BACHELOR OF BUSINESS ADMINISTRATION
(YEAR 1)
MODULE 1
BUSINESS MANAGEMENT 1A
Study Guide
Copyright© 2013
MANAGEMENT COLLEGE OF SOUTHERN AFRICA
All rights reserved, no part of this book may be reproduced in any form or by any means, including photocopying
machines, without the written permission of the publisher
REF: BMG1A
Business Management 1A
MODULE INDEX - BUSINESS MANAGEMENT 1A
Section
Title of Section
Page
1
Introduction to Management
2
Evolution of Management Theory
35 – 64
3
The Management Environment
65 – 94
4
The Management Process
96 – 135
5
Bibliography
136 – 139
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Business Management 1A
AIMS OF THIS MODULE
The broad aims of this module are to:
•
Introduce the student to fundamental management principles and practices.
•
Develop the student’s understanding of the evolution of management theory.
•
Develop the student’s understanding of the management environment and its application.
•
Develop the student’s understanding of the management process and its application.
•
Develop the student’s understanding of contemporary management issues and their application.
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Introduction
This module, Businesss Management, forms an integral part of the MANCOSA qualification and serves to
introduce the student to the fundamentals of management. In so doing, the module explores the evolution
of management theory, the management environment, the management process, as well as contemporary
issues in management.
Contents and Structure
Section 1:
Introduction to Management
This first section introduces the student to the concept of management. In this section the nature and
definition of management are examined, as are the various levels of management, areas of management
and managerial skills. The relationship between management and organizational performance is studied
and the scope of and current challenges for management are explored.
Section 2:
Evolution of Management Theory
Section 2 explores the evolution of management theory. Here, the importance of theory is established, and
various management theories are examined.
Section 3:
Management Environment
This third section examines the dynamics of the management environment. In so doing the characteristics
of the macro-environment, market environment and micro-environment are studied. The interface between
the organisation and the environment is also examined.
Section 4:
The Management Process
Section 4 explores the nature of the management process. In this section the four fundamental
management functions of Planning, Organising, Leading and Controlling (POLC) are examined. The
various areas of management are also studied.
Section 5:
Contemporary Management Issues
This section examines certain contemporary management issues and explores the implications which these
have for the current day manager. Motivation, decision making, communication and groups and teams are
the four issues which are dealt with.
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How to use the Manual
Don’t try to complete the manual in a few long sessions. You will study more effectively if you divide your
study into two-hour sessions.
If you want to take a break it would be a good idea to stop at the end of a section.
As you work through the manual you will come across Activities and Self-Assessment Exercises. These
are designed to help you study and prepare for the examinations.
ACTIVITY
Activities ask you to carry out specific tasks. In most cases there are no right or wrong
answers to the Activities. The aim of the Activities is to give you an opportunity to apply
what you have learned.
SELF CHECK QUESTION
Occasionally you will be required to assess your grasp of concepts by applying concepts
to specific situations. Suggested answers to these activities are provided at the end of the
specific unit.
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READING
This manual has been designed to be read in conjunction with the following textbook:
Prescribed Reading:
Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition,
Oxford University Press: Southern Africa
Recommended Reading:
Books
Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues.
Massachusetts: McGraw Hill. pp 2 – 30.
Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices and Skills.
Massachusetts: Allyn & Bacon. pp 1 – 33.
Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 34 - 63.
Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town:
Juta & Co. pp 17-20.
Journals
•
Hofmeyer, K. (1998) “South African Managers Need To Be More Positive” People Dynamics
October, 16(10), pp 16 – 20.
•
Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard Business Review , Mar
– Apr, pp 163 – 170.
•
Moss Kanter, R. (1989) “The New Managerial Work” Harvard Business Review Nov - Dec, pp
13 – 20.
•
Taylor, G (2000) “An ‘Empty Beds’ Policy to Manage Aids?” People Dynamics May, 18 (5), pp
20 – 24.
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SECTION ONE
INTRODUCTION TO MANAGEMENT
CONTENTS
SECTION 1 - INTRODUCTION TO MANAGEMENT
Learning Outcomes
Reading
1.1 Introduction
1.2 Nature of Management
1.3 Definition of Management
1.4 Levels of Management
1.5 Management and the Organisation
1.6 ‘Old’ and ‘New’ Organisations
1.7 Management and Organisational Performance
1.8 Scope and Challenges of Management
1.9 Summary
1.10 Answers to Self Check Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the student should be able to demonstrate an
understanding of fundamental management issues. This overall outcome will be achieved through the
student’s mastery of the following specific outcomes, in that the student will be able to:
1.
Explain the relationship between the organisation and management.
2.
Discuss the management process and explain the relationship between the management process
and its environments.
3.
Formulate a workable definition of management.
4.
Identify the levels of management and critically discuss the activities which are performed at each
level.
5.
Identify and critically discuss the areas of management, manager role distribution and managerial
skills.
6.
Identify and critically discuss the concepts of, and key differences between, the ‘old’ organisation and
the ‘new’ organisation.
7.
Identify and critically discuss the measures of managerial and organisational performance.
8.
Identify and critically discuss contemporary management challenges.
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READING
Prescribed Reading:
Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford
University Press: Southern Africa
Recommended Reading:
Books
•
Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts:
McGraw Hill. pp 2 – 30.
•
Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices and Skills.
Massachusetts: Allyn & Bacon. pp 1 – 33.
•
Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 34 - 63.
•
Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co.
Journals
•
Hofmeyer, K. (1998) “South African Managers Need To Be More Positive”People Dynamics October,
16(10), pp 16 – 20.
•
Mintzberg, (1990) “The Manager’s Job: Folklore and Fact” HarvardBusiness Review , Mar – Apr,
pp 163 – 170.
•
Moss Kanter, R. (1989) “The New Managerial Work” Harvard BusinessReview Nov - Dec,
pp 13 – 20.
•
Taylor, G (2000) “An ‘Empty Beds’ Policy to Manage Aids?” PeopleDynamics May, 18(5), pp 20 – 24
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1.1
Introduction
This section, the first section of the BusinessManagement Module, serves to introduce the student to the
concept of management. In so doing the following issues are examined:
•
Nature of management;
•
Definition of management;
•
Levels of management;
•
Management and the organisation;
•
‘Old’ and ‘new’ organisations;
•
Management and organisational performance; and
•
The scope and challenges of management.
?
THINK POINT
The concept of management is inextricably intertwined with the purpose of the business
organisation. In your experience….
•
why do organisations exist; and
•
how does the role of management support the purpose of organisations?
Comment on Think Point
Robbins (1997:38) identifies organisations to be characterized by a distinct purpose, multiple members and
a systematic structure. Organisations have emerged and exist primarily because they are more efficient
than individuals operating individually and therefore can produce items and/or provide services which an
individual could not produce/provide alone. In so doing the organisation is able to meet the needs and
demands of current day society through:
•
bringing together resources to produce and provide the products and services which the society needs;
and
•
creating and providing career opportunities for members of the society
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In order to meet the needs and demands of current day society, organisations establish goals which need
to be operationalised for the purpose of the organisation to be achieved (Smit & Cronjé, 2002).
Management serves to ensure that such goals are established and operationalised, and in so doing
supports the purpose of the organisation.
1.2
The Nature of Management
Management’s task is argued to be “…to examine factors, methods and principles that enable a business
organisation to maximise its profits and achieve its objectives, (Cronje:2002:8). The achievement of this
task is reliant on the management process, which comprises the functions of planning, organising, leading
and controlling, as depicted in Figure 1.1 below.
MANAGEMENT SCHOOLS OF THOUGHT
THE ENVIRONMENT
THE ORGANISATION
ORGANISING
RESOURCES
•
•
•
•
Human
Financial
Physical
Info.
PERFORMANCE
PLANNING
LEADING
•
•
•
•
•
Achieve goals
Products
Services
Productivity
Profit
CONTROLLING
Figure 1.1: The Nature of Management (adapted from Smit & Cronjé, 2002:9)
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A study of Figure 1.1 reveals that the management process requires interaction with a number of variables
within different ‘environments’:
•
the organisation;
•
the macro-environment; and
•
management schools of thought.
•
The Organisation
Within the organisation, management achieves the goals of the enterprise through acting on its human,
financial, physical and informational resources by executing the four central management functions of
Planning, Organising, Leading and Controlling (abbreviated to POLC). These four functions comprise the
core management process:
o
Planning involves determining which goals and courses of action the organisation and the various
departments should pursue;
o
Organising involves the structuring and arranging of work, resources, departments and the overall
organisation in a manner which will facilitate the achievement of organisational goals;
o
Leading involves influencing the organisation’s employees so as to ensure that they are motivated to
perform actions which are aligned with the organisation’s overall goals;
o
Control means narrowing the gap between what was planned and the actual achievement of
management, and ensuring that all activities are carried out as they should be. (Du Toit et al, 2013)
The four management functions will be further discussed in Section 4 of this Module Guide.
•
The Environment
The organisation operates within a market environment, comprising consumers, suppliers and competitors,
as well as the macro-environment, which includes the technological, economic, social, political and
international environments. These two environments impact on the organisation and therefore affect the
nature of the organisation’s management. The organisation’s environment will be discussed further in
Section 3 of this Module Guide.
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•
Management Schools of Thought
Management Schools of Thought (also known as Management Theories) present frameworks which
provide the manager and management student with fundamental principles to guide effective management
decisions and actions. Management Theories will be addressed further in Section 2 of this Module Guide.
1.3
Definition of Management
With regards to a definition of management, on the whole, a considerable degree of consensus exists
within the literature. Definitions include:
•
“…the process of planning, organising, leading and controlling the resources of the organisation to
achieve stated organisational goals as productively as possible” ( Cronjé,et al 2004:10).
•
“…the process of getting things done through the efforts of other people” (Mondy, Sharplin
& Premeaux, 1991: 3).
•
“…the process of planning, organizing, leading, and controlling the work of organisation
members and of using all available organisational resources to reach stated organisational goals.”
(Jones, George & Hill, 1998:5).
An analysis of the above definitions point to the essential components which should be included in a
definition of management:
•
Management….
o involves a process in which …
the management functions of planning, organising, leading and controlling are executed;
organisational resources are utilized; and
work is achieved through the efforts of other employees,
o so as to provide for …the effective and efficient achievement of the organisation’s goals.
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1.4
Levels of Management
Three levels of management within an organisation may be identified:
•
Top Management
•
Middle Management
•
Lower / First-Line / Supervisory Management
ACTIVITY
Take note of the top, middle and lower management positions within your organisation.
From your experience, what are the distinguishing characteristics of each level of management?
Top Management:
Middle Management:
Lower Management:
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Comment on Activity
The three levels of management may be distinguished according to level of responsibility, main functions,
time orientation and positions held, as indicated in Table 1.1 below.
TOP MANAGEMENT
RESPONSIBILITY
MIDDLE
LOWER
MANAGEMENT
MANAGEMENT
Overall responsibility for
Responsible for
Responsible for
the organisation
specific departments departmental sections /
subsections
MAIN FUNCTION
Strategic management
Implementation of
Application of rules &
policies, plans &
procedures to achieve
strategies
high levels of productivity
TIME ORIENTATION
Long Term
Medium Term
Short Term
POSITIONS HELD
Board of Directors,
Departmental
Section/subsection
Managing Director,
heads, e.g.
heads, e.g. Product,
CEO, Management
Marketing Manager,
Sales & Promotion
Committees
HR Manager
Managers within the
Marketing Department
Table 1.1: Three Levels of Management
ACTIVITY
From your experience as a lower / middle / top level manager, what percentage of time would you
estimate you spend on planning, organising, leading and controlling at your particular management
level (lower, middle or top)?
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Comment on Activity
Evidence shows that managers at all levels spend time on all management functions. However, as Daft
(1995) points out, the amount of time spent on each particular function differs between each level of
management (see Table 1.2 below).
PLANNING
ORGANISING
LEADING
CONTROLLING
28 %
36 %
22 %
14 %
18 %
33 %
36 %
13 %
15 %
24 %
51 %
10 %
TOP MANAGERS
MIDDLE MANAGERS
FIRST-LINE
MANAGERS
Table 1.2: Percentage of Time Spent on Management Functions by Management Level
(Daft, 1995: 17).
It is evident from table 1.2 that:
•
Top managers spend much time organising, and a substantial amount of time planning;
•
Middle managers spend time mostly on organising and leading; and
•
Lower managers spend just over half of their time leading.
1.5
Management and the Organisation
It has already been identified, in the Introduction (subsection 1.1) to this section, that the relationship
between the organisation and management is critical in that management serves to support the
establishment of goals, implementation of actions and utilization of resources, so as to enable the
achievement of the organisation’s purpose.
This subsection serves to further highlight management’s relation to the organisation by discussing the
areas of management, role distribution of managers as well the managerial skills required at various
managerial levels.
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1.5.1 Areas of Management
A business also has different types of managers, each responsible for the management of a more or less
specialised group of activities. Six functional areas of management may be identified (Cronjé, et
al,2004:125):
•
Marketing Management
•
Financial Management
•
Operations Management
•
Purchasing Management
•
Human Resource Management
•
Public Relations Management
These functional areas of management will be examined further in Section 4 of this Module Guide.
In addition to the six functional areas of management identified above, a seventh area may be identified:
that of General Management (Cronjé, 2004). This area of management involves the execution of the four
generic management functions of Planning, Organising, Leading and Controlling (POLC), already identified
in subsection 1.2, and which are to be discussed further in Section 4 of this Module Guide. General
Management is not only performed within each of the six areas of management identified above, but at all
levels of management as well.
1.5.2
The Role Distribution of Managers
The manager’s relation to the organisation can be further explored from a role distribution perspective.
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READING
Read the following article and then answer the questions which follow:
Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard Business
Review , Mar – Apr, pp 163 – 170.
1. How does Mintzberg (1990) view the manager’s job in relation to the organisation?
2. How does Mintzberg’s view differ from the ‘Areas of Management’ approach examined in
paragraph 1.5.1 above?
3. From your experience, which approach is more applicable to your position as manager?
Comment on Activity
As identified in paragraph 1.5.1 above, the area of General Management identifies the four management
functions of Planning, Organising, Leading and Controlling (POLC) as characterising the manager’s work.
However, Mintzberg (1990) argues that not only do these widely accepted management functions provide
an inadequate explanation of what managers do, they fail to provide a practical approach to understanding
and developing managerial competence as well.
It is argued that the traditional POLC approach oversimplifies the complexity of the manager’s job, which is
in effect, “enormously complicated and difficult” (Mintzberg, 1990: 167) and is characterised by brevity,
fragmentation and an overburden of tasks. Thus Mintzberg (1990) maintains that it is more useful to view
the manager’s relation to the organisation in terms of their roles.
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Interpersonal
role
Representative
figure
Leader
relationship
Decision-making
role
Entrepreneur
Troubleshooter
Allocator of
resources
negotiator
Information role
Monitors
Analyses
spokesman
Figure 1.2: The overlapping roles of managers (Du Toit, et al:2007:137)
Figure 1.2 presents the three categories of managerial roles in a sequential manner. The sequence begins
with status emerging from the formal authority vested in the manager’s position. This status allows for the
formation of interpersonal relationships and the execution of Interpersonal Roles. The interpersonal
relationships in turn provide the manager with access to information and the consequent carrying out of
Informational Roles. This information consequently enables the manager’s decision making, and his
execution of Decisional Roles.
It needs to be noted that Mintzberg (1990) emphasizes that although he breaks down the manager’s work
into ten different roles, his focus is on the gestalt (whole) and he argues that the roles are not separable. In
so doing the complex nature of managerial work is acknowledged.
Mintzberg (1990) argues that the managerial role approach contributes to more effective management in
that, unlike the traditional POLC approach, it provides managers with insight into the pressures and
complexities of their work.
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SELF CHECK QUESTION 1
Discuss the ten manager roles which Mintzberg identifies. Provide an example of each.
The answer to this self-check question may be found at the end of this section.
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1.5.3
Managerial Skills
In order for the manager to effectively perform in his/her position, certain managerial skills are required.
?
THINK POINT
In studying towards this management qualification, what specific management skills are you
expecting to acquire?
