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SCHOOL OF GRADUATE STUDIES
GBS 550: MANAGEMENT THEORY
AND PRACTICE
LECTURE NOTES
Dr H B Maliti
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TABLE OF CONTENTS
INTRODUCTION............................................................................................4
1. The Nature and Scope of Management……………………………………..5
1.1 Defining Management...............................................................................5
1.2 What Managers Do....................................................................................9
1.3 Administration and Management..........................................................13
1.4 Leadership and Management.................................................................15
1.5 Approaches to the Study of Management.............................................17
2. The Evolution of Management Thought and Theory…………………….20
2.1 Introduction.............................................................................................20
2.2 Fayol and Administrative Management................................................20
2.3 Taylor and Scientific Management........................................................22
2.4 Mayo and the Human Relations School................................................26
2.5 Barnard and the Systems Approach......................................................28
2.6 Contemporary Management Thought..................................................31
3. Management Principles and Functions……………………………………39
3.1 Corporate Governance…………………………………………….39
3.2 Communication…………………………………………………….42
3.3 Planning .......................................................……………………….43
3.4 Strategic Management......................................................................58
3.5 Forecasting.........................................................................................67
3.6 Problem-Solving……………………………………………………70
3.7 Human Resource Management……………………………………74
3.8 Leadership…………………………………………………………..81
3.9 Organizing…………………………………………………………..82
3.10 Controlling…………………………………………………….....92
3.11 Decision making………………………………………................96
3.12 Knowledge Management............................................................106
4 Recent Developments in Management.......................................................108
4.1 Total Quality Management............................................................108
4.2 Benchmarking.................................................................................111
4.3 Business Process Re-Engineering..................................................111
4.4 Globalization...................................................................................112
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5 Managerial Accountability and Authority………………………………......113
5.1 Authority and Responsibility.........................................................113
5.2 Effective Delegation........................................................................115
6 Power and Influencing.…………………………………………………........118
6.1 Power...............................................................................................118
6.2 Influencing.......................................................................................121
7 Behaviour Modification…………………………………………………........124
7.1 Introduction.....................................................................................124
7.2 Motivation……………………………………………………….....126
7.3 Leadership…………………………………………………………138
7.4 Communication……………………………………………………150
7.5 Group Dynamics…………………………………………………..154
8 Conflict Management……………………………………………………...159
8.1 Managing Conflict............................................................................159
8.2 Managing Conflict in the Organization.........................................163
9 Managerial Ethics…………………………………………………………166
9.1 Introduction.....................................................................................166
9.2 The Ethical Dimension of Management.........................................166
9.3 Encouraging Ethical Conduct.........................................................168
9.4 Social Responsibility........................................................................170
10 Management of Change…………………………………………………...176
10.1 Managing Change............................................................................176
10.2 Types of Organizational Change....................................................178
10.3 Individual Reactions to Change......................................................179
10.4 Overcoming Resistance to Change.................................................180
10.5 Making Change Happen..................................................................182
11 Management Challenges in Contemporary Zambia…………………….187
11.1 The Changing Scene.........................................................................187
11.2 Managerial Actions to Maximize Shareholder Wealth.................188
11.3 A Zambian Case Study....................................................................189
11.4 Sector Management.................……………………………............201
12 Managerial Self-Development....………………………………………….203
12.1 The New Business Reality................................................................203
12.2 How Executives Learn.....................................................................204
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12.3 Managerial Development................................................................206
12.4 The Seven Habits of Highly Effective People................................207
13 References..................................…………………………………………..209
INTRODUCTION
The course introduces the principles and functions of management at an advanced
level and evaluates the relevance and applicability of management theory and thought
to modern management practice in general and Zambia in particular.
This is achieved through, inter alia, provision of a foundation in general management
concepts and practices related to organizations and their place in the wider
international context.
These notes have been reproduced verbatim from the sources indicated and they are
for teaching purposes only.
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CHAPTER 1: THE NATURE AND SCOPE OF MANAGEMENT
1.1 DEFINING MANAGEMENT
Definition: Management is the process of working with and through others to achieve
organizational objectives in a changing environment.
Central to this process is the effective and efficient use of limited resources. Five
components of this definition, shown in Fig. 1.1, require closer examination:
1. Working with and through others;
2. Achieving organizational objectives;
3. Balancing effectiveness and Efficiency;
4. Making the most of limited resources; and
5. Coping with a changing environment.
1.1.1. Working with and through others
Management is, above all else, a social process. Many collective purposes bring
individuals together – building cars, providing emergency health care, publishing
books, etc.
But in all cases, managers are responsible for getting things done by working with and
though others. Research has shown that aspiring managers who do not interact well
with others hamper their careers.
Failed managers reportedly have the following shortcomings:
(a) Problems with interpersonal relationships
(b) Failure to meet business objectives
(c) Failure to build and lead a team
(d) Inability to change and adapt during a transition.
Significantly, the first and third shortcomings involve failure to work effectively with
and through others. The failed managers experienced a number of interpersonal
problems. Among other things, they were perceived as manipulative, abusive,
untrustworthy, demeaning, overly critical, not team players, and poor communicators.
Even managers who make it all the way to the top often have interpersonal problems.
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2.5.1 Achieving organizational objectives
An objective is a target to be strived for and, one hopes, attained. Like individuals,
organizations are usually more successful when their activities are guided by
challenging, yet achievable, objectives. Although personal objectives are typically
within the reach of individual effort, organizational objectives or goals always require
collective action. Thus, a goal-oriented approach strives to inspire and energize
employees to achieve greater organizational success.
Organizational objectives also serve later as measuring sticks for performance.
Without organizational objectives, the management process, like a trip without a
specific destination, would be aimless and wasteful.
2.5.2 Balancing effectiveness and Efficiency
The relationship between effectiveness and efficiency is an important one, hence the
need to distinguish between them.
Effectiveness entails promptly achieving a stated objective. But given the reality of
limited resources, effectiveness alone is not enough.
Efficiency enters the picture when the resources required to achieve an objective are
weighed against what was actually accomplished. The more favourable the ratio of
benefits to costs, the greater the efficiency.
Changing environment
Getting the most
out of limited resources
Achieving
organizational
objectives
Working with
and through
others
Balancing
effectiveness
and efficiency
Fig. 1.1: Key Aspects of the Management Process
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When too much emphasis is placed on effectiveness, the job gets done (effectiveness)
but limited resources are wasted (efficiency).
When too much emphasis is placed on efficiency, the job does not get done
(effectiveness) because available resources are underutilization (efficiency).
But when there is a balanced emphasis on effectiveness and efficiency, the job gets
done (effectiveness) and limited resources are not wasted (efficiency).
Managers are responsible for balancing effectiveness and efficiency. Too much
emphasis in either direction leads to mismanagement. On the one hand, managers
must be effective while on the other hand they need to be efficient by containing costs
as much as possible and conserving limited resources. But managers who are too
stingy with resources may not get the job done. At the heart of the quest for
productivity improvement (a favourable ratio between inputs and output) is the
constant struggle to balance effectiveness and efficiency.
2.5.3 Making the most of limited resources
We live in a world of scarcity and those who are concerned with such matters worry
not only about running out of non-renewable energy and material resources but also
about the lopsided use of those resources. Our planet is becoming increasingly
crowded while its carrying capacity is open to speculation. In productive
organizations, managers are the trustees of limited resources, and it is their job to see
that the basic factors of production- land, labour, and capital- are used efficiently and
effectively.
2.5.4 Coping with a changing environment
Successful managers are the ones who anticipate and adjust to changing
circumstances rather than being passively swept along or caught unprepared.
Employers today are hiring managers who can take unfamiliar situations in stride.
The major changes for managers doing business in the 21st century are the product of
five overarching sources of change: globalization, the evolution of product quality,
environmentalism, an ethical reawakening, and the Internet revolution.
Globalization: The globe is shrinking in almost every conceivable way.
Networks of transportation, communication, computers, music, and economics have
tied the people of the world together as never before. Companies are having to
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become global players just to survive, let alone prosper. Today’s model manager is
one who is comfortable transacting business in multiple languages and cultures.
The Evolution of Product Quality: Thanks to various quality gurus, product/
service quality has become both a forethought and a driving force in effective
organizations of all kinds (industrial and non-industrial).
The emphasis on quality has evolved through four distinct stages since WWII – from
“fix it in” to “inspect it in” to “build it in” to “design it in”.
The focus has shifted from reactively fixing product defects to proactively working to
prevent them and to satisfy the customer completely.
Today’s quality leaders strive to exceed, not just meet, the customer’s expectations.
A popular label for the build-it-in and design-it-in approaches to quality is total
quality management (TQM).
Environmentalism: Environmental issues such as deforestation, global
warming, depletion of the ozone layer, toxic waste, and pollution of land, air,
and water are the concern of everyone like politicians and managers.
The so-called green movement has spawned successful parties in Europe.
Managers are challenged to develop creative ways to make a profit without
unduly harming the environment in the process. Terms such as industrial
ecology and eco-efficiency are heard today under the general umbrella of
sustainable development. Also, cleaning up the environment promises to
generate whole new classes of jobs and robust profits in the future.
The debate over jobs versus the environment has been rendered obsolete by
the need for both a healthy economy and a healthy environment.
An Ethical Reawakening: Managers are under strong pressure from the
public, elected officials, and respected managers to behave better.
This pressure has resulted from years of headlines about discrimination, illegal
campaign contributions, accounting fraud, price fixing, insider trading, the
selling of unsafe products, and other unethical practices. Traditional values
such as honesty are being reemphasized in managerial decision making and
conduct.
One survey has uncovered the following ethical problems in the workplace:
lying to supervisors, lying on reports or falsifying records, stealing and theft,
sexual harassment, abusing drugs or alcohol and conflict of interest.
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The Internet and E-Business Revolution: Growth of the Internet – the
worldwide network of personal computers, routers and switches, powerful
servers, and organizational computer systems – has been explosive.
The implications of this massive interconnectedness for managers are
profound and truly revolutionary. Legal, ethical, security, and privacy issues,
however, remain largely unresolved.
Within the business community, heads are still spinning from the dot-com
crash of 2000-2001. Where their focus before the dot-com crash was primarily
on business-to-consumer retailing, Internet strategists are now much more
broadly focused.
Thus, an e-business is one seeking efficiencies via the Internet in all basic
business functions and all support activities involving human, material, and
financial resources.
Considering the variety of these sources of change in the general environment,
managers are challenged to keep abreast of them and adjust and adapt as
necessary.
2.6 WHAT MANAGERS DO
Management is much more than the familiar activity of telling employees what to do.
Management is a complex and dynamic mixture of systematic techniques and
common sense.
Managerial functions are general administrative duties that need to be carried out in
virtually all productive organizations.
Managerial roles are specific categories of managerial behaviour. Roles are the means
and functions are the ends of the manager’s job.
1.2.1 Managerial Functions
The most popular approach to describing what managers do has been the functional
view. It has been popular because it characterizes the management process as a
sequence of rational and logical steps.
Henri Fayol, a French industrialist turned writer, became the father of the functional
approach when he identified five managerial functions: planning, organizing,
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command, coordination, and control. Fayol claimed that these five functions were the
common denominators of all managerial jobs, whatever the purpose of the
organization. There are now 8 different managerial functions after updating and
expanding the original list: planning, decision making, staffing, organizing,
communicating, motivating, leading and controlling.
Planning: The primary management function, planning is the formulation of future
courses of action.
Plans and the objectives on which they are based give purpose and direction to the
organization, its subunits, and contributing individuals.
Decision Making: Managers choose among alternative courses of action when they
make decisions. Making intelligent and ethical decisions in today’s complex world is
a major management challenge.
Organizing: Structural considerations such as the chain of command, division of
labour, and assignment of responsibility are part of the organizing function.
Careful organizing helps ensure the efficient use of human resources.
Staffing: Organizations are only as good as the people in them. Staffing consists of
recruiting, training, and developing people who can contribute to the organized effort.
Communicating: Today’s managers are responsible for communicating to their
employees the technical knowledge, instructions, rules, and information required to
get the job done. Recognizing that communication is a two-way process, managers
should be responsive to feedback and upward communications.
Motivating: An important aspect of management today is motivating individuals to
pursue collective objectives by satisfying needs and meeting expectations with
meaningful work and valued rewards. Flexible work schedules can be motivational
for today’s busy employees.
Leading: Managers become inspiring leaders by serving as role models and adapting
their management style to the demands of the situation. The idea of visionary
leadership is popular today.
Controlling: When managers compare desired results with actual results and take the
necessary corrective action, they are keeping things on track through the control
function. Deviations from past plans should be considered when formulating new
plans.
1.2.2 Managerial Roles
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Mintzberg criticized the traditional functional approach as unrealistic and vague about
what managers actually do. The functional approach is believed to portray the
management process as far more systematic and rational and less complex than it
really is. The average manager is not the reflective planner and precise “orchestra
leader” that the functional approach suggests.
Mintzberg characterizes the typical manager as follows: “The manager is
overburdened with obligations; yet he cannot easily delegate his tasks. As a result, he
is driven to overwork and is forced to do many tasks superficially. Brevity,
fragmentation and verbal communication characterize his work.” Constant
interruptions are the order of the day.
Mintzberg has isolated ten roles he believes are common to all managers and are
grouped into three major categories: interpersonal, informational and decision roles.
Interpersonal Roles: Because of their formal authority and superior status, managers
engage in a lot of interpersonal contact with people who report to them. They also
interact with other managers. The three interpersonal roles managers play are those of
figurehead, leader and liaison.
Informational Roles: Every manager is a clearinghouse for information relating to the
task at hand. Informational roles are important because information is the lifeblood of
organizations. Typical roles include acting as nerve centre, disseminator, and
spokesperson.
Decisional Roles: In their decisional roles, managers balance competing interests and
make choices. Through decisional roles, strategies are formulated and put into action.
Four decisional roles are those of entrepreneur, disturbance handler, resource
allocator, and negotiator.
Fig. 1.2: Mintzberg’s Managerial Roles
Category Role Nature of Role
Interpersonal Roles 1. Figurehead As a symbol of legal
authority, performing
certain ceremonial duties
( e.g. signing documents
and receiving visitors)
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2. Leader Motivating subordinates to
get the job done properly
3. Liaison Serving as a link in a
horizontal and vertical
chain of communication
Informational Roles 4. Nerve Centre Serving as a focal point for
nonroutine information;
receiving all types of
information.
5. Disseminator Transmitting selected
information to
subordinates
6. Spokesperson Transmitting selected
information to outsiders
Decisional Roles 7. Entrepreneur Designing and initiating
changes within the
organization
8. Disturbance Handler Taking corrective action in
nonroutine situations
9. Resource Allocator Deciding exactly who
should get what resources
10. Negotiator Participating in negotiating
sessions with other parties
( e.g. vendors and unions)
to make sure
organization’s interests are
adequately represented
1.2.3 Merging Functions and Roles
Both the functional and role approaches to explaining management are valuable to the
student of management. Managerial functions are a useful categorization of a
manager’s tasks, tasks which require different techniques and perspectives.
The role approach is valuable because it injects needed realism.
2.7 ADMINISTRATION AND MANAGEMENT
The word “Administration” is a noun used to describe the collection of resources
under the control of an Administrative Director or a person with a similar title.
All office functions come under this heading, although there are some areas which are
treated separately for particular purposes.
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When accountants follow the conventional functional breakdown, certain office
functions are included under each main heading. For example, the structure of a
business is as follows:
Production or manufacturing
Selling and distribution
Research and development
Administration
Administration includes all costs connected with the formulation of policy and
management, excluding those activities which relate specifically to the other three
categories. However, when viewed generally all clerical, management and director
functions come under the heading of the Administrative Function.
The main areas which come into the category of Administration or Office
Management are as follows:
Accounting and Finance ( Financial accounting, Cost accounting,
Management accountancy, General financial management – which includes
the provision of adequate finance to operate the business)
Company secretariat
Computer and other EDP services
Organization and Methods
Sales Office
Purchasing Office
Wages
Stock and Stores Control
Production offices ( Planning and Control, Drawing Office, Progress)
General office services
Many large organizations have a central administration office/ department which is
responsible for controlling paperwork and supporting other departments with facilities
such as filing, mail, word processing and data handling.
It is common practice for an administration department to appoint an office manager
with the responsibility for coordinating office services and offering expert advice to
departmental managers
The work of an office manager might include organizing clerical training, advising
departments on layout, equipment and practices, coordinating the supply of equipment
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and stationery, standardizing office practices and setting up an effective
communications system within the organization – such as mailing or phone systems.
Management theory as a science identifies four broad functions that characterize all
administrative activity:
Planning – deciding what provisions need to be made available in the future.
Organizing – making sure that all resources are available at the right moment.
Controlling – making sure that things happen as they were planned.
Doing – becoming actively involved in the task in hand.
It is possible to relate each of these four functions to a specific level of management
responsibility. Senior managers tend to spend a lot of their time planning, some time
organizing, and a lot of their time controlling but very little time actually involved in
the tasks. Middle managers spend less time planning, more time organizing, more
time controlling and more time doing the work. First-line or lower managers
contribute little to planning, are involved in some organization and some control, but
spend most of their time actively involved in the task at hand.
Administration is not just about people being well organized. It is also about the
setting up of a system which ensures that events function as planned. The system
should include the tangible ‘mechanics’ of the operating environment which enables
an organization to carry out its functions efficiently as well as the people themselves:
Organizing people + Organizing operating environment = Administrative system
One definition of administration is: That part of the management process concerned
with the institution and carrying out procedures by which the programme is laid down
and communicated, and the progress of activities is regulated and checked against
targets and plans.
Hence, as a management process, administration will involve the administrator taking
responsibility and using organizational skills and judgement to make decisions.
Another definition gives administration as: That branch of management which is
concerned with the services of obtaining, recording and analyzing information of
planning, and of communicating, by means of which the management of a business
safeguards its assets, promotes its affairs and achieves its objectives.
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Hence, administration is of great importance for the organization as a secondary
service which enables other departments to operate more efficiently. It is thus an
important component of management.
2.8 MANAGEMENT AND LEADERSHIP
Managers are appointed and they have legitimate power that allows them to reward
and punish. Their ability to influence is founded upon the formal authority inherent in
their positions. In contrast, leaders may either be appointed or emerge from within a
group. Leaders can influence others to perform beyond the actions dictated by formal
authority. It’s leaders in organizations who make things happen, hence the importance
of leadership.
Since no one yet has been able to demonstrate through research or logical argument
that leadership ability is a handicap to a manager, we can state that all managers
should ideally be leaders. However, not all leaders necessarily have the capabilities in
other managerial functions, and hence not all should hold managerial positions. The
fact that an individual can influence others does not tell whether he can also plan,
organize, and control.
Given (if only ideally) that all managers should be leaders, we will pursue the subject
from a managerial perspective. Therefore, leaders are those who are able to influence
others and who possess managerial authority.
What do effective leaders have in common apart from almost all being males?
According to Fortune magazine, the most effective CEOs have the following
leadership qualities:
1) Trust your subordinates
2) Develop a vision
3) Keep your cool
4) Encourage risk
5) Be an expert
6) Invite dissent
7) Simplify
There should be effective leadership for a specific business and for each part of it.
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The qualities of leadership have to be adapted to meet particular situations and cannot
be stereotyped to deal with all situations. Bearing this fact in mind it is possible to
establish a general pattern of the qualities required for leadership as follows:
High intelligence: This does not mean the same thing as superiority. A leader
should be bale to come down to the level necessary for the employees he is
leading.
Education – broad as well as technical: A leader should have a wide
knowledge of many fields as well as being master of his own speciality.
Acceptability: Some people are accepted as leaders without question while
others have difficulty in commanding the necessary respect. Much depends
upon the confidence felt in a leader.
Maturity: A leader should have the maturity necessary for acceptability,
coping with situations and making decisions. He should be emotionally stable
and unlikely to break down with the frustrations and responsibilities which
inevitably exist in a complex business.
Drive: This should be present in sufficient quantity to achieve both personal
and company objectives. But a leader must also be able to inspire and motivate
those under him. Firm discipline should be tempered with understanding or
workers will resist.
Management skills: A leader should be conversant with the techniques of
management, skilled in dealing with people and in the conditions necessary for
maximum production.
Loyalty: Loyalty to the business in which he is employed is an essential factor
in good leadership.
The term “leader” has been used to signify a manager at any level.
A general manager and a foreman are both leaders; the difference lies in the area
being managed and the related responsibilities. Hence a foreman may not be capable
of performing the work of general manager or vice versa.
2.9 APPROACHES TO THE STUDY OF MANAGEMENT
The 1980s saw a dramatic increase in the public’s interest in management.
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People in all walks of life have come to recognize the important role good
management plays in our society. You don’t have to be a student of management, for
instance, to recognize that Zambian organizations are under strong pressure to reduce
costs and increase quality in order to stay even with foreign competitors such as the
Japanese, Chinese, South Africans and others.
Thus, organizations that are well managed will sustain a loyal constituency, grow, and
prosper while those that are poorly managed will find their continued existence
threatened.
Management is a complex process that can be considered from a number of different
perspectives. For example, one can design prescriptive models - which is the
systematic approach designed to bring about optimum results.
An alternative conceptual framework is a systematic approach that concerns
understanding what is happening in reality and thinking about how things might be
improved. The emphasis is on learning by looking at what organizations actually do
and by examining the decisions that they make and carry out.
Prescriptive models are found quite frequently in business and management teaching.
Thus, there are models for rational decision making and there are economic models of
various market structures.
The reader with personal experience of organizations, management and change should
use this experience to complement the examples and cases described in textbooks.
Since there is no universal approach, an individual must establish what approaches are
likely to prove most effective in particular circumstances, and why. This learning
experience can be enhanced:
by evaluating the theoretical and conceptual contributions of various authors,
by considering practical examples of what has proved successful and
unsuccessful for organizations,
by examining these two aspects in combination to see which theories and
concepts best help an understanding of reality.
Students and managers build on their own experiences when they read about theories
and concepts and think about case-study examples. They should reflect upon these
experiences continually and seek to develop personal concepts that best explain for
them what happens in practice. Wherever appropriate they should experiment with,
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and test out, these concepts to establish how robust they are. This, of course,
constitutes added experience for further reflection as follows:
Experiences, theories and concepts generate awareness. This, with reflection,
improves understanding. Constant evaluation helps one to develop a personal
perspective of effective management. This process is enhanced by trying out ideas
which generate new experiences.
Therefore, students can learn to manage by integrating theory and practice and
observing role models (Fig. 1.5). Usually, though, full-time students get a lot of
theory and little practice. This is when simulated (simulated) and real experience
become important. If you are a serious management student, you will put your newly
acquired theories into practice wherever and whenever possible (for example, in
Experience Reflection Theory
Pragmatism and Experimentation
THEORY
ACQUIRING
THE ABILITY
TO MANAGE
PRACTICE
Definitions
Relevant facts
Concepts
Techniques
Guidelines
Source: Textbooks,
audiovisual
presentations, and
formal classroom
instruction
Systematic
integration of theory
and practice into
personally
meaningful and
useful ways of
managing.
Source: Self
Imitating managerial
role models
Source: Practicing
managers
Simulated
experience:
Participating in
instructor-aided
experiential
exercises, case
studies, and role-
playing
Source: Semi-
structured
classroom
experience
Real experience:
Actually managing
an organized
endeavour.
Source: Part-time
or full-time
employment as a
manager
Fig. 1.5: Acquiring the Ability to Manage by Merging Theory and Practice
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organized sports; positions of leadership in societies or clubs; and part-time and
summer jobs). What really matters is your personal integration of theory and practice.
CHAPTER 2: EVOLUTION OF MANAGEMENT THOUGHT
2.10 Introduction
The systematic study of management is relatively new. As an area of academic study,
management is essentially a product of the twentieth century. But the actual practice
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of management has been around for thousands of years. Nevertheless, we can safely
state that no single theory of management is universally accepted today. Instead there
are six different approaches to management: the universal process approach, the
operational approach, the behavioural approach, the systems approach, the
contingency approach and the attributes of excellence approach.
Understanding these general approaches to the theory and practice of management
can help you appreciate how management has evolved, where it is today, and where it
appears to be headed.
2.20 HENRI FAYOL AND ADMINISTRATIVE MANAGEMENT
The universal process approach is the oldest and one of the most popular approaches
to management thought. It is also known as the Universalist or functional approach.
According to this approach, the administration of all organizations, public or private,
large or small, requires the same rational process.
The Universalist approach is based on two main assumptions.
First, although the purpose of organizations may vary (e.g. business, government,
education or religion), a core management process remains the same across all
organizations.
Successful managers, therefore, are interchangeable among organizations of differing
purpose.
Second, the universal management process can be reduced to a set of separate
functions and related principles.
Early universal process writers emphasized the specialization of labour (who does
what), the chain of command (who reports to whom), and authority (who is ultimately
responsible for getting things done).
In 1916, at the age of 75, Henri Fayol published his now classic book Administration
Industrielle et Generale, though it did not become widely known outside France until
an English translation became available in 1949. Fayol was first an engineer and later
a successful administrator in a large French mining and metallurgical concern.
He believed that the manager’s job could be divided into the five functions or areas of
managerial responsibility – planning, organizing, command, coordination, and control
– that are essential to managerial success. His 14 universal principles of management
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were intended to show managers how to carry out their functional duties. Fayol’s
functions and principles have withstood the test of time because of their widespread
applicability. In spite of years of reformulation, rewording, expansion, and revision,
Fayol’s original management functions still can be found in nearly all management
texts.
Table 2.1: Fayol’s 14 Universal Principles of Management
1. Division of work. Specialization of labour is necessary for organizational
success.
2. Authority. The right to give orders must accompany responsibility.
3. Discipline. Obedience and respect help an organization run smoothly.
4. Unity of command. Each employee should receive orders from only one
superior.
5. Unity of direction. The efforts of everyone in the organization should be
coordinated and focused in the same direction.
6. Subordination of individual interests to the general interest. Resolving the
tug of war between personal and organizational interests in favour of the
organization is one of management’s greatest difficulties.
7. Remuneration. Employees should be paid fairly in accordance with their
contribution.
8. Centralization. The relationship between centralization and decentralization
is a matter of proportion; the optimum balance must be found for each
organization.
9. Scalar chain. Subordinates should observe the formal chain of command
unless expressly authorized by their respective superiors to communicate with
each other.
10. Order. Both material things and people should be in their proper places.
11. Equity. Fairness that results from a combination of kindliness and justice will
lead to devoted and loyal service.
12. Stability and tenure of personnel. People need time to learn their jobs.
13. Initiative. One of the greatest satisfactions is formulating and carrying out a
plan.
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14. Espirit de corps. Harmonious effort among individuals is the key to
organizational success.
Lessons From the Universal Process Approach: Fayol’s main contribution to
management thought was to show how the complex management process can be
separated into interdependent areas of responsibility, or functions.
Fayol’s contention that management is a continuous process beginning with planning
and ending with controlling also remains popular today. Contemporary adaptations of
Fayol’s functions offer students of management a useful framework for analyzing the
management process.
But this sort of rigid functional approach has been criticized for creating the
impression that the management process is more rational and orderly than it really is.
The functional approach is useful because it specifies what managers should do, but
the other approaches help explain why and how.
2.30 FREDERICK W. TAYLOR AND SCIENTIFIC MANAGEMENT
The term operational approach is a convenient description of the production-oriented
area of management dedicated to improving efficiency, cutting waste, and improving
quality. Since the turn of the 20th century, it has had a number of labels, including
scientific management, management science, operations research, production
management and operations management. Underlying this confusing evolution of
terms has been a consistent purpose: to make person-machine systems work as
efficiently as possible. Throughout its historical development, the operational
approach has been technically and quantitatively oriented.
Born in 1856, F. W. Taylor was the epitome of the self-made man. Because a
temporary problem with his eyes kept him from attending Harvard University, Taylor
went to work as a common labourer in a small Philadelphia machine shop.
In just four years he picked up the trades of pattern maker and machinist.
Later he went to work at a steel works where he quickly moved up through the ranks
while studying at night for a mechanical engineering degree.
23
As a manager, Taylor was appalled at industry’s unsystematic practices. He observed
little, if any, cooperation between the managers and the labourers. Inefficiency and
waste were rampant. Output restriction among groups of workers, which Taylor called
“systematic soldiering”, was widespread. Ill-equipped and inadequately trained
workers were typically left on their own to determine how to do their jobs. Hence, the
father of scientific management committed himself to the relentless pursuit of
“finding a better way”. Taylor sought nothing less than what he termed a “mental
revolution” in the practice of industrial management.
Scientific management is “that kind of management which conducts a business of
affairs by standards established by facts or truths gained through systematic
observation, experiment or reasoning.
Hence it is the development of performance standards on the basis of systematic
observation and experimentation.
While working in industry, Taylor started the scientific management movement in
four areas: standardization, time and task study, systematic selection and training, and
pay incentives.
Standardization. By closely studying metal-cutting operations, Taylor collected
extensive data on the optimum cutting-tool speeds and the rates at which stock should
be fed into the machines for each job. The resulting standards were then posted for
quick reference by the machine operators.
He also systematically catalogued and stored the expensive cutting tools that usually
were carelessly thrown aside when a job was completed. Operators could go to the
carefully arranged tool room, check out the right tool for the job at hand, and check it
back in when finished. Taylor’s approach caused productivity to jump and costs to
fall.
Time and Task Study. According to the traditional rule-of-thumb approach, there
was no “science of shovelling”.
But after thousands of observations and stopwatch recordings, Taylor detected a
serious flaw in the way various materials were being shovelled – each labourer
brought his own shovel to work. Taylor knew the company was losing, not saving,
money when a labourer used the same shovel for both heavy and light materials.
24
Taylor significantly increased productivity by having workers use specially sized and
shaped shovels provided by the company – large shovels for the lighter materials and
smaller ones for heavier work.
Systematic Selection and Training. Although primitive by modern standards,
Taylor’s experiments with pig iron handling clearly reveal the intent of this phase of
scientific management. Taylor observed that on the average, a pig iron handler moved
about 12 ½ tons in a 10-hour day of constant effort. After careful study, Taylor found
that if he selected the strongest men and instructed them in the proper techniques of
lifting and carrying the pigs of iron, he could get each man to load 47 tons in a 10-
hour day. Surprisingly, this nearly fourfold increase in output was achieved by having
the pig iron handlers spend only 43 percent of their time actually hauling iron.
The other 57 percent was spent either walking back empty-handed or sitting down.
Taylor reported that the labourers liked the new arrangement because they were less
fatigued and took home 60 percent more pay.
Pay Incentives. According to Taylor, “What the workmen want from their employers
beyond anything else is high wages.” This “economic man” assumption led Taylor to
believe that piece rates were important to improved productivity.
Under traditional piece-rate plans, an individual received a fixed amount of money for
each unit of output. Thus, the greater the output, the greater the pay.
In his determination to find a better way, Taylor attempted to improve the traditional
piece-rate scheme with his differential piece-rate plan. Taylor’s plan required that a
time study be carried out to determine the company’s idea of a fair day’s work. Two
piece rates were then put into effect. A low rate would be paid if the worker finished
the day below the company’s standard, and a high rate when the day’s output met or
exceeded the standard.
Lessons From the Operational Approach: Within the context of haphazard, turn-of-
the-century industrial practices, scientific management was indeed revolutionary.
Heading the list of its lasting contributions is a much-needed emphasis on promoting
production efficiency and combating waste.
Nevertheless, Taylor and the early scientific management proponents have been
roundly criticized for viewing workers as unidimensional economic beings interested
only in money. These critics fear that scientific management techniques have
dehumanized people by making them act like mindless machines but not all would
25
agree with this statement. Contributions by the quality advocates, who grew out of the
operational approach, are subject to less debate today.
Fig. 2.2: Taylor’s Differential Piece-Rate Plan. Taylor’s differential piece-rate plan
(Low rate: 5 cents per unit) / (High rate: 6 cents per unit).
An important post- World War II outgrowth of the operational approach is operations
management, which, like scientific management, also aims at promoting efficiency
through systematic observation and experimentation.
Operations management is defined as the process of transforming raw materials,
technology and human talent into useful goods and services.
Whereas scientific management was limited largely to hand labour and machine
shops, operations management specialists apply their expertise to all types of
production and service operations, such as the purchase and storage of materials,
energy use, product and service design, work flow, safety, quality control, and data
processing.
2.40 ELTON MAYO AND THE HUMAN RELATIONS SCHOOL
Like the other approaches to management, the behavioural approach has evolved
gradually over many years. Advocates of the behavioural approach to management
point out that people deserve to be the central focus of organized activity.
U 30
N
I 25
T
S 20
P
R 15
O
D 10
U
C 5
E
D 0
.25 .50 .75 1.00 1.25 1.50 2.00
Pay received (in dollars)
Low rate
Standard
High rate
Traditional piece-rate plan
(5 cents per unit)
26
They believe that successful management depends largely on a manager’s ability to
understand and work with people who have a variety of backgrounds, needs,
perceptions, and aspirations.
The progress of this humanistic approach from the human relations movement to
modern organizational behaviour has greatly influenced management theory and
practice.
The human relations movement was a concerted effort among theorists and
practitioners to make managers more sensitive to employee needs.
It came into being as a result of special circumstances that occurred during the first
half of the 20th century. It was supported by three very different historic influences:
(1) the threat of unionization, (2) the Hawthorne studies, and (3) the philosophy of
industrial humanism.
Threat of Unionization: From the late 1800s to the 1920s, American industry grew
by leaps and bounds at it attempted to satisfy the many demands of a rapidly growing
population. Cheap immigrant labour was readily available, and there was a seller’s
market for finished goods. Then came the Great Depression in the 1930s, and millions
stood in bread lines instead of pay lines. Many held business somehow responsible for
the depression, and public sympathy swung from management to labour.
Congress consequently began to pass prolabour legislation. When the Wagner Act of
1935 legalized union-management collective bargaining, management began
searching for ways to stem the tide of all-out unionization. Early human relations
theory proposed an enticing answer: satisfied employees would be less inclined to join
unions. Business managers subsequently began adopting morale-boosting human
relations techniques as a union-avoidance tactic.
The Hawthorne Studies: As the socio-political climate changed, a second
development in industry took place. Behavioural scientists from prestigious
universities began to conduct on-the-job behaviour studies. Instead of studying tools
and techniques in the scientific management tradition, they focused on people.
27
Practical behavioural research such as the famous Hawthorne studies stirred
management’s interest in the psychological and sociological dynamics of the
workplace.
The Hawthorne studies began in 1924 in a Western Electric plant near Chicago as a
small-scale scientific management study of the relationship between light intensity
and productivity. Curiously, the performance of a select group of employees tended to
improve no matter how the physical surroundings were manipulated. Even when the
lights were dimmed to moonlight intensity, productivity continued to climb! Scientific
management doctrine could not account for what was taking place, and so a team of
behavioural science researchers, headed by Elton Mayo, was brought in from Harvard
to conduct a more rigorous study.
By 1932, when the Hawthorne studies ended, more than 20,000 employees had
participated in one way or another. After extensive interviewing of the subjects, it
became clear to researchers that productivity was much less affected by changes in
work conditions than by the attitudes of the workers themselves. Specifically,
relationships between members of a work group and between workers and their
supervisors were found to be more significant.
Though the experiments and the theories that evolved from them are criticized today
for flawed methodology and statistical inaccuracies, the Hawthorne studies can be
credited with turning management theorists away from the simplistic “ economic
man” model to a more humanistic and realistic view, the “social man” model.
The Philosophy of Industrial Humanism: Although unionization prompted a search
for new management techniques and the Hawthorne studies demonstrated that people
were important to productivity, a philosophy of human relations was needed to
provide a convincing rationale for treating employees better. Elton Mayo, Mary
Parker Follett and Douglas McGregor, although from very different backgrounds,
offered just such a philosophy.
Mayo, inspired by what he had learned at Hawthorne, cautioned managers that
emotional factors were a more important determinant of productive efficiency than
28
were physical and logical factors. Claiming that employees create their own unofficial
yet powerful workplace culture complete with norms and sanctions, Mayo urged
managers to provide work that fostered personal and subjective satisfaction. He called
for a new social order designed to stimulate individual cooperation.
Organizational behaviour, a modern approach to management that attempts to
determine the causes of human work behaviour and translate the results into effective
management techniques, is an offshoot of the behavioural approach.
Lessons from the Behavioural Approach: Above all else, the behavioural approach
makes it clear to present and future managers that people are the key to productivity.
According to advocates of the behavioural approach, technology, work rules, and
standards do not guarantee good job performance. Instead, success depends on
motivated and skilled individuals who are committed to organizational objectives.
On the negative side, traditional human relations doctrine has been criticized as vague
and simplistic. According to these critics, relatively primitive on-the-job behavioural
research does not justify such broad conclusions.
