Download File

CLASSIFICATION OF MANAGEMENT
FUNCTIONS
•
MANAGEMENT FUNCTIONS
Managerial functions
a) Planning
b) Organizing
a) Staffing
b) Directing
c) controlling
Operational functions
a) Production
b) Marketing
c) purchasing
d) Financing
e) Personnel
Management Process
MANAGEMENT PROCESS
STAFFING
PLANNING
DIRECTING
ORGANISING
MBO-Management by Objectives
• The concept was introduced by Peter Drucker in 1954.
• It sis a practice for accomplishing the objectives of an
organization in effective way.
• It is also known as management by results and goal
setting approach.
• It is an approach to management planning and evaluation
in which specific targets for a year, or some other length
of time, are established for each manager, on the basis
of the results which each must achieve if the overall
objectives of the company/organization are to be
realized.
• At the end of this period, the actual results achieved are
measured against the original goals, i.e. against the
expected results which each manager knows he is
responsible for achieving.
SMART Principle for Defining
Goals
S- Simple/Specific
M-measurable
A-Achievable
R-Realistic
T- Time bound
Organizing
• According to Henri fayol “To organise a
business means to provide it with
everything useful to its functioning-raw
materials,tools,capital and personnel”
Definition of Organizing
• “Organizing is the process of
identifying and grouping the work to
be performed
• defining and delegating responsibility
and authority
• and establishing relationships for the
purpose of enabling people to work
most effectively together in
accomplishing objectives.”
Louis Allen
Features of Organization
1. An Organization connotes group of persons:
McFarland has defined organization as an identifiable group
Of people contributing their efforts towards attainment of
goals.
2. Communication is the nervous system of organization:
The organizational members are able to communicate with
each other and they coordinate their activities. No
organization can survive without an efficient system of
communication.
3. Organizing is a basic function of mgt.: It is essential
for the achievement of organizational objectives.
Organizing is done in relation to all other functions of
mgt., namely, planning, staffing, directing & controlling.
• Is performed by all managers.
4. Organizing is a continuous process: It is not a one step
function. Managers are continuously engaged in organizing
and re-organizing.
5. Organizing is always related to objectives: Whether it
is organization of the entire enterprise or a part of it,
organizing is influenced by objectives.
• The operations are divided & authority & responsibility
are determined to achieve predetermined objectives.
6. Organization connotes a structure of relationships:
The structure of relationships created by mgt is referred
to as ‘formal organization’.
• But an org. also includes the network of social
relationships that arise between people working together
known as ‘Informal organization’.
7. Organization involves a network of authority &
responsibility relationships: Various positions are
created & specific tasks are assigned to them.
• To perform the tasks, each position is delegated
adequate authority. Authority & responsibility
relationships must be clearly defined to avoid conflicts.
A manager performs
Organizing function with the help
of following steps:-
1. Identification of activities - All the activities which
have to be performed in a concern have to be
identified first.
For example, preparation of accounts, making sales,
record keeping, quality control, inventory control, etc.
All these activities have to be grouped and classified
into units.
2. Departmentally organizing the activities - In this
step, the manager tries to combine and group similar
and related activities into units or departments. This
organization of dividing the whole concern into
independent units and departments is called
departmentation.
3. Classifying the authority - Once the departments
are made, the manager likes to classify the powers and
its extent to the managers.
• This activity of giving a rank in order to the managerial
positions is called hierarchy. The top management is
into formulation of policies, the middle level
management into departmental supervision and lower
level management into supervision of foremen.
• The clarification of authority help in bringing
efficiency in the running of a concern. This helps in
avoiding wastage of time, money, effort, in avoidance
of duplication or overlapping of efforts and this helps
in bringing smoothness in a concern’s working.
4. Co-ordination between authority and responsibility
• Relationships are established among various groups to
enable smooth interaction towards the achievement of
the organizational goal.
• Each individual is made aware of his authority and
he/she knows whom they have to take orders from and
to whom they are accountable and to whom they have
to report.
• A clear organizational structure is drawn and all the
employees are made aware of it.
Importance of organizing
1. Specialization - Organizational structure is a network
of relationships in which the work is divided into units
and departments. This division of work is helping in
bringing specialization in various activities of concern.
2. Well defined jobs - Organizational structure helps in
putting right men on right job which can be done by
selecting people for various departments according to
their qualifications, skill and experience. This is helping
in defining the jobs properly which clarifies the role of
every person.
