Oval Office in March 1987 and took ultimate responsibility for the Iran Arms and
Contra Aid controversy. Even though he had not personally authorized the unpopular
action, he did take responsibility for actions conducted by his administration’s officials.
This was an act that restored trust and contributed to his followers’ perceptions of his
integrity. Reagan was well known for demonstrating courage and conviction. He used
his personal strength and conviction to impress his values on followers and persuade
them that his vision was best for the nation.
Ronald Reagan is remembered historically as “The Great Communicator”. This is more

than just a nickname or passing compliment. Reagan was a very effective
communicator, and his communication style was perceived as charismatic. President
Reagan displayed expertise in managing his administration by utilizing delegation,
because he was regarded as an expert delegator of tasks. Reagan was not interested
in increasing his personal power base, but felt a strong personal conviction for his vision
and subsequent policies. Therefore, it was often said that Reagan’s approach to
managing his White House staff and other administration officials was a very positive
approach. As Reagan campaigned for president in the late 1970s, the nation was
suffering through a severe economic downturn where unemployment, gasoline prices,
and interest rates were soaring. President Carter, his predecessor, was seen as a
capitulator and a weak foreign policy president. The USA citizenry was very dissatisfied
and eager for change and Reagan perceived this and articulated his visionary platform
well by appealing directly to people’s core convictions. Reagan promised a new vision
that included a small federal government, strong military, and a booming economy. He
understood the timing of his political rise and used the country’s eagerness for change
to help him gain the presidency.
Source: Bell (2013)
Charismatic leaders in general have high self-confidence, vision, a holistic

approach to leading and are passionate about achieving the vision of the
organisation. They engage in extraordinary behaviours and display
substantial expertise. There seems to be a strong positive relationship
between charismatic leaders and the performance of employees.
Crisis situations in an organisation create an atmosphere that is conducive for

the emergence of charismatic leadership. Charismatic leaders have a deep
belief in their mission, and are strongly convinced that they and their
followers will succeed. Through this conviction of success, the leader
manages to convince followers as well. Therefore these followers are
usually obedient and loyal, whether the leader is succeeding or not.
Effective communication is an essential quality for a leader whatever his or

her leadership style. For charismatic leaders, effective communication
requires more than merely the dissemination of information. They believe
that in order to be effective, they have to include emotional appeals in their
rhetoric by using dramatic, symbolic and metaphoric language that lends
credibility to the communication. Ideas, thoughts and concepts are articulated
in an inspirational and motivating manner. Establishing a trust relationship
with followers is also crucial for charismatic leaders.
10.5.3 Servant leadership

This concept of leadership originates from the bottom-up approach to
leadership where leadership actually starts with the followers’ needs. It is a
leadership approach that makes serving others the number one priority. It is
based on the assumption that work exists for the development of the
employee as much as the employee exists to do the work. These leaders
motivate and influence followers because they want to fulfil the needs and
goals of the employees as well as achieve the organisation’s larger mission.
Servant leadership is about the following:
Service to others. Servant leadership begins when a leader assumes the

position of being a servant in interactions with followers. Leadership
arises not from the exercise of power or self-interested actions, but from a
fundamental desire to help others first.
Holistic approach to work. Servant leadership challenges organisations
to rethink the relationship between people, organisations and society as a
whole. Individuals should be encouraged to be who they are in both their
professional and their personal lives, because it will benefit the long-term
interests and performance of the organisation.
Promoting a sense of community. A sense of community among
followers helps an organisation to succeed in its objectives, because
groups of individuals are liable for themselves and each other,
individually and as a unit.
Sharing of power in decision-making. Effective servant leadership
nurtures participatory, empowering environments and encourages the
talents of followers. The result is a more effective, motivated workforce
and, ultimately, a more successful organisation.
In order to be effective, servant leaders require the following personal

characteristics and skills:
Listening – a critical communication tool necessary for accurate

communication and for actively demonstrating respect for others
Empathy – seeing things from other people’s point of view
Healing – recognising the human desire to find wholeness and to support it
in others
Awareness – staying alert for opportunities to lead followers
Persuasion – building group consensus through gentle but clear and
persistent persuasion, without abusing one’s position of power
Conceptualisation – conceiving solutions to problems that do not
currently exist
Stewardship – being concerned for both individual followers and the
organisation as a whole, as well as the organisation’s impact on and
relationship with all of society
Commitment to the growth of people – being able to appreciate and
encourage other people
Building community – uniting individuals in society
10.6 LEADERSHIP AND ENTREPRENEURSHIP
Research suggests that there is a significant relationship between leadership,

change and entrepreneurship. Many charismatic and transformational leaders
are by nature entrepreneurial and change oriented. Charismatic leadership
has also been associated with innovation. There is some empirical evidence
to suggest that active behaviour (which includes demonstrating initiative,
taking action and persisting until goals are achieved) is associated with
transformational and charismatic leadership and, therefore, it could be
argued that transformational and charismatic leadership are associated with
entrepreneurship.
10.7 GENDER AND LEADERSHIP
Research shows that women executives, when rated by their peers,

employees and bosses, score higher than their male counterparts on a wide
variety of measures. Placing more woman in leadership positions is currently
a hot topic in terms of equity in the workplace.
Men and women differ in their approach to leadership in the following ways:
Men are generally more task oriented, while women focus more on
relationship building.
Men tend to be more dominant and forceful than women.
Men are less flexible, while women are more open to change.
Men are more likely to use a directive and autocratic leadership style,
while women use a more participative and democratic approach.
Flexibility, teamwork and partnering, trust and information sharing are

rapidly replacing rigid structures, competitive individualism, control and
secrecy. The best managers and leaders listen, motivate and support their
people. They inspire and influence rather than control, and women’s
leadership styles seem to fit this new profile better than their male
counterparts for the time being.
10.8 LEADING THROUGH EMPOWERMENT
Empowerment involves increasing the decision-making discretion of

workers. Millions of individual employees and employee teams are making
the key operating decisions that directly affect their work. If organisations
are to compete successfully in a dynamic global economy, employees will
have to be able to make decisions and implement changes quickly. Leaders
should encourage and lead through empowerment.
10.9 SUMMARY
Good leadership is crucial for setting people in motion – to start them doing
the right things right. For any organisation to be effective, it needs good
leadership and good management. If there is no strong leadership, it is almost
impossible to increase performance levels. Leaders can make the difference
in any organisation. For any organisation to be effective, the organisation
needs good leadership and good management with neither being more
important than the other; both are very important for achieving the vision of
an organisation.
In today’s complex, ever-changing global environment, with both internal and

external factors continuously influencing an organisation’s effectiveness,
good leadership is becoming ever more important and can mean the
difference between success or failure. The search for the characteristics or
traits of leaders has been ongoing for centuries. Different components,
theories and perspectives of leadership have been discussed in this chapter.
Reading through this chapter, it is, however, clear that as people change,
leadership will have to change.
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CASE STUDY: THE MOST UNDERVALUED LEADERSHIP

TRAITS OF WOMEN
It’s impossible to respect, value and admire great leadership if you can’t identify what
makes a leader great. While the tide is changing and more women are being elevated to
leadership roles, there is still much work to do. Men have fulfilled many more leadership
roles than woman. As proof, as of July 2013, there were only 19 female elected
presidents and prime ministers in power around the globe. In the business world,
women currently hold only 4.6% of Fortune 500 CEO positions and the same
percentage of Fortune 1000 CEO positions. As women continue their upward
progression in the business world, they have yet to be fully appreciated for the unique
qualities and abilities they bring to the workplace.
It can be difficult for a man to understand how women think, act and innovate unless he
has been closely influenced by women in his life. Many will agree that women may
process things differently and in general a woman’s approach to leadership differs
slightly from that of men. Women tend to have different decision-making processes.
The dynamics and subtleties of their personality and style, and other special character
qualities that women possess, create a different perspective on problems and
decisions.
The best women leaders in organisations have globular vision that enables them to be
well-rounded people. For example, they have their finger on the pulse of the culture and
can talk to you about the latest pop-culture news – but then easily switch gears to give
you their perspective on what is taking place in the economy and the business world.
Women have run the show for years both at home and in the workplace. These women
are masters in multi-tasking and highly collaborative (though not afraid to get territorial to
protect their domain). They enjoy their own space to test themselves and find their own
rhythm. Women leaders are like scientists: many of them want to make new
discoveries or get solutions for problems where others have failed. Great women
leaders don’t stop pursuing until the job gets done. Good women leaders are good
collaborative leaders – not afraid of trial and error as long as they continue to build the
resource infrastructure around them that gets them closer to accomplishing their goals.
Good women leaders invest in themselves and become knowledge seekers. They are
not afraid to ask questions when given a safe platform to express themselves.
One thing is certain – good women leaders understand survival, renewal and
reinvention. They are not afraid to fight for what they believe in or seek an opportunity to
achieve something of significance. They believe in what they stand for, but that doesn’t
mean they won’t put their ideas and ideals to the test. For them, doing more with less is
simply a matter of knowing how to activate those around them strategically. While
women leaders have their productivity secrets, it’s not secret where they come from.
The leadership traits that women leaders naturally possess are the most undervalued.
1. Opportunity driven
When confronted with a challenge, good women leaders look for the opportunity within.
They see the glass as half-full rather than half-empty. They push the boundaries and,
when faced with adverse circumstances, they learn all they can from it. Optimism is
their mindset because they see opportunity in everything. An example of such a leader
is found in the story of Estée Lauder, the child of Hungarian immigrant parents. She was
quite the opportunist in the cosmetics industry. During the post-war consumer boom,
women wanted to start sampling cosmetic products before buying them. Lauder noticed
and responded to this shifting dynamic by pioneering two marketing techniques that are
commonly used today – the free gift and the gift-with-purchase. It’s exactly this type of
inventiveness that other women use to pursue the opportunities in front of them.
2. Strategic
Women see what others don’t see. A well-known statement reads as follows: “A
woman’s lens of scepticism oftentimes forces them to see well beyond the most
obvious details before them. Many women are not hesitant to peel the onion in order to
get to the root of the matter.”
Women leaders don’t allow their egos to stand in the way of good business. They have
a mindset of getting things done for the betterment of a healthier whole. They think
strategically.
3. Passionate
While historically women in general were viewed and stereotyped as emotional leaders
by men, they are actually just passionate explorers in the pursuit of excellence. When
women leaders are not satisfied with the status quo, they have the drive to make things
better. Good women leaders get things done and avoid procrastination. Many women
have learned not to depend on others for their advancement and thus have a tendency
to be too independent. A woman’s independent nature is her way of finding her focus.
When these women leaders are locked into what they are searching for – move out of
the way. Their passionate pursuits allow them to become potent pioneers of new
possibilities. No wonder minority women represent the largest growing segment of
entrepreneurs.
4. Entrepreneurial
Entrepreneurship is just a way of life for many women. They can be extremely
resourceful, connect the dots of opportunity and become experts in developing the
relationships they need to get the job done. Many women leaders find excitement and
motivation by being extremely creative and resourceful when completing tasks and
other duties and responsibilities.
5. Purposeful and meaningful
Many women leaders enjoy inspiring others to achieve. They know what it’s like to be
the underdog and work hard not to disappoint themselves and others. Women leaders
in particular often have high standards and their attention to detail makes it difficult for
others to cut corners or abuse any special privileges. Women leaders with a nurturing
nature are actually good listeners and excellent networkers/connecters. They enjoy
creating ecosystems and support a collaborative style that melds the thinking and ideas
of others.
6. Traditions, family and teamwork
Whether at home, or at work, women are often the glue that keeps things together.
When they sense growing tensions that can lead to potential problems or inefficiencies,
the most successful women leaders enjoy taking charge before circumstances force
them to do so. Women are usually the ones to secure the foundational roots of the
family and to protect family and cultural traditions from wavering. They provide the
leadership within the home and in the workplace to ensure that legacies remain strong
by being fed with the right nutrients and ingredients.
The most successful women leaders are big believers in team building and the
enforcement of mission, goals and values to ensure that everyone is on the same page
with the same intentions. This secures a sense of continuity and makes it easier for
everyone to have each other’s backs. No wonder women are assuming more
management and leadership roles in family-owned businesses.
Source: Adapted from http://www.forbes.com/sites/glennllopis/2014/02/03/the-most-
undervalued-leadership-traits-of-women/ (accessed on 21 October 2014)

1. Based on the traits theory and this case study, find a woman in a leadership role that
possesses most of these traits. Explain why this woman can be regarded as a good
leader.
2. What leadership style relates to women in leadership. Substantiate your answer

from the case study.
3. In what way does the leadership style of women differ from that of men?
Substantiate your answer.
4. In your opinion, is there a role for women in leadership positions? Substantiate your
answer.
1. Based on the leadership theories discussed in this chapter, give advice to a manager on
how to deal with the following employees:
a) A new employee who has recently graduated from university. He or she has no prior work
experience but is well qualified.
b) Sara who has eight years of relevant work experience and is newly employed.
c) John who has a lot of personal issues and financial stress that is starting to have a
negative effect on his work performance.
d) An employee who has been working for the organisation for many years and is not getting
along with the strict and directive manager of the department. It is so bad that he is
threatening to leave the company.
2. Are there any challenges in South Africa with regard to leadership? Based on theory, what
can be done and implemented to solve these issues?
11 Motivation
WERNER VERMEULEN AND KOBUS LAZENBY
Learning outcomes
Explain what motivation is, and why managers need to be concerned about it.
Understand the motivation process.
Explain how goals and needs motivate people.
Discuss and explain each of the early theories on motivation.
Explain and apply each of the contemporary theories of motivation.
Discuss how managers can improve the motivation of staff.
Identify how to design motivating jobs.
Understand some current issues in motivation.
11.1 INTRODUCTION
Motivation is part of the activation process in management – getting

employees to do their job. Motivation is also sometimes called the “core of
management”. Even with the best plan or strategy in place and an appropriate
organisational structure, an organisation will be effective only if its members
are motivated to perform at a high level.
Motivating and rewarding employees effectively can be challenging. In the

past it was believed that an adequate salary or wage would be enough, but
today it is recognised that people do not work for money only. Other factors,
like job satisfaction and empowerment, also play important roles in
motivation.
Poorly motivated employees can nullify the soundest organisation.

Motivation will evolve from a motive, an inner state that energises or moves,
and that channels behaviour towards the achievement of goals. This motive
depends on forces either within or external to a person that arouse
enthusiasm and persistence to pursue a certain course of action.
Employee motivation affects productivity, and part of a manager’s job is to

channel motivation into the achievement of organisational objectives. It is
therefore important to understand what triggers people to take action, what
influences their choice of action, and what motivates them to continue with
that action over time. Motivated employees will be eager and willing to
achieve organisational objectives or to go beyond the call of duty. People
primarily do what they do as a result of the motive to meet their (or in this
case, the organisation’s) wants or needs.
Understanding that people are driven by self-interest is an important key to

understanding motivation as a whole. Generally, a motivated employee will
try harder than an unmotivated one to do a good job. Motivation is not the
only important contributor to productivity and performance, however.
Abilities, skills and the right equipment are also indispensable (see

Motivation and communication are crucial for any organisation to succeed, says
Jack Welch
Jack Welch, the former CEO of General Electric, was a key speaker at a recent talk
titled Lessons in Leadership at the Wits Business School. Talking via satellite Welch
shared his belief that most employees needed encouragement and motivation from
management.
Employees want to see what is in it for them so that they can put in more effort and
work together as a team. He stressed the importance of communication and honesty
with employees. Employees do want to hear what they are doing well and where they
can improve. Employees must understand that they are only as good as their
performance is for the moment, and not forever.
He also highlighted the importance of a value system in the organisation and specifically
mentioned trust to help the organisation in the search for innovation. Communication in
an organisation is crucial and it will allow an organisational culture that is open to
change and learning.
Source: Adapted from http://www.leader.co.za/article.aspx?s=6&f=1&a=529
(accessed on 11 March 2015)
An important part of motivating employees is to be a motivated manager,

because enthusiasm is contagious. If employees see that their managers are
enthusiastic about their job, they are more likely to be enthusiastic about their
own job. This chapter will present several theories of motivation in the
workplace and provide specific approaches to motivating employees.
11.2 WHAT IS MOTIVATION?
Motivation means “to move” and is derived from the Latin word movere. It is
that state of an individual’s point of view which represents the strength of his
or her tendency to apply some particular behaviour. Motivation is thus an
internal vigour which stimulates, regulates and upholds a person’s actions
and determines whether and how he or she will behave. Motivation is the
inner drive that directs a person’s behaviour towards the achievement of
goals. Motivation can therefore be defined as a process which initiates,
directs and sustains human behaviour. It refers to a person’s desire to do the
best possible job or to put forth the maximum effort to perform the assigned
tasks. It is clear from this definition that motivation is directed at behaviour
towards goal achievement.
People often think that a “happy” employee is also a “motivated” employee.

However, although there may be a relationship, motivation is the level of
desire employees feel to perform, regardless of their level of happiness.
Motivated employees will be more productive and more engaged and will
feel more invested in their work. This will then lead to a “happy” employee.
When employees experience these things, it helps them and the organisation
to be more successful. Read Management in action 11.2 and see how
important an engaged employee is for the performance of an organisation.

Fired-up staff key to successful firms
Organisations with committed and motivated employees can significantly increase their
operating income, according to a survey done by professional services firm Towers
Watson. It found that companies with motivated employees had seen a 19% increase in
operating income over a 12-month period.
Employees who are mentally and emotionally unhealthy are the main reason why
organisations struggle to improve their productivity and their customer service levels.
Employees are the ones in the organisation who transform the inputs into outputs and
interact with the customers. Their loyalty and commitment to the organisation will
determine their effort in the whole process. It is also clear that loyalty and commitment
have a direct impact on productivity and customer loyalty. It is only when an employee is
happy and committed to the organisation, that such an employee will take care of
customers and go the extra mile to deliver a superior product or service.
To improve employee engagement is not as daunting as it may appear. Employees in

general actually want to be productive and want to progress and learn new skills. What
is required is that management must engage the employees through motivation and
continuous communication. This will create a meaningful work environment where the
workers will feel included and cared for and where they can enjoy doing their best.
Source: Adapted from http://www.fin24.com/Entrepreneurs/Fired-up-staff-key-to-
successful-firms-20120719 (accessed on 11 March 2015)
If a manager is successful in using motivation, he or she can effectively blend

organisational and individual goals and improve this feeling of engagement
in an employee.
11.3 THE MOTIVATION PROCESS
In its simplest form, the motivation process begins with an unsatisfied need,
which creates tension and drives an individual to search for goals to fulfil it.
If these goals are achieved and the individual experiences gratification, the
need is satisfied and the tension will be reduced.
Figure 11.1 The motivation process
The motivation process, as shown in Figure 11.1, can be explained as

follows:
Unsatisfied need. This is the first element in the process of motivation.

The individual perceives a deficiency that can be activated by an internal
stimulus (such as hunger) or an external stimulus (such as an
advertisement). The employee might, for example, feel the need for more
challenging work, for higher pay, for time off, or for the respect and
admiration of colleagues.
Tension is created. The unsatisfied need creates tension in the individual.
Such tension can be physical, psychological or sociological. It creates a
strong internal stimulus that calls for action and leads to thought processes
that guide the individual’s decision to satisfy these needs and to follow a
particular course of action.
Action or behaviour to satisfy the need. This stage involves the action of
the individual to satisfy the need. The individual will engage in action to
satisfy the needs and motives that will lead to tension reduction. Different
alternatives are available and the individual will decide on an action to
take that will lead to satisfaction, for example putting in some overtime to
earn extra money to pay for a holiday.
Satisfaction. This stage involves goal accomplishment. The indivudual’s
course of action or behaviour has satisfied his or her needs and motives. If
an employee’s chosen course of action results in the anticipated outcome
and reward, the person is likely to be motivated by the prospect of a
similar reward and will act in the same way in the future. However, if the
employee’s action does not result in the expected reward (dissatisfaction
or punishment is experienced), he or she is unlikely to repeat the
behaviour or will modify his or her behaviour to experience rewards in
the future. Ultimately a specific goal is accomplished.
Feedback. The reward or punishment acts as a feedback mechanism to
help the individual to evaluate the consequences of the behaviour when
considering future action. Feedback provides information for revision,
improvement or modification of behaviour or a redefining of needs if
necessary. Depending on how well the goal is accomplished, the needs
and motives can be adapted. Drastic environmental changes sometimes
necessitate the revision of needs.
11.4 MOTIVATION AND ORGANISATIONAL

PERFORMANCE
The link between employee motivation and organisational performance

seems to be quite obvious, but it is a lot more complex. Although an
individual will fulfil a task with a high level of dedication and enthusiasm
when the task is important and valuable to him or her, everyday duties can
become tedious and repetitive. Managers therefore constantly need to find
creative ways to keep their employees motivated.
Motivation is very important for every organisation owing to the benefits that
will result in increased organisational performance. The benefits of
motivation to an organisation include the following:
Human capital management. An organisation can only achieve its full
potential if it exploits fully all the financial, physical and human resources
at its disposal. These resources motivate employees to accomplish their
duties to the best of their ability.
Meeting personal goals helps an employee to stay motivated and to
continue to produce. Reaching personal goals leads to self-development
and when an employee realises the link between effort and results, he or
she will be motivated to keep striving for the next goal.
Greater employee satisfaction. Employee satisfaction influences the
progress or regress of an organisation. Motivated employees are eager to
fulfil their tasks and feel a personal sense of satisfaction when they
achieve them.
Raising employee efficiency. An employee’s efficiency level is not only
related to abilities and qualifications, but also to willingness, which
depends on motivation. Motivating employees will make them more
willing to work harder, which will lead to an increase in productivity,
lower operational costs and an overall improvement in efficiency.
An increased chance of meeting the organisation’s goals. Every
organisation has goals, which can be achieved only when there is proper
resource management and employees are motivated and directed by their
objectives.
Better team harmony. A proper work environment that is focused on co-
operative relationships is highly important for an organisation’s success. It
will increase stability and profits, and employees will also adapt more
easily to changes.
Workforce stability. Employees will stay loyal to an organisation if they
experience a sense of support and participation from management to
develop their abilities and effectiveness. Workforce stability creates a
positive public image in the job market which attracts more competent and
qualified individuals to the organisation.
These benefits highlight the importance of motivation. If managers want to

inspire personnel, they need to provide an organisational environment that
infuses positive energy. Employees should feel that they are integral
contributors to the organisation’s overall success.
Self-discipline is a crucial part of motivation. Self-discipline is a deeply

rooted, core passion or emotion that sustains an individual’s goal-striving
actions or behaviour over a long period of time, allowing him or her to
persist and persevere until his or her goals are achieved. The seven-step
process of learning self-discipline as a skill is explained in Management in
action 11.3.

The neuropsychology of self-discipline
This seven-step process will teach you how to build the power of self-discipline and
motivation into your life. The first four steps are motivational – they provide the fire, drive
and emotional energy to complete your goal. The final three steps are actionable – they
detail what must be done to succeed:
1. Create a purpose. Define exactly what you want to accomplish. This will give you
a cause, a reason for making the effort. It will light a small spark inside you that will
soon begin to burn as your emotion and drive increase.
2. Find role models. Seek out others who have achieved a similar goal. They will
provide two key ingredients: (a) the belief that the goal can be accomplished,
instilling a sense of possibility, and (b) a template or plan to follow. The sense of
possibility combined with a defined purpose will further feed your emotional fire.
3. Sensory vision. When you can vividly see yourself reaping the rewards of
achieving your goal, the vision will come alive. You must be able to see, touch, feel
and smell it. “I think I can do it” will change to “I know I can do it”.
4. Emotion. The vision becomes atomic, charging every cell of your body with
emotion and passion. With this passion, you will now be motivated to complete the
action steps four, five and six.
5. Planning. Determine exactly what you need to do to reach your goal and how long
it will take. This step will further fuel your passion by turning your vision into a
concrete plan.
6. Knowledge and skills. Acquire the skills and knowledge necessary to implement
the plan. Develop your confidence to learn. Every time you master a new skill, your
confidence in your ability to succeed will increase, you will get closer to your goal,
and the passion from which motivation is drawn will increase in energy.
7. Persistence and perseverance. Hold onto your vision and see it through to its
completion no matter how long it takes or how difficult it is. Fight through physical
and emotional pain, setbacks and hardships.
Once effort starts to bring someone closer to his or her goal, a self-perpetuating spiral
of vision, belief, emotion and effort will be created which has the ability to change
someone’s life.
Source: Adapted from http://www.sybervision.com/Discipline/sixsteps.htm (accessed

on 11 March 2015)
11.5 MOTIVATION THEORIES
The essence of motivation theories is to discover what drives individuals to

work towards a specific goal or outcome. Managers are interested in
discovering what will motivate employees, because motivated employees
are more productive and this leads to more economic use of resources.
Most motivation theories differentiate between intrinsic and extrinsic factors.

Intrinsic factors are concerned with an individual’s interest, pleasure and
willingness to participate in an activity. People with self-confidence and a
belief that their abilities will lead to success are more likely to have high
levels of intrinsic motivation. Extrinsic motivation focuses on the outcome of
the activity. It implies that individuals are driven by the outcome rather than
the activity itself.
Researchers have developed a number of different theories to explain

motivation. Each theory tends to be rather limited in scope, but contributes to
a better understanding of motivation as a whole. Three major categories of
motivation theories will be discussed below: content theories, process
theories and learning theories.
11.5.1 Content theory

Content theory emphasises employee’s needs and identifies those needs that
will motivate them to act in a specific way. The key to achieving
organisational objectives is then to design reward systems that will meet the
needs of employees and direct their behaviour towards the achievement of
the organisational goals.
Three examples of content theory are Maslow’s hierarchy of needs,

Herzberg’s two-factor theory and McClelland’s needs theory.
11.5.1.1 Maslow’s hierarchy of needs theory

Abraham Maslow developed his hierarchy of needs theory in 1943. His
theory emphasises various psychological factors that are responsible for
particular behaviour aimed at satisfying the needs of individuals. His basic
assumptions about human behaviour are as follows:
Man always wants more and is actually a “wanting” being.

A satisfied need is no longer a motivator of behaviour – only unsatisfied
needs motivate and influence one’s behaviour.
A person’s needs are arranged at different levels, i.e. in a hierarchy of

importance. As soon as needs on the lower levels are met, those on the next,
higher level will demand attention. The hierarchy of needs is presented in
Figure 11.2.
Figure 11.2 Maslow’s hierarchy of needs

According to Maslow, it is essential that the needs of the employee are given
substance and for the manager to be able to perceive the most important need
at any given moment:
Physiological needs (i.e. food, water, warmth) can be satisfied by making

sure that there is adequate heat, air and a basic salary for employees to
ensure their survival.
Safety needs (i.e. personal security) can be satisfied by providing a
working environment that is both physically and psychologically safe. This
includes having good fringe benefits and job security.
Social needs (i.e. intimate relationships and friends) can be satisfied by
managing the relationships between co-workers and supervisors. Working
in groups and teams will also satisfy this need.
Esteem needs (prestige and the feeling of accomplishment) can be
satisfied by giving recognition when due and increasing responsibility and
status of employees.
Self-actualisation needs (achieving one’s full potential) can be met by
providing opportunities for growth, creativity and training for challenging
assignments and advancement (see Management in action 11.4).

