Organizations and Their Internal Dynamics

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An organization is
a Socio-economic entity.

A group of people working together to achieve a common objective

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Elements of an organization
A group of people
An interaction A common objective

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What is a System
A system is an assemblage of interacting and interdependent components working together to achieve a common goal.

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Main features of a system

Set of interacting components But, an integrated whole Operates within a certain boundary Work together to achieve a common goal

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Why we need organizations?

Accomplishment of otherwise impossible tasks. Provision of means to achieve human needs Organizations create and preserve knowledge Organizations make the whole society
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A business is .
An Activity Involves producing goods and services Uses limited resources Focus on achieving certain objective/s

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What is an Objective

Objectives are those end results toward which the organizational activities are directed.

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Bases of Classification of Objectives

Time Horizon Measuring Instrument

SMART Qualities

Degree of Significance

Levels of the business

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Key Results areas

Market Standing Innovation Productivity Physical & Financial Resources Profitability Manager Performance & Developments Worker Performance & Attitudes Public Responsibility
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Internal Environment
All the factors inside an organization that affect its performance; including

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Structure Structure Resources Resources Culture Culture Processes Processes Leadership Leadership Goals Goals

External Environment
All the factors outside an organization that affect its performance Consists of Micro Environment Macro Environment

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Micro Environment
All the individuals, groups and institutions external to the organization that affect its performance. Customers Suppliers Competitors Government Media Trade Unions Professional institutions Trade Associations Political parties Local Bodies NGOs Debtors Creditors
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Macro Environment
A set of broad forces, created as a result of the interactions of micro environmental constituents, affecting the performance of the organization.

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Business Environment

Ecological Environment Macro Environment

Technological Forces

Micro Environment
Customers

Political & Legal Forces

Community

Political Parties

Internal Environment
Resources Culture Leadership Structure

Suppliers

Media Debtors

Processes Government Competitors

Trade Unions

Creditors Social & Cultural Forces

Economic Forces

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Social Responsibility
The obligation of a business to maximize its positive impacts and minimize its negative impacts on the society

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Management Definitions

Management is decision making

Management is the art of getting things done through other people
Management is the process of achieving organizational objectives effectively by efficiently using limited resources.
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Management- A science or an Art?

Management Theory

Use of management Knowledge (An Art)

Discovery of management Knowledge (A Science)

The Real World of Application

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Management as a Process
Planning

Controlling

Organizing

Directing
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Why Management?
Ever Increasing Scarcity of Resources
A Quest for better knowledge on Handling Resources

Discipline of Management

Increasing Social & Competition

A Quest for better knowledge & Skills of Competing

Development of Strategic Aspects of Management

Development of Quality aspects of Management Cost of Mistakes will be unbearable

A Quest for better knowledge & Skills of coping with changes

Highly Dynamic Business World

A Quest for better knowledge & Skills for perfection Department of Business Administration -University of Sri Jayewardenepura

Development of Dynamic & Learning Aspects of Management

Efficiency & Effectiveness Doing The Right Thing In The Right Way
How it is done?
In the right way In the wrong way

What is done?

Right Thing

EFFICIENT & EFFICIENT & EFFECTIVE EFFECTIVE Grow Grow EFFICIENT but EFFICIENT but INEFFECTIVE INEFFECTIVE Die Slow Die Slow

EFFECTIVE but EFFECTIVE but INEFFICIENT INEFFICIENT Survive Survive INEFFECTIVE & INEFFECTIVE & INEFFICIENT INEFFICIENT Die Fast Die Fast

Wrong Thing

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Productivity
productivity is the relationship between the output generated by a production or service system and the input provided to create this output.

Output Input
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Types of Managers
Different types of managers can be identified according to:

1 The Level of Authority 2 The Functional Area of Specialization 3 The Line and Staff Nature of Activities
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Classification of Managers by the Level of Authority

Top Management

Middle Management Lower Management Workers

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Classification of Managers by the Functional Area of Specialization

Managing Director

Production Manager

Marketing Manager

Finance Manager

General Managers Functional Managers

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Classification of Managers by the Line and Staff Nature of Activities (Responsibility)

General Manager

Production Manager

Marketing Manager

Finance Manager

HR Manager

Direct Responsibility

Indirect Responsibility

Line Managers
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Staff Managers

What Managers Do?

