ORGANISATION AND MANAGEMENT

MGT 1111

Centre for Professional Development and Lifelong Learning

UNIVERSITY OF MAURITIUS

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ORGANISATION AND MANAGEMENT

MGT 1111

SUPPORT MATERIALS

Centre for Professional Development and Lifelong Learning

UNIVERSITY OF MAURITIUS

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Contributors ORGANISATION AND MANAGEMENT – MGT 1111 was prepared for the

University of Mauritius. The Pro-Vice Chancellor - Teaching & Learning acknowledges

the contribution of the following persons from the Faculty of Law and Management,

University of Mauritius:

Course Authors: R Baichoo (Miss) Associate Professor M Boolaky Associate Professor D Gokhool D Lai Wai J A Peerally (Miss) R R Ramsaran Fowdar (Mrs) A Seebaluck I Vencatachellum Further editing: R R Ramsaran Fowdar (Mrs) August 2009 All rights reserved. No part of this work may be reproduced in any form, without the written permission from the University of Mauritius, Réduit, Mauritius.

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TABLE OF CONTENTS

About the Course

Unit 1

Introduction to Management

- Mrs R R Ramsaran Fowdar

Unit 2 The Evolution of Management - Miss J A Peerally

Unit 3 Planning - Dr M Boolaky

Unit 4 Decision Making - Miss R Baichoo

Unit 5 Organising - Mr D Lai Wai

Unit 6 Motivation - Associate Professor D Gokhool

Unit 7 Leadership - Mr I Vencatachellum

Unit 8 Control - Mr A Seebaluck

References

Answers to “Additional Activities”

Past Examination and Class

Test Papers

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We strongly recommend that you read this section before proceeding with the course.

ABOUT THE COURSE

ORGANISATION AND MANAGEMENT (O&M)– MGT 1111 is a one semester course for both diploma and degree students from the five faculties of the University. Most of you will move into positions of management responsibility at some time in the first part of the twenty first century. What challenges will you face and how would you best be prepared to meet these challenges. O&M aims to provide you with an overview of the evolution and an understanding of the major theories and practices related to the management of organisations. This module will therefore enable you to understand the complex and demanding nature of managerial functions in yesterday’s, today’s and tomorrow’s work environments. HOW TO PROCEED SUPPORT MATERIALS The support materials contain no prescribed textbook. You might, however, find it useful to refer to the following textbooks:

1. Bartol, K.M., Martin, D., Tein, M. & Matthews, G., Management: a Pacific Rim

Focus, (latest edition), McGraw-Hill, Australia.

2. Robbins, S., Management, (latest edition), Prentice-Hall International.

3. Boolaky, M., Gokhool D., Seebaluck A., (1999), Management: Concepts and

Applications, Editions de L’Ocean Indien.

A few copies of these books are available at the UOM Library. There is also a list of references – sources used for the preparation of the units- at the end the support materials. Feel free to consult these books to deepen your knowledge of management and also to prepare assignments.

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A Student Reference Manual is distributed together with the support materials. This is a valuable information source aimed at helping you formulate your written assessment tasks. Video Sessions The course also includes a set of video programmes, Taking the Lead, the Management Revolution (1993), produced by INTELECOM, (USA) and acquired through the Mauritius College of the Air.

The set includes the following episodes:

Video Programmes (30 minutes each) Related to Unit in the support

materials

Episode 1: Management at Work: the

Managerial World

Unit 1: Introduction to Management

Episode 2: In transition: The Changing,

Challenging Environment

Unit 2: The Evolution of Management

Episode 14: All Systems Go: Motivating

for Excellence

Unit 6: Motivation

Episode 16: At the Helm: Styles of

Leadership

Unit 7: Leadership

You will not be viewing all episodes in one go but your tutor will be organising sessions

for you as and when the relevant units are being covered in the support materials.

For some units, your tutor has prepared a list of questions and issues that have to be borne

in mind while viewing the video programmes. Be prepared to discuss your responses

after the video viewing.

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HOW DO I USE THE SUPPORT MATERIALS? Take a few minutes now to glance through the entire document to get an idea of its

structure. Notice that the format of the different units is fairly consistent. For example,

each unit begins with a UNIT STRUCTURE, an OVERVIEW and a list of

LEARNING OBJECTIVES.

The UNIT STRUCTURE identifies the main topics in the Unit. The OVERVIEW provides a brief introduction of the unit. You should then read the LEARNING OBJECTIVES. These objectives identify the

knowledge and skills you will have acquired once you have successfully completed the

study of a particular unit. They also show the steps that will eventually lead to the

successful completion of the course and provide a useful guide for review.

The ACTIVITIES sprinkled throughout the unit are designed to reinforce the learning

objectives for each part of the course. Therefore, make sure that you complete all the

activities and be prepared to discuss and share your answers with your tutor and peers.

WHERE DO I BEGIN? You should begin by taking a look at the TABLE OF CONTENTS. The table provides

you with a framework for the entire course and outlines the organisation and structure of

the material you will be covering. The Suggested Course Map indicates how you should

allocate your workload and what you should be working on in each week to be ready for

the respective tutorial. As far as possible, stick to the Suggested Course Map to ensure

that you are working at a steady pace and that your workload does not pile up.

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SUGGESTED COURSE MAP

Week

Unit Topic Tutorial Submission of

Assignment/ Class Test

1

Introduction to O & M Module 1

2 1 Introduction to Management 2

3 2 The Evolution of Management 3

4 3

Planning 4

5 4

Decision Making 5

6 Discussion on Units 1-4 6

7 Class Test End of Week 7

8 5 Organising 7 Submission of Assignment

9 6 Motivation 8

10 7 Leadership 9

11 Discussion on Units 5 - 7 10

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Complete Assignment

Date to be confirmed during the semester

13 8 Control 11

14 Discussion on Unit 8 12

15 Revision 13

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SUGGESTED ASSESSMENT CRITERIA → COURSE GRADING SCHEME:

Assignment: 15 marks Class Test: 15 marks Examination: 70 marks

CLASS TEST: Scheduled for Week 7

→ FINAL EXAMINATIONS:

• Scheduled and administered by the Registrar’s Office • A two-hour paper at the end of the semester. STUDY TIPS 1. Organise your time. It is best to complete each assigned reading in one sitting.

The logical progression of thought in a chapter/unit can be lost if it is interrupted. 2. Be an active reader. Use question marks to flag difficult or confusing passages.

Put exclamation marks beside passages you find particularly important. Write short comments in the margins as you go. For example, if you disagree with an author’s argument or if you think of examples which counter the position presented, note your opinions in the margin.

If you prefer to leave your book pages unmarked, you can make your notations on

“post-it-notes”. 3. Read critically. You must evaluate, as well as appreciate and understand, what

you read. Ask questions. Is the author’s argument logical? Are there alternatives to the author’s explanations or to the conclusions drawn? Does the information fit with your experience?

4. Take notes. If you make notes on an article or chapter right after finishing it, you

reap a number of benefits. First, note-taking allows you an immediate review of what you have just read. (You will find that this review helps you recall information). Second, it gives you an opportunity to reassess your flagged or margin comments. Finally, it gives you a second shot at deciphering any confusing passages.

5. Review your scribbling! Whether or not you make separate notes on your

readings, review your flags, underlining and marginalia. Study closely those passages you considered significant or difficult.

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6. Write down your ideas in a course journal. As you progress through the course,

the new information you absorb will stimulate new thoughts, questions, ideas, and insights. These may not be directly related to the subject matter, but may be of great interest to you. Use these ideas to focus your personal involvement in this and other courses.

7. Your ability to explain the subject matter to others is a good test of your true

comprehension of the material. Try explaining the material you are learning to others, classmates or friends, without resorting to jargon. Even if some of them are not directly involved with the techniques discussed in this course, many of the concepts may be of interest to them.

8. Activities found in units will not be marked. We strongly recommend that you

do not skip any of them. They will help you prepare for the graded assignments.

Now, it’s time to get to work. Good luck and enjoy the course!

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UNIT 1 INTRODUCTION TO MANAGEMENT

Unit Structure

1.0 Overview

1.1 Learning Objectives

1.2 The Meaning of Management

1.3 Management Functions

1.4 The Importance of Management

1.5 Management Skills

1.6 Types of Managers

1.6.1 Management Levels

1.6.1.1 Management Levels and Functions of Management

1.6.1.2 Management Levels and Skills

1.6.2 Responsibility Area

1.7 What Managers Actually Do

1.7.1 Work Methods

1.7.2 Managerial Roles

1.7.3 Agenda-Setting and Network-Building

1.8 The Challenge of Management

1.9 Key Concepts

1.10 Additional Activities

1.11 Video Session

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1.0 OVERVIEW

This Unit introduces the concept of management and outlines the work of a manager.

This Unit includes a video session. Refer to the Study Guide.

1.1 LEARNING OBJECTIVES

After you have successfully completed this Unit, you should be able to do the following:

1. Define management.

2. Explain the four functions of management.

3. Discuss the importance of management.

4. List the three skills, which an effective manager requires.

5. Describe the various management levels in a large organisation.

6. Explain how managerial work differs according to hierarchical level and

responsibility area.

7. Discuss how the importance of management functions and the skills needed by

managers vary at different levels of the hierarchy.

8. Describe the ten major roles performed by managers and evaluate Mintzberg's role

approach.

9. Explain the aims of agenda setting and network-building and identify the factors

which influence a manager's work agenda.

10. Explain how vision, ethics, respect for cultural diversity and training can help

people meet the challenge of management.

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Warm-up activity

Peter is the manager of a branch of Pizza Hut. Jot down the duties which you think he has

to perform as the manager of a pizzeria. Your answers will be discussed in the tutorial.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

1.2 THE MEANING OF MANAGEMENT

The task of management is to get work done through other people in order to achieve the

goals and objectives of organisations. An organisation can be defined as a systematic

arrangement of two or more people who work together to achieve a specific goal or set of

goals.

While some organisations are structured in a very formal way, such as Happy World

Foods Ltd., Mauritius College of the Air, Air Mauritius Ltd. and the Ministry of Labour,

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others are more casually organised, like your neighbourhood football team. However, all

these organisations share three common characteristics (Robbins 1988):

(i) Each has a distinct purpose which can be expressed in terms of a goal or set of

goals. For instance, the goal of the University of Mauritius is to provide quality

tertiary level education to students, and the goal of the neighbourhood football

team is to do its best to win all football matches played with rival teams.

(ii) Each is composed of people.

(iii) Each develops a structure that defines and limits the behaviour of its members.

For example, rules and regulations are created, and tasks and responsibilities are

assigned.

Activity 1

Does Pizza Hut satisfy the basic criteria underlying the concept of an organisation?

Elaborate on your answer.

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An organisation must be organised and properly managed if it is to achieve its goals.

Now, let's look at the various definitions of management.

'Management is the art of getting things done through other people.'

Mary Parker Follett

'Management refers to the process of getting activities completed efficiently, with and through other people.'

Stephen Robbins

'To manage is to forecast and plan, to organise, to command, to coordinate and to control.'

Henri Fayol

'Management is the process of achieving organisational goals through engaging in the four major functions of planning, organising, leading and controlling.'

Kathryn Bartol et al.

'Management is the process of planning, organising, leading and controlling the work of organisation members and of using all available organisational resources to reach stated organisational goals.'

James Stoner et al.

The above definitions are extremely broad. Follett's definition highlights the social nature

of management and indicates that managers achieve organisational goals by allocating

and delegating the required tasks to employees and not by performing the tasks

themselves. This definition is not adequate of course and this is recognised in Robbins'

definition of management where it is said that managers work in collaboration with other

people.

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It is worth explaining the term 'efficiently' used by Robbins and the difference between

efficiency and effectiveness. Managerial performance in an organisation comprises two

dimensions: effectiveness and efficiency (Drucker 1967).

Effectiveness is 'the ability to choose appropriate goals and to achieve them' (Bartol et al.

1997), that is doing the right thing. Effectiveness can therefore be divided into two

parts: first, choosing the right goals and second, achieving these goals.

Efficiency is 'the ability to make the best use of available resources at minimum cost in

the process of achieving goals (Bartol et al. 1997), that is doing things right. Efficiency

is basically an 'input-output' concept. An efficient manager is one who achieves more

output or results from a given input (such as materials, money, labour, equipment) or the

same output from less input (Robbins 1994). Efficient managers should therefore

minimise the cost of resources.

The word 'process' in the definitions by Bartol et al. and Stoner et al. indicates that

managerial activities are carried out in a systematic way. All managers achieve their

goals by engaging in the four main functions of planning, organising, leading and

controlling. It is on these functions that management activity is based. Therefore, they

are used as a framework by which management is studied. It is useful to note that the

term 'command' in Fayol's view of management is being replaced by the term 'lead' in the

definitions propounded by contemporary authors.

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Activity 2

Define management.

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1.3 MANAGEMENT FUNCTIONS

Management has been described above as a process whereby the resources of an

organisation are used to achieve organisational objectives. The traditional approach,

which is used to examine this process, is to condense it down to planning, organising,

leading and controlling activities (called the POLC approach). These four functions are

interrelated and are equally important in achieving the organisation's goals. For instance,

a manager cannot just do the planning and ignore the other aspects. Although these four

functions do not tell the whole story about what constitutes management, they are a

convenient way of describing most of the key aspects of the work of managers in practice

(Cole 1996). Let's now describe these four functions in detail.

PLANNING

Planning is usually listed as the first function of management. This is because we must

have a plan before we can organise. Planning can be defined as the management function

which involves setting the company's goals and then determining the means to achieve

these goals, or in other words, deciding how best to achieve them. In simpler terms, we

must first decide what to do and then find out how to do it. As you can see, planning

involves decision-making and therefore, this support materials shall address both these

elements in detail in Unit 3 - Planning and Unit 4 - Decision-Making respectively.

ORGANISING

Organising is the management function which focuses on arranging and allocating work,

authority, and resources among an organisation's members so that plans may be

successfully carried out. This function involves the setting up of an organisational

structure whereby work is allocated, lines of authority and responsibility defined, and a

system of rules and regulations which guide the conduct of employees laid down. This

structure should constantly change to suit the organisation's needs. The organising

function will be examined in more detail in Unit 5 - Organising.

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LEADING

The next management function is that of leading. Leading involves influencing others to

engage in the work behaviours necessary to reach organisational goals (Bartol 1997). The

manager must communicate with his/her subordinates, explain his/her plans to them, and

lead and motivate them to exert their maximum efforts to achieve the goals. Key aspects

of motivation and leadership will be dealt with in Unit 6 - Motivation and Unit 7 -

Leadership.

CONTROLLING

Controlling is the management function aimed at regulating organisational activities so

that actual performance will conform to expected organisational standards and goals

(Bartol 1997). Therefore, the controlling function consists of three steps:

(i) Establishing a standard or target,

(ii) Measuring current performance and comparing it with the standard, and

(iii)Taking corrective actions if deviations are detected.

This function will be discussed in more detail in the Unit 8 - Control.

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Activity 3 Some of Peter’s management activities are listed below. Tick the management function that normally includes each activity.

ACTIVITY Planning Organising Leading Controlling

1. Deciding to open a take-away counter.

2. Assigning job duties.

3. Communicating to employees about new pay incentives.

4. Deciding to increase the price of pizzas.

5. Checking that pizzas are prepared on time.

6. Hiring new cooks. 7. Checking menu cards to ensure that correct prices are being charged.

8. Monitoring opening and closing schedules.

9. Instituting an employee- suggestion scheme.

10. Appointing a marketing manager to take charge of sales.

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1.4 THE IMPORTANCE OF MANAGEMENT

An organisation with access to materials, machines and manpower will fail if the most

important element is missing- the ability to efficiently use these resources. Many

businesses have failed because of mismanagement. Some call it bad planning, others

blame it on lack of foresight or even bad luck. In our country, some well-known

examples of mismanaged companies include Litra Co. Ltd., MCCB Ltd., Howard and

Sang Furniture Ltd., Super Centre and recently, H. Teeluck & Sons Ltd. These testify to

the importance of proper management. Resources can only be put to proper use by an

efficient manager.

In the words of Peter Drucker (1989),

"The responsibility of management in our society is decisive not only for the enterprise

itself but for management's public standing, its success and status, for the very future of

our economic and social system and the survival of the enterprise as an autonomous

institution".

1.5 MANAGEMENT SKILLS

Robert Katz has identified three basic types of skills that make up effective management:

technical, human and conceptual skills.

Technical skill is the ability to use the procedures, techniques and knowledge of a

specialised field (Stoner et al. 1994). This skill may be acquired through education,

training or experience. The sales manager, for example, must be familiar with marketing

techniques, the products of his company, and the tastes of his customers, his sales

territories and the distribution network.

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Human skill refers to the ability to deal with other people. A manager must be able to

work with, communicate, understand and motivate others, both as a member of a group

and as a leader who gets things done through others.

Conceptual skill is the mental ability to see the overall picture and to understand how

one part is related to the others. It is an important skill because a manager must be able to

understand how, for instance, his actions can affect other departments, or how

environmental influences can affect the organisation.

We shall see in section 1.6.1.2 how the required mix of these three skills varies according

to the manager's rank in the organisation.

Activity 4

It has been said that good managers are born, and as such management skills cannot be

acquired. Discuss this statement.

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1.6 TYPES OF MANAGERS

Managers can be classified in two ways:

(i) by their level in the organisation; for example, as first-line, middle or top

managers and

(ii) by the range of organisational activities for which they are responsible; for

example, as functional or specialist managers and general managers.

1.6.1 Management Levels

The various levels of management in a large organisation form the management

pyramid as illustrated in Figure 1.1.

Figure 1.1. The Management Pyramid

TOP MANAGEMENT

Board of Directors

Chief Executive Officer

Managing Director

President

MIDDLE MANAGEMENT

Department Head

FIRST-LINE MANAGEMENT

Supervisor

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Top managers are managers at the very top levels of the hierarchy and are responsible

for the overall running of the organisation. Typical titles of top managers include chief

executive officer, president, and chairman of the board of directors, managing directors

and general manager among others. Top managers develop overall plans for the

company and make major decisions such as whether the company should expand its

operations or whether new products should be launched. Top management has to work to

some extent with the upper layers of middle management in implementing the plans.

They also oversee organisational progress and spend much time in understanding how

changes in the business environment can affect the company's operations.

Middle managers, also referred to as tactical managers (see Unit 3) are managers below

the top levels of the hierarchy and are directly responsible for the work of first-line

managers and sometimes for that of operating employees as well. Operatives or

operating employees work directly on a task or job and do not hold the responsibility of

monitoring the work of others while a manager's work includes directing the activities of

other people. A computer engineer is an example of operating personnel. Middle

managers include plant managers, divisional, department or section heads. They are

responsible for working out detailed plans and procedures in line with the overall plans

laid down by top management.

Middle managers are frequently part of several layers of the hierarchy in large

organisations. Since the 1980s however, there is a trend towards fewer layers of middle

managers in order to reduce costs, improve communication and to push decision-making

closer to the operating level. As a result of this trend, the pressure on the remaining

middle managers is higher since they now have to share more work and responsibility.

First-line managers are managers at the lowest level in an organisation. They direct the

work of operating employees only: they do not supervise the work of other managers.

First-line managers are sometimes called supervisors. Examples of first-line managers

include foreman, production supervisors in a manufacturing plant, technical supervisors

in a repair shop, or floor sale supervisors in a departmental store. These managers are

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responsible for the direct implementation of the plans developed in conjunction with

middle management and for the smooth running of day-to-day operations.

Research predicts that the autonomy and influence of first-line supervisors are likely to

decline due to

• increasing worker participation in workplace management,

a trend towards work teams,

• increased use of computers to track activities formerly monitored by first-line

managers and,

• increasing number of specialists who provide advice and direction to work areas

involving sophisticated technology in particular (Bartol 1997)

1.6.1.1 Management Levels and Functions of Management

No matter what title or position they hold, managers at all three levels on the pyramid

perform the same functions of planning, organising, leading and controlling in trying to

achieve the organisational goals. However, research demonstrates that the four functions

of management are used in different proportions across the levels of management.

Figure 1.2. Management Functions at Different Levels

Planning Organising Leading Controlling

First-line Middle Top Managers Managers Managers

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As shown in Figure 1.2, top management spends more time in planning, as they need to

define the objectives and policies of the whole organisation. Organising is more

important for top and middle managers because they are the ones who are mainly

responsible for allocating and arranging resource. Leading, on the other hand, is more

important for first-line managers because they have to provide leadership support to the

workers and communicate with them. In contrast, controlling is most similar at all levels

since the monitoring of activities has to be done at all levels.

1.6.1.2 Management Level and Skills

The importance of each of the key management skills depends on the manager’s rank in

the organisation. For first-line managers, technical skill is more important as they need to

deal directly with the daily operation-related problems requiring specific solutions.

Technical skill becomes less important as a manager moves up the management pyramid.

In contrast, conceptual skills are most important for the top manager since he/she must

understand the overall picture. Finally, human skill is equally important for managers at

all levels because all managers must understand and work with people.

Figure 1.3. Management Skills at Different Levels

Technical skills Conceptual skills Human skills

First-line Middle Top managers managers managers

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1.6.2 Responsibility Area

Managerial jobs are also classified according to the nature of the responsibility involved.

A functional manager is responsible for only one organisational activity or specialised

area of the organisation such as production, marketing, finance or human

resources.

A general manager is responsible for a whole organisation or a complex sub-unit of the

organisation such as a company, subsidiary or independent division and is responsible for

all the activities of that unit such as marketing, production, accounting or engineering.

Depending on circumstances, general managers can be called the president or the division

manager or by other titles. Large organisations usually tend to have more than one

general manager.

1.7 WHAT MANAGERS ACTUALLY DO

According to the functional approach, managers plan, organise, lead and control. But is

this what managers actually do? In the broad sense, yes: managers do plan, organise, lead

and control. However, if we look at how managers actually spend their time, we would

come to interesting conclusions about their work methods, the various roles that they

have to play and the importance of agenda-setting and network-building to them.

1.7.1 Work Methods

Over the past two decades, many studies have been conducted in an attempt to move

away from the classical view of the activities of management (see Unit 2 for further

explanations on the classical view of management) towards a more detailed and

behaviour-oriented analysis of the actual work methods of managers. Based on a study

of the work of five chief executives of medium to large organisations, Henry Mintzberg

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(1973) found that contrary to traditional views at that time that managers were reflective

and systematic planners,

• Managers worked at an unrelenting pace, that is, they started working at the very

moment they arrived at the office until leaving at night. Coffee and lunch were

usually taken during formal or informal meetings. Everyday, the managers had to deal

with an average of 36 pieces of mail and other matters.

• The work of managers was characterised by variety, brevity and fragmentation.

