Last Updated 19 Oct 2020

Management Importance in Nowadays Business

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ABSTRACT Management is the most important part of any organization. No organization can achieve its objectives without proper management. So management is considered the hub of any organization. As society continuously relied on group effort, and as many organized groups have become large, the task of managers has been increasing in importance and complexity. To meet the challenges like competition, efficient and economical uses of sources and maximum output, knowledge of management and theories of management is basic requirement.

Henceforth, managerial theory has become crucial in the way managers manage complex organizations. This article will provide the basic information of main management theories and how they have developed. It also addresses the management objectives, functions, goals, and essentiality as well as the requirement skills of a Manger. Relating to my current company – AON Vietnam, member of AON Corporation, the article point out which theory of management fit best with the style of management in AON Corporation, one of biggest insurance brokers worldwide and what a Manager at AON should do. Topic 1 & 2) CONTENTS I. MAIN MANAGEMENT THEORIES 1. Definition of Management According to Drucker (1974) Management is “the activity of getting things done with the help of others peoples and resources”. It means that management is a process of accomplishing work with the help of other people. According to Weijrich and Koontz (1993) “Management is process of planning, leading, organizing and controlling people within a group in order to achieve goals. It is also the guidance and control of action required to execute a program.

It indicates that there should be definite plan/program for affective management (Shied, 2010). On the basis of these definitions it can be concluded that management is a process that includes strategic planning, setting objectives, managing resources, developing the human and financial assets needed to achieve objectives and measuring results. It also includes recording facts and information for later use upon requirement. 2. Management Theories Contemporary theories of management tend to account for and help interpret the rapidly changing nature of today’s organizational environments.

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Several important management theories which are broadly classified as follows: 1. The Scientific Management School. 2. The Classical Organizational Theory School. 3. The Behavioural School. 4. The Management Science School. 5. Recent developments in Management Theory comprising works such as Systems Approach, Situational or Contingency theory, Chaos theory, and Team Building approach. This discussion will provide a general description of these management theories, how they have developed and the successes that they achieved. A Timeline Overview of Key Management theories pic] a. The Scientific Management School The first management theory is what is popularly referred to as Frederick Taylor’s Scientific Management. Frederick Taylor (1856 - 1915) started the era of modern management. Taylor consistently sought to overthrow management “by rule of thumb” and replace it with actual timed observations leading to “the one best” practice. “Taylorism” involved breaking down the components of manual tasks in manufacturing environments, timing each movement ('time and motion' studies) so that there could be a proven best way to perform each task.

Thus employees could be trained to be 'first class' within their job. This type of management was particularly relevant to performance drives e. g 'Action On' projects. It has to be acknowledged that from an economic standpoint, Taylorism was an extreme success. Application of his methods yielded significant improvements in productivity. For example, improvements such as his shovel work at Bethlehem Works, which reduced the workers needed to shovel from 500 to 140. Henceforth, Taylor proposed four underlying principles of management: First, there is need to develop a ‘science of work’ to replace old rule-of-thumb methods: pay and other rewards linked to achievement of ‘optimum goals’ – measures of work performance and output; failure to achieve these would in contrast result in loss of earnings. - Second, workers to be ‘scientifically’ selected and developed: training each to be ‘first-class’ at some specific task. - Third the ‘science of work’ to be brought together with scientifically selected and trained people to achieve the best results. Finally, work and responsibility to be divided equally between workers and management cooperating together in close interdependence. This was a rigid system where every task became discrete and specialized. However, many critics, both historical and contemporary, have pointed out that Taylor’s theories tend to “dehumanize” the workers. Therefore, in summary, while the scientific management technique has been employed to increase productivity and efficiency both in private and public services, it has also had the disadvantages of ignoring many of the human aspects of employment.

