1. Effectiveness and Efficiency
Effectiveness is “doing the right things in the right way at the right time”. In general, effectiveness is making the right decisions and successfully implementing them. It is the ability to determine appropriate objectives by choosing the right things. The concept of effectiveness focuses on the output.
Efficiency is the ability to avoid the wastage of materials, energy, efforts, money and time in doing something or in producing a desired result. In a more general sense, it is the ability to do things well, successfully and without waste. Efficiency deals with minimizing wastage to getting more output. It often speci?cally comprises the capability of a speci?c application of effort to produce a speci?c outcome with a minimum amount or quantity of waste, expense, or unnecessary effort. In other words, efficiency is “doing things right” while this concept focuses on the input of a production process.
Resources utilized actually
Efficiency = * 100
As a whole we can say that effectiveness is the art of getting the right things done while efficiency is the ability to do things right without wasting resources. Both concepts are important in order to become successful as an organization. If the management is both effective and efficient, the achievement of organizational goals will be a success.
Relationship between efficiency and effectiveness:
• Efficiency refers to the strategies or means while effectiveness is about maximizing the end/final output.
• Efficiency is obtaining the output but with a minimum input whereas effectiveness is about obtaining the best result during the required time period.
Doing things right Doing things wrong
Right Thing Effective
Wrong thing Efficient
2. Traditional Organizations and Contemporary Organizations
Traditional organizations run under the theme “somebody leads, others follow”, with extra managers to run their operations. With the structure they follow, it provides control as well as stability.
Contemporary organizations emerged due to different priorities such as the transfer of power from middle management to employees, the network structure which is not merely a structure, but a hub connected to outside suppliers as well.
Further we can examine this topic under three main segments as,
Traditional organizations are based on a hierarchy. That is, it has a particular flow from top level to lower level starting from CEO, managers and workers. Communication also flows from top to bottom.
We can define profit as the bottom line to a traditional organization’ definition as its goal. Goals are plans that the organization tries to achieve on a long-term basis.
When organizations run thorough specialization, it leads to departments. This specialization makes the entity a hierarchy, for example, a group of people work together under one manager to achieve a certain defined goal where that managers are again grouped with the managers of another department under another manager.
Traditional organizations are usually characterized with clear boundaries, formal procedures and well-defined organizational structures (Carpenter et al. 2012). As opposed to traditional organizations, contemporary organizations are seen as more spontaneous. Some examples for contemporary approaches of organizations are;
• The systems approach
• Contingency approach
• Cultural approach
Further, in contemporary organizations, there are potentially limitless arrangements of employees who are influenced by opportunities and tasks. Social networking, social movements, etc. can be named as some characteristics of these contemporary organizations.
3. Virtual Organization and Boundary less Organization
A virtual organization is an organization which does not have a physical existence with a physical business environment and its members are spreaded throughout different geographical regions. As a result of globalization and the development of technology, virtual organizations have become one of the latest trends in management as this type of organizations mainly depend on primary technologies such as the internet and the World Wide Web for their business activities.
The term “virtual” can be de?ned as “not physically existing as such, but made by software to appear to do so”. In other words, “unreal but looking real.”
Features of a virtual organization
• Email integrator
• Office system integrator
• Voicemail alerts
• Mobile data
• Lack of tangible assets used
Advantages and disadvantages of virtual organizations
• Increased Productivity
• Less paper-work
• Can be quickly reshaped
• Money saving and reduced cost
• Facilities to work at home • Difficult to control
• Technologies can be easily revealed
• Problems with external partner can occur
Boundary less organization
A boundary less organization is a contemporary approach in organization design. It is an organization that is not de?ned by, or limited to, the horizontal, vertical, or external boundaries imposed by a prede?ned structure.
This term was coined by former General Electric chairman Jack Welch because he wanted to eliminate vertical and horizontal boundaries within the company and break down external barriers between the company and its customers and suppliers.
Boundary less organizations will often make use of the latest technology and tools to facilitate the breaking down of traditional boarders, such as virtual collaboration and flexible working. With regard to employees, they may have more responsibility for their own projects and targets and be able to achieve results in a way that is appropriate for the project at hand. Because many Boundary less organizations are dispersed across geographic borders, employees may be from different cultures and countries, but all must work together. Because of this, boundary less organizations require a strong set of core values and a strong vision.
4. Mission, Vision, Goals and Objectives
Mission is the description of an organization, reasons for its existence and its fundamental purpose.
Statement which describes why a co-operation exists, what the organization is trying to achieve and how it intends to achieve its desired objectives.
