Functions and Skills of Management

Functions and Skills of Management

Managerial Functions

Planning

Organizing

Leading

Controlling

In this chapter we explore the four basic functions that management entails: planning, organizing, leading, and controlling resources. And we highlight the skills required of effective managers.

Some managers, especially those in smaller organizations, perform all four managerial functions. Although these functions tend to occur in a somewhat progressive order, sometimes they occur simultaneously, and often the process is ongoing.

The Roles of Management

Decisional

Informational

Interpersonal

In the course of performing the four management functions managers play a number of roles that fall into three main categories:

Interpersonal roles. Managers perform ceremonial obligations; provide leadership to employees; build a network of relationships with bosses, peers, and employees; and act as liaison to groups and individuals both inside and outside the company (such as suppliers, competitors, government agencies, consumers, special-interest groups, and interrelated work groups).

Informational roles. Managers spend a fair amount of time gathering information by questioning people both inside and outside the organization. They also distribute information to employees, other managers, and outsiders.

Decisional roles. Managers use the information they gather to encourage innovation, to resolve unexpected problems that threaten organizational goals (such as reacting to an economic crisis), and to decide how organizational resources will be used to meet planned objectives. They also negotiate with many individuals and groups, including suppliers, employees, and unions.

The Planning Function

Develop Strategies for Success

Set Goals and Objectives

Develop Action Plans

Planning is the primary management function, the one on which all others depend. Managers engaged in planning develop strategies for success, establish goals and objectives for the organization, and translate their strategies and goals into action plans.

Strategic Planning

Strategic plans outline the firms long-range (two to five years) organizational goals and set a course of action the firm will pursue to reach its goals. These long-term goals encompass eight major areas of concern: market standing, innovation, human resources, financial resources, physical resources, productivity, social responsibility, and financial performance.

Strategic Planning Process

Consisting of seven interrelated critical tasks, the strategic planning process is an ongoing event.

Clarity of Vision

Development

Communication

Execution

Modification

Most organizations are formed in order to realize a vision, a realistic attainable view of the future that grows out of and improves on the present. Developing a clear vision is a critical task in the strategic planning process. But having a vision alone is no guarantee of success; it must also be communicated to others, executed, and modified as conditions change.

The Mission Statement

To transform vision into reality, managers must define specific organizational goals, objectives, and philosophies. A starting point is to write a company mission statement, a brief document that defines why the organization exists, what it seeks to accomplish, and the principles that the company will adhere to as it tries to reach its goals.

Typical components of a mission statement include the companys product or service; primary market; fundamental concern for survival, growth, and profitability; managerial philosophy; and commitment to quality and social responsibility.

SWOT Analysis

Strengths, Weaknesses, Opportunities, Threats

Before establishing long-term goals, a firm must have a clear assessment of its strengths and weaknesses compared to the opportunities and threats it faces. Such analysis is commonly referred to as SWOT, which stands for strengths, weaknesses, opportunities, and threats.

Strengths are positive internal factors that contribute to a companys success, such as having a steady supply of knowledgeable employees or having a dynamic leader. Weaknesses are negative internal factors that inhibit the companys success, such as obsolete facilities, inadequate financial resources to fund the companys growth, or lack of managerial depth and talent.

Once managers have taken inventory of a companys internal strengths and weaknesses, they must next identify the external opportunities and threats that might significantly affect their ability to attain certain goals. Opportunities are positive external factors such as new markets or new customers. Threats are negative external forces that could inhibit the firms ability to achieve its objectives. Threats include new competitors or entrants into the market, new government regulations, economic recession, increase in interest rates, technological advances that could make a companys product obsolete, and so on.

Managerial Forecasts

To develop forecasts, managers must make a number of educated assumptions about future trends and events and modify those assumptions once new information becomes available.

Managerial forecasts fall under two broad categories: quantitative forecasts, which are typically based on historical data or tests and which involve complex statistical computations; and qualitative forecasts, which are based on intuitive judgments or consumer research. Statistically analyzing the cycles of economic growth and recession over several decades to predict when the economy will take a downward turn is an example of quantitative forecasting. Making predictions about sales of a new product on the basis of experience and consumer responses to a survey is an example of qualitative forecasting. Neither method is foolproof, but both are valuable tools, enabling managers to fill in the unknown variables that inevitably crop up in the planning process.

Competitive Analysis

Differentiation Strategy

Cost Leadership Strategy

Focus Strategy

Managers begin the competitive analysis process by identifying existing and potential competitors. Next they determine the competencies, strengths, and weaknesses of their major competitors. Armed with competitive information, they look for ways to capitalize on a competitors weaknesses or match or surpass their strengths to gain a competitive edge.

