Business management 2

Introduction to management
Study unit 1
® Society depends on businesses to improve its standard of living and to meet the ever-changing needs
of consumers. Businesses cannot do this on their own, hence, Government, as well as non-profit
organisations, must produce certain services to assist with satisfying society’s needs. Scarce resources
are used to produce products and services.
® The resources include:
• People (Human resources)
• Money
• Raw materials
• Knowledge

® Managers plan and implement (organise, lead and control) what has to be done to reach the
organization’s mission and goals. They are responsible for the success and sustainability of the business
and ultimately, the satisfaction of the consumers.

Business organisations and managers and the nature of management

® Organisations serve consumers and society in a number of ways. They are responsible for
transforming scarce resources into products and services that consumers need and want.
® Managers are needed to deploy the basic resources of an organisation at their disposal, to help the
organisation reach its mission and goals.

All managers perform four fundamental management functions:

• Planning
• Organising
• Leading
• Controlling

& Management can be described as the process of planning, organizing, leading and controlling the
scarce resources of the organisation to achieve the organization’s mission and goals as productively as
possible.
 Different levels and kinds of management in the organisation
® Managers at all levels in the organisation must carry out the four management functions.
® Managers are classified into two categories:
o According to their level in the organisation (top, middle, lower or first-line managers).
o According to their function in the organisation.

∆ Top Management
- Top management is responsible for the organisation as a whole.
- They determine the mission, vision, goals and strategies of an organisation.
- Top management is responsible for making future decisions that affect the entire business.

∆ Middle management
- Middle management is responsible for specific departments in the organisation.
- They are responsible for implementing the strategic plan that was formulated by top
management.

∆ Lower /first line management

- First line managers, such as supervisors, manage these smaller groups.
- They deal with monthly, weekly and daily management of a group in the business.
- First line managers deal directly with staff.

® Management can also be classified according to the specific area they are involved with. The
following managers have been identified who manage different functions/departments in a business
organisation:
• The general manager
• Marketing manager
• Financial manager
• Operations/production manager
• Purchasing / Procurement manager
• Human resources manager
• Public relations manager
• Research and development manager

The role distribution of managers

® Managers often need to perform certain additional roles to be able to manage effectively. The
following roles have been identified:
• Interpersonal roles
- Figure head: Manager is an aspirational figure
- Leader: managers lead people not just on work-related matters
- Liaison: managers know how to bond and establish relationships

• Information roles
- Monitor: managers analyse data and get accurate conclusions
- Disseminator: managers transmit and communicate data effectively
- Spokesperson: a manager knows how to speak on behalf of the company

• Decision roles
- Entrepreneur: managers take innovative and brave decisions
- Disturbance handler: managers solve the problems that the company has
- Resource allocator: managers are in charge of allocating resources properly
- Negotiator: managers are continually negotiating
 Managerial skills and competencies at various managerial
Levels
® There are three main skills needed by managers in an organisation:

• Conceptual skills involve the manager’s thinking and planning abilities to ensure that the
organisation is prepared for the future
• Interpersonal skills involve a manager’s ability to work with people
• Technical skills involve the manager’s ability to apply knowledge and techniques of a specific
area to reach specific goals

ê The concept ‘competent’ means that a manager is able to perform specific tasks successfully.
Management competencies indicate specific skills/abilities/knowledge that enable the manager to manage
specific functions effectively.
Management and organisational performance
® The task of management is to manage in such a way that the business makes a sustainable profit.
® The business must earn the highest possible income with the lowest possible cost.
® Consider also social responsibility towards community and environment: Triple bottom up

& Efficiency: performing or functioning in the best possible manner with the least waste of time and
effort
VS
& Effectiveness: the degree to which something is successful in producing a desired result; success.

The scope of management

® The principles of business management apply to large businesses - small and medium sized
organisations - as well as non-profit organisations.

