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Levels of Management

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The term Levels of Management refers to a line of demarcation between

various managerial positions in an organization. The number of levels inmanagement increases when the size of the business and work force increases andvice versa. The level of management determines a chain of command, the amountof authority & status enjoyed by any managerial position. The levels ofmanagement can be classified in three broad categories: -

1. Top level / Administrative level2. Middle level / Executory3. Low level / Supervisory / Operative / First-line managers

Managers at all these levels perform different functions. The role of managers atall the three levels is discussed below:

LEVELS OF MANAGEMENT

1. Top Level of ManagementIt consists of board of directors, chief executive or managing director. Thetop management is the ultimate source of authority and it manages goals andpolicies for an enterprise. It devotes more time on planning and coordinatingfunctions.

The role of the top management can be summarized as follows -

a. Top management lays down the objectives and broad policies of theenterprise.

b. It issues necessary instructions for preparation of department budgets,procedures, schedules etc.

c. It prepares strategic plans & policies for the enterprise.d. It appoints the executive for middle level i.e. departmental managers.e. It controls & coordinates the activities of all the departments.f. It is also responsible for maintaining a contact with the outside world.g. It provides guidance and direction.
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h.The top management is also responsible towards the shareholders forthe performance of the enterprise.

2. Middle Level of ManagementThe branch managers and departmental managers constitute middle level.They are responsible to the top management for the functioning of theirdepartment. They devote more time to organizational and directional

functions. In small organization, there is only one layer of middle level ofmanagement but in big enterprises, there may be senior and junior middlelevel management. Their role can be emphasized as -

a. They execute the plans of the organization in accordance with thepolicies and directives of the top management.

b. They make plans for the sub-units of the organization.c. They participate in employment & training of lower level

management.

d. They interpret and explain policies from top level management tolower level.

e. They are responsible for coordinating the activities within thedivision or department.

f. It also sends important reports and other important data to top levelmanagement.

g. They evaluate performance of junior managers.h. They are also responsible for inspiring lower level managers towards

better performance.3. Lower Level of Management

Lower level is also known as supervisory / operative level of management.It consists of supervisors, foreman, section officers, superintendent etc.According toR.C. Davis, Supervisory management refers to thoseexecutives whose work has to be largely with personal oversight anddirection of operative employees. In other words, they are concerned with

direction and controlling function of management. Their activities include -


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a. Assigning of jobs and tasks to various workers.b. They guide and instruct workers for day to day activities.c. They are responsible for the quality as well as quantity of production.d. They are also entrusted with the responsibility of maintaining good

relation in the organization.e. They communicate workers problems, suggestions, and

recommendatory appeals etc to the higher level and higher level goalsand objectives to the workers.

f. They help to solve the grievances of the workers.g. They supervise & guide the sub-ordinates.h. They are responsible for providing training to the workers.i. They arrange necessary materials, machines, tools etc for getting the

things done.j. They prepare periodical reports about the performance of theworkers.

k. They ensure discipline in the enterprise.l. They motivate workers.m.They are the image builders of the enterprise because they are in

direct contact with the workers.

BCG MATRIX (GROWTH SHARE MATRIX)


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The BCG matrix (aka B.C.G. analysis, BCG-matrix, Boston Box, Boston Matrix,BostonConsulting Groupanalysis, portfolio diagram) is a chart that had been created by BruceHenderson for theBoston Consulting Groupin 1968 to helpcorporationswith analyzing theirbusinessunits orproduct lines. This helps the company allocate resources and is used as ananalytical tool inbrand marketing,product management,strategic management, andportfolioanalysis.[1]

Like Ansoff's matrix, the Boston Matrix is a well known tool for the marketing manager. Itwas developed by the large US consulting group and is an approach to product portfolioplanning. It has two controlling aspect namely relative market share (meaning relative to yourcompetition) and market growth

To use the chart, analysts plot ascatter graphto rank the business units (orproducts) on the basis of their relativemarket sharesand growth rates.

Cash cowsare units with high market share in a slow-growing industry.These units typically generate cash in excess of the amount of cash needed

to maintain the business. They are regarded as staid and boring, in a

"mature" market, and every corporation would be thrilled to own as many

as possible. They are to be "milked" continuously with as little investment

as possible, since such investment would be wasted in an industry with low

growth.

Dogs, or more charitably calledpets, are units with low market share in amature, slow-growing industry. These units typically "break even",generating barely enough cash to maintain the business's market share.
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Though owning a break-even unit provides the social benefit of providing

jobs and possible synergies that assist other business units, from an

accounting point of view such a unit is worthless, not generating cash for

the company. They depress a profitable company'sreturn on assetsratio,

used by many investors to judge how well a company is being

managed. Dogs, it is thought, should be sold off.

