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Principles of Management

Management: Definitions, Roles & Skills

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Management: Definitions

Management is the process of designing and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aim(s) viz. to create a surplus(s). .
Weihrich & Koontz

Management is not an absolute; rather it is socially and culturally determined. Across all cultures and in all societies, people coming together to perform certain collective acts encounter common problems having to do with establishing direction, coordination and motivation. Culture affects how these problems are perceived and resolved. The
TONYRAWAT11@HOTMAIL.CO Art of Japanese Management M by R. Pascale & A. Athos .

Management: Definition ctd.


Applies to and through any kind of organization Applies to Managers at all levels Concerned with Doing the right things right at all times: 1. Effectiveness: Achievement of objectives (Right Things); 2. Efficiency: Achieving those objectives with least amount/ sacrifice of resources (Things Right); 3. Continuous Improvement: in creating increasing surplus (at all times); Improve or die = survival of the fittest what gets measured, gets managed and improved e.g. Productivity= Output / Input ratio

Collective, cohesive and consistent human effort towards accomplishing a common objective.
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Management: Definition ctd.


Additionally, Managers need to factor in external environmental forces:

Political Economic

Regulatory

Societal

Organization

Globalization Technological

TONYRAWAT11@HOTMAIL.CO For maximum benefit to the organization M

Management: Roles & Skills

Management - what managers do:


Fredrick Taylors path-breaking scientific approach Henri Fayols classical definition of functions, now modified to:

Plan -- Organize -- Lead(Command&Coordinate) -- Control Interpersonal + Informational + Decisional Technical / Human / Conceptual

Mintzbergs map of managerial roles:

Katzs interpretation of skills:

Management get things done through others:

Leadership: The ability to influence a group towards achievement of goals. Motivation: The willingness to exert high level of effort towards goals Communication:The transference and understanding of TONYRAWAT11@HOTMAIL.CO M meaning

Management: roles & skills ctd.


Managerial Roles (Mintzberg)
Role
Interpersonal Figurehead Leader Liaison Informational Monitor Disseminator Spokesperson Decisional Entrepreneur Trouble shooter Resource allocator Negotiator

Description
symbolic head; required to show face in social & legal conditions. Motivating & directing subordinates Networking outside for information & favours

Examples
Ceremonial, Civic etc. project plan Industry group meets

nerve centre and interpretator networking within the organization Transmit intent to outsiders; expert Opportunity finding& reacting Handling unexpected disturbance Initiating/approving changes TONYRAWAT11@HOTMAIL.CO M Getting best deal for Organization

Reports Meetings etc. Board Meets

Strategy Plan Contingency Budgeting Contracts

Management: roles & skills


Managerial Skills(Katz & others)

Technical Skills:
Application of specialized knowledge or expertise acquired though formal training & its use.

Skills Needed

Board Exec.

Human Skills:
Ability to work with people, understand and motivate groups & individuals.

Conceptual Skills:
Mental ability to recognize, analyze, diagnose and think through complex situations.

Mgr.
Supr.

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Principles of Management 2
Management: A Systems Approach

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Systems approach to Management


ENVIRONMENT

input

Transformation process

output

Feedback (Reenergizing the system)

System Boundary

Organization as a System receives Input, transforms it through a Process for Output and Operates in an TONYRAWAT11@HOTMAIL.CO Environment (economic, regulatory and other forces) M

Systems approach to Management ctd.


Systems Concepts
System Boundaries and Subsystems
> Systems often consist of numerous subsystems. > Each subsystem has elements, interactions with other subsystems, and objectives. > Subsystems perform specialized tasks for the overall system.

Subsystem Interfaces and Interface

Problems

Sub-System 1

Sub-System 2

Sub-System 3

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Systems approach to Management ctd.


Outputs and Inputs
Systems produce Outputs from Inputs i.e. the

Inputs are converted to Outputs. Outputs of one subsystem become inputs to another subsystem. Outputs must adhere to standards to be useful or acceptable to the next subsystem.