Contents of a mission statement
• What is the reason for the existence of the organization
• What is expected to be achieved by the organization
• What are the principles that will be used by the organization to achieve its objectives
Vision refers to the category of intention to which all inclusive and forward thinking is included. Vision describes the dreams for the future without specifying the means through which those desires will be achieved. Vision should be realistic and attainable. Vision can be defined as ‘what the organization is to become.’
A goal is a result which a company tries to achieve on a long term basis. Goals are established related to the use of resources, productivity, profitability, social responsibility, etc.
An objective is a result that a company tries to achieve, which is specified and quantified. Objectives are used to achieve short term targets.
Qualities of objectives
? S – specificity
? M – measurable
? A – achievable
? R – realistic
? T – time bound
• Therefore, objectives should be “SMART”.
Why objectives are needed
i. To communicate with employees
ii. To help the decision making process
iii. To evaluate the performance
iv. To analyze the whole business process and employee activity
v. To explain what the organization is trying to achieve
The difference between goals and objectives
? Not specified
? Long term
? Broadly defined
? Not time bounded
? Cannot be quantified ? Specified
? Short term
? Narrowly defined
? Time bounded
? Can be quantified
The relationship between goals and objectives
Objectives are adjusted according to the way the goals are achieved. Objectives must be achieved to reach at goals. Goals are limited but there can be more objectives.
Most concepts relating to the bureaucratic organizations were introduced by a German theorist named Max Weber. Simply, bureaucratic management is another approach of scientific management which is about the management of an organization through an impersonalized and a rationalized basis where the management is separate from the owners and so on.
Earlier, before the introduction of the bureaucratic management theory, organizations were managed on a personal, family-like basis where employees were the loyalty of employees were only towards a single individual rather than to the organization or to its mission. Employees used to utilize the resources of the organization for their personal benefits instead of using those resources to serve the customers.
Weber stated that in order to become more efficient and effective as an organization, it should be managed on a rational, impersonal basis. As per Weber, rationality in organizations meant employee selection and advancement based not on whom you know, but rather on competence and technical qualifications, which are assessed by examinations or according to training and experience. (Draft, 2009)
Characteristics of Bureaucracy according to Max Weber
? Division of labour with clear definitions of authority and responsibility
? Positions organized in a hierarchy of authority
? Managers subject to rules and procedures that will ensure reliable, predictable behavior
? Management separate from the ownership of the organization
? Administrative acts and decisions recorded in writing
? Personnel selected and promoted based on technical qualifications.
Advantages of Bureaucracy
• A standard way of dealing with employees will be implemented due to the rules, regulations and other bureaucratic procedures.
• Equality is promoted as everyone gets the same treatment.
• Bureaucratic management enables organizations to become more efficient and effective.
• A clear chain of command with be developed from top to bottom level of the organization.
• Efficiency will increase through specialization.
Disadvantages of Bureaucracy
• Rigidity of rules and regulations
• Human and social aspects are neglected in the organization
6. Management by objectives
Management by objectives is a management model that aims to improve performance of an organization by clearly defining objectives that are agreed to by both management and employees. According to the theory, having a say in goal setting and action plans should ensure better participation and commitment among employees, as well as alignment of objectives across the organization. The term was first outlined by management guru Peter Drucker in 1954 in his book “The Practice of Management.”
Peter Drucker set forth several principles for management by objectives. Objectives are determined with the employees and are challenging but achievable. There is daily feedback, and the focus is on rewards rather than punishment. Personal growth and development are emphasized, rather than negativity for failing to reach the objectives.
There are some advantages and disadvantages in management by objectives.
• It shows what should be done to reach the objectives.
• It helps to motivate employees to reach the goals.
• It can be achieved only with the support of the top management.
• Most managers are not skilled in interpersonal and interaction which is a compulsory requirement for management by objectives.
This style is appropriate for knowledge based companies when the staff is competent and chief executives of multinational corporations.
The process of management by objectives.
Figure 14.1 – Process of management by objectives
7. Management as a social process
Management has a process which consists of planning, control, coordination and motivation. In the organization, managers need to follow this process otherwise it will be harmful for the objectives of the organization. To reach the organization target they need to follow this process with the support of their employees. So we can call the management process as a social process.
Today organizations has hierarchy which consists of top level managers, middle level managers and lower level managers. Top level managers decide the objectives and plan how to reach it. Middle level managers decide how to reach the organization objectives from their departments and lower level managers decided how to conduct the organization work by the employees and have responsibility to give the progress of the work to the top level managers. From this we can conclude that lower level managers has socialized than top and middle level managers. Hierarchy shows the social process of the management.
