MANAGEMENT PROCESSES

management-processes-featuredFive important management processes are planning, controlling, organizing, leading and decision making. A particular manager may be more concerned with say, controlling and organising, while another may be more concerned with planning. The degree of involvement with each of these processes may vary from manager to manager, but essentially all managers have to be concerned with these processes. We shall first take up the planning process because only when there is planning can the other processes follow in logical sequence. 

PLANNING

Planning is the most basic and pervasive process involved in managing. It means deciding in advance what actions to take and when and how to take them.

Planning is needed, firstly for committing and allocating the organisation’s limited resources towards achieving its objectives in the best possible manner and, secondly for anticipating the future opportunities and problems.

Planning is putting down in black and white the actions which a manager intends to take. Each manager is involved in planning though the scope and character may vary with the level of the manager. At the top, the managing director is involved in planning for the company’s diversification over the next five years. The middle level marketing manager undertakes planning to increase the sale of his products. The field sales supervisor plans the day’s activities of his team of sales officers.

Planning implies:

  1. Making choices: There can be any number of diversification opportunities to choose from. It is up to the management to choose the alternative which offers maximum potential for growth and profitability.
  2. Committing resources: The marketing manager who increases the amount earmarked for television promotion, and adds four more salesmen in each territory with the objective of achieving higher sales, is committing scarce resources (money, people, etc.) which then are not available for any other use.
  3. A time horizon: Planning always refers to a specific time limit within which it must be completed. The field supervisor plans movements of each of his salesmen on a daily basis. The marketing manager plans promotion effort for the next three months, six months or twelve months. The top management may have a time perspective which may extend anywhere between 5 and 15 years.

Irrespective of the activity or level at which plans may be drawn, the critical, factor is that they focus on objectives and are directed towards their achievement. They serve to channelise the energies of the company in the desired direction. The future is always uncertain and therefore risky. Stepping out of home on a cloudy day with an umbrella in hand is the way I cover my risk (of getting wet) against the anticipated but uncertain future rain. It may or may not rain but I am prepared. The umbrella is representative of the plan which a company draws up in anticipation and preparation of the future opportunities and problems. Planning implies not simply reacting to events but anticipating and preparing for them.

Planning ensures the most efficient use of scarce resources. Planning implies coordinated, inter-related effort towards achievement of the common objective rather than uncoordinated haphazard, arbitrary, overlapping action towards individual objectives. Joint, coordinated effort implies pooling of resources and their optimum allocation without any wastage.

Planning is the only way by which an organisation can exercise control to check that it is on the desired course of action. Only when there are objectives to work for, and plans to achieve these objectives, can the manager exercise his control to measure the performance of his organisation, department or subordinates. An organisation without plans and controls is like a raft marooned on high seas with no maps and compass to show the direction and no steering to manoeuvre with. Planning is needed at every level of management and in every activity and department of the company. Annual sales targets, cash-flow statements, budgets of each branch, individual career development blueprint, assembly line operations, scheduling of production over a number of machines in the factory are examples of plans.

To ensure that a plan is effective and succeeds in achieving its objectives, it must have the following components:

  • Planning must start from the top. Objectives for the entire company are defined by the top management and then they percolate down throughout the organisation. Thus, logically, planning too must start at the top. For instance one of the objectives of the top management of Beautiful Books Ltd. (a company specialising in publishing books on Indian culture and history) is to increase its turnover from Rs.1.15 crore to Rs. 5 crore in 2012-13. The marketing director accordingly draws up a plan for increasing sale in existing markets and the new markets to be penetrated. From this overall plan, each area marketing manager will make his own annual, quarterly and monthly plans. And in turn each area sales supervisor will draw the plan for his entire sales team.
  • Planning must be flexible. Planning is needed to anticipate and prepare for the unknown events of the future. To the extent that the future is uncertain and events may or may not occur, planning must be flexible. Flexibility implies ability to keep moving towards objectives despite unexpected occurrences. Flexibility is especially needed when there is high degree of uncertainty and risk, the lead time involved in implementing the plan is long, and cost of making mistakes is high. The R & D cell of a television manufacturing company designed a completely indigenous circuit for colour television after 18 months of experimentation and used 100% more funds than were allocated to it. The success of the circuit is critical to the company as its entire marketing strategy for the coming 2-3 years is based on this. If the circuit is successful, the company will be able to establish its strong position in the market. However, if the circuit shows signs of failure the company is ready with its plans to airlift the circuits at a day’s notice from its Japanese collaborator. Thus one way to allow for flexibility is by developing alternate or contingency plans.
  • In the short-run, careful detailed planning without allowing for much flexibility will improve operational efficiency. But undue emphasis on inflexibility or rigidity may do more harm than good. Every manager has to find his own level of balance in allowing for flexibility.
  • Short-term planning must be integrated with long range planning. The long range plans, must be broken down into short-term plans on the basis of which the managers can take action. There can always be a difference of opinion on what constitutes the long and short-term. Some define five years as the longterm and anything up to one years as the short-term. In reality the definition will vary according to the nature and scope of organisational activity for which planning is being undertaken. However, you may define the long and short term, the point to remember is that the short-term plans must be derived from, and contribute to the long-term plans.
  • Plans are good only if they are properly implemented by the people down the line. An effective way to ensure this is to involve the people responsible for implementation in the entire process of planning.