System Environment
Environment consists of people, organizations

and other systems that supply data to or that receive data from the system Managers at different levels perceive Environment TONYRAWAT11@HOTMAIL.CO differently M

Systems approach to Management ctd.


Inputs: 5 Ms of Management

Inputs or the resources managers deal with are:

Man: human resources, both inside and connected with an organization; Materials: goods (hard & software, processed or semifinished) and services required to create the sellable end product; Machines: technology and expertise deployed towards the transformation process; Methods: systems, procedures and processes seamlessly put together for the transformation; Measurement: score-keeping and in-process monitoring continuously with due feedback to keep on-course on time.

Money is required for generating all theses Ms managers need toTONYRAWAT11@HOTMAIL.CO acquire, deploy, generate and M distribute money as a primary need for business!

Systems approach to Management ctd.


Output for Stake-holders in Business:
Stake: Something wagered or risked; an interest in an enterprise with contingent gain or loss Webster s dictionary

Holders who have stake in Business:

Shareholders: are the owners. They have put in their money in the enterprise, expecting better returns from it than from other ventures; Society: includes the State, provincial and local governments for the improvement of quality of life of its citizens;
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Systems approach to Management ctd.


Output for Stake-holders in Business ctd.

Suppliers: continuity of their enterprise depends on the success of the customer enterprise; Customers: require the goods and services provided by the enterprise, better than than those from its competitors. The enterprise is, in turn, a supplier to its customers; Employees: livelihood depends on the progress and success of the employing enterprise;

There is a freedom of choice (for association) between each of these stake-holders and the enterprise in the longer term:

But they sink or swim together in the shorter term TONYRAWAT11@HOTMAIL.CO Length of term definition varies with individuals! M

Systems approach to Management ctd.


Management as a system transforms inputs: by the process of
Planning + Organizing + Staffing + Leading + Controlling

to accomplish certain pre-determined, (as derived from stakeholder needs) goals or objectives
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Systems approach to Management ctd.


Man, Machine Material, Method, Measurement

Stakeholders Shareholders; Society; Customers; Employees; Suppliers

Product/Services, Profits, Customer & Societal satisfaction, Other Long-term Goals

Organizing

Controlling

(Goal Oriented)

Inputs

(External To Orgnzn.)

Outputs

Stake holder Feedback (reenergizing the system)


TONYRAWAT11@HOTMAIL.CO M ENVIRONMENT(Opportunities,

EXTERNAL

Planning

Staffing

Leading

Constraints)

Principles of Management 3
Management Process First Step: Planning

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Planning

Planning involves selecting objectives or goals and the course of actions to achieve them:

Provides the bridge to take us from where we are to where we want to go; Is a rational approach to achieving preselected objectives - based on innovation, knowledge and purpose; Decision making in choosing the best from alternative courses of action and is integral to planning; TONYRAWAT11@HOTMAIL.CO
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Plans as foundation of Management


What kind of resources needed? What kind of people & org. structure to have? How to lead them to reach planned goals? How to control in case of deviation from plan ?

Plans

The primacy M of Planning


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Types of Plans

Mission / Purpose

The basic function or reason for existence of an enterprise/ organization

Case in point: Mission of Indira Institute


To train our students to become the best business minds and entrepreneurs today, who will lead their companies successfully into the future tomorrow , locally, nationally and globally.
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Type of Plans (Contd)

Objectives/ Goals

The end towards which activity of an organization is aimed, e.g.


For a Business enterprise profit, surplus creation; For a Management Institute: The number of employable/useful trainees;

Strategies

Determination of the long term objectives and adoption of a course of action Gives a frame work for linked action-plans, communicated systematically to guide thinking and TONYRAWAT11@HOTMAIL.CO actions.
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Types of Plans (contd)

Policies

Plans that are general directional statements (or understandings) that guide/help in decision making:
Repeat decisions taken reflexively; Delegation of tasks without loss of control.

