BUSINESS MANAGEMENT 101
BACHELOR OF COMMERCE IN
HUMAN RESOURCE MANAGEMENT
BUSINESS MANAGEMENT 101
MODULE GUIDE
Copyright © 2021
REGENT BUSINESS SCHOOL
All rights reserved; no part of this book may be reproduced in any form or by any means, including
photocopying machines, without the written permission of the publisher.
BACHELOR OF COMMERCE
BUSINESS MANAGEMENT 101
Table of Contents
INTRODUCTION TO BUSINESS MANAGEMENT 101 ................................... 2
CHAPTER 1:
Introduction to Business Management ............................................................. 6
CHAPTER 2:
Development of Management Theory ............................................................ 18
CHAPTER 3:
Environmental Analysis .................................................................................. 36
CHAPTER 4:
General Management ..................................................................................... 60
BIBLIOGRAPHY ............................................................................................. 88
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
1
BUSINESS MANAGEMENT 101
INTRODUCTION TO BUSINESS MANAGEMENT 101
1. Introduction
Welcome to the Bachelor Of Commerce In Human Resource Management programme
and the Business Management 101 module. This study guide has been devised in line
with your syllabus and the latest developments in the field of management. The
structure of the guide is simple and user-friendly.
2. Module Overview
This module introduces the students to the fundamental concepts and functions of
management. It describes the functional areas of management and their related
activities. The guide assists students with a concise understanding of the general
management functions and the business environment.
3. Aim of the Module
This module aims to successfully demonstrate a suitable understanding of
management concepts and functions. Effectively identify and apply a comprehensive
knowledge of the business environment
4. Essential (Prescribed) Reading
Your essential (prescribed) reading comprises the following:
4.1. Prescribed Reading
•
Erasmus, B., Strydom, J. W., and Rudansky-Kloppe, S. (2016). Introduction to
Business Management – 10th Edition. Oxford University Press
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
2
BUSINESS MANAGEMENT 101
4.2. Recommended Reading
•
Hellriegel, Slocum et al. (2017). Management, 5th ed. South Africa: Oxford
University Press
•
Nieman and Bennet. (2014) Business management - A value chain approach,
2ND ed. South Africa: Van Schaik publishers
•
Smit, Cronje et al. (2011). Management Principles, 5th ed. South Africa: Juta
•
Van Rensburg, L.R.J. (ed). (2008). Business Management, 2nd edition. South
Africa: Van Schaik publishers
5. How to use this Module
This module should be studied using the recommended and prescribed textbook/s and
the relevant sections of this module. You must read about the topic that you intend to
study in the appropriate section before you start reading the textbook/s in detail. Ensure
that you make your own notes as you work through both the textbook/s and this
module. You will find a list of objectives and outcomes at the beginning of each section.
These outline the main points that you need to understand when you have completed
the section/s. The purpose of this guide is to help you study. It is important for you to
work through all the tasks and self-assessment exercises as they provide guidelines
for examination purposes.
6. Navigational Icons
Think Point
When you see this icon, you should think about and reflect on the
issues/challenges/themes presented.
Tasks
When you see this icon, you will know that you are required to perform
some kind of task to gauge how well you remember or understand
what you have read or how good you are at applying what you have
learnt.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
3
BUSINESS MANAGEMENT 101
Definitions
This icon will alert you to a specific definition related to the topic under
discussion
Case Studies
Case studies are often used to illustrate a concept within the setting
of a real life scenario. Answer the questions that follow to ensure that
you have a proper understanding of what has been discussed.
7. Specific Outcomes and Chapter Alignment
SPECIFIC PROGRAMME OUTCOMES
CHAPTER
ALIGNMENT
SO 1:
Describe the fundamental concepts of business
1,2,3,4
management in an organisational environment.
SO 2:
Provide an elementary understanding of the evolution
2
of management theory in relation to current business
practice.
SO 3:
Effectively determine the relationships between the
3
organisation and external environmental factors.
SO 4:
Describe the different internal and external factors that
3
may affect a business organisation.
SO 5:
Constructively apply factors of the business
3
environment to a variety of business contexts.
SO 6:
Demonstrate a sound understanding of the four basic
4
management functions.
SO 7:
Display a basic knowledge of management adapting
4
from traditional management methods to the digital age.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
4
BUSINESS MANAGEMENT 101
8. Specific Outcomes and Assessment Criteria
SPECIFIC PROGRAMME
OUTCOMES
SO 1:
ASSESSMENT CRITERIA
The student should demonstrate the ability to have:
Describe the fundamental
Clearly discuss the fundamental concepts of
concepts of business
management; explain the importance of
management in an
management to business.
organisational environment.
SO 2:
Provide an elementary
Discuss the evolution of management theories
understanding of the
in theory and apply knowledge to current
evolution of management
business practices within various
theory in relation to current
organisations.
business practice.
SO 3:
Effectively determine the
Describe in detail the composition of the
relationships between the
business environment.
organisation and external
environmental factors.
SO 4:
Describe the different internal
Explain the relationship between the internal
and external factors that may
and external environments; apply knowledge
affect a business
of the factors of the business environment.
organisation.
SO 5:
Constructively apply factors
Demonstrate an understanding of
of the business environment
environmental analysis to a variety of business
to a variety of business
scenarios.
contexts.
SO 6:
SO 7:
Demonstrate a sound
Demonstrate a sound understanding of the
understanding of the four
four management functions: apply knowledge
basic management
of each of the functions to a variety of
functions.
business operations.
Display a basic knowledge of
Discuss a basic understanding of the evolution
management adapting from
from traditional to digital management.
traditional management
methods to the digital age.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
5
BUSINESS MANAGEMENT 101
CHAPTER 1:
Introduction to Business Management
Chapter Outcomes
On completion of this chapter, you should be able to:
•
Clearly discuss the importance of studying of business management
•
Identify and discuss the functional areas of business management
•
Effectively describe an organisation’s value chain model
•
Successfully identify and discuss the factors of production required to start a
business
•
Describe the fundamental concepts of business management in an
organisational environment
•
Clearly understand and apply the roles, skills, and levels of management within
an organisational context
1.1. Introduction
As a subject, Business Management is relevant for every person in society. Although
many people are not actively involved in “business” as such, they are still involved in
the economic life of the country. The moment they are employed in the workplace,
or make use of a service, or buy a product, they are involved in economic life. Better
knowledge and improved understanding of what a business is and how it functions
increases understanding and appreciation. A thorough understanding of a business,
its workings and its management is essential for every business manager. Managers
need training on various matters relating to business, to generic management and
to a
number of
related subjects.
The subject of business management
encompasses all activities that are related to the management of all types of
organisations.
This chapter introduces students to the scope as well as some of the core principles
of Business Management-in particular, the value chain model, factors of production,
managerial roles and skills and types of business ownership.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
6
BUSINESS MANAGEMENT 101
1.2
Functional Areas of Business Management
The
management
of
a
business
involves
various
functional
areas
of
management, each of which should receive careful consideration. The extent to which
a particular functional area of business is important in a particular business depends
on several factors, for example the type of product or service, the location which
enables businesses to transform so-called inputs into outputs, as well as the size of
the organisation. The following functional areas are identified and discussed:
•
Production and operations management
•
Marketing management
•
Financial management
•
Human Resources management
•
Public Relations
It is important to note that these functions can be identified as separate functions and
can be studied on their own. However, in practice, these functions cannot be
separated; th ey wo rk t o ge t he r to achieve the goals and objectives of the
business.
Tasks
Take any business as an example (e.g. a café).
Think about the business activities of this business and classify these
as part of the various functional management areas.
1.3 Factors of Production
Business Management is concerned with the management aspects of the inputs, the
conversion process, and the outputs. Traditionally, the production factors (inputs) are
summarised a s fo llows :
•
Land
•
Capital
•
Labour
•
Entrepreneurship
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
7
BUSINESS MANAGEMENT 101
Land is now considered to include all natural resources used as raw materials. Capital
represents the financial means for acquiring other forms of production factors, for
example buildings and machinery. Labour refers to all physical and mental abilities of
human resources. Entrepreneurship refers to the initiative of putting together a range
of production factors in various combinations in diverse businesses to satisfy the
numerous needs of consumers. The optimal combination of factors requires various
other aspects such as internal and external communication. These aspects and
functions are linked in a value chain where each activity needs to note the influence
it may have on every other aspect of the business. The application of the economic
principle must be visible throughout the entire organisation.
1.4
Adding Competitive Value: The Value Chain
At every stage of the conversion process, one has to examine how value can be
added to the process in the most efficient way. The entire chain of linked activities
and processes, from the most rudimentary raw material to the most sophisticated end
product, must be guided by adding value.
This value concept is broad, not only in terms of financial or monetary value, but also
of adding value in terms of place, time and form utilities. By adding value to these
utilities, the products and services become enhanced need-satisfiers and can
therefore demand higher monetary value as well. If a particular activity does not add
value to the end product, then why have that activity?
The concept of the value chain was used in accounting analysis for some years before
Michael E. Porter of Harvard University suggested that it could be used as a tool for
identifying ways of creating customer value. As such, the value chain can be used as
a systematic means of examining all of the organisation's functional activities and their
effectiveness in creating customer value.
The idea behind value chain analysis is to identify the value that is added with each
activity in the process of providing products and/or services and to compare a
business's performance with the performance of competitors.
The knowledge obtained in this way will help management to make decisions and
follow them up with effective action to provide value for their customers. However,
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
8
BUSINESS MANAGEMENT 101
competitive advantage is obtained on overall value added, not through superior value
added with each activity. Hence, a business that sees itself as behind in one activity
can make up its shortfall in another, and emerge competitively in the end.
Therefore, analysing a business's value chain can draw attention to the organisation's
strengths and weaknesses.
A typical value chain divides activities within the business into two broad categories:
primary activities and support activities.
Primary activities (sometimes called line functions) are those involved in the physical
creation of the product, marketing and transfer to the buyer, and after sales support.
Support activities (sometimes called staff or overhead functions) assist the business
as a whole by providing infrastructure or inputs that allow the primary activities to take
place on an ongoing basis. The value chain includes a profit margin since a mark-up
above the cost of providing a firm's value-adding activities is normally part of the price
paid by the buyer. The value created should exceed cost so as to generate a return
for the business's effort.
Figure 1.1: The Value Chain Model
The primary activities are:
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
9
BUSINESS MANAGEMENT 101
•
Procurement and inbound logistics
These are areas concerned with sourcing and receiving goods from suppliers,
storing them until required by production/operations, and handling and transporting
them within the organisation.
•
Production/Operations
This is the production area of the business. In some businesses, this might be split
into separate departments, such as design furniture, make furniture, and quality
inspection in a furniture manufacturer, or receipt and payment of money, keeping
records of accounts, and safekeeping of valuable articles for a bank. In a service
business, where there is no production of tangible goods, this refers to the technical
core, or the backstage area where service support activities are carried out, such as
the mail sorting and distribution facility of a post office, and the servuction system,
that is the client service area such as the lobby of a hotel or the check-in counter of
an airline.
•
Outbound logistics
These distribute the final product to the customer. They would clearly include
transport and warehousing but might also include selecting and wrapping
combinations of products in a multi-product business. For a bank or other service
business, this activity would be reconfigured to cover the means of bringing
customers to the bank or service, including service centres (branches) or Internet
access to the organisation's services.
•
Marketing and sales
This function analyses customers' wants and needs and ma kes customers aware
of those products or services that the business has to offer for sale.
•
Customer service
Before or after a product or a product has been sold, there is often a need to
arrange financing, installation, or after- sales service. There may also be a need
to train customers, answer their questions, and so forth. Each of the above
categories adds value to the organisation in its own unique way For the business
to undertake its task more efficiently than its competitors, these activities must
ensure lower production costs, faster and cheaper outbound delivery, higher
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
10
BUSINESS MANAGEMENT 101
standards of service etc. By this means, they provide the areas of competitive
advantage of the organisation.
The support activities, according to the value chain, are:
•
Financial management
All activities, costs and assets related to the acquisition, utilisation and control of
the money the organisation required to finance its activities.
•
Human resource management
Activities, costs and assets associated with the recruitment, training,
development and compensation of all types of personnel and labour relations
activities.
•
Communication
Activities, costs and assets associated with communicating with all the internal
and external publics of the organisation.
•
Information management and e-business
Information
management is
the management of
organisational
processes
and systems that acquire, create, organise, distribute, and use information. Ebusiness (electronic business) is the conduct of business processes on the
internet. These e-business processes include buying and selling products,
supplies and services, servicing customers, processing payments, managing
production control, collaborating with business partners, sharing information,
running automated employee services, recruiting, and more.
These support activities add value, just as the primary activities do, but in a way that
is more difficult to link with any one particular part of the organisation. This is also the
case with general management and leadership that is required to plan, direct and
control all activities and functions at all levels within the organisation management
plan, direct and control.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
11
BUSINESS MANAGEMENT 101
1.5
Definition of Management
With regard to a definition of management, on the whole, a considerable degree of
consensus exists within the literature. Definitions include:
•
“the process of planning, organising, leading and controlling the resources of
the organisation to achieve stated organisational goals as productively as
possible” (Cronjé, et al., 2004: 10).
•
“the process of getting things done through the efforts of other people”
(Mondy, Sharplin & Premeaux, 1991: 3).
•
“the process of planning, organizing, leading, and controlling the work of
organisation members and of using all available organisational resources to
reach stated organisational goals.” (Jones, George & Hill, 1998: 5).
An analysis of the above definition’s points to the essential components which should
be included in a definition of management:
For an organisation to effectively and efficiently achieve its goals, its management
must involve a process in which …
•
the management functions of planning, organising, leading and controlling are
executed;
•
organisational resources are utilised; and
•
work is achieved through the efforts of other employees.
1.6
Levels of Management
Three levels of management within an organisation may be identified:
•
Top Management
•
Middle Management
•
Lower / First Line / Supervisory Management
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
12
BUSINESS MANAGEMENT 101
TOP MANAGEMENT
MIDDLE
MANAGEMENT
Responsible for specific
departments
LOWER
MANAGEMENT
Responsible for
departmental sections /
subsections
RESPONSIBILITY
Overall responsibility for
the organisation
MAIN FUNCTION
Strategic management
TIME
ORIENTATION
POSITIONS HELD
Long Term
Medium Term
Short Term
Board of Directors,
Managing Director, CEO,
Management
Committees
Departmental heads,
e.g. Marketing Manager,
HR Manager
Section/subsection
heads, e.g. Product,
Sales & Promotion
Managers within the
Marketing Department
Implementation of
policies, plans &
strategies
Application of rules &
procedures to achieve
high levels of productivity
Table 1.1: The levels of management
1.7
The Role Distribution of Managers
The manager’s relation to the organisation can be further explored from a role
distribution perspective.
