Man 3 Contents page - Oxford

Contents:

• Chapter 1 An Overview of Management– Pg 1 - 20

CHAPTER 1

CHAPTER 2

CHAPTER 3

PART 1

An overview of management

Introduction to organizations and management

Managerial competencies

The development of management thought

1.indd 1 8/29/08 4:01:39 PM

CHAPTER 1

Introduction to organizations and the nature of management

After studying this chapter you should be able to:1 Understand what an organization is and why business organizations exist.2 Define what a manager is and what the management process involves.3 Explain.4 Understand the differences between the various levels of management.5 Understand the three main managerial skills and at what managerial level they

are dominant.

learning outcomes

outline

key terms and concepts

A South African insight: Capitec Bank: Meeting the needs of customers by making banking affordable and accessible.Managers and managementl Human needs and wantsl What is an organization?l Organizations as systemsWhat managers dol General managerial tasksl Productivity and organizational performancel What is a manager?l What is management? l Scope of managementWhat managers dol Managerial functionsManagerial rolesLevels of managementl First-line managersl Middle managersl Top managersManagerial skills Technical skills Human skills Conceptual skills

Chapter summaryQuestions for discussion and exercises for competency development

1.indd 3 8/29/08 4:01:39 PM

Management 3 e4

A South African insight: Capitec Bank: Meeting the needs of customers by making banking affordable and accessible

A savings culture does not exist in South Africa particularly among low-income earners. Two reasons for this are the low savings returns and the high administration costs of having a savings account. The average client incurs fees and costs that exceed the savings returns in an account on an annual basis. Transaction costs are high, finance is generally inaccessible, and processes are cumbersome, with long delays before a response or approval is given.

Riaan Stassen and others saw a gap in the market and believed that if they could develop an innovative way of delivering a low-cost banking service with acceptable returns, they would, in effect, create a new market among the previously unbanked and under-banked members of the South African population and start a very profitable business. The result was Capitec Bank which started out on 1 March 2001 and was listed on the JSE in 2002. It was the first new retail bank in South Africa in 20 years, and at the end of the financial year in 2008, it had earned profit attributable to equity shareholders of R229m, and had 331 branches, 1.37 million clients, and 2 800 employees. A successful business indeed.

The two pillars on which Capitec Bank was built were affordability and accessibility. To achieve these goals, they offer one multipurpose account called the Global One Banking Facility. Linked to this facility are five interconnected savings accounts, and five short- and medium-term personal loans. The account is operated by way of a Maestro-endorsed debit card, which means the card can be used anywhere in South Africa and anywhere in the world. Regular banking services like debit orders, transfers, and a funeral plan form part of the package.

“At Capitec Bank we believe a client comes to a bank to solve problems, not to create paperwork. That is why we have made an enormous investment in technology to make it as easy as possible for clients to open and operate an account”, says Riaan Stassen. It takes 10 minutes to open a Global One Banking Facility at Capitec Bank and there are no forms to complete. The only requirements are an identity document, proof of address and a R10 deposit.. The appeal of this process to people with little education is enormous.

The bank also places a high premium on knowledgeable staff and personal service. Staff are recruited from the areas in which the bank’s branches are situated, and clients are served in their preferred language. “We want our current and potential clients to feel welcome at Capitec Bank. We want to build long-term relationships with our clients by making it easy for them to use our services”, says Stassen.

Affordable service fees. Clients can use their Capitec Bank debit cards either to withdraw cash or to pay directly for their purchases. Capitec Bank is the first bank not to charge any transaction fees on debit card purchases in order to encourage people to use cashless transacting in the interest of safety.

Accessibility. Capitec Bank clients can withdraw cash at the bank’s 500 ATMs or at certain retailers. The bank has entered into agreements with Pick ’n Pay, Shoprite and Checkers to enable its clients to withdraw cash at till points at very low rates per transaction. Capitec Bank has more than 330 branches conveniently situated near main commuter routes and shopping centres, and in most rural areas. The bank’s hours are from 8:00 to 17:00 on weekdays and 8:00 to 13:00 on Saturdays. The branches have extended hours at month-end. The bank also has a 24-hour client care centre for all product queries, lost and stolen cards and branch information.

1.indd 4 8/29/08 4:01:40 PM

Chapter 1 Assessment 5

Workplace banking. In general in South Africa, overall access to banking and the ability to fully inform clients of alternatives are limited. Most clients are therefore not informed with regard to the full functionality of banks and the basis of fees charged. Inevitably, this is to the detriment of the client. Capitec Bank therefore takes banking to employers in order to reach their employees and to increase the understanding of the options available in banking. Information sessions for employees are arranged at their place of work to explain options, reflect on cost comparisons and provide financial skills support where required.

Mobile banking. Should employees want access to banking, Capitec Bank provides a mobile banking service to enable them to open bank accounts at their place of work. These mobile banks, which use wireless

transmission, biometric verification of transactions and a digital camera to capture images of new clients, allow the bank to offer banking to clients at a time and place convenient to them.

Capitec Bank’s unique offer can be summed up as follows: An innovative single banking facility containing all savings, lending and transacting facilities which are accessed via a paperless, card-driven process on a real-time basis. Capitec Bank’s offer can be defined as follows:l The lowest-cost way to bankl The most innovative way to bankl The fastest way to bankl The easiest way to bankl The friendliest way to bank

SOURCE: Capitec Bank: Making banking affordable and accessible. 2006. Succeed Magazine, 34, August; and http://www.capitecbank.co.za

Managers and management

Human needs and wants

Human beings have an almost unlimited number and variety of needs and wants. What is the difference between the two? This could result in a wide-ranging debate but it could be said that needs are related to the physical, such as the need for food, shelter, clothing, social interaction, and sex, for example. In the absence of the satisfaction of these physical needs, a person’s very existence and survival could be threatened. On the other hand, it could be said that wants relate to the psychological area, such as the want of happiness, self-esteem, love, and self-actualization, for example. While the non-satisfaction of psychological wants might not threaten people’s survival, it could well threaten their well-being and development, and result in their not realizing their potential and leaving them feeling unfulfilled. Thus when people’s physical needs and psychological wants are not satisfied to a significant extent, they are in a severe state of disequilibrium.