Why are these particular skills important to the position which you hold (or are to hold) as a
manager?
Comment on Think Point
Cronjé et al (2004) identify three categories of skills which managers at all levels of the organisation are
identified to possess:
•
Conceptual Skills: which refer to the manager’s ability to view the operation of the organisation and its
parts holistically.
•
Interpersonal Skills: which refer to the manager’s ability to communicate and work effectively with
others.
•
Technical Skills: which refer to the ability to use discipline specific skills to complete a particular task.
Obviously managers at different hierarchical levels within the organisation will employ these skills to varying
degrees. For example, the nature of the work which top management performs requires a greater reliance
on, and employment of, conceptual skills.
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READING ACTIVITY
Read the section entitled “The Educator’s Job” on page 175 of
•
Mintzberg, H. (1990) “The Manager’s Job: Folklore and Fact” Harvard Business
Review , Mar – Apr, pp 163 – 170.
Also read:
Cronjé, (2004) Introduction to Business Management, 6th Edition : Cape Town: Juta & Co.
pp 136-140.
Compare and contrast Mintzberg’s (1990) view of managerial skills to that of Smit & Cronjé (2002).
Comment on Reading Activity
Mintzberg (1990) identifies the following skills to be important to managerial work:
o
Development of peer relationships
o
Motivation of subordinates
o
Conflict resolution skills
o
Negotiation skills
o
Establishment of information networks
o
Dissemination of information
o
Allocation of resources
o
Decision making in conditions of extreme ambiguity
o
Introspective skills which provide for learning of the job
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The key difference between the managerial skills identified by Mintzberg (1990) and those identified by
Cronjé, et,al (2004) is that while the latter’s focus is on skill categories, the former emphasizes important
skills necessary to cope with the complex nature of managerial work. Indeed, it may be argued that the
majority of skills identified by Mintzberg (1990) fall within S Cronjé’s, et,al (2004) Conceptual and
Interpersonal Skill categories.
SELF CHECK QUESTION 2
What mechanisms exist for the development of managerial skills and how effective are they?
The answer to this self-check question may be found at the end of this section.
This subsection, entitled Management and the Organisation, has served to further explore the fundamental
principles underlying the relationship between the organisation and the work of the manager. In so doing,
the Areas of Management, Managerial Roles and the Managerial Skills were examined.
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1.6
‘Old’ and ‘New’ Organisations
The management environment has been undergoing change which has resulted in change in organisations
and managerial work. This has resulted in the emergence of the ‘new’ organisation which provides the
flexibility necessary to respond adequately to the changing environment (Robbins, 1997).
ACTIVITY
From your experience, what changes have you observed within organisations and managerial work
over the past ten years?
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Comment on Activity
Organisations are changing in a number of ways. Table 1.3 below identifies some of the key changes, as
identified by Robbins (1997).
‘OLD’ ORGANISATION
‘NEW’ ORGANISATION
•
Permanent jobs
•
Temporary jobs
•
Control organisation’s own destiny
•
Externalize risk (e.g. through
through independence
outsourcing)
•
Relatively homogenous workforce
•
Diverse workforce
•
9-to-5 workdays
•
Workdays with no time boundaries
•
Large corporations provide job security
•
Large corporations are cutting overall staff
•
“If it ain’t broke, don’t fix it”
•
Reengineer all processes
•
Work is organized around individuals
•
Work is organized around teams
Table 1.3: Key Changes Within Organisations (Robbins, 1997: 11)
READING ACTIVITY
Read the following journal article and then answer the question which follows:
•
Moss Kanter, R. (1989) “The New Managerial Work” Harvard Business Review Nov-Dec,
pages 13 – 20.
How does Moss Kanter’s ‘post-entrepreneurial’ management differ from the more traditional managerial
approach which you have encountered thus far in this section?
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Comment on Reading Activity
Moss Kanter (1989) argues that as a result of competitive pressures within the management environment,
organisations are adopting more flexible strategies and structures. The move to flexibility requires that
managers learn to perform new ways of managing, deal with change, implement new ways of motivating
people and accept changes in their own bases of power.
Moss Kanter (1989) argues that the post-entrepreneurial organisation presents the traditional manager with
the following changes:
o
An increased number and variety of channels (horizontal, vertical, cross-functional) exist for exerting
influence and taking action within the new organisation;
o
Within the new organisation, relationships of influence are emerging within horizontal peer networks,
and thus are not limited to the vertical chain of command;
o
The division between managers and non-managers is blurring, particularly in terms of information
accessibility, access to relationships outside of the organisation and control over assignments;
o
External relationships are becoming important in providing for internal power and influence, as well
as career development;
o
As a result of the above four factors, stable and predictable paths of career development for
managers are difficult to pre-determine and to guarantee.
The above five factors demonstrate how the post-entrepreneurial manager is distinct from the traditional
manager in that his/her managerial power and success is not derived from his/her hierarchical position.
Indeed, it is asserted that managers “….must learn to operate without the crutch of hierarchy. Position, title,
and authority are no longer adequate tools, not in a world where subordinates are encouraged to think for
themselves and where managers have to work synergistically with other departments and even other
companies” (Moss Kanter, 1989: 16).
Thus Moss Kanter’s (1989) approach essentially differs from the traditional management approach in that
while the traditional approach is grounded in the concept of hierarchy (as shown in subsections 1.4 and
1.5), the post-entrepreneurial approach’s focus is on relationship networks.
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1.7
Management and Organisational Performance
It was indicated in the Introduction (subsection 1.1) that to meet the needs and demands of current day
society, organisations establish goals which must be operationalised for the purpose of the organisation to
be achieved (Cronjé, 2004).
Management serves to ensure that such goals are established and
operationalised, and in so doing supports the purpose of the organisation. Thus it follows that
organisational performance has a strong relation to managerial performance.
?
THINK POINT
What criteria do you think would be appropriate for the measuring of organisational and managerial
performance?
Comment on Think Point
The assessment of managerial and organisational performance is one characterized by much debate
(Stoner & Freeman, 1992). However, the criteria on which there is much agreement are those of efficiency
and effectiveness:
•
Efficiency (‘doing things right’) focuses on input and output. An efficient manager is regarded to be one
who is able to achieve outputs which measure up to the inputs (time, materials, labour) used to achieve
the outputs.
•
Effectiveness (‘doing the right thing’) focuses on choosing the most appropriate goals and plans of
action (Stoner & Freeman, 1992: 6).
Cronjé (2004) argue that the efficiency-effectiveness approach tends to be simplistic. Rather, the economic
principle, where the organisation (and its management) should seek to achieve the highest possible output
with the lowest possible input, should be used as the measure of managerial and organisational
performance (Cronjé, 2004).
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1.8
Scope and Challenges of Management
A number of challenges exist for management not only within the Southern African region, but globally as
well.
READING ACTIVITY
Read the following texts and then answer the question which follows:
•
Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition,
Oxford University Press: Southern Africa. Chapter 1 and 2
•
Hofmeyer, K. (1998) “South African Managers Need To Be More Positive”, People Dynamics, October,
16(10), pp 16 – 20.
•
Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition. Cape Town: Juta & Co, pp 23-25.
•
Taylor, G (2000) “An ‘Empty Beds’ Policy to Manage Aids?” People Dynamics, May, 18 (5), pp 20 – 24.
From your reading of the above three texts, what challenges currently face management within the
Southern African region?
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Comment on Activity
Cronjé et al (2007) identify the following challenges to management within the Southern African region:
•
Management Training for Large and Small Business Organisations: As both large and small
businesses play an important role in the South African economy, one of the challenges is to ensure that
organisations of all sizes have skilled management who are able to ensure effective organisational
performance. Such management competence should be acquired through appropriate management
training.
•
International Management: Globalisation has resulted in South African organizations having to
compete with global players. The challenge for management exists in improving the performance of
South African organisations to achieve sustainable competitive advantage within this highly competitive
market (Cronjé, et al 2004).
•
Non-profit Seeking Organisations: Non-profit organisations within South Africa, such as the
government, place a significant demand on scarce resources. Management’s challenge within these
organisations is to ensure efficient and effective use of these resources.
•
Managerial and Economic Empowerment: The initiatives of the South African apartheid government
resulted in considerable inequalities and consequently a vast number of disadvantaged individuals. The
challenge for management therefore is to ensure the managerial and economic empowerment of the
previously disadvantaged individuals through, for example, management training and mentorship
(Cronjé,et al 2004).
•
Cultural Diversity: The South African organisation is characterized by diversity in terms of
race,
ethnicity, religion, gender and sexual orientation. The challenge therefore is for management to not
only appropriately manage, but also harness the potential of a diverse workforce.
Taylor (2000) identifies HIV and AIDS to be a management challenge. Indeed, it is expected that in 2010
21% of the South African workforce will be HIV positive, while 3% will have AIDS. It is argued that in order
to deal with the HIV/AIDS epidemic, South African management need to start planning and devising
inventive solutions.
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The effective addressing of the management challenges identified by Cronjé et al(2004) and Taylor (2000)
may be argued to be dependent on management which is dedicated and enthusiastic. However, research
undertaken by Hofmeyer (1998) during 1997 shows that South African management attitudes have become
more negative since 1994, particularly in the areas of management relations, productivity, management
development and leadership. This thus presents a further challenge: given South African management’s
less positive attitudes, is it possible for management to be sufficiently committed and motivated for the
challenges identified by Cronjé (2004) and Taylor (2000) to be effectively addressed?
1.9
Summary
This section served to introduce the student to the fundamentals of management. The nature of
management was examined and a definition of management was formulated. Further, the levels of
management, the areas of management, management roles as well as management skills were examined.
The implications which the new organisation has for management were also explored, as were measures of
management and organisational performance. This introduction to management was concluded with an
examination of the current and future management challenges.
The next section of this Study Guide, Section 2, will examine the evolution of management theory.
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1.10
Answers to Self-Check Questions
The answers to the Self-Check Questions contained within this section are provided below.
Self-Check Question 1
Discuss the ten managerial roles which Mintzberg identifies. Provide an example of each.
Model Answer
Mintzberg’s (1990) ten managerial roles include:
•
Interpersonal Roles
o Figurehead Role: the manager is involved in the performance of ceremonial duties, such as
officiating at a long-service award evening.
o Leader Role: the manager works with and through his/her subordinates in order to achieve the
work of his/her department. For example the manager appoints, trains, motivates and promotes
his/her subordinates.
o Liaison Role: the manager makes contacts outside of the vertical chain of command to maintain
good relationships within and without the organisation, such as the forming of a sound relationship
with a supplier or distributor.
•
Information Roles
o Monitor Role: the manager is involved in constantly seeking pertinent information through, for
example, scanning the environment and receiving information from his network of contacts.
o Disseminator Role: the manager passes on information that he has received to individuals within
the organisation who would benefit from it, such as subordinates and colleagues.
o Spokesperson Role: the manager communicates information to people outside the organisation,
for example, the Marketing Director may ensure that the press is kept informed about the
organisation’s social responsibility initiatives.
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•
Decision-Making Roles
o Entrepreneur Role:
the manager seeks to maintain and extend the unit’s/ organisation’s
sustainability through adapting it to changes within the environment.
o For example, the CEO and the management team may decide to change strategy and reengineer
the organisation as a result of influential changes within the organisation’s environment.
o Disturbance Handler Role: the manager is involved in involuntarily responding to pressures and
solving problems. For example, the HR Director may be required to address an unexpected
situation within the company which may lead to strike action.
o Resource Allocator Role: the manager decides what quantities of resources such as people,
equipment and money each part of the department / organisation should receive. For example,
during the company’s budgeting period, the CEO approves a budget for the Information
Technology department which is considerably larger than the other departments’ budgets.
o Negotiator Role: due to his/her authority to allocate resources and his/her access to information,
the manager is involved in negotiations within the company. For example, a supervisor may
negotiate changes to job specifications with his/her subordinates.
In closing, it needs to be noted that although Mintzberg (1990) distinguishes ten managerial roles,
he argues that all ten of these roles form a integrated whole and cannot be easily separated.
Self-Check Question 2
What mechanisms exist for the development of managerial skills and how effective are they?
Model Answer
Managerial skills may be developed from both education and experience, as depicted in Figure 1.3 on the
following page.
Management education, which can take the form of formal or continuous education, provides the manager
or potential manager with the opportunity to develop management skills within an educational setting, for
example, at colleges, technikons, universities and/or company in-house training facilities (Cronjé, 2004).
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•
•
EDUCATION
Formal Education
Continuous Education
•
•
EXPERIENCE
Job Experience
Variety of Assignments
SUCCESSFUL
ACQUISITION &
UTILISATION OF
MANAGEMENT
SKILLS
Figure 1.3: Mechanisms for the Development of Management Skills (from Smit & Cronjé, 2002:20)
In contrast to management education, practical experience provides the manager and potential manager
with the opportunity to develop management skills while performing his/her job.
With regards to the effectiveness of the two different approaches it is important to note Mintzberg’s (1990)
assertion that the development of management competence cannot be achieved from a theoretical
approach to education alone. Indeed, it has been recognized that for management development programs
to be effective, the cognitive learning which results from education should be married with the practical
learning which results from experience.
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SECTION TWO
EVOLUTION OF MANAGEMENT THEORY
CONTENTS
Learning Outcomes
Reading
2.1 Introduction
2.2 Why Study Management Theory?
2.3 Understanding Management Theory
2.4 The Theories of Management
2.4.1 Classical Approach
2.4.2 Behavioural & Human Relations Approach
2.4.3 Quantitative Approach
2.4.4 Contemporary Approach
2.5 Management Theory or Management Fad?
2.6 Summary
2.7 Answers to Self-Check Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the student should be able to demonstrate a
holistic understanding of the evolution of management theory.
This overall outcome will be achieved through the student’s mastery of the following specific outcomes:
1.
Discuss the importance and relevance of studying management theory.
2.
Discuss the concept of theory and identify the factors which influence the development of
management theory.
3.
Critically discuss and apply the principles of the Classical Management School of
thought.
4.
Critically discuss and apply the principles of the Behavioural & Human Relations Management
School of Thought.
5.
Critically discuss and apply the principles of the Quantitative Management School of thought.
6.
Critically discuss and apply the principles of the Contemporary Management School of thought.
7.
Critically discuss and identify the concept of a management fad.
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READING
Prescribed Reading:
•
Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford
University Press: Southern Africa
Recommended Reading:
Books
•
Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts:
McGraw Hill. pp 32 – 63.
•
Micklethwait, J. & Wooldridge, A. (1996) The Witch Doctors. London: Random House.
•
Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices and Skills.
Massachusetts: Allyn & Bacon. pp 61 – 73.
•
Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 595 - 610.
•
Senge, P.M. (1990) The Fifth Discipline: The Art and Practice of the Learning Organisation. New York:
Doubleday.
•
Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co
Journals
•
Donaldson, L. & Hilmer, F.G. (1998) “The Case Against Fads that Harm Management” Organizational
Dynamics Spring, pp 7 – 20.
•
Galagan, A. (1991) “The Learning Organization Made Plain” Training & Development October.
•
Hammer, M. (1990) “Reengineering Work: Don’t Automate, Obliterate” Harvard Business Review JulyAugust pp104 – 112.
•
Nadler, D.A. & Tushman, M.L. (1980) “A Model for Diagnosing Organizational Behaviour”
Organizational Dynamics Autumn, pp 35 – 51.
•
Tetenbaum, T. (1998) “Shifting Paradigms: From Newton to Chaos” Organizational Dynamics Spring
pp 21 – 32.
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2.1
Introduction
While Section 1 introduced the student to the fundamentals of management, this section examines the
Evolution of Management Theory. Management theory is argued by some to have originated with Nicocolé
Michiavelli, while others argue that the Egyptians were the first management thinkers (Micklethwait &
Wooldridge, 1996). However, while Michiavelli and the Egyptians may well have been management
thinkers, it is only during the last century that management has undergone systematic investigation and has
been established as a formal discipline.
This section of the Study Guide examines the body of management knowledge which has emerged since
the early 1900s. In so doing, the following will be studied:
•
Why study management theory?
