Management Functions and Managerial Roles (Part 2)
In this section, we will discuss the functions of management, the different views of scholars on managerial functions, and the importance and limitations of planning.
Management Functions
Managing a modern business enterprise is a complex process. It is difficult to understand its real nature without studying the various functions involved. Managers perform several functions to achieve predetermined objectives.
Different management thinkers and scholars have defined managerial functions in their own ways based on their studies of different organizations.
Classification of Managerial Functions
Different scholars have classified managerial functions differently.
1. Henri Fayol’s View
Henri Fayol, the father of modern management theory, defined management as:
"To manage is to forecast and plan, to organize, to command, to coordinate, and to control."
Fayol classified the five functions of management as:
1. Forecasting
2. Planning
3. Organising
4. Commanding
5. Coordinating
6. Controlling
2. Ralph Davis’s View
Ralph Davis classified managerial functions into three categories:
1. Planning
2. Organising
3. Controlling
3. Luther Gulick’s View
Luther Gulick coined the acronym PODSCORB to describe management functions:
1. Planning
2. Organising
3. Directing
4. Staffing
5. Coordinating
6. Reporting
7. Budgeting
4. G.R. Terry’s View
G.R. Terry described managerial functions under four heads:
1. Planning
2. Organising
3. Actuating
4. Controlling
5. Koontz and O’Donnell’s View
Koontz and O’Donnell classified managerial functions as follows:
1. Planning
2. Organising
3. Staffing
4. Directing
5. Controlling
Universally Accepted Managerial Functions
Although there is no universally accepted classification, for the purpose of analysis, managerial functions can be classified as follows:
1. Planning
2. Organising
3. Staffing
4. Directing
5. Controlling
These functions are interrelated and interdependent. There is also an overlap between functions, such as:
Planning and Controlling
Organising and Staffing
Staffing and Directing
Planning
Definition:
"Planning is deciding in advance what to do, how to do it, when to do it, and who is to do it."
It involves setting objectives and determining the best course of action to achieve them. Planning serves as the foundation for all other management functions.
Purpose of Planning:
Planning bridges the gap between where we are and where we want to go.
Features of Planning
1. Planning Focuses on Objectives
Planning is meaningful only when it helps in achieving organizational goals.
Example: A McDonald’s franchise may set a goal to increase monthly sales by 10% over the previous year.
2. Planning is the Primary Function of Management
It provides the basis for all other functions.
Also known as the ‘primacy of planning’.
3. Planning is Futuristic
It involves looking ahead and forecasting future conditions.
Example: Google acquired YouTube in 2006 as part of its forward-thinking strategy.
4. Planning is Pervasive
Planning is required at all levels of management:
Top Management – Plans for the entire organization.
Middle Management – Departmental planning.
Supervisors – Operational planning.
5. Planning Involves Decision-Making
It requires choosing the best course of action among alternatives.
Example: A marketing company choosing between social media and traditional advertising.
6. Planning is a Continuous Process
Plans are revised periodically based on new conditions.
7. Planning is a Mental Exercise
It requires the application of intellect, foresight, and sound judgment.
Steps in the Planning Process
1. Setting Objectives
Clearly defining what the organization wants to achieve.
Example: A garment manufacturer aiming to increase profits by 20%.
2. Developing Premises
Making assumptions about future conditions (economic trends, government policies, etc.).
3. Identifying Alternative Courses of Action
Example: To increase profits, alternatives may include:
Buying high-speed machines
Increasing the selling price
Using waste material to manufacture new products
4. Evaluating Alternatives
Assessing the feasibility, risks, and consequences of each alternative.
5. Selecting the Best Alternative
The most profitable and feasible course of action is chosen.
6. Formulating Derivative Plans
Developing supporting plans (e.g., financial, marketing, and HR plans).
7. Implementing the Plan
Organizing resources and executing the plan.
8. Follow-up and Monitoring
Ensuring that the plan is working as intended.
Importance of Planning
1. Provides Direction
Ensures clarity of goals and activities.
Example: Tesla’s strategic planning for a sustainable energy future.
2. Reduces Risk and Uncertainty
Helps managers anticipate future risks.