In his hierarchy of needs, Abraham Maslow1 drew a distinction between lower-order and higher-order needs, as reflected in Figure 1.1. He categorized his lower-order needs as physiological, security, and social needs, and his higher-order needs as self-esteem and self-actualization. Not unexpectedly, Maslow argued the people would strive to satisfy their lowest-level needs, for example food, water and shelter, before satisfying the next level of needs, for example their safety and protection needs. Maslow did acknowledge, however, that lower-level needs did not need to be totally satisfied before attention would be turned to satisfying needs at the next highest level. In other words, people did not necessarily have to be enjoying such things as caviar and champagne before turning to their safety and protection needs, for example.

It is not difficult to conclude that the satisfaction of almost all of the lower-order needs of people and many, if not most, of their higher-order needs are capable of being satisfied via products and services of various types. It could be argued that the need for accessible and affordable banking as outlined in the South African insight is an example of a “safety

1.indd 5 8/29/08 4:01:40 PM

Management 3 e6

l Capital, which refers to money provided by investors and lenders to acquire natural and human resources

l Entrepreneurship, which has been described as “the catalyst which brings together the capital, natural resources and human resources associated with the provision of products and services. An entrepreneur is essentially a person who is a risk taker in the private enterprise system, someone who seeks a profitable opportunity and then devises a plan and establishes and manages a business to earn profits.”3

Various categories of organization have developed with the purpose of providing products and services to satisfy human needs:l Private business firms which have a profit

motive, for example car manufacturers, wheat millers, construction companies, clothing manufacturers

l Government enterprises, for example South African Airways, Eskom

l Non-profit organizations, for example the South African Red Cross

l Government departments, for example the Department of Education.

What is an organization?

“An organization is a collection of people working together to achieve a common purpose. In so doing, the members are able to accomplish tasks that are far beyond the reach of anyone acting alone.”4 A group of people working together is also called an organization because the group has a structure. While it is possible to have a one-person organization, it is very rare. Against the background of the discussion of human needs and wants, it is important to note that the purpose of any organization is to develop products and services which meet the needs of consumers. Capitec Bank is an excellent example of an organization which was started with the express purpose of meeting the affordability and accessibility banking needs of a large section of the South African population who until then were largely unbanked or under-banked.

and security” need in relation to money. “The urge to satisfy needs by means of products and services is commonly referred to as the economic motive”.2 Over the centuries, enterprising and innovative people, initially working on their own but then later in cooperation with others, have combined various “factors of production” in various ways to make products and provide services in order to satisfy the diverse needs of people. Organizations as we know them today – whether profit or non-profit – evolved from people working on their own, to working in groups, to working for other people informally, to working for other people in a formal way. The reason for this evolution was to increase the volume of products and services so that more needs of more people could be met.

The following are the typical factors of pro-duction involved in the production of goods and services:l Natural resources, which refers to, for example

water, mineral deposits, forests, crude oil, landl Human resources, which refers to people

employed to help produce products and services

Self-actualization

Creative talents

Self-esteemSelf-respect,reputation

Social needsAffection and friendship

Security needsSafety and protection

Physiological needsFood, water and shelter

Source: J. Bosch, M. Tait and E. Venter. Business Management: An Entrepreunerial Perspective, Port Elizabeth, Lectern. 2006.

Figure 1.1 Maslows needs pyramid

1.indd 6 8/29/08 4:01:43 PM


finished products, followed by wholesale and retail distribution into the hands of the consumer. The point to emphasize is that from the consumer’s point of view, value is added at each of these stages. At the production stage, for example, value is added when raw materials are converted into finished products. At the outbound logistics and marketing stages, value is added when finished products are made accessible and conveniently available to consumers. As shown in Figure 1.3, these activities can be categorized as primary activities and secondary activities.

Productivity and organizational performance

As shown in Figure 1.2, resources and consumers are very important in the open-systems view of the organization. This is where the concept of added value comes in. If an organization can add value to the resources it processes, then it can sell the product/service for a price greater than the cost of making it, i.e. earn a profit. In the value chain, a profit margin is included because a mark-up on the cost of performing the value-creating activities is part of the price paid by the consumer. In the case of “not-for-profit” organizations, such as the fire department of a local municipality, for example, it can create wealth for society by providing a service that is worth more than its cost. To maximize profits and the creation of wealth, “all of an organization’s human and material resources must be well used in the right way and at the right time to create high-quality products at minimum cost”.6

Organizations as systems

It is also important to view an organization as a system. “A system is a collection of interrelated parts that function together to achieve a common purpose”.5 Not only is an organization a system, but it is also an open system. As such, it does not exist in a vacuum, but within a broader environment with which it interacts in the process of converting inputs into product/service outputs.

As shown in Figure 1.2, the external environ-ment is a source of both resource inputs such as people, money, materials, technology, and infor-mation, and customer feedback. Customer feedback is vitally important to the organization in measuring the extent to which consumers are satisfied. If the level of consumer satisfaction is not very high, they may well stop buying from that organization. Most organizations rely on satisfied consumers for both repeat purchases and for positive word-of-mouth advertising. In the open-systems view of the organization, the consumer is therefore dominant.

