KENYATTA UNIVERSITY INSTITUTE OF OPEN LEARNING CBA 500 Management Functions by Otube M. Khayota SCHOOL OF HUMANITIES AND SOCIAL SCIENCES KENYATTA UNIVERSITY. @ All rights are reserved. 1CBA 500: MANAGERIAL FUNCTIONS ______________________________________________________________________ TABLE OF CONTENTS ______________________________________________________________________ NATURE OF MANAGEMENT....................................................................................... 6 INTRODUCTION............................................................................................................. 6 NATURE OF MANAGEMENT....................................................................................... 8 PROFESSIONALIZATION OF MANAGEMENT IN KENYA.................................... 13 PROCESS OF MANAGEMENT.................................................................................... 15 INTRODUCTION........................................................................................................... 16 FUNCTIONS OF MANAGEMENT............................................................................... 17 MANAGEMENT LEVELS............................................................................................. 19 LEVELS OF MANAGEMENT ...................................................................................... 19 MANAGERIAL SKILLS................................................................................................ 21 MANAGERIAL ROLES................................................................................................. 24 MANAGER AND THE ENVIRONMENT .................................................................... 29 INTRODUCTION........................................................................................................... 29 IMPORTANCE OF THE ENVIRONMENT.................................................................. 30 DIRECT ACTION VERSUS INDIRECT ENVIRONMENT ........................................ 30 THE DIRECT ACTION ENVIRONMENT.................................................................... 31 THE INDIRECT ENVIRONMENT................................................................................ 32 SYSTEMS APPROACH TO MANAGEMENT............................................................. 37 INTRODUCTION........................................................................................................... 37 SYSTEMS CONCEPTS.................................................................................................. 38 OPEN SYSTEM MODEL OF AN ORGANIZATION................................................... 39 MANAGERIAL SYSTEMS ........................................................................................... 41 SOCIAL RESPONSIBILITIES OF BUSINESS............................................................. 43 INTRODUCTION........................................................................................................... 43 THE CONCEPT .............................................................................................................. 44 RESPONSIBILITIES TO VARIOUS GROUPS ............................................................ 44 THE DIFFERING PERSPECTIVES .............................................................................. 46 PLANNING..................................................................................................................... 51 INTRODUCTION........................................................................................................... 51 PURPOSE OF PLANNING............................................................................................ 52 PRINCIPLES OF PLANNING ....................................................................................... 54 STEPS IN PLANNING................................................................................................... 56 LIMITATIONS OF PLANNING.................................................................................... 58 TYPES OF PLANS ......................................................................................................... 62 INTRODUCTION........................................................................................................... 62 STRATEGIC PLANNING.............................................................................................. 62 OPERATIONAL PLANNING........................................................................................ 65 TYPES OF PLANS ......................................................................................................... 66 2DECISION - MAKING................................................................................................... 71 INTRODUCTION........................................................................................................... 71 DECISION-MAKING MEANING................................................................................. 71 TYPES OF DECISIONS................................................................................................. 72 STEPS IN THE DECISION-MAKING PROCESS........................................................ 74 TECHNIQUES OF DECISION-MAKING..................................................................... 77 MANAGEMENT BY OBJECTIVES (MBO)................................................................. 80 INTRODUCTION........................................................................................................... 80 OBJECTIVES.................................................................................................................. 81 PROCESS OF MBO........................................................................................................ 82 PREREQUISITES OF MBO........................................................................................... 83 ADVANTAGES OF MBO.............................................................................................. 84 REASONS WHY MBO FAIL......................................................................................... 84 POLICY FORMATION - BASIC ISSUES..................................................................... 88 OBJECTIVES.................................................................................................................. 88 INTRODUCTION........................................................................................................... 88 TYPES OF POLICIES .................................................................................................... 88 IMPORTANCE OF POLICIES....................................................................................... 90 PRINCIPLES OF POLICY MAKING............................................................................ 90 PROCESS OF POLICY FORMULATION .................................................................... 91 BASIC AREAS OF POLICY MAKING ........................................................................ 93 ORGANIZING PROCESS.............................................................................................. 97 OBJECTIVES.................................................................................................................. 97 INTRODUCTION........................................................................................................... 97 STEPS IN ORGANIZING PROCESS............................................................................ 97 ORGANIZATION CHART ............................................................................................ 98 CHAIN OF COMMAND.............................................................................................. 100 SPAN OF MANAGEMENT......................................................................................... 101 CURRENT THINKING ON SPAN OF MANAGEMENT.......................................... 106 LESSON 12 ................................................................................................................... 110 ORGANIZATION STRUCTURE - DEPARTMENTATION...................................... 110 OBJECTIVES................................................................................................................ 110 INTRODUCTION......................................................................................................... 110 FUNCTIONAL DEPARTMENTATION ..................................................................... 110 FUNCTIONAL DEPARTMENTATION........................................................... 112 PRODUCT / MARKET DEPARTMENTATION ........................................................ 113 CONTINGENCY ORGANIZATION DESIGN ........................................................... 121 DELEGATION OF AUTHORITY AND DECENTRALIZATION............................. 124 OBJECTIVES................................................................................................................ 124 INTRODUCTION......................................................................................................... 124 PROCESS OF DELEGATION ..................................................................................... 125 BARRIERS TO EFFECTIVE DELEGATION............................................................. 126 DECENTRALIZATION OF AUTHORITY................................................................. 129 FACTORS INFLUENCING DECENTRALIZATION ................................................ 130 LESSON 14 ................................................................................................................... 135 LINE AND STAFF RELATIONSHIPS........................................................................ 135 3OBJECTIVES................................................................................................................ 135 INTRODUCTION......................................................................................................... 135 LINE AND STAFF CONCEPTS.................................................................................. 135 LINE AUTHORITY...................................................................................................... 136 STAFF AUTHORITY................................................................................................... 137 LINE AND STAFF CONFLICT................................................................................... 138 ACHIEVING HARMONY BETWEEN LINE AND STAFF....................................... 140 LESSON 15 ................................................................................................................... 143 MOTIVATION.............................................................................................................. 143 INTRODUCTION......................................................................................................... 143 MEANING .................................................................................................................... 144 NEEDS, INCENTIVES AND MOTIVES .................................................................... 144 MCGREGOR'S PARTICIPATION MODEL ............................................................... 