The characteristics of a self-actualising individual according to Maslow
The self-actualized person has more efficient perception of reality and more
comfortable relations with it. Such a person can accept the good and the bad, the
highs and the lows, and he can tell the difference.
Acceptance of self, others, and nature. The self-actualizing person sees reality
as it is and accepts responsibility for it.
The self-actualizing person has spontaneity, simplicity and naturalness. In other
words, this kind of person is not hung up on being as others think he should be. He is
a person who is capable of doing what feels good and natural for himself, simply
because that’s how he feels. He does not try to hurt others, but he has respect for
what is good himself.
Problem centering. The self-actualizing person is someone who is concerned with
the problems of others and the problems of society, and is willing to work to try to
alleviate those difficulties.
The need for privacy. The self-actualizing person has a need to be by himself or a
need for solitude. He enjoys times for quiet reflection and doesn’t always need
people around him. He can be with a few people and not need to communicate with
them. Their presence is enough.
Autonomy, independence of culture and environment. The self-actualizing
person can do things for himself and make decisions on his own. He believes in who
and what he is.
Continued freshness or appreciation. The self-actualizing person experiences a
joy in the simple and the natural. Sunsets are always beautiful and he seeks them
out. He can still enjoy playing the games he played as a child and having fun in some
of the same ways he did many years before.
Interpersonal relations. Self-actualizing people have deeper and more profound
interpersonal relations than other people. They are capable of fusion, greater love
and more perfect identification, and they generally tend to have relatively few friends,
but those relationships are deep and very meaningful.
The democratic character structures. Self-actualizing people tend to believe that
every individual has a right to a say and that each person has his strengths and
weaknesses.
Discriminating between means and ends, between good and evil. Self-
actualizing people know the difference between means and ends and good and evil
and do not twist them in a way that hurts themselves or others.
Philosophical and unhostile sense of humour. Self-actualizing people tend to
enjoy humour. They like to laugh and like to joke, but not at the expense of others.
They are generally seen as good natured, even though they are capable of being very
serious.
Creativeness. Self-actualizing people are capable of being highly creative in writing,
speaking, playing, fantasising, or whatever. A self-actualizing person does have
creative moods.
The imperfections of self-actualizing people. Self-actualizing people are
individuals who are aware of the fact that they are not perfect and that there are
always new things to learn and new ways to grow. The self-actualizing person,
although comfortable with himself, never stops striving.
Source: http://www.selfcounseling.com/help/personalsuccess/selfactualization.html
The five basic needs of an individual form a hierarchy. The higher-level

needs are not considered important by an individual until the lower-level
needs are satisfied at least to some extent. Once a need is satisfied, the
person becomes concerned about the next level of need in the hierarchy.
Citizens of different countries vary in terms of the needs they seek to satisfy
through work. People in Greece and Japan are especially motivated by safety
needs. People in Denmark, Sweden and Norway are motivated by
belongingness needs. In developing countries with low standards of living,
physiological and safety needs are likely to be the prime motivators of
behaviour. As countries become wealthier and have higher standards of
living, needs related to personal growth and accomplishment become more
important as motivators.
11.5.1.2 Herzberg’s two-factor theory

Frederick Herzberg’s two-factor theory, also known as the motivation–
hygiene theory, postulates that there are certain factors in the workplace that
cause job satisfaction, as well as a separate set of factors that cause
dissatisfaction.
According to Herzberg, motivators such as challenging work, recognition

and responsibility produce employee satisfaction. A person is thus either
satisfied (motivator is present) or not satisfied (motivator is absent).
Hygiene factors, including status, job security, salary and fringe benefits – if
absent – produce dissatisfaction. Thus a person is either dissatisfied (hygiene
factor is absent) or not dissatisfied (hygiene factor is present), but these
factors cannot motivate a person (see Table 11.1).
Table 11.1 The factors in Herzberg’s two-factor theory
Hygiene factors Motivators

Company policy and administration Achievement
Supervision Recognition
Relationship with supervisor The work itself
Working conditions Responsibility
Salary Advancement
Relationships with co-workers Growth
Hygiene factors Motivators
Personal life
Relationship with subordinates
Status
Security
If management wishes to increase job satisfaction, it should be concerned

with the nature of the work itself. Management must present opportunities
to employees for gaining status, assuming responsibility and achieving self-
realisation. If management wishes to reduce dissatisfaction, then they must
focus on the work environment. This will include looking at policies,
procedures, supervision and working conditions. The implication of this
theory is that if there is a problem with supervision for example, the
employee will feel dissatisfied. If everything is positive with regard to the
hygiene factors, an employee will feel not dissatisfied, but this does not
mean that he or she will feel satisfied and therefore be motivated. It is only
when all the hygiene factors are positive (actually a prerequisite) and
motivators are also present, that an employee will be satisfied and
motivated. To ensure a satisfied and productive workforce, managers must
give attention to both sets of factors.
Herzberg’s theory appears to have a relationship with Maslow’s needs

hierarchy. The higher-level psychological needs according to Maslow relate
to the motivators, namely, Herzberg’s achievement, recognition,
responsibility, advancement and the nature of the work itself. The lower
level of Maslow’s needs corresponds with the factors that cause
dissatisfaction (hygiene factors), such as organisational policies,
supervision, technical problems, salary, interpersonal relationships on the
job and working conditions.
This two-factor model of motivation is based on the notion that the presence
of one set of job characteristics or incentives leads to employee satisfaction,
while another, separate set of job characteristics leads to dissatisfaction.
Satisfaction and dissatisfaction are not on a continuum, but are independent
phenomena. Figure 11.3 clearly illustrates this.
Figure 11.3 Herzberg’s two independent factors
What, then, does this mean for managers? It means that if the hygiene factors
are not all positive and present, employees will be dissatisfied with their
jobs. From Figure 11.3 it is clear that if the hygiene factors are present and
positive, job dissatisfaction will decrease. However, it will not necessarily
improve an employee’s satisfaction. To increase satisfaction (and motivate
someone to perform better), the manager must address motivation factors. It
is clear that motivation according to this theory requires a two-fold approach
– eliminating the so-called dissatisfiers and enhancing the satisfiers.
The contribution of this theory to management is that it focuses attention on

the importance of “the work itself” in the motivation of employees. This has
an important implication for job enrichment.
11.5.1.3 Acquired needs theory

This theory of motivation was developed by social psychologist David
McClelland. It proposes that people acquire different types of needs during
their lifetime as a result of their life experiences. McClelland’s theory
suggests that a person’s early development will determine whether these
needs are present:
If an individual has developed a warm and loving relationship with his or

her parents, such a person may develop the need for affiliation. This is a
desire to create close personal relationships with others and avoid
conflict. Those with a need for affiliation value building strong
relationships, admire belonging to groups or organisations, and are
sensitive to the needs of others. This type of person is a team player and
wants to be respected and liked.
If the same individual was encouraged to act independently and was
rewarded for success as a child, he or she may have acquired the need to
achieve. This is a drive to compete, meet high standards of excellence and
succeed. Those with a high need for achievement are attracted to situations
offering personal accountability, set challenging, yet attainable, goals for
themselves, and desire performance feedback.
If this person enjoyed bossing and controlling other children as a child, he
or she may have developed a need for power. This is the drive to control,
be responsible and have authority over others, and to influence others.
Individuals with a need for authority and power desire to influence others,
but do not demonstrate a need to simply have control. These individuals
possess motivation and the need to increase personal status and prestige.
The contribution of this theory to management is that when a manager knows

what an employee’s needs are, he or she can match that employee with the
correct type of job. Someone with a need for achievement will typically want
to work on challenging matters either alone or with a group of high
achievers. A person with the need for affiliation will work best in close
groups and will enjoy customer interaction. They are also excellent in
coordinating the work in several departments in an organisation. If someone
has a need for power, he is best suited for management or in a position where
he or she has power over others.
In summary then, the content theories emphasise employees’ needs and

identify the needs that will motivate them to act in a specific way. Managers
must assign and design work in such a way that it will meet these needs and
thus motivate them.
11.5.2 Process theory

Process motivation theories focus on understanding how employees choose
different behavioural actions to meet their needs. They are more complex
than content theories as the latter focuses simply on identifying and
understanding employees’ needs. Process motivation theories go a step
further as they attempt to explain why employees have different needs, why
their needs change, and how and why they choose to satisfy their needs in
different ways. It also explains the mental process that employees go through
as they understand situations and how they then evaluate their need
satisfaction.
Three examples of process motivation theory, namely, equity theory, goal-

setting theory and expectancy theory, are discussed below.
11.5.2.1 Equity theory

The way employees support their experience of job satisfaction is to make
comparisons between themselves and their co-workers. If an employee
notices that a co-worker is getting more recognition and rewards for his or
her contributions, even when both have done the same amount and quality of
work, it would cause the employee to be dissatisfied. This dissatisfaction
would result in the employee feeling under-appreciated and perhaps
worthless. The essence of the equity theory is that employees will always
compare their jobs with those of other employees and, in so doing, may
perceive themselves as either under-rewarded or over-rewarded. This will
compel them to try to reach equity. Equity is measured by comparing the ratio
of contributions and benefits of one person with the contributions and
benefits of another person in the same organisation. In this theory, where the
essence is about comparison, these two people are called partners.
Partners do not have to receive equal benefits (outcomes), such as receiving

the same amount of money, or make equal contributions (inputs), such as
investing the same amount of effort or time, as long as the ratio between these
outcomes and inputs is similar. Individual factors will affect each person’s
assessment and perception of this relationship. When an employee
experiences underpayment inequity, he or she will experience anger, while
guilt is induced with overpayment equity. Payment for employees is the
main concern and therefore the cause of equity or inequity in most cases.
An employee will consider that he or she is treated fairly if he or she

perceives the ratio of his inputs (efforts) to his outcomes (rewards) to be
equivalent to those around him. The idea of the equity theory is to have the
rewards (outcomes) directly related with the quality and quantity of the
employee’s efforts (inputs). Inputs are defined as the contributions of an
employee that entitle him or her to receive a reward, for example time, effort,
loyalty, hard work, ability, enthusiasm, skill and commitment. Outcomes are
defined as the positive and negative consequences that an individual
perceives, such as job security, salary, employment benefits, expenses,
recognition, praise, sense of achievement stimuli and responsibility.
The comparable ratio between outcomes and inputs is measured as follows:

Outcomes of self Outcomes of partners
Equity = =
Inputs of self Inputs of partners
R100 R200
=
2 hours work 4 hours work
R50/hour = R50/hour
If both employees in this comparable partner relationship experience the

same ratio between outcomes and inputs, i.e. experience equity, they will
consider the organisation to be fair, observant and appreciative.
Employees who perceive themselves as being in an inequitable situation will

seek to reduce the inequity by
distorting inputs and/or their outcomes in their own minds (known as

“cognitive distortion”), or
directly altering their inputs and/or outputs, or
leaving the organisation.
According to this theory, it would then be acceptable for a more senior

colleague to receive higher compensation, since the value of his experience
(and input) is higher.
Equity theory has several practical implications for managers:
People measure the ratio of their inputs and outcomes. This explains why a
working mother will accept lower monetary compensation in return for
more flexible working hours.
Different employees assign personal values to inputs and outcomes. Two
employees of equal experience and qualifications performing the same
work for the same pay may have quite different perceptions about the
fairness of the situation.
Employees are able to adjust for purchasing power and local market
conditions. This means that a manager in Kimberley may accept lower
compensation than his colleague in Johannesburg if his cost of living is
lower. A manager in a remote African village may accept a totally
different pay structure.
An employee who believes he is overcompensated may increase his effort
as a result of a feeling of guilt. However, he may also adjust the values that
he ascribes to his own personal inputs. He may perhaps also start to
experience a sense of superiority and actually decrease his efforts.
The theory also explains why people can be happy and motivated by their
situation one day, and yet with no change to their terms and working
conditions, become very unhappy and de-motivated if they learn that a
colleague (or an entire group) is enjoying a better reward-to-effort ratio.
In any position, employees want to feel that their contributions and work
performance are being rewarded through fair pay. If an employee feels
underpaid, the employee will begin to feel hostile towards the organisation
and perhaps also co-workers, which may result in the employee not
performing well at work anymore. Just the idea of recognition for the job
performance and the mere act of thanking the employee will result in a
feeling of satisfaction and therefore help the employee feel worthwhile and
have better outcomes.
11.5.2.2 Goal-setting theory

Goal-setting theory began with Kurt Lewin’s work on levels of aspiration in
the 1940s and has since been primarily developed by Dr Edwin Locke, who
began his goal-setting research in the 1960s. This research reveals a definite
link between goal setting and the improved performance of employees.
A goal is what a person consciously desires to achieve or obtain through an

action or task. The source of motivation according to this theory is therefore
the desire and intention to achieve the goal. If employees find that their
current performance is not achieving the desired goals, they will typically
become motivated to increase their effort or they will change their strategy.
The dissatisfaction of an employee with his or her current performance

levels will motivate the person to set a goal that will change his or her
behaviour in order to achieve the set goal. Goal-setting theory predicts that
an employee will channel his or her efforts toward accomplishing his or her
goals, which will in turn influence the performance. There is a strong
relationship between the difficulty of the goal, the level of performance and
the effort involved. As long as the person is committed to the goal, has the
required ability to achieve it, and there are no conflicting goals, the
relationship between goal setting and performance is positive.
The following conditions are particularly important in successful goal

achievement by an employee: goal acceptance and commitment, goal
specificity, goal difficulty and feedback.
GOAL ACCEPTANCE AND COMMITMENT
Accepting or approving a goal is the first step in creating motivation. This is,
however, not enough. An employee must also be committed, or devoted, to
the goal. Goal devotion is the level of determination that an employee will
use to achieve the accepted goal. Two factors will help to improve goal
commitment: importance (how badly an employee wants to achieve the goal)
and self-efficacy (the belief that the goal can be achieved). Employee
participation in goal setting results in a higher rate of acceptance owing to
the feeling of control over the process. If objectives are clearly explained to
participants, motivation increases.
GOAL SPECIFICITY
Goals must be specific and measurable (see the SMART principle in section
5.3.2.2 of Chapter 5). Vague goals (like “doing better”) often have little
effect on motivation. The more specific the goal, the more explicitly
performance will be influenced. Specific goals lead to higher task
performance by employees than do vague or abstract goals. A person can set
a general goal to sell more cars per month. However, setting a goal to sell
two cars per day for the next thirty days is more specific and therefore more
effective. These goals will be more motivating and people will be more
dedicated to reaching their goals. Goal specificity does not, however, ensure
performance at an exceptional level. Performance also depends on the
intellect and abilities of each individual. Just because a goal is specific does
not guarantee that an individual will put in an increased effort to attain the
goal. Management must also make sure that goals are not below the actual
performance of a specific individual. In such a case an individual may lower
his or her performance to remain consistent with other employees.
GOAL DIFFICULTY
Goals have been proven to be an effective motivation tactic if they are set
high enough to encourage better performance, but still low enough to be
achievable. Management must therefore ensure that goals match the
performance capability of an employee: if goals are too hard to reach, the
employee will feel overwhelmed; if they are too easy, the employee will
slack off.
Challenging goals affect motivation in two ways: (1) they get people to
increase their effort (e.g. if a sales employee wants to receive a higher
bonus, he or she has to sell more products), and (2) they help people to focus
their inputs in the right direction.
FEEDBACK
Feedback is necessary for goals to remain effective and to sustain employee
commitment. Without feedback, people are unable to measure their progress
and it becomes difficult to determine the level of effort required to pursue the
goal effectively. Feedback also helps employees to identify any weaknesses
in current goals and to make modifications. Effort and productivity will
increase when performance falls short of achieving the goal (e.g. if a
salesperson receives feedback that he or she will fall short of the sales target
for the month unless he or she works harder after the first fortnight,
corrective behaviour can be applied).
Feedback can either be process or outcome oriented. Process-oriented

feedback provides specific processes that must be performed to achieve the
desired outcome. Outcome-oriented feedback is focused on the
performance of the goal. When these types of feedback are combined, it will
give a clear sense of how someone is performing, and what they can do
differently in order to perform better. By receiving feedback, employees will
know that their work is being evaluated and that their contributions are being
recognised.
11.5.2.3 Expectancy theory

Vroom’s expectancy theory explains how management can motivate their
employees. This theory is also classified as a process theory of motivation,
because it emphasises the process of individual perceptions of a person’s
environment and the behaviour that arises as a consequence of these personal
expectations. The basic idea behind the theory is that people will be
motivated because they believe that their decision will lead to a desired
outcome. The theory suggests that the way an individual perceives the
outcome of a specific behaviour will determine his or her level of
motivation, or put another way, that motivation comes from a person’s trust
that certain behaviour will get him or her certain rewards.
The theory postulates that the motivation to put a lot of effort into one’s work
is dependent on this perceived association between performance and
outcomes. Individuals will therefore modify their behaviour based on their
calculation of the anticipated outcomes.
The theory states that employees have different sets of goals and can be
motivated if they believe that
there is a positive correlation between their efforts and performance

a favourable performance will lead to a desirable reward, and
the reward will satisfy an important need.
Vroom theorised that the essence of motivation is a function of three

components or variables:
1. Expectancy – that increased effort will lead to better performance

(effort– performance linkage). This can be explained by the thinking of
“If I work harder, I will do something better”. Conditions that enhance
expectancy include having the correct resources available, having the
required skill set for the job at hand, and having the necessary support
from management and co-workers to get the job done correctly.
2. Instrumentality – that performing at a particular level is instrumental in

attaining the desired outcome (performance–reward linkage). Aspects
that help instrumentality include having a clear understanding of the
relationship between the performance and the outcomes, having trust and
respect for people who make the decisions about who gets what reward,
and experiencing transparency in the process of giving rewards.
3. Valence – that the reward will be worth the effort. Valence means
“value” and refers to the desirability and attractiveness of the outcome to
the employee. It considers both the goals and the needs of the individual.
For example, a bonus will not increase motivation for an employee who
values formal recognition or a promotion more.
Vroom states that motivation must be seen as a function of these three

concepts, as follows:
Motivation = valence × expectancy × instrumentality
These components are illustrated in Figure 11.4.
Figure 11.4 Basic concepts of expectancy theory
Although this theory is not a model for motivation, it provides managers with
a foundation on which to build a better understanding of how to motivate
subordinates. High motivation will result if employees believe that they can
do the work that is required (high expectancy), have confidence that they will
achieve the outcome if they do the work well (high instrumentality), and if
they really want the outcome (high valence).
11.5.3 Learning theory

Learning theory, as applied to an organisation, holds that managers can
increase employee motivation and performance by the way they link the
outcomes (or rewards) that employees receive to performance or desired
behaviours (the attainment of goals) in an organisation. Learning therefore
takes place in organisations when employees are directed towards
performing certain behaviours in order to receive certain outcomes. This
will lead employees to work faster or come to work earlier, for example,
because they are motivated to obtain the outcomes that result from these
behaviours, such as a pay rise or praise from a supervisor.
Two learning theories, namely, reinforcement theory and social learning

theory, are discussed below.
11.5.3.1 Reinforcement theory

The reinforcement theory of motivation proposed by Skinner and his
associates states that an individual’s behaviour is a function of its
consequences. The theory focuses on the “law of effect”: an individual will
tend to repeat behaviour he or she finds to have positive consequences, and
avoid behaviour associated with negative consequences. The external
environment of the organisation plays an important role in the motivation of
an employee and needs to be designed effectively to have a positive effect on
an employee.
Managers can use the following methods for controlling the behaviour of the
employees:
Positive reinforcement. A positive response is given to an individual

after a positive and required behaviour is perceived, which leads to
repetition of this behaviour. For example, the immediate praising of an
employee for coming to work early will increase the probability that this
behaviour will occur again. Reward can be a positive reinforcement, but
only if the employee’s behaviour has improved. To be really effective,
positive reinforcement should be spontaneous.
Negative reinforcement. This refers to avoidance learning and involves
rewarding employees by removing negative or undesirable consequences.
For example, constantly nagging employees to be more productive will
create an unpleasant and irritating situation that will encourage employees
to work to achieve the desired productivity level just so the nagging stops.
Punishment. This is applying undesirable consequences for showing
undesirable behaviour, which lowers the probability of the undesirable
behaviour recurring, for example forcing an employee who arrives late
during the week to work overtime on a Friday afternoon to make up the
lost time.
Extinction. This is ignoring certain behaviour until it goes away by itself.
For example, a disruptive employee may lose interest in playing the fool
when he or she no longer receives any attention, either positive or
negative, for doing so. This can also entail withdrawing a reward for
certain behaviour so that employees gradually stop doing it and begin to
focus their attention elsewhere.
This theory explains in detail how an individual learns behaviour. Managers

can make use of it by applying the following principles:
Set clear and reasonable expectations. The use of reinforcement to

motivate employees should be a positive experience for both the manager
and the employee. Unclear task expectations and evaluation standards
frustrate employees and reduce the tendency to achieve the desired
behaviour. Rewarding only impossible or extremely difficult tasks may
lead to irritation and a sense of helplessness. It may result in an employee
performing worse than before, because the employee will reason that there
is no way of getting a reward.
Identify strong motivators. It is important to work with employees and to
identify personalised motivators, or reinforcements, because these are
most likely to produce the desired results. For example, a vegetarian
employee will not appreciate a gift voucher from a steakhouse. An
employee might exceed the manager’s expectations while attempting to
earn the reward that she has chosen. Motivating rewards are essential to
the success of an organisation because they will reinforce efforts by
employees to change their behaviour.
Encourage desirable behaviours. Most managers want to encourage
positive employee behaviour such as punctuality, strong teamwork and
delivering quality service. According to reinforcement theory, it is wise to
choose one positive attribute to target and reinforce at a time.
Reinforcement theory can also be linked to the extinction of negative
behaviour that can help turn desirable traits into strong work habits over
time. For example, a manager might offer a paid seven-day holiday for
exceeding the annual sales target, and a long weekend for just meeting the
target. Withholding both the holiday and the long weekend helps with the
extinction of the negative behaviour of not achieving the target.
Use reinforcement effectively. The timing of reinforcements is
important. Consistently rewarding excellent performance will quickly
result in repeated high performances. However, rewarding the same
behaviour irregularly often yields even better results and is more likely to
facilitate a lasting change in behaviour as employees work harder in case
the bar has been raised. Intermittent reinforcement decreases an
employee’s dependence on reinforcement and will help to turn the desired
behaviour into a habit.
11.5.3.2 Social learning theory

Social learning theory proposes that motivation results from a person’s
thoughts and beliefs, and from his or her observations of other people’s
behaviour and not only from the direct experience of rewards and
punishment. There are three important elements of the social learning theory
that relate to motivation, namely, explicit learning, self-control and self-
efficiency.
EXPLICIT LEARNING
Explicit learning is also known as vicarious or observational learning, and is
a powerful source of motivation. It occurs when an individual sees other
employees performing certain behaviours and getting rewarded. It also takes
place when employees observe more experienced members of an
organisation performing specific behaviours properly. In this way, for
example, salespeople can learn how to be more helpful to customers and
subordinates can learn how to be managers.
This learning takes place as follows:
The employee notices the desirable behaviour,

accurately observes the behaviour,
memorises the behaviour,
has the necessary skills to perform the behaviour, and
sees that the behaviour is rewarded by the organisation.
SELF-CONTROL
The second element of this theory is self-control or self-reinforcement. This
refers to an individual that is able to motivate him- or herself by setting goals
and determining ways to achieve them, and then providing positive self-
reinforcement when the goals are achieved. Factors that can serve as self-
reinforcement include going to the movies or theatre, dinner out or taking
time out for exercising or a hobby.
When employees of an organisation control their own behaviour through self-

reinforcement, managers do not need to spend as much time as they normally
would trying to motivate and control employees’ behaviour, because
employees are controlling and motivating themselves. Read the eight tips for
self-motivation in Management in action 11.5.

Self-motivation
Here is a simple generic list of how to motivate yourself:

1. Start simple. Keep motivators around your work area – things that can give you
that initial spark to get going.
2. Keep good company. Make more regular encounters with positive and motivated
people.
3. Keep learning. Read and try to take in everything you can. The more you learn,
the more confident you become in starting projects.
4. Stay positive. See the good in bad. When encountering obstacles, you want to be
in the habit of finding what works to get over them.
5. Stop thinking. Just do. If you find motivation for a particular project lacking, try
getting started on something else. Something trivial even, then you’ll develop the
momentum to begin the more important stuff.
6. Know yourself. Keep notes on when your motivation sucks and when you feel like
a superstar. There will be a pattern that, once you are aware of, you can work
around and develop.
7. Track your progress. Keep a tally or a progress bar for ongoing projects. When
you see something growing you will always want to nurture it.
8. Help others. Share your ideas and help friends get motivated. Seeing others do
well will motivate you to do the same. Write about your success and get feedback
from readers.
Source: http://www.lifehack.org/articles/productivity/8-steps-to-continuous-self-
motivation.html (accessed on 14 March 2104)
SELF-EFFICIENCY
Self-efficiency can be defined as an individual’s belief in his or her ability to
successfully accomplish a specific task or outcome. Henry Ford used to say:
“Whether you think you can or think you can’t, you are usually right”. This
relates to the idea that someone’s beliefs can shape his or her motivation.
Managers can increase self-efficiency in employees by ensuring that they
receive the necessary training, skills and resources they need to perform. By
expressing confidence and trust in their employees’ abilities, managers can
enhance their self-efficiency.
It must always be the task of managers to strive to motivate people to

contribute their inputs to an organisation, to focus these inputs in the direction
of high performance and to ensure that employees receive the outcomes they
desire when they perform at a high level. A manager must identify which of
these different theories will be applicable to a specific individual and the
situation by thinking about the exercise in Management in action 11.6.