The main thing of the manager is reaching the organization objectives. They cannot reach it individually. They need to take support from the employees and information from the stake holders of the organization. So management is a social process.
8. Business environment
Organizations cannot do their business alone. They are surrounded by an environment this called as business environment. We can describe business environment, which is surrounded by many internal and external factors. It is important to look business environment and gain the knowledge about business environment because it affect a business in various ways. Such as its profitability, performance, growth and survival.
There are two concepts in business environment.
1. Internal environment
The factors which affect the inside of the organization is called internal environment. Organization can control the internal environment. There are 7 factors which decide the internal environment. They are value system, mission and objectives, unions, human resources, organization structure, physical resources, corporate culture. In internal environment organization must face strengths and weaknesses.
2. External environment
This is a complex of outside factors which affect the business operation. This is a very challenging environment because organization cannot control this environment. Therefore organization need to face this environment and also they cannot skip from this environment. Because otherwise it will harm the business objectives. Organization can face objectives and threats. There are 6 major factors which describe the external environment. They are economic environment, social and cultural environment, political and legal environment, natural environment, demographic environment, technological environment. External environment classified as:
I. Micro Environment: The immediate periphery of the business that has a continuous and direct impact on it is called Micro Environment. It includes suppliers, customers, competitors, market, intermediaries, etc. which are specific to the business.
II. Macro Environment: Macro Environment, is one such environment that influences the functioning and performance of every business organization, in general. It comprises of demographic, socio-cultural, legal, political, technological, and global environment.
9. Skills and Roles of a Manager
Skills of a Manager
• Every manager needs a skills factor when performing his/her duties.
• Robert L. Kertz introduced three main skills that managers need.
Apart from the above mentioned three skills that should be possessed by all managers, there are some other skills that managers should develop in order to face the changes and challenges in the rapidly changing world. They are,
? Decision making skills
? Time management skills
? Global management skills
? Communication and technology skills
Practical Example: Entrepreneur Elon Musk, holds degrees in both physics and economics, which clearly means that he is equipped with technical skills. He is the creator and designer of the first viable electric car, the Tesla Roadster, as well as the web-based payment service, Paypal and a spacecraft that enables private citizens to travel to outer space. However, it is the conceptual skills possessed by him that allowed him to lead the innovative companies which produces these products and services to be available for people worldwide, together with his human skills that helped him to work with others.
Roles of a manager.
• Henry Mintzberg introduced ten roles of all level managers. These ten roles are categorized into three main categories,
1. Interpersonal Roles
2. Informational Roles
3. Decisional Roles
1. Interpersonal Roles.
• Managers have a systematic and highly compete attitude that influences interpersonal relationships especially with subordinates and peers.
• The three interpersonal roles are those of,
i. Acting as a figurehead
ii. Acting as a leader
iii. Acting as a liaison
Figurehead Leader Liaison
• Collection, usage and distribution of information relating to the various tasks handled by a manager.
• The three informational roles are,
• This is the role of a manager where he/she should obtain the right information and make the right decisions
• four decisional roles are an acting as an,
Practical Example: Small business owners often assume multiple management roles. Susan Solovic, founder and CEO of sbtv.com, an internet news and information site for small business, functions as a spokesperson in an interview. When Solovic develops new ideas for sbtv.com, she functions as an entrepreneur, while she fills the monitor role when she keeps an eye on current trends that might benefit her evolving company and the small businesses her channel serves. (Daft, 2014)
What is an organization?
An organization is an organization or enterprise which employs resources in an economic activity with the objective of earning profits. It is a collection of people working together to achieve a common goal.
• An organization comprises of people who wish to achieve a certain goal.
• All organizations have a goal to be achieved.
• An organization always comprises of people.
• All organizations do their activities according to a deliberate structure.
• Presently the nature of organization is changing due to frequent changes in the business environment.
Practical examples for various types of business organizations that operate in Sri Lanka: Sole proprietorships, partnerships, limited companies, franchised companies, co-operative societies, public co-operations, government departments, government companies.
11. Time and Motion Study
Father of scientific management, Federic Winslow Taylor is well known for his “time studies.” In conducting these studies, he timed how long it takes a worker to perform his respective task such as shoveling or moving heavy loads using a stop watch. After experimenting different ways of performing the same task, he determined the best/optimum way to perform a particular task to save time and increase productivity. Further, he began to increase the wages of those workers who completed the daily target set for him rather than paying all workers an equal wage. By working in accordance with these optimum ways to perform tasks, labour productivity increased dramatically which resulted in higher quality and quantity of output and improved morale among workers. (Carpenter et. al, 2012)
Frank Gilbreth and his wife Lilian Gilbreth, associates of Taylor, went one step ahead of him by introducing “motion studies.” They photographed the individual movements of each worker in performing a particular task, and thereafter examined those motions, eliminated unnecessary motions and determined the best motion to perform each task. These motion studies were preceded by timing each task, and therefore it was known as “time and motion studies.” 4 Just like Taylor’s time studies, working according to this motion studies resulted in an increased labour productivity.