Figure 1.2: Henry Mintzberg’s managerial roles
According to (Erasmus, et al, 2016), each manager must fulfil a specified role,
irrespective of the managerial level or area he or she occupies. After all, a manager
will perform certain roles, meet certain needs and assume responsibilities. Mintzberg
(1990) presents the three categories of managerial roles in a sequential manner. As
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
13
BUSINESS MANAGEMENT 101
illustrated in Figure 1.2, the sequence begins with the status emerging from the
formal authority vested in the manager’s position.
This status allows for the formation of interpersonal relationships and the execution
of Interpersonal Roles. The interpersonal relationships in turn provide the manager
with access to information and the consequent carrying out of Informational Roles.
This information consequently enables the manager’s decision making, and his
execution of Decisional Roles.
•
Interpersonal Roles
❖ Figurehead Role: the manager is involved in the performance of ceremonial
duties, such as officiating at a long-service award evening.
❖ Leader Role: the manager works with and through his/her subordinates to
achieve the work of his/her department. For example, the manager appoints,
trains, motivates, and promotes his/her subordinates.
❖ Liaison Role: the manager makes contacts outside of the vertical chain of
command to maintain good relationships within and outside the organisation,
such as the forming of a sound relationship with a supplier or distributor.
•
Information Roles
❖ Monitor Role: the manager is involved in constantly seeking pertinent
information through, for example, scanning the environment and receiving
information from his or her network of contacts.
❖ Disseminator Role: the manager passes on information received to
individuals within the organisation who would benefit from it, such as
subordinates and colleagues.
❖ Spokesperson Role: the manager communicates information to people
outside the organisation, for example, the Marketing Director may ensure that
the media is kept informed about the organisation’s social responsibility
initiatives.
•
Decision-Making Roles
❖ Entrepreneur Role: the manager seeks to maintain and extend the unit’s/
organisation’s sustainability through adapting it to changes within the
environment. For example, the CEO and the management team may decide to
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
14
BUSINESS MANAGEMENT 101
change strategy and reengineer the organisation as a result of influential
changes within the organisation’s environment.
❖ Disturbance Handler Role: the manager is involved in involuntarily responding
to pressures and solving problems. For example, the HR Director may be
required to address an unexpected situation within the company which may lead
to strike action.
❖ Resource Allocator Role: the manager decides what quantities of resources
such as people, equipment and money each part of the department/
organisation should receive. For example, during the company’s budgeting
period, the CEO approves a budget for the Information Technology department
which is considerably larger than the other departments’ budgets.
❖ Negotiator Role: due to his/her authority to allocate resources and his/her
access to information, the manager is involved in negotiations within the
company. For example, a supervisor may negotiate changes to job
specifications with his/her subordinates.
In closing, it needs to be noted that although Mintzberg (1990) distinguishes ten
managerial roles, he argues that all ten roles form an integrated whole and cannot be
easily separated.
It needs to be noted that Mintzberg (1990) emphasises that although he breaks down
the manager’s work into ten different roles, his focus is on the Gestalt (whole)
approach, and he argues that the roles are not separable. In so doing, the complex
nature of managerial work is acknowledged.
Mintzberg (1990) argues that the managerial role approach contributes to more
effective management in that, unlike the traditional POLC approach, it provides
managers with insight into the pressures and complexities of their work.
1.8
Managerial Skills
Certain managerial skills are required For managers to effectively perform their duties.
Erasmus et al (2016) identify three categories of skills that managers at all levels of
the organisation are identified to possess:
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
15
BUSINESS MANAGEMENT 101
• Conceptual Skills: which refer to the manager’s ability to view the operation of
the organisation and its parts holistically e.g. analytical thinking, strategizing or
being innovative.
•
Technical Skills: which refer to the ability to use discipline specific skills to
complete a particular task e.g. programming, engineering, fashion design,
operating systems and machinery.
•
Interpersonal Skills: which refer to the manager’s ability to communicate and
work effectively with others e.g. delegation and conflict resolution.
Obviously, managers at different hierarchical levels within the organisation will employ
these skills to varying degrees. For example, the nature of the work which top
management performs requires a greater reliance on, and employment of, conceptual
skills.
1.9
Conclusion
This chapter focused on the core concepts of business management as well as the
functional areas of business management. All organisations are systems where inputs
are transformed into outputs. To survive, organisations must add value to their
processes either by raising the value of their output or by lowering the costs of their
inputs. The importance of understanding the various interactions of management
levels and determining their roles and skills in an organisation.
Tasks
With the aid of a labelled value chain model diagram, illustrate the
value chain model for a business of your choice.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
16
BUSINESS MANAGEMENT 101
Case Studies
Martin Brink is a co-owner of a family business located in the Eastern Cape. The
business, Brink & Brink, manufactures wooden furniture for both the local and
international markets. Recently, Martin read the following in an article in a journal
for the South African wood furniture industry:
“The use of the Internet in facilitating and enhancing the access to global markets
is becoming increasingly important to South African producers of wooden furniture
as they become integrated into the global economy and are exposed to the
demands of more sophisticated markets.
Failure to
adopt
e-commerce
technologies could marginalize producers of wooden furniture and isolate them
from the international markets that they wish to supply.”
After reading this article, Martin realised that Brink & Brink, although it had up to
now not invested in e-technology, should consider doing so. He decides to prepare
a proposal for the next management meeting to suggest this. Assist Martin to
prepare for the meeting by answering the following questions.
Questions
1. Explain how enterprise’s e-technology activities can be represented in its value
chain.
2. Explain how the adoption of e-commerce technology can add value to a
furniture manufacturing enterprise such as Brink& Brink by referring to the
value chain concept.
3. “The management of e-technology is not only an important value chain activity
but is also a critical supply chain enabler”. Explain this statement.
4. Formulate three arguments, derived from the questions above, that Martin can
use to convince Brink & Brink’s management team to invest in e-technology.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
17
BUSINESS MANAGEMENT 101
CHAPTER 2:
Development of Management Theory
Chapter Outcomes
On completion of this chapter, you should be able to:
•
Highlight the significance of learning management theory
•
Display a basic understanding of the factors that have contributed to
management theory
•
Provide an elementary knowledge and understanding of the theorist
contributions and findings of the Classical Management Approach, Behavioural
and Human relations Approach, Quantitative Approach and Contemporary
theories
2.1 Introduction
This chapter examines the Evolution of Management Theory. Management theory
is argued by some to have originated with Nicolé Michiavelli, while others argue that
the Egyptians were the first management thinkers (Micklethwait and Wooldridge,
1996).
However, while Michiavelli and the Egyptians may well have been
management thinkers, it is only during the last century that management has
undergone systematic investigation and has been established as a formal discipline.
This section of the module examines the body of management knowledge which has
emerged since the early 1900s.
2.2 Why Study Management Theory?
You may wonder why the study of management theory is necessary.
The study of
management theory is critical in developing a holistic understanding of the discipline
and professional competence..
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
18
BUSINESS MANAGEMENT 101
Think Point
Think about your experience in your current organisation and /or
organisation for which you have worked in the past:
1. Identify two managers, with whom you have dealt with
who have
demonstrated vastly different management styles (for example, an absolute
autocrat vs. a democratic manager).
2. Identify the one manager as “Manager A” and the other as “Manager B”.
From your experience and observations, what principles do you think underlie
Manager A’s view of and approach to management?
S t o ne r a n d Freeman (1992) point out that the study of management theory is
important in that the theories serve to:
•
Guide management decisions
•
Shape the manager’s view of organisations
•
Make the manager aware of the business environment
•
Provide the manager with a source of new ideas
2.3 Understanding Management Theory
In studying management theory, it is important for you to have an understanding
of the concept of theory, as well as the factors that influence the development of
theory.
Tasks
Define the concept “theory”.
What factors do you think influence the development of a theory?
Comment on Activity
Definition of Theory
Stoner and Freeman (1992) define a “theory‟ as a “coherent group of
assumptions put forth to explain the relationship between two or more observable
facts and to provide a sound basis for predicting future events”. Another
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
19
BUSINESS MANAGEMENT 101
definition of “theory‟ is “a supposition or system of ideas explaining something”. In
essence, therefore, a theory is a framework of principles.
From the management perspective, it may be argued that each management theory
provides a framework of principles that guide not only the managers understanding
of management issues, but his/her management-related actions as well.
Factors Influencing the Development of Theory
Management theories do not develop in a vacuum but within, and as a result of, the
dynamic environment. The environmental forces which impact on the development
of management theory are depicted below:
Figure 2.1: Environment forces that shape management thought
Source: Smit & Cronje (2011)
Evolution of management theory
A study of the evolution of management schools of thought reveals that theories tended
to emerge in tandem with, or just after, notable environmental changes (See Chapter
3 for an understanding of environmental forces):
•
The Classical Management School that emerged in the early 1900s was
influenced by the economic, technical and cultural changes which were brought
about as a result of the industrial revolution and the introduction of steam.
•
The Behavioural Management School emerged in the 1920s and 1930s and
was influenced by the Great Depression and decline in prosperity as well as
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
20
BUSINESS MANAGEMENT 101
failure of the Classical Management School
to
provide
for
workplace
harmony.
•
The Quantitative Management Approach tha t emerged in the 1940s was
influenced by World War II during which both the British and the Americans
utilised mathematical approaches and technology to solving war-related
problems.
•
The Contemporary Management Theories began to emerge during the 1950s
and were influenced by the rapid and ongoing change which characterised the
business environment after World War II (Cronjé,et al 2004).
2.3 Theories of Management
We will explore the following schools of management:
2.3.1 The Classical Management Approach
The emergence of the Classical Approach was influenced by the steam-engine which
was a product of the Industrial Revolution. Steam power provided for efficient
production which in turn led to a shift from farm work to factory work where the
principle of mass production was upheld. This shift from the agrarian mode to the
factory system brought about a number of organisational problems, such as poor
motivation of workers. The classical theories emerged to address these problems.
Scientific Management Theory
Scientific Management Theory arose partly due to the need to increase productivity.
Fredrick Taylor, Henry Gantt and Frank and Lillian Gilbreth are best known for their
contributions to the field of Scientific Management.
Frederick Taylor was a manufacturing manager (originally a mechanical engineer)
who sought to increase the productivity of the individual worker by increasing
specialisation and job division of labour. He developed four principles to increase
efficiency in the workplace:
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
21
BUSINESS MANAGEMENT 101
•
Examine the way in which workers perform their tasks and experiment with
ways of improving the way in which the task is performed
•
Record the new methods of performing the task as rules and standard
operating procedures
•
Ensure that workers’ skills and abilities match the needs of the task, and train
them to perform the task according to the written rules and standard operating
procedures
•
Determine an acceptable level of performance for each task and develop a
remuneration system which rewards performance which exceeds the
acceptable level
Frank and Lillian Gilbreth built on the work of Taylor and focused on work
simplification. Their approach included:
•
Analysing each individual action required to perform a task
•
Identifying better ways of performing each action
•
Increasing the efficient performance of the whole task through reorganising
the individual actions (Jones et al., 1998).
Henry Gantt redesigned the incentive system developed by Taylor by providing not
only for the payment of a bonus to the worker who exceeded the daily standard, but to
the worker’s supervisor as well. He also devised a chart for production scheduling, the
Gantt Chart, which is still in use today (Stoner & Freeman, 1992). The Scientific
Management Approach succeeded in its endeavour to increase productivity. However,
the approach, in focusing on work and productivity, neglected to address the “human‟
element, which ultimately resulted in worker dissatisfaction and distrust of
management.
Administrative Management Theory
While Scientific Management Theory focused on the productivity of the worker,
Administrative Management Theory essentially focused on how to increase
productivity at the level of the organisation. Henri Fayol and Max Weber made
significant contributions to this view of management.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
22
BUSINESS MANAGEMENT 101
Henri Fayol, recognised as Europe’s greatest management pioneer, adopted a
process approach to management.
He identified 14 principles which he argued
could increase the efficiency of the management process. Many of these principles
(e.g. Division of labour, authority and responsibility, unity of command, unity of
direction, team spirit) form the basis of management and research today (Erasmus,
et al, 2016).
Fayol also identified five basic functions of administration:
•
Planning
•
Organising
•
Commanding
•
Coordinating
•
Controlling
Max Weber: developed a theory of bureaucratic management and emphasised the
need for a hierarchy governed by lines of authority.
Administrative Management Theory has made a significant contribution to the field
of management in that a considerable number of its principles are still being used in
management research and applied in management practice today. However, this
theory is criticised because it is more applicable for the stable organisations and
predictable environments of the past (Peak; 2020).
2.3.2 The Behavioural and Human Relations Approach
While the focus of the Classical Management Approach was either the
productivity of the worker or the productivity of the organisation, the Behavioural &
Human Relations Approach focuses on the needs of the worker. Indeed, the
Behavioural & Human Relations Approach emerged in part in reaction to the
‘inhumane” view of the Classical Approach. Mary Parker Follett, Elton Mayo and
Douglas McGregor are recognised as having made significant contributions to the
Behavioural & Human Relations Approach
Mary Parker Follett: Much of Follett’s writing emerged in reaction to Taylor’s
scientific approach. Indeed, Follett argued that it is the worker who knows most
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
23
BUSINESS MANAGEMENT 101
about his/her job and therefore the worker should be involved in the job analysis and
work development process. She also anticipated the current management interest not
only in self-managed teams and empowerment, but in horizontal (as opposed to
Fayol’s and Weber’s vertical) power and authority.
Elton Mayo: An experiment, which investigated the relationship between the level
of lighting in the workplace and workplace productivity at the Hawthorne Works
at the Western Electric Company near Chicago during 1924 – 1933, showed that
productivity improved not only when lighting was improved, but when lighting
conditions were made worse as well. Elton Mayo, a Harvard psychologist was called
in to investigate this phenomenon. It was argued that management’s interest in, and
concern for, the workers’ well-being had served to enhance worker performance. This
phenomenon has come to be known as The Hawthorne Effect.
The findings of the Hawthorne experiment precipitated an interest in research in the
area of managerial behaviour and leadership, and thus emerged the Human
Relations Movement.
Douglas McGregor: McGregor argued that two different sets of assumptions
determine how manager’s view their subordinates and manage their departments. He
argued that Theory X managers assume that employees are inherently lazy and
therefore need to be closely supervised and controlled. On the other hand, Theory Y
managers adopt a positive view of employees and believe that it is the manager’s
task to create a climate in which employees can effectively perform their work.
