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In this chapter we explore the four basic functions that management entails: planning, organizing, leading, and controlling resources. And we highlight the skills required of effective managers. Some managers, especially those in smaller organizations, perform all four managerial functions. Although these functions tend to occur in a somewhat progressive order, sometimes they occur simultaneously, and often the process is ongoing.
In the course of performing the four management functions managers play a number of roles that fall into three main categories: Interpersonal roles. Managers perform ceremonial obligations; provide leadership to employees; build a network of relationships with bosses, peers, and employees; and act as liaison to groups and individuals both inside and outside the company (such as suppliers, competitors, government agencies, consumers, special-interest groups, and interrelated work groups). Informational roles. Managers spend a fair amount of time gathering information by questioning people both inside and outside the organization. They also distribute information to employees, other managers, and outsiders. Decisional roles. Managers use the information they gather to encourage innovation, to resolve unexpected problems that threaten organizational goals (such as reacting to an economic crisis), and to decide how organizational resources will be used to meet planned objectives. They also negotiate with many individuals and groups, including suppliers, employees, and unions.
Planning is the primary management function, the one on which all others depend. Managers engaged in planning develop strategies for success, establish goals and objectives for the organization, and translate their strategies and goals into action plans.
Strategic plans outline the firm’s long-range (two to five years) organizational goals and set a course of action the firm will pursue to reach its goals. These long-term goals encompass eight major areas of concern: market standing, innovation, human resources, financial resources, physical resources, productivity, social responsibility, and financial performance.
Managers set a firm’s long-term course of direction during a process called strategic planning, which consists of six steps: developing a clear vision, creating a mission statement, developing forecasts, analyzing the competition, establishing goals and objectives, and developing action plans.
Most organizations are formed in order to realize a vision, a realistic attainable view of the future that grows out of and improves on the present. Developing a clear vision is a critical task in the strategic planning process. But having a vision alone is no guarantee of success; it must also be communicated to others, executed, and modified as conditions change.
To transform vision into reality, managers must define specific organizational goals, objectives, and philosophies. A starting point is to write a company mission statement, a brief document that defines why the organization exists, what it seeks to accomplish, and the principles that the company will adhere to as it tries to reach its goals. Typical components of a mission statement include the company’s product or service; primary market; fundamental concern for survival, growth, and profitability; managerial philosophy; and commitment to quality and social responsibility.
To develop forecasts, managers must make a number of educated assumptions about future trends and events and modify those assumptions once new information becomes available. Managerial forecasts fall under two broad categories: quantitative forecasts, which are typically based on historical data or tests and which involve complex statistical computations; and qualitative forecasts, which are based on intuitive judgments or consumer research. Statistically analyzing the cycles of economic growth and recession over several decades to predict when the economy will take a downward turn is an example of quantitative forecasting. Making predictions about sales of a new product on the basis of experience and consumer responses to a survey is an example of qualitative forecasting. Neither method is foolproof, but both are valuable tools, enabling managers to fill in the unknown variables that inevitably crop up in the planning process.
Managers begin the competitive analysis process by identifying existing and potential competitors. Next they determine the competencies, strengths, and weaknesses of their major competitors. Armed with competitive information, they look for ways to capitalize on a competitor’s weaknesses or match or surpass their strengths to gain a competitive edge. A company can gain a competitive edge through at least one of three strategies: Differentiation. A company using differentiation develops a level of service, a product image, unique product features, or new technologies that distinguish its product from competitors’ products. Cost leadership. Businesses that pursue this strategy aim to become the low-cost leader in an industry by producing or selling products more efficiently and economically than competitors. Focus. When using a focus strategy, companies concentrate on a specific regional market or consumer group, such as the Southwest United States or drivers of economy cars.