Informational Roles Interpersonal Roles

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Decisional Roles

To be an effective and efficient manager, we need To be an effective and efficient manager, we need
Knowledge Knowledge Skills Skills Positive Attitudes Positive Attitudes

Know-what Know-what

Know-how Know-how

Positive attitudes on work Positive attitudes on work Positive attitudes on people Positive attitudes on people

General Skills General Skills Conceptual Conceptual Skills Skills Technical Skills Technical Skills

Specific Skills Specific Skills

Positive attitudes on environment Positive attitudes on environment Positive attitudes on self Positive attitudes on self

Human Skills Human Skills

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Managerial Skills
Conceptual Skills Top Level

Middle Level Lower Level

Human Relation Skills Technical Skills

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Evolution of Management Thought

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The Process of Planning

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Planning Defined
Planning is the process of establishing goals and suitable courses of action for achieving those goals. (Stoner and Freeman. 1995)

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Planning Defined

Planning is the process of deciding the objectives or goals of the organization and preparing how to meet them.(G.A. Cole, 1993)
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Activities Involved in Planning

1. Setting the goals & objectives 2. Setting Strategies

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The Process of Planning

Social Responsibility Establishment of Mission Policy Statement Agree/Revise Strategic Objectives

Environmental Analysis Internal Favourable Unfavourabl e Strengths Weaknesses External Opportunities Threats

Determination Of Corporate Strategies

Agree On Strategic Plan Issuance of Key Targets to Departments

Preparation of Tactical/Operational Plans Department of Business Evaluation and Revision as necessary Administration -University of Sri Jayewardenepura

Formulation of Mission
Management Values

Mission
Interests of owners
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Interests of the Society

Mission
Definition of a business in its scope and philosophy The fundamental, unique purpose that sets a business apart from other firms of its types and identifies the scope of its operations in product and market terms.

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Contents of Mission Statement

Fundamental Purpose - and Business Scope Business philosophy

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Vision
Colourful dream of the future of the business, deeply embedded in the founders mind

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Environmental Analysis
Environment Effect

Internal

External

Favourable

Strengths Opportunitie s Unfavourabl e Weakness Threats

es
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Corporate Strategies
The broad programme for achieving an organizations objectives and implementing its mission. (Stoner &
Freeman)

A comprehensive plan for accomplishing an organizations goals

(Griffin)

The organization's response to its environment overtime. (Stoner &

Freeman)
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Operational Plans
plans that provide the details needed to incorporate strategy into day to day operations. Eg,
Policies Procedures Programs Projects
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Rules and regulations Budgets

Effective Plan Implementation

1. 2. 3. 4. 5. 6. 7. 8. 9. Communicate strategies Develop and communicate planning assumptions etc. Make sure actions plans reflect major objectives and strategies Review strategies regularly Develop contingency plans and programs Ensure that organizations structure follows planning needs Continue to remember plans implementations Create an organization culture which drives for planning Establish a supporting organizational leadership and culture
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Contents of a Good Planning Document

Organisational Profile Executive Summary Detailed SWOT Analysis (Highlight distinct Competencies) Hierarchy of Aims (Vision, Mission, Goals & Objectives) Strategies (Corporate, Functional and Operational Level) Policies and Ground Rules Programmes and Procedures (SOPs) Work Instructions and Operational Guidelines Budgets Monitoring and Review Guidelines
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Hierarchy of Plans
Corporate plan SBU Plans Functional Plans Operational Plans
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Types of Plans
Corporate Strategic Plan (At Corporate Level)

Group

SBUs SBUs

Strategic Plans (At SBU Level) Tactical Plans Functional Plans Operational Department of Business Plans Single use Standing
4

Divisions

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Types of Operational Plans

Single-Use Plans

Standing Plans

Single use plan is a detailed course of action used once or only occasionally to solve a problem that does not occur repeatedly.

Standing plan is an established set of decisions used by managers to deal with recurring organizational activities.