Practical Example: Automaker Henry Ford made extensive use of Federic Taylor’s scientific techniques. Ford replaced workers with machines for heavy lifting and moving autos from one worker to the next. This reduced worker hours and improved efficiency and productivity. Under this system, a Ford car rolled off the assembly line every 10 seconds. (Draft, 2014)
12. Subordination of Individuals to the Common Goal
This concept suggests that the interests of an individual should not be placed before the goals of the organization. In other words, it states that the general interest is superior to the individual interests and that the priority must be given to the achievement of the common goal of the organization and not individual goals and interests.
The management must integrate the individual interests and the organizational goals to ensure that both objectives are achieved with efficiency and effectiveness. This is easier if the individual interests are in line with the organizational goals. However, if the individual interests are in an opposite direction to the directions of the common goal, then the manager must try to reconcile the goals in such a manner that the individual objectives are also achieved when achieving the organizational goals.
This will create a harmonious relationship between the employees and the management and will also facilitate to increase the efficiency of employees.
Practical Example: In KFC (Kentucky Fried Chicken), they have a main goal of providing good food for their customers. This is an example for the common goal of an organization. All departments and employees of KFC must work towards the achievement of this goal. In the production department, the manager, assistant manager, head chef and all other employees must try their level best to provide quality food for their customers. They should comply with their common goal from the beginning till the end of the production process.?
13. Hawthorne Study
This refers to a series of studies conducted at the Hawthorne plant of Western Electric Company in Illinois which began in 1924. The subject matter of this study was “labour productivity” while two Harvard professors, Elton Mayo and Fritz Roethlisberger were the pioneers of this study. (Draft, 2009)
Four experimental and three control groups were involved in this study where in all, five different tests were conducted. Initially, the tests were regarding the relationship between illumination and productivity but when looking at the tests results, it was clear that there are some other important factors affecting labour productivity other than illumination. To carefully examine these factors, various other experiments were conducted. (Greenwood et. al 1983).
The most famous studies out of them, the first Relay Assembly Test Room (RATR) experiment, concluded with extremely controversial results. So many factors were controlled while so many unseen factors were uncontrolled throughout the experiments. However, the scholars came into a conclusion which stated that money was not the cause for the increased output but rather, it was human relations that best explained the increased output. It was believed that the relationships between the human beings of an organization, such as, between managers, supervisors, subordinates, peers, etc. have a greater impact on productivity than any economic benefit or the physical environment of the organization. (Pindur, 1995). Also, the group pride of the employees and the feeling of importance, had an effect on increased productivity. This overall phenomenon is known as the “Hawthorne Effect.”
Practical Example: Many business organizations have taken initiatives to conduct various activities and events in order to enhance the relationships between various levels of employees in the organization such as, annual get-togethers, Christmas parties, family days, annual trips, etc. This is because the management has understood that the healthy relationships between various levels of employee results in increased productivity than any economic benefit or physical environment of the organization.
14. The Systems Approach and the Contingency Approach
The systems approach and the contingency approach are two contemporary management concepts emerged in the post-World War 2 period.
A system is an interrelated set of elements functioning together to achieve a common goal. A system consists of five components; inputs, a transformation process, output, feedback and the environment. The systems approach is an extension to the humanistic perspective of management. Under this approach, organizations are described as open systems with the characteristics of entropy, synergy and subsystem interdependence. Open systems were defined as systems that interacts with its environment to survive whereas closed systems do not interact with its environment. The concept of synergy states that the whole is better than the sum of its parts. Subsystem interdependence states that the subsystems of an organization depend on each other where changes in one sub system affects the other parts. (Draft, 2009) Shown below is the systems view of an organization.
figure 14.2 – Systems Approach (figure abstracted from Draft, 2009)
Practical Example: Think of construction organization. The inputs to the production process will be bricks, cement, information, plans, ideas, nails, etc. In the transformation process, those inputs will be transformed using the technology available and management techniques to build the final output which is a building or any other construction. While constructing the building, the organization will continuously communicate with its environment and obtain the feedback and comments from the environment about its production process and the final output.
