Business Management Dersi 1. Ünite Özet
Fundamentals Management
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Fundamentals Management
The Concept of Management
There are various definitions of management, one of which defines management as “an act of getting people to work together to achieve organizational goals through effective and efficient use of resources”. This brief definition of management involves all four functions of management: planning, organizing, leading/ influencing, and controlling. All managerial activities performed by business managers are represented in these four functions.
Effectiveness and efficiency are the key concepts almost in all definitions of management. In brief, effectiveness is about making the right decisions and it also involves successful implementation of these decisions. Effectiveness basically shows an organization’s performance in achieving pre-set goals. On the other hand, efficiency is mainly about how organization uses its valuable resources.
Functions of Management
Fayol suggests that there are five administrative functions that should be performed by business managers: planning, organizing, commanding, coordinating, and controlling. These functions are still considered to be the main functions of management with some slight changes. One of these changes is that commanding function is now known as leading/directing or influencing. Another important change is that coordination is no longer listed as a separate management function since it continues to exist as an integral part of each function (Figure 1.1).
Management functions are not a random listing. Planning, organizing, leading/ directing and controlling are listed in an order. Each function is followed by the next one. However, execution of management functions is not a linear process. All functions are interrelated and execution of all functions is a cyclical (continuous) process.
Planning
Basic tasks of planning are to establish organizational goals and determining necessary steps to achieve intended goals.
Organizing
Organizing involves determining tasks and jobs; finding and hiring best possible people to perform these tasks and jobs; defining the hierarchical relations within the organization; establishing the line of command; and finally coordinating the efforts of the employees.
Leading/Directing
The leading function refers to mobilizing and directing people toward organizational goals.
Controlling
Controlling refers to monitoring and measuring organizational outcomes and taking corrective actions when necessary.
Managers can use three types of organizational control in the controlling process. All three controlling methods enable managers to spot deviations and fluctuations in the steps toward organizational goals.
- Feedforward control involves identifying and preventing possible problems before they occur.
- Concurrent control identifies and prevents problems as they occur.
- Feedback controls identify and solve the problems after they occur.
Managers and Organizational Resources
Managers are important to all types of organizations. There are several reasons why they are important. First, organizations need their managerial skills and abilities more than ever in these unstable and complex times. Only the managers who possess required skills will lead the organization in today’s challenging environmental conditions. Second, managers are important for getting things done. If work within the organization is not being done then it simply means that the organization is not moving toward the organizational goals. Finally, managers do matter to organizations. Because research has found that the relationship between the employees and managers is the most important variable in employee motivation, performance, and loyalty.
At this point, it is important to understand that all organizations have goals and business managers allocate and utilize the organizational resources effectively and efficiently to achieve these goals. These organizational resources can be classified into four groups:
- Human resources
- Monetary resources
- Raw materials
- Capital resources
Human resources are the people working within the organization. The skills they have and their knowledge of the work are important for managers. Monetary resources refer to the money used by managers to purchase goods and services for the organization. Raw materials are the ingredients used directly in manufacturing of products. Capital resources refer to the machinery and equipment used in the production process.
Managers are responsible for effective and efficient utilization of these resources in the process of pursuing organizational goals. In other words, all business managers strive to achieve managerial effectiveness and managerial efficiency. Managerial effectiveness is about the level of achievement of organizational goals. On the other hand, managerial efficiency refers to the utilization of organizational resources during the activities toward organizational goals.
Types of Managers
There are different types of managers within the organization and each type of manager has different tasks, jobs, and responsibilities. In other words, managerial positions and expectations from each managerial position vary based on several conditions. For example, tasks of a manager who leads a multinational corporation and tasks of a local restaurant manager cannot be identical . Furthermore, each type of organization, depending on its size, the scope of operations, competitive position, etc., has different expectations from its managers.
Although there are different approaches to classifying managers, common approaches classify managers in two categories as vertical classification and lateral classification.
Vertical Classification
One of the most common criteria in determining managers’ levels within the organization is their hierarchical position. There are three main hierarchical levels of management: top management; middle management; and first-line management.
Top managers possess a high level in the organizational hierarchy. They are mainly responsible for setting the overall direction of the organization, building extensive strategies, and making sure that organizational goals are met. Decisions made by top management affect the entire organization.
Middle managers are mainly responsible for the implementation of strategies developed by top management to achieve desired organizational goals. Middle managers have a shorter time horizon compared to top managers and their focus is more specific and concrete since they are responsible for the implementation of organizational strategies, policies, and procedures.