But today, organizational behaviourists are trying to piece together the multiple
determinants of effective job performance in various work situations and across
cultures.
2.50 CHESTER I. BARNARD AND THE SYSTEMS APPROACH
A system is a collection of parts operating interdependently to achieve a common
purpose. Thus, the systems approach represents a marked departure from the past
since it requires a completely different style of thinking.
Theorists in the other approaches mentioned above studied management by taking
things apart. They assumed that the whole is equal to the sum of its parts and can be
explained in terms of its parts.
Systems theorists, in contrast, study management by putting things together and
assume that the whole is greater than the sum of its parts.
The difference is analytic (outside-in) thinking versus synthetic (inside-out) thinking;
by synthetic thinking we can gain understanding that we cannot obtain through
analysis, particularly of collective phenomena.
29
Systems theorists recommend synthetic thinking because management is not practiced
in a vacuum. Managers affect and are, in turn, affected by many organizational and
environmental variables.
The challenge presented by systems thinking to the field of management is to identify
all relevant parts of organized activity and to discover how they interact.
Chester Barnard established this new approach to management on the basis of his
experience as a top-level Bell Telephone manager. Rather than isolating specific
management functions and principles, he devised a more abstract systems approach.
He characterised all organizations as cooperative systems: A cooperative system is a
complex of physical, biological, personal, and social components which are in a
specific systematic relationship by reason of the cooperation of two or more persons
for at least one definite end.
According to Barnard, willingness to serve, common purpose, and communication are
the principal elements in an organization (or cooperative system). He felt that an
organization did not exist if these three elements were not present and working
interdependently. He viewed communication as an energizing force that bridges the
natural gap between the individual’s willingness to serve and the organization’s
common purpose.
Barnard’s systems perspective has encouraged management and organization theorists
to study organizations as complex and dynamic wholes instead of piece by piece.
Significantly, he was also a strong advocate of business ethics in his speeches and
writings. He opened some important doors in the evolution of management thought.
General Systems Theory:
This is an interdisciplinary area of study based on the assumption that everything is
part of a larger, interdependent arrangement. In order to understand an organized
whole we must know the parts and the relations between them. This interdisciplinary
perspective was eagerly adopted by Barnard’s followers because it categorized levels
of systems and distinguished between closed and open systems.
Levels of Systems: One of the more important recent steps has been the identification
of hierarchies of systems, ranging from very specific systems to general ones.
30
A hierarchy of systems relevant to management is the seven-level scheme of living
systems and each system is a subsystem of the one above it.
Closed Versus Open Systems: In addition to identifying hierarchies of systems,
general systems theorists have distinguished between closed and open systems.
A closed system is a self-sufficient entity, whereas an open system depends on the
surrounding environment for survival.
The key to classifying a system as relatively closed or relatively open is to determine
the amount of interaction between the system and its environment.
A battery-powered digital watch is a relatively closed system; after the battery is in
place, it runs without help from the outside environment.
The human body on the other hand is a highly open system because life depends on
the body’s ability to import oxygen and energy and to export waste. In other words,
the human body is highly dependent on the environment for survival.
Similarly, general system theorists say that all organizations are open systems because
organizational survival depends on interaction with the surrounding environment.
Lessons From the Systems Approach
Because of the systems approach, managers now have a greater appreciation for the
importance of seeing the whole picture.
System Level Practical Examples
Supranational General United Nations
National Zambia
Organizational CBU, Shoprite
Group Family, Work group
Organismic Human being
Organic Heart
Cellular Specific Blood cell
Fig. 2.4: Levels of Living Systems
31
Open-system thinking does not permit the manager to become preoccupied with one
aspect of organizational management while ignoring other internal and external
realities. The manager of a business, for instance, must consider resource availability,
technological developments, and market trends when producing and selling a product
or service.
Another positive aspect of the systems approach is how it tries to integrate various
management theories.
But some management scholars see systems thinking as long on intellectual appeal
and catchy terminology and short on verifiable facts and practical advice.
2.60 CONTEMPORARY MANAGEMENT THOUGHT:
a) The Contingency Approach
A comparatively new line of thinking among management theorists has been labelled
the contingency approach. Contingency management advocates are attempting to take
a step away from universally applicable principles of management and toward
situational appropriateness. The contingency approach is an effort to determine
through research which managerial practices and techniques are appropriate in
specific situations. Different situations require different managerial responses,
according to the contingency approach.
Generally, the term contingency refers to the choice of an alternative course of action.
In a management context, contingency has become synonymous with situational
management. This means the application of various management tools and techniques
must be appropriate to the particular situation because each situation presents to the
manager its own problems.
In real-life management, the success of any given technique is dictated by the
situation. For example, researchers have found that rigidly structured organizations
with many layers of management function best when environmental conditions are
relatively stable. Unstable surroundings dictate a more flexible and streamlined
organization that can adapt quickly to change.
Contingency Characteristics
32
Some management scholars are attracted to contingency thinking because it is a
workable compromise between the systems approach and a purely situational
perspective. This relationship is shown below.
Contingency advocates have tried to take advantage of common denominators without
getting trapped into simplistic generalization. Three characteristics of the contingency
approach are (1) an open-system perspective, (2) a practical research orientation, and
(3) a multivariate approach.
An Open-System Perspective: Open-system thinking is fundamental to the
contingency view. Contingency theorists are not satisfied with focusing on just the
internal workings of organizations. They see the need to understand how
organizational subsystems combine to interact with outside social, cultural, political,
and economic systems.
A Practical Research Orientation: Practical research is that which ultimately leads
to more effective on-the-job management. Contingency researchers attempt to
translate their findings into tools and situational refinements for more effective
management.
A Multivariate Approach: Multivariate analysis is a research technique used to
determine how a combination of variables interacts to cause a particular outcome.
For example, if an employee has a conscientious personality, the task is highly
challenging, and the individual is highly satisfied with her life and job, then analysis
might show that productivity could be expected to be high. Contingency management
theorists strive to carry out practical and relevant multivariate analyses.
Very general Very specific
Systems
view
Contingency
view Purely Situational
view
Everything is Relationships Every situation is
made up of between management totally unique.
systems with techniques and situations
common can be categorized.
Characteristics.
Fig. 2.5: The Contingency View: A Compromise
33
Lessons From The Contingency Approach
Although still not fully developed, the contingency approach is a helpful addition to
management thought because it emphasises situational appropriateness. People,
organizations, and problems are too complex to justify rigid adherence to universal
principles of management. In addition, contingency thinking is a practical extension
of the systems approach.
But contingency theory has been criticised for creating the impression that the
organization is a captive of its environment. If such were strictly the case, attempts to
manage the organization would be in vain. In actual fact, organizations are subject to
various combinations of environmental forces and management practices.
b) Peters and Waterman
Peters and Waterman, a pair of management consultants, wrote a book that took the
management world by storm. The book, entitled In Search of Excellence, attempted to
explain what makes America’s best-run companies successful. Peters and Waterman’s
approach to management was unconventional for three reasons.
First, they attacked conventional management theory and practice for being too
conservative, rationalistic, analytical, unemotional, inflexible, negative, and
preoccupied with bigness.
Second, they replaced conventional management terminology (such as planning,
management by objectives, and control) with catch phrases gleaned from successful
managers (for example, “Do it, fix it, and try it”and“management by wandering
around”).
Third, they made their key points with stories and anecdotes rather than with
objective, quantified data and facts.
All this added up to a challenge to take a fresh new look at management.
Peters and Waterman employed a combination of subjective and objective criteria to
identify 62 of the best-managed companies in the United States. But they noted as
follows: “Not all eight attributes were present or conspicuous to the same degree in all
of the excellent companies we studied. But in every case at least a preponderance of
the eight was clearly visible, quite distinctive.”
Table 2.4: Peters and Waterman’s Eight Attributes of Excellence
34
Attributes of Excellence Key Indicators
1. A Basis for Action Small-scale, easily managed experiments to build
knowledge, interest, and commitment.
Managers stay visible and personally involved in all
areas through active, informal communication and
spontaneous MBWA ( “ management by wandering
around”)
2. Close to the Customer Customer satisfaction is practically an obsession.
Input from customers is sought throughout the
design/production/marketing cycle.
3. Autonomy and
Entrepreneurship
Risk taking is encouraged; failure is tolerated.
Innovators are encouraged to “champion” their pet
projects to see them through to completion.
Flexible structure permits the formation of “skunk
works” (small teams of zealous innovators working on a
special project).
Lots of creative “swings” are encouraged to ensure some
“home runs” (successful products).
4. Productivity Through
People
Individuals are treated with respect and dignity.
Enthusiasm, trust, and a family feeling are fostered.
People are encouraged to have fun while getting
something meaningful accomplished.
Work units are kept small and humane.
5. Hands-on, Value-
Driven
A clear company philosophy is disseminated and
followed.
Personal values are discussed openly, not buried.
The organization’s belief system is reinforced through
frequently shared stories, myths and legends.
Leaders are positive role models, not “Do-as-I-say, not-
as-I-do” authority figures.
6. Stick to the Knitting Management sticks to the business it knows best.
Emphasis is on internal growth, not mergers.
7. Simple Form, Lean
Staff
Authority is decentralized as much as possible.
Headquarters staff are kept small; talent is pushed out to
the field.
8. Simultaneous Loose-
Tight Properties
Tight overall strategic and financial control is
counterbalanced by decentralized authority, autonomy,
and opportunities for creativity.
Certainly more than anything else, Peters and Waterman did a good job of reminding
managers to pay closer attention to basics such as customers, employees, and new
ideas. They also deserve credit for reminding managers of the importance of on-the-
job experimentation. All the planning in the world cannot teach the practical lessons
that one can learn by experimentally rearranging things and observing the results,
trying an improved approach, observing, and so on.
b) Peter Drucker
35
According to Drucker, a leading management scholar and consultant, two sets of
assumptions regarding the realities of management have been held by most scholars,
writers and practitioners:
One set of assumptions underlies the discipline of management:
Management is Business Management
There is – or there must be – ONE right organization structure.
There is – or there must be – ONE right way to manage people.
Another set of assumptions underlies the practice of management:
Technologies, markets and end-uses are given.
Management’s scope is legally defined.
Management is internally focused.
The economy as defined by national boundaries is the “ecology” of enterprise
and management.
But now all these assumptions have outlived their usefulness since they are now so far
removed from actual reality that they are becoming obstacles to the theory and
practice of management. It is now time to formulate the new assumptions that now
have to inform both the study and the practice of management.
That management is not business management is particularly important as the growth
sector of a developed society in the 21st century is most unlikely to be business.
In fact, business has not been the growth sector of the 20th century in developed
societies. A far smaller proportion of the working population in every developed
country is now engaged in economic activity, that is, in “business”, than it was a
hundred years ago.
The growth sectors in the 20th century in developed countries have been in
“nonbusiness”- in government, in the professions, in health care, in education.
And the growth sector in the 21st century is likely to be the nonprofit social sector.
The first conclusion that must underlie Management to make more productive both its
study and its practice is therefore: Management is the specific and distinguishing
organ of any and all organizations.
The pioneers of management a century ago were right: Organizational structure is
needed. The modern enterprise needs organization just as any biological organization
36
beyond the amoeba needs structure. But the pioneers were wrong in their assumption
that there is- or should be- one right organization. Just as there are a great number of
different structures for biological organizations, so there are a number of
organizations for the social organism that is the modern institution. Hence
management needs to learn to look for, to develop, to test: The organization that fits
the task.
In no other area are the basic traditional assumptions held as firmly as in respect to
people and their management. And in no other area are they so totally at odds with
reality and so totally counterproductive.
The assumption – “There is one right way to manage people, or at least there should
be”- underlies practically every book or paper on the management of people.
The productivity of the knowledge worker is likely to become the centre of the
management of people. This will require, above all, very different assumptions about
people in organizations and their work: One does not “manage” people. The task is to
lead people. And the goal is to make productive the specific strengths and knowledge
of each individual.
The assumptions about technology and end-users underlie the rise of modern business
and of the modern economy altogether. They go back to the very early days of the
Industrial Revolution. By now these assumptions have become untenable. The best
example is the pharmaceutical industry, which increasingly has come to depend on
technologies that are fundamentally different from the technologies on which the
pharmaceutical research lab is based: genetics, microbiology, molecular biology,
medical electronics, and so on. The same thing has happened in the automobile
industry, the steel industry and the paper industry, to name a few.
The new assumption now is: Management, in other words, will increasingly have to
be based on the assumption that neither technology nor end-use is a foundation for
management policy. They are limitations. The foundations have to be customer values
and customer decisions on the distribution of their disposable income. It is with those
that management policy and management strategy increasingly will have to start.
Management, both in theory and in practice, deals with the legal entity, the individual
enterprise. The scope of management is thus legally defined, and this has been – and
37
still is – the almost universal assumption. One reason for this assumption is the
traditional concept of management as being based on command and control.
Command and control are indeed legally defined but the CEO or overall boss of an
organization has no command and control authority beyond the legal confines of their
institution.
What is needed, therefore, is a redefinition of the scope of management. Management
has to encompass the entire (economic) process.
The new assumption on which management, both as a discipline and as a practice,
will increasingly have to base itself is that the scope of management is not legal.
It has to be operational. It has to embrace the entire process. It has to be focused on
results and performance across the entire economic chain.
It is still generally assumed in the discipline of management and still taken for granted
in the practice of management that the domestic economy, as defined by national
boundaries, is the ecology of enterprise and management – and of nonbusiness and of
businesses. This assumption underlies the traditional “multinational”: as long as it
produced outside its own national boundaries, it produced within the national
boundaries of another country.
In the traditional multinational, economic reality and political reality were congruent.
The country was the “business unit”. Management and national boundaries are no
longer congruent. The scope of management can no longer be politically defined and
national boundaries will continue to be important.
Thus the new assumption has to be: National boundaries are important primarily as
restraints. The practice of management – and by no means for businesses only – will
increasingly have to be defined operationally rather than politically.
All the traditional assumptions led to one conclusion: The inside of the organization is
the domain of management.
This assumption explains the otherwise totally incomprehensible distinction between
management and entrepreneurship. In actual practice this distinction makes no sense
whatever. An enterprise, whether a business or any other institution, that does not
innovate and does not engage in entrepreneurship will not survive long. But
management and entrepreneurship are only two different dimensions of the same task.
38
The new assumption – and the basis for the new paradigm on which management,
both as a discipline and as a practice has to be based – is therefore:
Management exists for the sake of the institution’s results.
It has to start with the intended results and has to organize the resources of the
institution to attain these results. It is the organ to make the institution, whether
business, church, university, hospital or a battered women’s shelter, capable of
producing results outside of itself.
A final new management paradigm is:
Management’s concern and responsibility are everything that affects the performance
of the institution and its results – whether inside or outside, whether under the
institution’s control or totally beyond it.
CHAPTER 3: MANAGEMENT PRINCIPLES AND FUNCTIONS
3.1 THE ORGANIZATIONAL CONTEXT: CORPORATE GOVERNANCE
One of a company’s major goals is to give its stockholders a good rate of return on
their investment. In most publicly held corporations, however, stockholders delegate
39
the job of controlling the company and selecting its strategies to corporate managers,
who become the agents of the stockholders.
As the agents of stockholders, managers should pursue strategies that maximize long-
run returns for stockholders. Although most managers are diligent about doing so, not
all act in this fashion. Failure to do so gives rise to the corporate governance problem,
wherein managers pursue strategies that are not in the interests of stockholders.
The Corporate Governance Problem
Why should managers want to pursue strategies other than those consistent with
maximizing stockholders’ returns? Like many people, managers are motivated by
desires for status, power, job security, and income. By virtue of their position within
the company, certain managers, such as the CEO, can use their authority and control
over corporate funds to satisfy these personal desires.
Examples include CEOs using their position to invest corporate funds in various perks
that enhance their status (e.g. executive jets, lavish offices, holiday trips) or award
themselves excessive pay increases.
A CEO might also engage in “empire building” by buying many new businesses in an
attempt to increase the size of the company through diversification.
Corporate Governance Mechanisms
Given that some managers put their own interests first, the problem facing
stockholders is how to govern the corporation so that managerial desires for on-the-
job consumption, excessive salaries, or empire-building diversification are held in
check.
There is also a need for mechanisms that allow stockholders to remove incompetent
or ineffective managers. A number of governance mechanisms allow stockholders to
exert some control over managers. They include the board of directors, stock-based
compensation schemes, corporate takeovers, and the exchange of equity for debt in a
leveraged buyout.
Board of Directors: Stockholders’ interests are looked after within a company by the
board of directors. Board members are directly elected by stockholders, and under
corporate law they represent the stockholders’ interests in the company. Thus the
board can be held legally accountable for the company’s actions. Its position at the
40
apex of decision making within the company allows the board to monitor corporate
strategy decisions and ensure that they are consistent with stockholders’ interests.
In addition, the board has the legal authority to hire, fire, and compensate corporate
employees, including, most importantly, the CEO.
The typical board of directors is composed of a mix of inside and outside directors.
Inside directors are senior employees of the company, such as the CEO. They are
required on the board because they have valuable information about the company’s
activities. Without such information the board cannot adequately perform its
monitoring function. But since insiders are full-time employees of the company, their
interests tend to be aligned with those of management. Hence, outside directors are
needed to bring objectivity to the monitoring and evaluation processes.
Outside directors are not full-time employees of the company, many of them being
full-time professional directors who hold positions on the boards of several
companies. The need to maintain a reputation as competent outside directors gives
them an incentive to perform their tasks as objectively and effectively as possible.
But inside directors may be able to dominate the outsiders on the board and use their
position within the management hierarchy to exercise control over what kind of
company-specific information the board receives. Consequently, insiders can present
information in a way that puts themselves in a favourable light.
In addition, insiders have the advantage of intimate knowledge of the company’s
operations. Because superior knowledge and control over information are sources of
power, insiders may be better positioned to influence boardroom decision making
than outsiders. The board may become the captive of insiders and merely rubber-
stamp management decisions, instead of guarding stockholders’ interests.
Today there are clear signs that many corporate boards are moving away from merely
rubber-stamping top-management’s decisions and are beginning to play a much more
active role in corporate governance.
Stock-Based Compensation: As another way to align the interests of managers with
stockholders, and thus solve the corporate governance problem, stockholders have
urged many companies to introduce stock-based compensation schemes for their
managers.
41
In addition to their regular salary, managers are given stock options in the company.
Stock options give managers the right to buy the company’s shares at a predetermined
price, which may often turn out to be less than the market price of the stock.
The idea behind stock options is to motivate managers to adopt strategies that increase
the share price of the company, for in doing so they will also increase the value of
their own stock options.
But critics argue that the schemes do not always have the desired effect, since stock
compensation plans can harm stockholders by diluting their interests and unjustifiably
rewarding management for improvements in stock prices.
Corporate Takeovers: If the board is loyal to management rather than to the
stockholders, or if the company has not adopted stock-based compensation schemes,
then a corporate governance problem may exist and managers may pursue strategies
that are inconsistent with maximizing stockholders’ wealth.
However, stockholders still have some residual power, for they can always sell their
shares. If they start doing so in large numbers, the price of the company’s shares will
decline. If the share price falls far enough, the company might be worth less on the
stock market than the book value of its assets, at which point it may become an
attractive acquisition target and runs the risk of being purchased by another enterprise,
against the wishes of the target company’s management. The risk of being acquired
by another company is known as the takeover constraint. The takeover constraint
limits the extent to which managers can pursue strategies and take actions that put
their own interests above those of stockholders. If they ignore stockholder interests
and the company is acquired, senior managers typically lose their independence and
probably their jobs as well.
Leveraged Buyouts: Whereas in a typical takeover attempt a raider buys enough
stock to gain control of a company, in a leveraged buyout (LBO) a company’s own
managers are often the buyers.
The management group undertaking an LBO raises cash by issuing bonds and then
uses that cash to buy the company’s stock. In effect, the company replaces its
stockholders with creditors (bondholders), transforming the corporation from a public
into a private entity.
42
However, often the same institutions that were major stockholders before an LBO are
major bondholders afterward. The difference is that as stockholders they were not
guaranteed a regular dividend payment from the company; as bondholders they have
such a guarantee. Although management does not have to pay out dividends to
stockholders, it must make regular debt payments to bondholders or face bankruptcy.
Thus, the debt used to finance an LBO helps limit the waste of free cash flow (cash
flow in excess of that required to fund all investment projects with positive net present
values when discounted at the relevant cost of capital) by compelling managers to pay
out excess cash to service debt rather than spend it on empire-building projects with
low or negative returns, excessive staff, indulgent perquisites, and other
organizational inefficiencies.
Hence, debt is a way of motivating managers to seek greater efficiencies; high debt
payments can force managers to slash unsound investment programs, reduce
overhead, and dispose of assets that are more valuable outside the company.
3.2 COMMUNICATION
One of the most difficult challenges for management is getting individuals to
understand and voluntarily pursue organizational objectives. Effective communication
is vital to meeting this challenge. Organizational communication takes in a great deal
of territory – virtually every management function and activity can be considered
communication in one way or another.
Thanks to modern technology, we can communicate more quickly and less
expensively. But complaints of information overload are common today.
Research has also shown that more communication is not necessarily better.
3.3 Planning
Planning is the process of coping with uncertainty by formulating future courses of
action to achieve specified results.
43
Planning enables humans to achieve great things by envisioning a pathway from
concept to reality. The greater the mission, the longer and more challenging the
pathway. Planning is a never-ending process because of constant change, uncertainty,
new competition, unexpected problems, and emerging opportunities. Because
planning affects all downstream management functions, it has been called the primary
management function.
3.3.1 Coping With Uncertainty
A key theme of modern life is that we are faced with a great deal of uncertainty.
Organizations, like individuals, are continually challenged to accomplish something
in spite of general uncertainty. Organizations meet this challenge largely through
planning.
There are three types of uncertainty: state uncertainty, effect uncertainty, and response
uncertainty.
State uncertainty occurs when the environment, or a portion of the environment, is
considered unpredictable. Examples are weather, traffic, conflicts, etc.
A manager’s attempt to predict the effects of specific environmental changes or
events on his organization involves effect uncertainty. Examples are the effects of
changes of those mentioned above.
Response uncertainty relates to being unable to predict the consequences of a
particular decision or organizational response.
Each of these three types of perceived uncertainty could affect an organization’s
attitude and performance. Similarly, managers are affected by their different
perceptions of environmental factors. Their degree of uncertainty may vary from one
type of uncertainty to another.
3.3.2 Organizational Responses to Uncertainty
Some organizations do a better job than others of planning amid various combinations
of uncertainty. Organizations cope with environmental uncertainty by adopting one of
four positions in relation to the environment in which they operate. These positions
are defenders, prospectors, analyzers and reactors, each with its own characteristic
impact on planning.
3.3.3 The Essentials of Planning
44
Planning is an ever-present feature of modern life, although there is no universal
approach. Virtually everyone is a planner, at least in the informal sense. We plan
leisure activities after school or work; we make career plans. Personal or informal
plans give purpose to our lives.
In a similar fashion, more formalized plans enable managers to mobilize their
intentions to accomplish organizational purposes.
A plan is a specific, documented intention consisting of an objective and an action
statement.
The objective portion is the end, and the action statement represents the means to that
end. Objectives give management targets to shoot at, whereas action statements
provide the arrows for hitting the targets.
Properly conceived plans tell what (end), when (time) and how (means) something is
to be done.
Despite the wide variety of formal planning systems, some essentials (common
denominators) of sound planning are organizational mission, types of planning,
objectives, priorities, and the planning/control cycle.
3.3.4 The Organizational Mission
Some organizations drift along without a clear mission while others lose sight of their
original mission. Periodically redefining an organization’s mission is both common
and necessary in an era of rapid change. A clear, formally written, and publicized
statement of an organization’s mission is the cornerstone of any planning system that
will effectively guide the organization through uncertain times.
A well-written mission statement does the following things:
(1) Defines your organization for key stakeholders.
(2) Creates an inspiring vision of what the organization can be and can do.
(3) Outlines how the vision is to be accomplished.
(4) Establishes key priorities.
(5) States a common goal and fosters a sense of togetherness.
(6) Creates a philosophical anchor for all organizational activities.
(7) Generates enthusiasm and a “can do” attitude.
(8) Empowers present and future organization members to believe that every
individual is the key to success.
A good mission statement provides a focal point for the entire planning process.
45
Table 3.3: Different Organizational Responses to an Uncertain Environment
Type of Organizational
Response
Characteristics of Response
1. Defenders Highly expert at producing and marketing a few products
in a narrowly defined market.
Opportunities beyond present market are not sought.
Few adjustments in technology, organization structure,
and methods of operation because of narrow focus.
Primary attention devoted to efficiency of current
operations.
2. Prospectors Primary attention devoted to searching for new market
opportunities.
Frequent development and testing of new products and
services.
Source of change and uncertainty for competitors.
Loss of efficiency because of continual product and
market innovation.
3. Analyzers Simultaneous operations in stable and changing product
market domains.
In relatively stable product/market domain, emphasis on
formalized structures and processes to achieve routine and
efficient operation.
In changing product/ market domain, emphasis on
detecting and copying competitors’ most promising ideas.
4. Reactors Frequently unable to respond quickly to perceived changes
in environment.
Make adjustments only when finally forced to do so by
environmental pressures.
Fig. 3.3: Planning – The Primary Management Function
46
3.3.5 Types of Planning
Ideally, planning begins at the top of the organizational pyramid and filters down.
The rationale for beginning at the top is the need for coordination. It is top
management’s job to state the organization’s mission, establish strategic priorities,
and draw up major policies. After these statements are in place, successive rounds of
strategic, intermediate, and operational planning can occur.
a) Strategic, Intermediate, and Operational Planning:
Strategic planning is the process of determining how to pursue the organization’s
long-term goals with the resources expected to be available.
A well-conceived strategic plan communicates much more than general intentions
about profit and growth. It specifies how the organization will achieve a competitive
advantage, with profit and growth as necessary by-products. This is done by top
management (chief executive officer, president, vice president, general managers,
division heads).
Plans Planning
Organizing Staffing Communicating Motivating
and Leading
Controlling
What, When and
How things should
be accomplished
in view of the
organization’s
capabilities and
environmental
uncertainties
Sets the stage for
all other
management
functions by
establishing
purpose and
direction
Filling jobs
with
appropriate
ly skilled
people
Making sure
individuals
understand and
carry out their
organizational
roles
Getting individuals
to pursue
collective
objectives through
satisfying needs
and expectations,
job redesign,
participation, and
influence
processes
Designing
flexible
authority and
responsibility
networks
Comparing
actual
performance
with prior
plans and
taking
necessary
corrective
action
47
Intermediate planning is the process of determining the contributions subunits can
make with allocated resources. This is done by middle management (functional
managers, product-line managers, department heads).
Operational planning is the process of determining how specific tasks can best be
accomplished on time with available resources. This is carried out by lower
management (unit managers, first-line supervisors).
Each level of planning is vital to an organization’s success and cannot effectively
stand alone without the support of the other two levels.
b) Planning Horizons:
Planning horizons vary for the three types of planning. Planning horizon is the time
that elapses between the formulation and the execution of a planned activity.
The planning horizon for strategic planning is 1 to 10 years; 6 months to 2 years for
intermediate planning; and, 1 week to 1 year for operational planning.
As the planning process evolves from strategic to operational, planning horizons
shorten and plans become increasingly specific (reduction in uncertainty).
Naturally, management can be more confident and hence more specific about the near
future than it can about the distant future.
The three planning horizons overlap, their boundaries being elastic rather than rigid.
The trend today is toward involving employees from all levels in the strategic
planning process. Also, it is not uncommon for top and lower managers to have a
hand in formulating intermediate plans. Middle managers often help lower managers
draw up operational plans as well.
c) Objectives
Objectives are targets that organizational members steer toward. Managers often use
the terms goals and objectives interchangeably.
A goal or an objective is defined as a specific commitment to achieve a measurable
result within a given time frame.
48
Many experts view objectives as the single most important feature of the planning
process. They help managers and entrepreneurs build a bridge between their dreams,
aspirations, and visions and an achievable reality.
d) The Importance of Objectives:
From the standpoint of planning, carefully prepared objectives benefit managers by
serving as targets and measuring sticks, fostering commitment, and enhancing
motivation.
Targets. Objectives provide managers with specific targets.
Without objectives, managers at all levels would find it difficult to make
coordinated decisions.
People quite naturally tend to pursue their own ends in the absence of
formal organizational objectives.
Measuring Sticks. Objectives are useful for measuring how well an
organizational subunit or individual has performed. When appraising
performance, managers need an established standard against which they can
measure performance. Concrete objectives enable managers to weigh
performance objectively on the basis of accomplishment rather than
subjectively on the basis of personality or prejudice.
Commitment. The very process of getting an employee to agree to pursue a
given objective gives that individual a personal stake in the success of the
enterprise. Thus objectives can be helpful in encouraging personal
commitment to collective ends. Without individual commitment, even well-
intentioned and carefully conceived strategies are doomed to failure.
Motivation. Good objectives represent a challenge – something to reach for.
As such, they have a motivational aspect. People usually feel good about
themselves and what they do when they successfully achieve a challenging
objective. Moreover, objectives give managers a rational basis for rewarding
performance. Employees who believe they will be equitably rewarded for
achieving a given objective will be motivated to perform well.
3.3.6 The Means-Ends Chain of Objectives:
49
Like the overall planning process, objective setting is a top-to-bottom proposition.
Top managers set broader objectives with longer time horizons than do successively
lower levels of managers.
In effect, this downward flow of objectives creates a means-end chain.
Working from bottom to top in Fig. 3.31 below, supervisory-level objectives provide
the means for achieving middle-level objectives (ends) that, in turn, provide the
means for achieving top-level objectives (ends).
3.3.7 Priorities
Defined as a ranking of goals, objectives or activities in order of importance, priorities
play a special role in planning.
By listing long-range organizational objectives in order of their priority, top
management prepares to make later decisions regarding the allocation of resources.
Limited time, talent, and financial and material resources need to be channelled
proportionately into more important endeavours and away from other areas.
Establishment of priorities is a key factor in managerial and organizational
effectiveness.
3.3.7.1 Prioritizing Techniques
There are basically three prioritizing methods which are available to managers:
i) The A-B-C Priority System:
Top Management
Example: Corporate
president
Objective: To increase
corporate sales to $250m
by end of year
Middle
Management Example: Product
manager
Objective: To increase market
share of a product by 5
percent by July 1
Lower Management
Example: Area field sales manager
Objective: To increase unit
sales of a product in Kitwe
by 100,000 units by April 1
Means
Means
End
End
Fig. 3.31: A Typical Means-Ends Chain of Objectives
50
Despite all the technological advances, establishing priorities remains a subjective
process affected by organizational politics and value conflicts. Although there is no
universally acceptable formula for carrying out this important function, the following
A-B-C priority system is helpful.
A: “Must do” objectives critical to successful performance. They may be the result of
special demands from higher levels of management or other external sources.
B: “Should do” objectives necessary for improved performance. They are generally
vital, but their achievement can be postponed if necessary.
C: “Nice to do” objectives desirable for improved performance, but not critical to
survival or improved performance. They can be eliminated or postponed to achieve
objectives of higher priority.
ii) The 80/20 Principle:
Another proven priority-setting tool is the 80/20 principle (or Pareto analysis).
The 80/20 principle asserts that a minority of causes, inputs or effort usually lead to a
majority of the results, outputs, or rewards.
The 80/20 formula is approximate, not literal.
iii) Avoiding the Busyness Trap:
These two simple yet effective tools for establishing priorities can help managers
avoid the so-called busyness trap.
In these fast-paced times, managers should not confuse being busy with being
effective and efficient. Results are what really count.
Activities and speed, without results, are an energy-sapping waste of time.
By slowing down a bit, having clear priorities, and taking a strategic view of daily
problems, busy managers can be successful and “get a life”.
3.3.8 The Planning/Control Cycle
To put the planning process in perspective, it is important to show how it is connected
with the control function. The figure below illustrates the cyclical relationship
between planning and control.
Planning gets things headed in the right direction, and control keeps them headed in
the right direction.
51
Basically, each of the three levels of planning is a two-step sequence followed by a
two-step control sequence.
The initial planning/control cycle begins when top management establishes strategic
plans. When those strategic plans are carried out, intermediate and operational plans
are formulated, thus setting in motion two more planning/control cycles.
As strategic, intermediate, and operational plans are carried out, the control function
begins. Corrective action is necessary when either the preliminary or the final results
deviate plans. For planned activities still in progress, the corrective action can get
things back on track before it is too late.
Deviations between final results and plans, on the other hand, are instructive feedback
for the improvement of future plans. The broken lines represent the important sort of
feedback that makes the planning/control cycle a dynamic and evolving process.
3.3.9 Planning Techniques
a) Project Planning and Management:
Project – based organizations are becoming the norm today. Why? Drawing-board-to-
market times are being honed to the minimum in today’s technology-driven world.
Typically, cross-functional teams of people with different technical skills are brought
together on a temporary basis to complete a specific project as swiftly as possible.
According to the project Management Institute, a project is a temporary endeavor
undertaken to achieve a particular aim.
A
Formulate plans
B Carry out plans
D Take corrective
actions
C Compare
preliminary and
final results with
plans
Improve
future
plans
Correct
deviations in
plans being
carried out
Planning Control
Fig. 3.32: The Basic Planning/ Control Cycle
52
Projects, like all other activities within the management domain, need to be
systematically planned and managed.
What sets project planning and management apart is the temporary nature of project,
as opposed to the typical ongoing or continuous activities in organizations.
When the job is done, project members disband and move on to other projects or
return to their usual work routines.
Project management is the usual thing on Hollywood movie sets and at construction
companies building homes, roads, and skyscrapers. But it is new to manufactures,
banks, insurance companies, hospitals, and government agencies.
Unfortunately, much of this Internet- age project management leaves a lot to be
desired, for example, consider the dismal track record for information technology (IT)
projects, typically involving conversion of an old computer system to new hardware,
software, and work methods.
Project managers face many difficult challenges.
First and foremost, they work out side the normal organization hierarchy or chain of
command because projects are ad hock and temporary. So they must rely on excellent
“people management skills” instead of giving orders. Those skills include, but are not
limited to communication motivation, leadership, conflict resolution, and
negotiations.
Because projects are deadline- driven, they carry added pressure. High visibility
increases the pressure.
Project planning deserves special attention because project managers have the
difficult job of being both intermediate/tactical and operational planners. They are
responsible for both the big picture and the little details of their project. A project that
is not well planned is a project doomed to failure.
b) The Project Life Cycle:
Every project, from developing a new breakfast cereal to staging a benefit rock
concert, has a predictable four-stage life cycle. The four stages are conceptualization,
planning, execution and termination. These stages typically involve varying periods of
time.
Sometimes the borders between stages blur. For example, project goal setting actually
begins in the conceptualization stage and often carries over to the planning stage.
53
During this stage project managers turn their attention to facilities and equipment,
personnel and task assignments, and scheduling. Work on the project begins in the
execution stage, and additional resources are acquired as needed.
Budget demands are highest during the execution stage because everything is in
motion.
In stage 4, termination involves the completed project being turned over to an end
user (e.g. a new breakfast cereal is turned over to manufacturing) and project
resources are phased out.
c) Project Management Software:
Making sure planned activities occur when and where appropriate and taking
corrective action when necessary can be an overwhelming job for the manager of a
complex project. Fortunately, a host of computer software programs can make the
task manageable.
The overriding attributes of good project management software packages are
flexibility and transparency (meaning quick and up-to-date status reports on all
important aspects of the project).
d) Project Management Guidelines:
Project managers need a working knowledge of basic planning concepts and tools.
Beyond that, they need to be aware of the following special planning demands of
projects.
Projects are schedule-driven and results-oriented.
By definition, projects are created to accomplish something specific by a
certain time. Project managers require a positive attitude about making lots of
quick decisions and doing things in a hurry. They tend to value results more
than process.
54
The big picture and the little details are of equal importance. Project managers
need to keep the overall project goal and deadline in mind when attending to
day-to-day problems and personnel issues. This is difficult because
distractions are constant.
Project planning is a necessity, not a luxury. Novice project managers tend to
get swept away by the pressure for results and fail to devote adequate time and
resources to project planning.
Project managers know the motivational power of a deadline. A challenging
(but not impossible) project deadline is the project manager’s most powerful
motivational tool. The final deadline serves as a focal point for all team and
individual goal setting.
“Big Picture”: Develop overall project goals, budget and schedule.
“Little Details”:
Acquire needed facilities and equipment
Acquire needed personnel and assign duties (goal setting)
Schedule and coordinate individual and team efforts
Project
Stages
Conceptualiza
tion Planning Execution Termination
Project
success
criteria
“Big Picture” “Little
details”
Both “little
details and big
picture”
Monitor
progress & take
corrective
action
Satisfy client’s
expectations.
Complete
project on time
& under budget.