A company can gain a competitive edge through at least one of three strategies:

Differentiation. A company using differentiation develops a level of service, a product image, unique product features, or new technologies that distinguish its product from competitors products.

Cost leadership. Businesses that pursue this strategy aim to become the low-cost leader in an industry by producing or selling products more efficiently and economically than competitors.

Focus. When using a focus strategy, companies concentrate on a specific regional market or consumer group, such as the Southwest United States or drivers of economy cars.

Company Goals and Objectives

As mentioned earlier, establishing goals and objectives is the key task in the planning process. Although these terms are often used interchangeably, a goal is a broad, long-range accomplishment that the organization wishes to attain in typically five or more years, whereas an objective is a specific, short-range target designed to help reach that goal.

Setting appropriate goals has many benefits: It increases employee motivation, establishes standards for measuring individual and group performance, guides employee activity, and clarifies managements expectations.

Once managers have established a firms long-term strategic goals and objectives, it must then develop a plan of execution. Tactical plans lay out the actions and the allocation of resources necessary to achieve specific, short-term objectives that support the companys broader strategic plan. Tactical plans typically focus on departmental goals and cover a period of one to three years. Their limited scope permits them to be changed more easily than strategic plans. Operational plans designate the actions and resources required to achieve the objectives of tactical plans. Operational plans usually define actions for less than one year and focus on accomplishing a firms specific objectives, such as developing a strategic partnership with another campaign.

Crisis Management

No matter how well a company plans for its future, any number of problems can arise to threaten its existence. An ugly fight for control of a company, a product failure, a breakdown in routine operations, or an environmental accident could develop into a serious and crippling crisis. Managers can help a company survive these setbacks through crisis management, a plan for handling such unusual and serious problems.

The goal of crisis management is to keep the company functioning smoothly both during and after a crisis. Crisis management requires comprehensive contingency plans in addition to speedy, open communication with all who are affected by the crisis.

The Organizing Function

Employee Activities

Facilities and Equipment

Decision Making

Supervision

Resource Distribution

Organizing, the process of arranging resources to carry out the organizations plans, is the second major function of managers. During the organizing stage, managers think through all the activities that employees carry out (from programming the organizations computers to mailing its letters), as well as all the facilities and equipment employees need in order to complete those activities. They also give people the ability to work toward organizational goals by determining who will have the authority to make decisions, to perform or supervise activities, and to distribute resources.

The organizing function will be discussed in detail in Chapter 7. In this chapter, however, we will discuss the three levels of a corporate hierarchy--top, middle, bottom--commonly known as the management pyramid.

In general, top managers are the upper-level managers who have the most power and who take overall responsibility for the organization. An example is the chief executive officer (CEO). Top managers establish the structure for the organization as a whole, and they select the people who fill the upper-level positions. Top managers also make long-range plans, establish major policies, and represent the company to the outside world at official functions and fund-raisers.

In general, top managers are the upper-level managers who have the most power and who take overall responsibility for the organization. An example is the chief executive officer (CEO). Top managers establish the structure for the organization as a whole, and they select the people who fill the upper-level positions. Top managers also make long-range plans, establish major policies, and represent the company to the outside world at official functions and fund-raisers.

Middle managers have similar responsibilities, but usually for just one division or unit. They develop plans for implementing the broad goals set by top managers, and they coordinate the work of first-line managers. In traditional organizations, managers at the middle level are plant managers, division managers, branch managers, and other similar positions. But in more innovative management structures, middle managers often function as team leaders who are expected to supervise and lead small groups of employees in a variety of job functions. Similar to consultants, they must understand every departments function, not just their own area of expertise. Furthermore, they are granted decision-making authority previously reserved for only high-ranking executives.

At the bottom of the management pyramid are first-line managers (or supervisory managers). They oversee the work of operating employees, and they put into action the plans developed at higher levels. Positions at this level include supervisor, department head, and office manager.

The Leading Function

Influencing People

Motivating People

Leadingthe process of influencing and motivating people to work effectively and willingly toward company goalsis the third basic function of management. Leading becomes even more challenging in todays business environment, where individuals who have different backgrounds and unique interests, ambitions, and personal goals are melded into a productive work team.