Question marks (also known as problem child) are growing rapidly and thusconsume large amounts of cash, but because they have low market shares

they do not generate much cash. The result is a large net cash

consumption. A question mark has the potential to gain market share and

become a star, and eventually a cash cow when the market growth slows. If

the question mark does not succeed in becoming the market leader, then

after perhaps years of cash consumption it will degenerate into a dog when

the market growth declines. Question marks must be analyzed carefully in

order to determine whether they are worth the investment required to

grow market share.

Stars are units with a high market share in a fast-growing industry. Thehope is that stars become the next cash cows. Sustaining the business

unit's market leadership may require extra cash, but this is worthwhile if

that's what it takes for the unit to remain a leader. When growth slows,stars become cash cows if they have been able to maintain their category

leadership, or they move from briefstardom todogdom.[citation needed]

As a particular industry matures and its growth slows, all business units becomeeither cash cows or dogs. The natural cycle for most business units is that they startas question marks, then turn into stars. Eventually the market stops growing thusthe business unit becomes a cash cow. At the end of the cycle the cash cow turnsinto a dog.

The overall goal of this ranking was to help corporate analysts decide which oftheir business units to fund, and how much; and which units to sell. Managers weresupposed to gain perspective from this analysis that allowed them to plan withconfidence to use money generated by the cash cows to fund the stars and,possibly, the question marks. As the BCG stated in 1970:

Only a diversified company with a balanced portfolio can use its strengths to trulycapitalize on its growth opportunities. The balanced portfolio has:
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stars whose high share and high growth assure the future; cash cows that supply funds for that future growth; and question marks to be converted into stars with the added funds.

[edit] Practical use of the BCG Matrix

For each product or service, the 'area' of the circle represents the value of its sales.The BCG Matrix thus offers a very useful 'map' of the organization's product (orservice) strengths and weaknesses, at least in terms of current profitability, as wellas the likely cashflows.

The need which prompted this idea was, indeed, that of managing cash-flow. Itwas reasoned that one of the main indicators of cash generation was relative

market share, and one which pointed to cash usage was that of market growth rate.

Derivatives can also be used to create a 'product portfolio' analysis of services. SoInformation System services can be treated accordingly.[citation needed]

[edit] Relative market share

This indicates likely cash generation, because the higher the share the more cashwill be generated. As a result of 'economies of scale' (a basic assumption of the

BCG Matrix), it is assumed that these earnings will grow faster the higher theshare. The exact measure is the brand's share relative to its largest competitor.Thus, if the brand had a share of 20 percent, and the largest competitor had thesame, the ratio would be 1:1. If the largest competitor had a share of 60 percent;however, the ratio would be 1:3, implying that the organization's brand was in arelatively weak position. If the largest competitor only had a share of 5 percent, theratio would be 4:1, implying that the brand owned was in a relatively strongposition, which might be reflected in profits and cash flows. If this technique is

used in practice, this scale is logarithmic, not linear.

On the other hand, exactly what is a high relative share is a matter of some debate.The best evidence is that the most stable position (at least in Fast MovingConsumer GoodsFMCGmarkets) is for the brand leader to have a share doublethat of the second brand, and triple that of the third. Brand leaders in this positiontend to be very stableand profitable; the Rule of 123.[3]

The reason for choosing relative market share, rather than just profits, is that it

carries more information than just cash flow. It shows where the brand is
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positioned against its main competitors, and indicates where it might be likely togo in the future. It can also show what type of marketing activities might beexpected to be effective.[citation needed]

[edit] Market growth rate

Rapidly growing in rapidly growing markets, are what organizations strive for; but,as we have seen, the penalty is that they are usually net cash users - they requireinvestment. The reason for this is often because the growth is being 'bought' by thehigh investment, in the reasonable expectation that a high market share willeventually turn into a sound investment in future profits. The theory behind thematrix assumes, therefore, that a higher growth rate is indicative of accompanyingdemands on investment. The cut-off point is usually chosen as 10 per cent per

annum. Determining this cut-off point, the rate above which the growth is deemedto be significant (and likely to lead to extra demands on cash) is a criticalrequirement of the technique; and one that, again, makes the use of the BCGMatrix problematical in some product areas. What is more, the evidence,[3]fromFMCG markets at least, is that the most typical pattern is of very low growth, lessthan 1 per cent per annum. This is outside the range normally considered in BCGMatrix work, which may make application of this form of analysis unworkable inmany markets.[citation needed]

