Business Management and Change
1.1 The Importance of Effective Management
Essential to the ultimate success of a business ? Coordinate the efforts of employees; allocate informational, physical and financial resources.
Effectiveness- refers to the ability of a management to achieve agreed objectives.
Efficiency- refers to how cost effectively the operations of the organisation are coordinated.
Levels of management
Top- individuals responsible for making business wide decisions and establishing the policies and strategies that affect the entire organisation ? make decisions holistic basis.
Middle- levels of management between top and supervisory management ? provide strategic direction and leadership and are responsible for sections of the business
Supervisory- responsible for implementing the plans of higher management into daily operations
‘Good managers visualize the organisation as a whole’
1.2 Management Roles
Figurehead- Symbolic head to perform legal or social duties ? signs documents, greets visitors
Leader- Deals with people, motivating, training and staffing ? directs subordinates
Liaison- Foster’s relationships with outside contacts ? responds to clients, external work
Monitor-Establishes and maintains an informational network ? Reads trade journals, internal reports
Disseminator- Transmits information to members of the organisation ? holds meetings, phone calls
Spokesperson- Transmits information to outsider’s ? holds board meetings, media work
Entrepreneur- analyses and exploits opportunities to improve and change ? Organizes strategies, review sessions
Disturbance handler- Responsible for corrective action in periods of crisis ? Develops corrective plans
Resource allocator- Allocates material or human resources to all projects? Staffing, scheduling, budgeting
Negotiator-Represents the organisation in all negotiations ? union wages, contracting
1.3 Skills of Management
1. Technical Skills
Tasks carried out in a certain specialized field e.g. engineering, IT, finance etc.
Give managers the knowledge and proficiency in a particular area, not just to carry out tasks if necessary but to plan and coordinate the tasks of the workers in that area.
2. Interpersonal skills
‘People skills’ how managers interact with people both in and out of the organisation. Managers must understand the needs and motivations of their subordinates. Interpersonal skills are vital to all levels of management.
3. Conceptual Skills
The ability to view and analyze situations at an abstract level ? looking at a situation from outside their normal role and responsibility ? understanding how various parts of the organisation work together and how it is affected by external conditions.
Vital to the decision- making process, allowing the formulation of plans and establishment of contingency procedures to limit damages from downturns or crisis.
Giving others a shared sense of direction allowing them to attain a common goal.
Modern Management Approach
Flexibility and adaptability to change
High personal standards
Complex problem solving
1.4 Responsibility to Stakeholders
Two views as to where the management’s primary loyalty should lie.
1. Management has a primary responsibility to maximize the wealth of owners.
2. Management is responsible to many stakeholders, not just shareholders.
Conflicts between stakeholders
Customers and Shareholders
General public and Shareholders
Owners and Suppliers
Owners and Management
2.1 Management Theory
‘The systematic study of the principles of good management’
Aims to select and design the tasks of workers to maximize the business’s productivity.
Objective of maximizing employee productivity through division of labor and training workers in efficient methods.
Division of Labour- each worker performs a specialized task to increase overall productivity.
Differential rate system of pay
‘Rational Man’ ? people are principle motivated by the desire for more money
Management as planning, organizing and controlling
Planning- determining the goals and objectives for the business and the strategies required to achieve its objectives.
- Defining goals/objectives
- establishing a strategy for achieving the objectives
- Developing plans to integrate and coordinate activities
Organizing- Designing a business’ processes and structure in a way that best achieves the business’ objectives.
- what tasks are to be done
- how the tasks will be allocated and coordinated
- how the results and feedback will be reported
- who will have authority
Controlling- Checking that what meant to happen did happen, and putting measures in place to do this or fix any variations.
Hierarchical organizational structure based on the division of labour
How different functions and responsibilities are grouped and allocated within a business.
