WOLLO UNIVERSITY

KOMBOLCHA INSTITUTE OF TECHNOLOGY

SCHOOL OF TEXTILE, LEATHER AND FASHION
TECHNOLOGY

LEATHER ENGINEERING DEPARTMENT (BSc.)

Business Management
5th YEAR 1sd SEMISTER
 CHAPTER ONE
Introduction to Principles
of Management
 Brain storm Questions
• What are the Function and Roles of Manager?

• Discuss the level of management

• The difference between Efficiency and Effectiveness?

• The difference between Manager and Leader?

 What do you think management is?
▪ Management is a set of activities directed at an
organization's resources with the aim of achieving
organizational goals in an efficient and effective manner.

▪ Management is a process of designing and maintaining

environment in which individuals work together in groups
effectively and efficiently accomplish selected aims.
▪ Management is the process of achieving organizational goals and
objectives effectively and efficiently by using management functions
i.e.
- Planning (mission ,vision an objective)
- Organizing (creating Organization structure)
- Staffing (Recruitment i.e., hiring & promoting)
- Leading (super vise, Motivate & guide)
- Controlling(measuring performance)

▪ Management is thus a continuous effort aimed at shaping an

organization and contributing to its overall growth.
▪ These functions are essential to any kind of organization.

▪ It applies to managers at all hierarchical levels.

▪ The aim of managers is to increase productivity, effectiveness and

efficiency.
 Elements of definition

Process - represents ongoing functions or primary activities

engaged in

Efficiency - getting the most output from the least amount of

inputs
• “doing things right”
• concerned with means
• Achieving the objectives in time
Effectiveness - completing activities so that organizational goals are
attained

o doing the right things

o concerned with ends

o Achieving the objectives on time

 Levels of
management
▪ Managers are those
who work with and
through other people
by coordinating their
work activities in
order to accomplish
a goal.
1. Top Level:
o Top management sets the mission and goals, develops policies, evaluates the
overall performance of various departments, responsible for the business as
a whole and is concerned mainly with long-term planning.

2. Middle Level:
o Middle level management develops departmental goals, executes the
policies, plans and strategies decisions determined by top management,
develops medium- term plans and supervises and coordinate lower-level
managers’ activities.

3. Lower (Supervisory, frontline) Level:

o Lower-level management takes charge of day-to-day operations, is involved
in preparing detailed short-range plans, is responsible for smaller segments
of the business, executes plans of middle management, guides staff in their
own subsections and keep close control over their activities.
 Roles of manager
▪ Role: a set of expectation for one’s behavior

▪ In 1960, Henry Mintzberg conducted a study to understand about the

managerial roles. He identified 10 managerial roles that are common to
all managers.
▪ These 10 managerial roles are grouped under: Interpersonal,
decisional, and informational roles.
 A: Inter-personal Role
• Figurehead: Represents the company on social occasions. Attending the flag
hosting ceremony, receiving visitors or taking visitors for dinner etc.

• Leader: In the role of a leader, the manager motivates, encourages, and

builds enthusiasm among the employees. Training subordinates to work under
pressure, forms part of the responsibilities of a manager.

• Liaison: Consists of relating to others outside the group or organization.

Serves as a link between people, groups or organization. The negotiation of
prices with the suppliers regarding raw materials is an example for the role
of liaison.
 B: Decisional Role:
1. Entrepreneur: Act as an initiator and designer and encourage changes and
innovation, identify new ideas, delegate idea and responsibility to others.

2. Disturbance handler: Take corrective action during disputes or crises;

resolves conflicts among subordinates; adapt to environmental crisis.

3. Resource allocator: Decides distribution of resources among various

individuals and groups in the organization.

4. Negotiator: Negotiates with subordinates, groups or organizations- both

internal and external. Represents department during negotiation of union
contracts, sales, purchases, budgets; represent departmental interests.
Informational role:

1. Monitor: Emerges as nerve center of internal and external information

about Information.