Where it can be applied, however, the market growth rate says more about thebrand position than just its cash flow. It is a good indicator of that market'sstrength, of its future potential (of its 'maturity' in terms of the market life-cycle),and also of its attractiveness to future competitors. It can also be used in growthanalysis.
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The McKinsey 7S Framework

Ensuring that all parts of your organization work in harmony

How do you go about analyzing how well your organization is positioned to achieve itsintended objective? This is a question that has been asked for many years, and there are manydifferent answers. Some approaches look at internal factors, others look at external ones,some combine these perspectives, and others look for congruence between various aspects ofthe organization being studied. Ultimately, the issue comes down to which factors to study.

While some models of organizational effectiveness go in and out of fashion, one that haspersisted is the McKinsey 7S framework. Developed in the early 1980s by Tom Peters andRobert Waterman, two consultants working at the McKinsey & Company consulting firm, the

basic premise of the model is that there are seven internal aspects of an organization that needto be aligned if it is to be successful.

The 7S model can be used in a wide variety of situations where an alignment perspective isuseful, for example to help you:

Improve the performance of a company. Examine the likely effects of future changes within a company. Align departments and processes during a merger or acquisition. Determine how best to implement a proposed strategy.

The McKinsey 7S model can be applied to elements of a team or aproject as well. The alignment issues apply, regardless of how youdecide to define the scope of the areas you study.

The Seven Elements

The McKinsey 7S model involves seven interdependent factors which are categorized aseither "hard" or "soft" elements:

Hard Elements Soft Elements

Strategy

Structure

Systems

Shared Values

Skills

Style

Staff


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"Hard" elements are easier to define or identify and management can directly influence them:These are strategy statements; organization charts and reporting lines; and formal processesand IT systems.

"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible andmore influenced by culture. However, these soft elements are as important as the hardelements if the organization is going to be successful.

The way the model is presented in Figure 1 below depicts the interdependency of theelements and indicates how a change in one affects all the others.

Let's look at each of the elements specifically:

Strategy: the plan devised to maintain and build competitive advantage over thecompetition.

Structure: the way the organization is structured and who reports to whom. Systems: the daily activities and procedures that staff members engage in to get the job

done.

Shared Values: called "superordinate goals" when the model was first developed, these arethe core values of the company that are evidenced in the corporate culture and the general

work ethic.

Style: the style of leadership adopted. Staff: the employees and their general capabilities. Skills: the actual skills and competencies of the employees working for the company.

Placing Shared Values in the middle of the model emphasizes thatthese values are central to the development of all the other critical

elements. The company's structure, strategy, systems, style, staff


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and skills all stem from why the organization was originally created,and what it stands for. The original vision of the company wasformed from the values of the creators. As the values change, so doall the other elements.

How to Use the Model

Now you know what the model covers, how can you use it?

The model is based on the theory that, for an organization to perform well, these sevenelements need to be aligned and mutually reinforcing. So, the model can be used to helpidentify what needs to be realigned to improve performance, or to maintain alignment (andperformance) during other types of change.

Whatever the type of change - restructuring, new processes, organizational merger, newsystems, change of leadership, and so on - the model can be used to understand how theorganizational elements are interrelated, and so ensure that the wider impact of changes madein one area is taken into consideration.

You can use the 7S model to help analyze the current situation (Point A), a proposed futuresituation (Point B) and to identify gaps and inconsistencies between them. It's then a questionof adjusting and tuning the elements of the 7S model to ensure that your organization workseffectively and well once you reach the desired endpoint.

Sounds simple? Well, of course not: Changing your organization probably will not be simpleat all! Whole books and methodologies are dedicated to analyzing organizational strategy,improving performance and managing change. The 7S model is a good framework to helpyou ask the right questions - but it won't give you all the answers. For that you'll need tobring together the right knowledge, skills and experience.

When it comes to asking the right questions, we've developed a Mind Tools checklist and amatrix to keep track of how the seven elements align with each other. Supplement these withyour own questions, based on your organization's specific circumstances and accumulated

wisdom.

7S Checklist Questions

Here are some of the questions that you'll need to explore to help you understand yoursituation in terms of the 7S framework. Use them to analyze your current (Point A) situationfirst, and then repeat the exercise for your proposed situation (Point B).

Strategy:

What is our strategy?


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How do we intend to achieve our objectives? How do we deal with competitive pressure? How are changes in customer demands dealt with? How is strategy adjusted for environmental issues?