Based on Division of Labour
Strict Chains of Command
Rigid Lines of communication
Several level of management
Clear lines of authority and communication
Autocratic leadership Style
A manager who tends to centralize decision making, dictate workplace policies and procedures. Employees have minimal participation in decision making. Used in Military, Emergency services. Workers questioning orders in these situations could lead to danger, decisions need to made quickly and be followed without question.
Strengths and Weaknesses of theory
High productivity ? division of labour, workers desire for more pay
Promoting efficiency and eliminating waste
Managers carefully select and train workers
Performance related pay
Lead to overspecialized jobs? boredom and resentment by workers? poor work quality, sickies, high worker turnover.
Results in layoffs
Workers doing more than being paid for
Too heavy focus on financial incentives instead of workers more social needs.
2.2 Behavioral management theory
The school of management theory that focuses on a workers satisfaction, moral and social interaction as the key influences on productivity.
‘Social man’ workers behaviour is affected by their social context and by their interpersonal relationships.
1. Paying attention to workers’ needs improves their satisfaction and morale this in turn increases their productivity
3. Worker motivation and productivity depend on social relations with other workers
Psychological and social forces are just as important to workers productivity as managerial control over the technical and economic factors emphasized in the classical theory.
Lessons for management
- More humane management work practices
- Recognize the importance of people skills and management style
- Create a partnership between managers and workers
- Remove rigid hierarchical structures.
Management as Leading, motivating and communicating
Leadership- ability to influence a group towards the achievement of goals. A manager must direct, motivate and communicate with people and resolve conflicts.
Motivating- encouraging people to meet goals of the organisation
Communication- Managers must keep all workers aware of relevant information and communicate their goals for the business in order to create a shared vision and common drive amongst workers.
Flat organizational structure and teams
Workers don’t require strict supervision or frequent instructions; maximum productivity can be achieved by providing workers with appropriate motivation and work environment conducive to collaboration, communication and creativity.
Removing levels of Middle Management or flattening the management structure
Thus giving managers a wider span of control.
Multi-Skilling- training workers in a range of skills which enable them to perform all tasks in their unit ? workers perform a variety of functions, gives a broader understanding of the operations of the business.
- Creates and promotes cooperation and improve employee morale
- Allows management to think strategically
- Increases flexibility
- takes advantage of workplace diversity
- increases performance
Participative/ democratic leadership style
Workers should be involved in the decision making process and have some degree of control over how their job is performed.
Manager involves subordinates in decision making
Subordinates have the authority to make some decisions
participation is encouraged in deciding work methods and goals
Feedback is used as an opportunity for coaching subordinates.
Strengths and Weaknesses of theory
Focuses on group dynamics
Understanding source of workers motivation
Managers need good interpersonal skill as well as technical skills
Provides counterbalance to classical
Vague and simplistic
Link between job satisfaction and morale and productivity
2.4 Political management theory
The philosophy that seeks to understand the nature and source of power in a business, the theory describes how politics in the workplace influence business management.
Political management theory is concerned with how manages can use their power and influence to manage on organisation and the problems can arise.
· Acknowledges that managers may disagree over goals of the business or the priority of different goals. Encourages formation of coalitions to promote different view points.
· Emphasizes the concept of power recognizing that real power does not always come from position in a formal hierarchy. Focuses on how power should be exercised.
· Recognizes that manager’s self-interest may conflict with interests of business.
The concept of power
“Power is the capacity of one party to influence another to do something they would not other wise do”
- Power is the potential to influence
- Power is the function of dependency
- Those who are subjected to power do not necessarily accept it as right or fair
- ‘Parties’ can be individuals, groups, departments, associations, institutions or countries.
- Subordinates can have power over their managers.
- No official rules of hierarchies
Organizational characteristics that encourage political behaviour-
intense competition over resources
unclear rules regarding employee policies and rules
performance evaluation processes
culture ? low trust, pressure to perform well
Use of power and influence
Coercive- The threat of punishment for undesirable behaviour
Reward- The promise of rewards for desirable behaviour
Legitimate- A formal position in the hierarchy
Expert- Having special expertise, skill, knowledge or talent
Referent- The respect and admiration of others
Management as negotiating and bargaining
Power can be held by non-management parties
E.g. unions or employees
Thus managers must be able to negotiate and bargain effectively so best outcome achieved. Reaching compromises between parties who hold different power and objectives.