Another way of viewing an organization is via the value chain, which is an attempt to disaggregate an organization into strategically relevant activities and business processes (see Figure 1.3). Every organization consists of a collection of activities undertaken in the process of designing, producing, marketing, delivering, and supporting a product or service. The chain of value-creating activities necessary to provide a product or service starts with the procurement of raw materials and continues through to the production of parts and components, to the manufacture and assembly of

Resource inputs

PeopleMoneyMaterialsTechnologyInformation

Product outputs

Finishedgoods and/orservices

Workflowsturn resourcesinto outputs

Transformation process

Consumer feedback

The environmentconsumes:

The organizationcreates:

The environmentprovides:

Figure 1.2 Organizations as open systems

Source: J. R. Schermerhorn. Management. New York, Wiley. 2001, p. 6.

1.indd 7 8/29/08 4:01:44 PM

Management 3 e8

information resources in pursuit of the organiza-tion’s goals. The many different types of managers include departmental managers, product manag-ers, factory managers, divisional managers, and district managers. What they all have in common is responsibility for the efforts of a group of people who share a goal and access to resources that the group can use in pursuing its goal.

Most employees contribute to organizations through their own individual work, not by direct ing other employees. Journalists, computer program-mers, insurance agents, accountants, and lawyers are essential to achieving their organizations’ goals, but many people with these job titles are not man-agers. What sets managers apart? Simply put, the difference between managers and individual con-tributors is that managers are evaluated on how well the people they direct do their jobs. Consider the exe-cutive chairman of Sappi Limited, Ralph Boettger (CEO from July 2008), for example. Sappi Limited is a global forest products group and the world’s largest producer of coated wood-free paper, with processing facilities on three continents and an inter national marketing network that sells the group’s products in more than 150 countries. In addition to being quot-ed on the JSE, its shares are traded on the London and New York stock exchanges. Ralph Boettger’s job is to oversee the efforts of everyone working in all the manufacturing operations in southern Africa, Europe, and the US.

An important responsibility of managers such as Boettger is to ensure that their groups understand their goals and how the achievement of these goals is related to the success of their organizations.

This brings us to the concept of productivity, which is most easily defined as the ratio of outputs to inputs. Organizations must continuously strive to either minimize the input for a given level of output, or maximize the output for a given level of input. This introduces the concepts of efficiency and effectiveness. Performance effectiveness refers to goal achievement, which is directly linked to the level of customer satisfaction. Performance efficiency, on the other hand, refers to the cost of resources relative to goal achievement. Common measures of efficiency are cost of labour, equipment utilization, and return on investment. Of course, all organizations should continuously strive to be both efficient and effective, as shown in Figure 1.4.

What is a manager?

It is important to realize that a collection of people do not work towards a common purpose by acci-dent. In fact, the larger the number of people in-volved, the less likely this will happen by accident. On the contrary, it is only by design that people are going to work together to achieve a common pur-pose. Someone or some people have to take respon-sibility for making this happen. These people are called “managers”. They are the individuals who decide on the most appropriate strategies and tac-tics to implement in order to achieve the goals that have been set to satisfy various stakeholders, and who guide, direct, or oversee the work and perfor-mance of other individuals. As such, a manager is a person who plans, organizes, directs, and controls the allocation of human, material, financial, and

Goalattainment

High

Low

Poor Good

Effective but not efficient;goals achieved but resourceswasted

Effective and efficient;goals achieved and resources wellutilized; zone of high productivity

Neither effective nor efficient;goals not achieved; resourceswasted in the process

Efficient but not effective;no wasted resources, but goalsnot achieved

Figure 1.4 Productivity and organizational performance

Source: J. R. Schermerhorn. Ibid. p. 6.

1.indd 8 8/29/08 4:01:46 PM


even if that is not their main focus. For example, Raymond Ackerman, the founder of Pick ’n Pay, believes in empowering people by creating effective and powerful teams. The current CEO of Pick ’n Pay has continued with this management philosophy and ensures that teams of employees throughout the entire organization are involved in ensuring customer service excellence. Those involved in the customer services department are empowered to reorganize some of their work and to deal with customer-related issues. They are able to do this because of the extensive training programmes that many staff members, from all levels, attend at Disney World US Training Centre.8 In other words, employees will be carrying out some management tasks, even though they may not become managers. We reserve the term manager for people in jobs that involve primarily management tasks.

Scope of management

There are many types of managers and many ways in which managerial jobs differ from each other. One difference is the scope of the activities being managed. The scope of activities performed by functional managers is relatively narrow, whereas the scope those performed by general managers is quite broad.

Functional managers supervise employees having expertise in one area, such as human resour-ces, sales, finance, marketing, or production. For example, the head of a salaries department is a func-tional manager. Usually, functional managers have a great deal of experience and technical expertise in the areas of operation they supervise. Their success as managers is due in part to the detailed knowledge they have about the work being done by the people they supervise, the problems those people are likely to face, and the resources they need to perform well.

General managers are responsible for the opera-tions of a more complex unit, such as an enterprise or a division. Usually they oversee the work of functional managers. General Managers must have a broad range of well-developed competencies to do their jobs well. Being adaptable enough to solve whatever problems may be encountered has been

critical for the MD of Sappi Limited.

Sappi’s primary goal is to “become even more global” and “to be judged as the most successful company, not only by assets, but by other criteria, such as performance”. The strategy to achieve these goals is to strengthen the organization’s position as a global paper company and leader in selected markets. A consequence of this strategy has been the restructuring of the organization into three divisions: Sappi Fine Paper, Sappi Forest Products, and Sappi Trading.

Because managers achieve organizational goals by enabling people to do their jobs effectively and efficiently – not by performing all the tasks themselves – they must find ways to keep employees motivated. Boettger describes Sappi’s employees as highly motivated and committed to continuous improvement. There is a top-to-bottom uniformity of purpose. Employees are also motivated by the culture of the organization which, governed by its stature in the industry, is entrepreneurial, challenging, hard working, and globally focused. The company also plays a big role in social responsibility actions and projects, and is serious about protecting the environment. Boettger knows that it is his job to keep employee motivation at a high level, which he plans to do by providing consistent leadership.7

What is management?

