MANAGERIAL FUNCTION AND PROCESS NOTES

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Managerial Function and Process
1. Concept and Foundations of Management
2. Evolution of Management Thoughts
3. Managerial Functions – Planning, Organizing, Controlling + Leading (covered in OB)
4. Decision making
5. Role of Manager
6. Managerial skills
7. Entrepreneurship
8. Management of innovation
9. Managing in a global environment
10. Flexible Systems Management
11. Social responsibility and managerial ethics
12. Process and customer orientation
13. Managerial processes on direct and indirect value chain

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1. Concepts and Foundations of Management:
◦ Management:
• Management is the process of designing and maintaining an environment in
which individuals, working together in groups, efficiently accomplish
selected aims.
▪ As managers, people carry out the managerial functions or
processes of planning, organizing, leading and controlling
▪ Management applies to all kinds of organizations
▪ Management applies to managers at all organizational levels
▪ The aim of managers is to create surplus for the organization
▪ Management is concerned with enhancing productivity

2. Who is the Manager:

• A manager is an individual in a firm who is responsible for the work
performance of group members.
▪ This is the most important characteristic of a
manager.

• Goals of a Manager
▪ A manager holds the formal authority to commit organizational
resources, even if the approval of others is required. For example,
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 manager of a restaurant in a restaurant chain business has the
authority to get the front of his restaurant re-painted. Persons like
the chef of the restaurant or the waiter, do not have the same
authority.
▪ A manager is responsible or his primary concern to the company or
the organization that he works for. This is true in private, public,
multinational situations.
▪ Managers’ aim is to create surplus for the organization they work for
by establishing an environment in which people can accomplish
group goals with the least amount of time, money, materials and
personal
dissatisfaction.

◦ Responsibilities:

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 •
◦ Levels of Management:
• Top Level or executive level or C-Level management
▪ These are the highest placed managers in an organization and they
are involved in decision making that decide the policies of the
organization and the direction it is taking on its processes, offerings
and commitments to various stakeholders.
▪ Examples: Chief of Staff in a political organization or the Chief
Marketing officer
▪ C-level managers have high experience, education credentials and
close connections in and outside their organizations
• Middle Level Managers
▪ These are neither the highest raining individuals nor the lower level
employees.
▪ Middle level managers serve the purpose of linking the top
management with the first-level managers in the company.
▪ They communicate firm’s policies, directions and other
announcements to the other members of the firm.
▪ These managers are responsible for more of the execution functions
in the organization.
▪ A major part of their jobs is working in various teams and
undertaking creative activities and profitable ventures of the firm.
▪ They are responsible for making the judgment calls and trade-offs
that shape the firm’s success.

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 ▪ These managers do not necessarily have professional or expertise
degrees but have substantial experience of working in conditions
similar to their work
• First-Level Managers
▪ Managers who supervise the operatives of the firm are known as
first-level managers.
▪ These are the first-line of managers or supervisors, and micro-
manage various operatives, assistants and other workers in the
company.
▪ They have lower education levels and are largely specific skill and
job-
oriented.

◦ Types of Managers
• Functional and General Managers
▪ Another way to classify managers is on the basis of people and their
work managed.
▪ Functional managers supervise the work of employees engaged in
specialized activities such as accounting engineering, information
systems, food preparation, marketing and sales. These
▪ A functional manager is manager of specialists and of their support
team such as office assistants.

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 ▪ General managers are those who supervise employees engaged in
various different tasks, not necessarily related to each other.
Example: the job description of a “plant general manager” offers an
insight into the work done by general managers. The plant general
managers look into work of various departments and their
employees example production department, accounting department,
safety, control etc.
▪ Branch managers and company presidents are general managers.
• Administrators
▪ An administrator is a manager who works in the public
(government) or nonprofit organization, including education
institutions.
• Entrepreneurs and Small Business Owners
▪ An entrepreneur is an individual who founds and operates an
innovative business. After the entrepreneur develops the business to
a certain level, he or she can’t handle it alone anywhere and assumes
the role of a general managers who manages people in his or her
firm.
▪ Small Business Owners are also similar to entrepreneurs as they
manage several employees as it grows larger.
▪ Entrepreneurs are small business owners but the reverse may not
be true. An entrepreneur must have an innovative idea to fit it the
definition of being one.
▪ Passion for their work is the common principle between the two.
▪ Recent research has indicated three roles or activities that arouse
passion in entrepreneurial work:
▪ Opportunity recognition, the inventor role
▪ Venture Creation, the founder role
▪ Venture Growth, the developer role
▪ Examples of recent successful entrepreneurial stories of young
Indians abound. One if of Flipkart.com - becoming a large company
from humble start as an start-up venture by entrepreneurs
• Team Leaders
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 ▪ Referred to as Project Managers, Program Managers, Task Force
Leaders etc., the team leaders are driving forces behind various
teams in organizations.
▪ Team leaders manage small groups of people while acting as
facilitators and catalyzers.
◦ The Process of Management
• A Process is a series of actions that achieves something - for example:
making a profit or providing a service. To achieve an objective, the manager
uses various resources available to him to carry out the four main
managerial functions, namely: planning, organizing, leading and controlling
• Resources Used by Managers (to carry out a process of management are:)
▪ Human Resources
▪ People needed to get the work done.
▪ Financial Resources
▪ Money the manager and the organizations use to reach goals.
▪ Physical Resources
▪ Firm’s tangible goods and real estate, including raw
materials, office space, production facilities, office equipment
etc. Vendors of a firm supply various physical resources to
get work done.
▪ Informational Resources
▪ Data the managers and organizations use to get work done.
▪ Example: sales representatives of a paper company may use
information from internet about new businesses that may
need their products. Hence, the informational resources in
this case is the internet.

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3. Four Managerial Functions:
◦ The Four Types of Managerial Functions
▪ To accomplish various goals in an organization, the manager performs
managerial functions. These functions are as follows:
▪ Planning
▪ Planning involves:
▪ Setting Goals and figuring our ways to reach these
goals.
▪ Central function of the management.
▪ Planning is performed in virtually all the departments
of a firm. Example: the finance division creates
financial budgets to plan the expenses to be done for
the year, the marketing team devises plans to target
demographics, geographical areas, and other
segments of the market for the products.
▪ Organizing
▪ Organizing is the process of determining organizational
structure, what are the tasks to be done, who will do them,
how are they to be grouped, who reports to whom, and
where are the decisions being made.
▪ Organizing is the process of making sure that necessary
human and physical resources are viable to carry out the plan
and achieve organizational goals.

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 ▪ Organizing consists of staffing the human resources among
various team that could perform the tasks planned by the
managers.
▪ Leading
▪ Leading means influencing others to reach certain
organizations
goals.

