GENERAL MANAGEMENT: MNG2601

CHAPTER 1: THE EVOLUTION OF THE MANAGEMENT THEORY

UNDERSTANDING THE DIFFERENT MANAGEMENT THEORIES
The environmental forces that shape management thought:
# Environmental Force
1 Social
2 Political
3 Economic
4 Technological
5 International
6 Ecological

Significant developments that have an effect on managers & organisations:

1. Advances in information technology - The internet & other forms of globally connected networks which provide the
ability to share info on a worldwide basis.
- Electronic commerce including EDI (electronic data interchange) enabling
managers to reshape their business processes to improve response time &
efficiency.
- Mobile computing: enables individuals to have access to information technology,
irrespective of their physical location.
2. Globalisation of the marketplace Used to be associated only with large, mature organisations, with the availability of the
internet and the trend toward e-commerce even the smallest business can reach global
marketplace with ease.
3. Increasing predominance of entrepreneurial Entrepreneurs provide opportunities for minorities & others who may face barriers in
firms traditional corporate environments & provides many job opportunities for others.
4. The growing importance of intellectual capitals Many employees will work in knowledge companies, and the value of their knowledge,
as both input & output will determine their value to the organisation.

The key elements of productivity are:

# Element of Productivity
1 The outcome is continuous improvement of performance
2 The improvement must be measurable
3 The key drivers of productivity are:
 Effectiveness Doing the right things
 Efficiency Doing things the right way
 Utilisation Optimum use of human capital and physical resources
 Elimination of all forms of waste
4 The benefits of productivity must be:
 The environment
 The economy
 Society

THE CLASSICAL APPROACHES

Scientific Management
Fact Description
Founded by Frederick W. Taylor
What he studied Studied individual workers to see exactly how they performed their tasks
Premise There is 1 best way to perform any task and measure everything that is measurable (time-motion-study)
Problem he addressed How to judge whether an employee had put in a fair day’s work
Limitations Workers cannot be viewed simply as parts of a smoothly running machine
Money is not the only motivator of employees
Creates the potential for exploitation of labour i.e. possible strikes by workers
Can lead to ignorance of the relationship between the organisation and its changing external environment as
the focus remains on internal issues i.e. the workers and their productivity
Belief Money motivates workers
Other researchers who helped establish these principles of efficiency:
- Frank & Lillian Gilbreth who focused on work simplification and
- Henry L Gantt whose main concern was productivity on shop floor level
The fundamental things he taught:
1. Find the best practice wherever it exists – today we call it “benchmarking”
 2. Decompose the task into its constituent elements – we call it “business process redesign”
3. Get rid of things that don’t add value
The Process or Administrative Approach
Fact Description
Founded by Henri Fayol
What he studied Administrative side of operations
Premise There are 5 basic functions of administration: planning, organising, commanding, coordinating, and controlling
Limitation Postulates that formal authority should be maintained by managers
Belief Management is a skill – something that one can learn once its underlying principles are understood
Focus Focuses on managing the total organisation
14 principles of admin:
1. Division of work
2. Authority and responsibility
3. Discipline
4. Unity of command
5. Unity of direction
6. Subordination of individual interests to general interests
7. Fair remuneration
8. Centralisation of power & authority
9. Scalar chain
10. Order
11. Equity
12. Stability of tenure of personnel
13. Initiative
14. Union in strength
The Bureaucratic Approach
Fact Description
Founded by Max Weber
What he studied The fundamental issue of how organisations are structured
Premise Any goal-oriented organisation comprising thousands of individuals would require the carefully controlled
regulation of its activities
Problem he addressed He developed a theory of bureaucratic management that stressed the need for a strictly defined hierarchy,
governed by clearly defined regulations and authority
Limitations  Bureaucratic results in managers being compensated for doing what they are told to do – not for
thinking
 Managers are often rewarded for complying with old, outdated rules
 Limited organisational flexibility and slow decision-making
Belief  Weber’s ideal bureaucracy is based on legal authority
 Legal authority stems from rules and other controls that govern an organisation in its pursuit of specific
goals
 Managers are given authority to enforce the rules by virtue of their position
 Obedience is not owed to an individual person but to a specific position in the hierarchy of the
organisation

BEHAVIOURAL APPROACHES
Human Relations Movement
 The studies following the ‘Hawthorne Effect’ concluded that group pressure, rather than management demands,
had the strongest influence on worker productivity.
Fact Description
Founded by Mayo
What he studied Hawthorne Studies (see above)
Premise Management’s concern for the well-being of their subordinates and sympathetic supervision enhances
workers’ performance
Problem he addressed Viewed workers as human beings and not as machines
Limitations  The belief that a happy worker is a productive worker is too simplistic
 Economic aspects of work remain important to workers
 Factors play role in productivity: their values, attitudes, perceptions, learning, motivation
Belief The importance of paying attention to people to improve their productivity.
Human needs and motivation
Theory X: based on a set of assumptions that take a command and control view of management, underpinned by
negative view of human nature
Theory Y: mixture of assumptions and underlying beliefs based on positive view of human nature, taking an
empowering view of management

QUANTITATIVE MANAGEMENT THEORY

Fact Description
Founded by
What he studied Management science or operations research
Premise Management is primarily about crunching the numbers
Problem he addressed The greatest contribution of the techniques (linear programming, PERT/CPM,
regression analysis) are in planning and control activities
Limitations Many aspects of management decisions cannot be quantified and expressed by means
of mathematical symbols and formulae
Belief
Focus Mathematical models & statistics and their use in management decision-making

THE QUALITY MOVEMENT

Total Quality Management
It was inspired by a small group of quality experts, the most prominent of them being Joseph M Juran.
Total: Quality involves everyone and all activities in the organisation
Quality: Meeting customers’ agreed requirements, formal and informal, at the lowest cost, every time.
Management: Quality must be managed.
TQM encompasses employees and suppliers, as well as customers. The goal is to create an organisation committed
to continuous improvement. TQM emphasizes actions to prevent mistakes; quality control consists of identifying
mistakes that may already have occurred.

THE SYSTEMS APPROACH

Fact Description
Founded by Ludwig von Bertalanffy
What he studied
Premise He noted characteristics common to all sciences:
 The study of a whole, or organism
 The tendency of a system to strive for a steady state of equilibrium
 An organism is affected by and affects its environment and can thus be seen as an
open system
Problem he addressed Viewed an organisation as a group of interrelated parts with a single purpose: to
remain in balance (equilibrium)
Limitations
Belief From a systems point-of-view, management should maintain a balance between the
various parts of the organisation, as well as between the organisation and its
environment
Focus The open system perspective of an organisation is a system that comprises 4 elements:
 Input – resources
 Transformation processes – managerial processes, systems etc.
 Outputs – products or services
 Feedback – reaction from the environment