145 MASLOW'S NEED HIERARCHY MODEL ............................................................... 147 HERZBERG'S MOTIVATION-RYGIENE MODEL................................................... 150 MODELS MCCLELLANDS THREE NEED MODEL .............................................. 153 ALDERFER'S EXISTENCE-RELATEDNESS-GROWTH (ERG) MODEL.............. 154 REINFORCEMENT THEORY..................................................................................... 156 JOB ENRICHMENT..................................................................................................... 159 JOB ENLARGEMENT ................................................................................................. 160 STYLES OF LEADERSHIP......................................................................................... 163 LIKERT'S MANAGEMENT SYSTEMS AND LEADERSHIP .................................. 165 TRAIT THEORY OF LEADERSHIP........................................................................... 167 BEHAVIORAL THEORY OF LEADERSHIP............................................................. 168 MICHIGAN STUDIES ................................................................................................. 168 EVALUATION OF MICHIGAN STUDIES ................................................................ 169 OHIO STATE LEADERSEIP STUDIES ..................................................................... 169 MANAGERIAL GRID.................................................................................................. 170 SITUATIONAL THEORY OF LEADERSHIP............................................................ 173 COMMUNICATION .................................................................................................... 175 INTRODUCTION......................................................................................................... 175 MEANING .................................................................................................................... 175 DEFINITION OF COMMUNICATION....................................................................... 176 CHARACTERISTICS OF COMMUNICATION......................................................... 176 ELEMENTS OF COMMUNICATION ........................................................................ 176 IMPORTANCE OF COMMUNICATION ................................................................... 177 THE COMMUNICATION PROCESS ......................................................................... 178 TECHNIQUES OF COMMUNICATION.................................................................... 179 BARRIERS IN COMMUNICATION........................................................................... 183 LESSON 18 ................................................................................................................... 189 CONTROLLING........................................................................................................... 189 INTRODUCTION......................................................................................................... 189 MEANING .................................................................................................................... 189 DEFINITIONS .............................................................................................................. 190 CHARACTERISTICS OF CONTROLLING ............................................................... 190 OBJECTIVES OF CONTROL...................................................................................... 191 4PROCESS OF CONTROL............................................................................................ 192 ESSENTIALS OF CONTROL PROCESS ................................................................... 194 IMPORTANCE OF CONTROL ................................................................................... 195 LIMITATIONS OF CONTROL.................................................................................... 197 CONTROL TECHNIQUES .......................................................................................... 198 INTRODUCTION......................................................................................................... 198 OLD CONTROL TECHNIQUES ................................................................................. 198 BUDGETING................................................................................................................ 198 TYPES OF BUDGETS.................................................................................................. 199 MERITS OF BUDGETARY CONTROL..................................................................... 200 DEMERITS OF BUDGETARY CONTROL................................................................ 201 STANDARD COSTING............................................................................................... 202 FINANCIAL STATEMENTS AND RATIO ANALYSIS........................................... 202 BREAK-EVEN ANALYSIS......................................................................................... 204 NEW CONTROL TECHNIQUES ................................................................................ 204 LESSON 20 ................................................................................................................... 209 JAPANESE MANAGEMENT PRACTICES ............................................................... 209 OBJECTIVES................................................................................................................ 209 INTRODUCTION......................................................................................................... 209 UNIQUE FEATURES OF JAPANESE MANAGEMENT .......................................... 210 FOCUS .......................................................................................................................... 210 TECHNIQUES .............................................................................................................. 211 COMPARISON OF JAPANESE AND U.S. MANAGEMENT................................... 213 PLANNING................................................................................................................... 213 ORGANIZING.............................................................................................................. 213 STAFFING.................................................................................................................... 214 CONTROLLING........................................................................................................... 215 THE INHERENT WEAKNESSES OF JAPANESE MANAGEMENT....................... 215 THE EMERGENCE OF A NEW PARADIGM............................................................ 216 LESSON 21 ................................................................................................................... 220 ENTREPRENEURIAL MANAGEMENT.................................................................... 220 INTRODUCTION......................................................................................................... 220 THE MEANING............................................................................................................ 220 CREATIVITY AND INNOVATION ........................................................................... 221 THE PROCESS ............................................................................................................. 221 ORGANIZATIONAL CREATIVITY AND INNOVATION....................................... 222 THE CLIMATE FOR ORGANIZATIONAL CREATIVITY...................................... 223 TEN RULES FOR STIFLING INNOVATION............................................................ 224 ENTREPRENUERSHIP................................................................................................ 224 ENTREPRENEUR8HIP VS. MANAGERSHIP........................................................... 225 ORGANIZATIONAL CULTURE: ............................................................................... 226 ____________________________________________________________________ LESSON 1 5NATURE OF MANAGEMENT ______________________________________________________________________ OBJECTIVES After studying this lesson, you should be able to; Understand the nature of management; Present your views on the nature of management; and Appreciatethegrowingimportanceofmanagementasaprofession INTRODUCTION Takeacloselookatthesocietyaroundyou.Youwouldfindtheexistenceofseveral organizations. To mention a few, there are business organizations that produce goods or servicesorideas.Alltheseorganizationsexisttoachievepre-determinedobjectives, whichaffecttheirfunctioningandapproaches.Itmustalsobenotedthatorganizations cannotachievetheobjectiveseffortlessly. They are achieved through systematic effort. Several activities have to be performed in a cohesive way. In the absence of systematic and cohesive performance of the activities to achieve the objectives, it is no wonder that theresourcesoforganizationswouldsimplyremainasresource.Assuchitisthe functionofthemanagementtofacilitatetheperformanceofactivitiessuchthatthe accomplishment of the objectives becomes possible. WHAT IS MANAGEMENT? Differentpeopleunderstandmanagementindifferentways.Economistsregarditasa factor of production. Sociologists see it as a class or group of persons while practitioners ofmanagementtreatsitasaprocess.Forourunderstanding,managementmaybe viewed as what a manager does in a formal organization to achieve the objectives. M. P. Follet has called it 'the art of getting things done through people. This definition throws 6lightonthefactthatmanagersachieveorganizationalgoalsbyenablingothersto perform rather than performing the tasks themselves. Management,infact,encompassesawidevarietyofactivitiesthatnoonesingle definitioncancaptureallthefacetsofmanagement,givenitsdynamicnature.Thatis why, it is often said that there are a many definitions of management as there are authors in the field. However the definition given by J.A.F. Stoner covers all the important facet of management. According to him: Management is the process of planning, organizing, leading and controlling the efforts oforganizationmembersandofusingallotherorganizationalresourcestoachieve stated organizational goals This definition suggests: Management is a continuous process; Several inter related activities have to be performed by managers irrespective of their levels to achieve the desired goals; Managers use the resources of the organization, both physical as well as human, to achieve the goals; Management aims at achieving the organization's goals by ensuring effective use of resources. Itisevidentthattheemphasisisonachievingtheobjectivesbyusingtheinputslike material,machinery,moneyandtheservicesofmen.Theseinputsaredrawnfromthe environmentinwhichtheorganizationexists.Whetheranorganizationisengagedin business or non-business, the various inputs are judiciously used to produce the outputs. Thisprocess,whichinvolvestheconversionofinputsintooutputs,iscommontoall organizations and is