INTRODUCTION TO BUSINESS
MANAGEMENT
Module Guide
Copyright© 2023
MANCOSA
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. Please report all errors and omissions to the following email address:
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This Module Guide,
Introduction to Business Management (NQF level 5)
will be used across the following programmes:

Higher Certificate in Business Management

Bachelor of Commerce in Accounting

Bachelor of Business Administration

Bachelor of Commerce in Entrepreneurship

Bachelor of Commerce in Financial Management

Bachelor of Commerce in Human Resource Management

Bachelor of Commerce in Information and Technology Management

Bachelor of Commerce in Marketing Management

Bachelor of Commerce in Retail Management

Bachelor of Commerce in Supply Chain Management

Bachelor of Commerce in Project Management

Bachelor of Commerce in International Business

Bachelor of Commerce in Corporate Communication

Bachelor of Commerce in Digital Marketing
INTRODUCTION TO BUSINESS MANAGEMENT
List of Content ......................................................................................................................................................... 1
Preface.................................................................................................................................................................... 2
Unit 1: Introduction to Management ........................................................................................................................ 8
Unit 2: Evolution of Management Theory .............................................................................................................. 31
Unit 3: The Management Environment ................................................................................................................. 54
Unit 4: The Management Process......................................................................................................................... 78
Bibliography ........................................................................................................................................................ 112
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Introduction to Business Management
List of Content
List of Tables
Table 1.1: Three Levels of Management .......................................................................................................... 14
Table 1.2: Percentage of Time Spent on Management Functions by Management Level................................ 15
Table 1.3: Key Changes within Organisations (Robbins, 1997: 11).................................................................. 20
Table 3.1: Characteristics of the First Curve and Second Curve Markets (from Morrison, 1996). .................... 65
Table 3.2: Characteristics of the First Curve and Second Curve Organisation (from Morrison, 1996). ............ 66
Table 3.3: Key Changes Within Organisations (Robbins, 1997: 11) ....................... Error! Bookmark not defined.
Table 4.1: Characteristics of Organisational Plans (adapted from Smit & Cronjé: 2002: 97). ........................... 82
Table 4.1: Differences Between Management & Leadership (Kotter, 1990) ........... Error! Bookmark not defined.
List of Figures and Illustrations
Figure 1.1: The Nature of Management (adapted from Smit & Cronjé, 2002:9) .............................................. 12
Figure 1.2: The overlapping roles of managers (Du Toit, et al:2007:137) ........................................................ 17
Figure 1.3: Mechanisms for the Development of Management Skills (from Smit & Cronjé, 2002:20) ......... Error!
Bookmark not defined.
Figure 2.1: Environmental forces that shape management thought (from Smit & Cronjé, 2002: 37) ................ 35
Figure 2.2: Key Management Theories (adapted from Freeman & Stoner, 1992: 29) ...................................... 36
Figure 2.3: The Classical Management School ............................................................................................... 37
Figure 2.4: Congruence Model of Organisational Behaviour (from Nadler & Tushman, 1980: 47) .............. Error!
Bookmark not defined.
Figure 3.1: The Composition of the Management Environment (from Smit & Cronjé, 2002: 65) ..................... 58
Figure 3.2: Forces Driving Industry Competition (from Porter, 1979: 137)....................................................... 61
Figure 3.3: The Organisational Value Chain (from Partridge & Perren, 1994). ................................................ 64
Figure 4.1: The Management Process (from Smit & Cronjé, 2002: 9) ............................................................. 81
Figure 4.2: The Organisation Design Process (adapted from Smit & Cronjé, 1997: 212)................................. 86
Figure 4.3: Categories of Leadership Theories................................................................................................. 91
Figure 4.4: The Control Process (Smit & Cronjé, 2002)................................................................................... 93
Figure 4.5: Strategic Control Points ................................................................................................................. 94
Figure 4.6: The Relationship Between the Financial Function and Related Disciplines, the Organisation’s
Environment and Other Management Areas ................................................................................ 97
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Introduction to Business Management
Figure 4.7: The Operations Function (adapted from Cronjé, et al, 2000 : 357)................................................. 99
Preface
A.
Welcome
Dear Student
It is a great pleasure to welcome you to Introduction to Business Management (IBM5). To make sure that you
share our passion about this area of study, we encourage you to read this overview thoroughly. Refer to it as often
as you need to since it will certainly be making studying this module a lot easier. The intention of this module is to
develop both your confidence and proficiency in this module.
The field of Business Management is extremely dynamic and challenging. The learning content, activities and
self- study questions contained in this guide will therefore provide you with opportunities to explore the latest
developments in this field and help you to discover the field of Business Management as it is practiced today.
This is a distance-learning module. Since you do not have a tutor standing next to you while you study, you need
to apply self-discipline. You will have the opportunity to collaborate with each other via social media tools. Your
study skills will include self-direction and responsibility. However, you will gain a lot from the experience! These
study skills will contribute to your life skills, which will help you to succeed in all areas of life.
This module, Business Management, forms an integral part of the MANCOSA qualification and serves to introduce
the student to the fundamentals of management. In so doing, the module explores the evolution of management
theory, the management environment, the management process, as well as contemporary issues in management.
We hope you enjoy the module.
MANCOSA does not own or purport to own, unless explicitly stated otherwise, any intellectual property rights in or
to multimedia used or provided in this module guide. Such multimedia is copyrighted by the respective creators
thereto and used by MANCOSA for educational purposes only. Should you wish to use copyrighted material from
this guide for purposes of your own that extend beyond fair dealing/use, you must obtain permission from the
copyright owner.
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Introduction to Business Management
B.

Module Overview
The module is a 15 credit module at NQF level 5
Aims of This Module
The broad aims of this module are to:

Introduce the student to fundamental management principles and practices

Develop the student’s understanding of the evolution of management theory

Develop the student’s understanding of the management environment and its application

Develop the student’s understanding of the management process and its application
Contents and Structure
Section 1: Introduction to Management
This first section introduces the student to the concept of management. In this section the nature and definition of
management are examined, as are the various levels of management, areas of management and managerial skills.
The relationship between management and organisational performance is studied and the scope of and current
challenges for management are explored.
Section 2: Evolution of Management Theory
Section 2 explores the evolution of management theory. Here, the importance of theory is established, and various
management theories are examined.
Section 3: Management Environment
This third section examines the dynamics of the management environment. In so doing the characteristics of the
macro-environment, market environment and micro-environment are studied.
The interface between the
organisation and the environment is also examined.
Section 4: The Management Process
Section 4 explores the nature of the management process. In this section the four fundamental management
functions of Planning, Organising, Leading and Controlling (POLC) are examined. The various areas of
management are also studied.
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Introduction to Business Management
C. Learning Outcomes and Associated Assessment Criteria of this Module Guide
LEARNING OUTCOMES OF THE MODULE
ASSOCIATED ASSESSMENT CRITERIA OF THE MODULE
 Describe the fundamental management

principles and practices
Definition of management and levels of management are
summarised to understand the fundamental management
principles and practices
 Explain the relationship between the

organisation and management
The macro market and micro environment are described
to make sense of the management environment and its
application

Explain the evolution of management

Theories of management are examined to understand the
evolution of management theory
theory and its relationship to modern
practices
 Identify the levels of management and

The corporate, middle and lower management levels are
discuss the activities which are performed
described to make sense of the activities which are
at each level
performed at each level
 Identify and discuss the core areas of

Planning, leading, organising and controlling are
management, manager role distribution
differentiated to understanding the management process
and managerial skills
and its application
 Discuss the relationship between the

Management process is described to make sense of the
management process and its
relationship between the management process and its
environments
environments
 Develop the student’s understanding of

contemporary management issues and
Contemporary management issues are discussed to
understand the contemporary issues and its application
their application
 Discuss, evaluate, and provide examples

that illuminate principles of good business

Undertake both independent and
Principles of good business are described to understand
the concept of contemporary business management

directed study as related to business
Independent and directed study is encouraged to promote
business management understanding
management
D.
Learning Outcomes of the Units
You will find the Unit Learning Outcomes on the introductory pages of each Unit in the Module Guide. The Unit
Learning Outcomes lists is an overview of the areas you must demonstrate knowledge in and the practical skills
you must be able to achieve at the end of each Unit lesson in the Module Guide.
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Introduction to Business Management
E.
How to Use this Module
This Module Guide was compiled to help you work through your units and textbook for this module, by breaking
your studies into manageable parts. The Module Guide gives you extra theory and explanations where necessary,
and so enables you to get the most from your module.
The purpose of the Module Guide is to allow you the opportunity to integrate the theoretical concepts from the
prescribed textbook and recommended readings. We suggest that you briefly skim read through the entire guide
to get an overview of its contents. At the beginning of each Unit, you will find a list of Learning Outcomes and
Associated Assessment Criteria. This outlines the main points that you should understand when you have
completed the Unit/s. Do not attempt to read and study everything at once. Each study session should be 90
minutes without a break
This module should be studied using the prescribed and recommended textbooks/readings and the relevant
sections of this Module Guide. You must read about the topic that you intend to study in the appropriate section
before you start reading the textbook in detail. Ensure that you make your own notes as you work through both the
textbook and this module. In the event that you do not have the prescribed and recommended textbooks/readings,
you must make use of any other source that deals with the sections in this module. If you want to do further reading,
and want to obtain publications that were used as source documents when we wrote this guide, you should look
at the reference list and the bibliography at the end of the Module Guide.
F.
Study Material
The study material for this module includes tutorial letters, programme handbook, this Module Guide, a list of
prescribed and recommended textbooks/readings which may be supplemented by additional readings.
G.
Prescribed and Recommended Textbook/Readings
There is at least one prescribed and recommended textbooks/readings allocated for the module.
The prescribed and recommended readings/textbooks presents a tremendous amount of material in a simple,
easy-to-learn format. You should read ahead during your course. Make a point of it to re-read the learning content
in your module textbook. This will increase your retention of important concepts and skills. You may wish to read
more widely than just the Module Guide and the prescribed and recommended textbooks/readings, the
Bibliography and Reference list provides you with additional reading.
The prescribed and recommended textbooks/readings for this module is:

Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 9th Edition, Oxford University
Press: Southern Africa
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Introduction to Business Management
In addition to the prescribed textbook, the following should be considered for recommended books/readings:

Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts:
McGraw Hill.

Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices and Skills.
Massachusetts: Allyn & Bacon.

Robbins, S.P. (1997) Managing Today. London: Prentice Hall.

Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co.
Journals

Hofmeyer, K. (1998) “South African Managers Need To Be More Positive” People Dynamics October,
16(10), pp 16 – 20.

Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard Business Review, Mar – Apr, pp
163 – 170.

Moss Kanter, R. (1989) “The New Managerial Work” Harvard Business Review Nov - Dec, pp 13 – 20.

Taylor, G (2000) “An ‘Empty Beds’ Policy to Manage Aids?” People Dynamics May, 18 (5), pp 20 – 24
Videos
 YouTube channels:
 Alanis Business Academy
 Motivational Videos to Success
 Lectures: Harvard Business: Managing People
Websites:

H.
Academicearth.com
Special Features
In the Module Guide, you will find the following icons together with a description. These are designed to help you
study. It is imperative that you work through them as they also provide guidelines for examination purposes.
Special Feature
Icon
Explanation
The Learning Outcomes indicate aspects of the particular Unit you have
LEARNING
to master.
OUTCOMES
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Introduction to Business Management
ASSOCIATED
ASSESSMENT
CRITERIA
The Associated Assessment Criteria is the evaluation of the students’
understanding which are aligned to the outcomes. The Associated
Assessment Criteria sets the standard for the successful demonstration
of the understanding of a concept or skill.
A Think Point asks you to stop and think about an issue. Sometimes you
THINK POINT
are asked to apply a concept to your own experience or to think of an
example.
You may come across Activities that ask you to carry out specific tasks.
ACTIVITY
In most cases, there are no right or wrong answers to these activities.
The purpose of the activities is to give you an opportunity to apply what
you have learned.
At this point, you should read the references supplied. If you are unable
READINGS
to acquire the suggested readings, then you are welcome to consult any
current source that deals with the subject.
PRACTICAL
Practical Application or Examples will be discussed to enhance
APPLICATION
understanding of this module.
OR EXAMPLES
KNOWLEDGE
You may come across Knowledge Check Questions at the end of each
CHECK
Unit in the form of Knowledge Check Questions (KCQ’s) that will test
QUESTIONS
your knowledge. You should refer to the Module Guide or your
textbook(s) for the answers.
You may come across Revision Questions that test your understanding
REVISION
QUESTIONS
of what you have learned so far. These may be attempted with the aid
of your textbooks, journal articles and Module Guide.
Case Studies are included in different sections in this Module Guide.
CASE STUDY
This activity provides students with the opportunity to apply theory to
practice.
You may come across links to Videos Activities as well as instructions
VIDEO ACTIVITY
7
on activities to attend to after watching the video.
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Introduction to Business Management
Unit
1:
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Introduction to Management
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Introduction to Business Management
Unit Learning Outcomes
CONTENT LIST
LEARNING OUTCOMES OF THIS UNIT:
1.1 Introduction

Introduce topic areas for the unit
1.2 Nature of Management

Explain the relationship between the organisation and
management

Discuss the management process and explain the relationship
between the management process and its environments
1.3 Definition of Management

Formulate a workable definition of management
1.4 Levels of Management

Identify the levels of management and critically discuss the
activities which are performed at each level
1.5 Management and the Organisation

Identify and critically discuss the areas of management,
manager role distribution and managerial skills
1.6 Old and New organisations

Identify and critically discuss the concepts of, and key
differences between, the ‘old’ organisation and the ‘new’
organisation
1.7 Management and Organisational

Performance
1.8 Scope and Challenges of
organisational performance

Management
1.9 Summary
9
Identify and critically discuss the measures of managerial and
Identify and critically discuss contemporary management
challenges

Summarise topic areas covered in unit
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Introduction to Business Management
Prescribed and Recommended Textbooks/Readings
Below is the prescribed reading for specific to this unit;

Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 9th
Edition, Oxford University Press: Southern Africa Chapter 6 Pages 165-179
Recommended Readings:
Below is the recommended reading for specific to this unit;
Books

Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues.
Massachusetts: McGraw Hill.

Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts,
Practices and Skills. Massachusetts: Allyn & Bacon. pp

Robbins, S.P. (1997) Managing Today. London: Prentice Hall.

Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town:
Juta & Co.
Journals

Hofmeyer, K. (1998) “South African Managers Need To Be More Positive” People
Dynamics October, 16(10), pp 16 – 20.

Mintzberg, (1990) “The Manager’s Job: Folklore and Fact” Harvard Business
Review, Mar – Apr, pp 163 – 170.

Moss Kanter, R. (1989) “The New Managerial Work” Harvard Business Review
Nov - Dec, pp 13 – 20.