CONTINGENCY APPROACH
Based on the systems approach to management:
Fact Description
Founded by
What he studied Using the right management approach for the situation in which managers find themselves.
Premise  The application of management principles depends on the particular situation that management
faces at a given point in time
 Emphasises a situational approach (dependent on a specific situation) but not all management
situations are unique, so;
 The characteristics of a situation are called ‘contingencies’:
o The organisation’s external environment - its rate of change and degree of complexity
o The organisation’s own capabilities – its strengths and weaknesses
o Managers and workers – their values, goals, skills, and attitudes
o The technology used by the organisation
Problem he addressed  Recognises that every organisation, even every department or unit within an organisation is unique
 Every organisation exists in a unique environment with unique employees and unique goals
Limitations Not listed in text book
Fact Description
Belief  There is no single best way to manage
 Management has to decide to use: scientific, bureaucratic, administrative, behavioural, or
quantitative approaches or a combination of these
Focus  Tries to direct the available techniques and principles of the various approaches to management
towards a specific situation in order to realise the goals of the organisation as productively as possible
 The manager must learn multiple ways to compete, innovate, and lead

CHAPTER 2: THE MANAGEMENT PROCESS

INTRODUCTION
All organisations utilise societies’ scarce resources, namely:
Scarce Resource Academic Name
People Human resources
Money Capital
Raw materials Physical resources
Knowledge Information resources

MANAGEMENT AND THE PROCESS

The 4 fundamental management functions:
Management Function
1 Planning – where the organisation wants to be (the vision, mission and goals)
2 Organising – deals with task, roles & responsibilities
3 Leading - redirecting the human resources & motivating them to be more productive.
4 Controlling – managers should constantly make sure that the organisation is on the right course to reach its goals

THE MANAGEMENT PROCESS

PLANNING
Managers determine the
organisations vision, mission &
goals and device on a strategy
to achieve them

CONTROLLING ORGANISING
Managers monitor progress Manager’s group activities to
and take corrective steps to establish authority, allocate
reach the mission and goals resources and delegate

LEADING
Managers/Directors motivates
members of the organisation to
achieve the mission and goals

The differences between vision, mission, goals strategy

Vision The image of the company, what the company wants to create and what it wants to become. Should be motivating
and inspiring.
Mission This is what the company does. It should be short and easy to memorize but shouldn’t be generic.
Goals Are dreams with deadlines, they are quantifiable and you should clearly know if you hit them or not.
Strategy Its something everyone can contribute to, that will advance the organisation.

A DEFINITION OF MANAGEMENT
Management: is the process of planning, organising, leading, and controlling the scarce resources of the
organisation to achieve the organisation’s mission and goals as productively as possible.
# Function Description
1 Planning  The management function that determines where the organisation wants to be in the future: vision,
mission, goals
 Strategic plans: made by top management, 5-10 years
 Tactical plans: made by functional managers
 Operational plans: made by lower management, shorter term plans i.e. daily, weekly, monthly
2 Organising  Allocation of human resources
 Tasks, roles and responsibilities are defined
  Development of a framework or organisational structure
 Organisational design: management must match the organisation’s structure to its strategies
3 Leading  Directing the human resources of the organisation and motivating them in such a way that they will
be willing to work productively to reach the organisation’s mission and goals
 Managers are responsible for getting things done through other people
 Leading the organisation means making use of influence and power to motivate employees to achieve
organisational goals
4 Controlling  Managers should constantly make sure that the organisation is on the right course to reach its goals
 The aim of control is to monitor actual results against planned results

DIFFERENT LEVELS AND AREAS OF MANAGEMENT

Top management
Responsible for the organisation as a whole
Includes board of directors, partners, managing director, chief executives
Responsible for determining the mission, vision, goals and overall strategies of the entire organisation
Concerned with long-term planning, leading the organisation, and monitoring overall performance
Middle management
Responsible for specific departments of the organisation
Includes functional heads such as financial manager, marketing manager etc.
Primarily concerned with implementing the strategic plan formulated by top management
Responsible for medium-term planning (the near future) and leads by means of the department heads
Continually monitor environmental influences that may affect their own departments
Lower/first-line management
Responsible for smaller segments of the organisation
Includes supervisors or foremen
Deal with the monthly, weekly and daily management of their sections
Ensure the plans made my middle management are implemented
The primary concern is to apply policies, procedures and rules, to provide technical assistance, to motivate and
ensure goals are reached
Areas of management
 Operations – controls & directs the process that transforms inputs into g&s
 Marketing – marketing of new product/services and improving old
 Financial – deals with all financial matters
 Procurement – buying of materials needed to create g&s
 Human resources – training, development, remuneration etc
 Public relations – create favourable, objective image of the organisation
 Research & development – developing new g&s and improving the old ones

THE ROLE DISTRIBUTION OF MANAGERS

Managerial Roles
Interpersonal role Information role Decision-making role
Figure head Monitor Entrepreneur
Leader Disseminator Problem solver
Liaison Spokesperson Resource allocator
Negotiator

MANAGEMENT SKILLS
Teambuilding – ability to listen & communicate with others and to coordinate a group
Drive – ability to set goals, maintain standards and evaluate performance
Technical – ability to apply knowledge, education & experience to organise a task

Managerial Skills
Technical Teambuilding Drive
Problem solving Coordinating Control of details
Imagination Cooperating Energy
Creativity Directing & coaching Exerting pressure
CHAPTER 4: THE COMPOSITION OF THE MANAGEMENT ENVIRONMENT
THE STRUCTURE AND DYNAMICS OF THE MANAGEMENT ENVIRONMENT
The micro-environment
↘the business itself that management has full control
The key variables in this environment include:
• The mission and goals
• Organisation strategies
• Various management functions
• The organisation’s resources
• The organisation’s policies
The macro-environment
↘exists outside of the organisation that management cannot control
It comprises 6 distinct sub-environments (PESTIE):
• The political environment – the government, political involvement, and legislation
• The economic environment – inflation, recession, exchange rates, monetary and fiscal policy
• The social environment – lifestyles, urbanisation, habits, values, culture
• The technological environment – responsible for the pace of innovation of change (includes infrastructure)
• The international environment
• The ecological environment – natural resources, flora and fauna, mineral resources, etc.
The market-environment
↘surrounds the organisation
The key variables in this environment include:
• Consumers – needs, preferences, purchasing power, behaviour
• Suppliers – supply of products, raw materials, services and even finance
• Intermediaries – compete to distribute an organisation’s product or its competitors
• Competitors – established (as well as new and potential) and wish to maintain or improve their position
• Labour unions – deal with the supply of labour
Management primary task in this environment:
Identify, evaluate, and utilise opportunities in the market
Minimise threats
Develop its strategy in such a way that it can deal with competition in that industry
The remote environment
↘ broader environment within which the organisation functions and surrounds the market
This includes:
• Ecological environment – limited natural resources
• Political environment – this influences organisations greatly
• Economic environment – businesses are influenced by interest rates, unemployment, BoP, policies
• Cultural environment – culture will affect our characteristics that distinguish one person from another
• Technological environment – knowledge, tools and actions that transform ideas, materials & info into
finished products

ANALYSIS OF THE MANGEMENT ENVIRONMENT

PHASE 1) Identify key environmental variables
PHASE 2) Evaluate and select a technique for analysing
Explicitness
Comprehensiveness
Simplicity
Sensitivity to nuances
Timeliness
Cost-effectiveness
PHASE 3) Develop an environmental profile
PHASE 4) Monitor the variables, trends and environment continuously
CHAPTER 10 – PRINCIPLES OF PLANNING
THE NATURE AND IMPORTANCE OF PLANNING
Determine the organisational vision, mission and goals
Organisational vision
Statement of where the business wants to be in the future and what it wants to become
Mission statement
Aligns the organisation with its vision in terms of g&s, market & technology
Goal setting
Targets that the business strives towards
Good objective:
 Expressed in quantitative terms
 Expressed in specific terms
 State desired results
 Be attainable
 Be acceptable
 Give a time period
 Be compatible with one another
 Be flexible

