FUNDAMENTALS OF ACCOUNTING AND MANAGEMENT –I MANAGEMENT – CONCEPTUAL FRAMEWORK
6. FUNCTIONS AND PRINCIPLES OF MANAGEMENT The subject known by different names such as General Management, Principles and practices of management dynamics and Management process is the basic subject in the field of management. It is applicable to all disciplines and specializations such as Finance, Production, Services etc. Scope of General Management begins with Forecasting and Planning and concludes with co-ordination and control.
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Objectives After going through this lesson, you will be able to:
• • • •
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Understand functions of management and its importance Understand the traits of leadership Apply motivation and morale to work Communicate, delegate and co-ordinate
Introduction Managing has been one of the most important human activities ever since the formation of groups. These groups were formed in order to achieve tasks which individuals could not. Thus, managing became essential to ensure the coordination of individual efforts, in order to accomplish group objectives. Thus the art and science of directing, harmonizing, coordinating and controlling the efforts of individuals of a group, to most efficiently achieve goals is called management. It entails the use of human, financial, technological and natural resources in the most efficient way.
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Management Management is planning, organizing, controlling, directing, and co-ordination supported by leadership communication, motivation, morale. In other words, Management is management of men, machinery, materials, and information. Definitions of Management by various management thinkers:
a. Koontz: The process of designing and maintaining an environment in which individuals, working together in groups, accomplish efficiently selected aims b. Frederick W. Taylor: The art of knowing what you want to do and then seeing it done in the best and cheapest way by securing maximum use of men and
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machines. c. Lawrence Appley: Management is the accomplishment of results through the efforts of people. d. Peter Drucker: Management is a multi purpose organ that manages a business and manages managers and manages workers and work. 6.3.1 Art and Science Management is both art and science. It is the art of making people more effective than they would have been without a manager. The science lies in how it is done. There are four basic pillars: plan, organize, direct, and monitor Some famous management thinkers: • • • •
Frederick W. Taylor - Father of Scientific management Frank and Lillian Gilbreth – Inventers of Therbligs Henry Fayol - Father of Modern Management Peter F. Drucker
6.3.2 Scientific Management by Fredrick Winslow Taylor (1856 – 1915) Taylor thought that by analyzing work, the "One Best Way" to complete work would be found. He is most remembered for developing the time and motion study. His approach is also often referred to, as Taylor's Principles, or frequently disparagingly, as Taylorism. Taylor's scientific management consisted of four principles: 1. Replace rule-of-thumb work methods with methods based on a scientific study of the tasks. 2. Scientifically select, train, and develop each employee rather than passively leaving them to train themselves. 3. Cooperate with the workers to ensure that the scientifically developed methods are being followed. 4. Divide work nearly equally between managers and workers, so that the managers apply scientific management principles to planning the work and the workers actually perform the tasks 6.3.3 Modern Management theory by Henry Fayol Fayol was one of the most influential contributors to modern concepts of management. His five functions still form the basis of much of modern management thought and action. 1. Plan (and look ahead), 2. Organize, 3. Command, 2
4. Co-ordinate, 5. Control (feedback and inspect) He also identified 14 principles that he saw as common to all organizations. 1. Specialization/ division of Labour. 2. Authority with responsibility 3. Discipline 4. Unity of command 5. Unity of direction. 6. Subordination of Individual Interests 7. Remuneration 8. Centralization 9. Chain / line of authority 10. Order 11. Equity 12. Lifetime jobs (for good workers) 13. Initiative 14. Esprit de corps (In union there is strength)
Self-Check Questions 1. Who is the father of Modern Management? 2. Who is the father of Scientific Management?