This too is an extension of the humanistic perspective of management. As per the classical perspective, it was assumed that all management principles were universal. In contrary to this, the case view stated that each situation is unique, and the principles are not universal. As a result of integrating these two concepts, the contingency approach emerged. Contingency approach, however, does not say that either of the two concepts are entirely correct. It states that depending on the type of the situation and contingency, the management would undertake appropriate strategies to handle the situation. In other words, contingency approach states that the successful resolution of organizational problems depend on managers’ identification of key variations in the situation at hand. (Draft, 2009)
15. The Delphi Method
Delphi method is a decision-making technique which relies on a panel of experts. Firstly, the experts individually provide their opinions and thoughts regarding a certain subject or issue which will be then anonymously summarised by a facilitator. The person coordinating the Delphi method is usually known as the facilitator or leader. Then the experts are encouraged to consider the replies of the other members of their panel and revise their earlier opinions. This process will continue as such and it is believed that the range of the answers/opinions will eventually decrease resulting with convergence effect to the “correct” or “best” answer.
The panel of experts can be drawn both from inside and outside the organization. The panel consists of wise individuals having knowledge of the area requiring decision making. In general, the Delphi method is used in forecasting and in policy making.
Key Characteristics of Delphi Method
• Anonymity of the facilitator
• Structuring of information flow
• Regular feedback
• The role of the facilitator
Practical example: Think of a factory that started to implement and follow the Delphi method. The expert panel will be questioning about the speed, cost and usage from different groups and different departments. Then they will be able to come up with a systematic process within the factory.
16. Types of Decisions
Decision making is an act or a conclusion taken or reached after consideration. In management, there are two types of decisions such as, programmed decisions and non-programmed decisions.
Programmed decisions are repetitive, routine and made according to a specific procedure. These programmed decisions rely on rules, regulations and policies. The lower level of the management handles all the programmed or routine decisions, taken in the short-term period. Programmed decisions are taken by executives on a daily basis.
Practical Example: A temporary employee, who earns Rs.10,000 per month, applies for a Rs.500,000 loan. The manager refuses the application on the basis of an established rule that prohibits giving loans for temporary employees in the company. Here the manager took a solution under the rule of not giving loans for temporary employees, manager clearly ignored that application without giving the loan and also this decision is taken in the short term period. Because of these characteristics the above example can be identifies as a programmed decision.
Non-programmed decisions are new, unusual and are difficult because its complexity. These decisions rely on judgment and certainty. Normally the upper or higher level of management handles the non-programmed decisions. Also, these are taken in the long-term period.
Practical Examples: 1) A complex non-programmed decision for Apple Inc company manager would be whether to outsource the manufacture of its products to China to lower their total manufacturing cost. It would be necessary to consider about product quality, labor cost and shipping cost. When the manager starts to think about the above characteristics, the decision will be more complex and complicated. Also, the outsourcing would be related to the long-term period. 2) Recruitment of employees to a new factory also would be a complex non-programmed decision because it takes a long time to do the recruitment planning, strategy development, searching, screening, evaluation and control. Therefore, the above decisions can be identified as complex non-programmed decisions. A complex decision is more demanding than a less complex decision.
There is a huge difference between programmed decisions and non-programmed decisions. The type of the problem in a programmed decision is structured and in non-programmed its unstructured. The frequency of a programmed decision is routine, repetitive and non-programmed is new, unusual. The information availability of programmed decision is more, and non-programmed information is less available as well as incomplete. The final result of the programmed decision is clear and non-programmed, it is vague. The time period of the programmed decision is short and non-programmed decision is relatively long. The solution of the programmed decision is relying on procedures, rules and policies. In a non-programmed decision, it relies on judgment and certainty.
The well planned and highly structured companies reduce the number of non-programmed decisions. It does so to formulate policies to help managers to know what to do when faced with a problem. When a manager takes practical decisions (programmed or non-programmed decisions), adaptation, flexibility and creativity are much needed, otherwise it will be destroying the organization. To make successful and creative decisions, the manager must have a proper knowledge about the organization and its culture.
17. Bounded rationality
Bounded rationality means that decision makers are limited or bounded by their values, attitudes and mental abilities. Because so many factors influence the decision maker, decision making is not entirely or usually rational. As Herbert A. Simson proposed, limits (or bounds) to rationality are presented in decision making. These bounds are the limitations of humans, particularly related to the processing of information.
In bounded rationality the limitations are included as follows; information failure which means there may not be enough and reliable information, the amount of time that we have to make our decisions, the impact of emotions on decision making, etc. Therefore, people are not entirely rational decision makers.