As mentioned earlier, establishing goals and objectives is the key task in the planning process. Although these terms are often used interchangeably, a goal is a broad, long-range accomplishment that the organization wishes to attain in typically five or more years, whereas an objective is a specific, short-range target designed to help reach that goal. Setting appropriate goals has many benefits: It increases employee motivation, establishes standards for measuring individual and group performance, guides employee activity, and clarifies management’s expectations.
Once managers have established a firm’s long-term strategic goals and objectives, it must then develop a plan of execution. Tactical plans lay out the actions and the allocation of resources necessary to achieve specific, short-term objectives that support the company’s broader strategic plan. Tactical plans typically focus on departmental goals and cover a period of one to three years. Their limited scope permits them to be changed more easily than strategic plans. Operational plans designate the actions and resources required to achieve the objectives of tactical plans. Operational plans usually define actions for less than one year and focus on accomplishing a firm’s specific objectives, such as developing a strategic partnership with another campaign.
No matter how well a company plans for its future, any number of problems can arise to threaten its existence. An ugly fight for control of a company, a product failure, a breakdown in routine operations, or an environmental accident could develop into a serious and crippling crisis. Managers can help a company survive these setbacks through crisis management, a plan for handling such unusual and serious problems. The goal of crisis management is to keep the company functioning smoothly both during and after a crisis. Crisis management requires comprehensive contingency plans in addition to speedy, open communication with all who are affected by the crisis.
Organizing, the process of arranging resources to carry out the organization’s plans, is the second major function of managers. During the organizing stage, managers think through all the activities that employees carry out (from programming the organization’s computers to mailing its letters), as well as all the facilities and equipment employees need in order to complete those activities. They also give people the ability to work toward organizational goals by determining who will have the authority to make decisions, to perform or supervise activities, and to distribute resources.
The organizing function will be discussed in detail in Chapter 7. In this chapter, however, we will discuss the three levels of a corporate hierarchy--top, middle, bottom--commonly known as the management pyramid . In general, top managers are the upper-level managers who have the most power and who take overall responsibility for the organization. An example is the chief executive officer (CEO). Top managers establish the structure for the organization as a whole, and they select the people who fill the upper-level positions. Top managers also make long-range plans, establish major policies, and represent the company to the outside world at official functions and fund-raisers.
In general, top managers are the upper-level managers who have the most power and who take overall responsibility for the organization. An example is the chief executive officer (CEO). Top managers establish the structure for the organization as a whole, and they select the people who fill the upper-level positions. Top managers also make long-range plans, establish major policies, and represent the company to the outside world at official functions and fund-raisers.
Middle managers have similar responsibilities, but usually for just one division or unit. They develop plans for implementing the broad goals set by top managers, and they coordinate the work of first-line managers. In traditional organizations, managers at the middle level are plant managers, division managers, branch managers, and other similar positions . But in more innovative management structures, middle managers often function as team leaders who are expected to supervise and lead small groups of employees in a variety of job functions. Similar to consultants, they must understand every department’s function, not just their own area of expertise. Furthermore, they are granted decision-making authority previously reserved for only high-ranking executives.
At the bottom of the management pyramid are first-line managers (or supervisory managers ). They oversee the work of operating employees, and they put into action the plans developed at higher levels. Positions at this level include supervisor, department head, and office manager.
Leading— the process of influencing and motivating people to work effectively and willingly toward company goals—is the third basic function of management. Leading becomes even more challenging in today’s business environment, where individuals who have different backgrounds and unique interests, ambitions, and personal goals are melded into a productive work team.
Research has shown that leaders who have specific traits, such as decisiveness and self-confidence, are likely to be more effective. Managers with strong interpersonal skills and high emotional quotients (EQs) tend to be more effective leaders. The characteristics of a high EQ include: Self-awareness. Self-aware managers have the ability to recognize their own feelings and how they, their job performance, and other people are affected by those feelings. Moreover, managers who are highly self-aware know where they are headed and why. Self-regulation. Self-regulated managers have the ability to control or reduce disruptive impulses and moods. They can suspend judgment and think before acting. Moreover, they know how to utilize the appropriate emotion at the right time and in the right amount. Motivation. Motivated managers are driven to achieve beyond expectations — their own and everyone else’s. Empathy. Empathetic managers thoughtfully consider employees’ feelings, along with other factors, in the process of making intelligent decisions. Social skill. Socially skilled managers tend to have a wide circle of acquaintances, and they have a knack for finding common ground with people of all kinds. They assume that nothing important gets done by one person alone and have a network in place when the time for action comes.