Fig. 3. 33: The Project Life Cycle and Project Planning Activities
Amount of
financial,
human, and
material
resources
committed to
project
Project
planning
activities
Project control
activities
55
Both “Little Details and Big Picture”:
Turn project over to client
Identify new project opportunities
3.3.10 Graphic Planning/Scheduling/Control Tools
Management science specialists have introduced needed precision to the
planning/control cycle through graphics analysis. Three graphic tools for planning,
scheduling and controlling operations are flow charts, Gantt charts and PERT
networks. They can be found in project management software.
We are going to look at Flow Process Charts, Gantt Charts and PERT networks.
i) Sequencing with Flow Process Charts
Flow charts are a useful sequencing tool with broad applications.
Def.: Sequencing is simply arranging events in the order of their actual or desired
occurrence.
Flow charts have also been used extensively for identifying task components and by
TQM teams for work simplification (eliminating wasted steps and activities).
The chart consists of boxes and diamonds in addition to the start and stop ovals. Each
box contains a major event, and each diamond contains a yes-or-no decision.
Flow charts force people to consider all relevant links in a particular endeavour as
well as their proper sequence. This is an advantage because it encourages analytical
thinking.
But flow charts have two disadvantages. First, they do not indicate the time dimension
– that is, the varying amounts of time required to complete each step and make each
decision.
Second, the use of flow charts is not practical for complex endeavours in which
several activities take place at once.
ii) Scheduling with Gantt Charts
Scheduling is an important part of effective planning. When later parts depend on the
successful completion of earlier steps, schedules help managers determine when and
where resources are needed. Without schedules, inefficiency creeps in as equipment
56
and people stand idle. Also, like any type of plan or budget, schedules provide
management with a measuring stick for corrective action.
Def.: A Gantt chart is a graphical scheduling technique historically used in production
operations.
But now updated versions are widely used for planning and scheduling all sorts of
organizational activities. They are especially useful for large projects.
Filling in the timelines of completed activities makes it possible to assess actual
progress at a glance. Like flow charts, Gantt charts force managers to be analytical as
they reduce jobs or projects to separate steps. Moreover, Gantt charts improve on flow
charts by allowing the planner to specify the time to be spent on each activity.
A disadvantage Gantt charts share with flow charts is that overly complex endeavours
are cumbersome to chart.
iii) PERT Networks:
The more complex the project, the greater the need for reliable sequencing and
scheduling of key activities. Simultaneous sequencing and scheduling amounts to
programming. One of the most widely recognized programming tools used by
managers is a technique referred to as PERT – Program Evaluation and Review
Technique. This is a graphic sequencing and scheduling tool for large, complex and
nonroutine projects.
PERT Terminology: Because PERT has its own special language, four key terms
must be understood.
Event: A PERT event is a performance milestone representing the start or
finish of some activity.
Activity: A PERT activity represents work in process.
Activities are time-consuming jobs that begin and end with an event.
Time: PERT times are estimated times for the completion of PERT activities.
PERT times are weighted averages of three separate time estimates:
(1) Optimistic time (To) – the time an activity should take under the best of
conditions;
(2) Most likely time (Tm) – the time an activity should take under normal
conditions;
57
(3) Pessimistic time (Tp) – the time an activity should take under the worst
possible conditions.
The formula for calculating estimated PERT time (Te) is:
Te = To + 4Tm + Tp
6
Critical path: The critical path is the most time-consuming chain of activities
and events in a PERT network.
In other words, the longest path through a PERT network is critical because if
any of the activities along it are delayed, the entire project will be delayed
accordingly.
PERT in Action:
PERT networks are usually reserved for more complex projects with hundreds or even
thousands of activities.
PERT events are coded by circled letters, and PERT activities, shown by the arrows
connecting the PERT events, are coded by number.
A PERT time (Te) is calculated and recorded for each PERT activity.
By calculating which path will take the most time from beginning to end, you will see
that the critical path turns out to be A-B-C-F-G-H-I. This particular chain of activities
and events will require an estimated 21.75 workdays to complete. The overall
duration of the project is dictated by the critical path, and a delay in any of the
activities along this critical path will delay the entire project.
58
3.4 STRATEGIC MANAGEMENT
Strategic management drives the effort to succeed amid constant change, uncertainty,
and obstacles. Without the discipline of a strategic management orientation,
employees would tend to work at cross-purposes, with no unified direction. In fact, a
statistical analysis of 26 published studies documented the positive impact of strategic
planning on business performance.
There are three good reasons why staff specialists and managers at all levels need a
general understanding of strategic management.
First, in view of widespread criticism that managers tend to be short-sighted, a
strategic orientation encourages farsightedness.
Second, employees who think in strategic terms tend to understand better how top
management think and why they make the decisions they do.
Third, a broader understanding of strategic management relates to a recent planning
trend: greater teamwork and cooperation throughout the planning/control cycle are
A 1
2 5 8
3 6
4 7
9 10
B
C F
D
E
G H I
Te = 4 1/4
Te = 6
Te = 7 1/4
Te = 3
Te = 2
Te = 2
Te = 1
Te = 1
Te = 5 1/4 Te = 2 1/4
PERT Events
A. Receive contract
B. Begin construction
C. Receive parts
D. Bodies ready for testing
E. Frames ready for testing
F. Drive trains ready for
testing
G. Components ready for
assembly
H. Carts assembled
I. Carts ready for shipment
PERT Activities and Times
Activities To Tm Tp Te *
1. Prepare final design
2. Purchase parts
3. Fabricate bodies
4. Fabricate frames
5. Build drive trains
6. Test bodies
7. Test frames
8. Test drive trains
9. Assemble carts
10. Test carts
3
4
5
2 ½
1 ½
½
½
1
3
1
4
5
7 ½
3
2
1
1
1 ½
5
2
6
12
9
4
3
1 ½
1 ½
5
9
5
4 ¼
6
7 ¼
3
2
1
1
2
5 ¼
2 1/4
* Rounded to nearest ¼ workday
Task: Build 3 dozen customized golf carts for use by physically challenged adults
Fig. 3.34: A Sample PERT Network
59
eroding the traditional distinction between those who plan and those who implement
plans.
There is a clear trend away from the command, symbolic and rational modes of
strategy-making toward the transactive and generative modes. In other words, the
traditional idea of top-management strategists as commanders, coaches, or bosses is
giving way to a view of them as participative facilitators and sponsors.
In the traditional modes, people below the top level must be obedient, passive, and
reactive. In the transactive strategy-making mode, continuous improvement is the
order of the day, as middle- and lower-level managers and staff specialists actively
participate in the process. They go a step further, becoming risk-taking entrepreneurs,
in the generative mode.
Definition: Strategic management is the ongoing process of ensuring a competitively
superior fit between an organization and its changing environment.
In a manner of speaking, strategic management is management on a grand scale,
management of the “big picture.”
Accordingly, strategy has been defined as an integrated and externally oriented
perception of how the organization will achieve its mission.
The strategic management perspective is the product of a historical evolution and is
now understood to include budget control, long-range planning, and strategic
planning.
Thus, strategic management is made up of strategic planning, implementation and
control. The more encompassing strategic management concept is useful today
because it effectively merges strategic planning, implementation, and control.
Significantly, strategic management does not do away with earlier, more restricted
approaches but instead synthesizes and coordinates them all in a more systematic
fashion. Today’s competitive pressures necessitate a dynamic strategic management
process. Managers who adopt a strategic management perspective appreciate that
strategic plans are living documents. They require updating and fine-tuning as
conditions change; they also need to draw upon all available talent in the organization.
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Table 3.3: Five Different Strategy-Making Modes
Traditional Modes Modern Modes
Command Symbolic Rational Transactive Generative
Style Imperial.
Strategy
driven by
leader or
small top
team.
Cultural.
Strategy
driven by
mission and
vision of the
future.
Analytical.
Strategy
driven by
formal
structure
and
planning
systems.
Procedural.
Strategy
driven by
internal
process and
mutual
adjustment.
Organic.
Strategy
driven by
organizational
actors’
initiative.
Role of
Top
Manageme
nt
Commander.
Provide
direction.
Coach.
Motivate
and inspire.
Boss.
Evaluate
and control.
Facilitator.
Empower and
enable.
Sponsor.
Endorse and
support.
Role of
Organizatio
nal
Members
Soldier.
Obey orders.
Player.
Respond to
challenge.
Subordinate.
Follow the
system.
Participant.
Learn and
improve.
Entrepreneur.
Experiment
and take risks.
3.4.1 Porter’s Generic Competitive Strategies
This model of competitive strategies encompasses four generic strategies: cost
leadership, differentiation, cost focus and focused differentiation.
The model also combined two variables, competitive advantage and competitive
scope.
On the horizontal axis is competitive advantage, which can be achieved via low costs
or differentiation. A competitive advantage based on low costs, which means lower
prices, is self-explanatory.
Def.: Differentiation is the ability to provide unique and superior value to the buyer in
terms of product quality, special features, or after-sale service.
Differentiation helps explain why consumers willingly pay more for branded products
such as Mosi lager or Colgate toothpaste.
Competitive Advantage
Competitive
Scope
Lower cost Differentiation
Broad target
Narrow target
Cost leadership
Cost focus
Differentiation
Focused
differentiation
Fig. 3.31: Porter’s Generic Competitive Strategies
61
On the vertical axis is competitive scope: Is the firm’s target market broad or narrow?
IBM, which sells many types of computers all around the world, serves a very broad
market. A neighbourhood pizza parlour offering one type of food in a small
geographical area has a narrow target market.
Porter’s model helps managers think strategically: it enables them to see the big
picture as it affects the organization and its changing environment.
Cost Leadership Strategy:
Managers pursuing this strategy have an overriding concern for keeping costs, and
therefore prices, lower than those of competitors. Normally, this means extensive
production or service facilities with efficient economies of scale (low unit costs of
making products or delivering services). Productivity improvement is a high priority
for managers following the cost leadership strategy.
In manufacturing firms, the preoccupation with minimizing costs flows beyond
production into virtually all areas: purchasing, wages, overhead, R&D, advertising,
and selling. A relatively large market share is required to accommodate this high-
volume, low-profit margin strategy.
Differentiation Strategy:
For this strategy to succeed, a company’s product or service must be considered
unique by most of the customers in its industry. Advertising and promotion help the
product to stand out from the crowd. Specialized design (BMW automobiles), a
widely recognized brand (Coca-cola), leading-edge technology (Intel), or reliable
service (Caterpillar) also may serve to differentiate a product in the industry.
Because customers with brand loyalty will usually spend more for what they perceive
to be a superior product, the differentiation strategy can yield larger profit margins
than the low-cost strategy. When brand loyalty erodes, prices need to be lowered to
meet the competition. This step necessitates a switch to a cost leadership or a focus
strategy.
Cost Focus Strategy:
Organizations with a cost focus strategy attempt to gain a competitive edge in a
narrow (or regional) market by exerting strict control.
Focused Differentiation Strategy:
62
This generic strategy involves achieving a competitive edge by delivering a superior
product and/or service to a limited audience.
A contingency management approach is necessary for determining which of Porter’s
generic strategies is appropriate.
3.4.2 The Strategic Management Process
Strategic plans are formulated during an evolutionary process with identifiable steps.
In line with the three-level planning pyramid, the strategic management process is
broader and more general at the top and filters down to narrower and more specific
terms. The four major steps of the strategic management process are: (i) formulation
of a grand strategy, (ii) formulation of strategic plans, (iii) implementation of strategic
plans, and (iv) strategic control.
Corrective action based on evaluation and feedback takes place throughout the entire
strategic management process to keep things headed in the right direction.
I. Formulation of a Grand Strategy:
A clear statement of organizational mission serves as a focal point for the entire
planning process. Key stakeholders inside and outside the organization are given a
general idea of why the organization exists and where it is headed.
Working from the mission statement, top management formulates the organization’s
grand strategy, a general explanation of how the organization’s mission is to be
accomplished. Grand strategies are derived from a careful situational analysis of the
organization and its environment. A clear vision of where the organization is headed
and where it should be headed is the gateway to competitive advantage.
63
Situational Analysis:
A situational analysis is a technique for matching organizational strengths and
weaknesses with environmental opportunities and threats to determine the
organization’s right niche. Many strategists refer to this process as a SWOT
(Strengths, Weaknesses, Opportunities, Threats) analysis. Every organization should
be able to identify the purpose for which it is best suited. But this matching process is
very difficult as strategists are faced not with snapshots of the environment and the
organization but with a movie of rapidly changing events. The task is to find a match
between opportunities that are still unfolding and resources that are still being
acquired.
Forecasting techniques help managers cope with uncertainty about the future while
conducting situational analyses. Strategic planners, whether top managers, key
operating managers, or staff planning specialists, have many ways to scan the
environment for opportunities and threats. They can study telltale shifts in the
economy, recent innovations, growth and movement among competitors, market
trends, labour availability, and demographic shifts.
Unfortunately, not enough time is spent looking outside the organization evaluating
external factors – competition and markets – as compared to internal analysis –
budget, organizational factors, and human resources.
Formulation of
grand strategy
Formulation of
strategic plans
Implementation of
strategic plans
Strategic control
Corrective action
based on
evaluation and
feedback
Fig. 3.3.12: The Strategic Management Process
64
Capability Profile:
After scanning the external environment for opportunities and threats, management’s
attention turns inward to identifying the organization’s strengths and weaknesses.
This sub process is called a capability profile and the following are key capabilities
for today’s companies:
Quick response to market trends
Rapid product development
Rapid production and delivery
Continuous cost reduction
Continuous improvement of processes, human resources, and products.
Greater flexibility of operations
The Strategic Need for Speed:
Speed has become an important competitive advantage. Product life cycles are getting
shorter and shorter. Accordingly, the new strategic emphasis on speed involves more
than doing the same old things, only faster. It calls for rethinking and radically
redesigning the entire business cycle, a process called reengineering. The idea is to
have cross-functional teams develop a whole new – and better – production process,
one that does not let time-wasting mistakes occur in the first place.
II. Formulation of Strategic Plans
Here general intentions are translated into more concrete and measurable strategic
plans, policies, and budget allocations. This translation is the responsibility of top
The right niche
The markets the
organization is
uniquely qualified
to pursue
The organization’s
strengths and
weaknesses
Environmental
opportunities and
threats
Fig. 3.3.13: Determining Strategic Direction Through Situational (SWOT)
Analysis
65
management, though input from staff planning specialists and middle managers is
common.
Recall that a well-written plan consists of both an objective and an action statement.
Plans at all levels need to specify who, what, when, and how things are to be
accomplished and for how much. These are really “action plans” since they represent
the need to turn good intentions into action. Even though strategic plans may have a
time horizon of one or more years, they must meet the same criteria that shorter-run
intermediate and operational plans meet.
Strategic plans should do the following:
a) Develop clear, results-oriented objectives in measurable terms.
b) Identify the particular activities required to accomplish the objectives.
c) Assign specific responsibility and authority to the appropriate personnel.
d) Estimate times to accomplish activities and their appropriate sequencing.
e) Determine resources required to accomplish the activities.
f) Communicate and coordinate the above elements and complete the action
plan.
Specific strategic plans usually evolve over a period of months as top management
consults with key managers in all areas of the organization to gather their ideas and
recommendations and to win their commitment.
III. Strategic Implementation
The entire strategic management process is only as strong as these two traditionally
underemphasized areas.
Implementation of Strategic Plans:
Because strategic plans are too often shelved without adequate attention to
implementation, top managers need to do a better job of facilitating the
implementation process and building middle-manager commitment.
A Systematic Filtering-Down Process: Strategic plans require further translation
into successively lower-level plans. Top-management strategists can do some
groundwork to ensure that the filtering –down process occurs smoothly and
efficiently. Planners need answers to four questions, each tied to a different critical
organizational factor:
66
1) Organizational structure. Is the organizational structure compatible with the
planning process, with new managerial approaches, and with the strategy
itself?
2) People. Are people with the right skills and abilities available for key
assignments, or must attention be given to recruiting, training, management
development, and similar programs?
3) Culture. Is the collective viewpoint on “the right way to do things” compatible
with strategy, must it be modified to reflect a new perspective, or must top
management learn to manage around it?
4) Control systems. Is the necessary apparatus in place to support the
implementation of strategy and to permit top management to assess
performance in meeting strategic objectives?
Strategic plans that successfully address these four questions have a much greater
chance of helping the organization achieve its intended purpose than those that do not.
In addition, field research indicates the need to sell strategies to all affected parties.
New strategies represent change, and people tend to resist change for a variety of
reasons. The strategist thus faces a major selling job – trying to build and maintain
support among key constituencies for a plan that is freshly emerging.
Building Middle-Manager Commitment: Resistance among middle managers can
kill an otherwise excellent strategic management program. To protect their own self-
interests, managers frequently derail strategies. Participative management and
influence tactics can foster middle-management commitment.
IV. Strategic Control
Strategic plans, like our more informal daily plans, can go astray. But a formal control
system helps keep strategic plans on track. Software programs that synchronise and
track all contributors’ goals in real time are indispensable today. Importantly, strategic
control systems need to be carefully designed ahead of time, not merely tacked on as
an afterthought.
Before strategies are translated downward, planners should set up and test channels
for information on progress, problems, and strategic assumptions about the
environment or organization that have proved to be invalid. If a new strategy varies
67
significantly from past ones, new production, financial, or marketing reports will
probably have to be drafted and introduced.
The ultimate goal of a strategic control system is to detect and correct downstream
problems in order to keep strategies updated and on target, without stifling creativity
and innovation in the process. In high-performing companies there is no trade-off
between strategic control and creativity, both are delicately balanced.
Corrective Action Based on Evaluation and Feedback:
Corrective action makes the strategic management process a dynamic cycle.
A rule of thumb is that negative feedback should prompt corrective action at the step
immediately before. Should the problem turn out to be more deeply rooted, then the
next earlier step also may require corrective action. The key is to detect problems and
initiate corrective action, such as updating strategic assumptions, reformulating plans,
rewriting policies, making personnel changes, or modifying budget allocations, as
soon as possible. In the absence of prompt corrective action, problems can rapidly
worsen.
3.5 FORECASTING
Without the ability to obtain or develop reliable environmental forecasts, managerial
strategists have a minimal chance of successfully negotiating their way through the
strategic management process.
An important aspect of strategic management is anticipating what will happen.
Forecasts may be defined as predictions, or estimates of future events or conditions in
the environment in which the organization operates.
Forecasts may be little more than educated guesses or may be the result of highly
sophisticated statistical analyses. They vary in reliability. (Consider the track record
of television weather forecasts) They may be relatively short run –a few hours to a
year- or long run- five or more years.
A combination of factors determines a forecast’s relative sophistication, time horizon,
and reliability. These factors include the type of forecasts required, management’s
68
knowledge of forecasting techniques, and the money that management is willing to
invest.
i) Types of Forecasts
There are three types of forecasts: (I) event outcome forecasts, (2) event timing
forecasts and (3) time series forecasts.
Event outcome forecasts are used when strategists want to predict the outcome of
highly probable future events.
For example: How will an impending strike affect output?
Event timing forecasts predict when, if ever, given events will occur.
Strategic questions in this area might include, “When will the prime interest rate begin
to fall?” or “When will our primary competitor introduce a certain product?”
Timing questions like these typically can be answered by identifying leading
indicators that historically have preceded the events in question.
Time series forecasts seek to estimate future values in a sequence of periodically
recorded statistics. A common example is the sales forecast for a business.
Sales forecasts need to be as accurate as possible because they impact decisions all
along the organizations supply chain’.
ii) Forecasting Techniques:
Modern managers may use one or a combination of four techniques to forecast future
outcomes, timing, and values. These techniques are informed judgement, scenario
analysis, surveys, and trend analysis.
Informed Judgement (Intuition): Limited time and money often force strategists to
rely on their own intuitive judgement when forecasting. Judgemental forecasts are
both fast and inexpensive, but their accuracy depends greatly on how well informed
the strategist is. Frequent visits with employees – e.g. in sales, purchasing, and public
relations – who regularly tap outside sources of information are a good way of staying
informed. A broad reading program, refresher training through management
development programs, customized news clipping services (delivered by e-mail),
spreadsheet forecasting software, and a competitive intelligence-gathering operation
can help keep strategic decision makers up to date. But informed judgement generally
needs to be balanced with data from other forecasting techniques.
69
Scenario Analysis: This technique also relies on informed judgement, but it is more
systematic and disciplined than the former. Scenario analysis (also called scenario
planning) is the preparation and study of written descriptions of alternative but
equally likely future conditions. Scenarios are visions of what “could be “.
The two types of scenarios are longitudinal and cross-sectional.
Longitudinal scenarios describe how the present is expected to evolve into the future.
Cross-sectional scenarios, the most common type, simply describe possible future
situations at a given time (snapshots of the future).
Multiple forecasts are the cornerstone of scenario analysis. It is thus recommended to
develop two to four scenarios for narrowly defined topics. As the future unfolds, the
strategies accompanying the more realistic scenario would be followed.
The key to good scenario writing is to focus on the few readily identifiable but
unpredictable factors that will have the greatest impact on the topic in question.
Because scenarios look far into the future, typically five or more years, they need to
be written in general and rather imprecise terms.
Surveys: Surveys are a forecasting technique involving face-to-face or telephone
interviews and mailed, fax, or e-mail questionnaires. They can be used to pool expert
opinion or fathom consumer tastes, attitudes, and opinions. When carefully
constructed and properly administered to representative samples, surveys can give
management comprehensive and fresh information.
Trend Analysis: A trend analysis is the hypothetical extension of a past pattern of
events or time series into the future. An underlying assumption of trend analysis is
that past and present tendencies will continue into the future. If sufficient valid
historical data are readily available, trend analysis can, barring disruptive surprise
events, be a reasonably accurate, fast, and inexpensive strategic forecasting tool.
An unreliable or atypical database, however, can produce misleading trend
projections.
Each of these forecasting techniques has inherent limitations. Consequently,
strategists must cross-check one source of forecast information with one or more
additional sources.
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3.6 PROBLEM-SOLVING
3.6.1 Managerial Creativity
Nearly all managerial problem solving requires a healthy measure of creativity as
managers mentally take things apart, rearrange the pieces in new and potentially
productive configurations, and look beyond normal frameworks for new solutions.
What is Creativity?
Creativity is the reorganization of experience into new configurations. It is a function
of knowledge, imagination and evaluation. Three overlapping domains of creativity
are art, discovery and humour.
The combination and extension of seemingly insignificant day-to-day breakthroughs
lead to organizational progress. Entirely new businesses can spring from creative
discovery. Creative ideas can spring from unexpected places and unlikely people.
Today’s managers are challenged to create an organizational culture and climate
capable of surfacing the often hidden creative talents of every employee.
Some people naturally seem to be more creative than others but those who feel the
need can develop their creative capacity. Creative ability can be learned, in the sense
that our creative energies can be released from the constraints to creativity:
convention, lack of self-confidence and narrow thinking.
3.6.2 Creative Problem Solving
We are all problem solvers but not all of us are good problem solvers or
knowledgeable about solving problems systematically. Most daily problem solving is
done on a haphazard, intuitive basis.
Definition: Problem solving is the conscious process of bringing the actual situation
closer to the desired situation.
Managerial problem solving consists of a four-step sequence: (1) identifying the
problem, (2) generating alternative solutions, (3) selecting a solution, and (4)
implementing and evaluating the solution.
a) Identifying the Problem:
71
The most common problem-solving difficulty lies in the identification of problems.
Busy managers have a tendency to rush into generating and selecting alternative
solutions before they have actually isolated and understood the real problem.
b) What is a Problem? A problem is defined as the difference between an actual
state of affairs and a desired state of affairs.
Thus, a problem is the gap between where one is and where one wants to be.
Problem solving is meant to solve this gap. Managers need to define problems
according to the gaps between the actual and the desired situations. The challenge is
discovering a workable alternative for closing the gap between actual and desired
situations.
c) Stumbling Blocks for Problem Finders: There are three common stumbling
blocks for those attempting to identify problems:
1. Defining the problem according to a possible solution. One should be careful
not to rule out alternative solutions in the way one states a problem.
2. Focusing on narrow, low-priority areas. Successful managers are those who
can weed out relatively minor problems and reserve their attention for
problems that really make a difference. Formal organizational goals and
objectives provide a useful framework for determining the priority of various
problems.
3. Diagnosing problems in terms of their symptoms. As a short-run expedient,
treating symptoms rather than underlying causes may be appropriate. In the
longer run, however, symptoms tend to reappear and problems tend to get
worse. It is thus important to find the cause of the problem.
Causes are variables that, because of their presence in or absence from the
situation, are primarily responsible for the difference between the actual and
the desired conditions.
72
d) Pinpointing Causes with Fishbone Diagrams: Fishbone diagrams are a handy
way to track down causes of problems. They work especially well in group problem-
solving situations.
Construction of a fishbone diagram begins with a statement of the problem (the head
of the skeleton). On the bones growing out of the spine one lists possible causes of
problems, in order of possible occurrence.
The chart can help one see how various separate problem causes might interact.
It also shows how possible causes occur with respect to one another, over time,
helping start the problem-solving process.
e) Generating Alternative Solutions:
This is the creative step in problem solving but unfortunately creativity is often short-
changed. It takes time, patience, and practice to become a good generator of
alternative solutions: a flexible combination of analysis and intuition is helpful.
Several popular and useful techniques can stimulate individual and group creativity:
(i) Brainstorming. This is a group technique in which any and all ideas are
recorded, in a non-judgemental setting, for later critique and selection.
1. Identifying the problem
What is the actual
situation?
What is the desired
situation?
Cause
What is responsible for the difference
between actual and desired?
2. Generating alternative solutions
Objective and
analytical approach
Subjective and
intuitive approach
3. Selecting a solution
Is the solution
effective?
Is the solution
efficient?
4. Implementing and evaluating the solution
Are desired and actual now the same?
A = Recycle to Step 1 to redefine the problem and start over
B = Recycle to Step 2 for alternative solutions
Fig. 3.4: The Problem-Solving Process
A
B
73
(ii) Free association. Analogies and symbols are used to foster
unconventional thinking.
(iii) Edisonian. This involves trial-and-error experimentation.
(iv) Attribute listing. Ideal characteristics of a given object are collected and
then screened for useful insights.
(v) Scientific method. Systematic hypothesis testing, manipulation of
variables, situational controls, and careful measurement are used in this
rigorous approach.
(vi) Creative leap. This involves thinking up idealistic solutions to a problem
and then working back to a feasible solution.
f) Selecting a Solution:
Generally, alternative solutions should be screened for the most appealing balance of
effectiveness and efficiency in view of relevant constraints and intangibles. Thus,
problems can be resolved, solved or dissolved.
i. Resolving the problem: When a problem is resolved, a course of action that is
good enough to meet the minimum constraints is selected. The term satisfice has been
applied to the practice of settling for solutions that are good enough rather than the
best possible.
ii. Solving the Problem: A problem is solved when the best possible solution is
selected. Managers are said to optimize when through scientific observation and
quantitative measurement they systematically research alternative solutions and select
the one with the best combination of benefits.
iii. Dissolving the Problem: A problem is dissolved when the situation in which it
occurs is changed, so that the problem no longer exists. Problem dissolvers are said to
idealize because they actually change the nature of the system in which a problem
resides. Example: The introduction of robots has dissolved the problem of
absenteeism by replacing automobile assembly-line welders.
g) Implementing and Evaluating the Solution:
Until a particular solution has had time to prove its worth, the manager can rely only
on his judgement concerning its effectiveness and efficiency. Ideally, the solution
selected will completely eliminate the difference between the actual and the desired in
74
an efficient and timely manner. Should the gap fail to disappear, the two recycle loops
(A and B) in Fig. 3.43 should be utilized until a solution is found.
3.7 HUMAN RESOURCE MANAGEMENT
Staffing has long been an integral part of the management process. Like other
traditional management functions, the domain of staffing has grown throughout the
years. This growth reflects increasing environmental complexity and greater
organizational sophistication. Today, the traditional staffing function is just one part
of the more encompassing human resource management process.
Definition: Human resource management involves the acquisition, retention, and
development of human resources necessary for organizational success.
This broader definition underscores the point that people are valuable resources
requiring careful nurturing. In fact, what were once called personnel departments are
now called human resource departments. Progressive and successful organizations
treat all employees as valuable human resources. Fig. 3.5 reflects this strategic
orientation.
A logical sequence of human resource management activities – human resource
strategy, recruiting, selection, performance appraisal and training- all derive from
organizational strategy and structure. Without a strategic orientation, the management
of people becomes haphazardly inefficient and ineffective.
1. Recruitment and Selection
a) Recruiting for Diversity:
The ultimate goal of recruiting is to generate a pool of qualified applicants for new
and existing jobs. Everyday recruiting tactics include internal job postings, referrals
by present and past employees, campus recruiters, newspaper ads, Web sites, public
and private employment agencies, head-hunters, job fairs, temporary-help agencies,
and union halls.
But today’s recruiting is extremely challenging since applicant pools need to be
demographically representative of the population at large if diversity is to be
achieved.
75
b) The Selection Process:
Equal employment opportunity (EEO) legislation in the United States and elsewhere
attempts to ensure a fair and unprejudiced race for all job applicants. The first two
hurdles are résumé screening and reference checking; both are very important because
an estimated 40% of job applications include false information.
Background checks for criminal records and citizenship/immigration status are more
essential than ever in an age of workplace violence and international terrorism.
Other hurdles may include psychological tests, physical examinations, interviews,
work-sampling tests, and drug tests.
A respected author and trainer summarizes the overall employee selection process
with the acronym PROCEED, with each letter representing one of the seven steps
involved. This model encourages managers to take a systems perspective, all the way
from preparation to the final hiring decision.
Step 1 is where job analysis and job descriptions come into play.
Organizational
strategy and
structure
Human resource
strategy
Recruiting and
selection
Performance
appraisal
Training
Desired result: The
right number of
appropriately skilled
people in the right
jobs at the right
time.
Identifying and
solving human
resource problems
Fig. 3.5: A General Model for
Human Resource Management
76
Def.: Job analysis is the process of identifying basic task and skill requirements for
specific jobs by studying superior performers.
Def.: A job description is a concise document outlining the role expectations and skill
requirements for a specific job.
Up-to-date job descriptions foster discipline in selection and performance appraisal by
offering a formal measuring stick.
Table 3.5: The Employee Selection Process- The PROCEED Model
Step 1: PREPARE
o Identify existing superior performers
o Create a job description for the position
o Identify the competencies or skills needed to do the job
o Draft interview questions
Step 2: REVIEW
o Review questions for legality and fairness
Step 3: ORGANIZE
o Select your interview team and your method of interviewing
o Assign roles to your team and divide the questions
Step 4: CONDUCT
o Gather data from the job candidate
Step 5: EVALUATE
o Determine the match between the candidate and the job
Step 6: EXCHANGE
o Share data in a discussion meeting
Step 7: DECIDE
o Make the final decision
c) Equal Employment Opportunity (EEO):
EEO law now provides a broad umbrella of employment protection for certain
categories of disadvantaged individuals. The result of this legislation has been that in
virtually all aspects of employment, it is unlawful to discriminate on the basis of race,
colour, sex, religion, age, national origin, etc. This means managers cannot lay off or
discharge, refuse to hire, promote, train, or transfer employees simply on the basis of
77
the characteristics listed above. Selection and all other personnel decisions must be
made solely on the basis of objective criteria such as ability to perform or seniority.
Lawsuits and fines by agencies such as the EEO Commission are powerful incentives
to comply with EEO laws.
d) Employment Selection Tests:
The definition of an employment selection test has been broadened to include any
procedure used as a basis for an employment decision. Thus, in addition to traditional
pencil-and paper tests, numerous other procedures qualify as tests, such as unscored
application forms; informal and formal interviews; performance tests; and physical,
educational, or experience requirements. Historically, women and minorities have
been victimized by invalid, unreliable, and prejudicial employment selection
procedures. Similar complaints have been voiced about the use of personality tests,
polygraphs (lie detectors), drug tests, and AIDS and DNA screening during the hiring
process.
e) Effective Interviewing:
Interviewing is the most common employee selection tool. Line managers at all levels
are often asked to interview candidates for job openings and promotions and should
be aware of the weaknesses of the traditional unstructured interview.
The traditional unstructured or informal interview, which has no fixed question format
or systematic scoring procedure, has been criticized for being highly subjective and
unreliable. For example, these interviews are notorious for being culturally
insensitive.
f) Structured Interviews: Structured interviews are the recommended alternative to
traditional unstructured or informal interviews.
Def.: A structured interview is a set of job-related questions with standardized
answers applied consistently across all interviews for a specific job.
Structured interviews are constructed, conducted, and scored by a committee of three
to six members to try to eliminate individual bias. The systematic format and scoring
of structured interviews eliminate the weaknesses inherent in unstructured interviews.
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Four questions typically characterize structured interviews: (1) situational (handling
difficult situations), (2) job knowledge (possession of required knowledge), (3) job
sample simulation (doing essential aspects of the job), and (4) worker requirements
(coping with job demands).
g) Behavioural Interviewing: Behavioural scientists believe that past behaviour is
the best predictor of future behaviour. We are, after all, creatures of habit. Situational-
type interview questions can be greatly strengthened by anchoring them to actual past
behaviour (as opposed to hypothetical situations).
Structured, job-related, behaviourally specific interview questions keep managers
from running afoul of the problems associated with unstructured interviews. If the
questions are worded appropriately, the net result should be a good grasp of the
individual’s relevant skills, initiative, problem-solving ability, and ability to recover
from setbacks and learn from mistakes.
2. Performance Appraisal
Annual performance appraisals are a common part of modern organizational life.
But both appraisers and subjects tend to express general dissatisfaction with
performance appraisals.
Def.: Performance appraisal is the process of evaluating individual job performance as
a basis for making objective personnel decisions.
Formally documented appraisals are needed both to ensure equitable distribution of
opportunities and rewards and to avoid prejudicial treatment of protected minorities.
Two important aspects of performance appraisal are legal defensibility and alternative
techniques.
a) Making Performance Appraisals Legally Defensible:
Lawsuits challenging the legality of specific performance appraisal systems and
resulting personnel actions have left scores of human resource managers questioning
the legality of their organizations’ performance appraisal systems. Managers need
specific criteria for legally defensible performance appraisal systems. Employers can
successfully defend their appraisal systems if they satisfied four criteria:
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A job analysis was used to develop the performance appraisal system.
The appraisal system was behaviour-oriented, not trait-oriented.
Performance evaluators followed specific written instructions when conducting
appraisals.
Evaluators reviewed the results of the appraisals with the ratees.
Each of these conditions has a clear legal rationale. Job analysis anchors the appraisal
process to specific job duties, not to personalities. Behaviour-oriented appraisals
properly focus management’s attention on how the individual actually performed her
job. Performance appraisers who follow specific written instructions are less likely to
be plagued by vague performance standards and/or personal bias.
Finally, by reviewing performance appraisal results with those who have been
evaluated, managers provide the feedback necessary for learning and improvement.
b) Alternative Performance Appraisal Techniques:
Goal setting. Within an MBO framework, performance is typically evaluated
in terms of formal objectives set at an earlier date. This is a comparatively
strong technique if desired outcomes are clearly linked to specific behaviour.
Written essays. Managers describe the performance of employees in narrative
form, sometimes in response to predetermined questions.
Critical incidents. Specific instances of inferior and superior performance are
documented by the supervisor when they occur. Accumulated incidents then
provide an objective basis for evaluations at appraisal time.
Graphic rating scales. Various traits or behaviour are rated on incremental
scales. Behaviourally anchored rating scales (BARS), defined as performance
rating scales divided into increments of observable job behaviour determined
through job analysis, are one of the strongest performance appraisal
techniques.
Weighted checklists. Evaluators check appropriate adjectives or behavioural
descriptions that have predetermined weights that are unknown to the
evaluator. Following the evaluation, the weights of the checked items are
added or averaged to permit interpersonal comparisons.
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Rankings/ comparisons. Co-workers in a subunit are ranked or compared in
head-to-head fashion according to specified accomplishments or job
behaviour.
Multirater appraisals. This is a general label for a diverse array of non-
traditional appraisal techniques involving more than one rater for the focal
person’s performance.
3. Training
No matter how carefully job applicants are screened and selected, typically a gap
remains between what employees do know and what they should know. Training is
needed to fill in this knowledge gap.
Def.: Training is the process of changing employee behaviour and/or attitudes through
some type of guided experience.
a) Today’s Training: Content and Delivery:
Surprisingly, despite all we read and hear about computer-based training and e-
learning over the Internet, the vast bulk of today’s training is remarkably low-tech.
