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One of the most important activities in business is the management of the 4M’s – men, machines, material and money. The term ‘management’ can be interpreted differently in different contexts. Hence, it is difficult to define. In one context, it may comprise the activities of executives and administrative personnel in an organization, while in another, it may refer to a system of getting things done. In a broad perspective, management can be considered as the proper utilization of people and other resources in an organization to accomplish desired objectives. With increasing global competition, changes in the world of technology, changing business practices and increasing social responsibility of organizations, the role of managers has become all the more significant. In this chapter, we will first examine the definitions of management given by some eminent management thinkers to understand the essence of management. Secondly, we will discuss the five basic functions of management i.e., planning, organizing, staffing, leading and controlling. The chapter also focuses on the managerial skills required at various levels of the organizational hierarchy and briefly explains the various approaches to management.
DEFINITIONS OF MANAGEMENT
The term ‘management’ can be interpreted in a variety of ways. To gain a better insight into the nature of management, let us look at some of the definitions of management: Harold Koontz and Heinz Weihrich define management as “the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims.” Louis E. Boone and David L. Kurtz define management as “the use of people and other resources to accomplish objectives.” Dalton E. McFarland defines management as “a process, by which managers create, direct, maintain, and operate purposive organizations through systematic, coordinated, cooperative human effort.” Mary Parker Follet termed management as “the act of getting things done through people.” Definitions by Follet and Louis E. Boone and Kurtz call attention to the fact that managers achieve organizational goals by getting others to do the necessary tasks. The other two definitions suggest that management is much more than “just getting the work done” and (as shown in Figure 1.1) suggest the following aspects of management:
1. Managers carry out the functions of planning, organizing, staffing, leading and controlling: Henry Fayol was the first management thinker to outline the five basic functions carried out by managers. Every manager performs these basic functions. These functions are discussed in detail in the later part of this chapter. 2. Management is essential to any kind of organization: Wherever there are groups of people working together to achieve some common objectives, it becomes essential to guide, organize and control them. The term ‘management’ applies to any organization irrespective of the size or nature of operations. The prime concern of a CEO of a multinational company,
the General Manager of a hotel, the first-level supervisor, the manager of a cricket team and the student president in a college is to manage their people and resources effectively. Figure 1.1: Key Aspects of the Management Process
3. Management is essential at all hierarchical levels: Management is necessary at all levels. However, the type of skills and the degree to which various skills are required at different levels of the hierarchy may vary. In order to perform their duties satisfactorily, managers need technical, human, conceptual and design skills. 4. The goal of all managers is to generate surplus: The aim of all business managers is to create a surplus. To accomplish this objective, the manager has to create an environment which encourages people to accomplish as much as possible with the least amount of resources and personal dissatisfaction. Even in non-profit organizations, the aim of managers is to accomplish their goals with the minimum amount of resources or to make as much surplus as possible with available resources. 5. The aim of all managers is to improve productivity, efficiency and effectiveness: Productivity is defined as “the output-input ratio within a time period with due consideration for quality.” It can be expressed as: Productivity = Outputs / Inputs (within a time period, quality considered) Productivity can be improved in the following ways: • • • By producing more output with the same inputs. By reducing inputs, but maintaining the same level of outputs. By increasing outputs and reducing inputs, thereby, making the ratio more favorable.
Productivity can be improved by ensuring efficiency and effectiveness in the operations of the firm. Effectiveness refers to achievement of stated organizational objectives while efficiency denotes the
judicious use of resources to achieve organizational objectives. In the words of Peter Drucker, efficiency means “doing things right”, while effectiveness means “doing the right things.” In his book, “Management – Tasks, Responsibilities, Practices”, Drucker states that effectiveness is the foundation of success whereas efficiency is a minimum condition for survival after success has been achieved.
THE ROLE OF MANAGEMENT
As mentioned earlier, managers perform five functions – planning, organizing, staffing, leading and controlling. Since these functions are very essential for effective management, they have been used as the basic framework for this book. They have been briefly explained in the next section of the chapter. In order to understand the role of management, in the late 1960s, Henry Mintzberg devised a new approach – the managerial roles approach – by observing what managers actually do. He did a careful study of five chief executives at work and found that they were involved in a number of varied, unpatterned activities of short duration. Using a method called structured observation, Mintzberg isolated ten roles which he believed were common to all managers. As shown in Table 1.1, these ten roles were grouped into three categories – interpersonal roles, informational roles and decisional roles. A manager is required to interact with many people, both within and outside the organization and hence, the need to perform interpersonal roles. The three interpersonal roles of a manager are figurehead, leader and liaison. In his role as a figurehead, a manager performs all the ceremonial or symbolic duties. Example, it would be the duty of a college dean to award diplomas at the convocation ceremony. In the leadership role, a manager is required to motivate the employees to perform at their best to achieve the company’s objectives. In the liaison role, a manager is required to interact with people both within and outside the organization. A manager acts as a channel of information within the organization. The three informational roles of a manager are that of a recipient, disseminator and spokesperson. In the role of a recipient, a manager receives information pertaining to changes, opportunities and problems that the organization may face. As a disseminator, a manager provides information to subordinates that would influence their performance at work. And finally, a manager performs the role of a spokesperson when he or she represents the organization in public.
Table 1.1: Mintzberg's 10 Managerial Roles INTERPERSONAL Figurehead Leader Liaison Performs ceremonial and symbolic duties such as greeting visitors, signing legal documents. Direct and motivate subordinates, training, counseling, and communicating with subordinates. Maintain information links both inside organization, use mail, phone calls, meetings and outside
INFORMATIONAL Monitor Disseminator Spokesperson DECISIONAL Entrepreneur Disturbance Handler Resource Allocator Negotiator
Seek and receive information, scan periodicals and reports, maintain personal contacts Forward information to other organization members, send memos and reports, make phone calls Transmit information to outsiders through speeches, reports, memos Initiate improvement projects, identify new ideas, delegate idea responsibility to others Take corrective action during disputes or crises; resolve conflicts among subordinates; adapt to environmental crises Decide who gets resources, scheduling, budgeting, setting priorities Represent department during negotiation of union contracts, sales, purchases, budgets, represent departmental interests
FUNCTIONS OF MANAGERS
The functions of a manager provide a useful framework for organizing management knowledge under the various heads of planning, organizing, staffing, leading and controlling. Managerial functions are effective tools for managers to achieve the organization’s planned objectives. They include the general administrative duties that need to be carried out in virtually all organizations. Figure 1.2 depicts the management process and shows the various functions that managers are involved in. It is evident from the figure that managers are involved in more than one activity at the same time. Figure 1.2: Management Functions
Planning Planning can be defined as the process, by which, managers decide the mission and objectives of the firm and take necessary steps to achieve the desired objectives. At the same time, managers need to determine the future trends in business and incorporate change and innovation into the organization from time to time. There are various types of plans and they may range from planning to define the overall purposes and objectives of an organization to planning for a specific action. Planning helps a firm decide its future course of action.
Organizing Organizing is the process of assigning tasks and allocating resources to individuals to enable them to accomplish organizational goals. Organizing is a continuous process of determining (1) which tasks are to be performed, (2) how tasks can best be combined into specific jobs, (3) how jobs can be grouped into various units, and (4) the authority and reporting relationships within the corporate hierarchy. The organizational structure of a firm is a key element in determining its success or failure. If plans are not organized properly even the best of plans can fail. On the other hand, the pitfalls associated with a poor plan can be eliminated by excellent organization. Staffing Today, staffing is better known as “human resource management” and involves manning or filling the various positions in the organizational hierarchy. Activities like determining manpower requirements, assessing the number of people presently available in the organization, recruiting and selecting candidates, training and placing them in the organization come under the purview of staffing. This function also deals with compensation, performance appraisal, promotion and career planning. Leading Leading is defined as “the management function of influencing, motivating, and directing people towards the achievement of organizational goals.” It is the management function that involves influencing and inspiring team members to perform well and accomplish corporate objectives. Leading involves (1) communicating with others, (2) leadership styles and approaches, and (3) motivating people to put forth the effort required to achieve organizational goals. In simple words, it is the act of making things happen through others. Controlling The final step in the management process is to monitor the progress of an organization towards its goals. Controlling can be defined as the continuous measurement and analysis of actual operations against the established industry standards developed during the planning process and corrections of deviations, if any. The basic control process involves (1) comparing performance with standards, (2) determining where negative deviations occur, and (3) developing remedial measures to correct deviations.
LEVELS OF MANAGEMENT
In many small business enterprises, the owner is the only member of the management team. But, as the size of an organization increases, a more sophisticated organizational structure is required. It is a normal practice to categorize management into three basic levels: (1) top-level management, (2) middle-level management, and (3) supervisory or first-level management. Figure 1.3 illustrates the levels of management. The duties and responsibilities at these three levels of management vary from organization to organization, depending upon the size, technology, culture, etc. prevailing in the organization.