BENEFITS AND COSTS OF PLANNING

Benefits
 Provides direction
 Leads to a participatory work environment
 Reduces the impact to change
 Reduces the overlapping of activities
 Sets standards
Costs
o Create rigidity
o Consumes management time
o Formal plans cannot replace intuition and creativity
o Delay in decision making

TYPES OF PLANS
The types of plans made by top, middle, and lower management differ in many respects:
1. Top management: strategic plans for the entire organisation
2. Middle management: tactical and operational plans for specific functional areas
3. Lower management: individual plans for their smaller sections
Strategic, tactical & operational plans – Breadth
Strategic plans: ensure the organisation as a whole is aligned with the changing external environment.
Planning at this strategic level includes
1. Creating a vision of the future for the entire organisation
2. Translating the vision into a realistic mission statement
3. Translating the mission statement into measurable long-term goals
4. Choose a strategy/strategies to attain the above
The strategic plan reflects the following characteristics
1. Strategic plans have an extended time frame, usually more than 5 years
2. Focus on the entire organisation – not just certain departments
3. Look at reconciling the organisation’s resources with threats and opportunities in the external
environment
4. Focus on creating and maintaining a competitive advantage for the organisation
5. These plans also take synergy into consideration
Tactical plans: specify how medium-term objectives are to be achieved
Operational plans: focus on carrying out tactical plans to achieve operational goals
Long-medium & short term
LT: developed to achieve the overall goals of the organisation – top management
MT: developed to realise the tactical goals derived from overall goals – middle management
ST: developed to achieve operational goals – lower management
Specific & directional plans – Specificity
Breadth Timeframe Specificity
S: attaining broad, overall goals Long term Broad
T: focus on functional areas Intermediate More specific
O: carry out tactical plans Short term Narrowly focused
Single use, standing and individual plans

Steps in MBO:
1. Setting individual objectives and plans
2. Identify criteria for assessing work performance
3. Individual employees formulate and implement action plans
4. Compare performance of employees with goals
5. Reward performance
6. Preparation for next period’s objectives

BARRIERS TO EFFECTIVE PLANNING

1. Environmental complexity and volatility
2. Reluctance of managers to establish goals
3. Resistance to change
4. Planning is time-consuming & expensive

OVERCOMING BARRIERS TO EFFECTIVE PLANNING

 Effective planning should start at the top of an organisation
 Involve employees
 Communicate throughout the process
 Not cast in stone

CHAPTER 11: STRATEGIC MANAGEMENT

STRATEGY AND STRATEGIC MANEMENT
Strategy: helps explain what mangers do in order to fulfil the purpose of the business
A winning strategy
Is a strategy that:
 Links the internal strengths & weaknesses with external opportunities & threats
 Builds sustainable competitive advantage
 Always seeks ways to improve the business
 Meets stakeholders expectations
 Aligns itself with environmental requirements

STRATEGIC MANAGEMENT PROCESS

Strategic analysis
DEVELOP A VISION → FORMULATE MISSION STATEMENT → ANALYSE THE ENVIRONMENT
Develop a vision
A vision should provide a clear sense of what the organisation hopes to become. The vision is the end, not the means
of getting to the end.
A clear vision is important to an organisation for the following reasons:
 It portrays the dream that the organisation has for the future
  It promotes change
 It provides the basis for planning & decision making
 It provides a basis for strategic control
 It has positive consequences
Develop a mission statement
The vision statement guides the formulation of the mission statement. The mission statement aligns the
organisation with its dream in terms of its products, market, and technology.
Organizations should also address the following components in their mission statement
 Concern for survival/growth/profit
 Values, ethics and beliefs
 Public image
 Social responsibility
 Concern for all stakeholders
 Competitive advantage
Analyse the environment
Internal: to identify assets, resources, skills and processes that represent strengths or weaknesses
Strengths: potential competitive edge
Weaknesses: areas in need of change or improvement
External: this is to identify opportunities & threats
Opportunities: variables that can improve an organisation competitive position
Threats: hinder an organisation to be successful
Strategy formulation
SET LONG-TERM GOALS → FORMULATE CORPORATE AND BUSINESS STRATEGIES
Set long term goals
Goals state a general target while objectives state what is to be accomplished in specific measurable terms with a
target date. G & O should flow from the mission statement to address strategic issues identified through the analysis
phase
Kaplan and Norton state “what you measure is what you get”. BSC includes financial measures that tell the results of
actions already taken. A strategy map visually represents how an organisation creates value. They argue that
sustained value creation depends on managing four key internal processes:
1. Financial perspective
2. Customer perspective
3. Internal perspective
4. Learning and growth perspective
Formulating corporate business strategy
Generic strategies
There are three types of generic strategy:
An overall low-cost leadership strategy attempts to maximize sales by minimizing costs per unit and hence prices.
Differentiation distinguishes an organisation’s products or services from those of its competitors
Focus on a specific product line or a segment of the market to give an organisation a competitive edge
Grand strategies
CORPORATE GROWTH STRATEGY → CONCENTRATION GROWTH, MARKET DEVELOPMENT, PRODUCT
DEVELOPMENT, INNOVATION, INTEGRATON, DIVERSIFICATION,
CORPORATE COMBINATION
CORPORATE DECLINE STRATEGY → TUNAROUND, DIVESTITURE, HARVESTING, LIQUIDATION
Selecting a corporate strategy
STARS are businesses in rapidly growing markets with large market shares.
Cash generating businesses are CASH COWS as they can be “milked” for resources to support other businesses.
QUESTION MARKS are high-growth, low-share SBUs that normally require a lot of cash to maintain.
A DOG is usually a candidate for divestiture or liquidation.
Strategy implementation
SET FUNCTIONAL GOALS & OBJECTIVES → FORMULATE MEDIUM & SHORT-TERM STRATEGIES →
INSTITUTIONALISE STRATEGIES
Without strategy implementation all good intentions of business will not be realised
Strategic leadership: leading the entire organisation. Involves:
 Setting direction for the whole organisation
  Providing leadership to drive the organisational strategy
 Providing necessary HR
 Managing social capital
 Building and utilising core competencies
 Creating an alignment between vision, mission, goals & objectives
 Leading and managing change
Organisational culture: values, beliefs and norms that bind people together
Organisation architecture: integrated model of how the business is doing things
Strategic control
STRATEGIC CONTROL → ORGANISATION PERFORMANCE, PRODUCTIVITY, MANAGEMENT EFFECTIVENESS
This involves monitoring the implementation of the strategic plan and ensuring quality and total effectiveness

CHAPTER 12: DECISION MAKING

THE RELATIONSHIP BETWEEN PROBLEMS, PROBLEM SOLVING, AND DECISION MAKING
Problem solving: The process of taking corrective action that will solve the problem and that will realign the
organisation with its goals
Decision making: The processes of selecting an alternative course of action that will solve a problem – managers
need to make a decision whenever they are faced with a problem

TYPES OF MANAGERIAL DECISIONS

Programmed decisions – repetitive and routine
Decisions are programmed to the extent that they are repetitive and routine. Examples: processing of payroll
vouchers or of graduation candidates at a university.
Managers can usually handle programmed decisions by means of policies, standard operating procedures, and rules.
Non-programmed decisions – novel and ill-structured
Decisions are non-programmed to the extent that they are novel and unstructured.
Non-programmed decisions have never occurred before, they are complex and elusive, and there is no established
method for dealing with them.

