Lesson 5, 6 ,7 ,8,9 and 10

Lesson 5: Corporate social responsibility
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Completion requirements
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This lesson will require approximately EIGHT notional hours. Figure 5.1 represents
an overview of lesson 5.

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5.1 Introduction
Businesses operate in a wider social environment, causing both positive and

negative impacts on the communities and environment around them. They therefore
have a responsibility towards these communities and the environment, and as a
result they need to become involved in solving problems faced by society, such as
poverty, unemployment and pollution.
Learning outcomes
Figure 5.1: Visual overview of lesson 5. (Source: Author's design)
5.1 Introduction
LESSON

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5.2 Introducing Corporate Social Responsibility (CSR)
Being a citizen of any country brings with it certain rights and responsibilities. For
instance, we have the right to vote, and to associate with whomever we please; we
enjoy the freedom of religion and political orientation; and so forth. At the same time,
we must observe a few basic rules – these are our responsibilities. We must obey
law and order, we must respect other people’s privacy and possessions, we must not
interfere with the rights of other citizens, and so forth.
In the corporate sector, the same basic principles apply. Corporates – just like
ordinary citizens – have particular rights and responsibilities. Abiding by the laws of a
country is an important component of corporate social responsibility; however,
corporate social responsibility goes beyond legal compliance. Being a citizen means
being part of a community. As a good citizen, you want to contribute to the welfare of
the people in your community, because you realise that your life will be better if
people around you are having better lives.
Within the business context, corporate social responsibility is a concept that

recognises that:
(i) companies have a responsibility for their impact on society and the natural
environment;
(ii) companies have a responsibility for the behaviour of others with whom they do
business; and
(iii) business needs to manage its relationship with the wider society.
Nowadays businesses consider corporate social responsibility as a fundamental

piece of a company’s business plan, affecting its bottom line, share price and long-
term viability. Companies that do not have a strong corporate responsibility strategy
find themselves at a competitive disadvantage.
What is corporate social responsibility and how do different companies implement its
principles? Generally speaking, corporate social responsibility is about proactive
efforts by companies to make a positive contribution to society. As a form of self-
regulation, CSR entails a company’s voluntary business, as well as its social and
environmental actions to correctly and ethically interact with the surrounding
environment, which includes not only the natural environment but also stakeholders.
Open the following link to watch a YouTube video about the definition, examples and
benefits of CSR.
Time: 9:19 minutes
Play Video
There is a combination of reasons why companies implement corporate social

responsibility programmes and these are influenced by certain social, governmental,
market and ethical drivers.
Ethical drivers greatly affect the implementation of CSR measures and can be
summarised by grouping the four types of responsibilities in Carroll’s CSR pyramid
(Agudo-Valiente, Garces-Ayerbe & Salvador-Figueras, 2017):
• Economic responsibility – the business needs to be profitable.

• Legal responsibility – the business must operate within the sphere of the law.
• Ethical responsibility – the business must conduct itself in an ethical manner.
• Philanthropic responsibility – the business has a duty to be a good corporate
citizen.
Figure 5.2 visually depicts Carroll’s CSR pyramid.

Figure 5.2: Carroll’s CSR pyramid
(Source: https://www.toolshero.com/strategy/carroll-csr-pyramid/)
The YouTube video below explains how Carroll’s CSR pyramid works.
Time: 3:38 minutes
https://www.youtube.com/watch?v=u5t9Qv-dhmE
5.3 Terms and trends
1. Lesson 5: Corporate social responsibility
LESSON

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5.3 Terms and trends
A number of terms are applied to corporate social responsibility, and the differences
and overlaps can become quite confusing! Let’s have a look at some of the more
common terms and what they refer to.
5.3.1 Triple bottom line
While a company’s bottom line traditionally refers to its financial profit or loss, the
triple bottom line refers to the need to consider the social and environmental impacts
as well. What effect do the operations of the company have on the people it comes
into contact with (the social side) and on the physical environment in which it
operates? This approach is known as the triple bottom line: it measures the financial,
social and environmental impacts of business. All are equal and all are
interconnected.
Open the YouTube video below to learn about the triple-bottom-line pillars.
Time: 4:13 minutes
Play Video
5.3.2 Sustainable development
Sustainable development is the overarching aspiration and framework for corporate

citizenship. In 1987, the Brundtland Report emphasised the importance of
sustainable development and defined it as “development that meets the needs of the
present without compromising the ability of future generations to meet their own
needs”. Some of the most important meetings and agreements that have brought
sustainable development to the mainstream include the Rio Earth Summit 1992, the
United Nations Global Compact, Millennium Development Goals (MDGs) 2000–2030
and the World Summit on Sustainable Development (WSSD) 1992–2022.
Sustainable development is becoming increasingly important as the impact of global

warming becomes more widespread across the world. Sustainable development can
be achieved if human activities are restricted, and the rate of consumption is reduced
to not overtake the rate of salvation (in other words, we should not use more
resources than what we are saving). Similarly, the rate of consumption of renewable
resources should not surpass the production rate, all types of pollution should be
minimised and natural resources should be used more sensibly. Some examples of
sustainability include wind and solar energy, crop rotation, sustainable construction,
efficient water fixtures, dedicated green spaces and sustainable forestry.
Source: https://byjus.com/commerce/meaning-and-features-of-sustainable-
development/
Open the following YouTube videos to learn about sustainable development.
Time: 4:24 minutes
Play Video
Time: 7:51 minutes
Play Video
5.3.3 Corporate citizenship
The term “corporate social responsibility” can be considered synonymous with

corporate citizenship. However, the emphasis on “social” may be misleading, since it
emphasises one element of the triple bottom line above the others.
5.3.4 Corporate social investment (CSI)
Do not confuse corporate social responsibility with corporate social investment (CSI).
CSI is primarily a South African term that refers to companies’ philanthropic
initiatives, such as sponsorships for students or support to health clinics in areas
surrounding a company’s factory. CSI is only one component of corporate
citizenship; corporate citizenship comprises much more than that. One way to
describe this is that CSI is about spending a small part of your profits (such as 1% of
pre-tax profit) on good causes, while corporate citizenship is about how you make
your profits in the first place. An example of an CSI project is the FinEazy digital
financial literacy course presented by Momentum. This project is targeted at
schoolgoers and young adults and aims to teach participants relevant financial
skills.
5.3.5 Sustainability
Sustainability reporting refers to the increasing expectations for companies to

publicly report not just on financial matters, but also on social and environmental
issues. The self-assessment questions at the end of this lesson include a real-life
example of sustainability reporting – be sure to participate!
5.3.6 Corporate governance
Corporate governance refers to how a company’s objectives, strategy and decision-

making structures are developed, implemented and monitored. It also relates to the
way, and the extent in which, a company is accountable to its shareholders, as well
as its other stakeholders. Good corporate governance is an important aspect of
corporate social responsibility.
Activity 5.1
This activity will take approximately 15 minutes to complete.
Write a paragraph in which you explain what you understand by the concept of
corporate social responsibility and what the key elements of this concept are.
Feedback
There is no one correct answer to this activity. You could have referred to the various
definitions mentioned above, but you should have stated in your own words what you
understand by corporate social responsibility. You should have included the following
elements in your definition:
• responsibility
• stakeholders
• laws
• social impact
• environmental impact
• economic impact
• society
In the next section, you will learn about what it means to be a corporate citizen and
how corporate social responsibility ties in with the CSR imperative

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5.4 The Corporate Social Responsibility (CSR) imperative
In this section, you will learn what the South African and global drivers for corporate
social responsibility are and the reasons why organisations need to embrace
corporate social responsibility.
5.4.1 Global drivers
Over the past 10 years, the pressure on companies to demonstrate good corporate
social responsibility practices has increased dramatically. Initiatives such as the
United Nations Global Compact (www.unglobalcompact.org) and the Kyoto Protocol
(http://unfccc.int/2860.php) constitute a global shift towards greater accountability of
business to a wider range of stakeholders on issues relating to the environment,
social justice, human rights, labour rights and climate change. Let’s look at a number
of initiatives that play a role at an international level.
a. The United Nations Global Compact
The United Nations Global Compact, as summarised in table 5.1, was first proposed
by the then UN Secretary-General Kofi Annan in early 1999 in an address to the
World Economic Forum, which is a meeting of some of the world’s most important
economic leaders.
Table 5.1: The 10 principles of the United Nations Global Compact

Source: https://www.unglobalcompact.org/what-is-gc/mission/principles
Today, hundreds of companies from all regions of the world, international labour and
civil society organisations are engaged in the Global Compact. As far as South
African companies are concerned, the following are included (note that this is not a
comprehensive list):
• Clicks
• Anglo-American
• Discovery Limited
• AngloGold Ashanti
• Investec
• GIBS
• Naspers
• Bidvest
You can access the dedicated South African Global Compact site
here: https://globalcompactsa.org.za/
b. United Nations – Sustainable Development Goals (SDGs)
In 2015, all 193 members of the United Nations adopted a new plan for creating a
better future by laying out a 15-year plan to end extreme poverty, fight inequality and
injustice and to protect our planet. Agenda 30 then outlines 17 Sustainable
Development Goals (SDGs) which define the world we should strive to create.
The SDGs were developed from an inclusive process where governments included
businesses, civil societies and citizens from the outset. To achieve the SDGs,
responsible business and investment will be essential and should be rooted in the 10
principles of the United Nations Global Compact (see table 1). It is only through
dedication that transformational change can be achieved.
The 17 SDGs can be seen in figure 5.3. For a detailed description, important
initiatives and resources, visit the
website: https://www.unglobalcompact.org/sdgs/17-global-goals
Figure 5.3: The 17 Sustainable Development Goals (SDGs)
(Source: https://www.unglobalcompact.org/sdgs/17-global-goals)
c. The Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) was launched in 1997 and has pioneered the
development of the world’s most widely used sustainability reporting framework. It
aims to provide a set of reporting guidelines and indicators that cover all the key
issues of concern regarding corporate citizenship. By developing these guidelines,
the GRI wants to encourage companies worldwide to be more systematic and
comprehensive in their approach to sustainability reporting. It is recognised as the
provider of global best practices for impact reporting.
GRI Africa is based in Johannesburg, South Africa and strives to promote market
transparency. The organisation drives accountability for organisational impacts in
sub-Saharan Africa. The organisation is mostly active in Ghana, Kenya, Mauritius
and Nigeria.
Visit their website https://www.globalreporting.org/ for a plethora of resources on

reporting standards.
d. AA1000 Framework
The AA1000 Framework was launched in 1999 by AccountAbility, a UK-based

membership organisation advising and advocating on corporate social responsibility
issues. The AA1000 Assurance standard is used for assessing and strengthening
the credibility and quality of an organisation’s social, economic and environmental
reporting. The purpose of the framework is to help “users to establish a systematic
stakeholder engagement process that generates the indicators, targets, and
reporting systems needed to ensure its effectiveness in overall organisational
performance” (see www.accountability.org.uk). It does not describe what should be
reported, so its guidance is considered complementary to that of the GRI Reporting
Guidelines.
Source: https://www.nefconsulting.com/training-capacity-building/resources-and-
tools/aa1000-assurance-standard/
e. Other initiatives
A number of other relevant initiatives include:
• ISO 14000 series. This is a series of standards issued by the International

Organization for Standardization; it focuses on corporate environmental
management systems.
• Organisation for Economic Co-operation and Development (OECD)
Guidelines on Multinational Enterprises. The work of this organisation
concerns the disclosure of information, employment relations, environmental
management, bribery, competition, consumer interests, and science and
technology diffusion.
• SA 8000. This standard focuses on labour conditions and was developed by
Social Accountability International.
The South African initiatives and imperatives are discussed next.
5.4.2 South African initiatives and imperatives

Although South African legislation does not make CSR obligatory for companies, the
foundation of corporate social responsibility is compliance with all relevant national
legislation. The following section discusses a couple of South African imperatives
that were established to encourage CSR.
a. King Code on Corporate Governance in South Africa
The third King Report on Corporate Governance for South Africa, better known as
the “King III Report”, was launched by the Institute of Directors on 1 September
2009. It has since been replaced by the King IV, which builds on the King III Report.
The King IV Report is very important for corporate social responsibility of South
African companies and is internationally recognised as being a progressive
document. It was launched to bring the report up to international governance codes
and best practices. The report provides organisations with guidance on good
corporate governance practices and it explicitly defines and substantiates concepts
such as “corporate citizenship”, “social responsibility”, “triple bottom line”
performance, “stakeholder engagement” and “sustainability reporting”. It is also
aligned with shifts in the approach to capitalism; that is, a shift to more inclusive,
integrated thinking across the globe. The new report also takes into account
corporate governance developments such as increased compliance requirements
and new governance structures, emerging risks and opportunities from new
technologies as well as new reporting and disclosure requirements.
Source: https://home.kpmg/za/en/home/insights/2016/10/king-iv-summary-
guide.html
The King VI Report is also discussed under corporate governance in this lesson.
b. JSE Socially Responsible Investment Index
A further recent development in South Africa, which also affects other African
countries, relates to the role of investors in corporate social responsibility and the
emerging requirements of investors and civil society for companies to demonstrate
more socially responsible behaviour. The JSE Socially Responsible Investment
Index was launched in 2004 as a means of identifying an index of listed companies
that integrate the concept of triple-bottom-line reporting into their business activities.
This index then comprises criteria to measure the triple-bottom-line performance of
those companies in the FTSE/JSE All Share Index. The criteria are provided in terms
of the triple-bottom-line categories of environmental, economic and social impacts,
as well as a separate category for corporate governance.
Open the link below to watch the YouTube video about the JSE Sustainability and
Climate Change Disclosure guidance.
Time: 4:05 minutes

Play Video
c. Industry charters
Over the past few years, a number of sector-specific charters were adopted to
promote socio-economic transformation and establish an equitable economic playing
field. For example:
• The Tourism BEE Charter and Scorecard

• The Financial Sector Charter
• The Mining Charter and the revised B-BBEE Codes
Ensuring operational legitimacy or a “licence to operate” requires more than simply a

business license. Non-compliance with these codes and guidelines will have a
serious impact on the future position of businesses in local and global markets, and
every organisation has to take note of the specific relevance of these imperatives to
their business.
Activity 5.2
List three international and three local imperatives that promote the implementation
of corporate social responsibility in organisations. Briefly explain the significance of
each factor.
Feedback
The answer to this activity can be found in Section 5.4. You could have discussed any of the
following elements:
International elements
• United Nations Global Compact

• United Nations Sustainable Development Goals (SDGs)
• The Global Reporting Initiative (GRI)
• AA1000 Framework
• ISO 14000 series
• Organisation for Economic Co-operation and Development (OECD) Guidelines for
Multinational Enterprises
• SA 8000
South African elements
• King Code on Corporate Governance in South Africa

• JSE Socially Responsible Investment Index
• Industry charters such as the Tourism BEE Charter and Scorecard, Financial Sector
Charter and The Mining Charter and the revised B-BBEE Codes
5.5 The business case for Corporate Social Responsibility (CSR)

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5.5 The business case for Corporate Social Responsibility (CSR)
Corporate social responsibility is not about being nice. Applying corporate social
responsibility strategies is simply good business sense as it has the potential to limit
expenditure, maintain or improve employee and community relations, control risk
and promote reputation. The business case for corporate social responsibility refers
to the argument that being a good corporate citizen can contribute to a company’s
profitability. The business case, therefore, argues that incorporating good corporate
social responsibility practices will eventually have positive implications for the
financial bottom line. These benefits can come in a variety of forms:
• For example, a company that uses energy-saving technology will save money
on its monthly electricity bill. This benefit is often referred to as cost savings.
• Being a good corporate citizen can also have positive implications for a
company’s reputation. This reputational gain can also have positive financial
benefits through customer loyalty, attracting higher-quality employees or
improving relationships with investors.
• Eco-efficiency can save a company costs by, for example, using recycled
materials in building design, employing solar panel technology to generate
energy and using fuel-efficient technologies in vehicles.
• Competitive advantage and value creation: a company that ignores ethical,
environmental or social issues may actively destroy value through the
inadequate management of risks, but may also limit value through missing
opportunities. While focusing on the risks will protect existing business
interests, and thus conserve value, such a purely defensive approach will not
open up new opportunities to create value.
By performing a simple SWOT analysis of the strengths, weaknesses, opportunities

and threats facing an organisation, management can identify areas where risks
should be managed (threats) and areas where there is potential to create value
(opportunities).
Table 5.2 below identifies the key strategic opportunities and threats in the
environmental and social field.
Table 5.2: Key strategic opportunities and threats in the environmental and
social field
Threat Opportunity
Labour shortages Access to new pools of labour from education and
training programmes and community involvement
Low productivity and quality Higher productivity levels because of better-trained staff
because of poor labour practices and higher standards
and skills levels
Missing new market New markets through an improved understanding
opportunities and the erosion of of consumer needs
traditional markets
Product obsolescence through New products and markets through the application of
low levels of innovation and new technologies
inappropriate technology
Failure to anticipate new social First-mover advantage by anticipating the impacts of
and regulatory requirements social pressures
Vulnerability because of low Lower cost of capital because of greater investor
investor confidence confidence in the company’s ability to manage change
Higher cost levels from Lower compliance costs by being ahead of regulations
increased regulation of old
technology
Recruitment and customer Enhanced reputation leading to greater staff, customer
retention problems through poor and investor loyalty
reputation
Some aspects of corporate social responsibility may not have any economic benefit
for companies. This is why the business case for corporate social responsibility
cannot be the only reason why companies should be good corporate citizens –
national laws and ethics also play an important role.
In the South African environment in particular, companies have a huge role to play in
making socio-economic progress, and compliance with these rules, regulations and
codes will go a long way to ensuring that companies retain their licence to operate.
Use the link below to watch the YouTube video for examples of CSR programmes
implemented by various companies.
Time: 9:13 minutes

Play Video
In the next section, you will learn about corporate governance.
5.6 Corporate governance

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5.6 Corporate governance
Corporate governance refers to the way in which an organisation makes decisions

such as how to manage its affairs. The King Report (as per its various iterations)
defines corporate governance as “the exercise of ethical and effective leadership by
the governing body”. Corporate governance can therefore be seen as the policies
and guidelines that serve as the rules for engagement. The foundation of corporate
governance lies not only in overseeing critical decisions but also in ensuring that the
organisation has adequate resources and an effective strategy to thrive. This means
that corporate governance covers:
• Policies for hiring and firing senior executives

• Oversight of business activities to ensure compliance with laws and ethical
structures
• Ensuring that there is transparency in terms of business actions for
stakeholders
• Establishing corporate strategy, compensation and risk management
Source: https://www.diligent.com/insights/corporate-governance/
Corporate governance primarily consists of four principles:
• Accountability ensures that the organisation is able to justify every action

taken. This enables the organisation to build confidence among stakeholders
and assists in taking ownership of risks.
• Transparency is vital for confidence. Without transparency, informed decision-
making will not be possible. Transparent processes allow stakeholders to
make informed and powerful decisions when required.
• Fairness. Good corporate governance requires the equal treatment of all
stakeholders. Fairness entails both good business sense and ethics – as
unequal treatment leads to a lack of support of and interest in the
organisation. Investors will no longer invest in organisations with a reputation
for treating stakeholders differently.
• Responsibility. The organisation is responsible and accountable for all its
actions. Poor performance has consequences and failing to lead the
organisation will be detrimental its success.
Source: https://www.diligent.com/insights/corporate-governance/
Open the links below to watch the two YouTube videos to learn more about what
corporate governance is all about.
Time: 1:50 minutes
Play Video
Time: 2:10 minutes
Play Video
To assist organisations in practising good corporate governance, the King Report

was established. One of the focal points of the most recent report, the King VI
Report, is transparency – where sound corporate governance is an essential
element of good corporate citizenship. Following the principles set out in the King IV
Report, the following aspects regarding corporate governance should be noted:
• Good governance is about effective leadership.

• Sustainability is the primary moral and economic imperative for the 21st
century.
• Innovation, fairness and collaboration are important regarding sustainability.
• Integrated sustainability and social transformation will give rise to greater
opportunities for the company and society.
• Sustainability reporting is a key facet of good corporate governance.
It is evident then that good corporate governance does not operate on its own, but
rather forms an integral part of society – where it holds accountability towards
current and future stakeholders. The King IV report is therefore an important tool
when it comes to corporate governance, as it (Agudo-Valiente et al., 2017):
• creates an ethical culture in the organisation

• improves performance and increases value creation
• ensures that there are adequate and effective controls in place
• builds trust between all stakeholders
• ensures that the organisation has a good reputation
• ensures legitimacy
Source: https://www.michalsons.com/focus-areas/information-technology-law/king-
report-king-code-on-corporate-
governance#:~:text=The%20King%20Report%20and%20King,ethical%20and%20eff
ective%20leadership%20is.
The King IV Report reinforces the notion that corporate governance is holistic and
interrelated and should not be viewed as a “tick-box” exercise. It must be applied
mindfully, taking into account the industry in which the organisation operates.
Summary of the King IV Report:
• The report consists of a set of voluntary principles and leading practices.

• It has been revised to include all organisations, irrespective of their form of
incorporation.
• Proportionality is explained and advocated.
• Principles and practices are linked to desired outcomes. This allows the benefits of
good corporate governance to become evident.
• There is a differentiation between principles and practices. Principles are achievable
by mindful consideration and application of the recommended practices.
Key new or enhanced features of King IV relate to:
• Fair, responsible and transparent organisation-wide remuneration

• Responsible and transparent tax strategy and policy
• Balanced composition of governing bodies and independence of members of the
governing body
• Delegation to management
• Delegation to committees
• Corporate governance services to the governing body
• Performance evaluations of the governing body
• Audit committee disclosures
• Risk governance
• The combined assurance model
• Social and ethics committees
• Performance evaluations
• Responsible institutional investors
• Technology and information
Source: https://www.pwc.co.za/en/publications/king4.html
In the next section, you will learn about stakeholders and how companies can
engage with them.