The Behavioural and Human Relations Approach has contributed to the field of
management in that it has stressed the employee’s social needs, which in turn has
led to a focus on the development of people-management skills, as opposed to
technical skills alone. Further, it has provided insights into issues such as individual
motivation, group behaviour and interpersonal relationships at work. A limitation
of the Behavioural & Human Relations Approach lies in the fact that human
behaviour is complex in nature, which presents challenges to its study.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
24
BUSINESS MANAGEMENT 101
Tasks
Consider the organisation for which you currently work. What
particular organisational and managerial practices show evidence of
a Behavioural and Human Relations Approach?
Comment on Activity
Organisational and managerial practices that exhibit a Behaviour & Human Relations
Approach could, for example, include:
•
Allowing for self-direction in employee work
•
Participative decision-making
•
Self-managed work-teams
•
Knowledge sharing at, and between, all levels
•
Training and development initiatives for employees
2.3.3 Quantitative Approach
According to Technofunc (2020), the Quantitative Approach, also referred to as the
Management Science Approach, is essentially an extension of Taylor’s Scientific
Management Theory. It focuses on the use of rigorous quantitative techniques that
enable managers to achieve productivity through the most effective and efficient use
of organisational resources to produce goods or services. Management science is
an approach that aims at increasing decision effectiveness through the use of
sophisticated mathematical models and statistical methods.
Whenever management has a problem, it calls on relevant disciplines which analyses
business problems and frames a mathematical model by collecting the relevant data
(like cost of machine, cost of raw material, selling price of the product etc.) and tries
to maximise the output and minimise the cost. Computers have simplified application
of these models to deal with various problem-solving situations.
By changing values of variables in the model, different equations can be solved
through computers and it makes it possible to find the effect of each change on the
dependent variable to arrive at the optimum and rational solution to managerial
problems.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
25
BUSINESS MANAGEMENT 101
The Quantitative School includes the following approaches, all of which provide the
manager with tools and techniques to increase the effectiveness of his/her decisionmaking:
•
Quantitative management (employs mathematical techniques such
as linear programming, modelling, simulation & queuing theory)
•
Operations management
•
Total Quality Management (TQM); and
•
Management information systems (MIS)
2.3.4 Contemporary Approaches
A considerable number of contemporary management theories exist. The following
contemporary theories will be studied in this sub-section:
•
Systems Theory
•
Contingency Theory
•
Chaos Theory
•
Other Theories
2.3.4.1 Systems Theory
The Classical Approach, The Behavioural and Human Relations Approach and the
Quantitative Approach have two major shortcomings which Systems Theory (also
known as Organizational-Environment Theory) seeks to address:
•
The influence of the environment is not considered; and
•
One part or aspect of the organisation is focused on the neglect of
all other parts and/or aspects.
Systems theory views the organisation as a purposeful and unified system which is
composed of interrelated elements. The principle of synergy applies in that the whole
is regarded to be greater than the sum of its parts (Stoner and Freeman, 1992).
The view of organisations as open social systems that must interact with their
environments in order to survive is known as the systems theory approach.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
26
BUSINESS MANAGEMENT 101
Organisations depend on their environments for several essential resources:
customers who purchase the product or service, suppliers who provide materials,
employees who provide labour or management, shareholders who invest, and
governments that regulate.
Characteristics of a System
A system is defined to be a set of interrelated components. An open system is one
which interacts with its environment, and in so doing becomes part of a greater
system. Basic system characteristics include:
•
Internal
interdependence:
where
changes in
one
of the system’s
components will result in changes or repercussions in the system’s other
components.
•
Capacity for feedback: information about the output can be used by the
organisation to address problems. However, organisations do not always
use the information available.
•
Equilibrium: the system seeks homeostasis i.e. if an event leaves the
system in a state of imbalance, it will react in such way so as to regain
equilibrium.
•
Equifinality: the system can achieve its outputs through a number of different
ways or system configurations.
•
Adaptation: a systems survival depends on it maintaining a state of balance
within the greater system in which it operates, i.e. the environment.
Figure 2.2: Organisational systems theory model
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
27
BUSINESS MANAGEMENT 101
Nadler and Tushman’s (1980) Congruence Model of Organisation Organisational
Behaviour views the organisation as a system that takes inputs from the
environments and transforms them within its system to produce outputs.
The
system (or organisation) is identified to consist of four main components, namely
the informal organisation, task, individual and formal organisation. The effectiveness
of the organisation’s performance depends on the achievement of congruence
between all four components.
2.3.4.2 Contingency theory
Systems Theory provides for a Contingency Approach (also known as a
Situational Approach) to management.
The basic premise of Contingency Theory is that there is no one best way to lead an
organisation. There are too many external and internal constraints that will alter what
really is the best way to lead in a given situation. In other words, it all depends on the
situation at hand as to what will be the best course of action.
Fred Fiedler is a theorist whose Contingency Trait Theory was the precursor to his
Contingency Management Theory. Fiedler believed there was a direct correlation to
the traits of a leader and the effectiveness of a leader. According to Fiedler, certain
leadership traits helped in a certain crisis and so the leadership would need to change
given the new set of circumstances. Fiedler's Contingency Theory proposes the
following concepts:
1. There is no one best way to manage an organisation.
2. A leader must be able to identify which management style will help achieve the
organisation's goals in a particular situation.
3. The main component of Fiedler's Contingency Theory is the least preferred coworker (LPC) scale that measures a manager's leadership orientation.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
28
BUSINESS MANAGEMENT 101
Think Point
Consider the organisation in which you are currently employed. To
what extent are the following approaches evident in the organisational
and management practices within your organisation?
•
The Classical Approach
•
The Behavioural & Human Realtions Approach
•
The Quantitative Approach
•
The Systems Approach
It is likely that you can identify practices within your organisation that demonstrate
elements of all four approaches to management. Indeed, given the complexity of
today’s management environment, it would be unwise for a manager to adhere to one
particular school and neglect the others. Rather, given the dynamic environment in
which organisations operate, it is the manager’s task to tailor his/her management
approach to the particular situation – and this would require drawing on a range of
management theories.
2.3.4.3 Chaos Theory
For decades, managers have acted from the premise that organisational events can
be controlled. However, Chaos Theory, is based on the premise that very rarely can
events be controlled, and thus acknowledges the
dynamic nature of the
contemporary management environment.
Tasks
1. Why
is
Chaos
Theory
appropriate
to
the
present-day
organisation?
2. What are the key characteristics of Chaos Theory?
3. How could management go about transforming the organisation
for which you work into a chaotic organisation?
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
29
BUSINESS MANAGEMENT 101
Comment on Reading Activity
Chaos Theory argues that relationships in complex systems, like organisations, are
nonlinear, made up of interconnections and branching choices that produce
unintended consequences and render the universe unpredictable.
Chaos Theory and the Present-Day Organisation
The industrial era of the past is fundamentally different to the information age of the
present. During the industrial age, the environment was relatively stable and
organisational work was routine. The information age to be characterised by the
following:
•
Technology that increases production, efficiency and consumer
power
•
Globalization
•
Competition which, as a result of technology and globalization, has become
more fierce
•
Change, the pace of which is considerable
•
Speed
•
Complexity & Paradox which has emerged as a result of the above 5 factors
and presents the manager with the challenge of conflicting choices and
conditions.
Key Characteristics of Chaos Theory
Chaos Theory focuses on the “web of feedback loops present in every system”
(Tetenbaum, 1998: 24). While feedback loops are linear in certain systems, they are
non-linear in systems characterised by complexity, such as the business organisation.
The characteristics of Chaos Theory include:
•
Chaos as Order: Tetenbaum (1998: 24) asserts that “chaos describes a complex,
unpredictable, and orderly disorder in which patterns of behaviour unfold in
irregular but similar forms”. An example of such orderly disorder is the regular
irregularity of a snowflake.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
30
BUSINESS MANAGEMENT 101
•
Chaos as a Self-Organising Entity: Chaos Theory views systems to be selforganising in that they are self-adaptive and complex (Tetenbaum, 1998). Thus
structure evolves and change emerges (this differs from the Classical Approach
where structure is imposed). Visa is an example of an organisation that is managed
according to chaos principles and which is thus self-organising. Visa has grown
by 10,000% since 1970, consists of 20,000 financial institutions and operates in
more than 200 countries. However, despite its size and growth, we do not know
where it is located due to the fact that it is decentralised, non-hierarchical and
evolving (Tetenbaum, 1998).
Building a Chaordic Organisation
Tetenbaum (1998) identifies the following characteristics of a chaordic
organisation (i.e. an organisation that embraces the chaordic paradigm):
•
Knowledge and information sharing
•
Innovation and creativity
•
Teamwork and project orientation
•
Diversity
•
Strong core values
The role of management in facilitating the move to the chaordic organisation is
to:
•
Manage the transition
•
Build resilience to change
•
Destabilise the system
•
Manage complexity and paradox i.e. order and disorder, the present and the
future
•
Create and maintain a learning organisation (Tetenbaum, 1998).
2.3.4.4 Other Contemporary Theories
Cronjé (2004) identify three further contemporary management theories:
•
•
•
Total Quality Management (TQM)
The Learning Organisation
Re-engineering
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
31
BUSINESS MANAGEMENT 101
Total Quality Management (TQM)
A core definition of total quality management (TQM) describes a management
approach to long-term success through customer satisfaction. In a TQM effort, all
members of an organisation participate in improving processes, products, services,
and the culture in which they work
Focuses the business on the achievement of quality through the prevention of
mistakes. The central principles of TQM, which have emerged from the work of
Deming, include:
•
Strong emphasis on the customer
•
Focus on continual improvement
•
Quality improvement in all that the organisation does
•
Accurate measurement
•
Employee empowerment (Cronjé, 2002).
The Learning Organisation approach, advocated by Peter Senge, is based on the
Systems Theory and argues that organisations should overcome their learning
disabilities through:
•
Commitment to lifelong learning
•
Challenging assumptions and generalisations
•
Sharing the organisation’s vision
•
Promoting active dialogue within the organisation
•
Encouraging systems thinking (Cronjé et al., 2004).
Re-engineering is an approach put forth by Hammer & Champy, and involves
the redesign (re-engineering) of organisational processes so as to “create and
sustain value for customers while managing costs”.
Business Process Reengineering involves the radical redesign of core business
processes to achieve dramatic improvements in productivity, cycle times and quality.
In Business Process Reengineering, companies start with a blank sheet of paper and
rethink existing processes to deliver more value to the customer.
This chapter has explored various management theories. The theories that fall
within the Classical School, the Behavioural & Human Relations School, the
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
32
BUSINESS MANAGEMENT 101
Quantitative School and Contemporary School have been examined.
Tasks
Read the following case study adapted from Stoner and Freeman
(1992:52) and then answer the question which follows
Case Studies
Consolidated Automobile Manufacturers Inc.
On Tuesday morning at 6 am, two young automobile assembly-line workers, disgruntled
after failing to get their supervisor transferred, shut off the electric power supply to an autoassembly line and closed it down at Consolidated Automobile Manufacturers, Inc.
The electric power supply area, containing transformers, switches, and other high-voltage
electrical equipment, was positioned near the centre of the plant in a 1.5-by-1.5 metre
area. Enclosing this area was a 2.5-metre-high chain-link fence with a locked gate of
equal height that formed a protective cage around the facility and provided a measure of
security.
The two assembly-line workers, Kagiso Mabuso and Ernest Raymond, gained access to
the electric power supply area simply by scaling the fence. Once inside, they halted the
assembly line by opening the switches and cutting off the electrical power.
Mabuso and Raymond, who worked as spot welders, had taken matters into their hands
when the union’s grievance procedure had not worked fast enough to satisfy them. Coworkers, idled by the dramatic protest and the motionless assembly line, grouped
themselves around the fenced area, shouting encouragement to the two men inside. In
response, Mabuso and Raymond were chanting, “When you cut the power you’ve got the
power.” They were in the process of becoming folk heroes to their co-workers.
Sam Nkosi, who supervised Mabuso and Raymond and who was the target of their
protest, had been supervisor for only a short time. In explaining the events that led to the
protest, Nkosi said that production on the assembly line had been chronically below quota
before he took charge, and the plant manager had plainly told him that his job was to
improve the production rate. Production had improved markedly in the short time that
Nkosi had been supervisor.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
33
BUSINESS MANAGEMENT 101
Nkosi advised the plant manager that his transfer would only set a serious long- term
precedent. “The company’s action to remove me would create a situation where the
operations of the plant would be subject to the whims of any employee with a grudge,” he
argued. His contention was confirmed by the comments of a union steward who said
there were other conditions in the plant that needed improving – such as cafeteria food
and relief from the 40-degree heat in the metal shop. Moreover, the steward said, there
was at least one other supervisor who should be removed. He implied that, if successful,
the power cage protest would achieve two goals – namely employees could dictate the
company’s problem-solving agenda and simultaneously undermine its power to determine
decision-making priorities. The union steward’s final comment was that two men on an
unauthorised, wildcat strike might accomplish the same thing as a full-blown strike.
Each passing minute was costing the company a production loss of one automotive unit
valued at R15 000; the cost of each lost production hour, therefore was R900 000.
As he began a staff meeting to resolve the dilemma, the plant manager felt pressure to
accomplish two objectives: (1) to restore production on the profitless assembly line (a
solution about which he was uncertain) and (2) to develop policies for preventing future
interruptions by assembly line workers.
Article adapted from https://www.citeman.com/5089-theory-and-policy-encounter-powerand-motivation-%E2%80%93-a-case.html
Answer the following questions:
1. Explain how
the plant manager would go about resolving the dilemma and
accomplishing the two objectives (stated in the last paragraph of the case study)
according to:
1.1
The Classical Approach
1.2
The Behavioural & Human Relations Approach
1.3
The Quantitative Approach
1.4
The Contemporary Approach
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
34
BUSINESS MANAGEMENT 101
2.5 Conclusion
This chapter provided an understanding of the evolution of management theory. The
reasons for studying management theory were elucidated and the concept of
management theory was examined. Various approaches to management theory,
including the Classical Approach, the Behavioural and Human Relations Approach,
the Quantitative Approach and the Contemporary Approach were explored.
