Learn Figure 1.6 Managerial skills needed at various managerial levels p16 A competency in managerial skills refers to the necessary: # Competency 1 Knowledge 2 Skills 3 orientation Management and Organisational Performance p18 # Theory Description 1 The fundamental economic principle Achieving the highest possible satisfaction of with scarce resources 2 The task of management in a free-market economy To manage in such a way that the organisation makes a sustainable profit, that is, earns the highest possible income with the lowest possible costs 3 The triple bottom line Run the organisation as profitably as possible with due responsibility of the organisation towards the community, as well as the environment for which it needs to care CH2 The Evolution of Management Theory p27 Understanding the Different Management Theories p30 The environmental forces that shape management thought: # Environmental Force 1 Social 2 Ecological 3 International 4 Technological 5 Economic 6 Political The key elements of productivity are: # Element of Productivity 1 The outcome is continuous improvement of performance 2 The improvement must be measurable 3 The key drivers of productivity are: Effectiveness Efficiency Doing the right things things the right way
Secondary activities – provide the infrastructure that allow the primary activities to take place e.g. general admin, human resources management, research and development, technology, procurement etc. Differentiation and response time can be used instead of cost analysis e.g. excellent customer service is a differentiating factor The resource-based view (RBV) – see below p102 The product/market evolution – based on product lifecycle p103 Using financial analysis – based on past data using the balance sheet and income statement, the key financial ratios are: Liquidity – the ability of an organisation to meet its objectives Leverage – looks at the source of an organisation’s capital Activity – looks at how well an organisation is using its resources Profitability – measure how well an organisation is managed Learn Figure 4.7: The value-chain approach to internal assessment p102 (same as FTI) *personal note The Resource-Based View (RBV) of an Organisation p102 # Study Note 1 According to the RBV of an organisation, there are 3 types of resources: Tangible assets – found on an organisation’s balance sheet e.g. property and warehouses Intangible assets – cannot see or touch but are critical to creating competitive advantage e.g. brand names, patents, knowledge of the market Organisational capabilities – the ability of an organisation to turn inputs into outputs 2 For a resource to be valuable (a strength) to a company it must be: Superior to the resources of competitors e.g. a better location Scarce so that competitors struggle to get hold of the resource Difficult to imitate e.g. a view over the ocean Under the control of management Slow to depreciate Difficult to substitute 3 The hierarchy of resources p103: Strategic/competitive resources – the unique resources or capabilities of an organisation that cannot be easily emulated by its competitors Base resources – resources that an organisation cannot operate without Peripheral resources – necessary resources but can easily be outsourced Step 2: Evaluate Strategic Internal Factors p104 # Study Note 1 Yardsticks that management can use to determine whether an internal factor is a strength or a weakness: A comparison with the organisation’s performance in the past A comparison with competitors A comparison with industry ratios Benchmarking – the search for the best practices among competitors and non-competitors that lead to their superior performance
Translating the Mission into Long Term Goals p110 The Balanced Scorecard (BSC) is used for this purpose. When fully deployed, the BSC transforms strategic planning from a conceptual exercise into the nerve centre of an organisation. The 4 BSC perspectives measure the following: # Note 1 Financial perspective – operating income, return on capital employed and economic value added 2 Customer perspective – number of new customers, customer retention, customer defection and customer satisfaction 3 Internal business processes – continuous improvement, throughput and quality e.g. number of mistakes made during a certain process, and number of new processes incorporated in last year 4 Learning and growth – competency of employees, innovative ideas generated by employees and managers, and staff retention Kaplan and Norton (created a tool called ‘strategy maps’) argue that you can’t measure what you can’t describe, and that sustained value creation depends on managing 4 key internal processes: # Study Note 1 Operations 2 Customer relationships 3 Innovation 4 Regulatory and social processes Choosing a Strategy p111 When choosing a strategy, strategic planners decide on a core idea about how the organisation can best compete in the marketplace – this core idea is called the ‘generic strategy’. # Study Note 1 are 3 types of generic strategy: Low-cost leadership Differentiation Focus 2 The low-cost leadership strategy: Maximises by minimising costs per unit and hence prices Several things can be done to minimise costs: The ‘learning curve’ or the ‘experience curve’ Economy of scale – as size increases so cost per unit decreases because the fixed costs are shared with the larger number of products 3 The differentiation strategy: An organisation can charge higher prices for a product that customers perceive to be different Differentiation may be in terms of: Quality The production process Design
Planning forces an organisation to be proactive – it forces management to consider possible changes that may occur and then prepare timeously for these changes Labour legislation forces SA organisations to plan their workforce according to the relevant laws Planning ensures that managers and workers focus their efforts on the attainment of the same goals plans are essential when monitoring the progress of an organisation – actual results can be measured against clearly stated goals Increasing complexity of organisations makes planning essential of Organisational Plan p134 The types of plans made by top, middle, and lower management differ in many respects: Top management: strategic plans – for the entire organisation Middle management: tactical plans for specific functional areas e.g. finance or marketing department Lower management: operational plans for their smaller sections Learn Figure 5.2: The types of organisational plan p135 Strategic p134: Strategic plans are plans designed to ensure that the organisation as a whole is aligned with the changing external environment. Planning at this strategic level includes p134: Creating a vision of the future for the entire organisation Translating the vision into a realistic mission statement Translating the mission statement into measurable long-term Choose a strategy/strategies to attain the above The strategic plan reflects the following characteristics p134: Strategic plans have an extended time frame, usually more than 5 years Focus on the entire organisation – not just certain departments Look at reconciling the organisation’s resources with threats and opportunities in the external environment on creating and maintaining a competitive advantage for the organisation These plans also take synergy into consideration The Balanced Scorecard (BSC) is a tool that can be used at strategic, tactical and operational level to ensure that all divisions and individuals focus on the same key performance areas. 5.3.2 Tactical Plans p135: Tactical plans deal mainly with people and action to implement the strategic plans. Synergy is important in tactical planning p136.