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5.7 Stakeholders and stakeholder engagement
Stakeholders are those groups or people who are affected by or who can have an
effect on a company. Business is about people. Stakeholders can be found either
inside the organisation (called internal stakeholders, such as executive board
members, management, and other employees) or outside the organisation (external
stakeholders – here we are thinking about shareholders, the consumer public,
customers/clients, suppliers and the wider community in the area where the business
operates, etc.). Primary stakeholders are those whose ongoing support of the
company is vital to the company’s survival. These stakeholders commonly have
some contractual or financial relationship with the company, that is, shareholders
and employees. A company cannot survive if shareholders or employees withdraw
their support of the company.
Often government is also a primary stakeholder. Local communities can also be a

primary stakeholder, especially if they own the land that a company needs. For
instance, opposition or sabotage by the local community may make it impossible for
a mine to operate.
Secondary stakeholders have a less direct impact on the company and include
environmental NGOs or the media. A secondary stakeholder can become a primary
stakeholder if the conditions change. For instance, a local group that is small and
powerless probably has little impact on a company, but if it gets more local support
or if it has a convincing legal argument, it may quickly become a primary
stakeholder.
Stakeholder engagement is at the heart of good corporate social responsibility. The

stakeholder engagement process allows stakeholders to determine what they want
from the company and what they consider to be the issues and culture of the
company. The stakeholder engagement process consists of six basic steps
(Erasmus, Rudansky-Kloppers & Strydom, 2017):
1. Prepare – identify and understand the territory to be explored through the

engagement process. During this step, it is important to identify the most
important issues as well as which kinds of stakeholders would be most
appropriate to engage with.
2. Plan – objectives and parameters for the engagement process are set and
stakeholders are prioritised. In addition, persons accountable for the
engagement should be identified and the best mode of discussion should be
determined. It is also important to establish how to measure the success of
the process during this step.
3. Design – the engagement plan, agenda and logistics should be developed to
meet the objectives set in step 2. Decisions during this step include deciding
how and when to invite stakeholders, the best way to conduct the sessions,
whether a third-party facilitator will be required, the rules and logistics to be
used and if the sessions will need to be audited afterwards.
4. Engage – the engagement plan must now be executed.
5. Evaluate – assess the outcomes of the engagement session from both
company and stakeholder perspectives. During this step, it is important to
determine if additional sessions will be required. Consider the outcomes of the
engagement session and establish whether the process was successful or
not.
6. Apply – information must be shared and integrated into business processes,
where appropriate. It is important to decide on how to ensure that that the
results of the engagement reach the appropriate internal decision-makers. If
further follow-up engagement sessions are required with stakeholders, they
should be duly informed.
A company wishing to embark on a stakeholder engagement process should start by

mapping all external and internal stakeholders, defining their role in and their impact
on the organisation, and determining the most appropriate methods to engage with
each stakeholder group. The methods can include the use of questionnaires, focus
group meetings, surveys, market research, personal visits, joining existing networks,
and so on.
Access the link below for an example of a real-life engagement policy.
https://www.coca-cola.com.sg/policies/transparency
Finally, in the next section you will learn how CSR is linked to the functions of a
company.
5.8 The link: Does CSR relate to the various business functions?
LESSON

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5.8 The link: Does CSR relate to the various business functions?
If we look at the various business functions in more detail, it becomes clear that
corporate social responsibility touches on every single business terrain and
management function. In this section, we will briefly refer to some of the areas where
corporate social responsibility has an impact on the different business functions.
5.8.1 CEO / top management

The CEO and the top management team are responsible for managing issues that
pertain to the entire organisation, such as strategy, financial performance, mergers
and acquisitions, and governance. In addition, they oversee all the functional areas.
Accordingly, the CEO and the top management team will be concerned both with the
issues presented above and with specific ways in which more corporate social
responsibility practices can be helpful, for instance by improving stock price, financial
performance, corporate reputation and risk management. These elements will now
be discussed in more detail.
5.8.2 Operations
Operating managers are responsible for ensuring that their organisations can
produce products and services in a timely, cost-effective way and can beat their
competitors on price, innovation and quality.
Good corporate social responsibility practices can create market opportunities and
increase the competitiveness of companies that use innovation to develop products
or services based on sustainability criteria. Recognising and responding to emerging
niche markets allow companies to translate good corporate social responsibility into
corporate social opportunity. Organic coffee, ecotourism, sweatshop-free clothing
(e.g. Nike) and fuel cell technologies are but a few examples of product innovations
that have successfully penetrated new markets. These products have effectively
responded to changing consumer preferences.
Total quality management (TQM) forms an integral part of the operations function
and focuses on the development and delivery of quality products by involving the
entire company. Total quality should be defined not only with reference to financial
considerations but should also include the social and environmental characteristics
of the products. Similarly, priorities for continuous improvement should be
determined with reference to the preferences of clients/customers and the activities
of competitors, but also to constant monitoring of the product’s impact on society and
the environment.
5.8.3 Finance
Generally speaking, the financial director is a very powerful individual who has
significant influence in an organisation. This implies that he or she will also indirectly
exercise a strong moral influence on the behaviour of employees in the workplace. In
addition, strategic priorities (profit maximisation, expanding market share, cutting
costs, etc) can be very strong influences on morality. Traditionally, the finance
manager is the most difficult to convince of the advantages of implementing good
corporate social responsibility practices in an organisation, since not all benefits can
be converted into rands and cents.
When it comes to the role of the finance function with regard to the investment
decision, one must acknowledge that access to capital is critical for any company
wanting to invest and grow. Good corporate social responsibility practices –
particularly corporate governance structures and risk management systems –
provide important opportunities to unlock capital. Investors, financial institutions and
multilateral lenders will invest in and lend to companies that have a good reputation.
This reputation is built not only through sound financial performance but also through
demonstrated transparency, disclosure, integrity concerning shareholder rights,
strong stakeholder relations and sound risk management practices.
For example, the International Finance Corporation (IFC), which is the private sector
arm of the World Bank Group, has stringent lending criteria in place. The IFC insists
that prior to lending money to companies for large projects, an adequate impact
assessment be undertaken. Projects must be environmentally and socially sound,
satisfying IFC environmental and social standards as well as those of the host
country.
5.8.4 Procurement
A group of external stakeholders that has a very close relationship with the business
is the suppliers. Unfortunately, the attitude of organisations when dealing with
suppliers is all too often: “We tell them what we need, we pay them, and that’s about
it.” How can a company maximise its positive impact through its suppliers?
Consider, for instance: How does the organisation, first of all, choose its suppliers?
Do the selection criteria provide for more than just the best price? What is the right or
ethical thing to do, and how can the organisation maximise its impact through its
suppliers?
Here we are talking about something as simple as complying with legislation:
• The Preferential Procurement Act 5 of 2000 stipulates that a preferential point

system must be followed to promote sustainable black economic
empowerment.
• Black economic empowerment through the supply chain has seen many
individuals and communities become financially independent for the first time
in their lives. BEE charters, such as those for the finance sector, mining sector
and tourism sector, impose specific requirements on the respective industries.
But it is also about more than just adhering to the letter of the law. Does the business
know how its suppliers are running their businesses? Where and how do they obtain
the products that they provide to the enterprise, and are the values of the
organisation aligned with those of its suppliers? After all, by buying from them, the
organisation is keeping its suppliers in business and adding its vote of confidence to
its suppliers’ business practices!
Some relevant legislation:
• Preferential Procurement Policy Framework Act 5 of 2000

• National Black Economic Empowerment Act 53 of 2003
• Companies Act 61 of 1973 and Closed Corporations Act 69 of 1984
• Constitution of the Republic of South Africa, 1996
Table 5.3 below comprises the JSE impact classification table.
Table 5.3: JSE impact classification table

High impact Medium impact Low impact
Aerospace and defense General retailers Banks
Automobiles and parts Health Insurance
Chemicals Household goods and textiles Investment companies
Construction and building Information technology and Investment entities
materials hardware
Electricity Leisure, entertainment and Life assurance
hotels
Food and drug retailers Media and photography Specialty and other finance
Forestry and paper Real estate
Mining Software and computer
services
Oil and gas Telecommunications services
Tobacco
Water
5.8.5 Human resources
The real value of a company lies in its people – without sound HR practices, any
organisation, however big or small, will sooner or later find itself in big trouble. CSR
can help to increase employee satisfaction and loyalty, improve recruitment and
retention, and build a long-term pipeline of employees.
Employees form the internal stakeholder group of an organisation. How does the
business treat this stakeholder group? Does it have proper policies and procedures
in place that meet the real needs of its employees? This goes beyond service
contracts and normal benefits such as leave, maximum working hours and overtime
– it includes factors such as training opportunities, disciplinary practices and non-
discrimination. Does management promote sound health and safety measures in the
workplace? Does the employer encourage its staff to take part in organised
employee actions, such as unions? Also, how does it deal with the unions – is there
regular, honest consultation, and do these unions have an input in decision making?
On the other hand: How do employees treat their employers? Do they adhere to a
code of conduct? Is there a corporate culture of anti-corruption and anti-bribery, and
are employees participating in initiatives beyond their call of duty, for instance,
volunteer programmes within the community in which they operate?
Staff involvement in corporate social responsibility should not be a separate or an

optional aspect of an entity; the assessment of the social and environmental impact
of employees’ activities should form an integral part of their key performance areas
(KPAs) and their performance evaluation. Some relevant legislation:
• Labour Relations Act 66 of 1995

• Employment Equity Act 55 of 1998
• Basic Conditions of Employment Act 75 of 1997
• Occupational Health and Safety Act 85 of 1993
• National Black Economic Empowerment Act 53 of 2003
5.8.6 Risk management
The management of organisational risk has become more difficult – for several
reasons:
• Globalisation of risks. Companies are competing in a global environment, with

risks coming at them from multiple sources and multiple geographies. It is
more difficult to keep abreast of potential risks and to know how to respond if
they occur.
• Heightened surveillance. Companies are being watched by more groups, with
more diverse agendas, than ever before. These groups are linked across the
globe by the internet, allowing instant transmission of fact (and falsehood) to
millions of consumers.
• Increased demands for transparency. Consumers, labour and communities
have moved from a “trust me” to a “show me” stance, demanding to know
more about what a company is doing and how it affects them.
Social and environmental factors pose an increasing risk to the environment in which
organisations operate. Here we are talking about factors such as unemployment,
crime, the use of non-renewable resources, poverty and ill health. Of course,
HIV/Aids is currently the most significant health challenge facing South Africa.
HIV/Aids is but one social risk factor that can have an enormous impact on the
financial bottom line of companies: shouldn’t companies seriously rethink their risk
management focus?
5.8.7 Marketing and public relations
Marketing deals mainly with the effective development and delivery of a satisfactory
product offering to the market – in such a way that it meets the needs of the
organisation, the consumer and the community. How should organisations then use
their marketing function responsibly and ethically to ensure maximum benefit to
everyone involved: the business, customers/clients, employees and the wider
community?
We all know that marketing is about much more than advertising. However,
advertising is a good example of a visible marketing initiative that is directed at
consumers. How responsible are the advertising practices of companies? An
example that most of you might be familiar with is the television advertisement of a
certain cellphone manufacturer, where the boyfriend uses cellphone technology to
deceive his girlfriend’s father. It might make you smile, but what message does it
send out about the values associated with that product? Is that responsible
advertising?
An example of an advertisement where a product is associated with a good cause is
the Isuzu ad where the KB280D small truck is used to rescue a beached whale.
However, we do not know what business practices underlie this claim of corporate
social responsibility – and that is where the real impact will be found. Responsible
marketing is also about how the organisation positions its brand. For instance:
• Is the product properly labelled?

• Does the brand – through its marketing – actively promote social and
environmental well-being?
An interesting new development, which is gaining huge popularity worldwide, is that

of brand citizenship and cause-related marketing. Broadly speaking, this is where
businesses and charities form a partnership to market an image, product or brand for
mutual benefit, using the power of the brand to make a difference in society.
Consider the following examples:
• Woolworths – think of the My School card: Woolworths benefits; and many

schools in less fortunate environments benefit.
• Avon beauty products donate a part of their profits to the fight against breast
cancer, especially through the proceeds on their pens that are sold
specifically for this purpose.
• Coca-Cola sponsors the Coke Football Stars Tournament.
• Tiger Brands and the Unite Against Hunger campaign – this is a classic
example of business, government and charities working together for mutual
benefit.
Of course, corporate social responsibility entails much more than public relations
(PR). If a company chooses to put a marketing spin on flaunting the company’s good
corporate social responsibility practices, it should always be underpinned by
demonstrated triple-bottom-line benefits. CSR can very easily be misused and
turned into a pure PR initiative without any substance. Some relevant legislation:
• Promotion of Access to Information Act 2 of 2000

• Competition Act 96 of 1979
This brings us to the end of this lesson.
5.9 Summary
LESSON

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5.9 Summary
You now have a basic understanding of the concepts underlying corporate social
responsibility. We have examined the imperatives for implementing corporate social
responsibility in organisations and discussed why and how stakeholder engagement
is key to the process. Finally, the concepts of “corporate governance” and
“sustainable development” were defined and we have highlighted the link between
corporate social responsibility and the various business functions. When you revisit
the lessons in this study guide, always be aware of how corporate social
responsibility relates to the other key business management concepts. The next
lesson gives you an introduction to general management.
LESSON
Lesson 6: Introduction to management

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This lesson will require approximately EIGHT notional hours. Figure 6.1 represents
Figure 6.1: Visual overview of the lesson.
6.1 Introduction
LESSON

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6.1 Introduction
Our society consists of all types of organisations (small and large), such as
businesses, schools, hospitals, sports clubs, churches, and political parties, which
contribute to the functioning of a people. All these organisations need to be managed
for them to be successful. Upon completing this lesson, you will be able to discuss
the principles involved in the management of any of these organisations. More
specifically, you will have a better understanding of the management principles
involved in running a business. You will be able to define the term "management"
and discuss the functions, levels, functional areas, skills, and roles of management.
In the last section, you will learn how to differentiate between the different
management approaches.
LESSON

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Learning outcomes
When you have worked through lesson 6, you should be able to do the
following:
• Define the term “management”.

• Discuss the processes, levels, functional areas, skills and roles of
management in an organisation.
• Differentiate between the various schools of thought in management
Key terms
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Key terms
conceptual skills lower management

contemporary approach management
contingency approach management approaches
decision-making role roles of management
information role middle management
interpersonal role top management
levels of management quantitative school
functions of management management process
Click here for the multilingual key terms for MNB1501.

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6.2 Defining management

Management is the process of planning, organising, leading, and controlling the
resources such as financial, human and physical resources of an organisation to
achieve stated goals as efficiently as possible. Management is dynamic by nature
and develops to fulfil the needs and deal with the challenges presented by the
internal and external environments of an organisation.
Managers are responsible for developing and implementing a management process.

Research found that managers in practice switch frequently from task to task,
changing their focus of attention to respond to issues as they arise, and engaging in
a large volume of tasks of short duration (Gitman, McDaniel, Shah, Reece, Koffel,
Talsma, & Hyatt, 2018).
The four functions of management include planning, organising, leading, and

controlling. These functions enable managers to improve the effectiveness and
efficiency of the organisation. Effectiveness is the ability to produce the desired
outcome, while efficiency refers to utilising the smallest possible number of
resources to achieve the desired outcome. For example, producing a target of 100
pairs of shoes per day in a factory relates to effectiveness because the target has
been reached. To be efficient, though, managers need to use minimum resources,
such as labour, input, time, and equipment to reach the set target of 100 pairs of
shoes per day. However, this should not be done in a way that compromises quality.
To demonstrate your understanding of the definition of management, complete the

following activity:
Activity 6.1
In your own words, define the term management and share it with your peers on
myUnisa.
Feedback
Management is the process of planning, organising, leading, and controlling the resources
such as financial, human and physical resources of an organisation to achieve stated goals
as efficiently as possible.
Did you notice any differences and similarities between your definition and others provided
by your peers?
After studying the next section, you will be able to explain the process of
management.
6.3 The process of management

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6.3 The process of management

As you will remember from the previous lessons, management operates in a
dynamic environment. In this lesson, you will learn about how management
manages an organisation in the changing environment. The reason for establishing a
business is to achieve objectives that would be too difficult for individuals to achieve
on their own. It is important to remember that the success of any organisation
depends mostly on how the organisation is managed.
The effective performance of any business requires management to perform the four
steps as depicted in figure 6.2, namely planning, organising, leading and controlling.
Figure 6.2: The management process
Planning enables management to take a business concept beyond the idea stage.
However, planning alone is incomplete. People and other resources in the
organisation should be allocated to various activities (organising). In addition,
management should provide leadership and motivate employees to do their work
well (leading). Finally, to determine whether the planned activities were carried out
effectively and efficiently, systems should be put in place to measure the results and
compare them with what was planned (controlling). These steps of the
management process are also known as management functions and they will be
discussed in detail in the subsequent lessons. Planning will be discussed in lesson 7,
organising in lesson 8, leading in lesson 9 and controlling in lesson 10. These
functions of management are conducted at various levels in an organisation. After
going through the next section, you will be able to explain the levels of management
in an organisation.
6.4 Levels of management

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6.4 Levels of management

Levels of management include top management, middle management and lower
management. These levels – and the responsibilities of managers at each level – are
explained below.
6.4.1 Top management

Top management refers to a small group of people who lead the organisation (for
example, CEO, president, chairman, board members and vice president). The main
responsibility of top management is to develop strategic plans and long-term goals
for the organisation by focusing on issues such as the industries to compete in, the
way market share will be improved, and actions to be implemented to invest. These
managers are also responsible for designing and approving the policies,
representing an organisation externally and defining the values and ethics of an
organisation.
6.4.2 Middle management

Middle management is responsible for the implementation of strategic plans in their
functional areas (the functional areas of management will be discussed in section
6.5). Examples of middle management include departmental managers, division
heads, and regional sales managers. These managers are responsible for designing
and carrying out tactical plans in specific areas of the organisation, allocating
resources and overseeing lower-level managers to meet organisational goals.
6.4.3 Lower management
Lower management is found at the bottom of the managerial pyramid, which is also
known as the supervisory level. These managers design and carry out operational
plans for the ongoing daily activities of the organisation. Supervisors are responsible
for guiding and motivating the employees reporting to them to produce the goods
and services.
Figure 6.3 summarises the three levels of management and the related
responsibilities of eac
Figure 6.3: Levels of management
Note that some organisations will have only one or two levels of management (e.g. in
a sole proprietorship), whereas very large organisations may have as many as eight
or more management levels. Even with so many levels of management, they can still
be classified into three broad categories, namely, top, middle and lower
management.
STUDY
Study the section titled, "Levels of Management: How Managers Are Organized"
(pages 275–277) in Saylor.com Academy. 2020. Exploring business [Online]. The
Saylor.com Academy. Available from:
<https://resources.saylor.org/wwwresources/archived/site/textbooks/Exploring%20Bu
siness.pdf> [Accessed 31 January 2022].
Activity 6.2
The following image depicts the management structure of the Education, Training
and Development Practices Sector Education and Training Authority (ETDP SETA).
Identify the names of the employees at the three levels, namely top, middle and
lower management.
Source: ETDPSETA 2019-20 annual report
(http://www.etdpseta.org.za/education/sites/default/files/annual-reports/ETDP-SETA-
2019-20-Annual-Report.pdf)
Feedback
The employees who are part of the management structure of the ETDP SETA can be
classified as follows:
• Top management: Mrs Nombulelo Sesi Nxesi

• Middle management: Ms Nonhlanhla Dick, Mr Mzikayise Dondolo and Dr Timothy
Makofane
• Lower management: Ms Zokhanyo Pikashe, Ms Velile Msane, Mr Moloti Nkune, Ms Lihle
Mndebela,
Ms Winnie Kananda, Mr Mabu Raphotle and Mr Tommy Baloyi
Now that you have a better understanding of the different levels of management and
their respective responsibilities, you need to know the different functional
management areas.
6.5 Functional management areas

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6.5 Functional management areas

The different functional areas of management are distinguished as follows:
• General management – controls the management process and the general

principles of management as applied by top management.
• Marketing management – activities are undertaken to create, communicate, deliver
and exchange products and services that have value for customers, clients, partners
and society at large.
• Financial management – provides information to individuals and groups (both inside
and outside the organisation) to help them assess its financial performance.
• Production and operations management – activities involved in transforming raw
material and other inputs into final goods or services.
• Purchasing management – management of networks in the organisation linked to
each other through buying and selling of material, products and services.
• Human resource management – consists of all the actions that an organisation
takes to attract, develop and retain suitable employees.
• Public relations management – involves planned actions aimed at managing the
transfer of information between an organisation and the public to influence the public
perception or reputation.
Since most first-year courses in Business Management are presented in terms of

these functions, you need to know what the functions of a business are and how they
work together to attain the set objectives of the organisation. Special reference must
be made to the function of the general manager. General management differs from
other functions because every manager, regardless of the specialised function in
which he or she operates, exercises general management.
The following section will enable you to discuss the skills required of managers to
carry out the management functions.
6.6 Skills at different management levels

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6.6 Skills at different management levels

6.6.1 Technical skills
Technical skills are skills that are needed to perform specific tasks and are mostly
used during the early years of one's career. These skills are normally developed
during one's formal education but can also be developed through job training and
work experience. Examples of technical skills include preparing financial statements
as an accountant, preparing promotional campaigns in marketing, operating a certain
machine, and so forth. Technical skills are very useful when someone is promoted to
a first-line managerial role whereby the person will be expected to supervise the task
performance of his or her subordinates.
6.6.2 Interpersonal skills

Interpersonal skills (also known as human relations skills) are the ability to
understand, get along with and motivate other people. This is critical for middle-level
managers as they play a pivotal role by reporting to top-level managers and
overseeing the activities of first-line managers. Middle-level managers must use
these skills to build trust, foster teamwork, manage conflict and inspire employees to
improve their performance. Managers with poor interpersonal skills usually adopt an
authoritarian leadership style and as a result, employees feel alienated.
6.6.3 Conceptual skills

Conceptual skills refer to the ability to reason abstractly and analyse complex
situations. This includes the ability to see the organisation as a whole, to understand
how its different sub-elements are mutually dependent, and to assess how the
organisation is linked to other stakeholders in the external environment. Top
management is expected to "think outside the box" to arrive at creative solutions to
complex, and sometimes ambiguous, problems.
Note the different management skills required at different levels, particularly as

illustrated in figure 6.4.
Conceptual skills Interpersonal skills Technical skills

Top management Very important Not as important
Important
Middle Important Important

management
Important
Lower management Not as important Very important

Important
Figure 6.4: Skills at different levels of management
Figure 6.4 depicts the various "blocks" of skills next to each level of management.
This figure, for example, illustrates that top management requires a few technical
skills and interpersonal skills (compared with lower management), but concrete
conceptual skills and diagnostic/analytical skills. For lower management, the skills
required are the other way round, while middle management requires a relatively
equal proportion of all the listed skills. Some of the most famous managers moved
through the ranks; meaning they started out working at a technical level (lower
management) and worked themselves up into middle management and eventually
top management positions. After studying the following section, you will be able to
differentiate between the different roles that managers play in an organisation.
6.7 The roles of managers