DECISION-MAKING CONDITIONS
The conditions under which decisions are made are:
1. Certainty
2. Risk
3. Uncertainty
Certainty
A decision is made under conditions of certainty when the available options and the benefits or costs associated with
each are known in advance.
Risk
Decisions under conditions of risk are perhaps most common.
Probability falls into two categories: Objective and Subjective:
Objective probability is based on historical evidence. Historical evidence is not available, so a manager must rely on
a personal estimate and belief, or subjective probability, of the situation outcome.
Uncertainty
A decision is made under conditions of uncertainty when there is a lack of information – the outcome of each
alternative is unpredictable and managers cannot determine probabilities.
Sources of uncertainty and high risk for organisations: Seven categories:

1. Economic recessions, stock market crashes, hostile takeovers

2. Physical industrial accidents supply breakdowns,
3. Personnel strikes, workplace violence
4. Criminal theft of money and goods, product tampering
5. Information theft of information, tampering with company records
6. Reputation rumour mongering, slander
7. Natural disasters fires, floods, earthquakes
DECISION-MAKING MODELS
The decision making process
Stage 1: Recognise, classify, and define the problem or opportunity
The problem or opportunity may be classified in terms of the type of decision that needs to be made, the decision-
making condition and the decision-making model making model used.
Stage 2: Set goals and criteria
The manager will be responsible for this task. He or she can make an individual decision or involve a group in
decision making.
Stage 3: Generate creative alternative courses of action
Innovation and creativity play a major part in generating various courses of action.
Stage 4: Evaluate alternative courses of action.
Each option should be evaluated in terms of its strengths and weaknesses, advantages and disadvantages, benefits
and costs.
Stage 5: Select the best option
This step requires a manager to evaluate each option carefully against the goals and criteria set during the second
state, with a view to ranking the options in order of priority.
Stage 6: Implement the chosen option
It is possible for a good decision to be damaged by poor implementation, while a poor decision may be helped by
good implementation.
Stage 7: Conduct follow-up evaluation
Evaluation is necessary to provide feedback on its outcome. Adjustments are invariably needed to ensure that
actual results compare favorably with planned results.

GROUP DECISION MAKING

The advantages
 Variety of skills and specialised knowledge
 Multiple and conflicting views can be taken into account
 Beliefs and values can be transmitted and aligned
 More commitment to decisions because more members participate
 Will improve the morale and motivation of employees
 Allowing participation trains people to work in groups
The disadvantages
o More time consuming and slower decisions
o Groups are likely to choose the first option that meets minimal criteria
o One group member, or a sub-group, may dominate and nullify the group decision
o It may inhibit creativity and lead to conformity

TECHNIQUES FOR IMPROVING GROUP DECISION MAKING

Brainstorming
Criticism is prohibited
No “yes, but…” comments allowed
Imaginative solutions are welcome
Quantity is important
Combination and improvement of suggested solutions is encouraged
Nominal group technique
7-10 members meet as a group
Each member independently writes down his/her ideas
Each member presents one idea to the group – no discussion takes place until all ideas have been recorded
The group leader instructs participants to vote on their preferred solutions
Each member silently and independently ranks the ideas
The process may conclude with an acceptable solution
Appropriate when there is a: dominant person, conformity, or groupthink
The Delphi technique
Does not require the physical presence of participants
Involves using a series of confidential questionnaires to refine a solution
Characterised by the following steps:
A. Problem identified and members asked to provide solutions using a questionnaire
 B. Each member anonymously and independently completes the first questionnaire
C. Results compiled at a central location, transcribed, and reproduced
D. Each member then receives a copy of the results
E. Members are asked again for their solutions
F. Process repeats (last 2 steps)
Group decision support system (GDSS)
Computer-supported group decision-making systems
In an electronic brainstorming sessions, the participants simply type in their suggestions. These ideas are
disseminated to the other group members without an identifying mark. Thus anonymity is preserved and the group
members can respond more freely than in a conventional brainstorming session.
Top management commonly uses the Delphi technique for a specific decision. Brainstorming and the nominal group
techniques are frequently used at middle and lower management level where work groups are involved.

TOOLS FOR DECISION MAKING

Quantitative tools for decision making
Decision-making tools in conditions of certainty
Linear programming
↘The most frequently and extensively used. It is a quantitative tool for optimally allocating scarce resources among
competing uses to maximize benefits or minimize losses.
Queuing theory
Queuing theory is a quantitative tool for analyzing the costs of waiting in queues. The objective of queuing theory is
to achieve an optimal balance between the cost of increasing service and the amount of time individuals, machines,
or materials must wait for service.
Decision-making tools in conditions of risk and uncertainty
 Probability analysis
Probability refers to the estimated likelihood (%) that an outcome will occur. There are two complementary
approaches to using probability analysis, namely pay-off matrices and decision trees.
o Pay-off matrix
The pay-off matrix is a technique for indicating possible pay-offs, or returns, from pursuing different courses of
action.
o Decision tree
A decision tree is a graphic illustration of the various solutions available to solve a problem.
 Break-even analysis
This technique involves the calculation of the volume of sales that will result in a profit. The break-even point is then
calculated as the level of sales where no profit or loss results.
 Capital budgeting
Capital budgeting is a technique that can be used to evaluate alternative investments. A process by which each
alternative investment is analysed in financial terms
 Simulation
Simulation is a quantitative tool for imitating a set of real conditions so that the likely outcomes of various courses of
action can be compared. This enables managers to save time and money and keeps them better informed.
The Kepner-Fourie method
The Kepner-Fourie method combines the objective quantitative approach with some subjectivity. The subjectivity
comes from determining “must” and “want” criteria and assigning value weights to them.
Step 1 Compare each alternative to the “must” criteria listed in column 1.
Step 2 Rate each “want” criterion (column 1) on the scale of 1 to 10.
Step 3 Assign a value of 1 to 10 to how well each alternative meets all the “want” criteria.
Step 4 Compute the weighted scores for each alternative by multiplying the importance value by the “meets
criteria” value for each house.
Step 5 Select the alternative with the highest total weighted score as the solution the problem.
Cost-benefit analysis
Compares the costs & benefits of each alternative course of action using subjective intuition & judgment. Makes use
of mathematics to make the decision. A: benefits | D: costs
CHAPTER 13: INFORMATION MANAGEMENT
INFORMATION MANAGEMENT AND THE DECISION MAKING PROCESS
An information system transforms data from an organisation’s external and internal environments into information
that can be used by managers in the decision-making process.