® Large business organization: a country needs large organizations with managers to compete in
competitive environment
® Medium businesses also play an important role
® Non-profit organizations providing services:
o Charity organizations
o Schools
o Clinics
o Post office
 The evolution of management theory
Study unit 1 part 2
Introduction
® There is no single best way to manage. Over time different theories have been applied, to reflect
dominant issues and cultures that relate to a specific time period and how management dealt with
these differences.
® The evolution of management over time, shows how management is dealing with the needs of society
® It shows how management has been trying to find solutions on how to optimize resources, to make a
profit and survive

® Capitalism has changed drastically over the years

• Industrial Revolution made mass production possible
• People moved from their agriculture lands to factories
• The relocation from people to cities, meant that now there was a need for:
- Housing
- Sanitation
- Transport
- Schools
- Hospitals
- Postal services
® A need for professional managers developed

Why study management theory

• To create a management theory:
- Identify the variables in the business environment
- Rely on observation on what happens really in the workplace
- Make assumptions
- Construct a model

Understanding the different management theories

® Environmental forces influence everything we do in an organisation. Changes in the environment have
an impact on every aspect in a business and management must adapt to these environmental changes.

® All management theories are based on assumptions, e.g.:

• People are merely machines
• Robots are better employees than humans
• People are emotional beings and should be treated with respect
® Bear in mind that subjects change over time due to environmental influences
® Society and social changes influenced management theory over time:
• Child labor
• Woman in the workplace
• Sexual harassment
• Quality of life

Reasons to understand management theories

• Empowers managers to show what has worked in the past and what has not
• Look at management theories that stood the test of time
• There is no way that can guarantee success or is a best recipe
• The fast-changing business environment is just too complex
The theories of management
There are two schools of thought:
• Classical approaches
• Contemporary approaches

The following are elements of an external environment that have an influence on organizations:
• Customers’ demands (Zara and Edgars)
• Types of products needed (Apple)
• Nature of positioning and market segmentation strategies (Nando’s)
• Types of services needed (Ecolab)
• Business to acquire or sell (Pioneer Foods)
• Competitors actions (Pepsi and Coke)
• Selecting suppliers and distributors (Tropicana)
• Government laws (sugar tax = Pepsi and coke came out with sugar free drinks)

Organizations need to anticipate and empower managers to identify these external forces in order to
realize emerging opportunities and threats

∆ Classical approaches
- The focus is on the internal environment
- Environment relatively stable
- Focused on doing things right

• Scientific management
- The focus in this approach was to look for ways to improve the productivity of workers.
- Money was identified as a motivator of workers in scientific management.
- Example coal mine

About:
o One, and only one, method of work
o Time-and-motion studies
o Standardization of tools
o Implements Focus on productivity
o Rewards for exceeding goals
o De-humanizes the workplace

1800’s, Frederick W Taylor (mechanical engineer) interested to improve productivity in

workers
® Study work and determine the most effective way to perform tasks
® He studied:
o Individual workers
o Measured everything
o Identify unnecessary movements
o Standard times were established
o Money motivates workers

® Criticism:
o Dehumanizing effect on workers
o Ignores emotions of workers

Frank and Lilian Gilbreth

® Studied movements
® Changed 18 steps in process to 5 steps
 Henry Gantt
® Improved productivity at shop floor level
® The relationship between planned work and completed work
® In Summary: The classical approach focusses on managing work, not managing people
® Limitations:
o Workers cannot only be seen as parts of a machine
o Assumptions on motivation of employees is simplistic. Money is not the only thing.
o This approach can lead to exploitation of workers and strikes.

• Process / Administrative approach

- This approach centered on finding ways to managing complex organisations.
- The main aim was to manage the total organisation

® Henry Fayol: argued that management was applied in business, schools, sport, even at home
® Fayol: 5 functions of administration: Planning, Organizing, Commanding, Coordinating,
Controlling
® Fayol’s 14 principles for effective management:
o Division of labor and specialization
o Authority gives management the right to give orders
o Discipline: Employees must respect rules of organization
o Unity of command: Employees must receive commands from one superior
o Unity of direction: All operations towards the same goal

Individual interest to the common good

• Renumeration: Reward should be fair
• Centralization: Proper degree between centralization and decentralization
• Hierarchy: Line of order in an organization
• Order: Resources should be at the right
• place at the right time
• Equity: Managers should be fair to them
• employees
• Stability: Low turnover of staff
• Initiative: Employees should have the freedom to conceive plans
• Team spirit: Give organization a sense of unity

• Bureaucratic approach
- The focus in this approach was on how organisations developed structures to deal with their
many employees.
- The main components of this approach included a hierarchy that involved clearly defined
lines of authority and regulations.

