Management in business and organizations means to coordinate the efforts of people to accomplish goals and objectives using available resources efficiently and effectively. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization or initiative to accomplish a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources.
Since organizations can be viewed as systems, management can also be defined as human action, including design, to facilitate the production of useful outcomes from a system. This view opens the opportunity to 'manage' oneself, a prerequisite to attempting to manage others.
- 1 Etymology
- 2 Definitions
- 3 Nature of managerial work
- 4 Historical development
- 5 Topics
- 5.1 Basic functions
- 5.2 Basic roles
- 5.3 Management skills
- 5.4 Formation of the business policy
- 5.5 Levels of management
- 6 See also
- 7 References
- 8 External links
The verb 'manage' comes from the Italian maneggiare (to handle, especially tools), which derives from the Latin word manus (hand). The French word mesnagement (later ménagement) influenced the development in meaning of the English word management in the 17th and 18th centuries.
Views on the definition and scope of management include:
- Management defined as the organization and coordination of the activities of an enterprise in accordance with certain policies and in achievement of clearly defined objectives
- Fredmund Malik defines as Management is the transformation of resources into utility.
- Management included as one of the factors of production - along with machines, materials and money
- Peter Drucker (1909–2005) sees the basic task of a management as twofold: marketing and innovation. Nevertheless, innovation is also linked to marketing (product innovation is a central strategic marketing issue). Peter Drucker identifies marketing as a key essence for business success, but management and marketing are generally understood[by whom?] as two different branches of business administration knowledge.
- Directors and managers should have the authority and responsibility to make decisions to direct an enterprise when given the authority
- As a discipline, management comprises the interlocking functions of formulating corporate policy and organizing, planning, controlling, and directing a firm's resources to achieve a policy's objectives
- The size of management can range from one person in a small firm to hundreds or thousands of managers in multinational companies.
- In large firms, the board of directors formulates the policy that the chief executive officer implements.
Management involves the manipulation of the human capital of an enterprise to contribute to the success of the enterprise. This implies effective communication: an enterprise environment (as opposed to a physical or mechanical mechanism), implies human motivation and implies some sort of successful progress or system outcome. As such, management is not the manipulation of a mechanism (machine or automated program), not the herding of animals, and can occur in both a legal as well as illegal enterprise or environment. Based on this, management must have humans, communication, and a positive enterprise endeavor. Plans, measurements, motivational psychological tools, goals, and economic measures (profit, etc.) may or may not be necessary components for there to be management. At first, one views management functionally, such as measuring quantity, adjusting plans, meeting goals. This applies even in situations where planning does not take place. From this perspective, Henri Fayol (1841–1925) considers management to consist of six functions:
Henri Fayol was one of the most influential contributors to modern concepts of management.
Some people[which?], however, find this definition useful but far too narrow. The phrase "management is what managers do" occurs widely, suggesting the difficulty of defining management, the shifting nature of definitions and the connection of managerial practices with the existence of a managerial cadre or class.
One habit of thought regards management as equivalent to "business administration" and thus excludes management in places outside commerce, as for example in charities and in the public sector. More broadly,every organization must manage its work, people, processes, technology, etc. to maximize effectiveness. Nonetheless, many people refer to university departments that teach management as "business schools". Some institutions (such as the Harvard Business School) use that name while others (such as the Yale School of Management) employ the more inclusive term "management".
English speakers may also use the term "management" or "the management" as a collective word describing the managers of an organization, for example of a corporation. Historically this use of the term often contrasted with the term "Labor" - referring to those being managed.
Nature of managerial work
In for-profit work, management has as its primary function the satisfaction of a range of stakeholders. This typically involves making a profit (for the shareholders), creating valued products at a reasonable cost (for customers), and providing rewarding employment opportunities for employees. In nonprofit management, add the importance of keeping the faith of donors. In most models of management and governance, shareholders vote for the board of directors, and the board then hires senior management. Some organizations have experimented with other methods (such as employee-voting models) of selecting or reviewing managers, but this is rare.
In the public sector of countries constituted as representative democracies, voters elect politicians to public office. Such politicians hire many managers and administrators, and in some countries like the United States political appointees lose their jobs on the election of a new president/governor/mayor.