Matching the theory to specific individuals and situations
1. Compare the three major theories of motivation. List the similarities and differences.
2. Which motivation theory would be more applicable to the following occupations?
Teacher
Administrative clerk
Nurse
Managing director
Salesperson
Student
Domestic worker
11.6 CONTEMPORARY ISSUES ON MOTIVATION
Some contemporary motivation issues facing today’s managers include

motivating a diversified workforce, pay for performance programmes,
motivating minimum wage employees, motivating professional and technical
employees, and flexible work schedule options. These issues will be
discussed briefly below.
11.6.1 Pay and motivation

All employees need to feel valued by their managers and the organisation.
Pay is a crucial part of every employee’s motivation and plays an important
role in the retention of employees. The amount of pay is not all that is
important. In reality the structuring of compensation is sometimes more
important, because employees have a constant need to feel that their efforts
are being noticed and appreciated by management. A year-end bonus does
little to help employees to remain engaged. More important is a mix of both
long- and short-term rewards, because these motivate employees to stretch
beyond their comfort zone.
Short- and long-term targets and associated rewards mitigate the risk of
misunderstandings, because they decrease the good or bad surprises when it
is time for reviews. The time to reward is immediately after an employee
does something great – not months later because the calendar says that is the
time. This issue is an integral part of employee retention. Annual reviews
and compensation are sometimes very frustrating and de-motivating for
employees and also risky for the employer, because they give the employee
time to think that his or her work and excellent performance are going
unnoticed. Even worse is that they may start to think that they might be better
treated elsewhere.
Monetary rewards are a big motivator and also an appropriate measure in the
relationship between an employer and an employee. Setting compensation
correctly and applying it effectively should always be linked to the balance
between inputs and outputs.
11.6.2 Family-friendly workplaces

Employees have the need to balance their family and work life. A family-
friendly workplace or employer creates a place in which it is possible to
find this balance, and where it is possible to fulfil both family and work
obligations. This is a highly motivating factor for employees.
Family-friendly workplace policies can take many forms. The most common
is the provision of in-house day care for children. This makes it easier for
mothers to work, especially if they are still breastfeeding. This type of
facility is, however, almost entirely restricted to large organisations, because
it is expensive, and requires permits and licensed premises and staff.
Organisations nevertheless need to identify which policies they can adopt to
help employees to balance work and family life.
11.6.3 Flexible working hours
A system of flexible working hours gives employees some choice over the
actual times they work their contracted hours. Such a system can be a good
way of recruiting and retaining staff since it provides an opportunity for
employees to work hours consistent with their other commitments (e.g.
childcare).
Many organisations have developed flexible working schedules that

recognise different needs. Some of these flexible working schedules include
the following:
Compressed work week. A work week in which employees work longer

hours per day but fewer days per week.
Flexible work hours. A scheduling system in which employees are
required to work a certain number of hours per week but are free, within
limits, to vary the hours of work per day.
Job sharing. The practice of having two or more people split a full-time
job. This is especially important for mothers who can then work half days
and so have time with their children.
Telecommuting. A job approach in which employees work at home and
are linked to the workplace by computer and modem. This saves on
infrastructure costs for an organisation.
Most flexible working hours schemes have a period during the day when
employees must be present. This is known as core time. A typical core time
would be 10:00 to 15:00. During this time, employees must be in the office,
but they may choose when they start and finish work within flexible bands at
the beginning and end of each day. There is wide scope for variation
depending on the core time, the hours the workplace is open and the nature of
the organisation. With flexible work schedules, employees experience these
benefits:
Flexibility to meet family needs and personal obligations

Reduced commuting time and fuel costs
Avoidance of rush hour
Personal control over work schedule and environment
Less chance of burnout due to overload
Working when they accomplish most, feel freshest and enjoy working (e.g.
a morning person who can wake up early and start to work vs a night
person who prefers to work late at night).
Fewer external childcare hours and costs
11.6.4 Open-book management

There are many misconceptions of what open-book management is and what
it means to practise open-book management. Many people believe that it is
simply about sharing financial information with employees and maybe
teaching them what that information means. However, open-book
management goes far beyond simply ‘opening the books’. If an organisation
follows this approach, it involves its employees in workplace decisions by
opening up the financial statements, for example. It shares this information
with the employees to motivate them to make better decisions about their
work and to be able to understand the implications of what they do, how they
do it, and the ultimate impact on the bottom line. It teaches employees the
goals of the organisation and how they can make a difference, both
individually and as part of a team. Open-book management works because
employees get a chance to act and to take responsibility rather that just “do
their job”. Each employee knows enough about the organisation to understand
how their actions will affect the outcome.
Open-book management is therefore about empowering every single

employee in the organisation with the tools, education and information they
need to act and take responsibility. Open-book management is not a spectator
sport – it is not just about showing people all the numbers; it is also about
understanding and taking responsibility. Transparency is great, but following
an open-book management approach is also about taking charge and
accepting responsibility, as well as accountability, collaboration and taking
initiative. It is about looking forward and working together as a team to win.
11.6.5 Motivating the workforce
Different sections of the workforce will respond better to different forms of
motivation.
11.6.5.1 Motivating professionals

When working with professionals, a manager must think carefully about the
approach he or she will follow to motivate them. Motivating professionals
will be different from motivating non-professional workers. Professional
people have a strong and enduring commitment to their field of expertise.
Money and other hygiene factors (Herzberg’s theory) are important for non-
professional employees, while they are typically low on the priority list of
professional people, who are usually well-paid and high-ranked employees.
What will motivate them then?
Developing challenging jobs tends to be ranked high, with the main reward
being achievement of goals. The work itself is thus a motivating trigger and
managers must make sure that the challenges of the job remain high for
professional people.
11.6.5.2 Motivating contingent workers

Contingent or part-time workers do not experience the protection or stability
that permanent employees experience in an organisation. They are also not so
committed and loyal to the organisation. The question is thus: how will a
manager motivate these employees, because they do not identify with the
organisation? In addition, their insecurity makes it a challenge for managers
and the organisation to motivate them. A possible motivating approach would
be giving employees the opportunity to become permanent and to work hard
to prove themselves to the organisation. Another would be providing the
opportunity for training.
11.6.5.3 Motivating low-skilled, minimum-wage employees

To motivate low-skilled, minimum-wage employees is more or less the same
as motivating non-professional employees. Hygiene factors are important for
them. Some other motivating approaches will include employee recognition
programmes, like being nominated for the employee of the month award.
Celebrating a major accomplishment of an employee can be also an effective
motivator. These types of programme serve the purpose of singling out those
employees whose work performance has been of the type and level the
organisation wants to improve its competitive position. It is also encouraging
for employees.
11.7 DESIGNING MOTIVATING JOBS
Managers are primarily interested in how to motivate individuals on the job,

therefore it is important to look at ways to design motivating jobs. Managers
should design jobs that reflect the demands of the changing environment, as
well as the organisation’s technology, skills and abilities, and the preferences
of its employees.
11.7.1 Job enlargement

Although specialising in a job can improve proficiency and organisational
performance, one of the drawbacks is boredom and fatigue. One way to
overcome this is horizontal expansion by increasing the job’s scope. Job
enlargement means that the number of different tasks required in a job and the
frequency with which those tasks are repeated is increased. It also changes
the division of labour. For example, a waiter is taught to both prepare and
serve the food.
11.7.2 Job enrichment

Vertical expansion of a job combats boredom and fatigue by adding high-
level motivators such as planning and evaluation responsibilities, and
opportunities for growth, learning and achievement. Job enrichment increases
job depth and the degree of responsibility and control that employees have
over their jobs. Specifically, job enrichment provides the following benefits
not only to the employee, but also to the organisation:
It empowers employees to be more innovative.
It facilitates employees to develop new skills and abilities.
It allows employees to make their own decisions on specific issues owing
to their greater responsibilities.
Employees monitor and measure their own performance.
The rationale behind job enrichment is that if an employee’s responsibility is

increased, he or she will be more involved in his or her job. Such a person
will also pay more attention to the quality of the products and services for
which he or she is responsible.
11.7.3 Job rotation

Job rotation involves moving the employee from one job to another,
increasing the opportunity to learn a number of different tasks, without
increasing the complexity of any one job. This provides variety and
stimulation for employees and improves their skills and abilities. This can be
motivating because it also combats boredom.
11.8 SUMMARY
Motivation has been defined as the motives within a person that will
determine the direction of his or her behaviour in an organisation. Motivation
will determine a person’s level of effort and persistence in his or her job.
Managers strive to motivate employees to increase their inputs in the
organisation and to focus these inputs on increased organisational
performance. It is also the responsibility of managers to ensure that their
employees receive the relevant rewards they desire when they do perform at
a high level.
Different motivation theories have been discussed. Each of these theories has
elements that can be applied in the organisation. A manager must know his or
her employees and understand that what will motivate one employee will not
necessarily motivate another. Taking a holistic approach to motivation and
taking into consideration all the relevant issues in all the theories can
contribute to effective motivation. A few contemporary issues of motivation
were also discussed. It is important that managers take note of these issues
and apply them in their organisations.
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continuous-self-motivation.html (accessed on 14 March 2014).
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motivation.html ixzz-39VbMvhFP (accessed on 12 August 2014).
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Learning.
DuBrin, A. 2012. Management essentials, 9th ed. Canada: South-Western Cengage Learning.
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business-textbook/motivation-theories-and-applications-11/modern-views-on-motivation-76/equity-
theory-360-3209/ (accessed on 28 July 2014).
Heathfield, S.M. Advantages and disadvantages of flexible work schedules?

http://humanresources.about.com/od/employeebenefits/f/flex_schedules.htm (accessed on 5 August
2014).
Kelley, S. What is motivation in management? Definition, process and types. http://education-

portal.com/academy/lesson/what-is-motivation-in-management-definition-process-and-types
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2014).
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Cengage Learning.
Lussier, R.N. 2008. Management fundamentals: concepts, applications, skill development, 8th ed.
Massachusetts: South-Western Cengage Learning.
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238-1041/
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Berkshire: McGraw-Hill.
Motivation and communication are crucial for an organisation to succeed, say Jack Welch. Article in
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11 March 2015).
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xii/ixzz38B-hGHUsp (accessed on 10 August 2014).
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on 11 March 2015).
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Psychology, 63: 151–162.
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(accessed on 24 July 2014).
CASE STUDY: JOHN’S BRAVE DECISIONS

It is a well-known fact that organisations are realising that in order to be successful they
should not only focus on profits and other financial figures, but also on fostering their
human capital and motivating their employees to achieve their goals. If organisations
demonstrate commitment to their workforce and cultivate long-term and fruitful
relationships with it, it is attractive to all stakeholders. These are the organisations that
offer the most sustainable results and that seem more resilient in troubled times.
Organisations that consider their human resources their most valuable asset are more
successful than those that still concentrate solely on profit figures and do not pay much
attention to the happiness and advancement of their employees. The South African
labour market is plagued with high rates of unemployment. It is also associated with a
shortage of specific skills and employers are increasingly faced with the need to
become ever more innovative when rewarding their people and keeping them stimulated
and engaged in their businesses.
John realises that employers cannot afford to lose their valued employees as a result of
unsatisfactory working conditions and limited prospects. John also realises that clients,
suppliers, investors and job seekers are increasingly favouring organisations that take
responsibility for the welfare of their workers. He recognises that he has to start thinking
about the importance of engaging, retaining and motivating his employees in an effort to
achieve operational and business objectives.
He calls his 20 employees together and tells them that from now on they must feel that
they are co-owners of the business and not that he is the only owner. He further states
that from now on, they are all bosses. They have to decide what they are worth to the
business and tell the pay office what they deserve as a salary. They can decide which
days of the week they want to work and what hours of the day, as long as they work at
least 40 hours per week. They have thus an increased choice in terms of their own
career development, but at the same time they must understand that it is associated
with increased responsibilities and risk. They now take responsibility for their own
career movement and professional development. They identify their own needs and how
the business might fulfil these needs, and steer the course of their own careers. John
even goes one step further and points out that they now have an open petty cash
system and that it is available to anyone that needs some cash. They can take the
cash, but must leave a note indicating the amount and their names.
John’s employees are amazed at this new approach. A few employees arrange a higher
salary for themselves, but soon realise that they have to increase their productivity when
they compare themselves with some of their co-workers. John finds that his employees
are improving their service delivery to customers and that they are taking better and
informed decisions.
John also emphasises the values of honesty, integrity, loyalty and service orientation to
his employees. He believes that by encouraging every employee to live by these values
he can create an organisational culture of ownership. He believes that employees will
take ownership of their own goals and strive for continuous improvement and industry-
leading results. These values will influence the behaviour of the employees within the
workplace and make the business a positive place to work. Employees are encouraged
to speak positively about each other and focus on their strengths. This involves listening
to others and accepting their right to their own views regarding the workplace.
John introduces a few new safety measures at his business as well. He urges his
employees to take responsibility for observing these health and safety rules and
practices. He introduces weekly meetings in which employees can request to receive
information on any part of the organisation. This helps strengthen the workers’ sense of
belonging. He encourages an open approach to communication and seeing the best in
every colleague. To support this open approach in his business, he introduces a
suggestion box scheme to generate ideas and improve productivity.
He introduces a wellness programme in the form of a monthly social event. Every last
Friday afternoon of the month, employees take part in a 3 km fun walk, ending with a
braai during which they share the success stories of the month.
*This is a fictitious case study.
1. Give examples of how John applies Maslow’s hierarchy of needs.
2. Which other motivation theories does John apply to motivate his employees?
3. What contemporary motivation approaches does John apply?
4. Do you think that making everyone feel like a “boss” is a good motivating approach?
1. Interview four people who have the same kind of job and determine what kinds of needs
they are trying to satisfy at work.
2. Interview a manager of an organisation and determine what motivation strategies are

applied by the organisation to keep staff motivated.
3. Complaints are often heard about employees who spend much of their time at work using
smartphones to send and receive text messages and access the internet. What
programme might be effective in motivating these time-wasting workers to spend more
time working?
4. Hundreds of programmes for motivating employees are described on the internet. Find one
motivational programme of interest to you and determine which theory of motivation
underlies the work of the programme.
5. Research any well-known organisation in South Africa and determine how it keeps its staff
motivated.
12 Communication
ANNEMARIE VAN NOORDWYK
Learning outcomes
Understand why communication is important in an organisation.

Understand the importance of the communication process.
Identify the different types of organisational communication.
Evaluate the formal and informal communication in an organisation.
Explain the barriers to communication.
Discuss the skills or tactics that managers need to communicate effectively.
12.1 INTRODUCTION
Communication is an integral part of management. Managers have to

communicate with their subordinates in order to plan, organise, activate and
control, as well as to motivate and lead. Motivating and leading the
subordinates would be impossible without some communication. It is a
known fact that the largest part of each workday is spent on communication.
Around 75% of each work day consists of communication in some form, be it
verbal, non-verbal or written. Communication can therefore be seen as an
important skill that managers should possess. That is why it is important to
know and understand the communication process.
Communication is one of the things in life that many people struggle with and
that can lead to frustration if the message is not correctly sent or received.
This is not only the case for personal relationships, but also in the workplace
because communication is very important for organisations to improve
operational activities and productivity. Communication’s primary role is the
transfer and understanding of meaning. Managerial communication includes
both interpersonal communication (between two or more people) and
organisational communication (via the communication systems in place).
Employees can experience an increase in morale, productivity and
commitment if they are able to communicate well with co-workers and
management.
In this chapter, the importance of communication will be explored, as well as

the communication process, different types of communication and barriers to
communication.
12.2 IMPORTANCE OF COMMUNICATION
No day passes without someone communicating with someone. Although it

sounds easy, it is a very difficult task for many people, since communication
can happen in different forms. It can happen in words or verbally (facts,
ideas, concepts, opinions), while non-verbal communication can take place
through beliefs, attitudes and emotions. Think about the manager who, on
returning to his office after a day out, sees that there are dozens of email
messages and voice-mails waiting for his response. It is clear that there is no
escape from workplace communication or everyday personal communication.
Communication is important in an organisation because without it, managers

would not be able to lead employees or ensure excellent job performance,
organisations would not be able to market their products or services, and
customers would not be able to make their needs known. Communication
therefore performs the following functions:
Informs. Employees need data and information to perform their jobs

effectively. Communication informs them about organisational rules and
procedures, and eliminates job uncertainty. This is a two-way process,
because managers also receive feedback and information from
subordinates.
Persuades. Persuasion is the ability to change someone’s attitude or
behaviour. To persuade a customer to buy something, the customer must
experience the following three things:
– Source credibility. A trusted person must be used to transmit the

information. A customer is more likely to believe a message delivered
by the CEO than by the floor salesperson.
– Emotional appeal. Sentiment is used to persuade others instead of

objective facts. Organisations can use emotional appeals when
delivering bad news. A CEO can explain that it is emotionally
devastating for him and the organisation to enter a process of
retrenchments. The emotional appeal however is that it will be in the
best interests of the organisation.
– Social and ego needs. Employees need to have a sense of belonging

and acceptance (social needs) as well as self-worth (ego needs and
self-importance). A manager who compliments his employees on their
work performance and makes them feel valued is more likely to
persuade them to work late to get a job finished on time.
Motivates. Motivation differs from persuasion in that it stimulates an

action, whereas persuasion changes an attitude or behaviour. Motivation is
the ability to stimulate a desire in employees and consists of words of
appreciation, recognition and support. Managers need to motivate their
employees on a daily basis in order to get results (see Management in
action 12.1).

Words and phrases that inspire, motivate and persuade at work
Words are powerful, because they have the ability to inspire, motivate and persuade; or
discourage, dismiss and dissuade. “With your words, you wield the power to plant
seeds of either success or failure in the mind of another, and in the process you reveal
who you are, how you think, and what you believe,” says Darlene Price, author of Well
said! Presentations and conversations that get results.
It’s important in organisations to choose words correctly because this has an influence
on someone’s attitude. “In the workplace, a positive collaborative mind-set can mean
the difference between landing a job or losing out; winning a customer or wasting an
opportunity; developing teamwork or destroying trust,” Price says. “Actions may speak
louder than words, but words and thoughts are the seeds of those actions. Words
announce to the world how you feel and what you think about important workplace
values like respect, commitment, accountability, gratitude, initiative, service, and
excellence. According to research, some of the most persuasive words also happen to
be the shortest and oldest,” Price explains. “Look at any advertisement, and you’re likely
to see one or more of these words.”
Words that can persuade you include: affordable, best, convenient, discover, easy,
enjoy, fast, free, guarantee, more, new, power, reduce, results, safe, save, time.
“These words help your customers visualize how good they’ll feel and what they’ll gain
when they own your product or use your service,” Price says. Deliberately crafting these
words to communicate value transforms them into power phrases which actually trigger
buying behaviour. Think about how motivating and persuasive the following sound:
“It’s affordable, while giving you all the power, performance, and speed you need.”
“Best of all, you’ll save time, save money, and get immediate results.”
“It’s fast, easy, and convenient. Plus it reduces your costs.”
“Words matter,” Price concludes. “Rudyard Kipling said that words are the most
powerful drug used by humanity, and whether we use that drug to heal or harm lies in
the power of the tongue.”
Source: http://www.forbes.com/sites/jacquelynsmith/2013/03/26/words-and-phrases-
that-inspire-motivate-and-persuade-at-work (accessed on 19 January 2015)
12.3 THE COMMUNICATION PROCESS
Communication is a lot like breathing. One does it giving little thought to the
process or the way information is exchanged. One does it constantly and
therefore one tends to forget how to do it, because it becomes second nature.
It is, however, important that communication happens regularly and that the
information provided is a true reflection of what is happening. In
Management in action 12.2 it is clear that Eskom should be more effective in
its communication.

ANC urges Eskom to improve load shedding plan
Since 2008, South Africa has experienced challenges with regular disruptions in the
supply of electricity. The South African public are concerned about “the current and
serious” load shedding programme being undertaken by Eskom and the ANC has said
that Eskom should communicate its load shedding schedule more effectively.
Although load shedding may be a necessity as a means of conserving energy as per

the explanation provided by Eskom, the ANC urges the power utility to communicate
these schedules better with the intention of minimising inconvenience and the inevitable
disruptions to businesses and households alike.
Source: Adapted from http://www.fin24.com/Economy/ANC-urges-Eskom-to-improve-
load-shedding-plan-20141209 (accessed on 31 March 2015)
The communication process starts with a purpose or reason. This purpose is

to formulate a message that someone wants to send to another person. To
formulate the message one must:
Understand the objective – why is the communication important?

Understand the receiver with whom communication will take place
Plan the contents of the message
It is important that one must also remember that the entire process is
disposed to noise – disturbances that interfere with the transmission, receipt,
or feedback of a message. These disturbances can also be regarded as
barriers, which will be discussed in more detail in a later section.
The sender initiates the communication and translates the information into
representations or symbols (encoding) so that the message can have meaning
to the receiver. This is the transformation of thoughts into a form that can be
sent, such as words or body language.
A communication channel has to be selected by the sender for transmitting

the message. This can be verbal, non-verbal or written communication.
Noise, either external (e.g. a telephone ringing) or internal (e.g. disliking the
sender) can interfere with the transmission of the message.
The receiver is the person who receives the message, but it is important that
he or she translates the message meaningfully. The receiver decodes the
message, i.e. mentally processes the message in order to understand the
contents. If the receiver can’t decode it, the message will fail. Sending a
message in a foreign language that is not understood by the receiver probably
will result in decoding failure. Decoding is a two-step process: the receiver
must (1) receive the message, and (2) interpret it. Aspects like past
experiences can have a major influence on the decoding process.
Sometimes the receiver is expected to give the sender feedback, which is a

message sent by the receiver back to the sender. Since communication
involves a continued dialogue between senders and receivers, a feedback
loop is created. This feedback loop ensures that a message has been properly
received and interpreted by the other party. In the workplace, feedback is
important. A manager needs to be confident that messages are sent, received
and interpreted correctly to ensure appropriate actions from employees.
Proper feedback makes the communication process effective and efficient.
Figure 12.1 explains the communication process in detail.
Figure 12.1 The communication process
The communication process can be summarised as follows:

A sender who wants to send a message and encodes information.
The sender selects a channel of communication through which to send the
message.
The receiver receives the message and decodes it.
The receiver may provide the sender with feedback.
The process can start over again.
Management in action 12.3 stresses the importance of effective

communication, because miscommunication can lead to problems.

Communication in action
Nthabi and her brother, Nkosi, decide to sell homemade pies to help them earn some
money for their brother’s operation. After a long day of selling, their earnings amount to
R2000. They are overjoyed and cannot wait to tell their family about their success. On
the way home, a thief snatches Nthabi’s bag and runs away down the street. Nthabi has
to act fast to catch the culprit and get their money back. As she waits for help to arrive,
she formulates her message. She knows that she must provide the correct information
about the incident.
When the police arrive, she begins to convey her message to the sergeant verbally. The
sergeant receives the message from Nhtabi, but at the same time he thinks about his
children playing soccer. The sergeant realises that he must concentrate so that he can
listen effectively to Nthabi’s message and get the information that he needs to catch the
thief.
Once the sergeant receives Nthabi’s message, he asks a series of confirmatory

questions to ensure that a shared understanding of the situation is reached. Once
confirmed, the sergeant springs into action, and after a successful chase he catches
the thief and returns the money to Nthabi. Without the effective communication between
the sergeant and Nthabi, this could have had a sad ending.
12.4 TYPES OF COMMUNICATION

Communication types can be analysed and compared on the basis of feedback
potential, confidentiality, encoding ease, decoding ease, time-space
constraint, cost and degree of formality. The communication method a
manager ultimately chooses depends on the needs and ability of the sender,
the attributes of the message, the attributes of the channel, and the needs and
ability of the receiver.
12.4.1 Verbal communication

Verbal communication simply involves sending a message using a language
that is understood by both the sender and the receiver of the message. Verbal
communication thus encompasses the use of words in delivering the intended
message. Verbal communication makes the process of conveying thoughts and
concepts easier and faster. Although it remains the most successful form of
communication, it makes up only about 7% of all human communication. The
majority of human communication happens through non-verbal
communication. There are two major forms of verbal communication: written
and oral.
12.4.1.1 Written communication

Written communication includes traditional pen and paper or typed letters
and documents, emails and SMSs and is indispensable for formal
organisational communications. The effectiveness of written communication
depends on writing style, grammar, vocabulary and the clarity of the
message, as well as the language ability of the parties involved. The
advantages of written communication include the following:
Fast and economically feasible. A manager can communicate a message

quickly to individuals despite their geographical location. For example,
email is less expensive than long-distance phone calls and certainly less
than travel expenses.
Efficient and accurate. Written communication allows time for reflection,
affording a manager the opportunity to refine a message and reformulate it
for correctness.
Flexible. A manager can send a message whenever he or she wants to and
the receiver has the flexibility to review it at a time that is convenient for
him.
Official. Written communication can be filed and thus provides a formal
record of messages being sent and received.
Disadvantages of written communication include the following:
There can be a lack of confirmation as to whether the message was

actually received by the intended recipient.
It depends on the reading and writing skills of both the sender and
receiver.
12.4.1.2 Oral communication

Oral communication is about the spoken word, either face to face or via
telephone, voice calls using a computer or video conferencing. The
importance of video conferencing is highlighted in Management in action
12.4.