Indeed, the managers had to handle a variety of matters throughout the day and many

of these activities were brief since half of them lasted less than nine minutes. The

managers would also be constantly interrupted by telephone calls and by subordinates

wishing to talk to them. Therefore, there was little time for reflective thinking during

the office hours and many managers even had to think about planning at home.

• The managers relied much on verbal contacts and networks. They preferred having

phone conversations and informal and formal meetings rather than writing memos

and reports. The CEOs also depended on their managerial networks for the exchange

of information. Networks are sets of co-operative relationships with other people

such as subordinates and peers, and individuals and groups both inside and outside

the organisation. Such networks were considered essential for managers to have

influence and operate effectively.

Mintzberg's research focused on the work of CEOs. However, other researchers have

observed that the findings of Mintzberg's study characterise the work of managers at all

three levels of the hierarchy.

1.7.2 Managerial Roles

Mintzberg's study of the work of the five CEOs led him to conclude that the activities of

a manager can be classified into a set of ten different but closely interrelated roles or

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organised sets of behaviour associated with a particular position. He argued that all

managers have formal authority over the unit they command and derive a special position

of status from that authority. This status causes managers to be involved in interpersonal

relationships with other people who, in turn, provide the managers with the information

they need to make decisions. The ten managerial roles can thus be classified into three

main groupings: interpersonal roles, informational roles and decisional roles as follows:

Interpersonal roles Informational roles Decisional roles

Figurehead Monitor Entrepreneur

Leader Disseminator Disturbance handler

Liaison Spokesperson Resource allocator

Negotiator

INTERPERSONAL ROLES

The interpersonal roles arise from the manager's authority and status and involve the

development and maintenance of positive relationships with other people.

(i) Figurehead

As a figurehead, the manager has to perform ceremonial duties as head of the unit,

such as signing legal documents, participating in subordinates' weddings, or

taking clients to dinner.

(ii) Leader

The leader role involves the responsibility for the staffing and for the training,

motivation and guidance of subordinates.

(iii)Liaison

Just like politicians, managers must build interpersonal relationships or networks

with people outside their unit who can help them achieve their organisation's

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goals by providing information, co-operation and support. These people can be

individuals or groups inside or outside the organisation.

INFORMATIONAL ROLES

Informational roles involve the reception and transmission of information arising from

the manager's interpersonal roles. The three informational roles performed by managers

are the monitor, disseminator and spokesperson roles.

(i) Monitor

This role identifies the manager as seeking and receiving information both

internally and externally, which enables the manager to develop thorough

understanding of the working of the organisation and its environment. Managers

can also collect information through personal contacts or by reading newspapers,

magazines and reports for example.

(ii) Disseminator

The disseminator role involves internal transmission of information received

either from outsiders or from other subordinates to organisational members.

Transmission of information internally can be conveyed through staff meetings,

notice boards, by making phone calls and/or through the writing of memos. The

information may be factual or may be based on the manager's judgement of

events.

(iii)Spokesperson

Managers also transmit information on the organisation's plans, policies, actions

and results to people outside their own units, such as the board of directors and

other superiors, and the general public such as customers, government

departments, suppliers and the press.

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DECISIONAL ROLES

Decisional roles involve the making of strategic organisational decisions on the basis of

the manager's status and authority, and access to information.

(i) Entrepreneur

As entrepreneurs, managers plan and initiate projects to bring about change and

innovation to improve the performance of their unit and organisation.

(ii) Disturbance handler

As a disturbance handler role, the manager takes corrective action in response to

previously unforeseen problems such as strikes, financial difficulties or change in

government policy. In such situations, managers can, for instance, devise a

strategy and set up committees that deal with disturbances and crises.

(iii)Resource allocator

As resource allocators, managers are responsible for the distribution of the

organisation's resources such as money, time, equipment, staff and materials

among organisational members.

(iv) Negotiator

The negotiator role relates to participation in negotiation activities with outside

organisations (for example when negotiating a contract with suppliers) or with

individuals working for the same organisation (for instance when bargaining

about working terms and conditions with the trade union). Negotiation plays an

important part of the manager's job because of his/her authority, responsibility

and knowledge of information.

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Evaluation of Mintzberg's role approach

Mintzberg acknowledged that his categorisation of the ten roles was somewhat an

arbitrary division of the manager's activities. It presented only one of the many possible

ways of classifying the managerial roles. In practice, the ten roles are not isolated but

they form an integrated whole. The effectiveness of the manager's performance is

affected if any of the roles is removed.

A number of studies support Mintzberg's view that this set of ten roles is common to the

work of all managers in different organisations and at different levels of the hierarchy.

However, the importance of the roles varies according to the hierarchical level. For

instance, the leader role is more important at the lower level of the hierarchy while the

roles of figurehead, liaison, disseminator, spokesperson and negotiator are more

important at the higher levels.

Mintzberg's model of managerial roles is a realistic approach to classifying the actual

activities of managers and provides clues to the skills they require in order to carry out

their work effectively. However, this model has been criticised. For example, Griffin

(1984) found that activities involved in figurehead, disseminator, disturbance handler and

negotiator were not separate roles but overlapped considerably with activities of the six

other roles.

Viewing management as playing roles is complementary to describing the functions of

management. Each of the functions of planning, organising, leading and controlling may

require any combination of roles; each role may involve any combination of functions.

The two are different perspectives of the same thing. For instance, the three interpersonal

roles are part of the leading function; planning, on the other hand, involves the allocation

of resources and the transmission of information.

23

Activity 5-CASE STUDY

Jean Marc at Pizza Hut

The first branch of Pizza Hut (Mauritius) was opened in Port-Louis on 25 July 1993.

Since then, the restaurant has known a huge success. The Mauritian scene now counts

three other branches of Pizza Hut and there is no doubt that it is the No.1 pizzeria in

Mauritius today. According to Jean Marc Ah-Foo, Operations Manager at Pizza Hut, the

secret behind this success is due to the company's respect for procedures and standards as

regards QSCH (Quality, Service, Cleanliness, Hospitality).

When the first branch opened at Happy World House, there was a big craze for its pizzas

during the first two months. The kitchen had to run for 24 hours for the preparation of

fresh dough since the restaurant was open from 10.00 a.m. to 10.00 p.m. The opening of

this first pizzeria initiated the 'pizza culture' in Mauritius. At first, there was no big

competition in the pizza market, but then competition started earlier than expected with

small pizzerias opening all over the island. Pizza Hut therefore decided to create "brand

awareness" by having recourse to advertising and other promotional activities. It also

made its restaurant more accessible to people by opening new branches with home

delivery facilities.

Jean Marc initially worked as a waiter after having followed a course in 'Restaurant and

Housekeeping' at the Hotel School of Mauritius. After ten years spent in the hotel

industry, he was appointed as the first Restaurant Manager at Pizza Hut. The company

then provided him with the opportunity to follow courses in computer programming, time

management, hygiene and finance. This enabled him to upgrade his management skills

along with on-the-job training. He is now the Operations Manager and as a middle

manager, is responsible for directing the activities of the four Restaurant Managers and is

accountable to the General Manager.

Unlike the four Restaurant Managers, Jean Marc does not spend his days in the same

office. Every week he visits the Head Office at Coromandel and all the four branches of

Pizza Hut on specific days to ensure they are operating smoothly. His main

24

responsibilities include staffing and the training of personnel, product development, menu

planning, product tasting, ordering of overseas products, handling of customer

complaints, liaising with the overseas business support manager located in India (home

office overseeing Pizza Hut operations in Mauritius) and managing the overall

organisation of the business. He also looks after the administrative side by supervising

stock levels and monitoring food costs.

Planning plays an important role in Jean Marc's job. Ordering of overseas products, sales

forecasts and allocation of budget for promotional activities are usually carried out one

year in advance. Rosters for all the management team and outings for staff are also

prepared beforehand.

Specific tasks are delegated to each of the staff in all the four branches; regular meetings

are scheduled with managers, employees and cashiers respectively once a month to

exchange information and to discuss on events which happened during the month. Jean

Marc believes that such meetings help to prevent communication problems among

organisational members.

As far as his relationship with the staff is concerned, Jean Marc tries to be friendly and

shows concern for his subordinates. In fact, he hates using the word 'subordinates' and

entertains a cordial relationship with his personnel. Jean Marc sometimes even visits

parents of female staff to reassure them that working at Pizza Hut is safe at night and that

their daughters will be safely dropped at home by the company vehicle. He also attends

weddings and funerals of staff. To motivate the personnel, the company gives special

incentives for working on Sundays and management tries to be flexible when planning

rosters. Jean Marc also tries to develop new ways of upgrading service, motivating staff,

launching new products and reviewing the design of the restaurants. He recalls having

high levels of absenteeism during the riots of February 1999 in the country when the

restaurants had to remain closed for two days for security reasons. Jean Marc's staff look

25

upon him with respect because he deals with them in a professional manner and is

conversant with all the operations of the business.

However, when it comes to the 'controlling' function, Jean Marc acknowledges that he

has to be strict on control procedures. In fact, he has adopted the principle 'main de fer

dans des gants de velours' or otherwise his personnel will not respect the company's rules

and standards. Many control procedures have been implemented at Pizza Hut such as the

daily stock count of bottles, monitoring of cash and stock losses and audit of food costs.

Any variances have to be reported to him. The respect for quality is especially important

at Pizza Hut. At the branch in the Phoenix Commercial Centre, for instance, pizza slices

are thrown away if they have not been sold after 20 minutes!

Jean Marc also relies on his network of contacts to achieve organisational goals. He often

talks to friends or other managers in Happy World Ltd. to share ideas and to look for

information. For instance, he can contact the manager at the cargo department to know

what has happened to his goods; or at the computer department if there is a problem with

a computer. Sometimes, if his friends make complaints about the service at Pizza Hut, he

acts upon such information. Occasionally, the company contracts the services of a

specialised firm in marketing research to establish customers' profiles which it can target.

Competitive shopping is usually carried once in a month to identify the most suitable

suppliers of local materials in terms of prices and quality. Jean Marc also tries to

negotiate with the existing suppliers from time to time to obtain discounts and gifts for

his staff for the end-of-year party or to have better quotes for their uniforms.

Question

Consider Mintzberg's managerial roles and identify which of the roles Jean Marc

undertakes as part of his job as Operations Manager of Pizza Hut.

26

27

1.7.3 Agenda-Setting and Network-Building

Kotter (1982) studied the work of 15 successful American general managers in nine

different organisations involved in a broad range of industries. He found that the

managers had two significant activities in common: agenda-setting and network-building,

despite the fact that their jobs differed and the way they handled their work was different.

AGENDA-SETTING

A work agenda is a set of tentative goals and tasks that a manager is trying to

accomplish in order to bring about desired end-results. Kotter suggested that managers

focus their efforts through the use of work agendas. A work agenda can be developed for

a period of one month or more and has to be reviewed constantly due to changing

circumstances.

Stewart (1982) identified three factors which influence a manager's work agenda:

(i) Job demands are what the jobholder has to do. Some responsibilities of the

jobholder cannot be delegated: for example, attending meetings; meeting

minimum criteria of performance which is expected of the manager, for instance

the manager's department should achieve a 30 per cent increase in turnover by the

end of the year.

(ii) Job constraints are internal or external factors which limit what the manager can

do: for example, resource limitations, technological limitations, union activity,

attitudes of other people and geographical location.

(iii) Job choices are activities that the manager can do but does not have to. A manager

usually has the choice to do different work from another manager, or to do the

work in a different manner. For instance, a manager can opt to do part of the work

and delegate the rest of the work to others or he/she can choose to participate to a

greater extent in public relations activities than another manager would. A

28

manager therefore enjoys a degree of flexibility when setting his/her work agenda

which tends to reflect personal preferences, job demands and constraints, and

career objectives of individual managers (Bartol 1997).

NETWORK-BUILDING

As explained in sub-section 1.7.1, networks involve the manager establishing co-

operative relationships with people both inside and outside the organisation. The aim of

network-building is to establish and maintain contacts which would be helpful to the

manager to achieve the goals set on the agenda.

1.8 THE CHALLENGE OF MANAGEMENT

The world economy is becoming fiercely competitive, turbulent and unstable. Stoner et

al. (1994) argue that effective managers will need vision, ethics, respect for cultural

diversity and training to meet the challenges of global competition.

(i) The need for vision

Managers have to develop a sense of vision and have to predict what will happen

to their organisation in the longer-term. They also have to anticipate problems,

identify and exploit opportunities which will allow the organisation to grow and

prosper.

(ii) The need for ethics

Ethics are standards of conduct and moral judgement differentiating right from

wrong (Bartol 1997). With the increasing pressure from competition, is it ethical

for an organisation to pay bribes; or is it ethical to pollute the environment if this

helps the company to reduce its production costs and hence the price of its

products to its customers?

29

Organisations are gradually recognising the importance of ethics and social

responsibility. Unethical practices harm the interests of stakeholders and will

eventually hinder the organisation from achieving its goals.

(iii) The need for cultural diversity

With global competition and more companies likely to be doing business in other

countries, managers will need to be familiar with international business and

different cultures. Moreover, employees should be treated equitably and fairly,

regardless of their racial, cultural or sexual differences.

(iv) The need for training

Managers have to continually upgrade their management skills through formal

education or ongoing practice to maintain high levels of productivity and to keep

pace with new technology.

Activity 6

Discuss in small groups the extent to which organisations in Mauritius are meeting the

four challenges of management mentioned above. You may illustrate your case by citing

an organisation of your group's choice.

1.9 KEY CONCEPTS

Agenda

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Controlling

Conceptual Skills

Effectiveness

Efficiency

First-Line Managers

Functional Managers

General Managers

Human Skills

Leading

Management

Middle Managers

Networks

Organisation

Organising

Planning

Roles

Technical Skills

Top Managers

Work Methods

1.10 ADDITIONAL ACTIVITIES

A: MULTIPLE CHOICE QUESTIONS: Encircle the correct answer.

1. Which of the following is NOT one of the major functions of management?

A. Controlling

B. Planning

C. Leading

D. Selling

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2. Which of the following is the ability to choose appropriate goals and to achieve

them?

A. Planning

B. Management

C. Efficiency

D. Effectiveness

3. Leading is the management function that involves

A. setting goals

B. allocating resources

C. communicating to subordinates

D. regulating activities

4. Which of the following is NOT a key management skill?

A. Human skill

B. Technical skill

C. Conceptual skill

D. Entrepreneurial skill

5. The set of goals which a manager is trying to accomplish is called

A. an action plan

B. a work agenda

C. a slogan

D. a mission statement

6. Which of the following is NOT an informational role?

A. Spokesperson

B. Disseminator

C. Monitor

D. Liaison

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7. Stoner et al. predicts that managerial work will be affected by several trends in the

future. Which of the following is NOT one of them?

A. Managers will be more concerned with ethics

B. There will be an increasing use of information technology in the future

C. Organisations will grow in size

D. Organisations will have to assume an international perspective

B: TRUE OR FALSE ?

1. An organisation is two or more persons engaged in a systematic effort to produce

goods and services.

2. The management function of organising involves the regulation of organisational

activities.

3. Top managers are more concerned with the leading function than are managers at

other levels.

4. Middle managers utilise human, conceptual and technical skills in somewhat equal

proportions.

5. A general manager has responsibility for only one functional area.

6. First-line managers are mostly responsible for the day-to-day operations of the

organisation.

7. The monitor role as identified by Mintzberg involves the responsibility of controlling

the organisation's operations.

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1.11 VIDEO SESSION

“MANAGEMENT AT WORK: THE MANAGERIAL WORLD”: EPISODE 1

Your answers to the following questions will be discussed in the tutorial after you have

viewed the video:

1. List the functions of management.

2. Which changes in the business environment are likely to have an impact on

management in the future?

3. According to the video, what does ‘total quality management’ mean and how does

it work?

4. Why do middle managers represent an ‘endangered species’?

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UNIT 2 THE EVOLUTION OF MANAGEMENT

Unit Structure

2.0 Overview

2.1 Learning Objectives

2.2 Historical Contribution to Management

2.3 Classical Management Approaches

2.3.1 Scientific Management

2.3.2 Bureaucratic Management

2.3.3 Administrative Management

2.4 Behavioural Management Approaches

2.4.1 The Hawthorne Studies

2.4.2 The Human Relations Movement

2.4.3 The Behavioural Science Approach

2.5 Quantitative Management Approaches

2.5.1 Management Science/Operations Research

2.5.2 Operations Management

2.5.3 Management Information Systems

2.6 Contemporary Management Approaches

2.6.1 Systems Theory

2.6.2 Contingency Theory

2.6.3 Theory Z

2.6.4 Total Quality Management

2.7 Key Concepts

2.8 Video Session

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2.0 OVERVIEW

This Unit reviews the major approaches to management which have emerged over the

past two centuries.

This Unit includes a video session. Refer to the Study Guide.

2.1 LEARNING OBJECTIVES

After you have successfully completed this Unit, you should be able to do the following:

1. Compare the different classical approaches to management as well as appreciate

their contributions and limitations.

2. Recognise the important early management writers.

3. Assess the contributions of the major theories in the behavioural management

approach.

4. Identify the major components of the quantitative management approach.

5. Explain the emergence of the different contemporary management approaches.

6. Identify the relationships among the various classical management approaches

and the contemporary approaches.

2.2 HISTORICAL CONTRIBUTION TO MANAGEMENT

As you have seen from Unit 1, management usually entails four main activities namely

planning, organising, leading and controlling. Management theories and principles, as we

know them today, have emerged through a gradual evolutionary process which took place

over the past two centuries. In fact the first business and management programmes were

offered by the Wharton School at the University of Pennsylvania in 1881 (Bateman et al.,

1990).

36

It must be noted, though that many management techniques have been prevalent ever

since ancient and medieval times. Around 5000 BC, for example, the Sumerians devised

a method of record keeping to monitor and control their activities. Egyptians also were

known for their ability to plan, organise and control which made the construction of

pyramids, by over 100,000 slaves, possible. The Chinese have been practising five

management functions, namely planning, organising, staffing, leading and controlling as

early as 1100 BC. Even the Roman Empire, both before and after the birth of Christ,

relied heavily upon decentralised management systems in order to sustain its reign

(Bateman et al., 1990).

However attempts to develop formal management theories are more recent and were

spurred on by the industrial revolution in the United States from the early 18th Century.

The different phases in the evolution of management can be classified as follows:

1. Classical management approaches

2. Behavioural management approaches

3. Quantitative management approaches

4. Contemporary management approaches

2.3 CLASSICAL MANAGEMENT APPROACHES

The classical management movement began around the 1870s and this school of thought

refers to three main management styles which are:

1. Scientific Management

2. Bureaucratic Management

3. Administrative Management

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2.3.1 Scientific Management

The concept of scientific management was originally put forward by Frederick Winslow

Taylor. As a matter of fact, Taylor's contribution to this management viewpoint has been

so significant that he has been unanimously accepted as "the father of scientific

management". Many authors also refer to scientific management as "Taylorism".

Hired by the Midvale Steel Co. in 1878 as an engineer, Taylor made two crucial

observations on management and workers’ attitudes towards their responsibilities.

Taylor’s Observations

Management's Attitude

• Midvale's management exigency on workers to be more productive while, at the same time, its reluctance to pay for higher wages. Hence management's objective was that of "maximum production for minimum pay"(Bateman & al., 1990).

Workers' Attitude • Workers deliberate practice of restricting productivity by engaging in systematic soldiering. In other words the workers' main objective was that of "working at less than full capacity" (Bartol & al., 1998).

According to Taylor the workers were involved in soldiering for three specific reasons:

1. they felt if only some workers worked at full capacity, others who did not do so

would lose their jobs. So a feeling of solidarity towards their co-workers

handicapped their obligation to work at a faster pace.

2. the implied system of "maximum production for minimum pay" imposed by

management discouraged the workers from being more productive.

3. the working practices adopted by the workers were inherently inefficient.

Taylor also believed that Midvale's management was not bent in determining the most

efficient ways of tapping into the huge potentials of its workers. So in order to solve this

conflicting situation between management and workers attitudes, Taylor devised a

scientific approach to management, hence the name "scientific management".

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Time and Motion Study His scientific approach to management was based on the "time and motion study", which involved scientifically finding and timing the most efficient motions involved in each production task on the workshop floor. This study established, in a definite manner, how much each worker can do per day and therefore eliminated the workers' ability to engage in soldiering. In addition the study was useful in determining which worker was better suited for which task.

Furthermore, in order to strengthen his time and motion study, Taylor insisted that:

• standardised tools be used by all workers and these would be provided by

management.

• regular breaks be taken by workers to relieve fatigue.

• a "differential rate system" be introduced.

Differential Rate System Taylor encouraged management to introduce a differential rate system whereby workers who reached higher levels of productivity would benefit from higher pay, provided they exceeded a standard level of output. Again to discourage soldiering he assured the workers that if ever their peers were to fall behind and lose their jobs, they would quickly find new jobs elsewhere due to the prevailing labour shortage (Stoner, 1995). Taylor assumed that workers would be satisfied with higher payments while management will benefit from higher quantity and quality of output for future sales, therefore increasing profits. So Taylor's scientific management rested on specific principles.

Taylor's 4 Principles of Scientific Management

1. Management should scientifically study each task and develop the best method for performing the task.

2. Management should scientifically select, train and develop each worker in order to ensure that each worker is suited for each task.

3. Management should cooperate fully with workers to ensure that they use the proper methods.

4. Management should divide work and responsibility in such a way that management is responsible for planning work methods and workers are responsible for executing these work methods.

Source: Bartol et al. (1998)

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Scientific management contributed greatly to the spread of many factories in those days

due to its revolutionary approach to increasing productivity and some of its principles are

still of relevance today. In fact it was mostly scientific management that inspired Henry

Ford to mass-produce the Model T car, so that most people could afford it.

Scientific Management – Contributions:

• Introduced a scientific approach to management.

• Improved factory efficiency and productivity.

• Used as a model upon which the creation of modern assembly lines was based on.

• Allowed managers to reward workers for higher performance and productivity

through the differential rate system.

• Built a sense of co-operation between management and workers.

However scientific management has also been criticised by many authors.

Scientific Management - Limitations:

• Limited by its underlying assumption that workers were primarily motivated by

economic and physical needs. It therefore overlooked the desire of workers for job

satisfaction.

• Led, in some cases, to the exploitation of workers and it has been often suggested that

scientific management was at the centre of many strikes prevalent in those days.

• Excluded the tasks of management in its application.

• Instilled an authoritarian leadership approach.

• Focused only on the internal operations of the organisation.

The theory of scientific management was further extended through the works of Frank

and Lillian Gilbreth as well as of Henry L Gantt.

40

Activity 1

Why did Taylor find it necessary to introduce a scientific approach to management?

2.3.2 Bureaucratic Management

The concept of bureaucratic management was put forward by Max Weber, a German

sociologist. Weber's need to establish a bureaucratic system of management stemmed

from his exposure to nepotism whereby he saw that many people were being recruited in

organisations based on personal contacts (and based on who they were) rather than on

their competence. This practice, he believed, led to a great deal of inefficiencies in

organisations.