The number of managerial positions at each level varies from organization to organization. In most of the organizations, there are more positions at the first-level, fewer in the middle, and very few at the top. Many describe this kind of an organizational structure as a pyramid, as the managerial positions gradually decline as one progresses towards the higher levels of management (see Figure 1.4). The various activities performed at each of these levels of management are illustrated in Table 1.2.
Figure 1.3: Levels of Management
Figure 1.4: Managerial Levels and Areas
Top-Level Managers Top-level managers are usually appointed, elected or designated by the organization’s governing body. They are few in number, and they include job classifications such as the “Chief Executive Officer” (CEO), “President”, “Vice President”, “Senior Vice President” and “Executive Director.” Toplevel managers are responsible for taking major decisions for the organization as a whole. The toplevel managers are responsible for the overall activities of the business and are accountable for its impact on the society at large. They work to some extent with the middle-level managers in implementing the plans, and maintaining overall control over organizational performance.
In public limited companies, top-level managers report to the Board of Directors. Members of the board are selected by shareholders. Depending on the size of the company, the number of board members vary from 15 to 25. When a board comprises a majority of individuals who have close ties with the management, they essentially act as “rubber stamps.” But, on the other hand, boards with more outsiders operate more independently and are more proactive. Though it is a usual practice to elect the CEO as the chairperson of the board, a study has suggested that companies having an outsider as a board chairperson perform better, as he/she helps the board to monitor the performance of the top management objectively. Middle-Level Managers Middle-level managers deal with the actual operation of various departments in an organization. They are directly responsible for the performance of managers at lower levels. Their typical titles include “manager”, “director”, “chief”, “department head” and “divisional head.” The number of middle-level managers in complex organizations is far higher than other managers. These managers are responsible for implementing the plans and strategies developed by top management for the accomplishment of organizational goals. They look to the top management for direction and guidance and are answerable to them. In many organizations, middle-level managers serve as a source of innovation and creativity. Thus, they play a vital role in the success of the organization. Due to the advent of information technology, online technical assistance has become available to firstlevel managers. This has resulted in making middle-level managers redundant and has thus reduced the number of middle-level managers in many organizations First-Level Managers First-level managers are directly responsible for the performance of employees involved in operations. They are usually called supervisors. They may be addressed by different names. In a manufacturing plant, the first-level manager may be called a foreman, in a research department – the technical supervisor, and in a large office – the clerical supervisor. First-level managers implement the operational plans developed by middle managers and take corrective actions, when needed. They are responsible for output variables like number of units produced, labor costs, inventory levels, and quality control. Since first-level managers act as a link between the management and the rest of the workforce, they often confront conflicting demands. In recent times, the power of these managers has gradually decreased because of union influence, the increasing educational level of workers, and the growing use of computers to track many activities formerly monitored by first-level managers.
MANAGEMENT SKILLS AND ORGANIZATIONAL HIERARCHY
A manager’s job is varied and complex. Hence, managers need certain skills to perform the functions associated with their jobs. During the early 1970s, Robert K. Kalz identified three kinds of skills for administrators. These are technical, human and conceptual skills. A fourth skill – the ability to design solutions – was later added to the above mentioned skills. Technical Skills Technical skills refer to the ability of a person to carry out a specific activity. In order to do so, one needs to have knowledge of methods, processes and procedures. Engineers, computer specialists, accountants and employees in manufacturing departments all have the necessary technical skills for their specialized fields. Technical skills are essential for first-level managers. For example, employees at the operational level work with tools, and their supervisors must be able to teach them how to perform the tasks assigned to them using these tools. First-level managers spend much of their time in training subordinates and clarifying doubts in work-related problems.
Human Skills Human skills or interpersonal skills refer to the ability of a person to work well with other people in a group. It is the ability to lead, motivate, and communicate with people to accomplish certain objectives. Human skills are of paramount importance in the creation of an environment, in which people feel comfortable and are free to voice their opinions. These skills aid employees during interaction with their supervisors, peers and people outside the work unit such as suppliers, customers and the general public. These skills are important for all levels in the organization. Conceptual Skills Conceptual skills refer to the ability of a person to think and conceptualize abstract situations. It is the ability to understand and coordinate the full range of corporate objectives and activities. These skills are most important at the top management level, as top-level managers have the greatest need to see the “big picture,” to understand how the various parts of the organization relate to one another and associate the organization with the external environment. Design Skills Design skills refer to the ability of a person to find solutions to problems in ways that would benefit the organization. Top managers should not only recognize a problem but also suggest ways to overcome them. If they only see the problem, they become mere “problem watchers,” and will prove ineffective. Managers at upper organizational levels should be able to design a rational and feasible solution to the problem by considering the various internal and external factors. The relative significance of these skills varies at different levels in the organizational hierarchy as shown in Figure 1.6. We can briefly summarize them as follows:
Figure 1.6: Relative Need for the Main Categories of Skills
APPROACHES TO MANAGEMENT
1. The empirical or case approach: In this approach, one tries to understand management principles with the help of cases. It also identifies the situations, wherein organizations have either succeeded or failed by following this approach. 2. The interpersonal behavior approach: This approach is based on individual psychology and focuses on interpersonal relationships.
3. The group behavior approach: This approach is based on sociology and social psychology. It stresses on the behavior of people in groups. 4. The cooperative social systems approach: It advocates a system of cooperation using both interpersonal and group behavioral aspects. 5. The sociotechnical systems approach: It realizes the impact of technical systems on personal attitudes and group behavior. This approach focuses on areas involving close relationships between technical systems and the people involved such as production, office operations, etc. 6. The decision theory approach: The focus in this approach is on the decision-making process and people involved in it. 7. The systems approach: It considers organizations to be open systems as they interact with the external environment. It recognizes the importance of the inter-relationship between planning, organizing and controlling. 8. The mathematical or “management science” approach: This approach treats management as a logical process, which can be expressed in terms of mathematical symbols and relationships. 9. The contingency or situational approach: In this approach, the main assumption is that there is no hard and fast rule for all situations. Managerial practice depends upon circumstances. Different circumstances may necessitate the use of different methods. 10. The managerial roles approach: This approach had been developed by studying the work methods of five chief executives. The study identified ten managerial roles, which were grouped into three catsegories – interpersonal, informational and decisional roles. 11. The McKinsey’s 7-S framework: The seven S’s used in this approach are strategy, structure, systems, style, staff, shared values and skills. 12. The operational approach: This approach attempts to develop the science and theory of management by drawing upon concepts, principles, techniques and knowledge from other fields and managerial approaches.
Evolution of Management Thought
• • • • Classical Approach Behavioral Approach Quantitative Approach Modern Approaches to Management
According to one school of thought, history has no relevance to the problems faced by managers today. Some are also of the opinion that management theory is too abstract to be of any practical use. However, both theory and history are indispensable tools for managing contemporary organizations.
Like most modern disciplines, contemporary management thought has its foundations in the history of management and the many significant contributions of theorists and practitioners. A theory is a conceptual framework for organizing knowledge that provides a blueprint for various courses of action. Hence, an awareness and understanding of important historical developments and theories propounded by early thinkers is important for today’s managers. We first take a look at the early approaches to management. We then focus on four well-established schools of management thought (see Table 2.1): (i) the classical approach; (ii) the behavioral approach; (iii) the quantitative approach and (iv) the modern approaches to management. Finally, some emerging approaches in management thought are discussed. Table 2.1: Major Classification of Management Approaches and their Contributors Major Classification of Management Approaches Classical approach Scientific management Bureaucratic management Administrative management Behavioral approach Group influences Hawthorne studies Maslow’s theory needs Major Contributors Frederick W. Taylor, Frank and Lillian Gilbreth and Henry Gantt Max Weber Henri Fayol Mary Parker Follet Elton Mayo Abraham Maslow Douglas McGregor Chris Argyris William Ouchi
Theory X and Theory Y Model I versus Model II values Quantitative approach Management science Operations management Management information system Modern approaches The Systems Theory Contingency Theory Emerging pproaches: Theory Z and Quality management
Classical management thought can be divided into three separate schools: scientific management, administrative theory and bureaucratic management. Classical theorists formulated principles for setting up and managing organizations. These views are labeled “classical” because they form the foundation for the field of management thought. The major contributors to the three schools of management thought – scientific management, administrative theory and bureaucratic management – are Frederick W. Taylor, Henry Fayol and Max Weber respectively.
Scientific Management Scientific management became increasingly popular in the early 1900s. In the early 19 th century, scientific management was defined as “that kind of management which conducts a business or affairs by standards established, by facts or truths gained through systematic observation, experiment, or reasoning.” In other words, it is a classical management approach that emphasizes the scientific study of work methods to improve the efficiency of the workers. Some of the earliest advocates of scientific management were Frederick W. Taylor (1856-1915), Frank Gilbreth (1868-1924), Lillian Gilbreth (1878-1972), and Henry Gantt (1861-1919).