The next section examines the management environment that was alluded to in this
chapter during the discussion on the contemporary approach.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
35
BUSINESS MANAGEMENT 101
CHAPTER 3:
Environmental Analysis
Chapter Outcomes
On completion of this chapter, you should be able to:
•
Identify and discuss the salient characteristics of the management environment
•
Distinctly discuss the composition of management environment in its entirety
•
Comprehensively discuss and apply fundamental knowledge of the macro,
market and micro-environment to a business context
•
Clearly explain the importance of conducting an environmental analysis and
scenario development in business
•
Effectively acknowledge and understand the approaches management can
adopt when relating to scenario development
•
Have a perspicuous understanding of the elements of a SWOT analysis matrix
3.1. Introduction
The value chain discussed in Chapter 1 suggests that businesses create value by
performing a range of activities, some of which are considered primary and others
supportive. These activities are largely controllable by the individual organisation.
Outside the organisation, however, lies an environment that is largely uncontrollable
by the individual business. This suggests that an organisation must continuously
monitor events in its environment to remain competitive, and that the business and its
environment are not closed, independent or mutually exclusive entities, but rather
influence and depend on each other for their existence. This mutual dependence
arises from the fact that society largely depends on business to satisfy its needs
for products, services and employment.
Conversely, a business depends on its environment for such resources as labour,
capital and raw materials. In a certain sense, the business can be regarded as a
creation of its environment in that its assets, income, problems, opportunities and
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
36
BUSINESS MANAGEMENT 101
continued survival depend on the environment. Because of changes in the
environment, management is continually forced to make adjustments to its
competitive strategy. There is a continual interaction between the organisation and
its environment and this, to a large extent, determines how the organisation is
structured and how it functions. In a dynamic
environment
management
must
strive to adapt timeously and effectively to current and anticipated changes in its
environment.
A thorough investigation or scanning of the environment is therefore essential. This
enables management to avert threats in the environment timeously and to
exploit opportunities. This chapter discusses the relationship and the interaction
between the organisation and its environment.
3.2. The Environment Of The Organisation In Perspective
The environment within which the business finds itself changes rapidly and this
necessitates a thorough environmental awareness on the part of management, as
well as adaptability with regard its approach to management. The democratisation of
South Africa in 1994 normalised international relations, but at the same time
exposed South African businesses to a borderless world in which they suddenly had
to compete. Globalisation and the trend towards a world without barriers affect
businesses in new ways, and some have responded by taking their investments out
of the country.
Accelerating urbanisation and increased poverty in southern Africa, the influx of
immigrants, the high crime rate and the breakdown of law and order, and the impact
of the COVID-19 pandemic have affected – and continue to impact - the environment
in which South Africans must do business and make decisions regarding
their investments. Thus, when planning strategically, it is critical for management to
consider the interaction between the organisation and its environment. In so doing,
long-term planning becomes geared towards the future. This makes planning more
systematic and integrated.
The number of environmental factors influencing organisations is increasing, and
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
37
BUSINESS MANAGEMENT 101
this necessitates a new approach to future events. Appropriate methods of research
frequently need to be developed and organisational structures and management aids
must be revised to stay abreast of new challenges.
The business uses inputs from the environment and in turn delivers outputs in the
form of products or services for which there is a need in the environment. The
management task cannot be carried out effectively and efficiently without taking
external factors into consideration. The internal environment is also known as the
decision-making or micro-environment.
The micro-environment encompasses, among others, the strategy, business
functions, and management tasks, setting of goals, resource abilities and
expectations of interest groups that must be considered. Management must therefore
make decisions that relate to the strengths and weaknesses of the business.
Strength is defined as a unique capability of a particular organisation that gives it an
advantage over competitors, while a weakness can be described as a deficiency,
which, if not addressed, could negatively affect the organisation's position in the
market.
Management can control the elements of the micro-environment, and is therefore
able to use its strengths to improve the position of the organisation in the market, or
to rectify weaknesses to improve its competitive capacity.
The market or task environment is the environment immediately outside the
organisation. The market environment lies between the micro and macro business
environments and, while influenced by both, serves as a buffer between the two. This
environment includes factors such as suppliers, competitors, consumers, interest
groups, intermediaries and strategic alliances (Erasmus, et al, 2016).
The macro business environment encompasses all uncontrollable variables and
the implications they have for management. Management must therefore make
strategic decisions with regard to economic, social, technological, physical, political
and institutional and international environments, based on the changes in the macroenvironment.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
38
BUSINESS MANAGEMENT 101
Changes in the market and macro-environment give rise either to opportunities or
threats. An opportunity is defined as a favourable condition in the external
environment that could be exploited to the benefit of the organisation by the deliberate
actions of management. A threat, on the other hand, is defined as an unfavourable
condition in the external environment, which, if not responded to by management,
could seriously harm the organisation's position in the market. The organisation's
management must be well informed of international events, especially with regard to
economic, social, and political developments.
3.3 Characteristics of the Business Environment
The business environment is characterised by the following:
•
Interrelatedness of environmental factors
Change in one of the external factors may cause a change in the microenvironment or internal factors, and, similarly, a change in one external factor
may cause change in other external environmental variables.
•
Increasing instability
One of the consequences of interdependence in the environment is increasing
instability and change. Although the general rate of change in the environment
accelerates, environmental fluctuation is greater in some industries than others.
• Environmental uncertainty
Uncertainty about the environment is, of course, a function of the amount of
information about environmental variables and of the confidence that management
has in such information.
• Complexity of the environment
This indicates the number of external variables to which a business organisation
has to react as well as variations in the variables themselves.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
39
BUSINESS MANAGEMENT 101
3.4. The International Environment
International business activities refer to profit-oriented activities across national
borders. Organisations that operate within a country while drawing resources
from or selling products to another country can be affected on both a national and
an international level.
Local organisations must keep up to date with international data on inflation,
exchange rates, interest rates, recession, and shortages of natural resources, the gold
price and especially international political events. Organisations involved in
international trade quickly realise that success or failure greatly depends on
knowledge of legislation, customs, ethics, economic systems and on the management
practices that are followed. The professional manager must be conversant with the
nature of international management and must be trained not only to recognise threats,
but also to convert these threats into opportunities.
3.5. The Macro Business Environment
The macro-environment includes all external influences that have a bearing on the
business but do not fall within its direct sphere of influence. In the study of the macroenvironment, the emphasis falls on the changes that uncontrollable macro-variables
bring about, and their implications for the business.
Remaining abreast of environmental changes to predict environmental changes is a
difficult task. Certain changes are unpredictable owing to the speed with which they
take place, while others are difficult to predict owing to a lack of information or
knowledge. The main characteristics of these external factors are that their origin is
outside the business, that they are largely unpredictable and that they change
constantly, but they are nevertheless a determining factor in the survival of the
business. Because of the uncertainty of the future, it is absolutely essential that
environmental scenarios be developed for the business.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
40
BUSINESS MANAGEMENT 101
3.5.1. The economic environment
Economic factors such as the business cycle, inflation, and recession, influence the
demand for goods and services by compelling consumers to reassess their priorities
in terms of consumer products. Each significant economic change requires
appropriate reaction by the business. It is the responsibility of management not only
to try to determine the intensity of the business cycle for a specific industry, but also
to try to forecast the possible cycle of the economy for at least the following year. In
the following sections, we consider some of the most important economic factors
to be considered by managers.
3.5.1.1 Inflation
Price stability is an important part of the economic landscape. Inflation is described
as a continual rise in the general price level.
The two forms of inflation are demand inflation and cost push inflation. Demand
inflation occurs when the demand for goods and services is higher than the supply,
resulting in higher prices. Cost push inflation occurs when production costs of goods
and services continually increase, resulting in higher selling prices. The organisation
must counteract the influence of inflation as far as possible. Under condition of high
inflation, the emphasis is, to a large extent, placed on the management of working
capital, such as debtors, stock and creditors.
3.5.1.2 The business cycle
This involves the pattern of expansion and contraction of economic activities around a
long-term growth tendency. Western economies, including South Africa, are harassed
by inflation as well as periods of recession that follow each other in quick succession,
interrupted by short periods of economic growth. The business and the consumer must
make certain value adjustments during the various phases of the business cycle to
adapt to emerging economic realities.
At the cycle peak, the economic activity is high in relation to the general trend
whereas the lowest rate of economic activity is reached at the trough. A practical
measure is to link the business cycle to the behaviour of the real gross domestic
product (GDP), which provides a combined indicator of the prevailing economic
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
41
BUSINESS MANAGEMENT 101
climate of an economy. Exogenous factors such as wars, drought, natural disasters,
inventions and drastic changes in consumer demands may lead to an increase or
decrease in economic activities. These factors result in changes in the volume of
production activities and the volume of bank credit, in interest rate patterns, in orders
for and the installation of capital equipment, and in price increases or decreases.
3.5.1.3 Interest rates
Interest is the price paid for money. The level of interest rates is largely determined
by the demand for and the supply of funds. The Reserve Bank also uses interest rates
to influence the money supply. The "repo" rate is the cost at which banks can borrow
money from the Reserve Bank. The prime rate is the floor price at which banks make
loans or overdraft facilities available to their clients. Personal risk leads to an increase
in this rate for the individual and the organisation. Both current and expected interest
rate levels are important since these have a marked influence on the cost of capital
as well as on the expected minimum return on capital. Relatively high interest rates
have the following implications:
•
The use of debt financing becomes more expensive and places liquidity
under pressure.
•
High interest rates can dissuade the consumer from buying durable
consumer products like furniture, cars or electrical household appliances.
Many consumers purchase these items on a hire-purchase basis and an
increase in interest rates discourages such purchasing. The same applies
to interest on overdrawn bank accounts.
3.5.1.4 Provision of employment
Unemployment is one of the biggest problems in the South African economy. In the
early 1990s, unemployment spread beyond the unskilled labour force. An
unemployment figure of 40 per cent of the economically active population has
enormous social implications. Crime is on the increase and is a problem not only for
homeowners who have to spend more of their disposable income on home security,
but also for the business community.
3.5.1.5 Productivity and profitability
Even though productivity and profitability are not synonymous, there is a strong
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
42
BUSINESS MANAGEMENT 101
relationship between them. If productivity increases, profitability should also increase.
Increased productivity enables the organisation to compete better in the market. The
labour unit cost in South Africa is among the highest in the world. Owing to the
conduct of labour unions, and because of a low work ethic, the situation continues to
deteriorate, with serious consequences for the South African economy in general and
for business in particular, as businesses find it difficult to compete on the basis of
price with businesses in other parts of the world.
It is clear that South Africa is locked into an increasing wage psychosis. There is no
positive correlation between wage increases and productivity. South Africa is included
among countries that have the highest disparity between labour productivity and
wages, with a resulting increase in labour-unit cost and inflation.
3.5.1.6 The influence of trade unions
Due to the activities of trade unions, many organisations have been forced to close
their doors, resulting in a
loss in employment opportunities. It is imperative that
management knows how to deal with labour disputes. Trade union activities in
South Africa are often characterised by acts of intimidation and violence. Until such
time that government realises the seriousness of the situation and is willing to
restore order in labour relations, South African and local businesses will pay a heavy
price.
3.5.2 The technological environment
Many of the recent changes within the business environment are the result of
technological advances and innovation. Research and development provide the
source of technological innovation and new products, processes, methods and
approaches to management result from this. Because of the interaction between
technology and other environmental factors, there is a continual tendency
towards innovation in all spheres of the business community.
Scientific research produces and systematises new knowledge, and when knowledge
is applied in practice, new goods and services are developed. The economic
environment largely determines the direction of technological innovation.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
43
BUSINESS MANAGEMENT 101
•
Trading
Developments in electronic communication, as manifested by the Internet, for
example, have changed the business. This has created new business
opportunities or capabilities, such as e-commerce, e-trading, e-marketing,
e- supply and others. It has also created new types of businesses, such as
cellular communication services, vehicle tracking services, sophisticated
information supply services and on-board vehicle navigational systems.
•
Labour-saving machinery, equipment and products. New and improved
products, which satisfy specific needs, have been made available to the
consumer, thanks to technological innovation. The research and development
departments of manufacturers must continually pursue the improvement of
existing products and the development of new ones.
•
Administrative systems and equipment. New technology in the form of
electronic and automated apparatus and systems has introduced a new area of
competition among organisations. Especially in the areas of banking, retailing,
tourism and recreation, entrepreneurs are forced to keep abreast of new
developments regarding credit cards and computer- backed services. These
services are primarily focused on the convenience of and service to the
consumer.
•
Increased productivity. This is probably the most outstanding result of
advanced technology. Increased productivity demands or increases turnover of
the organisation's products and services. It creates more intense competition
and may reduce employment opportunities.
3.5.3 The social environment
The organisation is a creation of the social environment. The role of an organisation
in a dynamic environment is to adapt continually to changing circumstances
and to meet the expectations of the society. There is also an overlapping of some
of
the
elements
in
the
social
and
the
economic environments. The
organisation is at the centre of changes taking place in the social environment. The
organisation contributes to social change, but is also influenced by it. The organisation
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
44
BUSINESS MANAGEMENT 101
must therefore be aware of the culture, needs, preferences, purchasing patterns,
nationality, religion and geographical location of consumers.
3.5.3.1. Distribution of income
South Africa, with its heterogeneous population and geographical vastness, consists
of many subcultures, each of which reacts differently to change. Increasing income
levels and improved literacy among the country’s Black population in recent years
has greatly influenced the market. The growth of the black consumer market and
buying power is already of vital importance in many branches of industry.
Management must establish where its biggest buying power is located and
ensure that that market is exploited and served with high quality products and service.
LANGUAGE
INCOME
DISTRIBUTION
RELIGION
SOCIAL
RESPONSIBILITY
CULTURE
SOCIAL
ENVIRONM
ENT
POPULATION
GROWTH
HIV/AIDS
URBANISATION
EDUCATION
CONSUMERISM
Figure 3.1: The Social Environment
3.5.3.2 Consumerism and employee interests
The primary responsibility that the organisation has towards the consumer lies in
protecting him or her, but the demands of society for greater social responsibility on
the part of the organisation culminate in consumerism. This is also the link between
the organisation and the social environment. Previously, social responsibility was
limited largely to social and welfare services. The employer concerned himself only
with the social well-being of his workers, without paying attention to the socio-
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
45
BUSINESS MANAGEMENT 101
economic and cultural fate of individuals. Nowadays, the totality of the employee's
existence and experience is studied, and the expectations not only of his family but
of the entire community demand attention. By neglecting the latter, the organisation
will definitely elicit the criticism of the community, consumer groups and even of
government.
3.5.3.3 Participation of employees and the community (social involvement)
The new labour community is characterised by the principles of labour
democracy. This implies that the worker has a greater say in the design,
execution and evaluation of work. The employer provides additional educational
services, like literacy training. Other areas of direct social involvement are transport,
housing, financial assistance, clothing, medical services, recreational facilities,
cultural facilities and general counselling.