Online video conferencing set to spike
Online video will soon become the preferred method of communication for businesses
as it allows for more efficient collaboration over distance.
As the speed of the internet increases, many organisations have identified video
conferencing as a growth driver for data consumption. The Cisco Visual Networking
Index forecasts a huge increase in internet data consumption in SA and shows that
video traffic online will jump to 53% of all data traffic on the internet in 2013. Some
companies have included video conferencing in their consumer services.
According to data from Ericsson’s Mobile Data Traffic Growth report for 2013 to 2019,
South Africa’s data appetite is huge and expected to grow at 65% to 2019 and beyond.
Put into perspective, mobile data in the region was at 37 000 terabytes (TB) per month
in 2013, and that will jump to 76 000 TB by the end of 2014, on its way to a mammoth
764 000 TB by the end of 2019.
The government has set a deadline of 2020 for 100% broadband coverage in SA and it
is expected that the majority of new broadband connections will be wireless.
Source: http://www.fin24.com/Tech/News/Online-video-conferencing-set-to-spike-
20140610 (accessed on 31 March 2015)
Oral communication can be informal, such as the grapevine or rumours, and

formal, such as lectures and business conferences. The effectiveness of oral
communication depends on the clarity of speech, pitch, volume of voice,
speed and non-verbal communication such as body language and visual cues.
12.4.2 Non-verbal communication

Non-verbal communication entails the sending and receiving of messages
without using any words. Every oral communication has a non-verbal
message behind it that conveys the emotions behind the words. The saying ‘it
is not what you say, but how you say it’ is important in the whole
communication process.
Managers send, receive and interpret non-verbal messages the same way they
would oral or written communication. Non-verbal communication involves
the following elements:
Vocal cues, e.g. pitch, inflection, tone, volume, speed of speech, quality,
non-word sounds, pronunciation, enunciation, even silence
Body movement and gestures, e.g. leaning forward to show interest, a
clenched fist to indicate anger, crossing arms as a defensive posture
Facial expression, e.g. smiling, crying, rolling one’s eyes
Space, e.g. territorial space (an area a person feels belongs to him or her
in some way) and personal space (a three-dimensional space surrounding
a person that he or she does not like other people to enter)
Touch, is often considered as positive and reinforcing action e.g. patting
someone on the back or touching someone reassuringly
Clothing and artifacts send a clear message, e.g. a doctor’s white lab
coat indicating status or a punk hairstyle indicating rebellion
12.5 ORGANISATIONAL COMMUNICATION
Organisational communication is essential for creating and maintaining a

competitive advantage. Without communication in the organisation, it is
difficult to understand what an organisation stands for, why it exists, who its
customers are, how work is completed, who has authority over others and so
on. The mission statement of an organisation clearly conveys the message of
who its customers are, what products or services the organisation is
providing and how it will be done. There are formal and informal
communication channels in any organisation.
12.5.1 Formal communication

Formal communication involves the formal communication channels in an
organisation. Formal communication takes place via the prescribed
organisational work arrangements. If a manager asks an employee to
complete a certain task, he or she is communicating formally and uses the
communication channel of the organisation. Formal communication can move
vertically, horizontally and diagonally in an organisation.
12.5.1.1 Vertical communication

Vertical communication flows downward or upward in an organisation:
Downward communication moves from superiors to subordinates and

usually consists of orders or updates. It is used to inform, direct,
coordinate and evaluate the employees in the organisation. A typical
example will be if the CEO sends out an email to all his middle managers
to inform them that the negotiated salary adjustment for the following year
will only be 6.5% and not 8.5% as originally requested by the unions.
Upward communication is information that moves from lower-level
employees to their superiors and usually consists of feedback or reports.
Upward communication facilitates employee involvement, shared
decision-making and the building of positive working relationships
between managers and their employees. For example, employees may be
asked for their input during the budgeting process.
12.5.1.2 Horizontal communication
Horizontal or lateral communication is information that flows from worker to
worker or manager to manager on the same hierarchical level and usually
consists of reports or data. When a co-worker informs his or her colleague
about an upcoming marketing event, horizontal communication is taking
place.
12.5.1.3 Diagonal communication

Diagonal communication happens when employees on different hierarchical
levels and in different departments come together to solve specific problems
and to coordinate work. Coordination in any project is critical for its
success. Diagonal communication needs to take place to ensure that
everything is going according to plan. It is facilitated by the use of email.
12.5.2 Informal communication

Not all the communication in an organisation is formal. Informal
communication between employees happens outside the formal
communication structure and arrangements of the organisation, often during
lunch or tea breaks. The topic can be organisation related, but it does not
need to be. The grapevine is an excellent example of informal
communication and goes in every direction – up, down and laterally.
Management does not have any control over it and it is usually difficult to
stop rumours once they have started.
The grapevine can give management important feedback about employee

attitudes and can strengthen group cohesion. However, it can also spread
false information. South Africa’s supermarket chain Pick n Pay has denied
industry speculation and rumours that it might be ripe for a takeover by a
foreign retailer such as the UK’s Tesco. This rumour started after Walmart
entered South Africa. A discussion about a worrying decrease in sales
between two managers overheard by an employee could, for example, be
distorted into a rumour that layoffs are going to occur because the
organisation is having financial problems.
There is, however, also a positive side. If a manager wants to test the waters,
he can start a rumour about a plan to see how employees will react. If there
are no serious objections, he can go ahead with it. If they respond badly, he
can say that there was no truth in it and abandon the idea.
12.6 BARRIERS TO COMMUNICATION
Many organisations develop internal difficulties as a result of communication

issues. These difficulties are called barriers to communication and are
specific items that can mislead or prevent effective communication in an
organisation. If they are identified and dealt with, this can lead to more
effective working conditions and organisational culture. Barriers can be
divided into two groups: organisational and individual barriers.
12.6.1 Organisational barriers

The communication channels for both formal and informal communication
depend largely on organisational design. If the organisation has a deep
hierarchical structure or a scattered geographical departmentalisation, the
influence of some of these barriers will increase:
Physical barriers. These occur when people are not in the same area,
town or even the same country. Technology, such as emails, phone calls,
video conferencing and webcams, can help to overcome this problem.
(Read about the influence of physical distance on an organisation in
Management in action 12.5.)

Barrier to effective communication
A product development specialist in Kenya came up with a new idea for one of his
organisation’s existing products. He emailed the marketing director in South Africa about
the idea and product description. The marketing director struggled to obtain answers to
some of her questions back from the person in Kenya. The email response from the
marketing director was however interpreted by the person in Kenya as that she did not
like the new idea. In fact, the marketing director was excited about the idea, but only had
some concerns about the influence on the price of the product.
It is clear that both parties got frustrated. The marketing director suggests a regular
meeting via a video conferencing system to iron out the details of the new idea for the
product. Once they were able to talk face to face, the product idea was able to move
forward into finalisation. It is clear that the physically-separated work environment led to
difficulty in understanding and the finishing of the new idea.
Status differences. Differences in organisational hierarchy can cause

difficulty with regard to communicating either up or down the corporate
ladder. If the status difference is low, interaction between executives and
their subordinates is easier. Organisations with high status differences are
very hierarchical in nature and have severe differences in authority. This
creates a barrier for communication. This can, however, be eliminated by
managers who relate well to their employees. The following example
illustrates this barrier. Yamamoto, a Japanese businessman, would never
consider asking his employees for their feedback on his managerial style
or ideas. Jack, however, wanted to clinch a deal with Yamamoto and made
a big mistake when he asked his workers for their thoughts on his business
ideas. Yamamoto did not sign the contract with Jack when he heard that
Jack had consulted his employees. Jack did not realise how segregated the
power structure is in Yamamoto’s company with its high status differences.
Different goals. If there is no cohesion of goals in an organisation and
each department or business unit has different goals, it will make effective
communication difficult. This becomes especially problematic if the
departments or business units are rewarded for ultimately achieving their
own goals at the expense of the organisation’s.
Filtering. This is the manipulation of information to make it appear more
favourable to the receiver. It occurs when the manager as the sender of a
message withholds part of the information because he or she thinks that the
receiver does not need to know all the information. Filtering sometimes
happens when the message contains bad news. It also tends to be a
function of the number of vertical levels in the organisation. The more
vertical hierarchical levels there are, the more opportunities there are for
filtering.
12.6.2 Individual barriers

Many managers experience difficulties in communicating with others as a
result of the following:
Gender differences. Men and women tend to communicate differently.

Men prefer to sit side by side and are more aware of personal space,
while females enjoy a face-to-face exchange and a more personal setting
for communicating. Men and women also take their communication styles
for granted and they do not realise that when they are talking to someone of
a different gender that their differences in style actually lead to ineffective
communication. See Management in action 12.6.

Gender differences as barrier
Male managers sometimes behave in a way that can be regarded as rude by female
managers. If men distance themselves from female employees in a meeting, it is
because of the preference for personal space. A female manager may experience
some rudeness if a male manager is taking a seat furthest away from her at a
conference table. This may influence communication and the trust in the conversation.
The point of understanding in such a situation is that it is all about different preferences
with regard to personal space.
Cultural diversity. Different cultures see and experience things

differently. North America and Western Europe are generally considered
to have low-context cultures as employees here are individualistic and
tend to base their decisions on facts. They want specifics noted in
contracts and may have issues with trust. High-context cultures such as
those in the Middle East, Asia and Africa, on the other hand, are
collectivist and employees here focus on getting to know the person they
are conducting business with to get a gut feeling on decision-making. They
may be more concerned with group success than individual achievement.
The employees of the Spanish office of Coca Cola take two-hour siestas,
or breaks, during the day to re-energise. This has led to frustration in the
South African office when they call and have to wait hours for an answer.
Language. Different countries may speak the same language, but have
different terms for the same things, for example Americans have
“elevators” and “traffic lights”, whereas South Africans have “lifts” and
“robots”. Marlboro is well known for its American cowboy sitting on a
horse, symbolising the spirit of the frontier area in America but it
symbolises a low-status labourer in Hong Kong. Employees who work in
different departments for the same organisation often have different jargon.
They use specialised terminology or technical language that others do not
understand.
Selective perception. People selectively interpret what they see or hear
on the basis of their own interests, background, experience and attitudes
which may be vastly different from the sender of the message.
Emotions. The same message can be interpreted differently, depending on
whether a person is happy or distressed. Extreme emotions are likely to
hinder effective communication.
Information overload. An employee may be so overwhelmed that any
further information he or she receives exceeds his or her capacity to
process.
Defensiveness. When people feel threatened, they tend to go on the
defensive which reduces their ability to listen and understand the message
and thus the ability to achieve mutual understanding.
12.6.3 Noise
In the discussion on the communication process, reference was made to
noise. Noise is any interference that can cause a disruption between the
sender and receiver in the communication process, such as barking dogs, the
ringing of the telephone, car alarms or internal issues like stress or dislike of
the manager. Noise can be psychological, physical, physiological or
semantic:
Psychological noise refers to the things going through your mind as you
engage in the communication process, such as wondering what to make for
dinner or why a friend has not called. Personal dislike can get in the way
of accepting what the manager is saying.
Physical noise is the actual physical sounds in the environment that make
it difficult to hear someone’s message, like the loud laugh of a co-worker
nearby when another employee is trying to take an order from a client on
the telephone.
Physiological noise comes from inside a person’s body, such as hunger,
fatigue, headache, stress or anything that prevents someone from giving his
or her full attention to the message.
Semantic noise occurs when someone finds it difficult to understand the
words, language or grammatical structure of a message. For example,
using “LOL” in a SMS to someone unfamiliar with textese may cause a lot
of confusion. This also includes the language barriers discussed above.
12.7 SKILLS FOR EFFECTIVE COMMUNICATION
It is clear that effective communication is very important in an organisation.

The following tactics can be used to develop the skills of managers to
improve organisational communication.
12.7.1 Tactics for managers as senders of messages

It is important that managers send messages effectively to organisational
members as well as to other stakeholders. The following skills or tactics can
be learnt by managers on all levels to improve organisational
communication:
Use feedback. A manager should be aware of the tendency to just talk and
then walk away. It is important to give an opportunity for feedback, either
verbal or non-verbal, to make sure that the receivers of the message
understood it well. Communication problems can be directly attributed to
misunderstandings and inaccuracies. When a manager does not use a
feedback loop in the communication process, these problems are likely to
occur. In his or her communication it is a good idea for the manager to
state that he or she is expecting a response from the receiver. This
feedback can be verbal or non-verbal and will ensure that the message is
well heard and understood.
Simplify the language and send clear and complete messages.
Managers should consider their audience and choose words and structure
their messages in ways that will make them clear and understandable. The
truth is that everybody cannot be on same page when it comes to
vocabulary. Therefore, to be effective in your communications with your
team members, use words that can be easily understood and that are not
ambiguous. Precious time will be wasted if the manager has to explain
him- or herself.
Use the appropriate tone of voice. A word can take on different
meanings depending on how it is said, for example in a different tone of
voice. Also, emphasising the wrong word can change the meaning of a
sentence. Make sure you use the appropriate tone of voice to communicate
your message to your team so that you won’t be misunderstood and
discourage or de-motivate members or cause them to shut down
completely out of fear.
Be humorous. Using friendly and appropriate banter when communicating
with employees will help to pass on a message in a more relaxed way.
This is especially useful when stress levels are high and the atmosphere is
tense in the organisation.
Avoid mumbling. When a manager is communicating with his employees,
it is important that they are able to hear him or her clearly. It is important
not to speak indistinctly or too quickly on the assumption that the subject is
clear to everyone.
Use gestures. Using hand movements and signals to demonstrate the
message will establish the seriousness of the subject matter. Be aware of
over-exaggerating, though, which may have the opposite effect.
Be appreciative. After conveying a message, thank listeners for their time.
It costs nothing and will convey courtesy.
Avoid filtering and information distortion. A manager should provide all
the important and relevant information, and avoid leaving out what he or
she personally thinks will have no value for the receiver.
Select the right communication medium. A manager should convey his
or her message through a medium that is accessible to the receiver.
Sending a written message to someone who cannot read the language well,
for example, will be pointless. One cannot assume that the receiver has
access to all communication media or that they will read/listen to different
media.
Control emotions and subjectivity. An overly emotional manager may
fail to communicate his or her outgoing messages clearly and accurately.
Subjectivity can jeopardise a good message.
Focus on non-verbal cues. The effective communicator watches his or her
non-verbal cues to ensure that they convey the desired message. Body
language is an important sender of messages. Ways to improve
communication through body language include standing/sitting up straight,
smiling, a firm handshake and making eye contact.
12.7.2 Tactics for managers as receivers of messages

Equally important for a manager is the skill to receive messages. The
following can assist in this regard:
Listen actively. An effective listener pays attention so that he or she can

take in the full meaning of the message without making premature
judgements or interpretations. This demands total concentration and
attention.
Restrict emotions. An effective listener remains calm. Someone who is
emotionally upset over an issue is more likely to miscomprehend incoming
messages.
Interpret non-verbal cues. An effective listener watches for non-verbal
cues to ensure that he or she interprets the message correctly.
Be empathetic. An effective listener does his or her best to understand the
message from the sender’s perspective instead of from his or her own
point of view.
12.8 SUMMARY
In an organisation it is important that all employees understand the

importance of working as a team. This means that they have to share ideas
and boost productivity in the organisation. When communication is not
effective in the organisation, it can interfere with the entire goal and purpose
of the organisation. Communication is the sharing of information between
two or more individuals to reach a common understanding. Effective
communication is essential for an organisation to gain a competitive
advantage. A manager must therefore understand the communication process,
be aware of the different types of communication, recognise the roles of
formal and informal communication, analyse the barriers to successful
communication, and be able to apply some skills as the receiver and sender
of messages to enhance organisational communication. Managers should
work hard at achieving the skills to steer clear of confusion and to ensure that
everyone in the organisation is on the same page.
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to-improve-load-shedding-plan-20141209 (accessed on 31 March 2015).
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communication-definition-examples.html (accessed on 19 January 2015).
Erasmus, B.J., Strydom, J.W. & Rudansky-Kloppers, S. 2013. Introduction to business management,
9th ed. Cape Town: Oxford.
Ferrell, O.C., Hirt, G.A. & Ferrell, L. 2011. Business, 2nd ed. New York: McGraw Hill.
ed. Boston: McGraw-Hill.
Hartzell, S. Organizational communication. https://study.com/academy/lesson/organizational-

communication.html (accessed on 11 November 2014).
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process.html (accessed on 12 November 2014).
Hartzell, S. Types of communication: interpersonal, non-verbal, written & oral.

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(accessed on 11 November 2014).
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Hill.
Kelly, M. & Williams, C. 2013. Introduction to business, 7th ed. Stamford: South-Western Cengage
Learning.
Lombardo, J. Barriers to effective communication: Definitions & Examples.

https://study.com/academy/lesson/barriers-to-effective-communication-definition-examples.html
Lombardo, J. Formal communication networks vs. the grapevine: definition & contrast.
https://study.com/academy/lesson/formal-communication-networks-vs-the-grapevine-definition-
contrast.html (accessed on 11 November 2014).
Lombardo, J. What are the functions of communication? https://study.com/academy/lesson/what-are-

the-functions-of-communication-definition-examples.html (accessed on 12 November 2014).
Lombardo, J. Workplace communication: importance, strategies & examples.

https://study.com/academy/lesson/workplace-communication-importance-strategies-examples.html
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Learning.
Words and phrases that inspire, motivate and persuade at work. http://www.forbes.com/sites/jacque-
lynsmith/2013/03/26/words-and-phrases-that-inspire-motivate-and-persuade-at-work (accessed on 19
January 2015).
CASE STUDY: AMWAY – USING COMMUNICATION TO

DEVELOP ORGANISATION OPPORTUNITIES
The importance of communication
Amway began in Ada, Michigan in the 1950s. The founders Jay Van Andel and Rich
DeVos coined Amway as an abbreviation for “American Way”.
Amway is more than an income opportunity or a company with products. The important
goal is to put people in control of their lives and to connect people to a better way of life.
It is about connecting people to others who share their goals and aspirations, and
supporting people in their efforts and acknowledging their achievements. Amway is thus
about people.
Amway is simply the best and most rewarding business opportunity in the world today. It
offers world-class products and a great support system. It offers global networks and
the latest trends in business. There are no special skills required to begin and operate
an Amway business. The only thing you need is commitment. Amway South Africa is an
active member of the Direct Selling Association of South Africa. The company is also a
founder member of Ethics SA – an independent, non-partisan, non-profit organisation
which promotes ethical practices in South Africa in all professions, business and public
policy.
For more than 50 years, Amway has been recognised all over the world for its expertise
in the field of home care products. With a long heritage of performance and strength,
the home care product range from Amway tackles the toughest household cleaning
challenges and its products and brands continue to be built upon the same foundation
as the original home care products, with quality being the most important factor.
Clear communication is, however, essential when managing activities. That is why
Amway needs to communicate regularly with all its distributors in order to help them
prepare for their increasingly challenging role. This case study focuses on how Amway
uses a range of communication methods and processes to help individual distributors
develop their own business opportunities. The objectives and benefits from a well-
developed communication system include the providing and gathering of information
and, perhaps very important, to clarify issues and points.
It is common knowledge that communication is only successful when the intended

result is achieved. This effectiveness of communication depends on the choice of
receiver, the clarity of the message and the choice of communication medium. It would
be inefficient and wasteful for Amway to send a message to every distributor regarding
every single issue, particularly if some issues only concern a few individuals. An
important principle in organisational communication is not to overload employees with
information. If there are too many messages from Amway, distributors may simply stop
reading them. This could mean that they may miss important messages.
Effective communication at Amway, therefore, involves making prior decisions about
who needs to receive the message. Sometimes it is necessary to repeat a message.
For example, in a classroom a lecturer will attempt to explain a task in clear and simple
terms, but if students are unsure about the message, he will rephrase it until the
students understand. Repeating messages through a different communication channel
can also help the receiver to understand the message. Messages to Amway’s
distributors should, therefore, be as clear and direct as possible, limiting the areas in
which misinterpretation could arise. A good understanding of the audience and using
terms and language they are familiar with, is vital.
Choosing the communication channel
The choice of the communication channel used by Amway depends on what needs to
be communicated. The way in which a message is delivered has an important effect
upon how it is received. For example, certain publications which are specifically
targeted at top distributors are used when Amway wishes to communicate very
specialised information that is of value only to this level. Amway thus uses different
communication channels:
• Corporate Events
Corporate events include specially arranged functions, such as product fairs,
conferences and seminars, which distributors at different levels are invited to attend.
Face-to-face communication at a range of events helps Amway and its distributors to
get to know each other. They also provide an opportunity for distributors to get to
know each other and are useful for relaying messages, giving advice and generating
personal discussion. Participation in these events enables distributors to contribute
ideas and solutions to problems encountered. The relationship between Amway and
its distributors can, therefore, take place in an atmosphere of mutual trust and
respect.
• Training
Training builds the skills and knowledge of distributors and therefore improves
competence levels. It is important for Amway to identify the skills and knowledge
necessary for distributors to carry out their role. Acquiring product knowledge is an
important aspect of training and preparation. Amway distributors are provided with a
training manual. As Amway relies on the personal service of its distributors and the
quality of its products, it is essential that distributors not only know how to use
products, but also how to merchandise them to their best advantage.
Entrepreneurship education and teaching of business skills are important for
encouraging young adults to found of their own business.
• Lines of sponsorship
Amway is essentially a people-based organisation – without people, the organisation
cannot expand. The organisation of each distributor grows via new customers and
through the sponsorship of new distributors. Established distributors are involved in
helping newly sponsored associates to merchandise Amway products. Distributor
groups meet to discuss organisational procedures and their goals. The groups also
discuss new product launches and promotions, and the administration of their
organisation. A major purpose of these group meetings is to support new and existing
distributors.
• Publications
Written communication is useful and serves as a permanent source of reference.
Amway uses a range of written communication. This includes the Amagram, a
magazine that is mailed directly to all Amway distributors in the UK, the Republic of
Ireland and the Channel Islands. Amagram is used to communicate information about
new products, promotions, community news, distributor events and recognitions, as
well as news of other affiliates throughout the Amway world. Occasionally, Amway
designs a brochure or leaflet which is used to address a particular change or launch,
e.g. a new car care product range.
• Other communication channels

The circumstances under which a organisation communicates change constantly.
Organisations have to constantly review their communication systems to ensure the
correct messages are transmitted in the correct way to the required audiences. For
Amway, this means that different communication media are required for a range of
purposes. For example direct distributors are targeted via a monthly mail-out and
packing slips have short messages printed on them.
Perhaps the most rapidly developing global communication forum is the internet. For
an organisation like Amway, with distributors all over the world, the potential of the
internet, as a communication mechanism, is enormous. The internet serves as an
important information source and offers the Amway Corporation a platform to define
‘Amway’, its opportunities, products and association. The Amway South Africa
website is interesting and informative, containing many different facts about the
Amway organisation. Amway news is communicated through the website.
Amway distributors can also use other usual communication channels to further
develop and improve their product knowledge and obtain key information, such as
product updates.
Product ranges
Developing a new range of skin care and cosmetics products is a costly process. It is
important to co-develop the distribution network, thus giving key advantages over other
products in the marketplace.
A few of the fantastic product ranges available from Amway include:
NUTRILITE™ – part of the world’s top selling brand of vitamin, mineral and dietary
supplements.
ARTISTRY™ – among the world’s top five, largest-selling, premium skin care
brands. This is a complete line of skin care and cosmetics, to make the clients look
and feel the best that they possibly can. Amway is one of the few cosmetics
organisations in the world with its own manufacturing plant, so the organisation can
retain control over quality and follow hygiene guidelines which are stricter than those
required by law.
eSpring™ – the world’s largest-selling brand of kitchen water treatment systems,
available exclusively from Amway.
The best of all is that Amway products are of such a high standard that they back every
one of their products with their famous 180-day 100% Satisfaction Guarantee.
Clarifying organisation opportunities
Acceptable organisational procedures must be developed when a large number of

distributors representing a single organisation all work independently. It is important that
communications from Amway provide a moral direction for its distributors but, at the
same time, allows them to develop their own identity.
Amway’s values and corporate social responsibility communicate how it wants to do

business. Its six enduring values are:
Partnership
Working in trust and confidence with each other to maximise everyone’s long-term
success.
Integrity
Measuring success not only in economic terms, but also by the respect, trust and
credibility one earns.
Personal Worth
Treating people fairly, respecting their unique qualities and giving them opportunities to
reach their full potential.
Achievement
Encouraging and recognising creativity, innovation, excellence and accomplishment in

all we do.
Personal Responsibility
Helping people to hold themselves accountable for achieving personal, team and
corporate goals.
Free Enterprise
Advocating freedom and free markets as the best way to improve standards of living
worldwide.
Amway makes it clear that it believes that being a successful company means more
than just selling high-quality products. Therefore Amway’s corporate responsibility is
based on three pillars: people, products and performance.
People are the heart of Amway’s business. It gives employees and business owners
the opportunity and support they need to realise their ambitions and balance their
professional and personal lives. It aims to improve people’s lives outside of the
company with programmes such as the Amway™ One by One campaign, which helps
disadvantaged children.
Products – Using the core competencies of its innovative brands, it tackles the issues
affecting the societies it works in, from battling malnutrition to providing clean water.
Performance – At Amway, they believe that understanding the environment is the key to
a sustainable future. Every year, it expands its programmes with innovative, thoughtful
and impactful efforts to preserve the world for this generation and the next.
Sources: Adapted from https://www.amway.co.za/Content/Article?PageCode=ZA-
OurCompany&c=EN-ZA (accessed on 30 March 2015);
http://organisationcasestudies.co.uk/amway/using-communications-to-
develop-organisation-opportunities/direct-selling.html axzz3VZXLlwGP
1. Draw a diagram of the communication process displayed in Amway.
2. Do you agree with Amway’s communication network? Why?
3. Amway uses formal and informal communication. Explain each term and give
examples from the case study for each.
4. What barriers to communication could Amway experience?
5. Explain the role of communicating Amway’s vision and corporate social

responsibility to its distributors as well as to its clients.
1. Interview a manager in an organisation of your choice and draw up a report about how he
or she communicates: who the manager communicates with on a daily basis, what
communication media the manager uses, and any barriers or problems the manager
experiences.
2. Explore the advantages and disadvantages of using the internet as a way of

communication in the business world.
3. Explain why differences in language and semantics can lead to ineffective communication
in an organisation.
4. Explain why you think some people find it difficult to be good listeners.
13 Foundations of control
KOBUS LAZENBY
Learning outcomes
Define control in an organisational context.

Explain why control is so important.
Differentiate between the different types and forms of control.
Identify the different areas where control should happen.
Discuss and apply the steps in the control process.
Explain the requirements or qualities of control systems.
Understand why frequent control should take place.
Discuss some contingency factors of control.
Evaluate the importance of some contemporary issues of control.
13.1 INTRODUCTION
Control is the last and final step in the management process and is an
important link in the whole cycle of the management process. Every
organisation must have some control procedures in place to ensure that the
organisation is progressing according to plan. The concept “control” implies
that the behaviour of individuals can be influenced in the course of activities
and events. If things are under control, they are proceeding as they should,
but if not, they become unmanageable and problems can arise.
Control is 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. Management can be very
precise in their forecasting and development of plans, but if there is no
control to identify whether employees are carrying out these plans, there can
be no guarantee that plans and objectives will be achieved.
During planning and organising, managers develop the organisational strategy

and structure that allow the organisation to use resources most effectively.
Activating sets the organisation in motion to achieve the organisational goals.
Although the most brilliant plans and objectives may be planned, impressive
structures may be designed and people may be motivated to achieve these
objectives, if no control is implemented to make sure that everything is
actually proceeding according to what was planned, problems will arise.
In controlling, managers must monitor and evaluate
whether the organisation’s plan and structure are working as intended

how the plan could be improved
how the plan might be changed if it is not working.
Successful management is dependent on sound planning and effective control,

because the control process informs management whether activities are
proceeding according to plan, activities are not proceeding according to plan
or whether the whole situation has changed and new plans have to be
devised.
13.2 WHAT IS CONTROL?
The aim of control is to keep the deviations from the planned activities to a
minimum. Control involves a systematic process through which managers
can compare the real performance of activities with the plans, standards and
objectives and take corrective action if deviations occur. It is a regulatory
task of management in that it allows action to tie in with plans. Control is an
important guide in the execution of plans and it measures the performance of
the entire organisation.
Control bridges the gap between the formulation of objectives during the
planning process and the achievement of these objectives. Control ensures
that activities are performed as they should be. Control complements
planning, because when deviations are encountered, plans and even
objectives need to be revised. Successful management cannot happen without
sound planning and effective control. The control process informs the
manager that (a) activities are proceeding according to plan – the existing
plan should be continued, or (b) activities are not proceeding according to
plan – the existing plan should be adjusted, or (c) the whole situation has
changed – new plans must be devised.
There are three approaches to control:
1. Market control emphasises the use of external market mechanisms, such

as price competition and relative market share, to establish the standards
used in the control system. Managers can compare the profits and prices
of competitors to determine the efficiency of their own organisation.
2. Bureaucratic control emphasises organisational authority and relies on

administrative rules, regulations, reward systems, procedures and
policies to influence employee behaviour and to assess organisational
performance.
3. Clan control represents almost the opposite of bureaucratic control,

because it relies on values, beliefs, traditions, rituals, corporate culture,
shared norms and informal relationships to regulate employee behaviour
and facilitate the reaching of organisational goals. This requires trust, as
employees are given minimal direction and it is assumed that they will
perform well, because of shared norms and values that are in line with
the organisation’s goals and objectives.
13.3 THE IMPORTANCE OF CONTROL
Planning can be done, organisational structure can be created and employees

can be motivated, but still there is no assurance that activities will happen as
planned. That is why control is important. The specific value of the control
function lies in its relation to planning and delegating activities:
Control determines how efficiently the organisation is using its resources.