Some discretion is permissible depending on circumstances thus encouraging initiative within limits and situational adjustments; Issues with Policy
Seldom documented in writing TONYRAWAT11@HOTMAIL.CO Subject to interpretations

Types of Plans (contd)

Procedures

Plans that are chronological sequences of required actions: task-oriented in nature; Cuts across department boundaries (subsystems) in an organization: e.g. customer complaint handling procedure; Procedures and policies are inter related: e.g. authorization for paid leave

Policy governs quota, responsible authority etc. Procedure governs application, grant and record-keeping.

Rules

Specific actions or non-actions allowing no discretion

Caution: rules TONYRAWAT11@HOTMAIL.CO (and procedures too) limit initiative! M

Types of Plans (contd)

Programs

Action plans (mainly non-routine or for changed activities) including, task assignments, steps to be taken, resources to be deployed etc. to achieve a (new/renewed) goal;
Primary program may require supporting programs, spreading across the enterprise; Perfect coordination between supporting & primary programs essential to avoid delays, unnecessary costs and expected roll-out.

Programs are a complex of (sub)goals, policies, rules and other elements necessary for the TONYRAWAT11@HOTMAIL.CO course of action e.g. obtaining ISO certification. M

Types of Plans (contd)

Budgets

A statement of expected results expressed in Numerical terms e.g. financial operating budget = profit plan; Budgets enforce precision in thinking:
Making a budget is planning by itself; Encourages innovation a different way to work

Budgets serve for Control:


Enforces discipline in execution of plans; Instills cost consciousness; TONYRAWAT11@HOTMAIL.CO Makes people (constantly) plan!

Steps in Planning
Being aware of challenges
Market, Customers wants, Competition, Own strengths & weakness

Setting Goals/ Objectives


What to accomplish & when

Planning premises

Identifying alternatives

Internal & external Environment/conditions

Comparing & choosing an alternative e.g., Sales budget e.g., plan to buy Decision Operational ExpenseTONYRAWAT11@HOTMAIL.CO budget, Equipment, recruit & train making M Capital expenditure budget Employees, develop product etc

Budgeting (Numberizing Plans)

Formulating Supporting plans

The Planning Process

Planning Period:

Short range plans e.g. material procurement plan in a factory Long range plans e.g. product development plan, plant/production facility installation; Urgent drives out the Important mismatch between short & long term plans!

Planning horizon must allow for actions to run their course requiring commitments:

Thus decisions today are key to good plans; Long-term plans reap benefits of good shortterm plans. TONYRAWAT11@HOTMAIL.CO
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Steps in Planning
Being aware of Opportunity Considering, Market, Competition, Customers wants, Own strengths &weakness

Setting Goals/ Objectives


What to accomplish & when

Objective = Important end towards which activities are directed; therefore needs verification at the end of the plan period.
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Hierarchy of Objectives& Org. Levels


Board of Directors

Mission Overall Objectives & Key result areas. Divisional objectives


Sales & Mktg Dept

CEO

Division Head Product X

Production Dept

Departmental objectives Individual objectives


Sales Manager A Sales Manager B

Objectives set end results they need to be supported by a hierarchy of sub-objectives, duly networked through the organization to avoid TONYRAWAT11@HOTMAIL.CO discord and wasted effort. M

Hierarchy of Objectives& Org. Levels ctd.

The Organizational Objectives is deployed into the objectives of :

Divisions Departments Individual objectives; The cascade principle: seamless flow;

Mutual support & interlocking of goals is essential

Managers must ensure that the components of the network fit each other; Departments/divisions can be blind-sided.
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Hierarchy of Objectives& Org. Levels ctd.


Top-down Approach
Mission Overall Objectives & Key result areas. Divisional objectives Departmental objectives Individual objectives

Bottom-up Response: The result

While setting Objectives, ideally, Top Management should get information / buy-in from lower levels to set realistic goals for TONYRAWAT11@HOTMAIL.CO a good result. M

Key Result Areas (KRA)

Are areas in which performance is essential for the success of an enterprise Examples of generic KRAs:

Market share Return on Investment (ROI) Service level Customer satisfaction

Peter Drucker recommends: Market standing, innovation, productivity, physical & financial resource, profitability, managerial performance & development, worker performance & attitude and public responsibility. TONYRAWAT11@HOTMAIL.CO
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Management By Objectives (MBO)

A comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed towards the effective and efficient achievement of organizations and individual objectives:

Set-out by Peter Drucker in 1954; Integrated to personal performance appraisal by Douglas McGregor in 1957; Has formed the basis for many theories on motivation; Has been criticized for introducing a short-term focus and undesirable behaviour; Currently viewed TONYRAWAT11@HOTMAIL.CO as a way of managing not a specific M tool.