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Benefits of Planning
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Provide a sense of direction Prerequisite to successful growth Set up the organizational framework Helps delegation Helps motivate people Serves as a communication media Lays the basis for control Provides coordination Facilitates efficient use of resources. Reduces uncertainty by anticipating Department of Business change Administration -University of Sri
Jayewardenepura

Organizing

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The Process of Organizing

1. 2. 3. 4. 5. 6. 7. 8. 9. Identification of Work Dividing the workload in to jobs Grouping jobs in to departments Deciding Spans of Management Creation of Hierarchy Delegating authority Determining systems of working Allocation of resources Establishing coordinating mechanisms
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Organizational Structure.
The way in which an organizations activities are divided organized and coordinated.

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Elements of an Organizational Structure

Work specialization Departmentalization Chain of command Span of Management Delegation Formalization Coordination
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Factors Affecting Structure

1. 2. 3. 4. 5. 6. 7. Nature of the business Company objectives & Policies Business Strategies Size of the business Growth Rate Nature of the Ownership Product Differentiation & Diversification 8. Management Styles 9. Nature of the market 10. Financial Position of the organization 11. Nature of the Business Environment 12. Production Technology 13. Business Life-cycle

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Organizational Chart
Visual Presentation of the organizational Structure

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Benefits of Using the Organizational Chart

Whole structure can be viewed at one glance Organizations Hierarchy is explained Number and types of positions are explained Departments and divisions are shown Management relationships are identified Communication Department of Business Administration -University Channels are shown Jayewardenepura of Sri

Limitations of the Organizational Chart

Informal Relationships are not explained Informal Communication Channels are not explained Degree of delegation is not explained Degree of formalization is not shown Introduce rigidity in to relationships Creates status problems Cost of preparation, storing, and studying Can soon become out of dated
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Leadership

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Definitions of Leadership
Leadership is the ability to influence a group toward the achievement of goals. (Robinson, 1995) Leadership is "the process of directing and influencing the taskrelated activities of group members". (Stoner and Freeman, 1992)
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Definitions of Leadership
Leadership is" the ability to influence individuals and groups to work toward attaining organizational objectives". (Mescrn, Albert and Khedourn)

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Power and Influence

Power: The ability to influence others Influence: The act of changing others behaviour

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Management and Power

Reward Reward Power Power Coercive Coercive Power Power Legitimate Legitimate Power Power Expert Expert Power Power Referent Referent Power Power Informatio Informatio n Power n Power

Power Power Influence Influence Getting Things Done Getting Things Done Through Other People Through Other People (Management) (Management)
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Criteria
Members known as Sources of Power Influencing mode Future focus

Manager
Subordinates Positional Punishments Short-sighted

Leader
Followers Personal Rewards and Charisma Far-sighted Innovative Receive Emotional, charismatic. May alter the mood of followers and raise their hopes and expectations. Outward Followers goals

Attitude towards change Status-quo Respect Expect

Type of decision Rational, logical, making most often used analytical. Tends to rely on models, computers, and number crunching Orientation / Focus Primary goal Inward Company Goals Administration -University of Sri
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Leadership Theories & Approaches

Trait Approach Behavioural Approach Situational Approach

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Trait Approach
In this approach, leadership is understood by identifying the personal characteristics of leaders. Therefore leadership is determined by leader's own personal characteristics believed to be taken from birth. Hence, it is assumed that leaders are born but not made.
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Traits - Examples
Physical factors Intelligence Self confidence Sociability Will (Initiative, Persistence, ambition) Dominance Surgency (Talkative, cheerfulness, geniality, enthusiasm, expressiveness, avertness, Originality)
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Limitations of the Study

It does not consider the whole environment There cannot be generalization of traits for a successful leader. No evidence has been given about the degree of the various traits There is a problem of measuring traits. There have been many people with traits specified for leader, but they were not good leaders.
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Significance of the Study

Easy to understand Gives an indication as to the personal characteristics that a leader should possess. Helps management to develop such qualities through training and development programmes.
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Behavioural approach

Focused on two aspects of leadership behaviour namely leadership functions, and leadership styles.

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Leadership Functions
Leadership functions are the set of activities that must be performed by the leader, for a group to perform effectively.
Those activities are 1. Task-related functions, Functions which directly help the organization to achieve its objectives 2. Group-maintenance functionsFunctions that focus at furthering employees well-being.