6.4
Planning and Decision making
6.4.1 Planning Planning is concerned with the future impact of today's decisions. It is the fundamental function of management from which the others stem. The need for planning is often apparent after the fact. However, planning is easy to postpone in the short-run. Postponement of planning especially plagues labor oriented, hands on managers. 6.4.2 Decision Making A Manager's primary function is to solve problems. A manager's understanding of his or her approach to problems and problem-solving style most often used is an essential early step to becoming a more effective creative problem solver. Managers tend to deal with problems in one of three ways: 1. Avoid them - refuse to recognize that a problem exists 3
2. Solve them as necessary - deal with the urgent 3. Seek them out - anticipate to avoid them becoming urgent Managers tend to one of two basic problem-solving styles: systematic or intuitive. Systematic thinkers are logical and rational. They prefer narrow and focused problems, step by step processes, rules to be followed, and computer programs that grind to a recommendation. Intuitive thinkers are more comfortable with solutions that just "came to" them. Intuitive thinkers believe on their gut feelings. 6.4.3 Management by Objectives Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives. 6.4.4 Main Principle The principle behind Management by Objectives (MBO) is to make sure that everybody within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness of their own roles and responsibilities in achieving those aims.
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Self-Check Questions Fill in the Blanks: 3. Management by objectives (MBO) is a _____________ and __________ approach. 4. The principle behind MBO is to make sure that everybody within the organization has a clear understanding of the _____ and ______.
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Organizing Organizing is establishiinng the internal organizational structure of the business. The focus is on division, coordination, and control of tasks and the flow of information within the organization. Managers distribute responsibility and authority to jobholders in this function of management.
6.5.1 Organizational Structure Each organization has an organizational structure. By action and/or inaction, managers structure businesses. Ideally, in developing an organizational structure and distributing authority, managers' decisions reflect the mission, objectives, goals, and tactics that grew out of the planning function. Specifically, they decide: 1. 2. 3. 4. 5.
Division of labor Delegation of authority Departmentation Span of control Coordination Management must make these decisions in any organization that has more than two people.
Self-Check Questions 5. What are the various functions of Organizational Structure?
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Directing Directing is influencing people's behavior through motivation, communication, group dynamics, leadership and discipline. The purpose of directing is to channel the behavior of all personnel to accomplish the organization's mission and objectives while simultaneously helping them accomplish their own career objectives. Managers give this function a variety of names. Higgins calls it leading. Other labels are: influencing, coaching, motivating, interpersonal relations, and human relations.
6.6.1 Importance The directing function gives the manager an active rather than a passive role in employee performance, conduct and accomplishments. Managers accomplish their objectives through people. In blaming others for her or his human resource problems, a manager is denying the management responsibilities inherent in the directing function. The directing function gives managers a second responsibility: helping people in the organization accomplish their individual career goals. Organizations do not succeed while their people are failing. Helping people in the organization with career planning and professional development is an integral part of the directing function.
Self-Check Questions 6. What are the various names of Directing? 7. The directing function gives the manager a passive rather than an active role in employee performance, conduct and accomplishments - True/ False
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Controlling Controlling is a four-step process of establishing performance standards based on the firm's objectives, measuring and reporting actual performance, comparing the two, and taking corrective or preventive action as necessary.
6.7.1 Characteristics of the Control Process The control process is cyclical which means it is never finished. Controlling leads to identification of new problems that in turn need to be addressed through establishment of performance standards, measuring performance etc.
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Employees often view controlling negatively. By its very nature, controlling often leads to management expecting employee behavior to change. No matter how positive the changes may be for the organization, employees may still view them negatively. Control is both anticipatory and retrospective. The process anticipates problems and takes preventive action. With corrective action, the process also follows up on problems. Controlling is related to each of the other functions of management. Controlling builds on planning, organizing and leading.
Self-Check Questions 8. The control process is ________ which means it is never finished. 9. Control is both _______and________.
