Managing a business

Management: Management means 'Getting things done through other people'. Managers act on behalf of owners in the organization. Need for Management: In a private sector organization Objectives have to be set for the Organization Somebody has to monitor progress and results to ensure that objectives are met. Somebody has to communicate and sustain corporate values, ethics and operating principles. Somebody has to look after the interests of the organizations owners and other stakeholders. In a public sector organization, management acts on behalf of the government. Governance: Governance is the system by which an organisation is directed and controlled. Governance incorporates concepts of ethics, risk management and stakeholder protection, extending way beyond management alone. What is needed for effective management? Businesses have a large number of different activities to be co-ordinated, and large numbers of people whose co-operation and support is necessary for a manager to get anything done. Different activities need to be managed by managers for effective management. Power, authority, responsibility, accountability and Delegation (Forces of an Organization) Power: Power is the ability to get things done. Power is not something a manager 'has' in isolation: it is exercised over other individuals or groups, and to an extent depends on their recognizing the manager's power over them. French and Raven classified power into six types or sources. 1. Coercive power: The power of physical force or punishment. Physical power is rare in business organizations, but intimidation may feature, e.g. in workplace bullying. 2. Reward (or resource) power: Based on access to or control over valued resources. For Example, managers have access to information, contacts and financial rewards for team members. 3. Legitimate (or position) power: Associated with a particular position in the organization. For example, a manager has the power to authorise certain expenses. 4. Expert power: Based on experience, qualifications or expertise. For example, accountants have expert power because of their knowledge of the tax system. 5. Referent (or personal) power: Based on force of personality, which can attract, influence or inspire other people. 6. Negative power: The power to disrupt operations: for example, by industrial action, refusal to communicate information. Authority: Authority is the right to do something or to ask someone else to do it and expect it to be done. The right to do something, or Authority is thus another word for position or legitimate power. Responsibility and accountability Responsibility: Responsibility is the obligation that someone has to do the thing that the person in authority over them has required. Accountability: A person's liability to be called to account for the fulfillment of tasks s/he has been given by persons with a legitimate interest in the matter. The terms reflect two sides of the same coin. A person is said to be responsible for a piece of work when he or she is required to ensure that the work is done. The same person is said to be accountable to a superior when he or she is given work by that superior. One is thus accountable to a superior (or other persons with legitimate interest) for a piece of work for which one is responsible.
Page 1 of 5 Managing Business, Synopsis 02-- B & F , Prepared by, Anup Kumar Mukherjee ACA

Types of manager Different types of manager have different types of authority. A manager may have line, staff, functional or project authority. Types of manager in a business can be classified according to the types of authority they hold. A line manager has authority over a subordinate. A staff manager has authority in giving specialist advice to another manager or department, over which they have no line authority. A functional manager has functional authority, a hybrid of line and staff authority, whereby the manager has the authority, A project manager has authority over project team members in respect of the project in progress; this authority is likely to be temporary (for the duration of the project). There are inevitable tensions involved in staff managers asserting staff authority in giving specialist advice to other managers. P Problem Possible Solution The staff manager can undermine the line Clear demarcations for line, staff and functional manager's authority, by empire building. managers should be created. Lack of seniority: line managers may be Use functional authority (via policies and procedures). more senior than staff managers. Experts should be seen as a resource, not a threat. Expert staff managers may lack realism, They should be fully aware of operational issues and going for technically perfect but commercially communicate regularly with the line managers. impractical solutions.

The management hierarchy Businesses of any size develop a management hierarchy, with some management positions holding more power and authority than others, the less powerful managers being accountable to the more powerful ones, and the latter being responsible for the performance of the managers lower down the hierarchy.