•
Understanding management theory
•
The theories of management
o Classical Approach
Scientific management theory
Administrative management theory
o Behavioural & Human Relations Approach
o Quantitative Approach
o Contemporary Approaches
Systems theory
Contingency theory
Chaos theory
Other contemporary theories
2.2
Why Study Management Theory?
The management student may wonder why the study of management theory is necessary. However, as
will be shown, the study of management theory is critical in developing not only a holistic understanding of
the discipline, but professional competence as well.
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?
THINK POINT
Think about your experience in your current organization and/or organizations for which you have worked in
the past:
•
Identify two managers, with whom you have dealt, who have demonstrated vastly different
management styles (for example, an absolute autocrat vs a democratic manager).
•
Identify the one manager as ‘Manager A’ and the other manager ‘Manager B’.
•
From your experience and observations, what principles do you think underlie Manager A’s view of,
and approach to management?
•
From your experience and observations, what principles do you think underlie Manager B’s view of,
and approach to management?
Comment on Think Point
Each individual manager has a particular view about what management is, and how he/she should
approach it. This management framework, which guides the manager in his/her task, is based on a number
of principles which the manager has internalized as a result of his/her education and experiences within,
and interactions with, organizations and the world itself. In essence, therefore, each individual manager’s
actions are guided by his/her own unique, internalized management ‘theory’. It therefore follows that, in
exposing the manager or potential manager to the range of management theories which exist, an
opportunity will be provided to perhaps challenge and/or extend the manager’s current view of
management, and thus enhance his/her professional competence. Indeed, Stoner & Freeman (1992) point
out that the study of management theory is important in that the theories serve to:
•
Guide management decisions;
•
Shape the manager’s view of organizations;
•
Make the manager aware of the business environment;
•
Provide the manager with a source of new ideas.
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2.3
Understanding Management Theory
In studying management theory it is important that the management student has an understanding of the
concept of ‘theory’, as well as the factors which influence the development of theory.
ACTIVITY
Define the concept ‘theory’.
What factors do you think influence the development of a theory?
Comment on Activity
Definition of Theory
Stoner & Freeman (1992) define a ‘theory’ as a “coherent group of assumptions put forth to explain the
relationship between two or more observable facts and to provide a sound basis for predicting future
events”. Another definition of the word ‘theory’ is “a supposition or system of ideas explaining something”
(Thompson, 1995: 1446). In essence, therefore, a theory is a framework of principles.
From the management perspective, it may be argued that each management theory provides a framework
of principles which serve to guide not only the manager’s understanding of management issues, but his/her
management-related actions as well.
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Factors Influencing the Development of Theory
It needs to be noted that management theories do not develop in a vacuum but develop within, and as a
result of, the dynamic environment. The environmental forces which impact on the development of
management theory are depicted in Figure 2.1 below:
POLITICAL
ECONOMIC
SOCIAL
EVOLUTION
OF
MANAGEMENT
ECOLOGICAL
INTERNATION
AL
Figure 2.1: Environmental forces that shape management thought (from Smit & Cronjé, 2002: 37)
?
THINK POINT
Examine Figure 2.2 (under sub-section 2.4) which provides an indication of the periods during which the
various schools of management emerged. Are you aware of any of the environmental forces which were
influential during the periods in which these management schools of thought emerged?
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Comment on Think Point
A study of the evolution of management schools of thought reveals that theories tended to emerge in
tandem with, or just after, notable environmental changes:
•
The Classical Management School emerged during the early 1900s and was influenced by the
economic, technical and cultural changes which were brought about as a result of the industrial
revolution and the introduction of steam power (Cronjé, et al 2004); Jones, George & Hill, 1998)
•
The Behavioural Management School emerged during the 1920s and 1930s and was influenced by the
Great Depression and decline in prosperity (Cronjé,et al 2004) as well as failure of the Classical
Management School to provide for workplace harmony (Stoner & Freeman, 1992).
•
The Quantitative Management Approach emerged during the 1940s and was influenced by
World War II during which both the British and the Americans utilized mathematical
approaches and technology to solving war-related problems (Cronjé,et al 2004).
•
The Contemporary Management Theories began to emerge during the 1950s and were influenced by
the rapid and ongoing change which characterised the business environment after World War II
(Cronjé,et al 2004)
In summary, this sub-section has provided the management student with an understanding of the nature of
theory, as well as the environmental factors impacting on the development of management theory.
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2.4
Theories of Management
The schools of management which will be studied in this subsection include:
•
Classical Approach
•
Behavioural & Human Relations Approach
•
Quantitative Approach
•
Contemporary Approach
These schools emerged in a chronological sequence, which is depicted in Figure 2.2 below.
CONTEMPORARY SCHOOL
QUANTITATIVE SCHOOL
BEHAVIOURAL SCHOOL
CLASSICAL SCHOOL
1900
1950
2000
Figure 2.2: Key Management Theories (adapted from Freeman & Stoner, 1992: 29)
It must be noted however, that although the schools developed chronologically, later management theories
did not (and do not) serve to replace the earlier theories. Rather, each new theory which emerges tends to
complement or exist alongside those theories which have been established for some time.
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2.4.1 The Classical Approach
The two major theories which comprise the Classical Management Approach are Scientific Management
Theory and Administrative Management Theory.
CLASSICAL MANAGEMENT
SCHOOL
SCIENTIFIC
MANAGEMENT THEORY
ADMINISTRATIVE
MANAGEMENT THEORY
Figure 2.3: The Classical Management School
The emergence of the Classical Approach was influenced by the steam-engine which was a product of the
Industrial Revolution. Steam power provided for efficient production which in turn led to a shift from farm
work to factory work where the principle of mass production was upheld. This shift from the agrarian mode
to the factory system brought about a number of organisational problems, such as poor motivation of
workers (Cronjé,et,al 2004). The classical theories emerged to address these problems.
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READING ACTIVITY
Read the following texts and then answer the questions which follow:
•
Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford
University Press: Southern Africa.
•
Cronjé,. (2004) Introduction to Management Principles ;6th Edition Cape Town: Juta & Co. pp 132-138
•
Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co
•
Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts:
McGraw Hill. pp 36 – 47
1. Identify the key characteristics of Scientific Management Theory.
2. Identify the key characteristics of Administrative Management Theory.
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Comment on Reading Activity
Scientific Management Theory
Scientific Management Theory arose partly due to the need to increase productivity. Fredrick Taylor, Henry
Gantt and Frank and Lillian Gilbreth are best known for their contributions to the field of Scientific
Management.
•
Frederick Taylor was a manufacturing manager (originally a mechanical engineer) who
sought to increase the productivity of the individual worker through increasing specialization and job
division of labour. He developed four principles to increase efficiency in the work place:
o Examine the way in which workers perform their tasks and experiment with ways of improving the
way in which the task is performed;
o Record the new methods of performing the task as rules and standard operating procedures;
o Ensure that workers’ skills and abilities match the needs of the task, and train them to perform the
task according to the written rules and standard operating procedures;
o Determine an acceptable level of performance for each task and develop a remuneration system
which rewards performance which exceeds the acceptable level (Cronjé, et al, 2004).
•
Frank & Lillian Gilbreth built on the work of Taylor and focused on work simplification.
Their approach included:
o Analysing each individual action required to perform a task;
o Identifying better ways of performing each action;
o Increasing the efficient performance of the whole task through reorganizing the individual actions
(Jones, et al, 1998).
•
Henry Gantt redesigned the incentive system developed by Taylor by providing not only for the
payment of a bonus to the worker who exceeded the daily standard, but to the worker’s supervisor as
well. He also devised a chart for production scheduling, the Gantt Chart, which is still in use today
(Stoner & Freeman, 1992).
The Scientific Management Approach succeeded in its endeavour to increase productivity. However the
approach, in focusing on work and productivity, neglected to address the ‘human’ element, which ultimately
resulted in worker dissatisfaction and distrust of management.
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Administrative Management Theory
While Scientific Management Theory focused on the productivity of the worker, Administrative Management
Theory essentially focused on how to increase productivity at the level of the organization. Henri Fayol and
Max Weber made significant contributions to this view of management.
•
Henri Fayol, recognised as Europe’s greatest management pioneer, adopted a process approach to
management. He identified 14 principles which he argued could increase the efficiency of the
management process. Many of these principles (e.g. division of labour, authority and responsibility,
unity of command, unity of direction, team spirit) form the basis of management and research today
(Jones, et al, 1998).
Fayol also identified five basic functions of administration:
o Planning
o Organising
o Commanding
o Coordinating
o Controlling
Having achieved the outcomes of Section 1 (Introduction to Management) of this Study Guide the student
of management should recognize that Fayol’s five basic functions correspond to the four contemporary
management functions of Planning, Organising, Leading and Controlling.
•
Max Weber: developed a theory of bureaucratic management and emphasized the need for a
hierarchy governed by lines of authority (Cronjé,et, al 2004).
Administrative Management Theory has made a significant contribution to the field of management in that a
considerable number of its principles are still being used in management research and applied in
management practice today. A criticism of this theory however, is that it is more applicable for the stable
organizations and predictable environments of the past (Stoner & Freeman, 1992).
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2.4.2 The Behavioural & Human Relations Approach
While the focus of the Classical Management Approach was either the productivity of the worker or the
productivity of the organization, the Behavioural & Human Relations Approach focuses on the needs of the
worker. Indeed, the Behavioural & Human Relations Approach emerged in part in reaction to the
‘inhumane’ view of the Classical Approach. Mary Parker Follett, Elton Mayo and Douglas McGregor are
recognized as having made significant contributions to the Behavioural & Human Relations Approach.
•
Mary Parker Follett: much of Follett’s writing emerged in reaction to Taylor’s scientific approach.
Indeed, Follett argued that it is the worker who knows most about his/her job and therefore the worker
should be involved in the job analysis and work development process. She also anticipated the current
management interest not only in self-managed teams and empowerment, but in horizontal (as opposed
to Fayol’s and Weber’s vertical) power and authority (Jones, et al, 1998).
•
Elton Mayo: An experiment, which investigated the relationship between the level of lighting in the
workplace and workplace productivity, at the Hawthorne Works at the Western Electric Company near
Chicago during 1924 – 1933, showed that productivity improved not only when lighting was improved,
but when lighting conditions were made worse as well (Jones, et al, 1998). Elton Mayo, a Harvard
psychologist, was called in to investigate this phenomenon. It was argued that management’s interest
in, and concern for, the workers’ well-being had served to enhance worker performance. This
phenomenon has come to be known as the Hawthorne Effect.
The findings of the Hawthorne experiment precipitated an interest in research in the area of managerial
behaviour and leadership, and thus emerged the Human Relations Movement (Jones, et al, 1998).
•
Douglas McGregor: McGregor argued that two different sets of assumptions determine how
manager’s view their subordinates and manage their departments. He argued that Theory X managers
assume that employees are inherently lazy and therefore they need to be closely supervised and
controlled. On the other hand, Theory Y managers adopt a positive view of employees and believe that
it is the manager’s task to create a climate in which employees can effectively perform their work
(Cronjé, et,al 2004).
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The Behavioural & Human Relations Approach has contributed to the field of management in that it has
stressed the employee’s social needs, which in turn has led to a focus on the development of peoplemanagement skills, as opposed to technical skills alone. Further, it has provided insights into issues such
as individual motivation, group behaviour and interpersonal relationships at work (Stoner & Freeman,
1992). A limitation of the Behavioural & Human Relations Approach lies in the fact that human behaviour
is complex in nature, which presents challenges to its study.
ACTIVITY
Consider the organization for which you currently work. What particular organizational and
managerial practices show evidence of a Behavioural & Human Relations Approach?
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Comment on Activity
Organizational and managerial practices which exhibit a Behaviour & Human Relations Approach could, for
example, include:
•
Allowing for self-direction in employee work;
•
Participative decision making;
•
Self-managed work-teams;
•
Knowledge sharing at, and between, all levels;
•
Training and development initiatives for employees.
2.4.3 Quantitative Approach
The Quantitative Approach, also referred to as the Management Science Approach, is essentially an
extension of Taylor’s Scientific Management Theory (Jones, et al, 1998). It focuses on the use of rigorous
quantitative techniques which enable managers to achieve productivity through the most effective and
efficient use of organizational resources to produce goods or services. The Quantitative School includes
the following approaches, all of which provide the manager with tools and techniques to increase the
effectiveness of his/her decision making:
•
Quantitative management (employs mathematical techniques such as linear programming, modeling,
simulation & queueing theory);
•
Operations management;
•
Total Quality Management (TQM); and
•
Management information systems (MIS) (Jones, et al, 1998).
2.4.4 Contemporary Approaches
A considerable number of contemporary management theories exist. The following contemporary theories
will be studied in this sub-section:
•
Systems Theory
•
Contingency Theory
•
Chaos Theory
•
Other Theories
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2.4.4.1 Systems Theory
The Classical Approach, The Behavioural & Human Relations Approach and the Quantitative Approach
have two major short-comings which Systems Theory (also known as Organizational-Environment Theory)
seeks to address:
•
The influence of the environment is not considered; and
•
One part or aspect of the organization is focused on the neglect of all other parts and/or aspects
(Cronjé, et, al 2004).
Systems theory views the organisation as a purposeful and unified system which is composed of
interrelated elements. The principle of synergy applies in that the whole is regarded to be greater than the
sum of its parts (Stoner & Freeman, 1992).
READING ACTIVITY
Read the following article and then answer the questions which follow:
•
Nadler, D.A. & Tushman, M.L. (1980) “A Model for Diagnosing Organizational Behaviour”
Organizational Dynamics Autumn, pp 35 – 51.
1. What characteristics of a system do Nadler & Tushman (1980) identify?
2. What do you understand by Nadler & Tushman’s (1980) concept of “congruence”?
3. Provide a summary of Nadler & Tushman’s (1980) ‘Congruence Model of Organizational behaviour’.
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Comment on Reading Activity
Nadler & Tushman (1980) present a general model of the organisation which “provides a framework for
thinking about the organisation as a total system….the models major premise is that for organizations to be
effective, their subparts or components must be consistently structured and managed – they must
approach a state of congruence.” (Nadler & Tushman, 1980: 37).
Characteristics of a System
A system is defined to be a set of interrelated components. An open system is one which interacts with its
environment, and in so doing becomes part of a greater system. Basic system characteristics include:
•
Internal interdependence: where changes in one of the system’s components will result in
changes or repercussions in the system’s other components (Nadler & Tushman, 1980).
•
Capacity for feedback: information about the output can be used by the organization to address
problems. However, organizations do not always use the information available.
•
Equilibrium: the system seeks homeostasis, i.e. if an event leaves the system in a state of imbalance,
it will react in such a way so as to regain equilibrium.
•
Equifinality: the system can achieve its outputs through a number of different ways or system
configurations (Nadler & Tushman, 1980).
•
Adaptation: a systems survival depends on it maintaining a state of balance within the greater system
in which it operates, i.e. the environment.
The Concept of Congruence
Nadler & Tushman’s (1980) concept of congruence refers to achieving an appropriate balance between the
parts of the organisation (system), i.e. achieving a good ‘fit’ between the entire organisation’s components.
Congruence Model of Organisational Behaviour
Nadler & Tushman’s (1980) Congruence Model of Organisational Behaviour is depicted in Figure 2.4 on the
following page.
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TRANSFORMATION PROCESS
INFORMAL
ORGANISATION
INPUTS
Environment
Resources
History
OUTPUTS
Strategy
FORMAL
ORGNISATION
TASK
Organisation
Group
Individual
INDIVIDUAL
FEEDBACK
Figure 2.4:Congruence Model of Organisational Behaviour (from Nadler & Tushman, 1980: 47)
Nadler & Tushman’s (1980) Congruence Model of Organisational Behaviour views the organisation as a
system which takes inputs from the environments and transforms them within its system to produce
outputs. The system (or organisation) is identified to consist of four main components, namely, the informal
organisation, task, individual and formal organisation. The effectiveness of the organisation’s performance
is dependent on the achievement of congruence between all four components.
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2.4.4.2 Contingency Theory
Systems Theory provides for a Contingency Approach (also known as a Situational Approach) to
management.
?