This led to the creation of boring repetitive jobs with the introduction of systems for tight control and the alienation of shop floor employees from their managers. b. Classical Organizational Theory School In this category of management theory are the works of Henri Fayol’s administrative theory and Max Weber’s bureaucratic theory. Administrative Theory Henri Fayol’s administrative theory mainly focuses on the personal duties of management at a much more granular level. Fayol believed that management had five principle roles: • Forecasting and planning. • Organizing. • Commanding Co-ordinating • Controlling. Forecasting and planning was the act of anticipating the future and acting accordingly. Organization was the development of the institution’s resources, both material and human. Commanding was keeping the institution’s actions and processes running. Co-ordination was the alignment and harmonization of the group’s efforts. Finally, control meant that the above activities were performed in accordance with appropriate rules and procedures. Fayol also developed fourteen principles of administration to go along with management’s five primary roles.

These principles are: specialization/division of labor, authority with responsibility, discipline, unity of command, unity of direction, subordination of individual interest to the general interest, remuneration of staff, centralization, scalar chain/line of authority, order, equity, stability of tenure, initiative, and esprit de corps. Fayol clearly believed personal effort and team dynamics were part of an “ideal” organization. Fayol’s five principle roles of management are still actively practiced today. The concept of giving appropriate authority with responsibility is also widely commented on and is well practiced.

Unfortunately, his principles of “unity of command” and “unity of direction” are consistently violated in “matrix management”, the structure of choice for many of today’s companies. Bureaucratic Theory Max Weber (1864 – 1924) postulated that western civilization was shifting from “wertrational” (or value oriented) thinking, affective action (action derived from emotions), and traditional action (action derived from past precedent) to “zweckational” (or technocratic) thinking. He believed that civilization was changing to seek technically optimal results at the expense of emotional or humanistic content.

Through analyses of organizations, Weber identified three basic types of legitimate authority: - Traditional authority: where acceptance of those in authority arose from tradition and custom. - Charismatic authority: where acceptance arises from loyalty to, and confidence in, the personal qualities of the ruler. - Rational-legal authority: where acceptance arises out of the office, or position, of the person in authority as bounded by the rules and procedures of the organization. It is the rational-legal authority form that exists in most organizations today and this is the form to which Weber ascribed the term 'bureaucracy'.

The main features of bureaucracy according to Weber were: • A continuous organization or functions bounded by rules. • That individual functioned within the limits of the specialization of the work, the degree of authority allocated and the rules governing the exercise of authority. • A hierarchical structure of offices. • Appointment to offices made on the grounds of technical competence only. • The separation of officials from the ownership of the organization. • The authority was vested in the official positions and not in the personalities that held these posts.

Rules, decisions and actions were formulated and recorded in writing. It is not coincidence that Weber's writings were at a time of the major industrial revolutions and the growth of large complex organizations out of the cottage industries and/or entrepreneurial businesses. c. Behavioural School The key scholar under this category is Elton Mayo. The origin of behavioralism is the human relations movement that was a result of the Hawthorne Works Experiment that started in the early 1920s. Elton Mayo and his associates’ experiments disproved Taylor’s beliefs that science dictated hat the highest productivity was found in ‘the one best way’ and that way could be obtained by controlled experiment. The Hawthorne studies attempted to determine the effects of lighting on worker productivity. When these experiments showed no clear correlation between light level and productivity the experiments then started looking at other factors. These factors that were considered when Mayo was working with a group of women included no rest breaks, no free more hours in the work-day/work-week or fewer hours in the workday/work-week.

With each of these changes, productivity went up. When the women were put back to their original hours and conditions, they set a productivity record. These results showed that the group dynamics and social makeup of an organization were an important force either for or against higher productivity. This outcome caused the call for greater participation for the workers, greater trust and openness in the working environment, and a greater attention to teams and groups in the work place.