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Leadership Styles
Task Oriented Style People Oriented Style

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Task-orientation / Style
Task-orientation is the degree to which the leader organizes and defines relationships in the group by activities such as Assigning specific tasks, Specifying procedures to be followed Scheduling work, and clarifying expectations Encourage people to work harder Emphasize meeting deadlines See to it that people in the work group are working up to capacity Closely supervise employees and Getting the job done is more important to them than employees growth or personal satisfaction
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Employee orientation / Style

Employee orientation is the degree to which the leader creates an environment of emotional support, warmth, friendliness, and trust. Employee oriented leaders are
Friendly, Trustful, Earn respect, Have a warm relationship with team members, Do personal favours for people in the work group, Treat all people in the work group as his/her equal, Be willing to make changes, Back up what people do Have a participative decision making
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The Ohio State University Study

This study concentrated basically on two fundamental styles of leadership as follows: Task Oriented Leadership Employee Oriented Leadership
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The Ohio State University Study Findings

The employee turnover is lowest and satisfaction is highest under "employee oriented leaders". Among "task oriented" leaders employees had high grievances (complaints) and high turnover rates.

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University of Michigan studies

Leadership Styles: Employee centered and Production centered Found that most productive work groups tended to have leaders who were employee centered rather than production centered.
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University of Michigan studies Findings

Found that the most effective leaders form supportive relationships with their subordinates Tended to depend on group rather than individual decision-making, and encouraged subordinates to set and achieve high performance goals. Michigan researches strongly favoured employee oriented leaders. Such leaders were associated with high group productivity and higher job satisfaction. Production oriented leaders tended to be associated with low group productivity and lower worker satisfaction. Department of Business
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The Managerial Grid

Developed by Robert Blake and Jane Mouton helps to measure a managers relative concern for people and task. Located in this grid a manager can have either of five major leadership/management styles.
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1.9

9.9 Democratic Management

The Managerial Grid

Country-club Management

5.5 Middle-of-the Road Management

1.1

Impoverished Management
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Authoritarian Management

9.1

Situational determinants of Leadership

Superiors Superiors expectations and expectations and behaviour behaviour Leaders Leaders personality past personality past experience and experience and expectations expectations Task Task requirements requirements

Leadership Leadership effectiveness effectiveness

Peers Peers expectations expectations and and behaviours behaviours

Subordinates Subordinates characteristics, Organizations characteristics, Organizations expectations and culture and expectations and culture and Department of Business policies policies Administration -University of Sribehaviours behaviours
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Charismatic Leadership Theories

charismatic leaders have some extraordinary or heroic personal ability and they are capable of having profound and extraordinary effects on followers. Followers of charismatic leader identify the leader and the mission of the leader and follow them, exhibit extreme loyalty to the leader and have confidence in the leader, emulate the leaders values and behavior, and derive self-esteem from Department of the leader. their relationship withBusiness Sri Administration -University of
Jayewardenepura

Characteristics of Charismatic Leaders.

Self-confidence. Ability to articulate the vision. Strong convictions about the ordinary. Behavior that is of extra ordinary. Perceived as being a change agent. Environment sensitivity.
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Managerial Decision Making

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What is a Decision ? Decision is a solution for a problem

A Problem is

The unfavorable difference between the actual state of affairs and desired state of affairs

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Decision Making
The process of selecting the best among the alternatives in order to solve a problem

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Decision Making Process

1.Identification of the problem 2.Analyzing causes for The problem 3.Developing alternative solutions 4.Evaluating the alternatives & selecting the best 5.Implementing and evaluation

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Managerial Decision Situations and Types of Decisions

Programmed Decisions Decisions made in routine, repetitive,a well structured situation through the use of predetermined decision rules such as habit, computational techniques, policies, procedures etc. Non-programmed Decisions Decisions made in non-routine, novel, illstructured situations
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Conditions of Decision Making

Certainty-All possible Alternative solutions & exact consequences of them are perfectly known Risk-All possible alternative solutions are known. Consequences for each of them are multiple and probable Uncertainty-All possible alternative solutions are not known. Consequences of whatever the known possibilities can not be expressed even with a probability
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Decision Making Styles