3.5.3.4 Different languages
In an effort to inform consumers about their products and services, organisations
must communicate with their target market(s) in a language that they understand. This
can be a challenging task, as South Africa is a multi-lingual country.
3.5.3.5 Level of education
The low levels of productivity and skill in the South African labour force are, to some
degree, attributable to the relatively low level of education of the broader society.
This also makes it difficult to develop a sophisticated industrial and work ethic.
Education is an important key to future socio- economic development.
3.5.3.6 The threat of HIV/Aids
HIV/AIDS has become an extremely important factor in the process of strategy
formulation. In Africa especially, there is much speculation as to the implications of
this threat for the future. The first cases of HIV/AIDS in South Africa were reported in
1982. Since then, the number of cases has increased dramatically each year.
Management must, as a matter of urgency, develop a personnel policy for
dealing with HIV/AIDS in the workplace, and organisations should be prepared for
the direct and indirect consequences of the disease. Costs associated with HIV/AIDS
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
46
BUSINESS MANAGEMENT 101
are reflected in the following areas:
•
Loss of trained manpower
•
Costs associated with the recruitment, training and induction of
replacement personnel
•
Loss of labour productivity
•
Loss of efficiency due to the loss of skills and experience
•
Direct and indirect costs associated with health care
•
Interruptions in the production process
•
Increased costs of employee benefits
•
A decline in the consumer base
•
A decline in the disposable income of consumers as a result of higher
health care costs
The handling of AIDS- related issues must be incorporated into strategic planning
by management. A policy regarding HIV/AIDS must be formulated timeously
and be incorporated into the existing health and security policies of the organisation.
Tasks
List the activities that have been carried out in your area to address
concerns around HIV/AIDS. Do you think your community is doing
enough to address the problem?
3.5.3.7 Population growth
The size of the market, the labour force and unemployment are closely related to
population growth.
By 1850, the world population numbered 1 b i l l i o n . By
1925, it was already 2 billion. Now in 2021, the world population is at a staggering
7.9 billion and counting (Worldometer, 2021).
Population figures of Third World
countries double every 32 years.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
47
BUSINESS MANAGEMENT 101
Urbanisation
The current population of South Africa is 59,990,356 as of Tuesday, June 1, 2021,
based on Worldometer elaboration of the latest United Nations data (worldometer,
2021). Urbanisation, along with the expected population growth, has far-reaching
social implications and consequences. Urbanisation greatly influences the economy,
for example, purchasing power is increasingly concentrated in urban areas.
3.5.4 The physical environment (Ecological)
The physical environment includes the availability, conservation, improvement and
utilisation of the limited natural resources a country possesses. The business obtains
its basic raw materials from the physical environment in order to place a product on
the market in combination with other factors of production. The shortage of basic
factors of production influences the supply of goods and contributes to large price
increases and resultant high inflation. Consideration must be given to different and
more sophisticated methods of production, and even a reorientation in marketing
thinking. Each business should have a clear policy regarding its responsibility for the
most judicious utilisation and conservation of the physical environment.
Another factor that determines economic essential is the availability of sufficient
suitable and qualified personnel and entrepreneurs. South Africa is experiencing a
shortage of skilled labour, mainly because of the mass exodus of highly trained
individuals that occurred in the last few decades. A dramatic increase in productivity
by means of training can help alleviate the skills problem.
3.5.5. The political environment
The political environment encompasses complicated variables that are extremely
difficult to control or predict. Management's responsibility is to acquaint itself with
government policy with regard, inter alia, to the acceptance of a free market system
as the key to economic activity. Management must ensure that it is informed on the
general economic policy and specific policies with regard to underlying economic
issues. Specific government policy standpoints are implemented by government
ordinances.
This
includes
monopolistic
laws,
environmental
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
conservation,
48
BUSINESS MANAGEMENT 101
employment policies and taxation laws. Owing to the complexity of the political
environment and the different ways in which it influences the management
environment, it is probably the most unpredictable environment and consequently the
most difficult to scan. In South Africa, the effect of political decision-making on the
economy as a whole and on the organisation in particular must form part of strategy
formulation in all organisations. The role of government is to create a conducive
climate where business can flourish and develop. The government’s policy on the
above factors could either foster or hinder such a climate.
3.5.6. The institutional environment
The
institutional
environment
encompasses
all
the
government,
semi-
government and other institutions with which the organisation is directly or
indirectly involved. Many associations protect the interest of organisations and
branches of industry.
3.6 The Market Environment
The ability of a business to be competitive is determined by the interaction
between the business and its immediate environment, the market environment. The
market environment surrounds the organisation, and it forms the link between
the organisation and the macro-environment. The importance of environmental
variables varies according to the influence that they have on the organisation via the
market environment. Management is responsible for identifying the needs of the
consumer within the market environment and identifying opportunities and threats, to
convert threats into opportunities and to develop specific strategies to counteract
competition. Management by carefully analyse the following components within the
market environment:
3.6.1. Interest groups
These include institutions and groups who have an interest in the existence and future
of the business. Each group will place a different emphasis on the activities of
the business. These interest groups lack the power of government agencies, but they
can exert considerable influence by using the media to their advantage.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
49
BUSINESS MANAGEMENT 101
3.6.2. Consumers
Consumers have a major effect on the organisation’s performance by purchasing
products and services. Effective managers realise the need to offer the consumer
value for money. The creation of consumer value is the primary responsibility of the
marketing department of the organisation. Through comprehensive and continual
market research the business stays in touch with the needs, motives and behaviour
of consumers. The changing needs of consumers may offer opportunities as well
as threats.
3.6.3 Competition
Business must compete for customers. Effective managers develop strategies that
offer a unique advantage over the competition in the market. Because all businesses
strive to increase their market share, their market strategies are continually adjusted
to ensure an advantage over competitors. The formulation of strategy requires a
sound competitive strategy that ensures that business can increase its competitive
edge.
3.6.4 Suppliers
Effective managers realise the importance of suppliers and develop close working
relationships with them. Suppliers impact the organisation’s performance and the
relationship with suppliers is an important part of effective management.
3.6.5 Labour force
An organisation’s employees directly affect its performance. The organisation’s
mission, its structure and its systems processes are major determinants of the
capability levels employees need to meet objectives. Organisations must focus on
labour organised into unions.
3.6.6 Strategic alliances
This refers to two or more companies that work together in joint ventures. Strategic
alliances help organisations obtain from other companies whatever expertise they
lack. Management must look outside the organisation and be aware of trends in the
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
50
BUSINESS MANAGEMENT 101
market environment in order to utilise opportunities (upon which profits depends) and
to counteract threats. Knowledge, information and market research are thus
important.
Think Point
Think of an organisation that is familiar to you. How is the organisation
affected by the macro-environment? How has that particular
organisation adapted?
3.7 The Micro-environment
The micro-environment is also known as the decision-making environment. It
incorporates the goals of the organisation, management of the functions of the
organisation, entrepreneurial ability, interest groups and all other aspects
controllable by management.
3.7.1. The functional division of the organisation
The micro-management environment encompasses all the functions of the
organisation. These functions complement one another; they form a coherent unit
and cannot function in isolation. Together, they serve the organisation as a whole.
Thus, the production and marketing functions, for example, have to cooperate,
otherwise that which is produced will not be sold. Each function therefore has
a stake in the entrepreneurial ability of the organisation, and as such on the capital,
labour, raw materials and expertise of management. In the process of decisionmaking, management must continually consider the total interdependency of these
functions. These functions are discussed at length in later chapters.
3.7.2. Entrepreneurial ability
Resources within the organisation include fixed assets, equipment, labour, capital
and specific expertise. Analysis of the organisation’s business potential is of primary
importance. This encompasses an analysis of the potential availability of the means
of production, as well as of possibilities for the creative utilisation of these means of
production. The potential of these resources is to a large extent reflected in the
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
51
BUSINESS MANAGEMENT 101
functional activities of the organisation. Inadequate knowledge of the relevant
resources, as well as of basic evaluation techniques that can be used to determine
the capacity of these resources, often
makes
it
difficult
for
organisation to determine its entrepreneurial ability. A few o f
the
individual
the resources
which contribute to the entrepreneurial capacity of the organisation are discussed
below:
•
Capital. In most cases, capital determines the entrepreneurial ability of the
organisation, since little can be done with limited capital. The funds obtained
by the financial function are vital for the continuation of the activities of the
various departments: this supply the fuel for the "motor" of the organisation.
Financial management must always be attuned to the capital needs of the
organisation, as well as to the sources of finance, to ensure that the right type
of capital is available at the lowest possible cost. Financial management must
see to it that the goals of the organisation are realistic and attainable, from a
financial point of view, by undertaking sound financial planning and control.
•
Labour
and
expertise.
This includes
the
acquisition,
retention
and
utilisation of adequate and suitable personnel to handle the activities of the
organisation as efficiently as possible. Through human resources planning and
task analysis, the personnel department can remain informed of the total
personnel requirements
of the organisation, that is the number and type of
employees required. Without comparable labour advantages, the organisation
loses its competitive edge.
•
Raw materials. The marketing and production functions must be well
informed about the type of goods and services that should be “placed at the
disposal of the consumer”. This information can be obtained through market
research into consumer needs. The purchasing function is responsible for
obtaining basic raw materials and parts for production purposes. It therefore
has to be certain of the needs of the production function so it can ensure that
the right quantity and quality of materials are always in stock. Delays due to a
shortage of raw materials must be avoided at all times.
•
Management
skill.
Ultimately,
the
quality
of
management
is
the
organisation's most important asset. Without expert and skilled management,
it is unlikely that an organisation will achieve success, even with a good product
and market potential.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
52
BUSINESS MANAGEMENT 101
•
Expert management at all levels is a necessity.
Figure 3.2: Micro-environment of the firm
3.8 Environmental Analysis and Scenario Development
Environmental analysis is essential for the formulation of a corporate strategy for the
organisation - a strategy which must be seen as the deliberate decision of
management to adapt to the current and anticipated change in the market and microenvironments in a timeous, economical and effective manner. A step-by- step
approach is necessary for the formulation of a strategy for the organisation.
Functional strategies with regard to financing, production, personnel, purchases,
liaison work and marketing must be developed on a coordinated basis. Through a
process of environmental exploration, management must become aware of all
external powers, opportunities and threats, and also of the strengths and weaknesses
of the organisation.
3.8.1. The process of scenario development
To reduce uncertainly about the future, it is important to develop environmental
scenarios for an organisation. The following steps are required to develop a typical
scenario:
•
Determine the internal and/or external factors for which scenarios have to be
developed. This implies that management has to decide which factors will have
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
53
BUSINESS MANAGEMENT 101
an important influence on the organisation.
•
Select critical indicators for each factor.
•
Determine the nature, occurrence and trend of the indicators in the past. This
is known as TIA (trend impact analysis). The reasons for trend behaviour
must be determined in the process.
•
Verify potential future trends. Make suppositions.
•
Forecast or extrapolate to form idea of what might happen in the future.
•
Write the scenario on the basis of the information gleaned.
3.8.2 Use the scenarios to formulate strategy for the organisation
A general and simple application of the analysis of the external and the internal
environment is possible with the aid of a SWOT (strengths, weaknesses,
opportunities, threats) analysis. By comparing the strengths, weaknesses,
opportunities and threats of the organisation, a logical framework for the systematic
analysis of the activities of the organisation can be obtained. A SWOT analysis
allows management to convert threats into opportunities and weaknesses into
strengths.
Think Point
Define and analyse the expression “environmental scanning”.
Comment to think point
Environmental scanning may be defined as a method of keeping abreast of external
social, economic, technological and political developments which may be difficult
to observe or predict, but which management dare not ignore. It entails the
identification and monitoring of every opportunity or threat, and may range from a
simple information system to a formal environmental scanning division or unit whose
sole task is to monitor external environmental factors.
Please note that the word "scanning" is defined in the dictionary as "scrutinising
minutely" and also as "glancing over quickly". When we speak of the need for an
enterprise to scan the environment, we refer to the first meaning, that is, to scrutinise
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
54
BUSINESS MANAGEMENT 101
carefully and systematically.
3.9
The
Result
of
Environmental
Scanning
and
Scenario
Development
The purpose of environmental scanning and scenario development is to provide a
basis for the formulation of a strategy regarding the activities of the organisation.
Some of the possible strategic decisions that may be taken include the following:
1. A maintenance strategy where the organisation continues along the route
taken and attempts to maintain the current profit position.
2. A growth strategy involving an extension of
activities.
3. A combination strategy, which may be a combination of the above strategies
and is mainly used in cases where the organisation serves a variety of
markets.
4. A specific activity strategy whereby a strategy concerning specific aspects
such as finance, investment, personnel, production or purchases, is
formulated.
Reading
How the Fourth Industrial Revolution Is Catalysing Massive
Social Change - Tiana Laurence (April 27, 2021)
According to (Laurence, 2021) The term Fourth Industrial Revolution (4IR) often
refers to a series of technological breakthroughs: the improvement of artificial
intelligence (AI), robotics and automation, dramatic advances in biotechnology, and
so on. While these technologies are central to 4IR, there’s an even more
fundamental shift taking place – consumers and companies are increasingly
moving the economy toward socially responsible production and consumption.
It’s vital for forward-looking companies to make issues such as environmental
sustainability, racial equality and justice, the fight against poverty, and other
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
55
BUSINESS MANAGEMENT 101
contributors to the public good top priorities. The move toward social responsibility
isn’t just what the next generation of consumers is demanding – it’s also one of the
most powerful engines of innovation, as it orients companies toward the
development of radical solutions for the most pressing issues on the planet. But
above all, it’s the right thing to do.
Even companies that aren’t explicitly focused on providing products and services
that address public health, education, the environment, and other social issues now
have more options than ever to have a positive impact. Any company can change
its business practices to reduce its environmental footprint; address racial, gender,
and socioeconomic inequality; and work toward a safer, healthier, and more equal
world.
A permanent shift in consumer and employee expectations
In many ways, 4IR is being driven by younger generations. Millennials have been
the largest generation in the workforce for several years, while members of Gen Z
are quickly moving into adulthood, graduating from college, and starting their
careers. These changes are having a profound impact on how companies
approach social responsibility.
For example, Millennials are disproportionately likely to prioritize diversity in the
workplace – they say they’re motivated by diverse leadership teams and they’re
more loyal to companies that embrace diversity and inclusion. Millennials and Gen
Z report that their top concern is climate change, and significant proportions of
these groups have taken action to improve their impact on the environment. Threequarters of Millennials say they would take a pay cut to work for a socially
responsible company, compared to 55 percent of other American workers.
