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Lesson 6
Management Functions






PLANNING

  • Definition of planning
  • Significance of planning
  • Benefits of planning
  • Limitations of planning
  • Planning process
  • Types of plans/levels of planning
Definition of planning

Planning is the process of establishing goals & suitable course of action for achieving those goals.
( James A.F.Stoner)

Six P’s of planning (necessary elements of planning)

  1. Purpose
  2. Philosophy
  3. Premise
  4. Policies
  5. Plans
  6. Priorities
Significance of planning
  1. Plans give the organization its objectives & set up the best procedures for reaching them.
  2. Planning produces a picture of desirable future circumstances given currently available resources, past experience.
  1. Without plans, managers cannot know how to organize people & resources effectively.
  2. Planning is essential in modern business.
  3. Planning is related to performance.
  4. Ensures maximum utility of managerial time & efforts.
  5. Planning is necessary to facilitate control.
  6. Planning anticipate problems & help in smooth flow of operation.
  7. Establish advance warning of possible deviations from the expected performance.
  8. It provides quantitative data.
  9. Planning helps in the process of decision making

Benefits of planning
  1. Planning gives managers some purpose & directions.
  2. Proper planning helps in the process of motivation.
  3. Planning provides a framework for decision making.
  4. Proper planning result in proper & effective utilization of organizational resources.
  5. Reduce the risk & uncertainty of decision making.
  6. Improve the competitive strength of the company.
  7. Effectively coordinate the activities of all the areas of business.
  8. Provides performance standards.
  9. Aid to the controlling process.

Limitations of planning
  1. Corporate planning is not integrated into the total management system.
  2. Lack of understanding of the different steps of planning process.
  3. Management at different levels in organization has not properly contributed to the planning activities.
  4. Poor information & inadequate inputs may have formed the basis for planning.
  5. Management is not always willing to cancel or modify poor planning.
  6. Management fails to operate by the plans.
  7. Resistance to change by organizational members.
  8. Lack of contingency plans.
  9. Planning is expensive
  10. Planning is time consuming
  11. Planning is obstacle to innovation
  12. Planning require high mental ability

Principles of effective planning
  • Keep aims crystallized.
  • Develop accurate forecast.
  • Involve subordinates in the planning process.
  • The plan must be sound one.
  • Assign planning responsibility to right people.
  • Don’t be over optimistic.
  • Decide in advance the criteria for abandoning a project.
  • Keep your plan flexible.
  • Review long range plans on a short-range basis.
  • Fit the plan to the environment.




Vision
  • Vision is a state of organization, which hopes to achieve in long term & Established by the initial members of organization.
  • This is a unrealized dream of a organization
  • Broader & unclear than mission

E.g. - Vision of Sri Lanka Telecom
“To lead Sri Lanka to become the hub of telecommunication in the South Asia”

LOLC
“To be the most preferred financial; solution provider”

Brown & Company PLC
“To achieve excellence in marketing”


Mission
  • Mission describe the organization’s basic function in society, in terms of product & services it produce for it’s client
  • It gives reason for the existence of organization
  • It describes purpose of existence of organization
  • It is short term , clear , narrow & achievable than the vision
  • More powerful & visible than vision

Eg- Mission of Brown & Company PLC
‘To enhance profitability, To diversify & enhance our product range,
To achieve excellence in service & to be a model employer”
Characteristics of mission statement
Brevity-easy to understand & remember
Flexibility-to accommodate change
Distinctiveness-to make the firm stand out



Goal

The purpose that an organization strive to achieve
  • Broader than objective
  • Long term than objective

Eg- Increasing profit
Increasing market share


Objectives

Objectives are those ends which the organization seeks to achieve by it’s existence & operation in short term
  • More precise statement of the goal
  • Ways of achieving goals
  • Short term than the goals
  • Narrow than the goal
  • Specific than the goals
Eg- Increasing profit by 5% in next year

Objective should be SMART

Specific
Measurable
Achievable
Realistic
Time Bounded

Strategy
A course of actions including the specification of resources required to meet a specific objective