Job specialisation (or job simplification) p235: Refers to the narrowing down of activities to simple, repetitive routines: used in industries where many of the employees are illiterate or inexperienced Job expansion p236: Almost the opposite of job simplification – the process of making a job less specialised through: Job rotation – performing different jobs for a set period of time Job enlargement from the thinking of industrial engineers) – the employee carries out a wider range of activities of approximately the same level of skill, it is thus more interesting because it is more varied Job enrichment – implemented by adding depth to the job: Based on Herzberg’s two-factor theory of motivation Herzberg argued that job rotation and job enlargement do not enhance employee motivation - a worker should be provided with actual control over the task to be more motivated Involves increasing the number of tasks a worker does and the control the worker has over the job Two more forms: work teams and the job characteristics model Delegation p236: The process through which managers assign a portion of their total workload to others – authority is also passed on to an employee. Managers delegate for the following reasons: Promotes succession planning Enables manager to get more management work done Subordinates profit from delegation – to develop decision-making and problem-solving skill Managers remain accountable for subordinates The parity principle: Neither managers nor subordinates should be held responsible for things beyond their control or influence Authority and responsibility should be co-equal Principles of Effective Delegation p237: Explain the reasons for delegating Set clear standards and goals Ensure clarity of authority and responsibility Involve subordinates Request the completion of Provide performance training Provide feedback to the subordinate The Advantages of Delegation p237: Managers who train their staff to accept more responsibility are in a good position themselves to accept more authority and responsibility from higher levels of management
9.6 Culture and Change p258: Shared values and beliefs form the foundation of a particular culture that influences the actions and activities – corporate culture may thus be defined as: the beliefs and values shared by people in an organisation. 9.6.1 Definition of the Concept of Culture p259: Corporate culture is a set of basic assumptions that work so well that they are regarded as valid assumptions within the organisation. The term ‘basic assumptions’ refers to the following: Beliefs or convictions about the world and how it works Values 9.6.2 Elements that Determine and Express a Corporate Culture p259: The elements are: Symbols – architecture of the buildings, arrangement of offices, parking bays reserved for senior management, name, logo, the way outsiders are treated Rituals – practices and reactions that repeatedly and have a certain significance such as awards, celebrations, farewell parties Ideologies – the beliefs, moral principles, and values underlying decision making Language – can be subdivided into 3 general themes: Equality Security Control – the way in which people deal with internal and external problems Assumptions – may be different between divisions Relationships – between managers and subordinates or between managers of different departments Humour Organisational Culture Analysis (OCA) p261 Overview: OCA is a of determining the here and now of what life is really like in an organisation – a quick barometer of the difference between current culture and that which is desired It is an analysis of whether or not conditions for competence exist, and if they do not, which conditions oppose them The analysis also indicates whether the planned changes have any flaws The OCA measures 3 conditions for competence in terms of an organisation’s culture p261: Collaboration – measures leadership values, accessibility of leaders, credibility of leaders
Commitment – measures the extent to which the sharing of power is formalised, the extent to which people are allowed to do what needs to be done, the extent to which mutual reliance and respect (team values) are established Creativity – measures the extent to which personal control over work is allowed, the extent to which excitement is created, and the faculty for problem solving Culture is an asset for the following reasons p262: It eases communications – people know how things are done It facilitates decision making – people know what to do It control more effective – people know what is expected of them It may generate pride and cooperation The results of the above are: Efficiency Good products Satisfied customers Higher profits 9.6.3 Changing the Organisational Culture p262 Learn diagram on p261L Organisational Culture Analysis (OCA) Basic approaches that managers can follow in attempting to change a culture p262: Getting people to subscribe to a new pattern of beliefs and values and changing some elements of culture, such as the name or logo or corporate colours Inducting and socialising people into the organisation and removing people who deviate from the culture Strengthening the prevailing culture through appropriate communication and training In severe case, use of mergers or acquisitions or divestments 9.7 Organisational Development (OD) p263 The ongoing planned effort by managers and leaders to manage change as a of improving organisational performance It involves planned interventions to improve the skills and abilities of employees and to eliminate aspects that limit growth and performance The interventions include: Diagnostic activities – assess the current condition of an organisation Surveys Training and development Intergroup activities Team building sessions Conflict resolution