MS 731 2022 (Prin of Man)

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Principles of management

MSC 731
Unit 1
Prof M Roy
Definition
• Management: Art of directing human activities.
• Process of planning, organizing, leading, and
controlling people and their efforts for
achievement of certain goals.
• Process of achieving organizational objectives
effectively through other people by utilizing
limited resources efficiently in an ever-changing
environment
• Management is related to people, resources,
goal, challenges and changing environment.
• Central to this process is an effective efficient
use of limited resources.
• Effectiveness deals with the achievement of
objectives
• Efficiency is achievement of ends with least
amount of resources
Levels of management
• Top management, middle management and
lower (operating) management.
• Focus:
• Top management more on planning ,strategic
decisions and goals that affect the entire
organization.
• Middle management translates broad and
general strategies , policies into specific goals
and organize the work of first-line managers.
• Lower management involved more on training
and developing workers and take short term
decisions
Management functions
• Henri Fayol proposed five functions : planning,
organizing, commanding, coordinating and
controlling.
• Key functions: planning, organizing, leading
and motivating, controlling
Planning
• Planning: involves advance decisions related to what,
why, when, how and who.
• Involves :
• Study of environment around the organization
• Specifications of goals and strategies for achieving
these goals.
• Framework of policies, procedures and anticipated
course of action
• Revision of plans and adjustments in changed situations
Organizing
• Includes the process of translating the
required activities of plans into a structure of
task, authority and responsibility to carry out
the management’s plans and meet the
organizational goals.
• It consists in determining what tasks are to be
done, who is to be done, how the tasks are to
be grouped, who reports to whom, and where
decisions are to be made.
• Subfunctions:
• Defining the nature content of each job in the
organization
• Setting the base for grouping the jobs
together
• Delegating authority to assigned managers.
Directing and motivating
• Stimulate the organizations to undertake actions
along plan and channelize the organizational
behaviour for attainment of goals . It involves:
• Communicate and explain the objectives to the
subordinates
• Assign the performance standards
• Help and guide subordinates to meet the
standards of performance.
• Praise and reward for better performance
• Management of change through proper
communication and build confidence among
different layers of management
• Coordinate the entire process,
Controlling
• Process of monitoring performance against
goal, determine the causes of deviation from
goals and take corrective actions for
improvement. It involves:
• Set standards of performance,
• Measure the gaps in standard and attained
performance.
• Corrective actions to bridge the gap.
Management Roles
• Role : organise, supervise and control people
to get productive outcome and help
organizations to achieve goals.
• Henry Mintzberg (1973) identified three basic
roles for managers : inter-personal,
informational and decisional role.
Interpersonal role:

• Figurehead: every manager must perform some


duties of traditional nature, as greeting
dignitaries, attending the wedding of employees,
taking an important customer to lunch.
• Leader: motivate and activate the subordinates.
• Liaison: every manager must develop contacts
outside their vertical chain of command to collect
information and maintain a self-developed net-
work of outside contacts and information.
Informational role
• Monitor: collect a wide variety of information and
create a knowledge-base to develop a thorough
understanding of organization and continuously
examine environment,
• Disseminator: means transmission of information to
their subordinates so that value added knowledge
emerges for organizational use.
• Spokesperson: Means transmitting information to
outsiders on behalf of the organization to clarify
organizational plans, policies, actions and results.
Decisional role
• Entrepreneur: means searching the environment
for opportunities and initiating the change
process to bring about transformation.
• Disturbance handler: Means responsibility
related to corrective actions when organizations
face sudden unanticipated problems.
• Resource allocator: Responsibility related to
allocation of resources among different sections
and departments.
• Actions involve scheduling budgets, allocation
of duties to subordinates, authorization etc.
• Negotiator: represent the organization at
major negotiations and bring advantage to
the organization.
Knowledge leadership role
• Due to advent of information technology
managers have additional role as knowledge
leader and Change handler
• Knowledge team builder: Create teams to
build knowledge-base through seminar,
internet-search, and adoption of technology
• Sustaining and maintaining knowledge:
Related to knowledge management
Change Handler
• Continuous improvement supporter: Develop a quality
culture and explore the route for gradual improvement.
• Benchmarking Leader: Involves identifying the world –class
performers or ‘best practices’ in a specific area ,identify the
gap between world-class and the organization and bridge
the gap through systematic planning and leadership.
• Re-engineering Leader: Instead of gradual improvement
allocate resources carefully for a radical redesign of the
system and take risk for dramatic transformation
Managerial skills
• Technical skill: Ability to apply specialised
knowledge to work-related techniques and
procedures, crucial for lower level managers
as they are in direct contact with the
employees performing the work concerned.
• Human skill: Ability to work with , understand
and motivate other people.
• Conceptual skill: Ability to organize and combine
the interest and activities of the organization.
• Ability to see the ‘big picture’, that is, to
understand how various functions of the
organization complement one another and how
the organization relates to the environment and
how changes in one part of an organization can
affect the whole organization
Managerial competencies
• Management competencies : sets of knowledge, skills,
behaviours, attitudes to transfer and exchange effective
information
• Team-work competency: Ability to design teams
properly, create a supportive team environment, and
manage team dynamics effectively.
• Planning and administration Competency: Ability to
decide what work needs to be done, determine how it is
to be done, allocate resources to enable it to be done,
and then monitor its progress and take corrective action
• Strategic action competency: Includes understanding
the overall vision , mission, and strategy of the
organization and lead the actions and efforts of the
team towards the achievement of the mission.
• Global awareness competency: In a globalised business
environment, awareness of the global development and
its influence to one’s own industry is very important .
• This needs to develop global awareness competency.e.,
cultural knowledge, cultural openness and sensitivity.
• Self-management competency : Managers
need to have self-management competency
that includes integrity, ethical conduct,
personal drive, resilience, balancing work and
personal life and self-awareness.
• With more focus on material well-being and
urge to grow fast and achieve higher status in
life as early as possible, there has been a
tendency to ignore ethical behaviour.
Changes influencing management
• Global warming and environmentalism:
organizations are expected to produce green
products and green technologies.
• Internet and e-business: Information
technology and the internet has changed the
nature of job, transforming business altogether.
• Growth of e-commerce and e-business has
transformed management completely
• Technological change : Along with information technology,
new technologies as biotech, nanotech are being
invented , having a significant change in nature of work,
skill in job market. Concept of life-long learning is
emerging.
• Changing workforce: Changes in composition and growing
diversity in the workforce requires change in management
thinking and style.
• With the entrance of GenX and Y into work force, the work
place issues have become different, so are their
aspirations and expectations.
• Value and ethics :In the context of recent scams and scandal,
value based thinking has evolved , giving more focus on ethical
behaviour and concern for the society.
• Value based management style has emerged as a new
management style in order to direct and manage efforts and
competence of people of an organization to attain goals along
with environmental and social goals
• Ethical awakening and social innovations: Because of growing
incidents of exploitation of workers, selling of unsafe products,
unethical lobbying, accounting frauds, innovative business
models have evolved to combine profit with social welfare.
Evaluation of management thought
• Classical management theories :
• Three major forms : scientific, bureaucracy
and administrative management.
• Frederick W. Taylor(1856-1915) : founder of
Scientific management theory ----developed
four principles to increase efficiency in the
workplace.
Principles
• Determine one best way to do each Job: It
requires studying the way workers perform
their task, gathering all informal job
knowledge the workers possess and
experimenting with ways of improving the
way tasks are performed.
• Select the best person for the job:
Carefully select the right person so that they
possess skills that match the need of the task
and train them to perform the task according
to the established rules and procedures.
• Train the beast possible method to perform
the task: Study the task and determine the
optimal way to perform it.
• Provide sufficient monetary incentive:
establish a fair level of performance for a task
and then develop a pay system that provides
reward for performance above the acceptable
level.
The theory of Bureaucracy

