Management – Art or Science

The concept of management is universal and very old. That is why different views have been
expressed about its nature by different writers from time to time. The continuous and rapid
development of management principles and practices in organization has changed the nature of
management. The main points of view about the nature of management are given below:

Management as an Inborn or Acquired Ability

In the pre-scientific management period, i.e., prior to 1880 there has been a leading concept that
management is an inborn ability. It is a traditional approach. The supporters of this concept believe
that the hereditary characteristics, inborn talents and natural aptitudes of a man make him an
efficient manager. Some people are so efficient and talented since their birth that they lead and get
success in the field of business. To our mind, this concept was used when the ownership and
management were not separated. But later on the researches and development in the field of
science, technology and training etc. changed this old concept. Today management is considered not
only as an inborn ability but also as an acquired ability. In the words of Ordway Tead, "Managers are
both born and made." Today, in large-sized business organizations, ownership and management are
separate identities. The management lies in the hands of professional managers who are educated
and trained. Thus, now the management can be considered as an acquired ability.

Management as an Art, Science or Both

A lot of controversy arises whether management is an art or science or both. It is said that the
management is the oldest of arts and youngest of science. This explains the changing nature of
management. But to have an exact answer to this question, it is necessary to understand both these
aspects separately and combinedly, as given below:

* Management as an Art: Art refers to the way of doing specific things; it indicates how an object
can be achieved. In the words of George R. Terry, "Art is bringing about of a desired result through
the application of skill." Art is, thus, skilful application of knowledge which entirely depends on the
inherent capacity of a person which comes from within a person and is learned from practice and
experience. In this sense, management is certainly an art as a manager uses his skill, knowledge and
experience in solving various problems, both complicated and non-complicated that arise in the
working of his enterprise successful. In the words of Ernest Dale, "Management is considered as an
art rather than science mainly because managerial skill is a personnel possession and is intuitive."

* Management as a Science: Science may be described as a systematized body of knowledge based

on proper findings and exact principles and is capable of verification. It is a reservoir of fundamental
truths and its findings apply safely in all the situations. In this sense, management is a science as it
has also developed some systematized knowledge. Like other sciences, management has also
developed certain principles, laws, generalization, which are universal in nature and are applicable
wherever the efforts of the people are to be coordinated. But management is not as exact science as
other physical sciences like physic, chemistry, biology, astronomy etc. The main reason for the
inexactness of science of management is that it deals with the people and it is very difficult to predict
their behavior accurately. In this way, management falls in the area of 'social sciences'. Thus, it is a
social science.

Conclusion- Management is an Art and Science Both

From the above study, we conclude that management is an art and science both. According to
American Society of Mechanical Engineers. "Management is the art and science of preparing,
organizing and directing human efforts to control the forces and utilize the material of nature for the
benefit of men. "Thus, it has now been accepted that management is an art as well as science. It has
the elements of both arts and science. In the words of Dean Stanley, "Management is a mixture of an
art an science - the present ratio is about 80% art and 20% science."

What is management by exception?

There are tons of different styles of management out there, but what is management by exception?

A quick summary of management by exception is: management by exception is a management style

that where managers only intervene when employees fail to meet their standards of performance.

But, let's take a closer look.

Management by exception is growing in popularity among managers, and it is no question why. This
form of management is a style where managers do as little as possible, instead they delegate it to
people below them, and only step in when they have to. So, it is the idea of minimizing responsibility.

Now I can see why you might be thinking, "What kind of business owner would let their managers
manage this way?" and that is a great question. It seems sort of contradictory to say the manager
does not do anything until a problem occurs, because isn't their job to manage? Yes, that is true, and
yet this style of management has proven to be extremely successful for some organizations.

So, why does this management style work for some? It is based around the concept or policy that
states that the most effective use of your managers is not as a babysitter, but rather management
should devote its time to investigating only those situations in which actual results differ significantly
from planned results.