shown in figure 1.1. Figure - 1.1 INPUT - OUTPUT MODEL 7 TRANSFORMATION PROCESSINPUTS EXTERNAL ENVIRONMENT OUTPUTS Depending on the nature of business or activity that a firm is engaged in, the output of thefirmmaybeaphysicalproductorservice.Sinceabusinessorganizationisan economicentity,thejustificationforitsexistenceliesinproducinggoodsandservices thatsatisfiestheneedsofthepeople.Ascouldbeseeninthefigure,theorganization draws several inputs from the environment, converts them into products or services and sends them back to the environment. Environment here means the larger system, i.e., the societyinwhichthefirmexists.Therefore,itgoeswithoutsayingthathoweffectively thegoodsandservicesareproducedisamatterofconcernforanysociety,giventhe scarcity of resources. Effective management plays a crucial role in this context. NATURE OF MANAGEMENT Thepracticeofmanagementisasoldashumancivilization.Infact,muchofthe progress of mankind over the centuries may be attributed to the effective management of resources.Theirrigationsystems,existenceofpublicutilities,theconstructionof variousmonumentslikeTajMahalinIndia,andtheEgyptianPyramidsofthebygone eraamplydemonstratethepracticeofmanagementintheoldendaysalso.Theancient civilizations of Mesopotamia, Greece, Rome and Indus-Valley displayed the marvelous resultsofgoodmanagementpractices.However,thestudyofmanagementina systematicwayasadistinctbodyofknowledgeisonlyofrecentorigin.Thatiswhy, management is often described as 'oldest of the arts and youngest of the sciences". Thus, the practice of management is not new. It has been practiced for thousands of years. But the science part of it 'the systematic body of knowledge' is, no doubt, a phenomenon of the present century. Thetraditionalmanagementpracticesremainedquitestablethroughthecenturiesuntil thebirthofIndustrialrevolutioninthemid18thcentury.Theindustrialrevolution 8broughtaboutthesubstitutionofmachine,formanpowerthroughseveralscientific inventions.Asaresult,withinafewdecades,thepictureofindustrialactivityhad undergoneametamorphicchange.Man'squestfornewwaysofdoingthings,coupled withhisingenuityinadoptingthescientificandtechnologicalinventionsinthe production of various goods and services resulted in the following: Mass production in anticipation of demand; Advent of corporate form of organization which facilitated such large scaleproduction; Spectacular improvements in the transport and communication facilities; Increase in competition for markets; The establishment of the new employer - employee relationship and so on. Industrialrevolutionhad,thus,sowntheseedsofmodernmanagement.Theearly scientific inquiries into the practice of management began. Despite the growing importance of management as an academic discipline and one that is contributing immensely to the quality of human life, it is disheartening to note that the conceptisstillcloudedbycertainmisconceptions.Nodoubt,managementasan academic body of knowledge has come a long way in the last few years. It has grown in statureandgainedacceptanceallovertheworld.Yet,itisaparadoxthattheterm 'management'continuestobethemostmisunderstoodandmisused.Certainquestions likewhethermanagementisascienceorartorprofessionareyettobeansweredina satisfactory way. Management as Science To gain a correct perspective as to what management is, let us examine the exact nature ofmanagement,whetheritisascienceoranart.Anunderstanding,therefore,ofthe exactnatureofscienceaswellasartmayhelpinresolvingtheproblemtoalarger extent. For any branch of knowledge to be considered a science, (like the ones we have -physics, chemistry, engineering, etc.) it should fulfill the following conditions:

Theexistenceofasystematicbodyofknowledgeencompassingawidearrayof principles; The principles have to be evolved on the basis of constant inquiry and examination; The principles must explain a phenomenon by establishing cause-effect relationship; 9The principles have to be amenable for verification, in that they must be universally applicable. Looked at from this angle, management as a discipline fulfils the above criterion. Over theyears,thankstothecontributionsofmanythinkersandpractitioners,management, has emerged as a systematic body of knowledge with its own principles. The application of these principles helps any practicing manager to achieve the desired goals. However, whileusingtheprinciples,oneshouldnotlosesightofthevariablesinthesituation, since situations differ from one to the other. Thus, the importance of personal judgment cannotbeunderminedintheapplicationofprinciples.Further,managementisa dynamicsubjectinthat;ithasdrawnheavilyfromeconomics,psychology,sociology, engineering and mathematics, to mention a few. It is multi-disciplinary in nature. But a wordofcaution.Thoughmanagement,consideringitssubjectmatterandthepractical utility, may be considered as 'Science, for reasons discussed below, it cannot be viewed as an exact science. In other words, it is a science, but an 'inexact science' because: Firstly,managementbydefinitioninvolvesgettingthethingsdonethrough people.Comparedtotheotherinputs,'people',whoconstitutethehuman resource of any organization, are unique in respect of their aspirations, attitudes, perceptions and the like. Dissimilarities in the behavior patterns are so obvious that standard results may not be obtained in otherwise similar conditions. Secondly,thebehaviorofthehumanbeingscannotbeaccuratelypredicted. Hence, ready made and standard solutions cannot be prescribed. Thirdly,managementismoreconcernedwithfuture,whichiscomplexand unpredictable.Asthesayinggoes,'manyaslipbetweenthecupandlip', changes in the environment may affect the plans' and render them ineffective. Lastly, since a business organization exists in an environment, it has a two-way interactionwiththeenvironment.Theorganizationinfluencestheenvironment by its several decisions and in turn, is influenced by the various elements of the environment. Important among these are technological, economic, socio-cultural andpoliticalfactors.Thewholethingissocomplexthathowevereffectivethe plansare,oneispronetobetakenoverbytheunexpectedchangesinthe environment. Unlikethepureorexactscienceswheretheresultsareaccurate,inthecaseof management, the various factors discussed above may force even the excellent plans and strategiesgohaywire.Toomanycomplexitiesanduncertaintiesrendermanagementan in exact science. 10Management as an Art Art refers to the 'know-how', the ways of doing things or to accomplish a desired result. Thefocusisontheskillwithwhichtheactivitiesareperformed.Asthesayinggoes 'practice makes a man perfect', constant practice of the theoretical concepts (knowledge base) contributes to the formation and sharpening of the skills. Therefore, the right blend of the theory and practice is required. In a way, the attributes of science and art are the two sides of a coin. Medicine, engineering, accountancy and the like require skills on the partofthepractitionersandcanonlybeacquiredthroughpractice.Managementisno exception. As an university gold medallist in surgery may not necessarily turn out to be a good surgeon, similarly a management graduate from the best of the institutes may not necessarilybeveryeffectiveinpractice.Inboththecases,theapplicationofthe knowledgeacquiredthroughformaleducationrequiresingenuity,creativityonthepart ofthepractitioner.Correctunderstandingofthevariablesofthesituationcallsfor pragmatism and resourcefulness. Effective practice of any art requires a thorough understanding of the science underlying it.Thusscienceandartarenotmutualbyexclusive,butarecomplementary. Executiveswhoattempttomanagewithouttheconceptualunderstandingofthe managementprinciplesandtechniqueshavetodependonluckandintuition.Witha soundknowledgeandthenecessaryskillstousesuchknowledge;theyhaveabetter chancetosucceed.Therefore,itmaybeconcludedthatmanagementisbothascience and an art. Management as a Profession Thesearethedayswherewearehearingalotaboutprofessionalmanagersandtheir contributiontotheeconomicdevelopmentofthenation.Therefore,itisappropriateto know the other dimension of management - whether it is a profession. McFarland gives the following characteristics of a profession: Existence of an organized and systematic body of knowledge.Formalized methods of acquiring knowledge and skills; Existence of an apex level body with Professionalization as its goal; Existenceofanethicalcodetoregulatethebehaviorofthemembersofthe profession; Charging of fees based on service; andA concern for social responsibilities. 11 Acloserexaminationofmanagementasaprofessionrevealsthatunlikemedicineor law, management has no universally acceptable norms of behavior. There is no uniform code of conduct that governs the behavior of managers. The apex level bodies in various countries,providesonlyguidelinesanddonothaveanycontrollingpoweroverthe erringmembers.Managersalsodifferwidelyinrespecttotheirconcernfortheethics andvaluesofthesocietyinwhichtheyfunction.Manyatime,intheirobsessionwith profit,thesocietalinterestsareeitherneglectedorcompromised.However,asinthe caseofotherprofessions,itis implied that managers are expected to set an example in doinggoodtothesociety.Whilemakingdecisions,theyshouldbeconsciousofthe impact of their decisions on the society. The larger interests of the society must be given top priority rather than short-term benefits. After all, given the enormous resources they have at their command, managers are expected to address themselves to the problems of society. Itmust,however,berememberedthatunlikeprofessionslikeengineering,medicine, law, accountancy, etc., the entry to management positions is not restricted to individuals withaspecialdegree.Inotherwords,oneneednotnecessarilypossessM.B.Aorany other management degree or diploma to practice management. To quote Peter Drucker, ""nogreaterdamagecouldbedonetoaneconomyortoanysocietythantoattemptto professionalize management by licensing managers, for instance, or by limiting access to management to people with a special academic degree." Inspiteofthegrowingnumberofmanagementinstitutesandconsequentlythelarge numberofpeopletrainedinmanagement,itisanironythatweoccasionallyhearthe debate-"whethermanagersarebornormade."Thesuccessesachievedbyafew visionaries and great entrepreneurs are often cited in support of the argument. It is true thatmanyfoundingfathersoftheindustryinKenyaandelsewheretoo,didnotstudy managementintheformalway.Thenativewisdomcoupledwiththeirvisionand ingenuity in organizing the enterprises helped them earn name and fame. Huge industrial empireswerebuiltwithsheerbusinessacumen.Businesshistoryofanynationisfully repletewithmanyrags-to-richesstories.ThelikesofNjengaKarumeandGerishon KirimaincentralKenya,AbrahamAmbwereinwesternKenyaamongothers,amply demonstrates that success in business requires much more than the academic degrees. Atthesametime,ithastoberealizedthattheachievementsofthepioneersofthe industrialdevelopment,neednot, however, water down the importance of management 12asaprofession.Inarguingforandagainst,wemustnotignorethecontextofthe business.Therehasbeenaseachangeintheenvironmentofthebusiness.Modern business has become more complex