As younger generations facilitate long-overdue change in workplaces around
diversity and gender equity, they’re also transforming markets in which they have
rapidly increasing buying power. According to a 2020 Edelman survey, 81 percent
of consumers say they “must be able to trust the brand to do what is right,” while
almost two-thirds say they’ll “choose, switch, avoid or boycott a brand based on its
stand on societal issues.” Other Edelman surveys have found that Millennials are
disproportionately likely to describe themselves as belief-driven buyers.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
56
BUSINESS MANAGEMENT 101
It’s clear that employees and consumers are only going to become more concerned
with social responsibility, and 4IR companies are in an ideal position to capitalize
on this trend.
Many people automatically associate the Fourth Industrial Revolution with Silicon
Valley tech start-ups or major companies attempting to capture market share in
emerging fields like AI, but this is misleading. Beyond the fact that regions beyond
the West Coast and Mid-Atlantic are seeing a long-overdue increase in VC activity,
4IR encompasses much more than a few new developments in the software
industry. It represents a sweeping shift in how we interact with technology, our
environment, and one another.
Consider the implications of telemedicine for inequalities in access to healthcare;
augmented reality and biotechnology for people with disabilities and injuries; or
access to digital financial tools for entrepreneurs in developing countries. The sheer
range of applications for AI alone is remarkable: self-driving cars that have the
potential to drastically reduce traffic fatalities, the rapid diagnosis of illness,
language translation tools and resources to help people with atypical speech, the
research implications of big data analysis, and so on.
A recent article in Nature Communications explained that the AI for Social Good
(AI4SG) movement seeks to facilitate “collaborations between AI researchers and
application-domain experts, relate them to existing AI4SG projects and identify key
opportunities for future AI applications targeted towards social good.” A focus on
social responsibility isn’t incidental for 4IR companies – it’s an essential part of what
makes them contributors to the Fourth Industrial Revolution in the first place.
Making social responsibility a core business function
AI4SG is intended to “deliver positive social impact in accordance with the priorities
outlined in the United Nations’ 17 Sustainable Development Goals (SDGs).” These
goals – which include ending poverty and hunger, improving access to education,
achieving gender equality, creating sustainable economic growth, and reducing
inequality – serve as a useful framework for 4IR companies to think about their
impact.
The vast range of issues covered by the SDGs should be a reminder to all
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
57
BUSINESS MANAGEMENT 101
companies that there are many ways to contribute. For-Progress-For-Profit (4P4P)
companies can work toward many SDGs with how they conduct business: by
promoting diversity and inclusion at the workplace, keeping their environmental
impact as sustainable as possible, providing paid family leave and taking an active
interest in the emotional wellbeing of their employees, and developing products and
services that make the world a better place.
This should come particularly naturally to 4IR companies, which are leveraging the
most advanced technologies in human history to solve the most pressing problems
our species faces.
Article
adapted
from:
https://www.business2community.com/business-
innovation/how-the-fourth-industrial-revolution-is-catalyzing-massive-socialchange-02401302
3.10 SWOT Analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and
weaknesses are internal to your company i.e. things that you have some control over
and can change. Examples include who is on your team, your patents and intellectual
property, and your location.
Opportunities and threats are external i.e. things going on outside your company, in the
larger market. You can take advantage of opportunities and protect against threats, but
you can’t change them. Examples include competitors, prices of raw materials, and
customer shopping trends.
A SWOT analysis organises your top strengths, weaknesses, opportunities, and threats
into an organised list and is usually presented in a simple two-by-two grid
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
58
BUSINESS MANAGEMENT 101
HELPFUL
HARMFUL
INTERNAL
STRENGTHS
WEAKNESSES
EXTERNAL
OPPORTUNITIES
THREATS
3.11 Conclusion
There is continuous interaction between the organisation and its environment, which
determines the organisational structure and functioning of the business. Management
must be aware of all internal and external forces, opportunities, threats, and strengths
and weaknesses of the organisation. This can only occur through a process of
environmental exploration.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
59
BUSINESS MANAGEMENT 101
CHAPTER 4:
General Management
Chapter Outcomes
On completion of this chapter, you should be able to:
•
Demonstrate a well-rounded understanding of the general management
functions
•
Identify and discuss the levels and fundamentals of the planning process
•
Demonstrate an understanding of the essential aspects of the organising
function
•
Successfully apply the elements and critical aspects of leadership within a
business
•
Display knowledge and understanding of the rudimentary aspects of the control
process to maintain efficiency within a business
•
Provide a clear understanding of the evolution of traditional management to
digital management
4.1. Introduction
Planning is the first primary management task conducted by managers. Strategic
planning is conducted by top level management, and focuses on developing a
mission and long-term objectives for the organisation as a whole. Functional
planning, on the other hand, focuses on medium-term objectives and is conducted by
middle management. Operational planning is the process of setting short-term
objectives and determining in advance how they will be accomplished. The difference
between strategic, functional and operational planning is primarily the time frame
and management level involved.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
60
BUSINESS MANAGEMENT 101
Think Point
List the reasons why management is indispensable to any business.
Comment to think point:
•
Management is necessary to direct a business toward its objectives.
•
Management is necessary to set and keep the operations of the business
on a balanced course.
•
Management is needed to keep the organisation in equilibrium with its
environment.
•
Management is necessary to reach the goals of the organisation, because it
maintains the organisation's equilibrium and helps it to attain its goals
synergistically and at the highest possible level of productivity.
4.2 Planning
Planning is the first primary management task conducted by managers.
The planning function includes defining an organisation’s goals, establishing an overall
strategy for achieving those goals, and developing a comprehensive hierarchy of plans
to integrate and co-ordinate activities. Setting goals keeps the work to be done in its
proper focus and helps members of the organisation focus their attention on what is
most important.
4.2.1 Strategic planning
Strategic planning includes developing a vision, mission statement and long-term
objectives. This is done by considering the norms, values and philosophy
of
management and the employees of the organisation, its internal strengths and
weakness the external opportunities and threats in the organisation’s business
environment.
In South African organisations, "long-term" generally means that it will take between
one and ten years to achieve the objective. Strategic plans are usually reviewed and
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
61
BUSINESS MANAGEMENT 101
revised every year so that there is always a two-year, five-year or even ten-year plan.
This allows the organisation to be future-oriented and able to adapt to changes in
the business environment. In the strategic process, top management develops the
long-term plans, and the middle and first level managers develop the tactical
(medium-term) and operational (short-term) plans to accomplish these objectives.
Develop strategies (corporate level, business level and functional level). At the
corporate level, grand strategies are formulated for the overall performance of the
organisation. These include growth, stability, turnaround and combination strategies.
These corporate level strategies, described by Porter (2003) as grand strategies, can
be summarised as follows:
Growth strategies attempt to increase the organisation's size through increased sales.
Examples of growth strategies
are
concentration,
integration, diversification,
mergers and acquisitions. A stability strategy attempts to hold or maintain the
organisation's present size or enable it to grow slowly. A turn-around strategy is an
attempt to reverse a declining business as soon as possible. Finally, an organisation
can consider combining the above-mentioned strategies for different lines of business
in the organisation.
At the business level, generic strategies identified by Porter (2003) include cost
leadership, differentiation and focus strategy. Generic strategies allow the
organisation to create or maintain a competitive advantage. For an organisation
consisting of more than one business unit, each business unit will have its own
generic strategy, linking up with the grand strategy at corporate level.
At the functional level, strategies are developed for each management function (e.g.
marketing and sales, logistics and operations) and must be aligned with the business
unit generic strategy as well as the corporate level grand strategy, to ensure success
and a competitive advantage. Implement and control the most appropriate strategies
selected. The implementation of the planned strategies is the responsibility of first
level managers. An effective support system provided by higher level managers is of
great importance to ensure the successful implementation of strategic planning.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
62
BUSINESS MANAGEMENT 101
4.2.2. Functional planning
Functional planning refers to medium-term planning carried out by middle
management (in cooperation with top management) for the various functional
departments to realise their objectives (which are derived from the long-term goals)
Examples of functional strategies or functional plans include human resources
strategy on employment equity, marketing strategy on product positioning and
financial strategy on profit management and dividend payments.
4.2.3. Operational planning
Operational plans have short-term objectives that should be met in less than one
year. Middle and first-level managers develop operational plans. Examples
include plans that reflect the day-to-day activities of the organisation, such as
equipment maintenance to maximize plant production or sending sales staff to
training seminars.
Some organisations distinguish tactical plans from strategic and operational plans.
Tactical plans have an intermediate range between strategy and operational plans
and focus on functional planning issues. Many organisations combine tactical and
operational plans and describe them both as tactical and operational. The
organisational structure of the organisation will indicate whether a distinction is made
only between strategic and operational planning (applicable to flat organisation
structures) or between strategic, tactical (functional) and operational planning
(applicable to high organisational structures).
4.2.4. Levels of planning
As discussed under strategic planning, developing strategies takes place at three
levels: corporate, business and functional. The corporate-level strategy is the
plan for managing multiple lines of businesses. This includes broad strategies for the
organisation as a whole, such as Woolworths or McCarthy Retail, each of which
consists of a variety of independent businesses. The business level strategy is the
plan for managing one line of business, for example Game Stores or Dion. This
strategy focuses on the product line or service provided by one of the enterprises.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
63
BUSINESS MANAGEMENT 101
The functional level strategy is the plan for managing one functional area of the
business, for example the marketing or financial division.
4.2.5. The Planning process
Planning can only be successful in terms of goal achievement based on appropriate
strategies and tactics, if the allocation of resources (e.g. human, capital and
technology) is well planned. Planning allows management to identify opportunities,
anticipate and avoid problems (threats), and develop courses of action with the
related risks involved.
Thus the organisation will have a better chance of achieving its general goals. These
goals include adapting and innovating to create desirable change, improving
productivity and maintaining organisational stability. Obtaining these goals should
enable the organisation to achieve future performance, including long-term growth,
profitability and survival in a growing, turbulent business environment.
Why is planning so important to management?
• It gives direction and focus to each functional department in an organisation.
•
It forces people to think before acting. Resources must be used efficiently to
achieve the desired results.
•
It encourages managers to analyse changes in the macro and market
environments and to plan to take them into account.
•
When an organisation plans together, its people begin to understand each
other’s business and operational problems. They also develop a better
appreciation of the business as a whole. This is the systems approach being
applied in practice.
•
Planning together improves the horizontal communication and co-ordination
between sections and departments when the plans are implemented.
•
Good plans help reduce waste of time and materials. It makes the organisation
more effective and efficient.
•
The standards of performance and objectives set at the planning stage are used
in the controlling stage to ensure the company is ‘on track’ towards achieving
its results.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
64
BUSINESS MANAGEMENT 101
Briefly, the steps in the planning process are as follows:
Step 1 This step is the awareness of opportunities. Analyse the macro and market
environments (Chapter three) for changes that affect your organisation. Identify
opportunities and threats to your organisation. Be aware of what the customer
(whether internal or external) wants from the section, department, and organisation as
a whole. You may think that you work in a department that does not have external
customers. However, you have internal customers who provide products and services
to departments with external customers. You may establish the needs of those
customers. Every person in your organisation contributes to a business process that
either finds or keeps customers. If they do not, then perhaps the organisation does not
need that job function. Think about your computer’s activities.
Step 2 Develop a mission and vision for the organisation. Where do we want to be,
what do we want to accomplish and by when? Develop purpose statements for each
functional department. They must be based on the mission statement and show its
contribution to the organisation. Set objectives or goals for the organisation as a whole
and each of its functional areas. Clearly state the results to be achieved. They must
satisfy the characteristics for objectives discussed earlier in this module.
Step 3 Develop your planning premises. These are assumptions the management
team make about changes in the macro and market environments. Existing
organisation strengths and weaknesses, policies and plans are also considered.
Forecasts of possible environmental changes are critical inputs to this process.
Planning assumptions for each functional area will become more specific the further
down the organisation hierarchy you go.
Step 4 Search for the alternate courses of action (or plans) that will help you reach
your objective. Several courses of action are often available to reach an objective.
Step 5 You must now evaluate each alternative with its use of resources, ease of
implementation, impact on other departments, and effectiveness.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
65
BUSINESS MANAGEMENT 101
Step 6 Select the plan you will use. Invariably, you will have to think of supporting
plans to make the main plan work. At middle manager, supervisor, and operator
levels, other sections and departments will frequently be involved. (This occurs
because you are all working to satisfy customers’ needs).
Step 7 The final step is to convert the plan into a budget, where necessary. Some
objectives must be converted into financial results, and the resources and actions
needed to achieve them must also be put into financial terms.
Think Point
Can an organisation survive without a plan? How is the controlling
element linked to the planning process?
4.3. Organising
Organising entails structuring the activities of the organisation to facilitate the
attainment of its objectives.
Organising determines an organisation’s division of labour into specific departments
and teams as well as what tasks are to be done, who is going to do them and how
they will be grouped. Organising also encompasses deciding the formal chain of
command, operational processes, reporting structures and decision-making authority
that will be used.
To ensure continued competitiveness, as a manager you are expected to use your
organising skills to restructure and maintain a leaner, or maintain a more efficient and
more productive department or team. You are expected to place the right people with
the right skills in the right roles at the right time to achieve maximum productivity and
performance.
4.3.1 Definitions of organising
Organising analyses how we are going to carry out our plans. Organising creates a
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
66
BUSINESS MANAGEMENT 101
framework that allows you to allocate resources, responsibilities, and tasks to achieve
the organisation’s objectives effectively and efficiently.
•
Koontz and O’Donnell say this about organising: “Organising is the grouping
of activities necessary to attain objectives. The assignment of each grouping
to a manager with authority necessary to supervise it and the provision for
horizontal and vertical coordination in the enterprise structure.”
•
Smit and Cronje say this about organising “Organising is the process of
creating a structure for the organisation that will enable people to work
effectively towards its vision, mission and goals, and for people to work
effectively towards its vision, mission and goals.”
4.3.2 The steps in the process of organising
The vision, mission goals/objectives and strategies for the organisation inform the
process of organising. Organising is deciding how to execute the strategies and plans.
It consists of these steps:
•
List and write down all the business processes for selling to customers,
executing their orders and collecting money from them. (These
processes
link the various functional units). Identify the work to be done (tasks and
activities) for each stage in the processes, as its contribution to overall process
performance. Use the systems approach to help you do this.
•
Then group the work into logical operating functions or units. That
makes
sure the organisation is designed to implement the strategy of the business.
The modern trend is to focus on the ‘value’ customers need from the
organisation, and to develop the appropriate structures.
•
Establish positions and working relationships between units and departments.