What should managers be doing when they are not investigating situations that vary significantly
from planned results? According to the principles of management by exception, the management
should spend its valuable time concentrating on the more important items such as shaping the
company's future strategic course. So, rather than roam the floor watching each employee with an
eagle eye, they should employ trustworthy adults who do not need constant supervision, and instead
spend their time determining the best path for the company to take in the future.
This is worth repeating: So, rather than monitoring every move of their employees, a manager should
encourage, and set a path, then only step in if there is a big deviation from the path. In the
meantime, they should be planning future paths for their employees to follow.

As you can see, if the people employed are responsible enough to move forward, and work toward
company goals without constant prodding and supervision, than this is an excellent choice of
management style. It works best in situations where all employed greatly benefit from the success, or
are harmed by the failure of their outcomes. People who are paid hourly, and could find similar work
easily should the company go under, and those who do not look at this job as a career path would
not do well with this type of management. However, on the other hand, those with greater financial
stakes, or a career made in the company would probably flourish with this management style.

Also, if your managers use this style of management, you want to make sure that they make effective
use of their time, and are actually planning for the company future. Otherwise, you are paying
someone an awful lot of money to do almost nothing.

Also, be sure that when there is an exception, that your managers are properly trained and able to
appropriately problem solve. Keep their management skills honed with refresher courses and
continued education, or they may find it difficult to manage those exceptions effectively.

BCG Growth-Share Matrix

Companies that are large enough to be organized into strategic business units face the challenge
of allocating resources among those units. In the early 1970's the Boston Consulting Group
developed a model for managing a portfolio of different business units (or major product lines).
The BCG growth-share matrix displays the various business units on a graph of the market
growth rate vs. market share relative to competitors:

      BCG Growth-Share Matrix

Resources are allocated to business units according to where they are situated on the grid as
follows:

 Cash Cow - a business unit that has a large market share in a mature, slow growing
industry. Cash cows require little investment and generate cash that can be used to invest
in other business units.
 Star - a business unit that has a large market share in a fast growing industry. Stars may
generate cash, but because the market is growing rapidly they require investment to
maintain their lead. If successful, a star will become a cash cow when its industry
matures.
 Question Mark (or Problem Child) - a business unit that has a small market share in a
high growth market. These business units require resources to grow market share, but
whether they will succeed and become stars is unknown.
 Dog - a business unit that has a small market share in a mature industry. A dog may not
require substantial cash, but it ties up capital that could better be deployed elsewhere.
Unless a dog has some other strategic purpose, it should be liquidated if there is little
prospect for it to gain market share.

The BCG matrix provides a framework for allocating resources among different business units
and allows one to compare many business units at a glance. However, the approach has received
some negative criticism for the following reasons:

 The link between market share and profitability is questionable since increasing market
share can be very expensive.
 The approach may overemphasize high growth, since it ignores the potential of declining
markets.
 The model considers market growth rate to be a given. In practice the firm may be able to
grow the market.

GE / McKinsey Matrix
In consulting engagements with General Electric in the 1970's, McKinsey & Company developed
a nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic business units
(SBU). This business screen became known as the GE/McKinsey Matrix and is shown below:

GE / McKinsey Matrix

Business Unit Strength

 
    High      Medium      Low    

High      

Medium      

Low      
The GE / McKinsey matrix is similar to the BCG growth-share matrix in that it maps strategic
business units on a grid of the industry and the SBU's position in the industry. The GE matrix
however, attempts to improve upon the BCG matrix in the following two ways:

 The GE matrix generalizes the axes as "Industry Attractiveness" and "Business Unit
Strength" whereas the BCG matrix uses the market growth rate as a proxy for industry
attractiveness and relative market share as a proxy for the strength of the business unit.
 The GE matrix has nine cells vs. four cells in the BCG matrix.

Industry attractiveness and business unit strength are calculated by first identifying criteria for
each, determining the value of each parameter in the criteria, and multiplying that value by a
weighting factor. The result is a quantitative measure of industry attractiveness and the business
unit's relative performance in that industry.