Power

Characteristic

Authority/Resp onsibility
Accountability

Few in number, responsible for overall direction and performance

Top managers: managing the business

Many, responsible for ensuring performance targets are met by first-line managers Middle managers: managing managers

Numerous, responsible for ensuring direct operational staff do what is required

First-line managers:managing staff on direct operations

Very numerous, accountable to first-line managers for getting the job done

Direct operational staff: doing the work

The management hierarchy

The management process The process of management comprises planning, organizing, controlling and leading. Planning Planning involves setting detailed objectives and targets in the light of the overall objective, forecasts and resources. Plans should be constantly reviewed and updated in the light of actual performance.
Page 2 of 5 Managing Business, Synopsis 02-- B & F , Prepared by, Anup Kumar Mukherjee ACA

Following on from the business's overall objective, mission and goals, managers need to set the direction of the work to be done. This includes: Pinpointing specific aims Forecasting what is needed Looking at actual and potential resources Developing objectives, plans and targets Using feedback from the control part of the process to make necessary amendments to the plan Organizing: Organizing involves identifying the processes, technology and people that are required and then allocating and co-coordinating the work. Managers allocate time and effort in such a way that the objectives, plans and targets are likely to be met. This includes: Defining what processes, technology and people are required Allocating and co-ordinating work Controlling Controlling follows on from reviewing plans in the light of experience; control actions will often have to be taken to ensure that the overall objective can still be met. Managers monitor events so they can be compared with the plan and remedial action can be taken if required. Leading Leading means generating effort and commitment in a team. Managers generate effort and commitment towards meeting objectives, including motivation of staff. Managerial roles The management process sets out what managers have to achieve and how, but it does not as such describe what managers actually do. Mintzberg (1973) defined what managers do in terms of three key roles: The informational role: Checking data received and passing it on to relevant people. The interpersonal role : Acting as leader for his or her own team The decisional role. It is in this role that managers actually 'do' what we perceive as managing. In this role they Allocate resources to operations, Handle disturbances such as sorting out a crisis in staffing caused by illness, Negotiate for what they need this may be with more senior managers or with client staff Solve problems, Act as entrepreneur spotting gaps in the market, or unmet needs in clients. Business culture to management Definition Culture: Culture incorporates the common assumptions, values and beliefs that people in an organization share. Each cultural type can be briefly characterized as follows: Internal process culture: The business looks inwards, aiming to make its internal environment stable and controlled. Goals are known and unchanging, and there are defined methods, rules and procedures. Security, stability and order motivate staff. Example: public sector organisations. Rational goal culture: Effectiveness is defined as achieving goals that satisfy external requirements. The business is structured and controlled so as to deal effectively with the outside world. Competition and the achievement of goals motivate staff. Example: large established businesses. Open systems culture: The external environment is a source of energy and opportunity, but it is ever-changing and unpredictable. The business must be highly flexible and open to new ideas, so it is very adaptable in structure. Staff are motivated by growth, creativity and variety. Example: a new business unit working with fast-changing technology. Human relations culture: The business looks inwards, aiming to maintain its existence and the well-being of staff. Staff are motivated by a sense of belonging. Example: support service units The type of culture manifested by an organisation affects the way in which it is managed, as we shall see.
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Management models Models: Models are used in management theory to represent a complex reality, such as a client's business, which is then analyzed and broken down into its constituent parts. Handy points out that management models: Help to explain the past, which in turn, Helps us to understand the present, and thus to predict the future, leading to, More influence over future events, and Less disturbance from the unexpected The rational goal model of management This is a model of management that has been developed over about 100 years, since the days of Frederick Taylor's 'scientific management' model back in 1915. Taylor analyzed factory work and came to the conclusion that in order for every worker to reach their state of maximum efficiency, managers needed to be in detailed control of every last part of the process. Individual initiative was not part of the equation; instead Taylor put forward five 'principles' of scientific management: 1. Determine the one best way of doing a particular task 2. Select the best person to do this task on the basis of their mental and physical capabilities 3. Train the worker to follow the set procedure very precisely 4. Give financial incentives to ensure the work is done in the prescribed way 5. Give all responsibility to plan and organize work to the manager, not to the worker The internal process model of management The internal process model looks at how the organisation is doing things, not at why. In businesses with an internal process model of management we tend to find: Rationality use of the most efficient