First-line managers are mainly responsible for managing shop floor employees with no managerial responsibilities. They supervise daily operations and make sure that operational-level activities run flawlessly.
In recent years, the fourth type of manager has emerged in the vertical classification of managers. This fourth type of managers is generally titled as team leaders.
Team leaders are mainly responsible for coordinating the work of a small group of people while acting as a catalyst or facilitator.
Lateral Classification
Lateral classification of managerial positions are subdivided into two subcategories known as functional and general managers.
Functional managers are responsible for supervising the employees and departments engaged in specific activities. Marketing, finance, human resources, research and development are few examples of functional divisions.
General managers are responsible for the activities of several different groups that perform various functions. For example, manager of a department store is a general manager since she or he manages several different functions concurrently.13
Roles of Managers
The Canadian scholar Henry Mintzberg provided one of the most extensive definitions of the managerial roles. Mintzberg’s typology of managerial roles has three major categories: interpersonal, informational, and decisional.
Interpersonal Roles
Interpersonal roles refer to interpersonal relations and behaviors necessary for effectively managing the organization. Mintzberg notes that there are three interpersonal roles and these roles are derived from the manager’s formal authority granted by the organization. These three roles are the figurehead role, the leader role, and the liaison role.
The figurehead role: The figurehead role of managers emphasizes that the organization is represented by the managers in various events such as ceremonial activities and other social activities.
The leader role: This role refers to influencing or directing people within the organization toward organizational goals.
The liaison role: The liaison role refers to the manager’s communication with individuals and organizations outside the formal chain of command.
Informational Roles
Mintzberg notes that another type of managerial role is the informational roles. Informational roles include gathering information and conveying relevant information to internal and external stakeholders. There are three informational roles: the monitor role, the disseminator role, and the spokesperson role.
The monitor role: This role involves extensively seeking and gathering information through which a manager can understand the developments crucial for the organization and the environment.
The disseminator role: A manager who learns about the organization’s plans for his or her department and shares this information with his or her subordinates is an example of the disseminator role.
The spokesperson role: Managers are sometimes requested to represent their views on the divisions they manage. Such representation can occur at different levels within the organization. While middle managers represent their views on their departments, top managers are called upon to represent the entire organization.
Decisional Roles
Decisional roles are critical for making decisions that affect organization partially or as a whole. There are four decisional roles: the entrepreneurial role, the disturbance handler role, the resource allocator role, and the negotiator role.
The entrepreneurial role: Managing the change process, finding solutions for possible problems, generating new ideas, building an organizational culture that encourages employees to come up with new ideas, and evaluating and implementing innovative ideas are considered in the domain of the entrepreneurial role of managers.
The disturbance handler role: The disturbance handler role is needed when conflicts occur. Managers are required to manage conflicts effectively. Because unresolved conflicts eventually lead to poor performance at individual and organizational level.
The resource allocator role: An effective manager utilizes the organizational resources effectively and efficiently. It is also the manager’s responsibility to decide how these resources will be distributed among different units and divisions. Allocation of funds, assigning individuals to most relevant positions, and effective/efficient use of organizational resources are some exemplary parts of the resource allocator role.
The negotiator role: The negotiator role does not only refer to accommodations with suppliers, customers, government institutions, and industrial unions. Managers also act as negotiators within the organization.
Managerial Skills
Although the managerial roles are important, it is also crucial to note that the skills of the managers also contribute to the organizational performance. Because different roles of management would be performed best only when supported with managerial skills. One of the most well-known studies with regard to the managerial skills was published in Harvard Business Review in 1955.
A skill is an ability either to perform some specific behavioral task or the ability to perform some specific cognitive process that is functionally related to some particular task.
Technical, human, and conceptual skills are together parts of a larger skill set. Each management level must possess a different composition of this larger skill set.
Technical skills identify manager’s ability to use necessary knowledge, methods, techniques, and equipment to perform certain tasks.
Human skills are a manager’s ability to communicate with other people.
Conceptual skills refer to manager’s ability to see the big picture.
Current Issues in Management
As mentioned above, management and managers play a more important role in today’s challenging conditions. Recent changes in the environment caused the business environment to become more unstable, sophisticated, and competitive than before. These changes are so influential that the concepts of management and managers had to be redefined. Although there are many on-going discussions with regard to the areas where these changes are more influential, this chapter focuses on globalization, technologic changes, diversification of the workforce, and ethics and social responsibility.
Globalization
Globalization is the reduction of most barriers– physical and non-physical–between nations. Globalization does not only refer to the reduction of physical barriers such as the boundaries between countries. It also refers to the reduction of non-physical barriers such as culture and values.