THINK POINT
Consider the organization where you are currently employed. To what extent are the following approaches
evident in the organizational and management practices within your organization?
•
the Classical Approach
•
the Behavioural & Human Relations Approach
•
the Quantitative Approach
•
the Systems Approach
Comment on Think Point
It is likely that the student of management is able to identify practices within his/her organisation which
demonstrate elements of all four approaches to management. Indeed, given the complexity of today’s
management environment, it would be unwise for the manager to adhere to one particular school and
neglect the others. Rather, given the dynamic environment in which organisations operate, it is the
manager’s task to tailor his/her management approach to the particular situation – and this would require
drawing on a range of management theories.
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2.4.4.3 Chaos Theory
For decades, managers have acted from the premise that organizational events can be controlled.
However, Chaos Theory, is based on the premise that very rarely can events be controlled, and thus
acknowledges the dynamic nature of the contemporary management environment.
READING ACTIVITY
Read the following article and then answer the questions which follow.
•
Tetenbaum, T. (1998) “Shifting Paradigms: From Newton to Chaos” Organizational Dynamics Spring
pp 21 – 32.
1.
Why is Chaos Theory appropriate to the present day organisation?
2.
What are the key characteristics of Chaos Theory?
3.
How could management go about transforming the organisation for which you work into a chaordic
Organization
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Comment on Reading Activity
Chaos Theory argues that “relationships in complex systems, like organizations, are nonlinear, made up of
interconnections and branching choices that produce unintended consequences and render the universe
unpredictable (Tetenbaum, 1998: 21).
Chaos Theory & the Present Day Organisation
Tetenbaum (1998) argues that the industrial era of the past is fundamentally different to the information age
of the present. During the industrial age the environment was relatively stable and organizational work was
routine. In contrast, however, Tetenbaum (1998) identifies the information age to be characterized by the
following:
•
Technology which increases production, efficiency and consumer power;
•
Globalization;
•
Competition which, as a result of technology and globalisation, has become more fierce;
•
Change, the pace of which is considerable;
•
Speed;
•
Complexity & Paradox which has emerged as a result of the above 5 factors and presents the
manager with the challenge of conflicting choices and conditions (Tetenbaum, 1998).
Key Characteristics of Chaos Theory
Chaos Theory focuses on the “web of feedback loops present in every system” (Tetenbaum, 1998: 24).
While feedback loops are linear in certain systems, they are non-linear in systems characterised by
complexity, such as the business organisation.
The characteristics of Chaos Theory include:
•
Chaos as Order: Tetenbaum (1998: 24) asserts that “chaos describes a complex
unpredictable, and orderly disorder in which patterns of behaviour unfold in irregular but similar forms” .
An example of such orderly disorder is the regular irregularity of a snowflake.
•
Chaos as a Self-Organizing Entity: Chaos Theory views systems to be self-organizing in that they are
self-adaptive and complex (Tetenbaum, 1998) Thus structure evolves and change emerges (this
differs from the Classical Approach where structure is imposed). An example of an organisation which
is managed according to chaos principles and which is thus self-organising is Visa, which has grown by
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10,000% since 1970, consists of 20,000 financial institutions and operates in more than 200 countries.
However, despite its size and growth one does not know where it is located due to the fact that it is
decentralized, non-hierarchical and evolving (Tetenbaum, 1998).
Building a Chaordic Organisation
Tetenbaum (1998) identifies the following characteristics of a chaordic organisation (i.e. an organisation
which embraces the chaordic paradigm):
•
Knowledge and information sharing;
•
Innovation and creativity;
•
Teamwork and project orientation;
•
Diversity; and
•
Strong core values
The role of management in facilitating the move to the chaordic organisation is to:
•
Manage the transition;
•
Build resilience to change;
•
Destabilize the system;
•
Manage complexity and paradox, i.e. order and disorder, the present and the future;
•
Create and maintain a learning organisation (Tetenbaum, 1998).
2.4.4.4 Other Contemporary Theories
Cronjé (2004) identify three further contemporary management theories:
•
Total Quality Management (TQM)
•
The Learning Organisation
•
Re-engineering
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•
Total Quality Management (TQM) focuses the business on the achievement of quality
through the prevention of mistakes. The central principles of TQM, which have emerged
from the work of Deming, include:
o Strong emphasis on the customer;
o Focus on continual improvement;
o Quality improvement in all that the organisation does;
o Accurate measurement;
o Employee empowerment ( Cronjé, 2002).
•
The Learning Organisation approach, advocated by Peter Senge, is based on the Systems
Theory and argues that organisations should overcome their learning disabilities through:
o Commitment to lifelong learning;
o Challenging assumptions and generalizations;
o Sharing the organisation’s vision;
o Promoting active dialogue within the organisation;
o Encouraging systems thinking (Cronjé,et,al 2004).
•
Re-engineering, is an approach put forth by Hammer & Champy, and involves the redesign
(re-engineering) of organizational processes so as to “create and sustain value for customers while
managing costs” (Cronjé,et al, 2004:137).
This subsection has explored various management theories. The theories which fall within the Classical
School, the Behavioural & Human Relations School, the Quantitative School and Contemporary School
have been examined.
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SELF CHECK QUESTION 1
Read the following case study adapted from Stoner & Freeman (1992: 52) and then answer the question
which follows.
Consolidated Automobile Manufacturers Inc.
On Tuesday morning at 6 am, two young automobile assembly-line workers, disgruntled after failing to get
their supervisor transferred, shut off the electric power supply to an auto-assembly line and closed it down
at Consolidated Automobile Manufacturers, Inc.
The electric power supply area, containing transformers, switches, and other high-voltage electrical
equipment, was positioned near the centre of the plant in a 1.5-by-1.5 metre area. Enclosing this area was
a 2.5 metre high chain-link fence with a locked gate of equal height that formed a protective cage around
the facility and provided a measure of security.
The two assembly-line workers, Kagiso Mabuso and
Ernest Raymond, gained access to the electric power supply area simply by scaling the fence. Once
inside, they halted the assembly line by opening the switches and cutting off the electrical power.
Mabuso and Raymond, who worked as spot welders, had taken matters into their hands when the union’s
grievance procedure had not worked fast enough to satisfy them. Co-workers, idled by the dramatic protest
and the motionless assembly line, grouped themselves around the fenced area, shouting encouragement
to the two men inside. In response, Mabuso and Raymond were chanting, “When you cut the power you’ve
got the power.” They were in the process of becoming folk heroes to their co-workers.
Sam Nkosi, who supervised Mabuso and Raymond and who was the target of their protest, had been
supervisor for only a short time. In explaining the events that led to the protest, Nkosi said that production
on the assembly line had been chronically below quota before he took charge, and the plant manager had
plainly told him that his job was to improve the production rate. Production had improved markedly in the
short time that Nkosi had been supervisor.
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Nkosi advised the plant manager that his transfer would only set a serious long-term precedent. “The
company’s action to remove me would create a situation where the operations of the plant would be subject
to the whims of any employee with a grudge,” he argued. His contention was confirmed by the comments
of a union steward who said there were other conditions in the plant that needed improving – such as
cafeteria food and relief from the 40-degree heat in the metal shop. Moreover, the steward said, there was
at least one other supervisor who should be removed. He implied that, if successful, the power cage
protest would achieve two goals – namely employees could dictate the company’s problem solving agenda
and simultaneously undermine its power to determine decision-making priorities. The union steward’s final
comment was that two men on an unauthorized, wildcat strike might accomplish the same thing as a fullblown strike.
Each passing minute was costing the company a production loss of one automotive unit valued at R15 000;
the cost of each lost production hour, therefore was R900 000.
As he began a staff meeting to resolve the dilemma, the plant manager felt pressure to accomplish two
objectives: (1) to restore production on the profitless assembly line (a solution about which he was
uncertain) and (2) to develop policies for preventing future interruptions by assembly line workers.
(Adapted from Stoner & Freeman, 1992: 52)
ANSWER THE FOLLOWING QUESTIONS:
1. How would the plant manager go about resolving the dilemma and accomplishing the
two objectives (stated in the last paragraph of the case study) according to:
1.1
the Classical Approach?
1.2
the Behavioural & Human Relations Approach?
1.3
the Quantitative Approach?
1.4
the Contemporary Approach?
The model answer to this question may be found at the end of this section
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2.5
Management Theory or Management Fad?
It is important that the manager is able to identify possible management fads.
?
THINK POINT
As you have probably noticed from your study of this section thus far, and from your experience as
a manager, a considerable number of theories of management exist. Why do you think this is so?
Comment on Think Point
Micklethwait & Wooldridge (1996) argue that the proliferation of management theories can be ascribed to
the existence of a management theory industry which is characterised not only by commercial success, but
also by a mixture of legitimate management approaches and damaging management fads. In answer to
the question “So why does a discipline that contains so much sense contain so much nonsense as well?” (p
369), Micklethwait & Wooldridge (1996) argue that management theory is still a young discipline, it is
negatively influenced by the managers’ demands for instant solutions and “the discipline, no less than
astrology, is a magnet for charlatans” (Micklethwait & Wooldridge, 1996: 370).
Donaldson & Hilmer (1998) also point out that “fads, jargon and superficial research are undermining the
status and relevance of management work” (p 7). It is argued that not only do management fads attempt to
relegate the work of the manager, but they also often fail to bring about the benefits which they claim.
Regarding the solution to the problem of management fads, Donaldson & Hilmer (1998) adopt a medium to
long term view and argue that the establishment of management as a profession, characterised by ideals,
ethics, a body of knowledge, sound reasoning and clear language, is the ‘antidote’ to management fads.
On the other hand, Micklethwait & Wooldridge (1996) adopt a more immediate approach and emphasise
that the manager must learn to be selective. Indeed, they assert that “nothing is more witch-doctorish than
the suggestion that one magic potion will cure all ills. By all means re-engineer your distribution system:
but the same discipline will probably work less well if it is applied to your research-and-development arm”
(Micklethwait & Wooldridge, 1996: 370).
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2.6
Summary
This section provided the student with an understanding of the evolution of management theory. The
reasons for studying management theory were elucidated and the concept of management theory was
examined. Various approaches to management theory, including the Classical Approach, the Behavioural
& Human Relations Approach, the Quantitative Approach and the Contemporary Approach were explored.
In closing, the existence of damaging management fads was discussed.
The next section of this Study Guide, Section 3, will examine the management environment.
2.7
Answers to Self-Check Questions
Self-Check Question 1
Model Answer to Case Study - Consolidated Automobile Manufacturers Inc.
The different schools of management would adopt various approaches to dealing with Consolidated
Automobile Manufacturer’s dilemma.
The Classical Approach
Scientific Management Theory maintains that employees are motivated primarily by economic and
physical needs. The resolution of the dilemma at Consolidated Automobile Manufacturer will therefore
revolve around the satisfaction of these needs. It is stated in the case that the protest against Nkosi was
motivated by Nkosi’s improvement of the production rate. However, no mention is made of a wage system
which supported the improved production rate.
The Scientific Management Approach would thus focus on
•
Scientifically identifying a daily production standard through the analysis of work and the identification
and implementation of the most efficient manner in which to perform tasks; and
•
Implementing an appropriate wage system which would reward those workers whose performance
exceeded the daily production standard.
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Administrative Management Theory focuses on the improvement of organizational productivity through
the development of bureaucracy with rules, standard operating procedures and norms (Jones, et al, 1998).
This approach also emphasizes the manager’s authority, as well as discipline as a means to promote
respectful relations. Thus, the Administrative Management Approach supports Nkosi’s assertion that
Mabuso and Raymond’s demands, that Nkosi be transferred, should not be met. The resolution of the
dilemma therefore lies in the enforcement of the manager’s authority, the discipline of Mabuso and
Raymond and the subsequent development of an organizational climate that exhibits obedience, diligence,
energy and respect for authority.
The Behavioural & Human Relations Approach
In contrast to the Classical Approach, the Behavioural & Human Relations Approach focuses on the social
and self-actualization needs of the employee (Stoner & Freeman, 1992). This approach thus emphasizes
the effect that the manager’s approach can have on employee performance, and this therefore would be
the focus of the resolution of the dilemma at Consolidated Automobile Manufacturers. It is evident from the
case that Mabuso and Raymond are very dissatisfied with their supervisor’s approach in that not only have
they attempted to have him transferred, but they have taken drastic action and have brought production to
a halt as a result of Nkosi not being transferred. Further indications of dissatisfaction with management are
evident in the case, for example, there is dissatisfaction about another supervisor and working conditions
are considered to be unsuitable (40-degree workshop and poor cafeteria food). The plant manager’s
approach therefore would be to focus on developing the managements’ ability to appropriately motivate and
encourage workers. For example, the plant manager should encourage the supervisors to approach the
workers from the perspective of Theory Y (Jones, et al, 1998), and in so doing adopt a positive view of the
workers and create an environment which promotes initiative and self-direction.
Quantitative Approach
The Quantitative Approach uses mathematical techniques to solve production problems. This approach
alone would not be appropriate to solving Consolidated Automobile Manufacturer’s current dilemma,
however, it could be used in determining a suitable manner to improving the company’s production rate by
making more efficient use of organizational resources.
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Contemporary Approaches
Systems Theory Systems Theory emphasizes the inter-relatedness and inter-dependence of the parts of
the organisation. If the dilemma at Consolidated Automobile Manufacturers is considered from a Systems
perspective it becomes evident that a state of imbalance exists within the organisation as a result of the
incongruence which exists between the management sub-system and the employee sub-system. The task
of the plant manager in resolving the dilemma, therefore, is to restore the homeostasis of the organisation
by addressing the incongruence which exists between management and the employees.
If Nadler & Tushman’s (1980) Congruence Model of Organisational Behaviour is used, the dilemma may be
configured as follows: initially management felt that incongruence existed between the individual (the
employees) and the task (the organisation’s work) in that production was low. Nkosi succeeded in
addressing this incongruence, but in so doing created incongruence – between the individual (the
employees) and the formal organisation (new approach to production, HR management). For the plant
manager to achieve the objectives stated in the last paragraph of the case and to resolve the dilemma, he
will need to find a way to address the incongruence. This can be achieved in a variety of ways (see
contingency theory below).
Contingency Theory
Contingency theory emphasizes aligning the solution to the situation. In addressing the incongruence
identified by the Systems Approach, the plant manager should consider all of the solutions discussed thus
far (classical, behavioural & human relations and quantitative) and implement the one which is best suited
to the situation. In this particular case, the behavioural and human relations approach appears to be the
most appropriate in that the core problem may be argued to be predominantly a social one.
Thus, as has been shown, the dilemma highlighted in the case study Consolidated Automobile
Manufacturer can be addressed in varying ways when approached from different management schools of
thought.
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SECTION THREE
THE MANAGEMENT ENVIRONMENT
CONTENTS
Learning Outcomes
Reading
3.1 Introduction
3.2 Composition of the Management Environment
3.3 The Macro-Environment
3.4 The Market / Task Environment
3.5 The Micro-Environment
3.6 Interface Between Organisation and Environment
3.7 Ways in which Management can React to the Environment
3.8 Summary
Answers to Self-Check Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the student should be able to demonstrate a
holistic understanding of the management environment and its application. This overall outcome will be
achieved through the student’s mastery of the following specific outcomes:
1. Explain the relevance which the systems understanding of the organization as an open
System has to the study of the management environment.
2. Identify the characteristics of the management environment.
3. Explain the relevance of both systems theory and chaos theory to the study of the management
environment.
4. Describe and critically discuss the composition of, and inter-relations within, the management
environment.
5. Critically discuss the macro-environment.
6. Critically discuss the market / task environment.
7. Critically discuss the microenvironment.
8. Identify and critically discuss the impact of environmental change and uncertainty on the business
organisation.
9. Identify and critically discuss the approaches which management can adopt in reacting to the
environment.
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READING
Prescribed Reading:
Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford
University Press: Southern Africa
Recommended Reading:
Books
•
Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts:
McGraw Hill. pp 66 – 124.
•
Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices and Skills.
Massachusetts: Allyn & Bacon. pp 34 – 61.
•
Pearce, J.A. & Robinson, R.B. (1997) Formulation, Implementation, & Control of Competitive
Strategy. Chicago: Irwin, pp 61 – 98 & pp 168 – 202.
