PRINCIPLES OF MANAGEMENT
PRINCIPLES OF MANAGEMENT
Module 213-18-B
Duration:120 Hours
Module description/Purpose: To equip trainees with knowledge, skills and values in applying
management principles.
Objectives: On Completion Of This Module, Trainees Should Be Able To:
1.
2.
3.
4.
5.
EXPLAIN MANAGEMENT
CARRYING OUT MANAGERIAL ROLES
IDENTIFY TYPES OF BUSINESS ORGANIZATIONS
ORGANISE ENVIRONMENTS
DESCRIBE THE ORGANISATIONAL STRUCTURE
UNIT B18.1
EXPLAINING MANAGEMENT
 Nature of Management
 Development of modern management
 Supervisory management
UNIT B18.2
CARRYING OUT MANAGERIAL ROLES AND SKILLS




UNIT B18.3
Interpersonal roles
Informational roles
Decisions role
Planning, organizing, controlling, directing, leading and staffing
IDENTIFYING TYPES OF BUSINESS ORGANISATIONS OR COMPANIES
 Importance of organisational environments
 Elements of internal and external environments
UNIT 18.4
DESCRIBING THE ORGANISATIONAL STRUCTURE ORGANISATIONAL STRUCTURE





Purposes and objectives of organizations
Business functions
Organisation structure
Organisation charts
Influences on organization structure
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PRINCIPLES OF MANAGEMENT
1
INTRODUCTION PRINCIPLE OF MANAGEMENT………………………………………………………………………
Page
No.
3
2
DEVELOPMENT OF MANAGEMENT THOUGHT……………………………………………………………….........
5
3
HUMAN RELATIONS SCHOOL:………………………………………………………………………………………..........
13
4
SYSTEM THEORY…………………………………………………………………………………………………………………….
19
5
CONTEMPORARY THEORIES: SEARCH FOUR ORGANIZATION DRIVERS………………………….........
23
6
BUREAUCRACY……………………………………………………………………………………………………………………….
24
7
MOTIVATION THEORIES AND THEIR IMPLICATIONS FOUR MANAGEMENT…………………………….
29
8
MODELS OF BEHAVIOR………………………………………………………………………………………………………….
41
9
PROCESS THEORIES………………………………………………………………………………………………………..........
44
10
ROLES OF SUPERVISOR…………………………………………………………………………………………………………..
49
11
MANAGEMENT ROLES……………………………………………………………………………………………………………
51
12
LEVELS OF MANAGEMENT……………………………………………………………………………………………………..
54
13
SMART OBJECTIVES, PLANNING PROCESS………………………………………………………………………………
56
TABLE OF CONTENT
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PRINCIPLES OF MANAGEMENT
MANAGEMENT
There is no single, universally accepted definition of management. To quote just a few:
“deciding what should be done, and then getting other people to do it” Rosemary Stewart
“to forecast and plan, to organize, to command, to co-ordinate and to control” Henri Fayol
“the organization and control of human activity directed towards specific ends” International Labour
Office.
“sensible working arrangements” Mary Parker Follett
Another definition:
Management involves the processes of planning, organizing, directing and controlling the organisation’s
resources in order to achieve the organisation’s goals.
The organization and coordination of the activities of an enterprise in accordance with certain policies and in
achievement of defined objectives.
Management is often included as a factor of production along with machines, materials, and
money. According to the management guru Peter Drucker (1909-2005), the basic task of a
management is twofold: marketing and innovation. Practice of modern management owes its
origin to the 16th century enquiry into low-efficiency and failures of certain enterprises,
conducted by the English statesman Sir Thomas More (1478-1535). As a discipline,
management consists of the interlocking functions of formulating corporate policy and
organizing, planning, controlling, and directing an organization's resources to achieve the
policy's objectives.
The directors and managers who have the power and responsibility to make decisions to
manage an enterprise.
The size of management can range from one person in a small organization to hundreds or
thousands of managers in multinational companies. In large organizations the board of
directors formulates the policy which is then implemented by the chief executive officer. Some
business analysts and financiers accord the highest importance to the quality and experience of
the managers in evaluating an organizations current and future worth.
In general, management is the activity of resolving a disorderly situation into an intentionally orderly
situation,
to
achieve
pre-determined
(i.e.,
purposeful)
outcomes.
Since disorder continuously arises from creativity, destruction, decay, variance, versioning, chaos, and
other natural and intentional changes, resolving that disorder into an intended order requires
continuous tracking and adjustments in the "architecture" of the intended order's parts, part
relationships,
and
part
and
relationship
attributes.
Management is a practice of utilizing all available resources to obtain a desired result.
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Management is necessary because 1) A desired result must be established, and 2) Someone must be
delegated, or assume the authority, to obtain, organize, guide, and direct those resources toward the
desired result. Someone must "manage" the entire process. For that reason, all persons involved must
agree to the desired result, and even if not in total agreement with the plan being advocated, still agree
to the plan so as not to consciously or unconsciously sabotage the journey.
Assuming that you are talking about management in our industry, I might expand that I've found less
problems within our own companies but more problems with customers and subcontractors - all
integral
parts
of
"process"
and
desired
"result."
The problem with subcontractors, when they occur, was because their own priorities, important or
trivial,
trumped
"our"
desired
result.
They
just
didn't
care.
The problem with customers was one of two, and sometimes included both: Either they were sleazy, or
they just could not grasp the significance of every single aspect of the "process" of the project.
I think it's safe to say that the success of any managed project is determined in direct ratio to the control
of all resources utilized, especially human resources. In our industry, we have less control over
subcontractors, suppliers and customers than those in our own "house." And if one cannot even control
one's own house, then there will never be control over anyone else's house.
Management is the art of getting things done from others. Management is a universal phenomenon and
it exists in all the sectors. In case of private sector the management is very transparent. The goals are
properly defined and all the employees are very well aware of their goals and are rewarded well for hard
work.
In
case
of
public
sector,
there
s
not
that
much
transparency.
Read more: http://wiki.answers.com/Q/What_is_the_definition_of_management#ixzz1vV4lMwpg
Review Points
1.
2.
Define the term “management”
What do you understand by the terms “management” and “organization”? Explain, using your
own words.
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PRINCIPLES OF MANAGEMENT
THE DEVELOPMENT OF MANAGEMENT THOUGHT
The Classical management theory is one of the first schools of management thought; it developed
during the Industrial Revolution when new problems related to the factory system began to appear.
Managers did not know how to train employees or to handle increased labor dissatisfaction, so they
started to test solutions. This made the classical management theory developed so that they could find
the “one best way” to perform and manage tasks.
The classical writers thought of the organization in terms of its purpose and formal structure.
The placed emphasis on the planning of work, the technical requirements of the organization, principles
of management, and the assumption of rational and logical behavior.
The analysis of organization was initially carried out in the early part of the last century, by some writers
such as Taylor, Fayol, Urwick these writers laid the foundation for a comprehensive theory of
management.
The main advocate of classical thinking- principally Taylor, Fayol and Urwick – derived their theories
from their own practical experience in industry (mainly in the engineering field) and observations. The
argued that organization should be structured in a logical and scientific manner.
They maintained that there were a number of fundamental principles upon which organization are built.
1.
2.
3.
4.
There should be a blueprint of organization structure which could be applied universally.
The structure of an organization should be hierarchical, with clear levels of authority.
Each levels of authority should have its own functions to perform
Everyone in the organization should know their place derive from this would offer scientific
guidance to managers on how to run an organisation.
A framework of analysis is based on four main approaches:




Classical – including scientific management and bureaucracy
Human relations – including neo-human relations
Systems
Contingency
Henri Fayol was an early 20th century mining engineer who developed an interest in management
principles. He realized the importance of structure and argued that every organization needs to be
planned, organized and controlled. Fayol’s notion of the idea structure for all organistion rested on the
following principles. The key thinker in what is sometimes known as the administrative management
school was Heri Fayol a French mining engineer.
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Fayol suggested that the activities of work organizations can be divided into a number of groups






Technical
Commercial
Financial
Security
Accounting
Management.
Fayol’s definition of management – “as to manager is to forecast and plan, to organize, to command, to
co-ordinate and to control”
Fayol notion of the idea structure for all organizations related on the followings
a) Division of Labour
 Between the levels of authority in an organization, with each level having its own duties
and responsibilities from top management down.
 Between department and other groups, with each having its function to perform.
Here Fayol built on the work of earlier authors. As early as 1776, Adam Smith identified the
benefits on specialization, or division of labour, in the production process. Fayol extended this to
the study of management.
b) Coordination
The various levels and departments must be coordinated so that all their effects pull in the same
direction towards achieving the objectives of the organization.
c) Span of Control
Fayol stressed the importance of establishing the maximum number of subordinates which a
superior can control. This is called the span of control
d) Economies of scale
Wherever possible similar activities should be grouped together to avoid overlap and to obtain
economies that accrue to larger units: for example bulk buying, spreading overheads, making
better use of resources.
e) Objectives
Every organization must have clear objectives
f) Authority
There must be a clear line of authority
g) Responsibility
Where a person is given responsibility, he or she must also be given the authority necessary to
carry out the task. A superior can be held responsible for the actions of his or her subordinates.
h) Specialization
As far as possible people should specialize in order to be proficient
i) Unity of Effort
Everyone in the organization should be working towards achieving the goals of the organization
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j)
Definition of Tasks
Employees should know exactly what is expected of them
k) Unit of command
Each member of the organization should have one clear superior of whom he or she is
responsible. The span of control should not be too wide. Ideally no person should supervise
more than five or six subordinates.
Lyndall Urwick
Urwick, writing some twenty years after Fayol, consolidated his ideas and, to an extent, synthesized
them with the approach of scientific management. He forward ten principles of organizations as
follows:
a) Objectives
Achieving its objectives is the reason for the existence of any organization. Organisations that
fail to achieve their objectives should cease to exist.
b) Specialization
In an effective organization there is the principle of ‘one group, one function’, i.e. every section
or department should do its own job well and not interfere in other activities.
c) Coordination
Management should so structure the organization that all the parts fit neatly together and work
as a functional whole.
d) Authority
There should be clear lines of authority in the organization
e) Responsibility
Superiors are responsible for the actions of their subordinates
f) Job Definition
All jobs should be described precisely and duties define
g) Correspondence
Authority and responsibility should go hand in hand
h) Span of Control
A superior should be responsible for up to six subordinates
i) Balance
The sections and departments of an organization should be in balance; no one department
should dominate the organization
j) Continuity
The organization should be set up in such a way that it can continue to perform its functions.
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F. W. Taylor:
In 1911, Frederick W. Taylor’s and had risen from pattern-maker in a steel industry to chief engineer at
the age of 28 and indeed was a competent engineer, making a number of inventions and improvements
in technology. Bethlehem Steel Co hired him to reorganize their plant, but his fresh ideas brought
opposition from other managers. Taylor would not compromise, and he was summarily sacked.
Thereafter he undertook teaching, writing and consultancy work.
Taylor termed his key principles scientific management and he modeled his approach to management
on those of scientists seeking the laws of nature.
Taylor’s principles are summarized below:






Managers themselves should be guided by the scientific approach. In the division of labour
within an organization, management should accept full responsibility for planning, organizing
and supervising the work of subordinates. Workers should be freed from these problems so as
to concentrate on actually doing the job and performing work tasks.
Managers have a duty to select and train staff in the most efficient way of performing work
tasks.
Managers should motivate workers with the prospect of earning good pay and the chance of
promotion for those who deserve it. Taylor stressed ‘a fair day’s pay for a fair day’s work’.
Manager should ensure harmony in the workplace by showing that the success of an employee
performs, so as to avoid wastage of effort.
Managers should produce a blueprint of the best way to perform a given task by studying
successful employees and them applying this to all employees.
Managers should treat employees as individuals rather than as members of a wider grouping
like workgroups or trade unions.
THE IMPORTANCE OF CLASSICAL ORGANISATION THEORY
It is very easy to construct a strong case against the ideas of the classical theorist, but the
concepts they put forward are remarkably persistent and may be seem in many different types
of organization today. It is not sufficient, therefore, to dismiss them with a few well-chosen
arguments in favour of more modern approaches. We need to understand the value in their
ideas as the basis for their continued application.
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a) Principles of organization
The principles identified by Fayol and Urwick can be criticized on a number of points, particularly
in relation to their rigidity and their lack of appreciation of the external forces influencing
organizations.
Their weaknesses of Fayol and Urwick are as follow:





The rigidity of the principles preclude the need for flexibility in designing organizational and
management structures to suit the circumstances within which organizations find themselves.
Human beings are seen as puppets that must be made to fit into organizational roles: they are
there to do as they are told
There is an overemphasis on the division of labour and specialization, the scalar chain, spans of
control and line authority, all of which have been affected by the explosion of information and
communications technology which tends to empower both managers and workers at lower
levels in the hierarchy.
All important decision-making rests entirely with management, with very little consultation with
staff.
There is an assumption that organization are largely self-contained units where management
has complete control over events. Organisations and their employee, in the real world, exist in
an environment. They need to be responsive to external forces over which they may have little
or no control: for example, customers or competitors, a national strike or sudden rises in the
cost of oil.
Despite these weaknesses, though, there remains much of value in these theories.



There is a strong element of common sense in the ideas put forward, and many are easily
recognizable by practicing managers today.
The emphasis on the importance of objectives was a step forward. Likewise, the focus was put
on how the structure of an organization affects its performance.
Although the main stress was on the organization, theorist like Fayol did accept that modern
organisations operate in environments. There is also a strong theme in these theories that
emphasizes the importance of management education.
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b) THE PRINCIPLES OF SCIENTIFIC MANAGEMENT
Fayol and Urwick, Taylor’s work can be heavily criticized for its emphasis on management
control and lack of understanding of the complexities of the human dimension to organizations
and their management.





When management takes over all the planning and organizing functions, the workers’
role is reduced to taking orders. Workers have very little control over their work
situation.
Money is seen as the major reward and motivator. Taylor says little about other things
which could contribute to job satisfaction. This form of management encourages a
‘carrot and stick’ attitude by management to workers.
By treating the workers as individuals, Taylor underestimates the important effects of
group pressures on production and efficiency. Taylor also underestimates the
importance of trade unions in some organizations.
Taylor talks about a fair day’s pay for a fair day’s work, but who is to decide just what is
fair? Taylor leaves little room for negotiation between management and workers on
such issues. Unscrupulous managers could exploit workers when measuring
performances and payments.
Taylor gives the impression that managers are only really interested in first-class
workers; there seems little place for older or handicapped people.
Scientific management remains an important theory of management. If Taylor’s principles are used
sensitively, many of the criticism can be met. In particular, Taylor’s ideas on material rewards for
performance and achieving sales targets have been applied extensively in some businesses. The basic
payment-by-results ideas have been refined into performance bonuses and various mixes of money,
type of car, etc. and other tangible rewards. Some enlightened firms are giving their managers or staff
some choice over how the reward package is made up: for example, more emphasis on money, or less
commission and a larger company car.
BEHAVIOURAL LIMITATIONS IN A CHANGING WORLD
The importance of History
One reaction to the last section might have been “so what” since these entire theorist were writing a
over century ago. However, there are many reasons why you should study their ideas, even though
there may be significant weaknesses in their approaches.
 They form an important part of the accumulated body of management knowledge
 Management insight requires that you combine a conceptual framework of ideas with an
understanding of behavior in organizations and its application in practice
 Early ideas form the foundations of current understanding, out of which current thinking has
evolved.
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 Management is the process of realizing organisational goals through the efforts of people and
through planning, organizing, directing and controlling such efforts. To effective in practices, this
requires the manager to have an appreciation of early ideas and why they were either displaced
or evolved.
 It ensures that the managers does not have to re-invent the wheel
 Practical management of people and their behavior is founded on ideas of what will work in
practice
 Management thought has evolved to cope with changes in the manager’s environment.
Behavioural Reactions to the Early management Writers
Taylor’s approach was seen as having very significant and fundamental problems associated with it,
principally in its view of workers as simply mechanistic cogs in the production process whose sole
motivation is money. The main criticism of Taylor’s treatment of workers are:









It offered a one-dimensional approach to motivation which ignored job satisfaction;
It tended to generate fears of mass redundancies, strikes and long-lasting resentment;
It promoted resistance to change;
Workers suspicion of work measurement and time and motion studies arose due to one-sided
applications- working harder for the same money!
Power was concentrated in the hands of the production controllers and decision power was
removed from workers, thereby losing their potential contribution;
Rationalisation, division of labour and specialization led to de-skilling;
Taylor’s ideas were relevant economic view of workers and their behavior was too simplistic;
The social group aspect was therefore ignored
Specialisation led to boredom and monotony and ignored individuality and the desire for
variety.
The notion that adherence to the determinants of scientific management would resolve all the problems
of management was clearly naïve.
Taylor was just concerned with one narrow aspect of organization and management, too locked into the
advantages of specialization in automated processes to see the implications for people or to give any
credence to the human dimension in organizations. Whilst recognizing the serious shortcomings of the
scientific management approach, though, we must be careful not to denigrate the value that it has and
this is significant.
According to Drucker, Taylor’s ideas may yet play an important role in developing countries like China
and India. He saw his central theme as replacing industrial warfare with industrial harmony through
higher wages from increased output; the removal of physical strain from incorrect work methods; the
development of the workers and the replacement of a “boss” by a manager with a duty to improve the
worker’s lot. His work has had a lasting impact on management and although it has traditionally been of
most importance in manual work and automated processes (where payment systems based on
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standardized work practices continue to be used), the Scientific approach still underlies most ways of
organizing clerical and routine administrative work.
TO PRINCIPLES OF MANAGEMENT
The approaches of Fayol and Urwick are now seen as being far too mechanistic and rigid, as we demand
a more flexible approach to management and organization. For example, the straight line structure of
the proposed hierarchy makes sense in terms of clarity and the avoidance of conflicting orders and
standards, but it is generally accepted now that all but the smallest undertaking needs some form of
structure which enables functional specialists to provide advice, guidance and orders to staff apart from
their direct line manager.
There is only recognition of the formal organization and its various structures. The informal organization
and the power of workgroups and their unofficial leaders are not accounted for. The approach is
concerned with the skeletal framework rather than the behavioural flesh that gives it life, direction and
movement.
REVIEW POINTS
1. Which perspective is best represented in the scientific management approach?
2. Was scientific management a “fair’ system
3. Outline the major contributions of TWO of the following writers to the development of
management thought: FW Taylor, H.Fayol and M. Weber. Select one of these writers and explain
in what way they did not fully understand organisational behavior
4. Give two reasons why understanding the history of management thought is important
5. Write Fayol, Henri Fayol, and Taylor’s principles of Management.
MAIN APPROACHES TO ORGANIZATION, STRUCTURE AND MANAGEMENT
CLASSICAL
Emphasis on purpose,
Formal structure,
Hierarchy of management,
Technical requirements,
and common principles of
Organization.
HUMAN RELATIONS
Attention to social
factors at work,
groups, leadership,
the informal
organization, and
behavior of people.
SYSTEMS
The integration of the
classical and human
relations approaches.
Importance of the sociotechnical system. The
organization within its
external environment
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CONTINGENCY
No one best design of
organization. Form of
structure, management,
and success of the
organization dependent
upon a range of
situation variables.
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HUMAN RELATIONS SCHOOL: UNDERSTANING THE PEOPLE DIMENSION
The main feature of the Classical School is its concentration on structure. It views the
organization virtually as a machine, and indeed another term for this view of organization is
‘mechanistic’.
From the 1930s, greater attention began to be paid to the way in which the human dimension
affected the operation of organizations and what this meant for management. The basic idea
underlying this work is that to understand and improve an organization you need to understand
the people who work for it and to take account of the way in which they interact with it.
The key work which defines the human relations approach in respect of organization and
management comes from Elton Mayo’s studies at the Hawthorne plant of Western Electric
Company between 1927 and 1932. Other important contributions have been from Maslow and
McGregor in respect of motivation and leadership.
ELTON MAYO AND THE HAWTHORNE STUDIES
The purpose of the researchers was to trying to find the optimum level of lighting in the plant in order to
maximize productivity this was done by Elton Mayo and the Hawthorne Studies. It began as scientific
management approach, but surprising finding was that productivity increased among the group of
workers being studied both when the level of light was increased and when it was deceased. The
conclusion led Mayo that what was affecting performance was the special attention being paid to the
group of workers rather than any external physical factors. As result their working lives had suddenly
become more interesting because of the experiments which were taking place; they felt important and
valued, and the result was increased enthusiasm for their jobs and a higher output.
This established that performance was related to psychological and sociological factors as well as purely
physical ones and the organizational structure. Mayo also researched on other forces at play in the
workplace. These are as follows:
A.



