MANAGEMENT THEORY

What Is The Role Of Management?

·    Planning

The Business Plan that we looked at last week is primarily a tool for small business managers and entrepreneurs.  This week we will look at the planning process in large companies. 

·    Organizing

Once managers have planned sales goals or growth goals or other strategic goals, the next step is to make sure that the company is structured properly to be able to achieve those goals.  As an example, you can’t succeed if you have a sales goal of $100 million when your production and shipping capacities are $50 million.

·    Leading

A major goal of leadership within an organization involves employee motivation – how to maximize the output of this major Factor of Production. We’ll examine different theories, and try to reach some conclusions about what seems to work best.

·    Controlling

Other words for this are “coordinating” or “monitoring”.  In other words, how do we know if we are on track towards the goals we set?   We need a system that compares our actual performance to the goals so we can make decisions as we go.  We need to insure that the efforts of many different groups are coordinated properly towards achieving company objectives.

 I.            Planning

The planning process in a large organization typically moves through several phases, each phase involving different levels of the organization.

·          Strategic Planning – in this phase, top management of the organization defines long-term goals.  Where do we want to be in three years? Five years?  What level of sales? What markets? Global? These long-term plans define the “big picture” objectives of the company.

·          Tactical Planning – once the objectives of the company are defined, middle managers are given the task of preparing tactics to achieve the objectives.  Should we buy a new plant?  Do we develop new uses for our existing product to increase sales? Do we pursue new markets?  As these decisions are made, tactical plans can be formulated that say where the company needs to be in a year, in two years, etc., in order to achieve the original objective.

·          Operational Planning – here the individual department supervisors put operational details in place.  We’re going to buy the new plant, so this is how we will lay out the production area to achieve the goals defined in the tactical plan.

·          Adaptive Planning – what if during the operational planning phase top management is made aware that a fundamental assumption used to develop the strategic plan is no longer valid?  Say that top management assumed that the current level of technology would remain in place for at least five years, then after a year a newer, more efficient technology is introduced.  Adaptive Planning says that you have to be ready to rein in the current strategy and move in a new direction.  A good example of this is when Bill Gates decided that Microsoft had to become more involved in the Internet.  As difficult as it was to “turn the battleship around”, it was critical for Microsoft to become more involved in the area where software development was quickly moving.

·          Contingency Planning – what if we planned really carefully, but a totally unexpected situation arises?  These are the “what if it rains tomorrow” plans.  Better have a few umbrellas under the table just in case the weather report is completely wrong.

II.              Organizing
”Organizational structure refers to the way that an organization arranges people and jobs so that its work can be performed and its goals can be met.” - Howard Distelzweig

Traditionally, organizations were structured primarily vertically – in other words, there was a boss, below who were a group of managers, who had managers below them, etc.

There is an old story about a little boy who asks his grandfather, “Grandfather, how is the world held up?”  The grandfather replies, “The world rides on the back of a giant turtle”.

“What holds the turtle up?”, asks the boy.  To which the grandfather replies, “He rides on the back of another giant turtle.”

“What holds that turtle up?”  asks the boy, at which point the grandfather tersely replies, “You can’t trick me! It’s turtles all the way down.”

Vertical organization theory seemed to believe in the philosophy of building more and more layers of management, in order for specialization to occur at each level.  Has this worked? No.  In fact organizations today are becoming broader and broader, with increasing “Spans of Control” for managers, meaning that rather than a few specialists reporting to a manager, a larger group of managers report to one manager who is NOT necessarily an expert in that field.

The computer and email have allowed for the more efficient horizontal organizational structures of today, and will continue to allow for increasing flexibility in organizations in the future.

Please read the following for more information on the importance of organizational structure.  http://flightline.highline.edu/jward/BUSN270.w06-Prin%20of%20Mgmnt/Organizational%20Structure.doc

III.             Leading

Ultimately the job of management is leadership.  The above planning and organizing processes put in place goals and objectives and the structures needed to support them, but without effective leadership and motivation the goals may be difficult to achieve.

The text talks about the history of leadership styles – the way a leader uses “power” to lead and motivate others.  The below article is about what is my favorite form of leadership: empowerment.