Autocratic leaders make decisions without consulting others. “My way or the highway” summarizes this style, which tends to go with traditional, hierarchical organizational structures. In contrast, democratic leaders delegate authority and involve employees in decision making. Even though their approach can lead to slower decisions, soliciting input from people familiar with particular situations or issues may result in better decisions. As more companies adopt the principles of teamwork, democratic leadership continues to gain in popularity. Laissez-faire leaders take the role of consultant, encouraging employees’ ideas and offering insights or opinions when asked. The laissez-faire style may fail if workers pursue goals that do not match the organization’s. More and more businesses are adopting democratic and laissez-faire leadership as they reduce the number of management layers in their corporate hierarchies and increase the use of teamwork. However, experienced managers know that no one leadership style works every time. In fact, new research shows that leaders with the best results do not rely on only one leadership style; instead they adapt their approach to match the requirements of the particular situation. Adapting leadership style to current business circumstances is called contingency leadership.
You can think of leadership styles as existing along a continuum of possible leadership behaviors. The continuum ranges from boss-centered to employee-centered. Situations that require managers to exercise greater authority fall toward the boss-centered end of the continuum. Other situations call for a manager to give workers leeway to function more independently.
Coaching involves taking the time to meet with employees, discussing any problems that may hinder their ability to work effectively, and offering suggestions and encouragement to help them find their own solutions to work-related challenges. This process requires keen powers of observation, sensible judgment, and both a willingness and an ability to take appropriate action. Acting as a mentor is similar to coaching, but mentoring also emphasizes helping employees understand how the organization works. A mentor is usually an experienced manager or employee who can help guide other employees through the corporate maze. Another important function of leaders is to manage the process of change. As competitive pressures get worse, the pace of change accelerates while companies search for even higher levels of quality, service, and overall speed. Sometimes managers initiate change; other times change is imposed from outside the company.
Each organization has a special way of doing things. Strong leadership is a key element in establishing a productive organizational culture — the set of underlying values, norms, and practices shared by members of an organization. When you visit an organization, observe how the employees work, dress, communicate, address each other, and conduct business. In corporations, this force is often referred to as corporate culture. A company’s culture influences the way people treat and react to each other. It shapes the way employees feel about the company and the work they do; the way they interpret and perceive the actions taken by others; the expectations they have regarding changes in their work or in the business; and their ability to lead, be productive, and choose the best course of action.
Controlling is the fourth basic managerial function. In management, controlling means monitoring a firm’s progress toward meeting its organizational goals and objectives, resetting the course if goals or objectives change in response to shifting conditions, and correcting deviations if goals or objectives are not being attained.
Managers strive to maintain a high level of quality --a measure of how closely goods or services conform to set standards and customer expectations. Many firms control for quality through a four-step cycle that involves all levels of management and all employees. In the first step, top managers set standards, or criteria for measuring the performance of the organization as a whole. At the same time, middle and first-line managers set departmental quality standards so they can meet or exceed company standards. In the second step of the control cycle, managers assess performance, using quantitative (specific, numerical) and qualitative (subjective) performance measures. In the third step, managers compare performance with the established standards and search for the cause of any discrepancies. If the performance falls short of standards, the fourth step is to take corrective action, which may be done by either adjusting performance or reevaluating the standards. If performance meets or exceeds standards, no corrective action is taken.