Frederick Winslow Taylor Frederick Winslow Taylor took up Henry Towne’s challenge to develop principles of scientific management. Taylor, considered as “father of scientific management”, wrote The Principles of Scientific Management in 1911. An engineer and inventor, Taylor first began to experiment with new managerial concepts in 1878 while employed at the Midvale Steel Co. At Midvale, his rise from laborer to chief engineer within 6 years gave him the opportunity to tackle a grave issue faced by the organization – the soldiering problem. ‘Soldiering’ refers to the practice of employees deliberately working at a pace slower than their capabilities. According to Taylor, workers indulge in soldiering for three main reasons: 1. their jobs. 2. slow pace. Workers feared that if they increased their productivity, other workers would lose Faulty wage systems employed by the organization encouraged them to work at a
3. Outdated methods of working handed down from generation to generation led to a great deal of wasted efforts.
Table 2.4: Four Steps in Scientific Management Step Step 1 Step 2 Step 3 Step 4 Description Develop a science for each element of the job to replace old rule of thumb methods. Scientifically select employees and then train them to do the job as described in Step 1. Supervise employees to make sure they follow the prescribed methods for performing their jobs. Continue to plan the work but use workers to actually get the work done.
In essence, scientific management as propounded by Taylor emphasizes: i. ii. iii. Need for developing a scientific way of performing each job. Training and preparing workers to perform that particular job. Establishing harmonious relations between management and workers so that the job is performed in the desired way.
Frank and Lillian Gilbreth
After Taylor, Frank and Lillian Gilbreth made numerous contributions to the concept of scientific management. Frank Gilbreth (1868-1924) is considered the “father of motion study.” Lillian Gilbreth (1878-1972) was associated with the research pertaining to motion studies. Motion study involves finding out the best sequence and minimum number of motions needed to complete a task. Frank and Lillian Gilbreth were mainly involved in exploring new ways for eliminating unnecessary motions and reducing work fatigue. The Gilbreths devised a classification scheme to label seventeen basic hand motions – such as “search,” “select,” “position,” and “hold” – which they used to study tasks in a number of industries. These 17 motions, which they called therbligs (Gilbreth spelled backward with the‘t’ and ‘h’ transposed), allowed them to analyze the exact elements of a worker’s hand movements. Frank Gilbreth also developed the micromotion study. A motion picture camera and a clock marked off in hundredths of seconds was used to study motions made by workers as they performed their tasks. He is best known for his experiments in reducing the number of motions in bricklaying. By carefully analyzing the bricklayer’s job, he was able to reduce the motions involved in bricklaying from 18 ½ to 4. Using his approach, workers increased the number of bricks laid per day from 1000 to 2700 (per hour it went up from 120 to 350 bricks) without exerting themselves. Lillian’s doctoral thesis (published in the early 1900s as The Psychology of Management) was one of the earliest works which applied the findings of psychology to the management of organizations. She had great interest in the human implications of scientific management and focused her attention on designing methods for improving the efficiency of workers. She continued her innovative work even after Frank’s death in 1924, and became a professor of management at Purdue University. Lillian was the first woman to gain eminence as a major contributor to the development of management as a science. In recognition of her contributions to scientific management, she received twenty-two honorary degrees.
Figure 2.1 Gantt scheduling chart
Henry Laurence Gantt Henry L. Gantt (1861-1919) was a close associate of Taylor at Midvale and Bethlehem Steel. Gantt later became an independent consultant and made several contributions to the field of management. He is probably best remembered for his work on the task-and-bonus system and the Gantt chart. Under Gantt’s incentive plan, if the worker completed the work fast, i.e. in less than the standard time, he received a bonus. He also introduced an incentive plan for foremen, who would be paid a bonus for every worker who reached the daily standard. If all the workers under a foreman reached the daily standard, he would receive an extra bonus. Gantt felt that this system would motivate foremen to train workers to perform their tasks efficiently. The Gantt Chart (see Figure 2.1) is still used today by many organizations. It is a simple chart that compares actual and planned performances. The Gantt chart was the first simple visual device to maintain production control. The chart indicates the progress of production in terms of time rather than quantity. Along the horizontal axis of the chart, time, work scheduled and work completed are shown. The vertical axis identifies the individuals and machines assigned to these work schedules. The Gantt chart in Figure 2.1 compares a firm’s scheduled output and expected completion dates to what was actually produced during the year. Gantt’s charting procedures were precursors of today’s program evaluation and review techniques.
Limitations of scientific management
Scientific management has provided many valuable insights in the development of management thought. In spite of the numerous contributions it made, there are a few limitations of scientific management. They are: • The principles of scientific management revolve round problems at the operational level and do not focus on the management of an organization from a manager’s point of view. These principles focus on the solutions of problems from an engineering point of view. • The proponents of scientific management were of the opinion that people were “rational” and were motivated primarily by the desire for material gain. Taylor and his followers overlooked the social needs of workers and overemphasized their economic and physical needs. • Scientific management theorists also ignored the human desire for job satisfaction. Since workers are more likely to go on strike over factors like working conditions and job content (the job itself) rather than salary, principles of scientific management, which were based on the “rational worker” model, became increasingly ineffective. Administrative Theory While the proponents of scientific management developed principles that could help workers perform their tasks more efficiently, another classical theory – the administrative management theory – focused on principles that could be used by managers to coordinate the internal activities of organizations. The most prominent of the administrative theorists was Henri Fayol. French industrialist Henri Fayol (1841-1925), a prominent European management theorist, developed a general theory of management. Fayol believed that “with scientific forecasting and proper methods of management, satisfactory results were inevitable.” Fayol was unknown to American managers and scholars until his most important work, General and Industrial Management, was translated into English in 1949. Many of the managerial concepts that we take for granted today were first articulated by Fayol. According to Fayol, the business operations of an organization could be divided into six activities (see Figure 2.2) Figure 2.2: Business Operations of an Organization
Fayol outlined fourteen principles of management:
1. Division of work: Work specialization results in improving efficiency of operations. The concept of division of work can be applied to both managerial and technical functions. 2. Authority and responsibility: Authority is defined as “the right to give orders and the power to exact obedience.” Authority can be formal or personal. Formal authority is derived from one’s official position and personal authority is derived from factors like intelligence and experience. Authority and responsibility go hand-in-hand. When a manager exercises authority, he should be held responsible for getting the work done in the desired manner. 3. Discipline: Discipline is vital for running an organization smoothly. It involves obedience to authority, adherence to rules, respect for superiors and dedication to one’s job. 4. Unity of command: Each employee should receive orders or instructions from one superior only. 5. Unity of direction: Activities should be organized in such a way that they all come under one plan and are supervised by only one person. 6. Subordination of the individual interest to the general interest: Individual interests should not take precedence over the goals of the organization. 7. Remuneration: The compensation paid to employees should be fair and based on factors like business conditions, cost of living, productivity of employees and the ability of the firm to pay. 8. Centralization: Depending on the situation, an organization should adopt a centralized or decentralized approach to make optimum use of its personnel. 9. Scalar chain: This refers to the chain of authority that extends from the top to the bottom of an organization. The scalar chain defines the communication path in an organization. 10. Order: This refers to both material and social order in organizations. Material order indicates that everything is kept in the right place to facilitate the smooth coordination of work activities. Similarly, social order implies that the right person is placed in the right job (this is achieved by having a proper selection procedure in the organization). 11. Equity: All employees should be treated fairly. A manager should treat all employees in the same manner without prejudice. 12. Stability of tenure of personnel: A high labor turnover should be prevented and managers should motivate their employees to do a better job. 13. Initiative: Employees should be encouraged to give suggestions and develop new and better work practices. 14. Espirit de corps: This means “a sense of union.” Management must inculcate a team spirit in its employees. Bureaucratic Management Bureaucratic management, one of the schools of classical management, emphasizes the need for organizations to function on a rational basis. Weber (1864-1920), a contemporary of Fayol, was one of the major contributors to this school of thought. He observed that nepotism (hiring of relatives regardless of their competence) was prevalent in most organizations. Weber felt that nepotism was grossly unjust and hindered the progress of individuals. He therefore identified the characteristics of an ideal bureaucracy to show how large organizations should be run. The term “bureaucracy” (derived from the German buro, meaning office) referred to organizations that operated on a rational basis. According to Weber, “a bureaucracy is a highly structured, formalized, and impersonal organization.” In other words, it is a formal organization structure with a set of rules and regulations. The characteristics of Weber’s ideal bureaucratic structure are outlined in Table 2.5.
These characteristics would exist to a greater degree in “ideal” organizations and to a lesser degree in other, less perfect organizations.
Table 2.5: Major Characteristics of Weber’s Ideal Bureaucracy Characteristic Description
The duties and responsibilities of all the employees are clearly defined. Work specialization and Jobs are divided into tasks and subtasks. Each employee is given a division of labor particular task to perform repeatedly so that he acquires expertise in that task. Abstract rules regulations and The rules and regulations that are to be followed by employees are well defined to instill discipline in them and to ensure that they work in a cocoordinated manner to achieve the goals of the organization.
Managers make rational decisions and judgments based purely on facts. of They try to be immune to feelings like affection, enthusiasm, hatred and passion so as to remain unattached and unbiased towards their subordinates.
