The functions of management consist of five basic activities: planning, organizing, motivating, staffing, and controlling. An overview of these activities is provided in Table 4-3. These activities must be examined in strategic planning because an organization should continually capitalize on its strengths and improve on its weaknesses in these five areas.
The only thing certain about the future of any organization is change, and planning is the essential bridge between the present and the future that increases the likelihood of achieving desired results. Planning is the process by which a person (1) determines whether to attempt a task, (2) works out the most effective way of reaching desired objectives, and (3) prepares to overcome unexpected difficulties with adequate resources. Planning is the start of the process by which an individual or business may turn empty dreams into achievements. Planning enables one to avoid the trap of working extremely hard but achieving little.
Planning is an up-front investment in success. It helps a firm achieve maximum effect from a given effort. It also enables a firm to take into account relevant factors and focus on the critical ones. Planning helps ensure that the firm can be prepared for all reasonable eventualities and for all changes that will be needed. The act of planning allows a firm to gather the resources needed and carry out tasks in the most efficient way possible. It also enables a firm to conserve its own resources, avoid wasting ecological resources, make a fair profit, and be seen as an effective, useful firm. Furthermore, planning enables a firm to identify precisely what is to be achieved and to detail precisely the who, what, when, where, why, and how needed to achieve desired objectives. It empowers a firm to assess whether the effort, costs, and implications associated with achieving desired objectives are warranted.7 Planning is the cornerstone of effective strategy formulation, and even though it is considered the foundation of management, it is commonly the task that managers neglect most. Planning is essential for successful strategy implementation and strategy evaluation, largely because organizing, motivating, staffing, and controlling activities depend on good planning.
Planning can have a positive impact on organizational and individual performance. It allows an organization to identify and take advantage of external opportunities as well as minimize the impact of external threats. Planning is more than extrapolating from the past and present into the future (long-range planning). It also includes developing a mission, forecasting future events and trends, establishing objectives, and choosing strategies to pursue.
An organization can develop synergy through planning. Synergy exists when everyone pulls together as a team that knows what it wants to achieve; synergy is the 2 + 2 = 5 effect. By establishing and communicating clear objectives, employees and managers can work together toward desired results. Synergy can result in powerful competitive advantages. The strategic-management process itself is aimed at creating synergy in an organization.
In addition, planning allows a firm to adapt to changing markets and thus shape its destiny. It enables an organization to be proactive, to anticipate, and to influence, rather than being primarily reactive strategies. Successful organizations strive to control their own futures rather than merely react to external forces and events as they occur. Historically, organisms and organizations that have not adapted to changing conditions have become extinct.
The purpose of organizing is to achieve coordinated effort by defining task and authority relationships. Organizing means determining who does what and who reports to whom. There are countless examples in history of well-organized enterprises successfully competing against— and in some cases defeating—much stronger but less-organized firms. A well-organized firm generally has motivated managers and employees who are committed to seeing the organization succeed. Resources are allocated more effectively and used more efficiently in a well-organized firm than in a disorganized firm.
The organizing function of management can be viewed as consisting of three sequential activities: breaking down tasks into jobs (work specialization), combining jobs to form departments (departmentalization), and delegating authority. Breaking down tasks into jobs requires the development of job descriptions and job specifications. these tools clarify for both managers and employees what particular jobs entail. In The Wealth of Nations, published in 1776, Adam Smith cited the advantages of work specialization in the manufacture of pins:
One man draws the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head. ten men working in this manner can produce 48,000 pins in a single day, but if they had all wrought separately and independently, each might at best produce twenty pins in a day.8
Combining jobs to form departments results in an organizational structure, span of control, and a chain of command. Changes in strategy often require changes in structure because positions may be created, deleted, or merged. Organizational structure dictates how resources are allocated and how objectives are established in a firm. Allocating resources and establishing objectives geographically, for example, is much different from doing so by product or customer. the most common types of structure are functional, divisional, strategic business unit, and matrix. these designs are discussed in Chapter 7.
Delegating authority is an important organizing activity, as evidenced in the old saying, “You can tell how good a manager is by observing how his or her department functions when he or she isn’t there.” Employees today are more educated and more capable of participating in organizational decision making than ever before. In most cases, they expect to be delegated authority and responsibility and to be held accountable for results. Delegation of authority is embedded in the strategic-management process.
Motivating is the process of influencing people to accomplish specific objectives.9 Motivation explains why some people work hard and others do not. Objectives, strategies, and policies have little chance of succeeding if employees and managers are not motivated to implement strategies once they are formulated. The motivating function of management includes at least four major components: leadership, group dynamics, communication, and organizational change.
When managers and employees of a firm strive to achieve high levels of productivity, this indicates that the firm’s strategists are good leaders. Good leaders establish rapport with subordinates, empathize with their needs and concerns, set a good example, and are trustworthy and fair. Leadership includes developing a vision of the firm’s future and inspiring people to work hard to achieve that vision. Kirkpatrick and Locke reported that certain traits also characterize effective leaders: knowledge of the business, cognitive ability, self-confidence, honesty, integrity, and drive.10 Stressing the importance of leadership, Sun Tzu stated, “Weak leadership can wreck the soundest strategy.”