The systems approach also requires managers to view the organisation as one
system. The new trend to downsize or reduce ‘layers’ of management in
organisations requires the employees to be multi-skilled. This means that
individuals are taught how to do several jobs, which are combined into one.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
67
BUSINESS MANAGEMENT 101
The detailed job descriptions of the past will, or should become more flexible,
to allow for this situation.
•
Recruit, select and place people in positions. The Labour Relations Act has
implications for organisations and managers. Your organisation may have a
Human Resources (HR) Manager, who helps establish and implement
the
recruitment policies decided by the board of directors, as part of their strategic
planning process. As a line manager responsible for recruiting and selecting
staff, you must know the conditions of the Act, even though your HR manager
is there to help you.
•
Establish methods of co-ordinating activities between units and departments.
Identification of the business processes forms part of this function.
4.3.3. Organising concepts
4.3.3.1. Unity of command
This means that each employee should report to only one boss or superior to whom
he or she is directly responsible. This allows employees to know who is giving
direction and to whom he or she reports.
4.3.3.2. Chain of command
Chain of command is the clear line of authority running from top level of management
to the first level of management, including non-managerial employees within a
particular organisation. This is a vertical separation between levels based on
differences in authority and responsibility. All members of the organisation should
know to whom they report and who, if anyone, repots to them. The chain of
command also identifies communication lines within a formal structure.
4.3.3.3. Span of control
This refers to the number of employees reporting to a manager. The number of
employees reporting to manager should be limited to a number that can
effectively be supervised.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
68
BUSINESS MANAGEMENT 101
4.3.3.4. Division of labour
Specialization, or the degree to which a person’s work is limited to one or a few
tasks, becomes more pronounced as we move down the organisational hierarchy.
With the division of labour, employees have specialised jobs, and related functions
are grouped together under a single manager. Employees generally have specialised
jobs in a functional area such as marketing, operations and finance.
4.3.3.5. Coordination
All departments and individuals within the organisation should work together to
accomplish the strategic, tactical and operational objectives and plans. Coordination
requires conceptual skills to understand the greater organisation. It can therefore be
explained as the process of integrating organisational and departmental tasks and
resources to meet objectives.
4.3.2.6. Responsibility and authority.
All employees should be given the authority needed to meet their responsibilities and
should be held accountable for meeting them. It is therefore extremely important
for each employee’s responsibility and authority to be clearly defined. Responsibility
can be defined as the obligation to achieve objectives by performing required
activities. Accountability ensures that individuals meet their responsibilities. Authority
is the right to make decisions, issue orders or utilise resources.
4.3.3.7. Delegation
Delegation is the process of assigning responsibility and authority for accomplishing
objectives. Responsibility and authority are delegated down the chain of command
from top management to enable managers to concentrate on more important issues
or to get more work done
4.3.4. Organisational structure
Organisational structure can be described as a formal system of working
relationships that both separates and integrates tasks. Separation of tasks
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
69
BUSINESS MANAGEMENT 101
makes clear who should do what, and integration of tasks indicates how efforts
should interact and interrelate.
4.3.4.1. Departmentalisation
Departmentalisation is the grouping of related activities into units. Departments can
be created with an internal or external focus. An internal focus would result in
functional departmentalisation, whereas
an
external focus
would
result in
product, customer, or geographic departmentalisation.
Think Point
Why is the organising component so important in any organisation?
Comment on think point:
Organising is important for several reasons:
•
As with planning, it forces managers to think through how they are going to
achieve their results. It requires a detailed analysis of the work to be done and
the resources needed to do it.
•
It allocates responsibilities to people and their accountability for its accurate
performance.
•
No one can be led, motivated, and controlled unless he or she knows what must
be done and how.
•
It divides the total workload into related activities that can be logically and
comfortably performed by an individual and group.
•
It establishes clear vertical and horizontal operating and communications
relationships between individuals, and departments. This is especially true if the
systems approach is used.
•
Related activities are grouped in specialised, functional units that have a clear
focus on their contribution to the overall results of the organisation.
•
A clear organisation structure allows for mechanisms of co-ordination to be
developed and jobs to be clearly defined. This helps the recruitment and selection
process.
The interaction of organising, as a management task, with planning, leading and
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
70
BUSINESS MANAGEMENT 101
controlling is based on the following: Planning can be implemented and leading can
take place only once human resources are assigned to tasks. Leading can be effective
only once clear responsibilities and authority are allocated to employees. Controlling
can take place once procedures are established for collecting and evaluating
information to help managers make decisions, evaluate performance and solve
problems.
4.4 Leading
Leadership may be defined as “the process by which an individual exerts influence
over other people and inspires, motivates, and directs their activities to help achieve
group or organisational goals” (Jones, et al, 1998: 403).
Another
definition
proposed
by
Smit
and
de
Cronje
(2011)
is:
“That
management function that activates people to do things willingly”.
Charismatic leaders have the ability to enable ordinary people to achieve
extraordinary results. They are known for their capacity to inspire their employees
to over-achieve. Some of the characteristic qualities of the charismatic leader are:
self- confidence, a clear vision, extra-ordinary behaviour and environmental
sensitivity.
4.4.1 The Nature and Elements of Leadership
Leaders have to communicate their vision, strategies and expectations to their
followers. Leadership is a complex process which directly impacts on the
performance of an organisation.
Leadership comprises a number of elements, which include:
•
Authority: provides the leader with the right, by virtue of his/her position
within the organisation, to give instructions and delegate work to subordinates
(Smit and de Cronjé, 2011).
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
71
BUSINESS MANAGEMENT 101
•
Power: the leader’s ability to influence (without necessarily using his/her
authority). Various types of power exist and
include
legitimate,
reward,
coercive, referent and expert power (Smit and de Cronjé, 2011).
•
Influence: involves using authority and power in a manner which inspires
and motivates subordinates to take action.
•
Delegation: the leader allocates a part of his/her own task to a subordinate
to perform together with the necessary authority to execute it.
•
Responsibility and Accountability: the leader is responsible for carrying
out his tasks and must account for his/her performance.
4.4.2 Types of Power
Leaders can influence their followers and apply their authority effectively because a
true leader has power of one kind or another. Power is the ability to influence the
behaviour of others (Smit and de Cronjé 2011). John French and Bertram Raven
identified the following five types of power exerted by leaders:
Legitimate Power
This is based on the leader’s formal position in the organisation’s hierarchy.
Richard Brasher has legitimate power as the Chairman of Pick ‘n Pay. He has the
right to compel employees to perform their duties or to dismiss them. Thus, legitimate
power is the same as authority.
Reward Power
This is the power to give or withhold rewards such as:
•
A salary increase
•
Bonuses
•
Recognition
•
Interesting assignments
The more important these rewards are to subordinates; the greater the reward power
of the leader. Employees act on a manager’s requests in the belief that their
behaviours will be rewarded.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
72
BUSINESS MANAGEMENT 101
Coercive Power
This is the ability of a leader to obtain compliance through fear of punishment.
Punishment may take the form of:
•
Official reprimands
•
Less desirable work assignments
•
Pay cuts
•
Demotions
•
Suspensions
•
Termination of employment
Coercive power is usually less effective than reward power. Some employees
respond to coercion by falsifying performance reports or stealing company property
rather than improving their performance.
Referent Power
This refers to personal power. The followers are apt to like, admire, and want to
emulate the leader. Subordinates will follow the leader because they like and
respect him /her. In other words, the leader has “charisma” which makes this person
attractive. Former South African President and global icon, Nelson Mandela, had
much referent power.
Expert Power
This is power based on specialised knowledge and expertise. The more
important the information, and the fewer people who possess it, the greater the power
of the person who commands it.
A manager who has all five kinds of power is an exceptionally strong leader. The
possession of power is not restricted to managers and leaders only. Subordinates
also possess and exercise power.
4.4.3 The process of leading
It is easy to talk about leading and managing other people, but what about managing
yourself? Every day you interact with people in the work environment. These include
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
73
BUSINESS MANAGEMENT 101
your manager, subordinates, peers, and customers. How can you effectively ‘lead’ any
of them unless you show certain personal characteristics? In dealing with people, what
are some of the key issues to consider?
•
Communicate effectively with each category of person. This includes listening
and speaking to encourage sincere response. Ongoing communication with a
person enables you to give continuous response to that person on performance.
It helps you and subordinates build relationships and agree on expectations for
the future. It also enables the person to adjust his or her behaviour as s/he
progresses in the daily work environment.
•
Behave ethically towards each person you meet. Do you behave towards other
people in a way that you would like to be treated? Do you have any hidden
agendas?
•
Do you take ownership for making things happen? This is acting assertively with
your team and other people. A leader and manager must show initiative, take
decisions, and accept responsibility for their outcome.
•
Manage your time effectively. Do you know how to say and mean “no”? How
much of your time do you control? How well do you allocate your time?
•
Maintain a clear focus on objectives and priorities. Do you take your team with
you in this? Do you monitor and evaluate progress towards these objectives?
How do you ensure individual members are achieving their objectives?
•
Learn continuously. Learning is a life-long process. What notes do you keep of
your successes and mistakes and the reasons for them? What learning outcomes
have you set yourself? What formal studies are you following?
•
Are you a pro-active decision-maker or do you react to events? What decision
processes do you use? What group involvement do you seek? Do you set high
standards of personal excellence and set an example to your followers? Do you
continuously look for improvement in what your team does and how it does it?
4.4.4 The difference between management and leadership
The words manager and leader are frequently used in organisations. What do the two
words mean? What is required in these two roles? All managers should also be leaders
because it is part of the management process. The differences between management
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
74
BUSINESS MANAGEMENT 101
and leadership can be described as below:
•
Management is concerned with the activities of developing strategies and
goals,
planning,
budgeting,
organising,
staffing,
problem-solving
and
controlling. It focuses on ensuring results are achieved for customers and
shareholders. Management tends to think of getting things done in a more
predictable, task-oriented and efficient way. It makes use of systems and
controls.
•
Leadership is concerned with developing a vision and mission for the future and
the strategies for that to happen. It creates teams around the vision, which is
communicated to and accepted by everyone. Leadership makes change occur
in ways acceptable to everyone and motivates people to work towards
satisfying organisational and individual needs. Leadership relies on people and
their participation and development to achieve results. Motivation focuses on
making work challenging and meaningful.
4.4.5 Importance of leadership
There are a multitude of reasons as to why leadership is important to an organisation
and their subordinates:
•
Leadership pulls up the group to a higher level of performance through its work
on human relations.
•
Leadership contains all the essential ingredients of direction for inspiring people
and providing the will-to-do for successful work accomplishments.
•
It is the social skill of leadership that accomplishes objectives by mobilisation and
utilisation of people.
•
Competent leadership can, however, integrate informal organisations with formal
organisation and utilise them constructively for achieving company objectives.
•
Forms a basis of cooperation between leaders and their subordinates in terms of
communicating different viewpoints.
•
Increases commitment from all parties.
•
Encourages new ideas and innovation.
•
Maintains integrity for the organisation.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
75
BUSINESS MANAGEMENT 101
•
Creates a positive working environment.
•
Provides guidance and clear direction to subordinates.
4.5. Controlling
Control can be defined as the management task that ensures the coordination and
effective functioning of all the organisational activities, so that formulated
organisational objectives are implemented and pursued according to plan.
After management has set the goals, determined the structural arrangements, and
hired, trained and motivated people, some things may still go amiss. Therefore, the
manager must constantly monitor, compare and correct the organisation’s
performance. This is usually done against previously set goals to ensure things are
going as they should.
4.5.1 Definition for Control
“Control consists in verifying whether everything occurs in conformity with the plans
adopted the instructions issued and principles established. It has the object to point
out weaknesses and errors in order to rectify them and prevent reoccurrence.” —
Henry Fayol
4.5.2 Types of control
There are three types of organisational control: pre-control or proactive control,
concurrent or steering control, and post or reactive control.
Pre-control focuses on inputs (human resources, materials, capital, technology
and entrepreneurship); steering control on the transformation process (production
process and service process) and post control on outputs (produced goods and
services).
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
76
BUSINESS MANAGEMENT 101
4.5.3 Steps in the control process
Step 1: Establish the performance standard. This is done at the planning stage.
Organisational level and functional departments must set these objectives and
performance standards, for each area of the organisation. They must ensure that the
overall strategy is implemented in each area of the business. Standards can be set
based on a person’s experience and judgement. They can be based on the
performance of similar people in their organisations. Standards can also be based on
the previous performance of an individual and department. MBO is a technique for
individual control. At the end of the planning process, a budget is prepared with
standards of performance in each area and level in an organisation.
The idea of using benchmarks is becoming more frequent. These focus on crosscompany comparisons of how well basic functions and processes in the value chain
are performed. You will recall that we spoke about the processes of selling to and
executing customer orders as being a key factor in organisational success. Individual
companies can compare themselves with the achievements of other similar
companies.
Step 2: Measure performance against the standard. A manager needs information
to measure performance. Useful information must be accurate, relevant, timely, and
complete. Performance may be assessed visually or in writing. Performance should
be measured as close to the point of action as possible. Each functional area and level
in the organisation will have its appropriate reports.
Step 3: Evaluation of performance must occur after measurement. If there is no
deviation from the standard, then the management process continues normally. If
there are deviations from the standard, you must assess the reasons for their
occurrence. A small deviation may be significant under some circumstances, but not
under others. For example, tight control is needed over the manufacture of the turbine
blades of jet engines. The tyre pressures on your car may differ from the
manufacturer’s specification, but it is not serious, provided they are not too far out. To
be successful, performance evaluation must: concentrate on exceptions to the
standards. We must concentrate on what is not going to plan. Have allowable upper
and lower limits of deviation for the process being measured.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
77
BUSINESS MANAGEMENT 101
Step 4: Correction of performance is the final step in the process. If performance is
out of line, then three possible choices are available:
•
The first is to maintain the deviation provided it is within the set limits.
•
The second choice is to correct the deviation and return to the standard. This
could be achieved through training, changing the reward system, re-designing
jobs and processes, or changing the people doing the job.
•
The final choice is to change the standard. It could have been originally incorrectly
set (too high or too low) or market conditions might have changed since the
standard was set. If a person does not reach a standard, especially one that has
been set for him, then he will often blame the standard! He may be completely
correct in that assertion.
4.5.4 Criteria for effective control
To be effective, control must comply with certain criteria which include the following:
•
Control systems should be linked to the desired objectives of the
organisation.
•
The control process must be objective to eliminate subjectivity.
•
The control process must be completed by considering all relevant factors and
evaluating what is supposed to be evaluated.
•
Timely control provides information when it is needed most.
•
Acceptable control is recognised by employees as necessary and appropriate
for establishing and maintaining good performance.