• Max Weber (1864-1920): developed the


principles of bureaucracy—a formal system of
organization designed to ensure efficiency and
effectiveness
• Provides seven characteristics on which an
organization should operate.
• Formal system of rules: An explicit set of rules
to govern the behaviour of the employees and
provide discipline to the organization
• Impersonality: everyone should be treated
impersonally and should be evaluated as per
the rules.
• Division of labour: Division of duties into simple
and specialised forms to different employees
and provide training efficiently
• Hierarchical structure: All the positions and
jobs should be organized in hierarchy on the
basis of amount of authority
• Authority structure: Authority determines who has
the right to make decision of varying importance at
different levels within the organization. Superior
must be obeyed because of the position occupied
by him within the organization’s hierarchy.
• Life-long career commitment: Both employee and
organization view themselves as committed to
each other over the working life of the employee.
• Rationality: Use of the most efficient means
available to act and operate logically and
scientifically with all decisions leading directly
to achieve organizational goals.
• It is believed that bureaucracy leads to
enhanced efficiency and consistency in an
organization .
Administrative management
• Henri Fayol(1841-1925), the CEO of a mining company ,
suggested 14 basic principles essential for the efficiency of
the management process
• Fourteen principles:
• Division of labour ( more specialization, more efficiency)
• Authority and responsibility (Right to give orders and the
power to get things done)
• Discipline ( respect the rules and agreement that govern the
organization)
• Unity of command( An employee must receive orders from
only one superior)
• Line of authority( length of the chain of
command must be specific and limited )
• Centralisation( Authority should not be
concentrated at the top of the chain of
command)
• Unity of direction( Coordination in the efforts
of employees)
• Equity( equal and fair justice to all employees)
• Order(proper guidance and use of material
things and employees to maximise efficiency)
• Initiative(motivation to be innovative and
creative)
• Remuneration( Employees should be paid
equitably for performance)
• Stability of tenure of personnel( Long term
employees develop skills to improve efficiency)
• Subordination of individual interest to
common interest( Priority to achieve
Performance of organization)
• Esprit de corps( culture to develop shared
feelings of comradeship, enthusiasm, or
devotion to a common cause)
Behavioural approach
• A business organizations is not merely a
techno-economic system but is also a social
system.
• Focus is to understand the people, their needs,
perceptions and aspirations.
• Human relation movement :a new dimension to
look at the causes of human work behaviour and
translates the results into effective management
techniques.
Behavioral approach
• A worker does not always work for money only.
• Non-financial rewards (as affection, respect of his
co-workers) significantly affect his work behaviour.
• Employee-centred, democratic and participative
style of leadership
• Supervisors must be behaviourally trained to
manage subordinates in ways that elicit their
cooperation and increase their productivity.
Contemporary management thoughts
• Contemporary management thoughts consist of two
major theories: system approach and contingency
approach.
• System approach : organization is viewed as a part of
the external environment.
• Management needs to understand the interaction and
operation of various parts of a system together and
improve efficiency to face the risk and challenges in
the dynamic environment.
Challenges before business and management