About:
o Clearly defined job roles
o A hierarchy of authority
o Standardised procedures
o Meticulous record-keeping

® Max Weber, a German sociologist, was mainly interested in how businesses were
structured.
® He developed a theory of bureaucratic management and clearly defined regulations and
authority
® Ideas is based on legal authority. Rules and controls that govern an organization.
® Theory relatively stood the test of time.
 Limitations:
o Managers are compensated for being told what to do and not for thinking
o Rely on old, outdated rules. Need to continuously improve on practices.

• Human relations movement

- The main focus of this approach was the belief that people are not machines.
- The aim was to improve productivity by looking at people and their behaviour and not just
the work itself.

® Hawthorne Studies: The human relations approach to solving productivity problems.

® These studies studied the relativity between the amount of light in a factory and productivity. As
lighting improved. So did productivity. BUT, also as lightning worsened productivity also
improved.

® Hawthorne effect: Management concern for the well-being of its employees

® Findings: Group pressure had the strongest effect on worker productivity
® Employees were motivated by SOCIAL needs, not financial needs
® Maslow hierarchy of needs: satisfy lower needs first
® McGregor:
o Theory X: People do not like work. Motivate with force and money
o Theory Y: People approach work as an opportunity to develop talents

Limitations:
• Believe that happy worker is a productive worker, is simplistic
• Economic aspects remain important for worker

Key areas according to Top Employers Institute:

• Talent strategy
• Workforce planning
• Learning and development
• Performance management
• Leadership development
• Career and succession management
• Compensation and benefits
• Culture

• The quantitative management theory

• The focus in this approach was on how decisions should be made in an organisation.
• The theory suggested that mathematical models, statistics and other models be used, when
trying to simulate real life scenarios. This theory is not the primary aid to decision-making, as
people cannot be quantified.

• The Quantitative approach consists of:

o Management Science
o Operation Research
o Statistics

• Tools and techniques being used today:

o Linear Programming – linear optimizing
o Program Evaluation Review Technique (PERT): management of time to finish a project
o Critical path method (CPM): best path
o Regression analysis: relationship between data
∆ Contemporary approaches
- The interaction between an organisation and the external environment are taken into consideration
- Turbulent environment
- Focus on external and internal environment
- Focus on doing the right things

• The systems approach

- The focus of this approach is on the organisation as a whole.
- All the interrelated parts have a single purpose – to remain in balance.
- Management considers the impact of decisions on the business as a whole and not on
separate parts.
- Management must aim to maintain the
equilibrium between the business, all its parts and
the environment.

Relevance of the systems approach to management

in today’s business environment
This approach deals well with:
• Changes in both internal and external environments
• Systems and sub-systems that are constantly changing
• The fact that management has to decide about the optimization of scarce resources
• The four management functions (polc)
• The issue of productivity
• The unique mission and goals of organisations

An open system has the following elements:

o Input (resources)
o Transformation processes (managerial processes, systems, etc.)
o Outputs (products or services)
o Feedback (reaction from the environment)

• The contingency approach

- This approach is based on the assumption that the management principles that can be
applied are dependent on a specific situation that managers are faced with at a given point
in time.
- This approach highlights that there is no technique or method of managing that is
appropriate to every situation and that in certain situations a combination of different
approaches should be used.
- Managers using this approach must be flexible and adapt to every situation as it occurs.

This approach focuses on:

o The organization’s business environment
o The organization’s own capabilities
o The values, goals and skills of management and staff
o The technology used by an organization
• Total quality management (TQM)
- The focus in this approach is based on customer satisfaction.
- The customer will define what quality means.
- Total commitment of the entire workforce Gradual improvements
- TQM is not quality control!
- The focus of this approach lies in process thinking. TQM engages management and staff to
become more analytical and creative in their thinking, in order for the organisation to be
more competitive and effective in the way they operate.