Finally, while Taylor’s impacts were the establishment of the industrial engineering, quality control and personnel departments, the human relations movement’s greatest impact came in what the organization’s leadership and personnel department were doing. The seemingly new concepts of “group dynamics”, “teamwork”, and organizational “social systems”, all stem from Mayo’s work in the mid-1920s. d. Management Science Theories Douglas McGregor (1906-1964) postulated management ideas as contained in “Theory X” and “Theory Y”.

Using human behaviour research, he noted that the way an organization runs depends on the beliefs of its managers. “Theory X” gives a negative view of human behaviour and management that he considered to have dominated management theory from Fayol onwards – especially Taylorism. It also assumes that most people are basically immature, need direction and control, and are incapable of taking responsibility. They are viewed as lazy, dislike work and need a mixture of financial inducements and threat of loss of their job to make them work (‘carrot and stick’ mentality). Theory Y”, the opposite of “Theory X”, argues that people want to fulfil themselves by seeking self-respect, self-development, and self-fulfilment at work as in life in general. The six basic assumptions for ‘Theory Y’ are: work is as natural as play or rest – the average human being does not inherently dislike work, whether work is a source of pleasure or a punishment (to be avoided) depends on nature of the work and its management. Second, effort at work need not depend on threat of punishment – if committed to objectives then self-direction and self-control rather than external controls.

Third, commitment to objectives is a function of the rewards associated with their achievement. Satisfaction of ego and self-actualization needs can be directed towards the objectives of the organization. Fourth, the average human being learns, under proper conditions, not only to accept but to seek responsibility. Fifth, high degrees of imagination, ingenuity and creativity are not restricted to a narrow group but are widely distributed in the population. Lastly, under the conditions of modern industrial life, the intellectual potentials of the average human being are being only partly utilized. . Recent Developments in Management Theory Under this category of theory are the Systems Approach, Situational or Contingency theory, Chaos theory, and Team Building theory. The systems theory has had a significant effect on management science and understanding organizations. A system is a collection of part unified to accomplish an overall goal. If one part of the system is removed, the nature of the system is changed as well. A system can be looked at as having inputs (e. g. , resources such as raw materials, money, technologies, and people), processes (e. g. planning, organizing, motivating, and controlling), outputs (products or services) and outcomes (e. g. , enhanced quality of life or productivity for customers/clients, productivity). Systems share feedback among each of these four aspects of the system. The Chaos theory is advocated by Tom Peters (1942). Chaos theorists suggest that systems naturally go to more complexity, and as they do so, they become more volatile and must, therefore, expend more energy to maintain that complexity. As they expend more energy, they seek more structure to maintain stability.

This trend continues until the system splits, combines with another complex system or falls apart entirely. It will need an effective manager for the latter worst scenario not to happen. Team Building approach or theory emphasizes quality circles, best practices, and continuous improvement. It is a theory that mainly hinges on reliance on teamwork. It also emphasizes flattening of management pyramid, and reducing the levels of hierarchy. Finally, it is all about consensus management – i. e. , involving more people at all levels in decision-making. 3. Management theory applied to AON II. WHAT A MANAGER DOES

Managing, like all other practices – whether medicine, music composition, engineering, accountancy, or even baseball – is an art; it is know-how. It is doing things in the light of the realities of a situation. Managers just don't go out and perform their responsibilities. A good manager should discover how to master 05 basic functions: planning, organizing, staffing, leading and controlling. • Planning: This step involves mapping out exactly how to achieve a particular goal. For example, that the organization's goal is to improve company sales. The manager first needs to decide which steps are necessary to accomplish that goal.

These steps may include increasing advertising, inventory, and sales staff. These necessary steps are developed into a plan. When the plan is in place, the manager can follow it to accomplish the goal of improving company sales. • Organizing: After a plan is in place, a manager needs to organize his team and materials according to his plan. Assigning work and granting authority are two important elements of organizing. • Staffing: After a manager discerns his area's needs, he may decide to beef up his staffing by recruiting, selecting, training, and developing employees.