Difficulties arise in tracing the history of management. Some see it (by definition) as a late modern (in the sense of late modernity) conceptualization. On those terms it cannot have a pre-modern history, only harbingers (such as stewards). Others, however, detect management-like-thought back to Sumerian traders and to the builders of the pyramids of ancient Egypt. Slave-owners through the centuries faced the problems of exploiting/motivating a dependent but sometimes unenthusiastic or recalcitrant workforce, but many pre-industrial enterprises, given their small scale, did not feel compelled to face the issues of management systematically. However, innovations such as the spread of Hindu-Arabic numerals (5th to 15th centuries) and the codification of double-entry book-keeping (1494) provided tools for management assessment, planning and control.
Given the scale of most commercial operations and the lack of mechanized record-keeping and recording before the industrial revolution, it made sense for most owners of enterprises in those times to carry out management functions by and for themselves. But with growing size and complexity of organizations, the split between owners (individuals, industrial dynasties or groups of shareholders) and day-to-day managers (independent specialists in planning and control) gradually became more common.
While management (according to some definitions) has existed for millennia, several writers have created a background of works that assisted in modern management theories.
Some ancient military texts have been cited for lessons that civilian managers can gather. For example, Chinese general Sun Tzu in the 6th century BC, The Art of War, recommends being aware of and acting on strengths and weaknesses of both a manager's organization and a foe's.
Various ancient and medieval civilizations have produced "mirrors for princes" books, which aim to advise new monarchs on how to govern. Examples include the Indian Arthashastra by Chanakya (written around 300BC), and The Prince by Italian author Niccolò Machiavelli (c. 1515).
Written in 1776 by Adam Smith, a Scottish moral philosopher, The Wealth of Nations discussed efficient organization of work through division of labour. Smith described how changes in processes could boost productivity in the manufacture of pins. While individuals could produce 200 pins per day, Smith analyzed the steps involved in manufacture and, with 10 specialists, enabled production of 48,000 pins per day.
Classical economists such as Adam Smith (1723–1790) and John Stuart Mill (1806–1873) provided a theoretical background to resource-allocation, production, and pricing issues. About the same time, innovators like Eli Whitney (1765–1825), James Watt (1736–1819), and Matthew Boulton (1728–1809) developed elements of technical production such as standardization, quality-control procedures, cost-accounting, interchangeability of parts, and work-planning. Many of these aspects of management existed in the pre-1861 slave-based sector of the US economy. That environment saw 4 million people, as the contemporary usages had it, "managed" in profitable quasi-mass production.
Salaried managers as an identifiable group first became prominent in the late 19th century.
By about 1900 one finds managers trying to place their theories on what they regarded as a thoroughly scientific basis (see scientism for perceived limitations of this belief). Examples include Henry R. Towne's Science of management in the 1890s, Frederick Winslow Taylor's The Principles of Scientific Management (1911), Frank and Lillian Gilbreth's Applied motion study (1917), and Henry L. Gantt's charts (1910s). J. Duncan wrote the first college management textbook in 1911. In 1912 Yoichi Ueno introduced Taylorism to Japan and became first management consultant of the "Japanese-management style". His son Ichiro Ueno pioneered Japanese quality assurance.
The first comprehensive theories of management appeared around 1920. The Harvard Business School offered the first Master of Business Administration degree (MBA) in 1921. People like Henri Fayol (1841–1925) and Alexander Church described the various branches of management and their inter-relationships. In the early 20th century, people like Ordway Tead (1891–1973), Walter Scott and J. Mooney applied the principles of psychology to management, while other writers, such as Elton Mayo (1880–1949), Mary Parker Follett (1868–1933), Chester Barnard (1886–1961), Max Weber (1864–1920), Rensis Likert (1903–1981), and Chris Argyris (* 1923) approached the phenomenon of management from a sociological perspective.
Peter Drucker (1909–2005) wrote one of the earliest books on applied management: Concept of the Corporation (published in 1946). It resulted from Alfred Sloan (chairman of General Motors until 1956) commissioning a study of the organisation. Drucker went on to write 39 books, many in the same vein.