means to meet the business's objectives Hierarchical lines of authority; managers have closely defined areas of authority, and have none outside those areas Detailed rules and procedures businesses which are subject to tight regulation and public scrutiny, such as those in the financial services sector, tend to have more rules and procedures Division of labour tight limits are set on the areas of responsibility of staff Impersonality appraisals of staff performance are based on objective criteria, not personal preference Centralization Businesses today operate in an environment which requires a high degree of control (because of regulations) but in which there is a high degree of competition. Therefore management will apply the principles of both the rational goal and the internal process models. Business functions Marketing, including sales and customer service, Operations or production, including research and development (R&D), and procurement, Human resources, Finance Marketing management Marketing: Marketing is the management process which identifies, anticipates and supplies customer requirements efficiently and profitably. It forms one of the key functions in any business. The set of human activities directed at facilitating and consummating exchanges. It therefore covers the whole range of a business's activities. A distinction can be made between: A customer, who purchases and pays for a good or service, and A consumer, who is the ultimate user of the good or service Consumer and industrial markets Markets can be analysed in terms of the product, or the end-user, or both. The most common distinction is between consumer and industrial markets. Consumer markets are the markets for products and services bought by individuals for their own or family use. These are high volume, low unit value, fast repurchase, such as bread, baked beans. Consumer durables. These have low volume but high unit value. They may be further divided into White goods, e.g. fridges, freezers, Brown goods, e.g. CD players, cars, Soft goods: these may be thought of as synonymous with consumer durables, e.g. clothes, Services, e.g. dentist, doctor, holidays
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A business which operates in the consumer market, selling to consumers, is often described as being in the 'business to consumers', or B2C market. The main goods and services covered by industrial markets are .RM-Iron ore ,FG-Steel Machine tools, Supplies- Stationery, Services- Accountancy, Businesses operating in industrial markets are often described as 'business to business' or B2B. Marketing mix: The set of controllable marketing variables that a firm blends to produce the response it wants in the target market (Kotler). Marketing mix for tangible products is the four 'P's. Product: quality of the product as perceived by the potential customer. Price: prices to the customer, discount structures for the trade, promotion pricing. Promotion: advertisement of a product, its sales promotion, the company's public relations effort.2 Place: distribution channel decisions, website selling (e-tailing), location of outlets, Definition of Product: Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need.. There are three main elements of a product: Basic (or core) product a car. This looks at the perceived or real benefits to be gained from the product, e.g. Volvo cars satisfy safety/security needs, BMWs satisfy ego or status needs, etc Actual product Brand name, design Augmented product Ford focus with 0% finance or extended warranty. General factors to be considered when taking a product from basic to actual and augmented include the following: Quality and reliability , Packaging, Branding, Aesthetics, product mix range of products, Servicing/associated services are these required? Promotion Promotion is all about communication, thus informing customers about the product and persuading them to buy it. There are four main types of promotion ('the communication mix'): 1. Advertising 2. Sales promotion (such as 'buy one, get one free' offers) 3. Public relations; and 4. Personal selling. Push (Encouraging Intermediaries) and pull(Persuading ultimate Consumers) promotion techniques When determining its promotion package, the business should consider the customer and the ultimate consumer (in a B2C market). In a B2B market, the business needs to consider buyer, customer and user The services marketing mix Marketing services, as opposed to physical products, includes consideration of the four Ps above, as well as three added extra Ps: People: the people employed by the service deliverer are uniquely important given they are likely to have regular interactions with customers. Processes: these often determine the structure of the 'service encounter'. There are some important 'moments of truth' that determine how effective a service is, such as enquiries and reservations before the service is granted, Physical evidence that the service has been performed, such as a certificate or a receipt. These three are important because of the varying degrees of intangibility that characterise services relative to tangible products. Operations (or production) management: Operations management (or production management) means creating the goods or services that the business supplies to customers. Operations management is concerned with balancing key variables: 1. External and internal demand for goods and services, Resources,Capacity,Inventory levels 2. Performance of the process which creates the goods or services There are certain key decisions in operations. 1. Forecasting demand, Make or buy, operate on a just-in-time basis, or to hold inventory, Deciding inventory levels,Managing the supply chain, Scheduling resources to meet the plan, processes used are managed efficiently,Ensuring quality, Eliminating waste efficiently.

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Managing Business, Synopsis 02-- B & F , Prepared by, Anup Kumar Mukherjee ACA