due to the uncertainties arising mainly from: Ever increasing competition from the domestic as well as international markets. Rapid technological changes affecting all facets of human life. Increased sophistication and rapid obsolescence of technology Expansion in the size of organizations and consequently the markets, and Thefrequentchangesinthesocio-culturalandpoliticalfactorsinfluencingthe business All these factors, which have a significant bearing on the functioning of a business point totheneedforformaltrainingandacquisitionofskillsbypursuingmanagement education.Moreso,particularlyatatimewhenpeoplearetalkingabout"orderless management" in the context of globalization of business. PROFESSIONALIZATION OF MANAGEMENT IN KENYA Inthelastfewyears,managementasaprofessionhasgainedafirmfootinginKenya. Theawarenessaboutthecontributionsofprofessionalmanagershasbeenincreasing. Consequently,therehasbeenamanifoldincreaseinthenumberofinstitutesoffering MBA and related diploma courses resulting in a phenomenal increase in the number of students seeking admission into the management programs. Interestingly, the awareness bysocietyoftheimportanceofprofessionaleducationinthemanagementforvarious sectorsisalsogrowing.Forinstance,therearespecializedprogramsthatcaterforthe specificneedsofthesectorslikeHotelandTourismIndustry,Transport,HealthCare, Foreign trade, etc Thefollowingfactorsseemtobemainlyresponsibleforthegrowingdemandfor professional managers: Theliberalizationpoliciespursuedbythegovernmentopenedupnew challenges for the Kenyan organizations; Asaconsequence,competitionhasincreasedinallthesectorsofIndian economy, forcing the firms to be efficient; Private industrial houses, which were indifferent before, have fully realized the 13need for professional managers. While the promoters in many cases still reserve thepolicyformulationforthemselves,theday-to-daymanagerialactivitiesare entrusted to the professional managers. Public sector undertakings are also, of late, forced to perform, if the number of memorandum of understandings (MOUs) signed by the management's of Public Sector Undertakings (PSUs) and the concerned ministries of the Government is anyindication.Asaresult,qualifiedmanagersaresoughtalterbyPSU'sthan ever before. Apartfromthemanufacturingconcerns,publicutilitiesliketransport, telecommunications,andahostofserviceorganizationsarerecruiting professional managers in a big way. SUMMARY Organizationsengagedinbusinessornon-businessactivitiesusetheinputstoproducethe outputs (may be products or services). The way, in which efficiently the inputs areconverted into outputs, depends on the effectiveness of management. Management as adiscipline has both the elements of science and art. The theory component consisting ofprinciples and techniques constitute the science facet, while skills taken and required forthe successful application of principles constitute the art. Another area that managementas a profession, has contributed is the growing importance of professional managers allover the world. REVIEW QUESTIONS 14i t t t d t il d t i th b d l 1.Whatdoyoumeanbytheterms'Science'and'Art'?Explainthebasiccharacteristics of both in a management set up. 2.Describe an organization as an input-output model from what you have understoodinthislesson.UsingKenyattaUniversityasanexample,explaintheconceptof FURTHER READINGS 1.Drucker, peter, F., 1981. Management: Tasks, Responsibilities and Practices, Allied Publishers, New Delhi 2Hodgets,RichardM.,1986,ManagementTheory:ProcessandPractice,Academic press, London 3.Stoner,James.A.FandFreeman.E.R.,1989.Management,Prentice-HallofIndia, New Delhi. LESSON 2 PROCESS OF MANAGEMENT ______________________________________________________________________ 15OBJECTIVES: After studying this lesson, you should be able to: - Identify the important functions of management; Describe the levels in management; Understand the skills required at each level; and Explain the different roles played by a manager. INTRODUCTION Amongthevariousapproachestothestudyofmanagementthathavebeenpracticed overtheyears,theprocessisthemostcommonlyapplied.Itisbecausethisapproach laysemphasisonwhatamanagerdoes.Amanager,nomatterhislevelinthe organization, performs a series of functions. However, there is no consensus among the managementthinkersontheclassificationofmanagementfunctions.Thenumberof functionsaswellastheterminologyusedtodescribethemisnotalike.HenryFayol identifiesfivefunctions,viz.,planning,organizing,commanding,co-ordinationand controlling.NewmanandSummerrecognizeonlyfourfunctions,namelyorganizing, planning,leadingandcontrolling.LutherGullic'spopularacronym'POSDCORB' suggestssevenfunctions,namely-planning,organizing,staffing,directing, coordinating, reporting and budgeting. Koontz and ODonnell classify the functions into planning,organizing,staffing,directingandcontrolling.Forthepurposeofourstudy, weshallconfinethediscussiontothefollowingfivefunctionsofmanagement- planning,organizing,staffing,directingandcontrolling.Sincestaffingfunctionforms the core of personnel management, of late, it has become customary not to discuss it at great length in this paper - management concepts. 16FUNCTIONS OF MANAGEMENT Planning Planninginsimpletermsislookingahead.Itispreparingforthefuture.Itinvolves outlining a future course of action. Planning makes the things to happen. Therefore, it is needless to say that in the absence of planning, things are left to chance. It is unique in that,itprecedesalltheothermanagerialfunctions.Itinvolvesdecidingtheobjectives andformulatingthepoliciesandprocedurestoachievethem.Effectiveplanning providesanswerstoquestionslike-whattodo?Howtodoit?Whoistodoit?And, when to do it? Planningisafunctionperformedbymanagersatalllevels.Thougheverymanager plans,theplansdevelopedbydifferentmanagersmayvaryinrespectofscopeand importance. For example, plans made by top managers have a wider scope with a focus ontheorganizationasawholeandnormallycoveralongerperiod. Ontheotherhand, plansdevelopedbymiddleandlowerlevelmanagersrelatetothedivisionsor departmentsandusuallycoverashortperiod.Systematicplanninghelpsinfacingthe uncertainties of future with less embarrassment. It helps in making things happen in the expected way. Organizing Organizations achieve objectives by using physical and human resources. When people work in groups, every one in the group should know what he is expected to achieve and withwhatresources.Inotherwords,organizinginvolvesinestablishingauthorityand responsibilityrelationshipsamongpeopleworkingin-groups.Themanager'staskin organizingaimsatcreatingastructurethatfacilitatestheachievementofgoals. Organizing involves: Determination of activities required to achieve goals; Grouping of these activities into departments; Assignment of such groups of activities to a manager; Delegation of authority to carry them out; and Provision for coordination both horizontally and vertically in the organization. Themanagerialfunctionoforganizingmakestheperformanceofthetaskseasy.It involves in designing the structure. The resulting structure varies with the task. A large 17organizationwithhugemarketsneedsadifferentstructurecomparedtoasmall organization.Similarly,structureofanorganizationoperatinginastableenvironment maybedifferentfromtheoneoperatinginadynamicenvironment.Thus,thesizeand natureoftheactivitiesinvolvedthetypeofenvironment,andtheoverallbusiness strategy, influence the structure. Staffing Organizing process results in the creation of a structure with various positions. Staffing involvesmanningthevariouspositionsoftheorganization.Itincludesmanpower planning,recruitingandselectingoftherightpeople,traininganddevelopingthem, decidingfinancialcompensation,appraisingtheirperformanceperiodically.Thereisa debate whether staffing function is to be performed by all managers in the organization orhandledbypersonneldepartmentalone.However,ingeneral,personneldepartment performssomeprocessesofstaffingonly.Forexamplerecruitmentandselection, training,salaryadministration,etc.Allmanagers,ontheotherhand,maydo performance appraisal. Directing Once plans are made and the organization is created, the focus shifts to the achievement ofobjectives.Thisfunctioniscalledbyvariousnames:directing,leading,motivating, actuating and so on. It basically involves directing or leading the activities of the people. The manager directs the activities of his subordinates by explaining what they have to do andbyhelpingthemperformittothebestoftheirability.Inleadingthepeople,the manager performs the following three distinct tasks: Communication: the process of passing information from one person to another; Leadership: the process by which a manager guides and influences the work of his subordinates; and Motivation:theactofstimulatingthepeoplesothattheygivetheirbesttothe organization. Leading involves directing, influencing, and motivating employees to perform essential tasks. Leading is a function predominantly interpersonal in nature. In the organizational contextmanyproblemsarisebecauseofthefailurebymanagerstounderstandthe people,theiraspirations,attitudes,andbehaviorasindividualsandingroups.Ifthe 18manager fails in leading the people towards better performance, any amount of planning and organizing, however effective they are, may not help the organization. Controlling Planningandcontrollingaretwocloselyinterrelatedfunctionsinthatwhileplans specifytheobjectivestobeachieved,controlasamanagerialfunctionfacilitatesto know whether the actual performance is in conformity with set plans so that, in the event of deviations, appropriate corrective measures can be taken. In the absence of adequate controlmechanism,unexpectedchangesintheenvironmentmaypushtheorganization off the track. Thus, controlling implies measuring and correcting the activities to ensure that the events conform to plans. That is why planning and controlling is often described as the 'Siamese' twins of management. It involves four main elements: Establishing standards of performance; Measuringtheactualperformanceandcomparingitagainstthestandardperformance; Detecting deviations, if any, in order to make corrections before it is too late; and Taking appropriate corrective measures. MANAGEMENT LEVELS Inanorganizationallthosewhoareresponsiblefortheworkofothersareusually known as managers. Though their primary task remains the same i.e., getting the things donebyotherpeople,widevariancesmaybefoundwithregardtotheauthorityand responsibilityofmanagers.Thesedifferencesarelargelyduetothedifferencesinthe levelsofmanagement.Inanycompany,thetotalmanagementjobrequiresmanyskills andtalents.Therefore,thejobofmanagerisdividedandsubdivided.Suchan arrangementimpliesdifferentlevelsofmanagement.Asamatterofcustomand convenience, we normally visualize a company's management as a pyramid as shown in figure 2.1. Figure - 2.1 LEVELS OF MANAGEMENT 19 TOP LEVEL MANAGEMENT MIDDLE LEVEL MANAGEMENT FRONT-LINE/SUPERVISORY MANAGEMENT The three levels of management that are commonly found in any organization are lower or front-line, middle and top management. Front-line Managers This is the lowest level in the hierarchy of management. Usually the jobs at this level are theentry-levelpositionsintomanagementprofession.Managersatthisleveldirectthe operatingemployees(workers).Theyareclosetotheaction,fortheirjobinvolves supervisingtheactivitiesofoperatives.Front-linemanagersarecalledforeman, supervisor, superintendent, inspector and so on. For instance, for manufacturing concern, intheproductiondepartmenttheyarecalledforeman;marketing,financeandothers departments,theyarecalledmanagementtraineesorjuniorexecutives.Similarly,ina government office, the term superintendent or section officer is normally used. Middle Level Managers Middlemanagementlevelinmanyorganizations;includemorethanonelevel. Managerswhoworkatlevelsbetweenthelowerandtoplevelsconstitutesthemiddle management. Departmental heads, Regional managers, Zonal managers and so on fall in this category. They report to top managers. Their principal responsibilitiesaretodirect the activities of lower level managers who implement the organization's policies. 