H. Dodge, Ronald Fisher (1890–1962), and Thornton C. Fry introduced statistical techniques into management-studies. In the 1940s, Patrick Blackett worked in the development of the applied mathematics science of operations research, initially for military operations. Operations research, sometimes known as "management science" (but distinct from Taylor's scientific management), attempts to take a scientific approach to solving decision problems, and can be directly applied to multiple management problems, particularly in the areas of logistics and operations.
Some of the more recent[update] developments include the Theory of Constraints, management by objectives, reengineering, Six Sigma and various information-technology-driven theories such as agile software development, as well as group management theories such as Cog's Ladder.
As the general recognition of managers as a class solidified during the 20th century and gave perceived practitioners of the art/science of management a certain amount of prestige, so the way opened for popularised systems of management ideas to peddle their wares. In this context many management fads may have had more to do with pop psychology than with scientific theories of management.
Towards the end of the 20th century, business management came to consist of six separate branches, namely:
- human resource management
- operations management or production management
- strategic management
- marketing management
- financial management
- information technology management responsible for management information systems
In the 21st century observers find it increasingly difficult to subdivide management into functional categories in this way. More and more processes simultaneously involve several categories. Instead, one tends to think in terms of the various processes, tasks, and objects subject to management.
Branches of management theory also exist relating to nonprofits and to government: such as public administration, public management, and educational management. Further, management programs related to civil-society organizations have also spawned programs in nonprofit management and social entrepreneurship.
As one consequence, workplace democracy has become both more common, and more advocated, in some places distributing all management functions among workers, each of whom takes on a portion of the work. However, these models predate any current political issue, and may occur more naturally than does a command hierarchy. All management embraces to some degree a democratic principle—in that in the long term, the majority of workers must support management. Otherwise, they leave to find other work or go on strike. Despite the move toward workplace democracy, command-and-control organization structures remain commonplace as de facto organization structure. Indeed, the entrenched nature of command-and-control is evident in the way that recent layoffs have been conducted with management ranks affected far less than employees at the lower levels. In some cases, management has even rewarded itself with bonuses after laying off lower-level workers.
Management operates through various functions, often classified as planning, organizing, staffing, leading/directing, controlling/monitoring and motivation.
- Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next five years, etc.) and generating plans for action.
- Organizing: (Implementation)pattern of relationships among workers, making optimum use of the resources required to enable the successful carrying out of plans.
- Staffing: Job analysis, recruitment and hiring for appropriate jobs.
- Leading/directing: Determining what must be done in a situation and getting people to do it.
- Controlling/monitoring: Checking progress against plans.
- Motivation: Motivation is also a kind of basic function of management, because without motivation, employees cannot work effectively. If motivation does not take place in an organization, then employees may not contribute to the other functions (which are usually set by top-level management).
- Communicating: is giving, receiving, or exchange information.
- Creating: ability to produce original Idea,thought through the use of imagination
- Interpersonal: roles that involve coordination and interaction with employees
- Informational: roles that involve handling, sharing, and analyzing information
- Decisional: roles that require decision-making
- Political: used to build a power base and establish connections
- Conceptual: used to analyze complex situations.
- Interpersonal: used to communicate, motivate, mentor and delegate
- Diagnostic: ability to visualize most appropriate response to a situation
- Technical: Expertise in one's particular functional area.
Formation of the business policy
- The mission of the business is the most obvious purpose—which may be, for example, to make soap.
- The vision of the business reflects its aspirations and specifies its intended direction or future destination.
- The objectives of the business refers to the ends or activity that is the goal of a certain task.
- The business's policy is a guide that stipulates rules, regulations and objectives, and may be used in the managers' decision-making. It must be flexible and easily interpreted and understood by all employees.
- The business's strategy refers to the coordinated plan of action it takes and resources it uses to realize its vision and long-term objectives. It is a guideline to managers, stipulating how they ought to allocate and use the factors of production to the business's advantage. Initially, it could help the managers decide on what type of business they want to form.