If managers are the people responsible for making sure that an organization achieves its goals, what does the term management mean? In everyday usage, people often refer to management as a group of managers in an organization. For example, the MD and other high-level executives often are referred to as top management. The managers under them may be referred to as middle management, and so on.

The term management can also be used to refer to the tasks and activities performed by managers. In this book, we use the term management to refer to the tasks or activities involved in managing an organization: planning, organizing, leading, and controlling. Busi ness managers at Sappi Limited plan, organize, lead, and control the activities to ensure that their particular businesses are ranked the best against all competitors.

As you will see, people in many different jobs may be expected to carry out management tasks,

1.indd 9 8/29/08 4:01:46 PM

Management 3 e10

Planning. In general, planning involves defining organizational goals and proposing ways to reach them. Managers plan for three reasons: (1) to establish an overall direction for the organization’s future, such as increased profit, expanded market share, and social responsibility; (2) to identify and commit the organization’s resources to achieving its goals; and (3) to decide which tasks must be done to reach those goals. Sappi’s group strategy to integrate the internationally acquired assets and restructure the organization into three divisions is a good example of what planning involves. Other examples of planning include Sappi’s strategy to expand even more globally, and Coca-Cola Sabco’s strategy to grow business by opening new plants in the emerging East African economies and to acquire additional businesses in Africa.

Organizing. After managers have prepared plans, they must translate those relatively abstract ideas into reality. Sound organization is essential to this effort.

“The organizing function takes the tasks iden-tified during planning and assigns them to indi-viduals and groups within the organization so that objectives set by planning can be achieved. Organizing, then, involves turning plans into action. The organizing function also provides an organizational structure that enables the organ-ization to function effectively as a cohesive whole and to achieve quality objectives.”9

Leading. After management have made plans, created a structure, and hired the right personnel, some one must lead the organization. Leading involves communicating with and motivating others to perform the tasks necessary to achieve the organization’s goals within the context of a sup porting organizational culture. Leading is not done only after planning and organizing ends; it is a crucial element of those tasks. The way in which Phil Gutsche leads is evident from Chapter 2’s opening South African insight on Coca-Cola Sabco: he leads not only by communicating the core values to all associates, but also by living them himself.

Controlling. The process by which a person, group, or organization consciously monitors performance

What managers doIn outlining what managers do, it is necessary to consider both the management functions which managers carry out, as well as their roles, namely the things they do in the process of carrying out their managerial functions.

Managerial functions

As we have described the various types of managers, we have given you some idea of what managers do. But these few examples do not show the whole picture by any means. Let us now consider systematically what managers do – the tasks they perform and the specific activities included in these tasks.

The successful manager capably performs four basic managerial tasks: planning, organizing, leading, and controlling. However, as you will see, the amount of time a manager spends on each task depends on the level of the particular job. After further describing each of the four gene-ral managerial tasks, we consider in detail the differences among managers at various levels in organizations.

Regardless of their level, most managers per-form the four general tasks more or less simultan-eously – rather than in a rigid, preset order – to achieve organizational goals. Figure 1.5 illustrates this point graphically. In this section we briefly examine the four tasks without looking at their interrelationships. However, throughout this book we refer to those interrelationships to help explain exactly how managers do their jobs.

Planning

Organizing

Leading

Controlling

Figure 1.5 Basic managerial tasks

1.indd 10 8/29/08 4:01:47 PM


planned and that corrective action is needed. Phil Knight, founder of Nike, believes that Nike’s success is due to its competitive spirit, its ability to respond to customers’ needs with diverse and genuine products, and its control procedures. In the control

and takes corrective action is controlling. Just as a thermostat sends signals to a heating system that the room temperature is too high or too low, so a management control system sends signals to managers that things are not working out as

Table 1.1 Managerial roles identified by Mintzberg

Type of role Specific role Examples of role activities

Decisional Entrepreneur

Disturbance handler

Resource allocator

Negotiator

Takes risks in the process of identifying and evaluating business opportunities and allocating resources thereto in order to make a profitMoves quickly to take corrective action to deal with unexpected problems facing the organization from the external environment, such as a crisis like an oil spill, or from the internal environment, such as producing faulty products or servicesAllocates organizational resources among different functions and departments of the organization; sets the budgets and salaries of middle managersWorks with suppliers, distributors, and trade unions to reach agreements about the quality and price of input, technical, and human resources; works with other organizations to establish agreements to pool resources to work on joint projects

Interpersonal Figurehead

Leader

Liaison

Performs ceremonial and symbolic duties, and represents the organization when and where necessaryDirects and coordinates subordinates’ activities, which may involve motivating employeesInvolves managers in interpersonal relationships outside their area of command. Within the organization, managers must interact with numerous other managers and other individuals

Informational Monitor

Disseminator

Spokesperson

Evaluates the performance of managers in different functions and takes corrective action to improve their performance; watches for changes occurring in the external and internal environments that may affect the organization in the futureInforms employees about changes taking place in the external and internal environments that will affect them and the organization; communicates to employees the organization’s vision and purposeRepresents the unit or organization to other people, either within the organization or outside the organization

Source: George, J. M. & Jones, G.R. 2006. Contemporary management, 4th ed. USA: McGraw-Hill, 21.

1.indd 11 8/29/08 4:01:48 PM

Management 3 e12

performance standards for the firm. At the same time, he reinforces the message that a retailer in Singapore or Johannesburg is just as important as one in New York City and that every consumer can count on a consistent commitment to quality. For more information refer to http://www.nike.com. In Chapter 16 we present and discuss typical organizational control processes.10

Having outlined the four traditional managerial functions, it is now necessary to look at the managerial roles.

Managerial roles

A role is a behaviour pattern expected of an indi-vidual within a unit or position. One of the studies

process at Nike, Coca-Cola Sabco, Sappi Limited and other organizations, managers do the following:l Set standards of performance.l Measure current performance against those

standards.l Take action to correct any deviations.l Adjust the standards if necessary.