2. Disseminator: Transmits information received from other employees to

members of the organization.

3. Spokesperson: Transmits information to the people who are external to

the organization, i.e., government, media etc. For instance, a manager
addresses a press conference announcing a new product launch or other
major deal.
Managerial skills
 Primary Skills

Conceptual skills:

o This refers to the ability to think and conceptualize abstract

situations.

o These abilities are required for making complex decisions.

o In short it is:

o The mental capacity to develop plans, strategies and vision

Human or interpersonal skills:
o This includes the ability to understand other people and interact

effectively with them.

o The human skills are also important in creation of an environment in

which people feel secure and free to express their opinions.

o In short it is:

o The ability to work with other people in teams

Technical skills:
o These skills include the knowledge, abilities of and proficiency in

activities involving methods, processes and procedures in the relevant

fields as accounting, engineering, manufacturing etc.

Or in short:

o The ability to use the knowledge or techniques of a particular

discipline to attain ends.

Design skills:
o These skills enable a manager to handle and solve any kind of

unforeseen or actual problems, that may crop up in the organization.

o Such problems could arise due to internal factors or external factors

and/or both.

In short it is:

o The problem-solving skill

Communication skills:
o The abilities of exchanging ideas and information effectively.

o To understand others and let others understand comprehensively.

Leadership skills
o The abilities to influence other people to achieve the common goal.
Organizational environment of Management
o Organizing is the process of allocating and arranging work, authority
and resources to the members of the organization so that they can
successfully execute the plans.

Objectives:
1. Developing the organizational structure

2. Allocating human resource

3. Task Allocation & the division of responsibility

Organizational Structure
▪ The term organizational structure refers to how the people in an
organization are grouped and to whom they report.

Organizational Structure Type

▪ Bureaucratic Structures
- Pre-bureaucratic
- Bureaucratic (Strict Hierarchy)
- Post-bureaucratic (Involves Total Quality, Culture and Matrix
Management)
o Functional Structure: Grouped based on functional areas, such as

IT, finance, and marketing.

o Divisional Structure: Several Parallel Teams focusing on a single

product.

o Matrix Structure: A mixture of functional and divisional structure.

 The Nature of Managerial Work
▪ Typical Activity Patterns in Managerial Work

o Pace of Work Is Hectic and Unrelenting

o Content of Work Is Varied and Fragmented

o Many Activities Are Reactive

o Many Interactions Involve Oral Communication

o Interactions Often Involve Peers and Outsiders

o Decision Processes are Disorderly and Political

 Social Responsibility, and managerial ethics
What Is Social Responsibility?

▪ The Classical View

o Management’s only social responsibility is to maximize profits (create
a financial return) by operating the business in the best interests of
the stockholders (owners of the corporation).

o Expending the firm’s resources on doing “social good” unjustifiably

increases costs that lower profits to the owners and raises prices to
consumers.
▪ The Socioeconomic View
o Management’s social responsibility goes beyond making profits to

include protecting and improving society’s welfare.

o Corporations are not independent entities responsible only to

stockholders.

o Firms have a moral responsibility to larger society to become involved

in social, legal, and political issues.

o “To do the right thing”

From Obligation to Responsiveness to Responsibility

▪ Social Obligation
o The obligation of a business to meet its economic and legal responsibilities
and nothing more.

▪ Social Responsiveness
o When a firm engages in social actions in response to some popular social
need.

▪ Social Responsibility

o A business’s intention, beyond its legal and economic obligations, to do the

right things and act in ways that are good for society.
Does Social Responsibility Pay?
▪ Studies appear to show a positive relationship between social involvement
and the economic performance of firms.

o Difficulties in defining and measuring “social responsibility” and

“economic performance” raise issues of validity and causation in the
studies.

o Mutual funds using social screening in investment decisions slightly

outperformed other mutual funds.