BASIC FUNCTIONING OF AN INFO SYSYTEM

A Definition of an Information System
Data: refers to raw, unanalysed numbers and facts about events or conditions from which information is drawn.
Information: processed data that is relevant to a manager. Management information: information that is timely,
accurate, and relevant to a particular situation. Information system: the people, procedures, and other resources
used to collect, transform, and disseminate information in an organisation. An information system accepts data
resources as input and processes them into information products as output.
The basic components of an info system
An information system utilizes hardware, software, and human resources to perform the basic activities of input,
processing, output, feedback, control, and storage
Hardware resources
Is a broad term that denotes the physical components of a computer system. The categories:
 Input devices (keyboards, optical scanning devices)
 A central processing unit (electronic components) The CPU can be seen as the “brain”
 Output devices (printers, audio devices and display screens)
 Auxiliary storage (magnetic disks and tape)
Software resources
Programs or detailed instructions that operate computers. These include:
 System software (manages the operations of a computer)
 Application software (performs specific data-processing)
 Procedures that entail the operating instructions for users
The human resources
Required to operate an info system. Includes:
 Specialists: people who develop and operate information systems, such as systems analysts,
programmers, and computer operators.
 End-users: people who use the information produced by a system. Managers are end-users of
information.

CHARACTERISTICS AND COSTS OF USEFUL INFORMATION

o Quality (accuracy). The more accurate the information, the higher its quality.
o Relevance. Information is relevant only when it can be used directly in problem-solving and decision-making
processes.
o Quantity (sufficiency). Quantity is the sufficient amount of information available when users need it – more
is not always better.
o Timeliness (currency). Timeliness means the receipt of the needed information while it is current and before
it ceases to be useful for problem-solving and decision-making processes.

ORGANISING INFORMATION SYSTEMS

An organisation’s corporate or grand strategy feeds down through divisional or business unit strategies, into a
number of functional strategies.
IS strategy, as one of an organisation’s functional strategies, may have various sub-strategies.
1. IT strategy can be developed into a hardware and software strategy:
2. The manual systems strategy can be developed into a planning and staffing strategy.
3. The communications strategy can be developed into a data strategy and voice strategy.

CLASSIFICATION OF INFORMATION SYSTEMS

Information systems perform operational and managerial support roles in organisations
Operations information systems – make routine decisions that control physical processes
Transaction-processing systems (TPS) – record and process data resulting from business transactions such as sales,
purchases and inventory changes
Process control systems (PCS) – an IS in which decisions adjusting a physical production process are automatically
made by computers
Office automation systems (OAS) – support office communication and productivity such as word processors, email,
desktop publishing, teleconferencing
Management information systems – Provide information on and support for decision-making managers
Information-reporting systems (IRS): Information reports
Decision support systems (DSS): Computer based information systems that provide interactive
information support to managers during the decision-making process Use:
 Analytical models
 Specialised databases
 The decision-maker’s own insights and judgements
 Interactive computer-based modelling process
Executive information systems (EIS): Tailored to the strategic information needs of top management
Access to information on the organisation’s critical success factors
Other classifications
Expert systems
An attempt to mimic human experts consisting of a decision-making & problem-solving package of PC hardware and
software that can reach the level of performance of a human
Business function information systems
Information systems directly support the business functions of accounting, finance, human resource management,
administration, purchasing, marketing, and operations management.
The internet
The Internet makes use of thousands of computers linked by thousands of different paths. Each message sent bears
an address code that speeds it towards its destination. It offers almost unlimited communication opportunities.
One drawback is the limited privacy of information sent over it.
Internet access usually provides four primary capabilities:
1. Electronic mail enables users to send, receive, and forward messages from people all over the world.
2. Telnet enables users to log in to remote computers and to interact with them.
3. File transfer protocol enable users to move files and data from one computer to another.
4. World Wide Web is a set of standards and protocols that enable users to access and input text, documents,
images, video, and sound on the Internet.
The extranet
The extranet is a wide area network that links an organisation’s employees, suppliers, customers, and other key
stakeholders electronically. The general public does not have access to an extranet.
The intranet
Is a semi-private internal network where access is limited to an organisation’s employees. It enables managers and
employees to communicate with each other and to access internal information and databases for which they have
been cleared.
E-commerce
Electronic commerce (e-commerce) can be defined as “the process of buying and selling goods and services
electronically by means of computerized business transactions.
Three types of e-commerce exist:
Business-to-consumer (B2C): selling products and services to customers over the Internet. (Amazon.com)
Business-to-business (B2B): electronic transactions between organisations.
Consumer-to-consumer (C2C): Internet-based business acts as an intermediary between and among
consumers (Web-based auction)

DEVELOPING AN INFORMATION SYSTEM

Systems Investigation
Determine the nature and scope of the need for information
Systems Analysis
An in-depth study of end-user requirements. Steps:
1. Study of the information requirements of an organisation and its end-users
2. Understand the current system that is to be improved or replaced
3. Determine the system requirements for a new or improved IS
Systems Design
Specifies how a system will accomplish the goal from systems analysis -it involves logical and physical design
activities.
Systems Implementation, Maintenance, and Security
Systems Implementation
Acquiring hardware and software, Developing software, Testing programs and procedures, Developing
documentation, Carrying out installation activities, Training of end-users and operating personnel
Systems Maintenance
Monitoring, Evaluating, Modifying, Enhancing a system once it is up and running, Post audit
Systems Security
Access rights

CHAPTER 15: PRINCIPLES OF ORGANISING

ORGANISING, ORGANISATION, AND ORGANISATIONAL STRUCTURE
Organising: The process of creating a structure for the organisation that will enable its people to work effectively
towards its vision, mission, and goals
The process of determining which tasks managers and workers should perform, who will perform them, and how
these tasks will be managed and coordinated
Organisation: The end result of the organising process
The process of assigning the tasks necessary to achieve the organisation’s goals to the relevant business units,
departments, or sections, and then providing the necessary coordination to ensure that they work synergistically
Organisational structure: The basic framework of formal relationships between responsibilities, tasks, and people in
the organisation

THE IMPORTANCE OF ORGNISING

 Allocation of responsibilities.
 Accountability. The responsible employees will be expected to account for the outcomes, positive or
negative, for that portion of the work directly under their control.
 Establishing clear channels of communication
 Resource deployment. Organising helps managers to deploy resources meaningfully.
 Synergy. This enhances the effectiveness and quality of the work performed.
 Division of work.
 Systematic grouping. In a variety of task, procedures, and resources.
 Coordination. The organisation structure is responsible for creating a mechanism to coordinate the activities
in the entire organisation.