Nike establishes budgets for each shoe line, such as cross-training, aerobic, walking, basketball, and football, and holds its managers responsible for meeting production and financial goals. If a shoe line cannot meet its goals, the line is replaced. Mark Parker, CEO of Nike, spends a lot of time travelling globally, visiting retailers. He learns what customers want in terms of product quality, performance, and price. He uses this knowledge when setting

Worker Worker Worker Worker

MiddleManager

TopManager

Figure 1.7 Vertical specialization of the management process

Figure 1.6 Horizontal specialization of the management process

Worker

ManagerProduction

TopManager

ManagerMarketing

Worker Worker Worker Worker Worker

1.indd 12 8/29/08 4:01:50 PM


managers, or production supervisors, depending on the organization. Employees who report to them do the organization’s basic production work – whether of goods or of services. For example, a first-line manager at an automotive manufacturer supervises employees who assemble cars, operate and maintain machines, and write dispatch orders. A sales manager at a South African car dealership supervises salespeople who sell vehicles to customers in the showroom.

This level of management is the link between the operations of each department and the rest of the organization. First-line managers in most organizations spend little time with higher manage-ment or with people from other organi zations. Most of their time is spent with the people they supervise and with other first-line managers. First-line managers spend relatively little time planning and organizing. Most of their time is spent directing the actions of employees who actually do production work or deliver services (leading) and making sure that parts arrive, settling disputes among employees, scheduling vacations and overtime, and inspecting products (controlling).

First-line managers usually need strong technical expertise to teach subordinates and supervise their day-to-day tasks. Workers usually develop technical expertise before becoming managers. Sometimes, though, a first-line manager is a recent university or college graduate who is responsible for the work of both hourly employees and professionals.

Middle managersSmall organizations can function successfully with only one level of management. As an organization grows, however, so do its problems. Some managers in larger organizations must focus on coordinating employees’ activities, determining which products or services to provide, and deciding how to market these products or services to customers. These are the pro blems of middle managers, who receive broad, general strategies and policies from top managers, and translate them into specific goals and plans for first-line managers to implement. Middle managers typically have titles such as department head, plant manager, and marketing manager. They are responsible for directing and coordinating the

of managerial roles which is most often referred to was carried out by Henry Mintzberg. He reduced the thousands of things which managers do in the course of planning, organizing, leading, and con-trolling to 10 roles, which he grouped into three broad categories, namely decisional, interpersonal and informational.11 These are outlined in Table 1.1.

Levels of management

The history of Pick ’n Pay in South Africa illustrates management’s growth from one entrepreneur, Raymond Ackerman, to a team of many managers and many subordinates. The development of differ-ent types of managers is a result of this growth. When Pick ’n Pay started in the 1960s, there were only three or four stores, and Raymond Ackerman was able to carry out all the important managerial functions himself. As the chain grew, and he required more help, he decided to specialize vertically by giving the task of supervising employees to other people, namely store managers (as shown in Figure 1.6), and horizontally (as shown in Figure 1.7) by giving certain tasks such as purchasing and finance to others in head office. With both these approaches, the management process is shared with other people, and becomes more specialized and complex. As Pick ’n Pay grew during its first four decades, more and more managers were added. In the process, Raymond Ackerman became CEO and chairman, which were high-level management positions.

Although both Raymond Ackerman and the people he hired to run local Pick ’n Pay stores can be called managers, their jobs are certainly not the same. The goals, tasks, respons ibilities, and skills of the first-line store manager are very different from those of the managing director and chairman. The three basic levels of management are first-line managers, middle managers and top managers.

First-line managers

In general, first-line managers are directly res-ponsible for the production of goods or services. They may be called sales managers, foremen, office

1.indd 13 8/29/08 4:01:50 PM

Management 3 e14

into specific operational plans, schedules, and procedures.

Middle managers carry out top management’s instructions primarily by delegating authority and responsibility to their subordinates and by co-ordinating schedules and resources with other man-agers. They often spend much of their day attend ing com mittee meetings, and preparing and reviewing reports. Middle managers tend to be removed from the technical aspects of work, so what ever technical expertise they may have is of less direct help to them now.

Finally, middle managers must be good at de-veloping their subordinates, opening lines of com-munication for them, and making them visible to other middle managers and to top managers. Hu-man skills are therefore critical at this level. In many organizations today, developing subordinates and helping them move up in the organization is essen-

activities of first-line managers and, at times, such non-managerial personnel as clerks, receptionists, and staff assistants.

Many middle managers begin their careers and spend several years as first-line managers. Even so, promotion from first-level to middle management is often difficult and sometimes traumatic. The heavier emphasis on managing group performance and allocating resources represents the most important difference between first-line and middle managers. The middle manager is often involved in reviewing the work plans of various groups, helping them set priorities, and negotiating and coordinating their activities. Middle managers are involved in establishing target dates for products or services to be completed; developing evaluation criteria for performance; deciding which pro jects should be given money, personnel, and materials; and translating top management’s general goals

Figure 1.8 Aligned eight ‘S’s

Strategy andPurposes

Structure Systems andProcesses

reSources Staff

Shared values Style SP

CONTEXT(aligned)

STRATEGICPERFORMANCE

Source: J. M. Higgins. “The Eight ‘S’s of Successful Strategy Execution”, Journal of Change Management, Vol. 5, No. 1, P.6.