Managers must be able to measure accurately how many units of inputs are
being used to produce a unit of output in order to assess how efficiently the
organisation is producing goods and services.
Organisational control gives managers feedback on product quality.
Effective managers create a control system that consistently monitors the
quality of goods and services so that they can make continuous
improvements.
Managers must ensure that their organisations are responsive to
customers. They have to develop a control system to evaluate how well
customer-contact employees are performing their jobs. Monitoring
employee behaviour can help managers to find ways to increase
employees’ performance levels. When employees know that their
behaviour is being monitored, they have a greater incentive to be helpful to
customers.
Controlling can raise the level of innovation. Innovation takes place when
managers create an organisational setting in which employees feel
empowered to be creative and in which authority is decentralised.
Deciding on the appropriate control systems to encourage risk taking is an
important management challenge.
Control enables management to cope with change and uncertainty,
because environmental change can result in activities not being carried out
according to plan. Changes can happen over the short term and
organisations need to respond timeously. Internal control systems should
be flexible enough to reflect the new goals and standards of performance.
A successful free-market system gives rise to more active competition. In
order to remain competitive and sustain competitive position and
competitive advantage, the organisation must exercise stricter quality and
cost control.
Control facilitates delegation and teamwork. If a manager wants to make
sure that the work which is delegated to a subordinate is done properly, a
control system is necessary. The progress of employees cannot be
measured without a control system.
13.4 TYPES OF ORGANISATIONAL CONTROL
There are three broad primary types of organisational control:
1. Strategic control. The process of evaluating the strategy is practised

both after the strategy is formulated and after it is implemented.
2. Management control. This functions within the framework established

by the strategy. Typical management control measures will include return
on investment (ROI), income, costs and product quality. These control
measures are essentially a summary of all the operational control
measures. If things are not happening as they should, corrective action
may involve minor or very major changes in the strategy.
3. Operational control is designed to ensure that the day-to-day activities

are consistent with the established plans and objectives.
The differences between strategic and operational control are mainly in

terms of measurement and analysis, and are indicated in Table 13.1.
Table 13.1 Differences between strategic and operational control
Strategic control Operational control

Strategic control Operational control
Uses data from very few sources and relates to Requires data from more sources and
internal operating factors. decisions are taken with regard to the
external environment.
Concentrates on day-to-day activities, with Oriented to the future.
control data giving rise to immediate decisions
that have immediate effects.
More concerned with the quantitative value of the More concerned with measuring the
outcomes of the decisions. accuracy of the assumption on which
the decision is based.
Deals with a particular period of time, for Relies on reporting intervals.
example output per week, profit per quarter, and
so on.
Generally very precise in the narrow domain in Models are less precise.
which it is applied.
Models are more formal because they deal with Models are more intuitive and therefore
actual day-to-day activities. less formal.
Efficient quantitative computation is usually most The key need in analysis is model
desirable. flexibility.
The formal review of outcomes requires the The key skill required for management
ability to do technical, even statistical, analysis of control analysis is creativity.
the data received.
The question can now be asked: What is the best way to carry out control?
There are three basic forms of control:
1. Feed-forward control. Also called preliminary control, pre-control or

preventive control, this is the most desirable form because it aims at
preventing anticipated problems and takes place before activities or
projects get underway. It however requires timely and accurate
information that is often difficult to obtain. It focuses on the control or
regulation of inputs (human, material and financial resources that flow
into the organisation) to ensure that they meet the standards necessary for
the transformation process (e.g. materials must be of good quality and be
available before the work starts).
2. Steering or concurrent control. This takes place while an activity is in
progress and occurs primarily at a supervisory level. It involves the
regulation of ongoing activities that are part of the transformation
process to ensure that they conform to organisational standards, and is
designed to ensure that employee work activities produce the correct
results. It is sometimes called screening or “yes–no” control, because it
often involves checkpoints at which determinations are made about
whether to continue as is, take corrective action or stop work altogether
on products or services. Because it involves regulating ongoing tasks, it
requires a thorough understanding of the specific tasks involved and their
relationship to the desired end product. The major advantage of this type
of control is that problems can be corrected on the spot, before they
become costly and have far-reaching consequences. An important
principle in steering control is that no activity may move to the next step
before the present step has been satisfactorily completed. The best-
known form of concurrent control is direct supervision.
3. Post-control or feedback control. Sometimes called post-action or

output control, this is the most popular form of control and focuses on the
outputs of the organisation after the transformation process is complete.
It is often used when feed-forward and concurrent controls are
unfeasible or too costly. Its biggest disadvantage is that by the time the
manager has the information that something is wrong, the damage has
already been done. However, it has two advantages over feed-forward
and concurrent control: (a) it provides managers with meaningful
information on how effective the planning effort was. If little variance
between the set standard and actual performance is detected, this is
evidence that planning was generally on target. If the deviation is great, a
manager can use this information when formulating new plans to make
them more effective. (b) It can enhance employees’ motivation. Post-
control can be regarded as an action where future activity is directed by
past results.
Feed-forward, concurrent and feedback control methods are not mutually

exclusive forms of control. They are usually combined into a multiple control
system. Managers design control systems to define standards of performance
and acquire information feedback at strategic control points. When
organisations do not have multiple control systems in place that focus on
strategic control points, they often experience difficulties that can cause
managers to re-evaluate their control processes.
13.5 AREAS OF CONTROL
To understand the importance of control and the different forms of control is

one side of the coin. The important question remains, however, what should
be controlled? The organisation’s activities should be controlled at strategic
control points. Management must identify the key areas or departments
responsible for the effective functioning of the entire organisation, i.e. those
activities that are especially important for achieving strategic objectives.
These include the following:
Financial situation. If an organisation wants to succeed in business,

managers must be able to work with budgets and manage with financial
discipline. The ultimate purpose of an organisation is to survive over the
long term and to generate sustainable profits. Goals set in terms of profit
margins and profitability must be carefully controlled. The regulation of
budgets and other financial controls will add to the importance of using
profitability as a key strategic control area.
Productivity. The optimal functioning of the organisation depends on the
attempts to improve its productivity constantly, since resources are
limited. The goals and plans to increase productivity must be controlled.
Competitive position. The organisation possesses specific goals with
regard to its future market position. It is important to exercise control over
this to make sure that the organisation will achieve the desired competitive
position.
Human resources. Managers accomplish the goals of the organisation by
integrating the work of employees. Employees are important in achieving
the organisation’s goals. That is why effective control measures are of the
utmost importance with regard to the behaviour of employees. The
development of the organisation and the extension of competitive
advantage therefore require that employees develop accordingly. The
training requirements of employees must be controlled to make sure that a
healthier and more productive work environment and culture is
established.
Technological leadership. A critical decision that an organisation must
make all the time is whether it wants to be a leader in the market or not.
This decision implies that the organisation must take a critical look at its
technology in order to determine what technology upgrades it needs to
obtain and/or maintain its competitive advantage.
Public responsibility. The organisation takes inputs from the environment
and, in return, gives outputs to the environment. Therefore the organisation
must ensure that it behaves responsibly towards the environment. Control
with regard to public responsibility is important to meet the requirements
of corporate governance.
13.6 THE CONTROL PROCESS
The control process ensures that resources are meaningfully deployed so that
the mission and objectives of the organisation can be achieved. This process
comprises four steps (see Figure 13.1).
Figure 13.1 The control process
13.6.1 Step 1: Establish performance standards

Performance standards are a projection of expected or planned performance.
The establishing of standards of performance at the mentioned strategic
points is an important first step in management control. Because of the said
interrelationship between planning and control, it is logical to say that
control starts as early as the planning stage. Managers usually base their
major controls on the organisational mission, goals and objectives developed
during the planning process.
What is a performance standard? It is the projection of expected or planned

performance. There is a particular relationship between standards of
performance and the establishing of objectives, because setting performance
standards is actually the formulation of objectives. Goals and objectives
developed during the planning process are translated into performance
standards by making them measurable. For example, an organisational goal to
increase market share may be translated into a top management performance
standard to increase market share by 10% within a 12-month period. To
make control possible and meaningful, these performance standards must be
realistic, attainable and measurable.
There are four main types of performance standards:
Profit standards – how much profit the organisation wishes to make

Market share standards – what market share the organisation is aiming
to achieve
Productivity standards – what outputs are expected with what inputs
Human resources standards – rates of staff turnover, absenteeism,
training, etc.
Management in action 13.1 provides some examples of performance

standards.

Performance standards of General Electric
The following eight types of standards have been set by General Electric:
Profitability standards. These standards indicate how much profit General Electric
would like to make in a given time period.
Market position standards. These standards indicate the percentage of total
product market that the company would like to win from competitors.
Productivity standards. These production-oriented standards indicate various
acceptable rates at which final products should be generated within the organization.
Product leadership standards. Product leadership standards indicate what levels
of product innovation would make people view General Electric products as leaders
in the market.
Personnel development standards. Personnel development standards list
acceptable levels of progress in this area.
Employee attitude standards. These standards indicate attitudes that General
Electric employees should adopt.
Public responsibility standards. All organizations have certain obligations to
society. General Electric’s standards in this area indicate acceptable levels of activity
within the organization directed toward living up to social responsibilities.
Standards reflecting balance between short-range and long-range goals.
Standards in this area indicate what the acceptable long- and short-range goals are
and the relationship among them.
http://www.strategic-control.24xls.com/en146 (accessed on 7 April 2015)

13.6.2 Step 2: Measure actual performance
Using the standards set in step 1, actual performance must now be determined
and evaluated. In some organisations, this may require only visual
observation, while in others more precise determinations may be needed.
Actual performance can be measured in physical, quantitative and/or
qualitative terms. (In Management in action 13.2 it is clear that organisations
can set targets and can then fail to achieve them.)

SPAR South Africa sets out ambitious growth plans for 2015
SPAR, which services independent retailers trading under the SPAR, Tops at SPAR,
Build It and Savemore brands, plans to open 35 new SPAR stores in 2015 and renovate
180, CEO Graham O’Connor said in the group’s latest annual report, end December
2014.
In the year to September, retail trading conditions were tough as consumers were under
pressure and competition increased. Spar would have to be more innovative in future in
securing greenfields sites, but there were still opportunities, especially in the informal
market, Mr O’Connor said.
In the past year the group opened 19 SPAR stores, below the target of 23, and closed
17 that either failed to meet standards or for financial reasons. The group opened 51
new Tops at SPAR stores, well ahead of the target of 35. Build It added 18 new stores in
the past year but these retailers came under pressure from labour unrest, imported
cement, and competition from small foreign-owned stores in outlying areas.
Source: http://www.spar-international.com/news-press/worldwide-spar-news/spar-
south-africa-set-out-ambitious-growth-plans-for-2015.html (accessed on 25
March 2015)
The five aspects of the actual performance that can be managed and
controlled are quantity, quality, time, cost and behaviour. Collecting data
and reporting on actual performance are ongoing activities. This is a difficult
step because managers need to know what to measure, how to measure and
when to measure. Data should be absolutely reliable, valid and linked to the
organisation’s objectives and goals. If any data is inaccurate, control will not
be effective. The organisation must also determine how much deviation from
targets will be acceptable, i.e. what its tolerance variance will be that will
be acceptable from the targets as defined in the first step of control. The next
step of the control process cannot be effective if these tolerances are not
determined.
One approach that a manager can use to measure and evaluate real
performance is management by walking around (MBWA). This entails a
manager being out into the work area, interacting directly with employees
and exchanging information about what is happening at ground level. A
manager can pick up facial expressions and tones of voice that may be
missed by other sources. This helps with the behavioural aspect of control.
The use of computer systems that are tied in to organisational networks has
made it possible for managers to obtain up-to-the-minute status reports on a
variety of quantitative performance measures. Managers should be careful to
observe and measure performance accurately before moving on to the next
step.
13.6.3 Step 3: Evaluate deviations

Actual performance must now be compared with the set standards as
objectively as possible. When the first two steps of the control process have
been executed well, this step should be straightforward, but behavioural
standard deviations can be challenging.
As an organisation grows, the principle of control by exception comes into

play. This means that only exceptional differences between actual
performance and planned performance are communicated to top management,
while subordinates deal with minor deviations on their own. Management
must decide whether the differences are significant enough to merit further
attention.
The nature and scope of deviations and their causes must be determined.
Some deviations from the standard may be justified because of changes in
environmental conditions. It is also important to make sure that discrepancies
are genuine – the performance standards and the actual performance should
be objectively set and observed. Management must decide whether the
differences are significant enough to merit further attention. That is why the
tolerances in the previous steps were determined to set the upper and lower
limits for each deviation, so that only differences outside these limits are
investigated. The important question is thus to ask “why does performance
deviate from the standards?” The organisation needs to know whether the
deviations are due to internal shortcomings, or external changes beyond the
organisation’s control.
The following is a general checklist of questions to ask when evaluating

deviations:
Are the standards appropriate for the stated objectives and plans?
Are the objectives and corresponding plans still appropriate in light of the
current environmental situation?
Are the plans for achieving the objectives still appropriate in light of the
current environmental situation?
Are the organisation’s structure, systems (e.g. information) and resource
support adequate for successfully implementing the plans and therefore for
achieving the objectives?
Are the activities being executed appropriately for achieving the set
standards?
The cause of the deviation, either internal or external, has different

implications for the implementation of corrective action.
13.6.4 Step 4: Take corrective action

The point in the control process has now been reached to determine the need
for corrective action. Once a performance evaluation has been done,
managers will have three options:
1. It will not be necessary to do anything. Maintaining the status quo is

preferable when performance essentially matches the standards.
2. Actual performance will have to be improved to attain the set standards.

3. The performance standards will have to be lowered, or raised, to make
them more realistic in the circumstances.
Corrective action aims to improve performance to ensure that future

deviations do not occur. When standards are not met, managers must
carefully assess the reasons for this and take corrective action with great
care. It is, however, very important to check the performance standards
periodically to ensure that the standards and the associated performance
measures are still relevant for the future. However, the real cause of any
deviation must first be found before corrective action can take place. This
can range from unrealistic objectives or standards to the wrong strategy
being selected to achieve the organisational objectives. Different causes will
require different corrective action.
There are four general types of corrective action:
1. Revise the standards. It is possible that the performance standards are

not in line with the objectives and plans selected. Changing the standards
is necessary if the standards were set too high or too low from the outset.
In such cases, it is the standard that needs corrective action and not the
performance.
2. Revise the objective. Some deviations from the standard may by

justified because of changes in the environmental conditions. In these
circumstances it is necessary to adjust the objectives, because it is more
logical and sensible than adjusting performance.
3. Revise the plans. Deciding on internal changes and taking corrective

action may involve changes in the plans. A specific plan that was
originally appropriate can become inappropriate because of
environmental changes and trends.
4. Revise the structure, system or support from management. The

performance deviation may be the result of an inadequate organisational
structure, system or support in terms of resources. A change in any of
these may align the performance with the set standards. This is the most
common corrective action. Additional coaching by management,
additional training, more positive incentives, improved scheduling,
training programmes, the redesign of jobs or the replacement of
personnel can do a lot to help the organisation to align the performance
with the set standards.
Corrective action in any of the above areas may require adjustments in one or
more of the other areas. For example, adjusting the objectives is likely to
require different plans and will need a different support structure from the
organisation.
13.7 QUALITIES OF AN EFFECTIVE CONTROL SYSTEM
To manage an organisation without an effective control system in place is

actually the abdication of management’s responsibility. Managers are
responsible and accountable for the actions of employees in the organisation
and must ensure that activities are being executed as planned. These
characteristics will vary according to the organisation and the environment,
but the following general qualities are associated with an effective control
system.
13.7.1 Integration
The control process must be integrated with the planning process, because
control feedback provides the necessary inputs for the planning process.
When deviations occur, plans and objectives often have to be revised. This
usually boils down to a question of whether the objectives should be
lowered or the plan of action be revised.
13.7.2 Understandability and simplicity

The techniques used in the control process must be easily understandable. If
control systems are interpreted incorrectly or are too complicated, mistakes
will occur and results will be inaccurate. Employees will also get frustrated
and begin to neglect this part of their job in the long term and will tend to
ignore the importance of control. Simplicity is thus a key concept in the
design of a control system.
13.7.3 Flexibility
The control system should be able to accommodate change and take
advantage of new opportunities that may appear. The organisational
environment is one of constant change and flexibility will allow for revisions
to be made so that deviations can be avoided. No organisation is operating in
a stable environment. The control system must be flexible so the in-time
adjustments to objectives or plans can be made. This flexibility in the control
system leads to a condition that is seen as revision rather than deviation.
13.7.4 Accuracy
An effective control system should be reliable, valid and accurate, and
provide an objective reflection of the organisation’s position. Errors and
deviations should not be included in the data. Any corrective action
implemented on the basis of false information will not only fail to improve
the situation, but may in fact make it worse.
13.7.5 Timeliness
Collecting control data should be an ongoing process so that at any point in
time, managers can evaluate the organisation’s position and, if necessary,
take corrective action quickly to avoid more serious consequences for the
organisation. Trying to get all the information needed hastily and at the last
minute can lead to mistakes and prevent the manager from making preventive
decisions.
13.7.6 Acceptability
A control system should contribute to the improvement of individual and
organisational performance. It must stimulate productivity and growth, and it
must lead to greater independence and responsibility among management and
subordinates. If managers and employees do not accept the control system as
reasonable and doable, it will be difficult to implement.
13.7.7 Strategic importance
It is impossible to control everything in an organisation. The cost of control
compared to any benefits may, in some cases, not be justifiable. This
necessitates being selective and ensuring that control is focused on those
areas that are most strategic and important to the organisation.
13.7.8 Multiple criteria measures

There should always be more than one criterion being measured by a control
system. For example, if an organisation focuses too much on productivity,
managers and employees may do their utmost in this area and work quickly
but at the expense of quality, which is not being controlled as strictly. This
narrow focus does not fulfil the effectiveness criterion for the organisation.
13.8 WHEN DOES CONTROL HAPPEN?
Although it was stated that control is a continuous process, it is important to

note that some control methods are applicable in some frequency categories.
There are three categories of frequency in the control process: constant,
periodic and occasional. These are discussed below.
13.8.1 Constant control

Constant control happens on a continuous basis. It includes the following:
Self-control. This is the ideal organisational condition – employees take

responsibility for their own work behaviour. If employees are responsible,
committed and motivated, it is not necessary for the manager to impose as
much control.
Clan control. This relies on the culture and norms of the organisation, and
happens when groups exercise control over each other. A positive
organisational culture and climate will therefore benefit the organisation.
If the organisational culture supports productivity, clan control can be very
effective.
Standing plans. These are the policies, rules and procedures in place in
an organisation. Employees are required to function within these
boundaries in the workplace.
13.8.2 Periodic control

Periodic controls happen on a fixed schedule, i.e. weekly, monthly, quarterly
or annually. Examples are as follows:
Regular reports. These are common to any organisation and can be verbal
(e.g. meetings) or written (e.g. business briefs). They can be feed-forward,
concurrent or feedback controls.
Budgets. A budget determines the standard against which financial
performance will be measured. During the financial year, it is used as a
concurrent form of control – to measure the progress of financial
performance. At the end of the financial year, it is used to evaluate whether
performance was within budgetary constraints. This is an example of
feedback control.
Audits. There are two types of audit – internal and external. Internal
auditing is exercised by a person or a department that periodically
controls whether the assets of the organisation are being applied and
reported accurately. External auditing is usually done through an
accounting firm to verify that the organisation’s financial statements are a
true reflection of its financial performance.
13.8.3 Occasional control

The following are examples of occasional control:
Observation. This can be used on a sporadic basis when the manager

suspects that something is wrong, such as installing video cameras or
tapping the telephone lines. Management by walking around is another
example.
Special reports. These are usually used when a specific problem or
opportunity is recognised. A manager can request a special report from a
specific department or an external consultant to identify the cause of a
problem and why a deviation from expected performance is being
experienced, and to suggest a proposed corrective action.
13.9 CONTINGENCY FACTORS IN CONTROL
The contingency factors that influence the design of an organisation’s control

system include organisational size, level in hierarchy, the degree of
decentralisation, organisational culture and an activity’s importance.
As organisations grow in size, direct supervision alone becomes ineffective

and has to be supplemented by more formal control measures. The higher an
individual is in the organisational hierarchy, the greater the need for a
multiple set of control criteria – a narrow focus of control is not effective. If
an organisation is decentralised, managers need to receive frequent
feedback about their performance. Performance feedback is only possible if
an effective control system is in place.
Organisational culture plays an important role in the way an organisation

functions. With a positive organisational culture where trust, autonomy and
openness flourish, an informal self-control system can work well. However,
in an organisational culture that is characterised by fear, retaliation and
mistrust, a more formal control system becomes essential. A manager must
operate in such a way that a positive, supportive organisational trust can
develop.
The importance of a specific activity in the organisation is directly

proportional to the level of control that needs to be exerted over it. If
deviations associated with an activity are highly damaging to the
organisation, extensive controls need to be implemented no matter what the
cost.
13.10 CONTEMPORARY ISSUES AFFECTING

CONTROL
13.10.1 Workplace privacy

Using the organisation’s computer resources to send and receive private
emails may influence an employee’s productivity, so managers could find
they need to restrict this. While employers are able to read employees’
emails and can monitor their computers, this creates an ethical dilemma
because employees may regard some emails as private and personal.
Employees also regard computer monitoring as a sophisticated form of
eavesdropping or a technique to catch people slacking off on the job.
Controlling these issues may create a hostile work environment and is a

major concern for both employers and employees. Managers can minimise
employees’ concerns by developing and communicating clear policies
regarding the use of email and computers at work.
13.10.2 Employee theft

Employee theft is defined as any unauthorised taking of company property by
employees for their personal use, even small items such as pens or
paperclips. It can also apply to the unauthorised use of organisation property,
such as using a company motor vehicle for a personal errand or the
photocopy machine for a child’s school project. Over time, it can add up to a
considerable cost and therefore it is important to deter or reduce it. (The
consistency in managing employee theft is highlighted in Management in
action 13.3.)

Be consistent when dealing with employee theft
One would think that dismissing an employee for theft is always defensible at the
CCMA. It is not quite that simple, though. An employer who has not been consistent in
dealing with theft cases might just have to reinstate a thieving employee.
The Labour Court has been quite clear in its condemnation of theft, irrespective of the
value of the item being stolen. The basis of this approach has in one case been stated
as follows: “It is one of the fundamentals of the employment relationship that an
employer should be able to place trust in an employee. A breach of this trust in the form
of conduct involving dishonesty is one that goes to the heart of the relationship and is
destructive of it.”
There are however certain situations where an employer might consider making an
exception due to the particular circumstances of the case. The employee might, for
example, have been a loyal employee for many years and might be genuinely
remorseful. The employer might feel that the employee deserves another chance. The
important question is however what happens if another employee steals and expects to
remain in employment, due to the leniency demonstrated towards the first employee?
The question is now: “Can the employer distinguish between two cases involving theft?”
It is a well-established principle that an employer has to be consistent in the application

of discipline. However, the employer also has an obligation to consider mitigating
circumstances before dismissing an employee. This means that allowance can be
made for an employer to exercise discretion in each individual case. But how much
allowance is made for the employer to distinguish, at the risk of being found to have
been inconsistent in the application of discipline?
The Labour Court in South Africa has on occasion found that where two employees
have committed the same wrong and there are no clear distinguishing circumstances,
they ought generally to be treated in the same way. Employers are not necessarily legal
experts and some grounds that they might use to distinguish between two matters may
be regarded as invalid or irrelevant by the CCMA or Labour Court.
Exercising discretion becomes dangerous territory, particularly when one looks at some
CCMA decisions where employees have been reinstated, even in situations where it
was common cause that they had stolen. The reason for reinstatement in these cases
was simply that the CCMA, perhaps correctly, differed from the employer about the
reason for giving one dishonest employee a final warning while dismissing another
employee.
Another difficult question is whether the employer may pardon an employee who
participated in theft, but who has decided to come clean and assist the employer by
providing evidence against his fellow transgressors in disciplinary hearings – much the
same as the state does with criminals that become state witnesses. It might seem like
a reasonable proposition to assist such an employee by keeping him in his job, but this
can also be a minefield.
In view of the above, an employer would be setting a bad precedent if a thieving

employee is pardoned or given a penalty short of dismissal. The best approach is to
have a clear policy that any form of theft or other form of gross dishonesty is likely to
lead to summary dismissal. This policy should be implemented consistently, except
where there are compelling reasons not to do so.
Source: http://southafrica.smetoolkit.org/sa/en/content/en/54585/Be-consistent-when-
dealing-with-employee-theft (accessed on 26 March 2015)
13.10.3 Workplace violence

Increasingly, it is important that employers prevent workplace violence
before it occurs and in particular they must be equipped to deal with it.
Violent crime has become instilled in the South African culture. The
likelihood of an employee becoming a victim of workplace violence, owing
to increased tensions across various ethnic groups and cultures, is high.
According to studies, it was found that more than 70% of South Africans had
experienced workplace bullying. Employers must do what they can to
prevent workplace violence before it occurs, while being equipped to deal
with it if and when it does happen.
Workplace violence is violence or the threat of violence against another

employee and it can occur at or outside the workplace, usually ranging from
threats and verbal abuse, to physical assault and even homicide.
Workplace violence is costly for businesses and should be deterred or

reduced. Employee stress is a major contributing factor, caused by long
hours, information overload, daily interruptions, unrealistic deadlines and
uncaring managers. Even office layout designs with small cubicles where
employees work amid the noise and commotion from those around them have
been cited as adding to the problem (see Management in action 13.4).