Workers are strongly motivated by social needs such as
For social interaction
Self-esteem and recognition
A sense of belonging and security
To seek satisfaction of those needs over and above any others, including the need for money, once a
certain level of remuneration as been achieved.
B. Individual workers belonged to groups at the workplace which had their own codes of behavior,
leaders and means of enforcement of the group norms (which included notions of what
appropriate output standards were), constituting a whole ‘informal’ organization within the
formal one.
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Mayo demonstrated that human attitudes and behavior seem to be what govern activity at the
workplace, and what was required was to examine the needs and interaction of individuals, the ways in
which groups operate and what this means for management.
The Hawthorne showed that the formal structure, organization, values and goals of an undertaking are
by no means the only, or even the main, determinant of behavior in the workplace. There will also be
an informal network of work group and interactions which constitute an alternative form of organization
for the workforce.
The informal organization determines to a large extent, worker’s attitudes to the formal organization
and how they view the formal structure of authority. It is work group norms which tend to set standards
of performance, such as timekeeping, output, quality, attitudes towards customers and clients, dress
codes, etc., and management will find it difficult to impose standards which do not accord with them.
This concept has important consequences for organization and management in that it must aim to bring
the formal and informal organizations into line: in particular, the values and goals which apply.
CONTINGENCY THEORY
The key feature of contingency theory is that there is no one best method that applies to all
organizations. The decision as to what structure would be appropriate will be influenced by such factors
as the external environment in which the organization operates, the motivation of the workforce, their
skills, knowledge, and commitment as well as their experience in the specific working environment.
Technology, the product or service of the organization are also influencing factors.
Contingency theory is primary based on the findings of personal observations within organizations.
There are some important researches in this field.
JOAN WOODWARD
Joan Woodward her purpose was to assess the degree to which the classical principles of organization
were being applied in British firms and analyse the relationship between organization structure and
success and that was in 1950. Woodward looked at 100 firms each employing at least 100 people. The
firms which was analysed were involved in wide range of activities such as manufacturing, commerce,
medical institutions, building, newspapers etc.
Woodward identified three broad categories which seemed to favour particular forms of
organizations.
a) Unit or Small Batch Production
A hierarchy of increasing application of technology within the category covered the production
of items to customers’ specifications and prototypes, the making of large equipment in stages,
and the production of small batches of items.
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In this category, it was found that organizational structure was quite loose. There was much
delegation of authority within a standard pyramidal hierarchy characterized by relatively small
spans of control and quite permissive management attitudes.
b) Large Batch and Mass Production
The production process is much more automated, the firms being those concerned with the
production of standard items in large quantity and assembly-line working
These organization were characterized by much tighter control procedures and rigid large-scale
hierarchies with the traditional pyramid shape being very elongated at the base, reflecting the
way in which large numbers of workers are required at the lowest levels, but there are relatively
few middle and senior manager. Span of control is very large (which may account for the
management problems experienced by many large industrial concerns)
c) Process Production
This is characteristic of the oil refineries and chemical manufacturers.
Such firms tended to be flexible again, but within a different organization structure, with
diamond-shaped hierarchies which reflected the small number of operative required to services
and maintain the process machinery, and the larger group of middle managers, scientists,
accountant, etc.
Woodward’s key contribution to organizational theory was the discovery that, far from there being set
of preferred organizational principles, the main determinant of structure is the kind of activity and the
technology with which organizations are concerned. As she stated:
‘The criterion of the appropriateness of an organizational structure must be the extent to which it
furthers the objectives of the firm – not, as management teaching sometimes suggests, the degree to
which it conforms to a prescribed pattern. There can be no one best way of managing a business.’
BURNS AND STALKER: THE INFLUENCE OF THE ENVIRONMENT
Burns and Stalker studied management and economic performance in a series of electronics firms where
the key to success was the ability to respond quickly to technological innovation.
The proposed two idea types of management organization which was
THE MECHANISTIC STRUCTURE
The mechanistic structure, sometimes used synonymously with bureaucratic structure, is a management
system based on a formal framework of authority that is certainly outlined and precisely followed. An
organization that uses a mechanistic structure is likely to have the following characteristics:
 Clearly specified tasks
 Precise definition of the rights and obligations of members
 Clearly defined line and staff positions with formal relationships between the two
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
Tendency toward formal communication throughout the organization structure
Perhaps the best example of a mechanistic structure is found in a college or university. Consider the
very rigid and formal college entrance and registration procedures. The reason for such procedures is to
ensure that the organization is able to deal with a large number of people in an equitable and fair
manner. Although many individuals do not like them, regulations and standard operating procedures
pretty much guarantee uniform treatment. But those same rules and procedures, with their timeconsuming communication and decision-making processes, tend to bog down organizations.
Mechanistic organizations are appropriate when the external environment is fairly stable.
The biggest drawback to the mechanistic structure is its lack of flexibility, which may cause an
organization to have trouble adjusting to change and coping with the unexpected.
THE ORGANIC STRUCTURE
The organic structure tends to work better in dynamic environment where managers need to react to
change. An organic structure is a management system founded on cooperation and knowledge-based
authority. It is much less formal than a mechanistic organization, and much more flexible. Organic
structures are characterized by






Roles that are not highly defined
Tasks that are continually redefined
Little reliance on formal authority
Decentralized control
Fast decision making
Informal patterns of both delegation and communication.
Because the atmosphere is informal and the lines of authority may shift depending on the situation, the
organic structure requires more cooperation among employees than does a bureaucracy.
One example of organic structure is the Salvation Army. Although branches are located throughout the
nation, the organization does not have a complex structure; it encourages different units to take on new
challenges. The Salvation Army does not rely heavily on written rules and procedures. Therefore, this
organization can create the procedures that work best as different situations arise. The Salvations
Army’s ability to take on new tasks and to fulfill its mission regardless of the circumstances it faces is
one reason why it’s a hallmark of organic organizations.
Burns and Stalker argue that many of the features of the classical approach (formal line structures of
authority, clear division of labour and a tendency towards centralized decision making, with orders
flowing down from the top) are appropriate when environments are fairly stable with little change.
When environments are changing rapidly a more flexible (organic) structure is appropriate (flexible
structures, delegated authority and decision making, and decentralization)
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LAWRENCE AND LORSCH
They put forward two key concepts Differentiation and Integration

Differentiation: if environments are changing rapidly and becoming difficult to predict,
organizations will set up more departments and sections. These in turn will become more
specialized, with a greater division of labour. These parts of subsections of an organization
develop different attitudes and ways of doing things. This situation creates the need for:

Integration: ways in which the organization as a whole draws together its parts or subsystems in
order to achieve its objectives.
Lawrence and Lorsch concluded that when environments are changing rapidly, both differentiation and
integration need to be at a high level. In contrast, when environments are fairly stable, only integration
needs to be high.
ASTON GROUP
This researchers, based at the University of Aston, put forward yet another variation of the contingency
theory theme.
They examined the way in which the classical concepts of structure were applied in different types of
organization. Concepts of specialization or division of labour, standardization of methods, formal rules,
and tall structures with many layers of authority and centralized decision-making, they argued that
there were many possible permutations where each of these elements may be at high or low level.
They identified the size of the organization as the most important factor influencing structure. The
concluded that as organizations grow larger they need to be more specialized (greater division of
labour), more formalized (more explicit and stricter rules), more standardized (similar procedures and
methods), but less centralized (greater delegation of decision-making). This would assist firms to
perform well as they grow larger.
THE IMPORTANCE OF CONTINGENCY THEORY
Contingency theory disputes the idea that, whilst organization and management structures are key
determinants in the performance of an organization, there is one best way to organize an enterprise.
If we draw the research together we find that if an organization is to be successful in achieving its goals,
it must be do designed as to be able to meet demands arising from
It is dangerous to take the ideas of the classical approach as a fixed blueprint and apply them to every
organization. The way you decide the best structure for an organization is to ask ‘What design of
organization will be most successful in achieving its objectives?’ The key phrase of contingency theory
is that there is no one correct way of designing an organization: it depends on the circumstances within
which the organization finds itself.
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The contingency models of organization concentrate attention on what is an appropriate organizational
form in the light of the situation pressures on the organization. Even though the various studies were
conducted in industrial organizations, we can see same processes at work in all types of organization.
For example the impact of technologies is a clear example of the type of influence identified by
Woodward, and administrative support structures of many public bodies have been moving steadily
away from the highly rigid rule bound bureaucracies of the past, along the continuum proposed by
Burns and Stalker, towards a more organic structure, in response to the continual pressure of change to
which they have been subjected.
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SYSTEMS THEORY
Systems theory developed in the 1950s and 1960s alongside management science, and derived from the
work being done on mechanical, electrical and biological systems. It is also related to the science of
cybernetics which is the study of control in various types of systems.
The systems approach is basic idea of a system by reference to a biological system, such as a human
being or any other animal – but the principles remain true for any type of system, be it an information
system (like a computer) or an orgnisation. The system, at its most simple level, takes inputs, such as
food and drink, sights and sound, from its environment and transforms them through various
physiological and physiological processes into outputs – such as actions of different kinds.
The same line of thought can be applied to organizations. The organization is essentially the
transformation process, but in viewing it we must be aware of the inputs and outputs as well.
BASIC ELEMENTS OF A SYSTEM
Inputs
Organization or
Transformation system
Outputs
Feedback
A number of points about the nature of systems need to be explained.
a) Sub-Systems
There are likely to be a number of ‘sub-systems’ each a separate entity but each forming an
integral part of the whole. The outputs from one sub-system are likely to form, at least in part,
the inputs for another sub-system.
Management must, therefore, understand and consider the inter-relationships and interdependence of the various parts which make up the organization.
b)
Boundaries and the Environment
System which function entirely within their boundaries and are totally unaffected by anything
outside and are known as closed systems.
Open system, this is where flows occur across the boundary and factors outside the system
affect it significantly.
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Environmental monitoring is a key activity for management as it enables managers to be aware
of change which may affect the functioning of the organization.
c) Objectives and Goals
All systems must have a purpose, at the very least to survive, but in terms of the types of
organization we are concerned with, some form of mission expressed as aims, objectives or
goals.
For example Ford, would have as its objective the production of motor cars, but each many subsystems which make up the organization would have its own goals: for example, to paint the
body parts and, a sub-system of that to mix paints into the correct colors.
THE ORGANISATION AS A SYSTEM
The systems approach concentrates attention on the dynamics of the organization. It allows us to
consider not just how the organization functions in formal or informal terms, but what it reacts to and
how change may affect it.
If an organization is to survive and thrive in its environment, it needs information about its outputs: for
example, how well its products are meeting customers’ needs, or whether is by-products or emission
are causing environmental problems?
Departments constitutes a sub-system of the organization as a whole, and we can show the
interconnections between them as follows
THE INTERDEPENDENCE OF SYSTEMS
Department A
Department B
Production System
Sales system
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For the organization as a whole to function effectively each of the systems must themselves function
effectively, and they must all function effectively together. Department A must produce goods
efficiently, Department B must sell these goods, Department C must see to it that the goods reach the
customers and Department D must pay for the raw materials used in production, and pay employees’
wages, and must collect money as payment from the customers.
Any malfunctions in a means that production will adversely affected and so disturb the functioning of
departments B, C and D. If Department B fails in its functions the problems of unsold goods will feed
back to production and will affect distribution and finance. If Department D fails to pay or collect
money, all the other departments would be in serious trouble.
SUBSYSTEMS OF THE ORGANIZATION
The system approach is a way to illustrate how inputs are organized to achieve the desired outcomes in
an effective manner. Advocates of the systems approach, notably Kast and Rosenzwieg, and Trist and
Bamforth, have attempted to develop categories for the different sub-systems which make up the
organizational system as a whole, so that we can concentrate more clearly on the organizational
implications of each. Three main sub-systems are identified.



The technical sub-system
The psycho-social sub-system
The structural sub-system
In addition, Kast, and Rosenzweig proposed two further elements:
A. Technical Sub-System
Any organization employs technology in its broadest sense to assist it in carrying out tasks.
The technology used is an important determinant of the organization. It prescribes to a considerable
extent the way the work is done, the organization form and the relationships between people. The
technical sub-system, explains a great deal about organization and management.
B. Psycho-Social Sub-System
The other key element that organization employs is, of course, people. The goals, values,
aspirations and modes of behavior of the members of the organization will also be important
determinants of the way work is done and the relationships between people in the organization.
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C. Structural Sub-System
The structural sub-system is concerned with the ways in which this is achieved - the division of
tasks their grouping into operation units, their coordination and control. It is also true that
structural form is constrained by the availability of appropriate personnel and technology, so the
interdependence can be seen.
D. Goals and values Sub-System
For productive industry, goals and values are generally expressed in terms of, or at least
underpinned by, quantifiable targets – profits, numbers of units produced over time, etc.
Goals and values do change considerably over time and can have a significant effect on other
sub-systems.
E. Managerial Sub-System
The best example of this is the concern with ‘quality’ across activities – customer care, total
quality management – which demands that values, structures and technology are employed in a
particular way in order to give proper expression to the particular managerial purpose.
REVIEW POINTS
1.
2.
3.
4.
5.
6.
7.
Define the term “systems”.
Draw a system diagram for an organization of your choice
List all the main inputs it uses and its positives and negatives outputs
What does systems theory contribute to your study of organizations?
Define the contingency approach
In what ways can your chosen organization be termed “excellent”?
Outline the contribution of systems theory to the study of organizations. State the meaning of
the contingency approach to managing organizations. Apply the contingency approach to an
organization that is experiencing rapid change.
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CONTEMPORARY THEORIES: THE SEARCH FOR ORGANIZATIONAL DRIVERS
The most recent approaches to the study of organizations and management have been empirical in
nature – that is to say, based on observation, although using more scientifically acceptable techniques
than the classical theories. They have sought to identify features of organization and management
which lead to successful and unsuccessful organizations, or which are associated with particular types of
organization.
The researches made a considerable contribution to organizational and management practices but they
were relatively short-lived and have been overtaken by later researchers seeking to identify what
practices are vital to organizational survival and growth.
Excellence Theory
A study of sixty-two American companies with outstandingly successful performance was conducted by
Peters and Waterman, and resulted in the publication of their hugely influential work, In Search of
Excellence in 1983.
The theory is based on a total commitment to series of management and organizational imperatives.
These are expressed in eight attributes that are characteristic of excellent, effective and innovative
companies.
a) Employee Engagement
Excellence in all of its varying definitions will only be achieved if employees are engaged in and
with the organisation’s business objectives. It is difficult to achieve this employee engagement
because it is mostly associated with the level of motivation of the individual.
REVIEW POINTS
1.
In what ways can your chosen organization be termed “excellent”?
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BUREAUCRACY
Fayol in France and Taylor in the USA were working separately around century, to arrive at it is called
inconsistent doctrines, which is called classical school.
Max Weber a Germany sociologist (1864-1920) paid attention to the subject of organization and his
concept of bureaucracy. Max Weber believed in the use of power and authority in organizations.
Max Weber’s though was not like Fayol and Taylor – saying this is how an undertaking should be run nor
did he, like other early writers, tell “How I did it”. Weber describe what seemed to him to be the
prevailing kind of organization and His thinking was how social and economic development, and why it’s
growing importance. (Max Weber was a university professor)
Max Weber disliked that many organization were managed on a personal such as family-like basis and
that employees were loyal to individual supervisor rather than to the organization. He believed that
organizations should be managed impersonally and that a formal organizational structure, where
specific rules were followed, was important. He did not approve that authority should be based on a
person’s personality. He though authority should be something that was part of a person’s job and
passed from individual to individual as one person left and another took over. This nonpersonal,
objective form of organization was called a bureaucracy.
WEBER AND TYPES OF AUTHORITY
The kinds of organization Weber distinguished by diagnosing the source of authority. He came up threefold
1) CHARISMATIC
2) TRADITIONAL
3) RATIONAL-LEGAL
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CHARISMATIC BASIS FOR AUTHORITY
The Greek term “charisma” refers to the special personal quality or power of an individual that makes
him or her capable of influencing or inspiring others. It is rare quality, possessed by few people who are
able to lead through the force of their personality alone. Examples are from political leaders (Nelson
Mandela, Mao Tse Tung, Hitler,)
Charismatic leadership in organization are managed or governed in accordance how the leader’s wishes
and invariably have staff who give dedicated service. The organization may even fragment, as different
“disciples” of the leader all claim to be his or her true heirs. The new management almost invariable
lacks the charisma of the old and therefore the organization becomes one of Weber’s two other types.
TRADITIONAL BASIS FOR AUTHORITY
Precedent and habit are the bases for the exercise of authority in this type. What has always happened
shall continue to happen and any proposal for change is viewed very unfavorably. The leader has
authority because it traditional comes with the post of leader, rather than because of any personal
charisma.
People follow the leader because of the accepted power of the office. Distribution of power is at the
disposal of the leader and again derives from the power of the leader’s office. Distribution of power is
at the disposal of the leader and again derives from the power of the leader’s office.
Organisations may be characterized by simple patronage, where appointments are in the personal gift of
the leader. It is by no means uncommon for managerial posts to be handed down through members of
family – virtually hereditary transmission of a dynasty – or for managers to bring in their “own man” to
reinforce their position.
RATIONAL –LEGAL BASIS FOR AUTHORITY
The system is called rational because it is, thought Weber based on reason or logic – the means are
specifically designed to serve the ends (or goals) with the organization like a well-planned machine
where each part takes its share of making the whole function efficiently. “Legal” applies because
authority is seen as “the rule of law” within the oganisation, the rules being laid down by those allotted
the right and duty to lay them down and accepted by staff precisely because that power is legitimate.
Rational-legal authority requires as its organisational system what Weber termed “bureaucracy” a
system of accepted, legitimate rules and regulations governing the functioning of the organization.
BUREAUCRACY AND ITS OPERATION
Weber saw bureaucracy as being the ultimate expression of organisational form:
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The prevailing form of organization for most enterprises such as industry and commerce, government
institutions, trade unions, the military. Bureaucracy is also used to describe a system of rule by officials,
whereby what should be an open institution appears to have insulated itself against participation by the
general public and is on longer representative of the people to which it is supposed to be responsible
(e.g. the public, shareholders, customers).
Bureaucracy is a description of a way of organizing a social institution, incorporating a specification of
one approach to structure, internal relationships, and distribution of authority and working procedures.
THE FUNCTIONS OF BUREAUCRACY
 Specialization
The regular activities required for the purpose of the organizations are distributed in a fixed way
as official duties.
The duties of each post are closely defined, and so are the qualifications of the person required
to fill it. The main emphasis is on the tasks and standard of performance needed by the
undertaking in order to ensure efficient performance. Because that performance is, essentially,
and impersonal thing, the individual employee’s personality and other talents are irrelevant.
 Hierarchy of authority
Each manager has clearly defined authority (which he or she must exceed) over subordinates in
a particular field (beyond which he or she must not stray), and they must obey. Each office is
supervised by the one above it.
 System of rules and procedures
The bureaucracy has a firm code of procedure to cover all possible foreseeable events – and
should the unforeseen occur, a decision is sought from a “higher authority”, and the precedent
established is added to the book of rules. Extensive written records are necessary and indeed,
verbal communication without any written confirmation of decisions and actions is positively
unsound. Training of employees consists largely of teaching them to find their way about in the
rules.
 Impersonality
Detached impersonality governs decision-making and activities generally – both internally, for
example in dealings with work colleagues, and externally when dealing, for example, with
customers and our clients. Impartiality and equitable treatment come from stern noninvolvement in or – even a seeming unconcern for – the particulars and problems of others;
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what matters is how the case fits the rules and that, and only that tells the official what should
be the higher authority’s considered decision.
 Employment
There is a great deal of certainty and security about working in a bureaucracy, and the overall
treatment of staff both derives from the above characteristic and supports the whole fabric of
the organization.
Recruitment is based on precise qualification for each level, rather than on personality, and
indeed impersonal competition is desirable (as for example, has been the case for many years in
the civil service). Salaries are related to posts occupied, not to individual job-holders’ talents
and performance. Security of employment is absolute, subject to good behavior. Promotion is
governed partly by achievement, partly by seniority. In return absolute loyalty to the
undertaking is demanded.
TO BUREAUCRACY
Despite the clear advantages of bureaucracy that we noted in the last section, are they really efficient?
Nearly all government organization adopt this form of organization to some extent and Weber claimed
they were capable of achieving the highest efficiency, but behaviouralists question if this is true today.
Why is this?
 Impersonality can ensure a common level of treatment but may also lead to stereotypical
behavior and lack of responsiveness to individual incidents.
 Human beings and individual circumstances vary pretty much infinitely and trying to apply rigid
rules can mean inefficiency, even injustice, in the non-standard case.
 Initiative may be stifled as rules become ends in themselves
 Every organization requires a number of mavericks to challenge the status quo and move the
organization forward.
 Bureaucratic rules/procedures can cause a lack of flexibility or adaptation to changing
circumstances
 There can be a lack of attention to the informal organization and the development of groups
and their goals. These provide the cohesion and communication that allow a rule-bound
organization to function
 Red tape and regulation may limit the psychological growth of the individual – “alienation”
among younger workers is quite likely, particularly where the work is machine-paced, repetitive
and does not call for individual decision-making and judgment
 Handling problems is a standard fashion, or alternatively passing responsibility to someone else
instead of using their own initiative did not satisfy most workers’ needs.
 There is a need for fluid organization and relationships in a changing environment.
 Environment are becoming more dynamic and prone to change.
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So a bureaucracy may serve most of its clients well – most of the time but no account can be taken of
the individual circumstances of either the member of stall or the customer/client. The essence of this is
that each activity/transaction/contact has to be categorized according to the rules and there is no
incentive to distinguish cases and develop new approaches. This leads to a lack of adaptation to the
changing needs and demands of people both inside and outside the organization.
Officials in a bureaucracy are employed, trained and paid to maintain routine efficiency, to follow
precedent and conform to the rules, not propose changes to them. The culture engendered by this
dominance of rules can also create unwarranted adherence to them. A familiar feature to all who have
been mismanaged or mishandled by bureaucracies is that when you question why something is being
done, there often seems to be no reason which can be given.
Review Points
1.
2.
3.
4.
5.
6.
7.
8.
Give two reasons why understanding the history of management thought is important
Rank the five most important criticisms of scientific management
Rank the five most important criticisms of bureaucracy
Why do governments seem to prefer bureaucracies?
Define a dynamic environment and give Two major environmental examples
How rapidly is your own organization/industry changing?
How is it changing
How is your management responding, and how are your workers reacting, to the change?
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MOTIVATION THEORIES AND THEIR IMPLICATIONS FOR MANAGEMENT
Elton Mayo’s contributions came as part of the Hawthorne studies, a series of experiments that
rigorously applied classical management theory only to reveal its shortcomings. The Hawthorne
experiments consisted of two studies conducted at the Hawthorne Works of the Western Electric
Company in Chicago from 1924 to 1932. The first study was conducted by a group of engineers seeking
to determine the relationship of lighting levels to worker productivity.
Many of the ideas of Elton Mayo can be deployed to assist the integration of individuals into their work
roles. Important among these are the following points.
 Individuals are social beings just as much as economic beings and will only perform will in
organizations if their social needs are met.
 Individuals expect to be treated as human beings in the workplace; they expect to treated with
dignity and politeness.
 Individuals like to feel that they have some control over their own work situation; they
appreciate being consulted over matters which affect them.
 Good communications are crucial; people have a right to know what is going on in the
organization
 Grievances should be dealt with quickly; if not, people may broad and discontent may fester.
 Individuals value praise when they feel that they have earned it.
 Individuals performs will in a secure environment; they react against uncertainty and threats.
 Within enterprises there is an informal organization of friendship groups, gossip and generally
accepted norms and values. Management should take account of this, e.g. when changing a
worker from one job to another.
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The major breakthrough of the human relations approach was the realization that people, unlike
machines, are not passive instruments of the organization who will always pursue organization goals; in
fact they often pursue goals which conflict with those of the organization. The essence of the practical
application of the approach is to try to reconcile the needs of the organization and the needs of the
individual.
INDIVIDUAL AND ORGANIZATION NEEDS
ORGANISATIONAL NEEDS
INDIVIDUAL NEEDS
Physical well-being
Job satisfaction
Personal development
Achievement
Respect from workgroup
High productivity
Low absenteeism
Co-operation
Industrial harmony
Constructive disagreements
Low labour turnover
If these needs are met
Contented, productive workforce
NEEDS AND MOTIVATION
Each human being is an individual, and each individual’s behavior is not entirely rational – not
always prompted by his conscious mind. Psychology makes a basic assumption that all behavior
has a cause: a person does something because of a basic underlying reason. The most
commonly accepted theory about causation of human behavior is “need theory”.
Maslow’s Hierarchy of Needs
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Maslow suggested that people are in a continuous state of motivation, and that the nature of
that motivation is variable and complex. People rarely reach a state of complete satisfaction
except for a short time. As one need is satisfied, another assumes prominence and motivates
further effort until satisfied – when yet another clamours, as it were, for satisfaction. He
divided these needs into five categories which are shown below in pyramid diagram; this helps
to accentuate the magnitude of primary needs as a base upon which to build towards higher
order needs such as status achievement and self-fulfillment.
Maslow’s Hierarchy of Needs
selfActualisation
Esteem/Ego
Love/Social
Safety/Security
Physiological/Physical
In order for a higher level need to be met, lower ones must first be satisfied. Satisfaction at a
lower level means that satisfying the need at the next level becomes the prime motivator. For
example, if you get that section head’s post with its much higher salary, your basic needs are
likely to be well catered for and you will probably stop worrying about paying the bills and your
immediate hob security, etc. Your strongest motivation now is likely to be in the area of social
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acceptance, gaining the respect and friendship of your new work colleagues. And once that has
been established, or perhaps it already is from beforehand, you may then be driven by the
“esteem” level of needs which include what your new office is like or what size company car
you may get.
Maslow’s studies and proposals related to human behavior per se, they have been almost
universally accepted as the key to understanding what motivates people in the workplace.
The five categories in the hierarchy
 Physiological/physical needs
The obvious basic needs arise from a person’s instinct to stay alive and reproduce – for
food, water, sleep, sex. These are the most powerful motivating forces and must be
taken care of before anything else. If you think of prisoners in the concentration camps
during World War II, obtaining food and water in enough quantities to stay alive was the
prime motivator – over and above personal safety and, in many cases, friendship.
Physiological needs can, therefore, exert a tremendous influence over behavior. And
this can extend to behavior at work.
 Safety/security needs
Once the physiological needs have been met, higher needs emerge and dominate
behavior. Safety needs are those which generally protect people from their
environment – at its most basic, from the physical environment by housing of some
sort, clothing (for warmth and/or protection from the sun), defense against natural
dangers (inserts, animals, germs etc).
In the work environment, this can emerge as a need for a steady job, redundancy
safeguards and so on. To extend this into the work environment, we can identify
many members of a workforce who need reassurance and the safety of routine
when faced with the pain of change and insecurity.
 Love/social needs
Physiological and safety needs are basically instinctual, whereas these sociological
needs – to belong, to be accepted by colleagues and friends, to find affection and
love – are acquired, and exist on a more refined level.
Social needs are the first of the secondary needs in Maslow’s hierarchy. The
workforce are satisfied in their physiological and safety needs, so they will initially be
striving for this next tier in the hierarchy, namely to feel part of the organization,
part of the team – in both the formal and informal structure of the workplace.
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Central to this is that people need a degree of social contact within their work – if
the job doesn’t provide it, they are likely to take it anyway. The importance of this,
and its impact on motivation, cannot be underestimated. Many studies have shown
that, whilst money comes fairly low down on most people’s list of what motivates
them, social contact and good relationships at work figure very highly.
Research has also clearly shown that membership of and acceptance into groups –
whether small informal groups at work or large organisational groups – influence the
manner in which individuals work. The feeling of “belongingness” and the desire for
social approval are reinforced by the feeling of security that group membership
brings.
 Esteem/ego needs
People want to feel a certain pride in themselves – that their abilities are tested and
prove adequate, that they are achieving something, that they are useful as
individuals.
These are psychological needs, concerned with the individual’s view of him- or
herself. As motivating forces, they are often difficult to satisfy. Their influence on
human behavior is very important in the context of management. Maslow notes:
“Satisfaction of the self-esteem needs leads to feelings of self confidence, worth, capability
and adequacy, of being useful and necessary in the world … thwarting of these needs
produces feelings of inferiority, of weakness and of helplessness. These feelings in turn give
rise to either basic discouragement or else compensatory …. Trends.”
A position of authority having an office or telephone to yourself, status symbols such
as a company car office size or even size of office chair, etc. are the sort of things
which are important, despite their sometimes apparent triviality, they are the means
by which ego and esteem needs are satisfied. Even the titles of jobs can be
significant – it has been found that “rodent exterminator” generates more pride in
the job than “rat-catche”, and similar, “refuse collector” has more status than
“dustman”.
 Self-actualisation needs
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The person fortunate enough to satisfy the first four needs is still driven on by an
urge to accomplish everything of which he or she is capable, to realize his or her
potential. Maslow describes it thus: “Man’s desire for self-fulfillment, namely the
tendency that might be described as the desire to become more and more what one
is, to become everything that one is capable of becoming.
Every individual will have a different level and form of self-actualisation. There is no
prescription that people should aspire to become the greatest musician or painter or
accountant, etc. The important thing is that everyone, by nature, is only truly
content when allowed to go as far as he or she possibly can to make the fullest use
of his or her capabilities. Maslow recognized that for many people, this need would
be seldom satisfied.
Besides the classification of needs into five groups, the critical feature of Maslow’s analysis is
the hierarchy itself – the suggestion that as one need is satisfied, a higher order one becomes
dominant as a motivator.
The implied rigidity of the hierarchy has been criticized for not taking account of the strength of
need some individuals feel which alters the ranking order and causes people to seek
satisfaction of some seemingly higher level ones before lower level ones. For example, for some
people, self-esteem may be more important than love, or the creative drive for self-fulfillment
may outweigh even the most basic physiological needs. Maslow does, in fact, acknowledge
these variations, as well as cultural and social differences, and the way in which the hierarchy
plays down the multiplicity of factors involved in motivation.
However, the basic classification has enduring relevance to modern management. In particular,
it emphasizes that incentives to motivate people will depend upon their current level of need
satisfaction. It is in the organisation’s best interests to ensure that pay and conditions of
services, and the design of jobs, are such that the lower needs of the workforce are met
through them, and this allows employees to be motivated by their needs for personal
achievement and recognition, and self-development and realization of their potential.
MCCLELLAND’S ACQUIRED NEEDS THEORY
D C McClelland (1972) developed need theory along slightly different lines. He argued there are
three basic types of need:
a) Need of affiliation
By this, he means human being need meaningful relationship (very few people are true
loners), and one of the places they will seek these relationships (very few people are
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true loners), and one of the places they will seek these relationships is in the work
situation, so who you work with is very important
b) Need of power
Some people are drive by a need to make a strong impression on people and events –
they want to shape things in their work lives.
c) Need to achieve
To many people the sense of getting on, progressing or being promoted is very
important.
The interesting feature of McClelland’s theory is that he associates the different types of need
with people at different levels of the organization:



People high up in the organization tend to have a strong drive for power and a wish to
make an impact on events. They have largely met their need for achievement. They
cannot go for affiliation because people at the top cannot have close relationships with
others in their organization. Top people have to make decisions which may be disliked
by those below so they have to be distant from their subordinates.
People in the middle of the organization hierarchy are likely to have considerable
achievement needs- they are often string to get to the top. They have some need for
power but, like the top people, the need for affiliation is played down because these
middle managers are often competing with each other for promotion and too many
friendships could get in the way of this competition.
People at the lower levels of the organization often have a strong drive for affiliation.
At these levels, work can sometimes be rather and may be undertaken in groups, so
friendships and mutual understanding (e.g. the feeling of all being in the same situation
and facing similar problems) can help give satisfaction to work.
The following diagram shows McClelland’s links between types of need and levels in the
orga
nizati
on.
High
level
Middle
level
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High level – Need for power
Middle level – Need of achieve
Lower level – Need for affiliation
McClelland’s model is useful in that appropriate incentives can be directed to encourage
satisfactory performance by taking account of an individual’s level in the organization.
McClelland also draws attention to the fact that when people are not satisfied with their work
lives they become frustrated. They may seek satisfaction, become antagonistic, or apathetic.
He argues that individuals have a number of key personality features, and that job success
depends on their being able to combine these features into a satisfying pattern in their work in
oragnisations. He classifies these personality features as follows:





Cupertino- the desire to be helpful and to carry out the wishes of those who hold
legitimate authority. Some individuals like to have their roles clearly defined and to
behave in a way which is consistent with such roles.
Approval – some people need people to like them. They want to be accepted; they are
warm, friendly individuals, who seek the approval of others.
Power, prestige, money – for this personality type, the actual work may not matter too
much; what is important to such people is the money they earn, the power they
exercise or the prestige that is accorded to them. They may even dislike the work itself,
but the status attached to it compensates for this.
Curiosity – the need to find out about things and make discoveries. This is the driving
force for research scientists, etc.
Achievement – some people set high but realistic standards against which to measure
their performance; their thoughts are constantly on meeting challenges and succeeding.
According to McClelland, achievement-oriented people are the real success in industry.
This model can be applied by matching the incentive offered to an individual to that
person’s personality needs.
Alderfer’s ERG Theory
Clayton Alderfer (1972) produced a revision of Maslow’s theory, again involving only three categories of
need, but with less emphasis on the strict hierarchy. ERG theory comprises:

Existence needs – these are concerned with survival and may be met by pay and good working
conditions.
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
Relatedness needs – these are concerned with importance of interpersonal and social
relationships and may be met through groups at work
 Growth needs – these are concerned with the individual’s intrinsic desire for personal
development and may be met through achievement and development in one’s job and the
success of the organization.
Alderfer’s concept suggests a continuum of needs rather than a strict hierarchy, with no necessity for
“lower level” ones to be satisfied before “higher level” ones come into play. There is agreement that,
generally, this would be the case, but he goes on to propose that the less a higher level need is met, the
stronger a lower level one becomes. Thus, a demand for more pay may in fact indicate that the job is
uninteresting and unfulfilling, or an individual who does not get an expected promotion may then
dismay a greater wish for social interaction – a reversion from growth to relatedness needs.
HERZBERG’S MOTIVATORS AND HYGIENE FACTORS
Maslow and Alderfer attempted to describe motivation in terms of human needs. In the context of
management, their theories are only of value if the work factors involved in the satisfaction of such
needs can be identified. Frederick Herzberg developed his two-factor theory of motivation by looking at
various job factors and how they relate to needs.
Herzberg, a psychology professor in Cleveland, Ohio, carried out his study with some 200 engineers and
accountants, and confirmed the findings by a review of the results of sixteen other studies reported
from the USA and Britain, involving some 11,000 employees.
The results of Herzberg’s findings summarized. It shows the spread of responses as bringing about
satisfaction or dissatisfaction for the range of factors considered.
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Factors Providing Satisfaction and Dissatisfaction at Work – Spread of Response
High
Dissatisfaction
Low
Satisfaction
High
Achievement
Recognition
Work itself
Responsibility
Advancement
Growth
Company Policy/Administration
Supervision
Relationship with Supervisor
Work Conditions
Salary
Relationship with Peers
Personal Life
Relationship with Subordinates
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From this research, Herzberg divided the factors at the workplace into two categories:
a) Motivators
These are factors which, when present to a market degree, increase satisfaction from work and
provide motivation towards superior effort and performance. These are:
 Recognition (for work done)
 Responsibility
 Achievement
 Advancement
 The work itself
These factors reflect the higher level needs identified by Maslow, and their satisfaction leads directly to
contentment. However, when absent, these factors do not lead to dissatisfaction. Note that they are all
directly related to the job.
b) Hygiene factors
These are factors which, to the degree that they are absent, increase worker dissatisfaction with
jobs. When present, they serve to prevent job dissatisfaction, but do not result in positive
satisfaction and motivation. These factors are:
 Type of supervision
 Interpersonal relations
 Salary/wages
 Working conditions
 Company policies, rule, etc.
From the list you can see that these factors relate to more basic needs. If not satisfied, they can lead to
unhappiness. However, their satisfaction does not, in itself, result in contentment. Note that all the
factors are related to the context of the job (for example, its environment) rather than the job itself.
(Herzberg uses the term “hygiene” by analogy with the way drains, water supply, and so on, cause illhealth when they are at fault, but do not produce good health simply by being in order.
Herzberg’s most important contribution is perhaps his assertion that work itself is a potential motivator.
He showed that the elements which give most job satisfaction have little to do with money or status,
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and far more to do with achievement and responsibility within the job. Note in particular that the
hygiene factors are those traditional thought of as motivators.
However, Herzberg saw them as essentially either preventative measures, taken to remove sources of
dissatisfaction, or actions taken to produce transitory satisfaction. For example, if working conditions
improve, or there is a pay increase, immediate dissatisfaction may be alleviated, but feelings of
satisfaction are not long lasting. When any of the hygiene factors is deficient, people sometimes express
their discontent in ways detrimental that are to the organization – strikes, grievances, go-slows,
decreased productivity.
The importance of this in a work environment is that managers should ensure that both hygiene factors
(pay, working conditions, etc. – roughly equating with Maslow’s levels ones and two) and motivating
factors (need for personal fulfillment – Maslow’s levels four and five) are satisfied if employees are to be
both contented and motivated. “Investment in hygiene may elimate a deficit, but it does not create a
gain.
In criticism it must be pointed out that the theory does not apply as well to unskilled or semi-skilled
workers with boring and repetitive jobs. For many of these, even though the work is often very well
paid, it is instrumental and a means to an end – to satisfy outside interest. Where there is minimal
satisfaction in the work and little scope for advancement or personal growth, it makes sense to focus on
the pay. However, Maslow did suggest that good performance led to job satisfaction and not vice versa.
Review Points
1.
2.
3.
4.
5.
6.
7.
8.
9.
State Six key points that best present the ideas on motivation of Three of the following
management theorist: FW Taylor; A Maslow; F Herzberg: V H Vroom. Select one other theory
and explain its implications for managers
Brief a group of supervisors on the means by which an organization may motivate its employees.
Select Two forms of motivation and explain why they are likely to be effective.
Exactly what is motivation and how do you know when you have got it?
Compare Theories X, Y and Z
Why does the motivation of staff depend on more than a good salary?
Use a simple diagram to describe the expectancy theory of your choice?
Can you think of a situation in which each of the process theories would be appropriates?
State Three implications of expectancy theories of management.
In your own work situation, which motivation theory would produce the best results and why?
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MODELS OF BEHAVIOUR
THEORY X AND THEORY Y – MCGREGOR
Douglas McGregor developed a typology of two opposed views about employee’s behavior, related to
Maslow’s categories of need, and considered their implications for management and motivation. The
two views are known as Theory X and Theory Y.
a) Theory X
McGregor labeled the traditional, scientific management, view of people as Theory X, asserting
that most managers still held this view despite the post-war dissemination of human relations
ideas. The characteristics of this area:


The average human being has an inherent dislike of work and will avoid it if possible,
wishes to avoid responsibility, has relatively little ambition and wants security above all.
Because of this, most people have to be coerced, controlled, directed and threatened
with punishment to get them to put forth adequate effort towards the achievement of
organisaitonal objectives.
b) Theory Y
If we accept Maslow’s concept of higher needs which people seek to satisfy through work, Theory X
is clearly deficient. The more rounded view of people is encompassed in Theory Y, the
characteristics of which are as follows:



The expenditure of physical and mental effort in work in as natural as play or rest, and the
average human being learns, under the proper conditions, not only to accept but to seek
responsibility.
External control and the threat of punishment are not the only means for bringing about
effort towards organisational objectives. People will exercise self-direction and self-control
in the service of objectives to which they are committed, and commitment to objectives is a
function of the rewards associated with their achievement.
The capacity to exercise a relatively high degree of imagination, ingenuity and creativity in
the solution of organisational problems is widely, narrowly, distributed in the population,
and under the conditions of modern industrial life, the intellectual potential of the average
human being is only partially used.
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Motivation and management based on Theory X is characterized by the carrot and stick approach of pay
awards and other incentives, together with close supervision and control. This is the scientific
management approach – an imposed system of control designed to motivate recalcitrant workers. On
the other hand, motivation and management based on Theory Y seek to produce an environment in
which employees are not frustrated and can take an interest in their work and the overall objectives of
the organization. This puts the emphasis on self-motivation and self-direction.
McGregor’s view was that this latter approach is far more satisfactory because it gives scope for the
meeting of the higher levels needs identified by Maslow, whereas the former is limited only to allowing
satisfaction of the more basic physiological and safety needs.
The culmination of the human relations and human behavior approaches is presented by McGregor as
the participative management style. Under this style of management, employees feel valued and are
treated as individual in the workplace. McGregor argues that if employees do not feel value some them
will spend more time and effort in attempting to defeat management’s objectives than they would in
achieving them.
Participative management styles is directed towards encouraging workers to be self-motivated as far as
possible in a given work situation; management tries to create an atmosphere of Cupertino rather than
merely depending on rules and regulations.
Theory Z – William Ouchi
Ouchi agreed with basic ideas put forward by McGregor’s Theory Y and related these to certain
of the ideas he detected in Japanese organizations.
Ouchi’s theory argues that participation is a crucial motivator. Employees will be motivated to
higher levels of performance if they are involved in meaningful participation in decision-making
in their organization. Employees should participates in groups and enter into consultations
with management to sort out problems and put forward ideas.
Ouchi took the idea of quality circles and developed it far beyond a concern for the quality of
goods and services produced by the organization (important though this is) He is said that the
circles should be a forum for employees’ ideas and a way in which employees could really
influence the running of the organization. He concluded that participation employees would be
a well-motivated employee.
Four Stages of Industrial Man – Schein
Edgar Schein, a former colleague of McGregor, developed a slightly more complex four-part typology to
describe employee behavior, again based on Maslow’s classification of needs.
a) Economic Man
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This view accords with Theory X and the views of F W Taylor. It tends to over-generalise people
into the “untrustworthy, money-motivated, irrational mass” and the trustworthy, more broadly
motivated elite.
The assumption behind management based on this view is that money is the prime concern of
people at work, and motivation must base on such economic incentives.
b) Social man
This is the type identified by Mayo in the Hawthorne studies. Concern for group and individual
satisfaction is liable to be stronger than that for effectiveness and performance.
For example, under this view, assembly line working is thought to be dissatisfying because of the
disruption of social relations – people cannot talk comfortably, when they want to, with friends
and colleagues.
Motivation is seen as deriving from the informal organization and bringing the formal structure
of work into accord with the social needs of the workforce. Re-designing the job so as to
increase teamwork and social interaction would result in better motivation and an increase in
both morale and productivity.
c) Self-actualizing man
This view, corresponding closely to Theory Y, sees people as seeking to satisfy their highest
levels needs through work. Management in the organization is now concerned not just with
being considerate and helpful to subordinates, but with supplying challenge and purpose in their
jobs and opportunities to harness their ego and self-fulfillment needs. This would, in turn,
further the objectives of the undertaking. The organization should foster and facilitate intrinsic,
rather than extrinsic, motivation with authority shifting from the manager to the individual
employee.
d) Complex man
Schein’s forth category breaks from the strict structuring of needs into a hierarchy and asserts
that people are not only complex but variable. The existences of motivators in some sort of
hierarchy is accepted, but order in the hierarchy is subject to change from time to time and in
different situations. For example, money as a motivator has particular force at certain times in
most people’s lives. Further, motives can interact: again, money can indicate “recognition”,
“achievement” (for example, a salesman paid on a commission basis) and “advancement” for
example, under merit-rating schemes).
REVIEW POINTS
1.
Exactly what is motivation and how do you know when you have got it?
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2.
3.
4.
5.
Construct a grid comparing the views, and criticisms, of motivation under different
schools of thought.
Can you think how the needs of the individual and organization might be brought
together
Compare Theories X,Y and Z
Where do you fit into Schin’s classification?
PROCESS THEORIES
Needs theories try to identify the integral desires that influence behavior – they are concerned
with the nature and context of motivation factors. By contrast, “process” theories concentrate
on elucidating the thought processes through which individuals determine their course of
action.
EXPECTANCY THEORY
Vroom’s expectancy theory, published in 1964, suggests that people are not necessarily motivated by
internal needs, but more by the expectation that certain actions will achieve an outcome seem that they
see as desirable. He argues that employees perform well when they can see a connection between
effort, performance and reward. In theory, extra effort will lead to better performance and improved
job performance will lead to outcomes such as promotion, extra responsibility and more pay.
The details of this connection involve a complex interplay of the concepts of “valence”,
“instrumentality” and “expectancy”. In short Vroom’s terms, these are as follows:
 Valence is the structure of preference for a particular outcome; It ranges from a negative
valence, where the individual strongly prefers not to attain the outcome, to positive valence
where the individual strongly prefers to attain the outcome, through “zero” valence where
the individual is indifferent to the outcome.
 Instrumentality is the extent to which one outcome will lead to another – for example,
improved performance in the present job will lead to promotion
 Expectancy is the extent of the probability that a particular effort or action will lead to a
particular outcome.
Vroom then postulates that motivation to perform a certain act depends on the product of the valences
for the outcome (taking into account instrumentality) times the expectancies.
Porter and Lawler further developed the approach by presenting a model which relates effort,
performance, reward and satisfaction. Again it is worth briefly reviewing these factors to help
understand more of what the concepts may mean to people.
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 Effort is the amount of energy exerted by an employee on a given task- how hard they try. This
is very much a product of the employee’s motivation and it depends on the interaction between
the value of the reward and the perceived effort – reward probability:
i.
The value placed on a reward depends on its degree of attractiveness and desirability –
rewards such as friendship, promotion, pay, recognition and praise will be given
different values by different people, and some may be unwilling to give up, say,
friendship for greater pay as a supervisor;
ii.
The perceived effort- reward probability is the likelihood of getting the desired reward
for a given amount of effort; high probability for a low effort, and low probability for
high effort, indicate clear courses of action (to try and not to try respectively), but the
position is less clear and may be more affected by the value of the reward where there
is high probability for high effort or low probability for low effort.
 Performance is the measurable output of the individual and depends not just upon effort, but
also upon a person’s abilities, personality traits and role perceptions. Thus, a highly motivated
employee making a great deal of effort may not necessary result in effective performance –
which may affect the reward attained. (Particularly in being out of line with expectations).
 Rewards are desirable outcomes and may be intrinsic (given to the worker by him – or herself –
e.g. Feelings of achievement) or extrinsic (given by someone else – e.g. salary and conditions).
Porter and Lawler believe that intrinsic rewards are much more likely to produce positive
attitudes about satisfaction that affect performance.
 Satisfaction is derived from the extent to which actual rewards fall short, meet or exceed the
individual’s expectations (perceived equity). The key to this lies in “expectations” rather than
the actual rewards themselves. Thus, if actual rewards are below what is perceived to be, say,
adequate or fair ( and this includes a view about what the organization should provide as a
reward for a given level of performance), the individual will be dissatisfied.
 In addition, satisfaction is more dependent on performance than performance is on satisfaction.
A dissatisfied worker can still produce acceptance levels of output, but poor performance is
unlikely to bring about the rewards necessary to produce satisfaction.
Note that satisfaction is not the same as motivation – it is an attitude, an internal cognitive state,
whereas motivation is a process. This is why the content models, such as Herzberg’s have more to do
with achieving satisfaction than with the complex process of motivation. In the content models,
motivation derives from job satisfaction which is deemed to be the sum of various content factors such
as responsibility and growth potential.
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These theories are complemented by Charles Handy’s , motivation calculus. The calculus may be
conscious or unconscious, and a decision to act will depend on three factors.
 The individual’s own needs;
 The desired results – what the person is expected to do at work; and
 E factors- effort, energy, excitement, enthusiasm, emotion and expenditure
Needs
E Factors
Motivation
Desired results
EQUITY THEORY
This approach, developed by J Stacey Adams, focuses on people’s feelings of how fairly they have been
treated in comparison with the treatment received by others. It builds on the idea of perceived
equitable rewards developed by Porter and Lawler and argues that people strive to achieve a situation
of balance – or equity – in terms of the perceived ratio of inputs to outcomes in relation to a
“comparison other”.