•
All individuals exposed to a control system must fully understand
the
meaning of the system and specifically the implications of the set standards.
•
The cost-benefit scenario regarding control must be clearly evaluated to
establish the economic viability of the measure.
•
Control is of no use if the control measures indicate deviations, but no
applicable corrective action follows.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
78
BUSINESS MANAGEMENT 101
4.5.5 Importance of control for an organisation
Several authors have stated that control is important for the following reasons:
•
It helps managers, supervisors and operatives to focus on what results must
be achieved – at a departmental, section and individual level.
•
It ensures that available resources are used effectively and efficiently, without
waste.
•
It helps identify and eliminate mistakes that people in organisations make.
The sooner mistakes are recognised, the earlier and cheaper it will be to
rectify them. It is easy for mistakes to compound themselves. It improves the
quality of performance.
•
We have already discussed the impact of the market and macro-environments
on organisations. A properly designed control system helps managers identify
factors that may cause change and disrupt plans.
•
As organisations grow and become more complex, with a wide diversity of
products and activities, controls are more important. A small business, with a
functional organisation structure, will need a simpler control system than a
larger organisation.
•
An effective control system enables managers to delegate with more
confidence because they can monitor subordinates’ performance.
•
It makes sure that activities go according to plan.
Think Point
Briefly summarise the fundamentals tasks of management in your own
words .
Comment on think point:
•
Planning entails determining what the objectives and goals of
the
enterprise are.
•
Organising means establishing the structures and processes required to
achieve those objectives.
•
Leading
involves
directing,
equipping
and
motivating
employees
to
achieve the objectives.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
79
BUSINESS MANAGEMENT 101
•
Control means determining whether the objectives have been achieved.
4.6. Managerial Decision-Making
Decision-making is the process of making a choice between various alternatives to
select the most appropriate alternative to solve the problem or utilise the opportunity.
The ability to solve problems in innovative ways through decision-making is one of
the essential management roles and skills. Decision-making is a supportive
secondary management task that assists managers in the process of planning,
organising, leading and controlling.
4.6.1. Types of decision
Decisions can be categorised in various ways, depending on situational factors Bennet
(et al, 2014).
Routine decisions are described as a selection or choice in response to relatively
well-defined and common problems and alternative solutions. Such decisions are
made under conditions of low risk and a high degree of certainty, using organisational
policies, rules and procedures as a frame of reference, for example, ordering stock on
a monthly basis.
Adaptive decisions are choices under conditions of average levels of risk and
uncertainty. Adaptive decisions are made to continuously adapt to
changes, and can involve improving past routine decisions and practices. Continuous
improvement is a core component of the learning organisation.
Innovative
decisions
are
choices
under
conditions
of
high
risk
and
uncertainty. These problems involve decisions about unusual and unknown problems
and hence require the development of creative solutions.
4.6.2. The rational decision-making process involves the following steps:
Step 1: Definition and diagnosis of the problem.
Step 2: Setting of goals and objectives.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
80
BUSINESS MANAGEMENT 101
Step 3: Searching for alternative solutions.
Step 4: Comparing and evaluating alternative solutions.
Step 5: Choosing from among alternative solutions.
Step 6: Implementing the solutions selected.
Step 7: Follow up and control.
4.7 Traditional to Digital Management
“No product is made today, no person moves today, nothing is collected, analysed or
communicated without some ‘digital technology’ being an integral part of it. That, in
itself, speaks to the overwhelming ‘value’ of digital technology,” Wired Magazine
founder and former editor-in-chief Louis Rossetto (2019) asserts. Indeed, digital is
everywhere, but how do organisations position themselves to make the most of it? The
answer is simple: hire the right people. Specifically, this means digital leaders with the
skills to navigate the transformation while simultaneously imbuing their employees with
the capabilities they will need to deliver in the digital age.
Case Studies
8 Ways Remote and Traditional Management Meet in Today's
Workplace by David Roe, 14 May 2020
.
As countries around the world start looking at lifting restrictions on movement to
enable people to get back to work despite the persistence of the coronavirus,
enterprises are looking at ways to minimize the economic impact that consistent
reduced economic activity has had on them.
While many are looking at staff reductions and downsizing business, one of the
common characterizations across all businesses that is emerging is that a large
number of people who used to work onsite are now working remotely and will
probably continue to do so in the future. To enable that, digital transformation has
become top of the C-Suite agenda with recent research from OpsRamp showing
that 73% of IT operations and DevOps teams expect to either accelerate or
maintain digital transformation spending through the global pandemic and into the
future.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
81
BUSINESS MANAGEMENT 101
The report, titled Thriving In The New Normal, third party surveyed a total of 137
respondents on April 1, 2020. All respondents work at the IT director level or above,
across IT/technology operations teams in the United States, the report adds.
Many enterprises envisage a permanent transition to remote work. Enterprises are
scrambling to figure out the right tools, business processes, and security
frameworks that can support the needs of remote employees.
Some of those teams will be managed remotely, and some of those teams will be
managed from the workplace, or digital workplace. No matter what happens,
though, there will be a need to manage remote teams in way that has not happened
before. Does this mean that traditional management techniques go out the
window? While there will be some differences between the two, traditional
management will stay at the heart of digital workplace. Here we explore the eight
points at which remote and onsite management meet.
1. Management Effectiveness
Greg Wood is CEO of Ontario-based MASV.io. He argues that there is no
fundamental difference between remote managers and workplace managers.
Remote work simply removes the veneer of good management from managers
who might be nice, friendly and personable, but managerially insufficient. Presence
should never be confused for productivity. “In remote work and remote
management, you're forced to take dedicated actions to manage, and this
separates the wheat from the chaff,” he said.
High social and emotional intelligence is 100% required since you need to
empathize with your employees who might be working in a tiny apartment with kids
running around, or who might rather be escaping to an office to get away from
issues at home. Remote work is a huge litmus for true management effectiveness
2. Keeping Employees Accountable
Remote managers are not that different from workplace leaders, Dusan Goljic, a
co-founder of DealsOnHealth, told us. Their management methods slightly differ
due to the different situation they operate in. Because they are “out of sight”,
remote managers have to learn how to be authoritative when their employees
cannot see them. Furthermore, they must let their employees know they have
somebody they can turn to. “Keeping employees accountable, motivated, and
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
82
BUSINESS MANAGEMENT 101
engaged is slightly different from achieving the same things in the office. That is
how good communication and organization skills come in handy when it comes to
managing remote teams,” he said.
Overall, there are the same rules that apply to both remote and workspace
managers. However, those rules should be highlighted in the remote setting due
to the physical barrier.
3. Delegating Responsibility
While remote and digital managers implement many of the same processes, a
remote manager must be able to delegate and give their remote team the freedom
that they require to complete their tasks without a lot of micromanaging, Angela
Ash, digital marketing specialist at Belingham, Wash.-based UpFlip, said. It takes
a lot of organization to do this, which is why almost all remote managers depend
on a tool kit filled with organization, communication and motivation apps and
software. Keeping the entire team on the same page — literally — is imperative.
Additionally, the hiring process is quite different for a remote manager.
“Through work experience, documentation and perhaps a Zoom call or two, he or
she must be able to spot those candidates who possess entrepreneurial traits that
can be harnessed for the company's growth. A remote manager must really
depend on their number 2 and the rest of their supporting team to provide the best
services and products to the customer," Ash said.
4. Metric Driven
Adam Sanders is a director with Philadelphia-based Successful Release. He leads
a fully remote team of 25 at Successful Release and has led large in-house teams
in the past as well. He points to three differences between remote and on-site
digital workplace managers.
If you can't measure it does not matter. It is very tempting to have metrics that
sound good but if you can't easily measure it you have no business holding your
employees accountable to it. These types of metrics are quickly ignored. When
you're in a remote; environment where it is extremely difficult to measure employee
effort and time working (input metrics) you have to really heavily on output metrics.
Being able to craft effective metrics, rally your team around them, and manage
your team to achieve them is a skillset many traditional managers struggle with.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
83
BUSINESS MANAGEMENT 101
5. Disciplined Performance Management
Discussing and evaluating employee performance needs to be happening
constantly to be effective. When you are not physically working side-by-side
everyday it can become very difficult to evaluate performance and coach effectively
on a regular basis. Remote managers need to be able to effectively gather
feedback on their employee's performance, coach them on their opportunities, and
have a strong performance management plan that spans the entire year. It is much
more common on remote teams for annual reviews to be a surprise to an employee
and that is typically due to a failure of the manager to manage expectations and
provide accurate ongoing feedback and coaching.
6. Top Project Managers
A lot of communication happens informally from desk to desk or through hallway
conversations. All these informal touchpoints are eliminated with a remote team
and it has a big impact on how quickly information spreads across the
team. Remote managers must rely on emails, instant messages, and meetings
which all take time and planning to execute. All these little additions to your
workload add up quickly and remote managers need to become very adept at
project management very quickly to survive.
7. Job Description
Jacob J. Sapochnick, who runs a firm by the same name, is an attorney based in
San Diego, Calif., working with entrepreneurs. He explained that the pandemic has
forced his office and field workforce to switch into a remote work set up in their
homes and apartments for these past few weeks.
Although remote work is not something new, as there are already 4.7 million homebased workers in the U.S. alone, the sudden shift has become a challenging hurdle
not only for employees but for team leaders and managers as well. With the rise of
remote managers, the question now is how do they rate against workplace
managers?
A remote manager is someone who, in effect, manages a team of remote workers.
His or her job entails keeping the team in check, helping increase their productivity
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
84
BUSINESS MANAGEMENT 101
by creating effective work systems, providing communication channels, and
offering emotional support and encouragement to the team.
Meanwhile, a digital workplace manager focuses on choosing the best software
and digital platforms for efficient information transfer and storage, as well as
developing online policies for the business or company.
8. Purpose or Focus
Remote managers are more focused on remote working people and how to
manage them efficiently, making use of whatever online platform is necessary to
achieve that. While digital workplace managers are more focused on digital
platforms itself, managing it, and providing the company with the best software and
online social networking tools.
Adapting to Change
Eyal Feldman, co-founder and CEO of Mountain View, Calif.-based Stampli, an AIbased platform that streamlines the accounts payable process. Stampli is in a
unique position because they are managing locations in both Israel and U.S., so
how they approach remote working and learning in each country is a little different
(yet they have experience with dispersed teams).
Adaptability is a critical component of leadership, Eyal Feldman, co-founder and
CEO of Stampli, said. Whether you are thrown, into remote management due to a
crisis like COVID-19 or your organization was built completely dispersed from the
ground up, the most important job of a leader is to help your team face the
challenges in front of them and work together to achieve more.
If your situation changes, you adapt to those changes and you help your team to
adapt to those changes so the goals can still be achieved. People are capable of
doing much more than they initially think they can and great leaders know how to
get them to achieve amazing results. From this perspective, there is no difference
https://www.reworked.co/leadership/8-ways-remote-and-traditional-managementmeet-in-todays-workplace/
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
85
BUSINESS MANAGEMENT 101
4.8. Conclusion
Management is a complex approach represented by an interactive combination of
tasks. The basic management tasks namely planning, organising, leading and
controlling are interdependent and cannot be seen in isolation. A successful manager
uses primary management tasks in collaboration with supportive or secondary tasks
to analyse and consider environmental factors in the process of transforming all
resources into final goods and services.
Case Studies
Precious and Fly have decided to expand their business. Over the last five years,
they have developed a very successful health and beauty organisation catering for
the specific needs of men in Cape Town. The organisation is known as “Cape-male
health and beauty”. Their services include facials, haircuts, massages, manicures
and pedicures for men. They want to open three new stores in the next financial
year throughout the country. They are considering Johannesburg, Pretoria, Durban
or Bloemfontein as possible locations.
Fly and Precious have decided to change the name of their business to “Beauty
for Men” in order to accommodate the different locations in the country. Their
customer base in Cape Town is mostly professional working men earning more
than R20 000 per month. They provide their services to an average of a thousand
male customers per month, making their Cape Town branch very profitable. Their
main competition is female health and beauty facilities in the various cities. At
“Beauty for Men” all staff appointed are trained at the International School for
Beauty in Pretoria. Fly has taken the responsibility of Chief Executive Officer and
Precious has taken responsibility for Marketing, Sales and Advertising. Additional
senior staff has been appointed for the other functional management activities.
Questions
1. What type of departmentalisation would you suggest for a business such as
Beauty for Men? Support your answer.
2. Carry out a SWOT analysis to establish which of the possible locations you
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
86
BUSINESS MANAGEMENT 101
think would have a suitable market. Identify the advantages and disadvantages
of each city.
3. Suggest ways Precious and Fly can establish and maintain competitive
advantage.
4. Identify which management skills and tasks will be relevant to Fly in her position
as CEO and which to Precious as Marketing Manager.
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
87
BUSINESS MANAGEMENT 101
BIBLIOGRAPHY
Cant, M.C. and Fourie, L. (2017) Public relations theory and practice, 2edn Cape
Town: Juta
DelVechio, L, (2020). [Online] Available at https://planergy.com/blog/purchasingprocess/ Accessed on 16/05/2020
Dovetail Business Solutions, (2018) [Online] Available at
https://www.dovetail.co.za/what-is-logistics-all-you-need-to-know-about-logisticsmanagement/ Accessed on 16/05/2020
Erasmus, B.J et al, (2016) Introduction to business management, 11th ed. South
Africa: Oxford university press
Hellriegel, Slocum et al (2017) Management, 5th ed. South Africa: Oxford University
Press
Nieman and Bennet, (2014) Business management - A value chain approach, 2ND
ed. South Africa: Van Schaik publishers
Oalekan, W (2016)[Online] Available at https://www.linkedin.com/pulse/challengesfacing-21st-century-hr-managers-williams-olalekan Accessed on 16/05/2021
Skinner, C and Benecke, D.R and Mersham, G. (2016). Handbook of public
relations, 11th edn. Cape town: Oxford University Press Southern Africa
Smit, Cronje et al, (2011) Management Principles, 5th ed. South Africa: Juta
Strutner, S (2020) [Online] Available at
https://www.netsuite.com/portal/resource/articles/financial-management/financialmanagement.shtml Accessed on 16/05/2021
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
88
BUSINESS MANAGEMENT 101
Van Rensburg (ed), (2008) Business Management, 2nd edition. South Africa: Van
Schaik publishers
Writing, A, (2019) [Online] Available at https://smallbusiness.chron.com/functionspurchasing-department-organization-158.html Accessed on 16/05/2021
BACHELOR OF COMMERCE IN HUMAN RESOURCE MANAGEMENT
89