Workplace violence awareness
Most people think of violence as a physical assault. However, workplace violence is a

much broader problem. It is any act in which a person is abused, threatened,
intimidated or assaulted in his or her employment. Workplace violence includes:
Threatening behaviour – such as shaking fists, destroying property or throwing

objects
Verbal or written threats – any expression of intent to inflict harm
Harassment – any behaviour that demeans, embarrasses, humiliates, annoys,
alarms or verbally abuses a person and that is known or would be expected to be
unwelcome (This includes words, gestures, intimidation, bullying, or other
inappropriate activities.)
Verbal abuse – swearing, insults or condescending language
Physical attacks – hitting, shoving, pushing or kicking
Rumours, swearing, verbal abuse, pranks, arguments, property damage, vandalism,

sabotage, pushing, theft, physical assaults, psychological trauma, anger-related
incidents, rape, arson and murder are all examples of workplace violence. … Mobbing
includes such behaviour as making continuous negative remarks about a person or
criticizing them constantly; isolating a person by leaving them without social contacts;
gossiping or spreading false information. In Sweden, it is estimated that mobbing is a
factor in 10 to 15 percent of suicides.
Source: http://www.workinfo.com/free/downloads/95.htm (accessed on 26 March

2015)
13.11 SUMMARY
Control is one of the four basic management functions and although it is the
final step in the management process, it is at the same time the starting point
for planning and strategic development.
Control is a relatively simple process, but its implementation demands great

care and even a degree of experience. It narrows the gap between planned
performance and actual performance by setting standards in the right places.
Control aims at every activity or group of activities in the organisation, but
normally it is aimed at physical, financial, information and human resources.
The broad general types of control have been discussed, while the different
forms of control have been identified and examined.
To manage an organisation without an effective control system in place is

tantamount to the abandonment of management’s responsibility.
The qualities of an effective control system have been stressed. Although it
was stated that control is a continuous process, the importance and
applicability of some control methods for certain different frequency
categories have been identified. The chapter concluded with some
contingency factors affecting control and the discussion of a number of
contemporary issues that are important in organisations with regard to
control.
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Truter, J. Nd. www.labourwise.co.za. Consistent when dealing with employee theft, in

http://southafrica.smetoolkit.org/sa/en/content/en/54585/Be-consistent-when-dealing-with-employee-
theft (accessed on 26 March 2015).
Watkins, B. Workplace violence awareness and prevention: is there a legal duty on employers to take
appropriate steps to prevent exposing employees to workplace violence?
http://www.workinfo.com/free/downloads/95.htm (accessed on 26 March 2015).
CASE STUDY: G4S: PROVING SMART SYSTEMS CAN
SIMPLIFY EVEN THE MOST COMPLEX TASK
Mining in South Africa has been the driving force behind the history and development of
Africa’s most prestigious economy. Gold mining in South Africa accounted for 15% of
the world’s gold production in 2002 and 12% in 2005, although South Africa produced as
much as 30% of world output as recently as 1993. Despite declining production, South
Africa’s gold exports were valued at £2.5 billion in 2005. Almost 50% of the world’s gold
reserves are found in South Africa. South Africa also possesses two of the deepest
mines in the world with the Tau Tona in Carletonville drilled to a record-breaking depth of
3.9 km and the shallower Mponeng gold mine drilled to a depth of 3.4 km.
Global mining houses and local mining companies throughout Africa employ well over
450 000 people across all the extraction sectors and platforms. The logistics involved in
their daily operations are often very complex and require reliable and innovative systems
to ensure control of the various aspects of their day-to-day business processes.
G4S Secure Solutions South Africa (then under the Skycom banner) became involved
with projects aimed at enhancing business support systems, especially in the HR &
Payroll sectors of their mining operations business. Different projects were initiated and
aimed at replacing time and access management system hardware and software as
well as the interfaces, which had become outdated and unsuited to modern business
practices.
One of the new solutions implemented in many operations was the replacement of
outdated time and access management systems with a solution better suited to the
business environment and its needs. The new system was purpose built in accordance
with the customer’s exact requirements and specifications. The G4S system has
allowed the site management to exercise both easy and efficient control over access,
time recording, Health and Safety requirements, movement patterns and environmental
situations. The intention was to create software that allowed ease of use for both the
end user and management. From the employee clocking into work to the HR team
collating reports and gathering management information, the system is seamless and
practical. The overall successes of the solution across South Africa have led to
implementation in other customer operations across Africa, including Ghana, DRC and
Zambia.
As a direct outcome of the success of the initial projects with large multinational mining
houses, a Technology Partnership was formed between G4S and a number of the big
mining companies. The aim was simple, to develop well-suited, efficient technology
solutions in accordance to specific requirements at various global mining sites with the
use of the Time and Access Management systems. The High End Security plant
systems were also converted to XTIME which was custom developed for many of the
Mining and Industrial sector customers that had a need for a high security environment
such as gold plants and high risk areas. The XTIME system handles full search facilities
with intelligent routines which are set up by users of the system to cater for different
conditions that occur in the plant. The Graphical Maps feature available provides control
and situational awareness from a single screen. This ultimately results in the business
being able to view the various platforms in one single view.
The solutions G4S-Skycom have subsequently offered to global mining companies
include:
Complete rewrite of the entire T&A Management System (Skycom Xtime 900®)
Introduction of Proximity Based Card Readers®
Introduction of Facial Recognition Biometrics®
Introduction of Fingerprint Technology Biometrics®
UPS/power supplies developed with our mining customers for the turnstiles
Xtime Command Centre Software® for the gold plants and high security areas for
proactive error reporting
Xtime Generic Sync® (HR & Payroll interface) (SAP, Oracle, Pal Pay, etc.)
Meal issuing & control through facial recognition biometrics at canteens at various
accommodation facilities
Automated protein dispensing (MorVite) for underground workers
Portable Proximity Reader® solutions for mass gatherings.
The G4S-Skycom systems have now been running across various mining and industrial
sites for a number of years. A number of company representatives have been quoted as
saying that they are delighted with the systems and the revolution it has caused in their
The flexibility of XTIME® software allows it to be easily integrated into other commonly
used systems. As a consequence, G4S-Skycom solutions are suitable for use in a wide
range of contexts where biometric recognition can substantially improve business
processes and improve operational efficiencies. These contributions include:
Access Control (Site, mining shafts, heavy vehicle operation)
Mines are often targeted by illegal miners and for asset thefts such as machinery or
copper cable. XTIME® is able to offer high calibre access control systems through a
variety of biometric readers and fingerprint identity measures. G4S uses state-of-the-art
biometric fingerprint and facial recognition hardware to provide cutting-edge technology
in order to secure mining assets.
Shift Attendance and Payment (Certified integration into systems such as SAP®)
Optimization and efficiency is core to mining operations, and XTIME900® allows

managers to identify key trends in staff attendance, lost productivity through absence,
and lost time due to sickness and absenteeism, etc. The type of view provided by
XTIME900® allows analysis to clearly identify key trends for the first time, leading the
mine to significantly improve mining efficiency and keeping overtime and absenteeism
down to a minimum. Equally important to this analysis ability is the ability to control the
legal Health & Safety requirements which need to be met and constantly monitored on
large site operations.
Shift Work/Group Access Management

Mining and extraction inefficiency can often be caused by work teams not having the
correct mix of skills. This leads to delays or the prevention of deployment down the
shafts, often resulting in lost productivity. XTIME900® is able to manage these group
requirements through integrated level control functionality as well as being able to
access recorded and instant skill databases, which provide immediate decision-making
possible on the deployment of shift and gangs. This ensures maximum productivity
from the deployment of miners.
Health & Safety Management
(HSE certificates, medical certificates, licence, training etc.)
Safety in mining is key and all pervasive, and when it goes wrong it can result in mine
closures, often legal action, and significant loss of revenue. XTIME900® allows
managers at all levels to govern access to the site or specific areas with feedback to
the employees via the reader as well as the management of safety critical training and
medical prerequisites to mention a few. These systems follow a strict certification
process that can even go as far as certifying licensing for qualified drivers to activate
heavy and underground vehicles via a starting management reader on the units.
Contractor Management
Many of the mining, processing and extraction clients manage their operations with a
high percentage of sub-contractors, whose more transient nature requires equally high
levels of access control, particularly safety management, to that of the permanent
workforce. XTIME900® is able to offer the ability to manage these contractors and
maintain critical safety standards for the company while giving clear and concise
reports of absenteeism, hours worked, etc. It also manages contract expiry dates as
well as certification of safety areas per contract.
Visitor Management
Ad hoc visitors to any mine can pose a significant risk. The management and
monitoring of access, movement around the mine as well as their exit, is as important
as that of any member of the permanent workforce. XTIME900® allows accurate entry
and exit management and ensures that all mandatory entry conditions are kept on
record and adhered to. XTIME900® also controls regulated search procedures for all
scenarios to ensure that the risk of loss of company assets is adequately mitigated.
Fuel Management
Fuel is an ever value-increasing commodity to all companies. Due to their considerable

usage losses, G4S has designed a highly effective fuel management system into
XTIME900® that allows the vehicle, the driver and fuel dispenser to be uniquely tied to
fuel transactions. The information made available through XTIME900® reports and
implemented control measures help to show direct cost savings simply by creating
transparency and control.
Canteen Catering Management
To prevent the unauthorised issuing of meals to “illegal miners” positive identification

needs to be exercised in a quick and efficient manner. Through the introduction of
XTIME900® and Facial Recognition Biometrics, G4S has managed to provide exactly
such a solution. The solution prevents unwanted persons from entering canteen areas
and “sharing” food with the workforce. As a direct result, massive savings have led to
improved food standards which have led to an overall improvement in morale and a
more effective workforce. The advantage is that “illegal miners” can be kept out of the
canteens, and as a result of them not being able to access the food, they also don’t try
to sneak in to get free accommodation either.
Lamp Room Solutions
Lamp rooms are one of the most important areas in any mining operation and this is no
exception when it comes to the XTIME900® lamp room module. The system checks to
make sure the correct equipment is allocated to the correct employee, contractor and
visitor, it checks the lamp, employee’s rescue kit and expiry dates. The system will also
check to see if methonometers are allocated and have been calibrated before they
proceed underground. This is all done online from the XTIME900® system.
Building Alarm and Security Management
Through the XTIME900® Command Centre Software any input or output can be
remotely monitored, and in some cases controlled, on a site by site mimic panel.
Devices, inputs and outputs are displayed on the Command Centre GUI and are
configured to supply information or trigger alarms in accordance with a predefined rule
set. Alarms are acknowledged, rules are set in motion and a range of reports are
available for audit purposes. The XTIME900® Command Centre really gives a “hands
on” feeling to alarm and device monitoring and it also acts as an early warning device
for system failure if peripherals go offline where it is displayed in the command centre.
G4S and its mining and industrial sector customers’ technical partnerships have been a
formidable success for both the customers and the service provider. Through its
investment, G4S has ensured that its customers’ business will grow from strength to
strength with the Skycom XTIME® systems that will keep pace with the changing needs
of the business for many years to come. The tailored high tech system now in place
has created a Resource Monitoring System which has proved to be worth its weight in
gold.
Source:
http://www.g4s.co.za/~/media/Files/South%20Africa/G4S%20Case%20Study%
20-%20Mining%20-%20Technical%20Partnerships.ashx (accessed on 27
March 2015)
1. In this case it is clear that control measures are very important in any organisation.
What type and form of control are exercised through all the measures discussed in
this case study?
2. Which external environmental factors are major issues that influence management
control in this case study?
3. Do you think that all these control measures pose a threat to the employees in the
mining sector?
1. Ask a manager to list the main performance measures that he or she uses to evaluate how
well the organisation is achieving its goals. Ask the same manager to list the main forms
that he or she uses to monitor and evaluate employee behaviour.
2. You are the production manager in a business that produces bookshelves. The workshop
consists of four working teams: A, B, C and D. All teams have an equal number of
employees. Each team uses its own material and machinery to produce the bookshelves.
The owner is away on holiday for one month. You have to report on the month’s production.
Assume a month has only four weeks. The production standard for each team is 84
bookshelves per month. You have received the following production report from an
administrative clerk. You are expected to compile a 3–5 page evaluation report on the
situation.
WEEK 1 2 3 4 TOTAL
A 18 17 19 32 86
B 22 14 24 21 91
C 27 18 31 26 102
D 15 12 14 16 57
TOTAL 82 61 88 95 336
3. As with every business it is important for Peter to see that his business is running smoothly.
He has a fabric shop and he really wants to make sure that everyone is pulling his or her
weight in the business. Therefore he set the following standards:
Cutters must cut at least 25 pieces per day.

Seamstresses are expected to complete at least four units per day.
The quality controller must make sure that not more than 0.5% of quality mistakes are
made.
State what further steps Peter should take to exercise proper control.
14 Contemporary management
issues
EKAETE BENEDICT
Learning outcomes
After studying this chapter, you should be able to do the following:
Identify the types and sources of conflict in organisations, and describe conflict
management strategies that managers can use to resolve it.
Explain the importance of organisational teams.
Discuss South Africa’s position and role in the global business environment.
Understand and explain the concept of black economic empowerment (BEE) in South
African organisations.
Describe the benefits of health and wellness programmes in organisations.
14.1 INTRODUCTION
In Chapter 1, you were introduced to the concept of management and learnt

about its history in Chapter 2. You also learnt, and now understand, the
different functions a manager engages in and the importance of these
functions. At this stage, it is important to also learn that there are other issues
besides the functions of planning, organising, leading and control; there are
several contemporary management issues that leaders in today’s modern
organisational environment have to learn to deal with in order to be
effective. As you have learnt in Chapter 3, today’s business environment
(both internal and external) is dynamic – ever changing and adapting to
changes. Therefore, a business manager has to be aware of the issues that
could affect the management of an organisation. These issues may change
from time to time depending on the existing trends in the business
environment at any point in time.
There are certain issues that are relevant in today’s organisational

environment and affect the management of organisations. These issues,
known as contemporary management issues, refer to the challenges and
problems in the workplace that today’s managers have to deal with. In this
chapter, some of the challenges managers have to contend with in the
workplace will be introduced. These challenges include how to manage
conflict and negotiate with different stakeholders, and how to oversee
organisational teams. The chapter also considers the way organisations
operate in the global business environment and the impact of black economic
empowerment (BEE) in the South African context. Lastly, the importance and
benefits of health and wellness programmes in the workplace are introduced.
14.2 MANAGING ORGANISATIONAL CONFLICT AND

NEGOTIATION
Conflict in organisations is inevitable as different stakeholders (both

individuals and groups) have different goals, ideas or interests that are often
not compatible. Organisational conflict can produce either positive or
negative outcomes, depending on the cause of the conflict and how it is
handled.
14.2.1 Types of conflict

Different types of conflict that occur in the workplace are as follows:
Interpersonal conflict. This occurs between individual members in an

organisation when they disagree over organisational goals or values.
Intragroup conflict. This happens within a group, team or department. For
example, members of the finance department may disagree over how their
budget should be allocated. Some of the members want the money to be
allocated to departments based on need, while others want the money to be
allocated based on output or the amount of revenue the department has
brought in.
Intergroup conflict. This occurs between groups, teams or departments.
The sales department, for example, may disagree with the marketing
department about the marketing plans.
Inter-organisational conflict. This happens across organisations. For
example, a manager in one organisation might accuse a manager of another
organisation of being corrupt or employing unethical business practices.
14.2.2 Sources of conflict

Conflict in organisations can arise from different sources (see Figure 14.1):
Different goals and target dates. An organisation is made up of different

departments and units, each of which has its own goals and time horizon
which may not coincide. For instance, sales and marketing departments
have to work closely with each other. If the sales department has a time
horizon of three months to compile its sales targets for the year, but the
marketing department needs the sales target information to write up its new
marketing strategy in two months’ time, conflict may arise.
Overlapping authority for the same tasks. Conflict will probably occur
when two or more departments, units or managers claim authority for the
same activities and tasks. If the manager of the marketing department
expects the leader of the sales force to report to him or her and not only to
the sales department manager, conflict could result.
Interdependency of tasks. Most departments in organisations are
interdependent, because they rely on another department to complete their
tasks and achieve their goals. This increases the potential for conflict. For
example, the sales department is dependent on the marketing department to
draw up a strategy to meet its sales targets, while the marketing department
is dependent on the sales department to give feedback so it can assess and
adjust the strategy if necessary.
No alignment of reward systems. Different departments evaluate and
reward their workers in different ways. The marketing department may
evaluate and reward its workers for signing up more customers, while the
sales department may evaluate and reward its workers for meeting their
sales target, irrespective of the number of customers.
Scarce resources. Limited resources (such as finance, people, stock,
office supplies, and so on) may cause conflict as departments battle for a
larger share.
Preference biases. Another source of conflict could be status
inconsistencies. This occurs when some departments, units, teams or
individuals within an organisation are given preference over others in
terms of the allocation of resources, respect, pay rises and promotions.
Figure 14.1 Sources of conflict in organisations
14.2.3 Conflict management strategies

There are two main categories of strategies that can be employed to manage
conflict in an organisation, namely functional conflict resolution and non-
functional conflict resolution. For an organisation to achieve its goals,
conflict must be resolved in a functional manner.
Functional conflict resolution involves compromise or collaboration
between the conflicting parties:
Compromise. Each party is not only concerned about its own goal, but is
also concerned about the goal of the other party and is willing to engage in
negotiations and to make concessions until an acceptable solution to the
problem is reached. This involves a give-and-take exchange in which each
party agrees to meet the other half way, otherwise known as a 50/50
exchange.
Collaboration. This does not require either party to make concessions, but
rather requires both parties to put forward a resolution that would be
mutually beneficial.
Non-functional conflict resolution entails accommodation, avoidance and

competition. These are ineffective methods of resolving conflict as the
parties involved do not cooperate with each other:
Accommodation. This involves one party (usually the weaker one) giving
in to the demands of the other party (usually the stronger party). The
stronger party pursues the attainment of its goals at the expense of the
weaker party, which is forced to accommodate it. This form of conflict
resolution may cause the weaker party to find ways to get back at the
stronger party in future.
Avoidance. In avoidance conflict resolution, the two or more parties
involved in the conflict do nothing to resolve the conflict by either
ignoring the problem, or failing to address it. This is an ineffective way to
resolve conflict since the main cause of the conflict is not dealt with.
Conflict is likely to continue and may escalate to further negativity.
Competition. Each party tries to maximise its own gain and achieve its
own goals with little consideration for the other. The conflict usually
worsens as each party focuses on “winning” the battle rather than working
together to arrive at a mutually beneficial solution.
14.2.4 Negotiation
Negotiation is an important conflict resolution technique in which the parties
to a conflict have equal levels of power and try to come up with a solution
acceptable to all by considering various alternative ways to allocate
resources to each other. It involves a dialogue between two or more parties
with the aim of resolving the differences and thereby reaching a consensus.
South Africa has a history of workplace disputes and unlawful strikes,

usually led by its powerful and influential trade unions. The 1996
Constitution of South Africa recognises that any individual has the right to
join a trade union and that unions can collectively bargain on behalf of their
members for better economic benefits as well as declare strikes. About 25%
of the South African formal workforce (more than 3 million people) belong
to a trade union. Therefore, the art and skill of negotiation is a vital
capability that contemporary managers need to possess.
There are different forms of negotiation. Conflicting parties can either deal
directly with one another or call in a third-party negotiator. Third-party
negotiators are neutral (i.e. not directly involved in the conflict) and have the
skills and expertise to conduct conflict-solving discussions. Their task is to
facilitate the finding of an acceptable resolution by acting as a mediator or an
arbitrator:
A mediator listens to each party’s argument and assists with negotiations,

but has no authority to impose a solution.
An arbitrator listens to the merits of each aggrieved party’s arguments and
then decides the outcome by imposing what he or she thinks is a
reasonable/impartial solution to the conflict and all parties are expected to
abide by the outcome.
There are two major types of negotiation, namely, distributive and

integrative bargaining:
1. Distributive bargaining. Two (or more) conflicting parties assume that

they have a “fixed pie” of resources to divide and try to claim the
maximum amount of value for themselves while conceding as little as
possible. This form of negotiation is characterised by a win–lose
outcome, because one negotiating party will unavoidably lose something,
and the other will gain. This form of negotiation is commonly used in
situations where the parties involved do not have a relationship in the
present and do not expect to have one in the future, so they do not care
about the fallout. For example, customers argue/negotiate with the seller
over the price of a product they want to purchase.
2. Integrative bargaining. This involves collaboration and/or

compromise. Also called “interest-based bargaining”, it is characterised
by a win–win outcome. It is commonly used in situations where the
conflicting parties have a relationship they want to preserve. In
integrative bargaining, cooperative negotiations take place and the
conflicting parties work together to reach a resolution that is beneficial
to both parties.
Organisational conflict is a reality in any organisation. It is thus paramount

that managers learn how to manage and resolve conflict.
14.3 MANAGING ORGANISATIONAL TEAMS
A team can be defined as a group of people with complementary skills who

work together in close cohesion to achieve a common goal or objective. An
organisation’s workforce can be made up of different teams which focus on
different objectives and goals within the organisation.
Teams are important in present-day organisations as they can help

organisations solve specific problems and challenges. In addition, teams can
improve an organisation’s performance over more traditional management
approaches.
Using teams has advantages and disadvantages, as discussed below.

14.3.1 The advantages of teams
There are several advantages to be derived from using teams in an
organisation:
Improved customer satisfaction. Teams can improve customer

satisfaction if they are trained to meet the needs of specific customers.
Improved product and service quality. Teams take direct responsibility
for the quality of products and services they produce and sell, unlike in
traditional organisational structures (with no teams) in which management
is responsible for organisational outcomes and performance.
Increased job satisfaction. Teams give employees opportunities to
improve their skills through cross-training, which occurs when team
members are taught how to carry out most of the jobs performed by other
team members. This is advantageous to the organisation because when one
team member is absent, quits or is transferred, the team can continue to
function as normal. The advantage of cross-training is that it expands the
skills of workers and increases their competencies, while also making
their work interesting.
Unique leadership responsibilities. Team members are given the
opportunity to lead the team or oversee certain projects or activities. Such
leadership responsibilities are not normally available in traditional
organisations.
Diversity of viewpoints. A team is able to view problems from diverse
perspectives, because a team is usually made up of people with different
skills, abilities and experiences.
Better quality of decisions. The increased knowledge and information
available to teams makes it easier for them to solve complex problems as
they are able to generate more alternative solutions to a problem.
14.3.2 The disadvantages of teams

Using teams in an organisation has the following disadvantages:
High employee turnover. Not everyone can fit into and work in a team.
Some employees may dislike the responsibility, effort and learning
required in team settings and may prefer to leave the team.
Social loafing. This refers to the behaviour in which team members
withhold their efforts and fail to perform their share of the work. They are
actually relying on the other employees to do the work and hide behind
them for their own performance.
Groupthink. This refers to a pattern of thought characterised by forced
consent and conformity to group values and ethics so as to approve a
proposed solution, even though it appears as if there is consensus. It
results in poor decision-making because opinions that are contrary to the
majority of group members are suppressed.
Waste of time/inefficiency. Team decision-making can take a lot of time.
Meetings may become lengthy, unproductive and inefficient.
Minority domination. A situation may be created where just one or two
people dominate team discussions and prevent the consideration of
alternative solutions.
Taking these advantages and disadvantages into consideration, there are

situations in which teams will function better than in others. Table 14.1
presents a list of conditions for when to use teams and when not to use teams.
Table 14.1 When to use and when not to use teams
Use teams when … Don’t use teams when …

there is a clear, engaging reason or purpose there is not a clear, engaging reason or
purpose
the job cannot be done unless people work the job can be done by people working
together independently
rewards can be provided for teamwork and rewards are provided for individual effort
team performance and performance
ample resources are available the necessary resources are not available
Source: Williams (2014: 202)

From Williams. SE MGMT 6E, 6E. © 2014 South Western, a part of
Cengage Learning, Inc. Reproduced by permission.
www.cengage.com/permissions
14.3.3 Types of teams

Organisations form different types of groups and teams to enable them to
achieve their goals, respond to customers’ needs quickly and motivate
employees. These can include the following:
Top management team. The top management team (as you have learnt in
Chapter 1) is composed of the CEO, managing director and the heads of
the most important departments in the organisation.
Research and development (R&D) teams. A research and development
team consists of members who have the skills, technical know-how and
capabilities necessary for developing new products. R&D teams are
common in computer, pharmaceutical and electronic companies. They can
also be cross-functional teams with members from various departments
such as marketing, production, engineering and finance joining the
members of the research and development department, for example.
Cross-functional teams. A cross-functional team is made up of
employees from different functional departments with different specialities
whose aim it is to resolve mutual problems. Cross-functional teams are
normally used in conjunction with matrix and product organisational
structures (see Chapter 7).
Self-managed work teams. In a self-managed work team, members are
empowered to manage and control their own work activities and monitor
the quality of the goods and services they produce without first getting
approval from management.
Virtual teams. A virtual team uses telecommunication technologies to link
members who are geographically and/or organisationally spread in order
to effect change and complete organisational tasks. As organisations are
becoming more global, it becomes vital for companies to use technology to
accomplish organisational tasks. Members of virtual teams do not
necessarily meet face to face, but can use video conferencing, email and
group communication software to interact with each other. An advantage of
virtual teams is their flexibility, as time zones and the physical location of
members are not restricting factors.
Project teams. Project teams are established for the purpose of
implementing specific tasks within a set period of time. Members of
project teams are usually skilled workers who belong to different
departments and functions and only come together to complete a particular
project. A project team is usually headed by a project manager whose
responsibility it is to coordinate and manage the different activities of the
team towards the completion of the project.
Teams must be healthy. If a team becomes dysfunctional, the disadvantages

mentioned above will outweigh any advantages. Management in action 14.1
spells out how important a healthy team in an organisation is.

