Accounting and business administration 1

Accounting and business administration: Managers and managing (Ch. 1)

What is management

Organizations, all managers work in organizations, that are collections of people who work together and coordinate their actions to achieve goals. Managers are the people who meet these goals using resources such as people and their skills, know-how and experience, raw materials, machinery, computers and technology, patents, financial capital, customers, and employees.

Management includes the planning, organizing, leading, and controlling of human and other resources to achieve organizational goals effectively and efficiently. Organizational performance is a measure of how efficiently and effectively managers use available resources to satisfy customers and achieve organizational goals. Efficiency is a measure of how well or how productively resources are used to achieve a goal, while effectiveness is a measure of the appropriateness of the goals an organization is pursuing and the degree to which the organization achieves those goals.

Four tasks of management

- Planning: Choose appropriate organizational goals and courses of action to best achieve those goals, deciding how to allocate organizational resources and what strategies to adopt. How well managers plan and develop strategies determines how effective and efficient the organization is.

- Organizing: Structuring working relationships so organizational members interact and cooperate to achieve organizational goals. Organizing people into departments according to the kinds of job-specific tasks they perform lays out the lines of authority and responsibility between different individuals and groups. Managers must decide how best to organize resources, particularly human resources. The outcome of organizing is the creation of an organizational structure, a formal system of task and reporting relationships that coordinates and motivates members so they work together to achieve organizational goals.

- Leading: Managers articulate a clear organizational vision for what they need to accomplish, and they energize and enable employees so everyone understands the part they play in achieving organizational goals. Leadership involves managers using their power, personality, influence, persuasion, and communication skills to coordinate people and groups so their activities and efforts are in harmony.

- Controlling: The task of managers is to evaluate how well an organization has achieved its goal and to take any corrective actions needed to maintain or improve performance. The outcome of the controlling process is the ability to measure performance accurately and regulate organizational efficiency and effectiveness. The controlling task also helps managers evaluate how well they are performing the other three tasks of management and take corrective action.

Managerial roles

Henry Mintzberg identified 10 managerial roles divided into three different groups:

• Interpersonal Roles
  • Figurehead: Outline future organizational goals to employees at company meetings; open a new corporate headquarters building; state the ethical guidelines and the principles of behavior employees have to follow in their dealings with customers and suppliers.
  • Leader: Provide an example for employees to follow; give direct commands and orders to subordinates; make decisions concerning the use of human and technical resources.
  • Liaison: Coordinate the work of managers in different departments; establish alliances between different organizations to share resources to produce new goods and services.
• Informational Roles
  • Monitor: Evaluate the performance of managers in different tasks, and take corrective action to improve their performance; watch for changes occurring in the external and internal environments that may affect the organization in the future.
  • Disseminator: Inform employees about changes taking place in the external and internal environments that will affect them and the organization; communicate to purpose.
  • Spokesperson: Launch a national advertising campaign to promote new goods and services; give a speech to inform the local community about the intentions.
• Decisional Roles
  • Entrepreneur: Commit organizational resources to develop innovative goods and services; decide to expand internationally to obtain new customers.
  • Disturbance Handler: Move 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 goods or services.
  • Resource Allocator: Allocate organizational resources among different tasks and departments; set budgets and salaries of middle and first-level managers.
  • Negotiator: Work with suppliers, distributors, and labor unions to reach agreements about the quality and price of input, technical, and human resources.

Levels of managers

To perform the four managerial tasks efficiently and effectively, organizations group or differentiate their managers in two main ways, by level in hierarchy and by type of skill.

- CEO (top managers): They establish organizational goals, decide how different departments should interact, and monitor how well middle managers use the resources. They spend most of their time planning organizational goals and organizing the structure, but also, they are responsible for most of the controlling task.

- Middle managers: They supervise first-line managers, are responsible for finding the best way to use resources to achieve organizational goals and also pass information from the top to the bottom of the structure.

- First-line managers: Often called supervisors, they are responsible for the daily supervision of the non-managerial employees. They have a lot of interpersonal relationships and an important leading role over the employees.

