Management mines the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading, and controlling organizational resources.
The definition of management
What do managers like Lee Iacocca. General Creech, and Kelly Johnson have in common? They get things done through their organizations. One early management scholar, Mary Parker Follett, described management as “the art of getting things done through people.” Peter Drucker, a noted management theorist, says that managers give direction to their organizations, provide leadership, and decide how to use organizational resources to accomplish goals.
Getting things done through people and other resources and providing direction and leadership are what managers do. These activities apply not only to top executives such as Lee Iacocca or General Creech, but also to a new lieutenant in charge of a TAG maintenance squadron, a supervisor in the Ontario plant that makes Plymouth minivans, and ReBecca Roloff as manager of Pillsbury’s distribution department. Moreover, management often is considered universal because it uses organizational resources to accomplish goals and attain high performance in all types of profit and not-for-profit organizations.
Thus, our definition of management is as follows:
Management is the attainment of organizational goals in an effective and efficient manner through planning, organizing, leading, and controlling organizational resources.
There are two important ideas in this definition: (1) the four functions of planning, organizing, leading, and controlling and (2) the attainment of organizational goals in an effective and efficient manner. The management process of using resources to attain goals is illustrated in Exhibit 1.
1. Although some management theorists identify additional management functions, such as staffing, communicating, or decision making, those additional functions will be discussed as Subsets of the four primary functions in Exhibit 1. Chapters of the book are devoted to the multiple activities and skills associated with each function, as well as to the environment, global competitiveness, and ethics, which influence how managers perform these functions. The next section begins with a brief overview of the four functions.
Exhibit 1.1. The Process of Management.
1.1.1. The four management functions
Planning is the management function concerned with defining goals for future organizational performance and deciding on the tasks and resource use needed to attain them.
Planning defines where the organization wants to be in the future and how to get there. Planning means defining goals for future organizational performance and deciding on the tasks and use of resources needed to attain them. Senior managers at Bausch & Lomb defined a specific plan: to capture at least 50 percent of every segment of the contact lens market even if prices had to be cut and profits reduced to maintain market share. Senior managers at Chase Manhattan Bank decided to make it the number one service-quality bank in the world and, through extensive planning, to develop a worldwide network of branch banks, implement a sophisticated foreign exchange system, and offer a state-of-the-art electronic funds transfer system. General Creech successfully turned around the Tactical Air Command because he had a specific plan including targets for improved sortie rates and techniques for achieving the new rates.
A lack of planning-or poor planning-can hurt an organization’s performance. For example, Tom Clausen was accused of poor planning when he insisted that BankAmerica increase loans 10 percent a year and that profits increase as well. To get new loans, BankAmerica’s offices gradually reduced loan quality. To keep boosting profit, Clausen delayed investing in computers, scrimped on bank control systems, failed to modernize the branches, and kept salaries low. The absence of a detailed plan for achieving growth and efficiency in several areas led to loan failures and huge losses in subsequent years.
Organizing is the management function concerned with assigning tasks, grouping tasks into departments, and allocating resources to departments.
Organizing typically follows planning and reflects how the organization tries to accomplish the plan. Organizing involves the assignment of tasks, the grouping of tasks into departments, and the allocation of resources to departments. For example, Hewlett-Packard, Sears, Roebuck, Xerox, and Digital Equipment have all undergone recent structural reorganizations to accommodate their changing plans. General Creech accomplished his plan for TAG’S improved sortie rate largely through decentralization and the development of small, independent maintenance units – a drastic departure from the traditional structure that had encouraged centralization and consolidation of Air Force resources. Kelly Johnson of Lockheed used organizing wizardry to reduce the number of subcontractor inspectors from 1,271 to 35 and still achieve the objective of improved launch effectiveness. Indeed, his organizing was so good that the Air Force insisted that a competitor be allowed to visit Johnson’s team. The competitor used 3,750 people to perform a similar task and was years behind and way over budget. Johnson’s organization was on schedule and under budget – and with only 126 people. Honeywell managers reorganized new product development into “tiger teams” consisting of marketing, design, and engineering employees. The new structural design reduced the time to produce a new thermostat from 4 years to 12 months.