Why organisational health trumps everything else in business
What is a healthy organisation? It is an organisation that is whole, consistent and

complete; that is, its management, operations, strategy and culture fit together and
make sense. Structured in this way it would have a minimal amount of politics and
confusion. It would have high levels [sic] of morale and productivity, and very low levels
of valued employees leaving the organisation.
Achieving this state of health requires a set of disciplines. First among all of these
disciplines is a cohesive leadership team. This is followed by creating and sharing the
clear objectives, values, and direction of the organisation. To create a leadership team
that is healthy does not happen by itself. It requires concerted, thoughtful effort, and the
adoption of a few critical, non-bureaucratic systems to keep it cohesive.
The leadership team will need to be a small group of people who all feel collectively
responsible for achieving a common objective for the organisation. It will comprise three
to nine people. If they are more, it is usually problematic. When a team is small, people
use their time together to ask questions and get clarity, much like a real conversation.
They know they will be able to regain the opportunity to share their opinions as the
meeting progresses. With a large group, members have only one, unsatisfactory
chance to say and ask everything they need to.
There is undeniable evidence that many executives do not genuinely understand the
critical importance of leadership team cohesion. This is undoubtedly the difference
between a “working group” and a real leadership “team”. The distinction is best
understood when you see the former as golf and the latter as soccer. In a cohesive
team no one would say: “Well, I did my job. Our failure isn’t my fault,” even if one
member is in Finance and the other in Operations.
Key to achieving this real team is “vulnerability-based trust”. This occurs when
members are completely comfortable being transparent and honest with one another,
where they say and genuinely mean: “I made a mistake”, “I need your help” or “Your idea
is better than mine”. This level of team cohesion requires effort to achieve, and vigilance
to maintain. However, this is not all. There are other behaviours that are also important
to develop this cohesion in a team. They are ability of mastering conflict, achieving
commitment among members, embracing accountability and an intense focus on
results.
While leadership team effectiveness is only one aspect of a healthy organisation, it is

undoubtedly the single most important factor. The organisation also requires clear,
unequivocal direction from the top, well communicated and unambiguously understood.
These messages need to be adopted and executed by all.
Source: http://www.fin24.com/Entrepreneurs/Opinions-and-Analysis/Business-health-
in-focus-20141014 (accessed 17 October 2014)
14.4 MANAGEMENT IN THE GLOBAL ENVIRONMENT
In this section, the environment in which an organisation operates will be

examined from an international or global perspective. For organisations to
survive and grow in today’s contemporary environment, managers have to be
aware of the factors that have an influence on survival and growth. Apart
from the task and general environment (which were introduced in Chapter 3),
the global business environment is also made up of economic trading blocs
and regional development associations that may have an influence on an
organisation. There are three important trading blocs that managers in South
Africa have to be aware of and which are discussed below: the Southern
African Development Community (SADC), sub-Saharan Africa and BRICS.
14.4.1 Southern African Development Community (SADC)

The Southern African Development Community (SADC) is an inter-
governmental organisation that consists of 15 African countries in the
southern African region. The organisation was originally known as the
Southern African Development Co-ordination Conference (SADCC) and was
formed in Lusaka, Zambia in 1980 with the goal of fostering socioeconomic
development and political and security cooperation among its member states.
The headquarters of the organisation is in Gaborone, Botswana.
Member states of the SADC are Angola, Botswana, Democratic Republic of

Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia,
Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
These member countries cover a total area of 9 882 959 km², and have a
population of 277 million people. The total gross domestic product (GDP) of
member states was estimated to be US$1 193 billion in 2013. The main
working languages for member states include English, French and
Portuguese.
The SADC operates through a formalised structure, which includes the

Summit of the Heads of State, the Council of Ministers, and the Standing
Committee of Senior Officials. The organisation also functions through 27
legally binding protocols or treaties dealing with issues such as energy,
defence, tourism, illicit drug trade, free trade, health, gender and
development and the movement of people.
South Africa joined the SADC in August 1994 after the first democratic
elections and has since taken a leading role in the region to promote stronger
collaborations and economic integration among member states. This includes
the establishment of a free trade area in the region known as the SADC Free
Trade Area (FTA). The SADC FTA was established in 2000 with the aim of
promoting intraregional trade in goods and services

ensuring efficient production
contributing towards the improvement of the climate for domestic, cross-
border and foreign investment
enhancing the economic development, diversification and industrialisation
of the region.
It is expected that promoting free trading in the region will create a larger
market for organisations, releasing the potential for trade among the different
citizenry; aid the economic growth of member states, and create employment
in the different countries. The benefits of the SADC FTA are listed in
Management in action 14.2

Benefits of the SADC Free Trade Area
Increased domestic production

Greater business opportunities
Higher regional imports and exports
Access to cheaper inputs and consumer goods
Greater employment opportunities
More foreign direct investment and joint ventures
The creation of regional value chains
Source: http://www.sadc.int/about-sadc/integration-milestones/free-trade-area/
(accessed 10 December 2014)
14.4.2 Trade with sub-Saharan Africa

Sub-Saharan Africa refers to the geographical area of African countries that
are situated south of the Sahara Desert. This consists of all African countries
except those in the northern part of Africa, which are mainly considered to be
part of the Arab world (Egypt, Algeria, Morocco, Tunisia, Libya and Sudan).
In the early 21st century, the population of sub-Saharan Africa was 800
million and the United Nations (UN) estimates that the population may
increase to 1.5 billion by 2050. In addition, the region is the most diverse in
terms of languages of any region in the world (more than 1000), but the main
languages or official languages are English, French and Portuguese.
Africa is one of the fastest developing regions in the world. In the past 10
years, six of the world’s 10 fastest growing economies have been sub-
Saharan African countries, with the remaining four being East and Central
Asian countries. It is postulated that within the next five years the economic
growth rate of the average African country will surpass that of an average
Asian country.
The growth in African economies has been attributed to the rise in prices for
its abundant mineral resources such as oil, platinum, gold, iron ore, copper
and zinc. Furthermore, the region has the fastest growing middle class in the
world, signifying an increase in disposable incomes and an increasing
demand for housing and lifestyle products. Notable sub-Saharan African
countries with fast growing economies include Ethiopia, Ghana, Rwanda,
Mozambique, Nigeria, Zambia, DRC, Tanzania, Chad, Burkina Faso, Niger
and Angola.
The importance of these countries is that they create opportunities for South
African companies to expand and acquire new markets for their products and
services. For instance, South African companies such as MTN, Shoprite,
Nando’s, Mr Price, Game, SAB Miller, Tiger Brands, Multichoice and
Protea Hotels already have markets in sub-Saharan Africa (see Management
in action 14.3).

Retail in Nigeria is “not for sissies” but there is plenty of opportunity
Although Woolworths has cancelled its three-store pilot project in Nigeria, citing a
mismatch with the Nigerian consumer and climate, Broll Nigeria says this need not
deter South African retailers from profiting in the country. Broll expects more South
African retailers to seek opportunities in the Nigerian market in the future. “Yes, doing
business in Nigeria is a challenge. But if you can offer middle-class Nigerians the right
price, product, service, quality and choice, the sky is the limit,” says Norman Sander of
Broll Nigeria, who manages Ikeja City Mall in Nigeria.
Shoprite is notching up exceptionally strong trading at Ikeja City Mall, says Sander. He
urges South African retailers to change their models for Nigerian consumers if they
want to gain a firm foothold in a marketplace in a country where consumers are brand
loyal and where they value good service. Good service is in short supply. He says the
Nigerian market is vastly different from that of South Africa and neighbouring countries.
“Research is essential to understanding this set of consumer needs and norms, before
venturing into this exceptional territory.” Broll is increasingly being called on for its
professional property services and insights to support retailers and property owners
alike seeking to unlock the many retail opportunities in Nigeria.
“The market and spend needed for retail success is here and growing. Retailers
wanting to crack this market need to customise their models to meet the specific
consumer needs and aspirations.” He also notes that the call of the mall is gaining the
support of more Nigerian shoppers. “Nigerians enjoy a First World shopping
environment that is pleasant, safe, cool, unrushed and offers a complete retail
experience from shopping to relaxing at the food court. Dwelling times in the malls are
increasing and foot counts are growing.” He also says there is little, if any, brand
recognition for South African retailers in Nigeria, where consumers are more familiar
with US and European retailers. This requires a marketing strategy that goes beyond
advertising a new store opening and extends to launching a new brand.
Buying patterns are different from what South African retailers [are] used to. For fashion,
there is no seasonal shopping – Nigeria is hot all year. Sizes are different from Europe
and South Africa. About 50 percent of men’s shoe sales are sizes larger than 10. Prices
noticeably above those of Europe aren’t tolerated. With the cell phone boom in Nigeria,
and an increasingly tech-savvy population, digital and social media marketing are
effective tools for retailers. “Offering guarantees and sticking to these promises is a
tremendous way of growing customer loyalty. We’ve also found that giveaway events
enjoy great participation at Ikeja City Mall. At first, journalists were genuinely surprised to
find that these were fair and above board.”
Despite all these opportunities, Sander cautions that retail in Nigeria is not for sissies.
“Mall rentals are high because of infrastructure and development costs which, in turn,
demands high turnovers. Infrastructure is poor, red tape is plenty and officials often
interfere. The supply chain also takes far greater focus, with a host of potential
obstacles to be navigated.” Sander says retailers need excellent warehousing to
overcome shipping issues in Nigeria, where goods don’t move as fast as they do in
South Africa.
Source: Adapted from “Retail in Nigeria is not for sissies but there is plenty of
opportunity”. Business & Property. 11 January 2014, p. 16.
14.4.3 BRICS
BRICS is an international organisation of the five emerging economies of
Brazil, Russia, India, China and South Africa. The acronym “BRICs” was
originally coined by Jim O’Neill in 2001, who was then chairman of
Goldman Sachs asset management. The acronym originally referred to the
countries of Brazil, Russia, India and China. Using gross domestic product
(GDP) and purchasing power parity (PPP) calculations, O’Neill posited that
by the middle of the 21st century (i.e. 2050), the economies of these four
countries would be larger and better off than most of the current major
economic powers that make up the so-called Group of 7, commonly known
as the G7. The G7 are the seven wealthiest, leading industrialised/developed
countries by national net wealth or GDP: Canada, France, Germany, Italy,
Japan, the UK and the US. O’Neill further theorised that in the coming
decades, the world’s main suppliers of manufactured goods and services
would be China and India, while the main suppliers of raw materials would
be Brazil and Russia.
O’Neill’s “BRICs” theory was quickly noticed by world leaders, including

the leaders of the original four emerging economies that he purported would
grow more than some present-day developed countries. In September 2006,
the foreign ministers of the four countries met to discuss the possibility of
actually forming such an economic association/organisation. In June 2009,
the organisation was officially launched and hosted its first summit in Russia.
Thus, what started as a theory in an investment bank’s research paper
metamorphosed into a real economic organisation. In 2010, South Africa was
invited to join the organisation after being recognised as the major leading
economy in Africa. The organisation was renamed BRICS – with the “S”
representing South Africa. In March 2013, South Africa hosted the
organisation’s 5th summit in Durban.
14.4.3.1 The significance and importance of BRICS

In 2014, the five BRICS countries represented 18% of the world economy
and accounted for 40% of the world’s population, which roughly translates to
three billion people with a combined nominal GDP worth 20% of the world
GDP. The significance of BRICS can be summarised as follows:
BRICS seeks to encourage commercial, political and cultural cooperation

between member nations.
It promotes economic integration and funds development projects in
member states.
It encourages the creation of a strong middle class.
It emphasises a greater exchange of information, knowledge, skills and
expertise in the sectors of finance, information technology, process
education, financial education and investor literacy, which could assist in
capacity building and sustained growth.
Small and medium enterprises (SMEs) are the dominant forms of business
in the BRICS nations. Therefore it is important for them to have access to
finance, capital markets and other forms of resources.
The BRICS Development Bank has been established.
The role of South Africa in BRICS is discussed in Management in action

14.4.

South Africa in BRICS
South Africa’s comparative advantage within BRICS pertains to the country’s

considerable non-energy wealth in the form of natural minerals. In a report
commissioned by the US-based Citigroup bank, South Africa was ranked as the world’s
richest country in terms of its mineral reserves, worth an estimated US$2.5 trillion.
South Africa is the world’s largest producer of platinum, chrome, vanadium and
manganese, the third-largest gold miner, and offers highly sophisticated mining-related
professional services, contributing significantly to the BRICS resource pool.
The demand from BRICS countries for these commodities has been a critical source of
support for growth on the continent. South Africa’s export structure to BRICS member
countries shows significant diversification and the negative trade balance has also
narrowed over the last four years, that is from R57 billion in 2008 to R22.8 billion in
2011. South Africa’s trade export with the BRIC partners grew from 6.2% of the total in
2005 to 16.8% in 2011, whereas its imports from the BRIC countries represented 13.6%
of total imports in 2005 and 20% in 2011. The Minister of Trade and Industry, Dr Rob
Davis, has emphasised that in 2011 alone, trade between South Africa and the BRICS
countries grew by 29%, which is considerable.
Source: Adapted from http://www.brics5.co.za/about-brics/south-africa-in-brics/
(accessed on 3 January 2015)
14.4.3.2 Implications for South African managers

With the growth in trade between South Africa and the BRICS member states,
it is important that managers of South African companies be aware of certain
implications that could affect their business. These influences can either be
opportunities or threats:
International trade. South African companies can engage in various

forms of international trade. China is renowned for manufacturing goods at
low prices due to its lower labour and production costs. India is a world
leader in software designs and precision engineering and also has low
labour costs. Brazil has abundant natural resources and is one of the
world’s leading suppliers of raw materials, along with Russia.
Bigger market. Being a member of BRICS gives South African
companies the opportunity to expand their markets beyond Africa and into
the larger parts of the world, such as South America (via Brazil), Europe
(via Russia) and Asia (via India and China). China is the most populous
country in the world with approximately 1.3 billion people. India follows
closely behind with 1.2 billion people and Brazil is the most populous
country in South America with a population of 200 million people.
Russia’s population of 144 million makes it the most populous country in
Europe. Thus, South African companies have access to larger markets.
Language and culture. The official languages of BRICS member states
include Afrikaans, English, Portuguese, Mandarin and Cantonese (standard
Chinese), Hindi, and Russian. Thus, it may be beneficial for a manager to
learn the basics of at least one of these languages and be conversant with
the prevailing business and social cultures of the countries.
14.5 BLACK ECONOMIC EMPOWERMENT (BEE) IN

SOUTH AFRICA
Another contemporary issue that managers in South Africa have to consider

is black economic empowerment (BEE). The black economic empowerment
(BEE) policy of South Africa is one of the most complicated and sensitive
topics in the country’s public debate. The policy was enacted by the African
National Congress (ANC) when it came into power in 1994 after the first
democratic elections in the country.
The decades before democratic rule were characterised by racial segregation

known as apartheid. During this period, African, Indian and coloured people
were systematically excluded from any meaningful economic participation in
the country. Thus, BEE was enacted with the aim of redressing the past
injustices committed during apartheid. The main purpose of BEE is to
increase black (African, Indian and coloured) participation at all levels of
the economy by transforming the economy through the transfer of business
ownership, management and control to the majority of its citizens. The main
objectives of BEE are given in Management in action 14.5.

BEE objectives
Through its BEE policy, the government aims to achieve the following objectives:
Empower more black people to own and manage enterprises. Enterprises are
regarded as black owned if 51% of the enterprise is owned by black people, and
black people have substantial management control of the business.
Achieve a substantial change in the racial composition of ownership and
management structures, and in the skilled occupations of existing and new
enterprises.
Promote access to finance for black economic empowerment.
Empower rural and local communities by enabling their access to economic
activities, land, infrastructure, ownership and skills.
Promote human resource development of black people through mentorships,
learnerships and internships.
Increase the extent to which communities, workers, co-operatives and other
collective enterprises own and manage existing and new enterprises, and increase
their access to economic activities, infrastructure and skills.
Ensure that black-owned enterprises benefit from the government’s preferential
procurement policies.
Assist in the development of the operational and financial capacity of BEE
enterprises, especially small, medium and micro-enterprises (SMMEs) and black-
owned enterprises.
Increase the extent to which black women own and manage existing and new
enterprises, and facilitate their access to economic activities, infrastructure and skills
training.
Source: http://www.southafrica.info/business/trends/empowerment/bee.htm
.VD_V17EaKUk (accessed 15 October 2014)
Despite the good intentions of BEE, it has been critisised for its
shortcomings and was cited as the most constraining factor in the
development of small businesses. Critics have said that the government’s
overemphasis on BEE initiatives hamper entrepreneurship rather than
facilitating it. The policy has had a negative impact on economic growth, job
creation and poverty as it has failed to tackle the root problems of low
entrepreneurial activity, a failing education system and an inadequate skills
development programme. Critics also blame improper implementation for its
failure, saying that BEE did not create entrepreneurs, but took political
leaders and politically connected people and gave them assets which they
were unable to manage. The taking of assets from people who were managing
them and handing them properly to people who could not manage them did
not add value but in fact destroyed it.
These arguments against BEE prompted the government to amend the policy
and formulate an integrated and more current, inclusive socioeconomic
policy called broad-based black economic empowerment (BBBEE).
The purpose of the new integrated policy is to encourage transformation by

“broadening the beneficiaries” of BEE. These beneficiaries include black
women, youth, workers, people with disabilities and people living in rural
areas. The BBBEE Act (53 of 2003) and the subsequent BBBEE Codes of
Good Practice (CoGP) of 2009 clearly set out the requirements for
organisations that wish or need to transform in order to benefit from
government procurement and projects. These codes involve seven elements
under which companies have to be rated and compliant (see Management in
action 14.6).

The seven elements of the BBBEE codes
Ownership. This is direct empowerment. It refers to the number of black persons
with ownership in the company/organisation/business. Companies earn more points
for having black females in ownership than having black males.
Management control. This is direct empowerment. It involves evaluating the
management levels in an organisation for the number of black persons who have a
say in the business. A company earns more points if it has black females in
management.
Employment equity. This is direct empowerment. It refers to the representativeness
of the South African population in the labour force of a company, and their job grade
levels, that is, how much influence black people have in the company. Again, the
presence of black females will earn a company higher points than black males.
Training and development. This is direct empowerment. It involves evaluating
which population groups in the company benefit from training and development
initiatives, be they formally recognised courses at tertiary institutions, continued
professional development, on-the-job training or informal employee development
programmes held in-house. Again, black females who benefit from training and
development initiatives earn higher points than black males.
Preferential procurement. This is indirect empowerment. It entails evaluating
whether a company’s suppliers are BBBEE compliant or not.
Enterprise development. This is indirect empowerment. It has to do with
evaluating whether an enterprise/company and its employees extend a helping hand
to the entrepreneurial ventures of black people. This includes favourable payment
terms, financial or tangible investments in such enterprises, assistance in the form
of shared expertise or offering the entrepreneur a space on their premises from
which they can conduct their business operations.
Socioeconomic investment. This is indirect empowerment. It involves evaluating
whether an enterprise invests back into the community; or reaches out to less
privileged communities, individuals or groups (also known as corporate social
investment).
Source: Knowledge Resources (2014)
The specific arguments against BEE are as follows:
It limits the growth and development of small and medium enterprises

(SMEs). The prerequisites and requirements for businesses to attain BEE
status may be too cumbersome for some SMEs and this may cause them to
fail.
It hampers entrepreneurship. BEE takes away the incentive to start new
businesses, as people prefer to pursue empowerment deals in which they
are allocated shares in an already established business.
It has a negative impact on economic growth, job creation and
poverty. The transfer of a certain percentage of shares in an already
established business to previously disadvantaged persons does not
necessarily create new jobs.
There has been improper implementation. The ideals and principles of
BEE have not been executed properly.
There are dysfunctional and unproductive business practices.
Businesses that do not meet BEE criteria or are excluded from bidding for
certain government contracts have resorted to “fronting” (having black
business partners in name only). Other businesses and individuals
capitalise on their BEE status and engage in corruption and
“tenderpreneurship” (procuring government contracts, commonly known as
tenders, through political connections and not necessarily through business
merit).
It has led to the failure of legitimate businesses. Owing to policies and
rules, such as preferential procurement, certain legitimate businesses do
not qualify for government tenders and have been forced to downsize their
operations, or worse, close their doors.
Only South African-owned companies are required to comply with BBBEE

codes. Companies operating under foreign-based holding companies are
exempt. Companies with annual revenues of R5 million or less are also not
required to comply with the codes and are classified as exempt micro
enterprises (EMEs). Companies with annual revenues of R5 million and
above, but less than R35 million are required to choose any four out of the
seven elements on which they can be rated. These companies are classified
as qualifying small enterprises (QSEs). Companies with annual revenues of
R35 million and above are required to comply with all seven elements of the
BBBEE codes.
In spite of the amended BBBEE policy, there is an ongoing debate whether

the policy is the appropriate medium for sustainable empowerment,
economic growth and poverty eradication in the country. This is because the
policy has given rise to dysfunctional and unproductive business practices
such as the high cost of compliance, fronting, corruption and
“tenderpreneurship”.
14.6 WORKPLACE HEALTH AND WELLNESS

PROGRAMMES
The success of an organisation depends largely on the productivity of its

employees. Employee productivity refers to the efficiency of a worker or
group of workers and it is usually evaluated in terms of the output of an
employee in a specific period of time. Productive employees tend to be
healthy people. Healthy people are generally more efficient, work harder and
are happier. Health conditions that affect productivity include back and neck
pain, stress, migraines, arthritis, diabetes, respiratory illnesses and
depression.
Every organisation should view health and wellness programmes as a

strategic necessity, because healthy employees cost organisations less money.
In the past few years, the workplace has been recognised as an important site
for introducing health and wellness programmes targeted at employees. The
reason for the focus on wellness is the increased prevalence of non-
communicable diseases (NCDs) in the workplace, communities and
societies. NCDs are chronic medical conditions which are non-infectious.
In South Africa, lifestyle-related chronic diseases are the second leading

causes of death and disability after HIV and AIDS. The World Health
Organization (WHO) reports that in 2014, 38 million people died worldwide
from NCDs. Of the 608 000 deaths recorded in South Africa during the same
period, 43% (261 440) was as a result of NCDs.
Non-communicable diseases affect a large proportion of the working-age

population, therefore having an impact on the workforce and the productivity
levels of the country. The five main NCDs identified in South Africa are
cardiovascular diseases (heart attack and strokes), diabetes, cancers, chronic
respiratory diseases (asthma, bronchitis) and mental illness.
Research shows that unlike communicable disease (which a person can get
by coming into contact with an infected person), NCDs are mainly caused by
unhealthy behaviours such as not eating a healthy diet, not participating in
regular exercise/physical activity, using tobacco (smoking) and abusing
alcohol. These give rise to metabolic risk factors and diseases such as
obesity, high blood pressure (hypertension), high blood glucose (diabetes)
and high cholesterol.
Furthermore, the WHO estimates that the probability of South Africans

between the ages of 30 and 70 years dying from NCDs is 27%. At the same
time, it maintains that 10% of NCD deaths can be prevented if certain
measures and policies which reduce risk factors for NCDs are implemented.
This projection highlights the need for organisations to establish workplace
health and wellness programmes (WHP) to encourage their employees to
seek and adopt a healthy lifestyle.
14.6.1 What is a workplace health and wellness programme?

A workplace health and wellness programme (WHP) is a programme that is
organised and sponsored by employers to engage and support employees
(and sometimes their families) in adopting and sustaining lifestyle behaviours
that reduce health risks and thereby improve quality of life, which enhances
personal effectiveness and benefits the organisation financially.
Examples of workplace health and wellness programmes include the

following:
Health-related educational services (e.g. nutrition education)

Individual health risk identification (e.g. confidential health risk
assessments)
Health risk reduction services (e.g. health counselling and support groups)
Preventative health services (e.g. immunisations)
Treatment health services (e.g. care at medical clinics situated within the
workplace)
Health-related regulations (e.g. workplace non-smoking policy)
The manager of an organisation can do a lot to improve the general health

and wellness of his or her employees. Initiatives need not be expensive or
burdensome. Management in action 14.7 provides some examples of what
organisations can do to improve the general health and wellness of
employees in the organisation.

Examples of wellness initiatives
The following are simple, cost-effective ways in which organisations can offer wellness
initiatives to employees:
1. Provide filtered/purified water canisters in the staff kitchen, offices or reception

area.
2. If the organisation has a canteen, ensure that a healthy menu is offered.
3. If the organisation has a tuckshop, ensure that healthy options such as fruit and
salads are available and certain harmful products such as alcohol and cigarettes
are banned.
4. Establish a gym at work that employees can make use of during their lunch break.
Alternatively, a cheaper option would be to arrange for an exercise instructor (e.g.
yoga or Pilates) to give classes during employees’ lunch hour for a minimal fee.
14.6.2 Benefits of workplace health and wellness programmes

It makes sense that managers recognise their roles in the general health and
wellness of employees. Some of the benefits of implementing these types of
programmes in organisations are as follows (also see Management in action
14.8):
Improve the general health of workers. Employees who make use of
their organisations’ health and wellness programmes tend to adopt healthy
behaviours and are less prone to suffer from NCDs.
Lower organisational costs. Workplace health programmes can achieve a
positive return on investment for both medical- and absenteeism-related
costs. Implementing wellness programmes can save an organisation on
healthcare costs as healthy employees cost less.
Increased productivity. Healthy employees are less likely to be absent
from work due to illness (less absenteeism). Employees are also less
likely to come to work, but underperform because of illness or stress
(called presenteeism – an employee is present, but his or her productivity
is low).
Improved worker morale. Participation in wellness programmes could
assist employees to manage and balance their work–life relationship
better. This in turn helps strengthen the organisation’s culture, build
employee trust and commitment to the organisation, and reduce employees’
stress levels.
Positive organisation branding. Organisations that provide health and
wellness programmes for their employees record lower turnover rates, as
employees tend to be loyal, stay on with the organisation and give a good
report about the organisation when asked. Therefore, the organisation
retains talented individuals who are crucial for performance.

Healthy employees make sound business sense
Healthier companies show lower absenteeism rates and more productivity levels than
their unhealthier competitors, according to the 2014 Healthy Company Index.
Prioritising the health of the workforce is good for business and critical for society,
according to Dr Craig Nossel, head of Vitality Wellness. “A trend that emerged from
2014 is that we’re seeing a significant shift in how employee health is viewed by
companies globally. There is increasing focus on improving and managing health and
wellbeing and how this is affecting their bottom line.” According to Nossel, this is largely
due to the worsening and alarming general state of health around the world, in particular
with chronic diseases of lifestyle.
The risks of chronic diseases of lifestyle – including diabetes, cardiovascular disease,

chronic respiratory conditions and certain cancers – play a significant role in employee
illness and absenteeism, as well as reduced levels of workplace morale, engagement
and productivity. Research has shown, though, that these diseases of lifestyle can be
largely mitigated through tailored interventions to promote a healthier diet, increased
levels of physical activity and regular health checks. Since people spend a great deal of
their lives at work, and work significantly affects stress and lifestyle, employers have a
unique opportunity to positively influence their employees’ ability to make healthy
choices and help them to manage stress and reduce illness.
This year, Discovery partnered with the University of Cambridge and Rand Europe, who
have offered a global perspective on corporate wellness. Christian van Stolk, director of
employment and social policy at Rand Europe, said the Healthy Company Index
provides employers with critical information on the health and wellbeing of employees.
Successful wellness initiatives are those that encourage a culture of health in the
workplace and motivate individuals to take control of their own health. As a
consequence, there is a strong business case for companies to look at health and
wellbeing more closely and invest in improving employee health.
The results of the 2014 Discovery Healthy Company Index showed that there are some
important improvements in employee health. The average Vitality Age, for example, a
measurement of health risk-related age, was 5.8 years older than the average real age
in this year’s results compared to 6.4 years older in 2012. “Although still not ideal, it
indicates that people are more physically active, are managing stress better and have a
lower smoking rate now than two years prior,” said Van Stolk. “The Healthy Company
Index showed that South Africans suffer an 11.4% loss in working days due to
suboptimal health, which equates to 25 working days per employee. When compared to
the UK, SA employers have a 2.3% higher productivity loss rate due to employees being
unhealthier and taking more sick days.”
Based on this year’s index results, recommendations for a healthier workplace include
implementing canteens that offer healthy, affordable food and drinks that are subsidised
where possible. In addition, having flexible work hours to allow employees to be active
before or after work and recruiting health ambassadors or advocates to champion
corporate wellness goals will help an organisation to lead the way when it comes to the
health and wellbeing of their staff.
Source: http://www.fin24.com/Entrepreneurs/News/Healthy-employees-make-sound-
businesssense-20141112 (accessed on 18 March 2015)
14.6.3 How to implement a health and wellness programme

There are specific steps that an organisation can take to develop and
implement a health and wellness programme:
Step 1: Determine the needs of the employer and the employee. First
find out what employees need and how those needs fit with the goals of the
employer. This can be done by conducting a survey, an open one-on-one
interview and/or using a suggestion box. A survey, for example, might
reveal that employees would like their employer to provide health
insurance.
Step 2: Get support from everyone. All levels of management, important
stakeholders (e.g. unions) and individuals must buy into the idea.
Step 3: Analyse the data and create a plan. Study all the information
that has been gathered and determine what elements will work within the
existing organisational culture.
Step 4: Implement the plan. Put the plan into action by (1) appointing a
wellness officer, and (2) communicating the programme to everyone in the
organisation. This can be done via email, bulletin boards, flyers,
pamphlets or posters around the workplace, as well as meetings.
Step 5: Monitor, evaluate and maintain the programme. Track the
progress of the programme. Identify what elements are working or are
popular with employees and what elements are not working.
See Management in action 14.9 for the health and wellness plan implemented
by Volkswagen South Africa.