Practical example for bounded rationality in decision making; a restaurant manager needs to maximize their productivity (number of meals) in the restaurant. The manager does not have sufficient information to make fully informed judgments about his decisions. The bounded rationality suggests him to produce the current level of productivity other than maximizing the productivity. In this scenario the bound or the limit was the lack of sufficient information in decision making. As another example many try hard to not lose money in the stock market instead of focusing on increasing profits. An individual might hang on to a losing stock or mutual fund too long, and a marketing manager might hang on to a losing their product brand for too long.
In here the result is that we usually end up by making satisfying decision and using heuristics strategies. Satisficing decision means a decision that meets the minimum standards of satisfaction. Such decisions are adequate, acceptable or passable. Decision makers stop their research for alternatives when they obtain a satisficing decision. Successful managers recognize that it is difficult to obtain every possible fact in decision making. In the words of Lawrence Weinbach, the former top executive at Unisys and now a member of a capital management firm, if we want to be leaders (successful managers), we are going to make decisions with maybe seventy five percent of the facts. If you wait for 95 percent, you are going to be a follower.
Affected by bounded rationality, decision makers often use simplified strategies known as heuristics. In common behaviour, heuristic means as the rule of thumb used in decision making. Such as the policy to reject a job applicant who does not smile during the first three minutes of the job interview. For a marketer, understanding heuristics is an advantage that helps them to forecast consumer behaviour when purchasing their brand. There will be three main heuristics such as representativeness heuristic, availability heuristics, anchoring and adjustment heuristics. Heuristics help decision makers to cope with masses of information, but oversimplification can lead to inaccurate or irrational decision making.
The impact of bounded rationality is that contracts cannot be fully complete in order to cover all possibilities, and this suggests that markets rarely work perfectly. Behavioural economists generally point out that bounded rationality is not same as irrationality, because decision makers are still attempting to make as rational decisions as possible by using satisficing decisions and heuristics strategies.
18. Political Forces in Decision Making
Political forces mean the parties, personalities, pressure groups that strongly influence the economic and political stability of a country through their actions and polices. The political forces are taken under the political environment. The political environment is a major part of the business environment. Also, it is known as an external and macro environment character. Political forces, political parties, policies and pressure groups will be discussed under political environment. Also, political forces will create opportunities and threats to the business and their decision making.
Political forces include the policies and decisions of political parties in a country, the nature of the constitution and the government system and environment encompassing the economic and business policies. The most important policies are industrial policy, EXIM (export and import) and trade policy and fiscal policy.
The change of the political forces will create a difference in decision making. The manager must consider about the political environment before he come up with a decision. Political forces may bring opportunities as well as threats.
Practical Example: Government introduces a tax on vehicles. This will be a threat to vehicle suppliers, because higher the tax, there will be an increment in vehicle prices. Then higher the price, there will be a low demand and at the end of the day, there will be less sales and profits. Therefore, the manger must consider about above steps in decision making
Also, political forces may bring opportunities to business. Such as foreign trade policies (tariffs and import quotes), contracting with private companies, grants and loan facilities. To a single entity, business grants and loans will be an opportunity. It helps to build a strong finance structure and the owner would be able to decide on new investments and increasing the productivity.
Political forces will create opportunities and threats. In decision making the effect of political forces may give positive or negative impact to the organization. Therefore, the manager must consider the political forces in decision making, because the organization does not have a control on political forces though political forces have a control (direct and indirect control) on the organization.
In business environment there will be political forces and political forces will affect to the decision making. Therefore, the change in decisions will lead to a change in business. Again, the change in business will create a change in business environment. Therefore, there will be a clear link between business environment, political forces and decision making.
19. Chain of Command
Chain of command refers to a company’s hierarchy of reporting relationships from bottom to the top of an organization, who must answer to whom. The span of command is a similar word for the chain of command. It does not describe about the company’s relationships, but rather it lays out the company’s lines of authority and decision-making power.
The chain of command defines who is in charge of whom in the organization. Chain of command is an important concept which is discussed under organizational structure. This refers to the level of authority in the company from top position. Such as a CEO down to workers on the front line. An example for chain of command is when an employee reports to a manger who reports to a senior manager who reports to the vice president and who finally reports to the CEO. In organizations, the authority comes from top level to bottom level of the management and the accountability reports from bottom to the top level of the management, therefore in the practical manner, chain of command operates from top to bottom level of management as well as bottom to top level of management.
Practical Example: If an employee needs to get a loan, he cannot directly submit his letter of request to the higher level of managers. He must first submit his request to the department manager or head of the department. Then the head of the department will submit it to the finance manager, the finance manager will get the opinion from general manger. Then they will decide on accepting it or ignoring it. In chain of command it clearly shows about the authorities and responsibilities.