• Challenges:
• Globalization and intense competition,
• Technological change and innovation,
• Demographic change
• Ethical awakening and social responsiveness
• Global warming and environmental degradation
• Restructuring and transforming of organization
• Internal and emergence of e-business
Peter F. Drucker
• Peter F. Drucker: Change, innovation and global
managers
• New concepts: Management by objective (MBO),
Knowledge worker, Innovation and entrepreneurship.
• Drucker(1993) : Change: Shift to knowledge and
knowledge society .The shift from knowledge to
‘knowledges’ has given knowledge the power to
create a new society--- “Post-Capitalist Society”
written by Drucker
• In the book‘ The practice of Management’ (1954):
Drucker noted that capitalism was indeed taking a
positive turn from a system based on selfishness and
greed to operating on the positive principle of public
good.
• In 1986, it is observed that production in the
manufacturing sector was increasing while total
employment was dramatically decreasing between
1973 and 1985.
Change: Shift to knowledge and knowledge
society
• In his book ‘Post-Capitalist Society’ he clarified this shift
from capitalism to knowledge society acknowledging that
knowledge was fast becoming the sole factor of production.
• He clearly defined the role of managers, invented the
modern concept of management, and conceptualised MBO
and knowledge management.
• He coined the term ‘knowledge worker and later regarded
knowledge work productivity.
• He was against excessive professionalisation and isolation
of managers from society
Ethics and social responsibility
• In the book ‘Management : Tasks,
Responsibilities ,Practices (1973) :role of
management is viewed as a distinct function
characterised by a degree of responsibility.
• He regards business corporation as a human
organization, a social organization and a community
and micro-society of the larger macro-society, in
addition to being an economic entity.
• His management philosophy was based on a
communitarian philosophy
• He advocated that managers’ work has a far-
reaching impact on the development and well-
being of the people who work in corporation and
a company’s action has an impact on the society.
• He integrated the professional responsibility of
managers with their duty to act as integrity,
exercise sound judgement and act with
courage.
• As a representative of social institution, the business
enterprise is successful when it simultaneously
conducts business in ways that do not undermine
social beliefs and harmony.
Business Environment
• Each organization part of Business Environment, classified into
two categories, i.e., microenvironment and macroenvironment
• Microenvironment: collection of forces that are close to a firm
• Its elements are competitors, organization itself, Suppliers.
Market, Intermediaries, and customers(COSMIC), which are
controllable to some extent.
• Macroenvironment: It is the general environment within an
economy.
• Elements constitutes those outside forces which are not under
the control of a firm
• Study of Macro environment is known as PESTLE analysis.
• PESTLE analysis studies key external factors (Political,Economic,
Socio-cultural, Technological, Legal and Environmental which
guide an organization in strategic decision making
• Political factors are those driven by Govt. actions and policies
like corporate taxation, other fiscal policy initiatives
• Economic factors relate to the broader economy like interest
rate, employment rate, inflation, exchange rates etc.
• Social factors include demographic factors, consumer beliefs,
attitudes
• Technological factors include automation, technological
infrastructure, cyber security etc.
• Environmental factors consider carbon
footprint, climate change impact, stewardship
of natural resources etc.
• Legal factors basically emerge from changes in
regulatory environment that includes industry
regulation, consumer and employment
protection laws, Protection of intellectual
property rights, licenses and permits required
to operate
• PESTLE analysis helps the organization to make
specific choices when planning the company’s
future, from how the brand should be
presented to development of new product
• Business professionals often use strategic
frameworks as SWOT analysis or Porter’s five
forces analysis
SWOT analysis
• SWOT analysis is a strategic evaluation framework used
to measure strength, weaknesses, opportunities and
threats.
• It is an important tool to scan the environment, both
internal and external
• It is used as an instrument to analyze organization’s
financial health and competitive advantages or
disadvantages
• Internal resources gives the strength
• External factors give threat as well as gives opportunities
• Internal environment: Strengths &Weaknesses
• External Environment: Opportunities & Threats
• Useful in formulating strategy to take
advantage of opportunities, such as growing
markets from new internet users
• Helps to minimize the effects of threats or
anticipated threats
• SWOT matrix has now changed to TWOS, where the
organization converts threats into opportunities.
• There are four strategies : S-O, S-T,W-O, W-T
• An organization wants to expand its market by lowering price
or other promotional package by employing reach channel of
social media, it is called S-O strategy.
• An organization wants to expand its market, but it is lagging far
behind the modern technology compared to a foreign firm. By
collaborating with foreign firm it aims to achieve its target to
raise its market , then it is W-O strategy.
 