In the 1940s Weber published "The Theory of Social and Economic Organisations" in

which he proposed a set of principles that managers should follow in order to make their

organisations "ideal bureaucracies" - ideal because these organisations would be based on

rationality, efficiency, consistency and fairness.

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Weber's Principles of Bureaucracy Principle 1 Specialisation of labour

Description: Each job should have a set of specific and regular activities.

This will ensure that each person in the organisation will know exactly what is expected of him/her and will also become an expert at what he/she does, through repeated task completion and regular training. It also ensures continuity in a job which has been handed over to a promoted or new member of the organisation. Principle 2

Formal rules and procedures

Description: Written rules and procedures set by the organisation and which require strict adherence to.

This will ensure that the organisation benefits from increased efficiency because all its members will have to perform their jobs according to these rules and procedures in a routine and unbiased manner. This will also reduce any scope for indolence and errors. It, for example, also involves strict application procedures for jobs in the organisation and hence the recruitment of competent people only. Principle 3 Impersonality

Description: Rules, procedures and sanctions are applied uniformly throughout the organisation.

This will ensure consistency and fairness in dealing with every member of the organisation regardless of any personal considerations. Principle 4 Well-defined hierarchy

Descriptions: 1. The establishment of multiple levels

of position in the organisation. 2. Authority is linked to specific

positions in the management hierarchy.

1. This will ensure that relationships between each hierarchy are carefully defined and that each hierarchy is responsible for the one below it. Similarly each hierarchy should report to the one directly above it. Important decisions are however taken by senior managers found at the top of the hierarchical ladder.

2. This will ensure the efficient achievement of organisational objectives through the formal network of relationships among specialised positions. It is also considered as an efficient means of dealing with exceptional situations and establishing accountability of actions.

Principle 5 Career advancement based on merits

Description: Selection and promotion is based on the qualifications and performance.

This will ensure that selection and promotion are done fairly and that only the most competent people are recruited.

Source: Bateman & al. (1990), Stoner (1995), Bartol & al. (1998)

42

It must be noted though that these principles were first applied to large organisations

following the publication of Weber's book in the United States in 1947. Managers there

were impressed by Weber's approach to management and were eager to apply them in

their own organisations. However, as mentioned above, Weber's intention was only to

provide managers with guidelines in order to increase the internal efficiency of their

organisations. Weber's bureaucratic approach includes many contributions to

management. In fact Stoner (1995) suggests that it is the bureaucratic model which has

"advanced the formation of huge corporations such as Coca-Cola and Exxon".

Bureaucratic Management - Contributions:

• Ensured that the organisation would be operated and managed by qualified/high

calibre personnel only.

• Allowed many organisations to efficiently perform routine organisational tasks

through job specialisation.

• Allowed management and employees to be more objective in their judgement and

approach due to rules and procedures for doing specific tasks being clearly set.

• Placed emphasis on job position, specialised employees and job continuity thus

providing the organisation with long-term perspectives and quality employees.

• Surpassed the loss of any employee or even of any manager due to the nature of job

specialisation. Hence in such a bureaucracy anyone can be replaced.

But inherent to this approach are also many limitations.

Bureaucratic Management - Limitations

• Imposed a formal and structured chain of command which is not compatible with

organisations that require flexibility and rapid decision-making. This is truer today

where organisations are constantly faced with a turbulent external environment of

increased competition.

• Made employees feel insecure and replaceable.

• Did not promote, again through its formal and structured chain of command,

interpersonal relationships between subordinates and superiors and vice versa.

43

• Often led to the abuse of power and control since only a few people in the hierarchy

had authority. This, sometimes, resulted in authoritarian styles of management as

well as autocratic styles of leadership.

• Argued that bureaucracies are difficult to dismantle. Their nature is such that once

they are institutionalised "they take a life of their own" (Bateman et al., 1990).

Activity 2

In your own words list the advantages and disadvantages of adopting a bureaucratic

approach to management.

Advantages:

Disadvantages:

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2.3.3 Administrative Management

The concept of administrative management was initially put forward by Henri Fayol, a

French mining engineer and industrialist when he published, in 1916, his managerial

experiences in a monograph titled “General and Industrial Management”.

Administrative management, as designed by Fayol, is based on two recommendations

which should be applied to the organisation, by senior managers, in order to achieve

superior levels of performance. These recommendations are as follows:

Recommendation 1 – Fayol’s Five Managerial Functions

Planning, organising, commanding, co-ordinating and controlling which relate to the four functions discussed in Unit 1. According to Fayol senior managers should be involved in carrying out these functions in order to ensure effective organisational performance. Furthermore, since he broke down the job of managers into specific functions, Fayol demonstrated that the ability to manage and become managers could be taught to individuals.

Recommendation 2 – Fayol’s 14 Principles of Management

1. Division of work Work is divided in order to produce more and better work with the same effort.

2. Authority Managers must exert authority whereby they have the right to give orders, establish each employee’s degree of responsibility and the power to extract obedience.

3. Discipline Managers establish clear and fair agreements between the organisation and the employees. Managers should also judiciously apply sanctions.

4. Unity of command Employees should receive orders from one superior only. 5. Unity of direction Activities aimed at the same objective should be organised so

that there is one plan and one person in charge. 6. Subordination of individual interest to the general interest Personal interests

of managers and employees are secondary to the overall interests of the organisation.

7. Remuneration Compensation should be fair to both the employees and managers.

8. Centralisation The proper amount of centralisation or decentralisation depends on the situation.

9. Scalar chain A scalar (hierarchical) chain of authority which forms a chain of superiors, ranging from the highest ranking to the lowest ranking manager.

10. Order There is a place for everyone in the organisation and everyone understands his/her place. Order also applies to materials, which should be kept

45

in well-chosen places, in order to facilitate activities. 11. Equity Employees should be treated with kindness and justice. 12. Stability and tenure of personnel Because time is required to become effective

in new jobs, high turnover should be prevented. 13. Initiative Managers should encourage and develop subordinate initiative to the

fullest. 14. Esprit de corps Harmony amongst all organisation members result in great

strength.

Fayol emphasised that these two recommendations be regarded as universal guidelines

and be applied flexibly to the organisation.

The scope of administrative management was further expanded through the effort of

Chester Barnard, former president of New Jersey Bell Telephone Company. After many

years of experience as an executive, Barnard published in 1938 “The Functions of the

Executives”. Unlike Fayol, Barnard did not propose a list of principles; instead he argued

that senior executives’ functions should include (Bateman et al., 1990):

1. Formulating the purpose and objectives of the organisation

2. Securing each employee’s effort in the organisation

3. Maintaining organisational communications

These functions transpired in the form of the “acceptance theory of authority” which

Barnard used to describe the perception which employees had for managerial authority.

Acceptance Theory of Authority Barnard contended that communication, as opposed to authority, is more effective in ensuring that employees follow orders and directives. So regardless of the fact that orders and directives are communicated by superiors/managers in the hierarchy (hence “persons of authority”), Barnard explained these will only be followed if employees (Bartol & al., 1998): 1. Understand the orders and directives 2. See the orders and directives as consistent with the purposes of the organisation 3. Feel that the orders and directives conform with their needs and those of other

employees 4. View themselves as mentally and physically able to comply with the orders and

directives

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Barnard believed that this approach to management would nurture a willingness to co-

operate and ensure a clearly articulated common purpose between managers and

employees.

Administrative Management - Contributions • Viewed management as a profession which can be trained and developed

• Offered universal managerial guidelines

• Promoted communication between managers and employees

• Highlighted the needs of employees through unity of command, unity of direction,

equity, and so on...

• Encouraged employees to act on their own initiatives

Administrative Management - Limitations • Fayol's recommendations are too experience biased and therefore not driven by

formal research. Hence its concepts have not been tested.

• Lacked consideration for organisation's environmental, technological and personnel

factors, due the blind application of Fayol's concepts. (Bateman et al., 1990).

Activity 3

How effective, do you think, are Fayol's principles in increasing organisational

performance?

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2.4 BEHAVIOURAL MANAGEMENT APPROACHES

As explained earlier the classical management approaches, and in particular scientific

management, were criticised for being mechanistic and dehumanising in nature.

Furthermore though the classical approaches looked at most functional avenues for

increasing productivity and internal efficiency, none emphasised human behaviour in

organisations. The behavioural approaches to management demonstrate that job

satisfaction through effective leadership and motivation influences organisational

performance. Behavioural approaches to management therefore attempted to understand

the "human aspects" in organisations and the main contributions to this school of thought

are:

1. The Hawthorne Studies

2. The Human Relations Movement

3. The Behavioural Science Approach

2.4.1 The Hawthorne Studies

The Hawthorne studies were named so because they were conducted at the Western

Electric's Hawthorne plant near Chicago. The management of the company hired a team

of Harvard researchers led by Elton Mayo and Fritz Roethlisberger to find the main

physical working conditions (starting with lighting) which might be affecting workers'

efficiency and productivity. Three sets of studies were carried out and the first two are

discussed below.

Hawthorne Studies - Experiment 1 'The Illumination Experiments" - The researchers changed the lighting in the factory to assess the effects of different lighting conditions on productivity. However one group of workers - the control group - was kept in constant lighting conditions. They observed that: 1. The control's group productivity increased 2. Where lighting conditions were improved, productivity also increased 3. Where lighting conditions were deteriorated, productivity still increased As level of productivity was rising in an unpredictable manner, the researchers were baffled and decided to look for other physical working conditions that might affect productivity.

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Hawthorne Studies - Experiment 2 In this second set of experiments, five female workers were placed separately in a Relay Assembly Test Room and the researchers acted as supervisors. As a consequence the researchers were able to alter a number of work conditions whereby:1. There were no formal supervisors present 2. Wages were increased and workdays and workweeks were shortened 3. The length of rest periods was altered and the group members were free to choose

when to take them. As a result the workers were allowed to leave their workstations without permission. The workers were also given the opportunity to suggest other possible changes in their working conditions.

A control group, which did not benefit from any changes, was also tested in order to compare findings between both groups. Once again the researchers found that productivity, in both groups, peaked after which it began to fall erratically. At this stage in the Hawthorne Studies, Mayo and his associates made their first

contribution to the behavioural approach - namely the Hawthorne Effect.

The Hawthorne Effect It is obvious that the only common element between the control group and the "five female workers test group" was the presence of the researchers. The researchers argued that since both groups of workers were being monitored closely and received special attention, they became more motivated than usual. This phenomenon of increased motivation to work harder, due to special attention, is known as the Hawthorne effect.

So the researchers suggested that employees' behaviour and productivity are influenced

by management's/supervisors' attitude towards them. The researchers also noticed that

the social environment of the employees may lead to the formation of informal work

groups which also have a considerable influence on productivity and output.

Informal Work Groups

Informal work groups refer to the associations and friendships which co-workers

usually tend to develop when they want to resist management expectations of

productivity and/or when they are unhappy with working conditions. These work

groups usually have different norms and they are able to influence productivity by

exerting pressure on individuals in the group, so that they can influence level of

output.

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The Hawthorne Studies are regarded as a milestone in the behavioural movement.

However many authors have branded the Hawthorne Effect as controversial [Stoner

(1995), Bateman et al. (1990)]. In fact, according to Bartol et al. (1998), "More

contemporary investigations now suggest that the Hawthorne-effect concept is too

simplistic...and...defective".

2.4.2 The Human Relations Movement

Although the findings of the Hawthorne studies were regarded as controversial, they

nevertheless urged a shift towards the search for a better understanding of human

behaviour. The human relations approach tried to encourage managers to move away

from the belief that employees were motivated only by material and economic incentives

and instead proposed that managers recognise the necessity of interpersonal processes as

an important motivational mechanism for employees.

Two important contributors to the human relations movement are:

1. Abraham Maslow for his "hierarchy of needs theory" which suggests that people

are motivated by the need to satisfy a sequence of human needs, including

physiological (the most basic needs), safety, social, esteem and self-actualisation.

2. Douglas McGregor for his "Theory X and Theory Y" which describe two

opposing management views of employees. Theory X views employees as

innately lazy and without ambitions, while Theory Y sees employees as

motivated, hard-working and responsible beings. McGregor preferred the Theory

Y management approach whereby he observed that job satisfaction increases

employees' performance. This, he argued, is achieved by allowing employees to

exercise responsibility and participate fully in the organisation.

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2.4.3 The Behavioural Science Approach

Though the human relations movement has contributed to management approaches by

highlighting the importance of motivating employees through job satisfaction, it has

nevertheless been criticised for being based solely on theories rather than scientific

evidence. Hence the behavioural science approach to management is based on

scientifically developing and establishing theories about human behaviour in

organisations which can be used to provide practical guidelines for managers.

Researchers from diverse disciplines such as economics, psychology, sociology and even

mathematics have joined their efforts in order to gain scientific knowledge about human

behaviour. Many concepts pertaining to human behaviour and the organisation are tested

in laboratory settings. Findings are then presented to management practitioners, who can

apply them to their organisations.

Activity 4

Based on your knowledge of the classical management approaches, list the major

contributions of the three behavioural management approaches.

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2.5 QUANTITATIVE MANAGEMENT APPROACHES

Quantitative methods were initially adopted during World War II when military planners

began to apply mathematical techniques to defence and logistics problems. Executives

gradually realised the importance and applicability of quantitative analysis to managerial

decisions, organisational effectiveness and hence the industry as a whole. So, after the

war, companies began to recruit quantitative experts who would be able to develop and

enhance this revolutionary approach to management and decision-making. Nowadays,

quantitative management includes, among other things, the application of statistics,

mathematics, computer and information models to organisation activities.

Quantitative approaches to management are applicable to many organisational functions

such as:

Production, Quality Control, Marketing, Finance, Distribution and Planning

Quantitative management can be sub-divided into the following 3 main management

styles:

1. Management Science

2. Operations Management

3. Management Information Systems

2.5.1 Management Science

Management science is also known as operations research (OR). In OR, complex

organisational decisions are made by using high-powered computers programmed with

quantitative tools. OR is popular, for example, in new product development, where

possible product models are simulated on computers and their features, cost of

production, inputs and so on can be assessed.

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Management science has also contributed to the development of other quantitative tools

which facilitate linear programming, forecasting, break-even analysis and hence help

decision-making process.

2.5.2 Operations Management

Operations management is used mainly to improve productivity and efficiency in

production through the use of quantitative tools. Some examples of production logistics

and activities which have been improved through operations management include

inventory modelling, quality control and distribution.

2.5.3 Management Information Systems (MIS)

Management Information Systems (MIS) involve a management approach geared

towards the "collection, processing and transmission of information to support

management functions"(Bovée et al., 1993). So organisations which apply MIS, design

and implement computer-based information systems on different aspects of the

organisation, including its customers and environment. Upon requirement such

information can be rapidly retrieved and utilised.

Activity 5

Compare and contrast the three quantitative management approaches.

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2.6 CONTEMPORARY MANAGEMENT APPROACHES

As can be gathered above, classical, behavioural and quantitative management

approaches tend to focus more on the internal workings of organisations. The

contributions of each school's of thought are still being applied today. However both

researchers and practitioners are now giving more attention to interaction of the

organisations with their external environment. The contemporary approaches to

management include:

1. The Systems Theory

2. The Contingency Theory

3. Japanese Management and Theory Z

4. Total Quality Management

2.6.1 The Systems Theory

In the systems theory, organisations are seen as systems composed of a set of

interdependent parts which co-ordinate their efforts in order to achieve common goals.

Organisational systems operate on the basis of four elements (see Figure 2.1):

1. Inputs - the organisational resources, e.g. raw materials, human resources,

financial resources, information and equipment.

2. Transformation processes - the conversion of inputs into outputs through

managerial functions, technological operations and production activities

3. Outputs - the results of the transformation processes, which include

profits/losses, goods/services and so on. Some of these outputs, like for example

products and services, are returned to the environment for use by other

organisations and individuals.

4. Feedback - the environment's reactions to these outputs are relayed back to the

system.

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External Environment

Figure 2.1: The Organisational System

This approach allows managers to assess their organisation's interaction with the larger

environment.

Open System and Closed System

An open system is an organisational system which interacts with its environment (as

shown in Figure 2.1), whereas a closed system is one that does not do so and is

therefore self-sufficient. However, in reality, an organisation cannot be a totally

closed system because for survival, an organisation has to interact with its

environment. The concept of open and closed systems is used as a continuum to

assess the extent to which an organisation interacts with its environment.

2.6.2 The Contingency Theory

Contingency theorists argue that each organisational circumstance is unique and as a

result management approaches should be selected and applied based on the specific

situation at hand. The contingency theory therefore supports the view that "there is no

one best way to manage" and emphasises the use of any management approach -

scientific, behavioural and quantitative - provided it is suited to the organisational

situation and helps managers to manage more effectively.

Inputs Transformation Process

Outputs

Feedback

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2.6.3 Theory Z

Theory Z was put forward by William G. Ouchi after he studied the management

practices of Japanese and U.S. firms which operated in both countries. Ouchi described

the U.S. management approach as Theory A and the Japanese management approach as

Theory J and integrated the successful practices of both to create the Theory Z.

According to Ouchi's observations:

Theory A typifies U.S.

management approach as being

geared towards:

Theory J typifies Japanese

management approach as being

geared towards:

1. Short-term employment

2. Individual decision making

3. Individual responsibility

4. Rapid evaluation and promotion

5. Explicit, formalised control

6. Specialised career path

7. Segmented concern

1. Lifetime employment

2. Consensual decision making

3. Collective responsibility

4. Slow evaluation and promotion

5. Implicit, informal control

6. Non-specialised career path

7. Holistic concern

Theory Z combined some of the U.S. and Japanese management approaches and

is geared towards:

1. Long-term employment

2. Consensual decision making

3. Individual responsibility

4. Slow evaluation and promotion

5. Implicit, informal control with explicit, formalised measures

6. Moderately specialised career path

7. Holistic concern, including familySource:

Bovée et al., 1993

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2.6.4 Total Quality Management

The concept of quality control was initially put forward by the American W. Edwards

Deming, following a visit he made to Japan, in 1950, to advise top Japanese managers on

how to improve their production effectiveness.

His contributions have been subsequently expanded into the Total Quality Management

(TQM) concept - a management approach that "aims at achieving zero defects by

involving all workers in striving to make a product or service conform exactly to desired

quality standards" (Bartol & al., 1998). An important aspect of TQM is its emphasis on

minimising costs through doing things "right first time".

Activity 6

Discuss the advantages of contemporary management approaches over the classical ones.

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2.7 KEY CONCEPTS

Scientific Management

Soldiering

Time and Motion Study

Differential Rate Systems

Bureaucratic Management

Administrative Management

The Hawthorne Studies

Hawthorne Effect

The Human Relations

The Behavioural Science

Quantitative Management

Management Science/Operations Research (OR)

Operations Management

Management Information Systems (MIS)

Systems Theory

Open System

Closed System

Contingency Theory

Theory A

Theory J

Theory Z

Total Quality Management (TQM)

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2.8 VIDEO SESSION

“Intransition: The Changing, Challenging Environment”: Episode 2

1. In what terms did Taylor define each worker’s task?

2. What is the legacy of Taylor’s work?

3. Why would people be “unhappy” if there was not a level of bureaucracy?

4. Bureaucracies were often compared to ______________ - ____________ machines.

5. What was the “one” major shortcoming of the classical management theories?

6. What is the economic order of today?

7. What advantages does “diversity” bring to an organisation?

8. Who are the stakeholders of a business?

9. What barriers do businesses have to break in order to survive in today’s

competitive environment?

10. What attributes will the company of tomorrow have?

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UNIT 3 PLANNING

Units Structure

3.0 Overview

3.1 Learning Objectives

3.2 Introduction

3.3 Planning

3.3.1 Benefits of Planning

3.3.2 Hierarchy in Planning

3.3.2.1 Strategic Plans

3.3.2.2 Tactical Plans

3.3.2.3 Operational Plans

3.3.3 Appellation for Plans

3.3.3.1 Statement of Objectives

3.3.3.2 Strategies

3.3.3.3 Policies

3.3.3.4 Procedures

3.3.3.5 Rules

3.3.3.6 Programmes

3.3.3.7 Budget

3.4 Objectives

3.5 Barriers to Planning: Why do organisations not Plan in Practice?

3.6 Forecasting

3.6.1 Methods of Forecasting

3.7 Summary

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3.0 OVERVIEW

In Unit 3, we introduce you to organisational planning, decision-making and forecasting.

We highlight the benefits of planning in organisations and explain the barriers faced by

planners. The Unit describes very briefly the various forecasting techniques that are

commonly used by managers.

Note that this Unit contains a group activity.

3.1 LEARNING OBJECTIVES

After you have successfully completed this unit, you should be able to do the following:

1. Define planning.

2. Identify what is involved in planning.

3. Distinguish the different types of plan.

4. Assess the nature and importance of objectives.

5. List the benefits of planning.

6. Explain what forecasting implies.

7. Compile the most commonly used forecasting techniques

3.2 INTRODUCTION

Plans and decisions are essential requirements to organisational tasks and management.

Business success depends significantly upon successful planning and decision making. In

fact, the challenge of management today lies in how to score success in the planning and

decision making exercise.

Organisations rarely operate in a vacuum. They are in fact open systems with significant

interaction with the environment. Managers are becoming increasingly aware of the

effects of the environment on organisations. Had it not been for the turbulence that

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characterises today’s business environment, chances would have been better that

activities would have proceeded as planned.

The business environment is changing so rapidly that Drucker characterises this change

as being irreversible.

Resources - manpower, money, materials- are also getting scarcer and another challenge

of management and the manager is how best to allocate these resources to survive and

grow. This process calls for sound decision making and right allocation of

resources. Unit 4 explains the major elements constituting the decision making process.

Mistakes and errors can no longer be permitted in organisations as these involve wastage

of resources and the organisation paying this off from its competivity. Thus, there is a

need for making the right forecast and prediction about the future. Forecasting deals with

this aspect. In Section 3.6, we deal with forecasting and highlight the major forecasting

techniques available to managers.

Now, let’s consider in more details the issues raised above. But before, complete the

exercise below in the space provided.

Warm up Activity

Imagine a few instances when you have had to make certain plans. Jot down the major

issues that crossed your mind about plans and planning from these experiences.

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3.3 PLANNING

All of us have been involved in “planning” in one way or the other, at home, at work, in

college, etc. We all have our own experience of what planning is about. Let’s try to

understand first a definition of planning.

Planning may be defined as…

Deciding now what to do in the future given certain intended conditions

This definition of planning incorporates three important elements that require attention:

now, what to do, and future.

First, the word now indicates present circumstances and the current state of affairs

pertaining to an organisation. It must be appreciated that organisations do not operate in

a vacuum and are in fact, with very few exceptions, open systems with constant and

dynamic interaction with the environment.

