Principles of Management

1. Principles of Management Management: Definitions, Roles & Skills

2. Management: Definitions • “Management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aim(s) viz. to create a surplus(s).” ….Weihrich & Koontz • “Management is not an absolute; rather it is socially and culturally determined. Across all cultures and in all societies, people coming together to perform certain collective acts encounter common problems having to do with establishing direction, coordination and motivation. Culture affects how these problems are perceived and resolved.” …The Art of Japanese Management by R. Pascale & A. Athos .

3. Management: Definition …ctd. • Applies to and throughany kind of organization • Applies to Managers at all levels • Concerned with “Doing the right things right at all times”: • Effectiveness: Achievement of objectives (Right Things); • Efficiency: Achieving those objectives with least amount/ sacrifice of resources (Things Right); • Continuous Improvement: in creating increasing ‘surplus’ (at all times); • “Improve or die” = survival of the fittest • “what gets measured, gets managed and improved” e.g. Productivity=Output / Input ratio • Collective, cohesive and consistent human effort towards accomplishing a common objective.

4. Management: Definition …ctd. Political Regulatory Economic Organization Societal Globalization Technological Additionally, Managers need to factor in external environmental forces: For maximum benefit to the organization

5. Management: Roles & Skills • Management - what managers do: • Fredrick Taylor’s path-breaking “scientific approach” • Henri Fayol’s classical definition of ‘functions’, now modified to: • Plan -- Organize -- Lead(Command&Coordinate) -- Control • Mintzberg’s map of managerial ‘roles’: • Interpersonal + Informational + Decisional • Katz’s interpretation of ‘skills’: • Technical / Human / Conceptual • Management – ‘get things done through others’: • Leadership: “The ability to influence a group towards achievement of goals”. • Motivation: “The willingness to exert high level of effort towards goals” • Communication:”The transference and understanding of meaning”

6. Management: roles & skills …ctd. Managerial Roles (Mintzberg) • Role Description Examples • Interpersonal • Figurehead symbolic head; required to show Ceremonial, • ‘face’ in social & legal conditions. Civic etc. • Leader Motivating & directing subordinates project plan • Liaison Networking outside for information Industry - • & favours group meets • Informational • Monitor nerve centre and interpretator Reports • Disseminator networking within the organization Meetings etc. • Spokesperson Transmit intent to outsiders; expert Board Meets • Decisional • Entrepreneur Opportunity finding& reacting Strategy Plan • Trouble shooter Handling unexpected disturbance Contingency • Resource allocator Initiating/approving changes Budgeting • Negotiator Getting best deal for Organization Contracts

7. Management: roles & skills Board Conceptual Exec. HUMAN Mgr. Technical Supr. Managerial Skills(Katz & others) • Technical Skills: Application of specialized knowledge or expertise acquired though formal training & its use. • Human Skills: Ability to work with people, understand and motivate groups & individuals. • Conceptual Skills: Mental ability to recognize, analyze, diagnose and think through complex situations. Skills Needed

8. Principles of Management 2 Management: A Systems Approach

9. ENVIRONMENT input Transformation process output Feedback (Reenergizing the system) System Boundary Systems approach to Management Organization as a System receives Input, transforms it through a Process for Output and Operates in an Environment (economic, regulatory and other forces)

10. Systems approach to Management …ctd. Systems Concepts • System Boundariesand Subsystems • > Systems often consist of numerous subsystems. • > Each subsystem has elements, interactions with other subsystems, and objectives. • > Subsystems perform specialized tasks for the overall system. • Subsystem Interfaces and Interface Problems Sub-System 1 Sub-System 2 Sub-System 3

11. Systems approach to Management …ctd. Outputs and Inputs • Systems produce Outputs from Inputs – i.e. the Inputs are converted to Outputs. • Outputs of one subsystem become inputs to another subsystem. • Outputs must adhere to standards to be useful or acceptable to the next subsystem. System Environment • Environment consists of people, organizations and other systems that supply data to or that receive data from the system • Managers at different levels perceive ‘Environment” differently

12. Systems approach to Management …ctd. “Inputs”: 5 Ms of Management • Inputs or the resources managers deal with are: • Man: human resources, both inside and connected with an organization; • Materials: goods (hard & software, processed or semi-finished) and services required to create the sellable end product; • Machines: technology and expertise deployed towards the transformation process; • Methods: systems, procedures and processes seamlessly put together for the transformation; • Measurement: score-keeping and in-process monitoring continuously with due feedback to keep on-course on time. • “Money” is required for generating all theses Ms – managers need to acquire, deploy, generate and distribute money as a primary need for business!

