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Study Guide 001 chapter 6
Business Management IA (MNB1501)
University of South Africa
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Study unit 6 Introduction to general management (New chapter in the prescribed book) Contents Key concepts Learning outcomes Getting an overview 6 The role of management 6 A definition of management 6 The different levels and types of management in businesses 6 Skills at different managerial levels and the roles of managers 6 Development of management theory 6 Summary Self-assessment questions Key concepts management definition of management levels of management types of managers management skills management roles approaches to management Learning outcomes When you have worked through study unit 6 you should be able to: - discuss the role of management in running a business - evaluate the definitions of management and discuss the task of a manager - describe the management process followed by managers, by referring to the levels and type of management, the skills needed to manage an organisation and the different roles performed by managers in the organization - discuss the various schools of thought in management and look at the innovations that have occurred in management thinking over the years Getting an overview The society we live in consists of all types of organisations. All sorts of small and large organisations such as businesses, schools, hospitals, sports clubs, churches and political parties contribute to the functioning of a community. All these organisations need to 1 be managed. In this study unit we are going to discuss the general principles involved in the management of any of the above organisations. More specifically we will look at the general management principles involved in running a business. 6 The role of management As you will remember from topic 1, management operates in a dynamic environment. In this study unit we are going to take a look at how management manage the organisation in this changing environment. Study section 6 in the prescribed book. The reason for the establishment of a business is to achieve objectives that would be too difficult for individuals to achieve on their own. If you could manufacture a product on your own, you would have no need to establish an organisation. For example think of al l those dressmakers who manufacture their product (dresses) without ever needing to form an organisation. However, if you wanted t o make dresses on a large scale and market them throughout South Africa you would not be able to do so on your own - you would have to employ other dressmakers. In other words, you would have to form an organisation. In this study unit the word ``organisation'' is used quite extensively. Throughout our discussion the word ``organisation'' and the word ``business'' are used interchangeably. It is important to remember that the success of any organisation depends almost entirely on how the organisation is managed. Management in any enterprise is essential to: Management tasks direct the organisation towards its objectives set and keep the operations of the organisation on a balanced course keep the organisation in equilibrium with its environment attain its goals synergistically and productively One of the commonest causes of business failure is poor management (see table 6 in the prescribed book). Read the insert which shows how one of the biggest organisations in the world turned a business failure around by following the basics of management. Bill Ford: 4th generation Ford is taking the Ford Motor Company back to its roots Towards the end of 2001 Bill Ford, 4th generation descendant of Henry Ford, who is renowned for constructing the first mass-produced automobile to be mass-marketed in the world, took over the Ford Motor company which was in serious trouble. Within 3 years he turned the organisation around by focussing on management fundamentals, namely lowering costs, raising production quality and introducing a regular range of new models. Source: Fortune, June 28, 2004, p 38 By Alex Taylor III. Bill's Brand New Ford It was panic stations at the start, but Bill Ford never doubted he had the right stuff to revive his great-granddaddy's car company. Now he has to prove that his controversial strategy will keep Ford in business for another 100 years. 2 objectives. The manager must, for example, ensure that employees are fully trained and knowledgeable about the use of the new equipment in the manufacturing process. - Control means determining whether the objectives have been achieved. Did the organisation attain the 10% increase at the end of the financial period? The key concepts of the definition in the prescribed book are process, utilising resources and objectives. It is important to understand that management is an ongoing process. Although, for study purposes, we present it in the sequence of planning, organising, leading and control, managers carry out these activities all the time, and often at the same time. The real yardstick for successful management is the extent to which the organisation has achieved its objectives. The only way management can accomplish that is through the effective utilisation of the business's resources, which in turn is achieved through good planning, organising, leading and control. Looking at the definitions, we see that Smit and Cronje's definition refers specifically to the four management tasks (planning, organising, leading and control). Webster's definition of organising as one of the tasks implies that the other three tasks are also essential: to manage your organisation you also need to plan, lead and control. So we can say that all the definitions refer implicitly to the four management tasks. Question 2 Looking at the excerpt in Fortune on Ford's comeback we see that Bill Ford also followed the management tasks: he planned the turnaround by among other things introducing a range of new cars. He obviously had to do organising and leading to ensure that the objectives set were reached (i. control), as illustrated by the mention in the excerpt of lowering production costs and improving product quality. 