Implementation of policies and strategies
- All policies and strategies must be discussed with all managerial personnel and staff.
- Managers must understand where and how they can implement their policies and strategies.
- A plan of action must be devised for each department.
- Policies and strategies must be reviewed regularly.
- Contingency plans must be devised in case the environment changes.
- Top-level managers should carry out regular progress assessments.
- The business requires team spirit and a good environment.
- The missions, objectives, strengths and weaknesses of each department must be analysed to determine their roles in achieving the business's mission.
- The forecasting method develops a reliable picture of the business's future environment.
- A planning unit must be created to ensure that all plans are consistent and that policies and strategies are aimed at achieving the same mission and objectives.
All policies must be discussed with all managerial personnel and staff that is required in the execution of any departmental policy.
- Organizational change is strategically achieved through the implementation of the eight-step plan of action established by John P. Kotter: Increase urgency, get the vision right, communicate the buy-in, empower action, create short-term wins, don't let up, and make change stick.
Policies and strategies in the planning process
- They give mid and lower-level managers a good idea of the future plans for each department in an organization.
- A framework is created whereby plans and decisions are made.
- Mid and lower-level management may add their own plans to the business's strategies.
Levels of management
Most organizations have three management levels: first-level, middle-level, and top-level managers. These managers are classified in a hierarchy of authority, and perform different tasks. In many organizations, the number of managers in every level resembles a pyramid. Each level is explained below in specifications of their different responsibilities and likely job titles.
The top consists of the board of directors (including non-executive directors and executive directors), president, vice-president, CEOs and other members of the C-level executives. They are responsible for controlling and overseeing the entire organization. They set a tone at the top and develop strategic plans, company policies, and make decisions on the direction of the business. In addition, top-level managers play a significant role in the mobilization of outside resources and are accountable to the shareholders and general public.
The board of directors is typically primarily composed of non-executives which owe a fiduciary duty to shareholders and are not closely involved in the day-to-day activities of the organization, although this varies depending on the type (e.g., public versus private), size and culture of the organization. These directors are theoretically liable for breaches of that duty and typically insured under directors and officers liability insurance. Fortune 500 directors are estimated to spend 4.4 hours per week on board duties, and median compensation was $212,512 in 2010. The board sets corporate strategy, makes major decisions such as major acquisitions, and hires, evaluates, and fires the top-level manager (Chief Executive Officer or CEO) and the CEO typically hires other positions. However, board involvement in the hiring of other positions such as the Chief Financial Officer (CFO) has increased. In 2013, a survey of over 160 CEOs and directors of public and private companies found that the top weaknesses of CEOs were "mentoring skills" and "board engagement", and 10% of companies never evaluated the CEO. The board may also have certain employees (e.g., internal auditors) report to them or directly hire independent contractors; for example, the board (through the audit committee) typically selects the auditor.
Helpful skills of top management vary by the type of organization but typically includea broad understanding competition, world economies, and politics. In addition, the CEO is responsible for executing and determining (within the board's framework) the broad policies of the organization. Executive management accomplishes the day-to-day details, including: instructions for preparation of department budgets, procedures, schedules; appointment of middle level executives such as department managers; coordination of departments; media and governmental relations; and shareholder communication.
Consist of general managers, branch managers and department managers. They are accountable to the top management for their department's function. They devote more time to organizational and directional functions. Their roles can be emphasized as executing organizational plans in conformance with the company's policies and the objectives of the top management, they define and discuss information and policies from top management to lower management, and most importantly they inspire and provide guidance to lower level managers towards better performance. Their functions include:
- Design and implement effective group and inter-group work and information systems.
- Define and monitor group-level performance indicators.
- Diagnose and resolve problems within and among work groups.
- Design and implement reward systems that support cooperative behavior. They also make decision and share ideas with top managers.
Consist of supervisors, section leaders, foremen, etc. They focus on controlling and directing. They usually have the responsibility of assigning employees tasks, guiding and supervising employees on day-to-day activities, ensuring quality and quantity production, making recommendations, suggestions, and up channeling employee problems, etc. First-level managers are role models for employees that provide:
- Basic supervision
- Career planning
- Performance feedback
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