20 Top-level Managers TopmanagementconstitutesthehighestlevelinthemanagementhierarchyThisisthe policymakinglevelinanyorganization.Thislevelconsistsofasmallgroupof executives.BoardofDirectors,Chairman,ManagingDirectorandthetopfunctional heads and divisional managers comprise this level top managers are responsible for the overall management of the organization. They decide the enterprise objectives, policies andstrategiestobepursuedtoachievethoseobjectives.Theyprovidedirectiontothe organization by guiding the organization's interactions with its environment. MANAGERIAL SKILLS Themanagementjobisdifferentfromotherjobs.Itrequireselementsofstewardship and commitment to the purpose. It involves the obligation to make prudent use of human andmaterialresources.Itrequiressoundjudgmenttohandlecomplexsituations. Further, the nature of the job becomes increasingly complex at each higher level because of the increase in the scope of authority and responsibility Therefore, each higher level requires increased knowledge, broader perspective and greater skills. Forpurposeofanalysis,skillsrequiredofanymanagerareclassifiedunderthree differentheads-technical,humanemployeerelationsskillsandconceptualskillsas showninfigure2.2.Theexhibithelpsinunderstandingthelevelsofmanagement responsibility, the principal skill requirements, and the extent to which each kind of skill is required at each level. Figure - 2.2 MANAGEMENT LEVELS AND SKILLS Top Management 21Middle Management Supervisory (Lower Level) Management Technical Skills Human Skills Conceptual Skills Technical Skills Technicalskillsrefertotheabilitytousethetools,equipment,procedures,techniques andknowledgeofaspecializedfield.Itisprimarilyconcernedwiththewaysofdoing thethings.Itimpliesproficiencyinaspecificfieldofactivity.Technicalskillsare important for the lower level managers, because by nature their job involves supervision oftheworkers.Effectivesupervisionandcoordinationoftheworkofsubordinates, therefore,dependsonthetechnicalskillpossessedbythelowerlevelmanager.Any supervisorwithoutasoundknowledgeofthejobcannotmakeaneffectivesupervisor. Thesubordinatesattheshopfloordonotrespectsuchsupervisors.Therelative importanceofthetechnicalskillsascomparedtotheotherskillsdiminishesasone moves up to higher levels of management. Human skills Human skills are primarily concerned with persons, as contrasted with "things". When a manishighlyskilledinemployeerelations,heisawareofhisownattitudes, assumptions, and beliefs and recognizes their limitations as well as their usefulness. He accepts,theexistenceofviewpoints and feelings, different from his own. Thus, human skillreferstotheabilityofthemanagertoworkeffectivelyasagroupmemberandto buildcooperativeeffortintheteamheleads.Itistheabilitytoworkwith,understand and motivate people. He understands why people behave as they do and is able to make hisownbehaviorunderstandabletothem.Hecanforeseetheirreactionstopossible coursesofactionand,isabletotaketheirattitudesintoaccount.Hisskillinworking with others is natural and continuous. He does not apply it in random or in inconsistent fashion. It is a natural ingredient of his every action. Conceptual skills This skill also called design and problem-solving skill involves the ability; 22 To see the organization and the various components of it as a whole; To understand how its various parts and functions mesh together; and To foresee how changes in any one of these may affect all the others Conceptualskillsextendtovisualizingandunderstandingtherelationofthe organizationtoindustry,tothecommunityandtothepolitical,economicandsocial forcesofthenationasawholeandeventoforces,whichoperatebeyondthenational boundaries. It is the creative force within the organization. A high degree of conceptual skills helps in analyzing the environment and in identifying the opportunities and threats. Asyoumayhaveunderstoodbynow,thethreetypes of skills discussed are related.In otherwords,managementjobalwaysrequiresallthethreeskillsbutindifferent proportionsdependinguponthelevelofmanagement.Thereisagradualshiftinthe emphasis from the bottom to the top of the pyramid. Technical skills and human skill are alwaysingreatdemandatthelowerlevelofmanagementforitistherethatthe productive processes and operations are carried out. It is here where you find most of the people. It is there where the action takes place. The need for conceptual skills is greatest atthetoplevelofmanagement.Obviously,thetopmanagersarenotofteninvolvedin the direct application of specific methods, procedures and techniques, compared to those at the lower levels of management Asevidentfromtheforegoingdiscussion,atthesupervisorylevel,besidestechnical skills, you have to acquire human skills and the problem - solving skills (conceptual). To climb up the organizational ladder, you must not only be good at the skills required for thepresentjob,butalsolearnand acquaint yourself with the skills required at the next level. As a result, in the event of promotion to the next higher levels, you would feel at home and discharge the responsibilities with ease. Based on the differences in the type of skills required, organizations assess the training needs of the managers. Accordingly, appropriate training methods are designed to equip themwiththeskillrequiredattherespectivelevels.Although,eachoftheseskillsis neededinsomedegreeateverylevelofmanagement,therearesuccessfulexecutives who have no great amount of technical skills. But they are able to compensate the lack ofthoseskillsthroughsuperiorcreativeabilityandskillsinselecting,planningand effectively motivating subordinates who are strong in technical skills. 23MANAGERIAL ROLES HenneryMintzberg,acontemporarymanagementthinkerhasdonealotofresearchon the various roles performed by a manager. A role according to him, "is an organized set of behaviors belonging to identifiable office or position.' Just as characters in a play have specificroles,managersalsoplaydifferentroles."Throughhisstudies,Mintzberg identifiedtenrolesthathebelievesallmanagersplayatvarioustimestovarying degrees.Heclassifiedthemwithinthreebroadcategories;interpersonalroles, informationalroles,anddecisionalroles.Figure2.3summarizesthetenrolesby category and gives an example of each. MANAGEMENT ROLES AS IDENTIFIED BY MINTZBERG ______________________________________________________________________ RoleDescriptionIdentifiable Activities from study of chief Executives ______________________________________________________________________ INTERPERSONAL Figure headSymbolic head; obligedCeremony, status requests; to perform a numbersolicitations of routine duties of a legal or social nature LeaderResponsible for theVirtually all managerial motivation andactivities involving activationofsubordinates. subordinates; responsible for staffing, training, and associated duties. LiaisonMaintainsself developedAcknowledgements of mail; developed network ofexternal board work; other outside contacts andactivities involving Favors and information ______________________________________________________________________ INFORMATIONAL Monitor Seeks and receivesHandling all mail and wide variety of contacts categorized as special information concerned primarily with (much of it current)receiving information 24to develop thorough (e.g., periodical news, understanding ofobservational tours) organizationand environment; emerges as nerve center of internal and external information of the organization. DisseminatorTransmits information Forwarding mail into received fromorganization for outsiders or frominformational purposes, other subordinates toverbal contacts involving members of theinformation flow to organization; somesubordinates (e.g., review information factual,sessions, instant some involvingcommunication flows) interpretation and integration of diverse value positions of organizational influencers. SpokesmanTransmits information Board meetings; handling tooutsider on and contacts involving organization's plans,transmission of information policies, actions,to outsiders. results, etc,; serves asexpert on organization's industry EntrepreneurSearches organizationStrategy and review session and its environmentinvolving initiation or for opportunities anddesign of improvement initiates improvement projects" tobring aboutchanges; supervises design of 25certain projects as well DisturbanceResponsibleforStrategy and review sessions Handlercorrective actioninvolving disturbances and when organizationcrises. faces important, unexpected disturbances ResourceResponsible for theScheduling; requests for Allocatorallocation ofauthorization; and activity organizationalinvolving budgeting and the resources - of all kindsprogramming of subordinates to effect the makingwork or approval, of all significant organizational decisions. NegotiatorResponsible forNegotiation representing the organizations at major negotiations' AsMintzbergpointsout,theserolesarenotindependentofoneanother.Instead,they areinterdependent.Theinterpersonalrolesariseoutofthemanager'sauthorityand status in the organization and involve interactions with people. These interpersonal roles maymakethemanagerafocalpointofinformation,enablingandcompellingthe manager to play the informational roles and act as an information-processing center. By playing interpersonal and informational roles, the manager is able to play the decisional roles;allocatingresources,resolvingconflict,seekingoutopportunitiesforthe organization, and negotiation on behalf of the organization. Taken together, the ten roles comprise and define the work of the manager, whatever the organization he works for. SUMMARY 26 In this lesson, the process of management is understood under the five basic functions, REVIEW QUESTIONS 1. Discuss the important functions of management to a modern day manager. How are they relevant in the running of institutions like Kenyatta University? 2. Are the functions of management common to all organizations? Explain with the helpof appropriate examples how they can be applied by a Jua Kali artisan. 3.Presentadetailedaccountofthelevelsofmanagementthatarecommonlyfoundinany large-scale organization. What are the important skills needed at each level? 