Environment scanning is therefore a pre-requisite for the planning process.

Environmental scanning is commonly carried out through what is termed a SWOT

analysis – the identification of strengths and weaknesses pertaining to the internal

environment of an organisation and opportunities and threats that the external

environment presents.

The internal environment relates to those factors that the organisation can relatively

control. The external environment that constitutes the PEST (Political, Economical,

Social and Technological) factors is relatively remote from what the organisation can

control. You will have an opportunity to study more about this in Strategic Management.

The second important element in the definition is “what to do” or “what to achieve”.

These are expressed in terms of a statement of objectives, also referred to as goals and

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targets. Put together planning is, therefore, a process that defines what the organisation

aims to achieve at some point in time. The process produces what we commonly call

plans. There are different appellations that are given to the output of the planning

process. These are briefly described in the next Section.

The third element that the definition of planning includes is the future. The future may

be any time that succeeds now, that is the next second or a fraction of it, the next

minute, hour, week, month, year, four years, ten years, etc. The future is basically

characterised by uncertainty and uncertainty involves risk. Expressed differently, the

future is quite unpredictable and the more we go into the future, the more it is difficult to

predict what it is going to hold that in turn implies the more risk one has to take. It is

particularly because of the uncertainty that rests with the future that there is a need for

plans to be flexible. Flexibility provides some leeway to take care of changing situations

and circumstances.

To be meaningful, plans must necessarily be put into action. Effective planning therefore

requires an effective and efficient process of coping with the uncertainty and risk of the

future to enable achievement of organisation’s objectives. Expressed in other terms,

planning takes care of defining from “what business we are in” to the nitty gritty of how

in detail an organisation fulfils its day to day operational tasks, its medium and long term

objectives.

Expressed more briefly, planning involves

→ Objective – setting, that is, What an organisation wants to achieve.

→ Environment scanning, that is, assessing internal strengths and weaknesses and

anticipating external opportunities and threats

→ Decision making, that is, what to do, how to do it, when to do it and who should do it.

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In essence, Planning:

- gives direction;

- enables predictability;

- enables adaptation to changes without crisis.

Activity 1

(a) State the major changes that you believe are affecting today’s business

environment.

(b) Give some examples of unexpected risks that may crop up in managing an

organisation.

3.3.1 Benefits of Planning

There are several benefits that an organisation may derive from initiating and organising

planning exercises and processes. A few of these benefits are listed below:-

Planning:-

(a) helps to prepare for unforeseen eventualities

(b) helps to clarify objectives

(c) helps to develop criteria for monitoring performance

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(d) helps to think ahead systematically

(e) demands conscious co-ordination of projects and active participation and co-

operation of subordinates

(f) eases accommodation of change

(g) helps to identify opportunities for greater efficiency

(h) reveals duplication of effort, bottlenecks in workflows and foreseeable pitfalls

(i) assists in integrating activities

(j) helps to take decisions unhurriedly, using maximum or optimum information

Activity 2

Write down an example from your experiences to illustrate four of the benefits that may

result from planning.

3.3.2 Hierarchy in Planning

Plans that emanate from different levels (hierarchies) of an organisation have different

connotations and are commonly referred as (illustrated in Figure 3.1):

• Broad long-term strategies

• Medium term tactics and policies

• Short term operational budgets and schedules

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The planning process typically produces several types of planning documents: strategic

plans, scenario plans and operational plans.

3.3.2.1 Strategic Plans

Strategic plans help identify and communicate the mission of the organisation. There is

usually at least one strategic plan in each planning document hierarchy. They deal with

fairly broad groups of organisational stakeholders including employees, customers,

shareholders, suppliers and the community. Objectives are normally only broadly defined

in strategic plans.

3.3.2.2 Tactical Plans

Tactical plans support strategic plan implementation and focus on intermediate time

frames usually 1 to 3 years. Generally, they tend to be more specific and concrete than

strategic plans. They are normally developed by middle managers who may consult

lower-level managers to develop steps to reach tactical goals.

ORGANISATIONHIERARCHY

PLANNING

Top management Broad long term strategies

Middle or tactical management

Medium term tactics and policies

Functional orOperational management

Short term operational budgets and schedules

Figure 3.1: Hierarchy in planning

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3.3.2.3 Operational Plans

Operational Plans specify how to accomplish the objectives defined broadly in the

strategic plan. There are typically several operational plans in the planning document

hierarchy. Operational plans should be checked for consistency and completeness with

the strategic plan from where they originated. Objectives become more observable and

measurable.

There are two main types of operational plans: single-use plans and standing plans.

1. Single-use plans are suited to situations that are not likely to be repeated often, like

the acquisition or divestiture of a new business or a move to new premises. Single-use

plans usually include time-phased milestones, specific assignment of responsibilities,

and a project budget.

2. Standing plans are suited to on-going operations and processes. The Human

Resource process of justifying and hiring new employees and effluent control

protocols in a river are examples of ongoing operations. Standing plans usually

include policies, procedures, budgets, etc.

3.3.3 Appellation for Plans

There are different appellations that have been given to plans or to the output of the

planning exercise. These are briefly explained here.

3.3.3.1 Statement of Objectives

Statement of objectives takes the shape of, for example:

• Corporate mission

• Strategic, tactical and operational plans

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3.3.3.2 Strategies

Strategies are statements of purpose to achieve a desired end:

• Follow on from determination of long-term goals and objectives.

• Plan for the allocation of resources to achieve objectives.

3.3.3.3 Policies

These are general statements of understanding which provide guidelines for management

decision-making and enable managers to exercise discretion and freedom of choice

within certain acceptable limits.

Some examples include the following:

→ Promote a manager from within the organisation wherever possible, instead of

recruiting from outside.

→ Encourage all recruits to improve academic qualifications.

→ Grant loans to individuals fulfilling certain criteria of credit worthiness.

3.3.3.4 Procedures

A procedure is a chronological sequence of actions necessary for performing a certain

task.

For example there is a procedure for handling employee grievances and complaints or for

banking money earned from sales.

3.3.3.5 Rules

Rules are specific, definite courses of action that must be taken in a given situation. Rules

do not provide for deviations, exceptions, or exercise of discretion (unlike policies).

For example, the rules that exist regarding the hours of work, rate of pay, etc.

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3.3.3.6 Programmes

A programme is normally a co-ordinated group of plans (goals, policies, procedures, and

budgets) for the achievement of a particular objective.

For example, a training programme that an organisation plans for its employees.

3.3.3.7 Budget

A budget is a plan for carrying out certain activities within a given period of time in order

to achieve certain objectives. Budgets indicate (in numerical terms) resources allocated

to each department or activity in order to carry out planned activities.

Production and marketing budgets are good illustrations.

Activity 3

Think of an organisation of your choice. List down the major elements that go in each of

the following department budget: production, human resource and marketing.

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Figure 3.2

Activity 4

1. If you were Jack, what information would you require to answer the question from

the Chairman, that is, “what are your budgeted production figures for this year”?

2. What are the possible implications for the Marketing, Human Resource and Finance

Manager?

What are your targeted production figures for this year, Jack?

Chairman

MarketingManager

Finance Manager

HR Manager

Production Manager (Jack)

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3.4 OBJECTIVES As explained earlier, the planning process results in a definition of objectives that an

organisation desires to achieve. Objectives are important in the learning process and are

equally important in motivating employees.

When you take care to define your objectives, you are in a better position to know:

→ how to adjust your behaviour;

→ how much effort to put in towards achieving your objectives;

→ whether you have succeeded or not.

For objectives to be meaningful, they have to be set in such a way that they are:

♦ Specific as far as possible

This will help to set clear guidelines at what is desired to be achieved. For example a

stated objective of “we have to increase sales by 10%” is more meaningful and

provides more direction than when the same objective is stated in terms of “we have

to increase sales”.

♦ Time bound

Again, when there is a limit set to the time over which it is desired to achieve a

certain objective, the latter becomes more meaningful and helps to clear ambiguities.

For example, the objective “we have to increase sales by 10%”, has a different

meaning if we add to this “we have to increase sales by 10% this year or this month

etc.”

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♦ Hard enough to challenge employees to put in extra effort and drive

It has been recognised that many if not most people are motivated by challenge.

When challenged, people have a tendency to put in the effort to face and deal with

the challenge.

Thus, objectives that are set and that are hard enough (careful that it is not beyond

possibility of achievement) normally get people to work at them and obtain results.

♦ Clearly achievable/realistic and within ‘reach’ based on realistic forecast

No person will dare getting up to break a strong brick wall with bare hands, as he or she

knows that this is impossible. This is to say that people would not put in the effort to

perform a task if it is seen to be extremely difficult or complex, with no chance of

successful completion.

Hence, when objectives are set, it is important to take these factors into consideration.

For example, it would sound unreasonable to ask a salesperson to sell 100 units overnight

in normal circumstances when he has been averaging a sale of 10 units a day.

♦ Agreed with employees wherever possible

There is nothing more motivating than to get people to participate in defining and

agreeing on the objectives assigned to them. People are more committed and feel

more at ease to perform a task that they have agreed to do - results would be much

better.

When you participate to set your own aims or objectives, you are more likely to

commit yourself to fulfil them than when these are imposed on or decided for you.

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♦ Reward – linked

Reward, either intrinsic or extrinsic, as you will study in the “motivation” module,

has great importance in obtaining results from performance. Consequently, to obtain

better results, objectives must be set in such a way that people know what to expect as

rewards when the objectives are achieved.

♦ Measurable

It is common saying that what can be measured can be controlled. Thus, to this end,

objectives must be expressed in quantifiable terms as far as possible. This will help to

establish whether they have been or are being achieved or not. A measurable

objective also clears ambiguity. For example, the objective “we have to increase sales

by 100 units this month” is clear and relatively easy to check.

Activity 5

Think of an organisation of your choice. Illustrate the importance of some of the

characteristics of objectives as explained above.

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3.5 BARRIERS TO PLANNING: WHY DO ORGANISATIONS NOT PLAN IN PRACTICE?

There are several reasons to explain why organisations do not formally get involved in

the planning exercise or process. These are highlighted below:-

♦ Analysis instead of Planning

Senior management often has more recourse to analysing situations than to sit down

and work out plans.

♦ Information instead of decisions

There is often a quest for more and more information than to actually decide what to

do. This is often seen as a delaying tactic in order not to implement what has been

planned.

♦ “Incrementalism”

Many organisations proceed by adding on to what is being achieved and thus avoid the

formal planning process. Some managers prefer to wait for what comes across and

then take subsequent decisions.

♦ Vested interests too strong

When there are strong vested interests in an organisation, planning does not normally

work.

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♦ Organisational mindset

There are still a number of managers who prefer using judgement and intuition rather

than formal planning.

♦ No ownership or commitment

Managers at lower levels may not be committed to the plans when they have not been

involved in their development. This also applies for managers who do not have a sense

of ownership.

♦ No resources for implementation

Planning will not work when there are no resources available to implement plans.

Many companies have resort to the planning process as a way to keep managers or

employees busy but are rarely committed to execute or implement plans. Sometimes

managers may lose the confidence that the organisation will provide the resources to

achieve the objectives.

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Diminishing effort and interest

It is a fact that more often than not enthusiasm is not sustained over the period that

plans are being implemented. Over time people provide diminishing effort in the

execution of a task or an activity. This does not assist the achievement of objectives.

♦ Planning and results achieved

Very often, managers refrain from stating their plans, as they are worried over the fact

that planning and plans make it easier to assess whether results are being achieved.

This applies particularly to managers who are not too sure about their performance.

♦ Fear of rigidity of planning system

Many managers resist planning because they are fearful that it may close the option

available to them. They would rather wait and see than to commit them in a specific

direction.

Activity 6: *Group Activity*

1. Elaborate, in small groups, the reasons, (mentioned above) that try to explain why

organisations do not formally carry out the planning exercise. Can you think of some

more reasons?

2. What recommendations would you make to overcome these “barriers to planning”?

* Record your answer on a separate sheet of paper.

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3.6 FORECASTING

Planning is concerned with predictions or forecasts of what potential customers want,

what competitors will develop, what suppliers will make available, what inflation and

interest rates will be, etc. Forecasting is therefore an essential element of the planning

process.

Basically forecasting requires you to make assumptions about the future. You have to

foresee future events by identifying trends, analysing risks normally based on past and

current events.

Forecasting, therefore, involves the analysis of:

→ past and current events;

→ trends;

→ ‘one-off events likely to recur’.

While forecasting future performance, you will have to take into account both DEMAND

(trends in population, number of customers, competition etc) and PERFORMANCE

POTENTIAL or capability of the organisation (trends in staff growth, training,

motivation, mechanisation and process etc.)

Activity 7

Explain why it is important to match demand with performance potential or capability

of an organisation?

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3.6.1 Methods of Forecasting

The methods that are utilised for forecasting are typically classified as either qualitative

or quantitative.

Qualitative forecasting techniques are appropriate when numerical models and data are

unavailable or inappropriate. Examples of qualitative methods include jury of executive

opinion (in which case opinions are sought from the executives of an organisation to

develop a forecast and an average is worked out), expert opinion (opinions of experts are

sought and averaged) and customer opinion (customers are contacted and invited to

make predictions about their future, for example buying behaviour). Methods for

determining opinion include Delphi panels, Nominal Group Technique, brainstorming,

surveys, etc.

Quantitative Technique involves the use of historical data or development of

mathematical models that attempt to utilise causal variables to make a forecast. The

analysed relationship of the causal factors to the product of interest will allow us to

extrapolate for the future. The use of objective data avoids personal biases that sometimes

contaminate qualitative methods.

Quantitative forecasting techniques include least squares regression, time series, and

dynamic systems analysis. Time series techniques focus on historical data. Moving

average and exponential smoothing are forms of time series. They are also called

autoregressive models because the values of the dependent variable in previous time

periods are explanatory variables for the current forecast.

Dynamic analysis includes rates of independent and dependent variables among the

explanatory variables and is generally formulated as non-linear, partial differential or

difference equations. Such expressions are typically difficult to resolve with direct

mathematical analysis and are explored via computer simulation.

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All the terms mentioned in this Section will become more familiar to you as your studies

at University levels proceed.

Activity 8

Explain how a supervisor or middle manager could contribute in forecasting.

3.7 SUMMARY

You must have realised by now that organisational planning is a process. In other words,

planning is action oriented and results in what is commonly called a plan.

For the planning process to be effective, it is important that it:

• is systematic. It must not be done haphazardly.

• incorporates flexibility to take care of changing situations.

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• is iterative and continuous. This is most important in the turbulent environment of

to-day. This enables continuous reviewing.

• involves the entire organisation. Although planning is usually depicted as a top-

down, serial process, several planning elements may occur concurrently and some

bottom-up input is solicited. Increasingly all levels of management are consulted and

asked to participate in the planning exercise.

• takes into consideration the current state of affairs of an organisation and reflects the

desired state

• translates strategies, opportunities and objectives into tactics and actions

• produces one or more plans

• identifies decisions to be made

• reflects the organisation structure

• identifies set points or benchmarks around which the organisation is controlled

Furthermore the planning process must establish the person or group of persons who is

entrusted with the responsibility and authority for planning. It also defines the horizon

and as well as the assumptions (premises and constraints) upon which the process relies.

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UNIT 4 DECISION MAKING

Unit Structure

4.0 Overview

4.1 Learning Objectives

4.2 What is Decision Making?

4.2.1 Characteristics of Managerial Decision Making

4.2.1.1 Lack of Structure

4.2.1.2 Risk

4.2.1.3 Uncertainty

4.2.1.4 Conflict

4.3 Models of Decision Making

4.3.1 Rational Model of Managerial Decision Making

4.3.2 Non Rational Models of Decision Making

4.3.2.1 Satisficing Model

4.3.2.2 Incremental Model

4.4 The Decision Making Process

4.4.1 Problem Identification

4.4.2 Alternative Solution Generation

4.4.3 Alternative Evaluation

4.4.4 Implementation and Decision Evaluation

4.5 Group Decision Making

4.5.1 The Advantages of Using Groups

4.5.2 The Disadvantages of Using Groups

4.5.3 Managing Group Decision Making

4.5.3.1 Leadership Style

4.5.3.2 Constructive Conflict

4.5.3.3 Encouraging Creativity

4.5.3.4 Structured Alternatives to Traditional Group Decision

4.6 Organisational Decision Making

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4.6.1 Constraints

4.6.2 Organisational Policies

4.6.3 Negotiations

4.6.4 Crisis Management

4.7 Key Concepts

4.0 OVERVIEW

Decisions. If you can’t make them, you won’t be an effective manager.

Unit 3 introduced the importance of planning and decision making as organisational tasks

for management. In Unit 4, we are going to identify, evaluate and differentiate between

the decisions we face as individuals, groups, managers and organisations. The unit also

highlights the realities faced by managers in organisations that constrain effective

decision making.

4.1 LEARNING OBJECTIVES

After you have successfully completed this Unit, you should be able to do the following: 1. Explain the concept behind decision making.

2. Explain the different characteristics of managerial decision making.

3. Identify and differentiate between rational and non-rational models of decision

making.

4. List the different steps taken to enable effective decision making.

5. Evaluate the pros and cons associated with group decision making.

6. Determine and appreciate the difficulties involved in decision making at an

organisational level.

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4.2 WHAT IS DECISION MAKING?

Wherever there are alternative courses of action that you can take regarding a particular

situation, decision making arises. Decision making may be explained as a process

through which problems are identified and possible solutions are generated and

implemented.

• What electives should you take in Year II?

• How much time would you allocate to revision for O&M?

• Where are you going to spend your holidays?

These are all examples of decisions that you may be faced with as a university student.

You may not always make the right decision, but you can use your knowledge of

appropriate decision making processes to increase your odds.

4.2.1 Characteristics of Managerial Decision Making Warm Up Activity

How do you think the decisions you are faced with in every day life are different from those faced by managers? 1. 2. 3. 4.

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Managers are faced with problems to be resolved in most daily activities performed.

These problems vary in degree of difficulty, complexity and the level of pressure

experienced, as illustrated in Figure 4.1.

Figure 4.1

4.2.1.1 Lack of Structure Most problems faced by managers are ill-structured, with a number of possible solutions,

all of which have merits and drawbacks. Ill-structured implies a situation which is not at

all routine, whereby the cause of the problem is not certain and in which several possible

solutions may be present to resolve the issue at hand.

4.2.1.2 Risk

Some degree of risk is inherent in many, if not most, decisions that have to be made. A

determining factor to the level of risk and difficulty involved in making a decision is the

amount and quality of information available to the decision maker.

RISK LACK OF

STRUCTURE

UNCERTAINTY

CONFLICT

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4.2.1.3 Uncertainty

Even when information is available and is of high quality, it is very often insufficient for

managers to accurately identify options and their likely impact. Further, it is not known

to a reasonable degree of accuracy what the future reserves. Indeed, what is widely

acclaimed as ‘turbulence’ in the organisational environment, makes prediction an ever-

increasing challenge. Thus uncertainty will more likely prevail but decisions, however,

will still need to be made.

4.2.1.4 Conflict

More often than not, managers are subject to opposing pressures from different sources

when faced with making decisions. Sometimes, a decision may be in conflict with the

manager’s personal opinion, but he may be in a situation where he still has to make a

decision. For example, firing an employee for alcohol abuse during working hours, even

when the employee is dedicated when working.

Activity 1

Imagine a situation when you were faced with making a decision that was:

a) lacking in structure

b) headed by a high element of risk

c) surrounded by uncertainty

d) in conflict with your personal opinion or that of your family

Write down a few comments about these situations.

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4.3 MODELS OF DECISION MAKING

Decisions that managers make have a profound impact on the success of an organisation.

Much research has been invested in determining and analysing the different approaches

to the decision making process. This section summarises some of these approaches.

4.3.1 Rational Model of Managerial Decision Making

The rational decision making process is based on the premise that maximum information

is required before a decision is made. The search for more information is crucial in this

approach to decision making.

This model stipulates that, despite the difficulties faced, managers are supposed to:

• engage in rational decision processes

• make optimal decisions, and

• possess and understand all relevant information.

This ideal is seldom realised.

Activity 2

List three shortcomings that you think this model presents.

1.

2.

3.

4.3.2 Non-Rational Models of Decision Making

In the real world, decision makers can rarely do a complete rational analysis because

some decisions are complex and complete information is difficult if not impossible to

obtain. Furthermore, people are not always capable of knowing, understanding or

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objectively interpreting all the information that is available. Thus rational decision

making has limitations that has prompted the proposition of Bounded Rationality as an

alternative. This alternative acknowledges that complete information is difficult and time

consuming to obtain. Bounded rationality, as the name suggests, accepts limited but

sufficient information for making a decision. The Satisficing and Incremental models

have been developed using this alternative rationale.

4.3.2.1 Satisficing Model

Rather than optimising decisions, managers seek alternatives only until they find one that

looks satisfactory. Let us say, for example, that you are stranded in a desert for days,

without food or water. You come across a gypsy who only has camel milk to offer you.

While you do not like the taste of camel milk, you want to quench your thirst and hunger,

and may forego roaming around in the desert seeking some other drink, and settle for the

milk.

Activity 3

Describe a situation where you have applied the satisficing model to your decision

making.

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4.3.2.2 Incremental Model The approach seeks to implement a short run solution that alleviates the problem

temporarily. To illustrate, imagine you have a small crack in a water pipe. At first, you

may try covering the crack with some soap, then you may try something stronger like

using glue and a rubber band to take care of the crack. These solutions seek to

temporarily solve the problem of the leak, and to forego the need to spend money on a

new water pipe, which will inevitably be the only effective solution to the problem.

Activity 4

Describe a situation where you have applied the incremental model to your decision

making.

4.4 THE DECISION MAKING PROCESS

While managers do not frequently have control over many factors affecting the success of

their decisions, many do have substantial control over the process used to make the

decisions. Although the following systematic approach to decision making does not

guarantee that all decisions will have the desired outcomes, it does increase the likelihood

of success. Figure 4.2 illustrates the steps involved in effective decision making.

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Figure 4.2 4.4.1 Problem Identification A problem usually occurs when a discrepancy exists between the way things are and the

way they ought to be. For example, a discrepancy may be detected for the organisational

performance when comparing current performance levels to forecasted performance

levels. Once identified, it is important to diagnose the problem, so as to identify the

cause.

4.4.2 Alternative Solution Generation

Once the problem is diagnosed for potential causes, alternative courses of action aimed at

solving the problem need to be developed. Alternative solutions may be generated from

past experiences to similar problems, or if the problem is unprecedented, solutions have

to be developed from scratch.

4.4.3 Alternative Evaluation

Once alternative solutions have been generated, their value and adequacy have to be

determined. Furthermore, importance should be given to predicting the consequences of

implementing the different alternatives.

The criteria for evaluating consequences are: • Feasibility: the extent to which an alternative can be accomplished within the time,

budget, technology and policy constraints imposed by the organisation.

