Management Process and Organizational Resources
Although we have discussed the four functions of management individually, planning, organizing, influencing, and controlling are integrally related and therefore cannot be separated in practice. Figure 1.3 illustrates this interrelationship and also indicates that managers use these activities solely for reaching organizational goals. Basically, these functions are interrelated because the performance of one depends on the performance of the others. For example, organizing is based on well-thought-out plans developed during the planning process, and influencing systems must be tailored to reflect both these plans and the organizational design used to implement them. The fourth function, controlling, involves possible modifications to existing plans, organizational structure, or the motivation system used to develop a more successful effort.
Figure 1.3 Relationships among the four functions of management used to attain organizational goals
To be effective, a manager must understand how the four management functions are practiced, not simply how they are defined and related. Thomas J. Peters and Robert H. Waterman, Jr., studied numerous organizations—including Frito-Lay and Maytag—for several years to determine what management characteristics best describe excellently run companies. In their book In Search of Excellence, Peters and Waterman suggest that planning, organizing, influencing, and controlling should be characterized by a bias for action; a closeness to the customer; autonomy and entrepreneurship; productivity through people; a hands-on, value-driven orientation; “sticking to the knitting”; a simple organizational form with a lean staff; and simultaneous loose–tight properties.
This brief introduction to the four management functions will be further developed in Parts 3 through 6 of this text.
Figure 1.4 Transformation of organizational resources into finished products through the production process
Management and Organizational Resources
Management must always be aware of the status and use of organizational resources. These resources, composed of all assets available for activation during the production process, are of four basic types:
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Human
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Monetary
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Raw materials
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Capital
As Figure 1.4 shows, organizational resources are combined, used, and transformed into finished products during the production process.
Human resources are the people who work for an organization. The skills they possess and their knowledge of the work system are invaluable to managers. Monetary resources are the amounts of money that managers use to purchase goods and services for the organization. Raw materials are the ingredients used directly in the manufacturing of products. For example, rubber is a raw material that Goodyear would purchase with its monetary resources and use directly in manufacturing tires. Capital resources are the machines used during the manufacturing process. Modern machines, or equipment, can be a major factor in maintaining desired production levels. Worn-out or antiquated machinery can make it impossible for an organization to keep pace with competitors.
Managerial Effectiveness
As managers use their resources, they must strive to be both effective and efficient. Managerial effectiveness refers to management’s use of organizational resources in meeting organizational goals. If organizations are using their resources to attain their goals, the managers are declared effective. In reality, however, managerial effectiveness can be measured by degrees. The closer an organization comes to achieving its goals, the more effective its managers are considered. Managerial effectiveness, then, exists on a continuum ranging from ineffective to effective.
Managerial Efficiency
Managerial efficiency is the proportion of total organizational resources that contribute to productivity during the manufacturing process.14 The higher this proportion, the more efficient is the manager. The more resources wasted or unused during the production process, the more inefficient is the manager. In this situation, organizational resources refer not only to raw materials that are used in manufacturing goods or services but also to related human effort.15 Like management effectiveness, management efficiency is best described as being on a continuum ranging from inefficient to efficient. Inefficient means that a small proportion of total resources contributes to productivity during the manufacturing process; efficient means that a large proportion of resources contributes to productivity.
As Figure 1.5 shows, the concepts of managerial effectiveness and efficiency are obviously related. A manager could be relatively ineffective—with the consequence that the organization is making little progress toward goal attainment—primarily because of major inefficiencies or poor utilization of resources during the production process. In contrast, a manager could be somewhat effective despite being inefficient if demand for the finished goods is so high that the manager can get an extremely high price per unit sold and thus absorb inefficiency costs. Thus, a manager can be effective without being efficient, and vice versa. To maximize organizational success, however, both effectiveness and efficiency are essential.
Figure 1.5 Various combinations of managerial effectiveness and managerial efficiency
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As an example of achieving efficiency and effectiveness, consider Telstra Corporation, Australia’s largest telecommunication company. Like its counterparts the world over, Telstra faces the challenges of a changing industry in which mobile phones are fast becoming more popular than the landline business on which Telstra built its fortunes. To survive, Telstra is scrambling to create a nimble management team and prune the bureaucracy that slows down decision making and internal operations. In a recent reorganization of his executive team, Telstra CEO David Thodey created four groups—customer sales and support, product and marketing innovation, operations, and corporate support—all focused on effectiveness: getting more competitive while also attracting and retaining customers.16
The Universality of Management
Management principles are universal: That is, they apply to all types of organizations (businesses, churches, sororities, athletic teams, hospitals, etc.) and organizational levels.17 Naturally, managers’ jobs vary somewhat from one type of organization to another because each organizational type requires the use of specialized knowledge, exists in unique working and political environments, and uses different technology. However, job similarities are found across organizations because the basic management activities—planning, organizing, influencing, and controlling—are common to all organizations.
The Theory of Characteristics
Henri Fayol, one of the earliest management writers, stated that all managers should possess certain characteristics, such as positive physical and mental qualities and special knowledge related to the specific operation.18 B. C. Forbes emphasized the importance of certain more personal qualities, inferring that enthusiasm, earnestness of purpose, confidence, and faith in their own worthiness are primary characteristics of successful managers. Forbes described Henry Ford as follows:
A Forbes article described the characteristics of a successful business leader by describing Henry Ford. According to the article, every successful business starts with an individual like Ford who is enthusiastic, believes in the organization’s purpose, is self-confident, and believes in the high value of what the organization aims to accomplish. Like any business leader, Henry Ford certainly faced many difficulties and high challenges in building the Ford Motor Company. It can be argued that only Henry Ford’s enthusiastic and continued support of his company saved both him and his company from certain failure.19
Fayol and Forbes can describe desirable characteristics of successful managers only because of the universality concept: The basic ingredients of successful management are applicable to all organizations.