Leadership Skills

Research has shown that leaders who have specific traits, such as decisiveness and self-confidence, are likely to be more effective. Managers with strong interpersonal skills and high emotional quotients (EQs) tend to be more effective leaders. The characteristics of a high EQ include:

Self-awareness. Self-aware managers have the ability to recognize their own feelings and how they, their job performance, and other people are affected by those feelings. Moreover, managers who are highly self-aware know where they are headed and why.

Self-regulation. Self-regulated managers have the ability to control or reduce disruptive impulses and moods. They can suspend judgment and think before acting. Moreover, they know how to utilize the appropriate emotion at the right time and in the right amount.

Motivation. Motivated managers are driven to achieve beyond expectationstheir own and everyone elses.

Empathy. Empathetic managers thoughtfully consider employees feelings, along with other factors, in the process of making intelligent decisions.

Social skill. Socially skilled managers tend to have a wide circle of acquaintances, and they have a knack for finding common ground with people of all kinds. They assume that nothing important gets done by one person alone and have a network in place when the time for action comes.

Leadership Styles

Autocratic

Democratic

Laissez-Faire

Contingency

Autocratic leaders make decisions without consulting others. My way or the highway summarizes this style, which tends to go with traditional, hierarchical organizational structures. In contrast, democratic leaders delegate authority and involve employees in decision making. Even though their approach can lead to slower decisions, soliciting input from people familiar with particular situations or issues may result in better decisions. As more companies adopt the principles of teamwork, democratic leadership continues to gain in popularity.

Laissez-faire leaders take the role of consultant, encouraging employees ideas and offering insights or opinions when asked. The laissez-faire style may fail if workers pursue goals that do not match the organizations.

More and more businesses are adopting democratic and laissez-faire leadership as they reduce the number of management layers in their corporate hierarchies and increase the use of teamwork. However, experienced managers know that no one leadership style works every time. In fact, new research shows that leaders with the best results do not rely on only one leadership style; instead they adapt their approach to match the requirements of the particular situation. Adapting leadership style to current business circumstances is called contingency leadership.

Continuum of Leader Behavior

Leadership styles occur along a continuum, ranging from boss-centered to employee-centered. Situations that require managers to exercise greater authority fall toward the boss-centered end of the continuum. Other situations call for a manager to give workers leeway to function more independently.

Additional Leadership Functions

Coaching

Managing Change

Mentoring

Coaching involves taking the time to meet with employees, discussing any problems that may hinder their ability to work effectively, and offering suggestions and encouragement to help them find their own solutions to work-related challenges. This process requires keen powers of observation, sensible judgment, and both a willingness and an ability to take appropriate action.

Acting as a mentor is similar to coaching, but mentoring also emphasizes helping employees understand how the organization works. A mentor is usually an experienced manager or employee who can help guide other employees through the corporate maze.

Another important function of leaders is to manage the process of change. As competitive pressures get worse, the pace of change accelerates while companies search for even higher levels of quality, service, and overall speed. Sometimes managers initiate change; other times change is imposed from outside the company.

Corporate Culture

Each organization has a special way of doing things. Strong leadership is a key element in establishing a productive organizational culturethe set of underlying values, norms, and practices shared by members of an organization.

When you visit an organization, observe how the employees work, dress, communicate, address each other, and conduct business. In corporations, this force is often referred to as corporate culture. A companys culture influences the way people treat and react to each other. It shapes the way employees feel about the company and the work they do; the way they interpret and perceive the actions taken by others; the expectations they have regarding changes in their work or in the business; and their ability to lead, be productive, and choose the best course of action.

The Controlling Function

Monitoring Progress

Resetting the Course

Correcting Deviations

Controlling is the fourth basic managerial function. In management, controlling means monitoring a firms progress toward meeting its organizational goals and objectives, resetting the course if goals or objectives change in response to shifting conditions, and correcting deviations if goals or objectives are not being attained.

The Control Cycle

Managers strive to maintain a high level of quality--a measure of how closely goods or services conform to set standards and customer expectations. Many firms control for quality through a four-step cycle that involves all levels of management and all employees.

In the first step, top managers set standards, or criteria for measuring the performance of the organization as a whole. At the same time, middle and first-line managers set departmental quality standards so they can meet or exceed company standards.

In the second step of the control cycle, managers assess performance, using quantitative (specific, numerical) and qualitative (subjective) performance measures.

In the third step, managers compare performance with the established standards and search for the cause of any discrepancies.

If the performance falls short of standards, the fourth step is to take corrective action, which may be done by either adjusting performance or reevaluating the standards. If performance meets or exceeds standards, no corrective action is taken.