Structure:

How is the company/team divided? What is the hierarchy? How do the various departments coordinate activities? How do the team members organize and align themselves? Is decision making and controlling centralized or decentralized? Is this as it should be, given

what we're doing?

Where are the lines of communication? Explicit and implicit?Systems:

What are the main systems that run the organization? Consider financial and HR systems aswell as communications and document storage.

Where are the controls and how are they monitored and evaluated? What internal rules and processes does the team use to keep on track?

Shared Values:

What are the core values?

What is the corporate/team culture? How strong are the values? What are the fundamental values that the company/team was built on?

Style:

How participative is the management/leadership style? How effective is that leadership? Do employees/team members tend to be competitive or cooperative? Are there real teams functioning within the organization or are they just nominal groups?

Staff:

What positions or specializations are represented within the team? What positions need to be filled? Are there gaps in required competencies?

Skills:

What are the strongest skills represented within the company/team? Are there any skills gaps?


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What is the company/team known for doing well? Do the current employees/team members have the ability to do the job? How are skills monitored and assessed?

7S matrix questions

Using the information you have gathered, now examine where there are gaps andinconsistencies between elements. Remember you can use this to look at either your currentor your desired organization.

Clickhereto download our McKinsey 7S Worksheet, which contains a matrix that you canuse to check off alignment between each of the elements as you go through the followingsteps:

Start with your Shared Values: Are they consistent with your structure, strategy, andsystems? If not, what needs to change?

Then look at the hard elements. How well does each one support the others? Identify wherechanges need to be made.

Next look at the other soft elements. Do they support the desired hard elements? Do theysupport one another? If not, what needs to change?

As you adjust and align the elements, you'll need to use an iterative (and often timeconsuming) process of making adjustments, and then re-analyzing how that impacts other

elements and their alignment. The end result of better performance will be worth it.

Tip:For similar approaches to this, see our articles on theBurke-LitwinChange Model, and theCongruence Model. You may also find ourarticles on theChange Curve,Impact AnalysisandLewin's ChangeManagement Modeluseful.

Key Points

The McKinsey 7Ss model is one that can be applied to almost any organizational or teameffectiveness issue. If something within your organization or team isn't working, chances arethere is inconsistency between some of the elements identified by this classic model. Oncethese inconsistencies are revealed, you can work to align the internal elements to make surethey are all contributing to the shared goals and values.

The process of analyzing where you are right now in terms of these elements is worthwhile inand of itself. But by taking this analysis to the next level and determining the ultimate state

for each of the factors, you can really move your organization or team forward.
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Hawthorne effect

From Wikipedia, the free encyclopedia

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The Hawthorne effect is a form ofreactivitywhereby subjects improve or modify an aspectof their behavior being experimentally measured simply in response to the fact that they arebeing studied,[1][2]not in response to any particular experimental manipulation.

The term was coined in 1955 by Henry A. Landsberger[3]when analysing older experimentsfrom 1924-1932 at theHawthorne Works(aWestern Electricfactory outside Chicago).Hawthorne Works had commissioned a study to see if its workers would become moreproductive in higher or lower levels of light. The workers' productivity seemed to improvewhen changes were made and slumped when the study was concluded. It was suggested thatthe productivity gain was due to the motivational effect of the interest being shown in them.Although illumination research of workplace lighting formed the basis of the Hawthorneeffect, other changes such as maintaining clean work stations, clearing floors of obstacles,and even relocating workstations resulted in increased productivity for short periods. Thusthe term is used to identify any type of short-lived increase in productivity.[3][4][5]

Contents

[hide]

1 Historyo 1.1 Relay assembly experimentso 1.2 Interviewing programo 1.3 Bank wiring room experiments

2 Interpretations and criticisms of the Hawthorne studies 3 See also 4 References 5 External links 6 Further reading

[edit]History

The term gets its name from a factory called theHawthorne Works,[6]where a series ofexperiments on factory workers were carried out between 1924 and 1932.

This effect was observed for minute increases in illumination.

Evaluation of the Hawthorne effect continues in the modern era.[7][8][9]
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Most industrial/occupational psychology and organisational behavior textbooks refer to theillumination studies. Only occasionally are the rest of the studies mentioned.[10]In thelighting studies, light intensity was altered to examine its effect on worker productivity.

[edit]Relay assembly experiments

In one of the studies, experimenters chose two women as test subjects and asked them tochoose four other workers to join the test group. Together the women worked in a separateroom over the course of five years (1927-1932) assembling telephone relays.