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6.7 The roles of managers

In addition to the four management functions of planning, organising, leading and
controlling, managers also have to play a number of supporting roles, namely the
interpersonal role, the decision-making role and the information role. In Mintzberg's
seminal study, it was found that most managers and their jobs were clustered around
these three supporting roles. The interpersonal role refers to the need for
managers to interact with others inside and outside the organisation to achieve the
organisational goals. In performing the interpersonal role, managers meet with
business prospects and partners; host receptions and take clients and customers to
dinner; conduct hiring and performance interviews; and form alliances, friendships,
and personal relationships with many others. The informational role relates to the
manager's responsibility to gather, collate, analyse, store and disseminate
information. Managers perform decisional roles when they make decisions on
behalf of both an organisation and all the stakeholders of the organisation.
Within these three major roles, the manager also fulfils sub-roles. Table 6.1 contains
the different sub-roles of managers, their descriptions and practical examples.
Table 6.1: Sub-roles of managers
Role Description Example
1. Interpersonal roles
Monitor Searching for and collecting Conducting a market analysis to
information relevant to the determine if a certain product will
organisation be suitable for the market
Disseminator Providing information in the A line manager informing his

organisation where it is subordinates about the new
needed roster
Spokesperson Conveying information to A branch manager using a
people outside the local social media platform to
organisation. inform the clients about a
technical glitch with their
system.
2. Inrterpersonal roles
Figurehead Representing the company A manager attending a career
symbolically exhibition on behalf of the
organisation
Leader Guiding and motivating During performance reviews, a
employees to achieve the manager realises that one of
goals of the organisation the employees struggled to
achieve the required standard.
The manager then drafts a plan
to help the employee to
improve.
Liaison Acting as a middleman A team leader who
between individuals inside communicates with a client and
and outside the then conveys the client's
organisation requirements to team members
3. Decisional roles
Entrepreneur Looking for new Acquiring and implementing a
opportunities and driving new production process using
change in the organisation new technology
Disturbance handler Managing unforeseen College management deciding
events and crises to move from blended learning
to an online delivery model due
to the Covid-19 pandemic. The
role of the disturbance handler
also includes resolving conflict
between employees.
Resource allocator Allocating financial, human, A line manager selecting a few
and other organisational staff members to form an
resources to various innovation team and allocating
activities a budget to the team.
Negotiator Representing the A manager taking part in
organisation during negotiations for a salary
negotiation processes increase for employees
The following section will enable you to differentiate between different management
approaches as they evolved over the past decades, which will also help to explain
the present status of management.
6.8 Different schools of management thought

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6.8 Different schools of management thought

This section deals with the different approaches to management. You need to
understand the approaches of the various schools of thought because this will help
you to understand the contemporary approaches to management.
Activity 6.2
Study the section titled "Management theories" from page 11 to 20 of the following
article:
Olum, Y. 2004. Modern management theories and practices. Paper presented at the
15th East African Central Banking Course, held on 12 July 2004, at Kenya School of
Monetary Studies. Available
from: <https://ahmadladhani.files.wordpress.com/2008/12/management.pdf>
[Accessed 26 May 2021]
Summarise the management approaches that have been discussed in the article.
Feedback
The feedback for this activity is contained in the section below as the different approaches
to management have been summarised. Compare your answers with the following
discussion about the different management approaches.
Figure 6.5 depicts different management approaches and the period they each
started.
6.8.1 The scientific approach

The scientific school tends to view employees as machines, who would all respond
in the same way if they were "tuned" correctly. According to this approach, it is
believed that an "expert" should work out the best way to perform a task and workers
should then be taught and supervised to ensure that they work in the prescribed
manner.
6.8.2 The management process approach

This school identifies the most important functional areas in the organisation, such
as the production/operations function, the marketing function and the financial
function.
6.8.3 The behavioural approach
The human relations or behaviourist school sees workers as people who need to be
"treated" properly, that is, with respect and consideration. The assumption made by
this school of thought is that when workers are treated well and made to feel happy,
they will give their best.
6.8.4 The quantitative approach

This school sees the main function of management as using a system of
mathematical models and processes. One such example is in the field of marketing
where marketers would like to know the differences between different groups of
people (target markets). This information can be gained by doing discriminant
analysis, which uses some aspects of mathematics and statistics. Management,
however, is much more than that and, at most, quantitative techniques are no more
than an aid to management.
6.8.5 Systems approach

This approach sees the organisation as a system of many parts that must be
managed in an integrated manner. All the functional areas in the organisation (e.g.
financial department and marketing department) must work together to attain the
objectives of the organisation.
6.8.6 Contingency approach

The contingency approach suggests that how an organisation is managed depends
on the nature of employees that an organisation has. Some employees will be
productive if their work procedures are clearly laid out for them, others will give their
best if they are given freedom, while there are also people who will perform well if
they are given the opportunity to prove how good they are. According to this
approach, managers must adapt their management style to the particular
characteristics of individual employees.
6.8.7 Strategic management approach

Due to the pace of technological changes between 1960 and 1970, organisations
were forced to align their goals and objectives with the developments in the business
environment (Erasmus, Rudansky-Kloppers & Strydom 2019). Management aimed
to build a distinct competence in a particular market by considering the strengths and
weaknesses of the organisation, to take advantage of the opportunities and
overcome threats in the environment.
6.8.8 Total Quality Management

The Total Quality Management (TQM) approach revolves around ensuring that every
aspect of an organisation is of high quality, to produce quality goods and services.
6.8.9 Re-engineering
This approach forced organisations to embrace their core activities while non-core
activities were outsourced to external providers. Activities such as security, cleaning,
gardening services, and so forth, were contracted to organisations that focus on
those functions, to cut costs and improve efficiency.
6.8.10 Diversity management
The diversity management approach in South Africa has been necessitated by the
promulgation of the Employment Equity Act 55 of 1998 that forced organisations to
employ people from different backgrounds (Erasmus et al 2019). As a result, there is
a need to have a management approach with a body of knowledge that makes
provision for the needs and cultural diversity of those who are involved in the running
of an organisation.
Management approaches and theories are important instruments to broaden

knowledge. Understanding the evolution of the management process gives us a
broad perspective of the vastness of the body of knowledge on research, principles
and problems of management and approaches to management from which
managers can draw.
6.9 Summary
LESSON

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6.9 Summary
Now that you have studied lesson 6, you should be able to define the word
“management”. You further need to be able to discuss the management process,
levels of management and roles of management. Lastly, you are expected to
differentiate between various approaches to management that have evolved over the
years. In the next lesson, you will study the first management function, namely
planning.
Self-assessment questions
Lesson 7: Planning
This lesson will require approximately TEN notional hours. Figure 7.1 represents an
overview of lesson 7.
Lesson 7: Planning
7.1 Introduction
In the previous lesson, we discussed the general principles involved in

the management of organisations and more specifically, the
management principles involved in running a business. This lesson
focuses on the management function of planning. Planning is the
starting point of the management process. Managers need to know
where they are heading; therefore, planning enables an organisation to
have direction.
Lesson 7: Planning
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Learning outcomes
When you have worked through this lesson, you should be able to do
the following:
• Define planning.
• Explain the importance of planning in an organisation.
• Differentiate between a goal and a plan.
• Provide the disadvantages of planning.
• Discuss the steps in the planning process.
• Discuss different types of organisational goals.
• Explain the SMART framework to be followed when setting goals.
• Distinguish between the different organisational strategies and plans.
• Explain the factors to be considered when formulating organisational goals and
plans.
Key terms
Lesson 7: Planning
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Key terms
planning lower management

tactical goals operational goals
vision planning process
goal strategic goals
management by objectives (MBO) top management
corporate strategy generic strategy
middle management SMART
LESSON
Lesson 7: Planning
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7.2 Defining planning

Planning is a management process whereby organisational goals are formulated.
This process entails a systematic and clear description of the direction that a
business must take to accomplish its organisational goals. Plans have two main
components, namely outcome or goal statements and action statements (Openstax,
2019). Outcome or goal statements symbolise the end state – the targets and
outcomes that an organisation aims to achieve. Action statements refer to how
organisations move forward to reach their goals. Planning starts by predicting
prospective problems or opportunities that an organisation may come across
(Gitman, McDaniel, Shah, Reece, Koffel, Talsma & Hyatt, 2018). Managers
formulate strategies to alleviate current problems, avoid future problems and exploit
opportunities. Effective planning involves collecting comprehensive information about
the external environment in which an organisation operates, as well as its internal
environment (Gitman et al., 2018). Successful managers anticipate change in the
environment and they plan accordingly.
Now that you are able to define planning, we move to the next section, where you
will learn about the importance of planning.
7.3 The importance of planning
LESSON
Lesson 7: Planning
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7.3 The importance of planning

"Before anything else, preparation is the key to success." – Alexander Graham Bell
This quotation says a lot about why planning is needed. Without a plan, it is difficult
to be successful at anything. The reason is simple: if you do not know where you are
going, you cannot go ahead. Planning is the starting point in any management
process. It has two components, namely the activities involved in determining an
organisation's goals and showing the way forward (the plan), and how to achieve
these goals. Today's environment is characterised by constant change – the more
turbulent the environment, the greater the need for planning. Even though managers
cannot predict the future, they need to anticipate changes in the environment and
adjust their goals and plans accordingly. Below are some of the main reasons why
planning is important:
• Planning directs an organisation's goals. It provides a road map showing an

organisation where to go and how to get there.
• Planning helps to get the different functional areas to work together. For example, for
a manufacturing company, planning will ensure that the production department is
informed about the required number of units to be manufactured; it assists the
marketing department to create a demand for the product and facilitates the process
of selling the product; and it gives the financial section a better idea about capital
needs and cash flow required to run a business properly. Therefore, we can say that
planning helps with the coordination, cohesion and stability of an organisation.
• Planning reduces the impact caused by external environmental changes. Managers
can anticipate threats and opportunities in the external environment, thus reducing
uncertainty and risks.
• Planning forces an organisation to take a hard look at what the future holds for the
organisation. Many managers get so involved in the day-to-day running of a business
that they tend to forget about the future. There is an old saying that nothing in the
future will be the same as it is today. This is true for any business. One of the most
dramatic changes that we see in the business world is the rise in technology.
Technological changes are taking place rapidly and an organisation must look to the
future, anticipate changes and reflect on how they will influence a business.
• Planning ensures effective control. Organisational goals and plans formulated during
this stage enable managers to implement effective control mechanisms.
Activity 7.1
Read the case study and answer the question.
After 25 years of mining with an open-cast zinc mine, a deep-level mine was built to
further exploit the ore body. This resulted in huge challenges due to the different
mining practices required to mine a deep-level mine. Consequently, the projected
production targets were never met. Management realised that a significant
intervention was required to unlock the potential of the mine in terms of production,
costs and skills.
Accordingly, management decided that they needed to reduce direct costs by 15%,
increase production by 20% to achieve projected output and improve asset utilisation
by 10%. A management operating system was developed and implemented to focus
on corrective, preventative decisions and activities. The managers also decided to
redesign the engineering function to ensure effective preventative and breakdown
maintenance. Management further trained and coached 75 managers and
supervisors in accountability for key performance areas centred on the three core
elements of production, safety and cost management. By the end of the 35 weeks of
implementing the new system and activities, management had reduced direct costs
by 18%, increased production by 22% and improved asset utilisation by 15%.
From the information provided in this case study, would you say that the
organisation’s management fulfilled the basic tenets of planning as we have
discussed in this section? Justify your answer.
Feedback
In the case study the management engaged in planning. The organisation was faced with
the challenges of having to change how they operate; not achieving their targets. Steps
were taken to formulate goals and plans to achieve those goals were put in place. The
goals assisted in terms of providing direction to the organisation, reducing the impact
caused by external environmental changes, forcing the organisation to review its operations
and ensuring that effective control systems are implemented. When the goals of the
organisation are clear, it is simple for employees to know where they are going and to
monitor their performance accordingly.
Watch the following video for a funny story of why planning is important:
Play Video
The video shows that the students are likely to provide different answers because
they might have not discussed the details of the accident that they have lied about.
Due to poor planning, the Dean is likely to find out that the accident was indeed
fictitious. This is a lesson that dishonesty is unacceptable and immoral as it can be
harmful and is associated with various psychological disorders.
Planning does not only provide benefits to the organisation; it also has
disadvantages. In the next section, you will learn about the disadvantages of
planning.
7.4 Disadvantages of planning
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7.4 Disadvantages of planning

If planning is not done properly, it will have a detrimental effect on how the
organising, leading and control tasks are performed. The following are some of the
pitfalls of planning:
• Planning may create inflexibility. It is not simple to deviate from the goals and plans.
• Managers spend a lot of time on this process.
• Decision making is delayed as plans and goals are usually determined by top
management.
• Creativity and innovation are restrained.
As much as planning is crucial for any organisation to know where it is going and to
achieve its goals, managers should ensure that decision-making is not delayed,
creativity and innovation are sustained, and planning inflexibility is minimised. After
going through the next section, you will be able to discuss the planning process.
7.5 The planning process
LESSON
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7.5 The planning process

It is important to understand that planning does not take place in isolation nor as a
once-off activity. It is an ongoing process. Figure 7.2 depicts the main steps of the
planning process.
Figure 7.2: The planning process

Figure 7.2 shows that the planning process starts when managers formulate goals
for an organisation (“establish goals”). When goals have been set, different courses
of action that can be implemented to achieve the established goals are suggested
(“develop alternative plans”), followed by an evaluation of the courses of action to
establish the most favourable one (“evaluate alternative plans”). The plan that is
most likely to attain the established goals is then put into action (“implement the
plan”) and lastly, evaluation is done to determine whether the implemented plan
resulted in the attainment of the established goals that were set during the first step
of the process. The outcome of the evaluation will enable an organisation to refine its
goals and plans (reactive planning). The feedback loop starts the whole process
again.
Remember the following about planning:
• It is not a static process but a dynamic one. This means that it is a process that never
stands still; nor can it remain the same. Plans should be reviewed at regular intervals
and then adjusted (if necessary) to adapt to changing needs and circumstances (the
feedback loop).
• It is the foundation on which the other management tasks rest. You need to
understand how planning is interlinked with the other management tasks.
Activity 7.2
Let us take the planning process to a more personal level to clarify the
differences between goal-setting, developing plans and implementing the
plans.
University and college lecturers live very sedentary lives, with long hours spent
sitting in front of a computer and at a desk while developing study material and
assessments, marking assessments and conducting research and administrative
work. The medical scheme of one university in Pretoria has conducted research and
identified that its members must become more active to lead more productive lives.
The medical scheme develops a mission statement that states that its members
should be healthy and feeling well. The goal that the medical scheme set to realise
this mission statement was that unhealthy lecturers must change their situation. To
this end, the medical scheme took the following action:
• It evaluated research that was published and information that was obtained from its
own database.
• It sent out a questionnaire to all lecturers about their current weight and physical
exercise regime.
• It compared the information obtained from the questionnaire with their own records
regarding the medical history of these lecturers.
• It identified the high-risk cases and invited these lecturers to join the High-
Performance Training Centre in Pretoria to undergo further tests so that a personal
trainer could be assigned to them.
The medical scheme decided to measure the success of this programme after one
year, with a requirement that at least 30% of the obese lecturers would have a
normal body-fat ratio and that 40% of these lecturers would have a normal blood
pressure reading.
You are asked to classify these actions into the steps of the planning process (i.e.
establishing a goal, developing alternative plans, evaluating alternative plans,
implementing the plan and reactive planning) completed by the medical scheme.
Feedback
Establishing a goal: The medical scheme developed a mission statement that its members
should be healthy. The goal was that obese lecturers must lose weight, which will also be
good for their blood pressure.
Developing alternative plans: Not mentioned.
Evaluating alternative plans: Not mentioned.
Implementing the plan: The following actions were implemented:
• It evaluated research that was published and information obtained from its own database.
• It sent out a questionnaire to all lecturers about their current weight and physical exercise
regime.
• It compared the information obtained from the questionnaire with their own records regarding
the medical history of these lecturers.
• It identified the high-risk cases and invited these lecturers to join the High-Performance
Training Centre in Pretoria to undergo further tests so that a personal trainer could be
assigned to them.
Reactive planning: The medical scheme decided to measure the success of the programme
after one year.
As depicted in figure 7.2, the first step of the planning process is establishing goals.
After studying the next section, you will be able to discuss various organisational
goals.
7.6 Organisational goals
LESSON
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7.6 Organisational goals

Every business needs to set goals to determine the direction in which it is
heading. Organisational goals are all about where an organisation wants to be at a
specific future date. Different goals are set by the different managerial levels and
range from strategic goals formulated by top-level management, and tactical goals
by middle-level management, to operational goals formulated by lower-level
management. Managers must formulate goals that are specific, measurable,
attainable, relevant and time-bound. This is called the SMART framework, as you will
learn in the next section.
Managers can follow the SMART framework when formulating goals:
• Specific (S) – Goals and the outcomes should be clearly defined.

• Measurable (M) – Goals should be defined in such a way that they can be measured
objectively and be quantified.
• Attainable (A) – Goals should be both challenging and realistic, taking into
consideration the resources that an organisation has.
• Relevant (R) – Goals should be aligned with the vision, mission and values of an
organisation.
• Time-bound (T) – Specific time limits should be assigned to the goals that an
organisation sets.
Now that you are able to define organisational goals and understand the SMART
framework for formulating goals, the next step will enable you to differentiate
between strategic, tactical and operational goals.
7.6.1 Strategic goals

Strategic goals involve creating long-term general goals for an organisation as a
whole and establishing what resources will be needed to achieve those goals. These
goals are set by top management and are future-oriented with a timeframe of three
to ten years. Strategic goals include the vision, mission statement and long-term
goals, as discussed below.
7.6.1.1 Vision
The vision refers to what an organisation aspires to be in the future. It provides a

picture of the future that an organisation aims to reach. A vision enables change and
guides an organisation during the strategic planning process.
7.6.1.2 Mission statement
An organisation’s mission refers to the purpose as set out by its management; that
is, the reason for its existence. For example, the mission statement of Pick n Pay is
"We serve – with our hearts we create a great place to be – with our minds we create
an excellent place to shop." The first part, "we serve", refers to the customer
orientation of an organisation. The second part of the statement refers to the dream
of an organisation that it will create a wonderful place for its employees to work and
the last part refers to the fact that they want to create a wonderful place for their
customers to shop. See the next extract for the vision, mission and values for
Mmakau Mining.
About us: Mmakau Mining
Vision
As a producer of minerals and a developer of human resources, Mmakau's vision is to

generate wealth through the sustainable development of resources and communities
wherever we operate. Practically, this will be achieved through the following:
• Facilitating the equity participation of local communities and rural renewal projects through our
mining activities
• Empowering communities with employment and skills training
• Ensuring broad-based indigenous participation in the wealth creation process
Mission
To contribute expertise and a business philosophy of sustainable wealth creation through

targeted procurement, entrepreneur development, skills enhancement and socio-economic
development.
Values
Mmakau adds value to and operationally implements its vision through the following:
• Board representation and participating in management and steering committees

• Diverse mining technical expertise and seasoned operational knowledge
• Participating in exploration programmes and negotiating compensation for interested and
affected parties during exploration
• Heading all mining applications initiatives; assisting in mining permit applications and in
acquiring mining licences for conversions
• Facilitating producers' forums and developmental committees in all mining regions
• Developing and participating in community trusts that have equity participation
• Coordinating and obtaining Tribal Resolutions
• Overseeing the implementation of employment equity programmes
• Mmakau establishes and/or chairs transformation committees that focus on procurement with
BEE targets, small and medium enterprise (SME) development and compliance with Mining
Charter.
Source: http://www.mmakaumining.co.za/about_philosophy.htm [Accessed

13/04/2021]
Activity 7.3
Go to Bantu Shoes' website at https://www.bathu.co.za/pages/our-new-journey
From the information provided under "About", compile the vision, mission and values
for the company. As of 2 February 2022, the information about the organisation’s
vision, mission and values was not available on the corporate website.
Feedback
The vision, mission and values of Bantu Shoes are as follows, as deduced from the
information provided on their website:
Vision: Building a sneaker brand that Africans can proudly affiliate with
Mission: To create world-class sneakers, creating sustainable jobs and reigniting hope
Values: Collaboration with other brands, staying true to oneself, perseverance, following
one's dreams and doing something one is passionate about.
7.6.1.3 Long-term strategic goals
Long-term strategic goals originate from the vision and mission of an organisation,
cover the entire organisation and focus on the long term, which is usually between
three and ten years. The goals include key areas such as market positioning,
profitability, productivity, financial sustainability, human resources, social
responsibility, leadership and technology.
Once strategic goals have been formulated, they need to be broken down in such a
way that they will be adopted by different functional departments. This brings us to
the next section, where you will learn about functional and operational goals.
7.6.2 Functional or tactical gaols

The long-term goals are separated into more manageable, shorter-term elements
known as tactical goals. These goals are determined by middle-level management or
heads of department and cover a period ranging from one to three years.
7.6.3 Operational goals

The functional goals are then separated into different operational goals to be
achieved by individuals or groups. Operational goals are current, narrow and
resource-focused and formulated to help direct and control the implementation of
tactical goals (Gitman et al., 2018).
Activity 7.4
In discussions by the top three retailers' CEOs in South African trade journals, the
following general planning activities were mentioned:
• All three CEOs stated that they wanted to grow their organisations internationally so
that they could earn at least 30% of their total revenue outside South Africa.
• They wanted to increase the number of consumers buying online by 20%. They
furthermore wanted to cap costs to grow at a rate lower than inflation.
• They wanted to raise their brand awareness inside South Africa in the next six
months by at least 10%.
Differentiate between strategic goals, functional goals and operational goals and
state which of the above goals can be classified under the respective types of goals.
Feedback
Strategic goals involve creating long-term general goals for an organisation as a whole and
establishing what resources will be needed to achieve those goals. These goals are set by
top management and are future-oriented with a timeframe of three to ten years. The first
goal provided above falls under this category as it is a long-term goal and affects the entire
organisation.
Functional or tactical goals are derived from long-term goals and are more manageable,
shorter-term elements. These goals are determined by middle-level management and cover
a period ranging from one to three years. The second goal provided in this activity falls under
this category because it does not affect all departments but only the marketing team. This
goal can be measured in a period of between one and three years.
Operational goals are goals to be achieved by individuals or groups. Operational goals are
current, narrow and resource-focused and are formulated to help direct and control the
implementation of tactical goals. The last goal is operational as it can be achieved by
individuals or groups of employees and the target period is very short (six months).
Now that you have a better understanding of organisational goals, you will learn
about actions to be taken to achieve the goals – thus, formulating organisational
strategies and plans.
7.7 Organisational stategies and plans
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7.7 Organisational stategies and plans