Example: Amazon uses forecasting to manage inventory and logistics.
3. Facilitates Decision-Making
Helps managers choose the best alternative.
Example: Netflix’s planning strategy for content acquisition.
4. Reduces Overlapping and Wasteful Activities
Ensures coordination and minimizes inefficiencies.
Example: Microsoft’s planning ensures seamless collaboration.
5. Encourages Innovation and Creativity
New ideas take shape in concrete plans.
6. Establishes Standards for Controlling
Performance can be compared against set benchmarks.
Limitations of Planning
1. Planning Leads to Rigidity
Sticking strictly to plans may make it difficult to adapt to sudden changes.
Example: A manufacturing company struggling to modify plans due to supply disruptions.
2. Planning Reduces Creativity
Lower-level managers have little room for independent thinking.
3. Planning is Time-Consuming
Extensive planning may delay action.
4. Planning Involves High Costs
Example: Market research, expert consultations, and feasibility studies require investment.
5. Planning Does Not Guarantee Success
Plans must be executed properly to achieve success.
6. Planning May Not Work in a Dynamic Environment
Frequent changes in the external environment can render plans ineffective.
Examples: Government policy changes, natural calamities, or shifts in consumer preferences.
Types of Plans in Management: A Complete Guide
Before any major business decision or project, an organization needs a plan. A plan is a structured approach that outlines how goals will be achieved. It provides direction and ensures that business operations run smoothly.
In management, plans can be classified based on their purpose and duration. The two broad categories are single-use plans and standing plans.
Single-Use Plans vs Standing Plans
A single-use plan is developed for a one-time event or project. It is created for unique situations that are unlikely to be repeated. For example, organizing an annual shareholder meeting or launching a new product requires a specific plan that won’t be reused. These plans include budgets, programs, and projects.
On the other hand, a standing plan is designed for activities that occur regularly. It helps streamline routine operations and decision-making. Unlike single-use plans, standing plans are reused with necessary modifications to adapt to changing business needs. Examples of standing plans include policies, procedures, methods, and rules. A common example is the hiring procedure followed by HR departments for recruiting employees.
Types of Plans Based on Purpose
Plans can also be classified based on what they aim to achieve. Here are the key types of plans every organisation needs:
1. Objectives – The Foundation of Planning
Objectives define the end goals that a business strives to achieve. They act as a roadmap for all activities within an organisation.
Objectives provide direction to all departments and employees.
They are usually set by top management and serve as benchmarks for performance evaluation.
Objectives should be measurable, such as aiming for a 10% increase in sales in the next quarter.
With clear objectives, employees understand what they need to contribute to achieve organisational success.
2. Strategy – The Big Picture Plan
A strategy is a high-level plan designed to achieve long-term objectives. It involves:
Setting long-term goals
Choosing a course of action
Allocating resources effectively
A business strategy takes into account external factors like competition, market trends, and government regulations. Major strategic decisions include expanding into new markets, launching new products, or acquiring competitors.
For example, a company’s marketing strategy may involve choosing the right pricing model, advertising platforms, and sales promotions to attract customers.
3. Policy – Guidelines for Decision-Making
A policy is a general guideline that ensures consistency in decision-making. It provides flexibility while maintaining a standard approach.
Examples of business policies include:
Recruitment policy – Hiring only university-trained engineers
Sales policy – Selling products only on a cash basis
Purchase policy – Choosing vendors based on quality standards
Policies help employees make decisions without always seeking approval from higher management.
4. Procedure – The Step-by-Step Approach
A procedure is a systematic method of handling repetitive tasks. It specifies the exact steps that need to be followed to complete a process efficiently.
Examples include:
Employee selection procedure – From application screening to final hiring
Production reporting procedure – The process of documenting daily output
Procurement procedure – How raw materials are requested and approved
A well-defined procedure ensures that tasks are completed efficiently and consistently.
5. Rule – The Non-Negotiable Directive
A rule is a strict guideline that specifies what must or must not be done in a given situation. Unlike policies, rules are non-flexible and leave no room for discretion.
Examples of business rules:
No smoking in office premises
No employee can accept gifts from vendors
Every employee must complete compliance training
Rules help maintain discipline and uniformity within an organisation.