Health and wellness – Volkswagen Group South Africa
Volkswagen Group South Africa acknowledges that the management of employees’

well-being has emerged as a priority due to increasing recognition that the health and
wellness of employees directly affects the productivity of the entire organisation. As
employees are fundamental to the success of an organisation, it is essential to help
them produce at their optimal levels.
Volkswagen Group South Africa has committed itself to invest R1 million annually to
support its employees and the broader community. The company’s Health and
Wellness Programme follows a holistic and integrated approach which focuses on both
primary (avoid the risk or condition) and secondary (minimize the effects of the
condition) prevention. The Health and Wellness Programme consists of the following
components: Comprehensive Occupational and Primary Health Care, HIV and AIDS
programme, Employee Wellness Programme and Health and Wellness Interventions.
Comprehensive Occupational and Primary Health Care
Comprehensive Occupational and Primary Health Care in the work place entails the
prevention, treatment and management of infectious diseases, occupational injuries,
minor injuries and ailments, disability and occupational diseases in an attempt to reduce
the burden of illness and disease on the individual and the organisation. This
programme also endeavours to promote early entry into disease management
programmes in order to enhance productivity.
In 2013, Volkswagen Group South Africa opened a R30-million PeoplePavilion for its
employees. The PeoplePavilion is a sports, recreational, rehabilitation and community
facility for the benefit of all Volkswagen Group South Africa employees and their families.
The facility has a gym which is managed by a qualified Biokineticist and is open to all
Volkswagen employees to use for a nominal membership fee. The gym is also used for
the rehabilitation of injured Volkswagen employees and is equipped with purpose-built
gym equipment. There is also an indoor multi-purpose hall which is used for indoor
sports as well as a main field where soccer, rugby and cricket leagues are played.
HIV and AIDS programme
The company’s HIV/AIDS Programme follows an integrated approach, tackling the

epidemic on all fronts with various initiatives and campaigns that include education and
awareness, comprehensive health care, risk management, community involvement and
monitoring and evaluation. Volkswagen has spent more than R6 million since the
programme’s inception in 2001. Its success has been recognised internationally,
receiving an award for Business Excellence in the Workplace from the Global Business
Coalition on HIV/AIDS. Volkswagen Group South Africa is also a member of the South
African Business Coalition on Health and AIDS (Sabcoha).
Employee Wellness Programme (EWP)
The EWP is the company’s resource that utilises specific core principles to enhance
employee and workplace effectiveness through prevention, identification, and resolution
of personal and work related issues. The EWP is a programme designed to assist
management, employees and their dependants and various stakeholders within the
company in addressing productivity and absenteeism issues and to resolve personal
concerns, including, but not limited to, health, marital, family, financial, alcohol, drug,
legal, emotional, stress, or other personal issues that may affect work performance and
attendance, in a confidential and effective manner. The company has also partnered
with Careways, a health support services company, to achieve its goal.
Health and Wellness Interventions
This covers areas that address the entire spectrum of psychosocial stressors in the
workplace, lifestyle diseases and work-life balance in order to enhance individual and
organisational wellness. These interventions include health risk assessments,
education and awareness which is linked to national health calendar days (such as
World Diabetes Day, World Aids Day) and other interventions aimed at improving the
overall health status of our employees and the quality of their lives. Another key element
of Volkswagen Group South Africa’s internal Corporate Health Services is its focus on
identifying sicknesses like tuberculosis (TB). The medical centre has a registered
national treatment centre since 2002. The national treatment protocol and Directly
Observed Treatment, Short Course Chemotherapy (DOTS) is followed and provided at
no cost by Corporate Health Services. The centre is a National Treatment Centre for
TB, with a 93 per cent cure rate.
Source:
http://www.vw.co.za/en/volkswagen_groupsouthafrica/corporate_citizenship/he
alth.html (accessed on 15 October 2014)
Media Release: Volkswagen Group officially opens R30-million PeoplePavilion for its
employees (issued 6 December 2013)
14.7 SUMMARY
This chapter has provided an overview of the contemporary issues that affect
management today. Owing to the wide scope of issues affecting businesses, it
is difficult to cover all of them but it is essential that business managers in
South Africa are aware of some of these issues. Managers should be able to
identify types and sources of conflict in their organisation and know how to
resolve it. They should know how to plan and lead teams, as well as
understand the wider global environment and see how best they can position
the organisation to seize the opportunities offered by economic trading blocs
to expand and grow their business. In addition, managers should understand
the concept of BEE in South Africa and how to correctly apply and
implement it. Finally, a healthy workforce translates to greater productivity,
thus managers should put in place a progressive health and wellness
programme that would be beneficial to employees.

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WHO: Geneva.
CASE STUDY: MAPONYA: BEE KILLS SELF-RELIANCE

One of South Africa’s greatest entrepreneurs, Richard Maponya, blames the country’s
lack of entrepreneurial activity on black economic empowerment (BEE). He says BEE
fostered a culture of entitlement and expectation that has robbed matriculants and
university graduates of the incentive to start their own businesses. Maponya, 86, was
raised in Limpopo and trained as a teacher before starting small grocery stores in
Soweto in the early 1950s, which became the foundation of a remarkable business
empire. Nothing symbolised his success more than the 65 000m2 Maponya Mall he built
in Soweto in 2007, which was voted no. 1 shopping centre in Gauteng and no. 2 in
South Africa in 2012. Maponya has won many awards, among them the 2012 Africa
entrepreneurship lifetime award by the African leadership network and philanthropic
investment firm Omidyar Network.
Maponya voices his observations about the damaging effect of BEE on the spirit of
entrepreneurship in post-apartheid South Africa. He says that while BEE was designed
to empower black people, it has, in a sense, done the reverse by taking away the
incentive to start their own businesses. “Our youngsters are growing up with the idea of
having everything for free. It’s an entitlement attitude. That sense of entitlement has
killed the initiative of our youngsters.”
While BEE has promoted it, he says the entitlement culture was borne out of an attitude
that began growing from 1976 where young people believed that a majority rule would
entitle them to grab whatever belonged to a white man and give it to the black people. As
a result, when 1994 came along, the “do it yourself” attitude that had driven his
generation to start businesses was largely absent. Maponya agrees that BEE was
necessary, even if it did have negative unforeseen consequences. “BEE was created to
empower the majority of our people, unfortunately it was abused and misused so that it
empowered the few who were connected.” It has left a sense of resentment and “a
feeling that the government owes us”. Maponya advocates that BEE in its present form
should be scrapped. Even preferential procurement, a central pillar of BEE, has only
helped “the very few who are connected. It has not helped the majority”.
Those who, in spite of BEE, are motivated to start their own businesses are being held
back by excessive red tape, he says. There was a lot of red tape when he started in
business, but he succeeded because “I never took no for an answer. I wanted to
achieve what I wanted to achieve”. Young people no longer have that never-say-die
attitude, he says. “They think government must do everything for them. That’s the
problem. Also the empowerment thing where you are given so many shares does not
really create anything. You are allocated some shares in an organisation that has been
in existence. That doesn’t create a single extra job.”
Maponya, says “we need to cut the red tape and educate youngsters to have self-
confidence and desire to start up things on their own. Government funding mechanisms
have largely failed. Thousands of young people matriculate and graduate, and when
they want to go into business they have no collateral to put forward and cannot access
funding.” Maponya suspects that BEE, and above all the tender system which rewards
loyalty, has created a situation in which too many business leaders feel they have too
much to lose if they make trouble for the government. He is of the opinion that if the
government cut the red tape, provided accessible funding and a more business-friendly
environment for entrepreneurs, then BEE would not be necessary at all.
Maponya has recently set up the Maponya Institute to educate young people to start and
run their own businesses, so that when they matriculate or graduate they don’t just look
at being employed but rather seek to create employment for themselves and others.
Maponya was the founding president of the National African Federated Chamber of
Commerce and Industry (Nafcoc), which was started in 1964 to serve the interests of
small businesses.
Source: Adapted from Barron (2012)
1. Why does Richard Maponya blame South Africa’s lack of entrepreneurial activity on
black economic empowerment (BEE)?
2. Mention some of the criticisms Maponya levels against BEE.
3. How has Maponya contributed to the advancement of entrepreneurship in South

Africa?
1. Why do managers have to possess good negotiation skills?
2. Why are compromise and collaboration preferred as strategies for managing conflict
rather than accommodation, avoidance and competition?
3. Conduct a Google search on all the 15 member states of SADC. In a tabular format, list
their population, GDP, main exports and main imports.
4. Briefly discuss the role and importance of BRICS in the global business environment.
5. What do you understand by the term “black economic empowerment (BEE)”?
6. Visit any large organisation in your town and enquire about its BEE policy and scorecard.
7. Go to any large organisation that you know and enquire about its health and wellness
programme. Does it have one? What does the programme entail?
8. Assume that you are the manager of a small business organisation. What type of health
and wellness initiatives would you implement in your organisation?
Index
A
Abraham Lincoln 225
acceptability 294
accommodation 310
accountability 143, 208
accuracy 294
action research 169
activating 4
age 189
agents 53
Amway 278
Anglo American 82
appreciative 276
appreciative inquiry 170, 171
arbitrator 311
authority 28, 142, 206, 222, 244
delegation 143
line 142
staff 142
avoidance 310
awareness 227
awareness-based training 194
B
bargaining 311
distributive 311
integrative 311
BBBEE 322
BEE 321, 322
BEEE 14
belief systems 74
Bill Clinton 225
Blake and Mouton’s managerial grid 216
BMW 180
Body Shop 88
bounded rationality 133
BRICS 318
budgeting 104
business cycle 59
business functions 48
C
Census report 54
centralisation 28, 141
chain of command 29, 144, 208
change 164, 285
behavioural 167
effective 172
fatique 166
forces for 164
general 165
internal 166
systemic 166
volatile 164
process 167
resistance 172, 197
cultural 174
dynamic 175
individual 173
organisational 174
overcoming 175
political 174
technical 174
strategic 166
structural 167
uncertainty 173
technological 167
character 73
City Lodge 110
coalition building 134
cognitive 212
collaboration 310
commitment 37, 83, 98, 103, 175, 197, 227, 247, 248
communication 176, 197, 226, 234, 263–277
barriers 271
individual 273
organisational 272
channel 266
diagonal 271
downward 270
formal 270
functions 264
horizontal 271
importance 264
informal 271
lateral 271
non-verbal 269, 276
elements 269
oral 269
organisational 270
process 265
skills 275
types 268
upward 270
verbal 268
vertical 270
written 268
competitive advantage 9, 11, 51, 63, 95, 108, 198, 270, 285, 288
competitive position 288
competition 51, 165, 310
brand 51
generic 51
need 51
product 51
competitors 51
compromise 310
conceptualisation 227
conflict 308, 309
intergroup 308
interpersonal 308
inter-organisational 308
intragroup 308
management 309
resolution 309
functional 310
non-functional 310
solving 9
sources 308
congruence 102, 145
consideration 213, 216
consumerism 58, 80, 84
consumer(s) 50, 57, 165
spending 59
contemporary management 307
contingency theory 36, 218
Fiedler’s theory 218
Hersey and Blanchard’s theory 223
House’s path-goal theory 220
control 4, 283–299
approaches 284
bureaucratic 284
clan 284, 295
market 284
areas of 288
by exception 291
categories of frequency 295
constant 295
occasional 296
periodic 295
forms 286
concurrent 287, 295
feed-back 287, 295
feed-forward 286, 295
post-control 287
steering 287
importance 285
contingency factors 296
process 289
self 295
system 293
types 286
management 286
operational 286
strategic 286
coordination 145
core time 255
core values 178
corporate governance 288
corporate social responsibility 83, 84
approaches 84–85
criteria 86
corrective action 292, 293
corruption 12
COSATU 30
cost savings 9
creativity 198
cultural diversity 273
culture(s) 74, 273
high-context 273
low-context 273
customers see also consumers, 50, 80, 84, 285
satisfaction 312
D
decentralisation 141
decisional roles 6
decision(s) 118, 141
adaptive 118
criteria 128
factors influencing 120
innovative 119
operational 116
routine 118, 130
strategic 116
tactical 116
decision-making 115–134, 141, 198
bias(es) 121
conditions 117
ambiguity 117, 119
certainty 117, 118
risk 117, 118
uncertainty 117, 119
models 125
administrative 125, 132
classical 125
political 125, 133
rational 125
nature 116
process 126
steps 126–132
styles 121, 122
analytic 122
autocratic 123
behavioural 123
collective 124
conceptual 123
consensus 124
democratic 124
directive 122
individual 122
group 123
types 117
decoding 266
defensiveness 274
delegation 143, 208, 285
Deming, W.Edwards 37
departmentalisation 138, 140, 150
customer 150, 153
functional 150, 151
geographic 150, 153
matrix 150, 154
product 150, 152
desire 211
deviations 291, 292
differentiation 10
disability 187
discrimination 197
disposable income 58
dissatisfaction 236, 242, 245
disseminator 7
disturbance handler 7
diversity 14, 185, 312
challenges 197
dimensions 187
ethical challenge 198
factors effecting 189
implications 191
positive outcomes 198
training 193
programmes 194
division of labour 28, 29
drive 211
E
eavesdropping 297
effective 3
efficiency 3, 138, 237
functional 191
efficiently 285
emotional 211
intelligence 212
emotions 274, 276
empathy 227, 276
employee theft 297
Employment Equity Act 185, 186, 192, 199
Employment Tax Incentive Act 189
empowerment 208, 210, 228
empowering 256
encoding 266
entrepreneur 7
entrepreneurship 228, 323
environment, see micro-environment, task environment and macro-environment
environmental scanning 64
equity 28
Eskom 266
ethical
behaviour 12, 71, 79
code 199
conduct 72
decision-making 77, 79
dilemma 72
issue 71
manager 80
reputation 80
standards 74
ethics 71
code of 82
committee 83
managerial 76
ethnicity 189
expectancy 249
experience 222
explicit learning 252
extinction 250
extrinsic 239
F
facilitators 53
family-friendly 254
Fayol, Henry 27
feedback 236, 248, 266, 275
loop 266
outcome-oriented 248
process-oriented 248
fertility rate 55
figurehead 7
filtering 273, 276
financial situation 288
flexibility 294
flexible working hours 255
Follet, Mary Parker 31
followers 205
Ford 85
G
G4S 300
Game 317
Gantt, Henry 25
gender 188, 228
differences 273
General Electric 180, 290
gestures 276
Gilbreth, Frank and Lillian 24
global environment 15, 315
goal(s) 98–103, 128, 153, 237, 246, 272, 288, 289, 308
acceptance 247
achievement 126, 247
commitment 247
criteria 100
difficulty 247
real 100
specificity 247
stated 100
Google 11, 209
grapevine 271
groupthink 312
H
Hawthorne studies 31
Health and wellness programme 325–328
Herzberg, Frederick 242, 256
honesty 211
human relations approach 30
human resources 103, 288
approach 32
humorous 275
hygiene factors 242
I
Implats 10
individual tolerance 187
Industrial Revolution 21, 30
industry discontinuities 163
inflation 58, 59
information management 34
initiating structure 213, 216
initiative 28
informational roles 6
information
distortion 276
overload 274
innovation 11, 285
instrumentality 249
integration 293
integrity 73, 211
interest rates 58
intermediaries 53
interpersonal roles 6
intervention 179, 191, 192
inter-workgroup training 195, 196
intra-workgroup training 195
intrinsic 239
intuition 133
J
job
enlargement 257
enrichment 243, 257
rotation 258
satisfaction 312
sharing 255
justice 78
K
knowledge 178
Kodak 49
Kotter 168
L
language 274, 275
law of effect 250
laws 74, 82
leader(s) 7, 205
approach 223
delegating 224
participating 224
selling 223
telling 223
employee-oriented 215
member relations 220
production-oriented 215
leadership 176, 203–229
charismatic 225
components 206
nature 206
perspectives 224
servant 226
styles see leadership styles
technological 288
theories 210
behavioural 210, 213
contingency see also contingency theory, 210, 217
trait 210, 211
transformational 225
leadership styles 213
achievement-oriented 222
authority compliance 217
autocratic 215
considerate 214
country-club 217
directive 221, 223
impoverished 217
initiating structure 214
liassez-faire 215
middle-of-the-road 217
participative 215, 221
relationship-oriented 218, 220
supportive 221
task-oriented 218, 220
team management 217
learning organisation 177
core processes 179
distinguishing features 179
least preferred co-worker questionnaire 218, 219
legal issues 107
level of maturity 223
Levi 62
Lewin Kurt 246
Lewin model 167
moving 168, 169
refreezing 168, 169
unfreezing 168, 169
LG Electronics 85
liaison 7
Locke, Edwin 246
locus of control 222
internal 222
external 222
LSM 56
M
macro-environment 53
demographic 54, 56
ecological 62
economic 54, 58
international 54, 63
legal 60
natural 54, 62, 85
political 54, 60
sociocultural 54, 57
technological 54, 60
inventions 61
management 3, 176
first-line 8, 105
functions 3, 4, 115, 138
kinds 6
middle 8, 105
principles of Fayol 28
process 4
roles 5, 7
science 33
skills 6, 8
communication 8
conceptual 7, 8
human 7, 8
technical 7, 8
time 108
top 8, 105, 141, 142, 144, 148
management theory 20, 22
administrative 27
behavioural 29
bureaucratic approach 26
classical 22
contemporary 35,
see also contemporary management
scientific management 22
quantitative 33
manager 2, 4, 94, 128, 143
challenges 9
first-line 5
middle 5, 142
top 5
Marikana 30
market 50
consumer 50
industrial 50
institutional 50
international 50
resale 50
share 103, 289
marketing 108
Martin Luther King 225
Maslow, Abraham 32, 239
Mayo, Elton 31
MBO 100
MBWA 291
McClelland, David 243
McDonalds 139, 149
McGregor, Douglas 33, 217
mediator 311
merchants 53
micro-environment 46
minority domination 313
mission 46, 47
Mintzberg 6
Monge, Gaspard 34
monitor 7
moral 74
manager 76
person 76
rights 78
Mother Theresa 225
motivating
contingent workers 257
jobs 257
low-skilled workers 257
professionals 256
motivation 233–258, 264
and pay 254
and organisational performance 237
benefits 237
contemporary issues 254
process 235
theories see motivation theories
motivation theories 239
content 239
Acquired needs theory 243
Maslow’s hierarchy of needs theory 239, 243
Herzberg’s two-factor theory 242
learning 250
reinforcement theory 250
social learning theory 251
process 244
Equity theory 244
Expectancy theory 248
Goal-setting theory 246
motivators 242
M-pesa 45
Mr Price 317
MTN 317
Multichoice 317
mumbling 276
N
Nampak 104
Nando’s 317
need for affiliation 243
need for power 244
need to achive 244
needs 240
esteem 240
physiological 240
safety 240
self-actualisation 240
social 240, 264
negotiation 310
negotiator 7
Nigeria 317
Nissan 85
noise 266, 274
physical 274
physiological 274
psychological 274
semantic 275
norms 74
O
observation 296
Ohio State University studies 213
open-book management 256
operations management 34
organisation 3
modular 156
virtual 156
organisational
change 161,
see also change
conflict 308,
see also conflict
culture 174, 296
designs 149
boundary-less 156
departmentalisation, see departmentalisation
simples structure 149
team-based 156
hierarchy 296
learning 161
negotiation 308
structure 146, 147
influencing factors 146
teams 311,
see also teams
resources 46, 49
intangible resources 49
tangible resources 49
organising 3, 137–157
elements 139
principles 139
authority 142
centralisation 141
chain of command 144
coordination 145
decentralisation 141
division of work 140
span of control 144, 149
specialisation 140
output control 287
overpayment 245
over-rewarded 245
P
Pep Stores 76
people centred 223
perceived ability 222
performance 95
actual 290
standards 289, 290,
see also standards
personality 190
persuasion 227, 264
physical barriers 272
planning 3, 93–109
formal 94
importance 97
informal 94
plans 104
alternative 106
operational 105
single-use 105
standing 105, 295
strategic 104
tactical 105
policy 105, 118
politicising 197
pollution 62
population 54
age-gender 55
growth 54
position power 220
positive model 170
power 207
coercive 207
expert 207
legitimate 207
referent 207
reward 207
predisposition 190
behavioural 191
judgemental 191
preference biases 309
prejudice 190, 193, 194, 197
components 191
problem-solving 9
procedure 106, 118
product
life cycle 163
quality 285
profitability 103
programming 104
production 179
centred 223
productivity 103, 198, 288, 326
employee 324
prosperity 59
Protea Hotels 317
public responsibility 288
punishment 250
Q
qualitative 130
quantitative 130, 291
R
receiver 266, 276
recession 59
recovery 59
reinforcement 250, 251
relationship behaviour 223
religious practices 193
remuneration 28
repo rate 58
resource allocator 7
responsibility 143, 208
responsiveness 11
restructuring 161
reward systems 309
Ronald Reagan 225
rule(s) 105, 118
S
SABMiller 180, 317
SADC 315
satisfaction 236, 237, 242
satisficing 133
scheduling 104
selective perception 173, 274
self-confidence 211
self-control 252
self-discipline 238
neuropsychology 238
self-efficacy 247
self-efficiency 253
self-motivation 252
self-reinforcement 252
sender(s) 266, 275, 276
shareholders 84, 85
Shoprite 9, 317
significance 106
simplicity 294
situation 206, 220
situational approach 36
skills-based training 195
Skinner 250
SMART 100, 143, 247
social
behaviour 57
loafing 312
responsibility 103
spokesperson 7
stakeholders 46, 81, 84, 85
standards 292, 293
human resource 289
market share 289
of performance 289
profit 289
productivity 289
status differences 272
stereotyping 190
stewardship 227
strategic
alliance 157
control points 288
importance 294
structure and
communication 148
environmental uncertainty 148
size 147
strategy 146
technology 147
sub-Saharan Africa 317
suppliers 52, 53
SWOT 64
synergy 36, 147
system 35
closed 35
open 35
systems management 35
T
tactics 275, 276
task behaviour 223
task environment 50
task structure 220, 222
Tata Steel 75
Taylor, Frederick 22, 23
teams
advantages 312
disadvantages 312
types 313
cross-functional 313
project 314
self-managed 314
virtual 314
technology 103, 107, 165
telecommuting 255
tenderpreneurship 323
Theory X 33, 217
Theory Y 33, 217
Tiger Brands 317
timeliness 294
Total Quality Management 37
Toyota 38, 85
trade by barter 21
trade union 192, 310
trading blocs 315
triple bottom line 86
trust 143, 225, 273, 284
U
underpayment 245
under-rewarded 245
unemployment 59
unethical behaviour 13
unity of command 28, 144, 155
unity of direction 28
University of Iowa studies 215
University of Michigan studies 215
urbanisation 57
utilitarian 78
V
valence 249
values 73, 284
virtual organisation 156, 157
vision 46, 47, 106
Vodacom 45, 47
Volkswagen 328
Vroom 248
W
Weber, Max 26
wellness 324
Westdene Fruiteries 67
Whitney, Eli 34
Wimpy 52
Winston Churchill 225
Woolworths 10, 317
workforce stability 237
workplace
diversity, see diversity
health 324, 325
privacy 297
violence 298
World Health Organisation 187

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GENERAL MANAGEMENT

First edition 2015

ISBN 978 0 627 03307 0

Commissioning editor Claire Thornton

Website addresses and links were correct at time of publication.

This book has been reviewed by independent peer reviewers.

Kobus Lazenby is an associate professor at the University of the Free State.

About the authors

Ekaete Benedict is a lecturer at the University of the Free State. Her

Jacques Taljaard has lectured in Employee Relations at the Central

Amandi van der Walt was previously a junior lecturer in Strategic

Annemarie van Noordwyk is a junior lecturer at the University of the Free

The content of each chapter is enriched with Management in action case

Chapter 4 discusses ethics and social responsibility. Managing in an

Chapter 6 deals with decision-making. Life is about choices and making

Chapter 10 introduces one of the most important management functions –

Chapter 12 explains the important skill of communication. Many people

I thank my Almighty Father for granting me the opportunity, wisdom and

About the editor

CHAPTER 1 Introduction to management

1.2 What is an organisation?

1.3 What is management?

1.4 Who is a manager?

1.5 Management roles

1.6 Management skills

1.7 Challenges for managers

1.7.1 Building a competitive advantage

1.7.2 Maintaining ethical and socially responsible behaviour

1.7.3 Managing a diverse workforce

1.7.4 Managing in a global environment

References and recommended reading

Case study: Peter Mogorosi

Management discussion exercises

CHAPTER 2 Management theory

2.1.1 Development of the need for management

2.2 Classical management theories

2.2.1 The scientific management approach

2.2.2 The bureaucratic approach

2.2.3 The administrative management approach

2.2.4 Common characteristics

2.3 Behavioural theories

2.3.1 The human relations approach

2.3.2 The human resources approach

2.4 Quantitative theories

2.4.1 Operations management

2.4.2 Information management

2.5.1 Systems management

2.5.2 Contingency theory

2.5.3 Total quality management (TQM)

References and recommended reading

Case study: The mining industry of South Africa

Management discussion exercises

CHAPTER 3 The organisational environment

3.2 An organisation and its environment

3.3 The micro-environment

3.3.1 Vision, mission and goals

3.3.2 Business functions

3.3.3 An organisation’s resources

3.4 The task environment

3.5 The macro-environment

3.5.1 Demographic factors

3.5.2 Sociocultural factors

3.5.3 Economic factors

3.5.4 Political/legal factors