4.DescribetheimportanceofmanagementinadevelopingeconomylikeKenyawithsuitable examples. 5.ExaminethedifferentrolesthatamanagerplaysintheorganizationsasperMintzbergclassification of managerial roles. 6. As a practicing manager, analyze the various skills you possess in relation to the level ofyour jobs. 27 FURTHER READINGS 1.PeterF.,1981.ManagementTasks.Responsibilitiesandpractices,Alliedpublisher:NewDelhi 2.Hodgets,RichardM.,1986.ManagementTheory:ProcessandPractice,AcademicPress,London. 3.KatzR.L.,1974.SkillsofanEffectiveAdministrator,HarvardBusinessReview,52(5)90-102 4.Koontz,HaroldandCyrilODonnell,1976.Management:asystemandcontingencyAnalysis of Managerial Functions, McGraw-Hill: Tokyo 5.Newman. William Summer, Charles E. and Warren, E, 1974. The Process of management:.Concepts, Behavior and Practice, Prentice Hall of India; New Delhi. 6.Stoner, James AF and Freeman Edward. R., 1989 Management prentice Hall of India, NewDelhi. 7. Mintzberg, Henry. The Managers job: Folklore and Fact. Harvard Business Review 53,no. 4 (July-August 1975) 28 ______________________________________________________________________ LESSON 3 MANAGER AND THE ENVIRONMENT ______________________________________________________________________ OBJECTIVES After studying this lesson, you should be able to: Understand the dynamics of environment; Analyze the various forces in the environment that affect the business; and Adapt to the changes in the environment to remain competitive in. your industry. INTRODUCTION Likehumanbeings,organizationsaretheproductsofenvironment.Asexplainedin Lesson-1,allorganizationswhethertheyareengagedinbusinessornon-business activities draw the inputs from the environment, convert the inputs into outputs and send thembacktotheenvironment.Thus every organization has a two-way interaction with the environment. Such an interaction between the organization and the environment has further been discussed in lesson - 4 (System Approach to Management), Accordingly, a business organization is an open system, which is influenced by the environment, and in turninfluencestheenvironment.Theenvironmentofthebusinessconsistsoftwo components internal, as well as external environment. The former refers t6 the various Systems inside the organization such as, technology, structure, processes and people. As all these aspects constitute the subject matter of this course, and are discussed in various lessons, the internal environment, therefore, does not merit a detailed analysis. As such, this lesson focuses on the important variables of the external environment, which have a bearing on the successful functioning, and survival of the business. 29IMPORTANCE OF THE ENVIRONMENT Theneedtoconsidertheforcesexternaltotheorganizationwasfirstincorporatedinto management thought during the late 195Os. It was one of the major contributions of the systems approach to management, which emphasizes and stressed the need for managers toviewtheirorganizationasanentityofinterrelatedpartsintertwinedwiththeoutside world.Inanever-changingbusinessenvironmentasoftoday,changesintheoutside worldhavemadetheneedtoconsidertheenvironmentmoreimportantthanever.As AlvarElbingstates,theexternalenvironmentofanorganizationisasubjectof increasingchallengefortoday'smanagers.Infact,themanagersofsocietiesmajor organizations-business,education,government-havebeenfacedbyrecenteventsto placeanincreasingfocusonarapidlychangingenvironmentanditseffectonthe internalorganization".Evenifchangesarenotsosignificant,managementwouldstill havetoconsidertheenvironmentbecause,asanopensystem,anorganizationis dependent on the outside world for supplies, energy, workers and customers. As all these affect the organization's very survival, management must be able not only to identify the factors in its environment but also to cope with them. Inthisrespect,organizationsaresimilartobiologicalorganisms.AccordingtoCharles Darwin's theory of evolution, the species that have survived have done so because they were able to evolve and adapt to changes in their environment. Organizations, too, must adapt to changes in their environment in order to survive and be effective. DIRECT ACTION VERSUS INDIRECT ENVIRONMENT Theexternalenvironmentaffectingtheorganizationmaybedividedintotwomajor categories-Directactionandindirectactionenvironment.Directactionenvironment consistsofthosefactorsthatdirectlyaffectandareaffectedbytheorganization's operations. These factors would include suppliers, labor unions, the various laws of the land, customers and competitions. The indirect environment, on the other hand, consists ofthosefactorsthatmaynothaveanimmediate,directeffectonoperationsbut neverthelessinfluencetheactivitiesofthefirm.Theseincludesuchfactorsas technology,socioculturalandpoliticalfactors,generaleconomicconditionsandsoon. Let us now understand the impact of all these factors in detail. 30 THE DIRECT ACTION ENVIRONMENT Suppliers As already understood, an organization is a vehicle for transforming inputs into outputs. Theimportantinputsarematerials,equipments,energy,capitalandlabor.The relationshipbetweentheorganizationandthesuppliersoftheseinputspresentsthe forcesintheenvironmentthatdirectlyinfluencetheoperationsofafirm.Ifan organization is unable to obtain these essential inputs of right quality, quantity and at the right price, it cannot possibly achieve the objectives. Laws Thelawsofthelandinfluencevirtuallyeveryaspectofthebusiness.Theformof organization, the management and the way in which a firm conducts itself in the society areverymuchinfluencedbythevariousprovisionsofthelaws.Forinstance,The Companies Act, Factories~ Act, Workmen's Compensation Act, Industrial Disputes Act, ProvidentFundAct,justtonameafew,affectthefunctioningofthebusiness.Asa responsiblecorporatecitizen,anenterprisehastocomplyitselfwiththeprovisionsof these acts. Customers The justification for 'the existence of a firm lies in the satisfaction of customer needs. In this context, it is appropriate to remember Peter F.Drucker's observation on the purpose of business. According to him, the purpose of any business is to create a customer. There isnoexaggerationinstatingthatitiscustomersinthemarketplacewhodictatethe fortunesofanybusiness.Needlesstosaythatthoseorganizations,whichneglectthe customersexpectationsandaspirations,wouldfindthelong-termsurvivalvery difficult.Customerstastesandpreferencesarenotstatic,butkeeponchanging. Mentionmaybemadeofsomeofthechangestakenplaceintherecentpast:the preference'forquartzwatches,audio-videogadgets,varioussophisticateddomestic appliances,cottongarments,fastfoodsandsoon.Organizationswhichareadeptin identifyingthechangesinthecustomersattitudesandpreferencesorwhichcan comfortablyrespondtothechangesinapositivemaywouldsurviveandthosewhich fail to take cognizance of changes in customers preferences would ultimately fall on the way side. 31 Competitors Thecompetitorsinfluencemanyapolicyoftheorganization.Inacompetitive environment,themarketplaceischaracterizedbymovesandcountermoves.Thepost-liberalizationIndianmarketsformanyproductsofferanexcellentexampleastohow competitioninfluencestheorganizations. In the last few years, as could be easily seen, in almost all the sectors of the Indian economy, competition has tremendously increased. Asaresult,manyfirmsareforcedtowakeupfromtheirslumber.Theyareforcedto unlearnmanyofthepracticesandattitudesofthepre-liberalization/protectionera. Companyaftercompanyisnowredefiningitsbusiness,rediscoveringthemarkets, talkinginfeverishpitchaboutcustomerservice,humanresourcedevelopmentand concern for the society. THE INDIRECT ENVIRONMENT Theindirectenvironmentisusuallymorecomplexanduncertainthanthedirect. Managementisoftencompelledtomakeassumptionsabouttheimpactofthevarious factors like technology, general economic conditions, socio-cultural and political factors. Let us, therefore, examine the impact of these factors on the business organization. Technology Technology,intheorganizationalcontext,influencesthewaysofdoingthings.It influencesvariousprocesses.Technologicalchangesaffecttheefficiencywithwhich productsaremanufactured'andsold,whenaproductwillbecomeobsolete,how informationcanbegatheredandprocessed,andwhatcustomersexpectfromthe organization'sproductsandsoon.Importanttechnologicaldevelopmentsthathave profoundly affected the organizations and society in the last few years are the computer, laser,xerography,integratedcircuits,semiconductors,television,satellite communication, nuclear power, synthetic fuels and foods etc. All these innovations have thoroughlychangedthefaceofthesociety.Therefore,today'sorganizationsneedto keepabreastoftechnologicalchangesthataffecttheiroperationsandproductssoasto remaincompetitive.Failureofthemanagementtoclearlygaugethetechnological changeswouldcostthebusinessdearly.Itendangerstheverysurvivalofthe organization. The pace at which technological changes occur varies from industry to industry. In some industrieswheretechnologyisstabilized,thechangesatelessfrequentandless turbulent.Ontheotherhandinsomeindustrieslikeinformationtechnology, 32tei~c9mmunicationsystems,polymers,etc.changesarefrequent.Dependinguponthe nature of business and the type of technology used,' every organization has to assess the technological environment from time' to time. Economic conditions Managersmustalsoassesshow changes in general economic conditions will affect the operations.Thefluctuationsineconomicactivitiesofanationasmeasuredbythe variousparameterslikethegrossdomesticproduct(GDP),pricelevel,employment, aggregatedemandandsupply3fconsumerandindustrialgoods,etc.willhavefar reachingimpactontheprosperityofthebusiness.Thesefactorsaffectthecostofthe inputs and the ability of customers to buy the goods and services. Organizations must be able to tackle effectively the inflationary and recessionary trends in the economy. When theeconomyisinanupbeatmood, firms normally benefit enormously and commit the resources' for further growth with a hope of continuity of favorable economic conditions. Problems arise when the economy turns to the downswing. It is at that stage, firms have to adjust themselves to the down turn in economic conditions. Efficiency in operations, elimination of wastage, product planning, etc. holds the key for the survival of firms in suchanadverseeconomicclimate.Asbusinessorganizations,intermsofsizeand impact,havegrownintomegainstitutions,theirfailurewillhavedisastrousaffectson thes9ciety.Byvirtueoftheirsize,theyalsoinfluencesignificantlytheeconomic conditions of the nation. Further, it is important to note that a given change in economic conditionsmayhaveapositiveeffectonsomeorganizationsandanegativeaffecton others.Therefore,amanagermustbeabletoclearly"assesstheimpactofchangesin economic conditions on the industry in general and his firm in particular. Socio-cultural factors Organizations are affected by the culture of the particular society in many ways. Firms, whichhavetheiroperationsinmorethanonecountry,havetoadapttotherespective culturesinaneffectiveway.Otherwise,theyfinditdifficulttogaintheacceptanceof thesociety.Soundunderstandingoftheculturalvariablesisallthemoreimportantfor firmsinacountrylikeKenyawherethereareseveraldiversitiesinculturesofvarious