SWOT Analysis

  • The overall evaluation of company’s strength, weaknesses, opportunities, & threats is called SWOT analysis
  • SWOT analysis is a tool for analyzing organizational environment
  • This is a method of scanning the environment of organization

Strength
Weaknesses
Opportunities
Threats
  • Strength & weaknesses analysis has an internal focus
  • Opportunities, & threats analysis are considered as part of an external appraisal
SWOT Matrix

SWOT Matrix is a conceptual frame work for a systematic analysis that facilitate matching external opportunities & threat with the internal weaknesses & strength



Strength

Strengths are resources ,skills or other advantages relative to competitors & the needs of markets a firm strives or anticipates serving

eg- Financial resources
Image
Market leadership
Buyer /supplier relationship


Weaknesses

Weaknesses are limitations or deficiencies in resources , skills & capabilities that seriously effective to performance of organization

eg- limitations in financial
resources
poor management
adverse image
poor capabilities
low marketing skills

Threats

Threats are challenges posed by an unfavorable trend or development that would lead in the absence of defensive action to determination of correct actions



Opportunities

Organizations must consider the opportunities which are external to the organizations environment




* PEST Analysis (Refer Lesson 5 Note)



Types of plans
  1. Strategic plans
  2. Intermediate plans (Tactical Plans)
  3. Operational plans

Levels of Planning
  1. Strategic planning
  2. Intermediate planning (Tactical Planning)
  3. Operational planning



Types/Levels of Planning




ORGANIZING


Definition of Organizing

The process of two or more people in working together in a structured way
to achieve a specific goals or set of goals.
(A.F.Stoner)

Organizational Design

The determination of the organizational structure that is most appropriate for
the strategy, people, technology & task of the organization.

Organizational Structure

The way in which an organization activities are divided, organized &
coordinated


Formal & Informal Organization Structure


Formal

Consist of classical hierarchical structure.
Position, responsibility, accountability & the lines of command are clearly
defined & established.

Informal

Which comes into existence due to social interactions & interpersonal
relationship & outside the formal authority system, without any set of rigid
rules.

Departmentalization

The grouping into departments of work activities those are similar & logically connected.
  1. Departmentalization by function
  2. Departmentalization by product
  3. Departmentalization by customers
  4. Departmentalization by geography
  5. Departmentalization by time




Departmentalization by function




Departmentalization by product









Departmentalization by customers





Departmentalization by geography






Departmentalization by time









Types of Organizational Structure

  1. Line Organization
  2. Line & Staff Organization
  3. Functional Organization
  4. Project Organization
  5. Matrix Organization

Line Organization




Functional Organization





Line & Staff Organization






Authority

“Right To command”
“Right to give orders & Power to exact obedience “
(Henry Feyol)

Types of Authority

  1. Legal Authority
  2. Traditional authority
  3. Charismatic Authority
  • Delegation of authority
Assignment of authority & responsibility to others in order to carry
out certain assignment.

  • Responsibility
Duty to perform certain assigned task in a satisfactory manner
Responsibility in a sense is accountability for authority


  • Coordinating
The integration of the activities of the separate parts of an
organization to accomplish organizational goal.

  • Chain of command
The plan specifies who report to whom in an organization, such
reporting lines are promotes features of any organization chart

  • Span of Control
The number of subordinates reporting directly to a given manager


1.1-The managers makes minimum efforts to get work done. minimal standards of
performance and minimum works dedication. (Impoverished Management)

9.1-Excelent work design .Well established procedures. Minimum worker interference.
Orderly performance and efficient operation (Task Management / Authority Compliance)

1.9-Personal & meaningful relationship with people. Friendly atmosphere and high morale.
Loosely structured work design (Country Club Management)

5.5-Satisfactory performance achieved by equating the necessity for performance and
reasonable morale. (Middle of the road Management / Organizational Man manager)

9.9-Ultimately in managerial efficiency. Thoroughly dedicated people .Trustworthy and
respectable atmosphere highly organized task (Team Management)