The old standbys – classroom presentations, workbooks/manuals, videotapes, and
seminars – are still the norm. Given variables such as interpersonal differences,
budget limitations, and instructor capabilities, it is safe to say that there is no one best
training techniq
Whatever method is used, trainers need to do their absolute best because they are key
facilitators for people’s hopes and dreams.
b) The Ingredients of a Good Training Program:
Every training program should be designed along the following lines to maximize
retention and transfer learning to the job:
Maximize the similarity between the training situation and the job situation.
Provide as much experience as possible with the task being taught.
Provide a variety of examples when teaching concepts or skills.
Label or identify important features of a task.
Make sure that general principles are understood before expecting much transfer.
Make sure that the trained behaviours and ideas are rewarded in the job situation.
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Design the training content so that the trainees can see its applicability.
Use adjunct questions to guide the trainee’s attention.
c) Skill versus Factual Learning:
The ingredients of a good training program vary according to whether skill learning or
factual learning is involved. Effective skill learning should incorporate four essential
ingredients: goal setting, modelling, practice, and feedback.
3.8 LEADERSHIP
Leadership is the social influence process of inspiring, influencing and guiding others
to participate in a common effort.
To encourage participation, leaders supplement any authority and power they possess
with their personal attributes, visions and social skills.
Definition: Leadership is the art of accomplishing more than the science of
management says is possible.
Effective leadership is associated with both better performance and more ethical
performance.
a) Types of Leadership
Formal Versus Informal Leaders:
Formal leadership is the process of influencing relevant others to pursue official
organizational objectives.
Informal leadership is the process of influencing others to pursue unofficial objectives
that may or may not serve the organization’s interests.
Formal leaders generally have a measure of legitimate power because of their formal
authority. Informal leaders typically lack formal authority.
Both types rely on expedient combinations of reward, coercive, referent and expert
power. Informal leaders who identify with the job to be done are a valuable asset to an
organization.
3.9 Organizing
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Definition: Organizing is the structuring of a coordinated system of authority
relationships and task responsibilities.
By spelling out who does what and who reports to whom, organizational structure can
translate strategy into an ongoing productive operation. Structure always follows
strategy in well-managed organizations. Tasks and interrelationships cannot be
realistically and systematically defined without regard for the enterprise’s overall
direction.
The modern open-system view, with its emphasis on organization-environment
interaction and learning organizations, has helped underscore the need for more
flexible organization structures. These more flexible organizations are adaptable to
sudden changes and are also interesting and challenging for employees.
Traditional principles of organization are severely bent or broken during the design of
flexible and adaptive organizations, and managers need new formulas for drawing up
these designs. The contingency approach permits the custom tailoring of
organizations to meet unique external and internal situational demands.
A. Contingency Design
The contingency approach to organizing involves taking special steps to make sure
the organization fits the demands of the situation. It is based on the assumption that
there is no single best way to structure an organization.
Def.: Contingency design is the process of determining the degree of environmental
uncertainty and adapting the organization and its subunits to the situation.
Managers who take a contingency approach select from a number of standard design
alternatives to create the most situationally effective organization possible. Each of
the following two somewhat different contingency models presents a scheme for
systematically matching structural characteristics with environmental demands.
i) The Burns and Stalker Model:
A useful typology for categorizing organizations by structural design has been
proposed. It distinguishes between mechanistic and organic organizations.
Def.: Mechanistic organizations tend to be rigid in design and have strong
bureaucratic qualities.
Organic organizations tend to be quite flexible in structure and adaptive to change.
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Mechanistic organizations exhibit precise task definition, low task flexibility, clear
definition of techniques, and high emphasis on obedience.
Actually, these two organizational types are the extreme ends of a single continuum
but pure types are difficult to find.
ii) Situational Appropriateness: Research has uncovered distinct organization-
environment patterns indicating the relative appropriateness of both mechanistic and
organic organizations. Successful organizations in relatively stable and certain
environments tended to be mechanistic. Relatively organic organizations tended to be
the successful ones when the environment was unstable and uncertain (high
environmental uncertainty).
Today, the trend necessarily is toward more organic organizations because uncertainty
is the rule. But a mechanistic structure is highly resistant to human error, technical
failures and attacks by hackers and terrorists.
Table 3.7: Mechanistic versus Organic Organizations
Characteristic Mechanistic
organizations
Organic organizations
1. Task definition for individual
contributors
Narrow and precise Broad and general
2. Relationship between individual
contribution and organization purpose
Vague Clear
3. Task flexibility Low High
4. Definition of rights, obligations, &
techniques
Clear Vague
5. Reliance on hierarchical control High Low (reliance on self-
control)
6. Primary direction of communication Vertical (top to
bottom)
Lateral (between peers)
7. Reliance on instructions and decisions
from superior
High Low (superior offers
information and
advice)
8. Emphasis on loyalty and obedience High Low
9. Type of knowledge required Narrow, technical &
task-specific
Broad and professional
iii) Woodward’s Study: This studied the relationship among technology, structure,
and organizational effectiveness. It focused on a single environmental variable rather
than on general environmental certainty-uncertainty.
When technological complexity was either low or high, Woodward found that
effective organizations tended to have organic structure.
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Mechanistic structure was associated with effectiveness when technological
complexity was moderate.
iv) The Lawrence and Lorsch Model: These two researchers documented the
relationship between two opposing structural forces and environmental complexity.
The opposing forces they isolated were labelled differentiation and integration.
Def.: Differentiation is the tendency among specialists to think and act in restricted
ways.
This structural force results from division of labour and technical specialization.
Differentiation tends to fragment and disperse the organization (pushing the
organization apart).
Def.: Integration, in opposition to differentiation, is the collaboration among
specialists that is needed to achieve a common purpose.
Integration can be partially achieved through a number of mechanisms, including
hierarchical control, standard policies and procedures, departmentalization, computer
networks, cross-functional teams and committees, better human relations, and liaison
individuals and groups. Integration is said to be a unifying and coordinating force
(pulling the organization together). Hence, integration is coordination.
Every organization requires an appropriate dynamic equilibrium (an open-system)
between differentiation and integration. From comparing successful and unsuccessful
firms in three industries, the study demonstrated that in the successful firms both
differentiation and integration increased as environmental complexity increased.
Organizational failure in the face of environmental complexity probably results from
a combination of high differentiation and inadequate integration. Under these
conditions, specialists in different areas within the organization work at cross-
purposes and get embroiled in counterproductive jurisdictional conflicts.
B. Basic Structural Formats
Because differentiation tends to fragment the organization, some sort of integration
must be introduced to achieve the necessary coordination. Aside from the hierarchical
chain of command, one of the most common forms of integration is
departmentalization. It is through departmentalization that related jobs, activities, or
processes are grouped into major organizational subunits. For example, all jobs
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involving staffing activities such as recruitment, hiring, and training are often grouped
into a human resources department.
Grouping jobs through the formation of departments permits coordination to be
handled in the least costly manner. A degree of coordination is achieved through
departmentalization because members of the department work on interrelated tasks,
obey the same departmental rules, and report to the same department head.
But managers commonly use labels such as division, group, or unit in large
organizations.
Five basic (ideal or pure) types of departmentalization are functional departments,
product-service departments, geographic location departments, customer classification
departments, and work flow process departments.
i) Functional Departments:
Functional departments categorize jobs according to the activity performed.
Functional departmentalization is popular because it permits those with similar
technical expertise to work in a coordinated subunit.
Fig. 3.7: Functional Structure
A negative aspect of functional departmentalization is that it creates “technical
ghettos”, in which local departmental concerns and loyalties tend to override strategic
organizational concerns.
ii) Product-Service Departments:
Because functional departmentalization has been criticized for encouraging
differentiation at the expense of integration, a somewhat more organic alternative has
CEO
Research and
Development
Sales and
Marketing
Manufacturing Materials
Management Engineering
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evolved. It is called product-service departmentalization because a product (or
service), rather than a functional category of work, is the unifying theme.
Fig. 3.71: Product-Service Departmentalization
The product service approach permits each of, say, two products to be managed as
semiautonomous businesses. Organizations rendering a service instead of turning out
a tangible product might find it advantageous to organize around service categories.
Ideally, those working in this sort of product-service structure have a broad
“business” orientation rather than a narrow functional perspective. It is the general
manager’s job to ensure that the mini-businesses work in a complementary fashion.
iii) Geographic Location Department:
Sometimes, as in the case of organizations with nationwide or worldwide markets,
geography dictates structural format. Geographic dispersion of resources (for
example, mining companies), facilities (for example, railroads), or customers (for
example, chain supermarkets) may encourage the use of a geographic format to put
administrators “closer to the action”. Long lines of communication among
organizational units have traditionally been a limiting factor with geographically
dispersed operations. But space-age telecommunications technology has created some
interesting regional advantages.
CEO
Production
Product X
department
Marketing
Product Y
department
Finance Finance Production Marketing
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Global competition is pressuring managers to organize along geographical lines.
This structure allows multinational companies to serve local markets better.
iv) Customer Classification Departments:
Fig. 3.73: Customer Classification Departmentalization
This structural format centres on various customer categories. The rationale is to
better serve the distinctly different needs of the sets of customers.
Customer classification departmentalization shares a weakness with the product-
service and geographic location approaches: all three can create costly duplication of
personnel and facilities. Functional design is the answer when duplication is a
problem.
Regional operations
Regio
nal
opera
tions
Regional operations
Regio
nal
opera
tions
Central operations
CEO
Individual stores
Fig. 3.72: Geographic Structure
CEO
Industrial Products
department
Home Products
department
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v) Work Flow Process Departments in Reengineered Organizations:
Reengineering involves starting with a clean sheet of paper and radically redesigning
the organization into cross-functional teams that speed up the entire business process.
Fig. 3.74: Work Flow Process Departmentalization (Reengineering)
The driving factors behind reengineering are lower costs, better quality, greater speed,
better use of modern information technology, and improved customer satisfaction.
Organizations with work flow process departments are called horizontal organizations
because emphasis is on the smooth and speedy horizontal flow of work between two
key points: (i) identifying customer needs and (ii) satisfying the customer.
This is a distinct outward focus, as opposed to the inward focus of functional
departments.
Each of the preceding design formats is presented in its pure form, but in actual
practice hybrid versions occur frequently.
C. Contingency Design Alternatives
Design alternatives include span of control, decentralization, line and staff, and matrix
design.
i) Span of Control: The number of people who report directly to a manager
represents that manager’s span of control.
Managers with a narrow span of control oversee the work of a few people, whereas
those with a wide span of control have many people reporting to them.
CEO
New product
development process
Product
development
teams
Order fulfilment process
Sales teams and customer
service teams
Customer and account
management process
Order processing teams
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Generally, narrow spans of control foster tall organizations (many levels in hierarchy)
while flat organizations (many levels in the hierarchy) have wide spans of control.
It stands to reason that an organization with narrow spans of control needs more
managers than one with wide spans. Ideally, the right span of control strikes an
efficient balance between too little and too much supervision, important
considerations in the era of lean organizations.
Research now has provided evidence that supports wider spans of control.
Combined with today’s emphasis on contingency organization design, this evidence
has made the question of an ideal span obsolete. Both overly narrow and overly wide
spans of control are counterproductive. Situational factors are a useful starting point
to striking a workable balance. Each organization must do its own on-the-job
experimentation since no ideal span of control exists for all kinds of work.
ii) Centralization and Decentralization:
Centralization is at one end of a continuum and at the other end is decentralization.
Def.: Centralization is the relative retention of decision-making authority by top
management.
Almost all decision-making authority is retained by top management in highly
centralized organizations.
Def.: Decentralization is the granting of decision-making authority by management to
lower-level employees.
Decentralization increases as the degree, importance and range of lower-level
decision making increases and the amount of checking up by top management
decreases.
When we speak of centralization or decentralization, we are describing a comparative
degree, not an absolute. The challenge for managers is to strike a workable balance
between two extremes. Extreme decentralization leads to lack of control but the
contingency approach dictates which end of the continuum needs to be emphasized.
Centralization, because of its mechanistic nature, generally works best for
organizations in relatively stable situations. A more organic, decentralized approach is
appropriate for firms in complex and changing conditions.
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iii) Decentralization Through Strategic Business Units: Strategic business units
are growing in their popularity, particularly among very large businesses attempting
to become more entrepreneurial.
Def.: A strategic business unit (SBU) is an organizational subunit that acts like an
independent business in all major respects, including the formulation of its own
strategic plans.
To qualify as a full-fledged SBU, an organizational unit must meet four criteria:
1. It must serve a specific market outside the parent organization, rather than
being simply an internal supplier.
2. It must face outside competitors.
3. It should be in a position of controlling its own destiny, especially through
strategic planning and new product development.
4. It should be a profit centre, with its effectiveness measured in terms of profit
and loss.
In addition to encouraging organizational units to take greater entrepreneurial risk,
SBUs can foster customer-centeredness.
D. Line and Staff Organizations:
Through the years, managers of large mechanistic organizations have struggled to
strike a balance between technical specialization and unity of command.
In a line and staff organization, a distinction is made between line positions, those in
the formal chain of command, and staff positions, those serving in an advisory
capacity outside the formal chain of command.
Line managers have the authority to make decisions and give orders to those lower in
the chain of command. In contrast, those who occupy staff positions merely advise
and support line managers. Staff authority is normally restricted to immediate
assistants.
Line and staff distinctions are a natural setting for conflict. Disagreement and conflict
are inevitable when two groups have different backgrounds, goals, and perspectives of
the organization. For instance, line managers tend to emphasize decisiveness and
deadlines, whereas staff members prefer to analyze problems systematically and
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thoroughly. The recent emphasis on internal service promises to reduce line-staff
conflict. Line managers are likely to expect staff organizations to treat them as
customers.
Functional authority is an organic design alternative that gives staff personnel
temporary, limited line authority for specified tasks. For example, the CEO’s personal
legal counsel may be given functional authority for negotiating a new union contract
with factory personnel. This authority would override that of cooperating line
managers.
E. Matrix Organization:
Originally called project management, a matrix organization is a structure where
vertical and horizontal lines of authority are combined in checkerboard (chess)
fashion. Authority flows both down and across the organization structure.
This is a more organic alternative that is suitable for projects since mechanistic
bureaucracies have not worked out well. In effect, the project managers borrow
specialists from the line managers and as such they only have limited (project-related)
authority over the specialists, who otherwise report to their lie managers.
The major advantage is increased coordination since the matrix format places a
project manager in a good position to coordinate the many interrelated aspects of a
particular project. Efficient use of resources, project integration, improved
information flow, flexibility and improved motivation and commitment are other
advantages.
The major disadvantage is that the matrix format flagrantly violates the traditional,
unity-of-command principle since the specialists will have two supervisors at the
same time.
The other disadvantages are power struggles, heightened conflict, slow reaction time,
monitoring and controlling difficulties, excessive overhead and experienced stress.
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Fig. 3.75: Matrix Organization Structure
3.10 CONTROLLING
Def.: As a management function, control is the process of taking the necessary
preventive or corrective actions to ensure that the organization’s mission and
objectives are accomplished as effectively and efficiently as possible.
Objectives are yardsticks against which actual performance can be measured.
If actual performance is consistent with the appropriate objective, things will proceed
as planned. If not, changes must be made. Successful managers detect (and even
anticipate) deviations from desirable standards and make appropriate adjustments.
The purpose of the control function is always the same: get the job done despite
environmental, organizational, and behavioural obstacles and uncertainties.
President
Functional
managers
Engineering Sales and
marketing
Finance R and
D
Purchasin
g
Project A
Project B
Project C
Project D
Proj
ect/
pro
duct
man
ager
s
for
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a) Types of Control:
Every open system processes inputs from the surrounding environment to produce a
unique set of outputs. Natural open systems, such as the human body, are kept in life-
sustaining balance through automatic feedback mechanisms.
In contrast, artificial open systems, such as organizations, do not have automatic
controls. Instead, they require constant monitoring and adjustment to control for
deviations from standards.
The three different types of control are feedforward, concurrent and feedback.
i. Feedforward Control:
Def.: Feedforward control is the active anticipation of problems and their timely
prevention, rather than after-the-fact reaction.
Planning and feedforward control are thus two related but different processes.
Preventive maintenance on machinery and equipment and due diligence qualify as
feedforward control.
ii. Concurrent Control:
Def.: Concurrent control involves monitoring and adjusting ongoing activities and
processes to ensure compliance with standards.
This type of control can be called real-time control because it deals with the present
rather than the future or past.
Feedforward control
Monitoring inputs
Anticipating &
preventing problems
Concurrent control
Monitoring processes
Adjusting ongoing
activities
Feedback control
Monitoring products
Learning from past
mistakes
Inputs Productive
processes and
activities
Outputs
Fig. 3.8: Three Types of Control
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iii. Feedback Control:
Def.: Feedback control is gathering information about a completed activity, evaluating
that information, and taking steps to improve similar activities in the future.
Feedback control permits managers to use information on past performance to bring
future performance in line with planned objectives and acceptable standards.
Because corrective action is taken after the fact, costs tend to pile up quickly, and
problems and deviations persist.
A successful manager must exercise all three types of control in today’s complex
organizations. Feedforward control helps managers avoid mistakes in the first place;
concurrent control enables them to catch mistakes as they are being made; feedback
control keeps them from repeating past mistakes.
b) Components of Organizational Control Systems:
The size and complexity of most productive organizations have made firsthand
control by a single person obsolete. Consequently, multilevel, multidimensional
organizational control systems have evolved.
Six distinct control subsystems have been identified:
(1) Strategic plans. Qualitative analyses of the company’s position within the
industry.
(2) Long-range plans. Typically, five-year financial projections.
(3) Annual operating budgets. Annual estimates of profit, expenses, and financial
indicators.
(4) Statistical reports. Quarterly, monthly, or weekly nonfinancial statistical
summaries of key indicators such as orders received and personnel surpluses
or shortages.
(5) Performance appraisals.
(6) Policies and procedures.
Complex organizational control systems like these help keep things on the right track
because they embrace three basic components, common to all organizational control
systems: objectives, standards, and an evaluation-reward system.
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Objectives: These are an indispensable part of any control system because they
provide measurable reference points for corrective action since they are targets
signifying what should be accomplished ad when.
Standards: Whereas objectives serve as measurable targets, standards serve as
guideposts on the way to reaching those targets. Standards provide feedforward
control by warning people when they are off the track.
A proven technique for establishing challenging standards is benchmarking:
identifying, studying, and imitating the best practices of market leaders.
An Evaluation-Reward System: A carefully conceived and clearly communicated
evaluation-reward scheme can shape favourable effort-reward expectancies, hence
motivating better performance. When integrated systematically, objectives, standards,
and an equitable evaluation-reward system constitute an invaluable control
mechanism.
3.11 DECISION MAKING
Definition: Decision making is the process of identifying and choosing alternative
courses of action in manner appropriate to the demands of the situation.
The act of choosing implies that alternative courses of action must be weighed and
weeded out. Amid lots of change and uncertainty, managers need to make important
decisions at a rapid pace, despite incomplete information. Reason and judgment are
required, thus judgement and discretion are fundamental to decision making.
3.11.1 Challenges for Decision Makers:
Though decision making has never been easy, it is especially challenging for today’s
managers. In an era of accelerating change, the pace of decision making also has
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accelerated. Additionally, today’s decision makers face a host of tough challenges
which include complex streams of decisions, uncertainty, information-processing
styles, and perceptual and behavioural decision traps.
a) Dealing with Complex Streams of Decisions: There is a recognition of
complexity in today’s decision-making contexts. The following eight intertwined
factors contribute to decision complexity:
1. Multiple Criteria. Typically, a decision today must satisfy a number of often
conflicting criteria representing the interests of different groups. Identifying
stakeholders and balancing their conflicting interests is a major challenge for
today’s decision makers.
2. Intangibles. Factors such as customer goodwill, employee morale, increased
bureaucracy, and aesthetic appeal, although difficult to measure, often
determine decision alternatives.
3. Risk and Uncertainty. Along with every decision alternative goes the chance
that it will fail in some way. Poor choices can prove costly yet the right
decision can open up whole new worlds of opportunity.
4. Long-term Implications. Major decisions generally have a ripple effect, with
today’s decisions creating the need for later rounds of decisions.
5. Interdisciplinary Input. Decision complexity is greatly increased when
technical specialists are consulted before making a decision. This also is a
time-consuming process.
6. Pooled Decision Making. Rarely is a single manager totally responsible for the
entire decision process. After pooled input, complex decisions wind their way
through the organization, with individuals and groups interpreting, modifying,
and sometimes resisting. Minor decisions set the stage for major decisions,
which in turn are translated back into local decisions. Typically, many
people’s fingerprints are on final decisions in the organizational world.
7. Value Judgements. As long as decisions are made by people with differing
backgrounds, perceptions, aspirations, and values, the decision-making
process will be marked by disagreement over what is right or wrong, good or
bad, and ethical or unethical.
8. Unintended Consequences. The law of unintended consequences states that
you cannot always predict the results of purposeful action. In other words,
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there can be a disconnect between intentions and actual results. Although
unintended consequences can be positive, negative ones are most troublesome
and have been called the Frankenstein monster effect. Hurried decision makers
typically give little or no consideration to the broader consequences of their
decisions. Unintended consequences cannot be eliminated altogether in
today’s complex world. Still, they can be moderated to some extent by giving
them creative and honest consideration when making important decisions.
b) Coping with Uncertainty:
Among the valuable contributions of decision theorists are classification schemes for
types and degrees of uncertainty. Unfortunately life is filled with varying degrees of
these types of uncertainties. Managers are continually asked to make the best
decisions they can, despite uncertainties about both present and future circumstances.
Managers who are able to asses the degrees of certainty in a situation - whether
conditions are certain, risky, or uncertain- are able to make more effective decisions.
There is a negative correlation between uncertainty and the decision maker’s
confidence in a decision. In other words, the more uncertain a manager is about the
principal factors in a decision, the less confident he or she will be about the successful
outcome of that decision. They key, of course lies not in eliminating uncertainty,
which is impossible, but rather in leaning to work within an acceptable range of
uncertainty.
i. Certainty. A condition of certainty exists when there is no doubt about the factual
basis of a particular decision and its outcome can be predicted accurately. Much like
the economic concept of pure competition, the concept of certainty is useful mainly as
a theoretical anchor point for a continuum.
In a world filled with uncertainties, certainty is relative rather than absolute. For
example, the decision to order more to order more rivets for a manufacturing firm’s
fabrication department is based on the relative certainty that the current rate of use
will exhaust the river inventory on a specific date. But even in the case, uncertainties
about the possible misuse or theft of rivets creep in to reduce confidence.
Because nothing is truly certain, conditions of risk of risk and uncertainty are the
general rule for managers, not the exception.
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ii. Risk: A condition of risk is said to exist when a decision must be made on the basis
of incomplete but reliable factual information.
Reliable information, though incomplete, is still useful to managers coping with risk
because they can use it to calculate the probability that a given event will occur and
then to select a decision alternative with favourable odds.
The two basic types of probabilities are objective and subjective.
Objective probabilities are derived mathematically from reliable historical data,
whereas subjective probabilities are estimated from past experience or judgement.
Decision making based on probabilities is common in all areas of management today.
A number of inferential statistical techniques can help managers objectively cope with
risks.
iii. Uncertainty. A condition of uncertainty exists when little or no reliable factual
information is available.
Still, judgemental or subjective probabilities can be estimated. Decision confidence is
lowest when a condition of uncertainty prevails because decisions are then based on
educated guesses rather than on hard factual data.
c) Information-Processing Styles:
Thinking is one of those activities we engage in constantly. Within the context of
managerial decision making and problem solving, it is important that one’s thinking
does not get into an unproductive rut. The quality of our decisions is a direct
reflection of how we process information.
Two general information-processing styles have been identified: the thinking style
and the intuitive style. Both are needed during organizational problem solving
because they complement each other.
Managers who rely predominantly on the thinking style tend to be logical, precise,
and objective. They prefer routine assignments requiring attention to detail and
systematic implementation.
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Conversely, managers who are predominantly intuitive find comfort in rapidly
changing situations in which they can be creative and follow their hunches and
visions. Intuitive managers see things in complex patterns rather than as logically
ordered bits and pieces.
Of course, not everyone falls neatly into one of these two categories; many people
process information through a combination of the two styles.
Thus, managers approach decision making and problem solving in very different
ways, depending on their information-processing styles. Their approaches,
perceptions, and recommendations vary because their minds work differently.
In traditional pyramid work organizations, where the thinking style tends to prevail,
intuitive employees may be criticized for being imprecise and rocking the boat.
A concerted effort needs to be made to tap the creative skills of “intuitives” and the
implementation abilities of “thinkers”.
d) Avoiding Perceptual and Behavioural Decision Traps:
Behavioural scientists have identified some common human tendencies capable of
eroding the quality of decision making. Three well-documented ones are framing,
escalation, and overconfidence. Awareness and conscious avoidance of these traps
can give decision makers a competitive edge.
i. Framing Error: One’s judgement can be altered and shaped by how information is
presented or labelled. In other words, labels create frames of reference with the power
to bias our interpretations.
Framing error is the tendency to evaluate positively presented information favourably
and negatively presented information negatively.
Thos evaluations, in turn, influence one’s behaviour. Framing thus influences both
interpretations and intended behaviour.
In organizations, framing error can be used constructively or destructively.
Advertisers, for instance, take full advantage of this perceptual tendency when
attempting to sway consumers’ purchasing decisions. A leading brand of cat litter
boasts of being 99 percent dust free.
Meanwhile, a shampoo claims to be fortified with 1 percent natural protein.
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Thanks to framing error, we tend to perceive very little dust in the cat litter and a lot
of protein in the shampoo.
Managers who couch their proposals in favourable terms hope to benefit from framing
error.
On the negative side, prejudice and bigotry thrive on framing error. A male manager
who believes women can’t manage might frame interview results so that John looks
good and Mary looks bad.
ii. Escalation of Commitment: Why are people slow to write off bad investments?
Why do companies stick to unprofitable strategies? And why has the U.S. government
typically continued to fund over –budget and behind- schedule programs?
Escalation of commitment is a possible is a possible explanation for these diverse
situations.
Def.: Escalation of commitment is the tendency of individuals and organizations to
get locked into losing courses of action because quitting is personally and socially
difficult.
This decision making trap has been called the “throwing good money after bad”
dilemma. Those victimized by escalation of commitment are often heard talking about
“sunk costs” and “too much time and money invested to quit now.”
Within the context of management, psychological, social and organizational factors
conspires to encourage escalation of commitment
Reality checks, in the form of comparing actual progress with effectiveness and
efficiency standards, are the best way to keep escalation in check.
iii. Overconfidence. Overconfidence can expose managers to unreasonable risks.
Ironically, researchers have found a positive relationship between overconfidence and
task difficulty. In other words, the more difficult the task, the greater the tendency for
people to be overconfident.
Easier and more predictable situations foster confidence, but generally not unrealistic
overconfidence. People may be overconfident about one or more of the following:
accuracy of input data; individual, team, or organizational ability; and the probability
of success.
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There are various theoretical explanations but one likely reason is that overconfidence
is often necessary to generate the courage needed to tackle difficult situations.
As with the other decision traps, managerial awareness of this problem is the
important first step toward avoiding it. Careful analysis of situational factors, critical
thinking about decision alternatives, and honest input from stakeholders can help
managers avoid overconfidence.
3.11.2 Making Decisions
It stands to reason that if the degree of uncertainty varies from situation to
situation, there can be no single way to make decisions. A second variable with which
decision makers must cope is the number of times a particular decision is made.
Some decisions are made frequently, perhaps several times a day while others are
made infrequently or just once. Consequently, decision theorists have distinguished
between programmed and non-programmed decisions.
a) Making Programmed Decisions
Def.: Programmed decisions are those that are repetitive and routine.
Organizational Factors
Resistance to change (organizational inertia)
Organizational politics
Basic organizational
values Escalation of
Commitment
Social Factors
Fear of admitting a
mistake to others (face-
saving)
Cultural emphasis on
persistence
Psychological Factors
Desire not to lose
Chance to turn things
around
Desire to justify earlier
decisions
Fig. 3.9: Why Escalation of Commitment is so Common
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Examples include hiring decisions, billing decisions in a hospital, supply reorder
decisions in a purchasing department, consumer loan decisions in bank, and pricing
decisions in university bookstore. Managers tend to devise fixed procedures for
handling these everyday decisions. Most decisions made by the typical manager on
daily basis are of the programmed variety.
At the heart of the programmed decision procedure are decision rules.
Def.: A decision rule is a statement that identifies the situation in which a decision is
required and specifies how the decision will be made.
Behind decision rules is the idea that standard, recurring problems need to be solved
only once. Decision rules permit busy managers to make routine decisions quickly
without having to go through comprehensive problem solving over and over again.
Generally, decision rules should be stated in “if-then” terms.
Carefully conceived decision rules can streamline the decision-making process by
allowing lower-level managers to shoulder the responsibility for programmed
decisions and freeing higher-level managers for relatively more important, non-
programmed decisions, e.g. strategic decisions.
b) Making Non-Programmed Decisions
Def.: Non-programmed decisions are those made in complex, important, and non-
routine situations, often under new and largely unfamiliar circumstances.
This kind of decision is made much less frequently than are programmed decisions.
Examples include deciding whether to merge with another company, how to replace
an executive who died unexpectedly, whether a foreign branch should be opened, and
how to market an entirely new kind of product or service.
The non-programmed decision-making process becomes more sharply focused when
managers take the time to answer the following questions: What decision needs to be
made? When does it have to be made? Who will decide? Who will need to be
consulted prior to the making of the decision? Who will ratify or veto the decision?
Who will need to be informed of the decision?
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But there is no cut-and-dried method for handling the problem because it hasn’t arisen
before, or because its precise nature and structure are elusive or complex, or because
it is so important that it deserves a custom-tailored treatment. Non-programmed
decision making calls for creative problem solving. The four-step problem-solving
process helps managers make effective and efficient non-programmed decisions.
c) A General Decision-Making Model
Although different decision procedures are required for different situations, it is
possible to construct a general decision-making model. This is an idealized, logical,
and rational model of organizational decision making. Importantly, it describes how
decisions can be made, but it does not portray how managers actually make decisions.
In fact, on-the-job research found managers did not follow a rational and logical series
of steps when making decisions. But a rational descriptive model has instructional
value because it identifies key components of a complex process and also suggests a
better way of doing things.
The first step, scanning the situation, is important and answers the question “How do I
know a decision should be made?”
The occasions for decision have been said to originate in three distinct fields: (a) from
authoritative communications from superiors; (b) from cases referred for decision by
subordinates; (c) from cases originating in the initiative of the manager concerned.
In addition to signalling when a decision is required, scanning reveals the degree of
uncertainty and provides necessary information for pending decisions. When the need
for a decision has been established, the manager must determine whether the situation
is routine. If it is routine and there is an appropriate decision rule, the rule is applied.
But if it is a new situation demanding a non-programmed decision, comprehensive
problem solving begins. In either case, the results of the final decision need to be
monitored to see if any follow-up action is necessary.
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3.11.3 Group-Aided Decision Making: A Contingency Perspective
Decision making, like any other organizational activity, does not take place in a
vacuum.
Typically, decision making is a highly social activity with committees, study groups,
review panels, or project teams contributing in a variety of ways.
a) Group Involvement in Decisions:
Whether it is a traditional face-to-face committee meeting or a global e-meeting, at
least five aspects of the decision-making process can be assigned to groups:
(i) analyzing the problem; (ii) identifying components of the decision situation;
(iii) estimating components of the decision situation (e.g. determining probabilities,
feasibilities, time estimates, and payoffs); (iv) designing alternatives; and (v) choosing
an alternative.
But before bringing others into the decision process, managers need to be aware of the
problem of dispersed accountability.
i. The Problem of Dispersed Accountability in Groups:
Is a
decision
required? NO
O
YES
NO
YES
Is it a routine
decision?
Follow existing
programmed decision rule
Generate a non-
programmed decision
through problem solving
Monitor results
Fig. 3.9.2: A General Decision-Making Model
Scan internal and
external situation
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There is a critical difference between group-aided decision making and group
decision making. In the first instance, the group does everything except make the final
decision. In the second instance, the group actually makes the final decision.
Managers who choose the second route face a dilemma. Although a decision made by
a group will probably reflect the collective experience and wisdom of all those
involved, personal accountability is lost. Blame for a joint decision that fails is too
easily passed on to others. The traditional formula for resolving this problem is to
make sure that a given manager is personally accountable for a decision when the
responsibility for it has to be traced. Even when a group is asked to recommend a
decision, the responsibility for the final outcome remains with the manager in charge.
There are three situations in which individual accountability for a decision is
necessary: (a) the decision will have significant impact on the success or failure of the
unit or organization; (b) the decision has legal ramifications (such as possible
prosecution for price-fixing, antitrust or product safety violations); and (c) a
competitive reward is tied to a successful decision.
In less critical areas, the group itself may be responsible for making decisions.
The advantages of group-aided decision making and problem solving are: (i) Greater
pool of knowledge; (ii) Different perspectives; (iii) Greater comprehension ( from
varying viewpoints); (iv) Increased acceptance ( due to ownership); and (v) Training
ground (for less experienced participants).
The disadvantages are: (i) Social pressure to conform; (ii) Domination by a vocal few;
(iii) Logrolling (political wheeling and dealing); (iv) Goal displacement (shift to
secondary considerations); and (v) “Groupthink” (desire for unanimity).
ii. A Contingency Approach is Necessary:
Whether two or more heads are actually better than one depends on the nature of the
task, the ability of the contributors, and the form of interaction. One research has
come up with the following contributions: (1) groups tend to do quantitatively and
qualitatively better than the average individual; and (2) exceptional individuals tend to
outperform the group particularly when the task is complex and the group is made up
of relatively low-ability people.
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Consequently, busy managers need to delegate aspects of the decision-making process
according to the contingencies mentioned in (2) above.
3.12 KNOWLEDGE MANAGEMENT - A NEW TOOL FOR IMPROVING
THE QUALITY OF DECISIONS:
Def.: Knowledge management (KM) is a powerful and robust concept defined as the
development of tools, processes, systems, structures, and cultures explicitly to
improve the creation, sharing, and use of knowledge critical for decision-making.
KM is at the heart of learning organizations.
After all, decisions are only as good as the information on which they are based.
a) Two Types of Knowledge: The two types of knowledge are tacit knowledge and
explicit knowledge.
Def.: Tacit knowledge is personal, intuitive, and undocumented information about
how to skilfully perform tasks, solve problems, and make decisions.
People who are masters of their craft have tacit knowledge and more often than not
have difficulty explaining how they actually do things.
They simply “do” the task; they have a “feel” for the job; they know when they are in
the “zone”. It is shared through networking, peer coaching, feedback, imitation,
training and mentoring.
Def.: Explicit knowledge is readily sharable information because it is in verbal,
textual, visual, or numerical form.
It can be found in presentations and lectures, books and magazines, policy manuals,
technical specifications, training programs, databases, and software programs. It is
shared through supervision, feedback, networking, meetings, training, formal and
informal education, Internet and professional conferences.
In short, explicit knowledge is public, whereas tacit knowledge is private.
b) Improving the Flow of Knowledge- Key Dimensions of Knowledge
Management: Knowledge flows in four basic directions.
From tacit knowledge to explicit knowledge via broader sharing of tacit knowledge
(documentation, sharing of best practices, and team-building exercises), then the
individual internalizes the explicit knowledge through personal growth, development
and self-education, and finally turns it back into tacit knowledge.
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But flow number one – the flow of constructive tacit knowledge between co-workers
– is a top priority.
Organizational support is needed to help individuals feel comfortable about giving
and receiving useful task-related knowledge on demand.
According to KM advocates, it is important to know what you know, what you don’t
know, and know how to find what you need to know. The result: better and more
timely decisions.
CHAPTER 4: RECENT DEVELOPMENTS IN MANAGEMENT
4.4 TOTAL QUALITY MANAGEMENT
The Evolution of Product Quality: Thanks to various quality gurus, product/
service quality has become both a forethought and a driving force in effective
organizations of all kinds (industrial and non-industrial). The emphasis on quality has
evolved through four distinct stages since WWII – from “fix it in” to “inspect it in” to
“build it in” to “design it in”. The focus has shifted from reactively fixing product
defects to proactively working to prevent them and to satisfy the customer
completely. Today’s quality leaders strive to exceed, not just meet, the customer’s
expectations. A popular label for the build-it-in and design-it-in approaches to quality
is total quality management (TQM).
Total quality management is defined as creating an organizational culture
committed to the continuous improvement of skills, teamwork, processes, product and
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service quality and customer satisfaction.
Others refer to TQM as “continuous, customer-centred, and employee-driven”.
But the full definition given above is linked to organizational culture since successful
TQM is deeply embedded in almost every facet of an organization’s life. This is
because personal commitment to systematic continuous improvement needs to
become an everyday matter of “that’s just the way we do things here.”
Although unrealistic expectations have inevitably led to disappointment and the need
for a new quick fix to replace TQM, managers with realistic expectations about the
deep and long-term commitment necessary for successful TQM can make it work.