3. Clarifies authority - Organizational structure helps in
clarifying the role positions to every manager.
•
This can be done by clarifying the powers to every
manager and the way he has to exercise those powers
should be clarified so that misuses of powers do not
take place.
•
Well defined jobs and responsibilities attached helps in
bringing efficiency into managers working. This helps in
increasing productivity.
4. Co-ordination - Organization is a means of creating coordination among different departments of the
enterprise.
• It creates clear cut relationships among positions and
ensures mutual co- operation among individuals.
• Authority responsibility relationships can be fruitful
only when there is a formal relationship between the
two.
•
• Clarity should be made for having an ultimate
responsibility attached to every authority.
•
• There is a saying, “Authority without responsibility leads
to ineffective behavior and responsibility without
authority makes person ineffective.” Therefore, coordination of authority- responsibility is very important.
5. Effective administration - The organization structure
is helpful in defining the jobs positions.
• The roles to be performed by different managers are
clarified.
• Specialization is achieved through division of work. This
all leads to efficient and effective administration.
6. Growth and diversification - A company’s growth is
totally dependent on how efficiently and smoothly a
concern works.
• Efficiency can be brought about by clarifying the role
positions to the managers, co-ordination between
authority and responsibility and concentrating on
specialization.
• In addition to this, a company can diversify if its
potential grows. This is possible only when the
organization structure is well- defined. This is possible
through a set of formal structure.
7. Sense of security - Organizational structure clarifies
the job positions. The roles assigned to every manager
are clear.
•
Co- ordination is possible. Therefore, clarity of powers
helps automatically in increasing mental satisfaction and
thereby a sense of security in a concern. This is very
important for job- satisfaction.
Organization Structure
• An organization structure denotes the authority &
responsibility relationships between the various positions
in the organization by showing who reports to whom.
• It is a set of planned relationships between physical
factors & personnel required for the achievement of
organizational goals.
• The structure of an organization is generally shown on an
organization chart or a job-task pyramid. It shows
authority & responsibility relationships between various
positions in the organization.
Developing Organization
Structure
• Two types of structural variables:
1. Basic Structure: involves such central issues as how
the work of the org. will be divided & assigned among
positions, groups, departments, divisions etc. & how the
coordination necessary to achieve organizational
objectives will be brought about….?
2. Operating Mechanism: includes such factors as
information system, control procedures, rules &
regulations, system of reward & punishment, etc.
The development of structures deals with two facts:
i. The functions which are to be performeddetermining activities, division of these using degree
of specialization.
ii. The form of structure- detailed study & analysis
Determining kind of Structure
• Org. structure is an indispensable means towards
business objectives.
• Wrong structure will seriously deter the enterprise from
achieving its objectives.
• Peter Drucker has suggested 4 specific ways to find
out what kind of structure is needed to attain the
objectives of a specific business:
1. Activity Analysis: It helps to find out what work has to
be performed, what work belongs together & how each
activity should be emphasized in the org. structure.
• Example-marketing, personnel, finance, operations, etc.
2. Contribution Analysis: on the basis of the kind of
contribution they make, activities can be grouped into 4
categories:
i. Result producing activities, which directly brings
revenue.
ii. Support activities generate output which contribute
result.
iii) Hygiene & House keeping activities contribute
nothing directly to the result of the business but
their malfunction can, however, damage the
business.
iv) Top mgt activities are those, which are carried out
by higher levels of mgt.
3. Decision Analysis: It determines what kind of decisions
are needed, where in the organization they should be
made & how each manager should be involved in them.
Basic characteristics determine the nature of any
business decision:
a) Degree of futurity in the decision
b) Impact of decision on other functions, areas or
business as a whole.
c) The number of qualitative factors that enter like
political beliefs, values, ethics, etc.
d) Whether decisions are recurrent or rare recurrent
4.Relations Analysis: It tells us where a specific
component belongs, it is finding the contribution each
manager must make to programmes, with whom he
works & what contribution other manager must make
to him.
Span of Management
• The term span of mgt is also known as span of control,
span of supervision and span of authority.
• It represents a numerical limit of subordinates to be
supervised and controlled by a manager.
• This principle is based on the theory of relationships
propounded by V.A. Graicunas.
• Span of control refers to the number of subordinates an
executive can supervise.
Flat/Wider Span of Mgt
• If a manager has more number of subordinates under
him, it is called wide span of management.
• It results into fewer levels of org. and gives rise to Flat
Structure.