•
Porter, M.E. (1985) Competitive Advantage. New York: The Free Press, pp 37 – 43.
•
Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 1 - 33.
•
Cronje, Du Toit, Marais, & Motlatla:2004 Introduction to BusinessManagement. Cape Town: Juta.
pp 81-114 (Chapter 4).
•
Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co
Journals
•
Morrison, I. (1996) “Jump onto the Second Curve” World Executive’s Digest November.
•
Porter, M.E. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review MarchApril, pp 137 – 145.
•
Partridge, M. & Perren, L. (1994) “Assessing & Enhancing Strategic Capability: A Value Driven
Approach Management Accounting June
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3.1
Introduction
This section examines the Management Environment, and the focus will be on the following:
•
the composition of the management environment
•
the macro-environment
•
the market / task environment
•
the micro-environment
•
the interface between the organisation and the environment
?
THINK POINT
Why do you think it is important for managers to understand the nature of the environment in which
they operate?
Comment on Think Point
Systems Theory, which was examined in Section 2 of this Study Guide, provides an argument for the
importance of managers understanding the environment in which they operate. According to Systems
Theory, the organisation is a system operating within the greater system of its environment. Further, the
organisation is an open system and thus is dependent on the environment in which it operates and
interacts with its environment so as to survive: the organisation obtains its resources from the environment
and processes these resources so as to produce outputs required by the environment.
The concept of equilibrium or balance is an important one in Systems Theory, in that homeostasis is a
state, which the organisation continually seeks to attain and maintain.
Thus a change within the
environment, such as the emergence of a new technology within the IT industry, could result in an
imbalance between an IT organisation and its environment, in that the IT organisation’s processes and
products may not be aligned to the new technology.
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It would thus be imperative for the IT organisation, which has achieved a state of incongruence with its
environment, to restore equilibrium through making the necessary adjustments to its subsystems.
Thus it is imperative for the manager to understand the nature of the management environment in that, as
the Systems Approach demonstrates, it is critical to not only the effectiveness of the organisation, but its
survival as well.
3.2
The Composition of the Management Environment
The Management Environment may be divided into several sub-environments.
ACTIVITY
Identify the different ‘environments’ which impact on your particular organisation and influence your
work as a manager?
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Comment on Activity
The Management Environment comprises three different environments:
•
The Micro-Environment
o comprised of the organisation itself over which management has control
•
The Market / Task environment
o also known as the industry environment and comprises the environment immediately
surrounding the organisation
•
The Macro-Environment
o which refers to the greater environment, existing outside of the market and task environment
These environments, and the relationships between them are depicted in Figure 3.1 on the following page.
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The organisation has a
negligible effect on the
macroenvironment
Influences the
organisation indirectly
through the market
MACRO-ENVIRONMENT
•
Technological
Environment
•
Economic Environment
•
Social Environment
•
Institutional / Political
Environment
•
International
Environment
•
Ecological Environment
Direct influence
through its competitors,
consumer expenditure,
etc.
MARKET ENVIRONMENT
•
The Market
(consumers, their
needs, purchasing
power & behaviour)
•
Suppliers
•
Intermediaries
•
Competitors
•
Opportunities &
Threats
MICRO-ENVIRONMENT
•
Mission & Objectives
•
The Organisation &
its Management
•
Organisational
Resources
•
Organisational
Culture
Influences the market
through its strategy
The macro-environment
influences the
organisation directly
Figure 3.1: The Composition of the Management Environment (from Smit & Cronjé, 2002: 65)
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3.2.1 Main Characteristics of the Management Environment
The main characteristics of the management environment are identified below.
ACTIVITY
Systems Theory and Chaos Theory are two of the contemporary management theories which were
explored in Section 2. Both of these theories take cognizance of the management environment.
What particular characteristics of the management environment do these theories highlight?
Comment on Activity
Systems Theory highlights the inter-relatedness of environmental factors, where a change in one
environmental factor could result in a change in another environmental factor (Cronjé,et,al2004). For
example, a technological innovation within the macro-environment may lead to the re-engineering of the
organisation’s structure within the micro-environment. The organisation’s new structure may ultimately
result in a more efficient production process within the micro-environment and subsequent price reduction
in the product. This price reduction could result in more customers buying the organisation’s product in the
market environment.
Chaos Theory highlights the complexity of the environment which emerges not only from the many
environmental factors to which the organisation must react (Cronjé,et ,al 2004), but also the non-linear
relationships between and within systems (Tetenbaum, 1998).
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Chaos Theory, in recognizing the complexity of the environment, also acknowledges the following further
characteristics of the management environment: increasing instability and environmental uncertainty
(Cronjé, et,al 2004). Indeed, Chaos Theory acknowledges not only the rapid pace of change which
characterizes the information age, but also the unintended and unpredictable consequences which emerge
from the non-linear connections within complex systems.
3.3
The Macro-Environment
The macro-environment influences the organisation directly as well as indirectly through the organisation’s
market environment (Cronjé, 2004). However, it is seldom that the organisation is able to exert any
reciprocal influence on the macro-environment. For example, when the economy of a country slows, a
clothing retailer will have to endure a decline in business. While the clothing retailer may be able to come
up with initiatives to stimulate business within his/her locality, he/she will not be able to make a significant
impact on the overall economy of the country.
The macro-environment may be divided into six sub-environments:
•
Technological environment
•
Economic environment
•
Socio-cultural environment
•
Institutional / Political environment
•
International environment
•
Ecological environment
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SELF CHECK QUESTION 1
What are the distinguishing characteristics of each of the sub-environments comprising the macroenvironment? In what ways could each sub-environment impact on the organisation for which you work?
•
Technological Environment
•
Economic Environment
•
Socio-Cultural Environment
•
Institutional/Political Environment
•
International Environment
•
Ecological Environment
The answer to this self-check question may be found at the end of this section.
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3.4
The Market / Task Environment
The market or task environment refers to the environment which immediately surrounds the organisation,
i.e. it comprises the industry in which the organisation operates. As Figure 3.1 shows, the market
environment has a direct influence on the organisation (or micro-environment) through, for example, its
competitors and suppliers (Cronjé, et, al 2004).
The market environment comprises the:
•
Market
o consisting of the consumers or potential consumers who have particular needs and the buying
power to satisfy these needs
•
Suppliers
o provide the organisation with the ‘inputs’ required to produce the organisation’s goods and/or
services. These ‘inputs’ could take the form of materials (raw materials, equipment, energy), capital
and/or labour.
•
Intermediaries
o include wholesalers, retailers and agents and serve to bridge the gap between the producer and
the consumer.
•
Competitors
o are prevalent within a market economy, and compete with the organisation not only for market
share but for materials, capital and labour as well.
Much of the literature which exists on the market environment revolves around Michael Porter’s work on
competitive forces.
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READING ACTIVITY
Read the following text and answer the question that follows:
•
Porter, M.E. (1979) “How Competitive Forces Shape Strategy” Harvard Business Review, MarchApril, pp 137 – 145.
Discuss Porter’s configuration of the market environment. Illustrate your discussion with examples from
your organisation’s market environment.
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Comment on Reading Activity
Porter (1979) argues that the nature of competition within an industry is not only determined by competing
organisations within the industry, but is established through the prevalence of five forces:
•
The threat of new entrants
•
The bargaining power of the consumers
•
The bargaining power of suppliers
•
The threat of substitute products or services
•
The jockeying for position amongst the current competitors.
These five forces are illustrated in Figure 3.2 below.
Potential
Entrants
Threat of New
Entrants
Bargaining Power
of Suppliers
Industry
Competitors
Suppliers
Bargaining Power
of Buyers
Buyers
Rivalry Among
Existing Firms
Threat of Substitute
Products or Services
Substitutes
Figure 3.2: Forces Driving Industry Competition (from Porter, 1979: 137).
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The profitability of an industry is determined by its strongest force or forces (Porter, 1979) and different
forces are important to different industries.
A discussion of the dynamics of each of the five forces is provided below.
Threat of Entry
The significance of a potential new entrant to the market can be reduced through the establishment of
substantial barriers to entry (Porter, 1979). Barriers to entry can be achieved when the industry has:
•
established economies of scale within the existing organisations;
•
differentiated products and/or services within existing organisations;
•
established high capital requirements for entry into the industry;
•
established cost advantages which are independent of the organisation;
•
limited access to distribution channels;
•
protection as a result of government policy (Porter, 1979).
Powerful Suppliers
Powerful suppliers can dominate competition within a particular industry through exercising bargaining
power by reducing the quality of the goods and services supplied and/or raising the prices of their goods
and/or services (Porter, 1979).
Powerful Buyers
Customers may have a significant impact on the nature of competition within an industry (Porter, 1979).
Customers who are powerful are able to reduce prices, play competitors off against each other and insist
on higher quality products and services.
Substitute Products
Substitute products serve to limit the profitability potential of an industry in that they impose a price ceiling
within the industry. This limitation can be overcome through the differentiation of competitors’ products
within the industry (Porter, 1979).
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Jockeying for Position
Jockeying for position is the fifth competitive force and refers to intense rivalry amongst competitors within
the same industry. Such intense rivalry can be demonstrated through price cuts, aggressive marketing and
new product innovation and introduction (Porter, 1979).
Thus an assessment of the competitive forces operating within a particular industry will provide the starting
point from which the organisation may identify its strengths and weaknesses, and ultimately develop an
effective strategy which will enable the organisation to attain and sustain competitive advantage within its
market environment.
3.5
The Micro-Environment
The micro-environment refers to the organisation itself. It is the environment in which the manager
operates (Smit & Cronjé, 2002) and performs the various management functions and roles at various
organisational levels, as was identified in Section 1 of this Module Guide (Introduction to Management).
SELF CHECK QUESTION 2
The micro-environment is characterised by those issues discussed in Section 1 of this
Study Guide. To consolidate your understanding of the nature of the microenvironment, identify and briefly discuss the fundamental management and
organisational issues which were explored in Section 1.
The answer to this question may be found at the end of this section.
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As has been previously stated, the micro-environment is influenced both directly and indirectly (via the
market environment) by the macro-environment. However, the micro-environment is rarely able to
significantly influence the macro-environment. On the other hand, the market environment directly impacts
the micro-environment which in turn directly exerts influence on the market environment. However, in order
for the micro-environment’s influence on the market environment to provide for the organisation’s strategic
advantage, the micro-environment’s components should be strategically aligned to the needs of the market.
The following Reading Activity will serve to explore this assertion further.
READING ACTIVITY
Read one (or both) of the following texts and then answer the question which follows:
•
Porter, M.E. (1985) Competitive Advantage. New York: The Free Press, pp 37 – 43.
•
Partridge, M. & Perren, L. (1994) “Assessing & Enhancing Strategic Capability: A Value Driven
Approach Management Accounting June.
How do Porter (1985) and Partridge & Perren (1994) suggest the micro-environment should go about
aligning itself to the market environment?
Comment on Reading Activity
Porter (1985) asserts that it is important to establish the manner in which an organisation creates value for
the consumer through the examination of the organisation’s value chain. The value chain essentially
comprises the processes which take place in the micro-environment.
The value chain, which is depicted in Figure 3.3 below, may be divided into two types of value activities:
•
Support activities which provide the infrastructure necessary for the performance of the primary
activities;
•
Primary activities, the focus of which is the provision of the product and/or service and its distribution to
the consumer (Partridge & Perren, 1994).
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Support Activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Primary Activities
Margin
Inbound
Logistics
Operations
Outbound
Logistics
Marketing
& Sales
Services
Figure 3.3: The Organisational Value Chain (from Partridge & Perren, 1994).
The organisation, in operating in the market environment, should adjust and configure the activities in its
microenvironment so as to ensure that the organisation is able to better meet the market needs than its
competitors (Partridge & Perren, 1994). For example, a retailing organisation which chooses a low-cost
strategy to gain competitive advantage within the market environment would examine its value chain and
focus on structuring its activities to reduce costs (such as reducing costs related to the storing and
transporting of the product - inbound logistics).
In summary, this subsection has examined the micro-environment, which essentially comprises the
environment within the organisation. It has been shown that much of that which was studied in Section 1
of this Study Guide, such as management roles and functions, is involved in the micro-environment. The
configuring of activities according to Porter’s (1985) value chain approach as a means of aligning the microenvironment to the macro-environment was also examined in this subsection.
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3.6
Interfaces Between the Organisation and the Environment
The organisation is an open system and thus interacts with the market environment and macroenvironment in order to survive. This subsection examines the generic ways in which the environment
interacts with the organisation.
3.6.1 Environmental Change and the Organisation
Change involves moving from a state of “…stability to instability, moving from predictable to the
unpredictable, or from the known to the unknown…it is immeasurable and causes uncertainty…” (Cronjé,
2004:). Tetenbaum (1998) identifies change as a characteristic of the twenty-first century and claims that
“…today’s changes are discontinuous and happening at a geometric rate…” (Tetenbaum, 1998: 23). Such
change has considerable implications for the organisation that, to maintain congruence with its
environment, the organisation “…must be sufficiently agile to be instantly reconfigurable to meet new
demands…” (Tetenbaum, 1998: 23).
READING ACTIVITY
Before reading the journal article listed below, contemplate the following:
1.
In your experience, what significant changes have taken place, not just within the organisation in
which you are employed, but within the business environment as a whole?
Now read the following journal article and then answer the questions which follow.
•
Morrison, I. (1996) “Jump Into the Second Curve” World Executive’s Digest November
2.
What changes in the business environment does Morrison (1996) identify?
3.
Compare the changes which you identified in question 1 to the changes which Morrison has
identified? Are there any similarities? Have you experienced any of Morrison’s (1996) changes as
yet?
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Comment on Reading Activity
Morrison (1996) argues that a ‘second curve’ marketplace is in the process of emerging. This marketplace
is bringing about considerable forces of change such as new technology, new consumers and new
markets. A comparison of the first curve and the second curve markets is provided in Table 3.1 below:
FIRST CURVE MARKET
SECOND CURVE MARKET
•
Capital
•
Knowledge
•
Producer
•
Consumer
•
Atlantic
•
Pacific
•
Japan
•
China
•
International Trade
•
Electronic Commerce
•
Computers
•
Internet
•
Money
•
People
Table 3.1:Characteristics of the First Curve and Second Curve Markets (from Morrison, 1996).
In order to compete in the second curve market, the organisation will operate differently to the manner in
which it operated in the first curve market. These changes are outlined in Table 3.2 .
FIRST CURVE ORGANISATION
SECOND CURVE ORGANISATION
•
Mechanistic
•
Organic
•
Engineering
•
Ecology
•
Corporations
•
Individuals & Networks
•
Horizontal & Vertical Integration
•
Virtual Integration
•
Business Processes
•
Culture
Table 3.2:Characteristics of the First Curve and Second Curve Organisation(from Morrison, 1996).
An examination of Table 3.1 and Table 3.2 indicates that in essence the move to the second curve market
and organisation represents a move towards a focus on people and the role which they play within the
complexity of business systems.
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Although Morrison’s article was published quite recently (1996), it is likely that the management student has
encountered a number of the second curve characteristics which he identifies, for example, electronic
commerce, the internet, and the focus on people and the knowledge which they bring to the organisation.
In closing, Morrison (1996) argues that organisations need to start embracing the second curve changes,
and at the same time effectively manage the first curve organisation and environmental forces, which are
still in operation.
3.6.2 Uncertainty in the Environment
As identified in subsection 3.2.1 the management environment is characterised by varying levels of
complexity and extent of change. Those organisations which operate within environments characterised by
high levels of complexity and dynamic change (such as the IT industry) experience high levels of
uncertainty (Cronjé, 2004). Various recommendations may be made to assist such organisations in coping
with such uncertainty. Morrison (1996) in his article on the second-curve market and organisation
(discussed in 3.6.3) argues that in order to cope with uncertainty, companies should:
•
Learn to jump, i.e. embrace emerging changes and markets;
•
Serve the new customer emerging from the second curve marketplace;
•
Build a diverse management team;
•
Focus on, and accept, the accelerating pace of change.