6 The different levels and types of management in businesses Study section 6 in the prescribed book. As far as the levels of management are concerned, it is essential to differentiate between: - - the three levels of management, which are top management such as the CEO of the company, middle management (e. responsible for the human resource function of the organisation) and lower management (e. managers at supervisory level in a factory) the responsibilities of managers at those different levels Levels Note that some organisations will have only one or two levels of management (e. in a sole proprietorship), while very large organisations may have as many as eight or more levels of management. But even with so many levels of management, they can still be classified into three broad categories of top, middle and lower management. 4 Types As far as the types of management are concerned, it is necessary to distinguish between the different functions. They are general management, marketing management, financial management, production and operations management, purchasing management, human resource management and public relations management. Since most of the first-year course in Business Management is presented in terms of these functions, it is important for you to know what the functions of a business are and how they work together to attain the set objectives of the organisation. Special reference must be made to the function of the general manager. General management differs from other functions because every manager, regardless of the specialised function in which he or she operates, exercises it. We now consider in more detail the skills required of managers to carry out the management process and the roles they play in business. 6 Skills at different managerial levels and the roles of managers Study sections 6 and 6 in the prescribed book and observe a manager of any business in action. Skills required Note the different management skills required at different levels, particularly as illustrated in figure 6 of the prescribed book. You must understand the management activities at the various levels. Figure 6 should be interpreted in terms of the size of the various ``blocks'' of skills next to each level of management. This figure, for example, illustrates that top management require a few technical skills and interpersonal skills (compared with lower management), but many conceptual skills and diagnostic/analytical skills. For lower management, the skills requirement is the other way round, while middle management requires a relatively equal proportion of all the listed skills. Some of the most famous managers moved through the ranks: that is, they started out working at a technical level (lower management) and worked themselves up into middle management and eventually top management positions. Jack Welch of General Electric was such a manager; he joined the company as a management trainee. Supporting roles In addition to the four fundamental management activities, managers also have to play a number of supporting roles: the interpersonal role, the decision-making role and the information role. Within these major roles the manager also fulfils sub-roles, such as in 5 Theories This section deals with the different approaches to management. It is essential for you to understand the theories of the various schools of thought, because this will help you understand the contemporary approaches to management. (See figure 6 on the evolution of management theory.) The process approach, which distinguishes four elements of management and seven functions of a business, forms the basis of the prescribed book. Schools It is important to understand that these theories are not all in contrast to one another since they deal with different aspects of management. The quantitative school, for example, focuses on the ways managers make decisions, while the classical school focuses on the various tasks (or processes) of management. Scientific school The scientific school tends to view workers rather like machines, who would all respond in the same way if they were ``tuned'' correctly. For example, Taylor believed that an ``expert'' should work out the best way to perform a task, and workers should then be taught and supervised to ensure that they work in the prescribed manner. There are many enterprises in South Africa where employees are still managed along these lines. Management process school This school identifies the most important functional areas in the organisation such as the production/operations function, the marketing function, the financial function and so on. Behaviourist school The human relations or behaviourist school saw workers as people who needed to be ``treated'' properly, that is with respect and consideration. The assumption made by this school of thought is that when workers are treated well and made to feel happy, they will give of their best. Quantitative school This school sees the main function of management as using a system of mathematical models and processes. One such example is in the field of marketing where marketers would like to know the differences between different groups of people (target markets). This information can be gained by doing discriminant analysis, which uses some aspects of mathematics and statistics. Management is however much more than that and at most quantitative techniques are no more than an aid to management. 