Opportunities(O) Threats (T)

Strengths S-O(Maxi-Maxi strategy) S-T(Maxi-Mini strategy)


(S)

Weakness W-O(Mini-Maxi strategy) W-T(Mini-Mini strategy)


(W) (strategies that minimise (strategies that minimise
weakness by taking advantage weakness and avoid threats)
of opportunities)
Organizations prefer S-O and S-T
• Helpful Harmful

Internal Strengths Weaknesses

External Opportunities Threats


• S-O focuses around how one can exploit strengths to respond
to potential opportunities in the market
• S-T look how strengths can be used to mitigate threats to the
business
• W-O is the hardest consideration, as it considers how
opportunities can remove threat
• W-T highlights how weaknesses can play into, enhance threats
of the business
• SWOT and PESTLE both are planning methods
• Pestle analysis does not consider internal
factors
• SWOT considers both internal and external
factors
Porter’s Model
• Michel porter : major contributions on tools and
techniques that help management to create and
sustain competitive advantage.
• Industries are everchanging and they operate in many
markets.
• Porter (1980): focus is to stay significantly different
from competitors to sustain competitive advantage
• Model of five forces is a method of analysing the operating
environment of a business and determine competitive intensity
and attractiveness of an industry in terms of its profitability
• Strategy: Techniques to help a firm analyse its industry as a
whole and predict industry’s future evolution , understand
competitors and its own position and translate this into a
competitive strategy for his own business.
• Michel Porter presents model of five forces dictate the rules of
competition and also determine industry’s weaknesses and
strengths
• .
• These five factors are:
• Potential of new entrants: (How likely is it that new
competitors will enter into the industry?) A firm faces
threat both directly and indirectly by new entrants as
suppliers of resources or as new consumers.
• Power of Suppliers((how much bargaining power do
suppliers have)
• Power of Customers (how much bargaining powers
do customers have?)
Porter’s model
• Threat of substitutes( How likely is it that the products
be substituted by new products by other industries?)
Substitute means an alternative product that gives more
or less same utility and same function for the consumer.

• Current rivalries or competitors(How intense is the


rivalry?) Competitive rivalry will intensify when other
enterprises enter a market.
• Managers should evaluate organizations in terms of these
five forces to understand the competitive landscape
Porter’ model
Threats of
New Entrants

Bargaining Bargaining
power of power of
sellers buyers

Threat of Intensity of
substitutes Rivalry
Strategy

• Every organization has to formulate a strategy to survive,


compete and grow
• Strategy is a broad and general plan developed to achieve long
term objectives .
• It is associated with crucial decisions and corporate planning
to achieve something in future.
• Strategy and strategic decisions are part of strategic planning
• Strategic planning is a managerial process that helps to
develop an appropriate fit between objectives, resources,
capabilities with the market opportunities available.
Strategic management
• Includes activities and functions of management to formulate,
implement and control the strategies of an organization.
• Strategic management process is a six step process that involves
strategy planning, implementation and evaluation.
• 1.Setting up mission , vision and objectives.
• 2.External environment analysis to explore the opportunities to
be exploited and threats to be minimised and avoided
• 3.Internal environment analysis to identify strength and
weakness to examine the viability of its mission and objectives
• 4.Scanning the environment by using SWOT analysis,
or Porter’s Five forces
• Strategy formulation: Corporate needs to identify
strategic alternatives at three levels both at
corporate ,business and functional level
• Corporate strategy gives the overall direction
• Business or competitive strategy guides the
organization to have an edge over the others and
compete in the chosen business.
• Functional strategy involves functional level
decisions such as finance, operation, marketing and
human resources
• 5.Strategy implementation includes creation of
appropriate organization structure, system, and
operationalisation of functional policies.
• 6. Strategy control is the final step to evaluate the
performance and take corrective actions
Boston Consulting Group Matrix
• BCG growth share matrix is a planning tool applied to portray
firm’s potential of business portfolio on the basis of relative
market share (along horizontal axis) and industry growth
along vertical axis.
• Relative market share helps measure a company’s
competitiveness, vertical axis represents the growth rate of a
product and its potential to grow in a particular market
• In addition there are Four quadrants
• Dogs: Low market share compared to
competitors and operate in a slowly growing
market
• High cost and low quality
• Business is situated at a declining stage

• Strategic choices: Retrenchment, liquidation etc.