▪ Controlling
▪ Controlling generally involves comparing actual performance
to a predetermined standard. Any significant difference
between the desired goal and the actual result will lead the
manager to take corrective action.
▪ For example: goals of sales might not be achieved due to
ineffective marketing or insufficient marketing campaigns,
and the manager may increase the budget outlay of
advertising to influence sales.
▪ A secondary aspect of controlling is to identify whether the
original plan needs revision, given the realities of the day.
◦ Managerial Roles
▪ Mintzberg Approach or Mintzberg’s managerial roles:
▪ “Role”, in the business context, is an expected set of activities or
behaviors stemming from a job Mintzberg conducted several
studies on managerial roles.
▪ These are:
▪ Interpersonal Roles

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 ▪ The role of a figurehead
▪ The leader role
▪ The liaison role
▪ Informational Roles
▪ The recipient role
▪ The disseminator role
▪ The spokesman role
▪ Decision Roles
▪ The entrepreneurial role
▪ The disturbance-handler role
▪ The recourse-allocator role
▪ The negotiator role

▪ Other Roles of Manager:

▪ Planning
▪ Strategic planner: higher level managers deciding the direction of
the firm, the outside environment and developing corporate policies

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▪ Operational planner: middle level managers deciding on day-to-day
jobs and tasks of the departments and employees, formulating
budgets and developing work
schedules.

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◦ Managerial role today has changed from controller and director to that
of motivator, team leader, coach, facilitator, supporter. Additionally, managers
emphasize on lateral or horizontal relationships rather than vertical relationships.
Vertical relationships are top-down relationships in which the managers and
workers interact in formal environment as opposed to lateral relationships where
communication between the managers and employees is informal and more open.
◦ Is Manager’s Role Universal?
▪ No, why?
▪ Because it varies according to the SIZE of the organization, the SCOPE of the
organization, the LEVEL of management in the organization, the
ENVIRONMENT.
▪ Size: small business vs. large corporation vs. a start-up
▪ Scope: Profit vs. Non-Profit vs. Government PSU
▪ Level: Line manager or a top level management
▪ Environment: Competition

◦ Five Key Managerial Skills

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▪ Technical Skills
▪ Proficiency of certain activities that involve methods, processes,
procedures, or techniques. Example: budget preparation, layout of
production schedule, spreadsheet analysis, uploading information to
a social site etc.
▪ Also referred to as hard skills, example programming.
▪ Interpersonal Skills
▪ Soft skills
▪ Communication, cooperation, team work
▪ Sending and receiving messages
▪ Important for top leadership
▪ Important facet: multiculturalism
▪ Conceptual Skills
▪ Ability to the organization as a total entity and recognize how
various
organizations

▪ Diagnostic Skills
▪ Political Skills

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◦

◦ Role of the Top-Level Management:

▪ Identifying Role
▪ Enabling Role

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 ▪ Synergizing Role
▪ Balancing Act
▪ Linkage Building Role
▪ Futuristic Role
▪ Making Impact
◦ Development of Managerial Skills
▪ Conceptual Knowledge and Behavioral Guidelines
▪ Conceptual Knowledge demonstrated by examples
▪ Skill-Development Exercises
▪ Feedback on skill utilization, or performance, from others
▪ Frequent practice from what you have learned, including making
adjustments from the feedback

Role Importance: à Key Diagram

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Efficiency and Effectiveness:
Efficiency means doing the task correctly and defines a relationship between inputs and outputs.
à Seeks to minimize resources.

Effectiveness means doing the right tasks and goal attainment.

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Evolution of Management Thoughts [The History Module of Management]
◦ Management as a study begun approximately in 1700s with the beginning of the
Industrial Revolution.

Schools of Thought in Management:

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 Schools of Thought

Human Resources
Approach - Owen, Quantitative Contingency
Classical Munsterberg, Mary
Approach - Whiz Process Approach - Approach - Most
Contributions Follet, Chester Barnard, Koontz
Hawthorne Studies by Kids recent
Mayo

ScientiVic
Management -
Taylor, Gantt,
Gilbreth

General
Administrative
Theories - Weber,
Fayol

◦ Classical Approach to Management

▪ The Classical Approach to Management was developed with the coming of
the industrial revolution in the 1700s and almost up to 1900s. The need
was felt to study and develop various methods to improve the functioning
of factories that came up during the industrial revolution.
▪ The Classical Approach encompasses the Scientific Management and the
Administrative Management:
▪ Scientific Management theory — Frederick Taylor
▪ Frederick W. Taylor is considered as the father of the
Scientific Management
▪ Wrote The Principles of Scientific Management in 1911.
▪ It entailed application of scientific method that is based on
observation and hypothesis formation to increase individual
workers’ productivity.

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 ▪ The fundamental principles that Taylor saw underlying the
scientific approach of management were as follows:
▪ Replacing rules of thumb with science (organized
knowledge)
▪ Obtaining harmony, rather than discord, in group
action
▪ Achieving cooperation of human beings, rather than
chaotic individualism
▪ Working for maximum output, rather than restricted
output
▪ Developing all workers to the fullest extent possible
for their own and the company’s highest prosperity

▪
▪ An example would be the setting up of methods of assembling
washing machines in least amount of motions and steps.
▪ Gantt: Gantt Charts
▪ Administrative management theory — Henry Fayol
▪ The French businessman, Henri Fayol and German scholar,
Max Weber was the primary contributors to the operational
and administrative management.
▪ This was concerned most with how organizations were
structured and managed.

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 ▪ Based on practical experience, Fayol developed 14
management principles that entailed planning, organizing,
commanding (leading) and controlling.

▪
▪ Examples:
▪ Scalar chain: Chain of superiors from the highest to
the lowest ranks, which, while not to be departed from
needlessly, should be short-circuited when following it
scrupulously would be detrimental.
▪ Unity of Command: Work any task worker should
receive command from only one supervisor
▪ Esprit de corps: promoting team building and team
spirit to encourage worker and increase their
productivity. “in union there is strength”
▪ Weber:
▪ Weber’s theory of administrative management
proposed development of bureaucracy to improve

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 inefficient organizations that included favoritism to
promote workers

▪ Chandler:
▪ He was one of the most influential scholars of the
Classical Management Theory and contributed some
indispensable works to the development and adoption
of this approach in many organizations.
▪ His book, Strategy and Structures, establishes an
important link between company’s strategy (master
plan) and its structure(layout or division of work).
The book demonstrates that strategy of an
organization should guide its structure, i.e., the
structure should always follows the strategy (master
plan). If this doesn’t happen then inefficiency is
created in an organization.
▪ In other words, what a company wants to achieve or
accomplish determines the structure of the company.
His insights resulted into decentralization of many
modern organizations.
▪ He also proposed the idea of breaking down each job
into simple, routine and well-defined tasks.
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◦ The Behavioral Approach —
▪ The Behavioral approach aims at improving management through
psychological makeup of the people. This theory, instead of focusing on
scientific processes or scientific management, aims at understanding the
people.
▪ This is also referred to as the Human Resources Approach.
▪ Behavioral approach was developed to address the increasing
management-employee conflicts as a result of the application of the
classical approach. The Behavioral approach focuses on human resource
topics such as leadership, motivation, communication, teamwork and
conflict.
▪ Owen, Follet and Others:

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 ▪ Largely developed from the 1930s-1960s as a management theory

▪ As opposed to Owen, whose theory focused on organizing the firm around

the individuals, Follet’s theory of Behavioral management proposed
organizing the firm’s functions around the work groups of people. She
emphasized on the importance of group work as the main strategy to
increase productivity and morale of the workers.
▪ Three cornerstones of Behavioral approach to management are: The
Hawthorne Studies by Elton Mayo and FJ Roethlisberger, Theory X and
Theory Y of Douglas McGregor and Maslow’s Need Hierarchy.
▪ The Hawthorne studies
▪ The Hawthorne studies were conducted at the Hawthorne
plant of Western Electric (an AT&T subsidiary located in
Cicero, Illinois) to determine the effects of change of lighting
on productivity. (between 1927-32)
▪ These experiments helped in determining that when workers
of an organization were given attention by their managers,
their productivity increased. Hence, this study established the
tendency of people to behave differently when they receive
attention because they respond to the demands of the
situation. This is known as the Hawthorne effect.
▪ Another important lesson from the Hawthorne studies is that
communication is a critical part of managerial success.