The activities of employees at each level are monitored by employees at Hierarchy of organization higher levels. Subordinates do not take any decision on their own and structure always look up to their superiors for approval of their ideas and opinions.
The behavioral school of management emphasized what the classical theorists ignored – the human element. While classical theorists viewed the organization from a production point of view, the behavioral theorists viewed it from the individual’s point of view. The behavioral approach to management emphasized individual attitudes and behaviors and group processes, and recognized the significance of behavioral processes in the workplace. Table 2.6 gives an overview of the key contributions to management theory by the behavioral management school of thought. Elton Mayo: Focusing on Human Relations Elton Mayo (1880-1949), the “Father of the Human Relations Approach,” led the team which conducted a study at Western Electric’s Hawthorne Plant between 1927 and 1933 to evaluate the attitudes and psychological reactions of workers in on-the-job situations. The researchers and scholars associated with the Hawthorne experiments were Elton Mayo, Fritz Roethlisberger, T.N. Whitehead and William Dickson. The National Research Council sponsored this research in cooperation with the Western Electric Company. The study was started in 1924 by Western Electric’s industrial engineers to examine the impact of illumination levels on worker productivity. Eventually the study was extended through the early 1930s. Exhibit 2.3 Limitations of Human Relations Approach Human relations theory recognizes the significance of human resources. This theory believes that each individual is unique and the attitude and behavior of an employee determines the way he or she works. This theory is against the view that people respond automatically to monetary stimulus. Human relations theory was one of the greatest advances in management, yet, it did not succeed in establishing new concepts. The limitations of the Human Relations theory are: • The Human Relations theorists are of the opinion that by removing fear, people would perform effectively. This view attacked the assumption that workers can be motivated to work only through fear. The Human Relations approach made a significant contribution at a time when it was generally being assumed that workers have to be coerced to work. Yet, this
approach has very little to say about positive motivation. The positive motivation aspect has been generalized by the Human Relations theorists. • Human Relations theory does not provide enough focus on work. It emphasizes more on interpersonal relations and on “the informal group.” Consequently, this approach assumes that a worker’s attitudes, behavior and effectiveness is predominantly determined by his relation with his fellow-workers and not by the kind of work he does. • Human Relations does not understand the economic implications of organizational problems. Therefore, most of the principles advocated cannot be applied in the organizational context. Human Relations theory also tends to be very vague. It stresses on “giving the workers a sense of responsibility” but hardly tells what their responsibilities are. Human Relations theory has made noteworthy contributions to the field of management. It provides valuable guidance in understanding the employees and managing them. This theory also states the importance of attitudes and behaviors in managing the workforce effectively. Human Relations is one of the foundations on which the building of management is to be built. Although this theory has given great insights, it has its limitations also. This theory focuses more on the informal group and is very vague about the positive motivation aspects. Table 2.7: Elton Mayo and the Hawthorne Studies Pre-judgments Job performance individual worker. depends on Findings the The group is the key factor in job performance.
Fatigue is the main factor affecting Perceived meaning and importance of output. the work determine output. Management sets production standards. Workplace culture production standards. sets its own
Abraham Maslow: Focusing on Human Needs In 1943, Abraham H. Maslow (1908-1970), a Brandeis University psychologist, theorized that people were motivated by a hierarchy of needs. His theory rested on three assumptions. First, all of us have needs which are never completely fulfilled. Second, through our actions we try to fulfill our unsatisfied needs. Third, human needs occur in the following hierarchical manner: (i) physiological needs; (ii) safety or security needs; (iii) belongingness or social needs; (iv) esteem or status needs; (v) selfactualization, or self-fulfillment needs. According to Maslow, once needs at a specific level have been satisfied, they no longer act as motivators of behavior. Then the individual strives to fulfill needs at the next level. Managers who accepted Maslow’s hierarchy of needs attempted to change their management practices so that employees’ needs could be satisfied. Douglas McGregor: Challenging Traditional Assumptions about Employees Douglas McGregor (1906-1964) developed two assumptions about human behavior, which he labeled “Theory X” and “Theory Y.” According to McGregor, these two theories reflect the two extreme sets of belief that different managers have about their workers. Theory X presents an essentially negative view of people. Theory X managers assume that workers are lazy, have little ambition, dislike work, want to avoid responsibility and need to be closely directed to make them work effectively. Theory Y is more positive and presumes that workers can be creative and innovative, are willing to take responsibility, can exercise self-control and can enjoy their work. They generally have higher-level needs which have not been satisfied by the job. Like Maslow’s theory, McGregor’s Theory X and Theory Y influenced many practicing managers. These theories helped managers develop new ways of managing the workers.
The management science approach stresses the use of mathematical models and statistical methods for decision-making. It visualizes management as a logical entity, the action of which can be expressed in terms of mathematical symbols, relationships and measurement data. Another name commonly used for management science is operations research. Recent advances in computers have made it possible to use complex mathematical and statistical models in the management of organizations. Management science techniques are widely used in the following areas: • • • • • • Capital budgeting and cash flow management Production scheduling Development of product strategies Planning for human resource development programs Maintenance of optimal inventory levels Aircraft scheduling
Various mathematical tools like the waiting line theory or queuing theory, linear programming, the program evaluation review technique (PERT), the critical path method (CPM), the decision theory, the simulation theory, the probability theory, sampling, time series analysis etc. have increased the effectiveness of managerial decision-making. To apply a quantitative approach to decision-making, individuals with mathematical, statistical, engineering, economics and business background skills are required. Since one person cannot have all these skills the quantitative method requires a team approach to decision-making. This approach has been criticized for its overemphasis of mathematical tools. Many managerial activities cannot be quantified because they involve human beings who are governed by many irrational elements.
Operations Management Operations management is an applied form of management science. It deals with the effective management of the production process and the timely delivery of an organization’s products and services. Operations management is concerned with: (i) inventory management, (ii) work scheduling, (iii) production planning, (iv) facilities location and design, and (v) quality assurance. The tools used by operations managers are forecasting, inventory analysis, materials requirement planning systems, networking models, statistical quality control methods, and project planning and control techniques.
MODERN APPROACHES TO MANAGEMENT
Besides the classical, behavioral and quantitative approaches to management, there are certain modern approaches to management. Two of these approaches are the systems theory and the contingency theory, which have significantly shaped modern management thought. Systems Theory Those who advocate a systems view contend that an organization cannot exist in isolation and that management cannot function effectively without considering external environmental factors. The systems approach gives managers a new way of looking at an organization as a whole and as a part of the larger, external environment. According to this theory, an organizational system has four major components: inputs, transformation processes, output and feedback (see Figure 2.4). Inputs – money, materials, men, machines and informational sources – are required to produce goods and services. Transformation processes or throughputs – managerial and technical abilities – are used to convert inputs into
outputs. Outputs are the products, services, profits and other results produced by the organization. Feedback refers to information about the outcomes and the position of the organization relative to the environment it operates in. Figure 2.4: A Systems View of Organizations
Fundamentals of Planning
• • • • • • Definitions of Planning Nature of Planning Significance of Planning Types of Plans Steps in the Planning Process Prerequisites for Effective Planning
Planning is the process of bridging the gap between where we are and where we want to be in the future. In other words, planning is “looking ahead, relating today’s events with tomorrow’s possibilities.” It is the process of deciding in advance what to do, how to do, when to do it, and who does what. Proper planning minimizes risk and ensures that resources are efficiently and effectively utilized. Planning and controlling are inseparable. Planning involves determining organizational objectives and developing strategies to achieve the objectives, while controlling involves establishing standards
of performance and comparing actual results with the planned results. Controlling without planning is meaningless. Unless one knows where to go, one cannot tell whether one is going in the right direction or not. Planning gives an organization the required focus and direction. Thus planning is a prerequisite of the control function.
DEFINITIONS OF PLANNING
In simple words, planning is deciding in advance what action to take, how and when to take a particular action, and who are the people to be involved in it. It involves anticipating the future and consciously choosing the future course of action. According to Peter Drucker, “Planning is a continuous process of making present entrepreneurial decisions (risk taking) systematically and with best possible knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions and measuring the result of those decisions against the expectations through an organized systematic feedback.” In the words of George R. Terry, “Planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualization and formulation of proposed activities believed necessary to achieve desired results.” Thus, while planning, a manager makes use of facts and reasonable premises and also considers the relevant constraints. The manager then decides what activities are needed, how they are to be carried out and how they would contribute to the achievement of the desired results. Dalton E. McFarland’s definition of planning takes into account the dynamic nature of the environment. He defines planning as follows: “Planning is a concept of executive function that embodies the skills of anticipating, influencing and controlling the nature and direction of change.” According to Heinz Weihrich and Harold Koontz, “Planning involves selecting mission and objectives and the actions to achieve them; it requires decision-making that is, choosing from alternative future courses of action.” Thus, planning involves determining organizational objectives and deciding how best to achieve them. It involves looking ahead and relating today’s events with tomorrow’s possibilities.