Industry Attractiveness

The vertical axis of the GE / McKinsey matrix is industry attractiveness, which is determined by
factors such as the following:

 Market growth rate

 Market size
 Demand variability
 Industry profitability
 Industry rivalry
 Global opportunities
 Macroenvironmental factors (PEST)

Each factor is assigned a weighting that is appropriate for the industry. The industry
attractiveness then is calculated as follows:

Industry attractiveness
   factor value1   x   factor weighting1
=  
   +  factor value2   x   factor weighting2
   +  factor valueN   x   factor weightingN

Business Unit Strength

The horizontal axis of the GE / McKinsey matrix is the strength of the business unit. Some factors
that can be used to determine business unit strength include:

 Market share
 Growth in market share
 Brand equity
 Distribution channel access
 Production capacity
 Profit margins relative to competitors
The business unit strength index can be calculated by multiplying the estimated value of each
factor by the factor's weighting, as done for industry attractiveness.

Plotting the Information

Each business unit can be portrayed as a circle plotted on the matrix, with the information
conveyed as follows:

 Market size is represented by the size of the circle.

 Market share is shown by using the circle as a pie chart.
 The expected future position of the circle is portrayed by means of an arrow.

The following is an example of such a representation:

The shading of the above circle indicates a 38% market share for the strategic business unit. The
arrow in the upward left direction indicates that the business unit is projected to gain strength
relative to competitors, and that the business unit is in an industry that is projected to become
more attractive. The tip of the arrow indicates the future position of the center point of the
circle.

Strategic Implications

Resource allocation recommendations can be made to grow, hold, or harvest a strategic business
unit based on its position on the matrix as follows:

 Grow strong business units in attractive industries, average business units in attractive
industries, and strong business units in average industries.
 Hold average businesses in average industries, strong businesses in weak industries, and
weak business in attractive industies.
 Harvest weak business units in unattractive industries, average business units in
unattractive industries, and weak business units in average industries.

There are strategy variations within these three groups. For example, within the harvest group
the firm would be inclined to quickly divest itself of a weak business in an unattractive industry,
whereas it might perform a phased harvest of an average business unit in the same industry.

While the GE business screen represents an improvement over the more simple BCG growth-
share matrix, it still presents a somewhat limited view by not considering interactions among
the business units and by neglecting to address the core competencies leading to value creation.
Rather than serving as the primary tool for resource allocation, portfolio matrices are better
suited to displaying a quick synopsis of the strategic business units.
The Product Life Cycle

A product's life cycle (PLC) can be divided into several stages characterized by the revenue
generated by the product. If a curve is drawn showing product revenue over time, it may take
one of many different shapes, an example of which is shown below:

Product Life Cycle Curve

The life cycle concept may apply to a brand or to a category of product. Its duration may be as
short as a few months for a fad item or a century or more for product categories such as the
gasoline-powered automobile.

Product development is the incubation stage of the product life cycle. There are no sales and the
firm prepares to introduce the product. As the product progresses through its life cycle, changes
in the marketing mix usually are required in order to adjust to the evolving challenges and
opportunities.

Introduction Stage

When the product is introduced, sales will be low until customers become aware of the product
and its benefits. Some firms may announce their product before it is introduced, but such
announcements also alert competitors and remove the element of surprise. Advertising costs
typically are high during this stage in order to rapidly increase customer awareness of the
product and to target the early adopters. During the introductory stage the firm is likely to incur
additional costs associated with the initial distribution of the product. These higher costs
coupled with a low sales volume usually make the introduction stage a period of negative profits.

During the introduction stage, the primary goal is to establish a market and build primary
demand for the product class. The following are some of the marketing mix implications of the
introduction stage:

 Product - one or few products, relatively undifferentiated

 Price - Generally high, assuming a skim pricing strategy for a high profit margin as the
early adopters buy the product and the firm seeks to recoup development costs quickly.
 In some cases a penetration pricing strategy is used and introductory prices are set low
to gain market share rapidly.