TQM can have a positive impact if managers understand and enact these four
principles of TQM:
1. Do It Right The First Time
2. Be Customer-Centred
3. Make Continuous Improvement a Way of Life
4. Build Teamwork and Empowerment
Do It Right The First Time
The trend in recent practice has been toward designing and building quality into the
product. This approach is much less costly than fixing or throwing away substandard
parts and finished products.
Generally, comprehensive training in TQM tools and statistical process control (SPC)
is essential if employees are to accept personal responsibility for quality
improvement.
Be Customer-Centred
Everyone has one or more customers in a TQM organization. They may be internal or
external customers. Internal customers are other members of the same organization
who rely on your work to get their job done.
Regarding external customers, TQM requires all employees who deal directly with
outsiders to be customer-centred. Being customer-centred means (1) anticipating the
customer’s needs, (2) listening to the customer, (3) learning how to satisfy the
customer, and (4) responding appropriately to the customer (customer
responsiveness).
Listening to the customer is a major stumbling for many companies.
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Vague requests to “be nice to the customer” are useless in TQM organizations.
Behaviour, not good intentions, is what really matters. Desirable behaviour needs to
be strengthened with positive reinforcement, according to behaviour modification.
Make Continuous Improvement a Way of Life
Kaizen, which means improving the overall system by constantly improving the little
details, is the Japanese word for “continuous improvement”.
TQM managers dedicated to kaizen are never totally happy with things. Kaizen
practitioners view quality as an endless journey, not a destination. They are always
experimenting, measuring, adjusting, and improving. Rather than naively assuming
that zero defects necessarily means perfection has been achieved, they search for
potential and actual trouble spots.
There are four general avenues for continuous improvement:
1. Improved and more consistent product and service quality.
2. Faster cycle times (in cycles ranging from product development to order
processing to payroll processing).
3. Greater flexibility (for example, faster response to changing customer
demands and new technology).
4. Lower costs and less waste (for example, eliminating needless steps, scrap,
rework, and non-value-adding activities).
These are not tradeoffs but have to be achieved concurrently. Greater quality, speed,
and flexibility have to be achieved at lower cost and with less waste. This is an “all
things are possible” approach to management which requires diligent effort and
creativity.
Build Teamwork and Empowerment
Since TQM is employee-driven, it empowers employees at all levels in order to tap
their full creativity, motivation and commitment. Empowerment occurs when
employees are adequately trained, provided with all relevant information and the best
tools, fully involved in key decisions, and fairly rewarded for results.
TQM advocates prefer to reorganize the typical hierarchy into teams of people from
different specialties.
Some of the ways to promote teamwork and employee involvement include
suggestion systems, quality control circles, self-managed teams, teamwork, cross-
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functional teams, and participative leadership. Each of these can be a valuable
component of TQM.
The Seven Basic TQM Process Improvement Tools
Continuous improvement of productive processes in factories, offices, stores,
hospitals, hotels and banks requires lots of measurement. Skilled TQM managers have
a large repertoire of graphical and statistical tools at their disposal. The seven most
common ones are:
Flow Charts ( a graphical representation of a sequence of activities and
decisions)
Cause-and-Effect Analysis using fishbone diagrams (help TQM teams
visualize important cause-and-effect relationships).
Pareto Analysis (constructing a bar chart by counting and tallying the number
of times significant quality problems occur).
Control Charts (used to monitor actual versus desired quality measurements
during repetitive operations).
Histograms (a bar chart showing whether repeated measurements of a given
quality characteristic conform to a standard bell-shaped curve).
Scatter Diagrams (used to plot the correlation between two variables).
Run Charts (track the frequency or amount of a given variable over time).
4.4 BENCHMARKING
A proven technique for establishing standards is benchmarking – that is, identifying,
studying, and imitating the best practices of market leaders.
The central idea in benchmarking is to be competitive by striving to be as good as or
better than the best in the business. The search for benchmarks is not restricted to
one’s own industry.
4.4 BUSINESS PROCESS RE-ENGINEERING
Strategic change is the movement of a company away from its present state toward
some desired future state to increase its competitive advantage.
There are three major kinds of strategic change which successful companies pursue:
reengineering, restructuring and innovation.
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One way of changing a company to allow it to operate more effectively is by using
business process reengineering – the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in critical, contemporary
measures of performance such as cost, quality, service and speed.
Strategic managers who use reengineering must completely rethink how their
organization goes about its business. Instead of focusing on a company’s functions,
strategic managers make business processes the focus of attention.
A business process is any activity (such as order processing, inventory control or
product design) that is vital to delivering goods and services to customers quickly or
that promotes high quality or low costs.
Business processes are not the responsibility of any one function but cut across
functions. Because reengineering focuses on business processes and not on functions,
an organization that reengineers always has to adopt a different approach to
organizing its activities.
Organizations that take up reengineering deliberately ignore the existing arrangement
of tasks, roles and work activities. They start the reengineering process with the
customer (not the product or service) and ask: How can we reorganize the way we do
our work, our business processes, to provide the best quality and the lowest-cost
goods and services to the customer?
Reengineering and TQM are highly interrelated and complementary. After
reengineering has taken place and the question, What is the best way to provide
customers with the goods or service they require? has been answered, TQM takes
over, with its focus on, How can we continue to improve and refine the new process
and find better ways of managing task and role relationships?
Successful companies examine both questions simultaneously and continuously
attempt to identify new and better processes for meeting the goals of increased
efficiency, quality, and customer responsiveness. Thus, they are always seeking to
improve their visions of their desired future state.
4.4 GLOBALIZATION
The globe is shrinking in almost every conceivable way. Networks of transportation,
communication, computers, music, and economics have tied the people of the world
together as never before. Companies are having to become global players just to
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survive, let alone prosper. Export and import figures are stunningly increasing while
business and job opportunities show little regard for international borders these days.
But on the negative side is the controversial practice of offshoring.
Def.: The outsourcing of jobs from developed countries to lower-wage countries.
Thanks to the broadband Internet, skilled jobs in hardware and software engineering,
architecture, tax return preparation, and medical diagnosis are being outsourced to
well-educated workers in India, China, the Philippines and Russia.
Hence, a good education and marketable skills are the best insurance against having
your job outsourced to a foreign country.
There is also some worry about giant global corporations eclipsing the economic and
political power of individual nations and their citizens. Indeed, half of the hundred
largest budgets in the world now belong to corporations, not nations.
Today’s model manager is one who is comfortable transacting business in multiple
languages and cultures.
CHAPTER 5: MANAGERIAL ACCOUNTABILITY AND AUTHORITY
5.1 AUTHORITY AND RESPONSIBILITY
5.1.1 Are Authority and Responsibility the Same Thing?
No. Authority should go hand in hand with responsibility, but the two are not the
same thing. Your responsibilities are those things you are held accountable for – such
as costs, on-time deliveries, and good housekeeping. Responsibilities are also spoken
of as your duties – such as checking time cards, investigating accidents, scheduling
employees, and keeping production records.
Authority is the power you need to carry out your responsibilities. A manager’s
authority includes the right to make decisions, to take action to control costs and
quality, and to exercise necessary discipline over the employees assigned to help carry
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out the responsibilities. One shouldn’t be given a responsibility without enough
authority to carry it out.
5.1.2 Sources of Organizational Authority
Authority, like responsibility, is usually handed down to managers from their
immediate bosses who in turn receive it from their immediate superiors. This process
of handing down responsibility and authority is known as delegation. The biggest
amount of authority and responsibility rests with the CEO and the amounts get
smaller as it goes down the line of command.
Most companies try to make the responsibilities and authorities at each level of
management fairly consistent. For instance, a supervisor in Department A should have
the same general responsibilities as a supervisor in Department B. And their
authorities would be generally the same even though the specific duties of each might
differ widely.
5.1.3 Other Sources of Authority
In addition to a manager’s organizational “right” to get things done, one may often
draw on other, more personal sources.
The employer tries to establish an employee’s organizational rights by granting him a
title or a rank, by depicting his position on an organizational chart, and by providing
some visible demonstration of status, such as a desk or an office or some special
privilege. Ordinarily, one must reinforce this personal authority – or power – with one
of the following:
One’s job knowledge or skill
One’s personal influence in the organization ( whom you know and whom you
can get to help you or your department)
One’s personal charm ( if one has it)
One’s ability to see that things get done (performance)
One’s persuasive ability ( a communication skill)
All these sources are important because employees tend to restrict their
acknowledgement of organizational rights over them. They expect their managers to
show a little more real power than that. When employees come to accept a manager’s
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authority as deserved or earned (acceptance theory of authority rather than
institutional), he will find that his people relationships will improve.
5.1.4 Authority vs Responsibility vs Accountability
A manager might be held accountable to higher management for the way in which
operating supplies are conserved in her department. But the manager has the
prerogative to delegate this responsibility to one of his employees – if he also grants
the employee the authority to take any steps needed to protect these supplies. If the
employee were to misuse these supplies or to lose track of them, the manager might
discipline him for failing to discharge his responsibility in this matter.
But the manager might still be held accountable to his boss (and would be subject to
discipline) for what happened – no matter which one of them was at fault.
Thus, you can delegate responsibility but you cannot delegate accountability.
5.1.5 Classification of Authority
There is no hard-and-fast rule as to how much leeway managers have in taking
authoritative action. Generally speaking, a company may establish three rough
classifications of authority within which managers can make decisions:
Class 1: Complete authority. Managers can take action without consulting
their superiors.
Class 2: Limited authority. Managers can take action they deem fit as long as
the superior is told about it afterward.
Class 3: No authority. Managers can take no action until they check with their
superiors.
If many decisions fall into class 3, managers will become little more than messengers.
To improve this situation, one must first learn more about one’s company’s policy and
then spend time finding out how one’s bosses would act. If the manager can convince
them that he would handle matters as they might, his bosses are more likely to transfer
class 3 decisions into class 2 and, as one proves himself, from class 2 to class 1.
But the existing company policy would still prevail. The big change would be in
permitting supervisory discretion. And this would be because one has demonstrated
that he is qualified to translate front-office policy into frontline action.
5.1.6 Exertion of Influence by Staff People
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Staff departments’ role is to advise or suggest. They may suggest a different, and
improved, way of doing something, advise that someone’s department is off target
(e.g. on quality), or provide information for others’ use and guidance. If managers are
smart, they will make every use they can of the staff department’s knowledge.
But in many organizations, staff units are granted functional authority.
Functional authority entitles a staff department to specify the policies and procedures
to be followed in matters within their specialties.
Additionally, organizational policy may specify that while managers have final
authority over a functional matter, they may be required either (1) to consult with the
functional specialist before taking action or (2) to reach an agreement beforehand on
the intended action.
5.2 EFFECTIVE DELEGATION
Definition: Delegation is the process of assigning various degrees of decision-making
authority to lower-level employees.
Delegation is a continuum and there are five different degrees of delegation from high
to low as follows: (i) Investigate and take action; (ii) investigate and take action;
advise on action taken; (iii) Investigate and advise on action planned; (iv) investigate
and recommend action; and (v) investigate and report back.
Delegation of selected tasks by managers can greatly add to their personal
effectiveness. Any member of management, including the manager, can usually
delegate some responsibility – and authority, since the two must go together.
A manager should delegate when she can’t personally keep up with everything she
feels she should do. Giving minor time-consuming tasks to others will save one time
for bigger things. As a manager, arrange to have certain jobs taken over when you are
absent from your department in an emergency or during vacation.
Keep it to routine matters, if you will, and to those requiring a minimum of authority.
But do try to get rid of the tasks that are routine and simple.
5.2.1 What Should Be Delegated
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Start by thinking of yourself as primarily a manager. No matter how good a person
you might be, you will always have more responsibilities than you can carry out
yourself. The trick of delegating is to concentrate on the most important matters
yourself. Trouble begins when one can’t distinguish between the big and the little
matters. Be ready, too, to give up certain work that you enjoy.
A manager must learn to let go of those tasks that rightfully belong to a subordinate,
otherwise larger and more demanding assignments may not get done.
Also don’t worry too much about getting blamed by your boss for delegating to an
employee work the boss has given to you.
Generally speaking, managers should be interested only in seeing that the job is done
the right way, not in who carries it out.
The figure gives an idea of how to decide which jobs should be targeted for
delegation. Although authority may be passed along to people at lower levels,
ultimate responsibility cannot be passed along. Thus, delegation is the sharing of
authority, not the abdication of responsibility.
By passing along well-defined tasks to lower-level people, managers can free more of
their time for important chores like planning and motivating. It is recommended that
managers should delegate those activities they know best since it is easier to monitor
something with which one is familiar.
The organizational structure provides the framework for the formal distribution – or
delegation – of authority and responsibility.
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5.2.2 What Not To Delegate
Some things should not be delegated as they are for the manager alone. When a duty
involves technical knowledge which only the manager possesses, it would be wrong
to let someone less able take over. It is also wrong to trust confidential information to
others.
5.2.3 What To Tell Employees About Jobs Delegated To Them
Give employees a clear statement of what they are to do, how far they can go,
and how much checking you intend to do.
Let employees know the relative importance of the job so that they can judge
how much attention it should receive.
Tell employees why you delegated the job.
If it shows you have confidence in them, they will try that much harder. But if
they think you are pushing off all the dirty jobs onto them, they may
deliberately make mistakes.
Don’t mislead employees about authority.
Do define the scope of the task and see that others in your department know
that this new task isn’t something an employee assumed without authorization.
Let it be known that you gave the assignment and that you will expect
cooperation from the other workers.
You MUST do
You SHOULD do but someone
else could help you
You COULD do but others
could do if given an
opportunity
Others SHOULD do
but you can help out in
an emergency
Others MUST
do
Fig. 5.2: Manager’s Task and Delegation Chart
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5.2.4 Why Employees Should Accept A Delegated Job
Employees who accept a delegated job outside their own job responsibilities are really
taking the job on speculation. They have a right to know what’s in it for them, as
follows:
Employees who take on an extra duty get a chance to learn.
Delegated jobs provide more job satisfaction. Employees thrive on varied
assignments.
Delegation is sometimes a reward for other work well done. This will help
build employee pride and a feeling of status.
5.2.5 Problems of Delegating
Delegation of personal tasks will invite trouble if you are tempted to engage in any of
the following practices:
o Delegating dirty work, trivial work, or boring work that cannot be justified as
representing a genuine opportunity for self-development.
o Overloading a subordinate beyond the limits of his time or ability.
o Failing to match responsibility with the appropriate authority to obtain the
resources needed to complete the job successfully.
o Undercontrolling or overcontrolling the subordinate. You should keep an eye
on progress and be ready to help, if requested. Otherwise, try to stand aside
and let the subordinate handle the assignment independently.
CHAPTER 6: POWER AND INFLUENCING
6.1 POWER
Definition: Power is the ability to marshal the human, informational and material
resources to get something done.
Power affects organizational members in the following three areas:
1. Decisions. An employee decides to take on a difficult new assignment after
hearing her boss’s recommendations.
2. Behaviour. An employee achieves a month of perfect attendance after receiving a
written warning about absenteeism from his supervisor.
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3. Situations. The productivity of a product design group increases dramatically
following the purchase of project management software.
We can also distinguish between “power over” (ability to dominate), “power to”
(ability to act freely), and “power from” (ability to resist the demands of others).
While authority is the right to direct the activities of others (an officially sanctioned
privilege that may or may not get results), power is the demonstrated ability to get
results. One may possess authority but have no power, possess no authority yet have
power, or possess both authority and power. Power must be used because managers
must influence those they depend on to obtain organizational effectiveness.
6.1.1 The Sources of Power
Def.: Power is the basis of influencing.
The total amount of power each individual in an organization possesses will be made
up of varying amounts of the 6 power types. The more power a manager has (type and
amount) the greater the number of influencing strategies that he can use, and the
greater the success with which they can use them
Also, the amount of power possessed is not fixed. Organizational members gain and
lose power depending on what they do, fail to do and the actions of others around
them. Six power bases have been identified.
Reward Power (R): Rewards to those who comply with a command or request is the
key to reward power. The target of this power must also value these rewards.
Management’s reward power can be strengthened by linking pay raises, merit pay and
promotions to job performance. Sought-after expressions of friendship or trust also
enhance reward power.
Coercive Power (C): Rooted in fear, coercive power is based on threatened or actual
punishment. The person with coercive power has the ability to inflict punishment or
aversive consequences on the other person or, at least, to make threats that the other
person believes will result in punishment or undesirable outcomes.
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Legitimate Power (L): This power source stems from the internalised values of the
other persons that give the legitimate right to the agent to influence them. This power
is achieved when a person’s superior position alone prompts another person to act in a
desired manner. This type of power closely parallels formal authority. The others feel
they have the obligation to accept this power.
However, legitimate power is unlike reward and coercive power in that it does not
depend on the relationships with others but on the position or role that the person
holds.
Referent Power (R): An individual has referent power over those who identify with
him if they comply on that basis alone. This type of power comes from the desire on
the part of the other persons to identify with the agent wielding power, regardless of
the outcomes. The others grant the person power because he is attractive and has
desirable resources or personal characteristics.
Charisma is a term often used in conjunction with referent power. Advertisers take
advantage of this type of power when they use celebrities to do testimonial
advertising.
Expert Power (E): Those who posses and can dispense valued information generally
exercise this power over those in need of such information. This is based on the extent
to which others attribute knowledge and expertise on the power seeker.
All the sources of power depend on the target’s perceptions but expert power may be
even more dependent on this than the other.
In particular, the target must perceive the agent to be credible, trustworthy and
relevant before expert power is granted.
Information Power (I): This is based on the power of information technology. IT
experts are in a position today to wield a lot of expert power because knowledge is
power.
Thus, total power is the sum of the six types of power and can be expressed as.
R + C + R + L +E + E + I =∑Power = POWERT
6.2 INFLUENCING
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Definition: Any attempt by a person to change the behaviour of superiors, peers or
lower-level employees.
It is the ability to affect another’s attitude, beliefs or behaviours, seen only in its
effect, without using coercion or formal position, and in a way that influences believe
that they are acting in their own best interests.
Influence can be used for purely selfish reasons, to subvert organizational objectives
or to enhance organizational effectiveness.
Managerial success is firmly linked to the ability to exercise the right sort of influence
at the right time.
6.2.1 Guidelines for using power
6.2.1.1 Influencing strategies:
Seven influencing strategies used by managers to influence their own managers, co-
workers and subordinates have been identified. These are: Reason, Friendliness,
coalition, bargaining, Assertiveness, Higher Authority, sanctions.
Reason: A strategy of influencing which relies on the presentation of data and
information as the basis for a logical argument that supports a request. The basis of
the influencer’s power is their own knowledge and ability to communicate the
information.
It is the most widely used strategy in organizations, and is the first choice when
influencing bosses and subordinates.
Friendliness: a strategy that depends on the influence thinking well of the influencer.
This can be accomplished by ‘acting friendly’, showing sensitivity and understanding,
creating goodwill and using flattery. Its basis is the influencer’s personality,
interpersonal skills and sensitivity to the feelings and attitudes of others. It is mostly
used with co-workers, subordinates and superiors. It is used when seeking personal
favours, help with work or when the organizational power based is weak.
Coalition: This is mobilizing other people in the organization to support one, thereby
strengthening one’s request. It operates on the premises that there is power in
numbers. Power when using this strategy is based on alliances with other
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organisational members. Coalition is a complex strategy which requires substantional
skill and effort. It is widely used when influencing co-workers and bosses. It is used
to attain both personal and organizational goals, usually as a back-up strategy.
Bargaining: This is influencing through negotiation and the exchange of benefits
based on the social norms ob obligation and reciprocity. Implied in this strategy are
the notions of finding common ground, equity and compromise. The influence relies
on a trade that involves making concessions in exchange for setting what they want. It
is used when the influencer seeks personal benefits. It is commonly used with co-
workers, but less with subordinates or bosses.
Assertiveness – insistence indicates that the behavioural style involved in this strategy
is closer to the aggressive end of the continuum. Assertiveness is an influencing
strategy which involves influencing people through one’s insistent, forceful manner.
It involves overtly making strident verbal statements (commends) and regularly
reminding the influence of the request. It can involve setting deadlines, deciding who
attends certain meetings, which items will be on the agenda, etc. It is used more with
subordinates and less with co-workers and superiors.
Higher Authority: An influencing strategy which uses the chain of command and
outside sources of power to influence the target person. This is where the influencer is
appealing for the support of senior people who had power over the influence. Higher
authority can be used when framing requests. Another application is appealing to a
higher order of ethical or moral values. It is most often used as a backup strategy
when the influencer does not expect the influence to agree to her request. It tends to
be used more often on co-workers.
Sanctions: These can be either positive or negative, involving either desirable benefits
or undesirable consequences. Its use depends on the influencer’s ability to provide
rewards and administer punishments. This is the least popular of all the influencing
strategies. It is used by managers on subordinates as a last resort. It can also be used
by staff on both their bosses and co-workers. It has to be used carefully since failure
to follow through can lead to a loss of credibility.
Preferred order of use of influencing strategies:
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Influencing up
[Manager]
Influencing Down
[Manager]
Influencing across
[Co-worker]
Reason, coalition,
Friendliness,
Bargaining,
Assertiveness, Higher
Authority
Reason, Assertive-
ness, Friendliness,
coalition,
bargaining, Higher
authority, sanctions
Friendliness,
Reason, Bargaining,
Assertiveness,
Higher Authority,
Sanctions, coalition
Popularity of the influencing strategies varies depending on the direction of influence:
influencing up (upwards towards managers), influencing down (towards subordinates)
or influencing across (laterally towards co-workers).
Power Base Influencing Strategy
Reward
Coercive
Referent
Legitimate
Expert
Information
Bargaining
Sanctions
Friendliness
Assertiveness, sanctions
Reason
Reason
Information Power: to gain information, a person needs to position themselves in
networks through which relevant information flows. To gain information power, it is
necessary to become well placed in the company’s communication net and develop
useful social connections with key organisational players.
Three aspects are crucial to becoming centrally located so as to gain the greatest
power and these are betweenness, connectedness and closeness.
Betweenness: Refers to the need for an information power-seeker to place herself
between others in a communication net and develop useful social connections with
key organizational players. It refers to the need for an information power-seeker to
place herself between others in a communication path, e.g. between the secretary and
the boss, salesperson between power-seeker and the customer.
Connectedness: refers to the number of other people with whom the power-seekers
has contact, both within and outside the organization. The more the better, provided
they contribute to power enhancement.
Closeness (Proximity): The distance between the power-seeker and all the other
people in the network. Power-seekers have to ensure that they can reach other people
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with as few intermediaries as possible. The closer they are, the more independent they
are, as others cannot control their access to the focal person. Being central in a
communication network is easily achieved through the careful choice of job and
office location.
CHAPTER 7: BEHAVIOUR MODIFICATION
7.1 Introduction
Definition: Behaviour modification (or B Mod) involves making specific behaviour
occur more or less often by systematically managing its cues and consequences.
On-the-job behaviour modification has been alternatively labelled organizational
behaviour modification (OB Mod), organizational behaviour management and
performance management.
Thorndike’s Law of Effect: Behaviour with favourable consequences tends to be
repeated, while behaviour with unfavourable consequences tends to disappear.
Skinner’s Operant Conditioning Model:
Skinner refined Thorndike’s conclusion that behaviour is controlled by its
consequences. His work became known as behaviourism because he dealt strictly with
observable behaviour.
Their Manager
Co-workers Internal External External
Coalitions Networks Contracts
Subordinates
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Skinnerian conditioning:
Def: Also known as instrumental and as operant conditioning, it is a technique for
associating a response or behaviour with its consequence. If the consequence is
desirable, the frequency of the behaviour is likely to increase.
Given a particular context, any behaviour that is rewarded or reinforced in some way
will tend to be repeated in that context. Instrumental conditioning demonstrates how
new behaviours or responses become established through association with particular
stimuli. Classical conditioning has that name because it is the older of the two
conditioning phenomena described here.
Skinnerian conditioning is also called instrumental conditioning because it is related
to behaviours that are instrumental in getting some material reward.
Stimulus – response psychology states that there was no behaviour, or no response,
without a stimulus to set it in motion (S - R). One could, therefore, condition a known
response to a given stimulus, i.e. one could attach that response to another stimulus.
Such responses are called respondents. Skinner argued that animals and humans do
behave in the absence of specific stimuli.
Behaviours that are emitted in the absence of identifiable stimuli are called operants.
Operant conditioning explains how new behaviours and new patterns of behaviour
can become established. Respondent conditioning does not alter the subject’s
behaviour, only the timing of that behaviour.
Operant conditioning is concerned primarily with learning that occurs as a
consequence of behaviour, or R-S. It is not concerned with the eliciting causes of
behaviour, as classical, or respondent, conditioning is.
7.1.1 Focusing on Behaviour
Behaviour Modification (B Mod) proponents emphasize the practical value of
focusing on behaviour. They caution against references to unobservable psychological
states and general personality traits when explaining job performance.
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Contingent Consequences:
According to operant theory, contingent consequences control behaviour in four
ways: positive reinforcement, negative reinforcement, punishment and extinction.
Behaviourists distinguish between:
(1) Positive reinforcement, or reward for particular responses, which encourages the
preceding behaviour;
(2) Negative reinforcement, or the removal of undesirable consequences, which also
encourages the preceding behaviour;
(3) Punishment, or the administration of sanctions including pain, which discourages
the preceding behaviour.
(4) Extinction, or the ignoring of undesirable behaviour so that it can disappear.
Positive reinforcement is the process of strengthening a behaviour by contingently
presenting something pleasing.
Negative reinforcement is the process of strengthening a behaviour by contingently
withdrawing something displeasing (e.g. the behaviour of clamping our hands over
our ears when watching a jumbo jet take off is negatively reinforced by relief from the
noise).
Punishment is the process of weakening behaviour through either the contingent
presentation of something displeasing or the contingent withdrawal of something
positive.
Extinction is simply the removal of undesirable behaviour by simply ignoring it.
Learning is thus the development of associations between stimuli and responses
through experience.
7.2 MOTIVATION
Definition: Motivation refers to the psychological process that gives behaviour
purpose and direction.
By appealing to this process, managers attempt to get individuals to willingly pursue
organizational objectives. Motivation theories are generalizations about the “why”
and “how” of purposeful behaviour.
The final element in this model, job performance, is the product of a combination of
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an individual’s motivation and ability [Both are unnecessary].
All the motivation in the world will not enable a computer-illiterate person to sit down
and create a computer spread sheet.
Ability and skills, acquired through training and / or on-the-job experience, are also
required.
Fig. 7.1: Individual Motivation and Job Performance
The individual’s motivational factors-needs, satisfaction, expectations, and goals – are
affected by challenging works, needs rewards, and participation.
7.2.1 Motivation Theories
Each theory of motivation approaches the motivation process from a different angle.
Each had supporters and detractors, and each teaches important lessons about
motivation to work.
7.2.1.1 Maslow’s Needs Hierarchy Theory
This was the first motivation theory which was developed by Abraham Maslow, who
was aptly termed the father of motivation.
Maslow proposed that people are motivated by a predictable five-step hierarchy of
needs. People always have needs, and when one need is relatively fulfilled, others
emerge in a predictable sequence to take its place. From bottom to top, Maslow’s
needs hierarchy includes psychological, safety, love, esteem and self-actualization
needs.
Challenging
and Interesting
Work
Opportunity for
participation and
self-management
Desired
Rewards
Individual Motivational
Factors
Needs
Satisfaction X Ability to get
Expectations the job done
Goals
Job
Performance
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According to Maslow, most individuals are not consciously aware of these needs and
yet we all supposedly proceed up the hierarchy of needs, one level at a time.
Fig. 7.1: The Maslow 5-Step Hierarchy of Needs
Higher-level needs Self-Actualization needs
Esteem needs
Social/ Love needs
Security/Safety needs
Low-level needs
Physiological needs
Managerial Implications
Maslow’s theory teaches managers one important lesson: a fulfilled need does not
motivate an individual.
Effective managers anticipate each employee’s personal need profile and provide
opportunities to fulfil emerging needs.
Because challenging and worthwhile jobs and meaningful recognition tend to enhance
self-esteem, the esteem level presents managers with the greatest opportunity to
motivate better performance.
7.2.1.2 Hertzberg’s Two-Factor Theory of Motivation
Due to lack of clarity from Maslow’s theory as to what really caused motivation,
Hertzberg set out to determine such causes. Herzberg’s research uncovered two
classes of factors associated with employee satisfaction and dissatisfaction. As a
result, his concept has come to be called Herzberg’s two-factor theory. The two
factors were satisfiers and the dissatisfiers.
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Dissatisfiers and Satisfiers
Dissatisfaction tended to be associated with complaints about the job context or
factors in the immediate work environment.
Satisfiers are factors responsible for self-motivation. They include the opportunity o
experience achievement, receive recognition, work on an interesting job, take
responsibility, and experience advancement and growth. The satisfiers are cantered on
the nature of the task itself.
Table 7.1: Herzberg’s Two-Factor Theory of Motivation
DISSATISFIERS: Factors mentioned most
often by dissatisfied employees. SATISFIERS: Factors mentioned most
often by satisfied employees
1. Company policy and administration. 1. Achievement
2. Supervision 2. Recognition
3. Relationship with supervisor 3. Work itself
4. Work conditions 4. Responsibility
5. Salary 5. Advancement
6. Relationship with peers 6. Growth
7. Personal life
8. Relationship with subordinates
9. Status
10. Security
Employees are motivated by job content – by what they actually did all day long.
Thus, enriched jobs were the key to self-motivation. The work itself – not pay,
supervision, or some other environmental factor – was the key to satisfaction and
motivation.
Managerial Implications
By insisting that satisfaction is not the opposite of dissatisfaction, Herzberg
encouraged managers to think carefully about what actually motivates employees.
The opposite of job satisfaction is no job satisfaction. The opposite of job
dissatisfaction is no dissatisfaction. The dissatisfaction – satisfaction continuum
contains a zero midpoint at which both dissatisfaction and satisfaction are absent.
An employee stuck on this midpoint, though not dissatisfied with pay and working
conditions, is not particularly motivated to work hard because the job itself lacks
challenge.
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The elimination of dissatisfaction is not the same as truly motivating an employee.
To satisfy and motivate employees, an additional element is required: meaningful,
interesting and challenging work. Money is a weak motivational tool because, at best,
it can only eliminate dissatisfaction.
7.2.1.3 Expectancy Theory
Also called instrumentality theory, it considers the process through which the
individual decides which of the many choices of behaviour will be put into effect.
It effectively deals with the highly personalized rational choices individuals make
when faced with the prospect of having to work to achieve rewards. It is a motivation
model based on the assumption that motivational strength is determined by perceived
probabilities of success.
Def.: Expectancy refers to the subjective probability (or expectation) that one thing
will lead to another.
Work-related expectations, like all other expectations, are shaped by ongoing personal
experience.
A Basic expectancy Model
In this model (Fig. 7.2), one’s motivational strength increases as one’s perceived
effort-performance and performance-reward probabilities increase. Employees are
motivated to expend effort when they believe it will ultimately lead to rewards they
themselves value.
Valence is the degree of preference that an individual has for a particular outcome.
Managerial Implications
According to expectancy theory, effort – performance – reward expectations
determine whether motivation will be high or low. This relationship can be depicted
algebraically as follows:
M= E X V V = Valence, or strength of preferences for the outcome.
M= Motivation to behave
E = Subjective probability or expectation that the behaviour
will lead to a particular outcome.
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Fig. 7.2: A Basic Expectancy Model
Although these expectations are in the mind of the employee, they can be influenced
by managerial action and organizational experience.
Training, combined with challenging but realistic objectives, helps give people the
idea they can get the job done if they put forth the necessary effort.
Listening skills enable managers to discover each individual’s perceived
performance-related probabilities.
Employees tend to work harder when they believe they have a good chance of getting
personally meaningful rewards.
Both sets of expectations require managerial attention and each is a potential barrier
to work motivation.
7.2.1.4 Equity Theory
Equity theory, proposed by Adams, is concerned with the fairness of distributed
rewards – Something is equitable if people perceive it to be fair rewards and just. An
appreciation of “fair play” and “fairness” seems characteristic of most people. Each of
us carries in our head a pair of scales upon which we weigh equity: Personal equity
scale and social equity scale.
Personal Equity:
i. Effort expended > Reward received: “I am underpaid. That’s unfair. I’m going to
take it easy from now on.” (Negative inequity)
Motivational strength: “How much effort should I put forth?”
Perceived effort-
performance
probability
Perceived value
of rewards
Perceived
performance-reward
probability
“What are my chances
of getting the job done
if I put forth the
necessary effort?”
EXPECTANCY
“What rewards do
I value?”
VALENT
“What are my chances of
getting the rewards I
value if I satisfactorily
complete the job?”
PERCEPTION
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ii. Effort expended = Reward received: “I am paid what I deserve. That’s fair.”
(Equity)
iii. Effort expended < Reward received: “I am overpaid. I feel guilty about getting
more than I deserve.” (Positive inequity)
Social Equity:
i. Personal effort/ reward ratio > Other’s effort/ reward ratio: “Joe and I have the
same job but he is paid more than I. That’s unfair. I’m going to take it easy. Is Joe
special?” (Negative inequity)
ii. Personal effort/ reward ratio = Other’s effort/ reward ratio: “Joe and I have the
same job and we are paid the same. That’s fair.” (Equity)
iii. Personal effort/ reward ratio < Other’s effort/ reward ratio: “Joe and I have the
same job but he is paid less than I. That’s unfair. He’s going to wonder why I
receive special treatment.” (Positive inequity).
The lower the effort/reward ratio, the greater the motivation.
The personal equity scale tests the relationship between effort expended and rewards
received.
The social equity scale compares our own effort-reward ratio with that of someone
else in the same situation.
People are motivated to seek personal and social equity and to avoid inequity.
Since perceived inequity is associated with feelings of dissatisfaction and anger,
jealously or guilt, inequitable reward schemes tend to be counter productive and are
ethically questionable.
Even though inequality does exist as result of special training or skills, we think it
only ‘fair’ that men and women doing the same work should be paid on the same
scale. People compare the rewards they receive with the effort (costs) they expend –
relative to the rewards received and costs incurred by other people.
We can express this as Rewards1 = Rewards 2
an equity equation: Costs1 Costs2
If these ratios are not roughly the same, then equity had not occurred. Interestingly,
people will attempt to change the variables in the equity equation to obtain equity.
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Five ways in which an individual can reduce perceived inequity are:
a. Changing either the inducements (rewards) or the contribution (cost).
b. Perceptually distorting inducements or contributions.
c. Leaving the field (escape) – resign, absence, apathetic daydream, absent
minded.
d. Getting comparison person to change. Produce less or more to “fall in line”.
e. Changing the basis of reference. To a higher status one.
MOTIVATING JOB PERFORMANCE
1. Motivation through job design
A job serves two but related functions. It is a productive unit for the
organization and a career unit for the individual. Considering that the average adult
spends about half of his or her working life at work, a challenging and interesting job
can add meaning to one’s life. Boring and tedious jobs can become a serious threat to
one’s motivation to work hard.
a) Fitting people to jobs
Through realistic job previews, job rotation and limited exposure, the
organization can boost motivation. Each of the three mentioned alternative
involves adjusting the person rather than the job in the person-job match. This
is the first strategy.
Realistic Job Previews:- Unrealized expectations are a major cause of job
dissatisfaction and low motivation. Managers commonly create unrealistically
high expectations in recruits to entice them to accept a position. Realistic job
previews, honest explanations of what a job actually entails, have been useful
in this area.
Job Rotation:- This involves periodically moving people from one
specialized job to another. Doing this prevents stagnation.
Limited Exposure:- Another way of coping with a tedious job is to limit the
individual’s exposure to it. This technique called contingent time off (CTO),
involves establishing a challenging yet fair daily performance standard and
letting employees go home when it is reached.
b) Fitting jobs to people
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This second design strategy calls for managers to consider changing jobs
instead of people. This is mainly through two techniques namely job
enlargement and job enrichment.
i) Job Enlargement: Is the process of combining two or more
specialized tasks in a work flow sequence into a single job.
ii) Job Enrichment: Job Enrichment builds more complexity and depth into
jobs by introducing planning and decision making responsibility normally
carried out at higher levels.
Job enrichment is redesigning a job to increase its motivating potential. It increases
the challenge of one’s work by reversing the trend toward greater specialization. It
builds more complexity and depth into jobs by introducing planning and decision-
making responsibility normally carried out at higher levels.
Thus, enriched jobs are said to be vertically loaded, whereas enlarged jobs are
horizontally loaded (merely combining equally simple and boring tasks).
Core job characteristics are common dimensions found to a varying degree in all jobs.