NATURE OF PLANNING
Planning is Goal-oriented Planning is an Intellectual or Rational Process Planning is a Primary Function Planning is All-pervasive Planning is Forward-looking Planning is a Perpetual Process Planning is an Integrated Process Planning Involves Choice
SIGNIFICANCE OF PLANNING
In a complex business situation, planning helps managers meet the challenges posed by the environment, while at the same time minimizing the risks associated with them. Planning is a prerequisite not only for achieving success but also for surviving in a complex and competitive world. Planning is very important in all types of organizations. It forces organizations to look ahead and decide their future course of action so as to improve their profitability. Organizations that plan in advance are more likely to succeed than those which fail to plan for the future. Planning is the first step in the management process. It ensures that the employees of an organization carry out their work in a systematic and methodical manner. It also helps coordinate and control various tasks and makes sure that resources are used optimally.
Focuses Attention on Objectives Offsets Uncertainty and Risk Provides Sense of Direction Provides Guidelines for Decision-making Increases Organizational Effectiveness Provides Efficiency in Operations Ensures Better Coordination Facilitates Control Encourages Innovation and Creativity Facilitates Delegation
Figure 4.1: Planning and Management Levels
Strategic plans These plans are designed to achieve strategic goals. More precisely, strategic plans are general plans that indicate the resource allocation, and priorities and actions necessary for achieving strategic goals. These plans which establish overall objectives for organizations, analyze the various environmental factors that affect organizations. Table 4.1 describes eight major areas for strategic goals.
Table 4.1: Eight Major Areas for Strategic Goals Major Areas Market Standing Description Desired share of present and new markets, including areas
in which new products are needed, and service goals aimed at building customer loyalty. Innovation Human Resources Financial Resources Physical Resources Productivity Social Responsibility Profit Requirements Innovations in products or services as well as innovations in skills and activities required to supply them. Supply, development and performance of managers and other organization members; employee attitudes and development of skills; relations with labor unions, if any. Sources of capital supply and how capital will be utilized. Physical facilities and how they will be used in the production of goods and services. Efficient use of resources relative to outcomes. Responsibilities in such areas as concern community and maintenance of ethical behavior. for the
Level of profitability and other indicators of financial wellbeing.
Tactical plans They aim at achieving tactical or short-term goals. These plans help support the implementation of strategic plans. Tactical plans essentially indicate the actions that major departments and sub-units should take to execute a strategic plan. Such plans are more concerned more with actually getting things done than with deciding what to do. They are thus essential for the success of strategic plans. Tactical plans are developed by middle-level managers, who may consult lower-level managers before finalizing the plan and communicating it to top-level management. Compared to strategic plans, tactical plans cover a shorter time frame (usually 1 to 3 years). A middle-level manager acting as a tactical planner deals with much less uncertainty and risk than the strategic planner. The information that he requires is also less and most of it can be derived from internal sources. Operational plans Operational plans are developed to determine the steps necessary for achieving tactical goals. They are stated in specific, quantitative terms and serve as the department manager’s guide to day-today operations. Operational plans are developed by lower-level managers. These plans generally consider time frames of less than a year, such as a few months, weeks, or even a few days. They spell out specifically what must be accomplished over short time periods in order to achieve operational goals. Lower-level managers who develop operational plans work in an environment of relative certainty. Hence, the amount of risk involved in making operational plans is lesser than that involved in making tactical plans. The information needed for operational planning can be obtained almost completely from within the organization. Unless operational goals are achieved, tactical and strategic goals will not be achieved. Therefore operational plans are necessary for the success of tactical and strategic plans.
STEPS IN THE PLANNING PROCESS
Planning is an endless process. The process is constantly modified to suit changes in environmental conditions and changes in objectives and opportunities for the firm. As organizations differ in terms of their size and complexity, no single planning procedure is applicable to all organizations. However, all planning processes contain some basic steps, which are represented in Figure 4.3. Figure 4.3: The Basic Steps in the Planning Process
PREREQUISITES FOR EFFECTIVE PLANNING
Planning is an essential managerial function and should be given due emphasis in order to make it more effective. It forms the basis for other functions in the management process. The following measures help to make the planning exercise more effective. Establishing the Right Climate for Planning Clear and Specific Objectives Planning Premises Initiative at Top Level Participation in Planning Process Communication of Planning Elements Integration of Long-term and Short-term Plans
Guidelines for Successful Planning and Implementation
Involve the right people in the planning process – While planning, it is essential to obtain inputs from those who will implement the plans and from representatives belonging to groups which will be affected by the plan. People who are involved in these plans should also be involved in reviewing and authorizing the plan. Communicate the plan throughout the organization – As plans keep changing, it becomes difficult to remember who is supposed to do what and according to which version of the plan. Moreover, the key stakeholders may also request copies of the various plans of the organization. Therefore, it would be in the best interests of the organization to put its plans in writing and make them known throughout the organization. Goals should be SMARTER – A SMARTER goal or objective is: Specific – A goal should be specific, not vague and hard to understand. Measurable – The outcomes of a goal should be measurable. Acceptable – The goal should be acceptable to those who are to pursue it. Realistic – The goals to be achieved should be realistic. Time frame – The goal should specify a time frame for achieving it. Extending – The goal should stretch the capabilities of the performer and motivate him to extend his capabilities beyond the usual limit. Rewarding – The goal should be such that those involved in its accomplishment are rewarded. Making people accountable – Plans should specify who is responsible for what results. The persons responsible should periodically review the status of the plan.
Redesigning the plan – Sometimes, it is necessary to deviate from the plan. The persons responsible for implementing the plan should note such deviations when they occur and make necessary adjustments to the plan. Evaluating the plan – Feedback plan. The feedback should address better, whether the goals are implementing the plan. This will organization. should be obtained regularly from the people implementing the aspects such as how the planning process could have been made realistic, and whether sufficient resources are available for help planners ensure that the plans meet the needs of the
Acknowledging and Celebrating accomplishments – This step is frequently overlooked. It is often observed that new targets are set once desired results have been achieved. As a result, employees have to continually solve one problem after the other. In order to avoid cynicism and fatigue from creeping into the planning process, one must acknowledge the good work done and have a little celebration. This would boost the morale of the planners and would ensure their fullest efforts in subsequent plans.
Fundamentals of Organizing
• • • • • • Definitions of Organizing Benefits of Organizing Formal vs Informal Organization Span of Management The Process of Organizing Prerequisites for Effective Organizing
Organizing is a very important managerial function. If planning focuses on deciding what to do, organizing focuses on how to do it. Thus, after a manager has set goals and worked out a plan to accomplish those goals, the next managerial function is to organize people and allocate resources to carry out the plan. People who know how to make effective use of their resources can make any organizational design or pattern work efficiently. A manager has to create the right conditions to enable the employees to effectively utilize the resources of the organization to achieve organizational goals. He has to make the employees understand the necessity of cooperation for accomplishing tasks. Employees should understand their roles and responsibilities and should work together to achieve the organizational objectives. This applies to any organization – business, government, or a football team. For a subordinate to understand his role, a manager must provide verifiable objectives and a clear picture of the major duties to be performed. The manager must also specify subordinates’ authority and responsibility. This gives the subordinate an idea of what he must do to achieve the goals and objectives of the organization. In addition, a manager should provide the subordinates with necessary information and tools for effectively performing their roles. Organizing is therefore designing and maintaining a formal structure of roles and positions.
DEFINITIONS OF ORGANIZING
According to Stephen P. Robbins and Mary Coulter, ‘organizing’ is “determining what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom, and where decisions are to be made. Thus, organizing refers to important dynamic aspects such as what tasks are to be performed, who has to perform them, on what basis the tasks are to be grouped, who has to report to whom and who should have the authority to take decisions. L.A. Allen defined organizing as “the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.” 1 According to this definition, organizing is a management function involving assigning duties, grouping tasks, delegating authority and responsibility and allocating resources to carry out a specific plan in an efficient manner. In a nutshell, organizing refers to the grouping of activities and resources in a logical fashion.
BENEFITS OF ORGANIZING
Effective organizing provides numerous organizational benefits: • The process of organizing helps an individual develop a clear picture of the tasks he or she is expected to accomplish. • The process of organizing supports planning and control activities by establishing accountability and an appropriate line of authority. • Organizing creates channels of communication and thus supports decision-making and control.
• The process of organizing helps maintain the logical flow of work activities. By so doing, it helps individuals and workgroups to easily accomplish their tasks. • Organizing helps an organization make efficient use of its resources and avoid conflict and duplication of effort. • Organizing coordinates activities that are diverse in nature and helps build harmonious relationships among members involved in those activities. • The process of organizing helps managers to focus task efforts such that they are logically and efficiently related to a common goal.