Advantages
1. It can shorten the line of communication between the
bottom and the top levels.
2. Communication route is simple, direct and clearly
apparent to individuals.
3. Flat structure adopts mgt by results and leads to high
morale of managers.
4. Flat structure puts a premium on mgt development and
training programmes.
5. Due to limited number of levels of mgt there is direct &
short chain.
Disadvantages
1. Supervision and control may be unsatisfactory if the
span of control is too large.
2. Coordination may be poor or difficult.
3. Cost of training may be high.
4. Flat structure is not suitable in large manufacturing
concern or when the business has been developed
vertically.
Flat Org Structure with Wide Span
Tall/Narrow Span of Mgt
• The narrow span of mgt refers to less number of
subordinates directly supervised by a superior.
• It results into more levels in the org. and hence leads to
tall org. structure.
Advantages
1. Tight control and supervision.
2. More time to think of future.
3. Effective performance even by lower quality managers
due to better management by the boss.
Disadvantages
1. Higher executive payroll.
2. Red Tapism.
3. Too many levels in the structure chocking
communication.
4. Employee morale may be low.
5. In effective, inaccurate and incomplete
communication.
Limited scope for management development and training.
Tall Org Structure with Narrow
Span
A
B
E
C
F
G
D
H
I
J
K
5 July 2017
NATURE OF ORGANIZING
L
32
Factors Affecting Span of
Control
1. Ability of the Managers- Individuals differ in various
qualities like leadership, decision making & communication.
The span may be wider if the manager possesses these
skills in greater degree as compared to others.
2. Time Available for Supervision- The span should be
narrow at higher levels because top managers have less
time available for planning, organizing, directing and
controlling.
3. Nature of Work- When the spans are narrowed, the
levels in the organization increase. This involves
delegation of authority and responsibility. If work is of
routine nature it can be easily delegated.
4. Ability of Employees/Subordinates- If subordinates
are skilled, efficient and knowledgeable, they will
require less supervision. In such case, the supervisor
may go in for a wider span.
5. Well defined Authority & Responsibility- If the
authority & responsibility of each employee are
properly defined and if there are clear policies and
procedures, they need not make frequent calls on the
supervisors for guidance and instructions. This helps a
superior to manage a large number of
subordinates.(wider span)
6. Geographic Location-If all or most of subordinates
are located in close proximity of superior, rather than
dispersed in different geographical areas, a manager
can have wider span of control.
7. Effectiveness of Communication- An effective system
of communication in the organization favors large
number of levels because there will be no difficulty in
transmission of information in spite of a large number
of intervening layers.
8. Control Mechanisms- The span of control also depends
upon the control mechanism being followed. Control may
be followed either through personal supervision or
through reporting. The former favors narrow span of
control and the latter favors a wider span.
What Is Authority?
• Authority is the right or power to command and control
the subordinates.
• It is granted to a position for the achievement of
organizational objectives.
• The authority may be exercised through persuasion or
sanctions. If subordinate does not obey, the superior
has a right to take disciplinary action.
What is Responsibility?
• Means the work or duties assigned to a person by virtue
of his position in the org.
• The person carrying the responsibility for the
performance of a given task has also the authority to
perform it.
What is Accountability?
 It is the obligation to carry out responsibility and
exercise authority in terms of performance.
 For accountability to be effective, the standards of
performance should be determined before entrusting a
task and should be understood and accepted by the
subordinate.
Difference Between Authority &
Responsibility
Authority
1.
Responsibility
What is Delegation of Authority?
• Delegation is a matter of entrusting a part of work to
others.
• Delegation results in the establishment of a hierarchy of
tasks and authority-responsibility relationship through
organization.
Need for Delegation
1. Lack of time or energy- a human being has limited time
& energy. The only way he can achieve more work is
through delegation i.e. through dividing his workload and
sharing his duties or responsibilities or tasks with other.
2. Complex and Intricate Techniques- The complexities
and intricacies of org demand special expertise. The line
executives delegate a part of their work to staff
specialists.
3. Geographic Dispersion- large scale business has a
network of branches spread over a wide area. Delegation
of authority is the best way to manage the diversified
and dispersed business effectively.
4. Method of Motivation- since delegation implies
employee participation in decision making, therefore it
invokes greater interest and enthusiasm in subordinate.
They take the challenges positively.
5. Management Development- the need for training for
mgt succession is one vital reason for delegation of
authority in a big org. delegation offers ample scope for
seld advancement and self expression.