Weaknesses of MBO

Emphasis on:

short term at the expense of long term Results over Process Individual over collective effort

Failure to grasp and deploy the concept of seamless cascade Difficulty in setting agreed, harmonized goals
TONYRAWAT11@HOTMAIL.CO Danger of inflexibility M

Planning Premises & Strategies


Setting Goals/ Objectives What to accomplish & when

Planning premises Internal & external environment

Identifying alternatives

Comparing & choosing an alternative Decision making

Strategic Planning Process

Strategy = determination of the purpose / the basic long-term

objectives; the adoption of courses of action and allocationTONYRAWAT11@HOTMAIL.CO of resources required to achieve the aims.
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Planning Premises & Strategies ctd.


Stakeholder Wishes & Shareholder demands Current External situation

Management Orientation

Enterprise Profile

Forecast External situation

External Opportunity & Threat Key success factors & Alternative Strategies Internal Strengths & Weakness Strategic choice

Purpose & Major objectives of enterprise

Current resource situation

The Strategic Planning Process TONYRAWAT11@HOTMAIL.CO


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Planning Premises

Porters Five Forces : an Model for analysis of the TONYRAWAT11@HOTMAIL.CO Externals environment. M

Planning Premises: forecast of demand

Estimate of future demand is made by qualitative methods, timeseries methods and/or causal methods:

Qualitative relies on judgement of experts to translate to quantities; Time-series statistically interpolate demand on historical data; Causal method seek co-relation on cause and effect basis between two (or more) variables to quantify demand; However, all forecasting methods are limited by:

Handling of un-quantifiable factors e.g. national pride Unrealistic assumptions fuelled by a desire to succeed Excessive data required (often unobtainable) to make accurate forecasts Uncertainty with environmental changes: Technology, Govt. Policy, International alignments, New materials/sources, Climate etc. Sensitivity analysis & What if scenarios (trust instinct!); TONYRAWAT11@HOTMAIL.CO Planning for contingencies with defined cut-in milestones.
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Coping with uncertainties require:


Generic Strategy
Customer
Relationship

Competitive Advantage

1. Cost Leadership:
To continually work reducing the cost prices of products. Supplier Q-C-D has very high priority.

Company

2. Differentiation:
Bmarking Partnering

To constantly offer innovative and unique solutions. Supplier technology & quality has focus.

Competitor

Supplier

3. Customization:

Ultimate competitive position: - position w.r.t major Customers

To offer required services in the required manner is the focus. Speed and flexibility important.

- K.S.Fs of Competitors TONYRAWAT11@HOTMAIL.CO - leveraging of suppliers M

Lean Management

Generic Strategy: BCG Matrix


Red: Marketing Perspective; Blue: Financial Perspective Cash Source Hi Lo
Hi
Hi

Market Growth rate

STAR Hold

??? Build Cash Use

Cash Cow Harvest

DOGS Divest
Lo Lo

Lo Hi

Relative Market Share

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Planning Premises & Strategies ctd.


Budgeting ( Numberizing Plans) Say, Sales budget Operational Expense budget, Capital expenditure budget Formulating Supporting plans Comparing & choosing an alternative Decision making

Say, plan to buy Equipment, recruit & train Employees, develop product etc

Deployment (MBO etc.)

Decision Making = is the core of the planning process; a plan does not come into being unless a decision i.e. certain commitments of resources, managerial time and money are made and risks are taken. Caution: A Plan is not intentions and should not suffer from TONYRAWAT11@HOTMAIL.CO Analysis Paralysis. M

Decision Making

Decision making is a rational choice process, bounded by:


Limitations: time, information and logic; Behaviour: Risk averseness and biases.

