Pride/Hughes/Kapoor Business, 10th Edition

Audio Review Transcript
Chapter 6 Understanding the Management Process

1. Define what management is

We all know that if a business has poor management it is more likely to fail, and that if it has good management it is more likely to succeed. But what exactly is management? Management is the process of coordinating people and other resources to achieve the goals of the organization. You may recall that there are four types of resources. Material resources are the tangible, physical resources that a firm uses. Human resources are the people who work for a firm. Financial resources are the funds a firm uses to meet its obligations, and information resources are the external environmental conditions that a firm interacts with. (LO 1 ends)

2. Describe the four basic management functions: planning, organizing, leading and motivating, and controlling

As they try to coordinate people and resources, managers perform four basic functions: planning, organizing, leading and motivating, and controlling. Frequently, managers engage in these activities simultaneously. Let’s look at these functions individually to better understand what each really entails. First, planning is establishing organizational goals and deciding how to accomplish them. Planning starts with a statement of the company’s mission. A mission states the basic purpose that makes an organization different from others. After the mission statement is written to describe a firm’s purpose, the firm goes through the process of establishing its major goals and objectives, and allocating the resources to achieve them. This process is called strategic planning. What is the difference between a goal and an objective? A goal is an end result that an organization is expected to achieve over a one-to-ten-year period. An objective, on the other hand, is a specific statement detailing what the organization intends to accomplish over a shorter period of time. Usually this time period is one year or less. Goals and objectives may focus on a variety of factors—not just the usual growth and income. Goals are set for each level of an organization, based on what each level is responsible for. It is critical that the goals be consistent and mutually supportive. Sometimes compromises have to be made, though, through a process called optimization. By using optimization, managers balance the needs of two or more potentially conflicting sets of goals. But nothing will happen beyond the thinking stage if the organization doesn’t have a plan. A plan is an outline of the actions by which the organization intends to achieve its goals and objectives. There are four primary types of plans. The broadest set of plans is called a strategic plan, which provides a guide for basic policy setting and decision making. Strategy is set by the board of directors and top management to achieve a firm’s long-term goals—perhaps a 5- or 10-year period. The second type of plan is called a tactical plan, a narrower, smaller-scale plan developed to implement a strategy. Tactical plans usually cover a 1- to 3-year period. Several tactical plans may be required to implement one part of a strategy. The third type is an operational plan, which is designed to implement a tactical plan. An operational plan usually has a duration of one year or less. Finally, most organizations realize that not everything always goes according to plan, so they develop contingency plans, which outline alternative courses of action that may be taken if the organization’s other plans are disrupted or become ineffective.
The second major managerial function is organizing. Organizing is the grouping of resources and activities to accomplish an end result in an efficient and effective manner. As organizations grow, the need for more and specialized people also grows. The organizing function is concerned with what people do, to whom they report, and how people can best take part in the organization’s activities.
The third managerial function deals with the human aspect of the organization and consists of leading and motivating. Leading is the process of influencing people to work toward a common goal, whereas motivating is the process of providing reasons for people to work in the best interests of the organization. Together, leading and motivating are often referred to as directing. The directing function is critical, since the human factor is so important to the success of an organization. A lot of research has been done on motivation—learning what makes people do what they do. This has helped managers do their jobs much better. 
The last of the four managerial functions is controlling. Controlling is the process of evaluating and regulating ongoing activities to ensure that goals are achieved. Controlling consists of three steps: (1) setting standards, (2) measuring actual performance, and (3) taking corrective action. These steps are actually circular in nature and are repeated until the goal is achieved. (LO 2 ends)

3. Distinguish among the various kinds of managers in terms of both level and area of management

So now that we know what functions managers perform in an organization, let’s look at the different types of managers. Managers are classified according to their level in an organization, whether they are top, middle, or first line, and by area of specialization, that is, financial, operations, marketing, human resources, or administrative. Let’s talk about each of these levels and specialties. A top manager is an upper-level executive who guides and controls the overall fortunes of the organization. They may have titles such as president, vice president, or chief executive officer, and they are responsible for setting the organization’s mission and strategy. A middle manager implements the strategy and major policies developed by top management. Middle managers develop tactical and operational plans, and have titles such as department head, plant manager, or division manager. A first-line manager coordinates and supervises the activities of operating employees. First-line managers spend a lot of their time working with and motivating their employees. Common titles include office manager, supervisor, and foreman. Each of these levels of management may appear within a particular department or area of special expertise. Let’s look at those areas now.
A financial manager is primarily responsible for the organization’s financial resources. Accounting and investments are specialized areas within the financial function. An operations manager manages the systems that convert resources into goods and services. Manufacturing and the production of services fall into this category. A marketing manager is responsible for facilitating the exchange of products between the organization and its customers or clients. Specific areas in marketing include advertising, promotion, sales, and distribution. A human resources manager is charged with managing the organization’s human resources program, including hiring, training, and evaluating performance. Finally, an administrative manager, sometimes called a general manager, is a person not associated with any specific function but who provides overall administrative guidance and leadership. (LO 3 ends)