Taylor, G (2000) “An ‘Empty Beds’ Policy to Manage Aids?” People Dynamics
May, 18(5), pp 20 – 24
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Introduction to Business Management
1.1 Introduction
This section, the first section of the Introduction to Business Management Module, serves to introduce the student
to the concept of management. In so doing the following issues are examined:

Nature of management

Definition of management

Levels of management

Management and the organisation

‘Old’ and ‘new’ organisations

Management and organisational performance; and

The scope and challenges of management
Robbins (1997:38) identifies organisations to be characterised by a distinct purpose, multiple members and a
systematic structure. Organisations have emerged and exist primarily because they are more efficient than
individuals operating individually and therefore can produce items and/or provide services which an individual could
not produce/provide alone. In so doing the organisation is able to meet the needs and demands of current day
society through:

Bringing together resources to produce and provide the products and services which the society needs

Creating and providing career opportunities for members of the society
In order to meet the needs and demands of current day society, organisations establish goals which need to be
operationalised for the purpose of the organisation to be achieved (Smit & Cronjé, 2002). Management serves to
ensure that such goals are established and operationalised, and in so doing supports the purpose of the
organisation.
Think Point 1
Select an organisation of your choice and analyse their goals.
1.2 The Nature of Management
Management’s task is argued to be “…to examine factors, methods and principles that enable a business
organisation to maximise its profits and achieve its objectives, (Cronje: 2002:8). The achievement of this task is
reliant on the management process, which comprises the functions of planning, organising, leading and controlling,
as depicted in Figure 1.1 below.
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Introduction to Business Management
MANAGEMENT SCHOOLS OF THOUGHT
THE ENVIRONMENT
THE ORGANISATION
ORGANISING
RESOURCES




Human
Financial
Physical
Info.
PERFORMANCE
PLANNING
LEADING





Achieve goals
Products
Services
Productivity
Profit
CONTROLLING
1Figure 1.1: The Nature of Management (adapted from Smit & Cronjé, 2002:9)
A study of Figure 1.1 reveals that the management process requires interaction with a number of variables within
different ‘environments’:

The organisation

The macro-environment

Management schools of thought
The Organisation
Within the organisation, management achieves the goals of the enterprise through acting on its human, financial,
physical and informational resources by executing the four central management functions of Planning, Organising,
Leading and Controlling (abbreviated to POLC). These four functions comprise the core management process:

Planning involves determining which goals and courses of action the organisation and the various
departments should pursue

Organising involves the structuring and arranging of work, resources, departments and the overall
organisation in a manner which will facilitate the achievement of organisational goals

Leading involves influencing the organisation’s employees so as to ensure that they are motivated to
perform actions which are aligned with the organisation’s overall goals

Control means narrowing the gap between what was planned and the actual achievement of management
and ensuring that all activities are carried out as they should be. (Du Toit et al, 2013)
The four management functions will be further discussed in Section 4 of this Module Guide.
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Introduction to Business Management
Video Activity 1
Watch the following YouTube video: https://www.youtube.com/watch?v=8jxJOa1P0lY
After watching the video, explain the four functions of management
The Environment
The organisation operates within a market environment, comprising consumers, suppliers and competitors, as well
as the macro-environment, which includes the technological, economic, social, political and international
environments. These two environments impact on the organisation and therefore affect the nature of the
organisation’s management. The organisation’s environment will be discussed further in Section 3 of this Module
Guide.
Management Schools of Thought
Management Schools of Thought (also known as Management Theories) present frameworks which provide the
manager and management student with fundamental principles to guide effective management decisions and
actions. Management Theories will be addressed further in Section 2 of this Module Guide.
1.3
Definition of Management
With regards 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, organising, 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 definitions points to the essential components which should be included in a definition of
management, i.e. management:


13
Involves a process in which
o
The management functions of planning, organising, leading and controlling are executed;
o
Organisational resources are utilised; and
o
Work is achieved through the efforts of other employees,
So as to provide for …the effective and efficient achievement of the organisation’s goals.
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Introduction to Business Management
Practical Application 1
A municipality received funding from government allocation, rates and taxes amongst others.
With these funds, together with employees, the municipality is required to maintain its offices
and other assets whilst providing service delivery based on statistic as well as other
information they possess, specific to the area under management.
With the use of appropriate examples, identify the four basic resources of the municipality that
its management can utilise.
1.4
Levels of Management
Three levels of management within an organisation may be identified:

Top Management

Middle Management

Lower / First-Line / Supervisory Management
The three levels of management may be distinguished according to level of responsibility, main functions, time
orientation and positions held, as indicated in Table 1.1
1Table 1.1: Three Levels of Management
TOP MANAGEMENT
MIDDLE
LOWER MANAGEMENT
MANAGEMENT
RESPONSIBILITY
Overall responsibility for
Responsible for
Responsible for
the organisation
specific departments
departmental sections /
subsections
MAIN FUNCTION
Strategic management
Implementation of
Application of rules &
policies, plans &
procedures to achieve
strategies
high levels of productivity
TIME ORIENTATION
Long Term
Medium Term
Short Term
POSITIONS HELD
Board of Directors,
Departmental heads,
Section/subsection heads,
Managing Director, CEO,
e.g. Marketing
e.g. Product, Sales &
Management Committees
Manager,
Manager
HR
Promotion Managers
within the Marketing
Department
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Introduction to Business Management
Think point 2
Take note of the top, middle and lower management positions within your organisation. From your
experience, elaborate on the actions / tasks undertaken by each level of management?
Evidence shows that managers at all levels spend time on all management functions. However, as Daft (1995)
points out, the amount of time spent on each particular function differs between each level of management (see
Table 1.2
2Table 1.2: Percentage of Time Spent on Management Functions by Management Level
PLANNING
ORGANISING
LEADING
CONTROLLING
28 %
36 %
22 %
14 %
18 %
33 %
36 %
13 %
51 %
10 %
TOP MANAGERS
MIDDLE MANAGERS
FIRST-LINE
MANAGERS
15 %
24 %
(Daft, 1995: 17).
It is evident from table 1.2 that:

Top managers spend much time organising, and a substantial amount of time planning;

Middle managers spend time mostly on organising and leading; and

Lower managers spend just over half of their time leading.
Activity 1
Discuss the following statement:
First line managers spend 51% of their time leading as opposed to middle managers and top
managers who spend 36% and 22% respectively.
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Introduction to Business Management
Practical Application 2
Based on the above figure, discuss the different levels of management being depicted.
1.5
Management and the Organisation
It has already been identified, in the Introduction (subsection 1.1) to this section, that the relationship between the
organisation and management is critical in that management serves to support the establishment of goals,
implementation of actions and utilisation of resources, so as to enable the achievement of the organisation’s
purpose.
This subsection serves to further highlight management’s relation to the organisation by discussing the areas of
management, role distribution of managers as well the managerial skills required at various managerial levels.
1.5.1 Areas of Management
A business also has different types of managers, each responsible for the management of a more or less
specialised group of activities. Six functional areas of management may be identified (Cronjé, et al, 2004:125):

Marketing Management

Financial Management

Operations Management

Purchasing Management

Human Resource Management

Public Relations Management
These functional areas of management will be examined further in Section 4 of this Module Guide.
In addition to the six functional areas of management identified above, a seventh area may be identified: that of
General Management (Cronjé, 2004).
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Introduction to Business Management
This area of management involves the execution of the four generic management functions of Planning,
Organising, Leading and Controlling (POLC), already identified in subsection 1.2, and which are to be discussed
further in Section 4 of this Module Guide. General Management is not only performed within each of the six areas
of management identified above, but at all levels of management as well.
1.5.2
The Role Distribution of Managers
The manager’s relation to the organisation can be further explored from a role distribution perspective.
As identified in paragraph 1.5.1 above, the area of General Management identifies the four management functions
of Planning, Organising, Leading and Controlling (POLC) as characterising the manager’s work. However,
Mintzberg (1990) argues that not only do these widely accepted management functions provide an inadequate
explanation of what managers do, they fail to provide a practical approach to understanding and developing
managerial competence as well.
It is argued that the traditional POLC approach oversimplifies the complexity of the manager’s job, which is in
effect, “enormously complicated and difficult” (Mintzberg, 1990: 167) and is characterised by brevity, fragmentation
and an overburden of tasks. Thus Mintzberg (1990) maintains that it is more useful to view the manager’s relation
to the organisation in terms of their roles.
Interpersonal role
 Representative
figure
 Leader
 relationship
Decision-making
role




Entrepreneur
Troubleshooter
Allocator of
resources
negotiator
Information role
 Monitors
 Analyses
 spokesman
2Figure 1.2: The overlapping roles of managers (Du Toit, et al: 2007:137)
Figure 1.2 presents the three categories of managerial roles in a sequential manner. The sequence begins with
status emerging from the formal authority vested in the manager’s position.
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Introduction to Business Management
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.
Think point 3
Based on your knowledge, outline some examples of the negotiators’ role of managers.
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) 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.
Video Activity 2
Watch the following YouTube video:
https://www.youtube.com/watch?v=r0ZRnKNyBlA
After watching the video, discuss the three conceptual categories of manager’s role.
1.5.3
Managerial Skills
In order for the manager to effectively perform in his/her position, certain managerial skills are required.
Cronjé et al (2004) identify three categories of skills which managers at all levels of the organisation are identified
to possess:

Conceptual Skills: which refer to the manager’s ability to view the operation of the organisation
and
its parts holistically.

Interpersonal Skills: which refer to the manager’s ability to communicate and work effectively with others.

Technical Skills: which refer to the ability to use discipline specific skills to complete a particular task.
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.
Mintzberg (1990) identifies the following skills to be important to managerial work:

Development of peer relationships
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
Motivation of subordinates

Conflict resolution skills

Negotiation skills

Establishment of information networks

Dissemination of information

Allocation of resources

Decision making in conditions of extreme ambiguity

Introspective skills which provide for learning of the job
The key difference between the managerial skills identified by Mintzberg (1990) and those identified by Cronjé, et
al (2004) is that while the latter’s focus is on skill categories, the former emphasises important skills necessary to
cope with the complex nature of managerial work. Indeed, it may be argued that the majority of skills identified by
Mintzberg (1990) fall within S Cronjé’s, et al (2004) Conceptual and Interpersonal Skill categories.
Management education, which can take the form of formal or continuous education, provides the manager or
potential manager with the opportunity to develop management skills within an educational setting, for example,
at colleges, technikons, universities and/or company in-house training facilities (Cronjé, 2004).
Managerial skills may be developed from both education and experience, as depicted next, in Figure 1.3.


EDUCATION
Formal Education
Continuous Education


EXPERIENCE
Job Experience
Variety of Assignments
SUCCESSFUL
ACQUISITION &
UTILISATION OF
MANAGEMENT
SKILLS
3Figure 1.3: Mechanisms for the Development of Management Skills (from Smit & Cronjé, 2002:20)
In contrast to management education, practical experience provides the manager and potential manager with the
opportunity to develop management skills while performing his/her job.
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With regards to the effectiveness of the two different approaches it is important to note Mintzberg’s (1990) assertion
that the development of management competence cannot be achieved from a theoretical approach to education
alone. Indeed, it has been recognised that for management development programs to be effective, the cognitive
learning which results from education should be married with the practical learning which results from experience.
This subsection, entitled Management and the Organisation, has served to further explore the fundamental
principles underlying the relationship between the organisation and the work of the manager. In so doing, the
Areas of Management, Managerial Roles and the Managerial Skills were examined.
1.6
‘Old’ and ‘New’ Organisations
The management environment has been undergoing change which has resulted in change in organisations and
managerial work. This has resulted in the emergence of the ‘new’ organisation which provides the flexibility
necessary to respond adequately to the changing environment (Robbins, 1997).
Organisations are changing in a number of ways. Table 1.3 below identifies some of the key changes, as identified
by Robbins (1997).
3Table 1.3: Key Changes within Organisations (Robbins, 1997: 11)
‘OLD’ ORGANISATION
‘NEW’ ORGANISATION

Permanent jobs

Temporary jobs

Control organisation’s own destiny

Externalise risk (e.g. through
through independence
outsourcing)

Relatively homogenous workforce

Diverse workforce

9-to-5 workdays

Workdays with no time boundaries

Large corporations provide job security

Large corporations are cutting overall staff

“If it ain’t broke, don’t fix it”

Reengineer all processes

Work is organised around individuals

Work is organised around teams
Moss Kanter (1989) argues that as a result of competitive pressures within the management environment,
organisations are adopting more flexible strategies and structures. The move to flexibility requires that managers
learn to perform new ways of managing, deal with change, implement new ways of motivating people and accept
changes in their own bases of power.
Moss Kanter (1989) argues that the post-entrepreneurial organisation presents the traditional manager with the
following changes:
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Introduction to Business Management

An increased number and variety of channels (horizontal, vertical, cross-functional) exist for exerting
influence and taking action within the new organisation

Within the new organisation, relationships of influence are emerging within horizontal peer networks, and
thus are not limited to the vertical chain of command

The division between managers and non-managers is blurring, particularly in terms of information
accessibility, access to relationships outside of the organisation and control over assignments

External relationships are becoming important in providing for internal power and influence, as well as
career development

As a result of the above four factors, stable and predictable paths of career development for managers
are difficult to pre-determine and to guarantee
The above five factors demonstrate how the post-entrepreneurial manager is distinct from the traditional manager
in that his/her managerial power and success is not derived from his/her hierarchical position. Indeed, it is asserted
that managers “….must learn to operate without the crutch of hierarchy. Position, title, and authority are no longer
adequate tools, not in a world where subordinates are encouraged to think for themselves and where managers
have to work synergistically with other departments and even other companies” (Moss Kanter, 1989: 16).
Thus Moss Kanter’s (1989) approach essentially differs from the traditional management approach in that while
the traditional approach is grounded in the concept of hierarchy (as shown in subsections 1.4 and 1.5), the postentrepreneurial approach’s focus is on relationship networks.
1.7
Management and Organisational Performance
It was indicated in the Introduction (subsection 1.1) that to meet the needs and demands of current day society,
organisations establish goals which must be operationalised for the purpose of the organisation to be achieved
(Cronjé, 2004). Management serves to ensure that such goals are established and operationalised, and in so
doing supports the purpose of the organisation. Thus it follows that organisational performance has a strong
relation to managerial performance.
The assessment of managerial and organisational performance is one characterised by much debate (Stoner &
Freeman, 1992). However, the criteria on which there is much agreement are those of efficiency and effectiveness:

Efficiency (‘doing things right’) focuses on input and output. An efficient manager is regarded to be one
who is able to achieve outputs which measure up to the inputs (time, materials, labour) used to achieve
the outputs

Effectiveness (‘doing the right thing’) focuses on choosing the most appropriate goals and plans of action
(Stoner & Freeman, 1992: 6)
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Activity 2
With the aid of an example, illustrate the difference between efficiency and effectiveness.
Cronjé (2004) argue that the efficiency-effectiveness approach tends to be simplistic. Rather, the economic
principle, where the organisation (and its management) should seek to achieve the highest possible output with
the lowest possible input, should be used as the measure of managerial and organisational performance (Cronjé,
2004).
1.8
Scope and Challenges of Management
A number of challenges exist for management not only within the Southern African region, but globally as well.
Cronjé et al (2007) identify the following challenges to management within the Southern African region:

Management Training for Large and Small Business Organisations: As both large and small
businesses play an important role in the South African economy, one of the challenges is to ensure that
organisations of all sizes have skilled management who are able to ensure effective organisational
performance. Such management competence should be acquired through appropriate management
training

International Management: Globalisation has resulted in South African organisations having to compete
with global players. The challenge for management exists in improving the performance of South African
organisations to achieve sustainable competitive advantage within this highly competitive market (Cronjé,
et al 2004)

Non-profit Seeking Organisations: Non-profit organisations within South Africa, such as the
government, place a significant demand on scarce resources. Management’s challenge within these
organisations is to ensure efficient and effective use of these resources

Managerial and Economic Empowerment: The initiatives of the South African apartheid government
resulted in considerable inequalities and consequently a vast number of disadvantaged individuals. The
challenge for management therefore is to ensure the managerial and economic empowerment of the
previously disadvantaged individuals through, for example, management training and mentorship (Cronjé,
et al 2004)

Cultural Diversity: The South African organisation is characterised by diversity in terms of
race,
ethnicity, religion, gender and sexual orientation. The challenge therefore is for management to not only
appropriately manage, but also harness the potential of a diverse workforce
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Taylor (2000) identifies HIV and AIDS to be a management challenge. Indeed, it is expected that in 2010 21% of
the South African workforce will be HIV positive, while 3% will have AIDS. It is argued that in order to deal with
the HIV/AIDS epidemic, South African management need to start planning and devising inventive solutions.
The effective addressing of the management challenges identified by (Cronjé, et al 2004) and Taylor (2000) may
be argued to be dependent on management which is dedicated and enthusiastic. However, research undertaken
by Hofmeyer (1998) during 1997 shows that South African management attitudes have become more negative
since 1994, particularly in the areas of management relations, productivity, management development and
leadership. This thus presents a further challenge: given South African management’s less positive attitudes, is it
possible for management to be sufficiently committed and motivated for the challenges identified by Cronjé (2004)
and Taylor (2000) to be effectively addressed?
1.9
Summary
This section served to introduce the student to the fundamentals of management. The nature of management was
examined, and a definition of management was formulated. Further, the levels of management, the areas of
management, management roles as well as management skills were examined. The implications which the new
organisation has for management were also explored, as were measures of management and organisational
performance. This introduction to management was concluded with an examination of the current and future
management challenges.
The next section of this Study Guide, Section 2, will examine the evolution of management theory.
Knowledge Check Questions
1) Which of the following roles would spend more than half of their time leading?
a. Board Directors
b. Chief Executive Officers
c. Human Resource Manager
d. Sales Manager
2) Planning, organising, leading and controlling are called managerial
a. roles
b. functions
c. competencies
d. skills
3) Conceptual skills refer
a. to the managerial skills that are required for the manager to effectively
perform in his/her position
b. to the ability to use discipline specific skills to complete a particular task
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c. to the manager’s ability to communicate and work effectively with others
d. to the manager’s ability to view the operation of the organisation and its
parts holistically.
Case Study
Pick n Pay converts spaza shop into store in Diepkloof
Pick n Pay on Thursday opens the first spaza-to-store conversion in Diepkloof township in
Soweto, as it looks for more markets in a tighter economy
The strategy comes as the number of new malls being built drops and competition from slicker
foreign operators continues.
The move will allow Pick n Pay to move more rapidly at a lower cost in lower-income areas,
where it has less penetration than rivals such as Shoprite.
There are 12 full-format Pick n Pay stores in Soweto.
Chris Reed, the grocer’s group executive for franchise, said on Wednesday that many
independent township traders were experiencing tough times, as the economy tightens, and
competition becomes more intense. "When we talk to spaza owners about the challenges, and
how we might help, they frequently identify better access to quality products at good prices, a
reliable distribution system, good business management systems, and business advice and
mentorship as priority areas for them," he said.
The pilot scheme, which is being opened in partnership with the Gauteng department of
economic development is owned and run by Solly Legae and his family, who have traded in
Diepkloof since 1972.
On a tour of the store, which carries about 800 stock-keeping units, Mr Legae said the initiative
would change the face of retail in townships.
"We were just buying and selling … that’s what you do in townships. The systems that Pick n
Pay have brought make me think I’ve been playing all along.
"There’s a vast difference in how I’m running the business," he added.
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The store offers services including social grant pay-outs, Lotto, bill payments, and the sale of
prepaid electricity — all known drivers of footfall. The sales are linked to the grocer’s Smart
Shopper scheme.
In managing the store, Mr Legae has received mentoring and advice from franchisee Bonny
Sachane
(Source: Moorad, 2016 – Extract – Full article available at
https://www.supermarket.co.za/news-article.asp?ID=5769)
Question 1:
Briefly explain the managerial functions that Mr. Solly Lagae will be responsible for as ownermanager of the business.
Question 2:
Discuss the overlapping roles of Mr. Solly Lagae as owner-manager of the business.
Question 3:
Discuss some socio-cultural factors associated with townships that might affect Mr. Solly
Lagae business operations.
Revision Questions
1. Identify the essential components which should be included in the definition of
management
2. Elaborate on the Time Spent on Management Functions by Management Levels
3. Discuss some of the key changes within organisations.
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Introduction to Business Management
Answers to Unit Questions and Activities
Think Point 1
Learners are expected to select an organisation that they are familiar with and perform the following:

Identify the goals

Analyse the meaning of the goals

Relate the goals to the purpose of the organisation
Think Point 2
Take note of the top, middle and lower management positions within your organisation. From your experience,
elaborate on the actions / tasks undertaken by each level of management?
Learners are expected to elaborate on the following:

Top management actions, e.g. developing corporate strategy

Middle management actions e.g. manage specific areas such as marketing.