CLOSED SYSTEM VS OPEN SYSTEM
Closed System View of Organizations The classical management theorists assumed that the primary goal of organizations was economic efficiency, and that organizations were essentially closed systems. Consequently, they regarded organizations as rational and economic entities. According to Louis E. Boone and David L Kurtz, “Closed systems are sets of interacting elements operating without any exchange with the environment in which they exist.” 2 This definition implies that closed systems require no inputs – human, technical, etc. – from the external environment in which they exist. But no organization can be a totally closed system. For instance, even a relatively closed system, like a wind-up alarm clock, requires outside intervention when it slows down or goes
out of order. Thus, a totally closed system is only a theoretical concept. Different systems differ in the degree to which they depend on the external environment for information, material and energy inputs. The two basic characteristics of a closed system are: • • It is perfectly deterministic and predictable. There is no exchange between the system and the external environment.
If the initial conditions and the stimuli in a closed system are known, the final condition, i.e., the result can be predicted with certainty. Let us consider the example of a pool table. Prior knowledge of the following conditions and stimuli make it possible to accurately predict where each ball will come to rest: • • • • • • the position of every ball on the table the elasticity of the bumpers the coefficient of friction between the balls and the table the force with which the cue ball is hit the direction of the cue ball the type of spin on the cue ball
Classical management theorists borrowed certain ideas from the closed-system concept that was popular during that period of time. As a result, these theorists emphasized structure and attempted to eliminate environmental disruptions that could affect their studies of planned systems activities. Open System View of Organizations Traditional closed-system views (like scientific management, the universal process approach, and bureaucracy) ignored the influence of the external environment. This sometimes led to the failure of plans and inefficient handling of resources. Unlike the closed-system approach, the open-system concept stressed the need for flexibility and adaptability in organizational structure, and the mutual interdependence between the organization and its external environment. According to this concept, organizations should be adaptive and should take into consideration the influence of the external environment. According to Andy Groove, former CEO of Intel Corp, “A corporation is a living organism, and it has to continue to shed its skin. The modern open-system model of organizing allows an organization to interact with its environment and evolve its organizational structure gradually over time. Thus, open systems are based on a biological model rather than a physical one. Boone and Kurtz define an open system as “a set of elements that interact with each other and the environment, and whose structure evolves over time as a result of interaction. The open-system concept is based on the assumption that no system is totally deterministic or predictable because of the uncertainties in the external environment. Here again, let us consider the example of the pool table. As a player strikes the cue ball, his or her opponent may pick up a ball from the table. This disturbs the game and it now becomes impossible to predict where the balls will ultimately come to rest. This is analogous to the influence of the environment on the system. An organization is a system consisting of several subsystems which interact with one another. The organization, in turn, is a subsystem of a larger system – social, political, economic or legal system. System-to-system interactions, like the movement of capital (example: corporate borrowings), the movement of goods and services (example: international trade), and the movement of people in and out of the labor force, are as important as the systems themselves.
SPAN OF MANAGEMENT
Organizations are growing in terms of size and geographical coverage, thereby increasing the workload of executives. To cope up with this workload, managers should delegate routine activities to their subordinates. Delegation of such activities would leave managers free to handle key strategic issues. The number of subordinates a manager has to supervise has a direct bearing on the degree to which managers can interact with and supervise subordinates. The span of control refers to the number of subordinates a superior can supervise efficiently and effectively. According to Kathryn M. Bartol and David C. Martin, “The span of management or span of control is the number of subordinates who report directly to a specific manager.” The principle of span of management states that there is a limit to the number of subordinates a manager can effectively supervise, but the exact number will depend on the impact of underlying factors. One important thing is to be noted in the definition cited above. It is not how many people who report to a manager that matters. What matters is how many people who have to work with each other report to a manager. What counts are the number of relationships rather than the number of men. The span of control is a very important principle that emphasizes the need for coordination among the subordinates working under a particular manager. The question therefore arises: how many people can a manager supervise effectively? Students of management have come to the conclusion that a manager can effectively manage usually four to eight subordinates at the upper levels, and eight to fifteen subordinates at the lower levels. According to the British consultant, Lyndall Urwick, the ideal number of subordinates for a higher level executive should be four while the number of subordinates for an executive at the lower level may be eight or twelve. Others are of the view that a manager can manage twenty to thirty subordinates.
THE PROCESS OF ORGANIZING
The process of organizing follows a logical sequence. The process of organizing consists of the following six steps: • • • The objectives of the organization should be established The supporting objectives, policies and plans should be formulated The activities required to achieve the objectives should be identified and classified
• The best way of grouping the activities and utilizing the available human and material resources should be chosen • Authority should be delegated to the head of each group so that they can perform their activities • The various groups should be connected to each other, both horizontally as well as vertically, by means of authority relationships and information flows.
PREREQUISITES FOR EFFECTIVE ORGANIZING
• The span of management and the levels of organization are clearly defined
• The factors determining the basic framework of departmentation, along with their strengths and weaknesses, are taken into consideration • The different kinds of authority and responsibility relationships that exist in an organization are understood • The way authority is delegated throughout the organization structure, along with the degree of delegation, is taken into consideration • The way the manager implements organization theory is considered
Human Resource Management and Staffing
• • • • Human Resource Management: An Overview Staffing Recruitment Selection
The most important resource of an organization is its human resources – the people who work in the organization. People are vital for the effective operation of a company. To meet the challenges and competitive atmosphere of today’s business environment, managers must recognize the potential of human resources, and then acquire, develop and retain these resources. This forms the basis of human resource management (HRM). HRM is the management of various activities that are designed to enhance the effectiveness of the manpower in an organization in the achievement of organizational goals. Acquiring skilled, talented, and motivated employees is an important part of HRM. Human resource management forms a crucial function in organizations of all sizes. Larger firms usually have a separate HRM department. Small organizations, however, cannot always afford to have a separate HRM department that can continually follow the performance of individuals in the organization and review their accomplishment of goals. Instead, in such organizations, each manager is responsible for utilizing the skills and talents of the employees under him, effectively. Traditionally, HRM departments had a relatively small role to play in the organization’s overall mission and plans. They developed staffing plans, handled complaints, determined benefits and compensation, and conducted performance appraisal programs. These activities were, and still are, very important in managing an organization. However, today HRM departments are playing a more strategic role in charting the course of their firms. Changes in the environment, such as increasing costs, changing demographics and limited skilled labor supply, rapid technological changes and the need for new skills, have created a strategic need for HRM expertise. These changes have led to the acknowledgment that human resources need careful attention and are vital to the success of any business. In this chapter, we will first discuss HR planning. The other steps in the HRM training and development, performance appraisal, and compensation will also later part of the chapter will discuss the two important elements of staffing selection. The chapter concludes with a description of the socialization process of process – staffing, be discussed. The – recruitment and new employees.
Human resource management: an overview
Human Resource Management (HRM) may be defined as the organized function of planning for human resource needs, and recruitment, selection, development, compensation and evaluation of performance to fill those needs. The HRM process is an ongoing function that aims to keep the organization supplied with the right people in the right positions, when they are needed. The HRM process, shown in Figure 12.1, includes five basic activities: (1) human resource planning, (2) staffing, (3) training and development, (4) performance appraisal, and (5) compensation. Figure 12.1 Human Resource Management Process
Human Resource Planning Human resource planning is the process of determining future human resource needs relative to an organization’s strategic plan and devising the steps necessary to meet those needs . It involves estimating the size and composition of the future work force, and helping the organization acquire the right number and the right kind of people when they are needed. Figure 12.2 Human Resource Planning
Staffing Though the term “human resource management” is frequently used for the managerial function of “staffing,” staffing is just a part of the HRM process and plays an important role. Staffing involves a set of activities aimed at attracting and selecting individuals for positions in a way that will facilitate the achievement of organizational goals. The two basic steps of staffing are recruitment and selection. The staffing process is a systematic attempt to implement the human resource plan by recruiting, evaluating and selecting qualified candidates for job positions in the organization. Recruitment involves finding and attempting to attract job candidates who are suitable for filling job vacancies. Job analysis, job description, and job specification are important tools in the recruitment process. Once suitable candidates are attracted to the job position, the management needs to find qualified people to fill the positions through the selection process. Several methods are used in selecting prospective candidates. These include preliminary screening, application blank, selection test, comprehensive interviews, etc.
Training and Development Although organizations often recruit fully qualified individuals who require little or no training, training is usually undertaken for new recruits as well as for existing manpower, who require improved skills in order to advance in the organization. Employees at all levels – managerial, technical and operative – will require some training at some point of time in their careers. Although the objectives, methods, and course or program contents often differ, the basic principles of teaching/learning are the same. Training is formally defined as a planned effort to improve the performance of the employee in his area of work. In other words, training denotes efforts to increase employee skills in their jobs. For instance, employees might be instructed in new decisionmaking techniques or the capabilities of data processing systems. Development programs are designed to educate employees beyond the requirements of their present positions in order to prepare them for promotions. They also help them get accustomed to the organizational climate. Development is long-term in nature. It helps the employee fit into the organization. Thus, the processes of training and development aim at increasing the ability of individuals and groups to contribute to organizational effectiveness.