ProblemIdentification

AlternativeGeneration

AlternativeEvaluation

ImplementationDecision Evaluation

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• Quality: the effectiveness of the alternative at solving the problem at hand.

• Acceptability: the degree to which parties affected by the implementation of the

alternative are willing to support it.

• Costs: the resource levels required to implement the alternative and the potential costs

of undesirable side effects.

• Reversibility: the extent to which the alternative can be reversed, if after

implementation, it is realised that it was the wrong alternative.

• Ethics: the extent to which an alternative is compatible with the social responsibilities

of the organisation and the ethical standards of its managers.

4.4.4 Implementation and Decision Evaluation

The decision process is still incomplete upon evaluating alternatives. A choice has to be

made, and the chosen alternative has to be implemented. Implementation is often

carried out by people that were not involved in the decision making process. It is

therefore essential that those implementing the decision should understand the choice and

why it was made. At times implementation of a decision is delegated to different parties.

For example, when a management team determines a change in policy or operating

procedures, very often first-line managers and supervisors are involved to implement the

changes. Motivation and commitment to the chosen alternative is crucial for successful

implementation.

Once the decision is made, and implemented, a monitoring system has to be set up. This

will accurately determine the success of the decision. If negative feedback is received,

this indicates failure in the decision making process and may suggest one of two

scenarios:

1) implementation requires more time, resources, effort or thought, or,

2) the decision was a bad one.

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Key points The best decision is made when:

1. A wide range of alternatives are considered

2. The full range of objectives to be pursued is taken into consideration

3. The costs and benefits of each alternative are weighed

4. Useful, first hand information is sought

5. Advice and information from different sources are considered

6. All consequences are thoroughly examined before making the final choice

7. Provision is made for contingency plans in case the implementation goes wrong.

If managers think about these decision-making activities in a conscientious manner, they

will know that they have done the best to make the most rational decision (though as

mentioned previously, this still does not guarantee that this decision will work).

4.5 GROUP DECISION MAKING

Very often, when important decisions need to be made, a manager finds it helpful if a

group of people- subordinates, peers and/or superiors- is convened to help in the decision

making process. The basic philosophy behind the use of groups for decision making is

captured in the old saying ‘two heads are better than one’. However, this saying does not

always prove right. The quality of group decision making depends heavily on the

understanding of how groups work together; capitalising on the potential benefits while

minimising the potential shortcomings.

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Activity 5

List three major benefits and pitfalls of using a group for decision making:

Benefits

1.

2. 3. Pitfalls

1. 2. 3. 4.5.1 The Advantages of Using Groups

Using groups instead of any one individual to make a decision has several potential

benefits, namely that a more fully informed, higher-quality decision will result, and that

the decision will be effectively executed.

1. Larger pool of information: When several people are coming together to make a

decision, more information is available. One group member’s lack of information is

always complemented by another’s access to such information.

2. More perspectives and approaches: Different group members can suggest different

ways to approach a problem, and also shed light on the issue from different angles.

Looking at a problem from different perspectives - for example legal, financial,

marketing, personnel- increases the chances of reaching an optimal solution.

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3. Intellectual Stimulation: Making a decision alone may not allow the person to

explore the problem in depth and to be creative in problem solving. Through

brainstorming, group discussions provide an opportunity to get members to think in a

broader way, and away from the more traditional manner of issue resolution.

4. Clearer understanding: People participating in a group decision making process tend

to have a clearer understanding of why a particular stance was taken or a particular

decision implemented. After being exposed to the process of evaluating different

alternatives, the group has better insight with regards to the issue at hand.

5. More Commitment: Involving a group in the decision making process, ensures a

higher level of buy in from all members. Involvement makes members feel

personally responsible for the success of the decision and therefore motivates them to

successfully implement the proposed solution.

4.5.2 The Disadvantages of Using Groups

As mentioned earlier, the success of group decision making depends heavily on

understanding how group members interact with one another. Most failures in group

decision making arise through the way members interact with one another.

1. Dominant members: When making use of groups, it is often the case that not all

members will have the same personality. In fact, more often than not, there is one

member who will dominate the decision making process which ultimately defeats the

purpose of resorting to a group in the first place. In this case, the wrong decision may

be implemented simply because the dominant member has made his/her preferences

clear.

2. Satisficing: This concept was introduced when discussing the non-rational models of

decision making in 4.3.2.1. Satisficing is more likely to occur in groups as people

search for quick, convenient and time saving solutions. With busy schedules and

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deadlines for different duties, members tend to be half-committed to the decision

making process and often come to a hasty, and not necessarily optimal, decision.

3. Groupthink: This is a very common symptom of group decision making. There is a

tendency for members to go along with the preferred group solution in order to avoid

any potential disagreements. In the search for cordial, positive interpersonal

relationships among team members, there is the possibility that members will refrain

from raising objections or highlighting possible negative developments.

4. Goal Displacement: Group decision making sessions often digress from the common

goal of finding a solution to the problem identified, to attaining personal goals. When

conflict exists between certain members of a group, there is a move from rational

persuasion and discussions to heated and personal disagreements.

4.5.3 Managing Group Decision Making

Effective managers pay close attention to group interaction processes, managing them

carefully to avoid the pitfalls outlined above. Effective management of group decision

making requires:

I) an appropriate leadership style,

II) constructive use of disagreement and conflict,

III) the enhancement of creativity, and

IV) the use of structured techniques.

4.5.3.1 Leadership Style A group leader’s main role is to minimise, if not eliminate, process-related problems.

This means that dominating group members should be controlled, quieter members

encouraged, while ensuring that the leader him/herself does not dominate the group

discussion. Furthermore, the leader should be aware of the inclination towards

groupthink and satisficing, and where possible should try to safeguard the primary

objective of the exercise.

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4.5.3.2 Constructive Conflict

Disagreement and conflict are destructive to the group if the result is emotional, bitter

and a cause for goal displacement. However, if used to air legitimate differences of

opinion and to develop better ideas and problem solutions, disagreement can be very

constructive. Some groups formally introduce conflict into a decision making group in

the form of a devil’s advocate. The person designated to be the devil’s advocate has the

main role of criticizing ideas to thoroughly assess the potential risks, drawbacks and

negative impacts of ideas generated. Such a practice encourages an in-depth analysis of

proposed solutions and can lead to generation of new alternatives that were previously

not thought of.

4.5.3.3 Encouraging Creativity

Ready-to-implement solutions are rarely available to solve problems faced by a company

and solutions that are available may be inadequate or sub-optimal. With the right

application of leadership style and constructive conflict, creativity is enhanced. The

technique of generating as many potential ideas to a problem is called brainstorming.

Members are encouraged to think out loud and say anything that comes to mind. No

criticism is allowed as the ideas generated are then used as building blocks to finding the

right solution.

4.5.3.4 Structured Alternatives to Traditional Group Discussion With the need to maintain creativity and to make group members less inhibited and more

likely to voice out unusual or odd opinions, the Nominal Group and Delphi techniques

have been developed. The objectives behind generating these techniques were to:

a) decrease people’s inhibitions about disagreeing,

b) encourage creativity and

c) keep group members oriented towards problem resolution.

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Nominal Group Technique: Individuals sit at a table and write down their ideas. These

are then displayed on a flipchart/chalkboard for further discussion, clarification and

evaluation. The final decision is determined by a written, silent vote.

Delphi Technique: Anonymity is maintained using this technique, as group members do

not meet face to face. The decision making process is in writing, through the mail,

whereby ideas are generated on a questionnaire. These ideas are summarised into a

feedback report and sent back to members for independent voting.

4.6 ORGANISATIONAL DECISION MAKING

Decision making at an individual level involves certain complexities, which are even

more inherent at a group level. However, a more complicated process is decision making

at an organisational level. Within the organisational context, several additional processes

and concepts come into play, which the manager must take into consideration before

coming to a decision.

4.6.1 Constraints

The decision makers within an organisation are seldom given a freehand where important

decisions are concerned. In the same way that managers are sometimes faced with

conflict (Refer to 4.2.1.4), organisational decision makers are faced with varying

constraints- financial, legal, market, human and organisational- which encroach upon

their ability to take certain actions. Legal restrictions may prevent the setting up of

international business operations in certain regions; financial constraints may make an

attractive but expensive new venture impossible.

4.6.2 Organisational Politics

Very often decisions involve determining the allocation of limited resources among

competing departments, groups and/or individuals. It is not surprising therefore that

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decisions are not always made on objective grounds and, more often than not, powerful

individuals are able to push through their own preferred alternatives.

Internal politics has come to be accepted as a reality and a challenge of organisational

life. Appreciating the existence of such practices helps in managing the decision making

process more effectively, insofar that when an influence is sought for a particular

decision, managers need to know who will be supportive and which groups would be

interested in having the decision implemented.

4.6.3 Negotiations

Decisions often need negotiations, bargaining, and/or compromises, whether cooperation

or permission is being sought from parties external to the organisation, or decisions being

made within the company. Internally, certain decisions require buy in from all levels of

management before it can be implemented. When a decision is bound to have an impact

on the environment, negotiations may need to be carried out with external parties. The

proposal to build an industrial zone on land that was previously used for agricultural

purposes requires buy in and support from several parties, including the relevant

ministries in the government, and residents of the area. Obviously such a proposal would

require an analysis to determine the environmental impact of the decision, if

implemented.

4.6.4 Crisis Management In crisis situations, managers not only have to make decisions while being under

tremendous pressure, but also have the additional problem of playing against time. In

such situations, the key between success and failure lies in responding quickly, honestly

and effectively to the crisis. Usually, a crisis management team is established with the

sole responsibility of collecting information, evaluating opportunities, making and

implementing the appropriate action plans. Decision making during a crisis can cause the

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rise or fall of an entire organisation which makes the management of the crisis process all

the more critical.

Activity 6 This mini case study gives you a chance to apply what you have learnt from Units 3 & 4. It requires application of the concepts learnt in planning and decision making. Imagine that you are CEO of a major corporation. One of your oil tanks was destroyed (though no fault of your own), spilling thousands of gallons of oil into a river. There is a severe drought in the country, and this river has dried up considerably. However, this river still provides drinking water to 3000 homes. Within hours, the oil has spread down the river, contaminating the drinking water of thousands of people, killing so many fish and other water life in the process. How would you handle the crisis, and what would be the expected outcome? (Consider the following points for discussion in class) 1. Public perception 2. Planning 3. Goals 4. Action

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4.7 KEY CONCEPTS Bounded Rationality

Brainstorming

Constructive Conflict

Goal Displacement

Group Think

Incremental Model

Managerial Decision Making

Satisficing Model

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UNIT 5 ORGANISING

Unit Structure

5.0 Overview

5.1 Learning Objectives

5.2 Elements of Organisational Structure

5.3 Job Design

5.3.1 Job Simplification

5.3.2 Job Rotation

5.3.3 Jon Enlargement

5.3.4 Job Enrichment

5.3.5 Scheduling Options

5.3.5.1 Flexitime

5.3.5.2 Compressed Work Week

5.3.5.3 Job Sharing

5.4 Departmentalisation

5.4.1 Functional structure

5.4.1.1 The Advantages of Functional Structure

5.4.1.2 The Disadvantages of Functional Structure

5.4.2 Divisional Structure

5.4.2.1 The Advantages of Divisional Structure

5.4.2.2 The Disadvantages of Divisional Structure

5.4.3 Hybrid Structure

5.5 Vertical Co-ordination

5.5.1 Line and Staff Authority

5.5.2 Delegation

5.5.3 Centralisation versus Decentralisation

5.5.3.1 The Advantages of Centralisation

5.5.3.2 The Advantages of Decentralisation

5.5.4 Formalisation

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5.5.5 Span of Management

5.6 Horizontal Co-ordination

5.6.1 Slack Resources

5.6.2 Information Systems

5.6.3 Lateral Relations

5.7 Key Concepts

5.8 Additional Activities

5.0 OVERVIEW

In this unit, we introduce the different types and approaches to construct an

organisational structure. We also explain managerial hierarchy and show the importance

of both vertical and horizontal co-ordination.

5.1 LEARNING OBJECTIVES

After you have successfully completed this Unit, you should be able to do the following:

1. Describe the elements making up organisational structure.

2. Explain the different approaches to job design.

3. Explain the different approaches to creating departments.

4. Discuss the different methods of vertical co-ordination.

5. Explain the importance of horizontal co-ordination.

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5.2 ELEMENTS OF ORGANISATIONAL STRUCTURE

Organisation structure is the way in which an organisation’s activities are divided,

organised, and co-ordinated [Stoner, 1995].

An adequate organisational structure is essential because it is the backbone of an

organisation. It caters for the smooth running of activities and work distribution with a

view to achieve set goals.

The elements of designing an organisation structure are as follows:

Identify every single task that the organisation needs to perform.

Allocate those tasks to the individuals or groups.

Combine the tasks and group employees together in a logical and strategic way.

Set up mechanisms to facilitate co-ordination, both vertically and horizontally.

Chain of command is the line of authority which links individuals at different

managerial levels indicating who reports to whom.

5.3 JOB DESIGN

With the big leap in technology and with customers becoming more and more

demanding, production of goods and services turn out to be more complex. No person

possesses the physical or psychological ability and skills to perform the whole series of

operations that form part of the production process. Therefore, in order to be able to

achieve organisational goals, the tasks and activities related to a specific job must be

clearly defined. This process is known as job design.

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Stoner (1995) defines division of work as the breakdown of a complex task into

components so that individuals are responsible for a limited set of activities instead of the

task as a whole.

The major approaches to job design are job simplification, job rotation, job enlargement

and job enrichment.

5.3.1 Job Simplification

Job simplification is based on the concept of division of work. As a result, the smaller

tasks can be learned and completed relatively quickly. Simple and repetitive tasks allow

workers to perform better since they become experts in their particular job, thus

enhancing production efficiencies. A good example is the different operations involved in

making a garment in a textile factory; the collar, sleeve, front panel, etc. are separately

stitched and then assembled together to make a garment.

5.3.2 Job Rotation

A simplified and repetitive task leads to monotony and boredom. In order to alleviate

boredom, the workers are made to shift through a set of jobs in a sequential manner. A

job rotation across the different units/tasks allows the individuals to understand the

various aspects of the organisation better. In addition, the individuals will become more

capable and flexible since they are exposed to a series of different and more challenging

jobs and will thus develop new skills.

5.3.3 Job Enlargement

Job enlargement is the combination of various operations at a similar level into one job to

provide more variety for workers as well as making it more challenging thus increasing

their motivation and satisfaction [Stoner,1995]. The idea behind this approach is to

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counteract monotony by increasing job scope, that is, the number of different tasks an

employee performs in a particular job.

5.3.4 Job Enrichment

Job enrichment is the combination of several activities from a vertical cross section of the

organisation into one job to provide the worker with more autonomy and responsibility

[Stoner, 1995]. Job enrichment is meant to increase the level of satisfaction among the

employees by increasing job depth, that is, the workers are allowed a degree of freedom

to work at their own pace, to do their planning and to devise their own way of improving

and controlling their job. Power to act and accomplish set goals is delegated by top

management to a certain extent. In other words, the subordinates are empowered with a

view to enhance self-satisfaction.

Activity1

List the possible difficulties that may be associated with each of the job design options:

job simplification, job rotation, job enlargement and job enrichment.

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5.3.5 Scheduling Options

Another approach to job design for increasing job satisfaction and motivation, is to offer

different options concerning work schedules. Different people have different needs and

priorities, and therefore work scheduling options help finding a compromise to cater for

such variance. The common options are flexitime, compressed work-week and job-

sharing.

5.3.5.1 Flexitime

Flexitime is a system that permits employees to arrange their work hours to suit their

personal needs. Flexitime allows the individuals to choose their own starting and

finishing time to be on duty as long as they fulfil the specified core of daily or weekly

working hours.

It helps workers to avoid traffic jams during peak congestion hours which eventually

results in a decreased lateness. Some disadvantages are that it is quite difficult to co-

ordinate people and to have adequate control over staff and key people may not be

available within a period of time.

Flexitime is also not appropriate for assembly-line operations and usually suits jobs

where most of the workload is assigned mainly on an individual basis.

5.3.5.2 Compressed Work-week

Compressed work week is a type of scheduling work where employees are made to work

longer hours per day as opposed to the usual eight-hour day and then they are given days

off as soon as they satisfy the specified working hours per week. Such a work schedule

leads to greater job satisfaction. But the disadvantages are the fatigue caused to the

employees who are then more prone to accidents, and it is difficult to deal with other

companies that do not apply similar schedule.

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5.3.5.3 Job Sharing

Job sharing is a work practice where two or more people share a single full-time job

[Bartol, 1996]. This allows these persons to arrange the working time among themselves,

for instance alternating workdays. Consequently, people who want to work part time

benefit from this system. Furthermore this arrangement helps the organisation to ensure

the co-ordination of the activities of part-time workers.

Activity 2

Distinguish among the different approaches to job design. Illustrate with appropriate

examples.

5.4 DEPARTMENTALISATION

Departmentalisation is the grouping of employees and tasks into areas of work activities

that are similar and logically connected. In an organisation, it is important to have the

jobs arranged in a well-defined way so that a good co-ordination of the activities involved

becomes possible. By grouping units of workers into departments, there is a better chance

to achieve the goals of an organisation. Some of the major ways of departmentalising are:

by function and by product (or market)

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5.4.1 Functional Structure

Functional structure is the grouping of people having similar working skills and expertise

and who are engaged in the same activities. For example, an organisation adopting a

functional structure will have different departments such as finance, marketing,

production, human resource, etc. Each of the departments is a specialised area comprising

specific set of activities. Such a structure is usually regarded as the most logical and basic

form of departmentalisation and is used mainly by organisations having a limited range

of products or services.

Figure 5.1 gives an example of functional structure.

5.4.1.1 The Advantages of Functional Structure

• Expertise is encouraged since managers concentrate on a restricted range of skills.

• Supervision becomes easier since each manager focuses on a particular department.

• The organisation is more efficient with experts working for it since bigger volume of

work can be handled.

Quality Officer

Quality Manager

Personnel Manager

FinancialSupervisor

FinancialManager

Foreman Foreman

ProductionSupervisor

Foreman Foreman

Production Supervisor

ProductionManager

MarketingOfficer

MarketingManager

Managing Director

Figure 5.1: Functional Structure

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• There can be better co-ordination when similar activities are grouped into one

department.

5.4.1.2 The Disadvantages of Functional Structure

• Decisions and actions are relatively slow since all functional managers have different

points of views and they have to report to the MD or CEO to be able to find a

solution.

• It is difficult to trace the real causes of failures since all departments contribute

towards meeting the organisational goal, in other words “Who is to blame?”.

• The very advantage of grouping individuals of similar specialisation together turns

out to create major differences between departments.

• Such an organisation usually fails to produce all-rounder managers to take over top

management since each functional manager possesses a school of thought reflecting

his/her specialised area.

5.4.2 Divisional Structure

Divisional structure groups similar products, services or markets thus creating

departments which look like small, separate businesses within the organisation itself.

These departments are commonly known as divisions which are again categorised as

product divisions, geographic divisions and customer divisions.

This kind of structure is usually applied in companies that have different customers,

dealing with a large variety of products and services, and which need to cope with

various geographical areas.

Product divisions obviously group a single set of products or services or those having

similar characteristics. Each product department has its own manufacturing system,

marketing, personnel, etc. that suit the process and organisation accordingly.

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Geographic divisions are created to satisfy different geographic areas. Many times it is

better to be close to crucial markets in order to gain in delivery time. In other cases, the

availability of raw materials may compel an organisation to open a division in a particular

geographical area for economic benefits. For example, some textile industries open

branches in Asia in order to be closer to the Asian market.

Customer divisions are set up to look after products or services that are meant for

particular types of customers. Such a structure is useful when discrepancies among the

customers are significant.

5.4.2.1 The Advantages of Divisional Structure

• Decision making is relatively quick since the divisions are independent to one

another, that is, there is hardly any chance for interdepartmental clash.

• Performance appraisal is more precise as bad performers can be traced relatively

easily since the department concentrates on limited range of products or services.

• More opportunities exist for managers to acquire general management competence

because they have the chance to deal with different functions.

5.4.2.2 The Disadvantages of Divisional Structure

• Resources are likely to be duplicated because each division has to be self-sufficient

and there is a risk of the resources being underutilised.

• It is unlikely to have experts since the division is not as restricted as in a functional

structure.

• Employees tend to focus on their particular division rather than consider the

objectives of the organisation as a whole.

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5.4.3 Hybrid Structure In the real world, many organisations include some features associated with the

functional structure as well as characteristics of divisional structure. Such organisation of

activities is known as a hybrid structure.

Activity 3

Think of an organisation with which you are familiar. In your opinion, which of the

above best describe the structure of that organisation?

5.5 VERTICAL CO-ORDINATION

Vertical co-ordination is the flow of information related to the activities in an

organisation from top to bottom in the managerial hierarchy. There are different ways of

carrying out vertical co-ordination, such as line and staff authority, delegation,

centralisation versus decentralisation, formalisation and span of management [Bartol,

1996].

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5.5.1 Line and Staff Authority

Line authority represents the authority exercised by managers over their subordinates to

ensure that organisational goals are met. It follows the chain of command throughout the

organisational structure.

Line managers represent those managers directly responsible for achieving organisational

objectives.

Staff managers consist of those managers who advise and service line managers. For

example in a manufacturing organisation, production and sales are regarded as line

departments (directly related to organisational goals), whereas personnel and accounting

are staff departments (indirectly related to organisational goals).

Staff authority is the authority that allows staff managers to advise and service line

managers.

5.5.2 Delegation

Delegation is the process by which an individual manager or supervisor transfers part of

his legitimate authority to a subordinate but without passing on the ultimate responsibility

which has been entrusted to him by his own superior [Cole, 1995].

It is important that the amount of authority delegated is sufficient and well defined. The

reasons for delegation are to prevent managers from being overloaded so that they can

concentrate on more important issues. Moreover, quicker solutions can be found when

decisions are taken nearer to the source of problems. The subordinates will get better job

satisfaction, as they will have the opportunity of experiencing decision-making.

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Activity 4

Outline the possible barriers to effective delegation.

5.5.3 Centralisation versus Decentralisation

Centralisation is the extent to which power and authority are retained at the top

organisational levels [Bartol, 1996]. If employees of lower managerial hierarchy are not

allowed to take decisions and they only follow general rules and procedures, it can be

said that the organisation is centralised.

Decentralisation is the extent to which power and authority are delegated to lower levels

[Bartol, 1996]. In a decentralised organisation, employees at lower levels are able to

participate in decision-making and these decisions are considered and included in the

general policies by top management.

Activity 5

Refer to an organisation with which you are familiar and provide examples of

centralisation and decentralisation.

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5.5.3.1 The Advantages of Centralisation

• The co-ordination of activities is easier when top management takes decision.