Management Skills

The Five Basics:

Interpersonal

Technical

Administrative

Conceptual

Decision-Making

Managers rely on a number of skills to perform their functions and maintain a high level of quality in their organizations. These skills can be classified into five basic categories: interpersonal, technical, administrative, conceptual, and decision making.

The various skills required to communicate with other people, work effectively with them, motivate them, and lead them are interpersonal skills. Because managers mainly get things done through people at all levels of the organization, they use good interpersonal skills in countless situations.

A person who knows how to operate a machine, prepare a financial statement, program a computer, or pass a football has technical skills; that is, the individual has the knowledge and ability to perform the mechanics of a particular job.

Managers at all levels use administrative skills, which are the technical skills necessary to manage an organization. Administrative skills include the abilities to make schedules, gather information, analyze data, plan, and organize.

Managers need conceptual skills to see the organization as a whole, in the context of its environment, and to understand how the various parts interrelate.

Decision-making skills involve the ability to define problems and select the best course of action.

Decision-Making Process

The first step in the decision process is to recognize that an opportunity or a problem exists. Once a problem or opportunity has been defined, the next step is to develop a list of alternative courses of action. Once the ideas have been generated, most companies develop criteria such as cost, feasibility, availability of existing resources, market acceptance, potential for revenue generation, and compatibility with the companys mission and vision, to evaluate the options.

After all options have been analyzed and debated, management selects the best one. Once a final option has been selected, its time to implement the decision. This step generally requires the development of action plans that may be similar in scope to those developed for a strategic plan. Next managers monitor the results of decision over time to see whether the chosen alternative works, whether any new problems or opportunities arise because of the decision, and the decision should be modified to meet changing circumstances.

KEY TERMS

administrative skills - Technical skills in information gathering, data analysis, planning, organizing, and other aspects of managerial work

autocratic leaders - leaders who do not involve others in decision making

coaching - Helping employees reach their highest potential by meeting with them, discussing problems that hinder their ability to work effectively, and offering suggestions and encouragement to overcome these problems

conceptual skills - Ability to understand the relationship of parts to the whole

contingency leadership - Adapting the leadership style to what is most appropriate, given current business conditions

controlling - Process of measuring progress against goals and objectives and correcting deviations if results are not as expected

core competence - Distinct skills and capabilities that a firm has or does especially well so that it sets the firm apart from its competitors

corporate culture - A set of shared values and norms that support the management system and that guide management and employee behavior

crisis management - System for minimizing the harm that might result from some unusually threatening situations

decision-making skills - Ability to identify and analyze a problem, weigh the alternatives, choose an alternative, implement it, and evaluate the results

democratic leaders - leaders who delegate authority and involve employees in decision making

first-line managers - Those at the lowest level of the management hierarchy; they supervise the operating employees and implement the plans set at the higher management levels; also called supervisory managers

goal - Broad, long-range target or aim

interpersonal skills - Skills required to understand other people and to interact effectively with them

laissez-faire leaders - leaders who leave the actual decision making up to employees

leading - Process of guiding and motivating people to work toward organizational goals

management - Process of coordinating resources to meet organizational goals

management pyramid - Organizational structure comprising top, middle, and lower management

mentor - Experienced manager or employee with a wide network of industry colleagues who can explain office politics, serve as a role model for appropriate business behavior, and help other employees negotiate the corporate structure

middle managers - Those in the middle of the management hierarchy; they develop plans to implement the goals of top managers and coordinate the work of first-line managers

mission statement - A statement of the organization's purpose, basic goals, and philosophies

objective - Specific, short-range target or aim

operational plans - Plans that layout the actions and the resource allocation needed to achieve operational objectives and to support tactical plans; usually defined for less than 1 year and developed by first-line managers

organizing - Process of arranging resources to carry out the organization's plans

participative management - Sharing information with employees and involving them in decision making

planning - Establishing objectives and goals for an organization and determining the best ways to accomplish them

quality - A measure of how closely a product conforms to predetermined standards and customer expectations

standards - Criteria against which performance is measured

strategic plans - Plans that establish the actions and the resource allocation required to accomplish strategic goals; usually defined for periods of two to five years and developed by top managers

tactical plans - Plans that define the actions and the resource allocation necessary to achieve tactical objectives and to support strategic plans; usually defined for a period of one to three years and developed by middle managers

technical skills - Ability and knowledge to perform the mechanics of a particular job

top managers - Those at the highest level of the organization's management hierarchy; they are responsible for setting strategic goals, and they have the most power and responsibility in the organization

vision - A viable view of the future that is rooted in but improves on the present