Lower management actions e.g. supervise officials within units.
Think Point 3
Learners are expected to provide some examples and elaborate:

Example: Price negotiation – managers might negotiate to secure better pricing of material

Example: Salary negotiation – managers might need to negotiate the salaries of their employees.
Activity 1
Learners are expected to relate to the following:

First line managers spend just over half of their time leading.

First line managers spend the most amount of time leading when compare to the other levels

First line managers supervise more employees than other levels therefore, time spent leading is higher
Video Activity 1
Learner must discuss the following:

Category 1: Informational
o
Managing by information
o
The activities used to maintain and develop an information network
o
Involves monitoring, disseminating and being spokesperson
- 75% of managers time involves
communicating with others
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Introduction to Business Management

Category 2: Interpersonal

o
Managing through people
o
Pertain to the relationship with others and are related to human skills
o
Involves undertaking a figurehead, leader and liaison role
Category 3: Decisional
o
Managing through action
o
Pertain to those events about which the manager must make a choice and take action
o
Involves being entrepreneurial, acting as a mediator and perform the allocator as well as the negotiator
role
Activity 2
Learners are expected to relate to the following:

Efficiency (‘doing things right’) focuses on input and output. An efficient manager is regarded to be one who
is able to achieve outputs which measure up to the inputs (time, materials, labour) used to achieve the
outputs.

Effectiveness (‘doing the right thing’) focuses on choosing the most appropriate goals and plans of action

Let's consider a surgery example. A surgeon is very skilled, perhaps the best in the country. The impending
job is to operate on the patient's left knee. However, the surgeon doesn't perform all the steps of the process
leading up to the surgery. Someone else marks the right knee for surgery. However skilled this surgeon is,
however fast he performs the surgery (i.e., however efficient he is), this process will not be effective. When
the patient awakens from the surgery, he will not be a happy camper. And what about the HMO? Who will
pay for a surgery performed on the wrong knee? (https://www.referenceforbusiness.com/management/DeEle/Effectiveness-and-Efficiency.html#ixzz6WQ2r0WnF)
Practical Application 1
Learners are expected to relate to the following:

Top management is represented by Board of Directors and CEO

Middle management is represented by COO, CFO, CMO and SVP Corporate Development

Lower management is not represented in the diagram
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Video Activity 2
Learner must discuss the following:

Planning
o

Where the organisation wants to be in the future and how to get there
Organising
o
Assigning tasks, grouping tasks into departments, delegating authority and allocating resources
across the organisation

Leading
o
Creating a shared culture and values, communicating goals to people throughout the organisation
and infusing employees with the desire to perform at a high level

Controlling
o
Monitoring employees’ activities, determining whether the organisation is moving towards its goals
and making corrections as necessary
Practical Application 2
Learners are expected to relate to the following aspects of the municipality:

Human resources – employees

Financial resources – fund received

Physical resources – offices

Information resources - statistics
Knowledge Check Questions
1) Which of the following roles would spend more than half of their time leading?
a. Board Directors
b. Chief Executive Officers
c. Human Resource Manager
d. Sales Manager
2) Planning, organising, leading and controlling are called managerial
a. roles
b. functions
c. competencies
d. skills
3) Conceptual skills refer
a. to the managerial skills that are required for the manager to effectively perform in his/her position
b. to the ability to use discipline specific skills to complete a particular task
c. to the manager’s ability to communicate and work effectively with others
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Introduction to Business Management
d. to the manager’s ability to view the operation of the organisation and its parts holistically.
Case Study
Question 1:
Briefly explain the managerial functions that Mr. Solly Lagae will be responsible for as owner-manager of the
business.
The managerial functions of the owner manager would be as follows:

Planning involves determining which goals and courses of action the organisation and the various
departments should pursue

Organising involves the structuring and arranging of work, resources, departments and the overall
organisation in a manner which will facilitate the achievement of organisational goals

Leading involves influencing the organisation’s employees so as to ensure that they are motivated to
perform actions which are aligned with the organisation’s overall goals

Control means narrowing the gap between what was planned and the actual achievement of management
and ensuring that all activities are carried out as they should be
Question 2:
Discuss the overlapping roles of Mr. Solly Lagae as owner-manager of the business.
The overlapping roles are as follows:



29
Decision making
o
Act as an entrepreneur
o
Trouble-shoot
o
Allocate resources
o
Negotiate
Interpersonal role
o
Representative figure
o
Leader
o
Relationship
Informational role
o
Monitor
o
Analyser
o
Spokesman
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Question 3:
Discuss some socio-cultural factors associated with townships that might affect Mr. Solly Lagae business
operations.
Some socio-cultural aspects:

Poverty

Unemployment

Lack of infrastructure, e.g. power, water
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Unit
2:
31
Evolution of Management
Theory
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Unit Learning Outcomes
CONTENT LIST
LEARNING OUTCOMES OF THIS UNIT:
2.1 Introduction

2.2 Why study management theory
 Discuss the importance and relevance of studying management
Introduce topic areas for the unit
theory
2.3 Understanding management theory
 Discuss the concept of theory and identify the factors which
influence the development of management theory
2.4 The Theories of Management
 Critically discuss and apply the principles of the various
Theories in Management
2.5 Management Theory or
 Critically discuss and identify the concept of a management fad
Management Fad?
2.6 Summary
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
Summarise topic areas covered in unit
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Introduction to Business Management
Prescribed and Recommended Textbooks/Readings
Below is the prescribed reading for specific to this unit;

Du Toit, Erasmus and Strydom (2013)
Introduction to Business
Management, 9th Edition, Oxford University Press: Southern Africa
Chapter 6 Pages 181-186
 Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary
Management Issues. Massachusetts: McGraw Hill.
 Micklethwait, J. & Wooldridge, A. (1996) The Witch Doctors. London:
Random House.
 Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management
Concepts, Practices and Skills. Massachusetts: Allyn & Bacon. pp 61 –
73.
 Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 595 610.
 Senge, P.M. (1990) The Fifth Discipline: The Art and Practice of the
Learning Organisation. New York: Doubleday.
 Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape
Town: Juta & Co
Journals

Donaldson, L. & Hilmer, F.G. (1998) “The Case Against Fads that Harm
Management” Organizational Dynamics Spring, pp 7 – 20.

Galagan, A. (1991) “The Learning Organization Made Plain” Training &
Development October.

Hammer, M. (1990) “Reengineering Work: Don’t Automate, Obliterate”
Harvard Business Review July-August pp104 – 112.

Nadler, D.A. & Tushman, M.L. (1980) “A Model for Diagnosing
Organizational Behaviour” Organizational Dynamics Autumn, pp 35 – 51.

Tetenbaum, T. (1998) “Shifting Paradigms: From Newton to Chaos”
Organizational Dynamics Spring pp 21 – 32.
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2.1
Introduction
While Section 1 introduced the student to the fundamentals of management, this section examines the Evolution
of Management Theory. Management theory is argued by some to have originated with Nicocolé Michiavelli, while
others argue that the Egyptians were the first management thinkers (Micklethwait & 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 Study Guide examines the body of management knowledge which has emerged since the early
1900s. In so doing, the following will be studied:
2.2

Why study management theory?

Understanding management theory

The theories of management

Classical Approach

Scientific management theory

Administrative management theory

Behavioural & Human Relations Approach

Quantitative Approach

Contemporary Approaches

Systems theory

Contingency theory

Chaos theory

Other contemporary theories
Why Study Management Theory?
The management student may wonder why the study of management theory is necessary. However, as will be
shown, the study of management theory is critical in developing not only a holistic understanding of the discipline,
but professional competence as well.
Think Point 1
Think about your experience in your current organisation and/or organisations for which you have
worked in the past:

Identify two managers, with whom you have dealt, who have demonstrated vastly different
management styles (for example, an absolute autocrat vs a democratic manager).

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Introduction to Business Management

From your experience and observations, what principles do you think underlie Manager A’s
view of, and approach to management?

From your experience and observations, what principles do you think underlie Manager B’s
view of, and approach to management?
2.3
Understanding Management Theory
In studying management theory, it is important that the management student understands the concept of ‘theory’,
as well as the factors which influence the development of theory.
Definition of Theory
Stoner & 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 definition
of the word ‘theory’ is “a supposition or system of ideas explaining something” (Thompson, 1995: 1446). 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 which serve to guide not only the manager’s understanding of management issues, but his/her
management-related actions as well.
Factors Influencing the Development of Theory
It needs to be noted that management theories do not develop in a vacuum but develop within, and as a result of,
the dynamic environment. The environmental forces which impact on the development of management theory are
depicted in Figure 2.1 below:
POLITICAL
ECONOMICA
L
SOCIAL
EVOLUTION OF
MANAGEMENT
THEORY
ECOLOGICA
L
INTERNATIONA
L
4Figure 2.1: Environmental forces that shape management thought (from Smit & Cronjé, 2002: 37)
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Figure 2.1 portrays the numerous environmental factors such as political, social, economic, ecological as well as
international forces that have shaped management thoughts from the beginning.
2.4
Theories of Management
The schools of management which will be studied in this subsection include:

Classical Approach

Behavioural & Human Relations Approach

Quantitative Approach

Contemporary Approach
These schools emerged in a chronological sequence, which is depicted in Figure 2.2 below.
CONTEMPORARY SCHOOL
QUANTITATIVE SCHOOL
BEHAVIOURAL SCHOOL
CLASSICAL SCHOOL
1900
1950
2000
5Figure 2.2: Key Management Theories (adapted from Freeman & Stoner, 1992: 29)
It must be noted however, that although the schools developed chronologically, later management theories did not
(and do not) serve to replace the earlier theories. Rather, each new theory which emerges tends to complement
or exist alongside those theories which have been established for some time.
Think Point 2
Examine Figure 2.2 which provides an indication of the periods during which the various schools
of management emerged. Elaborate on any of the environmental forces which were influential
during the periods in which these management schools of thought emerged?
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2.4.1 The Classical Approach
The two major theories which comprise the Classical Management Approach are Scientific Management Theory
and Administrative Management Theory.
CLASSICAL MANAGEMENT
SCHOOL
SCIENTIFIC MANAGEMENT
THEORY
ADMINISTRATIVE
MANAGEMENT THEORY
6Figure 2.3: The Classical Management School
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 (Cronjé, et al
2004). 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 through increasing specialisation and job division of labour. He developed four
principles to increase efficiency in the workplace:

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 (Cronjé, et al, 2004)
Frank & Lillian Gilbreth built on the work of Taylor and focused on work simplification. Their approach included:

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Analysing each individual action required to perform a task
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
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.
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 (Jones, et al, 1998).
Fayol also identified five basic functions of administration:

Planning

Organising

Commanding

Coordinating

Controlling
Having achieved the outcomes of Section 1 (Introduction to Management) of this Study Guide the student of
management should recognise that Fayol’s five basic functions correspond to the four contemporary management
functions of Planning, Organising, Leading and Controlling.
Activity 1
Contrast Fayol’s five basic functions of administration to the four contemporary
management functions of management
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Max Weber developed a theory of bureaucratic management and emphasised the need for a hierarchy governed
by lines of authority (Cronjé, et, al 2004).
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. A criticism of this theory, however, is that it is more applicable for the stable organisations and
predictable environments of the past (Stoner & Freeman, 1992).
Activity 2
Elaborate on the main difference between the Scientific Management Theory and
Administrative Management Theory.
2.4.2 The Behavioural & 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 writing emerged in reaction to Taylor’s scientific approach. Indeed, Follett argued that it is the
worker who knows most 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 (Jones, et al,
1998).
Hawthorne Effect
Elton Mayo appeared as a consequence of 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. The results showed that productivity improved not only when lighting was
improved, but when lighting conditions were made worse as well (Jones, et al, 1998). 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 (Jones, et al, 1998).
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Theory X vs. Y
Douglas 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 they 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 (Cronjé, et al 2004).
The Behavioural & 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 (Stoner & Freeman, 1992). 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.
Think Point 3
Consider the organisation for which you currently work. Describe the particular
organisational and managerial practices show evidence of a Behavioural & Human
Relations Approach?
2.4.3 Quantitative Approach
The Quantitative Approach, also referred to as the Management Science Approach, is essentially an extension of
Taylor’s Scientific Management Theory (Jones, et al, 1998). It focuses on the use of rigorous quantitative
techniques which enable managers to achieve productivity through the most effective and efficient use of
organisational resources to produce goods or services.
The Quantitative School includes the following
approaches, all of which provide the manager with tools and techniques to increase the effectiveness of his/her
decision making:

Quantitative management (employs mathematical techniques such as linear programming, modelling,
simulation & queueing theory)

Operations management

Total Quality Management (TQM); and

Management information systems (MIS) (Jones, et al, 1998)
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2.4.4 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
Systems Theory
The Classical Approach, The Behavioural & Human Relations Approach and the Quantitative Approach have two
major short-comings which Systems Theory (also known as Organisational-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 (Cronjé,
et, al 2004).
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 & Freeman, 1992).
Practical Activity 1
Using a juice manufacturing business as an example, provide examples for the four elements
of a system.
The Concept of Congruence
Nadler & Tushman (1980) present a general model of the organisation which “provides a framework for thinking
about the organisation as a total system….the models major premise is that for organisations to be effective, their
subparts or components must be consistently structured and managed – they must approach a state of
congruence.” (Nadler & Tushman, 1980: 37). The concept of congruence refers to achieving an appropriate
balance between the parts of the organisation (system), i.e. achieving a good ‘fit’ between the entire organisation’s
components.
Nadler & Tushman’s (1980) Congruence Model of Organisational Behaviour is depicted as follows in Figure 2.4
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TRANSFORMATION PROCESS
INFORMAL
ORGANISATION
INPUTS
Environment
Resources
History
Strategy
OUTPUT
S
FORMAL
ORGNISATION
TASK
Organisation
Group
Individual
INDIVIDUAL
FEEDBACK
7Figure 2.4: Congruence Model of Organisational Behaviour (from Nadler & Tushman, 1980: 47)
Figure 2.4 presents Nadler & Tushman’s (1980) Congruence Model of Organisational Behaviour which views the
organisation as a system which 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
is dependent on the achievement of congruence between all four components.
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 (Nadler & Tushman, 1980)

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 a way so as to regain equilibrium

Equifinality: the system can achieve its outputs through a number of different ways or system
configurations (Nadler & Tushman, 1980)

Adaptation: a systems survival depends on it maintaining a state of balance within the greater system in
which it operates, i.e. the environment
Video Activity 1
Watch the following YouTube video:
https://www.youtube.com/watch?v=uHL-l_Iz_sA
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After watching the video, answer the following questions:
1. List the two categories of systems and describe the main difference between them.
2. In which category of systems does an organisation fall?
3. Provide a definition of a system
Contingency Theory
Systems Theory provides for a Contingency Approach (also known as a Situational Approach) to management.
Given the complexity of today’s management environment, it would be unwise for the 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.
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.
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 (Tetenbaum, 1998: 21).
Chaos Theory & the Present Day Organisation
Tetenbaum (1998) argues that 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. In
contrast, however, Tetenbaum (1998) identifies the information age to be characterised by the following:

Technology which increases production, efficiency and consumer power

Globalisation

Competition which, as a result of technology and globalisation, has become fiercer

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 (Tetenbaum, 1998)
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.
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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

Chaos as a Self-Organising Entity: Chaos Theory views systems to be self-organising 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). An example of an organisation which is
managed according to chaos principles and which is thus self-organising is Visa, which 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 one does 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 which
embraces the chaordic paradigm):

Knowledge and information sharing

Innovation and creativity

Teamwork and project orientation

Diversity; and

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)
Other Contemporary Theories
Cronjé (2004) identify three further contemporary management theories:

Total Quality Management (TQM)

The Learning Organisation

Re-engineering
Total Quality Management (TQM) 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
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
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)
Video Activity 2
Watch the following YouTube video:
https://www.youtube.com/watch?v=40meQNZl3KU
After watching the video, list the six characteristics that most learning organisations have in
common.
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” (Cronjé, et al,
2004:137).
This subsection has explored various management theories. The theories which fall within the Classical School,
the Behavioural & Human Relations School, the Quantitative School and Contemporary School have been
examined.
Practical Activity 2
A bank has recently undertaken a survey which point to them that customers do not want to
visit different desks to be serviced. For example, if a customer enters the bank to apply for a
loan, an ATM card and change her residential address, it is very likely that the customer would
have to go to different desks to be assisted with each of the services.
Discuss the approach that can be taken by the bank to improve customer service while
managing cost.
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2.5
Management Theory or Management Fad?
It is important that the manager is able to identify possible management fads. Micklethwait & Wooldridge (1996)
argue that the proliferation of management theories can be ascribed to the existence of a management theory
industry which is characterised not only by commercial success, but also by a mixture of legitimate management
approaches and damaging management fads.
In answer to the question “So why does a discipline that contains so much sense contain so much nonsense as
well?” (p 369), Micklethwait & Wooldridge (1996) argue that management theory is still a young discipline, it is
negatively influenced by the managers’ demands for instant solutions and “the discipline, no less than astrology,
is a magnet for charlatans” (Micklethwait & Wooldridge, 1996: 370).
Donaldson & Hilmer (1998) also point out that “fads, jargon and superficial research are undermining the status
and relevance of management work” (p 7). It is argued that not only do management fads attempt to relegate the
work of the manager, but they also often fail to bring about the benefits which they claim.
Regarding the solution to the problem of management fads, Donaldson & Hilmer (1998) adopt a medium to long
term view and argue that the establishment of management as a profession, characterised by ideals, ethics, a
body of knowledge, sound reasoning and clear language, is the ‘antidote’ to management fads. On the other hand,
Micklethwait & Wooldridge (1996) adopt a more immediate approach and emphasise that the manager must learn
to be selective. Indeed, they assert that “nothing is more witch-doctorish than the suggestion that one magic potion
will cure all ills. By all means re-engineer your distribution system: but the same discipline will probably work less
well if it is applied to your research-and-development arm” (Micklethwait & Wooldridge, 1996: 370).
2.6
Summary
This section provided the student with 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 & Human Relations
Approach, the Quantitative Approach and the Contemporary Approach were explored. In closing, the existence of
damaging management fads was discussed.
The next section of this Study Guide, Section 3, will examine the management environment.
Knowledge Check Questions
1. Who 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?
a. Frank & Lillian Gilbreth
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b. Henry Gantt
c. Max Weber
d. Douglas McGregor
2. Mary Parker Follett argued that
a. Europe’s greatest management pioneer, adopted a process approach to
management
b. management’s interest in, and concern for, the workers’ well-being had
served to enhance worker performance
c. it is the worker who knows most about his/her job
d. the agrarian mode to the factory system brought about a number of
organisational problems
3. In which Theory does management adopt a positive view of employees?
a. Theory X
b. Theory Y
c. Management Theory
d. Leadership Theory
Case Study
Deming journey led to zero warranty claims: Siemens Gamesa
Chennai, Oct 14 (IANS) City based Siemens Gamesa Renewable Power Private Ltd (SGRP),
the first wind turbine company in the world to win the prestigious Deming award, faced the
challenge of not having any ready toolkit to adapt from unlike the automobile industries, said
a top company official.
However, over a period of time after starting the Total Quality Management (TQM) the
company started seeing benefits in the form of reduced raw material inventory turnover, zero
rework and nil warranty claims.
The Indian company is a subsidiary of the global wind power major -- 9.1 billion euros
turnover Spain-headquartered -- Siemens Gamesa Renewable Energy.
"Being the first wind company in the world to challenge this award, we didn’t' have any ready
toolkit to adapt from. Every aspect of TQM practices were totally tailor made to suit our wind
turbine manufacturing processes and operations," Ramesh Kymal, Chairman and Managing
Director told IANS in an interview.
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The Deming Prize is one of the most prestigious global awards on TQM given by the Union of
Japanese Scientists and Engineers (JUSE).
Kymal said the Deming tag further adds credibility to their products and in the current market
scenario, it will certainly place us in a better light in the eyes of our customers.
Queried about the tangible benefits derived after starting the TQM journey, Kymal said: "The
productivity levels had improved by 1.8 to 2 times as compared to our previous recorded
levels.
"We have achieved zero rework and our warranty claims has been reduced to zero. Further,
we have reduced our raw material inventory turnaround time to two days for local suppliers,"
Kymal said.
According to Kymal, renewables as an industry has become extremely cost competitive,
forcing companies to reinvent themselves.
"We were growing steadily and expanding our manufacturing footprints where creating a
common quality culture was imperative to ensure best in class products and solutions to our
customers. That sowed the idea for implementation of TQM processes and challenging
Deming Award," he said.
Though SGRP did not have any benchmark in the wind turbine industry to challenge the
Deming award, it was advised by Yasutoshi Washio -- professor emeritus of Keio University,
Japan and who had won the Deming prize for Individuals in 1993 for his contribution of
implementing quality control in Japanese industries.
On the company’s TQM journey, Kymal said that it started in 2015 for its industrial operations
division, which included nacelle and hub manufacturing facilities in Chennai, integrated
manufacturing facility in Nellore and a blade manufacturing facility in Halol.
"Our TQM journey commenced with benchmarking ourselves with various Deming
companies in other industries. In 2015, we had our plant and functional heads visiting few
Deming companies like Toyota, Aisin in Tokyo, Japan," Kymal remarked.
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On getting the confidence to challenge the Deming prize, Kymal said: "In 2018, we
underwent the Deming diagnosis examination, the results of which were quite encouraging
from which we gained the confidence to apply for the award in 2019."
On involving the suppliers in their Deming/TQM journey, Kymal said that as part of the
process, 10 key suppliers were trained on the TQM fundamentals and concepts like plan-docheck-act (PDCA), Kaizen, seven quality control tools (check sheet, control chart,
stratification, pareto chart, histogram, cause and effect and scatter diagram) and others thus
ensuring that their processes are benchmarked to Siemens Gamesa Renewable Power’s
operations.
Further training on TQM fundamentals, quality control story approach, Kanban and others
were provided for around 90 suppliers based at Chennai, Coimbatore and Vadodara region
to improve their performance, Kymal said.
On implementing the suggestions made by JUSE, Kymal said: "Generally JUSE presents its
final feedback report during the award ceremony and we are expecting to receive the same
on November 6, 2019. We will work towards implementing the same."
(Source: Outlookindia.com, 2019)
In light of the above case study, discuss the central principles of TQM which have emerged
from the work of Deming.
Revision Questions
1. Provide reasons as to why today’s managers should understand the different
approached to managing organisations.
2. Elaborate on the four principles of Frederick Taylor to increase efficiency in the
workplace.
3. Explain the Hawthorne Effect.
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Answers to Unit Questions and Activities
Think Point 1
Each individual manager has a particular view about what management is, and how he/she should approach it.
This management framework, which guides the manager in his/her task, is based on a number of principles which
the manager has internalised as a result of his/her education and experiences within, and interactions with,
organisations and the world itself. In essence, therefore, each individual manager’s actions are guided by his/her
own unique, internalised management ‘theory’. It therefore follows that, in exposing the manager or potential
manager to the range of management theories which exist, an opportunity will be provided to perhaps challenge
and/or extend the manager’s current view of management, and thus enhance his/her professional competence.
Indeed, Stoner & 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
Think Point 2
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:

The Classical Management School emerged during the early 1900s and 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 power (Cronjé, et al 2004); Jones, George & Hill, 1998)

The Behavioural Management School emerged during the 1920s and 1930s and was influenced by the
Great Depression and decline in prosperity (Cronjé, et al 2004) as well as failure of the Classical
Management School to provide for workplace harmony (Stoner & Freeman, 1992)

The Quantitative Management Approach emerged during the 1940s and was influenced by World War II
during which both the British and the Americans utilised mathematical approaches and technology to
solving war-related problems (Cronjé, et al 2004)

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)
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Activity 1
Fayol also identified five basic functions of administration:

Planning

Organising

Commanding

Coordinating

Controlling
Four contemporary management functions of management are:

Planning

Organising

Leading

Controlling
The main difference is the leading part in terms of management functions which is commanding and coordinating
in terms of Fayol’s functions of administration. The two concepts are similar.
Activity 2
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. Therefore, whilst 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.
Think Point 3
Organisational and managerial practices which 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
Practical Activity 1
51

Input – Resources such as people and fruits

Transformation process – Blending of the juice

Outputs – The juice

Feedback – Sales, customer satisfaction
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Video Activity 1
1. List the two categories of systems and describe the main difference between them.

Closed systems

Open systems

Open systems interact with and is affected by the environment whereby closed systems do not
2. In which category of systems does an organisation fall?

Open systems
3. Provide a definition of a system

A system is any set of distinct parts that interact to form a complex whole
Video Activity 2
Characteristics that most learning organisations have in common

Cherish an open culture

Design and implement feedback loops

Develop personal mastery

Create intelligent fast failure

Steal best practices

Share a common vision
Practical Activity 2
The above scenario calls for business re-engineering whereby the process can be completely re-engineered to
become more satisfying to the customer and more cost effective to the bank. This can be achieved through the IT
department which can create processes where information and documents can be exchanged by different
departments, providing a one stop service for all enquiries using one employee.
Knowledge Check Questions
1. Who 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?
a. Frank & Lillian Gilbreth
b. Henry Gantt
c. Max Weber
d. Douglas McGregor
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2. Mary Parker Follett argued that
a. Europe’s greatest management pioneer, adopted a process approach to management
b. management’s interest in, and concern for, the workers’ well-being had served to enhance
worker performance
c. it is the worker who knows most about his/her job
d. the agrarian mode to the factory system brought about a number of organisational problems
3. In which Theory does management adopt a positive view of employees?
a. Theory X
b. Theory Y
c. Management Theory
d. Leadership Theory
Case Study
The central principles of TQM, which have emerged from the work of Deming. Siemens Gamesa Renewable Power
Private Ltd should

Place strong emphasis on the customer - creating a common quality culture was imperative to ensure
best in class products and solutions to our customers

Focus on continual improvement - every aspect of TQM practice was totally tailor made to suit our wind
turbine manufacturing processes and operations

Ensure quality improvement in all that the organisation does - the productivity levels had improved by 1.8
to 2 times as compared to our previous recorded levels

Ensure accurate measurement - achieved zero rework and our warranty claims has been reduced to zero

Provide employee empowerment - functional heads visiting few Deming companies like Toyota, Aisin in
Tokyo, Japan
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Unit
3:
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Environment
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Unit Learning Outcomes
CONTENT LIST
LEARNING OUTCOMES OF THIS UNIT:
3.1 Introduction

Introduce topic areas for the unit
3.2 Composition of the Management

Identify the characteristics of the management environment
3.3 The Macro-Environment

Critically discuss the macro-environment
3.4 The Market/Task Environment

Critically discuss the market / task environment
3.5 The Micro Environment

Critically discuss the microenvironment
3.6 Interface between organisation

Identify and critically discuss the impact of environmental change
Environment
and environment
3.7 Ways in which Management can
and uncertainty on the business organisation

react to the environment
3.8 Summary
55
Identify and critically discuss the approaches which management
can adopt in reacting to the environment

Summarise topic areas covered in unit
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Prescribed and Recommended Textbooks/Readings:
Below is the prescribed reading for specific to this unit;

Du Toit, Erasmus and Strydom (2013)
Introduction to Business
Management, 9th Edition, Oxford University Press: Southern Africa Chapter
4
Below is the recommended reading for specific to this unit;
Books
 Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management
Issues. Massachusetts: McGraw Hill.
 Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts,
Practices and Skills. Massachusetts: Allyn & Bacon. pp 34 – 61.
 Pearce, J.A. & Robinson, R.B. (1997) Formulation, Implementation, & Control
of Competitive Strategy. Chicago: Irwin, pp 61 – 98 & pp 168 – 202.
 Porter, M.E. (1985) Competitive Advantage. New York: The Free Press, pp
37 – 43.
 Robbins, S.P. (1997) Managing Today. London: Prentice Hall.
 Cronje, Du Toit, Marais, & Motlatla: 2004 Introduction to Business
Management. Cape Town: Juta.
 Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape
Town: Juta & Co
Journals

Morrison, I. (1996) “Jump onto the Second Curve” World Executive’s Digest
November.

Porter, M.E. (1979) “How Competitive Forces Shape Strategy” Harvard
Business Review March-April, pp 137 – 145.

Partridge, M. & Perren, L. (1994) “Assessing & Enhancing Strategic
Capability: A Value Driven Approach Management Accounting June
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3.1
Introduction
This section examines the Management Environment, and the focus will be on the following:

The composition of the management environment

The macro-environment

The market / task environment

The micro-environment

The interface between the organisation and the environment
Understand the nature of the management environment
Systems Theory, which was examined in Section 2 of this Study Guide, provides an argument for the importance
of managers understanding the environment in which they operate. According to Systems Theory, the organisation
is a system operating within the greater system of its environment. Further, the organisation is an open system
and thus is dependent on the environment in which it operates and interacts with its environment so as to survive:
the organisation obtains its resources from the environment and processes these resources so as to produce
outputs required by the environment.
The concept of equilibrium or balance is an important one in Systems Theory, in that homeostasis is a state, which
the organisation continually seeks to attain and maintain. Thus a change within the environment, such as the
emergence of a new technology within the IT industry, could result in an imbalance between an IT organisation
and its environment, in that the IT organisation’s processes and products may not be aligned to the new technology.
It would thus be imperative for the IT organisation, which has achieved a state of incongruence with its
environment, to restore equilibrium through making the necessary adjustments to its subsystems. It is imperative
for the manager to understand the nature of the management environment in that, as the Systems Approach
demonstrates, it is critical to not only the effectiveness of the organisation, but its survival as well.
Think Point 1
Describe three complexities within the management environment of companies operating within
South Africa.
3.2
The Composition of the Management Environment
The Management Environment may be divided into several sub-environments which comprises of three different
environments:

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The Micro-Environment - comprised of the organisation itself over which management has control
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
The Market / Task environment - also known as the industry environment and comprises the environment
immediately surrounding the organisation

The Macro-Environment - which refers to the greater environment, existing outside of the market and task
environment
These environments, and the relationships between them are depicted in Figure 3.1 on the following page.
8Figure 3.1: The Composition of the Management Environment (from Smit & Cronjé, 2002: 65)
3.2.1 Main Characteristics of the Management Environment
The systems theory and the chaos theory are used to explain the main characteristics of the management
environment.
Systems Theory highlights the inter-relatedness of environmental factors, where a change in one environmental
factor could result in a change in another environmental factor (Cronjé, et al 2004).
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For example, a technological innovation within the macro-environment may lead to the re-engineering of the
organisation’s structure within the micro-environment. The organisation’s new structure may ultimately result in a
more efficient production process within the micro-environment and subsequent price reduction in the product.
This price reduction could result in more customers buying the organisation’s product in the market environment.
Chaos Theory highlights the complexity of the environment which emerges not only from the many
environmental factors to which the organisation must react (Cronjé, et al, 2004), but also the non-linear
relationships between and within systems (Tetenbaum, 1998).
Chaos Theory, in recognising the complexity of the environment, also acknowledges the following further
characteristics of the management environment: increasing instability and environmental uncertainty (Cronjé,
et, al 2004). Indeed, Chaos Theory acknowledges not only the rapid pace of change which characterises the
information age, but also the unintended and unpredictable consequences which emerge from the non-linear
connections within complex systems.
Think Point 2
In your own words, describe the effects of a drought on the hospitality industry.
3.3
The Macro-Environment
The macro-environment influences the organisation directly as well as indirectly through the organisation’s market
environment (Cronjé, 2004). However, it is seldom that the organisation is able to exert any reciprocal influence
on the macro-environment. For example, when the economy of a country slows, a clothing retailer will have to
endure a decline in business. While the clothing retailer may be able to come up with initiatives to stimulate
business within his/her locality, he/she will not be able to make a significant impact on the overall economy of the
country.
Practical Application 1
Assume that you have a transport business. Describe how an increase in the price of fuel
would affect your business and what control do you have on the pricing of fuel?
The macro-environment may be divided into six sub-environments:
59

Technological environment

Economic environment

Socio-cultural environment
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
Institutional / Political environment

International environment

Ecological environment
Activity 1
What are the distinguishing characteristics of each of the sub-environments comprising the
macro-environment? In what ways could each sub-environment impact on the organisation
for which you work?