6. Method – The Best Way to Perform a Task
A method is a detailed approach to performing a specific task in the most efficient way possible.
For example:
Training methods – On-the-job training, apprenticeship programs, or online courses
Production methods – Assembly line production, batch processing, or just-in-time manufacturing
A method is more specific than a procedure and focuses on a single step within a larger process.
7. Budget – The Financial Plan
A budget is a financial plan that estimates income and expenses for a specific period. It is a crucial tool for resource allocation and cost control.
Examples of business budgets:
Sales budget – Forecasting expected revenue from product sales
Cash budget – Estimating cash inflows and outflows to manage liquidity
Marketing budget – Allocating funds for advertising and promotions
Budgets help businesses track financial performance and make data-driven decisions.
8. Programme – The Roadmap to Success
A programme is a detailed plan that outlines specific tasks, timelines, and resources needed to achieve a goal.
Examples of programmes include:
Launching a new product – From market research to final rollout
Constructing a shopping mall – Planning every step from land acquisition to grand opening
Implementing a digital transformation strategy – Upgrading IT systems and training employees
A well-structured programme ensures smooth execution of complex projects.
The Role of Environmental Analysis in Planning
Business planning doesn’t happen in isolation. It is influenced by external factors, collectively known as the business environment.
What is Business Environment?
The business environment includes all external forces that affect an organisation’s performance. These include government regulations, competition, economic conditions, and technological changes.
For example, factors like rising taxes, changing consumer preferences, or political instability can impact business decisions. Companies must monitor these changes to stay competitive.
Environmental Analysis and Diagnosis
Environmental analysis is the process of studying external forces to identify opportunities and threats. This is also known as environmental scanning.
Key components of the business environment:
1. Economic Environment
Disposable income levels
Inflation and interest rates
Stock market trends
For instance, a rise in disposable income increases consumer spending, boosting demand for products.
2. Social Environment
Cultural values and traditions
Changing social trends
Customer expectations
For example, the growing health-conscious trend has increased demand for organic food, gyms, and diet supplements.
3. Political Environment
Government stability
Business-friendly policies
Tax and subsidy regulations
A stable political environment encourages businesses to invest in long-term projects.
4. Legal Environment
Labour laws and trade regulations
Consumer protection laws
Advertising restrictions
For example, cigarette advertisements must carry the "Smoking is injurious to health" warning.
5. Technological Environment
Innovations in production
Digital transformation
Automation and AI adoption
For instance, online shopping and e-commerce platforms have transformed the retail industry.
Techniques of Environmental Analysis and Diagnosis
Environmental analysis is not complete without diagnosing the results. Diagnosis helps assess opportunities and threats in the external environment. A strategist must decide which data to rely on, which to ignore, and how to prioritize important information over less relevant details.
1. SWOT Analysis
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and weaknesses come from an internal analysis, while opportunities and threats emerge from the external environment.
Strengths: These are internal capabilities that give a company a competitive advantage.
Example – Apple Inc.
Apple’s strong brand image and reputation for innovation are its key strengths. Its ability to design cutting-edge products like the iPhone and MacBook has made it a market leader. The Apple ecosystem, with seamless integration across devices and software, enhances user experience and builds brand loyalty. These strengths help Apple maintain premium pricing and high profit margins.
Weaknesses: These are internal limitations that put a company at a strategic disadvantage.
Example – Tesla
Tesla faces production constraints and supply chain bottlenecks as demand for electric vehicles (EVs) grows. The company’s reliance on a few key suppliers for critical components, such as batteries, exposes it to potential disruptions. Addressing these weaknesses is crucial for smooth operations and maintaining a competitive edge.
Opportunities: These are favorable external conditions that allow a company to strengthen its position.
Example – Amazon.com Inc.
Amazon identified the growth of e-commerce as an opportunity and invested in developing a robust online platform. By offering a wide product range, competitive pricing, and fast delivery, Amazon has captured a significant share of the market.
Threats: These are unfavorable external conditions that pose risks to a company’s success.