Advantages of having the chain of command
• The first one is the establishment of company hierarchy; CEO and the Board of directors occupy the top positions in a company hierarchy, which is also the top spot in a chain of command. In this concept, employees report to supervisors, supervisors report to the department managers, department managers report to the senior managers and they will report to the board of directors and the CEO.
• The second advantage is efficiency, which means that the chain of command creates efficiency when reporting problems or communicating with workers.
• The other advantages are unity of command and assigning clear responsibilities.
Disadvantages of the chain of command
• Office politics
• Time consuming for some decisions
• Jobs are no longer rigidly defining employee empowerment
• Position power
• High compensation cost and limited initiative
20. Mechanistic and Organic Organizations
Mechanistic organization is an organization which is hierarchical and bureaucratic. It is designed by its highly centralized authority, formalized procedures, practices and specialized functions. An organic organization is a type of informal organization. It has a very flexible structure which is also able to adapt well to changes. It has little job specialization, few layers of management, decentralized decision making and not much of direct supervision.
There are some important characteristics in mechanistic organizations and organic organizations.
The concepts of mechanistic organizations are as follows,
• Individual specialization: employees work separately and specialize in to one work
• Simple integrating mechanisms: hierarchy of authority well-defined
• Centralization: decision making kept as high as possible, the communication is vertical
• Standardization: made of rules and standard operating procedures, use the written communication and informal status in organization based on size of empire.
Also, mechanistic organization is a network of positions, corresponding to one task. Typically, each person corresponds to one task. The examples for mechanistic organizations are healthcare, universities and government organizations.
The characteristics of organic organizations are as follows;
• Joint specialization: employees work together and coordinate tasks
• Complex integrating mechanisms: tasks forces and terms are primary integrating mechanisms,
• Decentralization: authority to control task is delegated, the communication is lateral,
• Mutual adjustment: face-to-face contact for coordination.
Work process tends to be unpredictable, use the verbal communication and informal status based on perceived brilliance. Organic organization is network of persons or teams. People work in different capacities simultaneously and over time. The examples for organic organizations are retail companies and supermarket companies.
The advantages of mechanistic organizational structure are, maximizing efficiency and minimizing costs. When comparing to mechanistic structures, organic structures are very flexible and able to react quickly. The disadvantages of mechanistic structure are, too much of written work, very impersonal, lots of rules and less freedom for employees, therefore the employee creativity will be discouraged. Also, the disadvantages of organic organizations are low efficiency, high costs, non-formalized structure and poor connection of employees’ efforts.
The organizational structure can be designed as a mechanistic structure or organic structure. It can be related to the whole organization or to a part of the organization. It means that they can handle some departments under mechanistic structure as well as some under organic structure. However, the structure of the organization will have an effect on business performances and growth of the organization.
21. Contemporary Organizational Designs
In general, organizational design refers to the process used by managers to organize the activities, goals and objectives of the business while deciding how to group people in order to achieve the organization’s objectives effectively and efficiently.
Contemporary organizational designs refer to a flexible structural method in which job tasks are divided, grouped and coordinated in response to dynamic environmental factors.
In order to face the highly dynamic and complex business environment, the contemporary organizational structure is of great importance. There are various types of contemporary organizational structures:
Name of the structure Advantages Disadvantages
A structure in which the entire organization is made up of work groups or teams. -Employees are more involved and empowered.
-Reduced barriers among functional areas. -No clear chain of command.
-Pressure on teams to perform.
Matrix is a structure that assigns specialists from different functional areas to work on a project and then return to their areas when the project is completed.
Project is a structure in which employees continuously work on projects. When one project is completed, employees move on to the next project. -Fluid and flexible design that can respond to environmental changes.
-Faster decision making. -Complexity of assigning people to projects.
-Tasks and personality conflicts.
This is a structure which is not defined by or limited to artificial horizontal, vertical or external boundaries; includes virtual and network types of organizations. -Highly flexible and responsive.
-Utilizes talent wherever it’s found.
-Lack of control
-Difficulties in communication.
In the learning structure, employees acquire and share new knowledge on a continuous basis and apply that knowledge in practical situations. -Sharing of knowledge throughout the organization.
-Sustainable source of competitive advantage. -Reluctance on the part of employees to share knowledge for fear of losing their power.
-Large number of experienced employees will be on the verge on retiring.
• Practical Examples for boundary-less organizations:
22. Bases of power
? Power is the ability to influence people to do things.
? Coercive Power
? Reward Power
? Legitimate Power
? Information Power
? Expert Power
? Charismatic Power
? Referent Power
? Power is a broader concept than authority. Managers are not the only people who can influence in an organization. Employees also to things to influence managers.