While goals are seen as the roadmap that shows an organisation where to go and
how to get there, a plan is a blueprint for achieving the goals. Plans explain how
goals will be achieved by specifying resources that will be used, the periods in which
the plans must be implemented and all the other initiatives that will be essential to
reach specific goals. Several different plans of action are formulated and considered,
and the best option is chosen.
7.7.1 Strategic plans

For an organisation to achieve the strategic goals discussed in the previous section,
management needs to develop strategies and plans. Just like the strategic goals,
strategic plans cover the entire organisation. Strategies can be categorised into
generic and corporate strategies.
7.7.1.1 Generic strategies
Generic strategies refer to the main plan of how an organisation envisages

competing in the market and include cost leadership, differentiation and focus
strategies (Erasmus, Rudansky-Kloppers & Strydom, 2019).
(i) Cost leadership focuses on having the lowest cost of production by a significant
margin. This strategy will normally target a wide range of customers.
(ii) Differentiation focuses on the distinctiveness of some dimensions that are
valued by customers, to enable an organisation to charge higher prices. This
strategy may focus on either a narrow customer segment or a broad section of
customers.
(iii) A focus strategy focuses on a narrow segment or domain of activity and tailoring
the products or services of an organisation to the needs of that specific segment, to
the exclusion of others. There are two types of focus strategies, namely focused low-
cost strategy (providing products or services in a specific market segment at a lower
production cost than rivals) and focused differentiation (providing valued products or
services in a particular market segment).
7.7.1.2 Corporate strategies
Corporate strategies focus on identifying the types and number of businesses and
industries that an organisation wants to conduct its activities in and how an
organisation can maintain cohesion to create a competitive advantage between the
different business units. The types of corporate strategies include internal and
external growth, turnaround, combination and decline strategies (Erasmus et al.,
2019). Figure 7.3 depicts the four corporate strategies.
Figure 7.3: Corporate strategies

(i) Internal growth strategies
Internal growth strategies aim to leverage the current range of products and services
of an organisation and the markets where it operates and initiate growth strategies
that combine new and existing products and markets (Van Rensburg, 2019). Based
on whether products and markets are new or not, four internal growth strategies are
possible, namely market development, product development, concentration growth
and innovation.
• Market development aims to grow turnover by selling an organisation's existing

products and/or services into new markets.
• Product development intends to grow turnover by selling new products or services to
an organisation's existing market.
• Concentration growth aims to increase market share by selling more of an
organisation's existing products and/or services to its existing markets.
• Innovation intends to introduce advancements in technology and/or services through
research and development.
(ii) External growth strategies
External growth strategies occur when organisations choose to expand by adding

new businesses to their current operations. Strategic options to achieve external
growth can be generally categorised under integration and diversification.
• Integration occurs when an organisation buys another organisation that is

comparable to the current business. Integration can be either horizontal (taking over
organisations similar to a business, therefore, eliminating competition)
or vertical (taking over organisations that supply a business with inputs or those that
act as the intermediaries of a business).
• Diversification occurs when adding new products or markets. There are two different
types of diversification, namely related diversification (acquiring a business that has a
close resemblance with how the main business performs key value chain activities)
or unrelated diversification (it focuses on entering and operating businesses in other
industries with opportunities to realise consistently good financial results).
(iii) Corporate combination strategies
Corporate combination strategies aim to join forces to generate adequate resources

and expertise. These strategies include mergers, acquisitions and joint ventures.
• A merger occurs when two separate organisations combine resources to form a new
organisation.
• An acquisition occurs when one organisation acquires another to become the only
owner of both.
• A joint venture occurs when a new corporate entity is formed and is jointly owned by
two or more organisations that agree to contribute resources and share in the
expenses, revenues and control of the newly formed entity.
(iv) Turnaround or decline strategies
Turnaround or decline strategies result from operational challenges and fierce

competition that caused an organisation to perform badly over an extended period.
The strategies focus on reducing direct operational costs and improving productivity
gains. The two turnaround or decline strategies include turnaround and liquidation.
• Turnaround occurs when an organisation experiences difficult times and its profits
decline over an extended period, forcing it to reduce costs by cutting unprofitable
products, disposing of unprofitable resources (asset reduction, retrenchment or
divestiture) and implementing strategies to improve the effectiveness of
management.
• Liquidation occurs if all the options discussed above are not viable and an
organisation has no other choice but to be liquidated. A liquidation strategy involves
selling the whole organisation or some parts of it. It can be voluntary or can be
directed by the court in case an organisation can no longer pay its debts
(bankruptcy).
Activity 7.5
Complete the following crossword puzzle about organisational strategies and plans.
Feedback
See the crossword puzzle below with answers.

For this module, we expect you to have a basic understanding of these strategies.
You will learn more about these strategies in the third-year module, Strategic
Planning III A (MNG3701).
Once strategic plans have been formulated, managers in all departments need to
formulate their tactical plans. This brings us to the next section where you will learn
about tactical or functional plans.
7.7.2 Tactical or functional plans

The tactical plans specify the activities and the allocation of resources such as
finance, people and equipment required to implement the overall strategic plan over
a specified time. Each department in an organisation should set their functional plans
as highlighted in table 7.1.
Table 7.1: Tactical plans
Functional areas Main areas to be included

Marketing The product line, marketing communication, prices, market
position and distribution channels
Finance Policy on capital structure, asset management, dividends and
debtors
Human resources Remuneration, training and development, labour relations,
diversity management, labour retention and recruitment
Operations Productivity, location, raw material, machines and equipment
Legal services Legislation issues
Research and Improve existing products and develop new products
development
Public relations Communicate with external and internal stakeholders
Information and Maintain internal and external communication networks and
Communication equipment
Technology (ICT)
Source: Adapted from Erasmus, Rudansky-Kloppers & Strydom (2019)
7.7.3 Operational plans
Operational plans are set by lower-level management and cover a maximum period
of one year. There are two types of operational plans, namely single-use and
standing plans.
7.7.3.1 Single-use plans
Single-use plans are developed to accomplish a set of goals that are not likely to
apply again in the future. These plans include the programme, project and budget.
• A programme is a set of plans formulated to achieve a once-off goal, such as

acquiring long-term assets.
• A project, similar to a programme, aims to achieve a once-off goal but of smaller
scope and complexity than a programme – for example, branding of an
organisation's vehicles and buildings.
• A budget is a comprehensive written plan indicated in monetary terms, summarising
the activities to be carried out and the strategies for achieving the goals of an
organisation. A budget provides guidance when it comes to managing the allocation
and distribution of resources and finances (Sithole, 2018).
7.7.3.2 Standing plans
Standing plans are used over time and assist employees to perform tasks that occur
frequently in an organisation. Examples of standing plans include policies, rules and
standard procedures.
• Policies set the boundaries for decision-making. Policies are of broad scope and
emanate from the overall goals of an organisation.
• Rules specify what employees may or may not do in a particular situation.
• Standard procedures stipulate the exact series of steps that should be taken to
perform a certain task.
Table 7.2 summarises different types of planning in terms of time, level of

management, extent of coverage, purpose, breadth and predictability.
Table 7.2: Types of planning
Strategic Tactical Operational

Timeframe Three to ten years One to three years Less than one year
Level of management Top management Middle management Supervisory or lower
management
Extent of coverage Entire organisation Functional areas Sections, teams and
individuals
Purpose and goal Establish mission and Establish mid-range Implement and
long-term goals goals for activate specific
implementation objectives
Breadth of content Broad and general More specific Specific and concrete
Accuracy and High degree of Moderate degree of Reasonable degree of
predictability uncertainty certainty certainty
It is important to understand that goals are not set in isolation. In the next section,
you will learn about factors that influence goals and plans.
7.8 Factors that influence goals and plans
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7.8 Factors that influence goals and plans

Below are some of the factors that influence the process of formulating goals and
plans:
7.8.1 Purpose
The purpose of an organisation includes its obligation to its stakeholders and the
community where it operates. For example, an organisation needs to provide
customers with safe products at equitable prices and generate enough revenue for
its stakeholders. The purpose directs the generic and corporate strategies of an
organisation.
7.8.2 Values
Management's values influence the goals. Values represent what an organisation

stands for and the principles that should guide the actions of an organisation as it
builds and operates a business. Core values have an impact on the whole planning
processes and operations of any organisation. Pick n Pay, for example, articulated
their values as follows: "We are passionate about our customers and will fight for
their rights; we care for and respect each other; we foster personal growth and
opportunity; we nurture leadership and vision and reward innovation; we live by
honesty and integrity; we support and participate in our communities; we take
individual responsibility and we are all accountable." (https://www.pnp.co.za/about-
us/mission-and-vision).
7.8.3 Environment
The strategic planning process must evaluate an organisation's fit with its
environment. The business environment has been discussed in lesson 3, therefore,
we will not go into detail about the dynamic environment in which organisations
operate. Management must consider the environment in which an organisation
operates when determining the goals of an organisation. It is very difficult for
management to keep track of all the changes in the dynamic business environment.
Organisations should consider the following ten principles of the United Nations
Global Compact (UNGC) when formulating goals and plans:
• Human rights
Principle 1: Support and respect the protection of internationally proclaimed

human rights.
Principle 2: Ensure that they are not complicit in human rights abuses.
• Labour
Principle 3: Uphold freedom to associate and recognise the right to

collective bargaining.
Principle 4: Elimination of all forms of forced and compulsory labour.
Principle 5: Effective abolition of child labour.
Principle 6: Elimination of discrimination of employment and occupation.
• Environment
Principle 7: Support a precautionary approach to environmental challenges.
Principle 8: Undertake initiatives to promote greater environmental
responsibility.
Principle 9: Encourage the development and diffusion of environmentally
friendly technologies.
• Anti-corruption
Principle 10: Work against all forms of corruption, including extortion and
bribery.
7.8.4 Management experience
The experience of management plays a key role in the determination of

organisational goals. The following excerpt summarises the value of experience in a
business environment: "Recently, I was asked if I was going to fire an employee who
made a mistake that cost the company $600,000. No, I replied, I just spent $600,000
training him. Why would I want somebody to hire his experience?" (TJ Watson).
This brings us to the end of this lesson about the management function of planning.
7.9 Summary
Lesson 7: Planning
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7.9 Summary
By now you should have a clear understanding of the process of planning and how it
interlinks with the various management activities (namely organising, leading and
control). We saw that planning is the first step in the management process that is
done once top management determines the mission and goals of an organisation.
You are advised to access the link below to watch the video presenting a
summarised overview of the management function of planning:
Play Video
Remember that planning is an ongoing process and that goals and plans need to be
adjusted and reviewed continuously within a changing environment. Should there be
a deviation from the plan, reactive planning needs to take place.
The next step is organising (lesson 8), which involves setting up a structure through
which activities can be performed to attain the set objectives. Necessary resources
that must be assigned to certain employees are also needed in this process. These
matters will be discussed in the next lesson.
Lesson 8: Organising
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This lesson will require approximately NINE notional hours. Figure 8.1 represents an
overview of lesson 8.
Figure 8.1: Visual overview of the lesson.
8.1 Introduction
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8.1 Introduction
This lesson will focus on the management function of organising. In the previous
lesson, you learned about planning as the first important element of the management
process. The structured grouping and combining of employees and other resources
and coordinating them to achieve the organisational goals constitute the second
significant element of management, namely organising. After an organisation has
concluded the planning process, management needs to organise the business to
implement the plan.
Learning outcomes
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Learning outcomes
When you have worked through this lesson, you should be able to do
the following:
• Explain the concept of organising.

• Describe the importance of organising.
• Discuss the fundamentals of organising.
• Explain the informal organisation and its role to support the formal structure.
• Identify and explain the factors that influence organisational design.
• Apply Ubuntu philosophy to the organising function of management.
Key terms
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Key terms
authority job enrichment

centralised job rotation
chain of command job specialisation
coordination organisational structure
decentralised organising
departmentalisation responsibility
informal organisation span of control
job enlargement Ubuntu
8.2 Defining organising
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8.2 Defining organising

Organising is a process of grouping different activities to be conducted and
allocating duties and responsibilities to people in groups or departments (Kumar,
2016). The main purpose of organising is to allocate and coordinate the resources of
an organisation to implement set plans and to accomplish predetermined goals
(Gitman, McDaniel, Shah, Reece, Koffel, Talsma, & Hyatt, 2018). According to
Kumar (2016), the characteristics of organising include the following:
• Goal-directedness – Achieving the organisation's goals and objectives

• Differentiation – Identifying and classifying the activities in an organisation into
different processes and tasks to achieve organisational goals
• Grouping – Grouping activities into small and manageable sections such as teams or
departments
• Assigning or delegating – Assigning groups to various supervisors and managers
with the required authority to manage their performance
• Dynamic and constantly evolving – Organising is dynamic and constantly evolves
because it changes depending on substantial changes in the internal and external
environments.
How the resources and activities of a business are organised will differ from one
organisation to another, depending on factors such as the size, strategies and
culture of a business. For example, compare the organisational structure of an
entrepreneurial business, such as a small catering company, with that of a
multinational company, such as Sasol. The catering company might consist of an
entrepreneur, a chef and some casual staff (waiters/waitresses). The entrepreneur
(owner) will probably assume the role of general manager who is responsible for
marketing, costing and pricing, planning, scheduling and supervising daily activities.
The chef will be responsible for purchasing fresh produce and preparing party
platters and other meals, while the casual staff will be responsible for preparing
venues, serving guests and cleaning up after functions. Although done very simply,
we have applied the management task of organising to the catering company by
dividing the total workload of the company and allocating it to different individuals.
Each person knows what is expected of him or her and what tasks to complete. In a
very large organisation such as Sasol or Transnet, the organising task is much more
complex, with the total workload of the organisation distributed over various
departments, functional and product areas and even geographical regions.
In the next section, you will discover why organising is important in an organisation.
8.3 The importance of organising
LESSON
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8.3 The importance of organising

Successful managers ensure that all the activities identified during the planning
process are allocated to relevant employees, departments or teams and that
everyone has the resources needed to perform the activities allocated to them.
According to Erasmus, Rudansky-Kloppers and Strydom (2019), organising in an
organisation is important for the following reasons:
• Organising involves a comprehensive analysis of work to be completed and

resources to be utilised to accomplish business plans.
• Organising separates the entire workload into tasks that can easily be performed by
an individual or a team.
• Organising encourages the productive allocation and use of resources.
• Similar tasks and activities of employees are clustered together logically in
specialised departments, such as finance, marketing, human resources and
operations, where experts in their particular fields carry out their given duties.
• The development of an organisational structure results in a mechanism that
coordinates the activities of the whole business into a complete, uniform, harmonious
unit.
With an understanding of why organising is important, the attention will now shift to
the fundamentals of organising.
8.4 The fundamentals of organising
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8.4 The fundamentals of organising

Building an organisational structure revolves around the following building blocks or
fundamentals of organising: job design (established work-related responsibilities of
each employee, departmentalisation (grouping employees into teams or departments
based on what they have in common), organisational relationships (establishing
reporting relationships and how the authority will be distributed among positions) and
coordination (designing systems for effective coordination between departments).
Each of these fundamentals is discussed below.
8.4.1 Job design

Job design refers to the systematic and planned allocation of job tasks to the team,
group and individuals in an organisational setting (Olusegun & Olusoji, 2020). During
this process, the work-related responsibilities of each employee are established. Job
design is essential to get the job done reliably, efficiently, economically and safely
(Francis & Singh, 2016).
When work is designed, it is usually divided into separate jobs and tasks to be
assigned to employees. This is called the division of labour. When tasks are
divided into jobs, employees only focus on their specialised activities.
8.4.1.1 Job specialisation
Job specialisation entails organising activities into sections of related tasks that can
be managed by individuals or teams. The overall task in the organisation is divided
into smaller tasks that are specialised (Erasmus et al., 2019). Table 8.1 shows the
advantages and disadvantages of job specialisation.
Table 8.1 Advantages and disadvantages of job specialisation

Advantages Disadvantages
It leads to efficiency. It may lead to boredom.
It simplifies jobs and results in clearer It is time consuming.
roles for employees.
It saves transfer time. It results in higher cost to the company.
It is easier to design or purchase It leads to underutilisation of skills.
specialised tools to support the work.
Motivation is derived from job
satisfaction.
The importance of job specialisation cannot be overemphasised. However,

specialisation should be implemented in such a manner that its possible unwanted
consequences are avoided. For example, an organisation can introduce job design
components such as job rotation, job enlargement, job enrichment and work teams,
as discussed next.
8.4.1.2 Job rotation
Job rotation is a systematic process whereby employees are moved from one job to
another. This means that employees are assigned to work on different tasks during
specific periods, which are categorised on a similar scale as the skills, knowledge
and capability of individual employees (Van Wyk, Swarts & Mukonza, 2018). The job
itself does not change as employees in similar positions are swapped.
8.4.1.3 Job enlargement
Job enlargement is all about increasing the number of activities that an employee
performs, resulting in all employees doing different activities.
8.4.1.4 Job enrichment
Job enrichment involves a variety of job content, higher levels of knowledge and
expertise, greater responsibility and autonomy for planning, directing and controlling
work (Putri & Setianan, 2019). It encompasses increasing both the number of
activities the employee does and the control the employee has concerning the
activities (Erasmus et al., 2019).
8.4.1.5 Work team
When the work team option is implemented, employees are permitted to design the
work system they will adopt as a team to conduct their interconnected set of
activities.
Activity 8.1
Game is a subsidiary of the JSE-listed Massmart Holdings. The retail company

operates out of 150 stores in 12 African countries and sells different products
classified under the following categories: Appliances, Electronics & Entertainment,
Mobile Devices & Computers, Baby & Toys, Sports & Leisure, DIY & Auto, Home &
Garden, Groceries & Household, Health & Beauty, and Money Centre
(https://www.game.co.za/game-za/en/aboutgame).
How would you allocate different tasks to salespersons at any Game store regarding
job rotation, job enlargement, job enrichment and work team?
Feedback
Job rotation – moving employees from one category to another. In other words,
employees are assigned to work in a different category during specific periods,
which are categorised on a similar scale as the skills, knowledge and capability of
individual employees. The job itself does not change as employees in similar
positions are swapped.
Job enlargement – all salespersons are responsible to advise customers on all

categories.
Job enrichment – involves a variety of job content, higher levels of knowledge and
expertise, greater responsibility and autonomy for planning, directing and
controlling work. For example, employees are allowed to communicate with
suppliers regarding the availability of certain products.
Work teams – salespersons would be permitted to design the work system they will
adopt as a team to conduct their interconnected set of activities.
Once the organisation has divided the work that needs to be done into specific jobs,
there is a need for managers to group the jobs in one unit to ensure that related
tasks and activities are coordinated.
8.4.2 Departmentalisation
The grouping of employees, tasks and resources into organisational units to facilitate
the planning, leading and control processes is called departmentalisation (Gitman
et al., 2018). The current dynamic business environment forces organisations to be
structured effectively to offset different competitive threats and to satisfy varying
customer needs (Gitman et al., 2018). The types of departmentalisation in an
organisation include functional departments, divisions, projects and matrix.
8.4.2.1 Functional departmentalisation
This form of departmentalisation is usually implemented by small to medium-sized

organisations. The employees in each function are grouped according to their
comparable skills and the similarity of the tasks that they perform. Functional
departmentalisation is based on the primary functions performed within an
organisational unit such as marketing, production or operations, supply chain,
finance and human resource management. You will learn more about the different
functions and their activities in an organisation if you register for the module
MNB1601. Figure 8.2 depicts the functional departmentalisation of a medium-sized
organisation.
Figure 8.2: Functional departmentalisation
With functional departmentalisation, all connected activities are placed in the same
unit and the employees in the unit are managed by one manager who reports to the
CEO. Table 8.2 shows the advantages and disadvantages of functional
departmentalisation.
Table 8.2: Advantages and disadvantages of functional departmentalisation
Functional departmentalisation The functional departmentalisation is
enables the CEO to have direct difficult to implement in a large organisation
access to the lower-level subordinates
and full knowledge of what is – it is appropriate for small and medium-
happening in the organisation. sized organisations.
The managers of each functional The flow of information tends to be slow,
department have direct access to the resulting in coordination and control
CEO. challenges.
Each unit specialises in what it does Challenges faced by sub-units at lower
best, resulting in the operational levels do not receive sufficient
efficiency of employees and the consideration from managers at a higher
organisation as a whole. level, while some tasks are inclined to be
exaggerated.
The CEO can resolve inter-functional When a different number of activities are
challenges and coordinate the performed in various units, it becomes
interrelated functions. difficult to manage them.
The structure is simple to understand It encourages inter-departmental conflicts.
and implement in most small to
medium-sized organisations.
8.4.2.2 Divisional departmentalisation
Organisations that have more assets or a higher number of employees and

customers regularly find it difficult to operate as one large entity using the functional
organisational structure. In such cases, the size makes it challenging to manage
operations and attend to all customers’ needs. Hence, these organisations are
structured as divisional organisations made up of different smaller, self-managed
divisions, which are responsible and accountable for their performance. Each
division is self-managed as it has its functional expertise such as finance, marketing,
production, supply chain and human resources as required to achieve its objectives.
The challenge for senior managers of an organisation is to establish the most
suitable manner to structure its operations to implement its strategic objectives.
Consequently, divisions can be designed based on products, location, customers
and processes.
(i) Product division
Product division means that an organisation is structured according to its product

lines. The product division is more appropriate for very large organisations,
especially those that sell different products to different customers. With this structure,
the organisation is separated into small business units that focus on different
products. Figure 8.3 depicts an example of a product division of a wholesaler that
deals with different products such as perishable goods, clothing, home and office
appliances, outdoor appliances and tools, car-related products and cellphones.
Figure 8.3: Product division
In product division, managers head the functional sections while the final authority
rests with the product manager who controls and coordinates the activities of the
department.
(ii) Customer division
The customer division is preferred by some organisations because it empowers