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Co-ordination
6.8.1 Definition Co-ordination is the orderly arrangement of group efforts to provide proper direction and cooperation in execution resulting in harmonious and unified actions towards the stated objective. 6.8.2 Importance of Co-ordination Co-ordination plays a very important role when the following factors arise: 1. Division of Labour: The greater the division of Labour, the greater is the need for Co-ordination. Co-ordination ensures proper synchronization between activities of different units and avoids interruptions in operations. 2. Continuity: Co-ordination must be regarded as a continuous process and must be carried out all the times. 3. Dynamism: Good Co-ordination removes all critical points as they arise. Excellent Co-ordination will remove them and prevent their occurrence. 6.8.3 Types of Co-ordination 1. Internal Co-ordination: Coordination amongst the employees of the department, amongst workers and managers at different levels is called internal coordination. 2. External Co-ordination: Co-ordination between customers, suppliers and other external agencies and the organization is called external co-ordination. 3. Vertical Co-ordination: Vertical coordination is between departmental head and his subordinates.
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4. Horizontal Co-ordination: Coordination purchasing, sales, finance etc.
between
departments.
Like
6.8.4 Techniques of Co-ordination 1. Hierarchy: In this the inter-dependents are put under one boss. This ensures some co-ordination among their activities. 2. Induction: Inducing a new employee into the new social setting of his work is also a coordinating mechanism. 3. Planning: Planning ensures co-coordinated effort. 4. Boundary Spanning: The number of contacts between departments dramatically decrease due to creation of a Single Point of Contact between them. 5. Effective Communication: Communication through letters, procedures, reports, bulletins etc ensure that people in an organization are well aware of the changing situations. 6.8.5 Barriers to Co-ordination Barriers in to co-ordination may be because of any of the following reasons: 1. Differences in Orientation towards particular goals: 2. Members of different departments develop their own view on how to best advance the interest of the organization. 3. Differences in time orientation: 4. Some members of operations team might have to work on short deadlines while members of the R&D team might take longer time to get the desired results. 5. Differences in the structure of the organization: 6. Every unit has a different structure and methods to evaluate and run a process. 7. Difference in Interpersonal Orientation 8. In some department or amongst some employees the way of communication can differ as opposed to other means or process of communication.
Self-Check Questions 10. What are the various techniques of coordination. 11. Differences in the structure of the organization causes what?
6.9
Leadership Leadership is the process of influencing people to direct their efforts towards the attainment of some particular goals
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6.9.1 Leadership Styles 1. Autocratic or Authoritarian o Hard Boiled Autocrat: Leaders who use heavy negative influence to make their subordinates follow their wishes or mandates o Benevolent Autocrat: Leaders who use praise and pats on the back to secure personal loyalty for achieving acceptance of his own decisions. o Manipulative Autocrat: Leaders make subordinate feel that they are actually participating in decision making even though manager has taken the decision himself. 2. Democratic or participative leadership: This type of style involves the leader including one or more employees in on the decision making process (determining what to do and how to do it). However, the leader maintains the final decision making authority. 3. Laissez – Faire or Free – Rein: In this style, the leader allows the employees to make the decision. However, the leader is still responsible for the decisions that are made. This is used when employees are able to analyze the situation and determine what needs to be done and how to do it. 4. Paternalistic: Paternalistic leadership is an approach that is based on the idea that the leader is in a better position than the followers to know best what is good for the organization, or the followers. In a nutshell it's the "leader as expert father figure". 5. Bureaucratic Style: Bureaucratic leaders work “by the book”, ensuring that their staff follow procedures exactly. This is a very appropriate style for work involving serious safety risks (such as working with machinery, with toxic substances or at heights) or where large sums of money are involved (such as cash-handling) 6.9.2 The Seven Keys to Business Leadership 1. Vision: Every leader, young or old, must have a vision. A vision defines what success looks like. The leader and the entire team compete for, struggle for, and sacrifice for a vision. 2. Communication: Every leader must be able to communicate the vision to the entire team-and must do so effectively and persuasively so that all the team members will buy into it. 3. People skills: Whether young or old, leaders must know how to motivate people, resolve conflicts, listen, acknowledge, affirm, praise, and build community. 4. Character: People admire and follow leaders who exhibit genuine character. As John Maxwell observed, "People buy into the leader before they buy into the leader's vision." So young leaders need to build good character traits into their lives, including a strong work ethic, humility, honesty, integrity, personal responsibility, social responsibility, self-discipline, courage, kindness, fairness, tolerance, and respect for others. 5. Competence: Notice that the first seven letters of competence are c-o-m-p-et-e. A group or team with a competent leader can compete and win. Competence comes from having experience (a proven track record), learning
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how to delegate, and approaching every task with a commitment to excellence. 6. Boldness: To become leaders, young people must learn how to overcome shyness, timidity, and a tendency to play it safe. Without risk, there is no adventure. You can't be a leader without boldness. 7. Servant hood: True leadership is not about being "the boss" but about being a servant.