Technological Environment

Economic Environment

Socio-Cultural Environment

Institutional/Political Environment

International Environment

Ecological Environment
Video Activity 1
Watch the following video: https://www.youtube.com/watch?v=VrmZLaFY3YE
After watching the video, perform the following tasks.
1. List all the elements of PESTLE?
2. Elaborate on the use of PESTLE analysis
3.4
The Market / Task Environment
The market or task environment refers to the environment which immediately surrounds the organisation, i.e. it
comprises the industry in which the organisation operates. As Figure 3.1 shows, the market environment has a
direct influence on the organisation (or micro-environment) through, for example, its competitors and suppliers
(Cronjé, et, al 2004).
The market environment comprises the:

Market
o
Consisting of the consumers or potential consumers who have particular needs and the buying
power to satisfy these needs

Suppliers
o
Provide the organisation with the ‘inputs’ required to produce the organisation’s goods and/or
services. These ‘inputs’ could take the form of materials (raw materials, equipment, energy),
capital and/or labour.
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
Intermediaries
o
Include wholesalers, retailers and agents and serve to bridge the gap between the producer and
the consumer.

Competitors
o
Are prevalent within a market economy and compete with the organisation not only for market
share but for materials, capital and labour as well.
Much of the literature which exists on the market environment revolves around Michael Porter’s work on
competitive forces. Porter (1979) argues that the nature of competition within an industry is not only determined by
competing organisations within the industry, but is established through the prevalence of five forces:

The threat of new entrants

The bargaining power of the consumers

The bargaining power of suppliers

The threat of substitute products or services

The jockeying for position amongst the current competitors
These five forces are illustrated in Figure 3.2 below.
9Figure 3.2: Forces Driving Industry Competition (from Porter, 1979: 137).
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The profitability of an industry is determined by its strongest force or forces (Porter, 1979) and different forces are
important to different industries.
Threat of Entry
The significance of a potential new entrant to the market can be reduced through the establishment of substantial
barriers to entry (Porter, 1979). Barriers to entry can be achieved when the industry has:

Established economies of scale within the existing organisations

Differentiated products and/or services within existing organisations

Established high capital requirements for entry into the industry

Established cost advantages which are independent of the organisation

Limited access to distribution channels

Protection as a result of government policy (Porter, 1979)
Powerful Suppliers
Powerful suppliers can dominate competition within a particular industry through exercising bargaining power by
reducing the quality of the goods and services supplied and/or raising the prices of their goods and/or services
(Porter, 1979).
Powerful Buyers
Customers may have a significant impact on the nature of competition within an industry (Porter, 1979). Customers
who are powerful are able to reduce prices, play competitors off against each other and insist on higher quality
products and services.
Substitute Products
Substitute products serve to limit the profitability potential of an industry in that they impose a price ceiling within
the industry. This limitation can be overcome through the differentiation of competitors’ products within the industry
(Porter, 1979).
Jockeying for Position
Jockeying for position is the fifth competitive force and refers to intense rivalry amongst competitors within the
same industry. Such intense rivalry can be demonstrated through price cuts, aggressive marketing and new
product innovation and introduction (Porter, 1979).
An assessment of the competitive forces operating within a particular industry will provide the starting point from
which the organisation may identify its strengths and weaknesses, and ultimately develop an effective strategy
which will enable the organisation to attain and sustain competitive advantage within its market environment.
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Practical Application 2
Elaborate on the competitive forces within the fast food industry with players like KFC and
McDonalds.
3.5
The Micro-Environment
The micro-environment refers to the organisation itself. It is the environment in which the manager operates (Smit
& Cronjé, 2002) and performs the various management functions and roles at various organisational levels, as
was identified in Section 1 of this Module Guide (Introduction to Management).
Activity 2
The micro-environment is characterised by those issues discussed in Section 1 of this
Study Guide. To consolidate your understanding of the nature of the micro-environment,
identify and briefly discuss the fundamental management and organisational issues which
were explored in Section 1.
As has been previously stated, the micro-environment is influenced both directly and indirectly (via the market
environment) by the macro-environment. However, the micro-environment is rarely able to significantly influence
the macro-environment. On the other hand, the market environment directly impacts the micro-environment which
in turn directly exerts influence on the market environment. However, in order for the micro-environment’s influence
on the market environment to provide for the organisation’s strategic advantage, the micro-environment’s
components should be strategically aligned to the needs of the market.
Porter (1985) asserts that it is important to establish the manner in which an organisation creates value for the
consumer through the examination of the organisation’s value chain. The value chain essentially comprises the
processes which take place in the micro-environment.
The value chain, which is depicted in Figure 3.3, may be divided into two types of value activities:

Support activities which provide the infrastructure necessary for the performance of the primary activities

Primary activities, the focus of which is the provision of the product and/or service and its distribution to
the consumer (Partridge & Perren, 1994)
Think Point 3
Using an example of choice, contrast a support activity against a primary activity by your
municipality.
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10Figure 3.3: The Organisational Value Chain (from Partridge & Perren, 1994).
The organisation, in operating in the market environment, should adjust and configure the activities in its
microenvironment so as to ensure that the organisation is able to better meet the market needs than its competitors
(Partridge & Perren, 1994). For example, a retailing organisation which chooses a low-cost strategy to gain
competitive advantage within the market environment would examine its value chain and focus on structuring its
activities to reduce costs (such as reducing costs related to the storing and transporting of the product - inbound
logistics).
In summary, this subsection has examined the micro-environment, which essentially comprises the environment
within the organisation. It has been shown that much of that which was studied in Section 1 of this Study Guide,
such as management roles and functions, is involved in the micro-environment. The configuring of activities
according to Porter’s (1985) value chain approach as a means of aligning the micro-environment to the macroenvironment was also examined in this subsection.
3.6
Interfaces Between the Organisation and the Environment
The organisation is an open system and thus interacts with the market environment and macro-environment in
order to survive. This subsection examines the generic ways in which the environment interacts with the
organisation.
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Environmental Change and the Organisation
Change involves moving from a state of “…stability to instability, moving from predictable to the unpredictable, or
from the known to the unknown…it is immeasurable and causes uncertainty…” (Cronjé, 2004). Tetenbaum (1998)
identifies change as a characteristic of the twenty-first century and claims that “…today’s changes are
discontinuous and happening at a geometric rate…” (Tetenbaum, 1998: 23). Such change has considerable
implications for the organisation that, to maintain congruence with its environment, the organisation “…must be
sufficiently agile to be instantly reconfigurable to meet new demands…” (Tetenbaum, 1998: 23).
Second curve marketplace
Morrison (1996) argues that a ‘second curve’ marketplace is in the process of emerging. This marketplace is
bringing about considerable forces of change such as new technology, new consumers and new markets. A
comparison of the first curve and the second curve markets is provided in Table 3.1 below:
4Table 3.1: Characteristics of the First Curve and Second Curve Markets
FIRST CURVE MARKET
SECOND CURVE MARKET

Capital

Knowledge

Producer

Consumer

Atlantic

Pacific

Japan

China

International Trade

Electronic Commerce

Computers

Internet

Money

People
(Morrison, 1996).
In order to compete in the second curve market, the organisation will operate differently to the manner in which it
operated in the first curve market. These changes are outlined in Table 3.2.
5
Table 3.2: Characteristics of the First Curve and Second Curve Organisation
FIRST CURVE ORGANISATION
SECOND CURVE ORGANISATION

Mechanistic

Organic

Engineering

Ecology

Corporations

Individuals & Networks
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
Horizontal & Vertical Integration

Virtual Integration

Business Processes

Culture
(Morrison, 1996).
An examination of Table 3.1 and Table 3.2 indicates that in essence the move to the second curve market and
organisation represents a move towards a focus on people and the role which they play within the complexity of
business systems.
Although Morrison’s article was published quite recently (1996), it is likely that the management student has
encountered a number of the second curve characteristics which he identifies, for example, electronic commerce,
the internet, and the focus on people and the knowledge which they bring to the organisation.
In closing, Morrison (1996) argues that organisations need to start embracing the second curve changes, and at
the same time effectively manage the first curve organisation and environmental forces, which are still in operation.
3.6.1 Uncertainty in the Environment
As identified in subsection 3.2.1 the management environment is characterised by varying levels of complexity and
extent of change. Those organisations which operate within environments characterised by high levels of
complexity and dynamic change (such as the IT industry) experience high levels of uncertainty (Cronjé, 2004).
Various recommendations may be made to assist such organisations in coping with such uncertainty. Morrison
(1996) in his article on the second-curve market and organisation (discussed in 3.6.3) argues that in order to cope
with uncertainty, companies should:

Learn to jump, i.e. embrace emerging changes and markets

Serve the new customer emerging from the second curve marketplace

Build a diverse management team

Focus on, and accept, the accelerating pace of change

Build second-curve capacity, i.e. develop new competencies which are sufficiently flexible

to cope with the demands of the second-curve market
Tetenbaum (1998) argues that in order to cope with uncertainty, an organisation should become chaordic. How
to go about developing a chaordic organisation was discussed in Section 2 (Evolution of Management Theory) of
this Study Guide.
Thus, in summary, this subsection has focused on the impact which environmental change and uncertainty has on
the organisation.
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Video Activity 2
Watch the following video: https://www.youtube.com/watch?v=qhLvhYFLoWE
After watching the video, discuss the concept of fourth industrial revolution.
3.7
Ways in which Management Can React to the Environment
A number of established methods exist to assist the organisation’s management in their attempts to align the
organisation to the external environment and anticipate environmental changes which are imminent.
Cronjé, et, al (2004) identify three inter-related approaches which the organisation can adopt in reacting to the
environment:

Information Management: which involves acquiring and maintaining knowledge of the organisation’s
environment through the process of environmental scanning, which serves to identify threats and
opportunities within the environment. Information obtained from environmental scanning should be
recorded in a management information system and should be utilised to aid decision making (Cronjé,
2004)

Strategic Response: Once sufficient information on the environment has been acquired, a strategic
response needs to be initiated (Cronjé, 2004), for example the organisation’s current strategy may have
to be adjusted and aligned to an emerging change within the environment

Structural Change: An adjustment to the organisation’s strategy (resulting from environmental change)
may require that the organisation’s structure be adjusted in such a way that it is aligned to the revised
strategy (Cronjé, 2004)
The effectiveness of the above approaches is dependent on the complexity and extent of change which
characterises the organisation’s environment. While the above approaches would be more effective in a stable
environment, they would not necessarily be effective in an environment characterised by dynamic change and
complexity. It may be argued that organisations operating in such environments would benefit more from the
implementation of chaordic organisational principles (Tetenbaum, 1998, as discussed in Section 2 of this Module
Guide.)
Case Study
Read the following article and answer the questions that follow.
Could disruptions such as COVID-19 bring new opportunities for business?
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A new study has highlighted how businesses can use disruptive, external changes, such
as the COVID-19 pandemic to their advantage
Changes in the external environment always have an impact on the success of companies and
may even tilt previously valid laws of business off balance.
Jan Recker, Chair for Information Systems and Systems Development at the University of
Cologne’s Faculty of Management, Economics, and Social Sciences, has published a study in
Academy of Management Perspectives, which explains how businesses can use this change in
the external environment to create a better business strategy. Recker explained: “If you want to
survive in a post-COVID-19 world, you should pause and question your current strategy.
“Every crisis leads to change. But that also means that crises can lead to new, even better
business strategies.”
The market is no stranger to disruption
The global financial crisis of 2008 is often seen as a bad time for businesses; however, the
event gave rise to start-ups such as Airbnb and Uber. Previously, private individuals had had
reservations about letting strangers into their own cars or homes, but in view of the financial
bottlenecks caused by the crisis, these business models became accepted and successful.
Another example of huge disruptions in the market-leading to business success is the
temperance movement in the USA in the 1920s, which proved successful for soft drink giants
such as Pepsi and Coca-Cola. It may be a matter of time before we see the new startups that
have used the current COVID-19 pandemic as an advantage to their business model.
Recker added: “Understanding the changes that are taking place, how they affect companies
and what can be done about them, is not only crucial for companies to survive this change but
can also be turned into a benefit.
“In the current situation, however, most companies look for temporary interim solutions until
they can return to ‘normal operations’. However, whether there will ever be a return and what
our new normality will be cannot be predicted. Good business models have to be able to adapt.”
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“Looking back, we can clearly see one thing,” Recker said. “History repeats itself. And we can
learn from it.”
(Extract - Source: Openaccessgovernment.org, 2020)
Questions
Based on the above article:
1. Identify two macro factors that have affected businesses
2. Discuss the ways in which management can react to the environment
3. Discuss what companies can do to cope with uncertainty
3.8
Summary
This section examined the Management Environment. The characteristics and inter-relations of the macroenvironment, the market/task environment and the micro-environment were explored. The impact of change and
uncertainty on the organisation was also examined, as were the ways in which management can respond to such
uncertainty and change.
The next section of this Study Guide, Section 4, will examine the management process.
Knowledge Check Questions
1. Which of the following environment is comprised of the organisation itself over which
management has control?
a. The Market Environment
b. The Micro-Environment
c. The Macro-Environment
d. The Task Environment
2. Which of the following serve to limit the profitability potential of an industry in that
they impose a price ceiling within the industry?
a. Powerful Buyers
b. Powerful Suppliers
c. Substitute Products
d. Threat of Entry
3. Which of the following provide the organisation with the ‘inputs’ required to produce
the organisation’s goods and/or services?
a. Intermediaries
b. Competitors
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c. Market
d. Suppliers
Revision Questions
1. List and explain the elements comprising the market environment.
2. Discuss the characteristics of the First Curve and Second Curve Organisations.
3. Elaborate on the three inter-related approaches which the organisation can adopt in
reacting to the environment.
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Answers to Questions and Activities
Think Point 1
Three complexities could include:

Diversity management – with the background of South African apartheid system, managing diversity
can be complex

Social unrest – there has been an increase in protests

HIV / AIDS – With a high prevalence level, this pandemic affects business in numerous ways
Think Point 2
The following should be noted:

The drought is an external factor

The drought will impact on companies within the hospitality industry in many ways

Restaurants and hotels might need to be closed due to health and safety issues amongst others
Practical Application 1
The following points must be noted

Fuel pricing is a macro-environmental factor affecting businesses. A transport company would be
particularly affected as fuel is a major input into the business

As such, an increase, would increase the cost of doing business

The business would have to either take less profit or pass the cost to customers, therefore making the
services of the business costly

This means that the increase in price might affect the business negatively

The business owner does not have control over the pricing of fuel – macro-environmental factor
Activity 1

Technological Environment

Economic Environment

Socio-Cultural Environment

Institutional/Political Environment

International Environment

Ecological Environment
The distinguishing characteristics of the sub-environments of the macro-environment, and the manner in which
they impact the organisation, are outlined below.
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Technological Environment
Technology is identified as “the combination of skills and equipment that managers use in design, production and
distribution of goods and services” (Jones, et al, 1998: 78).
Tetenbaum (1998) identifies technology as an
important characteristic of the twentieth century in that it is significant in promoting and accelerating change. In so
doing, the technological environment can have significant implications for the organisation, in that it can present
both opportunities (e.g. market leadership as a result of technological innovation) and threats (e.g. product
obsolescence). Further, not only does higher productivity result from technological advancement, but the
technological environment also provides innovations, such as teleconferencing and electronic mail, which plays a
significant role in changing the nature of work within organisations (Jones, et al, 1998).
Economic Environment
The factors within the economic environment which impact on the organisation include interest rates,
unemployment, inflation, consumer income and economic growth (Jones, et al, 1998). Cronjé (2004) assert that
the economic environment is influenced by the other five sub-environments (technology, social,
institutional/political, international and ecological). The economic environment has a significant impact on the
organisation in that the economy’s state of growth or decline influences the consumer’s standard of living and
buying power (Cronjé, 2004).
Socio-Cultural Environment
Jones et al (1998) identify socio-cultural factors to be “pressures emanating from the social structure of a country
or society or from the national culture” (p80).
The factors within the socio-cultural environment which affect the firm include the attitudes, beliefs, values, and
opinions of the people within the firm’s external environment. These factors develop from religious, ethnic, cultural,
demographic and educational conditioning (Pearce & Robinson, 1997).
The socio-cultural environment affects the organisation in that emerging socio-cultural beliefs, opinions and
lifestyles result in:

Changes in demand for various types of products, for example, consumers’ interest in quality of life issues in
recent years has led to the demand for products and services which are health orientated

Changes to the nature of employment within organisations, for example the focus on quality of life issues has
led to better and more flexible working conditions (Pearce & Robinson, 1997).
Cronjé (2004) assert that the organisation is at the centre of social change in that not only does it play a part in
bringing about such change, but it is imperative for the organisation to keep abreast of the emerging socio-cultural
trends.
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Institutional/Political Environment
Jones et al (1998) argue that political forces are “the outcomes of changes in laws and regulations, such as the
deregulation of industries, the privatisation of organisations, and increased emphasis on environmental protection”
(p 81). Thus the political environment essentially impacts on the organisation as a regulating force. The
government may also impact on the organisation through the performance of it’s:

Supplier function, where government decisions will affect the organisation’s accessibility to governmentowned natural resources

Customer function, where government’s demands for various products may contribute to the sustainability of
certain organisations (Pearce & Robinson, 1997).
International Environment
In addition to technology, Tetenbaum (1998) identifies globalisation as a characteristic of the twenty-first century.
Global forces are identified to be “the outcomes of changes in international relationships, changes in nations’
economic, political and legal systems, and changes in technology such as falling trade barriers, the growth of
representative democracies, and reliable and instantaneous communication” (Jones, et al, 1998: 82). The
international environment impacts on the organisation in that it expands to the complexity of the organisation’s
environment, and in so doing presents further opportunities and threats (Cronjé, et, al, 2004).
Ecological Environment
The ecological environment comprises the limited natural resources, as well as the pollution which results from
human-ecology relationship (Cronjé, et, al, 2004). The focus is not simply on the impact of ecological forces on
the organisation, but rather on the reciprocal relationship which exists between the ecology and business (Pearce
& Robinson, 1997). The shortage of resources, water, air and land pollution, global warming and damage to natural
resources are some of the organisational concerns which have emerged from the ecology-business relationship
(Pearce & Robinson, 1997; Cronje, 2004). The dynamics of this reciprocal relationship impact on the organisation
through the principle of eco-efficiency: organisations need to be eco-efficient through seeking to produce more
useful goods and services while continuously attempting to decrease not only pollution but resource consumption
as well (Pearce & Robinson, 1997).
Video Activity 1
1. List all the elements of PESTLE?

The elements are: Political / Economic / Social / Technological / Legal / Environmental
2. Elaborate on the use of PESTLE analysis

It gives a bird’s eye view of the whole environment from many different angles that one wants to check
and keep a track of while contemplating on a certain idea / plan
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
Used by companies as a tool to track the environment they are operating in or when they are planning
to launch a new project/product/service etc
Practical Application 2
The following points must be noted

KFC and McDonalds are strong players within the fast food industry

It appears that these two companies have the majority of the market share

The rivalry is mainly between the two and they market aggressively and have a strong component of
product innovation and introduction
Activity 2
The fundamentals of management, which were dealt with in Section 1 of this Study Guide, and which characterise
the micro-environment, include:

The Nature of Management
Management involves utilising inputs from the environment in the process of planning, organising, leading
and controlling (POLC) to produce outputs which satisfy the needs of the market. This process of
organisational management is influenced by the external environment as well as prevalent management
schools of thought.

Definition of Management
Management may be defined as 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. This process serves to provide for the effective and efficient achievement
of the organisation’s goals.

Levels of Management
Three levels of management may be identified:
o
Top management, responsible for the overall and strategic management of the organisation (e.g.
Chief Executive Officer);
o
Middle management, responsible for specific department within the organisation (e.g. Marketing
Manager);
o
Lower management, responsible for departmental sections and subsections within the organisation
(e.g. Sales Manager).

Areas of Management
In addition to the area of General Management, six functional areas of management may be identified:
Marketing Management, Financial Management, Production and Operations Management, Purchasing
Management, Human Resource Management, and Public Relations Management.
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
The Role Distribution of Managers
Mintzberg (1990) identifies three categories of managerial roles:

o
Interpersonal Roles (includes figurehead, leader, liaison role)
o
Information Roles (includes monitor, disseminator, spokesperson)
o
Decision-Making Roles (includes entrepreneur, disturbance handler, resource allocator,
o
negotiator)
Old and New Organisations
Change within the environment has resulted in the emergence of a ‘new’ organisation, the characteristics
of which are outlined as follows:
‘OLD’ ORGANISATION

Permanent jobs

Temporary jobs

Control organisation’s own destiny

Externalise risk (e.g. through outsourcing)

Diverse workforce
through independence

‘NEW’ ORGANISATION

Relatively homogeneous workforce

Workdays with no time boundaries

9-to-5 workdays

Large corporations are cutting overall staff

Large corporations provide job security

Re-engineer all processes

“If it ain’t broke, don’t fix it”

Work is organised around teams

Work is organised around individuals
Management & Organisational Performance
Management of organisational performance should be measured not only in terms of the achievement of
effectiveness and efficiency, but also in terms of adherence to the economic principle.
Think Point 3
The following points must be noted

Example of the municipality’s primary activity might include refuse removal, i.e. services to the residents
of the area

75
Example of a support activity by the municipality could be hiring of staff.
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Video Activity 2
The fourth industrial revolution is about:

Radical and fast changes

High speed changes

Interplay between fields such as nanotechnology, brain research, 3D printing, mobile networks and
computing will create realities that were previously unthinkable

Access to technology will be improved and people will be able to co-create

Business models will be transformed

Social issues such as unemployment will need further consideration
Case Study
Questions
Based on the above article:
1. Identify two macro factors that have affected businesses

Covid-19

Global Financial Crisis
2. Discuss the ways in which management can react to the environment

Information Management: which involves acquiring and maintaining knowledge of the organisation’s
environment through the process of environmental scanning, which serves to identify threats and
opportunities within the environment. Information obtained from environmental scanning should be
recorded in a management information system and should be utilised to aid decision making (Cronjé,
2004).

Strategic Response: Once sufficient information on the environment has been acquired, a strategic
response needs to be initiated (Cronjé, 2004), for example the organisation’s current strategy may
have to be adjusted and aligned to an emerging change within the environment.

Structural Change: An adjustment to the organisation’s strategy (resulting from environmental
change) may require that the organisation’s structure be adjusted in such a way that it is aligned to
the revised strategy (Cronjé, 2004).
3. Discuss what companies can do to cope with uncertainty

Learn to jump, i.e. embrace emerging changes and markets;

Serve the new customer emerging from the second curve marketplace;

Build a diverse management team;

Focus on, and accept, the accelerating pace of change.

Build second-curve capacity, i.e. develop new competencies which are sufficiently flexible

To cope with the demands of the second-curve market
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Knowledge Check Questions
1. Which of the following environment is comprised of the organisation itself over which management has
control?
a. The Market Environment
b. The Micro-Environment
c. The Macro-Environment
d. The Task Environment
2. Which of the following serve to limit the profitability potential of an industry in that they impose a price ceiling
within the industry?
a. Powerful Buyers
b. Powerful Suppliers
c. Substitute Products
d. Threat of Entry
3. Which of the following provide the organisation with the ‘inputs’ required to produce the organisation’s goods
and/or services?
a. Intermediaries
b. Competitors
c. Market
d. Suppliers
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Unit
4:
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The Management Process
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Introduction to Business Management
Unit Learning Outcomes
CONTENT LIST
LEARNING OUTCOMES OF THIS UNIT:
4.1 Introduction

Introduce topic areas for the unit
4.2 Four Fundamental Management

Demonstrate an understanding of the four management
Functions
functions and their application
4.3 The areas of Management

Demonstrate a practical understanding of the various areas of
management

4.4 Summary
Summarise topic areas covered in unit
Prescribed and Recommended Textbooks/Readings:
Below is the prescribed reading for specific to this unit;

Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 9th
Edition, Oxford University Press: Southern Africa
Chapter 7
Chapter 8
Chapter 9
Chapter 10
The student should utilise the following text (as well as the recommended texts) in studying
the Functional Areas of Management:

Cronjé, G.J. de J., du Toit, G.S., Motlatla, M.D.C. (Eds) (2000) Introduction to Business
Management 5th Ed. Cape Town: Oxford University Press,
(Chapter 7), (Chapter 8),
(Chapter 9), pp 278 – 312 (Chapter 11), (Chapter 13),
(Chapter 14), (Chapter 15), (Chapter 16), (Chapter 17), (Chapter 18),
(Chapter 19).

Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta
& Co

Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues.
Massachusetts: McGraw Hill. pp 196 – 228 (Chapter 7), pp 230 – 264 (Chapter 8), pp
266 – 296 (Chapter 9), pp 298 – 332 (Chapter 10),
pp 400 – 430 (Chapter 13), pp 558 – 588 (Chapter 18).
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
Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices
and Skills. Massachusetts: Allyn & Bacon. Pp 134 – 162 (Chapter 5), pp 165 – 194
(Chapter 6), pp 196 – 226 (Chapter 7), pp 228 – 257 (Chapter 8), pp 258 – 287 (Chapter
9), pp 328 – 356 (Chapter 11), pp 486 – 515 (Chapter 16), pp 516 – 546 (Chapter 17),
pp 574 – 597 (Chapter 19).

Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 136 – 168 (Chapter
5), pp 170 – 204 (Chapter 6), pp 236 – 264 (Chapter 8), pp 266 – 302 (Chapter 9), pp
440 – 468, (Chapter 15), pp 470 – 499 (Chapter 19).
Journals

Drucker, P.F. (1974) “New Templates for Today’s Organisations” Harvard Business
Review January – February, pp 115 – 123.

Kotter, J.P. (1990) “What Leaders Really Do” Harvard Business Review
May – June, pp 103 – 111.

Ostroff, F. & Smit, D. (1992) “The Horizontal Organisation” McKinsey Quarterly 1, pp
148 – 167.

Ulrich, D. (1998) “A New Mandate for Human Resources” Harvard Business Review,
January – February, pp 124 – 134.

Waterman, R.H., Peters, T.J. & Phillips, J.R. (1980) “Structure is Not Organisation”
Business Horizons June, pp 14 – 26.
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4.1 Introduction
This section will explore the Management Process. As identified in Section 1, Introduction to Management, the
management process entails the execution of the four management functions Planning, Organising, Leading and
Controlling (POLC). These functions are executed not only within the area of general management, but within the
functional areas of management as well.
Thus, in exploring the management process the following will be examined:

The Four Fundamental Management Functions, i.e. Planning, Organising, Leading and Controlling

The Areas of Management

General management

Financial function

Marketing function

Human Resources function

Operations function

Purchasing function
4.2 Four Fundamental Management Functions
The four fundamental management functions of Planning, Organising, Leading and Controlling (POLC) comprise
the management process, which serves to convert the organisation’s resources (or inputs) into products and
services (outputs) required by the organisation’s market. This process is depicted in Figure 4.1.
THE ORGANISATION
ORGANISING
RESOURCES




Human
Financial
Physical
Information
PERFORMANCE
PLANNING
LEADING





Achieve goals
Products
Services
Productivity
Profit
CONTROLLING
11Figure 4.1: The Management Process (from Smit & Cronjé, 2002: 9)
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4.2.1
Planning
This sub-section explores the first of the four fundamental management functions, Planning. In so doing, the
following will be examined:

Types of organisational plans

Steps in the planning process

Barriers to effective planning

Planning tools
Jones et al (1998) asserts that the importance of planning revolves around four main reasons:

It provides a means for managers to participate in decision making about organisational goals and
strategies (Jones, et al, 1998)

It is necessary to provide the organisation with a sense of direction and purpose. Without such a sense
of direction managers would pursue conflicting goals, which would jeopardise organisational performance
(Jones, et al, 1998)

It helps to coordinate the functions of the various organisational departments

It serves as a means to control managers and assess performance (Jones et al, 1998)
In addition to Jones et al’s (1998) reasons for planning, Robbins (1997) asserts that planning reduces the impact
of change in that it forces managers to look ahead, anticipate and prepare for potential change.
Types of Organisational Plans
Various types of organisational plans exist. A summary of the various organisational plans and their characteristics
is provided in Table 4.1 next.
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Table 4.1: Characteristics of Organisational Plans (adapted from Smit & Cronjé: 2002: 97).
STRATEGIC PLANNING
Alternative
TACTICAL PLANNING
OPERATIONAL PLANNING
Long-term planning
Medium-term planning
Short-term planning
Responsibility
Top management
Middle management
Lower management
Time-Frame
3 – 10 years
1 – 5 years
Less than 1 year
Detail
Focus on organisation as a whole

 Establishes day- to-day
Name

Purpose, mission, strategies.

Alignment to external
Establishes functional
goals
activities
 Determines policies,
procedures and rules
environment

 Programmes, budgets
Future orientation
and projects
Information

Broad, general guidelines

Vague & qualitative

More detailed than
strategic plans


Fine detail

Specific & quantitative
More specific
Practical Application 1
Select a South African Government department of your choice and search their webpage for
their planning documents. Based on your findings, elaborate on the two major types of plans
listed.
Steps in the Planning Process
Cronjé, et, al (2007) identify a generic planning process consisting of eight steps. These steps include:

Step 1 - Opportunity Awareness: which involves realistically diagnosing the opportunity in the light of the
organisation’s current capabilities.

Step 2 - Establishing Goals: goals are formulated to provide direction to organisational plans (Cronjé,
2007).

Step 3 - Drawing up Premises: which involves the establishment of planning assumptions, i.e. what is the
future environment in which the plans are expected to occur (Cronjé, 2004).

Step 4 - Developing Various Courses of Action: which serves to establish alternative ways in which the
identified goal can be achieved.

Step 5 - Evaluating Alternatives: the alternatives established in Step 4 need to be evaluated in terms of
various factors, including the planning premises established in Step 3.
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
Step 6 - Selecting a Course of Action: this step results from Step 5.

Step 7 - Formulating Derivative Plans: this involves the drawing up of plans which support the initial plan
(Cronjé, 2004).

Step 8 - Budgeting: this step serves to establish the resources available for the manager to carry out the
plans and achieve organisational goals Cronjé, 2004).
Barriers to Effective Planning
Barriers exist which may mar the effectiveness of a manager’s attempts to plan. A number of barriers to effective
planning may be identified. These include:

Lack of environmental knowledge (such as possible economic and technology changes)

Lack of organisational knowledge (such as a lack of understanding about the organisation’s strategy and
capabilities)

Reluctance to establish goals (for example, due to fear of failure and lack of confidence)

Resistance to change, as change is inherent in planning

Time and expense (Cronjé, et, al, 2004)
Barriers to effective planning may be overcome through:

Top management’s commitment to the planning process, demonstrated through the provision of effective
long-term plans

Management should recognise the limitations of planning and understand that plans will require
adjustments on an ongoing basis (Cronjé, et al, 2004)

Management should ensure effective communication of organisational plans at all levels

The benefits of contingency planning should be recognised by organisations operating within a turbulent
environment (Cronjé, et al,2004)
Activity 1
Discuss the ways in which management may overcome the barriers to effective planning.
Planning Tools
A number of scientific tools exist which can assist the manager in his/her planning efforts. These tools include:

Forecasting

Budgeting

Scheduling

PERT (Programme Evaluation and Review Technique)
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The distinguishing characteristics of the four planning tools are as follows:

Forecasting: a forecast provides a projection of future conditions based on current and historical
information. Different types of forecasting exist:
o
Sales forecasting predicts future sales
o
Technological forecasting predicts future technologies and determines when they should
become economically viable
o
Resource forecasting anticipates future needs for human, financial, physical and information
resources
o
Economic forecasting anticipates the future economic state of the country, such as the level of
unemployment

Budgeting: a budget is a plan “that deals with the future allocation and utilisation of various resources with
regards to different organisational activities over a given period” (Cronjé, 2004). It provides the manager
with a means to translate plans into quantitative terms

Scheduling: A Gantt chart serves to break a project down into smaller tasks. These tasks are plotted on
a chart so as to determine how much time is required for the successful completion of the tasks and the
project as a whole (Cronjé, 2004)

PERT: Programme Evaluation and Review Technique aids the planning of projects through establishing
a network of the project tasks and their inter-relationships (Cronjé, 2004).
Think Point 1
Elaborate on how you utilise the budgeting planning tool personally
4.2.2 Organising
The plans, which are derived for the organisation, need to be supported by the second management function of
organising. This sub-section will explore the management function of organising and examines the following:

Reasons for organising

Organisation design

Basic principles of organising

Factors influencing organisation design
Organising is the “process of creating a structure for the organisation that will enable its people to work together
effectively toward its vision, mission and goals” (Cronjé, 2004).
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Therefore, an organisation’s structure should contribute to the organisation’s performance by facilitating the
achievement of the organisation’s plans through the appropriate coordination of tasks and people.
Reasons for Organising
Organising is an integral part of the management process and is necessary for the following reasons, as identified
by (Cronjé, et al 2004):

Organisation structure serves to delineate employees’ responsibilities and accountabilities

Organising facilitates effective communication through the establishment of clear channels of
communication

Organisation structure provides a mechanism for the coordination of the entire company

Organising provides for the grouping of related tasks and activities and in so doing provides for
specialisation which results in efficiency
Organisation Design
Organisation design is a process in which managers make a decision as to what type of organisational structure
is sufficiently aligned to the external environment and which is most appropriate to the strategies and plans of the
organisation. The steps involved in the process of organisation design are depicted in Figure 4.2 below.
REFLECT ON
ESTABLISH
DIVIDE MAJOR
PLANS &
MAJOR TASKS
TASKS INTO
RESOURCES &
RESULTS OF
SUBTASKS
DIRECTIVES FOR
ORGANISING
OBJECTIVES
ALLOCATE
EVALUATE
SUBTASKS
Feedback
12Figure 4.2: The Organisation Design Process (adapted from Smit & Cronjé, 1997: 212)
Basic Principles of Organising
Four fundamental principles underlying organisation design may be identified. These are:

Division of work

Organisation structure

Departmentalisation

Coordination
Division of Work
Division of work involves “the breakdown of a complex task into components so that individuals are responsible
for a limited set of activities instead of the task as a whole” (Stoner & Freeman, 1992: 312), and in so doing provides
for job specialisation.
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Job specialisation provides the advantages of increased productivity, reduced training costs and reduced transfer
time (Stoner & Freeman, 1992, Smit & Cronjé, 2002). However, it also has the disadvantage of alienating the
worker from his/her work, which may result in absenteeism and boredom (Stoner & Freeman, 1992).
Organisation Structure
The structure of the organisation is usually represented in the form of an organisational chart, in which the division
of work and departmentalisation of tasks is shown. The organisational chart also shows the employees which
report to each manager, and demonstrates each manager’s span of control (Stoner & Freeman, 1992).
Two types of organisational structures exist within organisations:

The Formal Structure which is comprised of the relationships between managers and subordinates, as
represented in the organisational chart (Du Toit et al: 2013)

The Informal Structure which is a structure which emerges naturally from the social relationships which
develop between the employees within the organisation (Du Toit et al: 2013)
Du Toit et al (2013) recognise four underlying forces which influence the design of the organisational structure:

Management’s perception of the organisation and organisational problems

The task itself

Environmental forces

The needs and skills of subordinates
Departmentalisation
The formation of departments within an organisation results from specialisation and involves the logical grouping
of activities (Cronjé, et al2004). The method of departmentalisation adopted provides the organisation with a
specific type of structure. The forms of organisational structure include:

Functional organisational structure

Product departmentalisation

Location departmentalisation

Customer departmentalisation

Matrix organisational structure

Network departmentalisation
In establishing departments and designing the organisational structure it is important that the manager keeps the
following organisational design principles in mind:
87

Chain of command, where a management hierarchy is provided for the coordination of activities

Unity of command, which dictates that each subordinate should only report to one superior
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Introduction to Business Management

Span of control, which refers to the number of subordinates who report to a particular manager. The
wider the span of control, the flatter the organisation (Smit & Cronjé, 2002)
Coordination
A further principle of organising is that of coordination. In dividing and subdividing the overall task of an
organisation, managers are presented with the problem of achieving cooperation between the parts of the
organisation. Thus, coordination is fundamental to the task of management, in that he/she must facilitate the
integration of the various tasks performed at different levels so as to ensure that the organisation achieves its
ultimate goal (Cronjé, et al 2004). Mechanisms to assist the manager with coordination include budgets,
objectives, the organisational chart, committees and policies and procedures (Cronjé, et al 2004).
Factors Influencing Organisation Design
Cronjé, et al (2004) identify five factors influencing organisation design:

The organisation’s environment

The relationship between strategy and structure

The size of the business

Staff employed by the business

The organisation climate and culture
Drucker (1974) provides an additional factor influencing organisational design: the current day complex
organisation which is multiproduct, multi-technology and multimarket. The central problem therefore of the current
day organisation is “the organisation of complexity and diversity” (Drucker, 1974: 118). Due to the complexity of
the current day organisation, it is asserted that organisation design tends to be a series of risk-taking decisions,
guided only by established organisation design principles and logic.
Ostroff & Smith (1992) address the environmental factor identified by Smith & Cronjé (1997) in examining
organisational design. Indeed, it is asserted that “an ever more demanding competitive environment requires ever
higher levels of corporate performance” (Ostroff & Smith, 1992: 148). To achieve the required levels of corporate
performance, the organisation should move toward “a flatter, more horizontal mode of organisation, in which crossfunctional, end-to-end work flows link internal processes with the needs and capabilities of both suppliers and
customers” (Ostroff & Smith, 1992: 148).
In their presentation of the 7-S model, Waterman, Peters & Phillips (1980) address all 5 factors influencing
organisation design (either directly or indirectly) identified by Cronjé, et al (2004). Waterman et al (1980) assert
that “structure is not organisation” (p 14) and point out that many re-organisation initiatives have failed as
management has simply attempted to reorganise the structure of the firm.
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When considering the organisation, and reorganisation, of a company, it is not simply structure that should be
considered, but “the relationship between structure, strategy, systems, skills, staff and something we call
superordinate goals” (Waterman et al, 1980: 17).
In summary this sub-section explored the management function of Organising. The reasons for organising, the
process of organisation design, the principles of organisation and factors influencing organisation design, were
examined.
Knowledge Check Questions
1. Tactical planning establishes the
a. vision
b. functional goals
c. day to day activities
d. procedure and rules
2. Which one of the following is not a planning tool?
a. Forecasting
b. Scheduling
c. Costing
d. PERT
3. Span of control refers to
a. a management hierarchy provided for the coordination of activities
b. the doctrine that each subordinate should only report to one superior
c. dividing and subdividing the overall task of an organisation
d. the number of subordinates who report to a particular manager
4.2.3 Leading
This subsection will examine the fundamental management function of leadership, and the following will be studied:

The nature and components of leadership

Leadership vs management

Leadership models
The Nature & Elements of Leadership
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).
Leadership is a complex process which directly impacts on the performance of an organisation. It comprises a
number of elements, which include:
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
Authority: which provides the leader with the right, by virtue of his/her position within the organisation, to
give instructions and delegate work to subordinates (Cronjé, et al 2004)

Power: which refers to 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 (Cronjé,
et, al 2004)

Influence: which involves using authority and power in a manner which inspires and motivates
subordinates to take action (Cronjé, et al 2004)

Delegation: where the leader allocates a part of his/her own task to a subordinate to perform together
with the necessary authority to execute it

Responsibility & Accountability: where the leader is responsible for carrying out his tasks and must
account for his/her performance (Cronjé, et al2004)
The types of power which a leader may utilise include:

Legitimate power: which refers to the power which the leader has as a result of the hierarchical position
which he/she possesses within the organisation (Jones, et al, 1998)

Reward power: this refers to the leader’s ability to withhold or give tangible rewards (e.g. incentives, pay
increases, new office) and intangible rewards (e.g. respect, verbal praise)

Coercive power: refers to the leader’s ability to punish others and in so doing instil fear (Jones, et al,
1998). The exercise of coercive power has been found to seldom result in higher performance

Referent power: results from a leader’s personal characteristics and refers to his/her ability to command
respect, admiration and loyalty (Jones, et al, 1998)

Expert power: results from the knowledge, skills and expertise of the leader (Jones, et al, 1998)
Think Point 2
Describe a type of power that you have experienced from a manager / supervisor or person of
authority.
Leadership vs Management
Much debate exists within the literature about leadership and management. Kotter (1990) argues that management
and leadership are “two distinctive and complementary systems of action” (p 103) and that the former involves
coping with complexity, while the latter involves coping with change. The key differences between management
and leadership which Kotter (1990) highlights are provided in Table 4.1 below.
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Table 4.1: Differences between Management & Leadership (Kotter, 1990)
MANAGEMENT
LEADERSHIP
 Planning and Budgeting (in order to
 Setting a Vision (analyse broad range of data in
order to create visions and strategies)
produce orderly results)
 Aligning people (extensive communication of
 Organising & Staffing (includes decisions related to
vision to various individuals – internal and
job structures, placing of employees in appropriate
external to the organisation)
jobs, communication of plans to workforce, etc)
 Controlling & Problem Solving (ensures that
 Motivating People (energising staff to decide on
own ways to achieve vision)
managerial processes are fail-safe and risk-free)
Thus, according to Kotter (1990), leadership differs from management. Smit & Cronjé (2002) support this assertion
but indicate that management is not only broader in scope than leadership but encompasses leadership as well.
Leadership Models
A number of models exist which attempt to explain the nature of leadership. While those individuals who follow a
trait approach to leadership believe that leaders are born and not made, a number of research studies and other
leadership theories (such as behavioural and contingency theories) undermine this belief. These theories will be
examined in greater depth and depicted in figure 4.3 next. A brief summary of the various categories of leadership
theories is provided below.
LEADERSHIP
THEORIES
TRAIT
BEHAVIOURA
THEORIES
L THEORIES
CONTINGENCY
THEORIES



Fiedler’s
contingency
theory
Hersey &
Blanchard’s
model
Vroom-YettonJago model
CONTEMPORARY
THEORIES





Transactional
leadership
Charismatic
leadership
Transformational
leadership
Female leadership
Dynamic
engagement
13Figure 4.3: Categories of Leadership Theories.
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As depicted in Figure 4.3 above, four categories of leadership theories exist:

Trait Theories: focus on the personal characteristics and traits, such as intelligence, dominance and
self-confidence, which studies have shown leaders to possess (Jones, et al, 1998)

Behavioural Theories: focus on the behaviour of successful leaders (Smit & Cronjé, 2002)

Research has shown that leadership behaviour is two-dimensional and involves task-oriented behaviour
as well as employee oriented behaviour. The research also showed that leadership behaviour appropriate
to one situation is not necessarily suitable for another situation (Smit & Cronjé, 2002)

Contingency Theories: focus on the manner in which the situation impacts on the effectiveness of
leadership (Jones, et al, 1998). While Fiedler’s model focuses on congruence which exists between the
leaders, the subordinates and the situation, Hersey & Blanchard’s model focuses on the fit between the
leader’s style and the maturity of his/her subordinates (Smit & Cronjé, 2002). The Vroom-Yetton-Jago
model, on the other hand focuses on the degree of group participation expected

Contemporary Theories: More recent leadership theories include Transformational Leadership where
leaders are able to initiate substantial innovation and change (Smit & Cronjé, 2002). Female Leadership
is a further contemporary approach which focuses on an interactive leadership style which succeeds in
building consensus and creating an open and inclusive environment (Smit & Cronjé, 2002)
In summary therefore, this subsection explored the management function of Leading. The nature and elements of
leadership were studied, the differences between management and leadership were examined and the various
leadership theories were investigated.
4.3.2
Controlling
Control refers to the “process whereby managers monitor and regulate how efficiently and effectively an
organisation and its members are performing the activities necessary to achieve organisational goals” (Jones et
al, 1998: 269). This function adds value to the overall management process and the organisation, in that control:

Enables managers to achieve superior efficiency

Ensures, and improves, the quality of the goods/services produced/provided

Enhances responsiveness to customers (Jones, et al, 1998)
This section will explore the fourth management function, Controlling, and the following issues will be examined:

The control process

The focus of control

The characteristics of an effective control system
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4.3.2.1 The Control Process
The process of control is comprised of four steps and is summarised in Figure 4.4 next.
STEP 1:
ESTABLISH PERFORMANCE STANDARDS



Performance standard = projection of planned performance
Establish during planning stage
Performance standards should be realistic, attainable & measurable
STEP 2:
MEASURE ACTUAL PERFORMANCE


Manage performance on an ongoing basis
Determine deviation between actual performance and planned performance
STEP 3
EVALUATE PERFORMANCE DEVIATIONS


Determine reasons for poor performance or over performance
Determine significance of deviations – is further action necessary?
STEP 4:
IMPLEMENT CORRECTIVE ACTION

Corrective action serves to achieve or better the performance standard
14Figure 4.4: The Control Process (Smit & Cronjé, 2002).
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Video Activity 1
Watch the following video: https://www.youtube.com/watch?v=nhkIjLVYGAM
After watching the video, provide a description of the control process and list the four
associated steps.
4.3.2.2 The Focus of Control
Control mechanisms should be focused on activities relating to the organisation’s resources at strategic control
points.
Strategic Control Points
The organisation’s activities should be controlled at strategic control points (Jones et al, 1998). As depicted in
Figure 4.5 below, three strategic points exist at different stages of the management process:

Input Stage: during this stage feedforward control must be implemented, where management should
seek to anticipate problems before they occur

Conversion Stage: during this stage, concurrent control must be exercised, where management should
deal with problems as they occur

Output stage: during this stage, feedback control should be implemented, where problems are addressed
by management after they have arisen (Jones, et al, 1998)
CONCURRENT
CONTROL
FEEDFORWARD
FEEDBACK
CONTROL
CONTROL
ORGANISING
OUTPUTS
INPUTS




Human
Financial
Physical
Information
PLANNING
LEADING





Achieve goals
Products
Services
Productivity
Profit
CONTROLLING
15Figure 4.5: Strategic Control Points
Organisational Resources
The control of the organisational resources should occur at strategic points within the management process. Smit
and Cronjé (2002) identify various mechanisms to control the organisation’s physical, financial, information and
human resources.
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
Physical Resource Control Systems include:
o
Inventory control (systems include economic ordering quantity system, materials requirements
planning (MRP) and just-in-time (JIT))
o
Operational control, (techniques include PERT, linear programming and break-even analysis)
o
Quality control (techniques include Total Quality Management [TQM])
o

(Smit & Cronjé, 2002).
Financial Resource Control Systems include:
o
The budget
o
Financial analysis

Information Resource Control Systems

Human Resource Control Systems include
o
Performance measurement
o
Ratio analyses (to determine, for example, labour turnover, absenteeism, work force
composition)
A further control system which is identified is that of strategic control, which involves the organisation’s top
management in the study of the total organisation with respect to its productivity, effectiveness, management
effectiveness and alignment to the environment.
4.3.2.3 Characteristics of an Effective Control System
As was seen in the above subsection, a vast number of control systems and techniques are available for the
organisation to implement. However, it is important that the organisation implements its control systems in a
manner which ensures their effectiveness. There are five characteristics of effective control systems:

Integration: it is important to integrate the management functions of planning and controlling in that the
latter provides information which stimulates the revision of organisational plans

Flexibility: it has emerged throughout this Study Guide that environmental change has a considerable
impact on the current day organisation. Thus, the organisation’s control systems should be sufficiently
flexible to accommodate adjustments to the organisation’s plans

Accuracy: it is imperative that the control system provides an objective and accurate picture of the
organisation’s situation

Timeliness: control data should be available to management on a regular basis

Simplicity: the control system should not be unnecessarily complex. A system which is too complex is
likely to hamper the manager’s utilisation of the system
In summary, this subsection explored the fourth management function, Control. In so doing, the importance of
control, the control process, the focus of control as well as the characteristics of an effective control system were
examined.
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Video Activity 2
Watch the following video: https://www.youtube.com/watch?v=QdGfMrdE4f8
After watching the video, list the characteristics of an effective control system.
4.3
Areas of Management
The four fundamental management functions of Planning, Organising, Leading and Controlling discussed in
subsection 4.2 above comprise the area of General Management. As identified in Section 1 (Introduction to
Management) of this Study Guide, various functional areas of management exist in which the activities of General
Management are applied.
This sub-section will examine a number of the functional areas of management, and will address:

The financial function

The marketing function

The human resources function

The operations function

The purchasing function.
4.3.1
The Financial Function
The Financial Function is concerned with “the flow of funds, and in particular…the acquisition of funds, the
application of funds for the acquisition of assets, and the administration of, and reporting on, financial matters”
(Cronjé, 2004).
The relationship between Financial Function, other functional management areas, related disciplines and the
environment is depicted in Figure 4.6 below.
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SUBJECT
Financial Function
ENVIRONMENTAL
TASKS
FACTORS
 Financial analysis,
reporting, planning &
control
 Management of
financing structures
 Management of asset
structure
 Form of business
 Financial
institutions &
markets
 Incentive measures
 Legislation
 Taxation
Influence
Business Objectives
DISCIPLINES
Support





Accounting
Cost accounting
Economics
Statistics
Communication
Science
OTHER AREAS
Mutual
Support
MANAGEMENT