• Cash cows: Products with low market growth
but a high market share
• corporates should not invest into cash cows to
induce growth but only to support them so
they can maintain their current market share
• Strategic choices: product development,
diversification
• Stars : Products with high market growth and
a high market share,
• Require heavy investment
• Leaders in business
• Stars are both cash generators and cash users
• Strategic choices: vertical integration,
horizontal integration,market development,
product development etc.
• Question marks: Products with high market
growth but a low market share and require
very close considerations to decide if they are
worth of investing or not
• Most business start of as question mark
• Potential to become star and even cash cow
• Strategic choices: Market penetration, market
development
• Benefits: Easy to perform,helps to understand the strategic positions of
business portfolio
• Criticized: Market share and industry growth are considered as the
factors of profitability, it is not always true
• In spite of limitations, it is used as a useful tool to evaluate the strategic
position of a firm’s brand
• Relative market share=Firm’s market share/Largest competitor’s market
share or revenue
• For example, Competitor’s market share in an industry A is 25% and the
firm;s brand market share is 10% in the same year, relative market share
is 0.4
• Assumption is increase in relative market share implies increased cash
flow
Relative market share
High Low

Market High Star Question mark


growth
Rate Low Cash cow Dog
• This matrix has been developed to explore how
a brand will evaluate its investment in various
marketing channels
• Strategy is milk the cow , don’t waste money on
the dogs, invest in the stars and give question
marks some experimental funds to watch if they
can become stars.
• It is used basically by large companies as
production portfolio matrix
UnitII
Decision making and business forecasting
• Decision: Choice between two or more alternatives
• Programmed decisions: those which asre made in accordance with some
policy. Rule,or procedure. These are generally routine , repetitive and
obviously easiest for mamnagers
• Examples: pricing, ordinary customer’s orders, recording office supplies,
and so on
• Non-programmed decisions: novel and non-repetitive related with
problem like how to allocate resources, what to do about a failing product
line, how community relations should be improved
• Major and minor decisionsd: Basrd on relative significance, impact on
other functional areas.
• Rourtine and strategic decisions: Strategic decisions require lengthy
deliberation andlarge funds and are taken by managers at higher levels
• Decision is rational if appropriate means are chosen to reach
desired ends
• Steps in rational decision making:
• Recognize the problem
• Decide priorities among the problems
• Diagnose the problem
• Develop alternative solutions
• Measure and compare the consequences of alternative
solutions
• Convert the decision into effective action and follow-up action
Expected Monetary Value(EMV)
• Statistical concept that calculates consequence when the
future contains scenarios that may or may not transpire
• EMV analysis is used to stand for making decisions when
facing multiple risks in events and their possible
consequences on scenarios
• Used in projects to quantify and compare risks
• Accounts for both the money figure allocated to each
outcome and also the probability of the outcome
• Calculates average outcome when future includes uncertain
scenarios, which may be positive(opportunities)or
negative( threats)
• EMV= probability of the risk (P).(Impact of the risk(I)
• Example: You are a project manager in an IT firm
managing a software project and you identify the risk
linked to market claim. The possibility of risk is 20%
and if it occurs you will lose Rs 8000 . Calculate EMV.
• Probability of event happening : 20%
• Impact of risk: -8000
• EMV= Rs.-1600
• Example2
• Suppose you are managing a large scale farming project and your project has some risks that may cause
postponement and cost overflows
• Risk Project1: 30% possibility of heavy rain causing delay of the project for 5 weeks and Cost Rs. 9000
• Project2: 20% probability of the rental charges of the equipment to increase, which will cost Rs. 10,000
• Project 3: 40% probabilioty of cost of labour increases which will cost Rs. 6000
• Project 4: 25% possibility of increasing productivity which will enable you to complete the project in 3
weeks before and save Rs 10,000
• Calculate EMV
• Project 1: -2700
• Project 2: -2000
• Project 3: - 2400
• Project 4 : 2500
• EMV= -Rs 4600

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