1.indd 14 8/29/08 4:01:51 PM


As Higgins points out, “successful executives spend a great deal of their time on strategy execution. They realize that executing strategy is just as important, if not more important, than formulating strategy. They know that organizational performance invariably suffers when insufficient time and effort are expended on executing strategy, or when time and effort are expended on inappropriate execution actions.”12 Successful strategy execution or imple-mentation which leads to successful “strategic performance” essentially involves aligning key organi zational factors with the strategy which was form ulated. Get this wrong and a brilliant strategy can fail. At worst, the key organizational variables which must be aligned are strategic purposes (vision, mission, goals, strategic objectives), structure (jobs, authority, the grouping of jobs, span of control, and methods of coordination), systems and processes (information systems, quality systems, capital bud-get ing systems, etc.), leadership style, staff, resour-

tial to being viewed as a successful manager. At Lib-erty Life, the role of the traditional middle manager has been changed to that of a “coach”. A coach is seen as someone who trains and nurtures the sub-ordinate’s skills and enables the development of competencies, while providing en courage ment. When middle managers fail to develop their staff, low morale and high turnover are likely to follow. This is, however, not the case at Liberty Life. Instead of offering promotion, the company keeps moti-vation high by offering growth and development opportunities with salary increases based on per-formance and skills acquired, irrespective of race or gender. For more information refer to http://www.liberty.co.za

Top managers

The overall direction and performance of an organization is the respons ibility of top managers.

Figure 1.9 Non-aligned eight ‘S’s

Source: J. M. Higgins. “The Eight ‘S’s of Successful Strategy Execution”, Journal of Change Management, Vol. 5, No. 1, P.6.

Strategy andPurposes

Structure

Syst

ems

and

Proc

esse

s

reSources Staff

Shar

ed v

alue

s

Style SP

CONTEXTnon-(aligned)

STRATEGICPERFORMANCE

1.indd 15 8/29/08 4:01:53 PM

Management 3 e16

intense. Tightly scheduled workdays, heavy travel requirements, and workweeks of 60 or more hours are common. Top managers such as Phil Gutsche often represent their organizations in community affairs. Phil is also known as the “businessman with a big heart”, using his financial success as a platform for community, cultural, and sporting development. For example, he assisted St Francis Hospice by setting up a financially viable trust, lifting the hospice into financial stability. He was also the chairman of Round Table No. 8, and moved on to Rotary. The Eastern Cape African Chamber of Commerce in the 1980s was assisted by him to train emergent business figures in a project that paid university fees for several students.13

Top managers also face expanding public relations duties. They must be able to respond quickly to crises that may create image problems for their organizations. A development that required crisis management and involved management in public relations duties was the flooding and havoc caused at Coca-Cola Sabco’s Mozambique branch, and two depots in Chokwe and Xai Xai.14

Having outlined the three key levels of man-agement, it must be pointed out that at each level, different managerial skills are required.

Managerial skills

A skill is an ability to translate knowledge into action that results in desired performance.15 In order to carry out the managerial functions and tasks outlined in previous sections, a large variety and a number of skills are required. The most important of these, however, are the ones that empower managers to help others become more efficient and effective in their work. Robert L. Katz16 classified the main skills of managers into three categories, namely technical, human, and conceptual. Now while every manager requires each of these categories of skills, the extent to which they are required will differ according to the managerial level.

Technical skills

Technical skills are the ability to use specific know-ledge, techniques and resources to perform work.

ces (people, technology, money), and shared values (corporate culture). If one emphasizes the “S” in “resources”, seven contextual Ss can be iden-tified. An eighth S, strategic performance, puts the emphasis on results. Thus the 8S Model was developed.

Figure 1.8 shows the seven contextual Ss all closely aligned leading to successful strategic performance. Figure 1.9 shows the seven contextual Ss totally non-aligned leading to unsuccessful (or less than completely successful) strategic per-formance. The model is useful in alerting top managers as to where the causes of unsuccessful Ssrategic performance may lie and what needs to be done to turn the situation around.

Hiroshi Okuda, previous president of Toyota, and Phil Gutsche, chairman of Coca-Cola Sabco (Pty) Limited, are two such managers who have built hugely successful companies. Typical titles of top managers are chief executive officer (CEO), president, chairman, managing director (MD), division president, and execu tive vice-president. Top managers develop goals, policies, and strategies for the entire organization. They set the goals that are handed down through the hierarchy, eventually reaching each worker. Phil Gutsche started as a trainee at the Coca-Cola Company after graduating from the University of Cape Town in 1961. He moved up through the ranks at SA Bottling Company in Port Elizabeth to become the managing director at the head office in 1975. He knows what first-line and middle managers have to go through, because he has been there himself. He has spent many hours communicating with staff, especially fostering good relationships with union leaders and members. Since he has taken up the position of chairman, he does not communicate so frequently with staff at all levels. His time is largely spent meeting with people who report directly to him, visiting plants, and attending budget feedback meetings, country board meetings, and industry meetings.

Top managers spend most of their day (over 75 per cent) planning and leading. They spend most of their leading time with key people and organizations outside their own organizations. Top managers – like middle managers – spend little time directly controlling the work of others.

Pressures and demands on top managers can be

1.indd 16 8/29/08 4:01:53 PM


managerial hierarchy from first-line to middle to top manager, the greater are the number of ambiguous problems with longer-term consequences they have to deal with. This is also reflected in Figure 1.10, with conceptual skills being seen to be a dominant requirement for top managers.

It is important to recognize that in order to carry out the various managerial functions and to exercise the various managerial skills efficiently and effectively, a number of managerial competencies are required. A managerial competency is a skill or personal characteristic that contributes to high performance in a management job. Developing these competencies through education and training has become a major priority for aspirant and existing managers. This book emphasizes managerial competences, which are explored further in Chapter 2.

The following 10 qualities of successful man-agers, which were identified by Harbidge House, a Boston consulting firm17, put into perspective the roles and the skills of managers discussed above.1 Provides clear direction. An effective

manager needs to establish explicit goals and standards for people. Managers must communicate group goals, not just individual ones. The manager must involve people in setting these goals and not simply state them

Accountants, computer scientists, and engineers, for example, possess substantial technical skills. As indicated in Figure 1.10, technical skills are especially important at lower levels of management.