Likewise, weak organizing facilitated the destruction of Braniff Airlines under Harding Lawrence. Braniff did not have enough departments and offices to handle passengers and airplanes for the new national and international routes Lawrence grabbed during deregulation of the airline industry. Braniff needed an enormous amount of money to set up a structure to fit its strategy. Even before its expansion Braniff lacked a strong internal structure with clearly defined roles for accomplishing tasks. The structure produced a group of “yes men” who deferred to Lawrence’s every decision.
Leading is the management function that involves the use of influence to motivate employees to achieve the organization’s goals.
The third management function is to provide leadership for employees. Leading is the use of influence to motivate employees to achieve organizational goals. Leading means communicating goals to employees throughout the organization and infusing them with the desire to perform at a high level. Leading involves motivating entire departments and divisions as well as those individuals working immediately with the manager.
Managers such as Lee Iacocca are exceptional leaders. They are able to communicate their vision throughout the organization and energize employees into action. General Creech was a leader when he improved the motivation of aircraft maintenance technicians in hundreds of maintenance squadrons. Maintenance people previously had been neglected in favor of pilots. Creech set up highly visible bulletin boards displaying pictures of the maintenance crew chiefs, improved their living quarters, and established decent maintenance facilities, complete with paintings and wall murals. He introduced competition among the newly independent maintenance squadrons. He created trophy rooms to hold plaques and other prizes won in maintenance competitions. This prominent display of concern for maintenance specialists greatly increased their motivation to keep the planes flying.
When William Schaefer was mayor of Baltimore, he used a number of techniques to motivate city employees. He sent them action memos that were blunt and direct: “Get the trash off East Lombard Street,” “Broken pavement at 1700 Carey,” “Abandoned car at 2900 Remington.” One action memo said, “There is an abandoned car . . . but I’m not telling you where it is.” City crews ran around for a week and towed several hundred cars.
Leadership has a negative side, too. Again consider Harding Lawrence. His leadership of Braniff was said to contribute to employees’ demotivations. Lawrence won notoriety on Braniff Flight 6, which he took weekly to visit his wife, who worked in New York City:
His tantrums on Flight 6 are legend. On one flight a stewardess served him an entire selection of condiments with his meal instead of asking him which one he preferred. He slammed his fist into the plate, splattering food on the surrounding seats of the first-class cabin. “Don’t you ever assume what I want!” he screamed
“On several occasions flight attendants came to me in tears, fearful of losing their jobs,” says Ed Clements, former director of flight attendant services at Braniff. “I was sickened by what he was doing to the employees.”
Lawrence’s appearance on an aircraft was likely to arouse two emotions in the crew: fear and hatred.
Inevitably, dissatisfied employees led to get dissatisfied customers. Marketing surveys indicated that Braniff was unpopular with many of its passengers. Without a loyal customer base, successful expansion and high performance proved impossible. The Manager’s Shoptalk box highlights several leadership problems and possible solutions.
Controlling is the management function concerned with monitoring employees’ activities, keeping the organization on track toward its goals, and making corrections as needed.
Controlling is the fourth function in the management process. Controlling means to manager to monitoring employees’ activities, determining whether the organization is on target toward its goals, and making corrections as necessary. Managers must ensure that the organization is moving toward its goals. Controlling often involves using an information system to advise managers on performance and a reward system for recognizing employees who make progress toward goals. For example, at Domino’s Pizza Distribution Company over 1,200 franchises are measured weekly. A phone survey of customers determines the quality of service at each franchise, which is reported to management. Compensation for all employees is based on the results. Expected performance levels are reviewed every six months and set slightly higher for the next six months. The control system then monitors whether employees achieve the higher targets.
One reason for organization failure is that managers are not serious about control or lack control information. Robert Fomon, longtime autocratic chief executive of E. F. Hutton, refused to set up control systems because he wanted to personally supervise senior management. At one time he reviewed the salaries and bonuses of more than 1,000 employees, but eventually Hutton grew too big for his personal supervision. To achieve profit goals managers got involved in an undetected check-kiting scheme and the firm pleaded guilty to 2,000 counts of mail and wire fraud. Other undetected behaviors were the $900,000 in travel and entertainment expenses for one executive in one year and the listing of party girls from escort services as temporary secretarial help. The lack of control led to Fomon’s demise, E. F. Hutton has never fully recovered.