Total quality management (TQM) is both a management philosophy and a strategic management process that focuses on delivering the optimum level of quality to customers by building quality into every organizational activity. The four key elements are employee involvement, customer focus, benchmarking, and continuous improvement. Employee involvement. Total quality management involves every employee in quality assurance. Workers are trained in quality methods and are empowered to stop a work process if they feel that products or services are not meeting quality standards. Managers also encourage employees to speak up when they think of better ways of doing things. This approach exemplifies a participative management style. Customer focus. Focusing on the customer simply means finding out what customers really want and then providing it. This approach requires casting aside assumptions about customers and relying instead on accurate research. Benchmarking. This element of TQM involves comparing your company’s processes and products against the standards of the world’s best companies and then working to match or exceed those standards. Continuous improvement. This key feature of TQM requires an ongoing effort to reduce defects, cut costs, slash production and delivery times, and offer customers innovative products. Improvements are often small, incremental changes that add up to greater competitiveness over the long run.
Total Quality Management is based on the following 14 points derived from the work of W. Edwards Deming: 1. Create constancy of purpose for the improvement of goods and services. 2. Adopt a new philosophy to reject mistakes and negativism. 3. Cease dependence on mass inspection. 4. End the practice of awarding business on price alone, by creating long- term relationships with suppliers who deliver the best quality. 5. Improve constantly and forever the system of production and service. 6. Institute training. 7. Institute leadership.
8. Drive out fear. 9. Break down barriers between units. 10. Eliminate slogans, exhortations, and targets for the workforce. 11. Eliminate numerical quotas. 12. Remove barriers to pride in work. 13. Institute a vigorous program of education and training. 14. Take action to accomplish the transformation.
Managers rely on a number of skills to perform their functions and maintain a high level of quality in their organizations. The various skills required to communicate with other people, work effectively with them, motivate them, and lead them are interpersonal skills. Because managers mainly get things done through people at all levels of the organization, they use good use interpersonal skills in countless situations. Technical skills are most important at lower organizational levels because managers at these levels work directly with employees who are using the tools and techniques of a particular specialty, such as automotive assembly or computer programming. Still, twenty-first-century managers must have a strong technology background. Managers at all levels use administrative skills, which are the technical skills necessary to manage an organization. Administrative skills include the abilities to make schedules, gather information, analyze data, plan, and organize. Managers need conceptual skills to see the organization as a whole, in the context of its environment, and to understand how the various parts interrelate. Conceptual skills are especially important to top managers. These managers are the strategists who develop the plans that guide the organization toward its goals.
Business in Action Ch6
Understanding the Functions and Roles of Management
Managerial Functions Planning Controlling Organizing Leading
Informational Decisional Interpersonal The Roles of Management
Function 1: Planning Develop Strategies for Success Set Goals and Objectives Develop Action Plans
Corporate Culture Employee Performance Communication Community Involvement People Company Values
Function 4: Controlling Monitoring Progress Resetting the Course Correcting Deviations
The Control Cycle Set Strategic Goals 4. Adequate No Action 3. Compare To Standard 4. Inadequate Take Action 1. Set Standards 2. Measure Performance Reevaluate Standards Correct Performance
What Is Total Quality Management? Employee Involvement Benchmarking Customer Focus Continuous Improvement
Important Points of TQM <ul><li>Create constancy of purpose </li></ul><ul><li>Adopt a new philosophy </li></ul><ul><li>Cease mass inspection </li></ul><ul><li>Create long-term relationships </li></ul><ul><li>Constantly improve </li></ul><ul><li>Institute training </li></ul><ul><li>Institute leadership </li></ul>
Important Points of TQM <ul><li>Drive out fear </li></ul><ul><li>Break down barriers </li></ul><ul><li>Eliminate slogans and targets </li></ul><ul><li>Eliminate numerical quotas </li></ul><ul><li>Remove barriers to pride in work </li></ul><ul><li>Institute education and training </li></ul><ul><li>Take action and make changes </li></ul>