regions within the country. Cultureisawiderconcept,whichincludesvaluesystems,beliefs,likesanddislikes, altitudesandperceptions.Iftheproductsorservicesofafirmarenotinlinewiththe culture of the place, they may no be accepted by the society. At the international level, manybrandshavefailedtogainanymarketbecausetheyareoutoftunewiththe respective cultures. At the same time, it has to be remembered that certain products and 33services also affect the culture of a place. The satellite television, which has made deep inroads into the Kenyan culture and how certain values particularly in the Kenyan youth are changing, makes a good example. As such, an organization cannot insulate itself from the socio-cultural factors specific to acommunity.Forexample,payingbribestoobtaincontractsorpoliticalfavors, promotion on the basis of favoritism instead of competence, and spreading unfavorable rumors about a competitor are considered unethical immoral business practices in many countriesinsomecountriessuchpracticesareseenasnormalandacceptedbusiness practicebecauseofdifferingsocio-culturalfactors.InthisregardGeneralElectric's formerchairmanReginaldJonesobservationisworth]mentioning.Hestates "organizations must be able to anticipate the changing expectations of society; and serve them more effectively than competing firms. This means that the organization itself must change consciously evolving into an institution adapted to the new environment' Political environment The performance, growth and survival of business in general, to a larger extent, depend upontheattitudeofthegovernmenttowardthebusiness.Sincegovernmentisfully empoweredtomonitorandcontrol(thevariousinstitutionsofthesociety,thepolicies pursuedbythegovernmentaffectsthebusinessinasignificantway.Thecontinuityof policiesisverymuchessential.Thatdependsontheabilityofthegovernmentofthe particular nation. The cooperation that exists between business and government in Japan has, infect helped the Japanese Companies to conquer the world markets in the last few decades. In Japan, Ministry of International Trade and Industry (MITI) extends out excellent support to the organizations to merge internationally competitive. In India too, of late, we see a lot of changeintheattitudeofthegovernmentbothatcentralandstateleveltowardsthe business.ThesuccessofSouth Africa in the COMESA market has a lot to do with the government policy of supporting the business community within and without. Thevariousfactorsdiscussedsofarhighlighttheimpactoftheenvironmentonthe business.IfcompanieslikeKenyaBreweries,CocaCola,UnileverKenya,SpetreE.A, etc.areabletogoglobal,itispreciselybecauseoftheirabilitytoassessthechanging environment effectively and to adapt to the changes with considerable case. As a result, we see a few Indian companies reaching the status of being called Indian multinationals. 34SUMMARY REVIEW QUESTIONS The forces that exert influence on an organization in the environment are classified underdirectactionenvironmentandindirectactionenvironment.Astheforcesinthedirectenvironmentlargelyformpartsofthissubject, emphasisisplacedontheforcesintheindirectenvironment.Thustheexternalenvironmentsofthebusinessandtheforcesinthatenvironmentthatinfluencethebusinessorganizationhavebeendiscussedinthislesson. The dynamics of technological, economic, socio-cultural and political factors aridtheneedtorespondtothechanges in, these forces have been highlighted. Organizationsmustbeabletorespondeffectivelyandadapttoenvironmentalchangesinordertosurvive and attain their objectives. 1.Discuss the major factors in the environment of business and how they affect thesurvival of any given organization. 2.Organizationsareproductsofenvironment.Discussthestatementwithuseoflocalbut appropriate examples. 3.Analyze the various changes that have taken place in the Kenyan business environmentin the recent past. 4.Present the case of at least two Kenyan organizations and show how they responded tochanges in the environment. 5.Give a brief note on the environmental factors within and without Kenyatta Universityand show how they impact on its operations. 35 FURTHER READINGS 1.Alvin Toffler, 1970. Future Shore, Random House, New York. 2.Daniel Bell, 1973. The Coming of Post-Industrial Society, Basic book - NewYork. 3.John B.Miner, 1978. The Management Process, Macmillan, New York 4.RichardT.PascaleandAnthonyG.Athos,1981.TheArtofJapaneseManagement,Warner Books, New York. 36 ______________________________________________________________________ LESSON4 SYSTEMS APPROACH TO MANAGEMENT ______________________________________________________________________ OBJECTIVES After studying this lesson, you should be able to; Understand the systems concept See a business organization as an open system; and; Appreciate the interrelationship of the various subsystems. INTRODUCTION Likeahumanorganism,anorganizationisasystem.Justasthenerves,digestion,and blood circulation systems are interdependent in the human body, in an organization also, people, tasks and the management are interdependent. A change in any of these aspects mayaffectalltheotherpartstosomedegree.Thisiscalled'rippleeffect'which influencestheorganizationaleffectiveness.Forinstance,iftopmanagementdecidesto giveasubordinatemanagermorefreedomofaction,thiswillaffectthemanagers motivation, the way he deals with his subordinates and the way subordinates respond to him.Allthesechangeswilloccurandasaresult,infuture,theorganizationwillbea somewhat different entity. Tovisualizetheseinteractionsandconsequencesbetweenthevarioussegmentsofthe business,managersneedanoverallperspective.Theyneedtoknownotjusttheirown jobsbutalsohowtheirjobsandallothersfitintowhattheorganizationistryingto achieve. Managers need to be aware of the effect of a decision on various aspects of the organization.Thinkingaboutanorganizationthiswayisanexerciseinusingthe systems approach. The application of systems theory to management has made it easier formanagerstoconceptualizetheorganizationasanentityofinterrelatedparts intertwined with the outside world. 37 SYSTEMS CONCEPTS Systemstheorywasfirstappliedinthefieldsofscienceandengineering.Thetheory found its way into the practice of management in the late 1950s and since then attained wide acceptance all over the world. It has to be noted that the systems approach is not a setofguidelinesorprinciplesformanaging,butawayofthinkingaboutorganization andmanagement.Thefollowingdefinitionshighlightthebasiccharacteristicsofa system. "Asystemisanentitycomposedofinterdependentpartseachofwhich contributes to the unique characteristics of the whole". "Asystemisessentiallyasetorassemblageofthingsinterconnectedor interdependent, so as to form a complex unity. "Asystemisanorganized,unitarywholecomposedoftwoormore interdependentparts,components,orsubsystemsanddelineatedbyidentifiable boundaries from its environment". Cars,computersandtelevisionsetsareallexamplesofsystems.Theyaremadeupof manyparts,eachofwhichworksincombinationwithalltheotherstoformanentity. Similarlythehumanbodyisasystemmadeupofvarioussubsystemslikedigestive, nervousandrespiratorysystems.Inthesamefashion,anorganizationisalsoasystem withmanyinterrelatedpartsorcomponents.Justasadoctorwouldgatherinformation onyourrespiration,pulse,eatinghabitsandothervitalfunctionsofthebodybefore makingadiagnosisandprescribingmedication,aneffectivemanagershouldgather information about all relevant parts of the organization in order to accurately diagnose a problem and take corrective action. Open and Closed Systems Therearetwomajortypesofsystems:closedandopen.Aclosedsystemhasfixed boundaries;itsoperationisrelativelyindependentoftheenvironmentoutsidethe system. A watch is a familiar example of a closed system. The interdependent parts of a watchmovecontinuouslyandpreciselyoncethewatchiswoundorabatteryare inserted.Aslongasthewatchhassufficientenergystoredwithinit,itssystemis independent of the external environment. 38Anopensystem,ontheotherhand,ischaracterizedbyinteractionwiththeexternal environment.Informationandmaterialareexchangedwiththeenvironment.Thusan open system is one, which constantly comes into contact with the environment. Because of such close and constant interaction it must be capable of adapting to the environment for its continued existence and operation. Lookedatfromthesystemsviewpoint,itisobviousthatallorganizationareopen systems. They are dependent on the world outside for survival. Sub-systems While an organization as a whole is a system, the various components or parts within it arecalledthesubsystems.Thesubsystemsinanorganizationlikedepartmentsor divisions and different levels of management - all play a crucial role in the organization, justasyourbody'ssubsystemsofcirculation,digestion,nervesandskeletondowithin you. Further, subsystems can, in turn, be composed of still smaller subsystems. Since all are linked, a malfunction in even the smallest subsystem can affect the overall system. The Synergic Effect Asystemisnotmerelythecollectionofpartsandsubparts,buttheirarrangementis more important. Proper arrangement of the subpart results in synergy in operations and contributesfortheoveralleffectivenessofthelargersystem.Suchaunitarywhole becomesgreaterthanthetotalofindividualpartsbecauseofthetypeofarrangement madebythesepartsandsubparts.Thus,itisoftensaidthatoneplusoneistwoin arithmetic, but more than two in management because of the synergic effect created by the arrangement of the subparts. OPEN SYSTEM MODEL OF AN ORGANIZATION Asevidentfromtheforegoingdiscussion,anorganizationisanopensystem.All organizations irrespective of their nature of activities exist in society and thus constantly interactwiththevariousforcesintheenvironment.Ascouldbeseeninthefigure,the organizationimportsinformation,capital,humanresourcesandmaterialfromits environment.Theseresourcesarereferredtoasinputs,whichareconvertedinto productsandservicesthroughorganizationalprocessesusingtechnologysystemsand methods.Thesepr9ductsandservicesarereferredtoasoutput,whichtheorganization exportstotheenvironment.Iftheorganizationismanagedeffectively,theconversion process - inputs into outputs - will be smooth with value addition to the inputs. 39 Figure 3.1 ORGANIZATION OF AN OPEN SYSTEM Inputs Transformation Outputs Process People, Money, Machines, Materials, Information. ProcessProductionMarketingFinance Feed back Goods andService Asshowninthefigure;everysystemhasflowsofinformation,materialandenergy. These enter the system from the environment as inputs and leave the system as outputs. ThechangeprocessofinputsintooutputsisknownasThroughput.Oneimportant mechanism which enables a system to adapt and adjust to the changing conditions of its environmentand.toexercisecontroloveritsoperationsisfeedback'.Asoperationsof thesystemproceed,informationisfeedbacktotheappropriatepeoplesothatthe necessary corrective actions may be taken in time. The process goes on and on. Asexplainedthusfar,systemsapproachofmanagementprovidesanintegralapproach tomanagement.Itviewsmanagementinitstotality.Ithelpsinseeingtheproblemsof theorganizationinawiderperspective.Thisapproachismoreusefulinmanagerial decision-making. It facilitates a thorough understanding of the problems and the possible impact of the proposed decision on other areas of the organization. Thus, the chance for the various conflicts - intradepartmental and interdepartmental - is very less because all thevariablesinthe'situationareexaminedbeforethedecisionistaken.Itprovidesa frameworkthroughwhichorganization-environmentinteractioncanbeanalyzedand' contributes for effective decision-making. 