THE ORGANISING PROCESS

 Vision, mission, goals and strategies
 Outline tasks and activities
 Design jobs and assign to employees
 Define worker relationship.
 Developed organisational design
 A control mechanism should be put in place

PRINCIPLES OF ORGANISATION
Unity of command and direction
↘: means that each employee should report to only one supervisor.
↘: means that all task and activities should be directed toward the same mission and goals.
Chain of command
↘: states that a clear, unbroken chain of command should link every employee with someone at a higher level, all
the way to the top of the organisation.
Span of control
↘: refers to the number of subordinates reporting to a manager. A flat organisation exists when there are few
levels with wide spans of control, whereas a tall organisation exists when there are many levels with narrow spans of
control.
 Division of work
↘: how the workload is divided amongst business units, departments, sections and employees
With the division of work, employees have specialized jobs.
Standardisation
↘: is the process of developing uniform practices that employees are to follow in doing their jobs. The purpose is to
develop a certain level of conformity.
Coordination
↘: means that all departments, sections, should work together to accomplish the strategic, tactical, and operational
goals of the organisation. Coordination entails integrating all organisational tasks and resources to meet the
organisation’s goals.
Thompson has identified three major forms of interdependence
1. In groups that exhibit pooled interdependence, the units operate with little interaction; the outputs of the
units are pooled at organisational level.
2. In sequential interdependence, the output of one unit becomes the input for the next unit.
3. Reciprocal interdependence refers to a situation in which the outputs of one work unit become the inputs
for the second work units, and vice versa.
Responsibility, authority, and accountability
↘: the obligation to achieve goals by performing required activities
↘: the right to make decisions, issue orders, and use resources
↘: the evaluation of how well individuals meet their responsibility.
Managers can delegate responsibility and authority, but never their accountability.
Power
↘: refers to the ability to influence the behavior of others in an organisation.
The following kinds of power can be distinguished in organisations:
Legitimate power is the authority that the organisation grants to a particular position.
The power of reward is the power to give or withhold rewards, which can be of a financial or a non-financial nature.
Coercive power is the power to enforce compliance through fear, whether psychological or physical.
Referent power relates to personal power and is a somewhat abstract concept.
People follow a person with referent power simple because they like, respect, or identify with him or her.
Expert power is based on knowledge and expertise, and a leader who possesses it has special power over those who
need his or her knowledge.
Delegation
↘: the process of assigning responsibility and authority for attaining goals. Responsibility and authority are
delegated down the chain of command.
Downsizing and delayering
↘: is a managerial activity aimed at reducing the size of an organisation’s workforce.
↘: is the process of reducing the number of layers in the vertical management hierarchy.

AUTHORITY
Formal & informal authority
Formal authority
Formal authority refers to the specified relationships among employees. It is the sanctioned way of getting things
done.
Informal authority
Informal authority refers to the patterns of relationship and communication that evolve as employees interact and
communicate. It is the unsanctioned way of getting things done.
Line & staff authority
Line authority
Line authority entails the responsibility to make decisions and issue orders down the chain of command. Line
authority originates at top management level, with the directors, and is delegated to the heads of the different units,
departments, or sections.
Staff authority
Staff authority entails having the responsibility to advise and assist other personnel.
Centralized and decentralized authority
Centralised authority
In centralised authority, important decisions are made by top managers.
Decentralized authority
In decentralised authority, lower levels can decide on certain issues.
Advantages Disadvantages
Reduced workload for top managers Defeats integration of sub-units
Improved decision making Potential loss of control
Improved training, morale, initiative Danger of duplication
Faster and more flexible decision making More expensive and intensive training required
Fosters a competitive climate Demands sophisticated planning and reporting methods

The following factors should be considered in deciding to centralize or decentralize authority:

o The external environment
o The history of the organisation
o The nature of the decision
o The strategy of the organisation
o Skills of lower-level managers
o The size and growth of the organisation

THE DEPARTMENTALISATION APPROACH TO ORGANISATION STRUCTURE

Organisational design: refers to the arrangement of positions into work units or departments and the
interrelationship among them within an organisation

Functional departmentalisation
Activities belonging to each management function are grouped together
Used by organisations with a single product focus
Poses challenges in terms of coordination of the specialist functions – specialists may view the organisation solely
from their own perspective
Product departmentalisation
All activities concerned with the manufacturing of a product, or group of products, are grouped together in product
sections
Logical structure for large organisations providing a wide range of products or services
The advantages are:
o Specialised knowledge of employees regarding particular products is used to maximum effect
o Decisions can be made quickly within a section
o The performance of each group can easily be separately measured
The disadvantages are:
 Managers in one particular section may concentrate their attention almost exclusively on their particular
products and tend to lose sight of those of the rest of the organisation
 Administrative costs could increase
 Location departmentalisation
Suitable for multinational businesses
Customer departmentalisation
Appropriate when an organisation concentrates on a particular segment of the market or group of consumers, or a
limited group of users
Same advantages and disadvantages as product departmentalisation
Structures based on product, location, or customers resembles in some respects a small privately owned business
Multiple departmentalisations
The hybrid, used by large or complex organisations:
 Matrix departmentalisation
Combines functional and product departmental structures
Employee works for finance dept. but is also assigned to one or more products or projects
Advantage - flexibility
Disadvantage – employee reports to 2 superiors – violates the unity of command principle
Divisional departmentalisation
Large, complex, and global organisations with related products and services
Departmentalised into semi-autonomous strategic business units
Any combination of the other forms of departmentalisation may be used by the organisation within its divisions
Network structure
Describes an interrelationship between different organisations
A network organisation usually performs the core activities itself but subcontracts non-core activities to other
organisations
New venture units
Groups of employees who volunteer to develop new products or ventures
Uses a form of matrix structure and when complete can be adopted into:
The new products or ventures become part of the traditional departmentalisation
Team approach
Gives managers a way to delegate authority, push responsibility to lower levels and be more flexible and responsive
in the competitive global environment
The virtual network approach
Builds on the features of the network organisation
No longer necessary to have all employees, teams, departments in one office or facility
Advantage – provides flexibility
Disadvantage – higher levels of mutual and successive interdependence than a network organisation

DESIGNING JOBS THAT MOTIVATE

Job design
Job design refers to the process of combining the tasks that each employee is responsible for.
Job specialisation
Job specialisation, or job simplification, refers to the narrowing-down of activities to simple, repetitive routines.
The term “job” specialisation should not be confused with “person specialisation”, which refers to individuals with
specialised training (lawyers)
Job expansion
It is the process of making a job less specialized. Jobs can be expanded through job rotation, job enlargement, and
job enrichment.
 Job rotation involves performing different jobs for a set period of time.
 Job enlargement stems from the thinking of industrial engineers. A job is enlarged when an employee
carries out a wider range of activities of approximately the same level of skill.
 Job enrichment is implemented by adding depth to the job. Job enrichment entails increasing both the
number of tasks a worker does and the control the worker has over the job.

DELEGATION
The process through which managers assign a portion of their total workload to others – authority is also passed on
to an employee. Managers delegate for the following reasons:
o Promotes succession planning
o Enables manager to get more management work done
o Subordinates profit from delegation – learn to develop decision-making and problem-solving skill
o Managers remain accountable for their subordinates
The parity principle: Authority and responsibility should be co-equal
Principles of effective delegation
Some principles that can be used as guidelines:
1. Explain the reason(s) for delegating.
2. Set clear standards and goals.
3. Ensure clarity of authority and responsibility.
4. Involve subordinates.
5. Request the completion of tasks.
6. Provide performance training.
7. Provide feedback to the subordinate.
The advantages of delegation
• Delegation encourages employees to exercise judgment and accept accountability
• Better decisions are often taken by involving employees who are “closer to the action”
• Quicker decision making takes place
Obstacles to effective delegation
Barriers may be helpful to us, as managers:
• The manager may also feel that the subordinate will not do the job as well as he or she can do it.
• Managers are often too inflexible or disorganised to delegate.
• Managers may also be reluctant to delegate because they fear their subordinates will do the job better than them
Overcoming obstacles to effective delegation
One way of overcoming obstacles is to create a culture of continuous learning. Improved communication between
subordinates and managers removes obstacles to delegation.
The delegation process
The recommended steps in the delegation process:
1. Decide on the tasks to be delegated.
2. Decide who should perform the tasks.
3. Provide sufficient resources for carrying out the delegated tasks.
4. Delegate the assignment.
5. Be prepared to step in, if necessary.
6. Establish a feedback system.