A key step in the process is to identify those limiting factors, road-blocks to each effective (right thing) alternative then finding a solution with least sacrifice of resources (thing right):

Factors: quantitative, qualitative/intangible; Finding solutions:


marginal analyses benefits with incremental inputs; TONYRAWAT11@HOTMAIL.CO cost-effectiveness assessment of benefits over costs. M

Decision Makingctd.
Experience: good teacher and useful when routine/repeat situations arise under similar circumstances. Without due analysis of the conditions, mistakes tend to repeat or a poor fit results. Research & analysis: the approach is in at first understanding the problem (half the solution!), then finding relations between various factors which hinder or foster goal attainment. This is a structured, analytical approach quantitative or otherwise.

How to select Amongst the Alternatives ?

Experimentation: arguably, the best technique to use, particularly when either experience or rationale is lacking/limited. However is expensive and success/failures are magnified, results are subject to interpretational errors. TONYRAWAT11@HOTMAIL.CO
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Decision Makingctd.

Decision making takes place under varying degrees of uncertain conditions and risks. Techniques used to aid the process are:

Risk analysis: every decision is based on interactions amongst different factors/variables each of which have their own probabilities (towards success). Analysis of these probabilities yield a risk profile for each alternative path. In the absence of defined probabilities, estimates can be used. Decision trees: the outcome (measure pre-decided e.g. cost or time) of every step in the decision is charted and a course selected on the most favourable outcome. Very much like making a trip, navigating by using a road-map
(refer example in W & K, Management a global perspective/10th TONYRAWAT11@HOTMAIL.CO edn. Pg. 209)
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Decision Makingctd.

Flow Charts: as a process-guide to taking a decision and helps as a check-list of key variables, the sequence in which they fall and the interrelations. Key to making a choice or re-examining the path taken are also indicated as risk-reduction devices.
(refer example in W & K, Management a global perspective/10th edn. Figure 8-5)

Decision Support Systems: a wide variety of (proprietary) computer based programs are available for managers to use their time more effectively for decision making of semi-structured tasks by providing alternative evaluations. They focus on the process of decision making, taking data provide by the management information systems in enterprises.
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Principles of Management 4
Management Process: Organizing for results

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Nature of Organizing

Organizing may be broadly defined as:


1. 2. 3. 4.

The identification and classification of required activities; The grouping of those activities towards attaining their set objectives; The assignment of those groupings to a responsible manager, duly empowered; The provision for coordination among, within and across the groups in the organization. Clarify tasks & responsibilities, Remove obstacles, Furnish decision making & communication network TONYRAWAT11@HOTMAIL.CO M Support attainment of enterprise objectives

Organization structures are designed to:


Nature of Organizing ctd.


The Business Organization Model: Value Chain
Firm Infrastructure Human Resource Management Technology Development Procurement

(Porter,1985)

Inbound Logistics

Operations

Outbound Logistics

Marketing & Sales

Service

Primary Activities The margin reflects the reward for the risks run by the company. TONYRAWAT11@HOTMAIL.CO All activities together need to generate M value greater than the sum of its costs.

Nature of Organizing ctd.


The Value Chain: Primary Activities

Inbound Logistics: relate to receiving, storing and disseminating inputs; Operations: associated with transformation of inputs into final product form; Outbound Logistics: relate to collecting, storing and physically distributing the products to buyers; Marketing & Sales: relate to advertising, Promotion, sales, distribution-channel selection & management and Pricing; Service: associated with enhancement or maintenance of TONYRAWAT11@HOTMAIL.CO product value over life; M

Nature of Organizing ctd.


The Value Chain: Support Activities

Procurement: relates to the function of purchasing inputs used across the firms primary and support activities; Technology Development: relates to know-how, processes & procedures, technology embodied in the product design and delivery. Most activities have their own sub-set of technology; Human Resource Management: directed at recruiting, training, developing and compensating all personnel; Firm Infrastructure: associated with serving and supporting the firm as a whole, with the company as its customer eg. Finance & accounting, Quality; TONYRAWAT11@HOTMAIL.CO M

Nature of Organizing ctd.