•
Build second-curve capacity, i.e. develop new competencies which are sufficiently flexible
to cope with the demands of the second-curve market.
Tetenbaum (1998) argues that in order to cope with uncertainty, an organisation should become chaordic.
How to go about developing a chaordic organisation was discussed in Section 2 (Evolution of Management
Theory) of this Study Guide.
Thus, in summary, this subsection has focused on the impact which environmental change and uncertainty
has on the organisation.
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3.7
Ways in which Management can React to the Environment
A number of established methods exist to assist the organisation’s management in their attempts to align
the organisation to the external environment and anticipate environmental changes which are imminent.
ACTIVITY
What methods does the organisation in which you are employed implement to ensure alignment to
the external environment and to anticipate environmental changes?
Are these methods effective? Why/Why Not?
Comment on Activity
Cronjé, et, al (2004) identify three inter-related approaches which the organisation can adopt in reacting to
the environment:
•
Information Management: which involves acquiring and maintaining knowledge of the
organisation’s environment through the process of environmental scanning, which serves to identify
threats and opportunities within the environment. Information obtained from environmental scanning
should be recorded in a management information system and should be utilized to aid decision making
(Cronjé, 2004).
•
Strategic Response: Once sufficient information on the environment has been acquired, a strategic
response needs to be initiated (Cronjé, 2004), for example the organisation’s current strategy may
have to be adjusted and aligned to an emerging change within the environment.
•
Structural Change: An adjustment to the organisation’s strategy (resulting from environmental
change) may require that the organisation’s structure be adjusted in such a way that it is aligned to the
revised strategy (Cronjé, 2004).
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The effectiveness of the above approaches is dependent on the complexity and extent of change which
characterizes the organisation’s environment. While the above approaches would be more effective in a
stable environment, they would not necessarily be effective in an environment characterised by dynamic
change and complexity. It may be argued that organisations operating in such environments would benefit
more from the implementation of chaordic organisational principles (Tetenbaum, 1998, as discussed in
Section 2 of this Module Guide.)
3.8
Summary
This section examined the Management Environment. The characteristics and inter-relations of the macroenvironment, the market/task environment and the micro-environment were explored. The impact of
change and uncertainty on the organisation was also examined, as were the ways in which management
can respond to such uncertainty and change.
The next section of this Study Guide, Section 4, will examine the management process.
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3.9
Answers to Self-Check Questions
Self-Check Question 1
Model Answer
The distinguishing characteristics of the sub-environments of the macro-environment, and the manner in
which they impact the organisation, are outlined below.
Technological Environment
Technology is identified as “the combination of skills and equipment that managers use in design,
production and distribution of goods and services” (Jones, et al, 1998: 78). Tetenbaum (1998) identifies
technology as an important characteristic of the twentieth century in that it is significant in promoting and
accelerating change. In so doing, the technological environment can have significant implications for the
organisation, in that it can present both opportunities (e.g. market leadership as a result of technological
innovation) and threats (e.g. product obsolescence). Further, not only does higher productivity result from
technological advancement, but the technological environment also provides innovations, such as
teleconferencing and electronic mail, which plays a significant role in changing the nature of work within
organisations (Jones, et al, 1998).
Economic Environment
The factors within the economic environment which impact on the organisation include interest rates,
unemployment, inflation, consumer income and economic growth (Jones, et al, 1998). Cronjé (2004) assert
that the economic environment is influenced by the other five sub-environments (technology, social,
institutional/political, international and ecological). The economic environment has a significant impact on
the organisation in that the economy’s state of growth or decline influences the consumer’s standard of
living and buying power (Cronjé, 2004).
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Socio-Cultural Environment
Jones et al (1998) identify socio-cultural factors to be “pressures emanating from the social structure of a
country or society or from the national culture” (p80).
The factors within the socio-cultural environment which affect the firm include the attitudes, beliefs, values,
and opinions of the people within the firm’s external environment. These factors develop from religious,
ethnic, cultural, demographic and educational conditioning (Pearce & Robinson, 1997). The socio-cultural
environment affects the organisation in that emerging socio-cultural beliefs, opinions and lifestyles result in:
•
changes in demand for various types of products, for example, consumers’ interest in quality of life
issues in recent years has led to the demand for products and services which are health orientated;
•
changes to the nature of employment within organisations, for example the focus on quality of life
issues has led to better and more flexible working conditions (Pearce & Robinson, 1997).
Cronjé (2004) assert that the organisation is at the centre of social change in that not only does it play a
part in bringing about such change, but it is imperative for the organisation to keep abreast of the emerging
socio-cultural trends.
Institutional/Political Environment
Jones et al (1998) argue that political forces are “the outcomes of changes in laws and regulations, such as
the deregulation of industries, the privatization of organisations, and increased emphasis on environmental
protection” (p 81). Thus the political environment essentially impacts on the organisation as a regulating
force. The government may also impact on the organisation through the performance of its:
•
supplier function, where government decisions will affect the organisation’s accessibility to governmentowned natural resources;
•
customer function, where government’s demands for various products may contribute to the
sustainability of certain organisations (Pearce & Robinson, 1997).
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International Environment
In addition to technology, Tetenbaum (1998) identifies globalisation as a characteristic of the twenty-first
century. Global forces are identified to be “the outcomes of changes in international relationships, changes
in nations’ economic, political and legal systems, and changes in technology such as falling trade barriers,
the growth of representative democracies, and reliable and instantaneous communication” (Jones, et al,
1998: 82). The international environment impacts on the organisation in that it expands to the complexity of
the organisation’s environment, and in so doing presents further opportunities and threats (Cronjé, et, al,
2004).
Ecological Environment
The ecological environment comprises the limited natural resources, as well as the pollution which results
from human-ecology relationship ( Cronjé,et,al,2004). The focus is not simply on the impact of ecological
forces on the organisation, but rather on the reciprocal relationship which exists between the ecology and
business (Pearce & Robinson, 1997). The shortage of resources, water, air and land pollution, global
warming and damage to natural resources are some of the organisational concerns which have emerged
from the ecology-business relationship (Pearce & Robinson, 1997; Cronjé, 2004). The dynamics of this
reciprocal relationship impact on the organisation through the principle of eco-efficiency: organisations
need to be eco-efficient through seeking to produce more useful goods and services while continuously
attempting to decrease not only pollution but resource consumption as well (Pearce & Robinson, 1997).
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Self-Check Question 2
Model Answer
The fundamentals of management, which were dealt with in Section 1 of this Study Guide, and which
characterize the micro-environment, include:
•
The Nature of Management
Management involves utilizing inputs from the environment in the process of planning, organizing,
leading and controlling (POLC) to produce outputs which satisfy the needs of the market. This process
of organisational management is influenced by the external environment as well as prevalent
management schools of thought.
•
Definition of Management
Management may be defined as a process in which the management functions of planning, organizing,
leading and controlling are executed; organisational resources are utilized; and work is achieved
through the efforts of other employees. This process serves to provide for the effective and efficient
achievement of the organisation’s goals.
•
Levels of Management
Three levels of management may be identified:
o Top management, responsible for the overall and strategic management of the organisation (e.g.
Chief Executive Officer);
o Middle management, responsible for specific department within the organisation (e.g.
Marketing Manager);
o Lower management, responsible for departmental sections and subsections within the
organisation (e.g. Sales Manager).
•
Areas of Management
In addition to the area of General Management, six functional areas of management may be identified:
Marketing Management, Financial Management, Production and Operations Management, Purchasing
Management, Human Resource Management, and Public Relations Management.
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•
The Role Distribution of Managers
Mintzberg (1990) identifies three categories of managerial roles:
o Interpersonal Roles (includes figurehead, leader, liaison role)
o Information Roles (includes monitor, disseminator, spokesperson)
o Decision-Making Roles (includes entrepreneur, disturbance handler, resource allocator,
negotiator)
•
Old and New Organisations
Change within the environment has resulted in the emergence of a ‘new’ organisation, the
characteristics of which are outlined on the following page :
‘OLD’ ORGANISATION
‘NEW’ ORGANISATION
•
Permanent jobs
•
Temporary jobs
•
Control organisation’s own destiny
•
Externalize risk (e.g. through outsourcing)
through independence
•
Diverse workforce
•
Relatively homogeneous workforce
•
Workdays with no time boundaries
•
9-to-5 workdays
•
Large corporations are cutting overall staff
•
Large corporations provide job security
•
Re-engineer all processes
•
“If it ain’t broke, don’t fix it”
•
Work is organized around teams
•
Work is organized around individuals
Table 3.3: Key Changes Within Organisations (Robbins, 1997: 11)
•
Management & Organisational Performance
Management of organisational performance should be measured not only in terms of the achievement
of effectiveness and efficiency, but also in terms of adherence to the economic principle.
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SECTION FOUR
THE MANAGEMENT PROCESS
CONTENTS
Learning Outcomes
Reading
4.1 Introduction
4.2 Four Fundamental Management Functions
4.2.1
Planning
4.2.2
Organising
4.2.3
Leading
4.2.4
Controlling
4.3 The Areas of Management
4.3.1
Financial Function
4.3.2
Marketing Function
4.3.3
Human Resources Function
4.3.4
Operations Function
4.3.5
Purchasing Function
4.4
Summary
4.5
Answers to Self-Check Questions
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LEARNING OUTCOMES
The overall outcome for this section is that, on its completion, the student should be able to demonstrate an
understanding of the management process and its application. This overall outcome will be achieved
through the student’s mastery of the following specific outcomes:
1. Demonstrate an understanding of the four management functions and their application.
2. Demonstrate a practical understanding of the management function of Planning.
2.1
Identify and explain the characteristics of the various types of plans and discuss their
application.
2.2
Critically discuss and apply the steps in the planning process.
2.3
Identify barriers to effective planning and implement means to overcome such barriers.
2.4
Identify the various planning tools and discuss their application.
3. Demonstrate a practical understanding of the management function of organising.
3.1
Critically discuss the reasons for organising.
3.2
Identify and apply the process of organisation design.
3.3
Critically discuss and apply the basic principles of organising.
3.4
Demonstrate a practical understanding of the contemporary factors influencing
organisation design.
4. Demonstrate a practical understanding of the management function of Leading.
4.1
Critically discuss the nature and components of leadership.
4.2
Critically discuss the leadership-management debate.
4.3
Demonstrate a practical understanding of the various leadership models.
5. Demonstrate a practical understanding of the management function of Controlling.
5.1
Explain and apply the control process.
5.2
Critically discuss the focus of control.
5.3
Identify and apply the characteristics of an effective control system.
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6. Demonstrate a practical understanding of the various areas of management.
6.1
Demonstrate a practical understanding of the area of General Management.
6.2
Demonstrate an understanding of the Financial Function.
6.3
Demonstrate an understanding of the Marketing Function.
6.4
Demonstrate an understanding of the Human Resources Function.
6.5
Demonstrate an understanding of the Operations Function.
6.6
Demonstrate an understanding of the Purchasing Function.
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READING
Prescribed Reading:
Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford
University Press: Southern Africa
Recommended Reading:
Books
The student should utilise the following text (as well as the recommended texts) in studying the Functional
Areas of Management:
•
Cronjé, G.J. de J., du Toit, G.S., Motlatla, M.D.C. (Eds) (2000) Introduction to Business Management
5th Ed. Cape Town: Oxford University Press,
pp 171 – 196 (Chapter 7), pp 197 – 224 (Chapter 8), pp 225 – 239
(Chapter 9), pp 278 – 312 (Chapter 11), pp 331 – 353 (Chapter 13),
pp 354 – 369 (Chapter 14), pp 370 – 394 (Chapter 15), pp 395 – 417 (Chapter 16), pp 418 – 437
(Chapter 17), pp 438 – 452 (Chapter 18),
pp 453 – 480 (Chapter 19).
•
Smit, P.J. & Cronjé, D.J. (2002) Management Principles, 3rd Edition Cape Town: Juta & Co
•
Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts:
McGraw Hill. pp 196 – 228 (Chapter 7), pp 230 – 264 (Chapter 8), pp 266 – 296 (Chapter 9), pp 298 –
332 (Chapter 10),
pp 400 – 430 (Chapter 13), pp 558 – 588 (Chapter 18).
•
Mondy, R.W., Sharplin, A. & Premeaux, S.R. (1991) Management Concepts, Practices and Skills.
Massachusetts: Allyn & Bacon. pp 134 – 162 (Chapter 5), pp 165 – 194 (Chapter 6), pp 196 – 226
(Chapter 7), pp 228 – 257 (Chapter 8), pp 258 – 287 (Chapter 9), pp 328 – 356 (Chapter 11), pp 486 –
515 (Chapter 16), pp 516 – 546 (Chapter 17),pp 574 – 597 (Chapter 19).
•
Robbins, S.P. (1997) Managing Today. London: Prentice Hall. pp 136 – 168 (Chapter 5), pp 170 –
204 (Chapter 6), pp 236 – 264 (Chapter 8), pp 266 – 302 (Chapter 9), pp 440 – 468, (Chapter 15), pp
470 – 499 (Chapter 19).
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Journals
•
Drucker, P.F. (1974) “New Templates for Today’s Organisations” Harvard Business Review January –
February, pp 115 – 123.
•
Kotter, J.P. (1990) “What Leaders Really Do” Harvard Business Review
May – June, pp 103 – 111.
•
Ostroff, F. & Smit, D. (1992) “The Horizontal Organisation” McKinsey Quarterly 1, pp 148 – 167.
•
Ulrich, D. (1998) “A New Mandate for Human Resources” Harvard Business Review, January –
February, pp 124 – 134.
•
Waterman, R.H., Peters, T.J. & Phillips, J.R. (1980) “Structure is Not Organisation” Business Horizons
June, pp 14 – 26.
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4.1
Introduction
This section will explore the Management Process. As identified in Section 1, Introduction to Management,
the management process entails the execution of the four management functions Planning, Organising,
Leading and Controlling (POLC). These functions are executed not only within the area of general
management, but within the functional areas of management as well.
Thus, in exploring the management process the following will be examined:
•
•
The Four Fundamental Management Functions
o
Planning
o
Organising
o
Leading
o
Controlling
The Areas of Management
o
General management
o
Financial function
o
Marketing function
o
Human Resources function
o
Operations function
o
Purchasing function
4.2
Four Fundamental Management Functions
The four fundamental management functions of Planning, Organising, Leading and Controlling (POLC)
comprise the management process, which serves to convert the organisation’s resources (or inputs) into
products and services (outputs) required by the organisation’s market. This process is depicted in Figure
4.1 .
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THE ORGANISATION
ORGANISING
RESOURCES
•
•
•
•
Human
Financial
Physical
Information
PERFORMANCE
PLANNING
LEADING
•
•
•
•
•
Achieve goals
Products
Services
Productivity
Profit
CONTROLLING
Figure 4.1: The Management Process (from Smit & Cronjé, 2002: 9)
4.2.1
Planning
This sub-section explores the first of the four fundamental management functions, Planning. In so doing,
the following will be examined:
•
Types of organisational plans
•
Steps in the planning process
•
Barriers to effective planning
•
Planning tools
?
THINK POINT
Why is planning important within the organisation?
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Comment on Think Point
Jones et al (1998) asserts that the importance of planning revolves around four main reasons:
•
It provides a means for managers to participate in decision making about organisational goals and
strategies (Jones, et al, 1998).
•
It is necessary to provide the organisation with a sense of direction and purpose. Without such a sense
of direction managers would pursue conflicting goals, which would jeopardize organisational
performance (Jones, et al, 1998).
•
It helps to coordinate the functions of the various organisational departments.
•
It serves as a means to control managers and assess performance (Jones et al, 1998).
In addition to Jones et al’s (1998) reasons for planning, Robbins (1997) asserts that planning reduces the
impact of change in that it forces managers to look ahead, anticipate and prepare for potential change.
4.2.1.1 Types of Organisational Plans
Various types of organisational plans exist.
ACTIVITY
In your organisation:
1. What kinds of plans are generated?
2. For what purpose are these plans generated?
3. Who is involved in the generation of these plans?
4. What kind of time frame do these plans address?
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Comment on Activity
A summary of the various organisational plans and their characteristics is provided in Table 4.1 below.