• Six sigma
- The focus in this approach is on problem solving. The methodology used is DMAIC:
o Define
o Measure
o Analyse
o Improve
o Control
- Just like TQM, Six Sigma focus on improving processes in the organization
- Example coal mine

- Six Sigma focuses on:

o Reducing defects
o Reducing cycle times
o Reducing cost of operations
o Improving the return on investment

Examples of where Six Sigma can be used in a hospital:

§ Patient admission process
§ Patient invoicing process
§ Up-to-the minute patient information processing

• The learning organisation

The features that are emphasized in this approach are:
o Becoming committed to lifelong learning
o Each individual must challenge his/her own premises and generalizations regarding an
organisation and its environment
o Successes and failures are shared and become learning opportunities
o Everybody must share the same vision for the organisation
o Dialogue must be encouraged in an organization
o Systems-thinking must be promoted

• Re-engineering
- This approach starts by looking at how an organisation function.
- The main assumption is that current processes do not work, and that the organisation
should rethink what it does and how it is done.
- The focus is not just internal but is extended to suppliers and customers alike.

Steps:
§ It means drastic change of a process
1) Prepare managers and employees for the re- engineering intervention
2) Map the old process
3) Design a new process as if the old process does not exist
4) Implement the new process
5) Improve continuously on the new process
Current and near future management realities
® In the ever-changing business environment, organisations need to continuously find ways to remain
relevant to the target market and to find new ways to compete.
® Forecasting has become almost impossible, and management must view the business as a whole, in
order to get the big picture.
® The workforce is becoming more mobile, and staff can be employed on a project-by-project basis.
® Expert managers will not be part of the full-time staff complement of an organisation.

New management realities

• Working with Millennials
• Mobile workforce
• Robots
• Diversity
 Managing a changing environment
Study unit 1 part 3
Introduction
® Businesses have to survive and prosper in an extremely turbulent environment.
® Managers are often faced with situations where they have to make decisions about the future and
uncertainty and unpredictability prevails. Managers have to find creative solutions to
challenges that have never surfaced before.

South African managers are faced with a variety of challenges that impact on their decision-making. These
include:
• Economic variables such as the exchange rate, the weak South African currency, demands of
labour unions and inflation rates

• Social environmental variables that include crime, water-scarcity, urbanization and poverty

• Health factors, including substance abuse, HIV and diabetes, which should be factored into
management decisions regarding personnel

• Political dispensation which is characterised by various variables such as laws and policies
enforced by Government (Employment Equity Act 55 of 1998) that impact on managers

ê The organisation and the environment in which it functions are inter-related. Management must
constantly pay attention to the changing business environment.

The organisation as a micro system of its environment

& A system can be defined as a set of inter-related elements functioning as a whole. An organisation
can be viewed as an open system that has different sub-systems.
® These sub-systems are the different functions in a business.
® A business is dependent on its external environment
® Examples include the finance function, the marketing function, the HR function and procurement function.
Managers are responsible for managing this process in an ever-changing environment.

The systems approach in management

Four basic components are important:
• An open system (influences and is influenced by the environment)
• Subsystems (smaller systems within larger systems. Each system is influenced by each other.)
• Synergy (the whole is greater than the sum of all its parts)
• Entropy (if a business does not adapt to the environment, it will fail to continue)

The composition of the business / management environment

Macro-environment and Market environment Micro-environment
its sub-environments (external and its key variables (internal environment)
to the business)
• Political environment • Consumers • Mission and goals of the
• Economic environment • Suppliers organisation
Slide 37 on
merged bm • Social environment • Intermediaries • The organisation and its
(Pestle • Technological • Competitors (this will different management
analysis) environment include Porter’s five functions
• International environment forces model) • The resources of the
• Ecological environment • Labour unions organisation
• The organisational
culture
The main characteristics of the management / business environment include:
• Constant change
• Interrelatedness of environment variables
• Increasing instability
• Uncertainty
• Complexity