Organization is a social entity that is goal directed and deliberately structured.
The other part of our definition of management is the attainment of organizational goals in an efficient and effective manner. One reason management is sc important is that organizations are so important. In an industrialized society where complex technologies dominate, organizations bring together knowledge, people, and raw materials to perform tasks no individual could do alone Without organizations how could 15,000 flights a day be accomplished without an accident, electricity produced from large dams or nuclear power generators, millions of automobiles manufactured, or hundreds of films, videos, and records made available for our entertainment? Organizations pervade our society. Most college students will work in an organization-perhaps Hospital Corporation of America, Federated Department Stores, Boise Cascade, or Standard Oil. College students already are members of several organizations, such as a university, junior college, YMCA, church, fraternity, or sorority. College students also deal with organizations every day: to renew a driver’s license, be treated in a hospital emergency room, buy food from a supermarket, eat in a restaurant, or buy new clothes. Managers are responsible for these organizations and for seeing that resources are used wisely to attain organizational goals.
Our formal definition of an organization is a social entity that is goal directed and deliberately structured. Social entity means being made up of two or more people. Coal directed means designed to achieve some outcome, such as make a profit (Boeing, Mack Trucks), win pay increases for members (AFL-CIO), meet spiritual needs (Methodist church), or provide social satisfaction (college sorority). Deliberately structured means that tasks are divided and responsibility for their performance assigned to organization members. This definition applies to all organizations, including both profit and not-for-profit. Vickery Stoughton runs Toronto General Hospital and manages a $200 million budget. He endures intense public scrutiny, heavy government regulation, and daily crises of life and death. Hamilton Jordan, formerly President Carter’s chief of staff, created a new organization called the Association of Tennis Professionals that will take control of the professional tennis circuit. John and Marie Bouchard launched a small business called Wild Things that sells goods for outdoor activities. Small, offbeat, and not-for-profit organizations are more numerous than large, visible corporations – and just as important to society.
Based on our definition of management, the manager’s responsibility is to coordinate resources in an effective and efficient manner to accomplish the organization’s goals. Organizational effectiveness is the degree to which the organization achieves a stated objective. It means that the organization succeeds in accomplishing what it tries to do. Organizational effectiveness means providing a product or services that customer’s value. Organizational efficiency refers to the amount of resources used to achieve an organizational goal. It is based on how much raw materials, money, and people are necessary for producing a given volume of output. Efficiency can be calculated as the amount of resources used to produce a product or service.
Efficiency and effectiveness can both be high in the same organization. Consider the impact of Dick Dauch, vice-president of manufacturing at Chrysler. His leadership has allowed a startling increase in efficiency. Chrysler now ion build 8,000 cars and trucks a day compared with 4,500 a few years ago. The number of worker-hours per vehicle has shrunk from 175 to 102. Resources are more efficiently: Worker absenteeism is down sharply. New technology has transformed the assembly line. The manufacturing improvements have also boosted effectiveness. Chrysler cars are now first quality, rated nearer the top in reliability, durability, and fit-and-finish.
Managers in other organizations, especially service firms, are improving efficiency, too. Labor shortages in the Midwest and northeastern United States have prompted managers to find labor-saving tricks. Burger King and Kentucky Fried Chicken restaurants let customers serve themselves drinks. Sleep Inn hotels have a washer and dryer installed behind the desk so that clerks can launder sheets and towels while waiting on customers. McDonald’s is experimenting with a grill that cooks hamburgers on both sides at once, eliminating the need for an employee to flip them.
The ultimate responsibility of managers, then, is to achieve high performance, which is the attainment of organizational goals by using resources in an efficient and effective manner. Whether managers are responsible for the organization as a whole, such as Robert Stempel at General Motors, or for a single department, such as ReBecca Roloff at Pillsbury, their ultimate responsibility is performance. Harold Geneen, a legendary manager who transformed ITT into one of the world’s largest and best-run corporations, explained it this way: “I think it is an immutable law in business…..”
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