Structure as coalitions
Alliances of individuals united by shared goals and formed with a view to command greater power.
- Often a single key group ? Dominate coalition. Different groups all vie for this position at different times this may lead to instability
- Dominate coalitions try to cling to power even after they have outlived their usefulness
- Support of coalition needed to agree on decision and implementation. this requires political obeying and negotiating and barraging
Politics create intense competition which helps stimulate new ideas although it leads to low level employee satisfaction and workers may be distracted by engaging in political infighting.
Strengths and Weaknesses of theory
Realistic view on how management decisions take place
Emphasizes that rationality does not always take place and variety of other forces can came into play.
Importance of power
Explains power plays of managers
Acts as more as description rather than a theory.
Offers little practical advice to managers
Does not revel if political activity is a good or bad thing for the performance of the organisation.
2.6 Adapting management theory to circumstances
Views the business as a working system and studies how its components interact.
The whole is greater than the sum of its parts ? synergy
- internal activities in a business are interdependent
- business is interdependent with its outside environment
Aims to determine which techniques of management are appropriate in different circumstances. Acknowledges that what may work well in one situation my not be effective in another? management style must be contingent on particular circumstances.
Identifying the situation in which each theory applies.
3.1 Nature and source of changes in business
Changing nature of markets ? globalization
One-off abnormal circumstances
Effects of accelerating technology ? e-commerce
New Systems or procedures
New business cultures
Structural responses to change
Outsourcing ? the purchase of services, from a third party rather than the business performing the service itself.
· save on labour costs or floor space rent
· Enable business to fulfill a temporary or fluctuating demand for a particular service.
· provide a better quality service
Flat organisation structures
Strategic alliances and networks ? two or more business join together to achieve particular goals.
- Sharing technology
- expanding into new geographical markets
- increase business customer bas by drawing on partners product base
- Transferring customers between related businesses e.g. hotel and rental car company.
3.2. Reasons for resistance to change
· Purchasing new equipment
· redundancy payouts
· reorganizing plant layout
Inertia of managers and owners
The lack of desire to change and the tendency to remain in a state of inactivity
“If it ain’t broken why fix it” approach.
Business can miss out on opportunities to increase market share, introduce new products etc Business will also go unnoticed.
Change agents must be introduced “creative individuals who can anticipate the need for change and have the analytical skills to know how to implement change.
Cultural incompatibility in mergers takeovers
- Job losses
- new work groups formed
- new management
- new procedures
- different or clashing business cultures
- acquiring new skills
- loss of career prospects/ promotional opportunities
3.3 Managing change effectively
Identifying the need for change
Setting achievable goals
Creating Culture of Change
Business accepts change as a continual state and is constantly looking for ways to reinvent itself or improve effectiveness/efficiency.
- identify areas of organisation that require or are resistant to change
- communicate to staff why change needs to happen
- Promote managers who can implement change effectively
- lead by example in adopting new cultural values/principles
- implement evaluation and reward system
3.4 Change models
Change as a state of imbalance between driving forces and restraining forces. Looking at nature and source of change ? reasons for resistance to change.
Driving forces and restraining forces are in equilibrium if they are of equal strength ? unchanging state.
Find a way to disturb the equilibrium, either by increasing the driving forces of weakening the restraining forces or both.
1. Persuade staff to be receptive to possibility of change ? highlight and address areas of concern
2. Once managers/workers desire change then solution is forwarded and acted upon ? must be done as soon as possible before resistance builds up again.
3. To ensure change is permanent new procedures must be formalized ? structure, technology, employees. Freeze behaviour.
3.5. Change and social responsibility
Quality of working life
Globalization and managing cultural diversity