CHAPTER 19: PRINCIPLES OF LEADING

A DEFINITION OF LEADERSHIP
↘: the process of influencing and directing the behaviour of individuals towards reaching the organisation’s mission
and goals.

LEADERSHIP & MANAGEMENT

Management – about coping with the complexity of practices and procedures to make organisations work
Leadership – about setting the direction of the organisation and coping with change
LEADERS cope with change MANAGERS cope with change
Setting a directive Planning and budgeting
Aligning people Organizing and staffing
Motivate and inspire people Controlling and problem solving

THE COMPONENTS OF LEADERSHIP

The components of leadership
1. Authority – the right to give orders and to demand action from subordinates
2. Power – the ability to influence the behaviour of others
3. Influence – the ability to apply authority and power in such a way that followers take action
4. Delegation – subdividing a task and passing a smaller part on to a subordinate with the authority to execute

Kinds of power as per French and Raven (CH15)

Legitimate power: This refers to the authority that the organisation grants to a particular position.
The power of reward: There is the power to give or withhold rewards.
Coercive power: This is the power to enforce compliance through fear, either psychological or physical.
Referent power: This refers to personal power. Subordinates follow their leaders because they like, respect, or
identify with him or her. Such a leader is said to have “charisma”
Expert power: This is power based on knowledge and expertise.

LEADERSHIP APPROACHES
Trait theories of leadership – isolate characteristics that differentiate leaders from non-leaders and effective leaders
from ineffective leaders.
 The behavioural approach
University of Iowa
Autocratic: makes all decisions and limits employee participation
Democratic: involves employees in decision-making, encourages participation and provides feedback
Ohio State University
Initiating structure: establish formal lines and determine how employees should perform their tasks
Consideration: behaviour of leaders who show concern for subordinates
University of Michigan
Job-centred: leaders who focus on their job and work procedures
Employee-centred: leaders who develop cohesive work groups and ensure employee satisfaction
University of Texas
Impoverished management
Authoritarian management
County club management
Middle-of-the-road management
Team management
The contingency approach
Least preferred co-worker (LPC) theory
Based on the assumption that, for lack of a single best style, successful leadership depends on the match between
the leader, the subordinate, and the situation i.e. how well the leader’s style fits the situation.
According to Fiedler, a manager can maintain this match by:
The path-goal theory
Developed by Robert House – it is the leader’s job to assist his or her followers in attaining their goals and to provide
the necessary direction and support to ensure that their goals are compatible with the organisation.
House identified 4 leadership behaviours
The directive leader – lets employees know what is expected of them and gives specific guidance
The supportive leader – shows concern for the needs of employees
The participative leader – consults with employees and uses their suggestions before making a decision
The achievement-oriented leader – sets challenging goals and expects employees to perform at their highest level
Situational leadership theory
4 basic leadership styles: Telling, Selling, Participating, Delegating
Contemporary approaches
Transactional leadership – involves an exchange of rewards for compliance
Charismatic leadership – self-confidence, vision, unconventional behaviour and an emotional impact on
subordinates
Transformational leadership – leaders and followers raise one another to higher levels of morality & motivation
Emotional intelligence – ability to monitor one’s own & other’s feelings
Servant leadership – helping and encouraging others in personal development or to find purpose in their jobs
Empowerment – leaders empower employees at all levels to help make decisions

CHAPTER 20: WORKFORCE MOTIVATION

THE MOTIVATION PROCESS
The variables that determine performance are
 Motivation – goal or desire
 Ability – training, knowledge, skills
 Opportunity to perform
Motivation x Ability x Opportunity = Performance
NEED→MOTIVE→BEHAVIOUR→CONSEQUENCE→SATISFACTION/DISSATISFACTION→

MOTIVATION THEORIES
We classify motivation theories in terms of p387:
1. Content (the what and the how)
2. Process (the what and the how)
3. Reinforcement theories (the ways in which desired behaviour can be encouraged)
 Content Process Reinforcement
Focus Identify the needs Goal setting Behavior as a function of its
employees want to satisfy Evaluation of satisfaction consequences
Identify the factors that
influence employees
Theories Maslow’s hierarchy Equity theory Reinforcement theory
ERG theory of motivation Expectancy theory
Herzberg’s 2-factor model
Acquired needs theory
Content theories

Maslow’s Hierarchy of Needs

Based on 2 important assumptions
1. People always want more, and their needs depend on what
they already have
2. People’s needs arise in order of importance
Criticisms of Maslow’s theory
 During certain periods of their lives, people reorder the
hierarchy
 Difficult to determine the level of needs at a certain point in
time
 Managers work with many employees
 Individuals differ in the extent to which they feel a need has
been sufficiently satisfied

The ERG Theory

Clayton Alderfer adapted Maslow’s theory into 3 broader
categories
Existence – physiological & physical
Relatedness – social
Growth needs – esteem & self-actualisation

Herzberg’s Two-Factor Motivation Theory

The value of Herzberg’s two-factor theory in the

workplace
Extends Maslow’s ideas and makes them more
applicable in the workplace
Focuses attention on the importance of job-centred factors in the motivation of employees
Offers an explanation for the limited influence on motivation of more money, fringe benefits, and better working
conditions

McClelland’s Achievement Motivation Theory (Acquired Needs Model)

Postulates that people acquire certain types of needs during a lifetime of interaction with the environment – when a
need is strong, it will motivate the person to engage in behaviours to satisfy that need:
 The need for achievement (N Ach)
 The need for affiliation (N Aff)
 The need for power (N Pow)
Process theories
The Equity Theory of Motivation
An individual must be able to perceive a relationship between:
The reward he or she receives and his or her performance
 The Expectancy Theory of Motivation (Victor Vroom)
People will act according to:
Their perceptions that their work efforts will lead to certain performances and outcomes and how much they value
the outcomes

Effort Performance Reward

Expectancy Instrumentality Valence

An individual’s work motivation is determined by the following elements

 Expectancy (effort-performance relationship)
 Instrumentality (performance-reward relationship)
 Valence (rewards-personal goals relationship) – value attached to outcomes
The Reinforcement Theory of Motivation
Reinforcement can be positive or negative
Positive:
Positive reinforcement
Avoidance
Negative:
Punishment
Extinction
Strategies for scheduling reinforcement
o Continuous reinforcement – when managers reinforce all desired behaviours
o Fixed interval schedule – fixed times regardless of behaviour
o Variable interval schedule – used mainly for praise or rewards
o Fixed ratio schedule – provides reinforcement after a fixed number of performances
o Variable ratio schedule
The 5 steps that managers should follow to enhance motivation in the workplace by using reinforcement theory
1. Identify critical, observable, performance-related behaviours that are NB to successful job performance
2. Measure how often workers engage in these behaviours
3. Analyse the causes and consequences of these behaviours
4. Use positive and negative reinforcement to increase frequency of critical behaviours
5. Evaluate extent to which reinforcement has changed workers’ behaviour