Performance Appraisal Performance appraisal compares an individual’s job performance against standards or objectives developed for the individual’s position. The process of performance appraisal involves defining the expectations for employee performance, measuring, evaluating and recording employee performance against these expectations, and providing the employee with feedback regarding his performance. The major purpose of performance appraisal is to influence employee performance and development in a positive way. When the performance is high, the individual is likely to be rewarded (by a hike in pay or a promotion). If performance is low, some corrective action (such as additional training and development) might be arranged to make the performance meet the desired standards. Thus, effective performance appraisal as a control technique, requires standards, information and corrective action. Standards in performance evaluation are prior specifications of acceptable levels of job performance. Information must be available in order to measure the actual job performance against the standard job performance. Corrective action must be taken by managers to restore any imbalance between actual and standard job performance.
Compensation consists of the wages paid directly to the employees for the amount of time worked or the number of units produced. It also includes the monetary and non-monetary benefits that an employee receives as part of his employment relationship with the organization. Wages paid for time worked (or number of units produced) are typically payments made in the form of cash and reflect direct work-related remuneration such as basic pay, merit increases, or bonuses. Benefits, on the other hand, are forms of supplementary non-monetary payments over and above the wages paid. They include various protection plans (such as employee insurance), services (such as company cafeteria), pay for time not worked (such as during vacations or sick leave), and income supplements (such as stock ownership plans). A sound compensation program enhances the organization’s ability to attract and retain employees. The compensation program affects every member of the organization, and it is one of the most important and time-consuming tasks of the human resources department.
Motivating Employees for Job Performance
• • • Definitions and Meaning of Motivation Classification of Motivation Theories Motivational Techniques
In any type of organization, a manager must know what motivates his workers in order to make each individual employee perform to the best of his ability. It is not an easy task to motivate employees because they respond in different ways to their jobs and to organizational practices. Motivation is a human psychological characteristic that affects a person’s degree of commitment. It is the set of forces that move a person towards a goal. It deals with how behavior is energized, how it is directed and how it is sustained. The manager’s challenge, then, is to channel this energy and direct this behavior toward the organization’s ends. Factors that affect work motivation include individual differences and organizational practices. Individuals differ in their personal needs, values and attitudes, interests and abilities. Organizational practices that affect motivation include the rules, policies, managerial practices and reward systems. In order to motivate employees, managers must consider how these factors influence and affect their job performance.
DEFINITIONS AND MEANING OF MOTIVATION
According to Stephen P. Robbins, motivation is the willingness to exert high levels of effort toward organizational goals, conditioned by the effort’s ability to satisfy some individual need. Fred Luthans views motivation as “a process that starts with a physiological or psychological deficiency or need that activates behavior or a drive that is aimed at a goal or incentive.” The three key elements in the above definitions are needs, drives and goals. Needs set up drives aimed at goals; this is the basic process of motivation. Figure 16.1 depicts the motivation process. Need is the origin of any motivated behavior. Need is a felt deprivation of physiological or psychological well-being. Needs exist in each individual in varying degrees. When an individual recognizes a need, he is driven by a desire to fulfill the need. Drives are directed at fulfillment of needs. Drives are action-oriented and provide an energizing thrust toward reaching a goal. Incentives or goals are the instruments used to induce people to follow a desired course of action. Once the goal is attained, the physiological or psychological balance is restored and the drive is cut off.
Figure 16.1: The Basic Motivation Process
Table 16.1: Approaches to Motivation Type Content Characteristics Concerned with factors that arouse, start or initiate motivated behavior Theories 1. Needs hierarchy theory 2.Two-factor theory 3.ERG theory Process Concerned not only with factors that arouse behavior, but also with the process, direction, or choice of behavioral patterns 1.Expectancy theory 2.Equity theory Motivation by clarifying the individual’s perception of work inputs, performance requirements and rewards. Managerial Examples Motivation by satisfying individual needs for money, status, and achievement.
Maslow’s needs hierarchy theory One of the most popular explanations for human motivation was developed by the psychologist, Abraham Maslow and popularized during the early 1960s. Maslow’s hierarchy of needs theory argues that human needs form a five-level hierarchy (see Figure 16.2). Maslow classified these needs into five groups: physiological needs, need for security, social needs (love and belongingness), self-esteem needs and self-actualization needs. Figure 16.2: Maslow's Needs Hierarchy
Herzberg’s two-factor theory Motivators in the Herzberg’s two-factor theory correspond to the higher-level needs of esteem and self-actualization in Maslow’s needs hierarchy, while the hygiene factors correspond to Maslow’s physiological, safety and social needs. Table 16.2 compares Maslow’s and Herzberg’s theories of motivation. Table 16.2: Comparison of Maslow’s and Herzberg’s Theories of Motivation MASLOW’S NEEDS HIERARCHY OF HERZBERG’S TWO-FACTORY THEORY
Self-actualization needs Esteem needs Social needs Safety and security needs Physiological needs
Several researchers have challenged Herzberg’s findings. According to some researchers, it is easy to understand why people would associate feelings of satisfaction with factors such as challenge,
growth, and recognition. It is very natural for people to attribute good results to their own efforts and blame external factors for their failures. Thus, these researchers contended that satisfaction and dissatisfaction in individuals are not the outcome of different factors but it is individuals who assign different sources to their successes or failures. Edwin Locke, who reviewed research pertaining to Herzberg’s theory spelt out the various problems associated with Herzberg’s findings. They are 1.the theory minimizes differences across people; 2.there is confusion in the original classification and statements; and 3.the arguments put forth by Herzberg are characterized by logical inconsistencies. It was, therefore, concluded that Herzberg’s arguments did not withstand logical or empirical scrutiny. McClelland’s needs theory David C. McClelland has contributed to the theories of motivation by highlighting the importance of three basic needs to understand motivation. They are achievement needs, affiliation needs, and power needs. McClelland’s initial work centered on the need for achievement. Need for achievement Achievement-motivated people thrive on pursuing and attaining goals. People with a high need for achievement have an intense desire for success. They typically seek competitive situations in which they can achieve results through their own efforts and which allow them to obtain immediate feedback on how they are doing. They take a realistic approach to risk. People with high need for achievement are characterized by restlessness and willingness to work long hours. Individuals with high need for achievement can be a valuable source of creativity and innovative ideas in organizations. Supervisors who want to motivate achievement-oriented employees need to set challenging, but reachable goals and provide immediate feedback about their performance. Need for affiliation Need for affiliation refers to the desire to maintain warm, friendly relationships with others. Affiliation-motivated people are usually friendly and like to socialize with others. They suffer pain when they are rejected. They usually exhibit the following characteristics: i. ii. iii. iv. They strive to maintain pleasant social relationships. They enjoy a sense of intimacy and understanding. They are ready to console and help others in trouble. They love to engage in friendly interaction with others.
To motivate individuals with a high need for affiliation, managers should provide them with a congenial and supportive work environment in which they can meet both corporate goals and their high affiliation needs by working with others. In situations that require a high level of cooperation with and support of others, including clients and customers, individuals with a high need for affiliation prove to be assets for an organization. Need for power The need for power refers to the desire to be influential and to have an impact on a group. Powermotivated individuals see almost every situation as an opportunity to seize control or dominate others. They are willing to assert themselves when a decision needs to be made. The power motive has significant implications for organizational leadership and for the informal political aspects of organizations. The need for power is manifested in two forms: personal and institutional. People with high need for personal power try to dominate others by demonstrating their ability to wield power. They often run into difficulties as managers because they attempt to use the efforts of others for their own benefits. In contrast, individuals with a high need for institutional power focus on working along with others to solve problems and achieve organizational goals. McClelland’s work suggests that individuals with a high need for institutional power become the best managers, because they are able to coordinate the efforts of others to achieve long-term organizational goals.
Vroom’s expectancy theory The expectancy theory of motivation was originally proposed by Victor H. Vroom. He contends that before putting in the effort to perform at a given level, individuals consider the following three issues: • • • Valence Valence is the motivational component that refers to the preference of an individual for a particular outcome. In simple words, it signifies ‘how much reward one wants.’ The valence component helps an individual assess the anticipated value of various outcomes. If the possible reward or outcome of the work is of interest to the individual performing it, the valence component will be high. Expectancy Expectancy is the probability that certain efforts will lead to the required performance. In other words, expectancy is the probability (ranging from 0 to 1) that a particular action or effort will lead to a particular outcome. For an individual to exert efforts towards a goal, he must see a non-zero probability of effort leading to that goal. In other words, all individuals will be motivated to reach their goal only when they see some connection between their effort and performance. Instrumentality This refers to the probability that successful performance will lead to certain outcomes. The major outcomes we consider are the potential rewards such as incentives or bonuses, or a good feeling of accomplishment. What is the probability that the performance will be up to the required level? What is the probability that the performance will lead to the desired outcomes? What is the value assigned by the individual to the potential outcomes?