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 ▪

▪ The experiment: Two groups of workers - a control group

and an experimental group were made. Lighting conditions
for the experimental group were changed in intensity. The
lighting of the control group was kept constant.
▪ As expected, the productivity of the experimental group
increased with the increase in lighting. However,
unexpectedly the productivity of the control group also
changed. It increased at about the same rate of the
experimental group.
▪ Later the lighting intensity of the experimental group was
reduced, but the productivity kept increasing, as did of the
control group. Therefore, something other than illumination
was causing changes in workers’ productivity
▪ Tests with differing situations were held over the next few
years and eventually the test’s interpretation revealed that
management attention causes workers to behave differently.
▪ Theory X and Theory Y of Douglas McGregor
▪ Theory X is a set of traditional assumptions about people.
▪ Managers who hold this view, assume that people
inherently dislike work, seek to avoid responsibility,
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 are not ambitious and must be supervised very
closely.
▪ Theory X draws a pessimistic view of the workers’
motivations and capabilities. Therefore constant and
direct management is required.
▪ McGregor urged managers to change this view and
challenge these assumptions about human nature
because they are untrue under most circumstances.
▪ Theory Y poses an optimistic set of assumptions about nature
of people.
▪ These assumptions include the ideas that people are
ambitious, do accept responsibility, can exercise self-
control, possess the capacity to innovate, and consider
world to be natural as rest or play.
▪ McGregor stated that these assumptions provide a
true picture of the human nature and should guide
managerial practice.
▪ Maslow’s Need Hierarchy
▪ Clinical psychologist, Abraham Maslow developed the need
hierarchy which encapsulates a comprehensive view of
individual motivation.

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◦ Quantitative Approach to Management
▪ A perspective on management that emphasizes on the use of a group of
methods in managerial decision making, based on the scientific method.
▪ Today, this is also referred to as the management science or operations
research.
▪ Developed by Robert McNamara, Charles Tex Thornton etc.
▪ Frequently used quantitative methods, tools and techniques include
statistics, linear programming, network analysis, decision trees, and
computer simulations.
▪ These tools can be used while making decisions regarding inventory
management, plant-site locations, quality controls, and a range of other
decisions where information plays a key role.
▪ Developed mostly after the world war II as a key phenomenon in
management sciences.
◦ The Process Approach:

▪
◦ The Systems Perspective

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▪ The Systems Perspective is a way of viewing an organization as an
interrelated system with its internal processes and also the external
environment.
▪ It states that scientific management cannot be undertaken without
establishing relationships between different parts of the organization as
one part impacts the output of the other in the organization.
▪ Hence, the Systems Perspective believes in inter-dependence of an
organization and the fact that all departments or the parts of the firm are
interrelated and codependent on their functions.
▪ Components of Systems Perspective:
▪ Inputs
▪ Human
▪ Capital
▪ Managerial
▪ Technologies
▪ Raw Materials
▪ Processes or Transformation
▪ Outputs
▪ Products
▪ Services
▪ Profits
▪ Satisfaction
▪ Goal Integration
▪ External Environment
▪ Opportunities
▪ Constraints
▪ Participants
▪ Claimants [government, employees, consumers, suppliers,
stockholders, community]
▪ An example is if the Human resource component of the organization
decides on offering low compensation to new employees, the product
quality may suffer because of “lower quality” employees of the
organization.
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 ▪ The Environmental Aspect of Systems Approach:
▪ The environmental aspect of the systems perspective believes that
the organization constantly interacts with the environment. As
shown in the diagram, the firm produces products or services and
these are used by the society. If the society perceives these as
valuable, then the organization’s outputs will thrive.
▪ The feedback loop indicates the acceptance of the products by the
society. This provides managers a potential to expand.
▪ Hence, an organization does not operate in a vacuum, and instead
works along with the economic and human
environment surrounding it.

◦ The Contingency Approach

▪ The Contingency approach assumes that most situations that organizations
face are different. Therefor, manager must study individual and situational
differences before deciding on the course of action to be taken.
▪ This approach proposes that reliance on standard managerial models
should be decreased and customized solutions must be built as per the
need of the situation.
▪ A method that leads to high productivity and morale under one set of
circumstances may not achieve the same results in another.
▪ Components of Contingency: SIZE, ENVIRONMENT, STRATEGY,
TECHNOLOGY

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◦ The IT Era and Beyond

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• Four Types of Managerial Functions – Planning, Organizing, Controlling and
Leading
◦ Essentials of Planning
◦ Types of Plans
▪ Missions or Purposes
▪ Objectives or Goals
▪ Strategies
▪ Policies
▪ Procedures
▪ Rules
▪ Programs
▪ Budget Making
◦ Steps in Planning
▪ Being Aware of the Opportunity
▪ Setting Objectives or Goals