23. Charismatic Leadership
What is charismatic leadership?
“Certain quality of an individual personality, by virtue of which he/she is set apart from ordinary people and treated as endowed with supernatural, superhuman or at least specifically exceptional power or qualities.”
Charismatic leaders have the ability to encourage followers to do what they want them to do through their personality and charm. These leaders influence others through positivity, confidence and a strong self-image that naturally draws people in.
Qualities of a charismatic leader
? High principles
? Emotional sensitivity
Advantages of charismatic leadership
• Vision and articulation
• Supportive environment
• Sensitivity to the emotions of people
• Ability to effect change
• Energetic and driving leadership qualities
Disadvantages of charismatic leadership
• Lack of clarity
• Failure of vision
• Mis-articulation of goals
• Over reliance on the leader
• Broken trust
Practical Example: Sai Baba was an Indian spiritual master who has thousands of followers. He was considered as a leader by his devotees due to his in-born qualities and the magical powers possessed by him to attract people. Therefore, we can say that he was a charismatic leader.
24. Creativity, Invention and Innovation
The companies that have done the best over the long haul are those who are the most creative and innovative. Such organizations rather don’t copy from the others but, they may use innovative ideas from others as a spring board to come up with a unique application, product, or service for themselves. They tend to distance themselves from the competition rather than compete with them. If they see another company copying what they do, they create something new and better. In other words, they are able to leverage their creativity and their invention, innovative capabilities to attain long-term success.
The three components can be further defined as follows:
We can define the act of creativity as turning modern and imaginative concept into reality. Creativity promote people to think in new ways, and to produce solutions. Thinking and producing are two processes in creativity. Without these two processes, creativity is incomplete.
This is a technical idea that has never been built or used before. It will be a system, machine or device.
This can be defined as the process of instrumenting new ideas to generate the value of the company. This helps to generate ideas of the company in order to desire an expectation of the customers.
Above three items are combined in any goods or service in an organization.
For an example for creativity, invention and innovation the Project Manager described following situation.
In 2013, the company started a harbor project at Maavah Island in Raa Atoll, Maldives. The planned duration was 8 months. While the project is in progress, the client, a government ministry wanted to fast track the project. This was on political grounds as the government wanted the completion of some infrastructure development projects to fall in line with some political milestones. As the company wanted to maintain the good relationship with the client ministry, it decided to comply. But the challenge was that the cost of fast tracking could not exceed the permissible variation of 10%.
Additional labor and other resources were absorbed from other projects which were closing up but that didn’t appear to be sufficient. When detailing on the time consumption of the tasks, it was observed that one of the most critical is the concreting. So the design was changed such that certain pre casting methods were implemented. This solution enabled the company to fast track the project and meet the desired time frame of the client.
25. Barriers to effective communication
Communication skills are very important to managers because they have to communicate with different people to achieve their goals. So there must be an effective communication way, otherwise, it will be harmful for the organizational activities. Unfortunately, there are a lot of barriers for effective communication.
1. Structural errors.
In the organization there should be a proper organization structure. Otherwise the message will not pass to the suitable person. So if organization have a poor structure they must take an immediate action for it. Preparation of a management hierarchy will be a good solution for this situation.
2. Poor delivery system.
There should be an effective communication system, such as delivering any message through management hierarchy. There should be a fast communication system to pass the messages. Otherwise it will become a barrier to effective communication.
3. Using the wrong media.
In the organizational activities, all the workers should pass their message in formal language but sometimes, people use informal language. This would harm the goodwill of the organization. Using e -mails when a discussion is needed, writing letters for the immediate message without having a telephone conversation are the barriers to effective communication by using the wrong media.
4. Delivering the message to the wrong person.
In the organization, department managers should deliver the message to the correct department workers because in huge companies, there are a lot of departments and there are lot of workers in it. So managers should deliver the message to the correct person otherwise it will be a barrier for effective communication.
5. Confused messages.
Managers should use proper language for the proper person. For the employees, they should use simple language without using the business language. In another way, business language is suitable for top level managers.
Practical Example: The Administrative Manager of the consulted company which is a company engaged in foreign construction work, explained that they always communicate by telephone and e-mails. Although the telephoning is quicker and effective, it is rather expensive than sending e-mails. Therefore, the company uses e-mail facility to communicate with the employees at sites in foreign countries. But there is a problem whether the receiver sees the message in time. To overcome this problem, the company has instructed its employees to send a SMS message to the relevant receiver informing that an e- mail message has been sent after sending an e-mail. This helps the receiver to see the e-mail quickly without any delay.
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