However, despite all the above precautions, plans sometimes fail because of environmental and internal limitations. Government policies, regulations, laws, statutory obligations, and rapid social and technological changes pose external limitations on the company’s planning effort. Within the company, cumbersome procedures, capital inflexibilities in terms of investments already made, inadequate or inaccurate information are the possible barriers which a company may face.

CONTROLLING

Planning and controlling go hand in hand. There can be no control without a plan and plans cannot be successfully implemented in the absence of controls. Controls provide a means of checking the progress of the plans and correcting any deviations that may occur along the way.

As each worker enters the factory premises in the morning, his time of arrival is electronically (or manually) punched on his card and every evening his departure time is similarly recorded. This simple control process is effective in checking the time spent by each worker in the factory and at the end of the month for calculating his wages and overtime. The mere act of recording makes each worker conscious of his late arrival and acts as a self-check on his timing. In contrast to this simple control, the annual budget for the subsidiary of a multi-location company requires a far more sophisticated process for controlling its many diverse activities.

The type of control required will vary according to the factors that are to be controlled, and the critical importance of the factors to the organisation’s success. The more critical the factor the more complex is the control mechanisms needed to check its progress. Finance is a very critical area of management and most companies devise elaborate and sophisticated financial controls.

A control is meaningful only when there is clear cut responsibility for activities and results. It is meaningless to have a control process which simply points out deviations but cannot pinpoint the area in which they occurred and who is responsible for taking the corrective measures.

Controls maybe used to measure physical quantities (such as volume of output, number of man hours, number of units of raw material consumed per machine, etc.), monetary results (value of sale, capital expenditure, return on investment, earnings per share, etc.) or to evaluate intangibles such as employee loyalty, morale, and commitment to work. Obviously; the third kind of controls are the most difficult to design and implement: No quantitative measure can be used, but only a qualitative, descriptive evaluation is possible.

There are three basic steps involved in designing a control process.

  1. Establishment of standards: Controls are established on the basis of plans and so the first step is to have clear plans which in turn become the standards for controlling. The sales forecast plan which sets sales targets itself becomes the standard against which actual sale is measured. However, an effective control process focuses only on the critical variables rather than controlling all the variables. It also indicates the permissible range of deviation from the expected target. Only when the actual performance, is outside this range, does it become a matter of concern for the manager to find out why this has happened and take corrective action. Similarly, the marketing manager at the head office is interested in the sales figures achieved by each branch and not in the performance of individual salesman.
  2. Measurement of performance: Having set standards it is necessary to devise a system for measuring the performance of individuals, departments or the company against these standards. In some cases quantitative goals can be set, such as number of units to be sold by each salesman, number of units to be produced per machine, or the profit to be generated by each branch office. However, evaluating performance in case of managers at the top level or those operating in areas such as personnel, public relations, and administration is far more difficult. The work output cannot be translated into quantifiable terms. Only a qualitative appraisal is possible.
  3. Correcting deviations: The ultimate objective of the control process is to pinpoint the occurrence outside the permissible range of action to allow management to take corrective action. The maximum number of rejects per machine per day is fixed. When the number of rejects increases beyond this acceptable level, it is time for the production supervisor to investigate and take suitable steps to correct the situation.

The successful control process hinges on the all important concept of feedback. This refers to the information on the critical control variable of the operation or activity which when fed back to the manager triggers off corrective action.

Except in a self-regulated, closed mechanical system where the corrective action is taken instantaneously and automatically, most activities within an organization require human intervention. The finance manager must find out why profits have ‘fallen below the established level and take suitable steps to remedy this. In some cases, only a minor corrective action is needed. But sometimes the situation requires drastic action, even scrapping a department or plant whose operation has become totally unprofitable.