• Centralisation fosters strong leadership since the power is preserved at top managerial

level.

• The organisation will be more effective in the sense that there will be no overlapping

of effort since each department will be working on different activities.

5.5.3.2 The Advantages of Decentralisation

• Better strategic decisions can be made, as top management will not be overloaded.

• Quicker solutions can be achieved when decision-making can be done at a lower

level.

• Staff will be motivated since they will feel more responsible and it is more likely that

they will take initiatives.

Both centralisation and decentralisation have their advantages and it is up to top

management to devise a strategy that will benefit the organisation. Most managers like to

hold the maximum power, that is, going for centralisation. However, there are factors that

compel top management to go for decentralisation. For example, the larger in size an

organisation becomes, the more difficult and complex it is for top management to deal

with everything and hence there is no choice but to delegate authority to management at

lower levels. Furthermore, technological improvement brings about more complex

products that require in-depth expertise. Another aspect is the geographical factor

whereby the managers have to be on site in order to be able to make appropriate

decisions. In such cases, decentralisation becomes imperative.

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Activity 6

Compare and contrast the advantages and disadvantages of centralisation and

decentralisation.

5.5.4 Formalisation

Formalisation is the extent to which policies, rules, procedures, etc. are in written forms.

The organisation has to operate in accordance with those formal guidelines put forward

by top management with a view to achieve the organisational goals. Such bureaucracy

helps large organisations to have a better workflow. For example safety rules are clearly

displayed in the workshop of any manufacturing industry and the workers are compelled

to follow them.

However, too much formalisation that is, too many rules and procedures, make

operations become heavier to deal with. The employees tend to be less creative and

innovative and they hardly react to changes since they have a frame of mind to always

abide by or refer to rules and regulations.

5.5.5 Span of Management

Span of management or span of control is the number of subordinates reporting directly

to a specific manager [Bartol, 1996].

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It is important to have the right size of span of management because too many

subordinates make it hard for the manager to co-ordinate and control activities properly,

while too few subordinates create a situation of managers being underutilised.

The span of management affects the number of levels in an organisation’s hierarchy and

this is illustrated by Figures 5.2 and 5.3. A tall structure has a narrow span of control and

many hierarchical levels whereas a flat structure has a wide span of control and few

hierarchical levels.

The major problems associated with a tall structure are that communication is relatively

slow, administrative expenses are higher and it is difficult to locate the source of error. In

order to avoid these problems, organisations make their structure flatter by expanding the

span of control and reducing the middle management levels and workforce. This process

is known as downsizing. However, if downsizing is not properly done, the organisation

may lose valuable staff.

Figure 5.2: Organisation with Narrow Spans (Tall organisation structure)

Figures 5.3: Organisation with Wide Spans (Flat organisation structure)

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Activity 7

Nowadays organisations tend to have flatter structure. Discuss this statement.

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5.6 HORIZONTAL CO-ORDINATION

Horizontal co-ordination is the connection of activities through flow of information

across departments of the same levels.

With the ever increasing competition, it is imperative for an organisation to have

adequate methods of conveying information so that the different departments are aware

of the happenings within the entire organisation and work as a big team accordingly in

order to achieve the organisational goals. Horizontal co-ordination enhances the

exchange of information across departments and among individuals through slack

resources, information systems and lateral relations [Bartol, 1996].

5.6.1 Slack Resources

Slack resources are extra resources that help to relieve pressures (both external and

internal) as well as contribute to innovation. These resources can take any form, for

example, a mobile phone can embetter the daily life of a busy person. In an organisation,

extra equipment and manpower will help reduce tension by allowing a smoother co-

ordination of activities.

5.6.2 Information Systems

Another means of horizontal co-ordination is the use of information systems. A

breakthrough in information technology has led to an increasing importance of computer

as an effective means to transfer information. A computerised information system has

become the sine qua non for organisational success since information are being

exchanged at very high speed, for instance, through extensive use of email. The entire

organisation can be connected via a local area network for rapid information transfer.

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5.6.3 Lateral Relations

Lateral relations is the co-ordination of efforts through communicating and problem-

solving with peers in other departments or units, instead of referring issues up the

hierarchy for consideration [Bartol, 1996].

One means of lateral relations is direct contact, that is two or more individuals of

different departments interact and work towards a solution for problems affecting them;

many times problems can be solved at the lower or middle management levels.

Another way is to have a liaison role, that is, somebody who is employed to facilitate

communication between different departments and to ensure that the respective needs are

met. The liaison person improves horizontal co-ordination by maintaining a good internal

customer-supplier relationship.

Lateral relations can also be in the form of a taskforce whereby people from different

units are appointed to work together and share ideas with a view to provide

recommendations on important issues and try to implement them.

Activity 8

Explain with the help of examples, the means to facilitate horizontal co-ordination.

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Activity 9

Describe the strategy you would adopt in (re)designing an organisation structure that

would make an organisation competitive.

(Reference could be to any organisation of your choice, may it be from manufacturing or

service sector.)

5.7 KEY CONCEPTS

Chain of Command

Job Design

Departmentalisation

Vertical Co-Ordination

Delegation

Span of Management

Horizontal Co-Ordination

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5.8 ADDITIONAL ACTIVITIES

1. The number of people reporting to a manager is known as

(a) Slack resources

(b) Span of management

(c) Line and staff

(d) Job sharing

2. Delegation is the extent to which __________ is transferred from a manager to

his/her subordinate.

(a) Position

(b) Workload

(c) Authority

(d) Approach

3. Job enlargement is one of the approaches of job

(a) Rotation

(b) Scheduling

(c) Sharing

(d) Design

4. Horizontal co-ordination is the ___________of activities across departments of

the same levels.

(a) Linking

(b) Set

(c) Measurement

(d) Structure

5. Formalisation is one of the methods of

(a) Horizontal co-ordination

(b) Vertical co-ordination

(c) Motivation

(d) Innovation

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UNIT 6 MOTIVATION

Unit Structure

6.0 Overview

6.1 Learning Objectives

6.2 Motivation

6.2.1 The Importance of Motivation

6.2.2 Motivation and Behaviour

6.2.3 Meaning of Motivation

6.3 Theories of Motivation

6.3.1 Early Approaches to Motivation

6.3.2 Need or Content Theories

6.3.2.1 Abraham Maslow’s Hierarchy of Needs Theory

6.3.2.2 Douglas Mc Gregor’s Theory X and Theory Y

6.3.2.3 Frederick Herzberg’s Motivation Hygiene Theory

6.3.2.4 Clayton Alderfer’s ERG Theory

6.3.2.5 David Mc Clelland’s Acquired Needs Theory

6.3.3 Process or Cognitive Theories

6.3.3.1 Victor Vroom’s Expectancy Theory

6.3.3.2 J. Stacy Adam’s Equity Theory

6.3.3.3 Harold Kelly’s Attribution Theory

6.3.3.4 Edwin A Locke and Gary P. Latham’s Goal Setting Theory

6.3.4 Reinforcement Theory

6.3.5 Social Learning Theory

6.4 A Model of Motivation

6.5 Key Concepts

6.6 Video Session

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6.0 OVERVIEW

This Unit defines the concept of motivation and introduces the various theories of

motivation. It also underlines the importance of motivation in achieving managerial and

organisational effectiveness.

6.1 LEARNING OBJECTIVES

After you have successfully completed this Unit, you should be able to do the following:

1. Define the concept of motivation.

2. Outline the theories of motivation.

3. Identify the elements of a motivational process.

4. Design a model of motivation.

6.2 MOTIVATION

6.2.1 The Importance of Motivation

Some people like their jobs and work harder as well as smarter. They are also very proud

of the organisations for which they work.

Other people simply dislike their jobs and would do anything just to avoid working. They

would also prefer, if given the choice, to leave the organisations where they are working.

Such attitudes and behaviours are not uncommon. They have a direct link with the issue

of motivation at work.

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Managers and supervisors are always expected to obtain higher levels of performance and

productivity from the employees. They are expected to ensure that employees are

committed and dedicated to their work. Motivating employees is, therefore, an important

responsibility for managers and supervisors and their effectiveness is closely connected

with the issue of motivation.

The presence of motivation is equivalent to the achievement of better results and higher

levels of job satisfaction. Absence of motivation is synonymous to low levels of outputs

and can give rise to frustration, poor workmanship, strained interpersonal relations and

conflicts.

Understanding and managing motivation is of interest to managers, supervisors as well as

to anybody entrusted with the task of working with and through people to achieve certain

goals and objectives.

6.2.2 Motivation and Behaviour

Motivation is not behaviour itself. We can infer the presence or absence of motivation by

examining the behaviours of people in a given context. Some behaviours are desirable

and are encouraged. Other types of behaviours are undesirable and will not be

encouraged.

Some of the factors that explain the presence of undesirable behaviours are due to a lack

of motivation. The responsibility of those who are managing the motivational issue is to

trigger the motivational process within individuals.

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Activity 1

(a) List some behaviours that are normally considered undesirable in a work setting.

Example:

1. Coming to work late

2.

3.

4.

(b) List some of the likely causes of undesirable behaviours in work settings.

Example:

1. The work is poorly defined.

2.

3.

4.

6.2.3 Meaning of Motivation

The term motivation has a Latin origin. It is derived from the word ‘movere’ which

means ‘to move’. Motivation implies and involves a movement. Such movement can be

towards or away from a given situation or context.

The word motivation is also associated with such words like motives, needs, wants,

wishes, desires, likes, urges, and goals and objectives.

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Motivation is a derivation of the term motives that is equivalent to the term “needs”. We

shall, therefore, stick to the term “needs” when discussing the concept of motivation.

Needs

Needs are internal states or conditions whereby an individual experiences a certain

deficiency or scarcity, either of a physiological or psychological nature. For example,

whenever we are thirsty, hungry or sleepy, we are experiencing a certain need.

Needs and Drives

The term “drives” is associated with needs. Whenever the needs are sufficiently aroused

to push a person towards a certain action, the needs transform into drives. Drives are

needs that assume a certain orientation or direction and normally result in some action or

activity.

In other words, motivation is an activation of a need into a drive, which is likely to result

in a particular behaviour, under certain specific conditions.

The degree or strength of motivation depends upon the attractiveness of the “incentives”

or rewards which will be available for the efforts that are being made by the person.

For instance, a person is hungry (a need) and decides to go to a restaurant to eat a plate of

delicious food (incentive). How fast the person goes to the restaurant and how

enthusiastically he consumes the food will be illustrative of a typical motivational

situation.

Motivation is, therefore, an internal process that energises people to engage in certain

types of behaviours.

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Activity 2

What are the different types of needs or motives that a person can experience?

6.3 THEORIES OF MOTIVATION

6.3.1 Early Approaches to Motivation

The work of Frederick Winslow Taylor, commonly known as the Scientific Management

Movement, was one of the earliest attempts to understand and to deal with the problem of

worker motivation. Taylor advocated a system of wage incentives in order to encourage

workers to increase productivity.

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His assumptions were based on the concept of the Economic/Rational Man. It

emphasised the maximisation of gain as the prime concern in human beings. More

money for more and more work was equated as being a recipe for greater job satisfaction.

However, Taylor’s approach to motivating workers by providing them more “carrots” or

“incentives” in terms of higher wages had important limitations.

The limitations in Taylor’s approach to motivation were investigated by a team of

researchers led by Professor Elton Mayo of Harvard University. The work of Elton Mayo

is known as the Hawthorne Experiments / Studies or the Human Relations Movement.

This movement emphasised the importance of social needs and the importance of the

informal organisation and informal leadership in group dynamics and behaviour.

The Human Relations Movement argued that managers should pay attention to the social

dimensions in a work situation. If these aspects are taken care of, the workers will be

motivated.

Better communication, shared-decision making and consultation in job-related issues,

group incentives and attention to informal groups and the informal leader were some of

the ideas that were promoted as contributing to higher levels of motivation.

However, even under this approach, the managers were still responsible for prescribing

the type of behaviour that was acceptable to the organisations. Workers had to comply

with the managerial directives. The improvements proposed under the Human Relations

Movement were confined to whatever the managers considered to be primary in the

interests of the organisations.

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Activity 3

(a) What were the limitations of Taylor’s approach to motivation?

Note:

You are STRONGLY advised to refer to Unit 2 on “The Evolution of

Management” when tackling this question.

(b) In view of the limitations of the Human Relations approach to motivation, suggest

how the approach to motivation can be improved.

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6.3.2 Need or Content Theories

The early approaches to motivation contained certain weaknesses. These weaknesses

were addressed by a number of more sophisticated theories of motivation. The need or

content theories of motivation were based on the idea that people experience a number of

needs .To fulfil those needs, they will engage in specific activities.

Need theories require managers to understand and identify those needs. All that managers

would be required to do, having determined the needs of the workers would be to design

and implement appropriate motivational programmes with the right mix of incentives.

The contributors to these theories are:

Contributors Theories

• Abraham Maslow The hierarchy of needs

• Douglas Mc Gregor Theory X and Theory Y

• Frederick Herzberg Motivation–Hygiene Theory

• Clayton Alderfer ERG Theory

• David C. McClelland Acquired-needs Theory.

6.3.2.1 Abraham Maslow’s Hierarchy of Needs Theory

According to this theory, human beings experience at least five types of needs. These

needs normally exist in a hierarchical order ranging from the basic, first order needs to

the highest, second order needs. They are physiological or biological, safety or security,

social or belongingness, self-esteem and self-actualisation as shown in Figure 6.1

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Hierarchy of Needs

Figure 6.1

The strength or intensity of a particular need activates the motivational process in human

beings. However, critics of the theory argue that every human being may not experience

the various needs in the same manner. Moreover, a need may not be completely fulfilled

before another need becomes more pressing. It is also not necessary that the needs be

classified into five distinct categories.

Maslow’s theory nevertheless provides an interesting framework for understanding the

issue of motivation.

6.3.2.2 Douglas Mc Gregor’s Theory X and Theory Y Theory X is based on a set of assumptions about the nature of work and human beings.

For the theory X type, work is viewed as a necessary evil and people are normally

predisposed to avoid work. Work needs to be highly prescribed and tightly controlled.

Threats and punishments have to be resorted in order to get work done.

Social or Belongingness

Self-esteem

Self- Actualisation

Physiological or Biological

Safety or Security

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In contrast, Theory Y is based on a opposite set of assumptions. Work is viewed as an

interesting activity and people are normally predisposed to enjoy doing their work.

Managers are therefore encouraged to provide workers with opportunities to assume

higher responsibilities and greater autonomy.

Theory X and Theory Y did not depart from the ideas put forward by Maslow. They

looked at the issue of motivation from the point of view of managers. They argued that

managers held a set of assumptions about work and workers and these assumptions

influenced their attitudes and behaviours.

6.3.2.3 Frederick Herzberg’s Motivation Hygiene Theory

According to this theory, in any given work situation, there are two types of factors that

can affect the attitudes and behaviours of employees. The first set of factors are termed

as the satisfiers. They relate to the intrinsic nature of the work itself and what the worker

does; for example, the diversity of tasks to be carried out by the employee or the

opportunities for growth available to the employee. If these factors are present, the

worker may experience high job-satisfaction.

The other set of factors are referred to as the dissatisfiers; for example, working

conditions, salary or company policies which are available to the employee. They relate

to the environment of the work and the environmental conditions in which the work is

carried out. If these factors are not appropriate, the workers may experience a certain

level of job-dissatisfaction.

Herzberg’s theory has raised interesting issues. Are satisfied workers motivated

workers? Does the removal of dissatifiers in a work situation lead to job-satisfaction?

Herzberg seems to have related the notion of job-satisfaction to motivation in his theory.

While job-satisfaction can influence motivation, it does not, in all cases, have a cause and

effect relationship with motivation.

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6.3.2.4 Clayton Alderfer’s ERG Theory

Alderfer’s theory is considered as an alternative to Maslow’s Hierarchy of Needs Theory.

The five needs are grouped into three categories: existence, relatedness and growth

(ERG). They can be viewed as different stages along a continuum and differ in terms of

their concreteness. This is illustrated in Figure 6.2.

Figure 6.2

As one level of need is satisfied, another level takes over. Thus, the ERG theory

incorporates a satisfaction-progression principle, which is also present in Maslow’s

Hierarchy of Needs Theory.

Thus, the ERG theory also proposes that the levels of needs were satisfied in a sequential

manner. Further, if a need is not satisfied on a continuous basis, the individual may

decide to give such a need a low priority. For example, if you invite a person for dinner,

but your invitation is not reciprocated on several occasions, you may decide to stop

issuing any further invitation.

6.3.2.5 David Mc Clelland’s Acquired Needs Theory

According to this theory, the needs that individuals experience are acquired through life

experiences; they are learned.

Growth

Relatedness

Existence

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The needs can be classified into: Need for affiliation (nAff), Need for achievement

(nAch) and Need for power (nPow).

The existence of these needs defines the need profile of an individual .The strength of a

particular need becomes the driving force for an individual’s behaviour. In most

situations, individuals are likely to possess a combination of all the three needs.

Activity 4

List the strengths and weaknesses of the content theories of motivation.

6.3.3 The Process or Cognitive Theories

Need or content theories focus on WHAT motivates people. They do not explore how the

mind processes the needs in relation to other factors that can influence motivation. They

suggest what the antecedents of motivated behaviour are.

The process or cognitive theories go a step further and give a different perspective to our

understanding of motivation. They attempt to explain HOW behaviour is aroused and

energised. They focus on the cognitive or thought processes that precede or accompany

motivation.

The major process or cognitive theories are:

• Victor Vroom’s Expectancy Theory(The VIE Theory)

• J.Stacy Adams’ Equity Theory

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• Harold Kelly’s Attribution Theory

• Edwin A. Locke and Gary P. Latham’s Goal-setting Theory

6.3.3.1 Victor Vroom’s Expectancy Theory

Three key elements constitute the basis of this theory. They are Effort- Performance

expectancy (EP), Performance – Outcome expectancy (PO) and Valence.

Effort-Performance expectancy refers to the evaluation that efforts made will result in a

desired performance. Performance – Outcome expectancy consider the rewards that are

available if the outcome is attained. Valence is the value that is attached to the rewards.

Expectancy theory of motivation originally suggested that an individual will put in efforts

on the basis of the assessment made with respect of each element of the theory.

Subsequent work modified this approach and proposed that an individual will make a

global assessment of each element and combine them in a general formula:

(EP) × (PO) × valence = motivation

If any of the element obtains a low or a zero value, there will be an absence of

motivation.

Expectancy theory is not particularly suited for making comparisons among individuals

and their motivational levels. Each individual makes a unique assessment that influences

his/her behaviour.

6.3.3.2 J.Stacy Adam’s Equity Theory

Feelings or perceptions of equity are at the heart of Equity theory. It is based on the fact

that people are always comparing their efforts and the associated rewards with those of

other people. Whenever there is a situation which involves an element of injustice or lack

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of fairness (not in an absolute basis) there is an imbalance. In such circumstances, the

individual will try to engage in certain activities to reduce or remove the imbalance. The

efforts that will be expended will demonstrate the level of motivation.

6.3.3.3 Harold Kelley’s Attribution Theory

Kelley focusses on the complexity of human behaviour. His theory is concerned with the

“whys” of behaviour and motivation. The causes are to be found in the relevant

environment of the individual, both at the internal (within the individual) as well as

external levels. Cognition and perception are the two processes that are involved in the

search for causes or attributes and this information influences the behaviour and

motivation of individuals.

Attribution theory is not a theory of motivation; rather, it is a theory of the relationship

between personal perception and interpersonal behaviour.

6.3.3.4 Edwin A. Locke and Gary P.Latham’s Goal Setting Theory

The process of goal setting provides opportunities for shaping the attitudes and

behaviours of the people involved in the process. The particular attributes that are

associated with the set goals also contribute towards determining the level of motivation.

The element of feedback plays a key role in the motivational process.

Goal setting theory provides managers with an interesting approach to deal with the issue

of motivation at work. It is interactive and both managers and employees share the

responsibility for motivation.

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Activity 5

Is there any conflict or contradiction between the need/content theories and the

process/cognitive theories? Explain your answer.

6.3.4 The Reinforcement Theory

The reinforcement theory of motivation was promoted by psychologist B. F. Skinner and

others. The theory is also known as the Operant Conditioning, Behaviourism or the Law

of Effect.

According to this theory, behaviour is dependent upon its consequences. If the

consequence of behaviour is positive and pleasant, such behaviour will be repeated. If the

consequence is negative or unpleasant, the behaviour will be discontinued.

Behaviour can be shaped or reinforced by different types of reinforcements or rewards.

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• Positive reinforcement is a reward that is pleasant and the individual

repeats the behaviour in order to obtain the reward.

• Negative reinforcement (also referred to as Avoidance Learning) is a

negative or unpleasant stimulus that an individual would avoid or escape

by engaging in the required behaviour.

• Extinction is a technique whereby a positive reinforcement that was

available for an individual to continue with a behaviour, is deliberately

withheld or denied in order to discourage the behaviour from being

continued.

• Punishment is a technique whereby a negative reinforcement is applied in

order to discourage or stop an undesirable behaviour.

Schedules of Reinforcement

Behaviour can be reinforced either on a continuous or a partial basis. The types of

schedules chosen for reinforcement specify the purpose, the timing and the situation

being addressed.

The Reinforcement theory is considered as an opposite to the Cognitive or Process

Theories of motivation. The thought processes behind behaviour is given less

consideration than the consequence of the behaviour itself.

Activity 6

(a) Identify a couple of situations where the Reinforcement Theory can be applied.

(b) Provide examples of various types of reinforcement that can be utilised by a

manager in dealing with employees.

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6.3.5 Social Learning Theory

This theory has been put forward by A. Bandura. He argues that behaviour cannot be

explained by excluding the learning process that an individual goes through in his/her

experiences. Nor can we exclude the personal or environmental factors that can influence

the learning process as well as the behaviour.

According to Bandura, the Social Learning Theory combines elements of both the

Reinforcement and the Cognitive or Process Theories.

The Social Learning Theory involves symbolic processes, vicarious learning and self-

control.

• Symbolic Processes relate to our ability, through words and symbols, to visualise

situations even before experiencing them. Through self-efficacy (a cognitive aspect)

we are able to have an idea about our ability to do certain tasks.

• Vicarious Learning involves learning through observation, without having to make

the experience ourselves. We observe, retain, and reproduce behaviours. In order to

adopt such behaviours as our own, the element of motivation through appropriate

types of reinforcement becomes important.

• Self-control is our ability to be master of our own acts. For example, we have the

power in us to withhold our co-operation to a project, even if the reinforcement is

highly positive.

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Activity 7

Illustrate, with suitable examples, instances of (i) Symbolic Processes (ii) Vicarious

Learning (iii) Self-control

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6.4 A MODEL OF MOTIVATION

All the different elements or factors involved in a typical motivational situation can be

incorporated within a simple model. This is illustrated in Figure 6.3. Such a model will

provide a very useful and pragmatic way of sizing up the issue of motivation.