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 ▪ Considering Planning Premises - in what environment, internal or external
will our plans operate
▪ Identifying Alternatives
▪ Comparing Alternatives in Light of Goals
▪ Choosing an Alternative or selecting a course
▪ Formulating Supporting Plans
▪ Making Budgets (Quantifying the plans)
◦ Objectives
▪ Verifiable and Nonverifiable objectives
◦ Management by Objectives (MBO) — by Peter Drucker
▪ Establishing Organizational Goals
▪ Establishing Unit Objectives
▪ Reviewing Group member’s proposals
▪ Negotiating or agreeing
▪ Creating Action Plans to attain objectives
▪ Reviewing Performance
▪ General Framework
▪ Strategic Planning
▪ Firm’s overall master plan, objectives and goals that it wants
to achieve
▪ Strategic planning is long term in nature
▪ Strategic plan also includes a roadmap for achieving the
objectives through allocation of resources necessary to
achieve them
▪ Strategic planning includes many dynamics such as firms’
internal processes, strengths, outside environment,
competition etc. to address challenges and opportunities
faced by the firm and how to respond to them over the long
term.
▪ These is devised by Top Level management and
communicated to middle level managers for execution
▪ This is the direction map of the firm.
▪ Mission (Purpose), Major Objectives and Strategic Intent
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 ▪ Mission is the purpose of the firm. It answers the
question about what a companies does. “What is our
business”
▪ Major Objectives: These are prime goals that a
company wants to achieve, in the medium and the
long term at higher executive level.
▪ Strategic Intent: The commitment of a company to win
in the competitive environment is known as strategic
intent. CK Prahalad describes Strategic Intent as
company’s willingness and desire to be a leader in the
competition by defining what it wants to achieve.
Example: Honda’s strategic intent to be the
automotive pioneer by becoming a “second Ford” or
Canon’s intent to “beat Xerox”
▪ TOWS analysis (SWOT)
▪ Matches external threats and opportunities with the
internal strengths and weaknesses of the organization
▪ Used for M&A, JVs and Alliances as well
▪ Blue Ocean Strategy: Pursuit of Opportunities in uncontested
markets
▪ Blue oceans vs. Red Oceans
▪ Does not focus on either offering a differentiated
product for which customers pay extra price or low
cost structure as exemplified by Wal-Mart
▪ Focuses on offering a product or service that is unique
in a market space where there is no competitor, thus
making competition irrelevant
▪ This does not mean offering a product in new
geographical markets where the product simply does
not exist, however, this also means offering a product
on the basis of differentiation and low cost which
creates an entirely new market demand
▪ “Value Innovation”
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 ▪ Eg: Southwest Airlines in USA - low cost, low priced
airline that runs on less busy air routes where
competition does not run. It’s strategy is to offer flying
service that takes away the market share from routes
with trains and buses or cars.
▪ Four factors in determining a blue oceans strategy:
1. Eliminate all the factors that customers
consider unimportant
2. If elimination not possible, reduce them as
much as possible
3. Raise the factors that are unique
4. Introduce new or unique factors that are
important and essential to customers and are
ignored by the competition
▪ The BCG Matrix or the Business Portfolio Matrix

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 ▪ Shows relationship between the business growth rate and the
relative competitive position (market share) of the business
▪ Forecasting: Delphi Technique - developed at RAND corporation
▪ Tactical Planning
▪ Planning that translates firms master plan or strategy into
specific goals by the organizational unit
▪ These are specific targets the firm sets to achieve its long
term strategic plan
▪ These are devised by middle managers and implemented by
lower level managers
▪ Operational Planning
▪ Planning that requires specific actions and procedures at the
lower levels of an organization
▪ Operational planning is based on tactical and
strategic

▪ Making Contingency Plans:

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 ▪ An Exit Strategy might be part of a contingency plan.
▪ Ability to scale up and scale down and reconfigure
resources rapidly as per the demand of the
situation.

▪ Strategic Planning: The Nature of Strategy

▪ Michael Porter presented a comprehensive view and theory of the
“Nature of Strategy” in his writing in “What Is Strategy?”
▪ Porter’s view on strategy is:
▪ Strategy Involves More than Operational Effectiveness
▪ This means that we cannot be just more operationally
effective than our rivals and competitors.
▪ Operational efficiency means quicker production or
quality consciousness. Focusing on operation
efficiency alone does not form strategy of a company.
▪ Although, operational efficiencies may be drastic in
some cases, however, they do not lead to sustainable
improvements in profitability.
▪ Strategy involves performing activities differently
than what others are doing.
▪ Strategy Rests on Unique Activities:
▪ Strategy means deliberately choosing activités to
deliver unique value
▪ A Sustainable Strategic Position Requires Trade-Offs
▪ Once a firm finds a strategic position (or place in the
market), it needs to decide which position to keep for
sustainable advantage and which ones to forgo. Trade-
offs are necessary when activities are incompatible.
▪ Example: E-commerce where the convenience of
shopping online and getting everything delivered at
doorstep. However, the tradeoff in this situation is
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 trying the product before hand on whether it serves
the purpose. In online shopping, returning the product
may be a hassle as it involves repackaging and
shipping.
▪ Fit Drives Both Competitive Advantage and Sustainability
▪ Competitive Advantage and its sustainability greatly depends on the fit of
various activities in the company. If various activities in the company fit
and support each other than an effective system could become a
sustainable competitive
advantage.

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 ▪

▪ Problem Solving and Decision Making

▪ Quantitative Techniques for Planning and Decision Making
◦ Organizing (all from duBrin)
▪ Job Design and work schedules
▪ Organizing structure, culture and change
▪ HR and Talent Management
◦ Controlling (all from duBrin)
▪ IT and e-Commerce
▪ Essentials of Control
▪ Managing effective performers
◦ Leading (if time allows, (all from duBrin))
▪ Leadership
▪ Motivation
▪ Communication
▪ Teams, Groups and Teamwork

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Decision making
◦ Decision making can be defined as the process of selection of a course of action from
a choice of alternatives.
◦ It deals with the decision of allocation of resources for implementing the plan that
has been created.
◦ Plan does not become a plan until decision making takes place i.e. until commitment
of resources has been made for it. Before decision making, plan is just a study or
research project.
◦ Decision making gives real substance to the plan.
◦ Process leading to decision making in Systems management approach:

◦ Choice vs. Decision à step of selection of alternative is choice.

◦ Rational Decision making

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◦

◦ Limited or “Bounded” Rationality:

▪ Limitation of time, recourses like information, HR, leads managers to
comprise rationality even though they may try their best to be rational.
Since they cannot be completely rational owing to the unpredictable nature
of their decisions, managers usually take the “safe route” or play it safe.
Herbert Simon called this “satisficing” - picking a course that is satisfying
or good enough.

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 ▪
◦ Finding Alternatives: Development of Alternatives and The Limiting Factor
▪ Limiting factors exist in accomplishing a set of goals or objectives. In such
cases alternatives have to be developed to continue the plan and execute
upon decisions made by the firms. Hence, the principle of limiting factor
states that by recognizing different factors that stand critically in the way of
a goal, the best alternative course of action can be selected.
◦ Evaluation of Alternatives:
▪ Quantitative and Qualitative Factors
▪ Marginal Analysis
▪ Additional revenue and additional cost from increasing production
▪ Cost-effectiveness analysis
▪ Best ratio of the benefit and the cost
◦ Selecting the Alternative
▪ Three main approaches of selecting an alternative
▪ Experience
▪ Experimentation
▪ Research and Analysis
◦ Programmed and Unprogrammed Decisions
▪ Programmed Decision: Used for routine or structured work
▪ Example: Inventory management work across most companies is
programmed

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 ▪ Unprogrammed Decision: Used for non-routine, fragmented, unstructured,
novel and ill-defined situations of non-recurring nature.
▪ Example: Introduction of Macintosh by Apple computers
◦ Creativity and Innovation
▪ Creativity: The ability and power to develop new ideas
▪ Conditions necessary:
▪ Expertise
▪ Creative Thinking Skills
▪ Internal Motivation
▪ T.M. Amabile’s 3 Elements of Creativity

▪
▪ Invention: involves creativity - invention pertains to new ideas and
processes that have not be used or developed before
▪ Innovation: The application of creative ideas or inventions (products,
services) or the use of new ideas
▪ Situations leading to innovation
▪ An unexpected event, failure or success
▪ A desire to change the course of established practices to make them
more efficient
▪ Changing demographics
▪ Changing customer preferences
▪ Changing market and competitive landscape
▪ Newly acquired knowledge
▪ The Creative Process:
▪ The Unconscious Scanning