Within the organisation, feedback usually implies a lag between the time when the event actually occurs and the time by which information about the event reaches the concerned manager. Sales figures for the preceding month may not be available to the manager before the 7th of the current month. The manager can only take note of what happened in the past and take measures to prevent its occurrence in the future. Too long a time lag prevents any meaningful control or corrective action. To overcome this problem of time lag, most companies generate daily reports of critical variables which provide early warning signals to the manager. But even daily reports may reach two days later when they have to travel a long distance from say Jaipur to Delhi. With the introduction of computers and real time information systems (instantaneous transmission of information) this problem can largely be overcome. All control processes should reflect the plans that they are supposed to follow. However, to be truly effective the controls must highlight the critical variables in an objective manner, and be worth their cost in installing and operating.

Budget is a traditional and widely used control process. Apart from this a company may use historical statistical data, or break-even analysis to control its operations. By the use of mathematics, many sophisticated control techniques are also possible. These pertain to implementing control for inventory management, distribution logistics and project or programme management. Some of these such as Programme Evaluation and Review Technique (PERT), Critical Path Method (CPM) are widely used in management control. 

ORGANISING

Organising refers to the formal grouping of people and activities to facilitate achievement of the firm’s objectives. Issues for discussion here are the types of organisation structure, degree of centralisation, levels of management, span of control, delegation of authority, unity of command, line and staff relationship, and staffing.

Structure refers to the specific manner in which people are grouped. An organization can group its people on the basis of the various functions (such as production, personnel, finance, marketing), geographical territories or around specific products or product lines (such as detergents, toiletries, basic chemicals, agro-products, as in case of Hindustan Lever Limited). The concept of matrix organisation is a recent evolution and combines the functional and product organisation. This type of organisation is especially useful in case of projects which require both specialists as well as functional experts to execute a project within a specified time frame. Another type of organisation is by the type of customers served. A company manufacturing and marketing computers has organised its sales department in two groups. One group sells to institutions such as offices, banks, schools, colleges, etc., while the other group sells to individuals. Many companies selling office equipment have organised separate marketing teams to cater to the private sector and the public sector because of the different cultures prevailing in them.

Centralisation refers to the point or level where all decision-making authority is concentrated. One-man enterprises; such as a small bread and butter stores, vegetable vendor, a self-employed car mechanic, are examples of complete centralisation. As the enterprise grows, it becomes increasingly difficult for one person to manage alone and he has to necessarily line up other people and give them authority to make some decisions. These decisions may be routine, programmable decisions but complete centralisation is no longer possible. The decision-making authority is now vested in more than one individual. This is decentralization.

You require information to make a decision. It is possible that information may be generated at one place but the decision is taken at another. A Bombay based multinational involved in making and selling ball bearings has its manufacturing facility at Pun. Every evening all information regarding the day’s production, machine down time, inventory position is sent to the head office via the linked computer facility and all decisions regarding change in production scheduling are made at the head office. The introduction of real time information with the help of computers enables information generated at one place to be instantaneously transmitted thousands of miles away for making a decision. However, the real criterion for an organisation having a centralised or decentralised structure is a reflection of the top Management’s thinking and philosophy.

Closely related to the concept of centralisation are the concepts of levels of management and span of control. Levels of management refers to the number of hierarchical levels under the control of a particular manager. Machine operator, foreman, floor manager and production manager represent the levels of management in a typical production department under the director. The machine operators report to the foreman, the foreman reports to the floor manager who in turn reports to the production manager who is accountable to the director. The number of machine operators who directly report to the foreman represents his span of control. There is a great deal of controversy regarding the ideal number of people that a manager can effectively control or the ideal span of control. Many management thinkers are of the view that three to seven is the ideal range. In practice, this may actually vary from one individual manager to another.

At each level of management, there is a reporting relationship between the manager and the workers. The fewer the number of people that a worker has to report to, the less will be the problem of conflict in instructions, and greater the feeling of responsibility for results. Similarly, the clearer the line of authority from the manager to the workers, the better the decision-making and communication. The staff functionary reports directly to the top management and is not a part of the chain of command.

A company may draw up any number of ambitious plans, but if it does not have the right kind of people, it can never succeed in implementing these plans. One of the biggest challenges which a manager faces is matching the right people with the right jobs. The process of staffing starts with defining the job to be done and the necessary qualifications, skills and experience required to do it. The next step is to search for the persons with the desired background. The search may involve a number of complex steps such as advertising the job through newspapers and specialized magazines, screening the applications received in response to the advertisement, conducting a selection process which may include a variety of techniques such as written test, group discussion, personal interview, etc. Before making the final selection, it is important to be sure that the candidate fits in well with the other people and the culture of the organisation.