Needs or wants

Cognitive activities Motivated

(including personal factors) Behaviour

Behaviour

Reinforcements or rewards

Unmotivated

Behaviour

Environmental factors

Figure 6.3: A Model of Motivation

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Activity 8

(a) In designing motivational programmes, what considerations should a manager

keep in mind?

(b) Do managers themselves face the problems of motivation? How should they deal

with such situations?

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6.5 KEY CONCEPTS

Behaviour

Drives

Motivation

Needs

Needs Theory

Relatedness

6.6 VIDEO SESSION

“All Systems Go: Motivating for Excellence”: Episode 14

Pay particular attention to the following questions while viewing the video. Your

answers will be discussed during the tutorial.

1. What set of factors can influence people’s behaviours?

2. How can managers empower employees?

3. What elements can be included in rewards/incentive systems?

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UNIT 7 LEADERSHIP

Unit Structure

7.0 Overview

7.1 Learning Objectives

7.2 Definition of Leadership: In Search of the Holy Grail

7.3 Theories of Leadership

7.3.1 Traditional Theories of Leadership

7.3.1.1 Trait Theory

7.3.1.2 Style Theories

7.3.1.2.1 Autocratic and Democratic Leadership

7.3.1.2.2 Participative and Directive Leadership

7.3.1.2.3 People Oriented and Productivity Oriented

Leadership

7.3.1.3 Contingency Theories

7.3.2 Contemporary Theories of Leadership

7.3.2.1 Transactional Leadership

7.3.2.2Transformational Leadership

7.3.3 The Future of Leadership -Spiritual Leadership

7.4 Management and Leadership

7.4.1 Leadership: An Asset of a Successful Manager

7.4.2 Differences in Approaches

7.5 Skills of Leadership

7.6 Motivation and Leadership at Work

7.7 Key Concepts

7.8 Suggested Further Readings

7.9 Video Session

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7.0 OVERVIEW

After having gone through Unit 6 on Motivation, Unit 7 provides us with an insight of the

different theories of leadership and discusses the trend in its development. Since a

manager is called upon to become a leader in the workplace, we will see how this

transition could be enhanced through a comparison of leadership and management, and

identification of the skills pertaining to a leader. Motivation and leadership are not

independent concepts, and the last part of this unit attempts to illustrate this

interdependence.

Throughout this Unit, you will tackle various activities to help you assess your level of

understanding of the unit content.

7.1 LEARNING OBJECTIVES

After you have successfully completed this Unit, you should be able to do the following:

1. Define leadership.

2. Distinguish between the different theories of leadership.

3. Differentiate between a manager and a leader.

4. Identify the skills of a leader.

5. Discuss the importance and relevance of motivation and leadership for managerial

and organisational effectiveness.

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Warm Up Activity

Before going into the heart of the subject matter, write down in the space provided below,

what 'leadership' brings to your mind. As you proceed through the unit, check in the right

column below, the points that match your answers.

•

•

•

•

•

•

•

•

•

•

•

7.2 DEFINITION OF LEADERSHIP: IN SEARCH OF THE HOLY GRAIL

A lot of studies and research have been undertaken, and are still going on, on the topic of

leadership. In such a context, finding a specific definition can prove restrictive. Different

authors have their own ideas about leadership.

Leadership has commonly been defined as the traits, qualities, and behaviours of a leader,

Horner (1997).

146

For Dobbins and Pettman (1997) leadership is the ability to motivate people to work

towards achieving common goals, to make ordinary people display extraordinary

performance.

In short, leadership has been related to a person's skills, abilities and degree of influence

to get people moving in a direction, making decisions and do things that they would not

normally have chosen to.

7.3 THEORIES OF LEADERSHIP

Now, let’s look at the different theories of leadership through the various stages of its

development; traditional theories, contemporary theories and future of leadership. In the

process we will review the outcomes of studies done by psychologists and researchers

from the Universities of Michigan and Ohio, and many others.

7.3.1 Traditional Theories of Leadership

The traditional theories include:

• Trait theory

• Style theories

• Contingency theories

7.3.1.1 Trait Theory

Trait theory is based on the belief that leaders have different personality characteristics or

traits than other people. It assumes that leadership is innate (one is born a leader). The

emphasis is more on the individual rather than the situation. Although the same traits are

found in everyone, people may differ from each other on each trait. So psychologists tried

to identify the traits that were prominently present in Leaders or Great Men.

147

Traits are distinctive internal qualities or characteristics of an individual, such as physical

characteristics (height, weight, appearance, energy), personality traits (dominance,

extroversion, originality), skills and abilities (intelligence, knowledge, technical

competence), and social factors (interpersonal skills, sociability and socio-economic

position).

Different studies under this perspective, which according to Handy (1993) amounted to

over hundred by 1950, attributed the following common traits to a leader:

• Intelligence

• Initiative

• Self-assurance

• Helicopter factor - Adopting a holistic approach.

Referring to a study undertaken by Kouzes and Pasner in 1993, Cacioppe (1997)

presented the six highest characteristics that people admire in leaders:

1. Honesty

2. Forward looking

3. Inspiring

4. Competent

5. Fair-minded

6. Supportive

It is normally found that a great leader has a personal quality of magnetism or charisma,

and that such a person tends to be higher in certain characteristics than other people (e.g.,

intelligence, level of activity and social participation). However, psychologists remain

unconvinced that there is any link between any specific characteristics and any form of

leadership.

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Activity 1

a. List a few leaders whether national or international.

b. Provide the criteria that influenced your choices.

c. Make a list of personality characteristics or traits common to them.

d. Compare your answers with the responses of your classmates.

7.3.1.2 Style Theories

149

Failure to discover who the best leaders are, made the emphasis switch to an examination

of what the best leaders do, that is, at the behaviour of leaders. The assumption behind

the style theories is that employees will work harder and more effectively under some

given styles of leadership than others.

Style theories are reviewed under:-

(a) Autocratic and Democratic Leadership

(b) Participative and Directive Leadership

(c) People-oriented and Productivity-oriented Leadership

7.3.1.2.1 Autocratic and Democratic Leadership

In 1939, Lewin, Lippitt and White conducted a study concerning the effects of different

styles of leadership on group performance. In the study, the leaders had to adopt one of

three styles in performing their role: -

Autocratic - where the leader decides what should be done, when, how and by whom.

Democratic - where the work of the group is decided on by group discussion, supported

by the leader.

Laissez-faire - where the leader's input is minimal, limited to supplying materials and

information.

150

Autocratic

Democratic Laissez-faire

Figure 7.1: Trilateral Leadership Styles

The democratic leadership was the most appreciated and productive of the three methods.

Researchers from the University of Michigan confirmed this, at the beginning of the

1960s, when they found that the leadership of the successful groups was democratic in

style. In 1961, R. Likert proposed a classification of four systems of leadership styles:

1. Exploitative autocratic

2. Benevolent autocratic

3. Consultative

4. Democratic

Figure 7.2: Leadership Continuum

System 1 System 2 System 3 System 4

• No trust infollowers

• Leader makesdecision

• Limited trustin followers

• Bulk decisionmaking byleader

• Incompletetrust infollowers

• Followersalloweddecisionmaking underleader’s control.

• Complete trustin followers.

• Decentraliseddecision makingprocess.

Autocratic Democratic

Leadership style Leadership style

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Likert advocated the universal use of System 4 type of leadership, the democratic style, in

the management of organisations. According to Statt (1994), the programmes Likert

developed for the universal applicability of System 4 were closely related to the goal

setting and feedback aspects of motivation that we encountered in Unit 6.

There are however, situations in which autocratic leadership can improve a group’s

performance. The rationale behind this is that in some situations the satisfaction owing to

lifting up the burden of responsibility can outweigh that associated with participation in

decisions.

7.3.1.2.2 Participative and Directive Leadership

This dimension, illustrated in Figure 7.3, refers to the extent to which leaders in

organisations encourage their staff to participate in decision making regarding issues

affecting them directly. It is somehow similar to the Autocratic-Democratic dimension

mentioned above.

Kurt Lewin’s studies involving participative discussions showed that people are more

likely to accept and act on a group decision if they have participated in making that

decision. Participation by workers in decisions affecting their jobs can also lead to

increased enthusiasm, commitment and productivity. This finding is supported by

Locke's goal setting theory of motivation reviewed in Unit 6.

But there exist situations in which directive leadership seems to be more effective. In the

case of people knowing their job inside out, participation would be superfluous.

Participative Leadership

Figure 7.3: Bipolar Leadership Styles

DirectiveLeadership

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7.3.1.2.3 People-oriented and Productivity-oriented Leadership

This dimension refers to the work undertaken by the Ohio State University team that

identified two general factors which describe the behaviour of a leader: -

1. Consideration: the extent to which a leader shows attention to subordinates and is

concerned about their welfare.

2. Initiating Structure: the extent to which the leader’s role and the activities of the

group are structured around the accomplishment of the group’s task.

Generally the consideration dimension seems to be the more effective of the two, with

high consideration being associated with subordinates’ high job satisfaction and low staff

turnover. Initiating structure and its effects on subordinates' job satisfaction and work

performance seems to vary with the influence of other factors like the type of

organisation and the size of the work group.

Leaders like to think that they can operate on both dimensions but their subordinates feel

that they cannot, and tend to see their leaders as either people-oriented or productivity-

oriented.

Blake and Mouton's Managerial Grid

From the work done by the Ohio State University team on People-oriented and

Productivity-oriented Leadership dimensions, Blake and Mouton have designed a

managerial grid. The grid indicates the position of a manager according to the degree of

concern shown to people and production.

153

For Blake and Mouton, we should strive for the (9,9) leadership approach, that is, high

concern for both people and production. In some situations, other positions on the grid

could be held following the leader's assessment of the people and production issues, as

shown in Figure 7.4.

High

9

8

7

6

5

4

3

2

Con

cern

for p

eopl

e

1

Low 1 2 3 4 5 6 7 8 9 High

Concern for production

Adapted from Bartol and Martin (1998)

Figure 7.4: Blake and Mouton's Managerial Grid

1,9 Country Club Management

• Attention to people's needs for a friendly organisational climate.

1,1 Impoverished Management• Promote minimum

effort for accomplish- ment of work and retaining people.

9,9Team Management

• Committed people • Pursuing common

goals Cli t f t t d

Authority - Obedience

• Reduce human interference to a minimum for the accomplishment of

work. 9,1

5,5 Organisation Person

Management Maintain satisfactory:

• work output • people morale.

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Activity 2

Consider the following cases and suggest which style(s) of leadership would be more

appropriate. Provide the rationale behind your answers.

Case 1

A client meets the Director of the Management Consultancy Services of a consultancy

firm. A project for the consultancy team is the outcome of this meeting. The Director

requires the various expertise of his team to work on the project. He calls his first general

meeting on this project.

Case 2

On the production floor of a textile factory, the line supervisor will have to reshuffle

operators on the chain to resolve a line-balancing problem.

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7.3.1.3 Contingency Theories

As the trait and style theories had not generated a universally effective leadership style,

researchers focused their attention on the situation in which leadership occurred. The

question now asked is, what kind of leadership behaviour would produce the most

effective response from people in a given situation?

In that perspective, variables involved in a leadership situation, such as the task, the work

group and the position of the leader within that work group, were then taken into account.

We review here the different contingency theories:

(a) Fiedler’s LPC theory

(b) Vroom-Yetton theory

(c) Path-Goal theory

(d) Hersey-Blanchard Situational theory

(a) Fiedler’s LPC theory

Fiedler tried to match the most appropriate form of leadership with a particular context by

combining aspects of both trait and style theories. He assumed leadership styles would

take one of two forms:

(i) Concern mainly with task in hand or

(ii) interpersonal relationships among the people trying to perform the task.

The position of the leader on this dimension was determined by a questionnaire rating his

or her Least Preferred Co-worker (LPC). Leaders with a high LPC score shows that they

empathise with even their least appreciated colleague and express concern with

maintaining harmonious relationships. On the other extreme, a low LPC score implied a

greater concern with the task in hand and less concern with interpersonal relationships.

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According to Fiedler, in Statt (1994), the more effective style of the two forms will

depend on three situational factors and the extent to which the combined effect of these

factors is favourable to the leader. The situational factors are: -

• relations between leader and group members – degree to which the members accept

and support the leader.

• task structure – degree of the group’s task clarity, with well defined goals and

procedures.

• leader’s position power – ability of the leader to control group members through

rewards and punishments.

The most favourable context for the leader is where there are good relations with group

members, a very structured task and high position power. The least favourable one is

when there are poor relations with group members, a very unstructured task and low

position power.

As illustrated in Figure 7.5, Fiedler concluded that at the two poles-very favourable and

very unfavourable contexts-a group works best if its leader has a low LPC score and is

task oriented. A situation in between the extremes-only moderately favourable- requires a

high LPC score and person-oriented leader to achieve good group performance.

Very favourablecontext

Very unfavourablecontext

Low LPC andtask oriented

Low LPC andtask oriented

High LPC andperson-oriented

Moderately favourablecontext

Figure 7.5

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Fiedler’s theory has been criticised in that the LPC score of a leader does not remain

stable but changes radically over time. The LPC score also changes as group

performance does influence the relations between a leader and a group member.

(b) Vroom-Yetton Theory

Vroom and Yetton formalised the participative - directive conception of leadership into a

model to guide leaders in their choice of the most effective style. They found that most

leaders had a style that varied with the people and situation. But most leaders were

usually at the intersection of the participative - directive dimension, that is, at the

‘consultation’ point.

The Vroom-Yetton model identified five decision-making styles, from

directive/autocratic through consultative styles to participative/democratic:

1. Autocratic 1: leader uses information already available to make decisions.

2. Autocratic 2:additional information obtained from group before leader reaches

decision.

3. Consultative 1: after sharing the problem with subordinates individually, leader

comes to a decision.

4. Consultative 2: group discussion on the problem before leader decides.

5. Democratic: sharing of the problem with the group of subordinates for group

decision while leader acts as chair.

The research seems to promote a participative style, except where the group members do

not share the leader’s commitment to the organisational goals. However, in the long run,

implementing the participative style in the workplace could generate some problems.

Traditional autocratic leaders find it difficult to allow for workers' participation to the

extent that their own involvement becomes much less necessary.

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(c) Path-Goal Theory

This theory focuses on leadership from the viewpoint of motivating subordinates. It is

based on the expectancy theory of motivation, which was discussed in Unit 6. Path-goal

theory incorporates some elements of the Michigan and Ohio research into leadership

style and Fiedler’s contingency theory.

From this theory the leader’s role is to facilitate the subordinates’ paths to the

achievement of performance goals that will carry some rewards, and thus enhance their

opportunities for job satisfaction. According to the situation, there are four effective

leadership styles:

1. Supportive

2. Directive

3. Participative

4. Achievement-oriented

Leaders can adopt different styles in different situations with the key situational factors

being leader-group relations, task structure and position power, as in Fiedler’s theory. In

stressful situations, supportive behaviour enhances group satisfaction while a directive

style suits ambiguous contexts.

Path-goal theory is appealing to both behavioural scientists and managers because of its

objective, rational and quantifying approach. However, it ignores a large part of people’s

lives and cannot explain much of workplace behaviour. The theory concentrates on the

task and stresses extrinsic rewards to encourage its accomplishment, denying the

possibility of intrinsic factors in motivation, thus contradicting Herzberg’s motivational

theory encountered in Unit 6.

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7.3.2.4 Hersey - Blanchard Situational Theory

This theory tries to match the leadership style to the maturity of the followers. Maturity

refers here to:

(i) Psychological maturity - the followers’ self-confidence, desire for achievement and

readiness to accept responsibility.

(ii) Job maturity - the followers’ task-related ability, relevant skills, technical knowledge

and experience.

Thus an assessment of the level of expertise and knowledge of followers, and an

awareness of the goals to be achieved, are necessary factors that determine an effective

leadership style. As the maturity of the followers increases, leadership should be more

relationship-motivated than task-motivated. As shown in Figure 7.6, depending on the

degree of follower’s maturity, from highly mature to highly immature, the leadership

style could involve:

• Delegating to followers

• Participating with followers

• Selling ideas to followers

• Telling followers what to do

Highly Immature Highly Mature

Telling Selling Participating Delegating

Figure 7.6: Leadership Styles v/s Followers' Maturity

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The traditional theories of leadership showed that there are many appropriate ways to

lead and various styles of leadership. The contingency theories differ from, and also build

on, the trait and behaviour theories as the trend in leadership research evolved from the

one best way to lead into a complex analysis of the leader and situation.

As suggested by Horner (1997), to be effective, it is best to evaluate the leader style,

situation, and characteristics of the followers. Then, given the leader’s style of leadership

and the different behaviours that can be exhibited, either appoint the leader to an

appropriate situation or adjust the latter to match the former. Therefore, to be effective,

we must use all three traditional theories of leadership.

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Activity 3

Identify situations in which it will be most suitable to use the following styles of

leadership:

(a) Autocratic/Directive

(b) Consultative

(c) Democratic/Participative

Discuss the findings with your classmates.

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7.3.2 Contemporary Theories of Leadership

As the studies on leadership evolved into more complex analysis of the leader and

situation, it became obvious that leadership could not be tied up to the process and

activity of the person who is in a leadership position. Leadership is more and more

concerned with responding to the surroundings, it also encompasses the environment the

leader creates, and the particular skills and activities of the people being led.

So we have reached a point where a distinction needs to be made between:

a) Transactional leadership, and

b) Transformational leadership

7.3.2.1 Transactional Leadership

For Burns (1978), transactional leadership originates from more traditional views of

workers and organisations, emphasising the leader’s position of power to use followers

for task completion. As its name implies, transactional leadership refers to interpersonal

exchanges (transactions) in the workplace. It is concerned with maintaining agreements;

responsibility and fairness, that is, more emphasis is placed on the means rather than the

ends. Thus transactional leadership relates more to a manager than a leader. Cacioppe

(1997) supports this view, emphasising that transactional approaches identify the main

task of the leader as guiding and motivating their followers in line with established goals

and rewarding their efforts fairly, in ways that the followers value. Cacioppe also linked

transactional leadership to Blanchard’s situational leadership model, Path-goal and

Vroom-Yetton theories, as he presented situational leadership as one of several

transactional approaches to leadership.

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7.3.2.2 Transformational Leadership

This approach to leadership transcends followers beyond personal goals and self-

interests, emphasising goals contributing to a greater team, organisational, national and

world betterment. Transformational leadership differentiates itself from transactional

leadership, as it is more dynamic. A transformational leader is concerned with the ends

rather than the nitty-gritty of an organisation’s day to day running, and with transforming

the way the organisation operates. Such a leader accomplishes this transformation by

doing the right thing for the organisation rather than by doing things by the book. The

transformational leader empowers everybody in the organisation to fulfil their potential,

and enhance their prospects by creating and following new objectives. Transformational

leadership is concerned with a dynamic and changing organisational process.

Transformational leaders can initiate and cope with change, creating something new out

of the old. Thus these leaders personally evolve and at the same time help their followers

and organisations to do so. They support and encourage each individual’s development

while building strong relationships with others. Bass (1985) describes transformational

leadership as searching for ways to motivate followers by satisfying higher-order needs

and involving them in the process of the work, that is empowering them.

For Cacioppe (1997), transformational leadership is concerned with communicating a

vision, inspiring and motivating enough, to unleash people’s potential into achieving

extraordinary things. Such leaders are concerned with aligning people and systems

throughout the organisation towards this vision. Transformational leaders have a vision

and ability to inspire followers into indulging higher values to achieve important

challenges. They cater for the concerns and developmental needs of the followers.

Some recent leadership approaches have been questioning the idea of leadership

existence within a single designated person and a situation. Gardner (1990) views

leadership as the work of multiple members of a group, as opposed to that of a single

skilled individual, striving towards a group goal. In such a case the leader will serve as a

164

resource, in addition to setting the direction and moving the group forward, with the

involvement of other group members as other thinkers and doers.

In the same trend, Manz and Sims (1991) propose an integrative perspective on

leadership with their “Superleadership”. For them a leader is someone who can inspire

others to lead themselves. Therefore leadership is within each individual, and not

restricted to the boundaries of formally appointed leaders. Such successful leaders are

facilitators in the process of initiating individuals to lead themselves. They are concerned

with unleashing the potential and abilities of followers. Therefore they are expected to

have the knowledge of many people instead of only counting on their own skills and

abilities.

Drath and Palus (1994) view leadership as a process whereby leaders are not individuals

in charge of followers, but considered as members of a community of practice. The

community of practice is defined as “people united in a common enterprise who share a

history and thus certain values, beliefs, ways of talking, and ways of doing things”. Drath

and Palus suggest that leadership is the process of co-ordinating efforts and moving

together as a group, with much emphasis on the social process that takes place within the

group of people. People do not need to be motivated and dominated but rather be

involved in the activity by playing an active role in leadership.

The evolution of leadership is being almost imposed by the fast-changing and dynamic

environment. The notion of leader and followers is being questioned, resulting in

reflection on the assumptions behind the trait and contingency theories. This has brought

the movement from transactional leadership to transformational leadership. Leadership is

viewed as a process and more of a group dynamic. This requires a paradigm shift, that is

a change in mind-set, which becomes obvious when we will look at the future of

leadership that involves traditional human values, spirituality, and integrates wisdom into

leadership.

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Activity 4

a) Compare and contrast transactional and transformational leadership.

b) Identify some leaders who exhibit either of those types of leadership.

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7.3.3 The Future of Leadership – Spiritual Leadership

With new concepts in management like the learning organisation, knowledge

management and the virtual organisation, and transformational leadership reaching

dimensions beyond imagination, the future of leadership is becoming more and more

complex. We are called upon to work in teams, be flexible and responsible with a touch

of autonomy accompanying new technology. The workplace and workforce are more

dynamic. More knowledgeable employees with professional cultures are joining

organisations. This means that the battle of effective leadership will be won on the

grounds of the various cultures interacting in an organisation, that is harnessing

multiculturalism. Values are more predominant, especially human values, which take us

to the new dimension in leadership: Spiritual leadership.

Spiritual Leadership

This dimension of leadership lies in the trend set by management gurus like S.Covey,

championing the integration of traditional spiritual values in leadership. This is so to

achieve the peace of mind that results from aligning the soul and mind. It is what

Cacioppe (1997) calls leadership wisdom.

To be effective in leadership wisdom would mean being very high on emotional

intelligence. Goleman (1996) defines emotional intelligence as a person’s awareness of

the appropriate emotions, how to manage and use them, in dealing with people in various

situations. The importance of emotional intelligence has been confirmed in a survey,

reported by Cacioppe (1997), of about 200 managers and professionals who rated

successful leaders as being very high on emotional intelligence and moderate to high on

intellectual intelligence. Therefore successful leaders need to be aware of their own

emotions and those of others, and be able to manage them when responding to other

people’s feelings.