 Distribution - Distribution is selective and scattered as the firm commences

implementation of the distribution plan.

 Promotion - Promotion is aimed at building brand awareness. Samples or trial incentives

may be directed toward early adopters. The introductory promotion also is intended to
convince potential resellers to carry the product.

Growth Stage

The growth stage is a period of rapid revenue growth. Sales increase as more customers become
aware of the product and its benefits and additional market segments are targeted. Once the
product has been proven a success and customers begin asking for it, sales will increase further
as more retailers become interested in carrying it. The marketing team may expand the
distribution at this point. When competitors enter the market, often during the later part of the
growth stage, there may be price competition and/or increased promotional costs in order to
convince consumers that the firm's product is better than that of the competition.

During the growth stage, the goal is to gain consumer preference and increase sales. The
marketing mix may be modified as follows:

 Product - New product features and packaging options; improvement of product quality.

 Price - Maintained at a high level if demand is high, or reduced to capture additional

customers.

 Distribution - Distribution becomes more intensive. Trade discounts are minimal if

resellers show a strong interest in the product.

 Promotion - Increased advertising to build brand preference.

Maturity Stage

The maturity stage is the most profitable. While sales continue to increase into this stage, they
do so at a slower pace. Because brand awareness is strong, advertising expenditures will be
reduced. Competition may result in decreased market share and/or prices. The competing
products may be very similar at this point, increasing the difficulty of differentiating the product.
The firm places effort into encouraging competitors' customers to switch, increasing usage per
customer, and converting non-users into customers. Sales promotions may be offered to
encourage retailers to give the product more shelf space over competing products.

During the maturity stage, the primary goal is to maintain market share and extend the product
life cycle. Marketing mix decisions may include:

 Product - Modifications are made and features are added in order to differentiate the
product from competing products that may have been introduced.

 Price - Possible price reductions in response to competition while avoiding a price war.
  Distribution - New distribution channels and incentives to resellers in order to avoid
losing shelf space.

 Promotion - Emphasis on differentiation and building of brand loyalty. Incentives to get

competitors' customers to switch.

Decline Stage

Eventually sales begin to decline as the market becomes saturated, the product becomes
technologically obsolete, or customer tastes change. If the product has developed brand loyalty,
the profitability may be maintained longer. Unit costs may increase with the declining
production volumes and eventually no more profit can be made.

During the decline phase, the firm generally has three options:

 Maintain the product in hopes that competitors will exit. Reduce costs and find new uses
for the product.

 Harvest it, reducing marketing support and coasting along until no more profit can be
made.

 Discontinue the product when no more profit can be made or there is a successor
product.

The marketing mix may be modified as follows:

 Product - The number of products in the product line may be reduced. Rejuvenate
surviving products to make them look new again.

 Price - Prices may be lowered to liquidate inventory of discontinued products. Prices may
be maintained for continued products serving a niche market.

 Distribution - Distribution becomes more selective. Channels that no longer are profitable
are phased out.

 Promotion - Expenditures are lower and aimed at reinforcing the brand image for
continued products.

Limitations of the Product Life Cycle Concept

The term "life cycle" implies a well-defined life cycle as observed in living organisms, but
products do not have such a predictable life and the specific life cycle curves followed by
different products vary substantially. Consequently, the life cycle concept is not well-suited for
the forecasting of product sales. Furthermore, critics have argued that the product life cycle may
become self-fulfilling. For example, if sales peak and then decline, managers may conclude that
the product is in the decline phase and therefore cut the advertising budget, thus precipitating a
further decline.
Nonetheless, the product life cycle concept helps marketing managers to plan alternate
marketing strategies to address the challenges that their products are likely to face. It also is
useful for monitoring sales results over time and comparing them to those of products having a
similar life cycle.