STRATEGIC PLANNING
TACTICAL PLANNING
OPERATIONAL
PLANNING
Alternative
Long-term planning
Medium-term planning
Short-term planning
Responsibility
Top management
Middle management
Lower management
Time-Frame
3 – 10 years
1 – 5 years
Less than 1 year
Detail
Focus on organisation as a whole
•
Name
•
Purpose, mission, strategies.
•
Alignment to external
Establishes
• Establishes day- to-day
functional goals
activities
•
procedures and rules
environment
•
Determines policies,
Future orientation
•
Programmes, budgets
and projects
Information
•
Broad, general
•
guidelines
•
Vague & qualitative
•
More detailed
•
Fine detail
than strategic plans
•
Specific & quantitative
More specific
Table 4.1: Characteristics of Organisational Plans (adapted from Smit & Cronjé: 2002: 97).
4.2.1.2 Steps in the Planning Process
Cronjé, et, al (2007) identify a generic planning process consisting of eight steps. These steps include:
•
Step 1 - Opportunity Awareness: which involves realistically
diagnosing the opportunity
in the light of the organisation’s current capabilities.
•
Step 2 - Establishing Goals: goals are formulated to provide direction to organisational plans (Cronjé,
2007).
•
Step 3 - Drawing up Premises: which involves the establishment of planning assumptions,
i.e. what is the future environment in which the plans are expected to occur (Cronjé, 2004).
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•
Step 4 - Developing Various Courses of Action: which serves to establish alternative ways
in which the identified goal can be achieved.
•
Step 5 - Evaluating Alternatives: the alternatives established in Step 4 need to be evaluated
in terms of various factors, including the planning premises established in Step 3.
•
Step 6 - Selecting a Course of Action: this step results from Step 5.
•
Step 7 - Formulating Derivative Plans: this involves the drawing up of plans which support
the initial plan (Cronjé,2004).
•
Step 8 - Budgeting: this step serves to establish the resources available for the manager to
carry out the plans and achieve organisational goals Cronjé, 2004).
4.2.1.3 Barriers to Effective Planning
Barriers exist which may mar the effectiveness of a manager’s attempts to plan.
ACTIVITY
Consider your experience within organisations.
1. Have you ever been involved in and/or observed ineffective planning? Explain.
2. How would you go about ensuring effective planning?
Comment on Activity
A number of barriers to effective planning may be identified. These include:
•
Lack of environmental knowledge (such as possible economic and technology changes);
•
Lack of organisational knowledge (such as a lack of understanding about the organisation’s
strategy and capabilities);
•
Reluctance to establish goals (for example, due to fear of failure and lack of confidence);
•
Resistance to change, as change is inherent in planning;
•
Time and expense (Cronjé, et, al, 2004).
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Barriers to effective planning may be overcome through:
•
Top management’s commitment to the planning process, demonstrated through the
provision of effective long-term plans.
•
Management should recognise the limitations of planning and understand that plans will
require adjustments on an ongoing basis (Cronjé, et,al, 2004).
•
Management should ensure effective communication of organisational plans at all levels.
•
The benefits of contingency planning should be recognised by organisations operating
within a turbulent environment (Cronjé, et,al,2004).
4.2.1.4 Planning Tools
A number of scientific tools exist which can assist the manager in his/her planning efforts. These tools
include:
•
Forecasting
•
Budgeting
•
Scheduling
•
PERT (Programme Evaluation and Review Technique)
SELF CHECK QUESTION 1
Identify the distinguishing characteristics of the various planning tools.
The answer to this question may be found at the end of this section.
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In summary, therefore, this sub-section has examined the management function of Planning.
The
importance of planning was established, the different types of organisational plans were examined, as were
the planning process and barriers to effective planning. The different planning tools available to the
manager were also examined.
4.2.2 Organising
The plans, which are derived for the organisation, need to be supported by the second management
function of organising. This sub-section will explore the management function of organising and examines
the following:
•
Reasons for organising
•
Organisation design
•
Basic principles of organising
•
Factors influencing organisation design
?
THINK POINT
Consider the structure of the organisation in which you are employed. How does the structure
contribute to the organisation’s performance?
Comment on Think Point
Organising is the “process of creating a structure for the organisation that will enable its people to work
together effectively toward its vision, mission and goals” (Cronjé, 2004). Therefore, an organisation’s
structure should contribute to the organisation’s performance by facilitating the achievement of the
organisation’s plans through the appropriate coordination of tasks and people.
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4.2.2.1 Reasons for Organising
Organising is an integral part of the management process and is necessary for the following reasons, as
identified by Cronjé,et,al (2004):
•
Organisation structure serves to delineate employees’ responsibilities and accountabilities.
•
Organising facilitates effective communication through the establishment of clear channels
of communication.
•
Organisation structure provides a mechanism for the coordination of the entire company.
•
Organising provides for the grouping of related tasks and activities and in so doing provides
for specialization which results in efficiency.
4.2.2.2 Organisation Design
Organisation design is a process in which managers make a decision as to what type of organisational
structure is sufficiently aligned to the external environment and which is most appropriate to the strategies
and plans of the organisation. The steps involved in the process of organisation design are depicted in
Figure 4.2 below.
REFLECT ON
ESTABLISH
DIVIDE MAJOR
ALLOCATE
EVALUATE
PLANS &
MAJOR TASKS
TASKS INTO
RESOURCES &
RESULTS OF
SUBTASKS
DIRECTIVES
ORGANISING
OBJECTIVES
FOR SUBTASKS
Feedback
Figure 4.2: The Organisation Design Process (adapted from Smit & Cronjé, 1997: 212)
4.2.2.3 Basic Principles of Organising
Four fundamental principles underlying organisation design may be identified. These are:
•
Division of work
•
Organisation structure
•
Departmentalisation
•
Coordination
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Division of Work
Division of work involves “the breakdown of a complex task into components so that individuals are
responsible for a limited set of activities instead of the task as a whole” (Stoner & Freeman, 1992: 312), and
in so doing provides for job specialisation. Job specialisation provides the advantages of increased
productivity, reduced training costs and reduced transfer time (Stoner & Freeman, 1992, Smit & Cronjé,
2002). However, it also has the disadvantage of alienating the worker from his/her work, which may result
in absenteeism and boredom (Stoner & Freeman, 1992).
Organisation Structure
The structure of the organisation is usually represented in the form of an organisational chart, in which the
division of work and departmentalisation of tasks is shown. The organisational chart also shows the
employees which report to each manager, and demonstrates each manager’s span of control (Stoner &
Freeman, 1992).
Two types of organisational structures exist within organisations:
•
The Formal Structure which is comprised of the relationships between managers and subordinates, as
represented in the organisational chart (Du Toit et al: 2013).
•
The Informal Structure which is a structure which emerges naturally from the social relationships which
develop between the employees within the organisation (Du Toit et al: 2013)
Du Toit et al (2013) recognise four underlying forces which influence the design of the organisational
structure:
•
Management’s perception of the organisation and organisational problems
•
The task itself
•
Environmental forces
•
The needs and skills of subordinates.
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ACTIVITY
Consider the following: A young company, providing Internet services to the corporate clients, is influenced
by the following forces affecting organisational design:
•
High task complexity requiring intensive use of technology;
•
Constant change within the technological environment;
•
High skills levels, and a need for challenging work, amongst the company’s staff;
•
Management views the environmental change positively and believes in empowering employees.
In the light of these forces, what organisational design would be most appropriate for this organisation? A
flat structure or a tall structure?
Comment on Activity
A flat structure would be most appropriate for the young internet company, in that it would provide for a
wide span of management and few hierarchical levels, which would allow for empowerment of the
employees and the meeting of their needs. This in turn would provide for the flexibility necessary for the
organisation to adjust to the pace of change brought about by its environment.
Departmentalisation
The formation of departments within an organisation results from specialization and involves the logical
grouping of activities (Cronjé, et, al2004). The method of departmentalisation adopted provides the
organisation with a specific type of structure. The forms of organisational structure include:
•
Functional organisational structure
•
Product departmentalisation
•
Location departmentalisation
•
Customer departmentalisation
•
Matrix organisational structure
•
Network departmentalisation
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In establishing departments and designing the organisational structure it is important that the manager
keeps the following organisational design principles in mind:
•
Chain of command, where a management hierarchy is provided for the coordination of
activities;
•
Unity of command, which dictates that each subordinate should only report to one superior;
•
Span of control, which refers to the number of subordinates who report to a particular
manager. The wider the span of control, the flatter the organisation (Smit & Cronjé, 2002)
Coordination
A further principle of organising is that of coordination.
?
THINK POINT
What problems are likely to emerge from the division of tasks and departmentalisation of activities
brought about by the Organising management function?
Comment on Think Point
Organising, in dividing and subdividing the overall task of the organisation, presents the manager with the
problem of achieving cooperation between the parts of the organisation. Thus, coordination is fundamental
to the task of management, in that he/she must facilitate the integration of the various tasks performed at
different levels so as to ensure that the organisation achieves its ultimate goal (Cronjé,et,al 2004).
Mechanisms to assist the manager with coordination include budgets, objectives, the organisational chart,
committees and policies and procedures (Cronjé,et.al 2004).
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4.2.2.4 Factors Influencing Organisation Design
Cronjé, et,al(2004) identify five factors influencing organisation design:
•
The organisation’s environment
•
The relationship between strategy and structure
•
The size of the business
•
Staff employed by the business
•
The organisation climate and culture
READING ACTIVITY
Read the following texts and then answer the question which follows:
•
Drucker, P.F. (1974) “New Templates for Today’s Organisations”
Harvard Business Review January – February, pp 115 – 123.
•
Ostroff, F. & Smith, D. (1992) “The Horizontal Organisation” McKinsey Quarterly 1,
pp 148 – 167.
•
Waterman, R.H., Peters, T.J. & Phillips, J.R. (1980) “Structure is Not Organisation” Business
Horizons June, pp 14 – 26.
How do the factors which Drucker (1974), Ostroff & Smith (1992) and Waterman, Peters & Phillips
(1980) identify correspond to the factors influencing organisational design which Cronjé et al
(2004) identify?
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Comment on Reading Activity
Drucker (1974) provides an additional factor influencing organisational design: the current day complex
organisation which is multiproduct, multitechnology and multimarket. The central problem therefore of the
current day organisation is “the organisation of complexity and diversity” (Drucker, 1974: 118). Due to the
complexity of the current day organisation, it is asserted that organisation design tends to be a series of
risk-taking decisions, guided only by established organisation design principles and logic.
Ostroff & Smith (1992) address the environmental factor identified by Smith&Cronjé (1997) in examining
organisational design. Indeed, it is asserted that “an ever more demanding competitive environment
requires ever higher levels of corporate performance” (Ostroff & Smith, 1992: 148). To achieve the
required levels of corporate performance, the organisation should move toward “a flatter, more horizontal
mode of organisation, in which cross-functional, end-to-end work flows link internal processes with the
needs and capabilities of both suppliers and customers” (Ostroff & Smith, 1992: 148).
In their presentation of the 7-S model, Waterman, Peters & Phillips (1980) address all 5 factors influencing
organisation design (either directly or indirectly) identified by Cronjé,et,al (2004). Waterman et al (1980)
assert that “structure is not organisation” (p 14) and point out that many re-organisation initiatives have
failed as management has simply attempted to reorganize the structure of the firm. When considering the
organisation, and reorganisation, of a company, it is not simply structure that should be considered, but “the
relationship between structure, strategy, systems, skills, staff and something we call superordinate goals”
(Waterman et al, 1980: 17).
In summary this sub-section explored the management function of Organising. The reasons for organising,
the process of organisation design, the principles of organisation and factors influencing organisation
design, were examined.
4.2.3 Leading
This subsection will examine the fundamental management function of leadership, and the following will be
studied:
•
The nature and components of leadership
•
Leadership vs management
•
Leadership models
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4.2.3.1 The Nature & Elements of Leadership
Leadership may be defined as “the process by which an individual exerts influence over other people and
inspires, motivates, and directs their activities to help achieve group or organisational goals” (Jones, et al,
1998: 403).
Leadership is a complex process which directly impacts on the performance of an organisation. It
comprises a number of elements, which include:
•
Authority: which provides the leader with the right, by virtue of his/her position within the
organisation, to give instructions and delegate work to subordinates (Cronjé,et,al 2004)
•
Power: which refers to the leader’s ability to influence (without necessarily using his/her
authority). Various types of power exist and include legitimate, reward, coercive, referent and expert
power (Cronjé, et, al 2004).
•
Influence: which involves using authority and power in a manner which inspires and
motivates subordinates to take action (Cronjé,et,al 2004).
•
Delegation: where the leader allocates a part of his/her own task to a subordinate to perform
together with the necessary authority to execute it.
•
Responsibility & Accountability: where the leader is responsible for carrying out his tasks
and must account for his/her performance (Cronjé, et,al2004).
SELF CHECK QUESTION
What are the distinguishing characteristics of each of the types of power mentioned above?
The answer to this question may be found at the end of this section
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4.3.2.1 Leadership vs Management
Much debate exists within the literature about leadership and management.
READING ACTIVITY
First answer the following question:
1.
Consider your experience as a manager. In your opinion, is management different from
leadership? Why / Why not?
Now, read the following text and then answer the question which follows:
•
Kotter, J.P. (1990) “What Leaders Really Do” Harvard Business Review May – June,
pp 103 – 111.
2.
What is Kotter’s argument about management and leadership? How does Kotter’s view
correspond to your understanding, as outlined in your answer to question 1 above?
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Comment on Reading Activity
Kotter (1990) argues that management and leadership are “two distinctive and complementary systems of
action” (p 103) and that the former involves coping with complexity, while the latter involves coping with
change.
The key differences between management and leadership which Kotter (1990) highlights are provided in
Table 4.1 below.
MANAGEMENT
• Planning and Budgeting (in order to
produce orderly results)
• Organising & Staffing (includes decisions
LEADERSHIP
• Setting a Vision (analyse broad range of data in
order to create visions and strategies)
• Aligning people (extensive communication of
related to job structures, placing of employees
vision to various individuals – internal and
in appropriate jobs, communication of plans to
external to the organisation)
workforce, etc)
• Controlling & Problem Solving (ensures that
managerial processes are fail-safe and risk-
• Motivating People (energizing staff to decide on
own ways to achieve vision)
free)
Table 4.1: Differences Between Management & Leadership (Kotter, 1990)
Thus, according to Kotter (1990), leadership differs from management. Smit & Cronjé (2002) support this
assertion, but indicate that management is not only broader in scope than leadership, but encompasses
leadership as well.
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4.2.3.2
Leadership Models
A number of models exist which attempt to explain the nature of leadership.
?
THINK POINT
Do you agree with the assertion “leaders are born and not made”? Why/Why not?
Comment on Think Point
While those individuals who follow a trait approach to leadership believe that leaders are born and not
made, a number of research studies and other leadership theories (such as behavioural and contingency
theories) undermine this belief. These theories will be examined in greater depth below.
READING ACTIVITY
Read the following texts and then answer the question which follows:
•
Smit, P.J. & Cronjé, G.J. de J. (2002) Management Principles.3rd Edition. Cape Town: Juta, pp 285 –
300.
•
Jones, G.R., George, J.M. & Hill, C.W.L (1998) Contemporary Management Issues. Massachusetts:
McGraw Hill, pp 408 – 426.
From your readings, what are the distinguishing characteristics of the various leadership theories?
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Comment on Reading Activity
A brief summary of the various categories of leadership theories is provided below.
LEADERSHIP
TRAIT
BEHAVIOURAL
THEORIES
THEORIES
CONTINGENCY
THEORIES
•
•
•
Fiedler’s
contingency
theory
Hersey &
Blanchard’s
model
VroomYetton-Jago
model
CONTEMPORARY
THEORIES
•
•
•
•
•
Transactional
leadership
Charismatic
leadership
Transformational
leadership
Female leadership
Dynamic
engagement
Figure 4.3: Categories of Leadership Theories.
As depicted in Figure 4.3 above, four categories of leadership theories exist:
•
Trait Theories: focus on the personal characteristics and traits, such as intelligence, dominance and
self-confidence, which studies have shown leaders to possess (Jones, et al, 1998).