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 ▪ Intuition (includes Brainstorming as a process of intuition and takes
time and experience)
▪ Insight
▪ Logical Formulation

▪ Brainstorming:
▪ Alex F. Osborn - father of brainstorming
▪ Emphasizes group thinking, however in some situation individuals
may work better by themselves as well
▪ The rules of brainstorming:
▪ No ideas are ever criticized
▪ The More radical the ideas - the better
▪ The quantity of idea production is stressed
▪ The improvements of ideas by others is encouraged
▪ Errors in Decision Making
1. Availability Heuristic -- The availability heuristic is a mental
shortcut that relies on immediate examples that come to a given
person's mind when evaluating a specific topic, concept, method or
decision. à Tendency to make judgments on basis of information
readily available.
2. Representative Heuristic à Tendency to make judgments on things
with which people are familiar. Kahneman.
3. Escalation of Commitment à Increased commitment to a previous
decision despite negative information. Due to overconfidence.
▪ Decision Making Styles:

47
 ▪

Quantitative Techniques in DM:

1. Decision Tree

48
 Decision Tree and Expected Values for Renting a
Large or Small Retail Space

4–22

2. BEA

The
Breakeven
Analysis

49
3.Financial Control

Popular Financial Controls

OBJECTIVE RATIO CALCULATION
Liquidity test Current ratio _Current assets_
Current liabilities
Acid test Current assets level inventories
Current liabilities
Leverage test Debt-to-assets _Total debt_
Total assets
Times-interest-earned Profits before interest and taxes
Total interest charges
Operations test Inventory turnover Cost of sales
Inventory
Total-assets-turnover Revenues
Total assets
Profitability Profit margin-on-revenues Net profit after taxes
Total revenues
Return-on-investment Net profit after taxes
Total assets
4–30

4. EOQ

Economic Order Quantity

• Economic order quantity (EOQ)
Ø A technique for balancing purchase, ordering,
carrying, and stock-out costs to derive the optimum
quantity for a purchase order

50
 5. Linear Programming

▪ Group
Decisions:

▪ Advantages:
▪ Avoid Bounded Rationality
51
 ▪ Diversity
▪ More alternatives
▪ Increases acceptance
▪ Disadvantages
▪ Time Consuming
▪ Lack of responsibility
▪ Domination by a small group
▪ Groupthink or Conforming behavior

• Four Factors of Managerial Functions:

◦ Planning
▪ Planning encompasses defining the organisation’s objectives or goals,
establishing overall strategy for achieving those goals and developing a
comprehensive hierarchy of plans to integrate and coordinate activities.
▪ Hence planning is:
▪ Defining the organization’s objectives or goals
▪ Establishing an overall strategy for achieving those goals
▪ Developing a comprehensive hierarchy of plans to integrate and
coordinate activities
▪ Hence is it concerned with both the ends as well as the means to achieve
those ends.
▪ Reasons for Planning:

52
▪
▪ Criticisms of Planning à MINTZBERG’S CRITICISMS
• Planning may create rigidity.
• Plans can’t be developed for a dynamic environment.
• Formal plans can’t replace intuition and creativity.
• Planning focuses managers’ attention on today’s competition, not on
tomorrow’s survival.
• Formal planning reinforces success, which may lead to failure.
▪ Planning & Performance
• Higher Profits [efficiency]
• Quality [effectiveness]
▪ Types of Plans:

53
MBO – Management by Objectives à DRUCKER

54
55
STRATEGIC MANAGEMENT:

1. à

Vision, Mission, Goals, Objectives

56
2. à

4. à
Resources of Organization:
1. Capital Resources
2. Technological Resources
3. Human Resources
4. Entrepreneurial Resources

3,5. à

57
7.

58
59
 Examples: Jeff Bezos of Amazon, Bill Gates of Microsoft, Azim Premji of
Wipro, Narayan Murthy of Infosys

◦ Organizing [More in OB]

◦ Organization: Organization is a formal or intentional structure of roles or
positions in a firm.
▪ This means that organization is developed as set of rules that apply to
everyone playing different roles within the firm. These “rules” define the
structure of roles or positions played by different people to achieve the
goals of the firm.
◦ Forms of Organization:
▪ Formal
▪ The intentional structure of roles or positions of individuals in an
organization is known as formal organization of a firm
▪ Informal
▪ The network of interpersonal relationships that arise when people
interact with each other is known as informal organization.
▪ These may not appear in the organization chart of a firm, however
they are strong and exist in every organization
◦ Principle of the Span of Control of Management
▪ There is a limit to the number of people in an organization a manager can
supervise directly. This leads to the creation of wide spanning or narrow
spanning organizations.

60
 ▪

◦
▪ This depends on the nature of underlying factors in an organization.
▪ For example: A firm may have a wide variety of specialized roles due to
nature of its product. This may result in many managers specializing in
many functions separately (less time spent with subordinates). However,
another organization may have specific niche market with target
populations and one product, hence managerial function’s span is
narrowed.(high time spent with subordinates)
▪ Important factor that determines span of management:
▪ Manager’s ability to reduce the time he or she sounds with
subordinates is the prime determining factor
◦ Organizational Environment for Entrepreneurship and Intra-preneuring
▪ Entrepreneur
▪ An entrepreneur is a person who converts his ideas, inventions or
innovation into profitable business operations.

61
 ▪ Entrepreneurs work independently with the creation and
conceptualization of their ideas, and then formalize the execution by
putting together resources required to execute them. Therefore
entrepreneurs are constantly employing creativity in creating the
idea and then also executing it.
▪ Intrapreneur
▪ An intrapreneur is a person who converts his ideas, passions,
inventions or innovation into profitable business operations within
an established organization.
▪ Organizations must support entrepreneurs within and outside the
organization for formulation of new ideas, services and products for the
customers. This requires:
▪ Promotion of opportunities for entrepreneurs to realize their
potential
▪ Tolerance to failure faced by the entrepreneur
▪ Providing freedom to entrepreneurs to pursue their ideas
◦ Reengineering the Organization
▪ The fundamental rethinking or radical redesign of business processes to
achieve dramatic improvements in critical contemporary measures of
performance, such as cost, quality, service and speed.
▪ Fundamental Rethinking or Radical Redesign
▪ Processes
▪ Dramatic improvements
▪ Measures - cost, quality, service and speed
◦ Organization:
▪ Departmentation
▪ The limitation on the number of subordinates that can be directly
managed by managers leads to the need for departmentation.
Managers can only have a limited span of control, and
therefore departmentation is needed to organize the company to
achieve desired results.