▪ A general conclusion is that a firm’s social actions do not harm its long-
term performance.
Values-Based Management
▪ Values-Based Management
o An approach to managing in which managers establish and uphold an
organization’s shared values.
▪ The Purposes of Shared Values
o Guiding managerial decisions

o Shaping employee behavior

o Influencing the direction of marketing efforts

o Building team spirit

▪ The Bottom Line on Shared Corporate Values
o An organization’s values are reflected in the decisions and actions of
its employees.
Purposes of Shared Values
 Managerial Ethics
▪ Ethics Defined
o Principles, values, and beliefs that define what is right and wrong
behavior

Factors That Affect Ethical and Unethical Behavior

Factors That Affect Employee Ethics
▪ Moral Development
o A measure of independence from outside influences:
• Levels of Individual Moral Development
- Preconventional level(morality is externally controlled)
- Conventional level(comparing with society)
- Principled level(people live doing the right thing)
o Stage of moral development interacts with:
• Individual characteristics
• The organization's structural design
• The organization’s culture
• The intensity of the ethical issue
o Research Conclusions:

▪ People proceed through the stages of moral development

sequentially.

▪ There is no guarantee of continued moral development.

▪ Most adults are in Stage 4 (“good corporate citizen”).

 Individual Characteristics Affecting
Ethical Behaviors
▪ Values
o Basic convictions about what is right or wrong on a broad range of issues

▪ Personality Variables
> Ego strength
* A personality measure of the strength of a person’s convictions
> Locus of Control
❖ A personality attribute that measures the degree to which people
believe they control their own life.
• Internal locus: the belief that you control your destiny.
• External locus: the belief that what happens to you is due to luck or
chance.
 Other Variables
▪ Structural Variables
o Organizational characteristics and mechanisms that guide
and influence individual ethics:
• Performance appraisal systems

• Reward allocation systems

• Behaviors (ethical) of managers

▪ An Organization’s Culture
▪ Intensity of the Ethical Issue
Ethics in an International Context
▪ Ethical standards are not universal.

o Social and cultural differences determine acceptable behaviors.

▪ Foreign Corrupt Practices Act

o Makes it illegal to corrupt a foreign official yet “token” payments to

officials are permissible when doing so is an accepted practice in
that country.

▪ The Global Compact

 How Managers Can Improve Ethical
Behavior in An Organization
1. Hire individuals with high ethical standards.

2. Establish codes of ethics and decision rules.

3. Lead by example.

4. Set realistic job goals and include ethics in performance appraisals.

5. Provide ethics training.

6. Conduct independent social audits.

7. Provide support for individuals facing ethical dilemmas.

 The Value of Ethics Training
▪ Can make a difference in ethical behaviors.

▪ Increases employee awareness of ethical issues in business decisions.

▪ Clarifies and reinforces the organization's standards of conduct.

▪ Helps employees become more confident that they will have the

organization’s support when taking unpopular but ethically correct

stances.
Effective Use of a Code of Ethics
▪ Develop a code of ethics as a guide in handling ethical dilemmas in

decision making.

▪ Communicate the code regularly to all employees.

▪ Have all levels of management continually reaffirm the importance of the

ethics code and the organization's commitment to the code.

▪ Publicly reprimand and consistently discipline those who break the code.
 Ethical Leadership
▪ Managers must provide a good role model by:
o Being always ethical and honest.
o Telling the truth; don’t hide or manipulate information.
o Admitting failure and not trying to cover it up.
o Communicating shared ethical values to employees through symbols,
stories, and slogans.
o Rewarding employees who behave ethically and punish those who do
not.
o Protecting employees (whistleblowers) who bring to light unethical
behaviors or raise ethical issues.
 DECISION MAKING IN MANAGEMENT
▪ Decision making: the process by which managers respond to

opportunities and threats by analyzing options and making decisions

about goals and courses of action.

▪ Decisions in response to opportunities: managers respond to ways to

improve organizational performance.

▪ Decisions in response to threats occurs when managers are impacted by

adverse events to the organization.
 Types of Decision Making
■ Programmed Decisions: routine, almost automatic process.
■ Managers have made decision many times before.