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In addition to emotional intelligence, leadership wisdom incorporates other

characteristics that we have come across in our discussion on leadership: - • Ability to identify the needs of the specific situation,

• Managing and using the knowledge of others and that of the leader as required by the

situation,

• Showing empathy to followers so as to respond appropriately and differently,

• Inspiring and influencing followers to strive towards higher level values and goals,

• Ability to focus on the present situation while being aware of the people around.

We now have an insight of the different theories of leadership, its evolution and

development. It is a dynamic and complex subject, and we cannot say that we have

reached the end of the journey, as summarised in Figure 7.7:

Figure 7.7: Development and Evolution of Leadership.

Spiritual Leadership

Transformational leadership

Transactional leadership

Contingency theories of leadership

Style theories of leadership

Trait theories of leadership

?

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7.4 MANAGEMENT AND LEADERSHIP

We have looked at the evolution of leadership from the past (traditional), present

(contemporary) and future perspectives. We will now try to distinguish between

management and leadership. Leadership and management have been used

interchangeably. In fact, they are two notions describing two different concepts. We are

going to discuss here, the differences and similarities.

7.4.1 Leadership: An Asset of a Successful Manager

One of the several assets of a successful manager is leadership. The manager has to

undertake several functions, as seen in Unit 1, such as:

• Planning

• Organising

• Leading

• Controlling

Leadership is a component of the leading function. Management is not just about

leadership but requires involvement, playing various roles that cannot be delegated. In

some cases leadership may not be required, for example in self-motivated groups, thus

proving that leadership is just an asset of management.

7.4.2 Differences in Approaches

Managers tend to think incrementally while leaders adopt a radical approach. Managers

aim at doing things by the book whereas leaders are intuitive. Thus a leader is likely to be

more emotional than a manager, and this could be an explanation for teams choosing to

follow leaders, as some people are mostly driven by their emotions rather than their

intelligence. Managers adopt a transactional approach whereas leaders use a

transformational perspective.

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A leader is a pioneer with a vision that will unite people who will naturally become

followers through their own choice.

A manager could have earned his/her position of authority for years of service and loyalty

to the organisation rather than through owning leadership qualities. Hence the manager

will be obeyed and will rule but not necessarily be followed. Table 7.1 gives a

comparison between a leader and a manager.

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Table 7.1: A Comparison between a Manager and a Leader.

Manager Leader

• Motivates people and organises

resources to attain stated

organisational goals

• Pragmatic

• Limits focus

• Rational

• Does things right and by the book

• Transactional

• Static approach

• Motivates people to generate new

objectives

• Visionary

• Widens horizons

• Emotional

• Intuitive and does the right thing

• Transformational

• Dynamic approach

7.5 SKILLS OF LEADERSHIP

Along the line of our discussion throughout this unit, we can safely state that leadership is

not just innate. If one adopts the characteristics of leaders, do what they do, one can

become a leader. Hence we will have a quick overview of the skills and characteristics of

leadership and what leaders do.

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Table 7.2: Summary of Skills, Characteristics And Actions of a Leader.

Basic Skills of Leadership Characteristics of leaders What do leaders do? • Leaders set goals. • Leaders have a vision,

mission and clear goals.

• Inspire and motivate others.

• Leaders have high

expectations of themselves and others.

• Leaders have high expectations and are focused on winning.

• Put meaning and purpose into work.

• Leaders are good listeners.

• Leaders listen to and learn from others.

• Communicate well.

• Leaders are hard workers and believe in action to obtain results.

• Build winning teams.

• Leaders display courage in uncertainty.

• Leaders are strategic thinkers and show ability to plan.

• Leaders are results-oriented.

• Leaders relish leading and are confident in their abilities to lead.

• Leaders have high self-esteem.

• Leaders have the ability to self-motivate.

• Leaders thrive on continuous learning.

• Leaders possess high integrity.

Compiled from Dobbins and Pettman (1997)

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Activity 5: Don’t limit yourself to sections 7.4 and 7.5 while doing this activity.

(a) Think of the best manager you know or have worked with. Explain why you chose

that person. Was your choice guided by his/her leadership skills? Explain how

“leadership” affected your choice.

(b) Do the same exercise for the worst manager you know or have worked with.

(c) ‘A subordinate cannot be a leader'. Discuss.

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7.6 MOTIVATION AND LEADERSHIP AT WORK

Managers are expected to be effective leaders. The ability to influence the attitudes and

behaviours of others is essential in achieving organisational goals and objectives.

It is equally essential to be able to obtain the commitment and dedication of employees.

People always expect to be recognised and rewarded for their efforts and contributions.

Understanding and applying the theories of motivation can enhance the effectiveness of

managers as leaders.

Activity 6

(a) 'Effective managers facilitate and promote innovation'. Discuss with respect to

leadership and motivational theories.

(b) Provide suitable examples of the:

(i) leadership and

(ii) motivational skills, demonstrated by such managers.

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7.7 KEY CONCEPTS

Theories of Leadership

Transactional and Transformational Leadership

Spiritual Leadership

Management and Leadership

Skills of a Leader

Motivation and Leadership at Work

7.8 SUGGESTED FURTHER READINGS

1. Bartol, K.M. and Martin, D.C. 1998, Management, London: McGraw-Hill.

2. Steers, R.M., Porter, L.W. and Bigley, G.A. 1996, Motivation and Leadership at

Work, Singapore: McGraw-Hill International Editions.

3. Stoner, J.A.F., Freeman, R.E. and Gilbert, Jr, D.R. 1996, Management, New

Delhi: Prentice-Hall.

7.9 VIDEO SESSION

“At the Helm: Styles of Leadership”- Episode 16.

Hints while viewing the programme:

• Record the interviewees’/participants’ names to substantiate your answers to

questions listed below.

• Keep evidences from the programme to support your arguments.

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Answer the following questions after viewing the programme:

1. In trying to define leadership, some participants have talked about “Elements of

Leadership”. Identify these elements and relate them to what you have read in Unit 7.

2. Transformational leadership” is covered throughout the programme. What are the

interviewees’ contributions to the views provided in Unit 7 on “transformational

leadership”?

3. What additional information from the video could you bring to the distinction made

in Unit 7 between management and leadership?

4. From the programme, what are the challenges awaiting leadership in the future?

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UNIT 8 CONTROL

Unit Structure

8.0 Overview

8.1 Learning Objectives

8.2 Control

8.3 Control Related to other Management Activities

8.3.1 Dealing with Uncertainties

8.3.2 Detecting Irregularities

8.3.3 Identifying Opportunities

8.3.4 Handling Complex Situations

8.3.5 Decentralising Authority

8.4 Contribution of Management Levels to Control

8.4.1 Strategic Control

8.4.2 Tactical Control

8.4.3 Operational Control

8.5 The Control Process

8.5.1 Determine Areas to Control

8.5.2 Establish Standards

8.5.3 Measure Performance against these Standards

8.5.4 Correct Variations from Standards and Plans

8.6 Types of Control

8.6.1 Controls by Timing

8.6.1.1 Feedforward Control

8.6.1.2 Concurrent Control

8.6.1.2.1 SPC

8.6.1.3 Feedback Control

8.6.1.3.1 Quality Control

8.6.2 Multiple Controls

8.6.3 Cybernetic/Non-cybernetic Control

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8.7 Managerial Approaches to Control

8.7.1 Market Control

8.7.2 Bureaucratic Control

8.7.3 Clan Control

8.8 Characteristics of a Control Process

8.9 Potential Dysfunctional Aspects of Control

8.9.1 Behavioural Displacement

8.9.2 Game Playing

8.9.3 Operating Delays

8.9.4 Negative Attitudes

8.10 Key Concepts

8.11 Additional Activities

8.0 OVERVIEW

This Unit will show you the steps involved in a control process. The different types of

control as well as the approaches to control are discussed. Furthermore, you will be aware

of the characteristics of an effective control process.

8.1 LEARNING OBJECTIVES

After you have successfully completed this Unit, you should be able to do the following:

1. Describe the role of controls and their importance for different management levels

in organisations.

2. Explain the types of controls.

3. Describe the different approaches to implementing controls.

4. Explain the potential dysfunctional aspects of control systems.

5. Outline the characteristics of an effective control system.

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Warm up Activity

Before going through this unit, reflect on the meaning of control in an organization setup.

8.2 CONTROL

“Controlling is the measurement and correction of performance, in order to make sure

that enterprise objectives and the plans devised to attain them are accomplished.”

[Koontz, 1989].

Controlling can be likened to a thermostat set to control room temperature, in as much as

it checks, measures, appraises, and corrects if necessary. During its monitory phase it is

passive, that is not directly contributory, only becoming active when correction is

required.

Control is essential at every managerial level since each level has its own planning and

responsibility regarding the respective set of activities. However, there is a misconception

that control is from top management due to the fact that responsibility increases with the

level of hierarchy.

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8.3 CONTROL RELATED TO OTHER MANAGEMENT ACTIVITIES

The fundamental idea behind control is to assist managers in preventing problem

occurrence. Control helps in dealing with uncertainty, detecting irregularities, identifying

opportunities, handling complex situations and decentralising authority [Bartol, 1996].

8.3.1 Dealing with Uncertainties

In practical situations, things do not always come out as planned. There are many factors

that contribute to the success or failure of an organisation, for example availability of

material, change in technology and consumer tastes. But with a good control system,

management is in a better position to monitor activities and thereby react accordingly to

any changes.

8.3.2 Detecting Irregularities

In many cases, irregularities such as running over budget, unexpected high staff turnover

and product defects arise in an organisation, thus bringing it to perform badly. Control

systems help in detecting those irregularities and money can be saved when major

problems are prevented at an early stage.

8.3.3 Identifying Opportunities

Controls not only point out dark areas but also indicate favourable ones. For example,

managers will be aware of performance which is beyond expectation and by exploiting

those successful areas, the organisation will be more profitable. Such management

strategy can be developed with the help of controls.

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8.3.4 Handling Complex Situations

The larger the organisation the more difficult it is to have good co-ordination. Controls,

therefore, help to better co-ordinate large and complex operations.

8.3.5 Decentralising Authority

Controls help managers to go for decentralisation since they will be able to monitor

decisions made at lower levels. For example, a top manager can exercise control over a

delegated activity by monitoring accounting ratios such as return on sales, inventory

turnover, etc.

8.4 CONTRIBUTION OF MANAGEMENT LEVELS TO CONTROL

Each managerial level has its own level of responsibility and different types of controls

are applied correspondingly. These are strategic, tactical and operational controls.

8.4.1 Strategic Control

Strategic control consists of monitoring the determining factors which can affect the

strategic plans of an organisation and ensuring that the plans are realised. Such control is

exercised at top management level whereby the organisation is being looked over as a

whole and strategic decisions are taken on a relatively long term basis.

8.4.2 Tactical Control

Tactical plans are implemented at departmental level. Tactical control deals with the

assessment of these plans. It also covers the monitoring of results and taking corrective

measures when required. Middle management usually carries out this type of control

since they are mainly concerned with tactical decisions.

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8.4.3 Operational Control

Operational control consists of making sure that operating plans are well implemented by

lower level managers who need to rule within tight schedules and limited budget. This

type of control monitors the results on a daily basis followed by relevant corrective

actions.

Activity 1

Elaborate on the controls that exist in the different managerial hierarchy. Illustrate with

examples from an organisation with which you are familiar.

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8.5 THE CONTROL PROCESS

There is a general route to set up a control system although each managerial hierarchy

requires different types of control.

The basic steps in a control process is as follows:

Figure 8.1

8.5.1 Determine Areas to Control

In an organisation there are many controllable factors and it will be too expensive and

time consuming to control everything. So the very first step in a control process is to find

out which areas require control. Therefore managers have to focus on critical operations

to be controlled in order to achieve organisational goals.

Determine areas to control

Establish standards

Measure performance against these standards

Correct variations from standards and plans

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8.5.2 Establish Standards

The next step is to establish standards which will bring about a common understanding of

the specific activities and actions to be taken in order to achieve organisational

objectives. Standards are by definition simply criteria of performance.

Standards might point out the steps and requirements of a particular job with a view to

achieve the organisational goals. The standards will guide the employees throughout their

work and they will be in a better position to perform effectively.

8.5.3 Measure Performance Against these Standards

After setting up standards, the manager has to measure performance. The means for

performance measurement depends on those standards, and it can be in terms of number

of defects, number of units sold, return on investment (ROI), etc. These are quantitative

measurement and sometimes performance has to be assessed qualitatively, for example,

the evaluation of the attention paid to a customer. In such cases, the performance

evaluation is done by the peers in the organisation. The frequency of measuring

performance has to be determined as well, that is whether the control data has to be on a

monthly, weekly, daily, or even hourly basis. Then these performance values can be

compared to the standards set in terms of reports highlighting planned versus actual

results.

8.5.4 Correct Variations from Standards and Plans

The last step consists of analysing the difference in the actual results from the planned

ones, that is the variations from standards and necessary adjustments have to be made

accordingly. If the performance meets or exceeds requirements, the manager has to show

recognition and celebrate the success so as to encourage the subordinates to keep up the

performance. However, if standards are not met, the manager has to identify the root

cause of the problems and then appropriate corrective actions have to be taken. In some

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cases, the standards themselves have to be modified because they may be inappropriate

for the organisation.

8.6 TYPES OF CONTROLS

Apart from looking for the areas to be controlled, it is important for managers to decide

upon the types of controls to apply. The common types of controls are divided into

control by timing, multiple controls and cybernetic/non-cybernetic controls [Bartol,

1996].

8.6.1 Controls by Timing

A production cycle can be broken down into three main stages namely inputs,

transformation processes and outputs. Controls based on timing means applying control

at these different stages of a production cycle and such control types are divided into

feedforward, concurrent and feedback.

Figure 8.2

INPUTS

OUTPUTS

CONVERSION PROCESS

Feedforward control Concurrent control Feedback control

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8.6.1.1 Feedforward Control

Feedforward control concentrates on the very first stage of production and deals with

inputs. It ensures that inputs, which may be in the form of materials, people, time, money,

etc. meet the required standards so as to satisfy the next stage which is the transformation

process. It acts as a preventive measure for later process.

An example of feedforward control is inventory control whereby the necessary materials

needed to start production are verified to ensure that they conform to requirements.

8.6.1.2 Concurrent Control

Concurrent control looks upon the transformation process so that conformance to

standards is maintained throughout. It helps regulate the continuous process of producing

outputs so as to minimise defects, in other words, increase the quality level. This type of

control requires a sound knowledge of the process involved. An example of concurrent

control is statistical process control (SPC), one of total quality management (TQM) tools.

8.6.1.2.1 Statistical Process Control (SPC)

The aim of SPC is to minimise or prevent the risk of having defects by looking at the

process itself instead of inspecting finished products. In any process, variations exist. For

example, one of the factors pertaining to the quality of a product is its consistency.

Therefore, each product from the same production line must be similar or have a

minimum acceptable variance. Hence the performance of the process has to be monitored

and analysed, by using a control chart (see Figure 8.3) which is the main tool of SPC.

Scientific steps and statistical calculations are performed to set control limits. The control

data are plotted on the charts and these have to be within the lower and upper control

limits. Any deviation outside the limits will necessitate immediate corrective action.

SPC allows the operator to correct or adjust the production process in time, thus avoiding

the rejection of a whole defective batch at a later stage. Whenever the existing variation is

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controllable and predictable, it is said that the state is in statistical control, that is stable.

SPC is a vital tool of TQM.

Figure 8.3

Upper Control

Lower Control

Sample number

Data

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8.6.1.3 Feedback Control

Feedback control is the verification of a product or service after it has been completed to

see whether it meets the required standards. Sometimes deviations remain undetected

although feedforward or concurrent control has been exercised, and hence feedback

control can be regarded as a final check before supplying a product or service to the

customer.

An example of feedback control is quality control, which is a traditional type of control.

8.6.1.3.1 Quality Control

Quality control has existed for many years and is traditionally known as the identification

of nonconformances in the end products before they go to the customer.

For large production size, quality controllers take samples from the production batch and

check to see whether the batch must be accepted, rejected or sent back as rework. When

the product is safety critical or the batch is small, 100% inspection is performed.

8.6.2 Multiple Controls

Each of the methods described previously is useful. However, this usefulness is limited if

only one method alone is used since each method measures only part of the overall

production cycle. Therefore, most organisations use a combination of two or more of the

control types in order to be able to maintain higher overall quality. This use of multiple

controls scrutinise and, when required, correct at each stage, with the aim of ensuring

quality is maintained or improved, is the basis on which management practises total

quality management (TQM).

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8.6.3 Cybernetic/Non-cybernetic Control

Controls can be either cybernetic or non-cybernetic, that is without the involvement of

human being or relying on human factors respectively.

A cybernetic control system automatically monitors and makes the necessary adjustments

when needed. An example of such a type of control is the air-conditioning of a room

whereby the room temperature and humidity level are automatically regulated. Another

example is the monitoring of water level in tank and a pump automatically switches on

whenever the water level drops to a particular height. Nowadays, computers facilitate

largely the implementation of cybernetic control systems.

A non-cybernetic control system relies partly on human beings and this type of control is

used in most organisations. Many times the activities that need to be controlled are

complex and can be difficult to predict. Therefore human decision is essential before any

action is taken. For example many organisations have computerised inventory control

system and automatic order can be made, but at the same time a warning signal is sent to

the responsible manager before any action is taken.

Activity 2

Describe the different types of controls and illustrate their applications through some

examples.

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8.7 MANAGERIAL APPROACHES TO CONTROL

There are different managerial approaches to implement controls and these are known as

market, bureaucratic and clan control [Bartol, 1996].

8.7.1 Market Control

Market control is an approach that emphasises the use of external market mechanisms,

such as price competition and relative market share, to establish the standards used in the

control system [Robbins, 1999]. Basically, market control focuses on financial

performance.

For example, an organisation specifies its requirements and then publishes an invitation

for suppliers to provide quotations, thus creating competition among the suppliers. The

supplier who offers the best deal will then be given the contract.

8.7.2 Bureaucratic Control

Bureaucratic control is based on rules and regulations, standards, policies and other

mechanisms that are meant for the employees to comply, with the objective of achieving

organisational goals. This type of control is mainly a top-down hierarchical one and is

based on rewarding individual performance.

Bureaucratic control is very useful to monitor predictable activities since the rules and

policies are developed to deal specifically with these known variables. However, too

much bureaucratic control suppresses creativity and the employees tend to be slow to

react to changes.

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8.7.3 Clan Control

Clan control or cultural control lays emphasis on teamwork among employees to reach

organisational goals. It also relies on values, corporate culture, informal relationships

rather than stringent rules and policies.

Mutual influence is preferred to top-down hierarchical control. Clan control directs

rewards at group performance and encourages employee participation. In addition, it

fosters commitment from employees.

8.8 CHARACTERISTICS OF A CONTROL PROCESS

Effective control systems should be future-oriented, multidimensional, cost-effective,

accurate, realistic, timely, monitorable, acceptable to organisation members and flexible

[Bartol, 1996].

→ Future-oriented

A control system must help us monitor the actual work progress as well as to predict

future events and get prepared to take the necessary corrective actions if needed.

→ Multidimensional

A control system must be able to acquire all the various data that are relevant for specific

organisations.

→ Cost-effective

The cost of setting up and maintaining a control system must bring positive return on

investment to the organisation.

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→ Accurate

Control data has to be accurate since future actions will be based on them. Inaccurate

control data will mislead the manager who will in turn take wrong decisions that might

badly affect the organisation.

→ Realistic

An organisation must be realistic about factors that can be controlled and those that are

uncontrollable. Otherwise there is a risk that employees will get frustrated.

→ Timely

Control systems have to be able to provide information when required during a

production cycle. The time basis may take the form of a daily, weekly or monthly report

depending on the process and customer requirements.

→ Monitorable

Being able to monitor a control system is very important because the latter is liable to fail

like any other system. Since control data is crucial in decision making, it is imperative

that the control system can be monitored to ensure that it is working properly and do not

fail to detect defective part.

→ Acceptable to the organisation

A control system will work only if the employees accept it. If they find it as something

cumbersome or redundant, the control system on its own will not benefit the organisation.

In order for it to be accepted, the employees need to see its usefulness and the control

system has to reflect their performance.

→ Flexible

Flexibility is important since the control system has to be able to respond to changes and

meet new requirements. A control system must be designed in such a way that it can be

quickly modified to check new parameters.

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8.9 POTENTIAL DYSFUNCTIONAL ASPECTS OF CONTROL

Control systems are not always successful and a poorly designed one can lead to a

deterioration in the real purpose of controlling, which in turn will have a negative impact

on the organisation.

The major dysfunctional aspects of control systems are: behavioural displacement, game

playing, operating delays and negative attitudes [Bartol, 1996].

8.9.1 Behavioural Displacement

It is a situation where the individuals focus their efforts on what is measured by the

control system rather than real organisational objectives. For example employees may

overemphasise on quantitative aspects and forget about qualitative importance.

8.9.2 Game Playing

Game playing is the manipulation of control data by managers in order to create a

fictitious improvement in performance. The manipulation can take the form of falsifying

the data or by using more resources than allowed etc.

8.9.3 Operating Delays

Excessive controls especially feedforward and concurrent, will prevent the organisation

from running smoothly to achieve its goal. This is because controlling becomes so time

consuming that operations are delayed.

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8.9.4 Negative Attitudes

A control system tends to build negative attitudes towards it. Some individuals might find

it as being excessive or not suitable for the organisation. In other cases employees look

upon control as extra work.

Activity 3

Explain the dysfunctional aspects of a control system. How can you prevent them?

194

Activity 4

Choose an organisation you are familiar with and outline the major factors that need to be

considered to set up a control system

8.10 KEY CONCEPTS

Control Process

Types of Controls

Approaches to Control

Characteristics of a Control Process

Potential Dysfunctional Aspects of Control

195

8.11 ADDITIONAL ACTIVITIES

1. Control is to be performed by individuals at

A top management

B all levels

C middle management

D low level management

2. Clan control lays emphasis on

A standards

B costs

C teamwork

D strategy

3. Concurrent control is also known as

A yes-no control

B output control

C clan control

D market control

4. An effective control process should be

A sophisticated

B complex

C flexible

D costly

5. Market control is a ___________to implementing controls.

A managerial approach

B characteristic

C variation

D measure

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ANSWERS TO ADDITIONAL ACTIVITIES

Unit 1: Introduction to Management Multiple Choice Questions True or False

1. D 2. D 3. C 4. D 5. B 6. D 7. C

1. T 2. F 3. F 4. F 5. F 6. T 7. F

Unit 5: Organising 1. B

2. C

3. D

4. A

5. B

Unit 8: Control 1. B 2. C 3. A 4. C 5. A