62
 ▪ Pattern of departmentation depends on different situations the
organization is functioning in. It is based on the expected results of
the managers and also on the concept of reengineering.
▪ By Customers Group
▪ This grouping reflects primary interests of customers.
▪ Eg: Banks divided on types of customers: Community-city
Banking, Corporate Banking, Institutional Banking
▪ By Enterprise Function
▪ This is done by different functions of an enterprise such as
production, sales and financing.
▪ Eg: Manufacturing (Production), Marketing, Engineering,
Finance
▪ By Territory or Geography
▪ Grouping of activities by area or territory is common in
enterprises operating over wide geographic areas.
▪ Eg: Manufacturing (Production), Marketing, Engineering,
Finance etc. further divided by Western, Eastern, Country-
wise etc.
▪ By Product:
▪ Grouping of activities by products or product lines in large,
multi-product organizations.
▪ Eg: Industrial Tools, Chemicals, Cars, Steel
▪ Matrix Organisation (in Engineering companies)
▪ Matrix organizations are combination of functional and
product or product patterns of departmentation in the same
organization structure.
▪ By Roles of the Engineering VPs e.g.: Design, Mechanical
Engineer, Electrical Engineer etc. and then each have Project
Managers under them undertaking the various functions of
the engineering process
▪ Strategic Business Units

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 ▪ Distinct business units set up within an organization to ensure that
certain products or product lines are promoted and handled as
though each were an independent business.
▪ This means that a strategic business unit design of organization
focuses on putting resources to development of various product
lines across various units within the organization.
▪ These business units must have their own mission, strategy, have
their competitors in that product line, manage their own resources
in key areas, and be of appropriate size - not too large or small.
Example: an automotive parts company may have engine design and
production units of cars, motorcycles and tractors operating
separately.
▪ Problems:
▪ As CK Prahalad and Gary Hamel put it, the SBUs must be
carefully managed to avoid tyranny of particular units in
managing their resources They may be motivated to not
share their research, share their employees and to hide
information from other units, which may lead to lopsided
development of the company and sometimes under-
invetsment in core competencies of the company.
▪ Core Competencies:
▪ Collective learning, coordination and integration of
skills to obtain “streams of technology”
▪ For example: For Hondo, engines are the core
products to which design and development skills are
directed that result in end products such as cars and
motorcycles.
▪ The Virtual Organization
▪ Rather loose concept of a group of individuals or organizations that
are connected and functioning through the use of information
technology.
▪ Scalar Principle

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 ▪ Line Authority - superior exercises direct supervision over a subordinate;
authority relationship in a direct line or steps
▪ Staff Authority - Advisory in nature. Give advise to line managers based on
their experience, research and investigations, and not command them or
direct them specifically.
▪ Principle of delegation by results expected
▪ Principle of absoluteness of responsibility
▪ Principle of parity of authority and responsibility
▪ Principle of unity of command
▪ Authority-level principle
▪ Process of Organizing:
▪ Balance
▪ Flexibility
▪ Leadership Facilitation
• Four Factors of Managerial Functions: Controlling
◦ Controlling is the process of performance evaluation and correction of various
projects within the organization. The performance evaluation is done in terms of
goals and objectives assigned to the members of the organization, and correction is
offered as a critical analysis of their performance, its outcomes and areas of
improvement for the members.
▪ Performance evaluation measures the execution of the plans that were
allocated to the managers and other employees of the organization.
▪ Correction outlines the steps that can be taken by the managers to improve
performance and meet objectives and goals of the organization as assigned
to them.
◦ Three Steps in the Process of Controlling:
▪ Establishing Standards: Criteria of performance
▪ Involves clear definition of goals, objectives and criteria to measure
these goals and objectives
▪ Communication of such definition and performance standards to the
managers
▪ Clarification of any doubts of the managers
▪ Measuring Performance against these standards
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 ▪ Qualitative measurement
▪ Quantitative measurement
▪ Correcting variations from the standards and plans
▪ Entails Feedback
▪ Redesigning of the plans or objectives
▪ Allocation of more resources
▪ Providing additional information required
◦ Special Consideration in Controlling International Companies:
▪ Cultural Differences
▪ Distortion due to Transfer Pricing
▪ Communication Gaps
▪ Productivity and Cost Differences
◦ Critical Control Points and Standards:
▪ Managers can directly observe the performance of various employees,
however in many cases and in large companies this supervision and
observation might not be possible due to presence of a large number of
supervised employees and large number of managerial functions.
Therefore, managers set critical control points and define standards against
which they measure the performance of the employee.
▪ Critical control points are absolutely necessary functions that are required
to be evaluated for performance against the plans.
▪ Types of critical point standards:
▪ Physical Standards
▪ Cost Standards
▪ Capital standards
▪ Revenue Standards
▪ Goals as standards
▪ Intangible standards
▪ Program standards
◦ Benchmarking:
▪ Benchmarking is a process of creating minimum standards of performance
for different functions of the organization. These are derived from

66
 competitive analysis and using the best industry practices to be a standard
objective various functions.
▪ Example: The time required by a company to send product to the customer
after ordering and payment may be 5 days, as opposed to 3 days taken by
another competitor. In this case, the 3 day standard automatically becomes
a benchmark against which the former company can evaluate its
performance.
▪ Benchmarking could be:
▪ Strategic (longer term direction of the company and markets it
wants to serve, relevance of key elements of strategy)
▪ Operational (production costs, quality standards)
▪ Management (HR, logistics, market planning etc.)
◦ Types of Control/Correcting variations:
▪ Feedback
▪ Feedforward or preventative control
▪ Feedforward or preventative control is proactive approach where
corrective mechanism and feedback for correction are provided
before the problems occur.
▪ This occurs in organizations where such systems are real-time in
nature
▪ Feedforward system measure the inputs themselves to determine
whether they are the right ones for the required output as opposed
to feedback system where only objectives are clarified, and input
measurement is not possible. The outputs are measured both in
feedforward and feedback system of control.
▪ Feedforward is generally implemented through programmed
decision making systems and may exclude unpredictable events that
may effect the feedforward functioning.

67
 ▪

▪
◦ Profit and Loss Control
◦ Control Through Return on Investment (ration of company’s earning to
investment of capital)
◦ Management audits and accounting audits
◦ The Balanced Scorecard
▪ The Balanced Scorecard approach of controlling was pioneered by GE in
the 1950s and written extensively on by Robert Kaplan and David Norton.

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 ▪ The approach deals with a comprehensive view of the control systems
across the company, and measures the performance not just of the internal
processes, but also in relation with the objectives set by the company and
with the external environment the company operates in.

▪
▪ Linked closely to planning and organizing.
▪ Company Objectives
▪ Internal Business Processes
▪ Satisfaction of the Customer
▪ Financial Perspective
◦ Techniques of Controlling:
▪ Budgeting
▪ Zero-Based Budgeting
▪ Zero-Based Budgeting is an accounting control technique that
evaluates the financial outlays for achieving objectives of
various departments from the ground-up. This budgeting
approach requires managers of different departments to
evaluate their financial and other resource needs, starting
from zero and working their way up.