Example – Ford Motor Company
The rise of EVs and increased competition from Tesla, NIO, and Rivian are major threats to Ford. Stricter environmental regulations and changing consumer preferences are forcing traditional automakers like Ford to invest in EV technology to remain competitive.
SWOT analysis helps businesses align their strengths and weaknesses with external opportunities and threats to formulate an effective strategy.
2. Environmental Threat and Opportunity Profile (ETOP)
ETOP is a widely used environmental scanning technique that identifies threats and opportunities in a company’s environment. This information is then utilized in strategy formulation.
3. Forecasting of Trends
Forecasting involves systematically predicting the future using known facts. It identifies economic, social, political, and technological forces that will impact business operations. Based on past experiences and present assumptions, forecasting helps businesses prepare for upcoming challenges.
4. Spying
Businesses sometimes use spying to gather information about competitors. This can involve hiring professionals, engaging employees of competitors, or working with suppliers and customers to obtain market intelligence.
Organizing
Organizing is the process of defining and grouping activities and establishing authority relationships within an enterprise. It follows the planning function and ensures that resources such as money, materials, and manpower are effectively coordinated to achieve business objectives. Organizing translates plans into action by determining who will do what, where, and when.
The organizing function leads to the creation of an organizational structure by designing roles and defining relationships between them.
Organizing Process
1. Identification and Division of Work
Work is divided into manageable activities (jobs) to avoid duplication of effort and distribute tasks efficiently.
2. Departmentalization
Similar tasks are grouped into departments or divisions for specialization and coordination. This can be based on functions (marketing, finance), territory (North, East, West), or products (cosmetics, footwear).
3. Assignment of Duties
Once departments are created, work is assigned based on skills and competencies. Clear role definitions prevent duplication and inefficiencies.
4. Establishing Reporting Relationships
Authority-responsibility relationships are established to ensure accountability. Employees know from whom they take orders and to whom they report.
Importance of Organizing
Specialization: Organizing leads to specialization by assigning specific roles, reducing workload, and improving efficiency.
Clarity in Working Relationships: It establishes clear reporting structures.
Effective Administration: Job descriptions and authority structures streamline administration.
Optimum Utilization of Resources: It prevents duplication and minimizes resource wastage.
Expansion and Growth: A structured organization can easily scale and add new product lines or divisions.
Adaptability to Change: The organizational structure can be modified to adjust to external changes.
Personnel Development: Delegation of work allows subordinates to develop their skills and take on greater responsibilities.
Concept of Delegation
No manager can handle every task alone. Delegation involves transferring authority from a superior to a subordinate to ensure work gets done efficiently. It helps managers focus on high-priority tasks while providing subordinates with opportunities to develop their skills.
Delegation occurs when authority is transferred, and the subordinate accepts the corresponding responsibility. However, the delegator remains accountable for the task’s outcome.
Example – XYZ Corporation
The CEO delegates a project to a project manager, Sarah, who then assigns tasks to her team. Through effective delegation, the CEO focuses on strategic goals while Sarah gains valuable leadership experience.
Principles of Delegation
1. Authority and Responsibility Must Be Equal
If authority exceeds responsibility, it may lead to misuse of power. If responsibility is greater than authority, a person may be ineffective.
Example – A production manager is given a higher production target but is not given the authority to procure raw materials. If the target is not met, it would be unfair to blame the manager.
2. Delegation Does Not Mean Abdication
The manager remains accountable for the assigned tasks.
Example – A marketing manager is responsible for achieving sales targets. If deputy sales managers underperform, the marketing manager is still accountable to the company’s directors.
3. Authority Can Be Taken Back and Re-Delegated
A delegated task can be reassigned when necessary.
Example – An event manager initially assigns venue setup responsibilities to Sarah, but she falls ill. The task is then re-delegated to Mark, ensuring the event runs smoothly.
Elements of Delegation
Delegation consists of three key elements:
1. Authority: The right to make decisions and command subordinates. Authority flows from top to bottom.
Example – A manager gives a team member the authority to approve expense reports, allowing faster decision-making.
2. Responsibility: The obligation to perform an assigned duty. Responsibility flows upwards.
Example – A team leader assigns a sales presentation to a member, who must complete research and prepare slides.
