Mastering Management: Principles, Functions, and Skills

Posted on Apr 1, 2025 in International Business Economics

The Nature of Management

Remember when we discussed why individuals join organizations? It’s to accomplish goals or objectives that one could not achieve individually. However, this then requires us to manage those organizations.

Management defined: Management is the process of getting work done through other people.

The Importance of Management

  • Management is the process designed to achieve an organization’s objectives by using its resources effectively and efficiently in a changing environment.
  • Effectively means having the intended results (i.e., hitting the nail on the head with the hammer).
  • Efficiently means accomplishing the objective with a minimum of resources (i.e., driving the nail through the board with the fewest swings of the hammer).
  • Changing Environment: Environments always change, but the rate of change is now increasing, affecting the movement from rigid bureaucratic organization structures to more flexible and participative structures.

Phases of Management Thought

  • Ancient
    • Egypt – Pyramids
    • China – The Great Wall of China
    • Roman Empire – Roads, viaducts
    • The Arsenal of Venice 1436 used assembly line and interchangeable parts to build ships for defense against the Ottoman Empire.
  • Classical Business Management (Goal was to physically eliminate or control variables associated with labor)
  • Henri Fayol (1841 – 1925)
    • Six Functions of Management
      1. Forecasting – seeing the destination or vision
      2. Planning – drawing up plans to arrive at the destination
      3. Organizing – providing the resources for day-to-day operations
      4. Commanding – optimizing return from all employees to achieve the plan
      5. Coordinating – unifying and harmonizing activities and efforts among departments to achieve the plan
      6. Controlling – identifying weaknesses by conducting feedback and adjusting activities to achieve the plan
    • Fourteen Principles of Management
      1. Division of work – specialization
      2. Authority – i.e., to command infers responsibility
      3. Discipline – employees must obey rules
      4. Unity of command – each employee has only one supervisor
      5. Unity of direction – each group of organizational activity having the same objectives should be directed by one manager using one plan
      6. Subordination of individual interests to the general interests
      7. Remuneration – workers must be paid fairly
      8. Centralization – to be adjusted to the environment
      9. Scalar chain – line of communication
      10. Order – people and materials should be in the right place at the right time
      11. Equity – managers should be kind and fair to their employees
      12. Stability of tenure of personnel – high employee turnover is inefficient; plan for vacancies
      13. Initiative – employees who are allowed to originate and carry out plans will exert higher levels of effort
      14. Esprit de corps – harmony and unity within the organization. Today we call it teamwork.
  • Max Weber (1864 – 1920) – Bureaucracy
    • Authority or power resides in the position, not the person
    • Proposed to avoid the aristocracy from taking over business management
  • Frederick Taylor (1856 – 1915) – Scientific Management
  • Frank B. Gilbreth (1868 – 1924)
  • Lillian M. Gilbreth (1878 – 1972)
  • Henry L. Gantt (1861 – 1919)
  • Chester I. Barnard (1886 – 1961)
  • Hawthorne Studies 1924 – 1933
  • Modern Business Management (identify variables that can be influenced and managed by psychology and sociology)
  • Behavioral School
    • Mary Parker Follett (1868 – 1933)
    • Abraham Maslow (1908 – 1970) – Hierarchy of Needs Theory
    • Frederick Herzberg (1923 – 2000) – Two Factor Theory
    • Douglas McGregor (1906 – 1964) – Theory X, Theory Y
  • Management Science School
  • Management by Objective
    • Peter Drucker (1909 – 2005)
  • Post Modern Business Management (realize that the environment is unpredictable and uncontrollable; you can only control how you react to it)
  • Peter Drucker coined the term “post-modern” in regards to business management
  • Systems Management
  • Chaos Theory

Management Functions

(Some textbooks list only four functions of management by including staffing in with organization)