The “comparison other” is often a very individual selection, based on attributes which we
consider appropriate to our particular circumstances, although it may be influenced by group
membership. Thus, it could be another individual in the same workgroup, a friend who works in
another organization or even a generalized conception based on certain known or assumed
characteristics.
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

The inputs that we might consider in assessing the balance include those related to effort and
performance outcomes, as well as skills, educational background, domestic and social
circumstances, etc.
Outcomes are similarly broad in scope – including pay social esteem and recognition, work
assignments, office space and furniture, etc.
Situations of inequity exist where the inputs –outcomes ratio is perceived to be either less than or
greater than that of the comparison other. Note that this is a relative position, rather than one based
on absolute standards. Thus, equity is maintained where both we and our comparison others receive
low outcomes for a high level of inputs, or where a comparison other receives a higher level of
outcomes provided he or she also has a higher level of inputs.
Managers should recognize that workers have a number of means at their disposal for evening up the
perceived inequity.
The implications of equity theory are similar to those of expectancy theory in that managers need to
know the different motivating forces present among their staff – in this case, the way in which they
perceived equity – and to be explicit in the relationship of inputs to outcomes. The theory also draws
attention to the potential for demotivation where patterns of inequitable treatment persist.
Goal-Setting Theory
The essence of goal theory is to bring individuals to share the goals of the organization; only in this way
can organization be made effective and efficient and individuals encouraged to achieve their full
potential.
Latham and Locke developed goal theory by combining the ideas of management by objective (MBO)
and motivation theory. The essence of their approach is that people are more motivated and achieve
higher performance when they are set specific goals, when these goals stretch them, when the goals
have been agreed between superior and subordinate and when employees receive feedback on their
progress at regular intervals.
Goal theory is seen as a sound basis for performance management – objectives and goals are used as a
means of obtaining better results from all levels and parts of the organization. The goal-setting and
performance management process is dynamic – as some goals are achieved, new goals are set and
agreed and the achievement of these becomes a new motivating force, driven on by positive feedback.
IMPLICATIONS OF MOTIVATION THEORY
The Practical implications of Content Theories

Managers have found them simple, easy to understand and therefore to apply. They provide a
good framework for classifying needs.
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






Malsow’s theory, which is the simplest of those considered, allows the manager to feel in
control of motivation – it, therefore, prompts managers to think more deeply about employee
needs and their satisfaction
Herzberg’s theory is also viewed as readily applicable to business situations – although not all
individuals want challenging work. As we have seen, it is a refined way of looking at satisfaction
and dissatisfaction at work and concentrates on the key topic of job re-design.
These theories identify work-related factors that could trigger motivation but nothing to do with
the process itself- this is the province of process theories.
They tend to ignore potentially important characteristics of motivation, such as individuals
differences.
They are universal theories that assumes a common set of needs. This suggests a greater ability
to predict behavior than is realistic. Needs, in any case, have been shown to vary between
countries and are culturally determined.
They are the product of American theories who draw distinct lines between home and work.
This is not the case in many other countries, e.g. Italy and Spain.
Each theory has its own implications. McGregor’s Theory X, for example, results in autocratic
management, using rewards and punishments for control and retaining all decisions at the
centre. Theory Y results in a democratic and employee-centered style of management. The
manager would involve the worker in decisions and encourage development through enlarging
and enriching job design. In practice both these theories are extremes, and managers would
need a combination of motivational approaches to deal with varied situations.
The Practical Implications Of Expectancy Theory





Managers need to know what particular rewards and outcomes are important to staff-different
people have different needs.
Different rewards are needed for different people if individual needs are to be met, but it is
essential that everyone is seen to be treated fairly and equitably.
The relationship between performance and reward should be clear, explicit and understood by
all employees; rewards should be attainable and good performance should be seen to be
rewarded.
There should be no conflicting “measurements” of performance and reward within the
organization – if person in another section gets more for doing less, motivation will drop.
Pay and reward schemes should be designed so that only desirable performance is rewarded,
with no more promotion based on say, length of service or favouritism. Clear and transparent
procedures should be in place for the evaluation of individual performance.
Review Points
1.
2.
3.
4.
Compare Theories X, Y and Z.
Where do you fit into Schein’s classification?
Use a diagram to describe the expectancy theory of your choice
Can you think of a situation in which each of the process theories would be appropriate?
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5.
6.
State Three implications of expectancy theories for management
In your own work situation, which motivation theory would produce the best results and why?
ROLES OF SUPERVISORS
Coach
A good supervisor places a high priority on coaching employees. Good coaching involves working with
employees to establish suitable goals, action plans and time lines. The supervisor delegates and also
provides ongoing guidance and support to the employee as they complete their action plans. Rarely can
job goals be established without considering other aspects of an employee’s life, e.g. time available for
training, career preferences, personal strengths, and weaknesses, etc. A supervisor is sometimes
confronted with walking a fine between being a supervisor and the employees’ confidant.
Mentor
Usually the supervisor understands the organization and the employee’s profession better than the
employee. Consequently, the supervisor is in a unique position to give ongoing advice to the employee
about job and career. The employee about job and career. The employee can look to the supervisor as
a model for direction and development. An effective mentor-mentee relationships requires the
supervisor to accept the responsibility of mentorship. A good supervisor can be a priceless addition to
the career of an employee.
Advocate for organization
Often, the supervisor is the first person to tell employees about new policies and programs from
management. It’s not uncommon that employees are confused or frustrated by these new actions, and
need further clarification and support from supervisors. In the rapidly changing world of today’s
organizations, it can be a major challenge to present new programs to employees without their being
frustrated or even cynical. The supervisor must be authentic, yet tactful.
Advocate for employee
The supervisor is often responsible to represent the employee’s requests and to management, along
with also representing the employee’s case for deserving a reward. For example, if an employee
deserves a promotion, the supervisor often must justify the case for promotion to the supervisor’s
supervisor, as well. If the employee has a rather unique personal situation that warrants special
consideration by the rest of management, the supervisor must explain this situation and how it can be
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handled. It’s not unusual for employees to sometimes see the supervisor as part of “management”
while at other times seeing the supervisor as a personal friend.
RESPONSIBILITIES OF SUPERVISORS
Support of Human Resources Department
Note that if the organization is large enough, the supervisor is fortunate to have a staff department, e.g.
Human Resources (HR) Department, that directs or supports many of the activities carried out by
supervisors. The supervisor still carries out the supervisory responsibilities, but HR is a tremendous
help. For example, HR guides and supports activities in staffing, development and management of
personnel policies and records, training and development, performance appraisals and performance
problems, career counseling, organization developing, etc. HR provides this help and ensures that all
activities conform to current rules and regulations.
Personnel Policies and Procedures
The supervisor is usually responsible to ensure that employees follow the organization’s policies and
procedures, e.g. for sick time, personal leave, overtime contact with the media or press, confidentiality
about organization information, etc. Concurrently, the supervisor must follow policies and procedures
for carrying out supervisory responsibilities e.g. policies and procedures for hiring, firing, promotions,
etc.
Staffing
Supervisors regularly review the needs of their employees. Consequently, they’re often the first to
notice the need for a new position in the organization. In this case, the supervisor opens a new role by
getting authorization from upper management. This often requires communications and justification for
funds to fill the new position. The supervisor reviews advertisements for job candidates, reviews
resumes and conducts interviews. The supervisor recommends who should be hired from among job
candidates and ensures a job offer is made to the most suitable candidate. There’s usually a great deal
of paperwork, e.g. a job application, starting a personnel file, providing an employee manual, salary and
tax forms.
Employee Training and Development
Supervisors ensure new employees are oriented to the organization, its policies, facilities, etc. They
develop training plans with employees to ensure employees have the necessary expertise to carry out
their jobs. They provide ongoing guidance to employees, often in the forms of ongoing coaching and
counseling. Supervisors often provide career counseling, as well, to help employees develop and
advance in their careers.
Employee Performance Management
Supervisors ensure that job descriptions accurately records the primary responsibilities, qualifications
and terms for each job role in their group. They set performance standards for tasks, jobs and roles of
their employees have appropriate and realistic job goals. The provide ongoing feedback about the
employee’s performance. They conduct performance appraisals on a regular basis.
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http://managementhelp.org/supervision/roles.htm
Review Points
1.
2.
How does a supervisor differ from a middle manager?
An effective supervisor has a number of roles and responsibilities he/she has to perform.
Identify and explain some of the roles and responsibilities of a supervisor in any given
organization
MANAGEMENT ROLES
Mintzberg in 1980 analysis of masses of detailed notes on exactly how managers spent their time
resulted in his developing a typology of management roles which provides a slightly different overview
of what management involves from the functional approach.
Mintzeberg identified three general roles:
 Interpersonal – dealing with maintenance of relationships with others within and outside the
organization;
 Informational- dealing with the gathering and provision of information, again within and outside
the organization;
 Decisional – dealing with organisational and operational problems and difficulties.
TABLE MANAGEMENT ROLES
ROLES
DESCRIPTION
INTERPERSONAL
- Formal, representational and symbolic duties
Leader
- Relationship with subordinates – motivating, communicating, coaching, etc.
Liaison
- Contacts with others outside work unit, for assistance
INFORMATIONAL
Monitor
- Ensuring acquisition of information necessary for work
Disseminator
- Distributing information throughout organization and outside
Spokesperson
- Formal provision of information on behalf of organisation
DECISIONAL
Entrepreneur
- Initiating, developing and facilitating change and innovation
Disturbance handler
- Troubleshooting problems as and when they arise
Resource allocator
- Distributing and arranging use of resources (staff, finance, materials, time)
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Negotiator
- Representing organization in negotiations within area of responsibility
Mintzberg’s roles provide an alternative perspective, emphasizing three key elements which spread
across the spectrum of management processes- Planning, organizing and controlling.
THE KEY MANAGEMENT FUNCTIONS AND MOST MANAGEMENT TEXTS DEAL WITH THE THEM
IN SOME SYSTEMATIC WAY.
Planning, Organising, Directing, And Controlling, Staffing, Leading
a) Planning
Planning is the process by which the organization, or any particular part of it, determines what is
to be done. The manager first needs to decide which steps are necessary to accomplish that
goal. These steps may include increasing advertising, inventory, and sales staff. These
necessary steps are developed into a plan. When the plan is in place, the manager can follow it
to accomplish the goal of improving company sales.
 Forecasting – analyzing known information (within and external to the organization) in
order to predict future conditions.
 Goal-setting – the determination, in the light of forecasts and other imperatives
(including policy), of what the organization wishes to achieve in the relevant time span;
 Decision-making – making choices between different goals and courses of action,
including the identification and resolution of problems, conflicts and priorities.
One of the keys to this process is an understanding of where the organization is coming from and what
the future may be like. This requires information – about how the organization is performing now and
what the future holds.
b) Organising and directing
Organising is the management process which actually arranges for the work to be done. It is
concerned with the allocation of resources – both staff and others and their arrangement into
working units and relationship, such that the agreed plans may be carried out and achieved.
Directing arises out of organizing, and is about ensuring that employees are appropriately
engaged in working on activities to meet goals and plans. This involves motivating and
supervising staff towards the concerted efforts needed for effective performance.
c) Staffing
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After a plan is in place, a manager needs to organize her team and materials according to her
plan. Assigning work and granting authority are two important elements of organizing
d) Leading
A manager discerns his area’s needs; he may decide to beef up his staffing by recruiting,
selecting, training, and developing employees. A manager in a large organization often works
with the company’s human resources department to accomplish this goal.
e) Controlling
After the other elements are in place, a manager’s job is not finished. He needs to continuously
check results against goals and take any corrective actions necessary to make sure that his
area’s plan remains on track.
Management control is the process of monitoring and regulating performance to ensure that it
conforms to the plans and goals of the organization. This is not just some element added on to
the end of the management process, but an integral part of it control starts from the moment
plans are put into action. It involves continuous monitoring and review of the way in which
goals are being met through performance of the designated activities.
All managers at all levels of every organization perform these functions, but the amount of time
a manager spends on each one depends on both the level of management and the specific
organization.
These management functions are common to all the managers irrespective of the business
activity managed by them – for example, procurement, manufacturing, marketing, finance,
human resources management, and so on, or their level in organizational. However, the total
time and effort devoted by individual managers to each of the management function as well as
the total effort spent on all the management function in proportion to other non-managerial,
technical and operational, tasks depends on many factors such as nature of business and
organizations structure.
A manager’s level within the organizational hierarchy has major influence on the proportion of
efforts spent on managerial and non-managerial activities, and the proportion of different
functions within managerial activities.
Depending on size and structure, an organization may have half a dozen or more levels in the
management hierarchy. However, for ease of understanding these are often grouped in three
levels.
Review Points
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1.
2.
3.
4.
5.
Identify and explain three major management skills an effective manager must process
Categories the three (3) groups of managerial roles and justify their relevance to modern
management (20 marks)
List five ways in which a manager affects the behavior of a subordinate
How does a supervisor differ from a middle manager
Identify Mintzberg’s three general roles
1.
LEVELS OF MANAGEMENT
The various different processes, roles and activities of management apply to management throughout
the organization. There may be different emphases in different parts of the total management
structure; all managers are involved in carrying out the same functions.
MANAGEMENT STRUCTURE IDENTIFY THREE BROAD HIERARCHICAL LEVELS.

FIRST LINE MANAGEMENT
Management or supervision – taking place at the lowest level in the hierarchy and directly
responsible for the operation of discrete tasks and non-managerial personnel. This level is
sometimes referred to as the ‘technical’ level, being concerned primarily with the undertaking
of actual work processes.

MIDDLE MANAGEMENT
The meat in the” sandwich” between senior management and first line supervisors, this level is
responsible for the work of managers at a lower level (supervisors or possibly other middle
managers) and/ or a range of more senior operational staff such as specialist technicians and
professionals. Sometime this level is referred to as the “organisational” level, being concerned
with the organization and integration of work processes across a broader range

TOP OR SENIOR MANAGEMENT
This where responsibility for the entire organization, or significant large parts of it located. Such
management is also responsible for the middle tier of management. This level is often referred to as the
“institution” or “corporate” level, being concerned more with the organization as whole, its goals and its
relationship with its environment.
DEFINE A SKILL
A skill is the learned capacity to carry out pre-determined results often with the minimum outlay of
time, energy, or both. In other words the abilities that one possesses. Skills can often be divided into
domain-general and domain-specific skills. For example, in the domain of work, some general skills
would include time management, teamwork and leadership, self motivation and others, whereas
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domain-specific skills would be useful only for a certain job. Skill usually requires certain environmental
stimuli and situations to assess the level of skill being shown and used.
MANAGERIAL SKILLS
Conceptual skills
These are demonstrated in the ability to analyze and diagnose the situation and to distinguish between
cause and effect. This is the ability to focus on the big picture and seeing beyond the situation
immediately at hand and considering choices while keeping in mind the organisation’s long term goals.
Human skills
This includes the ability to understand, alter, lead and control the behaviour of other individuals and
groups. This is the ability to communicate, coordinate, motivate people, and mould individuals into a
cohesive team that distinguishes effective from ineffective manager.
Technical skills
These are the job-specific knowledge and techniques that required to perform an organisational role.
Managers need a range of technical skills to be effective. The array of technical skills a person needs
depends on his/ her position in the organisation. The manager of a restaurant, for example, may need
cooking skills to fill in for an absent cook, accounting and bookkeeping skills to keep track of receipts and
costs and to administer the payroll, aesthetic skills to keep the restaurant looking attractive for
customers.
Effective managers need all the three kinds of skills- conceptual, human, and technical. Management
skill, roles and functions are closely related and wise managers or prospective managers are constantly
in search of the latest educational contributions to help them develop the conceptual, human, and
technical skills they need to function in today’s changing and increasingly competitive environment.
Review Points
1.
2.
3.
4.
5.
Describe Henry Mintzberg a set of ten roles that a manager fills
Identify three broad hierarchical levels of management structure
Define skills needed by managers
Other than planning, organizing, direction and control, produce six words or phrases that best
summarise the work of the manager
Produce as concise and accurate a definition of management as you can.
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EXPLAIN THE MEANING OF THE TERM SMART OBJECTIVES
Characteristics of Objectives: SMART
Objectives should set out exactly what is being aimed for and, wherever possible, they should
be quantified. Their desirable characteristics are often represented through the SMART
S-Specific
The objectives states quite clearly what is to be achieved.
An objective has to be unambiguous; otherwise it will cause confusion and be open to
misinterpretation.
In contemporary organization two other Ss are desirable: objectives should be significant and
stretching. To motivate individuals, objectives must be significant in terms of the employee’s
contribution to the achievement of organisational effectiveness. The stretching factor is to
ensure that some areas of the tasks will need additional effort, since an objective should not be
so easy so as to demotivate an individual.
M-Measurable
Objectives are either quantifiable or qualitative. The outcomes must be defined so that those
who are fulfilling the tasks know exactly what is required of them and the person(s) measuring
their efficiency and effectiveness will know what the measurement outcomes are in practical
terms.
Meaningful and motivational should also be included as desirable Ms, because of their
relevance to the self-worth of the individual and his or her role in the department/unit/division,
and also to the achievement of corporate objectives.
A-Achievable
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Objectives should always be achievable, with training and support given by the immediate
manager where required. In setting individual objectives as part of the organisational
performance management and feedback process, objectives should be jointly set by the
member of staff and his or her manager. So acceptable objectives are more likely to be
achieved, as the individual will have been part of the decision-making process regarding the
outcomes of their job role. All objectives must be action-orientated: that is, there must be
outcomes measurable either quantitatively or qualitatively.
R-Realistic
The targets/aims/objectives must be realistic, which is aligned to them being achievable. They
must be relevant to the job role, reasonable, reviewable and rewarding. Rewarding in this
sense here does not necessary refer to monetary rewards but intrinsic in that the individual’s
job satisfaction and worth (self-esteem), is also recognized. Kanter believe that there are 50
ways to reward individuals, one of which is money and the other 49 recognition for a job well
done and personal commendations and public acknowledgement of the individual’s
achievements.
T-Time
A definite date must be decided upon by which the objectives have to be achieved, which
means they have to be time-based. It is appropriate too that they are timely in so far as the
time set for achievement of the objective must b e in line with other objectives of the team (or
the entire workforce). Objectives should be tangible, in that they can be assessed and are
meaningful to the organization and to the individual. Trackable objectives are vital: monitoring
and review must take place on a regular basis and, where necessary, remedial action taken. It
might well be that either the internal or external environment has made an impact on the
objectives, in which case they should either be rewritten or amended to meet the new
circumstances.
STRATEGIC AND OPERATIONAL PLANNING
Planning is the process by which we decide what we are going to do and how we are going to
do it. A plan fills the gap between the current state of affairs (‘where we are not’) and the
desired future state of affairs (‘where we want to be’). First the company must decide where it
wants to go, and by when, and then how to bridge the gap between the current situation and
that which it wants to achieve.
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The purpose of planning is to work out how to bridge the gap to ensure objectives are met.
EXPLAIN THE PLANNING PROCESS
Decisions at the top of the hierarchy, about mission and goals, are initially translated into
strategies and objectives by top management and then are cascades by the downward
communication channels to staff at the lower levels of the organisational structure. At the this
level the objectives become more specific to the department and are then transferred into
meaningful objectives for every individual in that department through tactical plans,
operational plans and individuals actions. This is known as ‘top-down’ objectives setting.
THE PLANNING PROCESS
Mission
Goals
Strategy
Objectives
Tactical plans
Operational plans
Performance
The elements of the planning process in turn
a) Mission
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A mission may be narrow or broad in scope. For example, a bank which had a narrow
mission could express it as providing savings and loan facilities to the citizens of a
particular location, whereas a bank with a broad mission could express it as providing a
wide range of financial services worldwide. If the mission is too narrow, then it may
limit the scope of the organisation’s activities, restricting future opportunities for
growth; but if is too broad, it may become meanings because it fails to identify what the
organization actually does.
An effective mission statement should:
 Describe the unique purpose of the organization;
 Identify the scope of its operations;
 Provide a unifying theme to its activities
b) Goals
The organization’s mission sets the parameters within which goals, strategies and
objectives are determined. Wheelen and Hunger distinguish goals from objectives by
defining goals as open-ended statements, typically not quantified or given time limits,
whereas objectives set out exactly what the organization wants to achieve within a
particular timescale. However, as we have seen, other writers use the terms differently.
We shall continue to use the term goal to refer to a consciously agreed statement of
something the organization desires to achieve in the long term.
c) Strategy
Chandler has defined strategy as:
‘the determination of basic long-term goals and objectives of an enterprise, and the
adoption of course of action and the allocation of resources necessary for carrying out
these goals.’