40MANAGERIAL SYSTEMS Organizationsareopenandadaptivesystems.Basedonthesystemsapproach,Talcot Parsonshassuggestedthreemeaningfullevelsinthehierarchyofcomplex organizations: Technical, Organizational and Institutional. TheTechnicallevelisconcernedwith,theactualproductionanddistributionof products and services. Besides the conversion of inputs into outputs, it also includes all thesupportingactivitieslikeresearchanddevelopment,operationsresearchand accounting. TheOrganizationallevelcoordinatesandintegratesworkperformanceatthetechnical level.Itisconcernedwithobtainingthecontinuedflowofinputsintothesystem, maintainingthemarketsfortheoutput~fromthesystem,ascertainingthescaleof operations and establishing operating policies to achieve the objectives. TheInstitutionallevelisconcernedwithrelatingactivitiesoftheorganizationto environmentalsystem.Itinvolvesrelatingtheorganizationtotheneedsofthe environment. Themanagerialsystem,thus,coversallthethreelevelsbyorganizingpeopledirecting the technical work, and relating the organization to its environment. SUMMARY The systems approach to management has been examine~ m this lesson. The various concepts of the systems such as open and closed systems have been examined in detail. Organization as an open system with the help of the input-output model is analyzed. The systems concept is next used to examine managerial systems. Three levels exist in the managerial systems of a complex organization: technical, organizational and institutional. The technical level is concerned with producing the goods and services. The organizational level coordinates and integrates the technical and institutional levels. The institutional level relates the activities of the organization to the environment. 41QUESTIONS 1.Explaintheusefulnessofsystemsapproachtomanagement.Howcanbeappliedinaninstitution of higher learning like Kenyatta University? 2. What is an open system? With use of suitable examples, show whether a businessorganization is an open system or closed system? 3. Describe each of the three managerial levels in the hierarchy of complex organizations.Are the three levels necessary in all types and sizes of organizations? 4. Describe the basic characteristics of a system. 5. How does systems approach help to make decision-making effective? FURTHER READINGS. 1. Richard M.Hodgets, Management - Theory, process and practice, Academic press,New York, 1981. 2.Arthur G.Berdan, Management, The Dryden press, New York, 1993. 3.George R.Teny and Stephen G.Franlllin, principles of Management, MTBS, Delhi,1988. 4.Peter F.Drucker, Management - Tasks, responsibilities and practices, Harper & Row, NewYork, 1974. 5. Harold Koontz, Cyril O'Donnel and Heinz Weihrich, Management, McGraw- Hill,Tokyo, 1984. 42 ______________________________________________________________________ LESSON 5 SOCIAL RESPONSIBILITIES OF BUSINESS ______________________________________________________________________ After studying this lesson, you should be able to: Understand the concept of social responsibilities of business; Examine clearly the interests of the various stakeholders in the business; and Familiarizewiththeargumentsforandagainstthesocialresponsibilitiesofbusiness. INTRODUCTION The relationship between an organization and its environment has been examined in the previous lesson. An organization is understood as importing various kinds of inputs such as human and capital resources, which are transformed into outputs such as products or services. Thus, a business enterprise is part of the larger system, for; it imports the inputs from the society and exports the outputs to the society. As a result, an inextricable link between the organizations in the society may be seen. Inthisconnection,itmaybeunderstoodthatintheoldendays.Themissionofthe businesswaspurelyeconomicinnature.Butasyearspassed,theroleofthebusiness organizationinthesocietyhasundergoneathoroughchange.Modernsocietiesare increasinglylookinguptothebusinessconcernsforthereadddressalofmanyofthe social problems. The concern of the managers towards the society, is not considered as one of the important parameters while giving the awards for best corporate performance /businessmanofyearaward,etc.institutedbyagencieslikeKenyaAssociationof Manufacturers, and so on. As outlined expectations of businesses are changing, there is urgent need for managers to understand clearly the concept of social responsibilities of business so as to be able to address themselves to the various issues involved. 43 THE CONCEPT According to Keith Davis, "Social Responsibilities refer to the businessman's decisions andactionstakentoreasonsatleastpartiallybeyondthefirm'sdirecteconomicor technical interest. To quote Andrews, "By social responsibility, we mean intelligent and objectiveconcernforthewelfareofsocietythatrestrainsindividualandcorporate behaviorfromultimatelydestructiveactivities,nomatterhowimmediatelyprofitable and leads in the direction of positive contribution to human betterment, variously as the latter may be defined". H.R.Bowen's observation on social responsibility is more clear and point to the specifics of the concept. He suggests that business managers be bound to "pursue those policies, to make those decisions, or to follow those lines of action, which are desirable in terms of the objectives and values of our society". Thus, as the above definitions indicate, the concern for the society on the part of managers implies a particular behavior, which is in linewiththesocietalinterests.Itsuggeststhattheyrefrainfromactionsdetrimentalto the interests of the society. RESPONSIBILITIES TO VARIOUS GROUPS Inabroadsense,businessowesalottothevariousgroupssuchascustomers, employees,shareholders,governmentandthecommunityatlargeinwhichitexists. These groups in the society are called interest groups or stakeholder in any modern businessorganization.Letusexaminehowanorganizationrespondsinasocially responsible ways to cater to the growing demands of all these interest groups. Towards the Customers Production and supply of quality goods and services at an affordable price is the primary responsibilityofbusiness.Customerserviceshouldbethemottoofthebusiness.It involvesofferingafairdealtothecustomerbyindulginginethicalbusinesspractices. Therefore,everymanagerinordertoservethecustomersinaneffectivewayshould restrain from: Making misleading advertisements aimed at deceiving the consumer; Giving wrong or false information about the ingredients, quality, origin, etc. of the product; Entering into collusive agreements with other firms to exploit the customers; MakingfalseclaimsofbeinganauthorizeddealerIimporterofcertain goods; and 44Giving misleading names to the products, etc. Towards Employees Proper selection, training and promotion; Recognition of the value of human resource; Maintaining cordial relations with employees; Recognition and encouragement of constructive unionism; Fair wage in relation to the cost of living; Better working conditions; Initiatingappropriatemeasuresforthedevelopmentofhumanresource; and Increaseinproductivityandefficiencybyrecognitionofmerit,by providingopportunities for creative talent and incentives. Towards shareholders Shareholders are the real owners of a corporation: in view of the several practical limitationsfortheminoverseeingtheday-to-dayoperationsofthebusiness,an organization must strive to provide: Security to their funds; A fair rate of return on their investment; Correct information about the operations of the company; and Properappreciationofthevalueoftheirinvestmentinthecompanyby identifying new opportunities that contributes to the growth of business. Towards creditors / suppliers Creditorsorsuppliersprovidethenecessaryinputstothebusiness.Businesshas, therefore,certainresponsibilitiestothem.Themanagementcandischargeits responsibilities towards these groups by Realizing the importance of maintaining good business relations with them; Meeting the payment obligations timely; Providingtrueandcorrectpictureaboutthefinancialaspectsofthecompany; and Helping them grow along with the growth of the company, etc. Towards government Governmentprovidesvariousfacilitiesforthedevelopmentofbusiness.Infrastructure 45facilitieslikeroads,telecommunication,transport,barking,insurancearesomeofthe facilitiescreatedbythegovernmentwithoutwhichnobusiness,worthmentioningcan conduct its affairs smoothly. Therefore, business also in turn owes to the government in the following ways. Business enterprises should act like law-abiding citizens; Taxes and other duties should be paid timely and honestly; Compliancewiththerulesandregulationsasstipulatedbyvariouslawsofthe land; and Supplementing the governments efforts in the developmental activities, etc. Towards society at large Anybusinessorganizationcanexistaslongasitenjoyssocietalsanction.Ifitfailsto safeguard the interests of the society, the pressure from various segments of the society mounts up. Such a situation eventually leads to the promulgation of various acts by the government. That is why, it is always desirable for the business to keep the government atbay.Somemanagementsconducttheiraffairsinsucharesponsiblewaywhere governmentsinterventionisnotwarranted.Forinstance,theoriginofseverallaws governingthebusinessorganizationsmaybetracedbacktothefailureofbusiness organizationinprotectingtheintensityofthevariousgroupsinthesociety.An organization can act in a socially responsible way by: Properly deciding the product policies in line with the national priorities; Preventing the creation of monopolies; Ensuring hygienic disposal of smoke and waste and other effluents; Providing to the community accurate information about its working, and Preservingthenationalresourcesofthenationbynotindulginginreckless exploitation of the resources, etc. THE DIFFERING PERSPECTIVES Therearedifferentviewsonthesocialresponsibilitiesofbusiness.Theviewsmaybe broadly classified under two categories: those for and against the social responsibilities of business. Oneview,stronglyadvocatedbyNobelLaureateineconomics,MiltonFriedman,on properroleofbusinessistouseitsresourcesandenergiesinactivitiesdesignedto increase its profits so long as it stays within the rules of the game and engages in open competition, without deception and fraud". According to Friedman, socially responsible 46businessisconcernedprimarilywithefficiencyandprovidingitsownerswiththebest possiblereturnoninvestment,withintheparametersestablishedbylawandethical conduct. Solving social problems, such as eliminating poverty, eradication of illiteracy is thetaskofgovernment.Ifbusinessdirectlydealswithsocialproblems,thecostsof doing will be reflected in the prices of goods and services. Otherwritescontendtha