them to cater effectively for their different classes of customers. This type of division
adopts a similar structure to the product division; an experienced manager who is
knowledgeable about the customers that they serve heads each division.
(iii) Location or geographical division
The location division is suitable for big organisations that sell their products in
different geographic areas to respond to customers' needs at a local level. With this
structure, an organisation is separated into small business units that focus on
different markets in various areas. Figure 8.4 depicts an example of the location
division of an organisation that operates in different provinces in South Africa.
Figure 8.4: Location division
Like all divisions, location division is also characterised by the decentralisation of

authority. Each region has its support functions. Managers head the functional
sections while the final authority rests with the regional managers who control and
coordinate the activities of the region.
(iv) Process division
If the products of an organisation move through several steps during production,

a process division structure might be required. For example, a dairy company that
owns farms, processes its and sells the milk to customers can decide to implement
the process division as shown in figure 8.5.
Figure 8.5: Process division
Each process division has its support functions. Managers head the functional
sections while the final authority rests with the managers who control and coordinate
the activities of the process divisions. The advantages and disadvantages of the
division structure are highlighted in Table 8.3.
Table 8.3: Advantages and disadvantages of division departmentalisation
The division structure enables It involves higher financial costs because of
managers to make decisions promptly the repetition of supporting functions for
and deal with challenges in their each division.
division.
The specialised employees’ It requires enough suitable managers to
knowledge is utilised fully. manage the divisions and their functional
sections.
The measurement of each group is Some divisions are likely to focus on their
easy. own needs and goals while disregarding
those of the organisation.
Activity 8.2
Use the Coca-Cola Company (https://www.coca-colacompany.com/home) to explain

how the organisation has organised its divisions according to product and location.
Feedback
The Coca-Cola Company has been arranged in the following manner regarding
their products and location:
Products: The company offers a variety of drinks including still and sparkling water,
dairy, fruit juices, organic and plant-based drinks, teas and coffees. Various
divisions have been created that offer different products. For example, Coca-Cola
offers soft drinks, Minute Maid offers a variety of juices, Aquarius provides bottled
water and Appletiser provides sparkling soft drinks.
Location: The company has divisions in more than 200 countries.
While the functional and division departmentalisations characterise how many

organisations are structured, the latest organisational structures, which are more
flexible, have been implemented by many organisations. The project and matrix
structures are two of the organisational structures adopted to minimise the
drawbacks presented by the functional and division structures.
8.4.2.3 Project structure
A project structure is utilised when an organisation embarks on a specialised

project for a long period. A special unit to cater for the project is designed from the
existing organisation to ensure that the normal operation of the organisation is not
interrupted. A project leader on the middle management level is assigned to manage
the project and this person reports directly to the CEO. The project draws its
managers and employees from the organisation's functional departments and they
return to their positions once the project has been completed. Table 8.4 indicates the
advantages and disadvantages of the project structure.
Table 8.4: Advantages and disadvantages of project structure
The project manager has the required Project managers usually experience
authority and is solely responsible for resentment from and conflict with functional
the results, making it better to manage managers regarding the authority over
and control the project activities. employees who are involved in a project.
It is mainly focused on the completion The transfer of employees to the project
of the project, on time and according regularly disturbs the stability of the
to the standard set. functional departments.
The project structure does not The development of employees' specialised
interfere with the normal structure of skills is interrupted because they are
the organisation. moving across different projects.
Sometimes none of the configurations may meet all the needs of a particular
business. To overcome this, the matrix organisational structure has been created to
incorporate the advantages of all the structures discussed earlier.
8.4.2.4 Matrix structure
With the matrix structure, specialised employees from different functional

departments are assigned to work full-time on different projects (sometimes on more
than one project), under the overall guidance and direction of a project manager.
This structure aims to draw skills from different departments and, therefore,
combines the advantages of independent project organisation and functional
specialisation. Each employee has two direct supervisors, namely the line manager
from the specific functional area where the employee is based, and the project
manager (Gitman et al., 2018). The matrix structure is relevant for organisations that
rely too much on contractual project activities and has many projects to manage.
Figure 8.6 depicts a matrix structure.
Figure 8.6: Matrix structure
Employees assigned to a project return to their respective functional departments

when the project is completed, while they are waiting to be allocated to another
project or to a new project. The advantages and disadvantages of the matrix
structure are highlighted in Table 8.5.
Table 8.5: Advantages and disadvantages of the matrix structure
It enables the sourcing of specialised The employees sourced from specialised
and technical employees from various functional departments are not sure who is
functional departments, who can be their manager as they are exposed to
assigned to different projects at the twofold authority: that of the functional
same time. manager and the project manager. The
principle of unity of command is, therefore,
violated.
The matrix structure offers a flexible The concurrent engagement of the same
structure suitable for the requirements employee in different projects results in
of unstable environments. compromised project management.
The coordinating authority of project Project members from different functional
managers enables the speedy sharing areas may struggle to communicate
of information and decision making. effectively and to work together as a team.
Instead of building big departments
with underutilised employees, project
managers source only the specialised
staff they require to complete the
project.
This structure offers employees an
opportunity to develop and reinforce
their interpersonal and technical skills.
Once departments have been established, an organisation needs to establish

reporting relationships and how the authority will be distributed among positions.
This brings us to the next section, on organisational relationships.
8.4.3 Organisational relationships

The chain of command, authority and span of control as elements of organisational
relationships in an organisation are discussed in this section.
8.4.3.1 Chain of command
The chain of command refers to the vertical connecting lines in the organisational
structure. A well-structured organisation has a clear chain of command indicating the
line of authority that ranges from one level of the organisation to the following, from
the highest position to the lowest, and clearly shows who reports to whom (Gitman et
al., 2018). The chain of command has two components, namely unity of command
and the scalar principle. Unity of command occurs when an employee only reports
to one supervisor. Once employees report to different supervisors (e.g. under the
project and matrix structures), the unity of command is broken. When the unity of
command is broken, employees sometimes receive conflicting instructions and are
unsure which direction to take. The scalar principle refers to the clear and unbroken
vertical line that extends across the organisation, ranging from the bottom to the top.
8.4.3.2 Authority
Authority refers to the legitimate power that permits an employee to demand action
and anticipate compliance as granted by the organisation and acknowledged by
employees (Gitman et al., 2018). In the discussion of authority, the concepts of line
authority and staff authority, centralised authority and decentralised authority, and
delegation of authority require some clarification.
(i) Line and staff authority
Line authority consists of direct and clear lines of authority where communication
starts from top management, descending to lower levels. This gives managers direct
control of all activities in the organisation. The line authority can be improved by
adding staff positions to the structure when an organisation develops and become
multidimensional. Staff authority affords support services and specialised advisory
to line managers (Gitman et al., 2018). Employees with staff authority take care of
the support and administrative activities required by operational employees to
accomplish the goals of the organisation.
(ii) Degree of centralisation
The degree of centralisation has to do with the level at which decisions are made.
Factors to be considered when determining how much decision-making authority to
delegate include the speed of change in the environment, the size of the
organisation, managers' willingness to give up authority, the organisation's
geographic dispersion and employees' willingness to accept more authority (Gitman
et al., 2018). The two forms of the degree of centralisation include centralised and
decentralised authority.
Centralised authority applies when most decision-making is concentrated at the

top. Centralisation has the advantage of consistency in decision-making. When
centralised authority is used in an organisation, critical decisions are made by top
management – resulting in those decisions being more constant than if they were
made by different supervisors at lower levels in the organisation. The disadvantage
of centralised authority, however, is that top management makes essentially all the
important decisions, causing lower-level managers to feel underutilised. Lower-level
managers also do not develop decision-making skills that would assist them to
become promotable. In addition, top management might not have access to certain
information that only supervisors and subordinates have, or might disrupt the
decision-making process.
Decentralised authority occurs when decision making is spread throughout the

organisation, allowing managers at lower levels to make certain decisions. The
decentralised authority provides top management with more time to work on higher-
level tasks such as strategic planning, which cannot be delegated to lower-level
managers. The main disadvantage of decentralised authority is that there is no
synchronisation between what the different divisions are doing, with the result that
divisions might end up competing against each other.
(iii) Delegation of authority
Delegation of authority is the process of entrusting work to subordinates.

Regrettably, many managers are averse to delegating authority. Consequently, they
deny subordinates the opportunity to learn and develop new skills – and in the
process they overload themselves with tasks that could be performed by others.
Delegation of authority goes hand in hand with responsibility, authority and
accountability. The duty to perform a task (responsibility) will not be enough to get
the job done. Subordinates should be granted the power to make the necessary
decisions (authority) to complete a task. Unfortunately, in many South African
organisations, people are given responsibility (the obligation to carry out a task)
without the corresponding authority (the right to give instructions and deploy
resources) to carry out that responsibility – and this can lead to a great deal of
frustration on the part of the subordinate who has been tasked with carrying out
certain activities. Subordinates should be held accountable for their performance
(accountability). Normally, authority and responsibility descend through the
organisation as managers allocate activities to, and share decision-making with, their
subordinates. However, accountability ascends in the organisation because
managers at each sequentially higher level are held accountable for their
subordinates' actions (Gitman et al., 2018).
Now that you have learned about organisational relationships, the next section will
enable you to differentiate between the two types of span of control and the factors
that influence the decision to implement either of the two.
8.4.3.3 Span of control
A span of control (also called span of management) refers to the number of

subordinates who report directly to a manager and the number of layers between the
top managerial position and the lowest managerial level. The number of
subordinates directly reporting to one supervisor should be kept to a minimum to
ensure that supervision and control are effective –as the time and ability of
managers are limited. There are two types of span of control, namely wide and
narrow span of control.
(i) Wide (flat) span of control
Usually, new organisations have only a few layers of management. When a wide
span of control is used, a manager can effectively supervise and control many
employees at the same time. As a result, an organisation will have fewer hierarchical
levels and the structure will be flat. A wide span results in fewer levels of supervision,
thereby making communication simple and effective in the organisation. However, it
allows only general supervision, as there is limited time to individually supervise
every employee. Figure 8.7 depicts a wide span of control.
Figure 8.7: Wide span of control
(ii) Narrow (tall) span of control
As organisations grow, they are more likely to add additional layers between top
management and the employees at the bottom. A narrow span of control involves
multiple levels of supervision, thereby allowing managers to exercise close
supervision and control. The disadvantage of a narrow span is that information takes
longer to reach employees at a lower level. The process of communication becomes
complicated and expensive. Figure 8.8 depicts an organisational structure based on
a narrow span of control.
Figure 8.8: Narrow span of control
Normally, the taller the span of control, the more efficient the organisation.
Nevertheless, both narrow and wide spans of control have advantages and
disadvantages, as indicated in table 8.6.
Table 8.6: Advantages and disadvantages of narrow and wide spans of control
It permits a high degree of control. It is more expensive due to extra
levels of management.
The manager is more familiar with Vertical layers result in slower
each individual due to fewer decision making.
Narrow subordinates.
span of
Immediate feedback is received Top management is isolated.
control
due to close supervision.
Employee autonomy is
discouraged.
Wide Increased efficiency and reduced Managers have less control over
span of costs due to fewer levels of their subordinates.
control management
Quicker decision making due to Managers may lack familiarity with
increased subordinate autonomy their subordinates due to the large
number of employees they
manage.
Offers greater organisational Managers have an inability to
flexibility provide the necessary leadership
or support.
Employee empowerment leads to This might lead to a lack of
higher levels of job satisfaction. coordination or synchronisation.
Source: Adapted from Gitman et al. (2018)
A span of management can be as wide as 50 or more, or as narrow as two or three

employees (Gitman et al., 2018). For example, an organisation such as Unisa has
quite a tall organisational structure, with over nine levels of management. It is
recommended that a span of control be four at higher levels and eight to twelve at
lower levels. However, determining the number of employees working under a
supervisor is not that simple – because the nature of jobs and the capacity of
individuals differ according to organisations. Below are some of the factors that
influence the span of control.
(iii) Factors influencing the span of control
• Ability of employees
• Ability of the manager
• Extent of decentralisation
• Nature of the work
• Efficiency of the organisation
• Availability of time for supervision
• Support staff
Activity 8.3

The following image depicts the management structure of the Education, Training
and Development Practices Sector Education and Training Authority (ETDP SETA).
By looking at the organogram, which span of control do you think the ETDP SETA
has implemented, and why do you think so?
Source: ETDPSETA 2019-20 annual report

(http://www.etdpseta.org.za/education/sites/default/files/annual-reports/ETDP-SETA-
2019-20-Annual-Report.pdf)
Feedback
The ETDP SETA has adopted a narrow or tall span of control. Various managers report to
the second level, which reports to the CEO. In addition, employees are likely working under
these managers even though they were not included in the diagram.
Once organisational relationships have been established, there is a need to

coordinate the activities in different departments. The next section deals with the last
fundamental of organising, namely coordination.
8.4.4 Coordination
The total tasks of the business are divided into small units when an organisation is
structured – to accomplish organisational goals. Therefore, the challenge for
managers is to ensure that the work is coordinated and there is cooperation between
departments. The main purpose of coordination is to facilitate the interdependence of
the departments and teams within the organisation. Coordination and cooperation
are very important because the combined performance of all the departments will
determine the overall performance of the organisation. Organisational charts,
committees, budgets, broad policies and procedures are some of the mechanisms
that are used to promote coordination in organisations (Erasmus et al., 2019).
Activity 8.4
Read the excerpt below and answer the question that follows:
“There was a longstanding disconnect between the project leadership and the
business office regarding responsibility for monitoring project expenditures and
labour hours. For the company’s 10-year history, there was no expectation that
project leads should receive and monitor budget and projected labour hours, or that
comparing actual versus projected expenditures would be useful for project
management purposes. There wasn’t a clear understanding among the project side
about why the contract and budget considerations were important, and these
parameters were not factored into how projects were staffed and managed.”
Extracted from https://www.aiscollaborations.com/process-this-
blog/2017/10/23/case-study-improving-coordination-between-project-teams-and-the-
business-office (Accessed 01 February 2022)
Which one of the fundamentals of organising do you think is lacking from this
extract? Justify your answer.
Feedback
There is a lack of coordination in the organisation. Coordination is all about facilitating the
interdependence of the departments and teams within the organisation to improve the
combined performance of all the departments, which will lead to the overall performance of
the organisation. Based on the information provided in the extract, it is obvious that the
different projects work in isolation.
The way organisations are structured is influenced by many factors. After going
through the following section, you will be able to explain the factors that influence
how organisations are structured.
8.5 Factors that influence how organisations are designed
LESSON
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8.5 Factors that influence how organisations are designed

How organisations are structured is a function of different factors. The main factors
that influence how organisations are designed include the following:
• The stability of a business environment. Both the level of stability and the rate of
environmental change will influence how organisations are structured and what form
of departmentalisation the organisation adopts. One good example of environmental
instability in South Africa has been in the higher education environment over the past
five years, where the entire public higher education system has been reconfigured
through a series of mergers and rationalisation initiatives. The merger between the
old Unisa and former Technikon South Africa has had a significant impact on how the
new Unisa is structured in terms of its functional, product and customer
departmentalisation. This need to restructure the University was brought about by
external environmental change and instability.
• The strategy of a business. As the saying goes, "structure follows strategy". This is
indeed true since an organisation's strategy has a direct impact on how the business
is structured. A renewed focus on technology might result in a significantly greater
allocation of resources to a business's IT department. Similarly, a business such as
General Electric (GE), which focuses on product development and innovation, will
allocate significant resources to its research and development department.
• The size of a business. The size of an organisation has a definite impact on how it
is structured. Small businesses are not organised in the same way as large, complex
organisations such as the Shoprite group. Historically, large businesses were often
characterised by many levels of management, a high degree of specialisation and
extensive departmentalisation; however, in recent years, there has been a shift
towards flatter and leaner organisational structures.
• The competence of employees and management. How organisations are
structured is not only a function of the competence of staff but also of the attitudes
and beliefs of top management.
• The organisational culture. The beliefs and values shared by the people in a
business influence how the organisation is structured. In this regard, it will not make
sense for a business to be structured in a very tall bureaucratic manner when the
culture is characterised by innovativeness, teamwork and few rules and regulations.
What you have learned in this lesson up to now relates to the formal arrangements
that an organisation makes to achieve its goals. However, relationships within
organisations are not limited to formal arrangements. In the next section, you will
discover how the informal part of organising works to support the formal
arrangements.
8.6 The informal organisation
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8.6 The informal organisation

The informal organisation is defined by the interpersonal relations between people in
an organisation that are not determined by the formal organisational structure
(Erasmus et al., 2019). It takes a fixed form and members interact regularly using
informal communication such as corridor conversations, personal calls, WhatsApp
groups, and so forth. The informal organisation could support formal organisations
as follows:
• By enhancing intra- and inter-departmental teamwork

• By improving decision making as communication occurs frequently
It is important to note that at times, an informal organisation may include activities

that are not in line with those activities expected in the formal structure.
The next section explains how the Ubuntu philosophy can influence an
organisational structure in an African context.
8.7 Linking Ubuntu philosophy to organising

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8.7 Linking Ubuntu philosophy to organising

Management theories originate from the West and are grounded in the Western
world environment, and consequently, they are not well matched to African
conditions and circumstances (Akpor-Robaro, 2018). In the South African context,
there is a developing philosophical belief system known as Ubuntu (a Bantu word
broadly meaning sharing and community), resulting from African culture, values,
beliefs and behaviours (Inyang, 2008). The notion of Ubuntu comes from the African
sayings, "Motho ke motho ka batho ba bangwe" and "Umuntu ngumuntu ngabantu",
plainly interpreted as "A person is a person through other persons", or "I am because
we are; we are because I am" (Ganiyu, 2018). Ubuntu is defined as "… humaneness
– a pervasive spirit of caring and community, harmony and hospitality, respect and
responsiveness – that individuals and groups display for one another. Ubuntu is the
foundation for the basic values that manifest themselves in the ways African people
think and behave towards each other and everyone else they encounter" (Inyang,
2008). The Ubuntu philosophy permits managers to adopt the familiar African values
to construct and support the effectiveness of an organisation in the following ways:
• Pooling resources for survival – maintaining productivity and effectiveness depends

on shared values and individual contributions: encourage a focus on communal (vs
differences) with reliance to eliminate a threat to survival through conflict.
• Engineering unified situations – the spirit of solidarity, the mutual regard among
members and individual adhesion to the group create situations defined by group
behaviours – sit together, focus on each other, and coordinate behaviour.
• Enhancing social oneness and participation – set up informal opportunities – central
village location for gatherings, activities, mediation, decisions, events and rituals
(Inyang, 2008).
Traditional African society's styles are generally categorised into two, namely
decentralised (consensus-based systems in which law making, social control and
allocation of resources are managed by bodies such as village groups and age
grades) and centralised (systems based on chieftaincy) (Oghojafor, Alaneme &
Kuye, 2013). The decentralised (fragmented) traditional states provisioned for
practices of control based on the dynamics of clanship; a normative scheme that
involved structures of well-established rules of conduct typically applied by
fragmented segments' heads and in more crucial instances, by spontaneous
community action (Oghojafor et al., 2013).
"Incorporating Ubuntu principles in management hold the promise of superior

approaches to managing organisations. Organisations infused with humanness, a
pervasive spirit of caring and community, harmony and hospitality, respect and
responsiveness will enjoy more sustainable competitive advantage" (Inyang, 2008).
Therefore, Ubuntu as a management system emphasises teamwork, attention to
relationships, mutual respect and empathy between a leader and followers, and
participative decision-making. These are fundamental principles of management,
which hold promise for improving organisation activities and functioning in Africa. All
these aspects should be considered when an organisation is structured – concerning
the division of work, departmentalisation and establishing organisational
relationships. This may be a valid suggestion or argument; however, it will only work
if such an indigenous theory considers the environment, even with the indigenous
background (Akpor-Robaro, 2018). An indigenous theory that does not consider the
environment will experience the same misfortune as an imported theory, as
circumstances differ, even within the same environment (Akpor-Robaro, 2018).
8.8 Summary
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8.8 Summary
A good structure does not safeguard the success of an organisation. However, a
poor organisational structure has an impact on the performance of employees – no
matter how good they are. In this lesson, you have learned about the importance and
fundamentals of organising, factors that influence how organisations are structured,
and informal organisation. Finally, you were conscientised about how Ubuntu can be
linked to the organising function.
Once planning and organising have been conducted, managers must take the lead
to ensure that plans are translated into action. In the next lesson, you will learn about
the third function of management, namely leading.
9.1 Introduction
In lesson 8, you learned about the second important element of management,

namely organising. The third complex element of management is called leadership.
Leadership is that element of management that sets activities and people in motion
to ensure that goals are accomplished.
Learning outcomes
LESSON
Lesson 9: Leading
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Learning outcomes
When you have worked through lesson 9, you should be able to do the
following:
• Describe the nature of leadership.