Rewards Managers have found that job performance and satisfaction can be improved by properly administered rewards. Rewards may be defined as material or psychological payoffs for the accomplishment of tasks. Rewards can be broadly categorized into extrinsic and intrinsic rewards. Extrinsic rewards are pay-offs granted by others. They include money, perks and amenities, promotion, recognition, status symbols, and praise. Intrinsic (job content) rewards are self-granted and internally experienced pay-offs. Individuals prefer intrinsic rewards such as satisfaction from performing challenging and interesting jobs. The motivation theories discussed in this chapter throw light on the role of the extrinsic and intrinsic rewards in improving productivity, and offer constructive suggestions about how to use these rewards in organization settings. Participation Motivation theories encourage the use of the participation techniques. The right kind of participation ensures an increase in the motivation and knowledge levels which contribute to the success of an enterprise. Participation allows an individual to satisfy his or her need for esteem (from self and from others). It gratifies the need for affiliation and acceptance. Above all, it gives people a sense of accomplishment and a chance for advancement. MBO (discussed in Chapter 5) is the most popular and modern method of motivating employees at all levels for better performance, since it ensures participation and freedom in setting goals and achieving them.
Quality of Work Life (QWL) One of the most interesting approaches to motivation is the quality of work life (QWL) program. QWL is not only a very broad approach to job enrichment but also an interdisciplinary field of inquiry and action. It is a combination of several fields which include industrial and organization psychology and sociology, industrial engineering, organization theory and development, motivation and leadership
theory, and industrial relations. Managers see this concept as a promising means of dealing with productivity problems and workers’ grievances. Job Enrichment A modern and more permanent approach to motivation is job enrichment. Here, the attempt is to build a higher sense of challenge and achievement in jobs. A job may be enriched in the following ways: 1. Allowing workers to make independent decisions on issues like work methods, sequence and pace or the acceptance or rejection of materials; 2. Encouraging involvement and participation of employees and interaction between workers; 3. Making workers feel personally responsible for their tasks; 4. Ensuring that workers get to know how their tasks contribute to the finished product and the welfare of the enterprise; 5. Giving people feedback on their job performance; and 6. Involving workers when bringing about changes in the physical aspects of their work environment, such as the layout of office or plant, temperature, lighting and cleanliness.
• • • Definition and Meaning of Leadership Key Elements of Leadership Leadership Theories
The success or failure of managers depends on their leadership qualities. They can be successful leaders by helping subordinates to find solutions to their problems. Managers are involved with bringing together resources, developing strategies, organizing and controlling activities in order to achieve objectives. At the same time managers, as leaders, have to select the goals and objectives of an organization, decide what is to be done and motivate people to do it. Thus, leadership is that function of management which is largely involved with establishing goals and motivating people to help achieve them. Leaders set goals and help subordinates find the right path to achieve these goals. A person may be an effective manager – a good planner, and an organized administrator – but lack the motivational skills of a leader. Another may be an effective leader – skilled at inspiring enthusiasm and devotion – but lack the managerial skills to channel the energy he/she arouses in others. Given the challenges of dynamic engagement in today’s business world, most organizations today are putting a premium on managers who also possess leadership skills.
DEFINITION AND MEANING OF LEADERSHIP
• Leadership is the use of non-coercive influence to shape the group or organization’s goals, and motivate behavior towards the achievement of those goals.
It is a process in which one individual exerts influence over others.
• Leadership involves other people – employees or followers – who by the degree of their willingness to accept direction, help to define the leader’s status. • It involves authority and responsibility, in terms of deciding the way ahead and being held responsible for the success or failure in achieving the agreed objectives. • Leadership involves an unequal distribution of power between leaders and group members. Group members are not powerless; they can and do shape group activities in a number of ways. Still, the leader will usually have more power.
KEY ELEMENTS OF LEADERSHIP
It has been observed that every group that attains its goals or performs efficiently has a skilled leader. A leader’s skill comprises of four major elements: (1) the ability to use power effectively and in a responsible manner, (2) the ability to understand the fact that people are motivated by different forces at different times and in different situations, (3) the ability to inspire and (4) the ability to behave in a manner that will develop a harmonious work culture.
Trait Theory of Leadership According to this theory, leaders are born, not made. Many researchers have tried to identify the physical, mental, and personality traits of various leaders. leaders do not possess all the traits mentioned in these theories, whereas many non-leaders possess many of them. Moreover, the trait approach does not give one an estimate of how much of any given trait a person should possess. Different studies do not agree about which traits are leadership traits, or how they are related to leadership behavior. Most of these traits are really patterns of behavior. Behavioral Theories When it became evident that effective leaders did not seem to have a particular set of distinguishing traits, researchers tried to study the behavioral aspects of effective leaders. In other words, rather than try to figure out who effective leaders are, researchers tried to determine what effective leaders do – how they delegate tasks, how they communicate with and try to motivate their followers or employees, how they carry out their tasks, and so on.
Figure 17.3: The Leadership Grid
Situational or Contingency Theories The use of the trait and behavioral approaches to leadership showed that effective leadership depended on many variables, such as organizational culture and the nature of tasks. No one trait was common to all effective leaders. No one style was effective in all situations. Researchers, therefore, began trying to identify those factors in each situation that influenced the effectiveness of a particular leadership style. They started looking at and studying different situations in the belief that leaders are the products of given situations. A large number of studies have been made on the premise that leadership is strongly affected by the situations in which the leader emerges, and in which he or she operates. Taken together, the theories resulting from this type of study constitute the contingency approach to leadership. Situational or contingency approaches obviously are of great relevance to managerial theory and practice. They are important for practicing managers, who must consider the situation when they design an environment for performance. The contingency theories focus on the following factors. 1. 2. Task requirements Peers’ expectations and behavior
3. Organizational culture and policies There are four popular situational theories of leadership: (1) Fiedler’s contingency approach to leadership (2) The path-goal theory, (3) The Vroom-Yetton model and (4) Hersey and Blanchard’s situational leadership model.
This theory was developed largely by Robert J. House and Terence R. Mitchell. The path-goal theory of leadership attempts to explain how a leader can help his subordinates to accomplish the goals of the organization by indicating the best path and removing obstacles to the goals. The path-goal theory indicates that effective leadership is dependent on, firstly, clearly defining, for subordinates, the paths to goal attainment; and, secondly, the degree to which the leader is able to improve the chances that the subordinates will achieve their goals. In other words, the path-goal theory suggests that the leaders should set clear and specific goals for subordinates. They should help the subordinates find the best way of doing things and remove the impediments that hinder them from realizing the set goals. Figure 17.4: The Path-Goal Theory
The Control Function
• • • • • Importance of Controlling Levels of Control Basic Control Process Types of Control Requirements for Effective Controls
Control is an essential function of management in every organization. The management process is incomplete and sometimes useless without the control function. The management process includes planning, organizing, staffing, leading, and controlling. Planning sets forth the objectives a manager intends to achieve. Organizing provides the structure of an organization by determining how and where the employees will be placed in the organization and the responsibilities that they will need to fulfill to attain predefined objectives. Staffing involves the managerial function of placing the right person in the right job in the organization. Leading involves the managerial function of influencing, motivating and directing the human resources of the organization to achieve organizational goals. The control function is concerned with ensuring that the planning, organizing, staffing and leading functions result in the attainment of organizational objectives. In other words, control is a tool that helps organizations measure and compare their actual progress with their established plan. The term ‘control’ has different meanings in different contexts. In the management context, ‘control’ refers to the evaluation of performance and the implementation of corrective actions to accomplish organizational objectives. Some people confuse ‘control’ with ‘supervision.’ Supervision is a part of control; it helps identify deviations from the established standards of performance.
IMPORTANCE OF CONTROLLING
The control function is gaining importance in today’s organizations due to a number of factors. These factors include the need for accountability in organizations, the need to detect environmental changes that significantly affect organizations, the growing complexity of present day organizations and the need to identify operational errors in organizations to avoid incurring excessive costs. In addition to addressing the above mentioned factors, controlling plays an important role in helping managers detect irregularities, identify opportunities, handle complex situations, decentralize authority, minimize costs, and cope with uncertainty. BASIC CONTROL PROCESS Even though control systems need to be tailored to suit specific situations, they all involve the same basic process. When exercising the control function, a manager measures the performance of an individual, a plan, or a program against certain predetermined standards and takes corrective action if there are any deviations. The process involves the following steps:
i. ii. iii. iv. v.
Determining areas to control Establishing standards Measuring performance Comparing performance against standards Recognizing good or positive performance
Taking corrective action when necessary Adjusting standards and measures when necessary
TYPES OF CONTROL
Controls Based on Timing Table 19.2: Major Control Types based on Timing Stages of Production Capital Labor Input Raw materials Market information Equipment Planning Transformation process Organizing Staffing Leading Controlling Goods Services Output Profits Waste materials Feedback control Concurrent control Regulates ongoing activities that are a part of the transformation process to ensure that they conform to organizational standards. Exercised after a product or service has been produced to ensure that the final output meets quality standards and goals. Feed forward control Type of Control Description Inputs are monitored to ensure that they meet the standards necessary for the transformation process.
REQUIREMENTS FOR EFFECTIVE CONTROLS
Controls should reflect plans, positions and structures They should be understandable They should be cost-effective Controls should identify only important/major exceptions Control systems should be flexible Control systems should provide accurate information