Self-Check Questions 12. Bureaucratic is a type of Democratic Leadership. 13. What is the meaning of Laissez – Faire?
True/ False
6.10 Motivation and Morale Motivation is the process of stimulating people to action to accomplish desired goals. 6.10.1 Theories of Motivation: a. The Hierarchy of Needs model of Abraham Maslow Each human being is motivated by needs. There exists a hierarchy of five needs:
o Physiological needs: These are the very basic needs such as air, water, food, sleep 10
o Safety needs: These have to do with establishing stability and consistency in a chaotic world. These needs are mostly psychological in nature. We need the security of a home and family. o Love and belongingness needs: Humans have a desire to belong to groups: clubs, work groups, religious groups, family, gangs, etc. We need to feel loved by others, to be accepted by others. Performers appreciate applause. o Self-Esteem needs: There are two types of esteem needs. First is selfesteem which results from competence or mastery of a task. Second, there's the attention and recognition that comes from others. o The need for self-actualization: This is "the desire to become more and more what one is, to become everything that one is capable of becoming." People who have everything can maximize their potential. b. Theory X and theory Y (Douglas McGregor X – Y Motivation Theory)
Theory X
Theory Y
People view work as being as natural as play and rest. Humans expend the Humans inherently dislike working and same amount of physical and mental Assumptions will try to avoid it if they can. effort in their work as in their private lives.
Application
Because people dislike work they have to be coerced or controlled by management and threatened so they work hard enough.
Provided people are motivated, they will be self-directing to the aims of the organization. Control and punishment are not the only mechanisms to let people perform.
Average employees want to be directed.
Job satisfaction is key to engaging employees and ensuring their commitment.
People don't like responsibility.
People learn to accept responsibility and seek responsibility. Average humans, under the proper conditions, will not only accept, but even naturally seek responsibility.
Average humans are clear and unambiguous and want to feel secure at work.
People are imaginative and creative. Their ingenuity should be used to solve problems at work.
Shop Floor, Mass Manufacturing. Production workers.
Professional Services, Knowledge Workers. Managers and Professionals.
Conducive to Large scale efficient operations.
Management of Professionals, Participative Complex Problem Solving.
Management Authoritarian, Hard Management. Style
Participative, Soft Management.
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c. Expectancy Theory: Victor H Vroom People will be motivated to do the things to reach a goal if they believe in the worth of those goals and if they can see that what they do will help in achieving it. According to Victor Vroom: • • • •
Force = Valence X Expectancy Force = Strength of a persons motivation Valence = Strength of an individual’s preference of an outcome Expectancy = Probability that particular action will lead to a desired outcome.
6.10.2 Types of Motivators 1. 2. 3. 4. 5. 6. 7. 8.
Financial – Money, Salary Non – Financial – Encouragement, Freedom, Recognition Positive – Rewards, Incentive Negative – Fear, Compulsion, Force Internal – Urge External – Individual doing it for someone else Ethical – Honesty, Integrity Unethical
Self-Check Questions 14. The Hierarchy of Needs model theory was proposed by whom? 15. According to Victor Vroom ‘Valence X Expectancy =______? 16. Douglas McGregor proposed _________ Theory.