∆ Micro environment
® The micro- environment is the internal environment of the organization and the main
environment in which management plans, organizes, leads and control.
® Also refers to the organizations strategy for competing
® This environment can be controlled by managers

Different approaches to assessing the capabilities of organization:

• Functional approach: looks at functions in company
• Value-chain approach: Looks at company as chain of activities
Differentiate clearly between:
- Primary activities (turning input into output)
- Secondary activities (support the primary activities)

Determine where an organisation has a competitive edge in terms of:

- Low cost
- Differentiation
• Resource based approach: Looks at organization’s available resources
• Financial ratios

Major advantages of Value Chain approach in Food Industry:

• Traceability
• Trustworthiness
• Quality control
• Food Safety
• Sustainability
• Reduces Transaction Charges
• More Fair Trade
• Reduce of food waste

∆ The market or Task environment

The environment that immediate surround the organization: THE MARKET
• The market consists of people who’s needs need to be satisfied
• These needs of consumers change needs to adapt
• Needs to do continuous market research
• Market demographics can change

® The Intermediate plays an important role in bridging the gap between the manufacturer and the
consumer.

Intermediates includes:
o Retailer
o Agents
o Spaza shops
o Artificial intelligence in insurance industry
 Competitors:
® The industry or market environment is a group of organizations (that sell similar products as
competitors) which influence each other
® This is referred to as an industry. If an organization is already in a certain industry or intends
entering a certain industry, it would require certain information on this industry in order to guide
its strategy
® Porters five forces in industry analysis highlights useful information

Michael Porter identified five competitive forces influencing competition in an industry

• Threat of new entrants
• Bargaining power of suppliers
• Bargaining power of buyers
• Threat of substitute products
• Rivalry amongst competing organizations

∆ Macro environment
• The political environment
- Laws and legislation
- Employment equity
- Broad-based black economic empowerment
- The ruling party
- Threats to freedom of speech
- Land confiscation
- Trading across borders
- Nationalization of mines
- Treatment of migrant workers and refugees

• The economic environment

® A Country’s economic factors can affect an organizations strategic direction as it changes the
factors that the strategic direction was built on in the first place
® Managers should keep an eye on economic trends which would usually have a direct impact on
most organizations

In terms of the economic factors, the managers should consider the following factors:
- Economic growth
- Unemployment
- Inequality
- Monetary policy of the government
- Fiscal policy of the government
- Inflation
- Interest rates
- Tenderpreneurism (the term describes individuals who enrich themselves through
corrupting the awarding of government tender contracts, mostly based on personal
connections and corrupt relationships)

• The social environment

- More women in the workplace
- Quality of life
- Crime
- Substance abuse
- Modern family structures (eg single families)
- Xenophobia
- Women in leadership positions
- Values and attitudes
- Changing demographics
 • The technological environment
- Technology changes human interaction
- Social media
- On-line shopping
- Drones
- Technology changes purchasing behaviour Technology changes how the workplace functions

• The international environment

- Boycotts and sanctions
- New trade alliances (eg Russia and the USA) BRIC countries (Brazil, Russia, India, China) Brexit
- The European Union
- Standardization of products
- International human rights

• The ecological / environment

- This can be explained as the relationship between humans ( organization ) and the physical
environment
- Global climate is changing due to human behavior, resulting in global warming
- Food production is an example of how it is directly influenced by this
Example: Coca-Cola admits that without water it would have no business at all. It takes almost three litres of
water to make one litre of Coca-Cola

Interfaces between the organisation and the environment

® Managers must be proactive when making decisions regarding the future of a business. The focus
must be on all activities and not just on internal operations.

Key factors to consider are:

- Environmental change and the organisation: Culture and values
- Uncertainty in the environment: Car manufacturers and cellphones
- Crises in the environment: Covid-19

Ways in which management can prepare for environmental changes

• Information management. The environment is changing constantly, and it is, therefore,
necessary to complete a thorough environmental scanning to enable the organisation to
identify all the possible threats to it and compile an extensive information network.