  • Planning – is the first function of management that lays the groundwork for all the other functions. It involves:
    • What the organization wants to achieve for its goals
    • Future state of being – vision for the firm
    • Position in the industry
    • Technical leadership
    • Market share
    • Operation cost structure
    • Customer relations
    • Forecasting the events needed to achieve those goals
    • Describing the various courses of action to achieve those goals, and identifying the best choice of action
    • The plan itself specifies what should be done, by whom, where, when, and how.
  • Types of Plans
    • Strategic Plans – establish the long-range vision and objectives and overall strategy or course of action by which the firm achieves its vision (2 to 5 years or longer)
    • Tactical Plans – are annual plans showing milestones and dates needed to achieve the strategic plan.
    • Operational Plans – the hourly, daily, weekly plans identifying department, work group, and individual achievements needed to achieve the tactical plan and ultimately the strategic plan.
    • Contingency Planning – stress this need in light of the ever increasingly changing environment.
  • Organizing – is the structuring of resources and activities to accomplish objectives efficiently and effectively. It is important for several reasons:
    • Helps create synergy (explain synergy)
    • Establishes lines of authority
    • Improves communication
    • Helps avoid duplicating efforts and wasting of resources
  • Staffing – this will be discussed in detail in Chapters 09 and 10
  • Directing – is motivating and leading employees to achieve organizational objectives
  • Controlling – is the process of evaluating and correcting activities to keep the organization on course to its intended objectives
    • The five-step process of controlling:
      1. Measuring performance
      2. Comparing present performance with standards or objectives
      3. Identifying deviations from the standards or objectives
      4. Investigating the cause of deviations
      5. Taking corrective action when necessary
    • The control function helps managers assess the success of their plans

Levels of Management

  • Top Management – officers of the company and senior executives on the CEO’s staff.
  • Middle Management – division managers, department managers such as production, accounting marketing, human resources, information technology
  • First-Line Management – supervisors of the workers in each department
  • Before computerization, middle managers compiled reports to convey operational results to top management and to pass down directives from top management, but since the application of computerized management information systems, most middle management jobs have been eliminated.
  • The effect has been the leveling or flattening of organizational structure from “tall” or “pyramid “ structure with many layers of management to a flattened structure with only two layers with a small top Corporate control staff.

Management Levels & Functions: Time Utilization

  • Top Managers
    1. Planning
    2. Organizing
    3. Staffing
    4. Directing
    5. Controlling
  • Middle Managers
    1. Organizing
    2. Staffing
    3. Planning
    4. Directing
    5. Controlling
  • First-Line Managers
    1. Controlling
    2. Directing
    3. Staffing
    4. Organizing
    5. Planning

Areas of Management Specialization

  • Financial – responsible for recording all transactions of the business and generating financial statements for senior management to review, and assisting in the acquisition of financial resources.
  • Production or Operational – responsible for managing the activities that transform resources into goods and services. In many firms, this function has become very technologically based and less reliant on human labor.
  • Human Resources – responsible for staffing the organization and dealing with all government regulations pertaining to employees
  • Engineering– designs the firms product or service
  • Marketing – responsible for all marketing, advertising, market research, sales of the product or service into the marketplace
  • Information Technology – responsible for developing, maintaining, and controlling the organizations databases and supplying each level of management the information and reports needed to manage the organization. This function has grown in importance from a relatively clerical function to a function that can be the essence of the firms competitive advantage.
  • Administrative Management – are not specialists but manage divisions as a business unit
  • Corporations today concentrate on their “core competencies” which include their proprietary competitive advantage and outsource those functions that do define their existence.

Skills Needed by Managers

  • Leadership – is the ability to influence others to work toward organizational goals
  • Technical Expertise – the specialized knowledge and training needed to perform jobs related to each specific area of management (i.e., engineering for production managers, and accounting for financial managers)
  • Conceptual Skills – to see things before they exist. See things in abstract terms and to see how things work together in a system.
  • Analytical Skills – ability to identify relevant issues and recognize their importance and relationships and perceive the underlying cause and effect relationships
  • Human Relations Skills – the ability to deal with and through people both inside and outside the organization

Decision Making

  • Recognizing and Defining the Decision Situation (in the real world, this is the most difficult part of decision making, for there is not a textbook writer defining the problem! You must do it yourself!) This process requires a great deal of conceptual skills by management.
  • Developing Options – creativity to see as many as possible potential solutions, sometimes called “brainstorming”.
  • Analyzing Options – being able to order rank the set of potential solutions
  • Selecting the Best Option – selecting the best solution from all possible solutions that will best achieve organizational goals
  • Implementing the Decision (this is the second most difficult part of decision making because it takes a lot of effort, cooperation, follow through, etc.) This requires a lot of planning.
  • Monitoring the Consequences (explain unforeseen consequences)
    • First, you may have missed something in the analytical stage, and you need to fine-tune your solution
    • Or you may have chosen a good solution but did not see unseen reactions or consequences to your course of action by other stakeholders of the organization
    • This requires you to go through all the steps under “controlling”