MONEY AS A MOTIVATOR
Maslow – money satisfies the lower order needs
Herzberg’s theories – a monetary reward linked to good performance - such as a merit bonus – acts as a motivator
Equity theory – we use pay as a measurement of fair treatment by comparing it to our outputs
Expectancy theory – money is a motivator if employees perceive that good performance results in a monetary
reward that they value highly
Reinforcement theory – money is a reward to reinforce behaviour that leads to positive job performance

DESIGNING JOBS THAT MOTIVATE

Job Enlargement
Job enlargement involves horizontal work loading – adding a greater variety of tasks to an existing job
Disadvantage – increases variety of tasks, does not alter the challenge that the work offers
Job Enrichment
The concept of vertical work loading – attributed largely to Herzberg’s findings re: the two-factor model
Job enrichment implies the addition of the following to worker’s activity:
  Measurable goals
 Decision-making responsibility
 Control and feedback
The Job Characteristics Model
This model recognises an important limitation of job enrichment – not all workers can or want to apply job
enrichment to their work and not all types of work are suitable for job enrichment.
The 5 core dimensions of this model
1. Skill variety
2. Task identity
3. Task significance
4. Autonomy – think management by objectives
5. Feedback
The 3 critical psychological states
○ Meaningfulness of work – is the task important, valuable, worthwhile?
○ Responsibility for outcomes of the work
○ Knowledge of the actual results of the work activities
The job diagnostic survey (JDS): questionnaire that measures the degree to which various job characteristics are
present in a particular job. The index used to predict the degree to which a job motivates a work =
Motivating Potential Score (MPS):
MPS = [Skill variety + Task identity + Task significance] / 3 x [Autonomy x Feedback]

CHAPTER 21: PRINCIPLES OF CONTROL

THE IMPORTANCE OF CONTROL
A control process is necessary in an organisation for the following reasons:
 Control is exercised to ensure that all activities are in accordance with the organisation’s goals.
 Control is applied to ensure that the organisation’s resources are deployed to attain its goals.
 Control usually results in better quality.
 An organisation is to reach its goals according to plan, control is necessary.
 Competition is a significant factor.
 Control can also help to minimize costs and limit the accumulation of errors.
 Control facilitates delegation and teamwork.

THE CONTROL PROCESS

Control is the process in which management ensures resources are meaningfully deployed so that the mission and
goals of the organisation can be attained.

Step 1: Establishing standards of performance

A performance standard is a projection of expected or planned performance. Control standards should meet certain
criteria:
•In measurable terms •Be consistent •Be realistic •Identify performance indicators
Step 2: Measuring actual performance
Collecting data and reporting on actual performance are ongoing activities.
Step 3: Evaluation deviations
Determining whether performance matches standards entails evaluating differences between actual performance
and the predetermined standards.
Step 4: Taking corrective action
Aimed at achieving or bettering the performance standard and ensuring that differences do not occur in the future.
If actual performance does not match the performance standard, management has three options:

LEVELS OF CONTROL
Strategic control
Strategic control is exercised at top management level and entails a close study of the organisations:
Total effectiveness: extent to which the organisation has reached its goals and the way in which the goals have been
realised
Productivity: an economic measure of efficiency that summarises what is produced (output) relative to resources
used (input) to produce it.
Total factor productivity = outputs \ inputs
Labour productivity = labour outputs \ direct labour
Management effectiveness: management audit of the organisations main success factors
Organisational maturity: an organisation needs to address 5 key business practises:
1. Organisational strategy, structure and support
2. Workflow processes
3. Management skills and competences
4. Functional skills and competences
5. Resource and information management systems
The Organisational Maturity Model has 4 stages:
A. Minimise mistakes
B. Industry positioning
C. Industry leader
D. Sustain industry leadership position
Operations control
Operations control is concerned with the organisation’s processes that entail transforming resources into products
and services.
Preliminary control
The purpose is to anticipate and prevent possible problems regarding any of the resources
Concurrent control
Taking action as inputs are transformed into outputs to ensure standards are met
Rework control
Control over outputs of the organisation after the transformation process is complete
Damage control
Action is taken to minimise the negative impacts on customers from faulty outputs
Feedback control
The measurement of the organisations attainment of its mission

FUNCTIONAL AREA CONTROL SYSTEMS

Financial control
This concerns the control of resources as they flow into the organisation, financial resources that are held by the
organisation and financial resources flowing out of the organisation. We examine two instruments of financial
control: namely budgetary control and financial analysis.
Budget
↘: a formal plan, expressed in financial terms, that indicates how resources are to be allocated to different activities,
departments or sub-departments. 3 types:
Financial budget
Operating budget
Non-monetary budget
Financial statements
This is a profile of some aspects of a business’s financial circumstances
Most popular: income statement, balance sheet and cash flow statement
Financial ratios
Comparing different elements of a BS or IS to assess the financial health, position and performance of the
organisation (liquidity ratios & debt ratios)
Financial audits
An independent appraisal of an organisations accounting and financial systems
The control of human resources
Performance measurement
This entails evaluating employees and managers in the performance of the organisation and comparing
predetermined standards
Coaching
One-on-one relationship with managers and employees aimed at development and improvement
Counselling
Giving feedback to employees so they can see problems affect their job
 Discipline
Corrective action aimed at enabling employees to meet performance standards and business plans
Effective planning rests on:
 Clear communication
 Be sure punishment is fair
 Follow organisational plans yourself
 Take consistent action when policies are broken
 Discipline immediately
 Discipline is private
 Document everything
 Resume normal relation afterwards
The control of physical resources
Inventory control
Inventory: reserves of resources held in readiness to produce products and services as well as the end-products that
are kept in stock to satisfy consumers’ needs.
The following 4 control systems are relevant:
1. The concept of economic ordering quantity (EOQ) is based on replenishing inventory levels by ordering the
most economical quantity.
2. The materials requirements planning (MRP) is to eliminate the shortcomings of the EOQ. Inventories are
ordered only when they are needed.
3. The just-in-time (JIT) is based on the premise that actual orders for finished products are converted into
orders for raw materials and components, which arrive just in time for the manufacturing process.
4. Enterprise resource planning collects processes and provides info about an entire business
Operational control
Purchasing raw materials to ensure that the required quantity & quality are available at the lowest possible cost.
It also establishes how well the organisation’s transformation process works.
Quality control
It compromises of the following steps:
1. The definition of quality goals or standards.
2. Measuring quality.
3. Rectifying deviations and solving quality problems in an effort to keep the cost of quality as low as possible.
The control of information resources
Relevant and timely information is vital in monitoring the progress of goal attainment.

CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM

Integration
A control system is effective when it is integrated with planning, flexible, accurate, goal-oriented, timely, and simple
Flexibility
It should be able to accommodate change.
Accuracy
A control system should be designed in such a way that it provides a goal-oriented and accurate picture of the
situation.
Timeliness
Timely control data is not obtained by means of hasty, makeshift measurement; control data should be supplied
regularly.
Unnecessary complexity
Unnecessarily complex control systems are often an obstacle because they can have a negative influence on the
sound judgement of competent managers.