Human skills

A human skill is the ability to work well in co-operation with other people. In the workplace, human skills manifest themselves as enthusiasm, trust, and genuine involvement in interpersonal relationships. As the major role of managers at any level is to get work done through other people, human skills are vitally important for all managers. Figure 1.10 shows human skills to be consistently important across all managerial levels.

Conceptual skills

A conceptual skill is the ability to think analytically and to solve complex problems. This involves an ability to break down problems into their constituent parts, to see the relationship between the parts, and to recognize the implications of one problem for others. It involves the ability to see the big picture, to take a systems perspective and to recognize that an organization influences, and is influenced by, the external environment. As managers move up the

Figure 1.10 Conceptual, human, and technical skills needed by three levels of management

Topmanagers

Conceptual skills Human skills Technical skills

Middlemanagers

First-linemanagers

1.indd 17 8/29/08 4:01:54 PM

Management 3 e18

to people employed to help produce products and services.

6 Factors of production: capital refer to money provided by investors and lenders to acquire natural and human resources.

7 Entrepreneurship is essentially a person who is a risk taker in the private enterprise system; someone who seeks a profitable opportunity and then devises a plan, and establishes and manages a business to earn profits.

8 An organization is a collection of people working together to achieve a common purpose.

9 An open system is a collection of interrelated parts that function together to achieve a common purpose and which operates in a broader environment with which it interacts during the process of converting inputs into product and service outputs.

10 Productivity is most easily defined as the “ratio of outputs to inputs”.

11 Managers are the individuals who decide on the most appropriate strategies and tactics to implement in order to achieve the goals that have been set to satisfy various stakeholders and who guide, direct, or oversee the work and performance of other individuals. They are the individuals who plan, organize, lead and control the allocation of human, material, financial and information resources in pursuit of the organization’s goals.

12 Functional managers supervise employees having expertise in one area, such as human resources, sales, finance, marketing, or production.

13 General managers are responsible for the operations of a more complex unit, such as an enterprise or a division.

14 Planning involves defining organizational goals and proposing ways to reach them.

15 The organizing function takes the tasks identified during planning and assigns them to individuals and groups within the organization so that objectives set by planning can be achieved.

16 Leading involves communicating with and motivating others to perform the tasks necessary to achieve the organization’s goals within the context of a supporting organizational culture.

17 Controlling is the process by which a person, group or organization consciously monitors performance and takes corrective action.

18 A role is a behaviour pattern expected of an individual within a unit or position.

19 The managerial role of entrepreneur is to identify and evaluate business opportunities and allocating resources thereto in order to make a profit.

20 The managerial role of a disturbance handler is to move quickly to take corrective action to deal with unexpected problems arising in the organization’s external environment.

21 The managerial role of resource allocator is to allocate organizational resources among different functions and departments of the organization.

to workers. Managers must be clear and thorough in delegating responsibility.

2 Encourages open communication. Managers must be candid in dealing with people. They must be honest and direct.

3 Coaches and supports people. This means being helpful to others, working constructively to correct performance problems, and going to lobby with superiors for subordinates.

4 Provides objective recognition. Manages must recognize employees for good performance more often than they criticize them for problems. Rewards must be related to the quality of job performance, not seniority or personal relationships.

5 Establishes ongoing controls. This means following up on important issues and actions and giving subordinate’s feedback.

6 Selects the right people to staff the organization. A successful manager knows how to attract and select the best people in terms of skills and competencies to accomplish the firm’s mission and goals.

7 Understands the financial implications of decisions. This quality is considered important even for functional managers, such as those in human resource management, and research and development, who have no direct responsibility for the profit margin.

8 Encourages innovation and new ideas. 9 Gives subordinates clear-cut decisions

when they are needed.10 Consistently demonstrates a high level of

integrity.

Key terms and concepts

1 Needs tend to be related to the physical, such as the need for food, shelter, clothing, social interaction, and sex, for example.

2 Wants relate to the psychological, such as the want of happiness, self-esteem, love, and self-actualization, for example.

3 Abraham Maslow identified a hierarchy of needs from lower-order needs such as physiological, security, and social needs, to higher-order needs such as self-esteem and self-actualization.

4 Factors of production: natural resources refer to, for example, water, mineral deposits, forests, crude oil, and land.

5 Factors of production: human resources refer

1.indd 18 8/29/08 4:01:55 PM


means of products and services is commonly referred to as the economic motive. Over the centuries, enterprising people, initially working on their own and later in groups as part of organizations, have combined various factors of production to make products and provide services to satisfy the needs and wants of people.

An organization is a collection of people working together to achieve a common purpose. An organization is an open system in that it is responsive to its external environment which presents it with various threats and opportunities.

Another way of viewing an organization is in terms of the value chain, which is an attempt to disaggregate an organization into strategically relevant activities and business processes. These activities and processes are divisible into primary and secondary activities.

In producing goods and providing services, orga nizations should strive to be as productive as possible. Organizations must continuously strive to either minimize the input for a given level of output, or maximize the output for a given level of input.

A collection of people are unlikely to work harmoniously together towards a common purpose and/or to be productive, by accident. Someone or some people have to take responsibility for helping this happen. These people are called managers. Functional managers supervise employees having expertise in one area, such as human resources, sales, finance, marketing or production. General man agers are responsible for the operations of a more complex unit, such as an enterprise or a division.

Regardless of their level, most managers perform four basic managerial tasks: (1) planning, which involves defining organizational goals and proposing ways to reach them; (2) organizing, which involves assigning the tasks identified during planning to individuals and groups within the organization so that objectives set by planning can be achieved; (3) leading, which involves communicating with and motivating others to perform the tasks necessary to achieve the organization’s goals within the context of a supporting organizational culture; and (4) controlling, which involves consciously monitoring the performance of a person, group or organization, and taking corrective action when necessary.