Jobs can be enriched by upgrading five core dimensions of work namely:-
- Skill variety: This is the degree to which a job requires a variety of different
activities in carrying out the work, involving the use of a number of different
skills and talents of the person.
- Task identity: This is the degree to which a job requires completion of a whole
and identifiable piece of work, that, is doing a job from beginning to end, with
a visible outcome.
- Task Significance: This is the degree to which the job has a substantial
impact on the lives of other people.
- Autonomy: The degree to which the job provides substantial freedom,
independence, and discretion to the individual in scheduling the work and
in determining the procedures to the used in carrying it out.
- Job Feedback: the degree to which carrying out the work activities required
by the job provides the individual with direct and clear information about the
effectiveness of his or her performance.
Internal motivation occurs when an individual is turned on to one’s work because of
the positive internal feelings that are generated by doing well (intrinsically
motivated), rather than being dependent on external factors (such as incentive pay or
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compliments from the boss) for the motivation to work effectively.
These positive feelings power a self-perpetuating cycle of motivation.
Hence, internal work motivation is determined by 3 psychological states.
In turn, these psychological states are fostered by the presence of the 5 core job
characteristics or dimensions mentioned above.
The object of this approach is to promote high internal motivation by designing jobs
that possess the 5 core job characteristics.
The 3 critical psychological states are:
Experienced Meaningfulness – The individual must perceive her work as
worthwhile or important by some system of value she accepts.
Experienced responsibility – The individual must believe that she personally is
accountable for the outcomes of her efforts.
Knowledge of results – She must be able to determine, on some fairly regular basis,
whether or not the outcomes of the work are satisfactory.
These psychological states generate internal work motivation.
Moreover, they encourage job satisfaction and perseverance because they are self-
reinforcing.
If one of these states is low, motivation diminishes.
The Job Characteristics Model (JCM) is a more recent approach to job design and a
direct outgrowth of job enrichment.
It attempts to pinpoint those situations and those individuals for which job design is
most effective. In this regard, it represents a contingency approach.
The motivating potential score (MPS) is a summary index that represents the extent to
which the job characteristics foster internal work motivation. It is the amount of
internal work motivation associated with a specific job.
The MPS is computed as follows:
MPS = Skill Variety + Task Identity + Task Significance x Autonomy x Job
Feedback
3
Low scores indicate that an individual will not experience high internal work
motivation from the job. Such a job is a prime candidate for job redesign.
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High scores reveal that the job is capable of stimulating internal motivation.
Because autonomy and feedback are not divisible by another number, low amounts of
autonomy and feedback have a greater chance of lowering the MPS than the other 3
job characteristics.
2. Motivation Through Rewards
So how can a specific job or task be made challenging, interesting and satisfying to
the individual who carries it out?
All workers, including volunteers who donate their time to worthy causes, expect to
be rewarded in some way for their contributions.
Def.: Rewards may be defined as the material and psychological payoffs for doing
something.
Job performance and satisfaction can be improved by properly administered rewards.
Rewards, if they are to motivate job performance effectively need to be administered
in ways that:
i) Satisfy individual needs – whether it is a pay rise or a part on the back, there is no
motivational impact unless the reward satisfies the individual’s need. Not all people
need the same things, and individual may need different things at different times.
Money is a powerful motivator for those who seek security through material wealth.
Others seek recognition.
ii) Foster positive expectations – An employee will not try to attain an attractive
reward unless it is perceived as attainable.
iii) Ensure equity distribution – Something is equitable if people perceive it to be fair
and just.
iv) Reward results – There should be a relationship between work and rewards.
Managers can strengthen motivation to work by making sure that those who give a
little extra through for instance, merit, pay, bonus etc.
How Job Enrichment Works: The Job Characteristics Model (JCM)
Core Job
Characteristics
Skill Variety
Task Identity
Task Significance
Autonomy Feeling of
responsibility for
outcomes of the work
Feeling that work is
meaningful
Critical
Psychological States
High Internal Work
Motivation
High “Growth”
Satisfaction
High General Job
Satisfaction
High Work
Effectiveness
Outcomes
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3. Motivation through Quality – of-Work- Life innovations
Def.: Quality-of-work life (QWL) is a process by which an organization attempts to
unlock the creative potential of its people by involving them in decision
affecting their work lives.
Quality of work-life programmes include:-
i) Flexible work schedules – allowing employees to determine their own arrival and
departure times within specified limits.
ii) Participative Management – Employees may participate in setting goals, making
decisions, solving problems and designing and implementing organizational changes.
By being personally and meaningful involved in one or more of these overlapping
areas, employee motivation and performance are paid to improve.
iii) Workplace Democracy – encompasses all efforts to increase employee self
determination.
7.3 LEADERSHIP
Leadership is a skill that can and must be learned in order to motivate subordinates to
be productive. Many large businesses, and even countries, have achieved success as
a result of good leadership.
There is a distinction between the terms “leader” and “manager”.
A manager is one who performs the functions of planning, organizing and controlling
and who occupies a formal position in an organization.
A leader is anyone who is able to influence others to pursue certain goals.
Job Feedback
Influencing/
Moderating Factors
Knowledge of the
actual results of the
work
Knowledge and Skill
Desire for Personal
Growth
“Context”
Satisfactions
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It is important for individuals to be both leaders and managers.
Def.: Leadership is the social influence process of inspiring, influencing and guiding
others to participate in a common effort.
Def.: Leadership is the art of accomplishing more than the science of management
says is possible.
Effective leadership is associated with both better performance and more ethical
performance. To encourage participation, leaders supplement any authority and power
they possess with their personal attributes, visions and social skills.
Leadership can be thought of as both a property of individuals and as a process
carried out by individuals.
As a property, leadership is a set of qualities possessed or attributed to those who
carry out the leadership process.
As a process, leadership is the ability of one individual or a small group of individuals
to influence other individuals positively in order to accomplish group goals.
Power is the foundation of the leadership process. It is a resource that leaders can call
upon in order to influence or control others.
7.3.1 Types of Leadership
Formal versus Informal Leaders:
Def.: Formal leadership is the process of influencing relevant others to pursue official
organizational objectives.
Def.: Informal leadership is the process of influencing others to pursue unofficial
objectives that may or may not serve the organization’s interests.
Formal leaders generally have a measure of legitimate power because of their formal
authority.
Informal leaders typically lack formal authority.
Both types rely on expedient combinations of reward, coercive, referent and expert
power.
Informal leaders who identify with the job to be done are a valuable asset to an
organization. Conversely, an organization can be brought to its knee by informal
leaders who turn cohesive work groups against the organization.
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Table 7.2: The Three Classic Styles of Leadership
Authoritarian Democratic Laissez-faire
Nature Leader retains all
authority and
responsibility.
Leader assigns people
clearly defined tasks.
Primarily a downward
flow of
communication.
Leader delegates a lot
of authority while
retaining ultimate
responsibility.
Work is divided and
assigned on the basis
of participatory
decision making.
Active two-way flow
of upward and
downward
communication.
Leader grants
responsibility and
authority to group.
Group members are
told to work things out
themselves and do the
best they can.
Primarily horizontal
communication among
peers.
Primary
Strength
Stresses prompt,
orderly, and
predictable
performance.
Enhances personal
commitment through
participation.
Permits self-starters to
do things as they see
fit without leader
interference.
Primary
Weakness
Approach tends to
stifle individual
initiative.
Democratic process is
time-consuming.
Group may drift
aimlessly in the
absence of direction
from leader
Patterns of leader behaviour are called leadership styles.
Three types of leadership styles have been identified: authorization, democratic,
laissez-faire.
Followers overwhelmingly preferred managers who had a democratic style to those
with an authoritarian style or laissez-faire (hands-off) style.
Theorists and managers have always hailed democratic leadership as the key to
productive and happy employees.
But practical experience had shown that the democratic style does not always
stimulate better performance. Some employees prefer to be told what to do rather than
to participate in decision making.
Transformational Leadership:
Def.: Transformational leaders are visionaries who challenge people to achieve
exceptionally high levels of morality, motivation and performance.
Only transformational leaders are capable of charting necessary new courses for
modern organizations because they are masters of change. They can envision a better
future, effectively communicate that vision, and get others to willingly make it a
reality. The importance of charisma in transformational leadership has been
140
emphasized. Transformational leaders rely heavily on referent power.
Transformational leaders inspire people to do the unexpected, above and beyond the
plan. They foster creative and productive growth.
Table 7.2.1: Transactional versus Transformational Leaders
Transactional Leader Transformational Leader
Contingent reward: Contracts exchange
of rewards for good performance,
recognise accomplishments
Charisma: Provides vision and sense of
mission, instil pride, gains respect and
trust.
Management by exception active):
watches and searches for deviations fro
rules and standards, takes corrective
action.
Inspiration: communicates high
expectations, uses symbols to focus
efforts expresses important purposes in
simple ways.
Management by exception (passive):
Intervenes only is standards are not met.
Intellectual stimulation: Promotes
intelligence, rationality and careful
problem solving.
Laissez-faire: Abdicates responsibilities,
avoids making decisions
Individualized consideration: gives
personal attention, treats each employee
individually, coaches, advises.
Transactional Leadership:
Transactional leaders monitor people so they do the expected, according to plan.
They foster creative and productive growth. They focus on maintaining the status quo.
Both types of leaders are needed today. Transformational leaders are needed in
rapidly changing situations. Transactional leaders can best handle stable situations.
Followers of transformational leaders tend to perform better and to report greater
satisfaction than those of transactional leaders.
APPROACHES TO LEADERSHIP
1. THE TRAIT THEORY
The trait approach to leadership is based on early leadership research studies, which
attempted to compare the traits of effective and ineffective leaders.
Researchers identified several common traits that are essential to leadership success:-
1. Decisiveness – nothing is possibly more damaging to the morale of an
organization than a vacillating and hesitating leader. A clear and constant focus
on a central purpose builds trust by letting others know where the leader stands.
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2. Clarity of Vision – a leader must know what he wants and what he does not want.
3. Unerring Judgment – a leader judgment has to be more correct than incorrect.
4. Building up of Subordinates – the extent to which an executive can change
individual’s bad behaviour into good behaviour is an index of his good leadership.
He must win the confidence and trust of his staff and inspire them.
5. Participative Management – a leader should be a good organizer and should also
be able to create in the worker a feeling of participating in managing the
organization.
6. Good Public Relations – the executive should have the skill to build relationships
and defend the integrity of his company.
7. Improvement in Consciousness – the leader should be progressive and be
zealous about improving performance of the organization.
8. Management of self- successful leaders nurtures their strength and learns from
their mistakes.
2. STYLES OF LEADERSHIP
Authoritarian Style
This style of leadership has the following characteristics:-
The leader makes most of the decisions without consulting group members
The leader controls the actions of group members by using the power to provide
rewards and discipline. There is very little individual freedom of action.
The leader tries to develop obedient and predictable behaviour from group
members.
The leader establishes group goals, provide coordination and plan activities.
The leader has little concern for the attitudes, feelings and value of the group
members.
Democratic (participative style)
The leader consults with members and involves them in the decision making
process.
The leader delegates authority and responsibility to group members.
The leader considers the attitudes, feelings and values of group members in making
decisions.
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The leader uses two-way communication and is directly involved with group
members in setting goals and conducting activities.
Laissez-faire (permissive) style
Group members are allowed to make decisions without any input from the leader
The leader does not attempt to coordinate or control the actions of group members.
The individual desires of the group members are the major influence on ground’s
goals and methods of operation.
The leader’s primary role is to help individual group members achieve their
personal objectives.
3. THE MANAGERIAL GRID
Perhaps the most widely known of all leadership theories is the managerial grid
developed by researchers in Michigan. The Michigan studies looked at the
differences between high producing and low-producing groups to see if they could
identify any differences in leadership behaviour. What they found was that
supervisors in high-producing groups were employee centered in there approach to
their work targets, whereas supervisors in low-producing groups were production
centered.
Some supervisors adopted characteristics of both extremes, and the resulting model of
leadership styles was presented as a continuum of alternatives. Blake and Mouton
created a grid depicting five major leadership styles representing the degree of
concern the leader has for “people, and “production” (Fig. 8.1).
Fig. 8.1: The Managerial Grid
High
C
o
n
c
e
r
n
9
8
7
6
5
4
3
1,9
CCM
9,9
TM
5,5
OMM
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for
People
Low
2
1
IM
1,1
AO
9,1
Low 1 2 3 4 5 6 7 8
9
Low Concern for Production
High
i) Impoverished management (IM) – the manager has little concern
for either people or production.
Exertion of minimum effort to get required work done is appropriate
to sustain organizational membership.
ii) Authority-obedience (AO) – the leader concentrates on task
efficiency but shows little concern for the development and moral of
subordinates. Efficiency in operations results from arranging
conditions of work in such a way that human elements interfere to a
minimum degree.
iii) Country club management (CCM) – the leader focuses on being
supportive and considerate and has little concern for output.
Thoughtful attention to needs of people for satisfying relationships
leads to a comfortable, friendly organization atmosphere and work
tempo.
iv) Organisation man management (OMM) – adequate task efficiency
and satisfactory morale are the goals of this style. The leader
attempts to balance and trade off concern for work in exchange for a
satisfactory level of morale – a compromiser.
Adequate organization performance is possible through balancing
the necessity to get out work with maintaining morale of people at
satisfactory level.
v) Team management (TM) – the leader seeks high output through
committed people. Achieved through mutual trust, respect and a
realization of interdependence.
144
Work accomplishment is from committed people; interdependence
through a common stake in organization purpose leads to
relationships of trust and respect.
From these findings, Blake and Mouton recommended team management.
They argue that using team management approach results in improved
performance, lower employee turnover and absenteeism, and greater
employee satisfaction.
4. THE OHIO STATE LEADERSHIP STUDIES
Beginning 1945, researchers in the bureau of business Research at Ohio State
University made a series of detailed studies of the behaviour of leaders in a wide
variety of organisations. The key concern of the Ohio State leadership studies was
the leader’s behaviour in directing the efforts of others towards group goals. After
many studies, researchers identified two important dimensions of leader behaviour.
1. Initiating structure – the extent to which leaders establish goals and structure
their roles and the roles of subordinates toward the attainment of the goals. It
is behaviour that is principally concerned with organizing the task where task
requirement is given priority.
High
Consid-
eration
Low
High consideration
and
Low structure (A)
High structure
and
High
consideration
(B)
Low consideration
and
Low structure (C)
High structure
and
Low consideration
(D)
Low Initiating Structure High
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Fig. 8.2: Ohio State Leadership Styles
2. Consideration – the extent to which leaders have relationships with
subordinates characterized by mutual trust, respect, and consideration of
employees’ ideas and feelings. It is behaviour that is essentially relationships
oriented i.e. where employee’s needs are taken into consideration.
The figure above illustrates four basic leadership style representing different
combinations of leadership behaviour. A manager can be high in consideration and
initiating structure, low in both, or high in one and low in the other.
The following observations can be made with regard to the type of leadership styles
proposed in the Ohio state model:-
High Structure, Low Consideration (D): Leader devotes primary attention to getting
the job done. Personal concerns are strictly secondary. If a group expects and wants
authoritarian leadership behaviour, it is more likely to be satisfied with that type of
leadership.
Low Structure, High Consideration (A): Leader strives to promote group harmony
and social need satisfaction. If group members have less authoritarian expectations, a
leader who strongly emphasizes initiating structure will be resented.
High Structure, High Consideration (B): Leader strives to achieve a productive
balance between getting the job done and maintaining a cohesive, friendly work
group. If the work situation is highly structured by technology and the pressures of
time, the supervisor who is high in consideration is more likely to meet with
success.
Low Structure, Low Consideration (C): Leader retreats to a generally passive role of
allowing the situation to take care of itself. If employees must work and interact
continuously, the usually want the superior to be high in consideration’
The optimum style is one where the tension between high consideration and high
structure has been successfully resolved – the leader pays thorough attention to
people’s needs and organizes the work very efficiently.
5. PATH-GOAL THEORY – ROBERT HOUSE
146
The essence of the theory is that it is the leader’s job to help his or her followers attain
their goals and to provide the necessary direction and support to ensure that their
goals are compatible with the overall objectives of the organization. It gets its name
from the idea that if an employee sees high productivity as a path that leads to one or
more personal goals the employee will tend to be a high producer, and the leader’s
job is to help the employee move along the path to his or her goals satisfaction.
According to the path goal approach, effective job performance results if the manager
clearly defines the job, provides training for the employee, assists the employee in
performing the job effectively, and rewards the employee for effective performance.
The path-goal theory identified four different leadership style that managers need to
rely on:-
1. Directive leadership – the leader tells people what is expected of them and
provide specific guidance, schedules, rules, regulations and standards.
2. Supportive leadership – the leader treats subordinates in a friendly manner and
shows concern for subordinates’ status, well being and needs.
3. Participative leadership – the leader consults with subordinates about issues
and takes their suggestions into account before making a decision.
4. Achievement oriented leadership – involves setting challengeing goals,
expecting subordinates to perform at their highest level, and showing strong
confidence that subordinates will put forth effort and accomplish goals.
Thus, path-goal theory emphasizes the use of different leader behaviour depending
upon the situation
6. HERSEY AND BLANCHARD’S SITUATIONAL LEADERSHIP THEORY
Paul Hersey and Kenneth Blanchard’s situational leadership theory is based on the
notion that the most effective leadership style varies according to the level of maturity
of the followers and the demands of the situation. Successful leadership is achieved
by selecting the right leadership style, which Hersey and Blanchard argue is
contingent on the level of the followers maturity and situation demands.
Maturity is not defined as age or psychological stability. The maturity level of the
followers is defined as:-
The ability and willingness of people to take responsibility for directing their
own behavior
147
A desire for achievement
Education or experience and skills relevant to the particular task.
A leader should consider the level of maturity of his or her followers only in relation
to the work or job to be performed. Certainly employees are mature on some tasks
when they have the experience and skills as well as the desire to achieve and are
capable of assuming responsibility. The appropriate leadership style used by a
manager varies according to the maturity level represented by M1 through M4
stages:-
M1: People are both unable and unwilling to take responsibility for doing
something. They are neither competent nor confident.
M2: People are unable but willing to do the necessary job tasks. They are
motivated but currently lack the appropriate skills.
M3: People are able but unwilling to do what leaders want.
M4: People are both able and willing to do what is asked of them
Hershey and Blanchard identified four leadership styles that are appropriate given
different levels of subordinate’s maturity. These are classified as:
S1: Telling – the leader defines roles and tells people what, how, when, and
where to do various tasks. It emphasizes directive behaviour.
S2: Selling – the leader provides both directive behaviour and supportive
behaviour
S3: Participating – the leader and follower share in decision making,. With the
main role of the leader being facilitating and communicating.
S4: Delegating – the leader provides little direction or support.
The S1 style is very appropriate when dealing with subordinates who are relatively
new and inexperienced employees. Inexperienced employees need to be told what to
do and how to accomplish their jobs.
As employees learn their jobs, the manager begins to use an S2 leadership style.
There is still need for guidance and support since the employees do not yet have the
experience or skills to assume more responsibility. The manager encourages the
employees and demonstrates greater trust and confidence in them.
148
The S3 leadership style is suitable when employees posses considerable task-relevant
maturity. As employees become more experienced and skilled, as well as more
achievement motivated and more willing to assume responsibility the leader should
encourage participation.
The S4 leadership style is for followers with the highest level of task maturity. At this
stage, the employees are very skilled and experienced, possess high achievement
motivation and are capable of exercising self-control. The employees no longer need
or expect a high level of support.
A leader must have insight into the abilities, needs, demands, and expectations of the
followers and be aware that these can and do change over time. Also, managers must
recognize that they must adapt or change their style of leadership whenever the level
of maturity of followers changes. Maturity levels can change for many reasons – for
instance, change in jobs, personal or family problems, and a break in a relationship, or
switch in the present job to new technology.
Situational leadership is only effective if:
(i) The leader is flexible in behaviour
(ii) The subordinate is recognized as a major situational determinant
AN INTEGRATED APPROACH TO LEADERSHIP
There is no one best leadership style that can be used to manage diverse groups. The
most effective style is one that meets the needs of each particular situation. This
requires a careful consideration of characteristics of the leader, the followers, and the
specific situation.
The development of an integrated approach to effective leadership requires
consideration of several important situational factors. Characteristics of the leader,
the followers, and the situation all interrelated to determine the most effective
leadership style. The followers represent the personnel. The situation includes the
149
structure, the technology, objectives, and the external environment. The leaders
represent managers.
Leader
Everyone has a different combination of abilities, personalities, experiences and
expectations. Because of these factors each person develops different patterns of
doing work. A person who has found that being an autocratic manager will get the
job done will likely continue this pattern unless something happens to show that this
style is no longer appropriate. A participative style may also continue to be used until
it is no longer effective. The leader should use a style that meets the needs of the
followers and the situation. A leader’s flexibility is important.
Followers
Like the leader followers have varying abilities, personalities, experiences and
expectations. Followers are a major factor for consideration in the integrated
approach to leadership. If the followers are inexperienced, lack the necessary
education or skills and do not seek more individual responsibility for their job, the
most effective leadership. Managers must take into consideration the needs, goals,
capabilities and experiences of the followers if they are to be effective.
Situation
The four factors of structure, technology, objectives and the external environment
comprise the situation. Each must be considered if leaders are to determine their most
effective style. The organizational structure and the environment in which the
manager operates affect the leadership style. In a loosely structured environment like
a research lab, a more participative style may be more appropriate.
Technology is another major factor that affects the selection of the most appropriate
leadership style. Technology has an impact on the design of work, which may in turn
determine the most appropriate leadership style. For example, if the technology the
firm is using is well understood and the workers have a great deal of experience with
it, managers will probably not have to exercis4 close supervision of employees.
Conversely, if the firm experimenting with a new technology and does not understand
150
it well, management may have to supervise workers closely until the technology
becomes familiar.
As the objective of the firm change, a change in leadership style may be necessary.
For example, if a firm determines that it should be innovative, it may require
personnel changes and a modification of leadership styles. The personnel who are
hired to make the transition to an innovative firm may not accept an autocratic style.
As the level of professional and technical capabilities increases, the style of leadership
may lean toward a more relationship-oriented leadership style. Still, if the firm’s goal
is survival, the leadership style may again move toward a greater emphasis on task
accomplishment.
The external environment has considerable influence on determining the most
effective leadership style. Obviously economic, political, social, and cultural forces
must be considered. For example, during periods of economic difficulty, some
managers tend to become more autocratic and place greater emphasis on the
efficiency of task accomplishment. The interaction of all the situational variables
must be a consideration by managers who wish to use the most effective leadership
style.
7.4 COMMUNICATION
One of the most difficult challenges for management is getting individuals to
understand and voluntarily pursue organizational objectives. Effective communication
is vital to meeting this challenge. Organizational communication takes in a great deal
of territory – virtually every management function and activity can be considered
communication in one way or another.
Planning and controlling require a good deal of communicating, as do organization
design and development, decision making and problem solving, leadership and
staffing. Organizational cultures would not exist without communication.
Studies have shown that both organizational and individual performance improve
when managerial communication is effective.
Given today’s team-oriented organizations where things need to be accomplished with
and through people over whom a manager has no direct authority, communication
skills are more important than ever.
151
Thanks to modern technology, we can communicate more quickly and less
expensively. But complaints of information overload are common today.
Research has also shown that more communication is not necessarily better.
7.4.1 The Communication Process
Def.: Communication is the transfer of information and understanding from one
person to another.
Communication is inherently a social process- a social activity involving two or more
people. The communication process is a chain made up of identifiable links, the links
include sender, encoding, medium, decoding, receiver and feedback.
The essential purpose of this chainlike process is to send an idea from one person to
another in a way that will be understood by the receiver.
Encoding: Communication requires the sender to package the idea for understandable
transmission. Encoding starts at this point. The purpose of encoding is to translate
internal thought patterns into a language or code the intended receiver of the message
will probably understand. Managers usually rely on words, gestures, or other symbols
for encoding.
Their choice of symbols depends on several factors, one of which is the nature of the
message itself: Is it technical or nontechnical, emotional or factual? Greater cultural
diversity in the workplace also necessitates careful message encoding.
Idea
Perception
Sender
Encode Medium Decode
Feedback
NOISE
Receiver
Perception
Understanding
Fig. 7.3: The Basic Communication Process
152
Selecting a Medium: Managers can choose among a number of media like face-to-
face conversations, telephone calls, e-mails, memos, letters, computer reports and
networks, photographs, bulletin boards, meetings, organizational publications, and
others. Communicating with those outside the organization opens up further
possibilities, such as news releases, press conferences, and advertising on television
and radio or in magazines, in newspapers, and on the Internet.
A contingency model for media selection pivots on the concept of media richness,
which describes the capacity of a given medium to convey information and promote
learning.
Media vary in richness from high (or rich) to low (or lean).
Face-to-face conversation is a rich medium because it (i) simultaneously provides
multiple information cues, such as message content, tone of voice, facial expressions,
and so on; (ii) facilitates immediate feedback; and (iii) is personal in focus.
In contrast, bulletins and general computer reports are lean media, i.e. they convey
limited information and foster limited learning.
Lean media, such as general e-mail bulletins, provide a single cue, do not facilitate
immediate feedback, and are impersonal.
Managers moving from low-context to high-context cultures need to select
communication media with care. Management’s challenge is to match media richness
with the situation. Nonroutine problems are best handled with rich media such as
face-to-face, telephone, or video interactions. Lean media appropriate for routine
problems.
Examples of mismatched media include reading a corporate annual report at a
stockholders’ meeting (data glut) or announcing a massive layoff with an impersonal
e-mail (data starvation).
153
Decoding: Even the most expertly fashioned message will not accomplish its purpose
unless it is understood. After physically receiving the message, the receiver needs to
comprehend it. If the message has been properly encoded, decoding will take place
rather routinely. But perfect encoding is nearly impossible to achieve in our world of
many languages and cultures.
The receiver’s willingness to receive the message is a principal prerequisite for
successful decoding. Successful decoding is more likely if the receiver knows the
language and terminology used in the message. It helps, too, if the receiver
understands the sender’s purpose and background situation. Effective listening is also
important.
Feedback: Some sort of verbal or nonverbal feedback from the receiver to the sender
is required to complete the communication process. Appropriate forms of feedback
are determined by the same factors governing the sender’s encoding decision.
Without feedback, senders have no way of knowing whether their ideas have been
accurately understood. Knowing whether others understand us significantly affects
both the form and content of our follow-up communication.
Employee surveys consistently underscore the importance of timely and personal
feedback from management.
High
Media
Richness
Low
Communication failure
Data glut
Rich media used for routine
messages
Excess cues cause confusion
and surplus meaning
Effective communication
Communication success
because rich media match
nonroutine messages
Effective communication
Communication success because
media low in richness match
routine messages
Communication failure
Data starvation
Lean media used for
nonroutine messages
Too few cues to capture
message complexity
Fig. 7.3.1: Media Selection Framework
Management Problem
Routine Nonroutine
154
Noise: Noise is not an integral part of the chainlike communication process, but it
may influence the process at any or all points. Noise is any interference with the
normal flow of understanding from one person to another. Thus, a speech impairment,
garbled technical transmission, negative attitudes, lies, misperception, illegible print
or pictures, telephone static, partial loss of hearing, and poor eyesight all qualify as
noise. Understanding tends to diminish as noise increases.
In general, the effectiveness of organizational communication can be improved in two
ways. Steps can be taken to make verbal and written messages more understandable.
At the same time, noise can be minimized by foreseeing and neutralizing sources of
interference.
7.5 GROUP DYNAMICS
7.5.1 Groups in Organizations
7.5.1.1 Characteristics:
Def.: A group is two or more freely interacting individuals who share a common
identity and purpose.
All groups may be collections of individuals, but all collections of individuals are not
groups. What does it take to make a group? The four important dimensions of groups
are:
First, a group must be made up of two or more people if it is to be considered a social
unit.
Second, the individuals must freely interact in some manner and have collective
norms.
Generally, larger organisations with bureaucratic tendencies are made up of many
overlapping groups.
Third, the interacting individuals must share a common identity. Each must recognize
himself as a member of the group.
Fourth, interacting individuals who have a common identity must also have a
common purpose (collective goals).
155
7.5.1.2 Types of groups:
Human beings belong to groups for many different reasons. Groups fulfil very
different needs. Groups display common characteristics: Formality of structure,
Permanence, Purpose.
a) Formality of structure:
Groups can be formal or informal in nature.
Formal Groups:
Def.: A formal group is a group created for the purpose of doing productive work.
It may be called a team, a committee, or simply a work group. It is usually formed for
the purpose of contributing to the success of a larger organization.
The completely formal group exhibits the characteristics of a formal organization –
rigidity and bureaucracy. A hierarchy of authority is established, with specified
member roles and functions. Rules, regulations, incentives and sanctions guide the
behaviour of formal group members. Rather than joining formal tasks groups, people
are assigned to them according to their talents and the organization’s needs.
One person normally is granted formal leadership responsibility to ensure that the
members carry out their assigned duties.
Thus, formal groups are those groups in an organization which have been consciously
created to accomplish the organization’s collective purpose.
Informal Groups:
Def.: An informal group is a collection of individuals who become a group when
members develop interdependencies, influence one another’s behaviour and
contribute to mutual need satisfaction.
An informal group results if the principal reason for belonging is friendship. Informal
groups usually evolve spontaneously when individual band together but without
setting up a formal structure. They serve to satisfy esteem needs because one develops
a better self-image when accepted, recognized and like by others.
Sometimes, as in the case of a group of friends forming an investment club, an
informal group may evolve into a formal one.
Managers cannot afford to ignore informal groups because grassroots social networks
can either advance or threaten the organization’s mission. Informal groups are highly
156
flexible and adaptive. Member roles are loosely defined. Member behaviour is guided
by an internalized perception of appropriateness. Such behaviour is sanctioned by
granting or with holding social approval.
b) Permanent or Temporary:
A group may be relatively permanent, like a church, or quite temporary, like a task
group which is disbanded after the accomplishment of a task.
c) Task or Social purpose:
The purpose around which a group is formed may be either task-oriented or socially
oriented. Accomplishing a particular task may tend to direct group members’
activities in ways different from the activities of members of the purely social group.
Most groups fall somewhere in the middle along this spectrum, with a mixture of task
and social purposes.
7.5.1.3 Characteristics of a Mature Group:
1. Members are aware of their own and each other’s assets and liabilities vis-à-vis
the group’s tasks.
2. These individual differences are accepted without being labelled as good or bad.
3. The group has developed authority and interpersonal relationships that are
recognised and accepted by the members.
4. Group decisions are made through rational discussion.
Minority opinions and dissension are recognized and encouraged.
Attempts are not made to force decisions or a false unanimity.
5. Conflict is over substantive group issues such as group goals and the effectiveness
and efficiency of various means for achieving those goals.
Conflict over emotional issues regarding group structure, processes or
interpersonal relationships is at a minimum.
6. Members of mature groups tend to be emotionally mature, which paves the way
for building much-needed social capital.
7.5.2 Roles and Norms: Social Building Blocks for Group and Organizational
Behaviour
157
Work groups transform individuals into functioning organization al members through
subtle yet powerful social forces. These social forces, in effect, turn “I” into “we’’
and “me” into “us.” Group influence weaves individuals into the organization’s social
fabric by communicating and enforcing both roles expectations and norms. We need
to understand roles and norms if we are to effectively manage group and
organizational behaviour.
a) Roles:
Def.: Roles are sets of behaviours that persons expect of occupants of a position.
Role theory attempts to explain how these social expectations influence employee
behaviour.
i. Role Episodes:
Def.: A role episode consists of a snapshot of the ongoing interasction between two
people.
In any giving role episode, there is a role sender and a focal person who is expected to
act out the role. Role episodes begin with the role sender’s perception of the relevant
organization’s or group’s behavioural requirements. Those requirements serve as a
standard for formulating expectations for the focal person’s behaviour. The role
sender than cognitively evaluates the focal person’s actual behaviour against those
experctations. Appropriate verbal and behavioural messages are then sent to the focal
person to pressure him or her into behaving as expected. On the receiving end of the
role epode, the focal person accurately or inaccurately perceives the communicated
role expectations and modeled behavior.
Various combinations of role overload, role conflict, and role ambiguity are then
experienced. The focal persons then respond constructively by engaging in problem
solving, for example, or destructively because of undue tension, stress, and strain.
ii. Role Overload:
Def.: Role overload occurs when “the sum total of what role senders expect of the
focal persons far exceeds what he or she is able to do.
iii. Role Conflict: Role conflict is experienced when “different members of the role
set expect different things of the focal person.” Managers often face conflicting
demands between work and family, for example. Role conflict also may be
experienced when internalized values, ethic, or personal standards collide with other’s
expectations.
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iv. Role Ambiguity: Those who experience role conflict may have trouble
complying with role demands, but they at least know what is expected of them.
Such is not the case with Role ambiguity, which occurs when “members of the role
set fail to communicate to the focal person expectations they have or information
needed to perform the role, either because they deliberately withhold it.”
In short, people experience role ambiguity when they do not know what is expected of
them. Organizational newcomers often complain about unclear job descriptions and
vague promotion criteria.
b) Norms: Norms are more encompassing than roles. While roles involve behavioural
expectations for specific positions, norms help organizational members determine
right from wrong and good from bad.
Def.: A norm is an attitude, opinion, feeling, or action – shared by two or more
people – that guides their behaviour.
Although norms are typically unwritten and seldom discussed openly, they have a
powerful influence on group and organizational behavior.
Group members positively reinforce those who adhere to current norms with
friendship and acceptance. On the other hand, nonconformists experience criticism
and even ostracism, or rejection by group members.
7.5.3 How Norms Are Developed: Experts say norms evolve in an informal manner
as the group or organization determines what it takes to be effective. Generally
speaking, norms develop in various combinations of the following four ways:
1. Explicit statements by supervisors or co-workers. For instance, a group leader
might explicitly set norms about not drinking (alcohol) at lunch.
2. Critical events in the group’s history. At times there is a critical event in the
group’s history that establishes an important precedent.
3. Primacy. The first behavior pattern that emerges in a group often sets group
expectations
4. Carryover behaviours from past situations. Such carryover of individual
behaviours from past situations can increase the predictability of group
members’ behaviours in new settings and facilitate task accomplishment.
ii. Why Norms Are Enforced: Norms tend to be enforced by group members when
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they:
Help the group or organization survive.
Clarify or simplify behavioural expectations.
Help individuals avoid embarrassing situations.
Clarify the group’s or organization’s central values and/or unique identity.
CHAPTER 8: CONFLICT MANAGEMENT
8.1 MANAGING CONFLICT
8.1.1 Organizational Conflicts
Conflict is intimately related to change and interpersonal dealings. The term conflict
has strong negative connotations, evoking words such as position, anger, aggression
and violence. But conflict does not have to be a negative experience as most
organizational conflict occurs within a cooperative context.
Definition: Conflict involves incompatible behaviours; one person interfering,
disrupting or in some other way making another’s actions less effective.
Thus there is an important distinction between competitive (or destructive) conflict
and cooperative (or constructive) conflict.
Cooperative conflict (Functional Conflict) is based on the win-win negotiating
attitude and is also a tool for avoiding group think. It serves the organization’s
interests.
The notion of conflict covers a wide variety of forms, from warfare to industrial
strikes to competition to simple dislike. Broadly, conflict occurs whenever the
attainment of a goal is hindered. Most forms of observable conflict occur when two or
more parties are each trying to attain mutually exclusive goal.
Individual conflicts are quite common and they may occur within an organizational
context, giving rise to special types of conflicts. These are called organizational
conflicts. They are either institutionalized (a direct result of formal organization and
technological processes) or emergent (emerging within the formal organizational
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context as a result of individual and social goals).
Dysfunctional conflict threatens the organisation’s interests.
The organization is a goal-directed system composed of interdependent goal-seeking
subsystems. It is inevitable that subsystems or individuals within the organization will
experience conflict. Competition for scarce resources or the means by which to attain
goals in the substance of organizational conflict.
a) Institutionalized Conflict
Division of labour and organizational form often go hand in hand with productive
efficiency. Such divisions and separations of individuals, work responsibility and goal
structure can create some severe conflict situations. The contributions of each unit
may be separately measured, established and rewarded.