•
Behavioural Theories: focus on the behaviour of successful leaders (Smit & Cronjé, 2002).
Research has shown that leadership behaviour is two-dimensional and involves task-oriented
behaviour as well as employee oriented behaviour. The research also showed that leadership
behaviour appropriate to one situation is not necessarily suitable for another situation (Smit & Cronjé,
2002).
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•
Contingency Theories: focus on the manner in which the situation impacts on the effectiveness of
leadership (Jones, et al, 1998). While Fiedler’s model focuses on congruence which exists between
the leader, the subordinates and the situation, Hersey & Blanchard’s model focuses on the fit between
the leader’s style and the maturity of his/her subordinates (Smit & Cronjé, 2002). The Vroom-YettonJago model, on the other hand focuses on the degree of group participation expected.
•
Contemporary Theories: More recent leadership theories include Transformational Leadership where
leaders are able to initiate substantial innovation and change (Smit & Cronjé, 2002).
Female
Leadership is a further contemporary approach which focuses on an interactive leadership style which
succeeds in building consensus and creating an open and inclusive environment (Smit & Cronjé,
2002).
In summary therefore, this subsection explored the management function of Leading. The nature and
elements of leadership were studied, the differences between management and leadership were examined
and the various leadership theories were investigated.
4.3.3
Controlling
This section will explore the fourth management function, Controlling, and the following issues will be
examined:
•
The control process
•
The focus of control
•
The characteristics of an effective control system
?
THINK POINT
How does the function of Control add value to the overall management process and the organisation?
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Comment on Think Point
Control refers to the “process whereby managers monitor and regulate how efficiently and effectively an
organisation and its members are performing the activities necessary to achieve organisational goals”
(Jones et al, 1998: 269). This function adds value to the overall management process and the organisation,
in that control:
•
Enables managers to achieve superior efficiency;
•
Ensures, and improves, the quality of the goods/services produced/provided;
•
Enhances responsiveness to customers (Jones, et al, 1998).
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4.2.4.1 The Control Process
The process of control is comprised of four steps, and is summarized in Figure 4.4 below.
STEP 1:
ESTABLISH PERFORMANCE STANDARDS
Performance standard = projection of planned performance
Establish during planning stage
Performance standards should be realistic, attainable & measurable
•
•
•
STEP 2:
MEASURE ACTUAL PERFORMANCE
Manage performance on an ongoing basis
Determine deviation between actual performance and planned performance
•
•
STEP 3
EVALUATE PERFORMANCE DEVIATIONS
Determine reasons for poor performance or over performance
Determine significance of deviations – is further action necessary?
•
•
STEP 4:
IMPLEMENT CORRECTIVE ACTION
•
Corrective action serves to achieve or better the performance standard
Figure 4.4: The Control Process (Smit & Cronjé, 2002).
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4.2.4.2 The Focus of Control
Control mechanisms should be focused on activities relating to the organisation’s resources at strategic
control points.
Strategic Control Points
The organisation’s activities should be controlled at strategic control points (Jones et al, 1998). As depicted
in Figure 4.5 below, three strategic points exist at different stages of the management process:
•
Input Stage: during this stage feedforward control must be implemented, where
management should seek to anticipate problems before they occur.
•
Conversion Stage: during this stage, concurrent control must be exercised, where
management should deal with problems as they occur.
•
Output stage: during this stage, feedback control should be implemented, where problems
are addressed by management after they have arisen (Jones, et al, 1998).
CONCURRENT
CONTROL
FEEDFORWARD
FEEDBACK
CONTROL
CONTROL
ORGANISING
INPUTS
•
•
•
•
Human
Financial
Physical
Information
OUTPUTS
PLANNING
LEADING
•
•
•
•
•
Achieve goals
Products
Services
Productivity
Profit
CONTROLLING
Figure 4.5: Strategic Control Points
Organisational Resources
The control of the organisational resources should occur at strategic points within the management
process.
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ACTIVITY
Describe the types of control mechanisms which you have encountered within your workplace.
What resources do these mechanisms attempt to control?
Comment on Activity
Smit and Cronjé (2002) identify various mechanisms to control the organisation’s physical, financial,
information and human resources.
•
Physical Resource Control Systems include:
o Inventory control (systems include economic ordering quantity system, materials requirements
planning (MRP) and just-in-time (JIT))
o Operational control, (techniques include PERT, linear programming and break-even analysis)
o Quality control (techniques include Total Quality Management [TQM])
(Smit & Cronjé, 2002).
•
Financial Resource Control Systems include:
o The budget
o Financial analysis
•
Information Resource Control Systems
•
Human Resource Control Systems include
o Performance measurement
o Ratio analyses (to determine, for example, labour turnover, absenteeism, work force composition)
A further control system which is identified is that of strategic control, which involves the organisation’s top
management in the study of the total organisation with respect to its productivity, effectiveness,
management effectiveness and alignment to the environment.
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4.2.4.3 Characteristics of an Effective Control System
As was seen in the above subsection, a vast number of control systems and techniques are available for
the organisation to implement. However, it is important that the organisation implements its control systems
in a manner which ensures their effectiveness. There are five characteristics of effective control systems:
•
Integration: it is important to integrate the management functions of planning and controlling in that the
latter provides information which stimulates the revision of organisational plans.
•
Flexibility: it has emerged throughout this Study Guide that environmental change has a considerable
impact on the current day organisation. Thus the organisation’s control systems should be sufficiently
flexible to accommodate adjustments to the organisation’s plans.
•
Accuracy: it is imperative that the control system provides an objective and accurate picture of the
organisation’s situation.
•
Timeliness: control data should be available to management on a regular basis.
•
Simplicity: the control system should not be unnecessarily complex. A system which is too complex is
likely to hamper the manager’s utilization of the system.
In summary, this subsection explored the fourth management function, Control.
In so doing, the
importance of control, the control process, the focus of control as well as the characteristics of an effective
control system were examined.
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4.3
Areas of Management
The four fundamental management functions of Planning, Organising, Leading and Controlling discussed in
subsection 4.2 above comprise the area of General Management. As identified in Section 1 (Introduction to
Management) of this Study Guide, various functional areas of management exist in which the activities of
General Management are applied. This sub-section will examine a number of the functional areas of
management, and will address:
•
The financial function
•
The marketing function
•
The human resources function
•
The operations function
•
The purchasing function.
READING
, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition,
Oxford University Press: Southern Africa
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4.3.1
The Financial Function
The Financial Function is concerned with “the flow of funds, and in particular…the acquisition of funds, the
application of funds for the acquisition of assets, and the administration of, and reporting on, financial
matters” (Cronjé, , 2004: ).
?
THINK POINT
What do you think the Financial Function’s relation is to …
•
…the organisation’s external environment?
•
…related disciplines such as Accounting and Economics?
•
…other areas of management?
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Comment on Think Point
The relationship between Financial Function, other functional management areas, related disciplines and
the environment is depicted in Figure 4.6 below.
SUBJECT
Financial Function
ENVIRONMENTAL
TASKS
FACTORS
• Financial analysis,
reporting, planning &
control
• Management of
financing structures
• Management of asset
structure
• Form of business
• Financial
institutions &
markets
• Incentive measures
• Legislation
• Taxation
Influence
Business Objectives
DISCIPLINES
Support
Mutual
Support
•
•
•
•
•
Accounting
Cost accounting
Economics
Statistics
Communication
Science
OTHER AREAS
MANAGEMENT
•
•
•
•
•
General
Purchasing
Marketing
Public Relations
HR
Figure 4.6: The Relationship Between the Financial Function and Related Disciplines, the Organisation’s
Environment and Other Management Areas
(adapted from Cronjé et al, 2004: 394).
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4.3.2
The Marketing Function
The Marketing Function “consists of management tasks and decisions directed at successfully meeting
opportunities and threats in a dynamic environment, by effectively developing and transferring a needsatisfying market offering to consumers in such a way that the objectives of the business, the consumer
and the society will be achieved” (Cronjé et al, 2004)
ACTIVITY
Consider the organisation for which you work. Identify the activities and initiatives for which the
Marketing Function is responsible.
Comment on Activity
The Marketing Function is involved in formulating a marketing strategy, which will enable the organisation
and its particular products and services to ‘reach’ the target market, through making decisions about the
four marketing instruments (four Ps):
•
Product: this refers to the item or service which is designed to satisfy the target market’s
needs. Decisions about products include brand decisions, packaging decisions, and decisions about
how to go about differentiating a product (Conjé, et al, 2004)
•
Price: refers to the exchange value of the product or service. Various factors influence the
determination of the price of a product (Cronjé, et al, 2004).
•
Place: refers to the manner in which the product or service is to be distributed. Decisions
about place (distribution) include the choice of distribution channel and type of market coverage.
•
Promotion: refers to the process of marketing communication which involves “informing,
persuading and reminding the consumer" (Cronjé, et al, 2004:279) about a particular product or service
through the use of advertising, personal selling, sales promotion and publicity.
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4.3.3
The Human Resources Function
Human Resources Function may be defined as “the activities that managers engage in to attract and retain
employees and to ensure that they perform at a high level and contribute to the accomplishment of
organisational goals” (Jones, et al, 1998: 301).
ACTIVITY
Consider the organisation in which you are currently employed. Identify the specific activities and
initiatives for which the Human Resource Function is responsible.
Comment on Activity
Cronjé et al (2004) identify the task of the Human Resource (HR) Function within an organisation as being
to assist “other managers in the business to fully utilise the employees allocated to them” In so doing, the
HR Function engages in three central activities:
•
Attracting human resources: which involves the process of human resource planning, recruitment,
selection, placement and induction.
•
Retaining human resources: which involves the management of employee performance, remunerating
employees, providing for health and safety and promoting positive labour relations.
•
Developing human resources: which involves training and educating employees both on and off the
job (Cronjé, et al, 2004).
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READING
1. From your experience, what challenges do you think the current day Human Resources Manager is
faced with?
Now read the following article and then answer the question which follows:
- Ulrich, D. (1998) “A New Mandate for Human Resources” Harvard Business Review,
January – February, pp 124 – 134.
2. How does Ulrich’s (1998) view about the challenges for the Human Resources Function differ from
those which you expressed in your answer to question 1 above?
Comment on Reading Activity
Ulrich (1998) argues that despite HR’s generally poor reputation within organisations, given the competitive
forces which exist in the current day, “achieving organisational excellence must be the work of HR” (Ulrich,
1998: 124). According to Ulrich (1998), the importance of HR is due to the following organisational
challenges:
•
Globalisation: which requires that organisations improve their learning capabilities and
manage complexity and diversity;
•
Profitability through Growth: companies seeking revenue growth need to be innovative and
creative and encourage the sharing of information amongst employees;
•
Technology: managers need to learn how to remain ahead of the information curve and
effectively utilise information to attain business results;
•
Intellectual Capital: managers are presented with the challenge of attracting, assimilating,
compensating and retaining talented individuals;
•
Change: in order to survive within an environment characterised by change, organisations
will need to develop the capacity to cope with change (Ulrich, 1998).
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For the HR Function to facilitate the manner in which the organisation deals with the above challenges, the
function needs to change its role by becoming a/an
•
Partner in strategy execution (to guide strategy discussions and decisions)
•
Administrative expert (to improve efficiency within both the HR department and the entire organisation)
•
Employee champion (to ensure employee commitment to the organisation)
•
Change agent (to build the organisation’s capacity to embrace and cope with change) (Ulrich, 1998).
Thus, in essence, HR needs to focus “more on deliverables of their work and less on just getting their work
done” (Ulrich, 1998: 134).
4.3.4 The Operations Function
The Operations Function is the function that is “primarily aimed at the utilization of resources to
manufacture products and render services” (Cronjé, 2004).
ACTIVITY
Consider the organisation for which you currently work. In what particular activities is the Operations
Function involved?
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Comment on Activity
The Operations Function influences the organisational transformation process where inputs are converted
into organisational outputs, as indicated in Figure below:
THE ORGANISATION
Operations Management
Strategies & Objectives
INPUTS
•
•
•
•
OUTPUTS
Human
Financial
Physical
Information
Operations
Design
Figure 4.7:
•
•
TRANSFORMATION
Operations
Planning &
Control
Products
Services
Operations
Improvement
The Operations Function (adapted from Cronjé, et al, 2000 : 357)
As shown in Figure 4.7, the following components of the Operations Function influence the organisational
transformation process:
•
Operations Design: which addresses the integration of the design of products and/or services and the
design of processes to produce these products and/or services.
(Cronjé et al, 2004)Operations planning & Control: which involves activities, which aim to reconcile
supply of, and demand for, products and services in terms of volume, timing and quality.
(Cronjé et al, 2004)).
•
Operations Improvement: which involves the implementation of various activities and techniques to
improve operations performance (Cronjé et al, 2004).
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4.3.5
The Purchasing Function
The purchasing function entails “the planning, organising, leading and controlling of all activities relating to
the purchase of materials and services from an external source and aimed at maintaining and increasing
the business’s profitability” (Cronjé et al, 2004).
ACTIVITY
Consider the Purchasing Function within the organisation at where you are currently employed.
For which particular activities is this function responsible?
Comment on Activity
Cronjé et al (2004) identify that the activities of the Purchasing Function include:
•
The selection of suppliers
•
The purchasing of materials
•
The transport of materials to the business
•
Deciding what prices are acceptable
•
Determining quality and quantity of materials and/or services
•
Expediting and receiving materials
•
Controlling warehousing and inventory holding (Cronjé, et al, 2004)
4.4
Summary
This section explored The Management Process.
The four fundamental management functions of
Planning, Organising, Leading and Controlling (POLC) were examined, as were the areas of management
where the General Management, Financial Function, Marketing Function, Human Resources Function,
Operations Function and Purchasing Function were examined.
The next section of this module, Section 5, will examine various contemporary management issues.
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4.4
Answers to Self-Check Questions
Model answers to the Self-Check Questions found within this section are provided below.
Self-Check Question 1
Model Answer
The distinguishing characteristics of the four planning tools are provided below:
•
Forecasting: a forecast provides a projection of future conditions based on current and
historical information. Different types of forecasting exist:
o Sales forecasting predicts future sales;
o Technological forecasting predicts future technologies and determines when they should become
economically viable;
o Resource forecasting anticipates future needs for human, financial, physical and information
resources;
o Economic forecasting anticipates the future economic state of the country, such as the level of
unemployment.
•
Budgeting: a budget is a plan “that deals with the future allocation and utilization of various resources
with regards to different organisational activities over a given period” ( Cronjé, 2004:). It provides the
manager with a means to translate plans into quantitative terms.
•
Scheduling: A Gantt chart serves to break a project down into smaller tasks. These tasks are plotted on
a chart so as to determine how much time is required for the successful completion of the tasks and the
project as a whole (Cronjé, 2004).
•
PERT: Programme Evaluation and Review Technique aids the planning of projects through
establishing a network of the project tasks and their inter-relationships.
( Cronjé, 2004).
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Self-Check Question 2
Model Answer
The types of power which a leader may utilise include:
•
Legitimate power: which refers to the power which the leader has as a result of the hierarchical
position which he/she possesses within the organisation (Jones, et al, 1998)
•
Reward power: this refers to the leader’s ability to withhold or give tangible rewards (e.g. incentives,
pay increases, new office) and intangible rewards (e.g. respect, verbal praise).
•
Coercive power: refers to the leader’s ability to punish others and in so doing instil fear (Jones, et al,
1998). The exercise of coercive power has been found to seldom result in higher performance.
•
Referent power: results from a leader’s personal characteristics and refers to his/her ability to
command respect, admiration and loyalty (Jones, et al, 1998).
•
Expert power: results from the knowledge, skills and expertise of the leader.
(Jones, et al, 1998).
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SECTION FIVE
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•
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•
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•
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•
Cronje, Du Toit, Marais,Motlatla (2004) Introduction to Business Management 6th Edition. Cape Town
•
Du Toit, Erasmus and Strydom (2013) Introduction to Business Management, 8th Edition, Oxford
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•
Daft, R.L. (1995) Management. New York: Dryden Press.
•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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•
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