Technological Changes
Technologic changes have strong impacts on how organizations are designed and how business processes run. New technologies offer new possibilities and opportunities to businesses. The recent changes in information and communication technologies have affected the business models in a radical way. Among these changes, increasing use of the Internet technologies in businesses and revolutions in information technologies play the most important roles in the evolution of the existing business models. The main effects of the Internet on businesses can be mentioned as follows:
- Fast access to quality information–anytime and anywhere.
- The Internet became an integral part of almost all business functions. While in some cases, it serves as a marketplace, in other cases it serves as a factor that changes the structure of the traditional distribution chain. The Internet facilitated the globalization and allowed managers to monitor competitors, suppliers, and customers regardless of their geographical location. Concepts such as e-management, e-business, home office, and social media strategies resulted in reconsideration of management functions and decision-making processes.
- Effective development of new products and services.
Innovation
One of the most influential topics in management is innovation. The structure of competition in many industries reveals that the life cycle of the organizations that fail to differentiate themselves through offering value- added products and services is constantly shrinking. Organizations that lack innovative skills fail to adapt to demanding environmental conditions. In the last three decades, rules of competition have changed dramatically and previous parameters of competition such as production capacity, quality, cost control, flexibility, and speed have become insufficient to help businesses to survive in the long term.
Diversity in the Workforce
Diversity is closely linked with globalization and it affects the social side of the organization. Fair and equal treatment in the workplace is an ethical and legal responsibility for managers. Because, due to globalization, managers work with people of different cultural, ethnic, and racial backgrounds. Since management is about getting people to work together toward meeting the organizational goals, managers must strictly avoid discriminating among the members of the organization.
Ethics and Social Responsibility
Managers sometimes face ethical dilemmas when making decisions. Thus, ethics and social responsibility are two issues that managers must take into consideration when managing the organization. It is obviously unacceptable and illegal for businesses to engage in unlawful activities or undertaking managerial practices in favor of an interest group while neglecting and even damaging the welfare of a larger group. Ethics refers to code of moral principles that set standards of conduct for what is “good” and “right” as opposed to “bad” and “wrong”.
It is also important to note that social responsibility since it ultimately leads to improved odds of long-term survival for the organization. Social responsibility refers to the belief that businesses have a responsibility to conduct their affairs ethically to benefit both employees and the larger society.
The Concept of Management
There are various definitions of management, one of which defines management as “an act of getting people to work together to achieve organizational goals through effective and efficient use of resources”. This brief definition of management involves all four functions of management: planning, organizing, leading/ influencing, and controlling. All managerial activities performed by business managers are represented in these four functions.
Effectiveness and efficiency are the key concepts almost in all definitions of management. In brief, effectiveness is about making the right decisions and it also involves successful implementation of these decisions. Effectiveness basically shows an organization’s performance in achieving pre-set goals. On the other hand, efficiency is mainly about how organization uses its valuable resources.
Functions of Management
Fayol suggests that there are five administrative functions that should be performed by business managers: planning, organizing, commanding, coordinating, and controlling. These functions are still considered to be the main functions of management with some slight changes. One of these changes is that commanding function is now known as leading/directing or influencing. Another important change is that coordination is no longer listed as a separate management function since it continues to exist as an integral part of each function (Figure 1.1).
Management functions are not a random listing. Planning, organizing, leading/ directing and controlling are listed in an order. Each function is followed by the next one. However, execution of management functions is not a linear process. All functions are interrelated and execution of all functions is a cyclical (continuous) process.
Planning
Basic tasks of planning are to establish organizational goals and determining necessary steps to achieve intended goals.
Organizing
Organizing involves determining tasks and jobs; finding and hiring best possible people to perform these tasks and jobs; defining the hierarchical relations within the organization; establishing the line of command; and finally coordinating the efforts of the employees.
Leading/Directing
The leading function refers to mobilizing and directing people toward organizational goals.
Controlling
Controlling refers to monitoring and measuring organizational outcomes and taking corrective actions when necessary.
Managers can use three types of organizational control in the controlling process. All three controlling methods enable managers to spot deviations and fluctuations in the steps toward organizational goals.
- Feedforward control involves identifying and preventing possible problems before they occur.
- Concurrent control identifies and prevents problems as they occur.
- Feedback controls identify and solve the problems after they occur.