A manager in a large organization often works with the company's human resources department to accomplish this goal. • Leading: A manager needs to do more than just plan, organize, and staff her team to achieve a goal. She must also lead. Leading involves motivating, communicating, guiding, and encouraging. It requires the manager to coach, assist, and problem solve with employees. • Controlling: After the other elements are in place, a manager's job is not finished. He needs to continuously check results against goals and take any corrective actions necessary to make sure that his area's plans remain on track.

All managers at all levels of every organization perform these functions, but the amount of time a manager spends on each one depends on both the level of management and the specific organization. Roles performed by managers In his classic book, The Nature of Managerial Work, Henry Mintzberg describes a set of ten roles that a manager fills. These roles fall into three categories: • Interpersonal: This role involves human interaction. • Informational: This role involves the sharing and analyzing of information. • Decisional: This role involves decision making.

The below table contains a more in-depth look at each category of roles that help managers carry out all five functions described in the preceding “Functions of Managers” section. Mintzberg's Set of Ten Roles | | |Category | |Role | |Activity | | |Informational | |Monitor | |Seek and receive information; scan periodicals and reports; maintain personal contact with stakeholders. | | | | | |Disseminator | |Forward information to organization members via memos, reports, and phone calls. | | | | |Spokesperson | |Transmit information to outsiders via reports, memos, and speeches. | | | |Interpersonal | |Figurehead | |Perform ceremonial and symbolic duties, such as greeting visitors and signing legal documents. | | | | |Leader | |Direct and motivate subordinates; counsel and communicate with subordinates. | | | | |Liaison | |Maintain information links both inside and outside organization via mail, phone calls, and meetings. | | |Decisional | |Entrepreneur | |Initiate improvement projects; identify new ideas and delegate idea responsibility to thers. | | | | | |Disturbance handler | |Take corrective action during disputes or crises; resolve conflicts among subordinates; adapt to environments. | | | | |Resource allocator | |Decide who gets resources; prepare budgets; set schedules and determine priorities. | | | | |Negotiator | |Represent department during negotiations of union contracts, sales, purchases, and budgets. | | | Skills needed by managers Not everyone can be a manager. Certain skills, or abilities to translate knowledge into action that results in desired performance, are required to help other employees become more productive. These skills fall under the following categories: Technical: This skill requires the ability to use a special proficiency or expertise to perform particular tasks. Accountants, engineers, market researchers, and computer scientists, as examples, possess technical skills. Managers acquire these skills initially through formal education and then further develop them through training and job experience. Technical skills are most important at lower levels of management. • Human: This skill demonstrates the ability to work well in cooperation with others. Human skills emerge in the workplace as a spirit of trust, enthusiasm, and genuine involvement in interpersonal relationships. A anager with good human skills has a high degree of self-awareness and a capacity to understand or empathize with the feelings of others. Some managers are naturally born with great human skills, while others improve their skills through classes or experience. No matter how human skills are acquired, they're critical for all managers because of the highly interpersonal nature of managerial work. • Conceptual: This skill calls for the ability to think analytically. Analytical skills enable managers to break down problems into smaller parts, to see the relations among the parts, and to recognize the implications of any one problem for others.

As managers assume ever-higher responsibilities in organizations, they must deal with more ambiguous problems that have long-term consequences. Again, managers may acquire these skills initially through formal education and then further develop them by training and job experience. The higher the management level, the more important conceptual skills become. • Designing skill is the ability to solve problems in ways that will benefit the enterprise. To be effective, particularly at upper organizational levels, managers must be able to do more than see a problem.

In addition, they must have the skill of a good design engineer in working out a practical solution to a problem. Managers must also have that valuable skill of being able to design a workable solution to the problem in the light of the realities they face. It has, however, got to be mentioned that the relative importance of these skills may differ at various levels in the organization hierarchy. Although all four categories contain skills essential for managers, their relative importance tends to vary by level of managerial responsibility.

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