• Differentiate between leader and manager.
• Explain the five components of the leadership function, namely authority,
power, responsibility, delegation and accountability.
• Discuss basic leadership models by referring to the factors influencing
effective leadership.
• Describe the fundamental model of motivation.
• Discuss groups in the organisation by referring to (1) the reasons why groups
are formed, (2) the kinds of groups and (3) the characteristics of groups.
• Differentiate between groups and teams in the organisation.
• Describe a simple communication model
Key terms
9.2 The nature of leadership
In this section, you will learn about the nature of leadership. The concepts “leader”
and “leadership” and the characteristics of leadership are discussed.
9.2.1 Leader
In order to understand what leadership is all about, you need to understand what the
word “leader” means in the business context. The word “leader” can be used in two
ways. Sometimes the word is used to refer to someone who takes the lead. We
speak of someone being a leader in a specific industry. A person such as Sol
Kerzner (of Sun International and founder of Sun City), for example, would be
considered a leader in the hotel industry. Similarly, Raymond Ackerman (of Pick n
Pay) is a leader in the retail industry. However, a more accurate way to describe
these people would be to say that they are entrepreneurs.
The second use of the word “leader” refers to the management of subordinates. This
is the meaning of the word that applies to the management task of leadership. It is
very important that you note this distinction. It is not uncommon for someone to be a
very successful entrepreneur (i.e. a leader in business or a pioneer in a specific
industry) and yet be a poor leader of people in the sense that he or she finds it
difficult to delegate responsibility and to motivate staff, inspire them to greater
achievement, develop their skills, and so on.
9.2.2 Leadership
It is important that you familiarise yourself with the definition of leadership. Make
sure that you understand this definition: Leadership is defined as the influencing and
directing of the behaviour of subordinates in such a way that they willingly strive to
accomplish the goals or objectives of the business.
There are a few important terms in this definition, but two particularly important ones
are the words “influence” and “willingly”. The word “influence” is used in a very wide
context here. For example, giving instructions to a subordinate would fall under the
definition of influencing, but so too would threatening a subordinate with dismissal if
his or her performance does not improve (although not the best example of good
leadership). Leadership is clearly a process of social influence directed at stimulating
action towards achieving the goals of the business.
The second important term in the definition of leadership is the word “willingly”. This
attribute of leadership is evident in the following two very famous statements by
former American President Dwight D Eisenhower: “You don’t lead people by hitting
them over the head. That is an assault, not leadership.” and “Leadership is the art of
getting someone else to do what you want to be done because he wants to do it”.
Richard Branson (the founder of the Virgin Group) remarks that there are many ways
to get your point across and make your business successful without being
aggressive: “Always remember that you love what you do and your role is to
persuade others to love your business too, therefore to want to work with you.” All of
these statements refer to influencing the behaviour of employees to pursue the goals
of the business willingly and not under coercion or through the use of power and
formal authority. In the next section, you will learn to differentiate between leadership
and management.
LESSON
Lesson 9: Leading
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9.3 Differences between leader and manager
A good manager is not necessarily a good leader and vice versa. Much has been
written in management literature about the differences between managers and
leaders. A manager can broadly be defined as a good administrator. This is
particularly true in a bureaucratic organisation where a manager may be extremely
good at carrying out procedures, having everything in place, always meeting
deadlines, and so on, and yet not be very good at inspiring and motivating his or her
subordinates. It is also possible to be an outstanding leader but a poor manager
because you do not plan very effectively, or do not exercise sound control – yet you
may get tremendous support and commitment from subordinates for your ideas and
vision. The distinction between leaders and managers is not clear-cut and has been
shown to be quite controversial in management literature. The following table is
therefore merely a summary of some of the differences between a leader and a
manager.
Table 9.1: The differences between leader and manager
Leader Manager
Lead and direct Plan, organise and control
Create and articulate vision and change Implement vision, change and policy
Innovate Administer
Develop Maintain
Inspire Control
Do the right things Do things right
Source: Author’s compilation
Do the following activity about the differences between a leader and a manager.
Activity 9.1
Access the link below to watch a YouTube video about the differences between a
leader and a manager:
https://www.youtube.com/watch?v=mhkLc0HEtR0
After watching the video, answer the following questions:
1. Write down the aspects that you have learned that separate the two concepts,
leader and manager.
2. Do you think that you can be both a leader and a manager?
Feedback
There is an overlap between leaders and managers in terms of functions, skills and
characteristics. The answers to the two questions are provided below.
1. As seen in the video, the two can be differentiated as follows:
• Leadership is a process of social influence that maximises the effort of others to

achieve a goal or a specific target. Management is the art of work done through
people.
• Leaders set goals while managers follow them.
• Leaders transfer the mission, goal and vision to the whole organisation while
managers keep employees aligned with the core goals and values of the
organisation.
• Leaders think of ideas while managers mostly focus on the execution phase.
• Leaders focus on improvement while management is concerned with control.
What are other differences that you have identified? You can discuss these with your fellow
students on myUnisa.
2. The answer to this question is “Yes!''. To improve the performance of any organisation, it
is desirable that all managers also display the attributes of good leaders. This is why more
and more organisations are embarking on leadership development initiatives to develop
strong managers into strong leaders. Turning managers into leaders so that they become
better managers is the underlying principle behind the study of leadership.
In the next section, you will learn about the components of the management function
of leading.
LESSON
Lesson 9: Leading
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9.4 The components of the leading function
• Authority – the right of a manager to give commands to and demand actions

from employees. Authority was discussed in depth in lesson 8.
• Power – a manager’s ability to influence the behaviour of employees.
• Responsibility – the obligation to achieve organisational goals by performing
the activities described in their job description. A manager is responsible for
the results achieved in their organisations, departments or sections.
• Delegation – the process whereby the manager assigns responsibility and
authority for achieving organisational goals. Managers delegate responsibility
and authority down the chain of command to their employees.
• Accountability – the evaluation of how well individuals meet their
responsibilities. Managers are accountable for everything that happens in
their sections, departments, or organisations, even for the successful
completion of the tasks they delegated to employees.
Since components such as authority, responsibility, delegation and accountability

have been discussed in lesson 8, we will now only focus on one component of the
leading function, namely power. Power is one of the key elements associated with
leadership and comes in five main forms. These different forms of power often
determine whether a leader is effective or ineffective in influencing subordinates and
securing their commitment to organisational goals and the leader’s vision. It is very
important that you understand the different kinds of power that a leader can use and
how these affect subordinates’ performance.
Line authority is always linked to a particular position in the organisation. For
example, the marketing manager has the authority to decide on a sales strategy, as
well as to give instructions to the sales, advertising and marketing research teams.
He or she also has the authority to allocate the marketing budget accordingly.
Because this authority is position-specific, the marketing manager cannot give
instructions to staff in the finance or production departments or decide on a
purchasing strategy for the business.
Power, on the other hand, is linked to both the person and (sometimes) the position.
It refers to the influence that leaders exert over their subordinates. Different forms of
power may result in differing levels of commitment and compliance by subordinates.
French and Raven (1959) provide us with a useful typology that identifies the
sources and types of power that may be at the disposal of leaders (Openstax, 2019).
The five types of power are:
• Reward power – the power a person has because people believe that they
can bestow rewards or outcomes, such as money or recognition that others
desire.
• Coercive power – the power a person has because people believe that the
person can punish them by inflicting pain or by withholding or taking away
something that they value.
• Legitimate power – the power a person has because others believe that the
person possesses the “right” to influence them and that they ought to obey.
This right can originate in tradition; in the charisma or appeal of the person;
and in laws, institutional roles within society, moralistic appeal, and rationality
(that is, logical arguments, factual evidence, reason, and internally consistent
positions).
• Referent power – the power a person has because others want to associate
with or be accepted by him or her. Referent power refers to a manager’s
personal power or charisma.
• Expert power – the power a person has because others believe that the
person has and is willing to share the expert knowledge that they need. (The
concept of resource power extends the idea of expert power to include the
power that a person has because others believe that the person possesses
and is willing to share resources, such as information, time, or materials that
are needed.)
Looking at the definitions of the five types of power we quickly see that power can be
either positional or personal. The first three types of power are clearly related to a
manager’s position in the organisation and can be likened to formal authority. The
last two types of power are both forms of personal power and are not derived from a
manager’s position within the organisation. Table 9.2 summarises the uses and
outcomes of power.
Table 9.2: Uses and outcomes of power
Type of outcome
Source of Commitment Compliance Resistance
leader
influence
Referent power Likely Possible Possible
If request is If request is If request is for

believed to be perceived to be something that will
important to leader unimportant to leader bring harm to leader
Expert power Likely Possible Possible
If request is If request is If leader is arrogant

persuasive and persuasive and and insulting, or
subordinates share subordinates are subordinates
leader’s task goal apathetic about oppose task goal
leader’s task goal
Legitimate Possible Likely Possible
power
If request is polite If request is seen as If arrogant demands
and highly legitimate are made or request
appropriate does not appear
proper
Reward power Possible Likely Possible
If used in a subtle, If used in a If used in a

very personal way mechanical, manipulative,
impersonal way arrogant way
Coercive power Very unlikely Possible Likely
If used in a helpful, If used in a hostile

non-punitive way or manipulative way
Source: (Cartwright, 1959 in Erasmus et al., 2019)
Make sure that you understand these different forms of power and how using
different forms of power can result in differing levels of commitment from followers.
This is a very important section of the lesson that you have to master.
Activity 9.2
Answer the following questions:

9.2.1 In fulfilling the leadership task of management, should a manager make use of
formal line authority associated with the specific position or rather the personal
power he or she possesses?
9.2.2 Having thought about the above question, now consider the well-known
business and political leaders listed below. Can you identify the type of power they
possess, be it personal or positional, as well as the source of their personal power?
Use the template below to complete the activity. You might not be familiar with all of
the leaders in the list. If this is the case, it would be a good idea to read up about
their achievements, either on the internet or in the library resources available to you.
Tip: Remember that leaders very seldom possess only one form of power and more
often than not they influence their subordinates through the use of a combination of
power sources.
Leader Type of power Source

Your own boss or line manager
President Cyril Ramaphosa
Nelson Mandela (former South African president)
Bill Gates (founder and CEO of Microsoft)
Oprah Winfrey (owner of Harpo Productions)
Jack Welch (former CEO of General Electric)
Feedback
To answer the first question, you can consult table 9.2. This table gives a good idea of the
outcomes of a manager using different sources of power; it illustrates that commitment from
subordinates is more likely when a leader draws on personal forms of power such as
referent and expert power. Positional power is most effective in ensuring compliance with
requests or instructions.
The second part of the learning activity dealt with the types of power used by prominent
leaders. It is quite possible that your answers to this activity will differ from the feedback
below because the views of subordinates regarding the power held by a leader can differ.
Leader Type of power Source
Your own boss or line Legitimate + Your line manager or boss will
manager whatever you may always have a degree of legitimate
have included power to give you instructions and
allocate resources. This type of
power is derived from formal
authority delegated to the line
manager. Your line manager or boss
may also be in a position to give or
withhold rewards.
President Cyril Ramaphosa Legitimate power The president of a country
possesses a great deal of positional
power as the head of the nation.
Nelson Mandela (former Referent power Mandela no longer possesses the
South African president) legitimate power that he once
enjoyed as President; however,
many people still follow him as a
leader and role model and identify
with his values and morals. Mandela
is a good example of a leader with
extensive referent power.
Bill Gates (founder and CEO Legitimate power + As CEO, Bill Gates has a lot of
of Microsoft) expert power legitimate power, however, in his
early days with Microsoft his
leadership was based largely on his
technical excellence and knowledge.
Oprah Winfrey (owner of Legitimate power + Although Oprah Winfrey has been
Harpo Productions) referent power described as a meticulous
businesswoman, her true power
base is drawn from referent power.
Her caring approach and
involvement in people's lives has
resulted in her becoming one of the
most influential women in the United
States.
Jack Welch (former CEO of Legitimate power + Although considered one of the top
General Electric) power of reward + businessmen of the 20th century,
coercive power his approach to management
received some criticism. A recent
management publication quoted
Jack Welch saying “Business
success is a matter of reward and
punish”. This approach was very
evident at GE in the days of Jack
Welch where the top 20% of
employees were richly rewarded
while the worst-performing 10%
were fired.
Having looked at some of the foundations of leadership and management, we next
delve into the theories of leadership.
9.5 Leadership theories
LESSON
Lesson 9: Leading
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9.5 Leadership theories
Apart from the types of power leaders possess, you might have asked yourself the
question: “But what makes them great?” Researchers have been asking similar
questions for many years now and in so doing have tested a number of models. In
this lesson, you will learn about the three important theories of leadership, namely
trait (characteristics), behavioural and contingency (situational) theory of leadership.
9.5.1 Trait theory of leadership
What does the person you described look like (e.g. male or female; tall or short)?
What kind of personality does he or she have? Did you describe this person as
imaginative, intelligent, honest visionary, and courageous? If you had difficulty
making a comprehensive list of traits, or if you perhaps found yourself with an
endless list, then you are once again in a similar position to those academics who
first sought as early as 1930, to define leaders according to a set of characteristics or
traits.
This first leadership model, known as the trait theory of leadership, suggests that
certain leadership characteristics are common to all successful leaders and that if we
can identify those characteristics, we can place people with such characteristics in
positions of leadership. The problem with this theory is that over half a century's
worth of research has failed to provide a universal set of characteristics for
successful leaders. Successful leaders in history have displayed very different traits.
Compare for example the leadership traits of the leaders identified in activity 9.2.
While all of them could be described as good leaders, their personal characteristics
might differ greatly.
Access the OER link below to learn about the trait perspectives on
leadership.
13.4 The Trait Approach to Leadership - Principles of Management | OpenStax

The core traits that have been identified as preconditions that endow people with
leadership potential include drive, leadership motivation, honesty and integrity, self-
confidence, cognitive ability, knowledge of the business and other traits. Make sure
that you have an understanding of what each of these entails.
9.5.2 Behavioural theory of leadership

Following researchers’ attempts to identify a single set of characteristics, the next
model of leadership that began to emerge is known as the behavioural theory of
leadership. This leadership model was based on the assumption that good leaders
are determined by how they behave and that successful leaders behave differently
from unsuccessful leaders. This behaviour is commonly referred to as “leadership
style”. In other words, a leader who treats subordinates in a certain manner will be
regarded as a successful leader.
A good contemporary example of different leadership styles would be to compare

Donald Trump (billionaire real estate developer and former president of the United
States of America) and Sir Richard Branson (CEO of Virgin). Donald Trump has
been widely described as autocratic and ruthless in his leadership style and he
exhibits many of the behaviours associated with a task-oriented leader. Sir Richard
Branson is quite different in his leadership approach and is described as the most
flamboyant business leader in modern times, with a clear focus on people
leadership. Branson’s leadership style is more characteristic of a relationship-
oriented leader. Researchers from four different universities support the behavioural
approach to leadership as highlighted below.
Access the OER link below to learn about the behavioural approaches to
leadership.
13.5 Behavioral Approaches to Leadership - Principles of Management |

OpenStax
9.5.2.1 The University of Iowa
The study conducted by the University of Iowa identified three basic leadership
styles, namely autocratic, democratic and laissez-faire.
9.5.2.2 The Ohio State University
The study by the Ohio State University identified two leadership styles, namely
initiating structure and consideration.
9.5.2.3 The University of Michigan
The study conducted by the University of Michigan distinguished between

production-oriented leaders and employee-orientated leaders.
9.5.2.4 Blake and Mouton
The Blake and Mouton study developed the managerial/leadership grid.

It is important that you familiarise yourself with the four main studies on the
behavioural theory of leadership as discussed in the OER provided above.
9.5.3 Contingency or situational theories of leadership
The third leadership model to emerge opposes the view that there is "one right way
to lead'' and rather attempts to determine the best leadership style for a given
situation depending on various factors, namely the type of objectives that have to be
reached, the type of subordinates at the leader's disposal, and so on – hence the
name “situational leadership”. The three main situational leadership theories are
discussed below.
Access the OER link below to learn more about Fiedler's contingency
theory of leadership.
https://openstax.org/books/principles-management/pages/13-6-situational-contingen
approaches-to-leadership
9.5.3.1 Fiedler's contingency theory of leadership
According to Fiedler, organisations attempting to achieve group effectiveness

through leadership must assess the leader according to an underlying trait, assess
the situation faced by the leader, and construct a proper match between the two.
9.5.3.2 House’s path-goal model
The model postulates that leaders have a responsibility to assist employees to reach
their goals. As such, they should provide employees with the essential directions and
support to make sure that employees’ goals are aligned with the goals and
objectives of the organisation. The four leadership behaviours that leaders can
implement in different situations identified in this model included directive,
supportive, participative and achievement-oriented (Erasmus et al., 2019).
9.5.3.3 Hersey and Blanchard's situational leadership model
The work maturity of employees determines the best leadership style for a particular
situation. The employees’ need for achievement, their willingness to accept
responsibility, and their task-related ability and experience determine their work
maturity. The manager uses one of four leadership styles (telling, selling,
participating or delegating) to match the employees’ maturity level in a given
situation (Erasmus et al., 2019). In the next section, we will explore motivation and
how managers and leaders can motivate their employees.
9.6 Motivation
LESSON
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9.6 Motivation
Motivation can be described as an inner desire to fulfil an unfulfilled need (Erasmus

et al., 2019). Every person, whether employed in an organisation, a full-time student,
a housewife or an entrepreneur, has personal goals that he or she strives for – and
will, to some extent, be driven intrinsically (internally) to achieve these goals. At the
same time, it is important that employees are also motivated to achieve the goals of
the organisation. Other than the decisions that employees make on their own about
their work – and whether they like their work – the manager in his or her role as a
leader is the most influential factor in ensuring employee motivation and morale, and
ultimately the pursuit of organisational goals. Read through the case study about
Siemens to see how they motivated their employees within a creative environment.
_____________________
Siemens: Motivation within a creative environment
Siemens is the engineering group behind many of the products and services people
take for granted in their daily lives. The list of products designed and manufactured
by Siemens is almost endless, from traffic lights to gas turbines to domestic
appliances such as kettles and fridges.
Engineers use scientific principles to develop products or systems that solve real-life
problems. Much of engineering is about innovation – rather than invention. This
means that engineers transform creative ideas into improved products, services,
technologies or processes. A career within the field of engineering is exciting and
varied, as the work is constantly changing. Becoming an engineer at Siemens is
about using energy, ideas and passion. It requires a range of skills and abilities that
are needed across the whole business.
Siemens offers opportunities for young people at all levels to enter the world of
engineering. The company also recruits undergraduates and graduates for
professional engineering jobs. It goes beyond the standard approaches to attracting
suitable candidates because its employees enable the company to be competitive.
This approach has led to Siemens having an open culture with opportunities for
employees at all levels. However, even at entry-level, Siemens employees enjoy
wide-ranging opportunities for further education and training. By following an
engineering career, Siemens people have the opportunity to move into other
disciplines. For instance, they may go into areas such as research, manufacturing,
sales and marketing, finance, or project management.
Motivation stimulates people and encourages them to willingly put more effort into
doing something. Well-motivated employees will feel fulfilled and happy in the
workplace. Additionally, they are likely to be more productive and to produce work of
a higher quality. Motivated individuals are influenced by a number of different factors.
Initially, everybody has basic needs, such as food or accommodation, which pay can
provide. However, there are many other factors that motivate individuals. A creative
environment, such as that provided by engineering, can be very stimulating.
The structure of Siemens motivates individuals by empowering them to improve

processes. Siemens provides the sort of environment where workers can learn new
things and are given the opportunity to progress within the business. Some staff at
Siemens thrive on the problem-solving aspect of their roles and respond to
challenges. Other employees find the varied nature of the work motivating – having
the opportunity to try different roles. Siemens employees also value the fact that they
are allowed to be imaginative and can influence their own work. This culture
demonstrates that Siemens values its employees and helps to recruit the next
generation of engineers.
________________________
If you want to be a successful manager, you need to understand how individuals are
motivated and what motivates them. You will then be in a position to influence the
behaviour of subordinates. Many theories have been developed that deal with the
motivation of employees. In this lesson, we introduce you to the basic model of
motivation as well as to Maslow’s hierarchy of needs. It is very important that you
understand this hierarchy and its application. According to Maslow, different people
experience different levels of need fulfilment. For instance, some people may be
striving to satisfy their social needs, while others are mostly driven by their esteem
needs. Some may even be at a level where their main concern in life is to satisfy
their physiological needs.
Activity 9.3
Give examples of how each need can be fulfilled in the workplace environment.
Feedback
The following examples explain how each need can be fulfilled at work:
• Security needs can be fulfilled by a long-term contract, good information on the future
of the organisation, and a safe work environment.
• The need for belonging in a work environment can be fulfilled by a good work
atmosphere characterised by teamwork and satisfying interpersonal interactions.
People are social beings and want to belong to a community.
• Esteem needs are linked to positive feedback on the quality of your work, being
rewarded and praised, getting a promotion or a raise, and knowing you are useful to
the organisation. All these examples are ways to fulfil esteem needs.
• Self-actualisation/self-realisation can be fulfilled by personal and spiritual
development, religion and culture. The company values autonomy and encourages
employees to become subject matter experts.
Maslow’s theory suggests that although all motives are present in every adult
(babies/toddlers acquire them over time), not all motives influence an individual. We
may spend a great deal of effort satisfying our esteem needs, but when there is a
sudden earthquake, the only motive that will influence our behaviour is the need to
survive. In the same way, we may eat a meal regularly, but we would not be
motivated to change jobs and join a company that gives its employees free meals. In
other words, although we take steps to satisfy certain needs, we are driven by those
needs that are basically unfulfilled. The basic model of motivation is depicted in
figure 9.2. Make sure that you understand this model and how it can be applied in
the organisational context. The motivation process begins with internal needs,
motives or drives, and moves in a certain sequence.
Figure 9.2: The basic model of motivation (Mullins, 2005)
Now that you understand motivation, in the next section we will look at the difference
between groups and teams in the organisation.
9.7 Groups and teams in organisations
Lesson 9: Leading
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9.7 Groups and teams in organisations
Employees of the modern organisation do not work merely as individuals hidden

away somewhere in a small cubicle and working in isolation from their co-workers.
As the world of work becomes more and more complex, so the need grows for
organisations to approach work and problems in a multidisciplinary and cross-
functional manner. This has given rise to the use of groups and teams in
organisational structures, with the associated need for team leadership; therefore,
groups and teams are discussed as part of this particular lesson.
A clear distinction is made between groups and teams and it is important that you
are able to identify and understand the difference between the two. You also need to
familiarise yourself with the different types of groups and teams.
9.7.1 Groups
“A group refers to two or more people, interacting and interdependent, who come
together to attain particular goals” (Smit, Botha & Vrba, 2020; Botha & Vrba, 2021).
People join groups for various reasons, such as:
• satisfying social needs to achieve goals that are impossible for them to
achieve as individuals
• achieving some level of recognition, prestige or status
• enhancing their self-worth by belonging to a specific group
• feeling more powerful by joining a group because group action can achieve
more than individual action
• feeling less insecure and less threatened, suffering less self-doubt and feeling
stronger than standing alone – groups offer security to people
Most people belong to various groups – at work, in the community or their families.
However, in organisations, there are informal and formal groups. Figure 9.3 depicts
these two categories together with the specific type of group within them.
Figure 9.3: Categories and types of groups (Smit, Botha & Vrba, 2020; Botha &
Vrba, 2021)
Do you still remember the informal organisation discussed in lesson 7? An informal