Secondly, organizations group managers into different departments according to their specific skills and experience. A department is a group of managers and employees who work together because they possess similar skills and knowledge.

Managerial skills

Both education and experience enable managers to recognize and develop the personal skills they need to put organizational resources to their best use. Research has shown that education and experience help managers acquire and develop three types of skills:

• Conceptual skills: The ability to analyze and diagnose a situation and to distinguish between cause and effect. Top managers require the best conceptual skills because their primary responsibilities are planning and organizing.
• Human skills: The ability to understand, lead, and control the behavior of other individuals and groups. The ability to communicate, coordinate, motivate, and to mold individuals into a cohesive team distinguishes effective managers. Skills like these are especially significant for successful management in the public sector.
• Technical skills: These are job-specific skills required to perform a particular type of work or occupation at a high level. Managers need a range of technical skills to be effective. The array of technical skills managers need depends on their position in their organizations.

Core competency is the specific set of departmental skills, abilities, knowledge, and experience that allows one organization to outperform its competitors. In other words, these are the skills that allow an organization to reach a competitive advantage, which is the difference between the price of a good and the cost of it.

Changes in management practices

The tasks and responsibilities of managers have been changing dramatically in recent years. Two major factors that have led to these changes are global competition and advances in information technology. To utilize IT to increase efficiency and effectiveness, organizations have been restructured to reduce the number of employees on the payroll and make more productive use of the remaining workforce.

• Restructuring: Downsizing an organization by eliminating the jobs of large numbers of top, middle, and first-line managers and non-managerial employees.
• Outsourcing: Contracting with another company, usually in a low-cost country abroad, to perform a work activity previously performed internally.

The second principal way managers have sought to increase efficiency and effectiveness is by empowering lower-level employees and moving to self-managed teams. Empowerment is a management technique that involves giving employees more authority and responsibility over how they perform their work activities.

Challenges for management in a global environment

• Building a competitive advantage, which is the ability of one organization to outperform others because it produces desired goods and services more efficiently and effectively.
• Maintaining ethical and socially responsible standards.
• Managing a diverse workforce.
• Utilizing new technologies.
• Practicing global crisis management.

The evolution of management thought (Ch. 2)

The 4 industrial revolutions

• 1^st IR (late 18^th - mid 19^th century): Steam engine, mechanization, manufacturing moves from small artisans to large factories.
• 2^nd IR (late 19^th - early 20^th century): Electricity, gas, and oil.
• 3^rd IR (mid-20^th century): Computers, automation, and the internet.
• 4^th IR (2000s - now): Mobile internet, cloud, big data, and AI.

Scientific management theory

Adam Smith observed that firms manufactured pins in one of two different ways. He found that the performance of factories in which workers specialized in only one or a few tasks was much greater than those in which each worker performed all 18 pin-making tasks. He developed the idea of job specialization, which is a process by which a division of labor occurs as different workers specialize in different tasks over time.

Frederick Taylor developed scientific management, which is the systematic study of the relationship between people and tasks for the purpose of redesigning the work process to increase efficiency.

• Study the way workers perform their tasks, gather all the informal job knowledge that workers possess, and experiment with ways of improving how tasks are performed.
• Codify the new methods of performing tasks into written rules and standard operating procedures (gives more power to the manager).
• Carefully select workers who possess skills and abilities that match the needs of the tasks, and train them to perform the tasks according to the established rules and procedures.
• Establish a fair or acceptable level of performance for a task, and then develop a pay system that provides a reward for performance above an acceptable level.

Many workers experiencing the reorganized work system found that as their performance increased, managers required that they do more work for the same pay, and also their role lost value because they were easily replaceable. Scientific management brought many workers more hardship than gain and a distrust of managers who did not prioritize their well-being.

The Gilbreths

Two followers of Taylor were Frank and Lillian Gilbreth, who refined the analysis of work movements and made many contributions. Their aims were to analyze every individual action necessary to perform a particular task and break it into each of its component actions, find better ways to perform each action, and reorganize each of the component actions so that the action as a whole could be performed more efficiently.