General
Purchasing
Marketing
Public Relations
HR
16Figure 4.6: The Relationship between the Financial Function and Related Disciplines, the Organisation’s
Environment and Other Management Areas (adapted from Cronjé et al, 2004: 394).
4.3.2
The Marketing Function
The Marketing Function “consists of management tasks and decisions directed at successfully meeting
opportunities and threats in a dynamic environment, by effectively developing and transferring a need-satisfying
market offering to consumers in such a way that the objectives of the business, the consumer and the society will
be achieved” (Cronjé et al, 2004)
The Marketing Function is involved in formulating a marketing strategy, which will enable the organisation and its
particular products and services to ‘reach’ the target market, through making decisions about the four marketing
instruments (four Ps):

Product: this refers to the item or service which is designed to satisfy the target market’s needs.
Decisions about products include brand decisions, packaging decisions, and decisions about how to go
about differentiating a product (Cronjé, et al, 2004)

Price: refers to the exchange value of the product or service. Various factors influence the determination
of the price of a product (Cronjé, et al, 2004)

Place: refers to the manner in which the product or service is to be distributed. Decisions about place
(distribution) include the choice of distribution channel and type of market coverage
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
Promotion: refers to the process of marketing communication which involves “informing, persuading and
reminding the consumer" (Cronjé, et al, 2004:279) about a particular product or service through the use
of advertising, personal selling, sales promotion and publicity
Think Point 3
Describe which of the four marketing instrument is being utilised when companies place
adverts in the newspaper.
4.3.3
The Human Resources Function
Human Resources Function may be defined as “the activities that managers engage in to attract and retain
employees and to ensure that they perform at a high level and contribute to the accomplishment of organisational
goals” (Jones, et al, 1998: 301).
Cronjé et al (2004) identify the task of the Human Resource (HR) Function within an organisation as being to assist
“other managers in the business to fully utilise the employees allocated to them” In so doing, the HR Function
engages in three central activities:

Attracting human resources: which involves the process of human resource planning, recruitment,
selection, placement and induction

Retaining human resources: which involves the management of employee performance, remunerating
employees, providing for health and safety and promoting positive labour relations

Developing human resources: which involves training and educating employees both on and off the job
(Cronjé, et al, 2004)
Ulrich (1998) argues that despite HR’s generally poor reputation within organisations, given the competitive forces
which exist in the current day, “achieving organisational excellence must be the work of HR” (Ulrich, 1998: 124).
According to Ulrich (1998), the importance of HR is due to the following organisational challenges:

Globalisation:
which requires that organisations improve their learning capabilities and manage
complexity and diversity

Profitability through Growth: companies seeking revenue growth need to be innovative and creative and
encourage the sharing of information amongst employees

Technology: managers need to learn how to remain ahead of the information curve and effectively utilise
information to attain business results

Intellectual Capital: managers are presented with the challenge of attracting, assimilating, compensating
and retaining talented individuals

Change: in order to survive within an environment characterised by change, organisations will need to
develop the capacity to cope with change (Ulrich, 1998)
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For the HR Function to facilitate the manner in which the organisation deals with the above challenges, the function
needs to change its role by becoming a/an:

Partner in strategy execution (to guide strategy discussions and decisions)

Administrative expert (to improve efficiency within both the HR department and the entire organisation)

Employee champion (to ensure employee commitment to the organisation)

Change agent (to build the organisation’s capacity to embrace and cope with change) (Ulrich, 1998).
Thus, in essence, HR needs to focus “more on deliverables of their work and less on just getting their work done”
(Ulrich, 1998: 134).
4.3.4 The Operations Function
The Operations Function is the function that is “primarily aimed at the utilisation of resources to manufacture
products and render services” (Cronjé, 2004).
The Operations Function influences the organisational transformation process where inputs are converted into
organisational outputs, as indicated in Figure below:
THE ORGANISATION
Operations Management
Strategies & Objectives
INPUTS




Human
Financial
Physical
Informatio
n
OUTPUTS
TRANSFORMATION
Operations
Design
Operations
Planning &
Control


Products
Services
Operations
Improveme
nt
17Figure 4.7: The Operations Function (adapted from Cronjé, et al, 2000: 357)
As shown in Figure 4.7, the following components of the Operations Function influence the organisational
transformation process:

Operations Design: which addresses the integration of the design of products and/or services and the
design of processes to produce these products and/or services

Operations planning & Control: which involves activities, which aim to reconcile supply of, and demand
for, products and services in terms of volume, timing and quality
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
Operations Improvement: which involves the implementation of various activities and techniques to
improve operations performance
Practical Application 2
Using an organisation of your choice, identify and discuss the inputs, transformation and
outputs aspects of the business
Case Study
How fruit juice is made
The process behind fruit juice depends on whether the fruit juice is ‘from concentrate’ or ‘not
from concentrate’. Let’s take orange juice as an example:
Not from concentrate
As with all fruit juices, the story of orange juice starts in the groves, where the fruit is grown.
Local growers cultivate oranges until they are ripe and ready to be picked manually. Once the
mature fruit is harvested, it goes straight to the factory where it is inspected – only ripe
oranges are selected for orange juice. The inspection process goes quickly to ensure that the
fruit retains all its natural vitamins and nutrients. At harvesting, oranges are washed before
squeezing.
Once the juice is squeezed from the orange, it is rapidly pasteurised. This keeps the juice
fresh longer, and is a widely accepted approach that protects its natural nutrients and
maintains premium quality.
From concentrate
Here, the process has a few more stages. Depending on the technique, the juice is either
heated by steam so the water in juice evaporates, or ‘ultra-filtrated’, and then concentrated
using a reverse osmosis technique. Juice concentrate is born! Next, water is added back to
the concentrate and blended to produce high-quality juice. Finally, the juice is pasteurised
before packaging.
Regardless of the method used, fruit juice producers make sure to capture the fruit’s natural
goodness and the qualities from the whole fruit from which the juice is squeezed. Not-fromconcentrate juice and from-concentrate juice use the same fresh raw materials and are both
considered (by the European Commission’s definition) to be minimally processed fruit.
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After processing, the fruit juice is filled and packed in a way that helps protect its natural
nutrients and quality.
(Source: fruitjuicematters.eu, 2019)
Based on the above, discuss the input, process and output for making juice with and without
concentrates.
4.3.5
The Purchasing Function
The purchasing function entails “the planning, organising, leading and controlling of all activities relating to the
purchase of materials and services from an external source and aimed at maintaining and increasing the business’s
profitability” (Cronjé et al, 2004).
Cronjé et al (2004) identify that the activities of the Purchasing Function include:

The selection of suppliers

The purchasing of materials

The transport of materials to the business

Deciding what prices are acceptable

Determining quality and quantity of materials and/or services

Expediting and receiving materials

Controlling warehousing and inventory holding
Activity 2
Identify and explain at least 5 functional areas of management.
4.4
Summary
This section explored The Management Process. The four fundamental management functions of Planning,
Organising, Leading and Controlling (POLC) were examined, as were the areas of management where the General
Management, Financial Function, Marketing Function, Human Resources Function, Operations Function and
Purchasing Function were examined.
Revision Questions
1. Discuss the importance of planning as one of the management functions.
2. Differentiate between Management and Leadership.
3. Discuss the characteristics of an effective control system.
4. List and explain the four marketing instruments.
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Answers to Revision Questions and Activities
Activity 1
Barriers to effective planning may be overcome through:

Improve top management’s commitment to the planning process

Recognise the limitations of planning and understand that plans will require adjustments on an ongoing
basis

Ensure effective communication of organisational plans at all levels

Benefits of contingency planning should be recognised by organisations operating within a turbulent
environment
Think Point 1
Learners are expected to relate to the following:

A monthly / weekly income is received

Payment commitments have to be adhered to

Sufficient money is / must put aside for food

Some contingency fund is / might be put aside in case of emergencies

Some amount is / might be saved for the future
Knowledge Check Questions
1. Tactical planning establishes the
a. vision
b. functional goals
c. day to day activities
d. procedure and rules
2. Which one of the following is not a planning tool?
a. Forecasting
b. Scheduling
c. Costing
d. PERT
3. Span of control refers to
a. a management hierarchy provided for the coordination of activities
b. the doctrine that each subordinate should only report to one superior
c. dividing and subdividing the overall task of an organisation
d. the number of subordinates who report to a particular manager
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Practical Application 1
South African Government are required to develop and publish the following plans:
 Strategic Plan

o
5 year horizon linked to the electoral cycle
o
Contains vision, mission and strategies / alignment to external environment
o
Future orientated
Annual Performance Plan
o
Plan for one year
o
More detailed than the strategic plan
o
More specific deliverables to be achieved for the year
Think Point 2
Learners must describe the situation and relate to one or a combination of the following:

Legitimate power: which refers to the power which the leader has as a result of the hierarchical position
which he/she possesses within the organisation (Jones, et al, 1998)

Reward power: this refers to the leader’s ability to withhold or give tangible rewards (e.g. incentives, pay
increases, new office) and intangible rewards (e.g. respect, verbal praise)

Coercive power: refers to the leader’s ability to punish others and in so doing instil fear (Jones, et al,
1998). The exercise of coercive power has been found to seldom result in higher performance

Referent power: results from a leader’s personal characteristics and refers to his/her ability to command
respect, admiration and loyalty (Jones, et al, 1998)

Expert power: results from the knowledge, skills and expertise of the leader (Jones, et al, 1998)
Video Activity 1
The control process is a system that allows to set, measure, match, and tweak any business activity such as
production, packaging, delivery and more. The list of associated steps are as follows:

Establishing standards and methods for measuring performance

Measuring the performance

Determining whether performance matches the standards

Take corrective action
Video Activity 2
An effective control system should be

Accurate

Timely

Objective and Comprehensible
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
Focused on Strategic Control Points

Economically realistic

Organisationally realistic

Coordinated

Flexible

Integrated

Accepted by member of the organisation
Think Point 3
The marketing instrument being utilised when companies place adverts in the newspaper is the fourth P, which
stands for Promotion.
Practical Application 2
Learner is required to select a business and outlines the following pertaining to the business:


Input
o
Human Resource, e.g. staff
o
Financial, e.g. budgets
o
Physical, e.g. inventory
Transformation
o

Description on how input are processed / converted
Output
o
Actual products / services produced by the business
Case Study
Making juice without concentrates:

Input – harvested fruits

Process

o
inspection process / selection of fruits
o
squeezing
o
pasteurisation
o
packaging
Output – juice
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Making juice with concentrates:

Input – harvested fruits

Process

o
Inspection process / selection of fruits
o
Squeezing
o
Heating / water evaporation / ultra-filtered
o
Reverse osmosis
o
Dilution with water
o
Blending
o
Pasteurised
o
Packaging
Output
o
juice
o
juice concentrate
Activity 2
5 functional areas of management:

The financial function - concerned with the flow of funds, and in particular…the acquisition of funds, the
application of funds for the acquisition of assets, and the administration of, and reporting on, financial
matters

The marketing function - consists of management tasks and decisions directed at successfully meeting
opportunities and threats in a dynamic environment, by effectively developing and transferring a needsatisfying market offering to consumers in such a way that the objectives of the business, the consumer
and the society will be achieved

The human resources function - the activities that managers engage in to attract and retain employees
and to ensure that they perform at a high level and contribute to the accomplishment of organisational
goals

The operations function - primarily aimed at the utilisation of resources to manufacture products and
render services / influences the organisational transformation process where inputs are converted into
organisational outputs

The purchasing function - entails “the planning, organising, leading and controlling of all activities relating
to the purchase of materials and services from an external source and aimed at maintaining and
increasing the business’s profitability
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Answers to Unit Revision Questions
UNIT 1
1. Identify the essential components which should be included in a definition of management
Essential components of management definition:

involves a process in which
i. the management functions of planning, organising, leading and controlling are executed
ii. organisational resources are utilised; and
iii. work is achieved through the efforts of other employees

so as to provide for …the effective and efficient achievement of the organisation’s goals
2. Elaborate on the Time Spent on Management Functions by Management Level

Top managers spend much time organising, and a substantial amount of time planning;

Middle managers spend time mostly on organising and leading; and

Lower managers spend just over half of their time leading.
3. Discuss some of the key changes within organisations.

Moving away from permanent jobs to temporary ones

Tendency to outsource more

Operating with a more diverse workforce

Typical 9-to-5 workday boundaries are getting blurred

Large corporation are cutting overall staff

Constant reengineering of processes

Teamwork is gaining prominence
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UNIT 2
1. Provide reasons as to why today’s managers should understand the different approached to managing
organisations

Not to repeat the same mistakes made by managers in the past

To better understand the current management practices

To expose managers to additional alternatives for consideration when practicing management
2. Elaborate on the four principles of Frederick Taylor to increase efficiency in the workplace.

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
3. Explain the Hawthorne Effect

Management’s interest in, and concern for, the workers’ well-being had served to enhance worker
performance

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UNIT 3
1. List and explain the elements comprising the market environment.
The market environment comprises the:

Market
o
Consisting of the consumers or potential consumers who have particular needs and the buying
power to satisfy these needs

Suppliers
o
Provide the organisation with the ‘inputs’ required to produce the organisation’s goods and/or
services. These ‘inputs’ could take the form of materials (raw materials, equipment, energy), capital
and/or labour

Intermediaries
o
Include wholesalers, retailers and agents and serve to bridge the gap between the producer and the
consumer

Competitors
o
Are prevalent within a market economy and compete with the organisation not only for market share
but for materials, capital and labour as well
2. Discuss the characteristics of the First Curve and Second Curve Organisations.
FIRST CURVE ORGANISATION
SECOND CURVE ORGANISATION

Mechanistic

Organic

Engineering

Ecology

Corporations

Individuals & Networks

Horizontal & Vertical Integration

Virtual Integration

Business Processes

Culture
3. Elaborate on the three inter-related approaches which the organisation can adopt in reacting to the
environment.

Information Management: which involves acquiring and maintaining knowledge of the organisation’s
environment through the process of environmental scanning, which serves to identify threats and
opportunities within the environment. Information obtained from environmental scanning should be
recorded in a management information system and should be utilised to aid decision making (Cronjé,
2004)
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
Strategic Response: Once sufficient information on the environment has been acquired, a strategic
response needs to be initiated (Cronjé, 2004), for example the organisation’s current strategy may have
to be adjusted and aligned to an emerging change within the environment

Structural Change: An adjustment to the organisation’s strategy (resulting from environmental change)
may require that the organisation’s structure be adjusted in such a way that it is aligned to the revised
strategy (Cronjé, 2004)
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UNIT 4
1. Discuss the importance of planning as one of the management functions
Planning:

Provides a means for managers to participate in decision making about organisational goals and
strategies (Jones, et al, 1998).

Is necessary to provide the organisation with a sense of direction and purpose. Without such a sense of
direction managers would pursue conflicting goals, which would jeopardise organisational performance
(Jones, et al, 1998).

Helps to coordinate the functions of the various organisational departments.

Serves as a means to control managers and assess performance (Jones et al, 1998).
2. Differentiate between Management and Leadership
MANAGEMENT
 Planning and Budgeting (in order to
produce orderly results)
 Organising & Staffing (includes
decisions related to job structures,
placing of employees in appropriate
jobs, communication of plans to
workforce, etc)
 Controlling & Problem Solving (ensures
that managerial processes are fail-safe
and risk-free)
LEADERSHIP
 Setting a Vision (analyse broad range
of data in order to create visions and
strategies)
 Aligning people (extensive
communication of vision to various
individuals – internal and external to
the organisation)
 Motivating People (energising staff to
decide on own ways to achieve
vision)
3. Discuss the characteristics of an effective control system

Integration: it is important to integrate the management functions of planning and controlling in that the
latter provides information which stimulates the revision of organisational plans

Flexibility: it has emerged throughout this Study Guide that environmental change has a considerable
impact on the current day organisation. Thus, the organisation’s control systems should be sufficiently
flexible to accommodate adjustments to the organisation’s plans

Accuracy: it is imperative that the control system provides an objective and accurate picture of the
organisation’s situation

Timeliness: control data should be available to management on a regular basis

Simplicity: the control system should not be unnecessarily complex. A system which is too complex is
likely to hamper the manager’s utilisation of the system
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4. List and explain the four marketing instruments.

Product: this refers to the item or service which is designed to satisfy the target market’s needs.
Decisions about products include brand decisions, packaging decisions, and decisions about how to go
about differentiating a product (Cronjé, et al, 2004)

Price: refers to the exchange value of the product or service. Various factors influence the determination
of the price of a product (Cronjé, et al, 2004)

Place: refers to the manner in which the product or service is to be distributed. Decisions about place
(distribution) include the choice of distribution channel and type of market coverage

Promotion: refers to the process of marketing communication which involves “informing, persuading
and reminding the consumer" (Cronjé, et al, 2004:279) about a particular product or service through the
use of advertising, personal selling, sales promotion and publicity
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