69
 ▪ This approach is "grass-root” based and avoids the tendency
of just comparing the changes from previous period, which is
common in budgeting.
▪ Generally, this technique has been applied to the support
areas such as Human Resources, R&D, Marketing, Planning
and Finance and not in core areas like production etc.
▪ Various programs thought to be desirable are costed and
reviewed in terms if their benefits to the enterprise and are
then ranked in accordance with those benefits and selected
on the basis of which package will yield the benefit desired.
▪ Gantt Charts and Milestone Budgeting
▪ Program Evaluation and Review Technique (PERT)
▪ Developed by the US Navy, it became popular with contractors,
engineers etc.
▪ The Program Evaluation and Review Technique is a time-event
network system that lays out various events in the program or
project and the time required to meet each of these events in the
project.
▪ The PERT lays out various parts of a project, marked by numbers 1
and above in their chronological order, and then connects these
activities or parts of the project with arrows defining the criticality
of the activity and also time required to complete the activity.
▪ PERT defines a “critical path” - a sequence of events that takes the
longest time and that has zero or the least slack time.
▪ Pros:
▪ Requires deep planning and analysis of objectives ad
activities involved in these objectives
▪ Involves fluid communication of the project manager with
other managers for proper planning and feedback on the
progress
▪ Forward looking and predicts areas of delay
▪ Forces managers to produce reports etc.
▪ Cons:
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 ▪ Does not involve costs, but only time
▪ Cannot be applicable to projects that are more abstract in
nature and based on guesstimates. This system cannot handle
a guesstimate project
▪ Inventory Control

Techniques:

71
72
• Managing in a global environment
◦ Multinational Corporation
▪ At heart of the international trade is multinational corporation (MNC). A
firm which is operating in two or more countries in addition to its own is
known as an MNC. It has headquarters in one country and operates in
others with its branch offices or units.
▪ Examples: Tata, Reliance, PepsiCo, IBM
◦ Transnational Corporation
▪ Transnational Corporation is type of an MNC that operates worldwide
without having one national headquarters.
▪ The transnational executive looks at operations and strategy of the
company in terms of the globe or the entire world, instead of considering
functions in different countries as being “foreign operations”
▪ Components of the company located in different parts of the world
sometimes provide continuous service as the workers from different time
zones begin their contributions when work ends in another time zone.
▪ Example: Tokyo based Trend Micro, a company specializing in combating
computer viruses is a highly developed transnational company. Many other
software virus companies could also be transitional in nature.
◦ Trade Agreements Among Countries:
▪ Tarde agreements facilitate the flow of business between different
countries. This includes exploring, importing, and building goods in other
countries as manufacturing bases.
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 ▪ Examples:
▪ NAFTA: US, Canada, and Mexico
▪ CAFTA: US, Dominican Republic, Central American Free Trade
Agreement.
▪ EU
▪ World Trade
Organization

◦ Global Outsourcing:
▪ The practice of hiring an individual or a company outside an organization.
These individuals or companies carry out specific tasks allocated by the
client company to the outsourced company.
▪ Also known as offshoring in the global context where firms are hired
outside organizations’ home country to take benefit of the low-cost human
resources and other resources available in other countries.
▪ Pros:
▪ Lower costs lead to lower priced products which democratize new
technologies and make them affordable for all sections of the society
▪ Outsourcing can actually help keeping important functions and jobs
in home country and increasing skill levels of home workers by
outsourcing lower-skill, repetitive or mechanical jobs to other
countries and benefitting from difference in employment rates
▪ Global cooperation of employees leads to development of innovative
products with local knowledge embedded in product development
process
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 ▪ Helps become companies more competitive by reducing costs
▪ Cons:
▪ Protectionism: People believe that permanent loss of jobs occurs in
home countries due to outsourcing of jobs outside
▪ People believe that outsourcing leads to reduction in wages in home
countries as a result of competition between the home country
workers and foreign workers
◦ Cultural Sensitivity and Multicultural Worker

Managerial processes on direct and indirect value chain

75
◦ Porter's Value Chain Understanding How Value is Created Within
Organizations Porter's Value Chain. How does your organization create value?
How do you change business inputs into business outputs in such a way that they
have a greater value than the original cost of creating those outputs? This isn't just
a dry question: it's a matter of fundamental importance to companies, because it
addresses the economic logic of why the organization exists in the first place.
Manufacturing companies create value by acquiring raw materials and using them
to produce something useful. Retailers bring together a range of products and
present them in a way that's convenient to customers, sometimes supported by
services such as fitting rooms or personal shopper advice. And insurance
companies offer policies to customers that are underwritten by larger re-
insurance policies. Here, they're packaging these larger policies in a customer-
friendly way, and distributing them to a mass audience. The value that's created
and captured by a company is the profit margin: Value Created and Captured –
Cost of Creating that Value = Margin The more value an organization creates, the
more profitable it is likely to be. And when you provide more value to your
customers, you build competitive advantage. Understanding how your company
creates value, and looking for ways to add more value, are critical elements in
developing a competitive strategy. Michael Porter discussed this in his influential
1985 book "Competitive Advantage," in which he first introduced the concept of
the value chain. A value chain is a set of activities that an organization carries out
to create value for its customers. Porter proposed a general-purpose value chain
that companies can use to examine all of their activities, and see how they're
connected. The way in which value chain activities are performed determines costs
and affects profits, so this tool can help you understand the sources of value for
your organization. Elements in Porter's Value Chain Rather than looking at
departments or accounting cost types, Porter's Value Chain focuses on systems,
and how inputs are changed into the outputs purchased by consumers. Using this
viewpoint, Porter described a chain of activities common to all businesses, and he

76
 divided them into primary and support activities, as shown below.

◦ Primary Activities Primary activities relate directly to the physical creation, sale,
maintenance and support of a product or service. They consist of the following:
▪ Inbound logistics – These are all the processes related to receiving,
storing, and distributing inputs internally. Your supplier relationships are a
key factor in creating value here.
▪ Operations – These are the transformation activities that change inputs
into outputs that are sold to customers. Here, your operational systems
create value.
▪ Outbound logistics – These activities deliver your product or service to
your customer. These are things like collection, storage, and distribution
systems, and they may be internal or external to your organization.
▪ Marketing and sales – These are the processes you use to persuade clients
to purchase from you instead of your competitors. The benefits you offer,
and how well you communicate them, are sources of value here.
▪ Service – These are the activities related to maintaining the value of your
product or service to your customers, once it's been purchased.
◦ Support Activities These activities support the primary functions above. In our
diagram, the dotted lines show that each support, or secondary, activity can play a
role in each primary activity. For example, procurement supports operations with
certain activities, but it also supports marketing and sales with other activities.