To the extent that the work of each unit is truly independent this concept is a valid
one. Yet because of the systemic nature of the organisation, such independence is
rare.
i. Organizational sanctions: Competition for organizational rewards can also create
conflict between members of the same department. Similarly, competition for budget
allocations can create conflict between the heads of two units as they compete for
scarce resources. Competition can be fostered through the reward of individual
performance. Thus, very little in the way of personal relationships with one’s
“competitors” would be expected to occur. These are termed win-lose situations: for
one to “win” or reach the goal, another must necessarily “lose” or fail to reach the
goal.
ii. Hierarchy-Based Incompatibilities: Other conflicts may result from the
creation of a hierarchy. Since task specialization increases as the hierarchy is
descended, broader and more long-range responsibilities are found near the top of the
hierarchy. This implies that a supervisor will have perspectives and goals different
from those of the president of the company.
iii. Functional conflicts: Inter departmental conflict similarly arises from the
organizational framework. When business functions are divided up into departments,
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many benefits accrue. At the same time, there are many differences between these
groups that are institutionalized and formalized. Conflicts between the departments
are ready-made whenever they must meet to resolve problems or to conduct yearly
planning sessions.
iv. Line and staff: Line and staff personnel conflict as a result of organizational
form. Staff and other advisory or support groups are responsible for measuring,
monitoring, analyzing and projecting the work and results of the organization.
Line management are concerned with reaching a “workable” solution as quickly as
possible, to avoid interruptions in work flow and production.
Line perceives that staff personnel are abstract, impractical overeducated,
inexperienced and too young. Staff sees line personnel as being unimaginative, dull,
narrow in mind and scope, and inflexible. The criteria for goal attainment similarly
are different in line management from those of staff groups.
b) Emergent conflict
Conflicts may also be derived from uniquely personal and social causes, even though
they occur within the organised social causes, even though they occur within the
organised setting. They may encompass informal as well as non formal behaviours.
i. Formal and informal organization conflict: One such major conflict is the
conflict between the formal and informal organisation. The informal organization has
specified goals around which the group forms, protected by its norms and values.
The informal organization has specified goals around which the group forms,
protected by its norms and values. Informal expectations that support group goals may
differ quite drastically from formal expectations, which are important to attaining
formal economic objectives.
Status: Status conflicts can also create difficulties. Status problems in industry have
arisen because of the impact of changes in technology. Highly qualified and trained
young specialists may supersede senior members who slowly rose through the ranks.
They move into higher-level positions because of their more current expertise.
But to the older people, status may be determined by seniority and age, the symbols of
the respect due them. Working for another who both is younger and has less seniority
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results in status conflicts for the older subordinates.
Another status conflict occurs as a result of giving orders. The one who gives orders
to another has higher status than those who receive and carry out the orders.
Politics: Another conflict factor is the political process within the organization.
Striving to get ahead, even at the expense of others, by whatever means necessary is a
characteristic ascribed to company politics. Political manoeuvrings are based on the
recognition that limited resources or rewards are available while many are attempting
to gain them. Competition and conflict are derived from the organizational reward
system, yet the means to goal attainment may be devoted largely to informal or non-
formal activities.
ii. Personality Conflict
Interpersonal opposition driven by personal dislike or disagreement.
Workplace incivility (anything goes) is the seed of personality conflict.
Chronic personality conflicts often begin with seemingly insignificant irritations.
Incivility is a self-perpetuating vicious cycle that can end in violence.
iii. Value Conflict
A value is an enduring belief that a specific mode of conduct or end-state of existence
is personally or socially preferable to an opposite or converse mode of conduct or
end-state of existence.
An individual’s value system is an enduring organization of beliefs concerning
preferable modes of conduct or end-state of existence along a continuum of relative
importance. Differing value systems go a long way toward explaining individual
differences in behaviour. Value conflict can erupt when opposition is based on
interpersonal differences in instrumental and terminal values.
iv. Intergroup Conflict
Conflict among work groups, teams and departments is a common threat to
organisational competitiveness. In-group thinking has the seeds of inter group
conflict. One group thinks positively about itself and negatively of everyone else
(other groups).
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v. Cross-Cultural Conflict
Doing Business with people from different cultures is common place in our global
economy where cross-border mergers, joint ventures and alliances are the order of the
day. Because of differing assumptions about how to think and act, the potential for
cross-cultural conflict is both immediate and huge. Success or failure, when
conducting business across cultures, often hinges on avoiding and minimizing actual
or perceived conflict.
8.2 MANAGING CONFLICTS IN THE ORGANIZATION
8.2.1 Stimulating functional conflict:
Sometimes committees and decision-making groups become so bogged down in
details and procedures that nothing substantive is accomplished. Carefully monitored
functional conflict can help get the creative juices flowing once again. Managers can
fan the fires of naturally occurring conflict – an unreliable and slow approach.
Alternatively, managers can resort to programmed conflict.
Def.: Programmed conflict is conflict that raises different opinions regardless of the
personal feelings of the managers.
The trick is to get contributors to either defend or criticize ideas based on relevant
facts rather than on the basis of personal preference or political interests. Two
programmed conflict techniques are devil’s advocacy and the dialectic method.
Devil’s Advocacy: Involves assigning someone the role of critic.
One individual uncovers and airs all possible objections to an idea. This approach to
programmed conflict is intended to generate critical thinking and reality testing.
It is a good idea to rotate the job of devil’s advocate so no one person or group
develops a strictly negative reputation.
The Dialectic Method: This approach calls for managers to foster a structured
debate of opposing viewpoints prior to making a decision. This leads to a better
understanding of the issue at hand. A major drawback is that “winning the debate”
may overshadow the issue at hand. Also, this method requires more skill training than
does Devil’s advocacy.
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8.2.2 Alternative styles for handling dysfunctional conflict:
People tend to handle negative conflict in patterned ways referred to as styles.
Five different conflict-handling styles can be plotted on 2 x 2 grid (Fig. 8.2)
High to low concern for self is found on the horizontal axis of the grid while low to
high concern for others forms the vertical axis. Various combinations of these
variables produce the five different conflict-handling styles: integrating, obliging,
dominating, avoiding and comprising. There is no single best style but each is subject
to situational constraints.
Integrating (problem solving): Interested parties confront the issue and
cooperatively identify the problem, generate and weigh alternative solutions and
select a solution. Integrating is appropriate for complex issues plagued by
misunderstanding. It is inappropriate for complex issues plagued by
misunderstanding. It is inappropriate for resolving conflicts rooted in opposing value
systems.
Obliging (smoothing): An obliging person neglects her own concern to satisfy the
concern of the other party. This style involves playing down differences while
emphasizing commonalities. It may be an appropriate conflict-handling strategy when
it is possible to eventually get something in return. Its main strength is that it
encourages cooperation. But it is inappropriate for complex or worsening problems.
Its main weakness is that it’s a temporary fix that fails to confront the underlying
problem.
Compromise: Advocates of this approach say everyone wins because compromise is
based on negotiation, on give-and-take. While most people do not have good
negotiating skills, successful compromise requires skilful negotiation.
Dominating (Forcing): Sometimes, especially when time is important or a safety
issue is involved, management must simply step into a conflict and order the
conflicting parties to handle the situation in a particular manner. Reliance on formal
authority and the power of a superior position is at the heart of forcing. But forcing
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does not resolve the conflict and may in fact serve to compound it by hurting feelings
and/or fostering resentment and mistrust.
Avoiding: This is when managers may choose to do nothing about destructive
conflict.
Superordinate Goals: Superordinate goals are highly valued, unattainable by any
one group [or individual] alone and commonly sought. Here the manager tries to
resolve destructive conflict by bringing the conflicting parties together to forget their
differences and get the job done. Although this technique often works in the short run,
the underlying problem tends to crop up later to cause friction once again.
Fig. 8.2: Five Conflict-Handling Styles (Source: Kreitner, 2004)
CHAPTER 9: MANAGERIAL ETHICS
9.1 Introduction
Integrating
Dominating
Obliging
Avoiding
Compromising
High Low
Concern for Self
High
Concern
for
Others
Low
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Major changes are never easy, particularly when entrenched interests and huge capital
investments are involved. What is the appropriate balance between profits and the
public good? As the social, political, economic and technological environments of
management have changed, the practice of management itself has changed.
The public is wary of the abuse of power and the betrayal of trust, and business
managers and managers of all types of organizations are expected to make a wide
variety of economic and social contributions.
9.2 THE ETHICAL DIMENSION OF MANAGEMENT
Highly publicized accounts of corporate misconduct in recent years have led to
widespread cynicism about business ethics. What sort of role models do senior-level
business executives as powerful people make?
Definition: Ethics is the study of moral obligation involving the distinction between
right and wrong.
Business ethics, sometimes referred to as management ethics or organizational ethics,
narrows the frame of reference to productive organizations. Many business ethics
decisions are close calls. Years of experience in a particular industry may be required
to know what is acceptable.
9.2.1 Practical Lessons From Business Ethics Research:
a) Ethical Hot Spots: The top 10 workplace hot spots responsible for triggering
unethical and illegal conduct are: balancing work and family; poor internal
communications; poor leadership; work hours, workload; lack of management
support; need to meet sales, budget or profit goals; little or no recognition of
achievements; company politics; personal financial worries; and insufficient
resources.
b) Pressure From Above: A number of studies have uncovered the problem of
perceived pressure for results. This is a widespread problem. Excessive pressure to
achieve results is a serious problem, because it can cause otherwise good and decent
people to take ethical shortcuts just to keep their jobs.
The challenge for managers is to know where to draw the line between motivation to
excel and undue pressure.
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c) Ambiguous Situations: These are situations in which there are no clear-cut ethical
guidelines. Ethical codes can satisfy this need for guidelines.
d) A Call to Action: Each manager needs to understand her own personal code of
ethics: what is fair; what is right; what is wrong? Where is the ethical line that I draw,
the line beyond which I shall not go? And where is the line beyond which I shall not
allow my organization to go?
9.2.2 Personal Values as Ethical Anchors
Definition: Values are abstract ideals that shape an individual’s thinking and
behaviour.
Personal values play a pivotal role in managerial decision making and ethics.
Instrumental and Terminal Values
Def.: An instrumental value is an enduring belief that a certain way of behaving is
appropriate in all situations.
Def.: A terminal value is an enduring belief that a certain end-state of existence is
worth striving for and attaining.
Individual value systems are like fingerprints, hence each one of us has a unique set.
This is because a person can hold a number of different instrumental and terminal
values. Thus, it is important that each person identifies his own values and rank them
accordingly.
9.2.3 General Ethical Principles
Like your highly personalized value system, your ethical beliefs have been shaped by
many factors, including family and friends, the media, culture, schooling, religious
instructions, and general life experiences. Ten ethical principles (generally unstated
taken-for-granted ethical beliefs) are self-interests, personal virtues, religious
injunctions, government requirements, utilitarian benefits, universal rules, individual
rights, economic efficiency, distributive justice and contributive liberty.
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9.3 ENCOURAGING ETHICAL CONDUCT
Four specific ways to encourage ethical conduct within the organization are:
9.3.1 Ethics training
Managers lacking ethical awareness are called amoral: neither moral nor immoral, but
indifferent to the ethical implications of their actions. Since managers in this category
far outnumber moral or immoral managers, there is a great need for ethics training.
Table 9.2: Twelve Questions for Examining the Ethics of a Business Decision
1 Have you defined the problem accurately?
2 How would you define the problem if you stood on the other side of the fence?
3 How did this situation occur in the first place?
4 To whom and to what do you give your loyalty as a person and as a member of
the corporation?
5 What is your intention in making this decision?
6 How does this intention compare with the probable results?
7 Whom could your decision or action injure?
8 Can you discuss the problem with the affected parties before you make your
decision?
9 Are you confident that your position will be as valid over a long period of time
as it seems now?
10 Could you disclose without qualm your decision or action to your boss, your
CEO, the board of directors, your family, society as a whole?
11 What is the symbolic potential of your action if understood? If misunderstood?
12 Under what conditions would you allow exceptions to your stand?
Source: Kreitner, 2004.
9.3.6 Ethical advocates
Def.: An ethical advocate is a business ethics specialist who sits as a full-fledged
member of the board of directors and acts as the board’s social conscience.
This person may also be asked to sit in on top-management decision deliberations.
The idea is to assign someone the specific role of critical questioner (Table 9.4 has
some recommended questions).
9.3.6 Ethics codes
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Def.: An organizational code of ethics is a published statement of moral expectations
for employee conduct.
Some codes specify penalties for offenders. To encourage ethical conduct, formal
codes of ethics for organization members must satisfy two requirements.
First, they should refer to specific practices such as kickbacks, payoffs, receiving
gifts, record falsification, and misleading claims about products.
Second, they must be firmly supported by top management and equitably enforced
through the reward-and-punishment system.
9.3.6 Whistle-blowing
Def.: Whistle-blowing is the practice of reporting perceived unethical practices to
outsiders such as the news media, government agencies, or public-interest groups.
Not surprisingly, many managers believe that whistle-blowing erodes their authority
and decision-making prerogatives. Because loyalty to the organization is still a
cherished value in some quarters, whistle-blowing is criticized as the epitome of
disloyalty. Whistle-blowing generally means putting one’s job and/or career on the
line. The challenge for today’s management is to create an organizational climate in
which the need to blow the whistle is reduced.
Constructive steps include: encourage the free expression of controversial and
dissenting views; streamline the organization’s grievance procedure so that problems
receive a prompt and fair hearing; find out what employees think about the
organization’s social responsibility policies and make appropriate changes; let
employees know that management respects and is sensitive to their individual
consciences; and, recognize that the harsh treatment of a whistle-blower will probably
lead to adverse public opinion.
9.4 SOCIAL RESPONSIBILITY: DEFINITION AND PERSPECTIVES
The concept of social responsibility has grown and matured to the point where many
of today’s companies are intimately involved in social programs that have no direct
connection with the bottom line.
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These programs include everything from support of the arts and urban renewal to
environmental protection.
9.4.1 What Does Social Responsibility Involve?
Social responsibility is a relatively new concern of the business community and is still
evolving.
Definition: Corporate social responsibility is the notion that corporations have an
obligation to constituent groups in society other than stockholders (profit) and beyond
that prescribed by law or union contract.
Voluntary Action: A central feature of this definition is that an action must be
voluntary to qualify as a socially responsible action. Importantly, the notion of
corporate social responsibility does not discard the profit motive. It simply challenges
managers to voluntarily make the world a better place while pursuing a legitimate
profit. When lawsuits must be initiated or court orders issued before a company will
respond to societal needs, that company is not being socially responsible.
An Emphasis on Means Not Ends: Another key feature of this definition of
corporate social responsibility is its emphasis on means rather than ends. Corporations
need to analyze the social consequences of their decisions before they make them and
take steps to minimize the social costs of these decisions when appropriate. The
appropriate demand to be made of those who govern large corporations is that they
incorporate into their decision-making process means by which broader social
concerns are given full consideration. This is corporate social responsibility as a
means, not as a set of ends.
9.4.2 What is the Role of Business in Society?
Much of the disagreement over what social responsibility involves can be traced to a
fundamental debate about the purpose of a business. Is a business an economic entity
responsible only for making a profit for its stockholders? Or is it a socioeconomic
entity obligated to make both economic and social contributions to society?
Depending on one’s perspective, social responsibility can be interpreted either way.
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The Classical Economic Model: The classical economic model can be traced to the
eighteenth century, when businesses were owned largely by entrepreneurs or owner-
managers. Competition was vigorous among small operations, and short-run profits
were the sole concern of these early entrepreneurs. Of course, the key to attaining
short-run profits was to provide society with needed goods and services.
According to Adam Smith, father of the classical economic model, an “invisible
hand “promoted the public welfare. Smith believed the public interest was served by
individuals pursuing their own economic self–interests. Thus, according to the
classical economic model of business, short-run profitability and social responsibility
are the same thing.
The Socioeconomic Model: Reflecting society’s broader expectations for business
(for example, safe and meaningful jobs, clean air and water, charitable donations, safe
products), many think he time has come to revamp the classical economic model,
which they believe to be obsolete.
According to the socioeconomic model proposed as an alternative to the classical
economic model, business is just one subsystem among many in a highly
interdependent society. Advocates of the socioeconomic model point out that many
groups in society besides stockholders have a stake in corporate affairs.
Creditors, current and retired employees, customers, suppliers, competitors, all levels
of government, the community and society in general have expectations, often
conflicting, for management. Some companies go so far as a conduct a stake holder
audit. This growing practice involves systematically identifying all parties that could
possibly be impacted by the company’s performance. According to the socioeconomic
view, business has an obligation to respond to the needs of all stakeholders while
pursing a profit.
9.4.3 Arguments For and Against Corporate Social Responsibility
As one might suspect, the debate about the role of business has spawned many
specific arguments both for and against corporate social responsibility.
Arguments For. Convinced that a business should be more than simply a profit
machine, proponents of social responsibility have offered these arguments:
1. Business is unavoidably involved in social issues. There is no denying that private
business shares responsibility for such societal problems as unemployment,
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inflation, and pollution. Like everyone else, corporate citizens must balance their
rights and responsibilities.
2. Business has the resources to tackle today’s complex societal problems. With its
rich stock of technical and managerial resources, the private business sector can
play a decisive role in solving society’s more troublesome problems. After all,
without society’s support, business could not have built its resource base in the
first place.
3. A better society means a better environment for doing business. Business can
enhance its long-run profitability by making an investment in society today.
Today’s problems can turn into tomorrow’s profits.
4. Corporate social action will prevent government intervention. As evidenced by
waves of antitrust, equal employment opportunity, and pollution- control
legislation, government will force business to do what it fails to do voluntarily.
Arguments Against. Remaining faithful to the classical economic model, opponents
of corporate social responsibility rely on the first two arguments below.
1. Profit maximization ensures the efficient use of society’s resources. By buying
goods and services, consumers collectively dictate where assets should be
deployed. Social expenditures amount to theft of stockholders’ equity.
2. As an economic institution, business lacks the ability to pursue social goals.
Gross inefficiencies can be expected if managers are forced to divert their
attention from their pursuit of economic goals.
3. Business already has enough power. Considering that business exercises
powerful influence over where and how we work and live, what we buy, and
what we value, more concentration of social power in the hands of business is
undesirable.
4. Because managers are not elected, they are not directly accountable to the
people. Corporate social programs can easily be come misguided. The market
system effectively control’s business economic performance but is a
poor mechanism for controlling business’s social performance.
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9.4.4 Toward Greater Social Responsibility
It has been said that business is bound by an iron law of responsibility, which states
that “in the long run, those who do not use power in a way that society considers
responsible will tend to lose it.” The demand for business to act more responsibly is
clear. If this challenge is not met voluntarily, government reform legislation will
probably force business to meet it.
9.4.4.1 Social Responsibility Strategies
Similar to management’s political response continuum, is its social responsibility
continuum, marked by four strategies: reaction, defense, accommodation, and
proaction.
Reaction: A business that follows a reactive social responsibility strategy will deny
responsibility while striving to maintain the status quo.
Defense: A defensive social responsibility strategy uses legal manoeuvring and /or
a public relations campaign to avoid assuming additional responsibilities. This
WAL-MART
Customers
Neighbours of stores Employees and
and facilities contractors
All levels of
domestic and
foreign govt.
Domestic &
foreign
suppliers &
distributors
Financial
community
(bankers, brokers,
investors International & local press
and news media
Labour
unions
Consumer
advocacy
groups
Competitors
Stockholders
Public-at-large
Political parties
Fig. 9.3: Sample Stakeholder Audit for Wal-Mart, the World’s Largest Retailer (Source: Kreitner, 2004).
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strategy has been a favourite one for the tobacco industry, intent on preventing any
legal liability linkage between smoking and cancer.
Accommodation: The organization must be pressured into assuming additional
responsibilities when it follows an accommodative social responsibility strategy.
Some outside stimulus, such as pressure from a special-interest group or threatened
government action, is usually required to trigger an accommodative strategy.
Proaction: A proactive social responsibility strategy involves formulating a
program that serves as a role model for industry. Proaction means aggressively taking
the initiative. Corporate social responsibility proponents would like to see proactive
strategies become management’s preferred response in both good times and bad.
Source: Kreitner, 2004.
9.4.4.2 Who Benefits from Corporate Social responsibility?
Some believe that social responsibility should be motivated by altruism, an unselfish
devotion to the interests of others. This implies that businesses that are not socially
responsible are motivated strictly by self-interest.
Deny or ignore
responsibility
Accept social
responsibility in
response to pressure
Reaction Accommodation
Put up a fight
Defense
Take the initiative;
establish a positive
model for the industry
Proaction
Degree of Social Responsibility
Fig. 9.3: A Continuum of Social Responsibility Strategies
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Enlightened Self-Interest: Enlightened self-interest, the realization that business
ultimately helps itself by helping to solve societal problems, involves balancing short-
run costs and long- run benefits. Advocates of enlightened self- interest contend that
social responsibility expenditures are motivated by profit. Research into corporate
philanthropy, the charitable donation of company resources, supports this contention.
An Array Benefits for the Organization: In addition to the advertising effect, other
possible long-run benefits for socially responsible organizations include:
Tax- free incentives to employees (such as buying orchestra tickets and giving
them to the employees)
Retention of talented employees by satisfying their altruistic motives.
Help in recruiting talented and socially conscious personnel.
Swaying public opinion against government intervention.
Improved community living standards for employees.
Attracting socially conscious investors.
A non-taxable benefit for employees in which company funds are donated to their
favourite causes.
Social responsibility can be a win-win proposition; both society and the socially
responsible organization can benefit in the long run.
CHAPTER 10: MANAGEMENT OF CHANGE
10.1 MANAGING CHANGE
10.1.1 Change: Organizational and Individual Perspectives
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There is a constant tension between opposing forces for stability and change in
today’s work organizations. A productive balance is required since too much stability
and organizational decline begins. Too much change and the mission blurs and
employees burn out.
10.1.2 Forces of change
Organizations encounter many different forces for change. These forces come from
external sources outside the organization and from internal sources. Awareness of
these forces can help managers determine when they should consider implementing
an organizational change.
External Forces
External forces for change originate outside the organization. Because these forces
have global effects, they may cause an organization to question the essence of what
business it is in and the process by which products and services are produced.
There are four key external forces for change: demographic characteristics,
technological advancements, market changes, and social and political pressures.
Demographic characteristics: The two key trends are that:
(1) the workforce is more diverse, and
(2) there is a business imperative to effectively manage diversity.
Organizations need to effectively manage diversity if they are to receive maximum
contribution and commitment from employees.
Technological Advancements: Both manufacturing and service organizations are
increasingly using technology as a means to improve productivity and market
competitiveness.
Manufacturing companies have automated their operations with rob0tics and
computerized equipment. The service sector is using office automation, which consist
of a host of computerized technologies that are used to obtain, store, analyze, retrieve
and communicate information. Development and use of information technologies is
probably one of the biggest forces for change. Hence, all organisations must adapt to
using a host of information technologies. E-business will continue to create
revolutionary changes in organizations throughout the world.
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Market changes: The emergence of a global economy is forcing companies to change
the way they do business. Increased International competition is forcing companies to
change operating philosophies, to forge new partnerships and alliances with their
suppliers and potential competitors, etc. Organizations must now learn to create
collaborative win-win relationships with other organizations if they are to survive in
the worldwide restructuring of alliances and partnerships.
Social and political pressures: These forces are created by social and political events.
Pressure to change the way tobacco products are marketed has been exerted through
legislative bodies that represent the general population.
Political events can also create substantial change. The collapse of the Berlin Wall
and communism in Russia created many new business opportunities. Although it is
difficult for organizations to predict changes in political forces, many organisations
hire lobbyists and consultants to help them detect and respond to social and political
changes.
Internal Forces
Internal forces for change come from inside the organization. These forces may be
subtle, such as low job satisfaction or can manifest outward signs, such as low
productivity and conflict. Internal forces for change come from both human resource
problems and managerial behaviour/decisions.
Human Resource Problem/ Prospects: These problems stem from employee
perceptions about how they are treated at work and the match between individual and
organization needs and desires.
Job dissatisfaction is a symptom of an underlying employee problem that should be
addressed. Unusual or high levels of absenteeism and turnover also represent forces
for change.
Organizations might respond to these problems by using the various approaches to job
design, by reducing employees’ role conflict, overload and ambiguity and by
removing the stressors. Prospects for positive change stem from employee
participation and suggestions.
Managerial behaviour/Decisions: Excessive interpersonal conflict between managers
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and their subordinates are a sign that change is needed. Both the manager and the
employee may need interpersonal skills training, or the two individuals may simply
need to be separated.
Inappropriate leader behaviours such as inadequate direction or support may result in
human resource problems requiring change. Leadership training is one potential
solution for this problem.
Inequitable reward systems and the type of structural reorganizations are additional
forces for change.
10.2 TYPES OF ORGANIZATIONAL CHANGE
A typology of organizational change has change characterized as either anticipatory
or reactive on the vertical axis of the model. This deals with the rate of change.
Anticipatory changes are any systematically planned changes intended to take
advantage of expected situations. Oppositely, reactive changes are those necessitated
by unexpected environmental events or pressures.
The horizontal axis deals with the scope of a particular change, either incremental or
strategic. Incremental changes involve subsystem adjustments needed to keep the
organization on its chosen path. Strategic changes alter the overall shape or direction
of the organization.
Four resulting types of organizational change in the Nadler-Tushman model are
tuning, adaptation, re-orientation and re-creation (in order of increasing complexity,
intensity and risk).
Tuning: This is the most common, least intense and least risky type of change.
It is also called preventive maintenance and kaizen (Japanese for continuous
improvement). The key to effective tuning is to actively anticipate and avoid
problems rather than passively waiting for things to go wrong before taking action.
Adaptation: This also involves incremental changes. But this time, the changes are in
reaction to external problems, events or pressures.
Scope of Change
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Re-orientation: This type of change is anticipatory and strategic in scope.
It is called “frame bending” because the organization is significantly redirected.
Importantly, there is not a complete break with the organization’s past.
Re-creation: Competitive pressures normally trigger this most intense and risky type
of organizational change. It amounts to “frame breaking” because it involves a
complete break with the organization’s past.
10.3 INDIVIDUAL REACTIONS TO CHANGE
Ultimately, workplace changes of all types become a personal matter for employees.
Specifically, people tend to respond to changes they like differently than they do to
changes they dislike, both on- and off-the-job.
10.3.1 How People respond to Changes They Like: A three-stage adjustment is
typical when people encounter a change they like. Unrealistic optimism (stage A)
gives way to reality shock (stage B) before getting back on a constructive direction
(stage C). Key personal factors – including attitude, morale and desire to make the
change work – dip during stage B. Sometimes the dip is so severe or prolonged the
person gives up. Stage B is thus a critical juncture where leadership can make a
difference.
10.3.2 How People Respond to Changes They Fear and Dislike: On-the-job
change generally is more feared than welcomed. Changes, particularly sudden ones,
represent the unknown and most of us fear the unknown.
Stage 1: “getting off on the wrong track” which overwhelms people.
Incremental Strategic
Anticipatory Tuning Re-orientation
Reactive Adaptation Re-creation
Fig. 3.50: Nadler-Tushman Model – Four Types of Organizational Change
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Stage 2: “laughing it off” in the hope that the change will not materialize.
Stage 3: “growing self-doubt” if one can match the demands of the changed situation.
Stage 4: “buying in” which is resignation to one’s fate and acceptance of the
inevitable.
Stage 5: “constructive direction” where attitude turns positive and morale takes an
upswing after obtaining positive results.
10.3.3 A Contingency Model for Getting Employees Through Changes:
Contingency managers adapt their techniques to the situation. The response patterns
call for different managerial actions. When employees are made to understand that
stages B and 3 are normal and expected responses, they will be less apt to panic and
more likely to respond favourably to managerial guidance.
10.4 OVERCOMING RESISTANCE TO CHANGE
Dealing with change is an integral part of modern management. Organizational
change comes in all sizes and shapes. It can be new and unfamiliar technology, a
reorganization, a merger, a new pay plan, or a new performance appraisal program.
Whatever its form, change is like a stone tossed into a still pond. The initial impact
causes ripples to radiate in all directions, often with unpredictable consequences.
A common consequence of change in organizations is resistance from those whose
jobs are directly affected. Both rational and irrational resistance can bring the wheels
of progress to a halt. Management faces the challenge of foreseeing and neutralizing
resistance to change.
10.4.1 Why Do Employees Resist Change?
The following are the most common reasons for employees resisting change:
Surprise: Significant changes that are introduced on the spur of the moment or with
no warning can create a threatening sense of imbalance in the workplace.
Inertia: many members of the typical organization desire to maintain a safe, secure,
and predictable status quo.
Misunderstanding/Ignorance/Lack of Skills: Without adequate introductory or
remedial training, an otherwise positive change may be perceived in a negative light.
Emotional Side Effects: Those who are forced to accept on-the-job changes can
experience a sense of powerlessness and even anger.
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The subsequent backlash can be passive (stalling, pretending to not understand) or
active (vocal opposition, sabotage, or aggression).
Lack of Trust: Promises of improvement are likely to fall on deaf ears when
employees do not trust management.
Fear of Failure: Challenges presented by significant on-the-job changes can also be
intimidating.
Personality Conflicts: Managers who are disliked by their people are poor conduits
for change.
Poor Timing: In every work setting, internal and/or external events can conspire to
create resentment about a particular change.
Lack of Tact: It is not necessarily what is said that shapes our attitude toward people
and events but how it is said is often more important. Tactful and sensitive handling
of change is essential.
Threat to Job Status/ Security: Because employment fulfils basic needs, employees
can be expected to resist changes with real or imaginary impacts on job status or job
security.
Breakup of Work Group: Significant changes can tear the fabric of on-the-job social
relationships. Accordingly, members of cohesive work groups often exert peer
pressure on one another to resist changes that threaten to break up the group.
Competing Commitments: Employees may not have a problem with the change
itself, but rather with how it disrupts their pursuit of other goals. Such competing
commitments are often unconscious and need to be skilfully brought to the surface to
make progress.
10.4.2 Strategies for Overcoming Resistance to Change:
1. Education and Communication. This advocates prevention rather than cure
and the idea is to help employees understand the true need for change as well
as the logic behind it.
2. Participation and Involvement. Personal involvement through participation
tends to defuse both rational and irrational fears about a workplace change.
3. Facilitation and Support. When fear and anxiety are responsible for
resistance to doing things in a new and different way, support from
management in the form of special training, job stress counselling and
compensatory time off can be helpful.
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4. Negotiation and Agreement. Sometimes management can neutralize
potential or actual resistance by exchanging something of value for
cooperation.
5. Manipulation and Co-optation. Manipulation occurs when managers
selectively withhold or dispense information and consciously arrange events to
increase the chance that a change will be successful. Co-optation normally
involves token participation.
6. Explicit and Implicit Coercion. Managers who cannot or will not invest the
time required for the other strategies can try to force employees to go along
with a change by threatening them with termination, loss of pay raises or
promotions, transfer, etc.
10.5 MAKING CHANGE HAPPEN
In these fast-paced times, managers need to be active agents of change rather than
passive observers or, worse, victims of circumstances beyond their control.
This active role requires foresight, responsiveness, flexibility, and adaptability.
Two approaches to making change happen are (i) organization development, a formal
top-down approach, and (ii) grassroots change, an unofficial and informal bottom-up
approach.
10.5.1 Planned Change Through Organization Development (OD)
Organizational development has become a convenient label for a host of techniques
and processes aimed at making sick organizations healthy and healthy organizations
healthier.
Definition: Organizational development (OD) consists of planned efforts to help
persons work and live together more effectively, over time, in their organizations.
These goals are achieved by applying behavioural science principles, methods, and
theories adapted from the fields of psychology, sociology, education, and
management.
OD is also known as planned change. OD programs generally are facilitated by hired
consultants, although inside OD specialists can also be found.
The objectives of OD: OD programs vary because they are tailored to unique
situations. In general, OD programs develop social processes such as trust, problem
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solving, communication and cooperation to facilitate organizational change and
enhance personal and organizational effectiveness.
The typical OD program tries to achieve the following seven objectives:
1. Deepen the sense of organizational purpose (or vision) and align
individuals with that purpose.
2. Strengthen interpersonal trust, communication, cooperation and support.
3. Encourage a problem-solving rather than problem-avoiding approach to
organizational problems.
4. Develop a satisfying work experience capable of building enthusiasm.
5. Supplement formal authority with authority based on personal knowledge
and skill.
6. Increase personal responsibility for planning and implementing.
7. Encourage personal willingness to change
OD leads to greater personal, group and organizational effectiveness. This is because
OD gives managers a vehicle for systematically introducing change by applying a
broad selection of management techniques as a unified and consistent package.
Lewin developed a three-stage model of planned change which explained how to
initiate, manage and stabilize the change process. The three stages are unfreezing,
changing and refreezing. The assumptions that underlie the model are:
The change process involves learning something new, as well as discontinuing current
attitudes, behaviours or organizational practices.
Change will not occur unless there is motivation to change.
People are the hub of all organizational changes, hence any change requires people.
Resistance to change is found even when the goals of change are highly desirable.
Effective change requires reinforcing new behaviours, attitudes and organizational
practices.
Fig 10.51: A General Model of OD
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10.5.2 The OD Process: Lewin’s Change Model
Unfreezing: This stage creates the motivation to change. It prepares the members of a
social system for change and then helps neutralize initial resistance. Sudden,
unexpected change is socially disruptive. Individuals are encouraged to replace old
behaviours and attitudes with those desired by management.
Changing: Because change involves learning, this stage entails providing employees
with new information, new behavioural models, or new ways of looking at things.
The purpose is to help employees learn new concepts or points of view. Role models,
mentors, experts, bench marking results and training are useful mechanisms to
facilitate change.
Refreezing: When the change has been introduced, refreezing is necessary to follow
up on problems, complaints, unanticipated side effects and any lingering resistance.
Change is stabilized during refreezing by helping employees integrate the changed
behaviour or attitude into their normal way of doing things.
This is accomplished by first giving employees the change to exhibit the new
behaviours or attitudes. Once exhibited, positive reinforcement is used to reinforce the
desired change.
Additional coaching and modelling also are used at this point to reinforce the stability
of the change. Thus, diagnosis is carried out during the unfreezing phase. Change is
then carefully introduced through tailor-made intervention. Finally, a systematic
follow-up refreezes the situation.
Adaptive
change
Innovative
change
Radically
innovative
change
Reintroducing a
familiar practice
Introducing a practice
new to the organization
Introducing a practice
new to the industry
Low High
Degree of complexity, cost and
uncertainty
Potential for resistance to change
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10.5.3 Unofficial and Informal grassroots change
OD is rationally planned, formal, systematic and initiated by top management.
But today’s organizations tend to be spontaneous, informal, experimental and driven
from within. Unusual things can happen when empowered employees (by earlier OD
programs) start to take the initiative. This is not top-down change in the tradition of
OD. Rather, it involves change from inside the organisation.
Two perspectives of this approach are tempered radicals and the 5p model.
Tempered Radicals: People who quietly try to change the dominant organizational
culture in line with their convictions. They want to rock the boat, and they want to
stay in it. Four practical guidelines for tempered radicals are:
1. Think small for big results.
Don’t try to change the organization’s culture all at once. Start small and build a
string of steadily larger victories. Trust and confidence in you and your ideas will
grow with the victories.
2. Be authentic
Base your actions on your convictions and thoughtful preparation, not on rash
emotionalism.
3. Translate
Build managerial support by explaining the business case for your ideas.
4. Don’t go it alone
Build a strong support network of family, friends and co-workers to provide moral
support and help advance your cause.
Unfreezing Phase Change Phase Refreezing Phase
Diagnosis
Assess the
situation and
prescribe an
appropriate
change strategy
Intervention
Implement change
strategy through
enhanced
collaboration and
cooperation.
Follow-Up
Address
unanticipated
problems and side
effects. Evaluate
effectiveness of
change strategy.
Fig. 10.5: Lewin’s Change Model
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The 5p checklist for grassroots change agents (Turning Ideas into action): This
consists of preparation, purpose, participation, progress and persistence.
Preparation: Develop the concept; test assumptions; weigh costs and benefits; identify
champion or driver.
Purpose: Specify measurable objectives, milestones, deadlines.
Participation: refine concept while building broad and powerful support.
Progress: Keep things moving forward despite road blocks.
Persistence: Foster realistic expectations and a sense of urgency while avoiding
impatience.
CHAPTER 11: MANAGEMENT CHALLENGES IN
CONTEMPORARY ZAMBIA
11.1 THE CHANGING SCENE
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Mwanalushi, in his book “Motivation for Development – Enhancing
Organizational Effectiveness” (1991) states as follows: “In May 1987, the
government of the Republic of Zambia abandoned the IMF-sponsored economic
recovery programme and, two months later, introduced the New Economic Recovery
Programme (NERP). The battle cry and development strategy of the NERP is
‘Growth From Our Own Resources’. The message in this theme is that we are
responsible for the destiny of our country, that our economy will only recover through
hard work and commitment by the people of Zambia – nobody else will do it for us. It
is the contention that over the years, due largely to ineffective management practices
and regimes, the work ethic has disappeared and our organizations have been assailed
by inertia, lethargy and indifference. Therefore, there is an urgent need to instil a
sense of purpose and rekindle the work ethic among the people of Zambia. This is the
only way to guarantee economic recovery”. This, therefore, is the primary
management challenge in the Zambia of the 21st century for both public and private
sectors.