Most practicing mangers would translate this value chain to imply an organization as:
a formalized, intentional structure of roles and positions

Thus formal organization implies the intentional structure of roles in an enterprise. However, in an enterprise informal organization will form, not necessarily bad and is:

a network of personal and social relations not established or required by formal organizations but arising spontaneously as people associate with each other.
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Nature of Organizing ctd.


Hierarchical levels
The building block of an organization is the Department: a group charged with independent task & responsibility.

# #

#
# Office Bridge Team

Span of control

$ Car pool

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Nature of Organizing ctd. Departmentation

Grouping activities & people into departments makes it conceptually possible to expand organizations to an infinite degree. Different patterns have been successfully used to group activities:

By simple nos. is a simple method works well for the lowest levels where work is routine, uniform and nonspecialized; time-grouping is an extension of this method where shift-working is required; By enterprise functions embodies what enterprises typically do e.g. Production, Engineering, Sales etc. This method, defined by F.W.Taylor, is arguably the most prevalent method still used. TONYRAWAT11@HOTMAIL.CO
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Departmentation ctd.

By territory or geography is very common when the geographical spread is wide. It was a device introduced to speed up management in similar units for easy and swift communication e.g. Sales: N/E/W/S; Fire Brigade: Camp, Hinjewadi, Aundh etc. By Customer/Account orientation reflecting the primary interest in nature of markets/business/customer e.g. Banks: Institutional banking, Small Savings etc. By Process groups encountered primarily in specialized/ manufacturing operations where processes are vital e.g. Advertising: Copy-writing, Creative etc.; Manufacturing: Steel Melting, Wire-drawing etc. By Product Lines has evolved with enterprises becoming multi-line with function needing adaptation/integration to suit specific products e.g. Tata Motors: Passenger TONYRAWAT11@HOTMAIL.CO M Vehicles / Commercial vehicles

Departmentation ctd.

By grid control in essence combining the functional and the product-line patterns to best effect. Functional excellence is not subjugated to Operational ease. In projects, this serves to bring together the diversity of skills required into one team. The Strategic Business Unit: companies today are organizing themselves as companies within a company to allow for maximum flexibility and freedom of operations, especially when the products/businesses are unconnected e.g. General Electric. Generally, SBUs have:

Their own Missions, Goals and Strategies; Distinct and definable set of competitors; Deploy and manage resources in key areas; TONYRAWAT11@HOTMAIL.CO A reasonable size. M

Departmentation ctd.
Example of Grid Control & S.B.Us
C.E.O

Finance

Qual.

HRM

BU 1

BU 2

I.S.O

I.R.M Recr.

G/H.R Plant 1

G/H.R

Ind.
Sin.

T&D

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Nature of Organizing ctd.


Span-of-Management

The purpose of organizing is to make human cooperation effective and is limited by:

the number of persons a manager can supervise effectively and efficiently; while the total number is dictated by the quantum of work/ nature of task/spread etc. Thus the two dimensions, Level (depth) and Span of control (width) are interrelated . The reason for creating Levels of organization is the limitation in the span of control. Effective span is influenced by:

Training/skill of subordinates and personal contact required; Clarity of delegation of authority; Clarity of plans, use of objective standards and communication techniques; Rate of change; TONYRAWAT11@HOTMAIL.CO Maturity and experience of the manager and organization.
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Span-of-Management ctd.

Levels, per se, are not desireable:

They are expensive as they increase, both infrastructure costs and staffing tends to increase; Real work is accomplished at the gemba (Japanese: workplace) where the actual value-addition/transformation takes place. The contribution of levels on top are not directly co- relatable, thus best avoided; Communication become complicated omissions, filterations and misinterpretations lead to wasted and misdirected effort; Planning and control become tortuous, requiring complicated coordination and alignment between levels.

Studies reveal that between 8 to 10 people at higher levels and upto 15 at lower levels is a good span. Increasingly, enterprises are attempting to cut back levels to 5 or less.
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