3. Accountability: The obligation to answer for the final outcome of a task. Accountability cannot be delegated and flows upwards.
Example – A department head assigns a project timeline to a manager and holds them accountable for meeting deadlines.
Through proper delegation, organizations can function efficiently, promote growth, and empower employees.
Importance of Delegation
Delegation is a critical management function that enhances efficiency by distributing authority and responsibilities. The following points highlight its importance:
1. Effective Management
Delegation allows managers to focus on decision-making and strategic planning while routine tasks are handled by subordinates, increasing overall effectiveness.
2. Motivation of Employees
When subordinates are given authority, they feel recognized and empowered, which boosts their motivation and encourages higher performance.
3. Employee Development
By handling delegated tasks, employees improve their skills, preparing them for leadership roles in the future.
4. Facilitation of Growth
Delegation enables an organization to expand by developing a trained workforce that can take on higher responsibilities in new ventures.
5. Better Coordination
Authority, responsibility, and accountability are clearly defined through delegation, leading to improved coordination among departments.
6. Creation of a Management Hierarchy
Delegation establishes superior-subordinate relationships, shaping the management structure and determining the power levels of different roles.
Challenges in Delegation
Despite its advantages, delegation faces challenges at different levels:
Difficulties on the Part of Superiors
1. Lack of Receptiveness
Some managers believe they can perform tasks better themselves, making them reluctant to delegate.
2. Inability to Direct
Managers who lack supervision skills avoid delegation because they fear losing control.
3. Unwillingness to Let Go
A desire to dominate decision-making prevents managers from trusting subordinates with important tasks.
4. Lack of Trust in Subordinates
If a manager lacks confidence in employees’ capabilities, they may hesitate to delegate authority.
5. Ineffective Control Systems
Without proper monitoring, managers fear that delegated authority may be misused.
Difficulties on the Part of Subordinates
1. Lack of Self-Confidence – Employees may doubt their ability to handle delegated tasks.
2. Desire to Play Safe – Some prefer relying on their boss for decisions to avoid risk.
3. Fear of Mistakes – Employees worry about criticism if they make errors.
4. Lack of Incentives – If there is no reward for taking on extra responsibility, employees may resist delegation.
5. Overburdened with Duties – Heavy workloads discourage employees from accepting additional responsibilities.
6. Inadequate Authority and Resources – Without proper authority or resources, subordinates may struggle to complete assigned tasks.
Organizational Barriers to Delegation
1. Defective Organizational Structure – Unclear authority-responsibility relationships lead to confusion.
2. Inadequate Planning – Poorly planned delegation creates inefficiencies.
3. Splintered Authority – When decision-making is fragmented across multiple people, coordination suffers.
4. Violation of Unity of Command – If an employee reports to multiple managers, conflicts arise.
5. Lack of Control Mechanisms – Without performance monitoring, delegated tasks may not be effectively executed.
Decentralization: Extending Delegation
Decentralization refers to the systematic delegation of authority across all management levels and departments, except for key decisions that must remain centralized.
Example of Decentralization
Initially, a General Manager approves all leave applications. To reduce workload, they delegate this authority to the Production Manager. If the Production Manager also feels overburdened, the authority is further delegated to department heads. This process continues, extending delegation to multiple levels, creating decentralization.
Key Difference:
Delegation is when authority is transferred to a single subordinate.
Decentralization extends delegation across multiple levels, distributing decision-making authority throughout the organization.
Importance of Decentralization
1. Relief to Top Management
By distributing authority, top executives can focus on strategic functions like policy-making and expansion.
2. Encourages Initiative in Subordinates
When employees make independent decisions, they develop self-reliance and confidence.
3. Develops Future Managers
Employees gain decision-making experience, preparing them for higher responsibilities.
4. Facilitates Growth
Decentralization enables departments to operate independently, fostering competition and increasing productivity.
5. Speeds Up Decision-Making
Decisions can be made quickly at lower levels without waiting for top management approval.
6. Improves Control
Each department is held accountable for its performance, ensuring better oversight and operational efficiency.
This concludes Part 2 of Management Functions and Managerial Roles.
Do read part 3!
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