Having found the right candidate, it is equally important that you are able to retain him. Among other things, motivation and leadership provided by the top management of organisation also plays an important role.

MOTIVATING AND LEADING

Having established plans, controls, and an appropriate structure to achieve the organisational objectives, the manager now has to get his people to work. Motivation is that desire or feeling within an individual which prompts him to action. Every individual has needs, desires and drives, which we collectively call motives and which channelise all his or her behaviour and action towards achievement of some objectives. The manager’s role is to influence each individual’s behaviour and action towards achievement of common organisational objectives.

A great deal of research has been conducted in this area and there are many theories of motivation. It is not possible to explain all these theories here and we shall only briefly explain the various factors that can act as motivation.

Money is the most commonly used motivating factor in the form of salary, bonus, incentives, commissions and rewards. Salary or wage is of course the primary motivation, and the poorer the economic background of an individual the greater the motivational value of money. However, once a basic salary or wage is assured, to motivate people to work that little bit extra, achieve that ten per cent higher sales figure, incentives and commissions come in handy. Most sales organisations pay salary plus incentives to their sales people. The incentives may be calculated on the basis of individual or team results, and may be linked to a sales target. Similar incentives can be offered to the production department. However, performance linked rewards are difficult to compute in areas such as finance, personnel, and administration where work output cannot be easily measured. A percentage of total profits can be distributed to these departments as incentive.

Man does not live by bread alone is an old saying. Man is a social animal and seeks recognition and status in society through his work. The status or position which an individual enjoys in the organisation, the number of people who work for him, the non-monetary benefits and perks which he enjoys are important motivational factors. In fact sometimes these are more important than the actual take-home pay packet.

Gupta started his career as a salesman in a medium sized company manufacturing and marketing stereo systems. Because of his analytical ability, capacity to work hard and achieve results, Gupta soon rose to be the area sales manager of North India. The owner of the company relied a great deal on Gupta’s judgment and always consulted him on every important matter. Gupta was making good money, performing well and enjoyed the great confidence of the owner, yet he felt that there was no power or position in his job which could give him a better status in society. Therefore, when the opportunity arose, Gupta joined an American multinational as Divisional Manager, selling scientific laboratory glassware. It was the glamour, the power, and the status which the job conferred on him that motivated Gupta to join. However, two years with the multinational were enough for Gupta to realise that he had no authority to take any independent decisions and he was not deriving any satisfaction from his job. Gupta quit his job and went back to his previous employer. Thus satisfaction at work is an important motivating factor.

The lesson from Gupta’s story is that the same individual will be motivated by different factors at different stages of his career. Generally as you move up the organisation to more important positions, the importance of money and monetary benefits as motivating factors decreases and intangible factors such as job satisfaction, confidence of the boss, good relationship with the boss, the status and respect commanded in the organisation, etc. become more important.

The physical working environment in which a person works also has tremendous motivational force. A pleasant, noise-free, well-lit room with comfortable temperature, and proper facilities of telecommunication, secretarial assistance, canteen, transport, etc. is always conducive to work.

Different individuals are motivated by different factors. This is because each individual in the organisation comes from a different socio-economic, cultural, religious, educational and family background, and each of these has a role in determining the degree to which he can be motivated by different factors.

In most Western countries, a great deal of emphasis is laid on leisure and individuals may be motivated to take up that job which affords greatest opportunity for leisure. Similarly religious background and personal values are important influences on the effectiveness of motivating factors. No matter how attractive the salary, not many Hindus would like to work in a beef packing factory.

The manager’s concern is to find a set of common factors which can motivate all his people coming from diverse and different backgrounds and working at different levels of management. The manager’s task will be greatly simplified when he understands that motivational factors are present in, and can be used, in design of work, rewards, work environment, work relationships and work content. All monetary benefits and non-monetary advantages such as free medical cover, company car and driver, club membership, etc. are part of the work reward and are important motivators.

Work environment as a motivating factor, first and foremost, refers to the status of the organisation for which a person works and the mere fact of his working in that organisation gives him that status. Harvard University has the reputation of being amongst the best in the world and anyone who has graduated from Harvard is generally perceived to be at least above average, if not excellent. The actual physical factors present in the work environment also act as motivators.