Research suggests that democratic behavior on the part of leaders results in more positive attitudes toward change and higher productivity than does autocratic behavior. According to Drucker:
Leadership is not a magnetic personality. That can just as well be demagoguery. It is not “making friends and influencing people.” That is flattery. Leadership is the lifting of a person’s vision to higher sights, the raising of a person’s performance to a higher standard, the building of a person’s personality beyond its normal limitations.11
Because social media has come to dominate the conversation at all levels of personal and professional life, Frank Guglielmo in The Social Leader reports that the best leaders today do not function like generals. Rather, Guglielmo observes, “Leaders today need to be more concerned with their span of influence than their span of control; agendas are negotiated, not dictated; information is shaped, not controlled; and accountability is shared, not monitored.”12 Selladurai and Carraher in Servant Leadership: Research and Practice (2014) promote the idea that true leadership requires a dissolution of autocratic thinking in favor of leading by guiding and encouraging.
An organization’s system of communication determines whether strategies can be implemented successfully. Good two-way communication is vital for gaining support for departmental and divisional objectives and policies. Top-down communication can encourage bottom- up communication. The strategic-management process becomes a lot easier when subordinates are encouraged to discuss their concerns, reveal their problems, provide recommendations, and give suggestions. A primary reason for instituting strategic management is to build and support effective communication networks throughout the firm.
The manager of tomorrow must be able to get his [or her] people to commit themselves to the business, whether they are machine operators or junior vice-presidents. The key issue will be empowerment, a term whose strength suggests the need to get beyond merely sharing a little information and a bit of decision making.13
The management function of staffing, or human resource (HR) management, includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union relations. Staffing activities play a major role in strategy- implementation efforts, and for this reason, HR managers are becoming more actively involved in the strategic-management process. It is important to identify strengths and weaknesses in the staffing area.
The complexity and importance of HR activities have increased to such a degree that all but the smallest organizations generally have a full-time human resource manager. Numerous court cases that directly affect staffing activities are decided each day. Organizations and individuals can be penalized severely for not following federal, state, and local laws and guidelines related to staffing. Line managers simply cannot stay abreast of all the legal developments and requirements regarding staffing. the HR department coordinates staffing decisions in the firm so that an organization as a whole meets legal requirements. this department also provides needed consistency in administering company rules, wages, policies, and employee benefits as well as collective bargaining with unions.
Human resource management is particularly challenging for international companies. For example, the inability of spouses and children to adapt to new surroundings can be a staffing problem in overseas transfers. the problems include premature returns, job performance slumps, resignations, discharges, low morale, marital discord, and general discontent. Firms such as Ford Motors and ExxonMobil screen and interview spouses and children before assigning families to overseas positions. Similarly, 3M Corporation introduces children to peers in the target country and offers spouses educational benefits.
Some companies, such as LRN Corporation and Ruppert Landscape, have recently dissolved their HR departments in order to flatten organizational structures, shift accountability for employees closer to managers, and to take advantage of outsourcing payroll, benefits, and other HR activities for greater efficiency and quality.14
The controlling function of management includes all of those activities undertaken to ensure that actual operations conform to planned operations. All managers in an organization have controlling responsibilities, such as conducting performance evaluations and taking necessary action to minimize inefficiencies. the controlling function of management is particularly important for effective strategy evaluation. Controlling consists of four basic steps:
- Establishing performance standards
- Measuring individual and organizational performance
- Comparing actual performance to planned performance standards
- taking corrective actions
Measuring individual performance is often conducted ineffectively or not at all in organizations. Some reasons for this shortcoming are that evaluations can create confrontations that most managers prefer to avoid, can take more time than most managers are willing to give, and can require skills that many managers lack. No single approach to measuring individual performance is without limitations. For this reason, an organization should examine various methods, such as the graphic rating scale, the behaviorally anchored rating scale, and the critical incident method, and then develop or select a performance-appraisal approach that best suits the firm’s needs. Increasingly, firms are striving to link organizational performance with managers’ and employees’ pay.
6. Management Audit Checklist of Questions
The following checklist of questions can help determine specific strengths and weaknesses in the functional area of business. An answer of no to any question could indicate a potential weakness, although the strategic significance and implications of negative answers, of course, will vary by organization, industry, and severity of the weakness. Positive or yes answers to the checklist questions suggest potential areas of strength.
- Does the firm use strategic-management concepts?
- Are company objectives and goals measurable and well communicated?
- Do managers at all hierarchical levels plan effectively?
- Do managers delegate authority well?
- Is the organization’s structure appropriate?
- Are job descriptions and job specifications clear?
- Is employee morale high?
- Are employee turnover and absenteeism low?
- Are organizational reward and control mechanisms effective?
Source: David Fred, David Forest (2016), Strategic Management: A Competitive Advantage Approach, Concepts and Cases, Pearson (16th Edition).
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