7 Systems approach This management school sees the organisation as a system of many parts that must be managed in an integrated manner. All the functional areas in the organisation (e. financial department and marketing department) must work together to attain the objectives of the organisation. Contingency approach The contingency approach suggests that it depends on the nature of the worker. Some employees will be productive if their work procedures are clearly laid out for them; others will give of their best if they are treated like human beings; and others again will perform well when they are given the opportunity to prove how good they are. According to this approach, managers have to adapt their management style to the particular characteristics of individual employees. Take note of some contemporary approaches to management (sec 6.7): - TQM (Total Quality Management) the learning organisation and re-engineering of businesses diversity management Management approaches and theories are important instruments to broaden knowledge. Understanding the evolution of the management process gives us a broad perspective of the vastness of the body of knowledge on research, principles and problems of management and approaches to management, from which managers can draw. Activity 6 Look at the company where you work or ask a family member who is working and try to answer the following question: How many nationalities, races and age groups are represented in the organisation? Do you think it is easy to manage such a diverse group of workers? Diversity management in the South African business environment includes the activities of the recruitment, training and optimisation of the full spectrum of workers available to the organisation. This means that the organisation must represent society in general when it comes to gender, race, age, disability, ethnicity, religion, sexual orientation, education and economic level. South African organisations must reflect the broad society of South Africa in the workplace. South African organisations must realise that people are not the same and that the differences that workers bring to the workplace are valuable and can make the organisation compete in the globally competitive world in which they operate. Most South African managers are however ill-prepared to handle diversity issues in South Africa because they grew up in racially unmixed neighbourhoods and had little exposure to people different from themselves outside the workplace. 8 b c d Let more managers report directly to the CEO. Increase revenues and cut costs simultaneously. Create autonomous SBUs and rotate managers among them. 1 2 3 4 3 None of them All of them ab a It is said that a manager has three overlapping roles: an interpersonal role, an information role and a decision-making role. Looking at the management tenets used by GE, under which role would you classify the seven tenets in the case study? (Write the seven tenets down in table format and identify the relevant management role that each refers to.) Question 1 Three of the statements are correct. GE uses the scientific school of management because its managers use scientific tools (e. Six Sigma) to improve their businesses. GE also uses the behavioural school of thought in the way it utilises its human resources, for example rotating the managers and exposing them to new problems and opportunities. The quantitative approach is also used if we look at the Six Sigma tool that has made GE famous. GE does not use the contingency approach; it uses the universal principles of management, such as planning and control. Question 2 Bureaucracy can be described as the way an organisation is managed and is usually applied in a negative manner, such as being inflexible or insensitive. With this as background we can see that statements a and b are correct. If you reduce the number of levels or layers of management in the organisation you get a flatter structure, which makes the time span shorter for communication to flow from the lowest levels to the highest levels and vice versa. Statements c and d are not directly linked to the reduction of bureaucracy. In effect we may find that too many managers reporting to the CEO may result in information overload, thus limiting the capabilities of the CEO. Question 3 Tenets of GE Roles of the manager 1 Understand the business and the man- Information role. In order to understand agement team and respect the corpo- the business you must gather information rate culture about the business 2 Use Six Sigma approach (Six Sigma is a quality control approach that emphasises the pursuit of higher quality products at lower costs) Decision-making role. Six Sigma can be seen as a measurement technique which management base their decisions for the future on 3 Create autonomous units and rotate Decision-making role. Creating autonomanagers among them mous units such as the GE jet engine unit and rotating managers are examples of allocating resources 10 Tenets of GE Roles of the manager 4 Increase revenues and reduce costs Decision-making role. This is a management decision to improve the profitability of the organisation 5 Cut the bureaucracy Information role. Cutting the layers of management and getting more people to report to the CEO help everyone get management information more quickly 6 Identify objectives and adhere to it Decision-making role. Managers decide on objectives in consultation with the relevant participants and ensure that these objectives are attained 7 Believe that great people build great Interpersonal role. Especially the leading part of management helps to appoint the companies right people, train them and motivate them to ensure that they operate for the greater benefit of the organisation Reference 1 Kratz, E. 18 April 2005, Get me a CEO from GE! Fortune, pp 63±66. 11
Study Guide 001 chapter 6
Course: Business Management IA (MNB1501)
University: University of South Africa
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