6.11 Communication • • •
Communication is meaningful interaction Communication is information sharing Communication is understanding
6.11.1 Process of Communication 1. 2. 3. 4.
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Communicator Communicatee Message Medium
6.11.2 Barriers to Communication 1. 2. 3. 4. 5. 6.
Physical barriers – Noise, time and distance Semantic barriers – Wrong interpretation or grammatical errors Wrong medium of communication Psychological barriers - closed mind, attitude, ego Barriers due to difference in perceptions, outlook, approach Barrier due to illiteracy, ignorance
6.11.3 Ten Principles of Effective Communication 1. 2. 3. 4. 5. 6. 7. 8. 9.
Remember that communication is a two way process Be sure of what you want to communicate and why Provide the right climate Be clear with the use of language Listen attentively Speak to the point and avoid irrelevant communication Be sure your actions do not contradict your communication Use right medium Remember the various barriers to communication – mental blocks, closed mind, ego 10. Desire to communicate is the essence of communication
Self-Check Questions 17. Communication is _______interaction.
6.12 Summing Up Management is the process of designing and maintaining an environment in order to achieve the predetermined goals in the most efficient manner. For this, the managers carry out the functions of planning, organizing, staffing and controlling. Managing as practice is art as it is the know how, while the organized knowledge underlying the practice is science. Managing is an activity spread across all spans of life. In an organizational structure, this activity is performed at all levels but with varying skills. A person higher in the hierarchy would possibly need to manage more as compared to a person with no or very few reporting employees under him.
6.13 Answers to Self-Check Questions 1. Fredrick Winslow Taylor
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2. 3. 4. 5.
Henry Fayol Systematic and organized Aims and objectives Division of labor, Delegation of authority, Departmentation, Span of control, Coordination 6. Influencing, coaching, motivating, interpersonal relations, and human relations 7. False 8. Cyclical 9. Anticipatory and Retrospective 10. Hierarchy, Induction, Planning, Boundary Spanning, Effective Communication 11. Barrier into coordination 12. False 13. Free – Rein 14. Abraham Maslow 15. Force 16. X and Y 17. Meaningful
6.14 Terminal Questions 1. Management is the combination of arts, science and profession. Comment with examples. 2. Explain the contribution of F.W. Taylor to management thought and modern management practices. 3. What is decision making. Explain the factors affecting decision making process. 4. Define organizing, with the help of 5 approaches towards understanding the concept. 5. Explain in detail Management by Objectives. 6. What are the various types of co-ordinations? Also explain the barriers to coordination. 7. What are the keys to business leadership? 8. What are the various styles of leadership? 9. Explain Maslow’s theory in detail. 10. Comment and compare Theory X and Theory Y. 11. What are the barriers to communication 12. Distinguish between a leader and manager.
6.15 References 1. Principles and practices of management by Prof Vivek S. Sane, Symbiosis Center for Distance Learning, Pune 2. http://www.valuebasedmanagement.net 3. http://en.wikipedia.org/wiki/Henri_Fayol 4. http://en.wikipedia.org/wiki/Henri_Fayol 5. http://www.12manage.com 6. http://www.onepine.info/
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6.16 Glossary • • • •
•
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Management: Management is planning, organizing, controlling, directing, and co-ordination supported by leadership, communication, motivation and morale MBO: Management by Objectives Directing: Influencing people's behavior through motivation, communication, group dynamics, leadership and discipline Controlling: Process of establishing performance standards based on the firm's objectives, measuring and reporting actual performance, comparing the two, and taking corrective or preventive action as necessary Co-ordination: The orderly arrangement of group efforts to provide proper direction and cooperation in execution resulting in harmonious and unified actions towards the stated objective Laissez Faire: Free reign
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