MOTIVATION


Definition

  • Motivation Is A Decision Making Process Through Which The Individual Choose The Desired Outcome & Set In Motion The Behaviour Appropriate To Acquire Them (Vitele)
  • The factors that cause , channel ,& sustain an individual’s behaviour (A.F.Stoner )
  • Process of simulating people to accomplish desires goal

Content Theory & process Theory of Motivation





Three categories of development of motivational model

Traditional Model
Human Resource Model
Human relation Model



Maslow’s Model

Theory of motivation that people are motivated to meet five types of need which can be ranked in a hierarchy.





Physiological needs
E.g.-Food, water, shelter

Safety Needs
E.g.-obtaining life & medical insurance policy

Love/Social Needs
E.g. - Love, Friendship, Social interactions

Esteem Needs
E.g.-Achievement, prestige, status, & power


Self-Actualization needs
Need to develop fully to realize one’s capacities & potentialities to the fullest extent possible.


Herzberg Two Factor Theory

Herzbrg concluded that job dissatisfaction & job satisfaction arose from the two separate sets of factors






  • The Herzberg two factor theory model is tied in with Maslow’s basic model.
In that Maslow is helpful in identify needs & Herzberg provide as with
directions & incentives that tend to be a satisfy these needs
  • Also Hygiene factors in Herzberg model satisfy the 1st 3 level of Maslow’s
model & the motivational factors satisfy the last two higher level needs.
  • Both models discussed about content theories of motivation that mean ask the
question, “What are the things that motivate people

  • Some researchers do not agree with Herzberg’s model as being conclusive, since the results were based primarily on the response of white-collar workers (Accountant’ Engineer etc.) do not necessarily reflect the blue collar workers opinion ,who may concern hygiene factors a motivational factors

  • Some studies have found that the effect of hygiene factors & motivational factors are totally reversed on some people. they are highly motivated by financial reward , organized supervision ,well defined work rules , pleasant work environment & positive employee interactions & do not give much importance to achievement of self actualization

X & Y Theory

Douglas Macgregor presented two opposing philosophies about people’s attitudes to work. These two philosophies named as Theory X & Y

Theory X
  • described the traditional view of management approaches for motivation
  • Described fully pessimistic view of employees
  • Match with the untrained employees
Assumptions

  1. Most people dislike to do work & they are lazy to doing work
  2. Most people are willing to controlled under others
  3. Threatened with punishment should be given to them to do work through them
  4. Required rigid rules & regulations to control them

Theory Y
  • described the modern view of management approaches for motivation
  • Described fully optimistic view of employees
  • Match with the fully trained employees

Assumptions
  1. Most people willing to do jobs
  2. If they know goals of organization ,they are trying to achieve those goal with a higher dedication
  3. They are willing to take responsibilities
  4. They are willing to use ideas creativity of them for the success of organization
CONTROLLING

Definition of controlling

The process of ensuring that actual activities conform to planned activities

Planning & Controlling Link
Planning provides performance standards for controlling that is activities, targets, objectives, & goals act as standards in controlling process

Purposes & Importance of controlling
  1. To ensure actual activities conform to planned activities
  2. To cope with changing environment
  3. To get maximum benefit from limited resources
  4. To ensure stability of organization
  5. To increase motivation of employees
  6. To produce high quality goods & services
Needs of controlling
  1. Need of delegation of authority & responsibilities
  2. Because of Complexity of organizational activities
  3. Because of faults which done by humans

Elements of effective controlling process
  1. Plan
  2. Cleary established organizational structure
Controlling process




Controlling Techniques / Controlling Methods / Controlling Instrument





Budget Statements
Sales
Production
Manufacturing cost
Labour
Material
Financial Statements

Income Statement
Balance sheet
Cash Flow statement

Ratio Analysis

Profitability
Liquidity
Gearing
Efficiency




Financial Controlling (Financial Management)

Financial budget
Budget detailing the money expected to be spent during the budget period & indicating its sources