The Gilbreths became increasingly interested in the study of fatigue. They studied how physical characteristics of the workplace contribute to job stress that often leads to fatigue and poor performance. They tried to link scientific management with the human element, reducing unnecessary motions and fatigue, giving clear instructions to help apprentices in their careers and nurturing respect and pride with scientific management: careful selection, clearly planned training, and proper equipment.

Administrative management theory

Administrative management theory focuses on creating an organizational structure and control system that leads to high efficiency and effectiveness. Max Weber developed the principles of bureaucracy as a formal system of organization and administration designed to ensure efficiency and effectiveness. He had 5 principles:

• Formal authority derived from a person's position in the organization. Authority is the power to hold people accountable for their actions and to make decisions concerning the use of organizational resources.
• Individuals occupy positions because of their performance (not nepotism or favoritism).
• The extent of each position's formal authority and the responsibilities and relationships of that position to others are clearly specified by the organization.
• Authority is exercised effectively when positions are arranged hierarchically.
• Rules of the organization are followed and control individual behavior.

Rules are formal written instructions that specify actions to be taken under different circumstances to achieve specific goals. Standard operating procedures (SOPs) are specific sets of written instructions about how to perform a certain aspect of a task. A rule might state that at the end of the workday employees are to leave their machines in good order, and a set of SOPs would specify exactly how they should do so.

Norms are unwritten, informal codes of conduct that prescribe how people should act in particular situations and are considered important by most members of a group or an organization. Weber believed organizations that implement all five principles establish a bureaucratic system that improves organizational performance, but if bureaucracies are not managed well many problems can result, for example, decision-making can become slow and inefficient. When managers rely too much on rules to solve problems and not enough on their skills and judgment, their behavior becomes inflexible.

Henry Fayol worked at the same time as Weber but independently, and he identified 14 principles that he believed essential to increasing the efficiency of the management process. Although they were developed at the turn of the 20^th century, they remain the bedrock on which much of recent management theory and research is based.

Behavioral management theory

American management theorists focused on Behavioral management, the study of how managers should personally behave to motivate employees and encourage them to perform at high levels and be committed to achieving organizational goals. Mary Parker Follett is considered the mother of managerial thought. Much of her writing about management and about the way managers should behave towards workers was a response to her concern that Taylor was ignoring the human side of the organization.

Taylor, for example, never proposed that managers should involve workers in analyzing their jobs to identify better ways to perform tasks or should even ask workers how they felt about their jobs. Follett argued that because workers know the most about their jobs, they should be involved in job analysis and managers should allow them to participate in the work development process. She suggested that if workers have the relevant knowledge, then workers, rather than managers, should be in control of the work process itself, and managers should behave as coaches and facilitators, not as monitors or supervisors.

The Hawthorne studies and human relations

The Hawthorne Studies began as an attempt to investigate how characteristics of the work setting affect worker fatigue and performance. The researchers conducted an experiment in which they systematically measured worker productivity at various levels of illumination. The experiment produced some unexpected results. The researchers found that regardless of whether they raised or lowered the level of illumination, productivity increased.

The results were influenced by the fact that the researchers themselves had become part of the experiment. In other words, the presence of the researchers was affecting the results because the workers enjoyed receiving attention and being the subject of study and were willing to cooperate with the researchers to produce the results they believed the researchers desired. This particular effect, which became known as the Hawthorne effect, suggested that interpersonal leadership approach can affect performance.

From this view emerged the human relations movement, a management approach that advocates the idea that supervisors should receive behavioral training to manage subordinates in ways that elicit their cooperation and increase productivity.

Theory X and Theory Y

After World War II, Douglas McGregor proposed two sets of assumptions about how work attitudes and behaviors not only dominate the way managers think but also how they behave in organizations. He named those two sets of assumptions Theory X and Theory Y:

- Theory X: According to the assumptions of this theory...