Managers and Organizational Resources
Managers are important to all types of organizations. There are several reasons why they are important. First, organizations need their managerial skills and abilities more than ever in these unstable and complex times. Only the managers who possess required skills will lead the organization in today’s challenging environmental conditions. Second, managers are important for getting things done. If work within the organization is not being done then it simply means that the organization is not moving toward the organizational goals. Finally, managers do matter to organizations. Because research has found that the relationship between the employees and managers is the most important variable in employee motivation, performance, and loyalty.
At this point, it is important to understand that all organizations have goals and business managers allocate and utilize the organizational resources effectively and efficiently to achieve these goals. These organizational resources can be classified into four groups:
- Human resources
- Monetary resources
- Raw materials
- Capital resources
Human resources are the people working within the organization. The skills they have and their knowledge of the work are important for managers. Monetary resources refer to the money used by managers to purchase goods and services for the organization. Raw materials are the ingredients used directly in manufacturing of products. Capital resources refer to the machinery and equipment used in the production process.
Managers are responsible for effective and efficient utilization of these resources in the process of pursuing organizational goals. In other words, all business managers strive to achieve managerial effectiveness and managerial efficiency. Managerial effectiveness is about the level of achievement of organizational goals. On the other hand, managerial efficiency refers to the utilization of organizational resources during the activities toward organizational goals.
Types of Managers
There are different types of managers within the organization and each type of manager has different tasks, jobs, and responsibilities. In other words, managerial positions and expectations from each managerial position vary based on several conditions. For example, tasks of a manager who leads a multinational corporation and tasks of a local restaurant manager cannot be identical . Furthermore, each type of organization, depending on its size, the scope of operations, competitive position, etc., has different expectations from its managers.
Although there are different approaches to classifying managers, common approaches classify managers in two categories as vertical classification and lateral classification.
Vertical Classification
One of the most common criteria in determining managers’ levels within the organization is their hierarchical position. There are three main hierarchical levels of management: top management; middle management; and first-line management.
Top managers possess a high level in the organizational hierarchy. They are mainly responsible for setting the overall direction of the organization, building extensive strategies, and making sure that organizational goals are met. Decisions made by top management affect the entire organization.
Middle managers are mainly responsible for the implementation of strategies developed by top management to achieve desired organizational goals. Middle managers have a shorter time horizon compared to top managers and their focus is more specific and concrete since they are responsible for the implementation of organizational strategies, policies, and procedures.
First-line managers are mainly responsible for managing shop floor employees with no managerial responsibilities. They supervise daily operations and make sure that operational-level activities run flawlessly.
In recent years, the fourth type of manager has emerged in the vertical classification of managers. This fourth type of managers is generally titled as team leaders.
Team leaders are mainly responsible for coordinating the work of a small group of people while acting as a catalyst or facilitator.
Lateral Classification
Lateral classification of managerial positions are subdivided into two subcategories known as functional and general managers.
Functional managers are responsible for supervising the employees and departments engaged in specific activities. Marketing, finance, human resources, research and development are few examples of functional divisions.
General managers are responsible for the activities of several different groups that perform various functions. For example, manager of a department store is a general manager since she or he manages several different functions concurrently.13
Roles of Managers
The Canadian scholar Henry Mintzberg provided one of the most extensive definitions of the managerial roles. Mintzberg’s typology of managerial roles has three major categories: interpersonal, informational, and decisional.
Interpersonal Roles
Interpersonal roles refer to interpersonal relations and behaviors necessary for effectively managing the organization. Mintzberg notes that there are three interpersonal roles and these roles are derived from the manager’s formal authority granted by the organization. These three roles are the figurehead role, the leader role, and the liaison role.
The figurehead role: The figurehead role of managers emphasizes that the organization is represented by the managers in various events such as ceremonial activities and other social activities.
The leader role: This role refers to influencing or directing people within the organization toward organizational goals.
The liaison role: The liaison role refers to the manager’s communication with individuals and organizations outside the formal chain of command.
Informational Roles
Mintzberg notes that another type of managerial role is the informational roles. Informational roles include gathering information and conveying relevant information to internal and external stakeholders. There are three informational roles: the monitor role, the disseminator role, and the spokesperson role.
The monitor role: This role involves extensively seeking and gathering information through which a manager can understand the developments crucial for the organization and the environment.
The disseminator role: A manager who learns about the organization’s plans for his or her department and shares this information with his or her subordinates is an example of the disseminator role.
The spokesperson role: Managers are sometimes requested to represent their views on the divisions they manage. Such representation can occur at different levels within the organization. While middle managers represent their views on their departments, top managers are called upon to represent the entire organization.
Decisional Roles
Decisional roles are critical for making decisions that affect organization partially or as a whole. There are four decisional roles: the entrepreneurial role, the disturbance handler role, the resource allocator role, and the negotiator role.