Relationships developed at work, with the boss, colleagues and subordinates have an important motivating influence. The more congenial, friendly and supportive are these relationships, the greater their positive motivational value. In contrast, strained relationships which create tension and unhappiness are serious enough reasons for people to leave jobs which in all other respects seem very comfortable and attractive.

The design and content of the actual work to be done is in itself an important motivational factor. An element of freedom to experiment with new ideas within the parameters of the job fulfils the creative urge in every individual. Freedom to take decisions and assume responsibility for the results are factors which enhance an individual’s self-confidence and feeling of self-esteem. The more such factors can be built into the job, the greater would be the job satisfaction of the individual performing the job. A happy, satisfied worker is a productive worker and a great asset to any organisation. If an individual is himself associated with designing the content and objectives of his job, there are greater chances, that he will work his utmost to fulfill these objectives. This is the approach known as Management by Objectives (MBO) and has tremendous motivational potential.

The manager has not only to motivate his people but also provide them with leadership. To that extent every manager is a leader. A manager has to inspire and influence his people to willingly work towards achieving the organizational objectives.

Much research has been conducted in this field and different studies have emphasized different aspects in attempting to answer the question `What makes an effective leader’? When put in a situation of leading, you must remember it is a role that your are performing, but that your personality has an important influence on your performance as does the situation in which you are expected to perform.

To be an effective leader, a manager must have a pleasing physical personality, ability to get along with people, qualities of honesty and integrity and be an excellent speaker. To command respect of others he must excel at his basic job whether it is operating a lathe machine or managing the finances of a large company. The leader must first set an example by his own actions rather than by just making speeches. His actions must communicate to the people that he belongs to them. Only when he is able to generate this feeling of oneness will he be able to inspire confidence in his people.

Secondly, a manager-must remember that he is only playing a role. However, to be able to perform effectively, the role demands that the manager be perfectly objective in all his judgements and decisions, and be guided only by the organisational objectives and have no other considerations. For a leader the interests of his people are of paramount importance and come first while personal benefits, take second place.

Thirdly, the role must be moulded according to the unique situation in which the manager is placed. In our society, great emphasis is laid on personal relationships and contacts and managers are perceived to be father figures and are expected to have a paternalistic attitude towards their workers. In contrast, in the West, especially in countries with a British colonial past, the relationships between manager and worker is only confined to the work. There, if a manager were to adopt a paternalistic approach, he would be totally ineffective. A manager who usually follows a consultative, participative approach, seeking the opinions and consensus of his subordinates before implementing any decision, in a crisis situation may adopt a very authoritarian approach and effectively manage the situation.

When Lee Iaccoca, took over the management of Chrysler Corporation, USA, it was an ailing automobile giant. To bring it out of the loss making situation, Iaccoca inspired tremendous confidence and loyalty in his workers by setting personal example of great hard work and accepting only a token wage. Under his leadership the company was soon able to turn its losses into profits.

Political leaders such as Gandhi who commanded the respect of millions of people are a model for managers to learn from. Gandhi’s leadership style was so finely turned to the moods of the people and the situation that his every word was law for the common man. His actions and life-style made the people feel he belonged to them.

DECISION MAKING

Underlying the processes of planning, controlling, organising, leading and motivating is the all important process of decision-making. Every manager makes decisions, no matter what his area of management responsibility may be.

Decision-making implies making a choice between alternatives. The choice is made rationally after due consideration of all the pros and cons. The rational approach implies that it is a carefully thought out, deliberate and well-weighed choice, guided only by the consideration of the organisational objectives to be achieved.

In making a decision, the manager first of all define the issue on which the decision needs to be made. Then he should generate all the possible alternatives available to tackle the issue at hand. The third step involves a careful evaluation of each alternative to choose that which offers the best chance of achieving the objectives.

Making a choice is making the decision. Follow up of the decision to ensure that it is properly carried out is very important. A decision which does not get implemented remains a decision only on paper and not in reality. The final step is to gather feedback on the impact generated by the decision.

Decision-making is so important because it implies commitment of resources, the desired outcome of which is never certain. Decisions are made under conditions of uncertainty and risk. Decisions made today have implications reaching into the future. The risk arises out of the fact that the manager never has complete facts and knowledge about the implications of his decision and there is always the chance that the wrong decision may be taken.

Many mathematical tools and theories have been developed to improve the quality of decisions which managers have to make under risky and uncertain conditions. Linear programming, queuing theory, probability and game theory, risk analysis, and decision trees are some of these tools. These will be discussed at length at a later posts. 

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