A coherent, unifying and integrative pattern of decisions for the organization
as a whole
The gives rise to the plans that ensure that the basic goals of the organization
are fulfilled. Many large organization have conscious explicit strategies, which
are set out formally. In smaller organizations, the strategy may not always be
articulated or analysed, but there may be still be a common understanding of it
among top management, expressed as for example, ‘the development and
acquisition of new product lines.’
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
A means of establishing an organisation’s purpose in terms of its long term
goals
This approach regards strategy as shaping both the goals and objectives of the
organization and defining the major actions needed in order to achieve them. It
therefore forms the key link between goals and objectives and the actions
necessary to ensure that they are achieved. Resource allocation is regarded as
the organisation’s most critical step and therefore the timescale for strategic
implementation is determined by the timescale during which all the resources of
the organization, such as capital and labour.

A definition of an organisation’s competitive domain
One of the central concerns of strategy is defining what business an organization
is in or intends to be in (strategic planning) and taking the necessary action to
move it from one state of affairs to the other (strategic implementation).
Strategy must therefore address issues both of growth, such as an extension to
existing capacity and diversification into new product areas, and of divestment,
such as closing production facilities.

A means of maximizing competitive advantage and minimizing competitive
disadvantage
This approach regards the key purpose of strategy as seeking to achieve longterm advantage over an organisation’s main competitors. The advantage is
achieved by having:
i.

A thorough understanding of the external environment in which the
organization operates, enabling identification of the opportunities and
threats presented by changing conditions.
ii. A thorough understanding of its internal strengths and weaknesses, so
that strengths can be built upon and weaknesses minimized.
A logical system for differentiating managerial tasks at corporate, business and
functional’ levels.
The different levels within an organization have different responsibilities in
terms of their contribution to planning and implementing strategy. The
corporate level is responsible for defining the overall mission, goals and overall
objectives and takes the highest-level decisions, for example on external
acquisitions. The business level is responsible for objectives planning within
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departments or divisions and may take decisions on, for example, developing a
new product within an existing range.

A definition of the contribution the organization intends to make to its
stakeholders
Stakeholders refer to everyone who is directly or indirectly affected by the
activities of the organization, ranging from employees, shareholders and
suppliers to customers, local communities and government. In recent years, the
concept of stakeholders has gained importance as an element of strategic
concern due to the increasing emphasis on organizations taking account of their
social responsibilities.
The process of strategy formulation will determine the direction of the organization: What it
intends to do, and how, to meet its goals. The existence of other dimensions to strategy
beyond that of the agreed goals indicates a need to acknowledge the influence of the
environment on the organization. Strategic planning must, therefore, be alert to external
conditions and what the future may hold. It takes place within constraints set by the internal
context of the organization, such as resources and established policies, management
organization and operational procedures and practices.
Objectives
The organisation’s objectives are an expression of the agreed strategy in terms of exactly what
is to be accomplished and by when. The achievement of objectives should result in the
organization meeting its goals and thereby fulfilling its mission.
Objectives may be either Quantitative, where the outcomes are expressed in terms of numbers
or
Qualitative, where the outcomes cannot be measured directly and their achievement is
identified through performance indicators or comparative analysis.
The objective for the organization may be to ‘to achieve year-on-year growth in profit after tax
for the next five years’. For the marketing division, this may be translated as ‘to achieve a 5%
increase in sales in one year’, and for the marketing section in a particular locality this may be
‘to obtain six new customers for our products within the first three months of the year.
Tactical Plans
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Deriving from the objectives set by top management for the organization as a whole are the
tactical strategies and objectives for the different parts of the organization, such as the various
departments or divisions. It is the responsibility of managers at business level, such as
department heads, to draw up tactical plans which set out the major steps necessary to achieve
the tactical planning differs from strategic planning in terms of scope and timescale:


Tactical plans are more specific than the strategy and are likely to focus on
measurable outcomes, such as increasing profitability by a particular amount
each year.
Tactical planning has a shorter timescales- typically one to five years – and
therefore less flexibility in the deployment of resources, because factors of
production are less variable in the short term. For example, the timescale to
build a production facility from acquisition of the site through to commissioning
may be seven to ten years, whereas the timescales to add a new production line
at an existing facility may be only one or two years.
The implementation of tactical plans supports the achievement of strategic plans, and in turn,
the implementation of strategic plans fulfils the mission of the organization.
Operational Plan
Operational objectives are derived from the tactical objectives of the different parts of the
organization. Managers at functional level, with responsibility for particular units or sections of
the organization, draw up operational plans which set out the actions necessary to achieve
operational objectives.
Operational planning differs from tactical and strategic planning in terms of scope and
timescale.


Operational plans are highly specific and set very clear, quantifiable outcomes.
Operational planning has a timescale of one year or less and therefore flexibility in the
deployment of resources is correspondingly reduced.
The implementation of operational plans supports the achievements of tactical plans, which in
turn supports the achievement of strategic plans.
PERFORMANCE
Deriving from the operational objectives set by functional management are the objectives for
different teams of staff and individuals in the organization. It is the responsibility of first-line
managers to prepare plans which set out the actions necessary to achieve team and individual
objectives, working in close consultation with staff to obtain their motivation and commitment.
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Such plans are likely to include developing the competencies of staff to provide them with the
skills required for successful achievement of their objectives. The agreed objectives and plans
are then fed back to their line manager for agreement.
Each individual or team works to achieve their objectives through implementation of the plans.
The performance of individuals and teams is monitored regularly by the manager through
normal supervision arrangements, supplemented if necessary by additional measures, such as
progress meetings, to ensure that key objectives are being met. Evaluation may be by both
quantitative and qualitative measures: for example, in a call centre, staff performance may be
evaluated by the number of telephone calls answered after the first ring and also by the level of
customer satisfaction, indicated by the number of complaints received.
FEEDBACK
The role of feedback is principally for evaluation and control purposes. Information in the form
of performance data and activity reports is fed up to managers each level, to enable actual
performance to be compared with planned performance, so that where necessary corrective
action can be taken and problems resolved.
Some organizations adopt a different approach, known as ‘bottom-up’ objective-setting, where
greater autonomy is allowed to lower levels of management; but if conflict and a lack of coordination is to be avoided, the objectives agreed at the lower levels must be fed back up to top
management, where decisions about the direction of the organization are made. The
difference between ‘top-down’ and ‘bottom-up’ objective-setting can therefore be seen as a
difference in the importance placed within the planning process on the linear cascade of
decisions down through the organization and feedback in the opposite direction. A balance
between the flow of decisions and information in both directions is essential if the organization
is to operate effectively.
BENEFITS OF PLANNING


By means of planning, top management can direct and co-ordinate the efforts of the
workforce towards the achievement of the organisation’s goals. In a small organization,
it may be possible for the owner to direct and co-ordinate the efforts o each individual
by direct personal contact, without the need for formal arrangements, but in an
organization of any size, more formal processes are necessary.
The process of planning can increase the commitment of employees to achieving the
objectives. If a ‘bottom-up’ process for setting objectives and preparing the plans to
achieve them is adopted, employees feel more involved in the process and therefore are
likely to be more committed to achieving them.
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


A formal plan clarifies expectation of staff at all levels about that the organization is
expecting of them.
Setting targets for achievement and providing means of recognition when they are
reached increases employees’ motivation. Research has shown that if challenging goals,
are set, the performance of employees increases.
Setting clear objectives at every level of the organization facilitates management
control, because benchmarks are then available against which progress can be
measured.
Management cannot do everything itself, if it did, there would be no-one to manage. Management must
therefore employ workers to get the work done. There is a hierarchy of authority and responsibility in
the organization: those who have the authority vested in them and are responsible for its operations are
the superiors of those who do not. The organization builds a management structure through which the
agreed strategy is pursued.
Organisational design is concerned with how this structure is built. The structure must be its
effectiveness in meeting the objectives of the organization. There are two key aspects to be decided
a) The way in which the authority is distributed through the organization in order to put the
strategy into effect: this commonly called the infrastructure.
b) The way in which operations are orgnised into separate groupings to develop efficiency and
effectiveness in carrying out the strategy: the superstructure.
Reviews Points
1.
2.
3.
In order to achieve organisational goals, managers utilize the following types of plans:
Operational, tactical, strategic, and contingency.
Describe each type of plan
Describe the following essential of planning
i.
Mission
ii.
Goal
iii.
Vision
iv.
Objective
v.
Strategy
Write how the following affect the Business Environment
i.
PEST environment
ii.
SMART objectives
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LEADERSHIP
Leadership or Management
Definition
Leadership is a process by which individuals are influenced so that they will be prepared to participate in
the achievement of organizational or group goals. It is the role of the leader to obtain the commitment
of individuals to achieving these goals.
Management is bout planning, organizing, directing, co-ordinating, controlling and reviewing the work
process, including what individuals do within that. It is a broad spectrum of organisational processes
and practices.
Leadership, on the other hand, is about how one person can influence others to do what is required for
the achievement of goals – a narrower quality concerned with the hearts and minds of people in the
group.
Management certainly encompasses leadership – good management is probably impossible without
appropriate leadership skills. However, not all managers are leaders –either by design or default.
Leadership itself may have nothing to do with management – it exists in groups rather than organization
structures and, therefore, will certainly also exist in the informal organization where, in management
terms, it may create problems in controlling workers whose influence comes from elsewhere. Not all
leaders are managers.
Consider the following definition by Field Marshal Slim, talking about leadership in the army:
“There is a difference between leadership and management. The leader and the men who follow him
represent one of the oldest, most natural and most effective of all human relationships. The manager
and those he manages are a later product, with neither so romantic nor so inspiring a history.
Leadership is of the spirit, compounded of personality and vision: its practice is an art. Management is
more a matter of accurate calculation, of statistics, methods, timetable and routine: its practice is a
science. Managers are necessary; leaders are essential.”
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The four most important types of leader
a. Charismatic leader
They gain influences mainly from strength of personality, eg Napoleon, Hitler, Churchill, Robert
Maxwell and Nelson Mandela and others. The difficulty with charismatic leadership is that few
people possess the exceptional qualities required to transform all around them into willing
followers! Another issue is that personal qualities, or traits, of leadership cannot be acquired by
training, they can only be modified by it.
b. Traditional leader
The position is assured by birth, eg kings, queens and tribal chieftains. This is another category
to which few people can aspire.
c. Situational leader
The influence can only be effective by being in the right place at the right time, eg the butler in
J.M. Barrie’s. This kind of leadership is too temporary in nature to be of much value in business.
What is looked for is someone who is capable of assuming a leadership role in a variety of
situations over a period of time.
d. Appointed leader, whose influence arises directly out of his position, eg most managers and
supervisors. This is the bureaucratic type of leadership, where legitimate power springs from
the nature and scope of the position within the hierarchy. The problem here is that, although
the powers of the position may be defined, the job-holder may not be able to implement them
because of weak personality, lack of adequate training or other factors.
e. Functional leader
They secures their leadership position by what he or she does, rather than by what they are. In
other words, functional leaders adapt their behavior to meet the competing needs of the
situation.
f.
Principle-centred leader
Approach to leadership is influenced by moral and ethical principle, involving considerations of
equity, juices, integrity, honesty, fairness and trust.
Leadership Tasks and Skills
The basic task of a leader is to influence (or motivate) group members to commit themselves to the
goals of the group and work to achieve them. Tasks are likely to be necessary:
 Planning, organizing and exercising control over group activities;
 Enabling all members to clarify and understand their roles in the group, particularly in relation
to other groups and as the circumstances of the group and its activities change;
 Enabling all group members to perform their roles satisfactorily within the group.
Leaders must have a range of skills to use to achieve these tasks. These are influencing skills –
persuasion, teaching, providing an example, etc – in order to inspire and motivate the members of the
group. It must be based on an (intuitive or learned) understanding of what motivates individuals group
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members at different times and in different situations or circumstances, and its must take place in a
climate within the group which encourages action on the basis of aroused motivation.
Authority and Responsibility
A key determinant of leadership and organisational structure is the way in which authority is distributed.
This is a very live debate in many organizations as traditional concentrations of centralized authority are
being questioned in the pursuit of more flexibility, speed of response and quality in decision-making.
Two aspect to this
1.
The distribution of authority throughout the various levels and divisions of an organization,
which takes the form of a debate about centralization and decentralization
2.
The passing of authority to act and make effective decisions from one level of management to
the next – known as delegation.
What is involved in “authority”.
Authority may be defined as “the right to issue valid instructions which others must follow”.
There are two other key concepts associated with this:
 Responsibility – which is the obligation to achieve certain objectives
 Accountability – Which is the obligation to report (give an account) to a higher authority for
the discharge of those responsibilities.
Accountability is a crucial concept in leadership and management. It is the control exercised by more
senior levels in the managerial hierarchy over subordinate managers. A person who accepts
responsibility also accepts the need to be accountable for that responsibility.
Accountability thus flows upwards in an organization, whilst responsibility is assigned downwards.
The distinctive features of leadership, as compared to management
 Leaders optimize in getting the most out of others;
 Leaders get others to do things willingly;
 Leaders get things done through others by a two-way process;
 Leadership can’t be separated from the group being led;
 Leaders have the ability to visualize what is best for the organization;
 Leader are the primary catalyst in creating team spirit;
 Leaders create a climate for action;
 Leaders bring lasting changes in attitudes;
 Leaders excite their followers and make change acceptable;
 Leaders are active, empathetic and future orientated;
 Leaders challenge the status quo and conventional wisdom;
 Leaders are more concerned with communicating vision;
 Leaders succeed by motivating, encouraging, inspiring and involving their followers
 Leaders recognize and value contributions from others in the team
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INFRASTRUCTURE: THE DISTRIBUTION OF AUTHORITY
The chain of command – or – line – running through the organization whereby responsibility for
operations in pursuit of the organiation’s objectives, and the authority
Decentralisation refers to the systematic devolution of responsibility and authority within the structure
of an organisation, i.e. certain levels or parts of an organisation are given responsibility for the
achievement of specific objectives and the authority necessary for the discharge of that responsibility;
Centralisation refers to the state of affairs where responsibility and authority are concentrated at the
higher or more senior levels of an organisation, with little or no allocation t
o lower, subordinate levels. Centralisation is characterised by decision-making being undertaken at the
top levels, whilst the actual work is carried out at the lower levels.
Delegation is the process by which authority and responsibility being passed down from one
management level to the next. Delegation involves the specification of what responsibilities are being
passed down and the terms under which authority may be exercised.
We can identify three types of responsibility which may be assigned to a lower level in the organisation:
a) Assigning responsibility for the performance of tasks.
b)
Allocating authority to issue orders.
c) Allocating decision-making powers in defined areas.
Note that, by centralisation/decentralisation, we are not concerned with the division of the organisation
into departments or sections, etc.
It is where decisions are made that determines the degree of centralisation, and it is quite possible for
an organisation to have many divisions, all of which are strictly controlled from a single central source of
authority.
(a)The advantages of centralization
It is important to be aware of the strengths of centralised authority before looking at the
possibilities of decentralisation.
 Chief among these is the role of central authority in ensuring a corporate integrity to the
organisation and preventing excessive departmentalism.
 Senior management needs to be seen as providing leadership for the organisation as a
whole, ensuring that the various parts perform as a team within corporate objectives.
 In the event of disputes between departments or divisions, or between departments
and the corporate whole, central authority takes on the role of referee in the resolution
of such conflict.
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 Leading on from this, it is clear that centralised authority is necessary for the making of
corporate policy and determining strategic plans across the whole organisation. These
depend on drawing together information across all parts of the organisation.
 At lower levels, information can only be partial, so effective decision-making is
necessarily limited in its range.
Centralisation may also fulfill other functions where corporate action is necessary, including:
 standardising procedures and approaches –defining and promoting a unity of style and
purpose in respect of issues and practices across the organisation (such as equal
opportunities practice or customer care);
 crisis management –the determination of action which can be effective (swiftly if
necessary) across the whole organisation in response to serious emergencies, the most
normal in local government being severe financial constraints imposed at relatively
short notice.
The advantages of decentralisation
Decentralisation aims to place the authority to make decisions at points as near as possible to where the
relevant activities take place. It utilizes local and immediate knowledge of situations in order to make
timely and effective decisions within the defined sphere of action. This is in contrast to centralised
decision-making which is remote from the point of impact. There is, therefore, a clear potential gain in
the quality of decision-making, but it must be confined to those situations which do not have a wider
impact than the area of responsibility of the decision-maker.
Apart from the quality and speed of decision-making, decentralisation of authority –and the associated
responsibility and accountability –has a number of other significant advantages:
1.
It facilitates the identification and assessment of performance in more detail than is possible
with centralised systems, linking objectives of individual units with authority and responsibility
for their achievement and accountability to higher management;
2.
It encourages initiative, stimulates job satisfaction and improves morale by providing individuals
with more control over their work and involvement with the objectives of the organisation;
3.
It fosters the development of managerial ability at lower levels.
(c)THE DISADVANTAGES OF DECENTRALISATION
The principal problem is one of the autonomy of decentralised units, where independence from the
centre can lead to working against corporate policy.
This works both ways in that the centralised authority can lose touch with the detail of operations in
decentralised parts of the organisation, and the decentralised unit can lose touch with its role as part of
the whole.
Other problems include:
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1.
the possibility that, because decision-making is very close to and often involves the affected
parties, it can actually turn out to be relatively slow and represent a compromise based on the
need for acceptance;
2.
the duplication of work throughout a decentralised organisation can prove expensive (not
reaping the economies of scale generated by centralising operations);
3.
decentralisation depends on effective management at the lower levels, and this is likely to
require extensive training –again a substantial organisational cost.
DELEGATION
Purposes of Delegation
Delegation in any organisation serves a number of purposes, which can be summarised as follows:
Fundamental to organisation
The whole concept of organisation is based upon delegation. An organisation arranged with different
levels of staff reporting to superiors above them is only possible if the principle of delegation is used.
a)
Decisions taken at most appropriate level
Delegation permits the application of one of the most important principles of good organisation.
Decisions should be taken at the lowest practicable level, only referring back to a higher level where
necessary.
b) Distribution of workload
As organisations grow, in terms of both volume of work and hence personnel, it is necessary to delegate
the work involved in carrying out the operations necessary. Delegation enables the workload to be
spread more evenly and fairlyover the available personnel.
Distributing the workload means that tasks can be given the priority, time and attention they deserve
and, as a consequence, work is done more quickly and more efficiently.
c) Development of ability
Delegation is a means of developing the abilities and skills of staff to take on increased responsibility and
assume higher positions in the organisational structure. Apart from providing for continuity of
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management and succession, it improves morale and growth of both individuals and teams through
recognition of their contribution.
THE PROCESS OF DELEGATION
The process of delegation involves a conscious series of steps:
a) Planning: the identification of tasks and/or functions which could usefully be delegated and the
selection of staff considered capable of assuming the responsibility.
b)
Specification of the terms of delegation: determination of the objectives and scope of the
responsibility to be delegated and communication/explanation of the terms (included expected
standards) to the staff.
c)
Monitoring and review: checking progress and results at suitable intervals, without maintaining
such close control that the autonomy of the staff to carry out the delegated responsibility is
undermined, but enabling support to be provided should it prove necessary.
It is important in considering delegation to remember our previous discussion about authority,
responsibility and accountability. The manager delegating a responsibility cannot abdicate that
responsibility: he or she retains the ultimate responsibility and is accountable to more senior
management for its discharge. However, that is no reason to fudge delegation. Delegation involves
passing the responsibility to someone else, and for this to be effective, full authority commensurate
with the responsibility must accompany the delegation. Having decided to delegate, the manager must
be prepared to live with the consequences: providing support, advice and guidance by all means, but
allowing the staff to fulfill the responsibility if at all possible. It is also important to remember that it is
the responsibility that is delegated, not the way of doing it. The staff should be judged against the
objectives and standards associated with the responsibility, not against how the manager would do it.
BENEFITS OF DELEGATION
To large extent, the advantages and disadvantages of delegation, in organisational terms, are similar to
those of decentralisation, as considered in Chapter 4.
On the personal level, delegation brings benefits to the organisation, individual managers and
employees.
(a)Organisational Benefits
a) Work is carried out more efficiently.
b)
Less time is lost.
c)
It enhances a company's reputation for good management.
d)
Morale is improved, with less need to recruit from outside.
e) Labour turnover is reduced.
(b)Benefits to Managers
a) More freedom to look ahead.
b) More planning time.
c) Satisfaction is gained from helping others.
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d)
Less worry and nervous strain.
e)
Relief from the worry of minor details.
f)
Improved reputation as an organiser.
g)
Promotion process is assisted if someone is trained to take over.
h)
More time for communication with others.
(c)Benefits to Employees
a) It provides training on the job.
b)
It helps in the promotion process.
c)
It gives supervisory experience and confidence.
d)
It provides additional interest.
e)
It helps to develop a sense of responsibility.
BARRIERS TO EFFECTIVE DELEGATION
Responsibility for performing tasks, issuing orders and decision-making can be delegated down through
the organisation only to the lowest level at which they can still be satisfactorily carried out. The extent
of delegation will, therefore, be subject to a number of limiting factors.
(a)Nature of the Task, Order or Decision
The nature of the authority and responsibility may be such that, either in itself or in particular
circumstances, it is not appropriate to delegate. This may be in terms of the seniority of management
role involved (for example, in setting corporate objectives or policies), work of a confidential or
otherwise highly sensitive nature, highly specialised tasks or extremely creative work.
(b)Company Policy
Delegation below a specified level may not be permitted by particular organisational policies: for
example, most companies have restrictions on which levels of management can commit the
organisation to certain levels of expenditure.
(c)Co-ordination and Span of Control
As discussed earlier, the span of control is the number of people reporting directly to the same superior.
Very wide delegation may stretch the span of control and make it increasingly difficult to co-ordinate
activities.
(d)Abilities of Staff
Delegation cannot, and should not, take place if the staffs available are not capable of carrying out the
work in the first instance. Furthermore, if training or coaching facilities for these staff are not available,
then the opportunity to delegate will be limited.
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CHARACTERISTICS AND WILLINGNESS OF MANAGERS TO DELEGATE
Individual managers very often do not take advantage of the possibilities and prefer to continue to
exercise close control over most of the detail of their various responsibilities. There are various reasons
advanced for this, such as:
a) it takes more time to explain what to do than to do the work oneself;
b)
staffs lack the knowledge, skills and/or experience necessary ('if you want something done
properly, the only way is to do it yourself');
c)
lack of trust in staffs –the potential consequence of mistakes being made is too great or costly
(or may reflect badly on the manager);
d)
Staffs do not want the additional responsibility, especially with no additional pay or reward.
To a large extent, this is a reflection of a traditional autocratic culture where there is a fear of losing role
and status associated with the distribution of authority. However, it demonstrates weakness in
management style and approach.
REVIEWS POINTS
1.
What is leadership and how does it differ from management?
2.
Define leadership
3.
What is the importance of leadership to a director as opposed to an informally appointed
leader?
4.
Distinguish the formal authority of a leader from the power of a leader
5.
What style of leadership prevails in a centralized, rather than decentralized structure?
6.
Why is leadership so important?
LEADERSHIP TRAITS AND LEADERSHIP STYLES
What Makes Leaders?
Until recently, thinking about leadership centred on the personal traits and characteristics that were
thought to be essential. This view has come to be known as “traits theory”.
The earliest ideas Various studies of traits have been made. Ralph M. Stogdill found that the various
researches identified five physical traits related to leadership ability
(such as energy, appearance, and height) four intelligence and ability traits, sixteen personality traits
(such as adaptability, aggressiveness, enthusiasm, and self confidence), six task-related characteristics
(such as achievement drive, persistence, and initiative), and nine social characteristics (such as
cooperativeness, interpersonal skills, and administrative ability).
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F.Ghiselli noted significant correlations between leadership effectiveness and the traits of intelligence,
supervisory ability, initiative, self-assurance, and individuality in ways of doing work. At the same time,
extremely high or low intelligence reduce the leader’s effectiveness. In other words, the intelligence
level of the leader should not be too different from that of the subordinates. In general, however, the
study of leader traits has not been a very fruitful approach to explaining leadership. Not all leaders
possess all the traits, and many nonleaders may possess most or all of them. Also, the trait approach
gives no guidance as to how much of any trait a person should have. Furthermore, the dozens of
studies that have been made do not agree as to what traits are leadership traits or what their
leaderships are to actual instances of leadership. Most of these so-called traits are really patterns of
behavior. (Management (Harold Koontz/Cyril O’Donnel/ Heinz Weihrich (8th Edition)
The earliest idea was that leaders were born not made. Under the influence of the behaviourist school
of psychological thought, this notion is clearly untenable. However, it has long been believed that
leaders possess certain qualities which mark their leadership ability, and there is still some mileage in
considering what these qualities are. We may no longer accept that leadership traits are inborn, but if
we identify them, perhaps they can be acquired through learning and experience.
It is tempting to think that a list of inherent qualities can be compiled to make a sort of identikit of the
“natural leader” – judgement, initiative, intelligence, dependability, courage, resolution, sense of
humour, and so on.
A number of general qualities do emerge from the various studies undertaken:

Intelligence, relative to that of the followers (although it by no means needs to be very much
higher) which can give a (perceived) greater understanding of the situation;

Personal maturity, self-confidence and self-awareness, or at least the ability to appear to have
these qualities in the leadership situation, which can promote confidence and faith in the
leader’s decisions;

Social skills in recognizing and giving value to the contribution of others according to the group
norms, in communicating effectively information and attitudes, and in dealing with the
necessary social relationships. (Organisation Behaviour ABE )
Various studies of traits have been made. Ralph M. Stogdill found that the various researches identified
five physical traits related to leadership ability
(such as energy, appearance, and height) four intelligence and ability traits, sixteen personality traits
(such as adaptability, aggressiveness, enthusiasm, and self confidence), six task-related characteristics
(such as achievement drive, persistence, and initiative), and nine social characteristics (such as
cooperativeness, interpersonal skills, and administrative ability).
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Leadership Styles
Leadership is the process by which one person influences others to achieve group goals, because the
process involves an interaction between the leader and the group in order to exert that influence.
There are two basic models of style:

Authority models, which consider the way in which power is exercised and relate strongly to
attitudes along the lines of McGregor’s Theory X and Theory Y;

Orientation models, which explore the relationship, within the leader’s behavior, between the
emphasis given to achieving the task and the emphasis given to relating to people.
Three basic styles
1.
Authoritarian (or autocratic) leadership
With this style, all authority is centred on the leader and decisions are enforced by the use of
rewards and the fear of punishment. Communication tends to be primarily in one direction,
from the leader to the followers
Advantage- Autocratic leadership is the speed with which decision can be made.
Disadvantage – may be the effect of autocratic leadership upon group morale. Members may
resent the way decisions are made and thus support them as little as they can.
2.
Democratic (or participative) leadership
In contrast to the autocratic style, democratic or participative leadership takes into
consideration the wishes and suggestions of the members as well as those of the leader. It is a
human relations approach, in which all members of the group are seen as important
contributors to the final decision. Participation is sought in order to both encourage member
commitment to the decision and to improve the quality of decisions.
The advantages of participative leadership often include increased morale and support for the
final decision, and better decisions through shared information and ideas among groups
members. Potential disadvantages include slower decision-making, diluted accountability for
decisions, and possible compromises that are designed to please everyone but are not the best
solution.
3.
Laissez-faire leadership
Moving still further away from autocratic leadership is the laissez-faire approach- literally,
“allow (them) to do”. Here the leader exercises very little control or influence over group
members. A member is given a goal and mostly left alone to decide how to achieve it. The
leader functions mainly as a group member, providing only as much advice and direction as is
requested.
The major advantage of laissez-faire leadership is the opportunity for individual development
offered to group members. All persons are given the chance to express themselves and to
function relatively independently. A disadvantage that may result is the lack of group cohesion
unity toward organisational objectives. Without a leader, the group may have little direction a
lack of control. The result can be inefficiency or, even worse, chaos.
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Situational Theory
The behaviourist of identifying leadership styles suffers from the problem that what constitutes an
effective style in one situation may not necessarily do so in another. A different approach has, therefore,
developed which sees effective leadership as constituting the most appropriate style for the
circumstances. Thus leadership behavior is contingent upon the characteristics of the situation.
Fiedler’s Contingency Model
The model aims to identify those situations in which each kind of leader will be effective and Fiedler
proposed three factors which, to the extent that they each exist in any situation, affect the degree of
favourability for a leader. The factors are:

Leader-member relations – the extent to which the leader has the support of the group;

Task structure – the extent to which the task can be clearly defined and structured;

Position power – the amount of power vested in the leader’s position (usually by the
organization); this is strongly related to the ability to reward and punish.
Leader-member relations are seen as the most important factor, with strong group support for a leader
increasing the favourability of the situation. High task structure and strong positional power are also
seen as producing favourability.
Situational Leadership Model
This approach, developed by Hersey and Blanchard, is based on the theory that leadership behavior is
contingent upon one major situational factor- that of the readiness of followers to act.

Leadership style is again postulated as being conditioned by the degree of task or relationship
orientation, giving four possible styles

Follower readiness is a product of the ability and willingness of followers to accomplish the
particular task – ability being described as job readiness and including the knowledge, skills,
experience and aptitudes appropriate for the task, and willingness (or psychological readiness)
being the confidence, commitment and motivation needed.
Normative leadership Model
This model, designed by Vroom and Yetton, provides a structured approach for leaders to determine the
most appropriate style of decision-making. Leadership style here, then, is seen as varying according to
the degree of involvement of subordinates in decision-making. Five styles are identified (autocratic,
consultative and group, with the first two being split into two categories each) and decision-making
becomes increasingly participative as one moves.
Path-Goal Theory
This approach, most closely associated with House, focuses on how leaders can influence the way in
which subordinates perceive goals (both work and personal) and the possible paths to their
achievement. As such, it uses expectancy theory for guidance in determining leadership behavior.
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Four leadership behaviours are proposed:

Directive – giving guidance, providing standards, specifying the basis of outcomes and rewards

Supportive – showing concern for subordinates, making work more pleasant, being friendly and
approachable.

Participative – consulting and involving subordinates;

Achievement – driven – setting challenging goals, providing high expectation and conveying
confidence.
In considering which behavior will be most appropriate, two groups of situational factors must be
assessed.

Subordinate characteristics – their personalities, abilities, goals and needs;

Environmental characteristics – the task itself, the workgroup and the formal system of
authority within the organization
REVIEWS POINTS
1. Identify Six key traits you association with leadership
2. Why is trait theory at best a partial explanation of leadership behavior?
3. Compare a leadership theory based on style with one based on situation
4. What is path-goal theory?
STRATEGIC BUSINESS UNITS
The meaning of strategic Business units is that companies have identified certain units of their business
as being as being key sections and as much these sections are given individual responsibilities.
McKinsey & Co. stated that to be an effective SBU, the unit must meet the following criteria. It should
have:
 A unique purpose in the organization
 Its own ‘manager’ (at any level) to make decisions
 Its own plans which fit into the overall corporate plan
 Its own customer base
 Recognised competition
The Benefits of operating on the basis of SBUs include:
 The single-mindedness of the personnel involved
 No fragmentation of effort
 Easier processes for purchasing, accounting, etc
 Easier monitoring and control of activities
The disadvantages can be
 Duplication of effort by scattered expertise in the organization
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



Restrictive practices between SBUs to gain competitive advantage
Poor utilization of resources due to ‘ narrow’ planning activities
Wasteful purchasing effort due to smaller quantities
Self-protection activities on the part of the ‘manager’ and personnel.
TYPES OF BUSINESS ORGANIZATION OR COMPANIES
Meaning of a company:
A company means a number of persons working together or a number of persons united for business or
commerce. They could be engaged in the trade, exchange, distribution and provision of goods and
services.
FORMATION OF A COMPANY
A company can be formed legally, meaning a group of people becoming a ‘legal person’ and enjoys all
legal rights that an individual has, e.g. it can own property. A company formed in this way becomes
incorporated and the people who formed it have separate rights and responsibilities from the firm itself.
Some of the companies formed have no legal identity and are termed as ‘unincorporated’ association,
e.g. sole trade, partnership etc.
CHARACTERISTICS OF BUSINESS COMPANIES





The proprietor must possess specific interest incorporated in the set goals, aims and objectives
of the company
Proprietors must set policies and procedures necessary for the company to attain the intended
objectives.
There must be established functional areas such as area of specialization and specified location
Functional areas are to be headed by chosen individuals or groups or owners.
There must be an organized system or procedure of doing things.
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Types of companies
1)
2)
3)
4)
Sole traders
Partnership
Limited companies
Cooperatives
SOLE TRADERS
A sole trade or simply a proprietorship is a type of business entity that is owned and run by one
individual and in which there is no legal distinction between the owner and the business. The owner
receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all
losses and debts. Every asset of the business is owned by the proprietor and all debts of the business
are the proprietor’s. This means that the owner has no less liability than if they were acting as an
individual instead of as a business.
Advantages of a sole trader
Sole traders benefit from the following advantages:





Control - Sole traders maintain full control of their business. Running it how they please without
the interference of others.
Profit retention – Sole traders retain all the profits of their business.
Private data – Information about sole traders is kept private, unlike that of limited companies
which is necessarily made public after registration with Companies House.
Specialist – Often a small business, sole traders can offer a more personal service with local
roots and ties. This can be more appealing to potential customers in the local community.
Personal – Because there is no need to confer with other decision makers, sole traders can
make decisions quickly and act on them swiftly, providing for the needs of their customers.
Disadvantages of a sole trader
Just like any other form of business, being a sole trader can also have its disadvantages.




Liability – sole traders are not seen as a separate entity by the law. Therefore, they are subject
to unlimited liability. This means if the business gets into debt, the business owner is liable. In
the worst case, this may mean a person risks their home, personal savings and any other assets
they have both in and outside of the business.
Finance – sole traders often find it difficult to raise finance to fund their business. They may
struggle with expansion in the future.
Reverse economies of scale – sole traders will be unable to take advantage of economies of
scale in the same way as limited companies and larger corporations, who can afford to buy in
bulk. This might mean that they have to charge higher prices for their products or services in
order to cover the costs.
Decision making – all decisions must be made by the sole trader. There is no room for help by
others. So the success or failure of the business rests on one person.
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PARTNERSHIPS
A partnership exists when at least two, and not more than twenty, people agree to carry on a
business together. Act 1890 Partnership defines a partnership as a relationship which ‘subsists
between persons carrying on a business in common with a view to profit. The legalities required to
set up a partnership are minimal, although it is advisable to have a formal Partnership agreement
drawn up by a solicitor. Such an agreement can specify the rights and obligations of individual’s
partners, and can make provision for changes brought about by death of retirement of partners. As
compared to a sole trader, the members of a partnership are owners of its property and liable for its
contracts. Therefore they are fully responsible for meeting their debts to third parties. Partners are
not automatically entitled to a salary for the services they provide for the partnership, but are
entitled to their proper share of the profits of the business.
Some agreements do allow for salaried partners.
Many partnerships, and some sole traders, have been converted into limited companies because of
the perceived benefits of incorporation. Most professional persons, and especially accountants and
solicitors, maintain partnership as their form of business in order to preserve the principle of
individual professional accountability towards the client.
SET UP AND REGISTER A PARTNERSHIP
TYPES OF PARTNER
There are three main types of partner, each of which has different rights and responsibilities.
General partners invest in the business, take part in running it and share in its profits. Each general
partner is fully liable for any debts that the partnership may have. This means that they could lose more
than their initial investment in the business if it runs into trouble, and that their personal assets could be
at risk. Every ordinary and limited partnership must have at least one general partner.
Limited partners are not permitted to participate in the day-to-day running of the business. Their debt is
limited to the amount of their initial investment.
Sleeping partners invest money in the business and share in its profits, but do not take part in running
it. Like general partners, they are fully liable for the partnership's debts.
Limited partnerships and limited liability partnerships
For information about setting up limited partnerships and limited liability partnerships, see our guides
on how to
The main advantages of partnership are:

Few formalities required for starting up
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


Sharing of partners’ knowledge and skills
Sharing of management of business
No obligation to publish accounts (except for Inland Revenue purposes)
Sharing of profits (or losses!) of business.
Disadvantages are primarily these



Each partner is liable for the debts of the partnership, even if caused by the actions of other
partners.
Risks that the partners may not be able to work together at a personal level
The death or bankruptcy of one partner will automatically dissolve the partnership, unless otherwise
provided for in a partnership agreement.
WHAT IS A LIMITED COMPANY?
A limited Company is a business that has become incorporated and authorized by Cap 686
Company Act whose capital is contributed by its members who are accorded limited liability
privileges. It is a legal entity which also owns property of the business with perpetual
succession – such companies are formed according to the laws of the land in which they intend
to operate, usually by or with the assistance of lawyers. The ownership of the limited company
is divided into shares depending on how initial capital is required. The people who own shares
in the Company are shareholders. The shareholders elect people who form the Board of
Directors to make important decisions about the running of the company or business.
Public Limited Companies and Private Limited Companies
Limited Liability companies fall into two categories i.e. Public Limited Companies (plc) and
Private Limited Companies (pvty).
1. Public Limited Company (plc)
A company is said to be a public limited company when its shares are available for
purchase by public and its names ends with the words public limited company (plc).
2. Private Limited Company
A private limited company may not offer its shares to the public and is restricted in the
transfer of its shares between the private shareholders and its names ends with the
word ‘Limited’ (Ltd). A public limited company has to obtain a certificate of trading from
the Registrar of Companies.
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All limited companies have to fulfill certain procedures before they can be incorporated. They
have to fill in the important documents. These are:
1.
The Memorandum of Association. The memorandum of association must supply the
following information.





The company’s name
The objectives or purpose of the company
A statement that the liability of members is limited
The amount of share capital together with the members and class of shares
A declaration of association in which the initial members (subscribes) express
their desire to form a company and to take up shares.
Cooperative Enterprises
These are small groups of people who set up business along explicitly democratic lines and with the
benefit of limited liability. Cooperatives were essentially Consumer – Cooperatives in which profits of
the business were given back to consumers in dividends based on the amount of their purchases over a
given period. However, today, cooperatives are Producers – Cooperatives in which individuals benefit
not only as investor but also as employees in the business.
The legislation governing cooperative enterprises requires that in lieu of memorandum and articles,
every cooperative shall have the following set of rules:





Each member must have equal control on ‘one person, one vote’ principle.
Members must benefit primarily from their participation in the business i.e. as employees as
well as investors.
Interest on loan or share capital has to be limited.
Surplus (profits) must be shared between or among members in proportion to their
contribution.
Membership must be given to all who qualify
ADVANTAGES OF COOPERATIVE ENTERPRISES





Provide opportunity for genuine pooling of capital between groups of people
Encourages active collaboration between all sections of the workforce
Enables decisions to be made democratically
Provides rewards on an equitable basis among those involved.
Provides limited liability (if registered).
DISADVANTAGES OF COOPERATIVE
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


There is less likelihood of a level of profitability and growth that could be achieved by a limited
company
As with partnership, relationships can deteriorate, especially when some members are seen to
be making a smaller contribution than the rest.
Democratic decision making can lead to lengthy decisions before action is taken
Members who are not fully dedicated to the democratic ethics of the business may find
themselves at odds with the openness of communication and decision.
REVIEW POINTS
1.
2.
3.
4.
5.
Define a company
Explain briefly how a company can be formed
Distinguish between partnership and private limited company
Advantages and disadvantages of sole trader and Partnership
What is a cooperative and what are advantage and disadvantages
BUSINESS ETHICS
The power and influence in business and society is greater than ever before. Business plays a large role
in society by providing goods and services that the public wishes to purchase, provides employment and
supports economic growth. When businesses act inappropriately, this can have a very harmful affect on
individuals, communities and society in general, Stakeholders, - including owners, employees, customers
and suppliers, and the public at large – are increasingly demanding transparency in business operations,
and are concerned that organisations treat them fairly.
The subject of business ethics includes issues of conflict of interest, financial and accounting integrity,
corruption, advertising standards, corporate and individual privacy and bioethics.
Business ethics can be defined as:
‘the study of business situations, activities and decisions where issues of right and wrong are
addressed.’
Right and wrong, in this definition, mean morally right or wrong. Morality is concerned with the norms,
values and beliefs embedded in the social processes that define right or wrong to an individual or a
community. Ethics, then is the application of this sense of right or wrong (morality) to the rules of
conduct of the individual or community.
Another definition is:
‘how a company integrates core values into its policies practices and decision making’.
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These two definitions there is a different emphasis on the meaning of ethics- the first is a more general
one, addressing right and wrong in terms of what is socially acceptable, and the second demonstrates
the perception related to the values that the company has defined for itself.
Ethics And Management
Management ethics concerns the behaviour of those individuals in the organisation who have the power
to make decisions.
It is legal duty of individual manager in Zambia not to pursue their own interests (or the interests of
others) where these are not the interests on the organisation and its shareholders, or where there
offend against the general moral norms of society.
The Potential of Unethical Behaviour
The forces driving towards unethical behaviour are:
 The pursuit of the organisation’s goals, in particular, profitability
 The individual’s goals, which may be many and varied.
Three core factors that increase the temptation to act unethically can be identified:
1.
2.
3.
Level of competition
Organisational culture
Degree of dependency between organisations and/ or individuals
Ethics and Conflicting Stakeholder Interests
Ethics operate at two basic levels – those of the individual’s manager and the wider ethics of the whole
organisation. Managers bring a set of values into their work situations and these operate in conjunction
with the ethical culture of the organisation, usually revealed in the general terms in their values and
mission statements.
One of the key problems facing managements when pursing higher ethical standards of decision making
is the clash of interests between the various stakeholders of the organisation.
The duty of managers to the owners of the enterprise (shareholders) is indisputable. If the owners do
not receive a return of capital, they will withdraw the capital or close the business, cutting their losses if
necessary.
Modern day businesses must take account of broader responsibilities.
a) Employees
Irrespective of the kind of organisation, the interests of the employees must be considered,
employers have certain statutory obligations to safeguard the interests of workers (for example,
a duty to promote safe working practices), but moral obligations also exist. These moral
obligations will be influenced by prevailing social attitudes that may be as compelling as the
legal obligations.
b) Customers
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There are very few true monopolies, largely due to the abundance of substitute products and
brands. Competition tends to preserve the objective of customer satisfaction in firms to a far
greater degree than would otherwise be the case. The customer clearly desires low prices,
conflicting with the profitability objective.
c) Suppliers
Most organisations depend upon an external source of supply and it is in their interests that this
should be served by a fair and open market. This emphasises the mutual interdependence of
commercial bodies, and fair and equal treatment of all potential external suppliers is therefore
vital to their well being.
d) Society
Current belief is that all organisations have an obligation to contribute to the well being of the
country’s economy and society as a whole. This may be thought of as an obligation of the
government of the day, but expectations now extend to all types of organisations. Managers
should demonstrate awareness of responsibilities to society in general.
The media, both within an organisation but more particularly within society as a whole, has an
ever increasing role in helping society answer its ethical questions and reporting on alleged
unethical behaviour by organisations.
e) Local communities
Organisations often have a significant impact upon the local communities in which they trade –
where products are grown, processed, distributed and sold. In employment terms, this extends
employers’ ethical relationship with residents to the broader travel to-work areas of their
organisation.
ACTIVITY
a) What does your organisation do to help managers make ethical decisions?
b) What is the organisational culture in respect of ethical issues? For example, is stealing from the
organisation tolerated? Do managers take credit for ideas that have come from other
employees?
c) Do feel that the organisation has high or low ethical standards?
d) To what extent to the standards of the organisation reflect those of the national culture?
CORPORATE SOCIAL RESPONSIBILITY
The concept of corporate social responsibility (CSR) is closely linked to ethics, but has a narrower focus
in respect of the responsibilities of organisations to society. There are a number of different terms used
to describe this – corporate responsibility, corporate citizenship, social enterprise, sustainability, triplebottom line and corporate ethics – and a number of definitions, including:
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

“treating the stakeholders of the firm ethically or in a responsible manner”
“the obligations of firms to society or more specifically to those affected by corporate policies
and practices”
The Harvard Kennedy School states that “corporate social responsibility encompasses not only what
companies do with their profits, but also how they make them. It goes beyond philanthropy and
compliance, and addresses how companies manager their economic, social, and environmental impacts,
as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply
chain, the community and the public policy realm.”
Define of CSR is now an accepted part of the business environment and CSR policies form an integral
part of business operations.
CSR policy is disparate and organisations take different views on what is means – for example, Starbucks
focus on employee issues while the Body shop focuses on human rights. Other examples of key focuses
include:








Child labour
Recycling
Use of scarce resources
World social problems such as obesity
Sustainable development and farming
Treatment of employees, including their well being
Emissions, including reducing the organisation’s carbon footprint
Paying a fair price to the producers of ingredients such as cocoa, coffee, milk, etc.
WHISTLE-BLOWING AND CORPORATE RESONSIBILITY
Whistle-blowing may be defined as intervention by an employee to bring the wrongs (or perceived
wrongs) of the employer to the attention of the owners of the company, the government, or the public
at large. This is a controversial practice which has become the subject of much debate since the 1990s.
Although most people agree on what is right or what is wrong, there are many different attitudes to
whistle-blowing, particularly as to how far employees should go in speaking out and the degree to which
that should be protected from the consequences so doing.
The issue is confused by the conflicting obligations on most workers by a duty of confidentiality imposed
by the contract of employment, as well as common law and the wider ethical responsibility to the
company and the public at large.
So, should an employee keep quiet about a situation which he or she believes to be wrong, or should his
or her conscience take over and ‘blow the whistle’? This is usually a matter for individual judgment or
conscience. As all employees are different, they will react in various ways as well as interpreting
situations differently.
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The Cases For and Against Whistle-Blowing
The primary case for whistle-blowing insists that employees have a moral duty not just to their work and
their immediate boss, but to the company and society as a whole. Thus, there is an obligation to report
wrongdoing and it is matter of conscience.
Other motivations arguments include:


If a wrong is seen by a person, there may be other things happening, which are unacceptable – it
might be the ‘tip of the iceberg’.
If unacceptable behaviour is allowed to persist without redress, others will believe they can get
away with the same thing.
Note that, in certain situations, whistle-blowing is actually required by law – for example, where health
and safety at work rules are being breached.
On the other hand, if information is given to someone outside the organisation, this can be a breach of
contract and render the whistle-blower liable to dismissal or even criminal action. It is common practice
in many organisations for the terms and conditions of employment to bind the employee to secrecy,
even after she or he leaves.
Other arguments against disclosure include:



The belief that the employee should concentrate on doing her/his job and that the actions of
others are nothing to do with him/her
Situations may be misinterpreted, or an employee can overrate the importance of the perceived
misdemeanours of others, and what may be seen as a breach of company rules or policy may in
fact be perfectly legitimate.
Some employees are reluctant to ‘blow the whistle’ due to a ‘snitching’ mentality, where it is
considered bad to tell tales on others.
Questions
1)
2)
3)
4)
5.
6.
What are your own views on whistle-blowing?
Would you do it, especially given the risks to yourself –both in terms of employment and potential for legal actions?
To what extent should whistle-blowers be protected?
Write brief notes on the following:
i.
Code of ethics
ii.
Corporate social responsibility
iii.
Whistle blowing
Who is a stakeholder
Explain the interests of these groups in an organisation
i.
Employees
ii.
Customers
iii.
The Government
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7.
Describe the following essential of planning
a) Mission
b) Goal
c) Vision
d) Objective
e) Strategy
UNIT B14.4 ORGANISING ENVIRONMENTS
Importance of Organisational environment
Organisations do not exist in isolation. They are part of the society within which they operate and as,
such; exist within a complex web of relationships which form their environment. Environment is always
changing – indeed, the pace of change appears to be speeding up and the modern world is characterized
as much by its turbulence as by any notion of stability.
This turbulent environment presents both threats and opportunities to business. The threats are that
the organization’s current ways of operating and/or the goods and services they produce will no longer
be viable under new conditions in the future. The opportunities come from the possibilities of new way
of operating and the production of new goods and services which will be successful in the changed
conditions.
Business organizations constantly have to come to terms with the changing nature of the forces acting
upon them within their environment. They need to understand how the national and international
economic and political situation affects them, what influence social attitudes and structures have on
them, how technology affects their activities and operations, what the legal framework within which
they operate requires of them, and how they work in the context of the broad ecological concerns of the
modern world.
ANALYSING THE ENVIRONMENT
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We need to establish a framework for understanding the nature of the environment – or, rather,
environments- within which organizations exist.
Classifying the Environment
A common way of showing the environment in which an organistation operates is by means of a series
of concentric circles, with the organization in the centre and various levels of environment radiating out
from it.

At the centre we have the organization and factors which we can describe as being Internal. These
would include resources, employees, the nature of the product(s), the structure and culture of the
organization, its technological base, etc. In essence, these factors can be controlled and determined
by the organization.

Immediately surrounding the organization is the ‘Specific external’ environment – i.e. those factors
which are external to the organization, but relate directly to it. The factors here might include the
nature of the industry, competitors, customers and suppliers. It could be said that these are factors
in the immediate Market within which the organization operates. As such, the organization cannot
directly control them, but may attempt to ‘manage’ them to its advantage. As a result, objectives
relating to the management of the specific market environment will often appear in the
organisation’s aims and objective.
In the outer ring is the ‘general external’ environment which will affect all organizations. Factors
here include the political environment, the economy generally, society at large, etc. These factors
are largely out of the control or management of the organization. Rather the organization has to act
in response to them. It is, therefore, important to recognize exactly what these factors are, how
they may change and how they impact on the organization.

MANAGERIAL ENVIRONMENTS

A manager’s environment is made up of constantly changing factors – both external and internal
– that affect the operation of the organization. If a new competitor appears in the marketplace,
the managerial environment is affected. If key clients take their business elsewhere, managers
feel the impact. And if technological advances date an organisation’s current methods of doing
business, once again, the managerial environment has to adapt.

Although managers can’t always control their environments, they need to be aware of any
changes that occur, because changes ultimately affect their daily decisions and actions. For
example, in the Hotel industry, deregulation opened up the market to new hotels and lodges,
forcing existing hotels and lodges to more competitive. Managers in existing hotel and lodges
couldn’t afford to ignore the cheaper rates and increased service that resulted. Not only did
managers have to identify the new challenge, but they also had to act quickly and efficiently to
remain competitive.
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THE ENVIRONMENTAL CONTEXT OF ORGANIZATIONS
Technology
Social
Environmental
Employees
Share
Holders
Economic
Customers
The
Organisation
SS
Specific environment
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Legal
Suppliers
Political
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The best way of examining the external environment is to conduct what is called a PEST analysis.
POLITICAL
ECONOMICAL
SOCIAL
TECHNOLOGICAL
THE EXTERNAL ENVIRONMENT
All outside factors that may affect an organization make up the external environment. The external
environment is divided into two parts:
 Directly interactive: This environment has an immediate and firsthand impact upon the
organization. A new competitor entering the market is an example.
 Indirectly interactive: This environment has a secondary and more distant effect upon the
organization. New legislation taking effect may have a great impact. For example, complying
with the Zambia with the Zambian with Disabilities Act requires employers to update their
facilities to accommodate those with disabilities.
Directly interactive forces
Directly interactive forces include owners, customers, suppliers, competitors, employees, and
employee unions.
Management has a responsibility to each of these groups. Here are some examples:
 Owners expect managers to watch over their interest and provide a return on investments.
 Customers demand satisfaction with the products and services they purchase and use.
 Suppliers require attentive communication, payment, and a strong working relationship to
provide needed resources.
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 Competitors present challenges as they vie for customers in a marketplace with similar
products or services.
 Employees and employee unions provide both the people to do the jobs and the
representation of work force concerns to management.
INDIRECTLY INTERACTIVE FORCES
The second type of external environment is the indirectly interactive forces. These forces
include sociaculutral, political and legal, technological, economic, global influences. Indirectly
interactive forces may impact one organization more than another simply because of the nature
of a particular business. For example, a company that relies heavily on technology will be more
affected by software updates than a company that uses just one computer. Although somewhat
removed, indirect forces are still important to the interactive nature of an organization.
The sociocultural dimension is especially important because it determines the goods, services,
and standards that society values. The sociocultural force includes the demographics and values
of a particular customer base.
 Demographics are measures of the various characteristics of the people and social
groups who make up a society Age, gender, and income are examples of commonly
used demographic characteristics.
 Value refers to certain beliefs that people have about different forms of behavior of
products. Changes in how a society values an item or a behavior can greatly affect a
business.
The political and legal dimension of the external environment include regulatory parameters
within which an orgnaisation must operate. Political parties create or influence laws, and
business owners must abide by these laws. Tax policies, trade regulations, and minimum wage
legislation are just a few examples of political and legal issues that may affect the way an
organization operates.
Political Change And Its Impact On Business
The government has a great influence on business activity. It dictates the legal framework within
which the business must operate and imposes regulations that must be adhered to and these cover
health and safety issues, consumer protection, advertising standards, employment conditions and
environmental factors. Laws regarding the labeling and packaging of goods for the added protection
of the consumer will usually result in increased costs this cause an impact on the business.
Organisations must operate within the regulatory environment applicable to the country of origin.
It is important to be familiar with the general framework of company and business law and their
impact on the conduct of business and aspects of the structure and organization of both private and
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public bodies. Businesses are subject to criminal law in much the same way as individuals, and there
are also a number of specific criminal laws which apply only to businesses.
Governments also influence business through the tax system. Indirect taxes make goods more
expensive for the consumer while subsidies reduce the market price and increase demand. Other
influences include items such as planning permission, financial incentives regarding location or the
promotion of exports. This may influence where a firm locates or who it targets its products at.
ECONOMIC DIMENSION reflects worldwide financial conditions. Certain economic conditions of special
concern to organizations include interest rates, inflation, unemployment rates, gross national product,
and the value of the Zambia kwacha against other currencies.

National economic trends comprises a variety of factors, such as population growth, rates of
inflation, interest rates, unemployment rates, taxation, government subsidies, public
expenditure policies, etc. For the most part it is national trends which tend to interest
strategic planners most and are likely to have the greatest impact on businesses.

At the international level, economic trends can be significant too. Comparative growth
rates, inflation, exchange rates changes, etc. can become a deciding factor when exporting
or importing or considering international business. As we move towards a more global
economy, international trends to begin to impact directly on national trends. For example,
a contracting overseas economy can result in fewer goods being sold in that country,
resulting in a downturn in profits, layoffs and redundancies amongst companies exporting to
that country. Another example is when sterling is strong overseas, which makes British
goods appear relatively expensive to overseas customers, so exports fall.
The technological dimension of the external environment impacts the scientific process used in
changing inputs (resources, labor, money) to outputs (goods and services). The success of many
organizations depends on how well they identify and respond to external technological changes.
For example, one of the most significant technological dimensions of the last several decades has been
the increasing availability and affordability of management information systems ( also known as MIS).
Through these systems, managers have access to information that can improve the way they operate
and manage their businesses.
Equipment, the method of using that equipment, and the organisational requirements of using the
equipment. These days we tend to use the term ‘technology’ to imply some computer application, but
in its widest sense we should be considering all types of equipment, systems and procedures. Changes
in the technological environment can impact directly on an organisation’s ability to carry out its
objectives.
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

Improvements in communications: for example, networking of PCs, videoconferencing, and
mobile phones all allow more people to work at home and reduce the need for large central
office.
Changes in production or working methods: for example, robots, containerization for storage.
Innovation communications technology in particular has probably brought about major opportunities in
recent years such as access to the World Wide Web has enabled even small rural businesses to operate
globally.
a) Computerisation and IT
Computerisation, in particular, can have a variety of effects on business, not all of them positive.
Current Trends: Globalisation And E-Commerce
The two recent developments which are having a significant impact on many organizations.
Globalisation and the emergence of e-commerce.
Impact of Globalisation
The drive towards globalization has been brought about by a number of factors:
Primarily political, economic and technological.


It requires different management skills, particularly with regard to language skills and the
appreciation of cultural differences.
It provides opportunities for employee development through experiencing new cultures and
methods of managing
E-Commerce
The spread of the internet throughout the world has created the conditions for conducting
business through computers in a truly global marketplace: buying and selling, marketing and
providing information. E-commerce must surely be the fastest developing systems of commerce
that the world has ever seen.
SOCIAL ENVIRONMENT
Social change involves changes in the nature and norms of society. Organisations need to understand
the trends in demographics and the cultural environment.
a) DEMOGRAPHIC CHANGE
Demographic is study of population dynamics, which has wide implications for both the nature
of the workforces and the markets for goods and services.
Key demographic factors which organizations need to monitor include:
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

The rate of growth or decline in population, either nationally or locally (or both),
including the amount of immigration or emigration.
Changes in the density of people in particular regions, such as the movement away from
certain geographical areas.
THE SPECIFIC EXTERNAL ENVIRONMENT
The general external environment is that, by and large, the organization is not able to control it. It may
attempt to influence the political and legal forces to which is it subject, and there is a degree of choice
about the way in which it reacts to technological change.
The specific external environment encompasses those factors external to the organization, but with
which the organization directly interacts. These comprise the markets from which it obtains its inputs of
materials, labour and finance, and the markets into which the outputs of goods or services flow. To
some extent, the forces at play in these markets are drawn from the general external environment: for
example, economic and demographic factors.
Customer Analysis
The customer base of an organization lies at the heart of the market. In producing goods or services
that customers do not want and the way in which the organization relates to its customers – meeting
their various needs – will determine its success or failure in the market.
Organisations need, therefore, to understand their customers. They need to be clear about who they
are, what they need in terms of the products offered and how these products are supplied and
supported.
Key elements of any customer analysis might include:




Demographic characteristics of customers: age, gender, class, wealth, ethnicity, geographical
spread, etc.
Relationship with products: types of product purchased (and why), average order size, order
frequency, etc. and other products (own or competitors’) purchased.
Size of the customer base and whether it is growing, stable or in decline
Relationship between customer and organization: attitudes towards the business, satisfaction
levels, etc.
Supplier Analysis
Not only do organizations need to look forward in the supply chain to their customers, but they also
need to look backwards to their suppliers. Relationships with suppliers have received great attention in
recent years, particularly through such practices as quality management and just-in-time production.
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The bargaining power of suppliers can be a major force on the organization. Their ability to dictate the
conditions of supply – price, quality, availability, etc. – will depend upon a number of factors. Some of
these are whether the supplier is in a position to charge monopoly prices; whether there are any
substitutes for the product; the importance of the supplier’s product to the customer; and the cost of
switching to a new supplier.
Competition Analysis
Competition is one of the most significant external forces that an organization faces. It does not matter
whether an organization is in the private, public or not-for-profit sector; all organizations face
competition. Even a sports or social club faces competition from other social activities available in the
immediate area.
Michael Porter suggests that are there are five basic competitive forces which influence competition
within any industry:





The threat of new entrants to the industry
The bargaining strength of customers
The bargaining strength of suppliers
The availability of substitute products
Rivalry amongst current competitors
New entrants to the Industry
To break into a market, a new entrant will have to make a certain amount of investment and therefore
will want to capture a certain proportion of market share to make the returns worthwhile. To do so, the
new entrant will have to overcome barriers to entry (factors which discourage new entrants).



The amount of capital necessary for a new entrant to invest. This will depend upon the nature
of the industry, but high capital requirements represent a strong barrier to new entrants,
particularly if the investment is relatively high-risk. Traditionally, well-established markets tend
to represent high start-up costs, as any new entrant will be faced with the prospect of taking
customers from the established companies and will therefore have to spend heavily on
marketing to build up a brand image of their own, unless they can establish a niche market.
New entrants to a market are unlikely to be able to benefit immediately from economies of
scale that existing competitors will have established. As a result, the cost incurred by a new
entrant will be higher than those of existing competitors. Similarly, existing producers will have
built up technical know-how, favourable supply terms, patent rights, etc. which the new entrant
is in a better position to benefit from technological advances more easily than an established
producer, who will have existing equipment, etc. in place.
Customer loyalty for existing products may have to be overcome if the market is well
established and unlikely to grow much more. This will be much easier for new products or
where there is a perceived difference in the product.
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
If customers are likely to incur costs for switching from one product to another, this will act as a
deterrent to purchase an alternative and create a barrier for the new entrant. In this respect,
the term ‘cost’ should include time, inconvenience or opportunity costs and not just financial
costs. For example, many people keep the same insurance company for all their household and
motor insurance requirements, simply because they ‘can’t be bothered to get alternative quotes
from other insures at renewal time. It is too inconvenient to do so.
In order to guard against new entrants increasing competition, existing businesses are likely to adopt
both positive and negative strategies. Positive one will be to build up customer loyalty and drive down
costs and prices, whilst negative action can be through preventing supply and distribution chains being
penetrated by competitors, as well as negative advertising.
Availability of Substitute Products
By using the term substitute we mean an alternative product or service as well as the same product or
services from another source.
A tennis club may be face competition from, say, a leisure centre
offering tennis facilities as well as a squash club and sauna facilities.
Rivalry amongst competitors
Competitive rivalry depends upon a number of factors but is intensified when the market is stagnant or
growth slow, so that companies are competing for a limited market. Competition is also encouraged
when customers can easily switch from one supplier to another or where switching out of the industry is
difficult (because of high exit costs, for example) thus forcing companies to remain in a particular (if not
very profitable) industry.
THE INTERNAL ENVIRONMENT
An organisation’s internal environment is composed of the elements within the organization, including
current employees, management, and especially corporate culture, which defines employee behavior.
Although some elements affect the organization as a whole, others, affect only the manager. A
manager’s philosophical or leadership style directly impacts employees. Traditional managers give
explicit instructions to employees, while progressive managers empower employees to make many of
their own decisions. Changes in philosophy and/or leadership style are under the control of the
manager.
The elements that make up the internal environment
Organisational mission statements
An organisation’s mission statements describes what the organization stands for and why it exists. It
explain the overall purpose of the organization and includes the attributes that distinguish it from other
organizations of its type.
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A mission statement should be more than words on a piece of paper; it should reveal a company’s
philosophy, as well as its purpose. This declaration should be a living, breathing document that provides
information and inspiration for the member of the organization. A mission statement should answer the
questions, “What are our values?” and “What do we stand for?” This statement provides focus for an
organization by rallying its members to work together to achieve its common goals.
But not all mission statements are effective in Zambia’s business. Effective mission statements lead to
effective efforts.
In today’s quality-conscious and highly competitive environments, an effective mission statement’s
purpose is centered on serving the needs of customers. A good mission statement is precise in
identifying the following intents of a company:




Customers – who will be served
Products/services – what will be produced
Location – where the products/services will be produced
Philosophy – what ideology will be followed
Company Policies
Company policies are guidelines that govern how certain organization situations are addressed. Just as
colleges maintain policies about admittance, grade appeals, prerequisites, and waives, companies
establish polices to provide guidance to managers who must make decisions about circumstances that
occur frequently within their organization. Company policies are an indication of an organisation’s
personality and should coincide with its mission statement.
Formal Structures
The formal structure of an organization is the hierarchical arrangement of tasks and people. This
structure determines how information flows within the organization, which departments are
responsible for which activities, and where the decision-making power rests
Some organizations use a chart to simplify the breakdown of its formal structure. This organisational
chart is a pictorial display of the official lines of authority and communication within an organization.
Organisational cultures
The organisational culture is an organisation’s personality. Just as each person has a distinct personality,
so does each organization. The culture of an organization distinguishes it from others and shapes the
actions of its members.
Four main components make up an organisation’s culture:
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



Values
Heroes
Rites and rituals
Social network
Values are the basic beliefs that define employees’ successes in an organization. For example, many
universities place high values on professors being published. If a faculty member is published in a
professional journal, for example, his or her chances of receiving tenure may be enhanced. The
university wants to ensure that a published professor stays with university for the duration of his or her
academic career – and this professor’s ability to write for publications is a value.
The second component is heroes. A hero is an exemplary person who reflects the image, attitudes, or
values of the organization and serves as a role model to other employees. A hero is sometimes the
founder of the organization. However, the hero of a company doesn’t have to be the founder; it can be
an everyday worker, such as hard-working paralegal Erin Brokovich, who had a tremendous impact on
the organization.
Rites and rituals, the third component, are routines or ceremonies that the company uses to recognize
high-performing employees. Awards banquets, company gatherings, and quarterly meetings can
acknowledge distinguished employees for outstanding service. The honorees are meant to exemplify
and inspire all employee of the company during the rest of the year.
The final component, the social network, is the informal means of communication within an
organization. This network, sometimes referred to as the company grapevine, carries the stores of both
heroes and those who have failed. It is through this network that employees really learn about the
organisation’s culture and values.
Organisational Climates
A by-product of the company’s culture is the organizational climate. The overall tone of the workplace
and the morale of its workers are elements of daily climate. Worker attitudes dictate the positive or
negative “atmosphere” of the workplace. The daily relationships and interactions of employees are
indicative of an organization’s climate.
Resources
Resources are the people, information, facilities, infrastructure, machinery, equipment, supplies, and
finances at an organization’s disposal. People are the paramount resource of all organizations.
Information, facilities, machinery equipment, materials, supplies, and finances are supporting,
nonhuman resources that complement workers in their quests to accomplish the organisation’s mission
statement. The availability of resources and the way that managers value the human and nonhuman
resources impact the organisation’s environment.
Managerial philosophies
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Philosophy of management is the manager’s set of personal belief and values about people and work as
such, is something that the manager can control. McGregor emphasized that a manager’s philosophy
creates a self-fulfilling prophecy. Theory X managers treat employees almost as children who need
constant direction, while Theory Y managers treat employees as competent adults capable of
participating in work-related decisions. These managerial philosophies then have a subsequent effect
on employee behavior, leading to the self-fulfilling prophecy. As a result, organisational philosophies
and managerial philosophies need to be in harmony.
Managerial leadership styles
The number of coworkers involved within a problem-solving or decision-making process reflects the
manager’s leadership style. Empowerment means delegating to subordinates decision-making
authority, freedom, knowledge, autonomy, and skills. Fortunately, most organizations and managers are
making the move toward the active participation and teamwork that empowerment entails.
When guided properly, an empowered workforce may lead to heightened productivity and quality,
reduced costs, more innovation, improved customer service, and greater commitment from the
employees of the organization. In addition, response time may improve, because information and
decision need not be passed up and down the hierarchy. Empowering employees makes good sense
because employees closest to the actual problem to be solved or the customer to be served can make
the necessary decisions more easily than a supervisor or manager removed from the scene.
The role of a manager is to monitor and shape the internal and external environments and to anticipate
changes and react quickly to them.
Managers can monitor the environments through boundary spanning – a process of gathering
information about developments that could impact the future of the organization. Managers can access
information through a variety of sources: customer and supplier feedback; professional, trade, and
government publications; industry associations; and personal contacts
Managers can also actively work to influence their external environments through lobbying, voting, and
using the media to influence public opinion.
Internal elements comprise the organization itself. Internal change arises from activities and decisions
within the organization. Managers can gather information by conducting a thorough evaluation of the
internal operations of the organization. The purpose of this internal analysis is to identify the
organization assets, resources, skills, and processes that represent either strengths or weaknesses.
Strengths are aspects of the organization’s operations that represent potential competitive advantages
(any aspect of an organization that distinguishes it from its competitors in a positive way), while
weakness are areas that are in need of improvement.
Several key areas of the organization’s operations should be examined in an internal analysis. Key areas
to be assessed include the marketing, financial, research and development, production, and general
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management capabilities. These areas are typically evaluated in terms of the extents to which they
foster quality and support the competitive advantage sought by the organization.
THE INTERNAL ENVIRONMENT
A position audit, or situational audit as it is sometimes called, is the global term used to describe an
analysis of the internal environment of an organization. It is not a single exercise, but consists of a
variety of techniques which are brought together to give a total picture of the organization and its
capabilities. The nature of a position audit will depend upon the organization, but in broad terms will
include a review of the following aspects of the organization.