Output was measured mechanically by counting how many finished relays each droppeddown a chute. This measuring began in secret two weeks before moving the women to anexperiment room and continued throughout the study. In the experiment room, they had asupervisor who discussed changes with them and at times used their suggestions. Then the

researchers spent five years measuring how different variables impacted the group's andindividuals' productivity. Some of the variables were:

changing the pay rules so that the group was paid for overall group production, notindividual production

giving two 5-minute breaks (after a discussion with them on the best length of time), andthen changing to two 10-minute breaks (not their preference). Productivity increased, but

when they received six 5-minute rests, they disliked it and reduced output.

providing food during the breaks shortening the day by 30 minutes (output went up); shortening it more (output per hour

went up, but overall output decreased); returning to the first condition (where output

peaked).

Changing a variable usually increased productivity, even if the variable was just a changeback to the original condition. However it is said that this is the natural process of the humanbeing to adapt to the environment without knowing the objective of the experiment occurring.Researchers concluded that the workers worked harder because they thought that they werebeing monitored individually.

Researchers hypothesised that choosing one's own coworkers, working as a group, beingtreated as special (as evidenced by working in a separate room), and having a sympatheticsupervisor were the real reasons for the productivity increase. One interpretation, mainly duetoElton Mayo,[citation needed] was that "the six individuals became a team and the team gaveitself wholeheartedly and spontaneously to cooperation in the experiment." (There was asecond relay assembly test room study whose results were not as significant as the firstexperiment.)

[edit]Interviewing program

The workers were interviewed in attempt to validate the Hawthorne Studies. The participantswere asked about supervisory practices and employee morale. The results proved that upward
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communication in an organisation creates a positive attitude in the work environment. Theworkers feel pleased that their ideas are being heard.

[edit]Bank wiring room experiments

The purpose of the next study was to find out how payment incentives would affectproductivity. The surprising result was that productivity actually decreased. Workersapparently had become suspicious that their productivity may have been boosted to justifyfiring some of the workers later on.[11]The study was conducted by Mayo andW. LloydWarnerbetween 1931 and 1932 on a group of fourteen men who put together telephoneswitching equipment. The researchers found that although the workers were paid according toindividual productivity, productivity decreased because the men were afraid that the companywould lower the base rate. Detailed observation between the men revealed the existence ofinformal groups or "cliques" within the formal groups. These cliques developed informal

rules of behavior as well as mechanisms to enforce them. The cliques served to control groupmembers and to manage bosses; when bosses asked questions, clique members gave the sameresponses, even if they were untrue. These results show that workers were more responsive tothe social force of their peer groups than to the control and incentives of management.

[edit]Interpretations and criticisms of the Hawthorne studies

H. McIlvaine Parsons(1974) argues that in the studies where subjects had to go for longdrives with no toilet breaks, the results should be considered biased by the feedbackcompared to the manipulation studies. He also argues that the rest periods involved possiblelearningeffects, and the fear that the workers had about the intent of the studies may havebiased the results.

Parsons defines the Hawthorne effect as "the confounding that occurs if experimenters fail torealise how the consequences of subjects' performance affect what subjects do" [i.e. learningeffects, both permanent skill improvement and feedback-enabled adjustments to suit currentgoals]. His key argument is that in the studies where workers dropped their finished goodsdown chutes, the "girls" had access to the counters of their work rate.

It's possible that the illumination experiments were explained by alongitudinal learningeffect.[citation needed] It is notable however thatParsonsrefuses to analyse the illuminationexperiments, on the grounds that they haven't been properly published and so he can't get atdetails, whereas he had extensive personal communication with Roethlisberger and Dickson.

But Mayo says it is to do with the fact that the workers felt better in the situation, because ofthe sympathy and interest of the observers. He does say that this experiment is about testingoverall effect, not testing factors separately. He also discusses it not really as an experimentereffect but as a management effect: how management can make workers perform differentlybecause they feel differently. A lot to do with feeling free, not feeling supervised but more in

control as a group. The experimental manipulations were important in convincing the
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workers to feel this way: that conditions were really different. The experiment was repeatedwith similar effects onmicasplitting workers.[citation needed]

Richard E. Clark and Timothy F. Sugrue (1991, p.333) in a review ofeducational researchsay that uncontrolled novelty effects cause on average 30% of astandard deviation(SD) rise(i.e. 50%-63% score rise), which decays to small level after 8 weeks. In more detail: 50% of aSD for up to 4 weeks; 30% of SD for 58 weeks; and 20% of SD for > 8 weeks, (which is

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