What is Centralization &
Decentralization?
•
Centralization and Decentralization refers to a degree
of delegation of authority-responsibility to lower levels
of org.
• Centralization is the systematic and consistent
reservation or withholding of authority at control points
within an org.
• If authority is not delegated, it is centralized. If those
doing work cannot decide but the decisions are made at
point higher in the org. It denotes centralization of
authority.
Advantages of Centralization
1. Better coordination-in centralization the authority is
used at one point only, therefore coordination becomes
easy.
2. Quick decision making- authority is concentrated at
the top , therefore, quick decision making is possible.
3. Economy of time & cost- helps to eliminate overlapping
or duplication of activities. It can thus lead to sufficient
saving of time & money.
4. Talent Utilization- centralization helps in fuller
utilization of talents of outstanding executives for the
enterprise as a whole.
5. Enforcement of Policies-in centralization the decisions
and controls are largely centralized, therefore uniformity
of policies and procedures can strictly be enforced.
Decentralization: when the org is large and complex, mgt
cannot centrally control all information necessary for
decision. The practical solution is to divide the org into
semi-autonomous decision making units and we have
multiple decision centers spread over in the org.
structure.
Advantages of Decentralization:
1. Frees Top Management
2. Executive Development
3. Better and Speedier Decisions
4. Possibilities of Diversification
5. Improvement of Morale
6. Permits Mgt by Objectives
Departmentation
• Departmentation represents the pattern of grouping
activities.
• Similar activities intimately related with a distinct
function are grouped to form larger administrative units
such as departments & divisions.
• It aims at achieving unity of direction, effective
communication, achieving, coordination and control.
Bases of Departmentation
a. Functional
b. Geographical
c. Product
d. Process
Departmentalization by
Type
• Functional
– Grouping jobs by
functions performed
• Product
– Grouping jobs by
product line
• Geographical
– Grouping jobs on the
basis of territory or
geography
• Process
– Grouping jobs on the
basis of product or
customer flow
• Customer
– Grouping jobs by type
of customer and needs
Exhibit 10–2
Functional Departmentalization
• Advantages
• Efficiencies from putting together similar specialties and
people with common skills, knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals
Exhibit 10–2 (cont’d)
Geographical Departmentalization
• Advantages
• More effective and efficient handling of specific
regional issues that arise
• Serve needs of unique geographic markets better
• Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas
Exhibit 10–2 (cont’d)
+
+
+
–
–
Product Departmentalization
Allows specialization in particular products and services
Managers can become experts in their industry
Closer to customers
Duplication of functions
Limited view of organizational goals
© 2007 Prentice Hall,
Inc. All rights
10–50
Exhibit 10–2 (cont’d)
Process Departmentalization
+ More efficient flow of work activities
– Can only be used with certain types of products
Exhibit 10–2 (cont’d)
Customer Departmentalization
+ Customers’ needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals
Types of Organization
Structure
A) Formal Organizations- The formal organization is a
system of well-defined jobs, each bearing a definite
measure of authority, responsibility and accountability.
• Formal organization is a system of consciously
coordinated activities or two or more persons toward a
common objective.
Features of Formal Organizations
• Deliberately planned and created
• Concerned with the co-ordination of activities
• Hierarchically structured with stated objectives
• Based on the specification of tasks and defined
relationships of authority & responsibility.
• It lays down rules & procedures needed to achieve the
objectives.
•
Efforts of various departments are coordinated,
interlinked and integrated.
Advantages of Formal Organizations
• Easy to fix accountability.
• No ambiguity in the role; avoids duplication of efforts.
• Behavior of employee is predictable.
• Established chain of command.
• Stability to the org.
Limitations of Formal Organizations
• Formal communication leads to procedural delays.
• Less recognition to creative talent.
• More emphasis on structure & work. Interpersonal
relationships are ignored.
Types of Formal Org Structures
1. Line Organization
2. Functional Organization
3. Line & Staff organization
4. Matrix Organization
5. Virtual Organization
Common Organizational Designs
• Traditional Designs
 Simple structure

Low departmentalization, wide spans of control, centralized
authority, little formalization
 Functional structure

Departmentalization by function
– Operations, finance, human resources, and product
research and development
 Divisional structure

Composed of separate business units or divisions with limited
autonomy under the coordination and control the parent
corporation.