The entrepreneurial role: Managing the change process, finding solutions for possible problems, generating new ideas, building an organizational culture that encourages employees to come up with new ideas, and evaluating and implementing innovative ideas are considered in the domain of the entrepreneurial role of managers.
The disturbance handler role: The disturbance handler role is needed when conflicts occur. Managers are required to manage conflicts effectively. Because unresolved conflicts eventually lead to poor performance at individual and organizational level.
The resource allocator role: An effective manager utilizes the organizational resources effectively and efficiently. It is also the manager’s responsibility to decide how these resources will be distributed among different units and divisions. Allocation of funds, assigning individuals to most relevant positions, and effective/efficient use of organizational resources are some exemplary parts of the resource allocator role.
The negotiator role: The negotiator role does not only refer to accommodations with suppliers, customers, government institutions, and industrial unions. Managers also act as negotiators within the organization.
Managerial Skills
Although the managerial roles are important, it is also crucial to note that the skills of the managers also contribute to the organizational performance. Because different roles of management would be performed best only when supported with managerial skills. One of the most well-known studies with regard to the managerial skills was published in Harvard Business Review in 1955.
A skill is an ability either to perform some specific behavioral task or the ability to perform some specific cognitive process that is functionally related to some particular task.
Technical, human, and conceptual skills are together parts of a larger skill set. Each management level must possess a different composition of this larger skill set.
Technical skills identify manager’s ability to use necessary knowledge, methods, techniques, and equipment to perform certain tasks.
Human skills are a manager’s ability to communicate with other people.
Conceptual skills refer to manager’s ability to see the big picture.
Current Issues in Management
As mentioned above, management and managers play a more important role in today’s challenging conditions. Recent changes in the environment caused the business environment to become more unstable, sophisticated, and competitive than before. These changes are so influential that the concepts of management and managers had to be redefined. Although there are many on-going discussions with regard to the areas where these changes are more influential, this chapter focuses on globalization, technologic changes, diversification of the workforce, and ethics and social responsibility.
Globalization
Globalization is the reduction of most barriers– physical and non-physical–between nations. Globalization does not only refer to the reduction of physical barriers such as the boundaries between countries. It also refers to the reduction of non-physical barriers such as culture and values.
Technological Changes
Technologic changes have strong impacts on how organizations are designed and how business processes run. New technologies offer new possibilities and opportunities to businesses. The recent changes in information and communication technologies have affected the business models in a radical way. Among these changes, increasing use of the Internet technologies in businesses and revolutions in information technologies play the most important roles in the evolution of the existing business models. The main effects of the Internet on businesses can be mentioned as follows:
- Fast access to quality information–anytime and anywhere.
- The Internet became an integral part of almost all business functions. While in some cases, it serves as a marketplace, in other cases it serves as a factor that changes the structure of the traditional distribution chain. The Internet facilitated the globalization and allowed managers to monitor competitors, suppliers, and customers regardless of their geographical location. Concepts such as e-management, e-business, home office, and social media strategies resulted in reconsideration of management functions and decision-making processes.
- Effective development of new products and services.
Innovation
One of the most influential topics in management is innovation. The structure of competition in many industries reveals that the life cycle of the organizations that fail to differentiate themselves through offering value- added products and services is constantly shrinking. Organizations that lack innovative skills fail to adapt to demanding environmental conditions. In the last three decades, rules of competition have changed dramatically and previous parameters of competition such as production capacity, quality, cost control, flexibility, and speed have become insufficient to help businesses to survive in the long term.
Diversity in the Workforce
Diversity is closely linked with globalization and it affects the social side of the organization. Fair and equal treatment in the workplace is an ethical and legal responsibility for managers. Because, due to globalization, managers work with people of different cultural, ethnic, and racial backgrounds. Since management is about getting people to work together toward meeting the organizational goals, managers must strictly avoid discriminating among the members of the organization.
Ethics and Social Responsibility
Managers sometimes face ethical dilemmas when making decisions. Thus, ethics and social responsibility are two issues that managers must take into consideration when managing the organization. It is obviously unacceptable and illegal for businesses to engage in unlawful activities or undertaking managerial practices in favor of an interest group while neglecting and even damaging the welfare of a larger group. Ethics refers to code of moral principles that set standards of conduct for what is “good” and “right” as opposed to “bad” and “wrong”.
It is also important to note that social responsibility since it ultimately leads to improved odds of long-term survival for the organization. Social responsibility refers to the belief that businesses have a responsibility to conduct their affairs ethically to benefit both employees and the larger society.