group is an interest group or a friendship group that is not part of the organisational
hierarchy and one that develops out of the day-to-day activities and interactions
between people working in the same organisation (Smit, Botha & Vrba, 2020; Botha
& Vrba, 2021).
• Interest groups focus on the needs of the group itself, stemming from the
shared interests of its members (Smit, Botha & Vrba, 2020; Botha & Vrba,
2021).
• A friendship group can range from a social club that organises social events
for the members of a department, to a few people playing cards together
during their lunch break (Smit, Botha & Vrba, 2020; Botha & Vrba, 2021).
The formal group or work group is a unit of two or more people who interact
primarily to share information and to make decisions that will help each group
member perform within his or her own area of responsibility. The organisation’s
structure defines formal groups, where work assignments are allocated to specific
work groups. (Smit, Botha & Vrba, 2020; Botha & Vrba, 2021).
• A command group comprises a manager and the employees who report

directly to him or her. The organisational structure determines the authority
relationships in an organisation and indicates the various command groups
(Smit, Botha & Vrba, 2020; Botha & Vrba, 2021).
• A task group comprises people working together to complete a specific task,
and it can cross hierarchical boundaries. With the completion of the project,
the group disbands (Smit, Botha & Vrba, 2020; Botha & Vrba, 2021).
Every group in an organisation is different in terms of its structure or the set of

characteristics that shape the behaviour of both the group and the individual group
members. The structure of a group defines the positions individual group members
occupy in the group and the position and functioning of the group in the context of
the entire organisation. The following seven variables define group structure, and it
often predicts the effectiveness of a group.
• Leadership is a critical factor in the success of a group. In both formal and

informal groups a leader gives direction and creates an environment where
workers can be motivated to achieve the goals of the group and the
organisation.
• Each member in a group fulfils a role and each role carries a role expectation,
which is how others believe a person should act in a given situation.
• Group norms are standards shared by members of a group and develop from
interaction between these members. Norms can be positive or negative and
should be managed by managers.
• Status in groups can be formal or informal, meaning that groups sometimes
give higher status (informal) to group members who are relatively low on the
hierarchical level of the organisation. Such status is derived from factors such
as age or experience or the social influence of a group member.
• Cohesiveness refers to group solidarity – the way a group stands together as
a unit. Group cohesiveness develops because the group is attractive to its
members and this attraction relates to need satisfaction.
• Group size affects the group’s overall performance. Smaller groups are
usually more productive than groups with more members, although bigger
groups perform better at problem-solving.
• Diverse groups with a variety of skills and knowledge tend to be more
effective than homogeneous groups.
9.7.2 Teams
“A team (or a work team) comprises a small number of people with complementary
competencies working together, committed to a common purpose, and individually
and collectively accountable for performing tasks that contribute to attaining specific
goals” (Saylor.com Academy, 2020; Smit, Botha & Vrba, 2020; Botha & Vrba, 2021).
There are several types of teams:
1. In the traditional manager-led team, the leader defines the team’s goals and
activities and is responsible for achieving its assigned goals.
2. The leader of a self-managing team may determine overall goals, but
employees control the activities needed to meet them.
3. A cross-functional team is designed to take advantage of the special
expertise of members drawn from different functional areas of the
organisation.
4. On virtual teams, geographically dispersed members interact electronically in
the process of pursuing a common goal.
Open the OER link below to learn about teams.
https://saylordotorg.github.io/text_exploring-business-v2.0/s12-teamwork-and-
communications.html
Teams can improve organisation and individual performance in a number of areas.
Not all teams, however, are formed to achieve the same goals, or charged with the
same responsibilities. Nor are they organised in the same way.
Is there a difference between groups and teams? Not all groups are teams. Open the
link below to watch the video about the difference between teams and groups.
Time: 3:10 minutes
Play Video
Having learned about teams and groups, in the next section you will learn about
communication.
9.8 Communication
Lesson 9: Leading
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9.8 Communication
By now you should have realised that leaders are human beings involved with other
human beings. For leaders to influence their subordinates they must be able to
communicate effectively. This section touches briefly on the importance of
communication and the elements involved.
9.8.1 Defining communication
The English word, “communication” has been derived from the Latin word,
“communicare”, which means to impart or to participate or to transmit. The word
“communicare” is derived from the root, “communis”, which means to make common
or to share (RA Podar College, n.d). Communication is defined as the process of
understanding and sharing meaning (Pearson & Nelson, 2000). The first keyword in
this definition is process. A process is a dynamic activity that is hard to describe
because it changes (Pearson & Nelson, 2000). Imagine you are alone in your
kitchen, thinking. Someone you know (say, your mother) enters the kitchen and you
talk briefly. What has changed? Now, imagine that your mother is joined by someone
else, someone you have not met before – and this stranger listens intently as you
speak, almost as if you were giving a speech. What has changed? Your perspective
might change, and you might watch your words more closely. The feedback or
response from your mother and the stranger (who are, in essence, your audience)
may cause you to re-evaluate what you are saying. When we interact, all these
factors — and many more – influence the process of communication.
The second keyword is understanding. “To understand is to perceive, to interpret,

and to relate our perception and interpretation to what we already know.” If a friend
tells you a story about falling off a bike, what image comes to mind? Now your friend
points out the window and you see a motorcycle lying on the ground. Understanding
the words and the concepts or objects they refer to is an important part of the
communication process (University of Minnesota Libraries Publishing, 2019).
Next comes the word sharing. Sharing means doing something together with one or
more people. In communication, sharing occurs when you convey thoughts, feelings,
ideas, or insights to others. You can also share with yourself (a process called
intrapersonal communication) when you bring ideas to consciousness, ponder how
you feel about something, or figure out the solution to a problem and have a classic
“Aha!” moment when something becomes clear (University of Minnesota Libraries
Publishing, 2019).
Finally, meaning is what we share through communication. The word “bike”

represents both a bicycle and a short name for a motorcycle. By looking at the
context in which the word is used and by asking questions, we can discover the
shared meaning of the word and understand the message (University of Minnesota
Libraries Publishing, 2019).
9.8.2 Elements of communication
To better understand the communication process, Figure 9.3 illustrates a basic

transactional communication model with the eight key elements of interpersonal
communication. These elements are explained below (University of Minnesota
Libraries Publishing, 2019):
• Source – The source imagines, creates, and sends the message. The
speaker begins by first determining the message – what to say and how to
say it. The second step involves encoding the message by choosing just the
right order or the perfect words to convey the intended meaning. The third
step is to present or send the information to the receiver or audience. Finally,
by watching the audience’s reaction, the source perceives how well they
received the message and responds with clarification or supporting
information.
• Message – The message is the stimulus or meaning produced by the source
for the receiver or audience. The message may convey ideas, opinions, plans,
orders or explanations. To be effective, a massage should be simple and
clear (Erasmus, Rudansky-Kloppers & Strydom, 2019).
• Channel – The channel is the way in which a message or messages travel/s
between source and receiver. Spoken channels include face-to-face
conversations, speeches, telephone conversations and voicemail messages,
radio, public address systems, and Voice over Internet Protocol (VoIP).
Written channels comprise letters, memorandums, purchase orders, invoices,
newspaper and magazine articles, blogs, e-mails, text messages, tweets, and
so forth.
• Receiver – The receiver receives the message from the source, analysing
and interpreting the message in ways both intended and unintended by the
source. As a receiver you listen, see, touch, smell, and/or taste to receive a
message.
• Feedback – When you respond to the source, intentionally or unintentionally,
you are giving feedback. Feedback is composed of messages the receiver
sends back to the source. Verbal or nonverbal, all these feedback signals
allow the source to see how well and how accurately (or how poorly and
inaccurately) the message was received. Feedback also provides an
opportunity for the receiver or audience to ask for clarification, to agree or
disagree, or to indicate that the source could make the message more
interesting. As the amount of feedback increases, the accuracy of the
communication also increases.
• Environment – The environment is the atmosphere – physical and
psychological – where you send and receive messages. For instance, the
environment can include the tables, chairs, lighting, and sound equipment that
are in the room. The room itself is an example of the environment. The
environment can also include factors like a formal dress that may indicate
whether a discussion is open and caring or more professional and formal.
• Context – The context of the communication interaction involves the setting,
scene, and expectations of the individuals involved. The degree to which the
environment is formal or informal depends on the contextual expectations for
communication held by the participants. Context plays a very important role in
communication, particularly across cultures.
• Interference – Interference, also called noise, can come from any source.
Interference is anything that blocks or changes the source’s intended meaning
of the message. Noise interferes with normal encoding and decoding of the
message carried by the channel between source and receiver. Not all noise is
bad, but noise interferes with the communication process.
Figure 9.4: A transactional communication model (University of Minnesota
Libraries Publishing, 2019)
Open the link below to watch a YouTube video for a short explanation of the
communication model.
Time: 4:52 minutes
Play Video
Activity 9.4
Identify some of the poor forms of communication that you are aware of.
Feedback
The following are some forms of poor communication:
• Giving unspecific deadlines – always give detailed deadlines when communicating a

need. A good leader will schedule a pre-deadline check-up to ask the employee about the
progress made.
• Negative emphasis – negative comments from a leader to an employee can lead to
discouragement and a decrease in work output.
• No feedback is given regarding what is expected.
• Messaging through e-mail is not a reliable form of communication – a good leader will
communicate with employees individually and face-to-face.
Did you identify some forms of poor communication not listed above? You can discuss this with your
fellow students via the Discussion Forum.
If you have not understood the explanations in this module so far, then the
communication between lecturer and learner has not been successful! This could be
as a result of faulty sending, or faulty receiving, or both. It could even be a case of
the channel of communication being ineffective because you would have benefited
more from attending a discussion class than from reading the study guide on your
own. Students sometimes phone their lecturers for information that has been clearly
set out in a tutorial letter – but they simply did not bother to read it. That would mean
poor communication on account of poor receiving. It could also be that the
explanation is so vague that the student still does not understand it, even after
reading it. This would simply be poor communication because of poor sending in
terms of the message being poorly constructed. Similarly, in the business
environment we often see the effects of poor communication. Many times, we hear
excuses such as “Oh, so that is what you meant!” or “If you had said so in the first
place, things would have been far clearer!”
9.9 Summary
LESSON
Lesson 9: Leading
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9.9 Summary
Leading is the third task of management and is the one that sets up the business
and keeps it going. As you may have realised from our discussion, leading is a
difficult concept to define, because it is concerned with influencing the behaviour of
subordinates and directing their activities so that the aims of the business are
attained as profitably as possible. Its components – leadership, motivation, group
and team behaviour and communication – are interrelated instruments used to exert
that influence. Managers should have sufficient knowledge of these factors to be
good leaders as well as good managers. We deal with the fourth and final important
element of management, namely control, in lesson 10.
Make sure you have mastered the key concepts that were listed at the start of the
lesson by making brief notes so that the meaning of each term is clear.
Before proceeding to the next lesson, take some time to reflect on what you have
learned in lesson 9. Make sure you have achieved all the outcomes listed at the
beginning of this lesson.
9.10 Self-assessment questions
QUESTION 1
Which one of the following statements on authority is wrong?
a) Final authority flows from delegation.

b) Management delegates authority to subordinates to enable them to execute
tasks.
c) The right to expect action from others is also conferred by members of a group.
d) Power is not granted to a manager.
QUESTION 2
Which one of the following types of power is granted to all managers?
a) legitimate
b) personal
c) referent
d) expert
QUESTION 3
A trade union is formed to satisfy the _______ needs of the employees.
a) basic
b) security
c) social
d) esteem
e) self-actualisation
The answers to the self-assessment questions
Questions Answer
1 d
2 a
3 b
LESSON
Lesson 10: Controlling

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This lesson will require approximately NINE notional hours. Figure 10.1 represents
Figure 10.1: Visual overview of the lesson. (Source: Author's design)
10.1 Introduction
LESSON

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10.1 Introduction
The management functions that you have learned about so far are planning (lesson
7), organising (lesson 8) and leading (lesson 9). By now you know that planning is
about establishing plans for the organisation. This includes defining the mission and
objectives or performance targets to be met to achieve the organisation's mission.
After planning has been concluded, an organisation needs to be organised by
allocating the employees and resources required to implement the objectives. In
addition, employees should be provided with focus and direction, and be motivated
to accomplish the objectives of the organisation. The question that comes to mind is
"Are these functions enough in an organisation to succeed?". Unfortunately, the
answer is no. Once the organisation carries out its plan, there is a need to monitor
operations to determine whether everything is going according to the plan. In most
instances, there is a need to take corrective action. This is where the controlling
function comes in. In this lesson, you will learn how to define the term controlling,
what the purpose of controlling is and why there is a need for controlling.
Furthermore, you will be introduced to the controlling process, types of controls,
areas to be controlled and characteristics of effective controlling. Lastly, you will
explore basic controls for small businesses.
Learning outcomes
LESSON

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Learning outcomes
When you have worked through this lesson, you should be able to:
• define the management function of controlling

• explain the purpose of controlling
• discuss how the need for control is determined depending on the complexity
and stability of the environment
• discuss the four steps of the controlling process
• differentiate between the various types of control
• explain the key areas of control in an organisation and the techniques used
• discuss the characteristics of an effective controlling system
• explain the basic controls for small businesses
Key terms

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Key terms
actual performance information resources controlling

areas of controlling inventory
budgets inventory controlling
control process just-in-time system (JIT)
complexity material requirements planning (MRP)
corrective action physical resources control
deviations quantity controlling
economic order quantity (EOQ) set standards
financial ratios small businesses
financial resources controlling stability
human resources controlling total quality management (TQM)
Now that you know what will be expected of you at the end of this lesson and the key
terms that you should be familiar with, the next section will enable you to define the
management function of controlling.
LESSON

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10.2 Defining controlling
Controlling is used to ensure that the organisation's goals and objectives are
reached and that resources are being used as productively and effectively as
possible. It functions to give feedback on the other three tasks, namely planning,
organising and leading, and to start a new cycle of the management task. Controlling
is concerned with narrowing the gap between what was planned and the actual
achievements of management and it ensures that all activities are carried out as they
should be. In addition, controlling is the process whereby management obtains
information to determine whether the objectives that were set for the organisation
during the planning stage have been reached and, if not, to take corrective action.
The management process thus takes place between planning and controlling. So, it
should be clear that the task of controlling has its roots in planning.
Like the managerial functions of planning, organising and leading, controlling is a

difficult task that is executed at different levels of the organisation (Openstax, 2019).
For example, top management monitors the overall strategic plans of the
organisation, which can be implemented only if middle management controls the
organisation's divisional and departmental plans. The divisional and departmental
plans, in turn, depend on lower management to control and monitor employees'
performance (Openstax, 2019). The following section will help you to understand the
purpose of controlling in an organisation.
10.3 The purpose of controlling

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10.3 The purpose of controlling
An organisation needs a controlling process because even the best-laid plans can go
wrong owing to unforeseen circumstances or unexpected changes within the
environment. Organisations did not foresee the recession that occurred in 2009 or
the impact that a pandemic like Covid-19 would have on their sustainability.
Therefore, many organisations experienced great losses despite proper planning
before these occurrences. Some organisations managed to adjust, though, because
they have had effective control systems to detect changes in the environment. Read
the following case study on small, medium and micro enterprises (SMMEs) surviving
and thriving post Covid-19 due to effective financial and quality control. The full
article focuses on how South African SMMEs can survive and thrive post Covid-19,
but we only extracted the sections related to the management function of controlling.
How South African SMMEs can survive and thrive post Covid-19
The ongoing Covid-19 pandemic is causing untold human suffering across Africa and is
likely to leave an indelible impact on the continent's small and medium-sized enterprises
(SMEs). For South African SMEs, already having to contend with a contracting economy,
additional shocks from Covid-19 are causing further pressure on their operations. Lockdown
measures have caused revenues in many SMEs to fall precipitously and the majority report
that they are being forced to cut back on business spending to survive. For some, this may
not be enough; analysts are predicting that around 60 per cent of SMEs may close before
the crisis is over.
Many low-matured and new SMME businesses lack the financial, operational, and strategic
structures that are common in larger businesses. This hinders them from making the best
use of the available capital to scale their operations. This may be because they have limited
cash flow and are highly dependent on clients paying their invoices on time or because they
have little knowledge of and insight into how to effectively set up and run the business, and
the associated key metrics to be tracked. For example, an agricultural client that had an
ambitious growth plan to expand their facilities in core and non-core areas struggled to
obtain the required funding because the business was not in a financial position to meet
stringent funding requirements.
Lack of prioritisation and financial planning that would have allowed them to focus on core
areas to finance and build out meant that, rather than growing sustainably, the scale of their
ambitions and poor internal management combined – and as a result, they did not grow at
all.
Liquidity and cash flow management are likely to come under even further pressure during
the crisis. A recent survey highlights that SMMEs are taking drastic actions to hedge against
future risk, with 70 per cent saying they have reduced business spending already.
One of the four areas where SMMEs can take action to mitigate these challenges during the
crisis is to drive efficiency as well as sales. Most SMMEs focus on increasing sales and
managing cash as priorities. SMMEs that also focus on operational efficiencies can drive
further competitiveness to support sales and potentially create increased capacity in the
business. For example, a manufacturing SMME used basic visualisation tools such as
management boards to optimise operations. By tracking tasks in progress and key
performance indicator dashboards, they managed to achieve a 25 per cent improvement in
scrap reduction, which had resultant earnings before interest, tax, depreciation, and
amortisation impact of roughly 100 per cent. This was primarily driven by improved visibility
into areas of leakage as well as a better ability to focus team efforts on solving problems.
Extract from https://www.mckinsey.com/featured-insights/middle-east-and-
africa/how-south-african-smes-can-survive-and-thrive-post-covid-19# (Accessed 8
February 2022)
Organisations must do environmental scanning to keep abreast of change, to

determine which factors pose threats to existing goals and to determine which
factors represent opportunities to promote current goals. The following reasons show
why it is important to have controlling processes:
• Without controlling, effective planning cannot take place.

• It enables companies to adapt to environmental change and allows them to
cope with changes and uncertainties.
• Controlling helps to limit the accumulation of errors due to poor decision-
making.
• As the size of a business increases, it becomes increasingly difficult to identify
areas of weak performance.
• Controlling helps to minimise costs and increase output.
• An effective controlling system allows management to identify problems
before they become critical for the organisation.
• Controlling allows management to determine whether delegated tasks have
been carried out satisfactorily.
• Increasing competition necessitates more effective cost and quality control. A
lack of control can result in resources being wasted or misused.
• Controlling usually results in better quality.
In this section, we have demonstrated the importance of the management function of
controlling. However, organisations differ in the levels of controlling that they require.
This brings us to the next section, which will enable you to discuss the different
levels of need for controlling.
10.4 The need for controlling

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10.4 The need for controlling
While there is a need for control in all organisations, the amount, importance and
type of controls differ from one organisation to another. The most important aspects
that affect the nature of controlling systems chosen by an organisation are the level
of environmental change and the complexity it experiences (Openstax, 2019). Figure
10.2 depicts different levels of need for controlling depending on the complexity and
stability of the environment in which an organisation operates.
Figure 10.2: Need for controlling

(Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license.
Available from https://openstax.org/details/books/principles-management)
The aspects of the above diagram are discussed below.
10.4.1 Environmental stability
Organisations that conduct business in a relatively stable environment usually need

to change very little; therefore, managers can ultimately control their organisations
by implementing a set of routine procedures. However, with greater levels of
environmental change and the associated uncertainty, controlling requires continual
attention from managers. Routines and rigid controlling systems are simply not
adequate for such conditions (Openstax, 2019).
10.4.2 Environmental complexity
Environmental complexity affects the nature of control systems. Simple

environments contain a limited number of highly similar components that are
relatively easy to control using shared sets of rules and procedures. For example,
the same rigid controlling system can be used in all branches of a large organisation.
Factors such as organisational growth and product diversification might increase the
complexity and as a result, the need for the latest information and management's
coordination between organisational activities intensify. However, the complexity that
calls for increased controlling also requires open, responsive systems that can react
rapidly and successfully to complex environments. In such complicated situations,
organisations often specify the development of flexible systems as a means of goal
attainment (Openstax, 2019).
The level of control that organisations need under different environmental conditions
can be classified as follows:
• Block 1 (Low need for controlling) – occurs when the environmental

complexity is simple and environmental stability is relatively static.
• Block 2 (Moderate need for controlling) – occurs when the environment is
complex and environmental stability is static.
• Block 3 (Moderate need for controlling) – occurs when the environmental
complexity is simple and environmental stability is relatively dynamic.
• Block 4 (High need for controlling) – occurs when the environment in which
the organisation operates is both complex and dynamic.
The organisation first needs to establish the need for controlling, considering the
stability and complexity of the environment in which it operates. This will assist it to
establish the process to be followed, areas to focus on and techniques to be used. In
the following section, you will learn about the controlling process followed by most
organisations.
10.5 The controlling process

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10.5 The controlling process
The controlling process as depicted in figure 10.3 represents the heart of the
controlling task. It is important that you understand the sequence of these steps and
how the process is linked to the task of planning.
Figure 10.3: The four steps of the controlling process
We will now discuss the controlling process.
Step 1: Setting performance standards
Performance standards are the levels of performance an organisation wants to

attain. The performance standard of an organisation are based on its mission,
objectives and plans (Gitman, McDaniel, Shah, Reece, Koffel, Talsma & Hyatt,
2018). The most effective performance standards state a measurable behavioural
objective that can be achieved in a specified timeframe. Remember that in the
planning lesson, we have indicated that the objectives should be SMART. Examples
of performance standards include the following (Erasmus, Rudansky-Kloppers &
Strydom, 2019):
• Productivity – The ratio of the inputs and outputs in the organisation. For
example, if the target is to produce goods and services at a ratio of 1:2, the
organisation expects to double the amount spent on producing their products
or services.
• Profit – The amount of revenue the organisation envisages generating over a
certain period.
• Market share – Indicates the share of the overall market that the organisation
aims to occupy. For example, in 2019 the market shares for Vodacom, MTN,
Cell C and Telkom were 42%, 29%, 16,9% and 9,5%, respectively
(https://www.statista.com/statistics/980115/mobile-market-share-south-
africa/).
• Staff development – This indicates the effectiveness of the training
programme for employees in the organisation.
Activity 10.1

Case study: Vodacom's strategic objectives
The company identified the following performance standards:
• Grow data revenue to 40% of Group service revenue.