Exhibit 10–7
Strengths and Weaknesses of Traditional
Organizational Designs
Line organization:
-is the most oldest and simplest method of administrative
organization.
-According to this type of organization, the authority flows
from top to bottom in a concern.
-The line of command is carried out from top to bottom.
- This is the reason for calling this organization as scalar
organization which means scalar chain of command is a part
and parcel of this type of administrative organization.
-In this type of organization, the line of command flows on
an even basis without any gaps in communication and coordination taking place.
Features of Line Organization
-It is the most simplest form of organization.
-Line of authority flows from top to bottom.
-Specialized and supportive services do not take place in
these organization.
-Unified control by the line officers can be maintained
since they can independently take decisions in their areas
and spheres.
-This kind of organization always helps in bringing
efficiency in communication and bringing stability to a
concern.
Staff Authority
• Staff refers to those elements which have responsibility
and authority for providing advice and services to line in
attainment of objectives.
• In practice distinction between line and staff gets
blurred
• Staff advice or service may be accepted by others much
the same as the line authority is.
• The demarcation between line and staff may be possible
during initial stages of the org; but when it grows, its
functions become more and more complex and the
demarcation between line and staff becomes progessively
fuzzier.
Line & Staff Organization
Types of staff
• Personal staff
• Specialized staff
• General staff
Conflict between line and staff
• Line and staff concept on the assumption that they
should support each other and work unitedly for the
achievement of organizational objectives.
• The major source of conflict is the difference in their
viewpoints & perceptions.
• Conflict arises when either of them fails to appreciate
the viewpoints of other.
• Line members view themselves as important and first
class members of the org. because they directly
accomplish the objectives.
• And staff members are often treated as second class
members. The line members ignore the staff advice.
Line’s Viewpoint
• Undermining of line authority
• Academic approach of staff
• Lack of accountability
• Limited outlook of staff
• Stealing of credit
Staff’s Viewpoint
• Ignoring the staff
• Resistance to New ideas
• Lack of enough authority
Organizational Designs (cont’d)
• Contemporary Organizational Designs
 Team structures

The entire organization is made up of work groups or selfmanaged teams of empowered employees.
 Matrix and project structures

Specialists from different functional departments are assigned
to work on projects led by project managers.

Matrix and project participants have two managers.

In project structures, employees work continuously on
projects; moving on to another project as each project is
completed.
Exhibit 10–8
Contemporary Organizational Designs
Team Structure
• What it is:
A structure in which the entire organization is made up of
work groups or teams.
• Advantages:
Employees are more involved and empowered. Reduced
barriers among functional areas.
• Disadvantages:
No clear chain of command. Pressure on teams to perform.
Matrix-Project Structure
What it is:
A structure that assigns specialists from different functional
areas to work on projects but who return to their areas when
the project is completed. Project is a structure in which
employees continuously work on projects. As one project is
completed, employees move on to the next project.
• Advantages:
Fluid and flexible design that can respond to environmental
changes. Faster decision making.
• Disadvantages:
Complexity of assigning people to projects. Task and
personality conflicts.
Exhibit 10–9
An Example of a Matrix Organization
• Virtual Organization
 An organization that consists of a small core of full-time
employees and that temporarily hires specialists to work on
opportunities that arise.
2. Informal Organizations- An informal organization is an
aggregate of interpersonal relationships without any
conscious purpose but which may contribute to joint
results.
• Informal organization is a network of interpersonal
relationships that arise when people associate with one
another.
Features of Informal Organization
• Originates from within the formal organization as a result
of personal interaction among employees.
• The standards of behavior evolve from group norms.
• Independent channels of communication without specified
direction of flow of information are developed by group
members.
• .
• Emerges spontaneously and is not deliberately created by
the management
Advantages of Informal Organizations
• It helps to fulfill the social needs.
• Sense of belongingness in the org.
• Faster spread of information & quick feedback
• It contributes towards fulfillment of organizational
objectives
Disadvantages
• It spreads rumors.
• The management may not be successful in implementing
changes.
• It forces members to conform to group expectations.
Reasons for Formation of Informal
groups
1.
2.
3.
4.
5.
6.
7.
Companionship
Sense of Identification
Source of Information
Job Satisfaction
Protection of Members
Outlet of Frustration
Generation of New Ideas
Importance of Informal
Organizations/groups
•
•
•
•
•
•
•
Filling in gap’s in managers abilities
Solving work problems
Better coordination
Channel of communication
Better relations
Norms of behavior
Developing future executives