13. Systems approach to Management …ctd. Output for “Stake-holders” in Business: “Stake”: Something wagered or risked; an interest in an enterprise with contingent gain or loss …Webster ‘s dictionary “Holders” who have stake in Business: • Shareholders: are the owners. They have put in their money in the enterprise, expecting better returns from it than from other ventures; • Society: includes the State, provincial and local governments for the improvement of ‘quality of life’ of its citizens;

14. Systems approach to Management …ctd. Output for “Stake-holders” in Business …ctd. • Suppliers: continuity of their enterprise depends on the success of the customer enterprise; • Customers: require the goods and services provided by the enterprise, better than than those from its competitors. The enterprise is, in turn, a supplier to its customers; • Employees: livelihood depends on the progress and success of the employing enterprise; • There is a “freedom of choice” (for association) between each of these stake-holders and the enterprise in the longer term: • But they sink or swim together in the shorter term • Length of term definition varies with individuals!

15. Systems approach to Management …ctd. Management as a system transforms inputs: • by theprocess of • Planning • + Organizing • + Staffing • + Leading • + Controlling to accomplish certainpre-determined,(as derived from stakeholder needs) goals or objectives

16. Systems approach to Management …ctd. Stakeholders Shareholders; Society; Customers; Employees; Suppliers Man, Machine Material, Method, Measurement Product/Services, Profits,Customer & Societal satisfaction, Other Long-term Goals Organizing Inputs (Goal Oriented) Outputs (External To Orgnzn.) Planning Staffing Controlling Leading Stake holder Feedback (reenergizing the system) EXTERNAL ENVIRONMENT(Opportunities, Constraints)

17. Principles of Management 3 Management Process First Step: Planning

18. Planning • Planning involves selecting objectives or goals and the course of actions to achieve them: • Provides the bridge to take us from where we are to where we want to go; • Is a rational approach to achieving pre-selected objectives - based on innovation, knowledge and purpose; • Decision making in choosing the best from alternative courses of action and is integral to planning;

19. What kind of resources needed? What kind of people & org. structure to have? Plans How to lead them to reach planned goals? How to control in case of deviation from plan ? Plans as foundation of Management The primacy of Planning

20. Types of Plans • Mission / Purpose • The basic function or ‘reason for existence’ of an enterprise/ organization Case in point:Mission of Indira Institute “To train our students to become the best business minds and entrepreneurs today, who will lead their companies successfully into the future tomorrow , locally, nationally and globally.”

21. Type of Plans (Cont’d) • Objectives/ Goals • The end towards which activity of an organization is aimed, e.g. • For a Business enterprise – profit, surplus creation; • For a Management Institute: The number of employable/useful trainees; • Strategies • Determination of the long term objectives and adoption of a course of action • Gives a frame work for linked action-plans, communicated systematically to guide thinking and actions.

22. Types of Plans (cont’d) • Policies • “Plans” that are general directional statements (or understandings) that guide/help in decision making: • Repeat decisions taken ‘reflexively’; • Delegation of tasks without loss of control. • Some discretion is permissible depending on circumstances thus encouraging initiative within limits and situational adjustments; • Issues with “Policy” • Seldom documented in writing • Subject to interpretations

23. Types of Plans (cont’d) • Procedures • Plans that are chronological sequences of required actions: task-oriented in nature; • Cuts across department boundaries (sub-systems) in an organization: e.g. customer complaint handling procedure; • Procedures and policies are inter related: e.g. authorization for paid leave • Policy governs quota, responsible authority etc. • Procedure governs application, grant and record-keeping. • Rules • Specific actions or non-actions allowing no discretion • Caution: rules (and procedures too) limit initiative!

24. Types of Plans (cont’d) • Programs • Action plans (mainly non-routine or for changed activities) including, task assignments, steps to be taken, resources to be deployed etc. to achieve a (new/renewed) goal; • Primary program may require supporting programs, spreading across the enterprise; • Perfect coordination between supporting & primary programs essential to avoid delays, unnecessary costs and expected roll-out. • Programs are a complex of (sub)goals, policies, rules and other elements necessary for the course of action e.g. obtaining ISO certification.

25. Types of Plans (cont’d) • Budgets • A statement of expected results expressed in “Numerical terms” e.g. financial operating budget = “profit plan”; • Budgets enforce precision in thinking: • Making a budget is ‘planning’ by itself; • Encourages innovation – a “different” way to work • Budgets serve for ‘Control’: • Enforces discipline in execution of plans; • Instills cost consciousness; • Makes people (constantly) plan!

26. Being aware of challenges Setting Goals/ Objectives Planning premises Identifying alternatives Market, Customer’s wants, Competition, Own strengths & weakness What to accomplish & when Internal & external Environment/conditions Formulating Supporting plans Budgeting (Numberizing Plans) Comparing & choosing an alternative e.g., Sales budget Operational Expense budget, Capital expenditure budget e.g., plan to buy Equipment, recruit & train Employees, develop product etc Decision making Steps in Planning

27. The Planning Process • Planning Period: • Short range plans e.g. material procurement plan in a factory • Long range plans e.g. product development plan, plant/production facility installation; • “Urgent” drives out the “Important” – mismatch between short & long term plans! • Planning horizon must allow for actions to run their course – requiring ‘commitments’: • Thus “decisions today” are key to good plans; • Long-term plans reap benefits of good short-term plans.