22 The managerial role of a negotiator is to work with suppliers, distributors, and trade unions to reach agreements about the quality and price of inputs, as well as technical and human resources.

23 The managerial role of a figurehead is to perform ceremonial and symbolic duties and represents the organization when and where necessary.

24 The managerial role of a leader is to direct and coordinate subordinates’ activities. This may involve motivating employees.

25 The managerial role of liaison involves managers in interpersonal relationships outside their area of command. Within the organization, managers must interact with numerous other managers and other individuals.

26 The managerial role of a monitor is to evaluate the performance of managers in different functions and to take corrective action to improve their performance, and to watch for changes occurring in the external and internal environments that may affect the organization in the future.

27 The managerial role of a disseminator is to inform employees about changes taking place in the external and internal environments that will affect them and the organization. Communicate to employees the organization’s vision and purpose.

28 The managerial role of spokesperson is to represent the unit or organization to other people, either within or outside the organization.

29 First-line managers are directly responsible for the production of goods or services.

30 Middle managers carry out top management’s instructions primarily by delegating authority and responsibility to their subordinates, and by coordinating schedules and resources with other managers.

31 Top managers are responsible for the overall direction and performance of the organization.

32 The 8S model shows that to achieve successful strategy performance, the seven contextual factors of strategic purpose, structure, systems, leadership style, staff, resources, and shared values must be closely aligned.

Human beings have an almost unlimited number and variety of needs and wants. Abraham Maslow developed a hierarchy of needs model comprising lower-order needs consisting of physiological, secur-ity, and social needs, and higher-order needs con-sisting of self-esteem and self-actualization needs. Almost all of the lower-order needs and many of the higher-order ones can be satisfied by products and services. The urge to satisfy needs and wants by

chapter summary

1.indd 19 8/29/08 4:01:56 PM

Management 3 e20

5 Explore fully the changes in functions and skills that occur as one is promoted from a non-management job to a managerial one.

6 Explore how knowledge of Maslow’s hierarchy of needs may help a manager to carry out the managerial function of leading.

ENDNOTES

1 MASLOW, A.H. 1970. Motivation and personality. 2nd ed.

New York. Harper & Row.

2 BOSCH, J., TAIT, M. & VENTER, E. 2006. Business

management: An entrepreneurial perspective. Port Elizabeth:

Lectern, 9.

3 BOSCH, J. et al. Ibid., 9.

4 SCHERMERHORN, J.R. 2001. Management, 6th ed. New

York: John Wiley, 5.

5 SCHERMERHORN, J.R. Ibid., 5.


7 SAPPI LIMITED 2007. Sappi annual report. Sappi Corporate

Affairs, Sappi House: Johannesburg, South Africa; http://

www.sappi.com (January 2008).

8 South Africa’s most promising companies. 2002. Cape Town:

Research Foundation, 171–178.

9 IVANCEVICH, J.M., LORENZI, P., SKINNER, S.J. & CROSBY,

P.B. 1997. Management: Quality and competitiveness, 2nd ed.

Chicago: Irwin, 13.

10 BIRGER, J. & STIRES, D. 2006. CEO on the hot seat: Mark

Parker, Nike. Fortune, 6 February. http://money.cnn.

com/2006/02/01/news/companies/investorsguide_nike/

index.htm (January 2008).

11 VANCEVICH, J.M. et al. Ibid., 20.

12 HIGGINS, J.M. 2005. The eight Ss of successful strategy

execution. Journal of Change Management, 5(1), 3, March.

13 GUTSCHE, P. 2000. Chairman Coca-Cola Sabco (Pty)

Limited. Interview in Port Elizabeth, 27 March; McAINSH,

G. 2000. Things go better with Phil. Eastern Province

Herald, Port Elizabeth, 8, 23 February.

14 GUTSCHE, P. 2000. Chairman Coca-Cola Sabco (Pty)

Limited. Interview in Port Elizabeth, 27 March.


16 KATZ, R.L. 1974. Skills of an effective administrator.

Harvard Business Review, 52 (2) (September/October):

90–103.

17 IVANCEVICH, J.M. et al. Ibid., 15.

Henry Mintzberg reduced to 10 roles the thou-sands of things which managers do in the course of planning, organizing, leading, and con trol ling. He grouped these into three broad cat egories, namely decisional, interpersonal, and infor mational roles.

In any organization there are typically at least three levels of management, namely first-line man-agers, middle managers and top managers. First-line managers are directly responsible for the production and/or sale of goods or services. Middle managers carry out top management’s instructions primarily by delegating authority and responsibility to their subordinates, and by coordinating schedules and resources with other managers. Top managers are responsible for the overall direction and performance of an organization.

The 8S model was developed to emphasize that to achieve successful strategic performance, which is the primary responsibility of top management, the seven contextual Ss of strategic purpose, struc-ture, systems and processes, leadership style, staff, reSources, and shared values, must be closely aligned.

Managers at the three levels require different degrees of technical, human and conceptual skills in order to discharge their responsibilities.

QuestIons For dIscussIon and eXercIses For competency deVeLopment

1 To what extent do you think that there are similarities in the managerial functions of planning, organizing, leading, and controlling are related? If a manager performs well in one function, is he or she likely to perform well in the others?

2 What is the difference between efficiency and effectiveness? Can an organization be both efficient and effective? Which is more important for performance?

3 Carry out an exercise similar to that conducted by Henry Mintzberg. Try to find a manager who is prepared to assist you and allow you to shadow him or her for a day. Which of Mintzberg’s 10 roles does the manager perform and how much time is devoted to each? What are your conclusions?

4 “The purpose of management courses is to teach students about management and not to teach them to be managers.” Do you agree or disagree with this statement? Explain.

1.indd 20 8/29/08 4:01:56 PM

Documents

Man 3 Contents page - Oxford