4. Identify the key management skills and the managerial roles

So now we know that managers perform the four primary functions at various levels and in various areas in an organization. But what distinguishes a good manager from one who is less effective? In addition to the specialized knowledge in their areas, effective managers have several skills and they use these skills in a variety of roles. There are three categories of skills and three categories of roles. Let’s start with skills. First, technical skills are the specific skills needed to accomplish a specialized activity. Examples include engineering, accounting, or computer skills. Second, a conceptual skill is the ability to think in abstract terms. Conceptual skills allow the manager to see both the big picture as well as the component parts. Third, interpersonal skills are the ability to deal effectively with other people. These skills are important to better motivate employees as well as to deal with people outside the organization. A manager who has all these skills is more likely to be successful than one who does not.
In the course of a day, managers are required to use their skills in a variety of roles. There are ten roles a manager can fulfill, and they fall into three categories. These categories are decisional roles, interpersonal roles, and informational roles. A decisional role is one that involves various aspects of management decision making. As a decision maker, the manager may be called upon to be (1) an entrepreneur—the voluntary initiator of change; (2) a disturbance handler—perhaps settling a strike; (3) a resource allocator—dealing with budgets and expenditures; and (4) a negotiator, by settling a dispute between a manager and worker. The second category of roles are interpersonal roles, where the manager deals with people. These roles include (5) a figurehead—by attending a special ceremony or entertaining a client, (6) a liaison—by serving as a go-between for two groups; and (7) a leader—by setting a good example for others. The third and final category of roles are informational roles, in which the manager either gathers or provides information. Among informational roles are that of (8) a monitor—when a manager actively solicits information that may be valuable to the organization; (9) a disseminator—by transmitting key information to those who can use it, and finally (10) as a spokesperson—by providing information to people outside the organization. Of course no one is likely to play any one role constantly, but all of the skills must be available when needed for each role. (LO 4 ends)

5. Explain the different types of leadership

A phenomenon that is somewhat related to management but can also be quite different is leadership, the ability to influence others. Leadership differs from management in that a leader strives for voluntary cooperation, whereas a manager may have to depend on his or her role as a formal leader. Formal leaders have legitimate authority and power of position, whereas informal leaders do not. How people use their power and authority determine to a great extent what type of leader they are. An authoritarian leader holds all authority and responsibility, with communication usually moving from top to bottom. This type of leader assigns work and expects results. A laissez-faire leader gives authority to employees and allows subordinates to work as they choose with a minimum of interference. Communication flows horizontally among group members. Finally, a democratic leader holds final responsibility but also delegates authority to others, who help determine work assignments. Communication is active both upward and downward. Probably no one style is best. Different situations may require different styles. What is important is that the leader’s style match the situation. (LO 5 ends)

6. Discuss the steps in managerial decision-making process

No matter what role or function a manager is performing, one constant is the need to make decisions. Decision making is the act of choosing one alternative from a set of alternatives. Many decisions are quite complex and require a systematic method to find the best alternative. Managerial decision making involves four steps: (1) identifying the problem, (2) generating alternatives, (3) selecting an alternative, and (4) implementing and evaluating the solution. Identifying the actual problem, that is, the discrepancy between an actual condition and a desired condition, is not always easy. It is critical to distinguish between the problem and its symptoms. It is a good idea to try to generate several possible alternative solutions, keeping an open mind to new ideas. Finally, managers select the alternative that will be most effective under the circumstances. Sometimes what the best managers can do is satisfice, which describes solutions that are only adequate and not the best possible. Implementing and evaluating the decision may ultimately require another round of generating alternatives if the first doesn’t work out as planned. (LO 6 ends)

7. Describe how organizations benefit from total quality management

The management of quality in products and services is very important today. Demanding customers and foreign competition have raised the stakes and cut into profit margins. More and more companies are embracing the concept of total quality management, or TQM. TQM is the coordination of efforts directed at improving customer satisfaction, increasing employee participation, strengthening supplier relationships, and facilitating an organizational atmosphere of continuous quality improvement. For TQM programs to be successful there must be a strong commitment by top management and a coordination effort throughout the management ranks to ensure that all elements of the program are working in harmony. (LO 7 ends)

8. Summarize what it takes to become a successful manager today

The demands put on managers today mean that they don’t just sit in an expensive office and look good. Managers must perform all four of the basic functions, make decisions, play a number of different roles, and use all of their well-honed skills to stay on top of situations. They also spend a lot of time talking to people, both giving and receiving information. Thus their oral and written communication and critical thinking skills must be very strong too. Managers live each day at a hectic pace but generally find their work very rewarding. (LO 8 ends)