28. Steps in Planning Being aware of Opportunity Setting Goals/ Objectives Considering, Market, Competition, Customer’s wants, Own strengths &weakness What to accomplish & when Objective = Important end towards which activities are directed; therefore needs verification at the end of the plan period.

29. Mission Overall Objectives & Key result areas. Divisional objectives Departmental objectives Individual objectives Hierarchy of Objectives& Org. Levels Objectives set end results – they need to be supported by a hierarchy of sub-objectives, duly networked through the organization to avoid discord and wasted effort.

30. Hierarchy of Objectives& Org. Levels …ctd. • The Organizational Objectives is deployed into the objectives of : • Divisions Departments  Individual objectives; • The ‘cascade’ principle: seamless flow; • Mutual support & interlocking of goals is essential • Managers must ensure that the components of the network fit each other; • Departments/divisions can be ‘blind-sided’.

31. Top-down Approach Mission Overall Objectives & Key result areas. Bottom-up Response: The result Divisional objectives Departmental objectives Individual objectives Hierarchy of Objectives& Org. Levels …ctd. While setting Objectives, ideally, Top Management should get information / ‘buy-in’ from lower levels to set realistic goals for a good result.

32. Key Result Areas (KRA) • Are areas in which performance is essential for the success of an enterprise • Examples of ‘generic KRA’s: • Market share • Return on Investment (ROI) • Service level • Customer satisfaction • Peter Drucker recommends: Market standing, innovation, productivity, physical & financial resource, profitability, managerial performance & development, worker performance & attitude and public responsibility.

33. Management By Objectives (MBO) • A comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed towards the effective and efficient achievement of organizations’ and individual objectives: • Set-out by Peter Drucker in 1954; • Integrated to personal performance appraisal by Douglas McGregor in 1957; • Has formed the basis for many theories on motivation; • Has been criticized for introducing a short-term focus and undesirable behaviour; • Currently viewed as a ‘way of managing’ – not a specific tool.

34. Weaknesses of MBO • Emphasis on: • short term at the expense of long term • “Results” over “Process” • Individual over collective effort • Failure to grasp and deploy the concept of “seamless cascade” • Difficulty in setting agreed, harmonized goals • Danger of inflexibility

35. Planning Premises & Strategies Setting Goals/ Objectives Planning premises Identifying alternatives Comparing & choosing an alternative What to accomplish & when Decision making Internal & external environment Strategic Planning Process Strategy= determination of the purpose / the basic long-term objectives; the adoption of courses of action and allocation of resources required to achieve the aims.

36. Stakeholder Wishes & Shareholder demands Current External situation External Opportunity & Threat Forecast External situation Management Orientation Enterprise Profile Key success factors & Alternative Strategies Purpose & Major objectives of enterprise Current resource situation Internal Strengths & Weakness Strategic choice Planning Premises & Strategies …ctd. The Strategic Planning Process

37. Planning Premises Porter’s Five Forces : an Model for analysis of the Externals environment.

38. Planning Premises: forecast of demand • Estimate of future demand is made by qualitative methods, time-series methods and/or causal methods: • Qualitative relies on judgement of experts to translate to quantities; • Time-series  statistically interpolate demand on historical data; • Causal method  seek co-relation on cause and effect basis between two (or more) variables to quantify demand; • However, all forecasting methods are limited by: • Handling of un-quantifiable factors e.g. national pride • Unrealistic assumptions fuelled by a desire to succeed • Excessive data required (often unobtainable) to make accurate forecasts • Uncertainty with environmental changes: Technology, Govt. Policy, International alignments, New materials/sources, Climate etc. • Coping with uncertainties require: • Sensitivity analysis & “What if” scenarios (trust instinct!); • Planning for contingencies – with defined cut-in milestones.