■ There are rules or guidelines to follow.

■ Example: Deciding to reorder office supplies.

■ Non-programmed Decisions: unusual situations that have not been
often addressed.
■ No rules to follow since the decision is new.
■ These decisions are made based on information, and a manger’s
intuition, and judgment.
■ Example: Should the firm invest in a new technology?
 The Classical Model
▪ Classical model of decision making: a prescriptive model that tells
how the decision should be made.

o Assumes managers have access to all the information needed to

reach a decision.

o Managers can then make the optimum decision by easily ranking

their own preferences among alternatives.

▪ Unfortunately, mangers often do not have all (or even most) required
information.
The Classical Model
 The Administrative Model
▪ Administrative Model of decision making: Challenges the classical
assumptions that managers have and process all the information.
▪ As a result, decision making is risky.
o Bounded rationality: There is many alternatives and information is
vast so that managers cannot consider it all.

• Decisions are limited by people's cognitive abilities.

o Incomplete information: most managers do not see all alternatives and

decide based on incomplete information.
 Why
Information
is Incomplete
 Decision Making Steps
1. Recognize need for a decision: Managers must first realize the need
for which a decision must be made.
2. Frame the problem: managers must frame problem for which decision is
to be made.
3. Generate alternatives: managers must develop feasible alternative
courses of action.
• If good alternatives are missed, the resulting decision is poor.
• It is hard to develop creative alternatives, so managers need to
look for new ideas.
Evaluate alternatives: what are the advantages and disadvantages of
each alternative?
• Managers should specify criteria, then evaluate.
4. Choose among alternatives: managers rank alternatives and decide.
• While ranking, all information needs to be considered.
5. Implement choose alternative: managers must now carry out the
alternative.
• Often a decision is made and not implemented.
6. Learn from feedback: managers should consider what went right and
wrong with the decision and learn for the future.
• Without feedback, managers never learn from experience and
might repeat the same mistake.
 Barriers to Decision Making
1. Lack of information
• limited information
• limited time
2. Lack of context
• absence of values, no reference points
• required to examine own values and reconcile with seemingly
conflicting values
3. Too much information
• overwhelming information can drown our ability to asses' situations
reliably
4. Lack of feedback and practice
• from supervisors, peers and subordinates

5. Cultural Barriers
• can lead to misunderstandings; may directly influence
decision making

6. Physiological factors

7. Psychological factors
• Ego, emotions, patience, procrastination, biases

8. Unhelpful theories or use of wrong theory

 Planning
▪ Planning is the process of analyzing the situation, determining the
objectives that will be influence in the future and deciding in advance,
the actions that will be taken to achieve.
▪ Planning is deciding in advance what to do, how to do it, when to do it
and who to do it.
▪ It involves anticipating the future and consciously choosing the future
course of action.
▪ “Planning is the function that determines in advance what should be
done.”
Hierarchy
of Plans
Planning
Process
 Analyzing opportunities

▪ Not a step of Planning, It is pre-step of planning.

▪ Essential to make a successful plan.

▪ SWOT analysis
SWOT
 Establishing objectives
▪ First and real starting point of planning.

▪ Management must define objectives in clear manner by considering

organizational resources and opportunities because a minor mistake in

setting objectives might affect in implementation of plan.

▪ Objectives must be specific, clear and practical.

▪ Objectives should be time bound

 Determination of planning premises
▪ Premises are the assumptions about the future in which the planning is
implemented.

▪ They provide environment and boundaries for the implementation of plan

in practical operation.

There are 3 types of planning premises

o Internal and external premises
o Tangible and intangible
o Controllable and uncontrollable
▪ Internal premises means within the organization ( Policies, investment,

availability of equipment's, funds etc.)

▪ External premises means outside the organization (Govt policies,

Economic conditions, population , demand)

▪ Tangible premises are the measurable premises like population,

investment, demand etc.

▪ Intangible premises are those which cannot be measured like business

environment, economic conditions etc.