11.1.1 Corporations
A corporation is a legal entity created by a state, and it is separate and distinct from its
owners and managers. This separateness gives the corporation three major
advantages:
(1) Unlimited life. A corporation can continue after its original owners and managers
are deceased.
(2) Easy transferability of ownership interest. Ownership interests can be divided into
shares of stock, which, in turn, can be transferred far more easily than can
proprietorship or partnership interests.
(3) Limited liability. Losses are limited to the actual funds invested.
Shareholders are the owners of a corporation, and they purchase stocks because they
want to earn a good return on their investment without undue risk exposure.
The common stockholders are the owners of a corporation, and as such they have
certain rights and privileges.
Shareholders elect directors, who then hire managers to run the corporation on a day-
to-day basis. Management’s primary goal is stockholder wealth maximization, which
translates into maximizing the price of the firm’s common stock.
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11.2 MANAGERIAL ACTIONS TO MAXIMIZE SHAREHOLDER
WEALTH
It is a company’s ability to generate cash flows now and in the future which
determines stock prices. This ability brings out three basic facts:
(1) A company’s stock, just like any other financial asset, is valuable only to the
extent that it generates cash flows;
(2) The timing of cash flows matters – cash received sooner is better, because it can
be reinvested in the company to produce additional income or else be returned to
investors; and,
(3) Investors generally are averse to risk, so they will pay more for a stock whose cash
flows are relatively certain than for one whose cash flows are more risky.
Because of these three facts, managers can enhance their firms’ stock prices by
increasing the size of the expected cash flows, by speeding up their receipt, and by
reducing their riskiness.
Three factors primarily determine cash flows:
(1) unit sales, (2) after-tax operating margins, and (3) capital requirements.
Unit sales are made up of two parts: the current level of sales and the expected future
growth rate in sales. Managers can increase sales, hence cash flows, by truly
understanding their customers and then providing the goods and services that
customers want.
After-tax operating margin is the amount of after-tax profit that the company can keep
after it has paid its employees and suppliers. Hence, operating profit can be increased
by reducing direct expenses such as labour and materials and charging higher prices.
Capital requirements are the amount of money a company must invest in plant and
equipment. In short, it takes cash to create cash. Reducing asset requirements tends to
increase cash flows, which increases the stock price.
Thus, there are many ways to improve cash flows but all of them require the active
participation of many departments, such as marketing, engineering, and logistics.
This is the responsibility of organizational management in both the public and private
sectors of contemporary Zambia.
A study conducted in the Zambian Food and Beverage industry (Maliti, 2006) came
up with the following findings.
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11.3 A ZAMBIAN CASE STUDY
As a consequence of the deterioration in the economic performance mentioned above,
the privatization of much of the Zambian productive sector was set in motion by the
establishment in 1992 of the Zambia Privatization Agency (ZPA) by the government
through the Privatization Act Number 21. Its function was “ to plan, implement and
control the privatization of state owned enterprises in Zambia, in cooperation with the
government, by selling them off to those who are more competent to run them and
who have the required capital to do so” (ZPA News / Home Page, 2003).
The privatization process targeted all the industry sectors in the country, and no sector
has been treated as a sacred cow, including mining, as long as it had government-
controlled businesses. Since 1992, some 257 companies from a target portfolio of 282
companies had been privatized by the middle of 2005 (ZPA, 2005), representing a 91
% privatization rate mainly between the period of 1992 to 2001. Many of the
privatized companies (19) were closed down during this phase on the basis of
unprofitability and notable examples are Zambia Airways (former national airline),
Kabwe Mine (part of ZCCM) on which the economy of the town of Kabwe was
based, Zambia Clay Industries, National Drug Ltd, etc.
The ZPA give the following as some of the causes of post-privatization company
failure: First, unavailability of long-term capital to local investors that is necessary to
bring in new skills and technology. Second, high interest rates causing some of the
companies to default on loan repayments to financial institutions. Third, market
liberalization causing some of the companies to fail to adjust to the new competitive
environment. Fourth, local investors’ lack of entrepreneurial skills training. Fifth,
wrong economic decisions caused by poor management. Sixth, the rapidly changing
global economic environment.
Company Ownership. Before Zambia’s independence, almost 100 percent of the
major productive enterprises of its economy were in the private hands of European
settlers and South Africans. At independence in 1964, about 260 enterprises made up
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the manufacturing sector of the country (Kaplan, 1979). But in 1968, fuelled by the
euphoria of the attainment of independence, came the Mulungushi Reforms when the
government nationalized the entire mining industry and much of the manufacturing
and other sectors. This created the public sector in the country.
Thus, the companies were turned into parastatal organizations with the government
controlling more than 51 percent of the shares at market value on behalf of the
Zambian people and in some cases even 100 percent shares (Burdette, 1988).
For a start, the Industrial Development Corporation (INDECO) was created as a
wholly government-owned sub-holding company for all the nationalized
manufacturing companies while the Zambia Industrial and Manufacturing
Corporation (ZIMCO) was the holding company for all the nationalized enterprises,
including the mines.
The “Zambianization” Programme
The government came to the political conclusion that, as Kaplan (1979) so succinctly
puts it, “the then almost entirely foreign- or expatriate-owned enterprises were
concerned primarily with maximizing and repatriating profits and capital rather than
with Zambia’s economic development and the indigenization of staff”.
The indigenization process was aptly called the “Zambianization” programme.
On one hand, this programme was very popular among the Zambian people for
obvious reasons as earlier mentioned above but on the other, it was not effective due
to the mismanagement of businesses that followed. Hence, nationalization of the
economy was primarily done to curtail capital flight from the country and also to
empower the citizens of the country after being dominated by foreigners both
politically and economically for a long time (Burdette, 1988).
But what the government was wrong about was thinking that it could turn people who
were basically peasant farmers with not much understanding of how to run businesses
into business managers overnight, especially those who were political appointees in
the new parastatals. In other words, all the CEOs of the new parastatal companies
were appointed by the government and hence were controlled by and accountable to
the same.
We can term this phase as the industrial milestone number one because the business
landscape of the country was completely transformed, including how business in
Zambia was perceived and carried out.
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Predictably, the results of this phase were disastrous as rampant mismanagement of
the economy followed through the following activities: First, nepotistic appointment
of friends and relatives to important company positions they were least qualified for.
Second, government appointments to important company positions (especially CEOs
who were all government appointees) were based upon appointing those people whom
it could use to control the businesses. But most of those appointees knew very little
about how to run a business, less still run it efficiently and effectively.
Third, over-employment became rampant in all the parastatal companies since a job
there was seen as a right for every Zambian after the attainment of independence.
Fourth, business resources were abused by using them for non-business, personal and
political reasons. For instance, most companies like the mining conglomerate Zambia
Consolidated Copper Mines (ZCCM), the Zambia Electricity Supply Corporation
(ZESCO), and the Postal and Telecommunication Corporation (PTC) were mandated
to fund some of the functions of the then ruling political party and government by
donating money, equipment, facilities, time or other resources.
Fifth, almost all the parastatal companies provided all their employees with free
housing, free transportation to and fro work, free company clinics, free company
furniture and appliances, heavily subsidized utilities, numerous scholarships for
employees and family members both locally and abroad, fully paid-for vacations, etc.
Sixth, all these companies relied heavily on expensive expatriate staff especially in
the technical and professional positions. These employees were sometimes paid more
than ten times what a local Zambian received plus fringe benefits like free housing,
free utilities, free company car, free air passage for employee and family, free tuition
payments for their children abroad, etc. This was mainly done in the name of the
political philosophy of Zambian Humanism, which placed ‘man’ at the centre of
every human activity (Kaunda, 1967).
Seventh, the government excessively interfered in the activities of all the parastatal
companies to the extent that politics became the main focus of those companies,
instead of focusing on business performance and growth issues.
Eighth, all these companies that had been highly profitable before nationalization
started making losses, which progressively got worse over the years.
Ninth, the perennial exposure of the financial indiscipline that was taking place in
these organizations by the Auditor-General’s office were ignored by the government
naturally since it was the one which was encouraging such behaviour.
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Government Intervention
The government’s reaction to the deteriorating situation of these companies due to
the activities mentioned above were thus threefold:
First, heavy annual subsidization from government coffers of the poorly performing
companies to ensure their continued survival.
Second, many imported products were banned and hence the parastatals were turned
into monopolies to produce them (import substitution), with the usual results of
complacency, lack of innovation, rigidity, etc.
Third, even more parastatals were created to make the import substitution strategy
work and these in turn got sucked in the mismanagement and political patronage
cycle. Their location was meant to further political objectives (providing jobs for the
electorate so as to win election votes). Hence, most of them were located very far
from sources of raw materials and the railway system, e.g. Mansa Batteries, Luangwa
Industries, Mwinilunga Canneries and Zambia Clay Industries.
Hence both their inputs and finished products could only be moved by using the most
expensive form of transport: air freight. This definitely adversely affected the
profitability of such organizations despite all their efforts to be viable businesses.
Additionally, most of these businesses imported almost all their raw materials and
other inputs (e.g. steel, chemicals, spare parts, electrical parts) and this made them
high-cost producers and inefficient. This really defeated the original intention of
creating viable Zambian organizations, which really was politically, and not business
motivated. Hence it can be seen that in Zambia, business and government were
inexorably intertwined due to historical reasons and separating the two has always
been problematic, as evidenced by the failure of the privatization exercise. This is the
legacy of eliminating any foreign participation in the affairs of the country and also
trying to safeguard the interests of the local people whose influence and participation
in business was still low at that time.
National Economic Underperformance
The reasons for the decline in the economic performance of African countries like
Zambia are as numerous as the number of countries on the continent.
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While some blame external forces like inclement weather, poor and fluctuating
worldwide commodity prices, scarcity of foreign aid and so on, others point to
endogenous shortcomings like the mismanagement of public resources, poor business
incentives, lack of political foresight, etc. (World Bank, 1989).
a) National Culture. The culture of the country was not taken into account in this
scenario (Kamoche et al., 2004). For example, Zambian culture requires that funerals
be conducted as communal affairs rather than personal issues. Hence, whenever there
is a funeral in a company, the majority of the employees have to spend days and
nights at the wake and on the day of burial almost everyone has to be in attendance.
The respect for the dead is so high that during burials business organizations almost
grind to a halt because relatives, friends, church mates and work mates feel duty
bound to be present when a deceased person is put to rest. The same people also have
to spend nights at funeral wakes and then report for work in the morning, tired, sleepy
and hence at reduced productive levels. This then severely affects business
performance as business activities almost grind to a halt during that time.
Additionally, businesses are required to incur all the funeral-related costs like food
and transport for the mourners, firewood, hearse, transporting the body to the part of
the country where the deceased originated from, transporting the family back to their
place of origin, etc. Businesses do this in the spirit of good citizenship and social
responsibility to their communities.
In this manner Zambian culture tends to significantly increase business costs,
negatively affecting economic performance as well. Culture plays a key role when it
comes to business management in the country. Zambia, like all African countries, has
a culture of communalism where community interests take precedent over those of the
individual. Individualism is discouraged. Most decisions are made collectively
(Aryee, 2004; Horwitz et al., 2004). The business world is less democratic.
Individual executives must often make unpopular decisions that are in the best
interests of the business. Frequently, these decisions must be made autocratically to
ensure effective compliance and managerial control.
b) Family Values. Employees live in neighbourhoods where communalism and
family values guide much of the social life but work in business environments is
autocratic and regimented. This can bring conflict, indifference and reduced
motivation since employees feel coerced to behave in predictable manner (Muuka &
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Mwenda, 2004). Since cultural values are imprinted from childhood, they have a
much stronger influence on the person than work-related obligations. This causes
employees to develop values that are discrepant from the vision, mission and
objectives of business organizations. Organizational culture is perceived by the
employees to be foreign and the management team is seen to be behaving in
unZambian ways. They are seen as not understanding Zambian culture and acting
against the interests of the workers. The success of the organization is seen to be
secondary to the preservation of community values and this leads to half-hearted
efforts and low job commitment.
c) Workforce Diversity. An additional problem is the diversity of the workforce.
Zambia is made up of 73 ethnic groups. Seven of these are considered to be the major
ones. Zambians identify with their ethnic groups which can create divisions in the
workplace. Ethnicity tends to influence most managerial decisions in Zambian firms
like hiring, firing, promotions, the determinations of perks, training, etc. (Muuka &
Mwenda, 2004; ). If workers belong to a different ethnic group from that of most of
the managers in the firm they may face bleak prospects in the company. Differences
in ethnic origin create a great deal of tension. Ethnic animosities can result in
diminished organizational performance since employees may not cooperate with each
other fully in teams, committees, budget-setting and other group assignments.
Disagreements can derail the fulfilment of company objectives.
Post-Privatization
Following privatization in the early 1990s, the Zambian economy has steadily
declined from a boom powered by copper exports in the late 1960s and early 1970s to
the current state where most of the industrial base is underperforming. The
achievement of high performance requires the use of effective management systems
to align and control a company in terms of strategy planning and implementation.
The study provides new insight on business performance in an African context. Thus,
small company size, directive decision-making, reduced new product investment,
smaller production quantities and the maintenance of finished goods inventories were
found to lead to high organizational performance.
a) The Manufacturing Sector
The manufacturing sector is the one which has been hit the hardest in all this
deterioration and most of the surviving firms are either slowly limping to their demise
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or are barely keeping their heads above water. Organizational productivity has gone
down steeply in those remaining firms (Szirmai, Yamfwa, & Lwamba, 2002) due to
the unfavourable economic environment in the country, which has made running a
business very difficult. Plant and equipment is outdated and badly needs replacing
while workers are very demoralized due to compensation packages that are grossly
inadequate to meet their daily needs. It is thus not a coincidence that the Zambian
economy is in bad shape when the manufacturing sector is slowly being wiped out,
pointing to that sector’s central place in Zambia’s economic well-being. This is the
institutional environment that impacts the performance of manufacturing firms and
the one that is relevant to the current study.
b) Firm-Level Constraints. Post-privatization restructuring has had a critical
influence on both economic and organizational performance in many developing
countries globally. In most African countries like Zambia, restructuring has always
involved firm-level cost-cutting rather than imported systems of management
(Szirmai et al., 2002; Chirwa, 2001; Amoako-Gyampah & Boye, 2001).This was
preceded by actions taken at the macro-economic level like opening up trade,
minimizing the role of government in business by way of deregulation and
privatization, and the reduction of poverty.
At the firm level, Zambian firms face a host of problems, which make them
high-cost producers (see Table 13.1). Nearly all Zambian manufacturing firms import
some of their raw materials, which requires the buying of foreign currency, incurring
transaction fees, and possible unfavourable exchange rates. High interest charges on
long-term loans discourage investment in new technology and additional production
capacity (IMF, 2006). The cost of capital, when available, increases business costs
and hence lowers profit. More effective management may lead to the reduction of
some of these costs and improve performance. FDI may also mitigate the effects of
most of these firm-level constraints but currently Zambia and the rest of Africa
receive insignificant amounts of FDI from large multinationals compared to the rest of
the developing world (Seidman & Anang, 1992).
Zambian workers’ work-related values are a function of the prevailing macro-
environmental conditions. The result is companies with workforces that suffer from
low morale/motivation caused primarily by poor salaries and conditions of service,
lack of credit facilities, job insecurity and high mortality rates (Cheru, 1989; ABSA
Bank & ING Barings, 2002; Muuka & Mwenda, 2005).
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Table 11.1: Major Constraints Faced By Zambian F&B Firms
Constraint Frequency (Number of Firms) % Of Firms
Raw Material Cost 27 64.3
Interest Rates 23 54.8
Forex Rates 22 52.3
Inadequate Capacity 21 50
Non-Automated Technology 19 45.2
Outdated Technology (> 15 years) 9 21.4
Manual Information Processing 8 19.1
Source: Maliti, 2006.
Hence workers tend to have low commitment at work, moderate desire to succeed,
moderate performance excellence and indifference to organizational achievement.
Motivating workers for superior organizational performance is thus a challenge for
Zambian managers, requiring situation-specific management systems.
Zambian industries tend to operate in an environment that causes their constituent
firms to be high-cost producers, thus diminishing their performance.
Local solutions need to identify and enhance the performance of industries that have
the potential to bring about economic development in Zambia.
The Current Zambian Domain
The current domain of the Zambian economy is thus that of a post-privatization,
developing country, mono-economy that has been performing poorly and declining.
The effects of Zambia’s continuing unhealthy dependence upon copper mining have
now moved Zambia from being one of the richest countries in Africa and a middle-
income country in the world during the 1965-1975 decade to being classified as one
of the 12 poorest countries in the world (BBC News, 2004) in terms of elevated
poverty levels and diminished GDP.
a) Employment
Zambia is now characterized by very high unemployment levels that have
been caused by the massive company closures in the wake of the privatization
program and the general worldwide economic recession. The towns where these
companies used to operate from have now been reduced to ghost towns with a
crumbling infrastructure and widespread decay (BBC News, 2004). Shells of the
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closed companies now liter Zambia’s industrial landscape both in the urban and rural
areas and these used to be among the major generators of wealth in the country.
Zambia faces an unemployment crisis (Muuka & Mwenda, 2004). In a population of
11 million only about 400,000 are formally employed. Others may work informally.
This contributes to a population with little purchasing power. The absence of credit
facilities and high inflation also reduces the demand for goods and services.
c) The Health Sector
Healthcare is very expensive and unaffordable to most workers, causing
companies to utilize labour that is not 100 percent healthy and not physically fit. The
HIV/AIDS pandemic and other endemic diseases have aggravated this situation to
further diminish the contribution of the most important resource organizations possess
– human resources (Muuka & Mwenda, 2004).
d) Imports
Due to the massive importation of finished goods into the country, most
Zambian companies have closed down their manufacturing operations and instead
converted into trading businesses importing finished goods and going into retailing
and trading. Since trading does not create new wealth but just moves it around, this
switch amplifies the diminished wealth generation capacity of the Zambian economy.
Other companies like Dunlop found themselves unable to compete with the cheap tire
imports and their response has been to close shop, tear down their plants and ship
them out to neighbouring countries like Zimbabwe (CSU-CBU-USAID, 2001).
e) Government Revenues
The massive company closures and the consequent decline in economic
activity in the country have translated into a diminished revenue base for the
government. The result has been minimal public expenditure on things like the
maintenance of roads, schools, hospitals, the environment and other social activities.
The current business environment in the Zambian economy is therefore one of
extreme uncertainty and unfavourableness for companies to do business in.
Companies in all industrial sectors of the country have faced and continue to face
enormous challenges to sustain positive performances or to improve on their negative
performances.
f) Technology. With the difficult economic environment in Zambia, most businesses
cannot afford to upgrade their technologies, resulting in the use of outdated
technology. Having a lot of cheap labour also makes it attractive for businesses to
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utilize as much of this cheap resource as possible and only to supplement it with
technology. But it has been suggested that it is that unique capability that a firm
possesses to both utilize and transform its resources which ultimately yields superior
organizational performance (Dierickx & Cool, 1989). Appropriate technology falls in
that category of a unique capability for a given firm.
g) Landlocked Location. Zambia has no outlet to the sea except through the
countries that surround her and Mpulungu port on Lake Tanganyika (her sole inland
port). This makes the transporting of commerce to foreign markets and the sourcing of
inputs from overseas to be comparatively costly due to land transportation, thefts and
damages at the ports, etc. The end result is that the prices of goods and services end
up being higher than if the country had a direct access to the seas.
h) HIV/AIDS. Zambia is one of the countries in Sub-Saharan Africa and the world
that has been hit hard by this pandemic and, coupled with insufficient health facilities
and low incomes, has reduced the life expectancy of Zambians from 51 years in 1991
to about 44 years in 2001 (IMF, 2004). Some of those dying from this scourge are the
young, highly educated and skilled, and professional individuals.
But the situation is made to look bad to outsiders than to Zambians because
malaria, for one, kills more people and is a source of greater organizational
productivity losses in Zambia than HIV/AIDS. In comparison, economic contraction
due to the AIDS pandemic in South Africa during the 2002-2015 periods is estimated
at 2.8 to 9.6 percent of real GDP (Horwitz et al, 2004; ABSA Bank & ING Barings,
2002). No comparable figures for Zambia are available but all the same AIDS/HIV
has been acknowledged to be negatively impacting the productivity of organizations
(Muuka & Mwenda, 2004).
i) Endemic Diseases. These diseases have always afflicted Zambia even during the
colonial era, and they include malaria, bilharzias, cholera, dysentery, etc. Similar to
HIV/AIDS as mentioned above, these diseases strongly affect labour productivity and
consume most of the health resources in the country.
j) Colonial Legacy. It has already been mentioned above how Britain managed all
its colonies in a manner that the colonized saw to be only to the benefit of the
colonizer (the horse and the rider phenomenon). In this regard, Zambia’s unique
mono-economy (copper- mining based) situation can be seen as the product of the
colonial legacy.
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k) Lack of Oil Deposits. Zambia does not possess any oil deposits and all
previous oil explorations in the country have not yielded any positive results.
Hence the country has to depend upon expensive imported crude oil that is then
refined within the country.
l) Traditions and Beliefs. Some traditional beliefs and practices are not conducive
with modern business practices like the fear of witchcraft, funeral wakes which last
days, the expectation for employers to assist materially during funerals of employees
and their families, etc. (Muuka, 2004). Thus they add significantly to the cost of doing
business in Zambia.
m) Corruption. Although Zambia is not one of those countries with rampant
corruption, this scourge has been slowly coming into the country through foreigners
and the globalization process. This practice is slowly adversely affecting business
practices in the country by increasing the cost of doing business and undermining the
confidence that potential investors have in Zambia.
n) Dependency on Foreign Aid. This could arguably be one of the biggest hurdles to
economic development and growth in Zambia since it stifles national initiative,
innovation and brings about the dependency syndrome. For example, for the year
1999, Zambia received a total of $307m in balance of payments aid while official
project financing and capital inflows from private sources were $381m (IMF, 2004).
Foreign aid has both positive and negative effects and the later include African
leaders’ reluctance to face reality and solve problems on the spot but expecting
outsiders to do it for them (World Bank, 1989). This then kills both local initiative
and enterpreneurship. In Zambia, the application of foreign aid has failed because it
does not account for three critical factors: the country’s historical background,
resources, social systems and unique culture.
o) Appetite For Everything Foreign. Like most of the developing world, Zambians
have a high appetite for everything that comes from the outside. This blows up the
import bill and stifles local enterpreneurship and enterprise, thus hampering home-
grown innovation, economic growth and stability.
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p) Lack Of Capacity For Saving. Due to the high unemployment levels and
inflation being at more than 31 percent at the beginning of 1999, it has become
virtually impossible for the average Zambian to save anything. Hence consumption
takes every financial resource one possesses. But such small domestic savings
cumulatively have been the engine of economic development in most countries like
those in Asia since they end up providing much needed financial capital to the
productive sectors of the economy. Most of Zambia’s neighbours also face this
problem of a diminished saving capacity.
q) Small Population. This could arguably be the biggest handicap for Zambia in
relation to most of its neighbours. Zambia’s population is currently put at around 11
million (one of the medium ones in the sub-region) and for such a small population, a
lot of economic activity becomes unprofitable to be undertaken within the country
(World Bank, 1989). This then encourages a lot of imports that tend to be
comparatively cheaper due to scale economies.
r) Excessive Brain Drain. Zambia is one of the countries in Africa which has lost a
lot of its trained, professional and skilled manpower to neighbouring countries and
even overseas. Thus, many Zambian professors, engineers, doctors, nurses, etc. are
now working in countries like Botswana, South Africa, USA and Europe where both
the remuneration is high and the inflation is low. This same migration is happening in
other African countries like Zimbabwe, Kenya, Cote d’Ivoire, Gabon and others
(World Bank, 1989).
s) Other problems Zambia faces. These include weak institutions, lack of a national
identity and language, global recession and globalization. For our purposes, these
problems or threats are considered to be emanating from the environment that
surrounds every industry and firm in Zambia. As such they should have a moderating
effect on the efforts of organizations in Zambia to achieve superior performance and
competitive advantage within the southern African sub-region. And hence they have
to be considered in the strategy formulation process undertaken by all Zambian firms
if they have to be successful.
There is a need to obtain the right fit between the critical macro- and
micro-level factors and the chosen business strategy of a firm if superior performance
is to be obtained. This is the major managerial problem in contemporary Zambia and
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it is a challenge Zambian managers have to meet in the management of both the
public and private sectors of the economy.
11.4 SECTOR MANAGEMENT
11.4.1 The Public Sector in Zambia
Public companies comprise this sector. These are large companies whose
stocks are owned by a large number of investors, most of whom are not active in
management. Such companies are called publicly owned corporations, and their stock
is called publicly held stock.
Characteristics and Challenges
This sector has few large enterprises that enjoy the following advantages:
a) Economies of scale.
b) High credit-worthiness.
c) High access to capital resources.
d) High access to technology and latest developments.
e) Wide customer base.
f) High variety of products.
g) Some are branches of multinational corporations.
h) High access to skilled human resources and new knowledge bases.
i) Strong market leadership.
j) Strong lobbying capabilities.
But this sector is one which has a low growth rate due to high barriers to entry.
Thus, the levels of innovation tend to be moderate. On average, the economic factors
mentioned above create serious challenges for the management of this sector.
11.4.2 The Private Sector in Zambia
Some companies are so small that their common stocks ( ) are not actively
traded; they are owned only by a few people, usually the companies’ managers. Such
firms are said to be privately owned, or closely held, corporations.
Characteristics and Challenges
This sector has the majority of the companies in Zambia and most of them belong to
the informal sector. This is the sector which has seen the largest increase in growth
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over the last decade or so. Most of the companies here have a lot of constraints in
terms of the following:
a) Small production capacity.
b) Limited access to capital resources.
c) Limited access to sources of financial resources like commercial banks.
d) Poor creditworthiness.
e) Limited access to technology and technological developments.
f) Narrow information pertaining to markets and market trends.
g) Excessive dependency on local and domestic markets.
h) Limited number of products and product offerings.
i) Shortages of critical skills and knowledge in human resources.
j) High rate of business failures.
k) Low barriers to entry.
l) Highly competitive environment.
This is a sector which exhibits high levels of innovativeness. These and the other
factors already mentioned above make the management of this sector very hard.
Thus, management needs to be multi-skilled in terms of managing the enterprise
almost single-handedly.
CHAPTER 12: MANAGERIAL SELF-DEVELOPMENT
12.1 INTRODUCTION- THE NEW BUSINESS REALITY
As even the casual observer of today’s business scene can attest, large
corporations are locked in battles for their very survival. Whatever the reason for
struggling in today’s business environments, the effect is the same: increased
competition.
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While many organizations have ceased to exist over the years, many that have
continued in business have done so only after flirting with bankruptcy or merger.
Such a failure rate is not surprising considering that the competitive marketplace –
both domestic and international – keeps changing at a dramatic rate.
The harsh realities of this new competitive environment have dictated new rules for
corporate managements. They have been forced to downsize their companies, to
streamline operations, to make their management more flexible, to rethink and
revamp their strategic direction, and to become more focused and disciplined in their
implementation of strategies.
Executive Development
Def.: Development is defined as any activity that broadens managers’ knowledge and
experience and helps them enhance their capabilities.
Management development is the problem of how an organization can influence the
beliefs, attitudes, and values of an individual for the purpose of “developing” him, i.e.
changing him in a direction which the organization regards to be in his own and the
organization’s best interests.
Adequate managerial performance at the higher levels is at least as much a matter of
attitudes as it is a matter of knowledge and specific skills. The acquisition of such
knowledge and skills is itself in part a function of attitudes. But there are just a few
studies of how a person:
develops loyalty to a company, commitment to a job, or a professional
attitude toward the managerial role;
how he comes to have the motives and attitudes which make possible the
rendering of decisions concerning large quantities of money, materials and
human resources;
how he develops attitudes toward himself, his co-workers, his employees, his
customers, and society in general which give us confidence that he has a
sense of responsibility and a set of ethics consistent with his responsible
position, or at least which permit us to understand his behaviour.
An Agenda for Self-Development
Self-improvement and self-development are more important than ever considering the
new employment contract.
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Definition: An employment contract is the written and implied expectations between
employer and employee.
The employer expects the employee to be a creative self-starter and team-player
capable of doing a variety of jobs with a diverse array of people. He is also expected
to take charge of his own career and act more like a partner than an employee. His pay
will be tied to results, not to years on the job.
For employees committed to life-long learning, working smarter rather than harder,
and making their own opportunities, the new employment contract is a positive
situation. Organizational life will give them more opportunities to grow and be
rewarded for creating value for internal and external customers.
Thus, corporate handholding up each rung of a well-defined career ladder has become
a thing of the past. Now, employees are told they “own their own employability”.
They must make the best of themselves and any opportunities that may come along.
Employees are also told that “no one is more interested or qualified when it comes to
evaluating your individual interests, values, skills, and goals than you are”.
The new age of career self-management challenges a manager to do a better job of
setting personal goals, having clear priorities, being well organized, skilfully
managing one’s time, and developing a self-learning program.
12.2 HOW EXECUTIVES LEARN
A good deal of executive education no longer takes place in the classroom.
Thus, a common element in the new methods of executive education is the use of
experiential learning. This includes outdoor learning, feedback, customer
involvement, and business simulation.
Outdoor Experiences: Most outdoor learning programmes can be grouped into two
general categories. The first focuses on challenging and pushing the participant both
mentally and physically, often beyond his limits, with the secondary purpose of
teaching teamwork and leadership. Participants are encouraged to take risks, to
overcome fear, and to assume personal challenges that stretch their capabilities.
Teaching vehicles include mountain climbing, rafting and surviving in the wilderness.
The second category of outdoor experience focuses on the development of leadership
and teamwork and uses the outdoors merely as the environment in which this learning
takes place. These programs do not push people to their limits. Rather, the message is
that tasks often need teams to accomplish them, and teams usually need leaders.
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The goal is to place people into situations where they are learning by doing, where
there is immediate feedback and where their actions have immediate consequences.
Feedback: This involves receiving feedback about your own management style and
behaviour. This feedback comes from subordinates and peers on their effectiveness.
Increasingly large corporations are concerned not only with the results their
executives achieve but with the values, management style, and leadership skills they
need to achieve them.
Virtually every large corporation has expended a great deal of time and effort on
agreeing to and articulating a set of corporate values. Virtually all of these value
statements include references to the primacy of the customer, the criticality of human
resources, the commitment to research and development, and the determination to
deliver value to the shareholders. The trick is in taking these well-intentioned but
general words and translating them into specific management actions, behaviours, and
expectations, and then providing feedback to the individual executive.
Customer Involvement: This is based on the realization that the customer, and the
customer alone, ultimately determines the success or failure of any business
enterprise. Due to foreign competition and deregulation corporations have learnt the
bitter lessons of turning their backs on what the customers wanted.
Customer-focused companies have been found to have two common denominators
that made them different – intensive, active involvement on the part of senior
management and a high degree of feedback, exhibited by a willingness to listen to the
customer.
Combining these two principles – senior management involvement and customer
feedback – has become a key element in executive development programs for several
of America’s leading corporations. We are all drawn toward people who make us feel
important. Thus, customers tend to gravitate to companies that make it clear they want
to satisfy and please as much as they want to make a sale. There is need to establish
that feeling with a customer and build it into a long-standing relationship.
Business Simulations: This is a natural response to the increasing demand for more
hands-on and results-oriented developmental experiences. Just as children learn
through playing, thousands of executives today are playing real-life management
games intended to modify behaviours, provide insights, and thus improve their craft
as individuals and the fortunes of their companies. These games all operate on a
single premise – you learn best by doing.
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Good management, the theory goes, is not an inherent skill. You may be able to learn
the concepts in a classroom setting, but you have not really learned them until you
have put them into use. The emergence of business simulations is one concrete way to
help managers do this. Participants learn that good management is a fine art, requiring
a delicate balance involving managerial decisions.
12.3 MANAGERIAL DEVELOPMENT: THE CORE DEVELOPMENT
SEQUENCE
Executive and management development has been divided into five distinct
phases, which are called the Core Development Sequence.
Development Stage I: All new professional hires attend the Corporate Entry
Leadership Conference I within six months of their hire date. This focuses on
individual and company values and integral to the experience is networking.
Participants get to meet their peers and exchange views with general managers and a
vice chairman of the board.
The Corporate Entry Leadership Conference II comes in their third year. Here the
focus shifts to the competitive context and the individual employee’s role in helping
the company achieve its vision.
Development Stage II: All newly appointed managers attend the New Manager
Development Program. There they concentrate on basic management skills, business
knowledge, values, and leadership ability.
Development Stage III: This phase is for about 300 to 400 persons who are
perceived as moving towards the top positions in the organization. The development
work includes advanced programs in financial management, human resources,
information technology, and marketing. Also developed is the ability to work on a
cross-functional basis.
Development Stage IV: By this stage, the top performers have been “narrowed
down” to 150. The program includes several month-long, intensive learning
experiences in how to lead large, complex organizations.
Development Stage V: Reserved for the fifty top executives who have made it to the
corporate office rank, this workshop, in which the CEO participates, focuses on major
business issues. The expectation is that action plans will be developed and
implemented.
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12.4 THE SEVEN HABITS OF HIGHLY EFFECTIVE PEOPLE
Covey, in his best-selling book “The 7 Habits of Highly Effective People”, has
given managers a helpful agenda for improving themselves. Covey refers to the seven
habits, practised by truly successful people, as “principle-centred, character-based”.
The first step for those practising Behaviour Self-Management is to pick one or more
of the seven habits that are personal trouble spots and translate them to specific
behaviours. For example, “think win/win” might remind a conflict-prone manager to
practice cooperative teamwork behaviours with co-workers. Habit number five might
prompt another manager to stop interrupting others during conversations.
Table 12.1: Covey’s Seven Habits – An Agenda for Managerial Self-
Improvement and Self-Development
1. Be Proactive. Choose the right means and ends in life, and take personal
responsibility for your actions. Make timely decisions and make positive progress.
2. Begin with the End in Mind. When all is said and done, how do you want to be
remembered? Be goal oriented.
3. Put First Things First. Establish firm priorities that will help you accomplish your
mission in life. Strike a balance between your daily work and your potential for future
accomplishments.
4. Think Win/Win. Cooperatively seek creative and mutually beneficial solutions to
problems and conflicts.
5. Seek First to Understand, Then to be Understood. Strive hard to become a
better listener.
6. Synergize. Because the whole is greater than the sum of its parts, you need to
generate teamwork among individuals with unique abilities and potential. Value
interpersonal differences.
7. Sharpen the Saw. This is the habit of self-renewal, which has four elements.
The first is mental, which includes reading, visualizing, planning, and writing.
The second is spiritual, which means value clarification and commitment, study, and
meditation. Third is social/emotional, which involves service, empathy, synergy and
intrinsic security. Finally, the physical element includes exercise, nutrition, and stress
management.
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REFERENCES
A. REQUIRED READING
1. Albanese, R. (1988): Management, South Western Publishing Co.
2. Cole, G.A. (1996): Management Theory and Practice, Fifth Edition, DP
Publications.
3. Kreitner, R. (2004): Management, Ninth Edition, Houghton Mifflin
Company, NY: New York
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4. Bittel, L. R., Newstrom, J.W. (1990): What Every Supervisor Should Know,
6th Edition, McGraw-Hill, NY: New York.
B. OTHER BOOKS
1. Boydell, T., Peddler, M. (Eds.) (1984): Management Self-Development –
Concepts and Practices, Gower.
2. Covey, S. R. (1989): The Seven Habits of Highly Effective People, Simon
& Schuster.
3. Drucker, P.F. (1993): Post-Capitalist Society, Butterworth/ Heinemann.
4. Mwanalushi, M. (1992): Motivation for Development – Enhancing
Organizational Effectiveness, Mission Press: Ndola.
5. Oakland, J. S. (1993): Total Quality Management- The Route to Improving
Performance, Second Edition, Butterworth/ Heinemann.
6. Peters, T. J. (1988): Thriving on Chaos – Handbook for a Management
Revolution, Macmillan.
7. Peters, T. J. (1992): Liberation Management – Necessary Disorganization
for the Nanosecond Nineties, Pan Books.
8. Kreitner, R., Kinicki, A. (2001): Organizational Behaviour. Fifth Edition,
Irwin McGraw-Hill, Boston.
9. Bolt, J.F. (1989): Executive Development – A Strategy for Corporate
Competitiveness. HarperBusiness, New York: NY.
10. Vicere, A.A. (1989): Executive Education – Process, Practice and
Evaluation. Peterson’s Guides, Princeton: NJ.
11. Maliti, B. (2006): Examining Performance Variables in the Zambian Food
and Beverage Industry Using The Action-Profit Linkage Model. Unpublished
DBA Thesis, Cleveland State University, Ohio, USA.