1. Rational Decision Making (Objectivity, Information based and logical) 2. Non-Rational Decision Making (Based on personal qualities such as intuition, gut feelings, opinions, prior experiences etc.)
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Bounded Rationality Theory

decision makers are bounded or restricted by variety of constraints such as, Informational limitations, Computational limitations, Psychological limitations and Cognitive limitations. Therefore, decision making is characterized by Limited information Processing, Satisfying rather maximizing and Use of rules of thumbs or shorts cuts
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Managing the Human Resource of an Organization: Staffing

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Staffing-Definition
Recognition of the importance of the company's workforce as vital human recourses and the utilization of several functions and activities to ensure that they are used effectively as legally for the benefit of the individual, the organization and the society.

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Focuses of HRM
Well-being of the Organization Well-being of the Employees Well-being of the Society

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HRM Functions
1.Job Analysis 2.Man Power Planning 3.Employee Procurement 3.1 Recruitment 3.2 Selection 3.3 Hiring 3.4 Induction / Orientation 4.Training and Development 5.Performance Evaluations 6.Reward Management
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7. Employee Movements 7.1 Promotions 7.2 Demotions 7.3 Transfers 7.4 Layoffs 7.5 Terminations 8. Discipline Administration 9. Grievance Handling 10.Employee Health and Safety Administration 11.Employee Welfare Administration 12.Labour Relations
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Motivation

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Motivation is
The willingness to exert high level of effort towards organizational goals, conditioned by the efforts ability to satisfy some individual need.

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Process of Motivation
1. Unsatisfied needs 2. Tension 3. Drives 4. Search behaviour 5. Satisfied need 6. Reduction of tension

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Theories of Motivation
Abraham Maslows Hierarchy of Needs

There are five needs which are identified in a hierarchy. When the lowest level need is fulfilled, the next higher level need emerges. Then individual moves up one step of the hierarchy.
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Hierarchy of Needs

Self- actualization Needs

Esteem Needs

Social Needs

Security Needs

Physiological Needs

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Hertzberg's Two Factors Theory

Dissatisfiers / Hygiene factors (Company Policy, Supervision,
Relationships with others, Work conditions ,Salary, Personal Life, Security)

Satisfiers /Motivators (Achievement, Recognition, Work

itself, Responsibility, Advancement, Growth)

Dissatisfaction

Indifference

Satisfaction

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ERG Theory (Clayton Alderfer)

Existence Need of Relatedness Need of Growth

Need of
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Three needs theory (David McClelland)

Need for Achievement (N Ach) Need for Power (N Pow) Need for Affiliation (N Aff)

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Communication

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Process of Communication
Idea Message Reception Behaviour

Encoding Sender

Media Transmission

Decoding

Understanding Receiver

Noise

Feedback
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Forms and Medium of communication

Communication

Verbal Communication

Non-verbal Communication

Oral

Written

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Communication Structure
Communication

Formal Communication

Informal Communication

Downward Upward

Horizontal

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Organizational

Control

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Control
Management control is the process of ensuring that actual activities conform to planned activities.
(Stoner and Freeman, 1992).

The process of monitoring activities to ensure they are being accomplished as planned and of correcting any significant deviation.
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Process of Controlling
1. Establish Performance Criteria and Standards 2. Measure Actual Performance 3. Compare Actual Performance against Standards 4. Evaluate and Take Corrective Actions - Correct deviations - Change standard - Maintain Status quo
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Operational Controls
Feed -forward Control Concurrent Control Feed-back Control

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Controlling Methods and Techniques

Financial Controlling Techniques Costing Financial Audit Financial Budgets Break even Analysis Financial Statements Financial Ratio Analysis Non-financial Controlling Techniques

Supervision Quality Control Inventory Control Security Personnel Performance Evaluation Non-financial Ratio Analysis

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Behavioral Implications of control

Control affects individual freedom Controls carry status and power implications in organizations Control actions may create intergroup or interpersonal conflicts Excessive number of controls may limit flexibility and creativity
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Behavioral guidelines for effective control Set meaningful, acceptable and attainable standards Establish an effective, accurate and timely two way communication Reward attainment of standards Develop voluntary co-operation, participation, sense of responsibility, self-control and self-discipline.
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