▪ Controllable premises like technical manpower, input technology,

financial investment etc.

▪ Uncontrollable premises like strikes, change of govt policies, wars etc.

 Determination of alternatives

▪ It is essential to identify all the possible hidden alternatives.

▪ There must be search for the best alternative.

▪ The management must develop alternatives through the support of

experienced and intellectual experts in management sectors.

 Evaluation of alternatives

▪ Evaluate the alternatives from their expected cost and benefits.

▪ This is the logical step to evaluate each alternative from its plus and

minus points.

▪ Each alternative is studied and evaluated in terms of some common

factors such as risk, responsibility, planning premises, resources,

technology etc.
 Formulation of Supportive plan
▪ It is essential to formulate action of supportive plan for each step of
work and to all departments of the organization.

▪ These action plans involve formulation of policies, rules, schedule and

budget to complete defined objectives.

▪ Thus, formulation of supportive plans is an essential step in planning

process.

▪ It is difficult to implement main plan without formulation of derivative

plan.
 Implementation of plan
▪ Without this step, other procedure of plan will remain as paperwork.

▪ This step brings all the procedure of plan into action.

▪ For implementation plan, management must take some steps such as to

communicate with subordinates who initiate to plan into action; provide
necessary instruction and guidance; make arrangement of all resources
like materials, machines, money, equipment's etc.; make timely
supervision and control over subordinates.
 MANAGEMENT BY OBJECTIVES (MBO)
▪ Management by objectives (MBO) is a systematic and organized
approach that allows management to focus on achievable goals and to
attain the best possible results from available resources.
▪ It aims to increase organizational performance by aligning goals and
subordinate objectives throughout the organization.
▪ Ideally, employees get strong input to identify their objectives,
timelines for completion, etc.
▪ MBO includes ongoing tracking and feedback in the process to reach
objectives.
▪ Management by Objectives (MBO) was first outlined by Peter Drucker

in 1954 in his book 'The Practice of Management’.

▪ In the 90s, Peter Drucker himself decreased the significance of this

organization management method, when he said: "It's just another

tool. It is not the great cure for management inefficiency...

Management by Objectives works if you know the objectives, 90% of

the time you don't."

 Core Concepts of MBO
▪ According to Drucker managers should "avoid the activity trap",
getting so involved in their day-to-day activities that they forget their
main purpose or objective.

▪ Instead of just a few top-managers, all managers should:

▪ participate in the strategic planning process, in order to improve the

implement ability of the plan, and implement a range of performance
systems, designed to help the organization stay on the right track.
 Main Principle of MBO
▪ The principle behind Management by Objectives (MBO) is to make sure

that everybody within the organization has a clear understanding of

the aims, or objectives, of that organization, as well as awareness of

their own roles and responsibilities in achieving those aims.

▪ The complete MBO system is to get managers and empowered

employees acting to implement and achieve their plans, which

automatically achieve those of the organization.

 Six MBO Stages
▪ Define corporate objectives at board level

▪ Analyze management tasks and devise formal job specifications, which

allocate responsibilities and decisions to individual managers

▪ Set performance standards

▪ Agree and set specific objectives

▪ Align individual targets with corporate objectives

▪ Establish a management information system to monitor achievements

against objectives
8 Key Result Areas Where Managers
Must Pursue Clear Objectives
1. Marketing

2. Innovation

3. Human organization

4. Financial resources

5. Physical resources

6. Productivity

7. Social responsibility

8. Profit requirements
 MBO Advantages & Disadvantages

Advantages
• MBO programs continually emphasize what should be done in an

organization to achieve organizational goals.

• MBO process secures employee commitment to attaining organizational

goals.
 Disadvantages

▪ The development of objectives can be time consuming, leaving both

managers and employees less time in which to do their actual work.

▪ The elaborate written goals, careful communication of goals, and

detailed performance evaluation required in an MBO program increase

the volume of paperwork in an organization.

Thank you!!