• Clear market share leadership in all markets through segmented offerings and
best distribution.
• Drive people transformation through diversity, skills and talent growth,
achieving an Engagement Score of 80.
• Grow fixed-line FTTx connections in South Africa.
• Grow five-point NPS and brand leadership through network leadership,
differentiated customer experience and best value.
• Engage proactively with government and stakeholders to achieve each
country's broadband goals and contribute to a positive impact on societies,
achieving clear reputation leadership in all markets.
• Grow contribution from enterprise to 30% of Group service revenue.
• Grow contribution from non-South African entities to 30% of Group service
revenue.
• Grow contribution from new services to 5% of Group service revenue.
• Drive cost efficiencies to ensure cost growth is 0.5% lower than revenue
growth.
Case study extracted from https://www.vodacom-reports.co.za/integrated-reports/ir-

2016/ovr-strategy.php (Accessed 22 October 2020)
Use the table to classify the performance standards that Vodacom formulated.
Productivity Profit Market share Staff Reputation

development
Feedback
The performance standards of Vodacom can be classified as follows:
Productivity Profit Market Staff Reputation

share development
- Grow fixed- - Grow data revenue - Clear - Drive people - Grow five-point
line FTTx to 40% of Group market transformation NPS and brand
connections service revenue. share through leadership through
in South leadership diversity, skills network leadership,
Africa. - Grow contribution in all and talent differentiated
from enterprise to markets growth, customer
- Drive cost 30% of Group through achieving an experience and
efficiencies service revenue. segmented Engagement best value.
to ensure offerings Score of 80.
cost growth - Grow contribution and best - Engage
is 0.5% from non-South distribution. proactively with
lower than African entities to government and
revenue 30% of Group stakeholders to
growth. service revenue. achieve each
country's
- Grow contribution broadband goals
from new services to and contribute to a
5% of Group service positive impact on
revenue. societies, achieving
clear reputation
leadership in all
markets.
Step 2: Measuring actual performance
An assessment of the actual performance must be conducted after establishing what

should be measured, by when, how and by whom (Openstax, 2019). This is a
continuous process that should be conducted to collect information and report on the
actual performance. The performance activities should be quantifiable; and reliable
measurements of actual achievements should be adopted (Erasmus et al., 2019).
The areas of control and the techniques used by most organisations are discussed in
section 10.7.
Step 3: Comparing actual performance with standards
During this step, the actual performance established in the previous step is
compared to the performance standards set in Step 1. This assessment includes
comparing actual organisational achievements with what was planned (what an
organisation is trying to achieve) and the means (how an organisation intended to
implement the actions). During this step, it is vital to understand why a standard has
only been achieved and not exceeded, or even why performance has been much
better than anticipated (Erasmus et al., 2019). The results of this comparison afford
management with the information to evaluate any deviations. When evaluating the
deviations, the following three aspects need to be considered (Erasmus et al., 2019):
• Ensure that the differences between the actual performance and the
standards are valid.
• Determine whether the size of the differences substantiates additional
investigation.
• Identify all the reasons and activities that have contributed to the differences.
Causes of deviations include poor planning, unrealistic standards, defective

processes, shortage of resources, ineffective supervision and lack of communication.
Step 4: Taking corrective action
Using comparative information, managers form conclusions about the relationships

found between expectations and reality – and then decide whether to maintain the
status quo, change the standard, or take corrective action (Openstax, 2019). The
controlling-by-exception principle should be applied (Erasmus et al., 2019); meaning
that only critical differences in performance are reported to top management. The
less critical discrepancies should be dealt with by supervisors and employees
themselves. There are three options that management can choose from if actual
performance differs from the set standards (Erasmus et al., 2019):
• Actual performance can be enhanced to reach the set standards.

• Strategies can be reviewed to realise the set standards.
• Performance standards can be adjusted (lowered or raised) to ensure that the
standards are more realistic considering the prevalent conditions.
This step completes the cycle of the controlling process and serves as the reference
point for the following cycle in the management process.
Activity 10.2
Case study: Phaṱhutshedzo Cup 'n Cakes plans to expand
Phaṱhutshedzo Cup 'n Cakes (PCnC) is an SMME based in Polokwane, Limpopo.

The owner, Ndivhuwo Ndou, started the company during the Covid-19 pandemic
after losing her job. Hence, she named it Phaṱhutshedzo (a Tshivenda name
meaning "blessings"). During a recent planning session, Ndivhuwo and her
employees decided that the company should expand in the next financial year. As
such, new employees should be hired and they should relocate to a building that is
big enough to accommodate the expanded operations. However, to achieve that,
individual and team sales needed to increase by 25%. Together with her sales team,
Ndivhuwo came up with strategies that they will implement to achieve the set target.
Ndivhuwo promised the team additional incentives if they were to achieve their
goals.
By the end of the financial year, the overall sales increased by 20,75%. Ndivhuwo
then reviewed the sales team's performance and found the following:
• Peter Ratau: Sales increased by 19%
• Bohlokoa Masemola: Sales increased by 28%
• Bonolo Mudau: Sales increased by 11%
• Mafemani Baloyi: Sales increased by 25%
Ndivhuwo is your friend and she knows that you are registered for this module at
Unisa; therefore, she requested your assistance regarding the management function
of controlling. Briefly explain and provide examples of each step in the controlling
process. Also suggest what actions should be taken in step 4 regarding the
performance of the sales team.
Feedback
The steps in the controlling process are as follows:
Step 1: Setting performance standards
This step involves setting the performance standards an organisation aims to achieve –
based on its mission, objectives and plans. Ndivhuwo and her employees decided that the
company should expand in the next financial year. However, to achieve this, individual and
team sales need to increase by 25%.
Step 2: Measuring actual performance
Step 2 involves assessing the actual performance after a certain period. In the case study, it
was found that the overall sales increased by 20,75%. Individuals were also evaluated.
Step 3: Comparing actual performance with standards
The target was 25%; however, only 20,75% was achieved. This means that the team did not
achieve its target.
Step 4: Taking corrective action
In this step, managers use comparative information to form conclusions about the
relationships found between expectations and reality. They then decide whether to maintain
the status quo, change the standard, or take corrective action. Although the overall
performance did not reach the target in the case study, two out of the four team members
managed to achieve the target. The manager would need to have a meeting with the other
two team members who did not meet the target. The following steps can be taken:
• Additional on-the-job support can be provided;

• training programmes can be identified for the team members to attend; or
• team members be reprimanded for poor performance.
The following video summarises the controlling process and provides practical
examples of each step:
Play Video
In the next section, you will learn about the types of controlling that organisations can
implement.

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10.6 Types of controlling
There are different controlling activities that organisations can implement at three
stages in the work process – prior to, during, or after the performance. However, in
practice, managers use a combined controlling system that integrates controlling at
each of these intervals to enable them to prepare for a task, lead its progress, and
monitor the outcomes (Openstax, 2019).
10.6.1 Reactive controlling
Reactive controlling is used after the product or service has been completed, to
assess the results. For example, after clothes have been sewn in a factory that
produces clothing, a sample of the clothes is assessed to establish whether it meets
the specifications and to determine if the work was completed on time and produced
within budget. This type of control plays a significant role in planning for future tasks,
but the main function is to provide feedback by explaining the degree to which actual
tasks have been conducted (Openstax, 2019).
10.6.2 Proactive controlling
Proactive controlling is used to prevent deviation from a desired plan of action before
the work begins and also to avoid deviation from the planned course of action while
the work is in progress. This type of controlling assists to reduce losses by providing
vital information about any deviations as soon as possible, before they take place.
This enables managers to take action to prevent or reduce undesirable
consequences.
The types of controlling that have been discussed in this section can be used to
control certain areas, and various techniques are used for this purpose. The
following section will provide more information regarding the areas to be controlled
and the techniques to be used.
10.7 Areas to be controlled and techniques used
LESSON

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10.7 Areas to be controlled and techniques used
As a rule of thumb, organisations should identify the different areas that need to be
controlled, as those areas are generally responsible for the effectiveness of the
entire organisation. Figure 10.4 depicts the four areas on which controlling systems
in most organisations focus, as well as the techniques in use.
Figure 10.4: Areas to be controlled and techniques used

(Source: Author's design. Images used licensed under CC-BY 4.0 license. See
section 10.13 for more details)
The areas to be controlled, namely financial, human, physical and information

resources are discussed below.
10.7.1 Financial resources
Financial resources are very important to the success of any organisation and are
central to the controlling process. Financial control mainly focuses on the following
aspects (Gitman et al., 2018):
• Resources already owned by the organisation, such as cash and working

capital
• Income. Organisations generate income through sales of final products and/or
by capital gains and royalties; rendering of services.
• Expenditures such as payment of salaries, rent, tax, purchasing of raw
materials and other expenses
• Liabilities. An organisation should ensure that it manages its liabilities such as
mortgage debt, bank overdraft, money owed to suppliers, salaries owed,
taxes owed, and so forth.
The financial resources are controlled to ensure that the organisation generates
sufficient revenues to cover its expenses, resulting in a profit. Managers should
ensure that incoming and outgoing funds are strictly monitored, as to irregularities
such as fraud and errors are likely to occur. It is also important to make sure that the
organisation's existing financial resources are not tied in activities such as slow-
moving inventory and outstanding debtors, as the organisation might not convert
them to cash when they need it the most.
There are two important instruments in use for controlling the financial resources of
an organisation, namely budgets and financial ratios.
10.7.1.1 Budgets
A budget is a formal plan encompassing financial terms that specify how resources
are shared between different activities and departments in an organisation.
Management uses a budget to determine how financial resources are used. A
budget is critical in an organisation as it makes the following contributions to financial
control (Erasmus et al., 2019):
• It provides standards that can be used in the controlling process.

• It offers guidelines about how the resources are shared in the organisation.
• It enables managers to coordinate resources, departments and projects.
• Management can use it to evaluate resource allocation in the organisation.
Types of budgets include financial budgets (focusing on cash flow and capital
expenditure), operational budgets (focusing on revenue and operational aspects of
the organisation such as sales and contracts) and non-financial budgets (focusing on
other activities in the organisation, expressed in non-financial terms such as sales
volume, production and time projections).
10.7.1.2 Financial analysis
Financial analysis (also known as ratio analysis) is the process of evaluating

businesses, projects, budgets and other transactions related to finance, to establish
their appropriateness and performance. It is used to scrutinise the solvency, stability,
profitability or liquidity of an organisation to assess whether investing money in it will
be worthwhile. Financial analysis will be discussed in the module Business
Management I B (MNB1602).
10.7.2 Human resources
The controlling of human resources involves assessing the performance of

employees and managers in the organisation and comparing the actual performance
with the set standards. The productivity of an organisation mostly depends on
employees who are responsible for combining the financial, physical and information
resources to convert inputs into outputs such as goods and services. The main
instrument used for controlling human resources in organisations is the performance
appraisal or review. An performance appraisal can be done through rating scales,
checklists, self-evaluation, 360-degree feedback and management by objectives. In
addition, an organisation should assess specific human resources performance such
as the composition of the workforce, the level of training and development,
absenteeism and turnover.
10.7.3 Physical resources
The controlling of physical resources focuses on the assets of an organisation such

as raw material, products in the processing phase, final products, office furniture,
tools, manufacturing equipment and machinery, vehicles and buildings. Physical
resources such as furniture, tools, equipment, machinery, motor vehicles and
buildings are usually recorded in an asset register. Other resources such as inputs
and final products are generally monitored through inventory and quality controls.
10.7.3.1 Asset register
An asset register is a list of the assets that an organisation owns. The list includes
important information regarding all fixed assets – to track their value and physical
location. The asset register provides the number and value of assets such as office
furniture, equipment, motor vehicles, computers, communication systems, buildings,
and so forth.
10.7.3.2 Inventory controlling
Inventory in an organisation entails resources such as raw materials, work-in-

process and final products. The main objective of inventory control is to contain the
costs of production without instigating interruptions or shortages. The following three
controlling systems for monitoring inventory are commonly used in an organisation
(Erasmus et al., 2019):
• Economic order quantity (EOQ) is based on ordering the most economic

number of inputs to refill inventory levels. For example, a factory that sews
graduation gowns will adopt the EOQ by purchasing fabric when their current
stock of fabric reaches a certain level. The downside of this system is that
inventory must be reserved at all costs, without considering the demand from
the production department or customers.
• Material requirements planning (MRP) is based on ordering the inventory
when needed, by estimating the demand for raw materials and the
components required to produce a final product. For example, the factory
might decide to purchase fabric based on the estimation of the quantity of
fabric needed to produce a certain number of gowns.
• The just-in-time (JIT) system is similar to the MRP. This system adopts the
notion that inventory should be ordered when required. However, the JIT goes
a step further by using the actual orders for final products to source the raw
material and components, which are delivered just in time for processing.
Using the graduation sewing factory case, the factory will apply the JIT by
only ordering fabric when there are orders for gowns.
10.7.3.3 Quality
Quality and productivity have become very important issues all over the world.
Quality control refers to the management activities that ensure a level of quality that
will satisfy customers and have benefits for the business. There are different
controlling systems used for the management of quality but in this module, we will
only focus on total quality management (TQM). TQM is based on the premise that
quality is the responsibility of all stakeholders in an organisation – ranging from the
board of directors to the employees. It emphasises how managers can continuously
improve an organisation's work systems to ensure that its final products and services
are of the expected quality.
10.7.4 Information resources
For the four functions of management (planning, organising, leading and controlling)
to work optimally, they rely on effective information. Management can implement
plans only if they receive accurate and timely information. The faster feedback is
received on how things are going in the management process, the more effectively
the controlling systems will function.
Now that we have covered the types of control, areas to be controlled and
techniques to be used, you must understand what constitutes an effective controlling
system.
10.8 Characteristics of an effective controlling system
LESSON

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10.8 Characteristics of an effective controlling system
Successful controlling systems have the following common characteristics

(Openstax, 2019):
• A good controlling system follows the prescriptions and adequately satisfies

each organisational target.
• An effective controlling system uses a combination of reactive and proactive
controlling systems to monitor and correct activities at all points in an
organisation's operations.
• All effective controlling systems are based on information. Without good
information, managers cannot assess whether the targets in terms of the
results and processes were achieved; they cannot establish a relationship
between them or provide feedback to planners. To be effective, information
must be objective, accurate and timely, and it must be distributed to
organisation members who need it.
• A controlling system focuses on issues of importance to the organisation.
Controlling procedures that focus on almost all tasks and results waste
resources and risk creating a controlling system that produces negative
feelings and reactions.
• A good controlling system is practical. Some practical considerations to look
for in a controlling system include flexibility, feasibility, the possibility that all
stakeholders will agree to adopt it, and the simplicity with which the system
can be integrated with planning activities.
In addition to implementing an effective controlling system, small businesses should

ensure that they pay special attention to some measures that are more prevalent for
their conditions. The following section highlights the basic controls that small
businesses should have in place.
10.9 Basic controls for small businesses
LESSON

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10.9 Basic controls for small businesses
The World Bank estimated that SMMEs globally add up to 33 per cent of the national
gross domestic products (GDP) of different countries, offering up to 45 per cent of all
opportunities for employment (Bruwer, Coetzee Meiring, 2018). In the South African
context, researchers established that SMMEs enhance the economy by creating at
least 60 per cent of employment opportunities while contributing up to 57 per cent to
the national GDP (Bruwer et al., 2018). The same can be said about small-scale
enterprises in Nigeria as they were found to be the engine room for economic growth
(Adeniyi & Okoye, 2017). Regrettably, the sustainability rate of SMMEs is reported to
be one of the worst, with about 75 per cent disappearing after being in business for
just three years (Bruwer et al., 2018).
Ineffective internal controls contribute to why SMMEs still find it hard to be

sustainable. Effective controlling systems are regarded as critical to the survival of
SMMEs due to their impact on risk mitigation and prevention (Nqala, 2019). Internal
controlling systems in most organisations are designed by considering the size of the
organisation, the level of the accounting department, costs and benefits. Everyone in
an organisation has responsibilities regarding internal controls, such as the board of
directors, management, internal auditor, external auditor and other personnel. The
basic controls for small businesses include (Nqala, 2019):
• Reconciling all cash receipts immediately.

• Depositing all cash receipts every day.
• Making all payments by serial numbered cheques, excluding all
disbursements from petty cash.
• Reconciling bank account every month and retaining copies of reconciliation
in the file.
• Using serial-numbered sale invoices, purchase orders and receiving reports.
• Paying the vendors of only approved invoices that have been matched with
the purchase order and receiving reports.
• Balancing subsidiary ledger with control account frequently and preparing and
sending statements of a customer every month.
• Preparing comparative financial statements supported by adequate detail to
divulge noteworthy variations in any category at revenue or expense.
Adopting these basic controls will alleviate risk and avert risk from occurring
unnoticed. The owner is also responsible for (1) approving all general ledger entries,
(2) reconciling the bank account monthly, (3) critically reviewing comparative monthly
statements of revenue and expense, (4) studying daily cash register totals, and (5)
signing all cheques and cancelling the supporting documents (Nqala, 2019).
The aspects highlighted in this section mostly focus on managing financial

resources. For entrepreneurs, cash is very important, especially during crises like the
2009 recession and the Covid-19 pandemic. The focus should be on the price, cost,
overheads, accounts receivable, volume, inventory and accounts payable to ensure
that an organisation has access to cash. Fundamentally, managers should establish
their organisation's current revenue and funding availability, analyse their scenarios,
and establish a way forward to improving cash reserves.
10.10 Summary
10.10 Summary
One of the most important ingredients for the sustainability of any organisation is
adopting and upholding efficient and effective internal controlling procedures. During
this phase, the gap between the actual performance and set standards is evaluated
and reduced. We have discussed controlling as the fourth and final step of the
management process, so the discussion of the management process is complete.
We hope that you now have basic insight into all the general management functions.
Access the link below for a video that summarises the management function of
controlling:
Play Video
LESSON

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QUESTION 1
Sibusiso Zulu, the CEO of Zulu Holdings, was worried about the poor financial
performance of the organisation, even though it was the market leader. He hired a
consultant to assist him to establish what could be the problem. The consultant
identified that the organisation has weak financial controlling systems and that the
staff members working with finances were not performing their jobs satisfactorily. In
which step of the controlling process did Sibusiso hire the consultant?
1. Step 1: Setting performance standards

2. Step 2: Measuring actual performance
3. Step 3: Comparing actual performance with standards
4. Step 4: Taking corrective action
QUESTION 2
Which option is an instrument that Sibusiso (in question 1) could use to control
human resources?
1. Performance reviews
2. Just-in-time (JIT) system
3. Total quality management (TQM)
4. Economic order quantity (EOQ)
QUESTION 3
Chloe manages the volunteer organisation, Barking Mad, which provides abandoned
animals with shelter and food and places them up for adoption. Which processes
would she follow when she is busy with the management function of controlling?
a. The shelter needs to maintain an adoption rate of 25% to provide all its
animals with shelter and food.
b. Chloe realises that their organisation is relatively unknown to the public and
organises a fun walk to raise awareness of Barking Mad.
c. Chloe compiles a detailed report of all the adoptions they have had over the
last six months.
d. The data Chloe has collected shows that their adoption rate is only 19%.
Choose the correct option:
1. abcd
2. bcda
3. dcba
4. acde
5. acdb
QUESTION 4
Match the area of controlling in column A with the correct type of controlling in
column B.
Column A Column B
a. Inventory i. TQM systems
b. Quality ii. Set standards
c. Financial resources iii. Just-in-time
d. Human resources iv. ITT systems
v. Performance measurements
vi. CCTV
vii. Budgets
Choose the correct option:
1. a (i) b (ii) c (iii) d (iv)

2. a (i) b (v) c (iv) d (iii)
3. a (ii) b (iv) c (i) d (vi)
4. a (iii) b (i) c (vii) d (v)

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Question Answer Reference (section)

1 2 10.5
2 3 10.7
3 4 (a c d e) 10.5
4 4 (a (iii) b (i) c (ii) d (v)) 10.7
10.11 References

Lesson 5, 6 ,7 ,8,9 and 10

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Lesson 5: Corporate social responsibility

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Lesson 5: Corporate social responsibility

Businesses operate in a wider social environment, causing both positive and

Lesson 5: Corporate social responsibility

Within the business context, corporate social responsibility is a concept that

Nowadays businesses consider corporate social responsibility as a fundamental

Time: 9:19 minutes

There is a combination of reasons why companies implement corporate social

• Economic responsibility – the business needs to be profitable.

Figure 5.2 visually depicts Carroll’s CSR pyramid.

Time: 3:38 minutes

5.3 Terms and trends

1. Lesson 5: Corporate social responsibility

Lesson 5: Corporate social responsibility

5.3.1 Triple bottom line

Time: 4:13 minutes

Sustainable development is the overarching aspiration and framework for corporate

Sustainable development is becoming increasingly important as the impact of global

Open the following YouTube videos to learn about sustainable development.

Time: 4:24 minutes

Time: 7:51 minutes

5.3.3 Corporate citizenship

The term “corporate social responsibility” can be considered synonymous with

Sustainability reporting refers to the increasing expectations for companies to

5.3.6 Corporate governance

Corporate governance refers to how a company’s objectives, strategy and decision-

This activity will take approximately 15 minutes to complete.

Lesson 5: Corporate social responsibility

5.4.1 Global drivers

a. The United Nations Global Compact

Table 5.1: The 10 principles of the United Nations Global Compact

b. United Nations – Sustainable Development Goals (SDGs)

c. The Global Reporting Initiative (GRI)

Visit their website https://www.globalreporting.org/ for a plethora of resources on

The AA1000 Framework was launched in 1999 by AccountAbility, a UK-based

A number of other relevant initiatives include:

• ISO 14000 series. This is a series of standards issued by the International

The South African initiatives and imperatives are discussed next.

5.4.2 South African initiatives and imperatives

a. King Code on Corporate Governance in South Africa

b. JSE Socially Responsible Investment Index

Time: 4:05 minutes

• The Tourism BEE Charter and Scorecard

Ensuring operational legitimacy or a “licence to operate” requires more than simply a

This activity will take approximately 15 minutes to complete.

• United Nations Global Compact

South African elements

• King Code on Corporate Governance in South Africa

5.5 The business case for Corporate Social Responsibility (CSR)

Lesson 5: Corporate social responsibility

By performing a simple SWOT analysis of the strengths, weaknesses, opportunities

Time: 9:13 minutes

In the next section, you will learn about corporate governance.

5.6 Corporate governance

Lesson 5: Corporate social responsibility

Corporate governance refers to the way in which an organisation makes decisions

• Policies for hiring and firing senior executives

Corporate governance primarily consists of four principles:

• Accountability ensures that the organisation is able to justify every action

Time: 1:50 minutes

Time: 2:10 minutes

To assist organisations in practising good corporate governance, the King Report

• Good governance is about effective leadership.