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 ▪ Procurement (purchasing) – This is what the organization does to get the
resources it needs to operate. This includes finding vendors and negotiating
best prices.
▪ Human resource management – This is how well a company recruits,
hires, trains, motivates, rewards, and retains its workers. People are a
significant source of value, so businesses can create a clear advantage with
good HR practices.
▪ Technological development – These activities relate to managing and
processing information, as well as protecting a company's knowledge base.
Minimizing information technology costs, staying current with
technological advances, and maintaining technical excellence are sources of
value creation.
▪ Infrastructure – These are a company's support systems, and the functions
that allow it to maintain daily operations. Accounting, legal, administrative,
and general management are examples of necessary infrastructure that
businesses can use to their advantage.
◦ Companies use these primary and support activities as "building blocks" to create
a valuable product or service. Using Porter's Value Chain To identify and
understand your company's value chain, follow these steps. Step 1 – Identify
subactivities for each primary activity For each primary activity, determine which
specific subactivities create value. There are three different types of subactivities:
▪ Direct activities create value by themselves. For example, in a book
publisher's marketing and sales activity, direct subactivities include making
sales calls to bookstores, advertising, and selling online.
▪ Indirect activities allow direct activities to run smoothly. For the book
publisher's sales and marketing activity, indirect subactivities include
managing the sales force and keeping customer records.
▪ Quality assurance activities ensure that direct and indirect activities meet
the necessary standards. For the book publisher's sales and marketing
activity, this might include proofreading and editing advertisements.
◦ Step 2 – Identify subactivities for each support activity. For each of the Human
Resource Management, Technology Development and Procurement support
activities, determine the subactivities that create value within each primary
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 activity. For example, consider how human resource management adds value to
inbound logistics, operations, outbound logistics, and so on. As in Step 1, look for
direct, indirect, and quality assurance subactivities. Then identify the various
value-creating subactivities in your company's infrastructure. These will generally
be cross-functional in nature, rather than specific to each primary activity. Again,
look for direct, indirect, and quality assurance activities. Step 3 – Identify
links Find the connections between all of the value activities you've identified. This
will take time, but the links are key to increasing competitive advantage from the
value chain framework. For example, there's a link between developing the sales
force (an HR investment) and sales volumes. There's another link between order
turnaround times, and service phone calls from frustrated customers waiting for
deliveries. Step 4 – Look for opportunities to increase value Review each of the
subactivities and links that you've identified, and think about how you can change
or enhance it to maximize the value you offer to customers (customers of support
activities can internal as well as external).

Entrepreneurship:
Intraprenuer:

79
 • A person who focuses on innovation and creativity and who transforms a dream or an
idea into a profitable venture by operating within an established organizational
environment.
Entrepreneur:
• A person who does similar things as the intraprenuer, but outside the organization
setting.

Innovation and Entrepreneurship

• Innovation requires systematic and rational work, well-organized system and
management for results.
• Entrepreneurship is about recognizing what is lacking, it suggest dissatisfaction with how
things are and an awareness of a need to do things differently. It comes about because of
following situations: [Peter Drucker]
◦ The Unexpected
◦ The Incongruous
◦ The Process Need
◦ Changes in the market and industry structure
◦ Changes in demographics
◦ Changes in society
◦ Newly acquired knowledge

Reengineering the Organization

• Reengineering is fundamental rethinking and radical redesign of business processes
to achieve dramatic improvements in critical contemporary measures of performance,
such as cost, quality, service, and speed.
• Idea and theory given by Michael Hammer and James Champy

Theories of Entrepreneurship:
1. Opportunity Based Theory
◦ Peter Drucker put forward the opportunity based theory in
entrepreneurship.

80
 ◦ Drucker contends that entrepreneurs excel at seeing and taking advantage of
opportunities created by social, technological and cultural changes. [the process
need, the incongruous, the unexpected etc.]
◦ For example, while a business that caters to old residents in a neighborhood see
the influx of younger inhabitants as a death stroke, an entrepreneur might see it as
an opportunity to open a club or cafe.
2. Resource Based Theory
◦ Capital, education, access to technology etc. all support the resource based
theory which says that access to resources makes it easier for entrepreneurs to
grow.
◦ However, most entrepreneurs start their ventures with limited amount of capital
and resources.
◦ Resource constraint leads to innovation by entrepreneurs, and may become a
competitive advantage for some companies in early part of their life cycles.
3. Economic Theory
◦ This theory contends that entrepreneurship is generated when economic
conditions in the market are ripe for innovation and new risk taking.
4. Psychological Theory
◦ Need for Achievement theory by David McClelland contends that
entrepreneurship had strong motivation driven by need for achievement

Flexible Systems Management:

• Flexible Systems Management relates to making the organizations become more flexible
(adaptive, responsive, robust and agile) at the level of strategy, structure, systems,
people, and culture.
◦ Flexibility relates to providing more options, quicker change mechanisms, and
enhanced freedom-of-choice so as to respond to the changing situation with
minimum time and efforts.
• This has become critical due to fast pace of change in business environment, competition,
consumer choices, economic, political and social environment, and technological factors
surrounding various businesses.
• The Systems view of management entails functioning of an organization in an
interrelated set of various business processes. These different processes are
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 interacting with each other in the organization and also with environmental factors
surrounding the business.
◦ The Systems Perspective is a way of viewing an organization as an interrelated
system with its internal processes and also the external environment.
• It states that scientific management cannot be undertaken without establishing
relationships between different parts of the organization as one part impacts the output
of the other in the organization.
• The Systems Perspective believes in inter-dependence of an organization and the fact that
all departments or the parts of the firm are interrelated and codependent on their
functions.
• In a Flexible Systems Management approach, the organization would be extremely agile
as different aspects of business processes, and even the strategic direction of the
business is flexible.
• Strategic flexibility also acts as a predictor of vitality and sustainability of the enterprise.
It not only acts as a driver of financial performance, but also contributes to long-term
survival (continuity) and growth (change) of any enterprise.
• Strategic flexibility is placed at a higher level of flexibility maturity, both for the
organization and the ecosystem. To sum up, it can be contemplated that the rigid
frameworks of strategy formulation (rooted into a generic competitive advantage) are
giving place to dynamic and flexible frameworks of strategy formulation and execution.
• Various adjectives that are associated with flexible organizations include: ambidexterity,
adaptability, responsiveness, openness, customization, localization, agility, vitality,
sustainability, etc.
• Business agility infused by new information and communication technologies: including
volatile and virtual business, developments in information and communication
technologies generating IT agility such as cloud computing, social networking, knowledge
based systems, search technologies, mobile transactions, business continuity, disaster
recovery, etc.
• Managing innovation, strategic change and risk: including strategic change, confluence of
continuity and change, strategic flexibility, strategy execution, innovation in
products/services, processes, management practices, and strategies, business dynamics,
business uncertainty and associated risk, etc.

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 • Flexibility in various operations for achieving business excellence: including
organizational flexibility, financial flexibility, manufacturing flexibility, information
systems flexibility, marketing flexibility, operational and supply chain flexibility,
technology management flexibility, flexibility in business excellence/maturity models, etc.

Process and Customer Orientation

http://en.wikipedia.org/wiki/Business_process_orientation

http://www.civilserviceindia.com/subject/Management/notes/process-and-customer-
orientation.html

Deming Flow Diagram

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Deming Chain Reaction (Quality)

Ethics in corporations
• Adopt a code of ethics
◦ Not enough in itself
◦ Employees should be required to sign a code of ethics
◦ Managers should incentivize ethical behavior by rewarding such behavior and acts
and punishing unethical behavior
• Appointing an ethics committee
◦ The committee should be active with external and internal directors
◦ Issues around ethical behavior must be discussed at meetings and steps should be
taken to promote ethical behavior in the company
◦ The board should communicate with the organization and check on possible
violations of the code
• Teaching ethics in management development programs
• CSR (Corporate Social Responsibility)
◦ Provisions under Company Act 2013

84