39. Customer Relationship Company B’marking Partnering Supplier Competitor Lean Management Generic Strategy • Competitive Advantage • Cost Leadership: • To continually work reducing • the cost prices of products. • Supplier Q-C-D has very high • priority. • Differentiation: • To constantly offer innovative • and unique solutions. Supplier • technology & quality has focus. • Customization: • To offer required services in the • required manner is the focus. • Speed and flexibility important. Ultimate competitive position: - position w.r.t major Customers - K.S.Fs of Competitors - leveraging of suppliers

40. Cash Source Hi Lo Hi Hi STAR ??? “Hold” “Build” Market Growth rate Cash Use Cash Cow DOGS “Divest” “Harvest” Lo Lo Lo Hi Relative Market Share Generic Strategy: BCG MatrixRed: Marketing Perspective; Blue: Financial Perspective

41. Comparing & choosing an alternative Decision making Deployment (MBO etc.) Formulating Supporting plans Budgeting ( Numberizing Plans) Say, Sales budget Operational Expense budget, Capital expenditure budget Say, plan to buy Equipment, recruit & train Employees, develop product etc Planning Premises & Strategies …ctd. Decision Making = is the core of the planning process; a plan does not come into being unless a ‘decision’ i.e. certain commitments of resources, managerial time and money are made and risks are taken. Caution: A “Plan” is not intentions and should not suffer from “Analysis Paralysis”.

42. Decision Making • Decision making is a ‘rational choice’ process, bounded by: • Limitations: time, information and ‘logic’; • Behaviour: Risk averseness and biases. • A key step in the process is to identify those limiting factors, ‘road-blocks’ to each effective (‘right thing’) alternative – then finding a ‘solution’ with least sacrifice of resources (‘thing right’): • Factors: quantitative, qualitative/intangible; • Finding solutions: • marginal analyses – benefits with incremental inputs; • cost-effectiveness – assessment of benefits over costs.

43. “Experience”: good teacher and useful when routine/repeat situations arise under similar circumstances. Without due analysis of the conditions, mistakes tend to repeat or a poor fit results. “Research & analysis”: the approach is in at first understanding the problem (‘half the solution’!), then finding relations between various factors which hinder or foster goal attainment. This is a structured, analytical approach quantitative or otherwise. “Experimentation”: arguably, the best technique to use, particularly when either experience or rationale is lacking/limited. However is expensive and ‘success/failures’ are magnified, results are subject to interpretational errors. Decision Making…ctd. How to select Amongst the Alternatives ?

44. Decision Making…ctd. • Decision making takes place under varying degrees of uncertain conditions and risks. Techniques used to aid the process are: • Risk analysis: every decision is based on interactions amongst different factors/variables – each of which have their own probabilities (towards ‘success’). Analysis of these probabilities yield a risk profile for each alternative path. In the absence of defined probabilities, estimates can be used. • Decision trees: the outcome (measure pre-decided e.g. cost or time) of every step in the decision is charted and a course selected on the most favourable outcome. Very much like making a trip, navigating by using a road-map (refer example in W & K, “Management – a global perspective/10th edn. Pg. 209)

45. Decision Making…ctd. • Flow Charts: as a process-guide to taking a decision and helps as a check-list of key variables, the sequence in which they fall and the interrelations. Key to making a choice or re-examining the path taken are also indicated as risk-reduction devices. (refer example in W & K, “Management – a global perspective/10th edn. Figure 8-5) • Decision Support Systems: a wide variety of (proprietary) computer based programs are available for managers to use their time more effectively for decision making of semi-structured tasks – by providing alternative evaluations. They focus on the process of decision making, taking data provide by the management information systems in enterprises.

46. Principles of Management 4 Management Process: Organizing for results

47. Nature of Organizing • Organizing may be broadly defined as: • The identification and classification of required activities; • The grouping of those activities towards attaining their set objectives; • The assignment of those groupings to a responsible manager, duly empowered; • The provision for coordination among, within and across the groups in the organization. • Organization structures are designed to: • Clarify tasks & responsibilities, • Remove obstacles, • Furnish decision making & communication network • Support attainment of enterprise objectives

48. Firm Infrastructure Human Resource Management Margin Support Activities Technology Development Procurement Inbound Logistics Outbound Logistics Marketing & Sales Operations Service Margin Primary Activities Nature of Organizing …ctd. The Business OrganizationModel: “Value Chain” (Porter,1985) The margin reflects the reward for the risks run by the company. All activities together need to generate ‘value’ greater than the sum of its costs.

49. Nature of Organizing …ctd. The Value Chain: “Primary Activities” • Inbound Logistics:relate to receiving, storing and disseminating inputs; • Operations:associated with transformation of inputs into final product form; • Outbound Logistics:relate to collecting, storing and physically distributing the products to buyers; • Marketing & Sales:relate to advertising, Promotion, sales, distribution-channel selection & management and Pricing; • Service:associated with enhancement or maintenance of product value over life;

50. Nature of Organizing …ctd. The Value Chain: “Support Activities” • Procurement: relates to the function of purchasing inputs used across the firm’s primary and support activities; • Technology Development: relates to know-how, processes & procedures, ‘technology’ embodied in the product design and delivery. Most activities have their own sub-set of technology; • Human Resource Management: directed at recruiting, training, developing and compensating all personnel; • Firm Infrastructure: associated with serving and supporting the firm as a whole, with the company as its customer eg. Finance & accounting, Quality;