Resources (tangible and intangible, including finance)
Operating systems
Products, brands and markets
The internal organization – structure and culture
Results
Returns to stakeholders ( note stakeholders, not shareholders, as this applies to publicsector organizations as well as the private sector).
RESOURCES
A resources audit considers the organisation’s resources. By the term ‘resources’ we are not just
considering raw materials, but all other ‘resources’ that an organization utilizes. Therefore, a complete
resources audit encompasses:





Human resources
Physical resources
Financial resources
Intangibles such as trademarks, corporate image, patents, etc.
Systems
As well as identifying particular strengths within the organization, a resource audit will also identify
weaknesses or limiting factors which might restrict the organisation’s ability to achieve its objectives or
develop. Once identified, those areas can be addressed so that a more effective use of resources can be
made or planned for.
a) Resource Efficiency and Effectiveness
 Efficiency is the relationship between output (the goods and services produced) and inputs
(the resources used to produce those goods and services). An organization is said to be
efficient if it produces the maximum output for a given input, or has minimum input for a
given level of output. From this definition, you can no doubt see that we tend to consider
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efficiency in monetary terms; but you should remember that not all ‘output’ or ‘inputs’ can
be measured in this way.
For example, a charity established to promote awareness of a particular health condition
may find it difficult to put a monetary value on its ‘outputs’.

Effectiveness is the measure of achievement and the extent to which objectives have been
attained. Again, we have the concept of measurement, but not all objectives are easy to
measure.
Finally, we should perhaps be considering ‘ economy’. If something is economical we mean that it takes
place at the lowest cost. If a department is over-staffed, it cannot be said to be economic.
The three Es- economy, efficiency and effectiveness – are often used to assess the performance of
public-sector organizations which do not have profit as planning objectives of the business.
b) Human Resources
A human resources audit will consider:
 The size of the workforce
 What skills are available
 Labour costs and its relationships to returns/profits
 Labour turnover rates
 Industrial relations
 Organisational structure – how hierarchical?
 The size of the management team
 Management styles and structure
 Training and staff/management development
Such an audit might reveal under-utilization of labour, a lack of certain skills or appropriate training, a
high labour turnover rate or lack of career structure.
b) Physical Resources
A typical audit of physical resources would include these questions:
 Where do materials come from and at what cost?
 Who are the main suppliers?
 What is the relationship between material costs and total cost of sales?
 What are wastage level?
 Are there any alternative suppliers or materials?
 What are the organisation’s fixed assets? What is their value and how old are they?
 To what extent are assets used?
 To what extent is the technology employed out of date or advanced?
c) Financial Resources
A financial resources audit might include:
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
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
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How much working capital is used?
What are the debt and gearing ratios?
What is the credit policy of the organization?
What credit is taken from suppliers?
How are foreign exchange transactions dealt with?
What rate of interest is achieved on spare cash?
What is the level of bad debts?
Lack of money is probably the most likely limiting factor to be identified by a financial resources audit,
but it may also be possible that interest rates or foreign exchange rates are uncompetitive, or that the
credit policy of the organization restricts working capital.
d) Intangibles
Intangibles resources include goodwill, brand image, corporate image, trademarks and patents.
An audit of intangible resources might include:



An identification of the value placed on intangible items, such as goodwill
Are company trademarks protected?
How does corporate culture affect the way people behave at work in the organization?
Such an audit might reveal that the corporate culture conflicts with its objectives or that the company’s
reputation is either not being exploited or is restricting development.
e) Systems
In an organisational sense, the term ‘system’ is used to mean ‘ how things are done’.
An organisation’s resources must be organized into systems in order to be utilized. A systems
audit considers how well or how badly resources are used, rather than the limitations on the
resources themselves. A systems audit therefore consider such factors as the interaction
between resources: for example, the use of labour to produce goods, monitoring and control
systems.
We can categories the systems employed by an organization in many ways. We talk about ‘
‘Production systems’ to mean the equipment, and methods used within the production process; control
systems’ to talk about the methods and procedures used to control activities within an organization; and
‘quality systems’ to mean the methods, equipment and procedures employed to ensure quality within
the organization.
Systems influence an organisation’s strategic choice both by offering opportunities for exploiting
capabilities, and as a limiting factor. For example, an organization which employs equipment for mass
production is unlikely to select a strategy, however attractive, which requires individuals, custom-built
production techniques, because the cost of either changing the equipment already in place, or of simply
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not using it, is likely to be too high. Instead, strategies involving spare production capacity (if available)
are likely to be selected.
Review Points
1. Describe how environmental factors aid the organisation’s strategy to influence organization
structure.
2. Describe the factors that may affect an organization External environment and Internal
environment.
3. Identify external and Internal elements which comprise the organisational itself.
THE ORGANISATIONAL STRUCTURE
DEFINITION OF ORGANIZATIONS
An organization is essentially, a social entity. It involves two or more people – but the actual number and
the way in which they are organized into groups vary from one organization to another.
It is generally agreed that organizations can be distinguished from other social groupings by virtue of the
fact that they exist to achieve certain goals.
The characteristics of an organization is that it involves specialization and requires co-ordination. The
activities of people are organized into specialized groupings. Labour is divided up in ways that are
believed likely to facilitate the achievement of organizational goals.
General Definition Of Organisation
Organisations comprise two or more people engaged in a systematic and co-ordinated effort,
persistently over a period of time, in pursuit of goals which convert resources into goods and or services
which are needed by consumers.
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The common features to all organizations
 All organizations have rules and regulations, formal or informal, written or oral.
 All organizations have a structure – a framework within which individual persons can perform
defined work roles.
 All organizations have a recognized system of authority which controls and delegates tasks and
duties within the organization.
There is no right or wrong way to structure authority in an organization – all we can ask is “Is this the
best way of to achieve the organisation’s goals?”. The chain of command – flowing down from the top
of the organization.
Five approaches to Organisational Design
Managers must make choices about how to group people together to perform their work. Five common
approaches – Functional, divisional, matrix, Hierarchical, Flat, Tall – help to managers determine
department groupings (grouping of positions into departments). The Seven structures are basic
organizational structures, which are then adapted to an organizational’s needs. All Seven approaches
combine varying elements of mechanistic and organic structures. For example, the organisational
design trend today incorporates a minimum of bureaucratic features and displays more features of the
organic design with a decentralized authority structure, fewer rules and procedures.
Functional Structure – group positions into work units based on similar activities, skills, expertise, and
resources. Production, marketing, finance, and human resources are common groupings within a
functional structure. In this case, tasks are linked together on the basis of common functions. As a
result all production activities or all financial activities are grouped into single function which will
undertake all the tasks required of that functional. A typical organization chart of a functional
organization would appear as shown below.
President
Vice President
Operation
Plant
Manager
Vice President
Marketing
Plant
Manager
Regional Sales
Manager
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Department
District
Manager
Manager
Manager
Vice President
Regional Sales
Manager
District
Manager
Director
Human
Resources
Accounting
Department
Manager
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Supervisor
Supervisor
Supervisor


Supervisor
Supervisor
Supervisor
Advantages of organization are that by grouping people together on the basis of their technical’s
and specialist expertise, the organization can facilitate both their utilization and their
coordination through the service of the whole enterprise. This is according to Cole (1990, p155).
Functional organization can also provide good opportunities for promotion and career
development.
A functional structure features well-defined channels of communication and
authority/responsibility relationships. Not only can this structure improve productivity by
minimizing duplication of personnel and equipment.

Disadvantages of functional structure can result in narrowed perspectives because of the
separateness of different department work groups. Managers may have a hard time relating to
marketing, for example, which is often in an entirely different grouping. As a result, anticipating
or reacting to changing consumer needs may be difficult. It also reduced cooperation and
communication may occur.

Decisions and communication are slow to take place because of the many layers of hierarchy.
Authority is more centralized.

The functional structure gives managers experience in only one field – their own. Managers do
not have the opportunity to see how all the firm’s departments work together and understand
their interrelationships and interdependence.
Divisional structure
Because managers in large companies may have difficulty keeping track of all their company’s products
and activities, specialized departments may develop. These departments are divided according to their
organisational outputs. Examples include departments created to distinguish among production,
customer service, and geographical categories. This grouping of departments is called divisional
structure. These departments allow managers to better focus their resources and results. Divisional
structure also makes performance easier to monitor. As a result, this structure is flexible and responsive
to change.
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CEO
Attractions
Motion
Picture
Walt Disney
World
Consumer
Product
Studio
Magic
Kingdom
Television
Tokyo
Disneyland
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Magic
kingdom
Florida
Epcor
Center
Disney
Catalog
Disney
MGM
Studios
Disney
Stores
Disney
Music
Disney
Software
Licensing
Publishing
Divisional structure does have its drawbacks. Because managers are so specialized, they may waste
time duplicating each other’s activities and resources. In addition, competition among divisions may
develop due to limited resources.
Matrix structure
The matrix structure combines functional specialization with focus of divisional structure. This structure
uses permanent cross-functional teams to integrate functional expertise with a divisional focus.
Chief Executive
Office
Vice President
Finance
Vice President
Engineering
Vice President
Manufacturing
Vice President
Manufacturing
Project Manager
A
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Project Manager
B
Project Manager
C
Employees in a matrix structure belong to at least two formal groups at the same time – a functional
group and a product, program, or project team. They also report to two bosses – one within the
functional group and the other within the team.
This structure not only increases employee motivation, but is also allows technical and general
management training across functional areas as well.
Advantages





Better cooperation and problem solving
Increased flexibility
Better customer service
Better performance accountability
Improved strategic management
Disadvantages





The two-boss system is susceptible to power struggles, as functional supervisors and team
leaders vie with one another to exercise authority
Members of the matrix may suffer tasks confusion when taking orders from more than one boss
Teams may develop strong team loyalties that cause a loss of focus on larger organization goals
Adding the team leaders, a crucial component, to a matrix structure can result in increased
costs.
Conflict can arise concerning the allocation of resources and the division of authority as
between project groups and functional specialist.
TEAM STRUCTURE
Team structure organizes separate functions into a group based on one overall objective. These Crossfunctional teams are composed of members from different departments who work together as needed
to solve problems and explore opportunities. The intent is to break down functional barriers among
departments and create a more effective relationship for solving ongoing problems.
The team structure has many potential advantages
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




Intradepartmental barriers break down
Decision-making and response times speed up
Employees are motivated
Levels of managers are eliminated
Administrative costs are lowered
The team structure has many potential disadvantages



Conflicting loyalties among team members
Time-management issues
Increased time spent meetings
Plant Manager
New Product
Development
Team
Manufacturing
Manager
Employee/
Subordinates
Sales
Manager
Human Resources
Manager
Employee/
Subordinates
Diversity
Task Force
Employee/
Subordinates
Team assignments
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Managers must be aware that how well team members work together often depends on the quality of
interpersonal relations, group dynamics, and their team management abilities.
NETWORK STRUCTURE
The network structure relies on other organizations to perform critical functions on a contractual basis.
In other words, managers can contract out specific work to specialists
This approach provides flexibility and reduces overhead because the size of staff and operations can be
reduced. On the other hand, the network structure may result in unpredictability of supply and lack of
control because managers are relying on contractual workers to perform important work.
NETWORK STRUCTURE
Accounts
Receivable and Billing
Management
Information
Company
Core
Security
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Benefit
Administration
This approach provides flexibility and reduces overhead because the size of staff and operations can be
reduced. On the other, hand, the network structure may result in unpredictability of supply and lack of
control because managers are relying on contractual workers to perform important work.
HIERARCHICAL STRUCTURE
A hierarchical organization is an organization structure where every entity in the organization, except
one is subordinates to a single other entity. This arrangement is a form of a hierarchy. In an
organization, the hierarchy usually consists of a singular/group of power at the top with subsequent
levels of power beneath them. This is the dominant mode of organization among large organizations,
most co-operations, governments, and organized religions are hierarchical organization with different
levels of management, power or authority.
Members of hierarchical organisational structures chiefly communicate with their immediate superior
and with their immediate subordinates. A hierarchy is typically visualized as a pyramid, where the
height of the ranking people are at the apex, and there are very few of them, the base may include
thousands of people who have no subordinates. These hierarchies are typically depicted with a triangle
diagram.
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Director
Departmental Managers
Team Leaders
Operatives
Advantages and disadvantages of this type of structure are the opposite of those of for tall
TALL STRUCTURE
Tall organization structure is one which has many levels of hierarchy. In this organization there are
usually many managers and each manager has a small span of control. They are in charge of only a small
group of people. Tall structure tend to be more complicated and complex, and may be slower to
respond to market changes than organization which/where managers have a larger span of control.
In tall organization there are many layers of middle management often develops. Its own rules and
procedures, which means that employees who work several layer down in the company may have a
great many rules and procedures to follow. This can slow work down and make it overly bureaucratic.
This can also add to costs, as some functions are performed by more than one person.
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Director
Assistant
Director
Divisional Managers
Section heads
Team Leaders
Supervisors/Foremen
Junior staff/Operatives
ADVANTAGE




Tall structure is that there is a very clear and distinct division of work between the various
levels. This fits well with a strong, clear line authority.
Decentralised authority
Many authority levels
Narrow spans of control
Disadvantage





Tall structure tend to be bureaucratic and rigid, lacking flexibility to respond quickly to meet
developments;
The long ladder of promotion may be discouraging to more junior staff (although a narrow span
of control increases promotion possibilities)
Additional management levels tend to b costly, having a greater amount of administrative
activity associated with them
A large distance between top and bottom lends to more communication problems, with the
number of levels increasing the chances of distortion, filtering and omissions
The profusion of levels makes the specification of clear objectives difficult at each level and
there is the possibility of confusion as to functions and role across levels.
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FLAT STRUCTURE
An organization where there is less distance between the higher and lower levels within the hierarchy.
This involves a shorter chain of command and usually, a wider span of control. A flat organization
structure has few level of management between the executive level and the front-line employees. The
premise behind a flat organization structure is to empower employees by making them a larger part of
the decision-making process.
Director
Departmental Managers
Team Leaders
Operatives
The advantages and disadvantages of this type of structure are the opposite of those for tall
structures.
A flat organization structure is designed to minimize bureaucracy and making/make employees more
productive by empowering them to make decision. Communication occurs more easily between upper
managers and base line employees allowing for more rapid change and problem resolution.
ORGANISATION CHARTS
An organization chart is a diagrammatic representation of the organisation’s structure; or at least,
elements of that organization structure since it does not, usually, show detailed information about
individual jobs.
What, then, does an organization chart show and how useful is it?
Organisation charts vary in the level of detail displayed, but they all invariably display three elements of
the organisational structure:
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The division of organizations into departments, sections, units etc;
The major positions in each division;
The inter-relationship between position and division, including the managerial reporting lines
and channels of communication.
For example the chart of the structure of a typical marketing department shown below. Diagram shows
the major divisions of the organization, the senior posts in some of the divisions, and the hierarchical
structure and reporting lines through four tiers in respect of two of the divisions. It gives you some idea
of the way in which the organization is organized and who reports to whom.
TYPICAL ORGANISATION CHART
Marketing Director
Marketing Manager
Advertising
Supervisor
Research
Supervisor
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Sales manager
Chief Order
Clerk
Chief
Representative
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Public
Organiser
O
Copy
Writer
Marketing
Research
Organiser
Order
Clerks
Area
Representatives
O
Graphic
Artist
Research
Officers
Junior Clerks
The reporting lines also show the chain of command within the organization. The chain of command is
the way in which authority is distributed down through the hierarchy of the organization, all the way
from the top to the bottom. In theory, it should be possible to track that line of authority from any
position – say a clerk in the Finance department – all the way up through his/her immediate superior, to
that person’s manager and so on to the Managing Director.
So the organization chart provides a useful snapshot of the formal structure of the organization at a
particular point in time. However, it is not a description of how that organization actually works. For
example, there is no sense of the role of particular posts, or how each division relates to the others,
except through their common managers. There is similarly no sense of the degree of authority and
responsibility of the various positions identified the extent to which they can autonomously or have to
consult their superiors or the degree of access they have to more senior management.
The organization chart illustrates the bones of the structure and much of the central nervous system,
but does not show all the branches of the nervous system, not does it give any indication of how
information, direction and co-ordination flow through it.
Influences on organization structure
Factors That Influence Organizational Structure
Organizational structure is important because a good structure allows efficient communication,
encourages departments and groups within the company to work together, establishes a hierarchy of
responsibility and allows the company to grow in a controlled manner. There are several factors that
influence organizational structure. In order to create and maintain an efficient organizational structure,
you must first understand the factors that go into it.
Training
Proper training helps to encourage a healthy organizational structure. When employees are schooled in
how the company operates, what the proper channels of communication are and how to work together,
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these tasks and the organizational structure remain intact. Reinforce the company's structural integrity
by making sure that each employee takes part in regular corporate trainings designed to introduce new
concepts within the framework of the organizational structure.
Mission Statement
An organization should be designed to rally around the corporate mission statement. A mission
statement is more than just a marketing device placed on the corporate pamphlets; it should summarize
the beliefs of the company and how the company wants its customers and vendors to perceive it. Create
a mission statement that the entire company can understand, and then encourage managers and
executives to reinforce the mission statement each day. A company that is unified behind a single vision
is better conditioned to maintain a strong organizational structure.
Change
It can be difficult to implement an effective organizational structure when there is significant employee
turnover, or when employees are constantly moved from one department to another. Stability can be
one of the best ways to encourage the growth of a strong organizational structure. Improve employee
retention by offering a competitive wage and opportunity to advance, and hire employees that are
specific to each department rather than all-purpose employees that would be moved around.
Priorities
Corporate priorities can sometimes dictate organizational structure. For example, if the company
dedicates more resources to engineering than sales, then over time the engineering department will
become more influential in the company structure. The challenge with something like that is
engineering tends to not be geared toward driving sales, and a company needs to drive sales to survive.
When you are designing projects and determining where company resources go, use the right priority
for your organization to be sure that your company is structured efficiently.
FACTORS AFFECTING ORGANIZATIONAL STRUCTURE
Organizational structure is the framework companies use to outline their authority and communication
processes. The framework usually includes policies, rules and responsibilities for each individual in the
organization. Several factors affect the organizational structure of a company. These factors can be
internal or external. Small business owners must be responsible for creating their companies
organizational structure framework. Business owners may use a management consultant or review
information from the Small Business Administration before setting up their organizational structure.
Size
Size is many times the driving factor for a company’s organizational structure. Smaller or
home-based businesses do not usually have a vast structure because the business owner is usually
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responsible for all tasks. Larger business organizations usually require a more intense framework for
their organizational structure. Companies with more employees usually require more managers for
supervising these individuals. Highly specialized business operations can also require a more formal
organizational structure.
Life Cycle
The company’s life cycle also plays an important part in the development of an
organizational structure. Business owners attempting to grow and expand their company’s
operations usually develop an organizational structure to outline their company’s business
mission and goals. Businesses reaching peak performance usually become more mechanical in their
organizational structure. This occurs as the chain of command increases from the business owner down
to frontline employees. Mature companies usually focus on developing an organizational structure to
improve efficiency and profitability. These improvements may be the result of more competitors
entering the economic marketplace.
Strategy
Business strategies can also be a factor in a company’s organizational structure
development. High-growth companies usually have smaller organizational structures so they can react
to changes in the business environment quicker than other companies. Business owners may also be
reluctant to give up managerial control in business operations. Small businesses still looking to define
their business strategy often delay creating an organizational structure. Business owners are usually
more interested in setting business strategies rather than developing and implementing an internal
business structure.
Business Environment
The external business environment can also play an important part in a company organizational
structure. Dynamic environments with constantly changing consumer desires or behavior is often more
turbulent than stable environments. Companies attempting to meet consumer demand can struggle
when creating an organizational structure in a dynamic environment. More time and capital can also be
spent in dynamic environments attending to create and organizational structure. This additional capital
is usually a negative expense for many small businesses.
1. Identify the common structures used by organizations and describe the strengths and weakness
of each of these structure.
2. Discuss the following basic organization structures
i.
Function structure
ii.
Matrix structure
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iii.
iv.
v.
vi.
vii.
Hierarchical structure
Flat structure and Tall structure
Divisional structure
Team structure
Network structure
3. What, then, does an organization chart show and how useful is it?
4. Draw chart of the structure of a typical marketing department, account department,
Production department the diagram showing the major divisions of the organization, the senior
posts in some of the divisions, and the hierarchical structure and reporting lines through four
organization is organized and who reports to whom.
5. What are the advantages and disadvantages of
i.
Function structure
ii.
Matrix structure
iii.
Hierarchical structure
iv.
Flat structure and Tall structure
v.
Divisional structure
vi.
Team structure
vii.
Network structure
6. Describe factors affecting organizational structure
7. What Influences an organization structure
REFERENCES:
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L.J.Mullins Management and organisational behavior , Eight Edition
ABE Business Management ,Organisational behavior
C. Gerald ,Management Theory and Practice, Sixth edition
Harold Koonty,Principle of management, an analysis of management function, Third Edition
G. A. Cole,Management Theory and Practice, Second Edition
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