Organization, Teamwork, and Communication

Developing Organizational Structure

  1. Structure is the skeleton of the organization and gives it shape and mobility.
  2. Structure shows delegation of authority
  3. Organizational lines of authority and communication
  4. It can be rigid or flexible
  5. Bureaucracy as a form of structure
    • Authority is derived from the position, and this structure controls the organization with formal “organizational charts”
    • Very centralized with very little decision-making authority delegated
    • Very formal lines of authority and communication through the hierarchy with no deviation tolerated
    • Specialization is stressed to achieve efficiency and lower costs
    • Rigid departmentalization with many layers of organization by:
      • Function or process
      • Product lines
      • Geographical
      • Customer
    • Clearly defined individual career path
    • No surprises; everyone must use “standard operating procedures”
    • Problem-solving through application of established policies, procedures, and rules
    • Successfully adaptive only when the macroeconomic environment is relatively stable and mathematically predictive
    • Collapsed in the late 1970’s and 1980’s when macroeconomic environments changed rapidly and non-systematic
  6. Post-Bureaucracy forms of organizational structure
    • Flexible organizational structure adaptive to changing macroeconomic conditions
    • Decentralized to improve responsiveness and enhance creativity with decision-making delegated to lower levels
    • Authority derived from competence, and “organizational culture” now replaces structure for organizational control
    • Communication is broad-based through computerized information systems
    • Work arranged around:
      • Work teams, not individual positions
      • Cross-functional teams, not departmentalization
      • Task forces for very short task duration
      • Project teams for longer duration projects but not permanent (example, the shuttle project)
      • Self-directed work teams; however, the real world is not to this point yet. Although some companies claim that they are using them, in reality, they are not there yet according to the definition of “self-directed”
      • Cell manufacturing rather than departmentalization
      • Learning organizations
  7. Organizational Culture:
    • A firm’s shared values, beliefs, traditions, philosophies, rules, and role models for behavior
    • A firm’s organizational culture may be expressed formally through its code of ethics, memos, manuals, and ceremonies: or
    • It may be expressed informally through interpersonal expressions, work habits, extracurricular activities, and stories of the past
    • Organizational culture helps ensure that all members of a company share common values and suggestions for behavior and problem-solving
  8. Contribution of Adam Smith to capitalism:
    • He published his book “The Wealth of Nations” in 1776
    • In his book, he argued against “mercantilism”
    • In his book, he argued for “specialization”
    • In his book, he argued that when each person in society pursues their “own best interests,” then the greatest good for society is also achieved
    • In his book, he argued that the “invisible hand” was the regulatory or control function that kept individuals from committing fraud. Today we know that this is “perfect competition” in the markets that does not exist anymore.
    • His theory was that the “strength” of a nation or its wealth was derived from its economic system’s ability to produce goods and services, and raising the standard of living for its citizens was the real determinant of the power of a nation. He stresses value-increasing activities rather than gold-hording activities.
  9. Delegation of Authority:
    • Responsibility
    • Accountability
  10. Forms of Management:
    • Line Structure – used when business firms are small
      • All employees have some function to get the product made and to the customer (i.e., they touch the product)
      • Each employee is assigned some support function responsibilities (i.e., employees wear many hats)
    • Line – Staff Structure – used when business firms grow larger
      • Line functions are those that actually touch the product or service
      • Staff functions are those that support the line people but are not in daily contact with the product (example accounting or human resources)
    • Matrix Structure – used when projects are large and complex
      • Each worker has two bosses: one for the function they perform, and one for the project that they are assigned to
      • Used for only very large complex projects because it is expensive
  11. Span of Management:
    • It is the greatest number of workers that a single supervisor can manage both effectively and efficiently
    • It is dependent upon the following:
      • Complexity of the task
      • Skills of the workers
      • Skill of the supervisor
      • Other time constraints on the supervisor
  12. Centralization of management control
    • Works best when:
      • The macroeconomic environment is relatively stable
      • The cost of failure is extremely high
    • Disadvantages
      • It takes a lot of time to get information up and down the organization
      • It takes a lot of time to get decisions implemented down through the organization
      • It does not allow for individual initiative
      • It does dot build morale
  13. Decentralization of management control
    • Works best when:
      • The macroeconomic environment is changing quickly and /or unpredictable manner
      • Decisions need to be made quickly to capture competitive advantage
      • High morale is needed to achieve the objective
    • Disadvantages
      • Requires a more talented workforce at the lower levels of the organization
      • Increases payroll costs
  14. Miscellaneous:
    • Committee – it is usually a permanent formal group that does some specific task
    • Task force – it is a temporary group of employees responsible for completing a specific task usually requiring a short time period to accomplish
    • Project teams – they are established for a much longer time period even years than task forces, but they do have a limited life