Ultimately:
- Keep up with change
- Assess any threats
- Assess any opportunities

• Strategic response. Management often has to make necessary changes to an existing strategy or
even adopt a brand-new strategy to enable them to adjust to identified changes and challenges.

Ultimately:
- Must decide on a strategic response

• Structural changes. The organisation also has the option to adapt to or redesign an
organisational structure for the organisation. This will lead all employees in a certain direction
and make necessary changes to how things are done in the organisation.

Ultimately:
- Adapt the organizational structure
 Management tasks:
Strategic planning
Study unit 2 part 1
Introduction
® Management is responsible for the future planning in an organisation.
® The strategic plan provides focus for all other plans
® The hierarchy of organisational plans includes
o strategic plans,
o tactical plans and
o operational plans.
® This section focuses on the process of creating a strategic plan for a business. This plan is important,
as it guides decision-making at every level in a business.

Strategic planning: what it encompasses

® Strategic planning is future focused.
® The main focus of strategic planning is to change the future, not the present or the past

The characteristics of strategic planning include:

• It is an ongoing process
• It is performed by top management, who need conceptual skills
• The focus is not on individual departments, but on the entire business as a whole
• It is concerned with vision, mission, long-term objectives and strategies
• It integrates all management functions
• It uses the organization’s resources to exploit opportunities or deal with threats
• It has to comply with corporate governance principles

Strategies are formulated at:

• Corporate level: specify in which markets the business should be
• Business level: the best to compete in a certain market
• Functional level: the skills and resources to do your job

The strategic planning processes

Vision
® STARTING POINT IN THE STRATEGIC PLAN
® Successful companies have a core vision and core purpose, that remains fixed with their strategies
® The first step towards a strategic formulation is an organization’s vision
® A strategic vision – an organization’s dream what to do in future.

® All managers should contribute to the creation of a vision

® The vision should be achievable
® The vision should be redeveloped as the organization and environment change

A clear vision is important for the following reasons:

• It shows where the organisation wants to be in the future
• It promotes change
• It provides the basis for the strategic plan
• Decision-making takes place within a certain context
• Serves as a motivator for managers and employees
• Leads to job satisfaction, commitment, loyalty and improved productivity
Characteristics of a vision:
• Looks to the future
• Appeals to emotions
• Inspires and encourages
• Mobilize people
• Positively charged
• Easy understandable

Requirements of a vision statement:

• Shared and generated commitment
• Preferred and desired future
• Create tension between current reality and desired outcome
• Fluid and enduring
• Sustained and nurtured

Visions SHOULD BE:

• Be motivational,
• A Beacon for Growth,
• Challenging,
• Be a Basis for Strategic Design,
• Be a Framework for Strategic Decision making,
• Be Directional
• Give Focus
• Be Desirable, but feasible
• Be Easy to Communicate and Easy to Remember

NOT:
• Vague
• Solutions to current problems
• Merely eloquent words and statements
• Merely hanging on boardroom walls

Mission
The mission should answer the following:
• What business are we in?
• Who are our customers?
• How will we serve our customers?

® A mission statement will stipulate the focus areas for management and be a tool for resource
allocation.
® The mission statement influences everybody in the organisation.
® Top management must live the mission statement, the key performance areas for the entire
organisation must be outlined in the mission statement, managers at all levels in the organisation must
buy into the mission statement and finally, the KPAs must reflect in every manager and staff member’s
contract.

Characteristics of a mission statement:

• Should reflect expertise and strengths of organization
• Advertising should appeal to customers
• Voicing potential opportunities
• Forging emotional bonds
Formulating a mission statement:
• Include as many managers as possible
• Should create emotional bond
• Communicated internal and external

Components of a mission statement:

• Core components:
- The product / service
- Market
- Technology
• Additional components:
o Profitability: Ensuring that our company exceeds the expectations of our shareholders
o Stakeholders: Exceeding the expectations of all other stakeholders
o Innovation: Relentlessly driving innovation in the company and dealerships
o Public image: Creating an image that will be the pride of all stakeholders
o People: Investing in our managers and workers
o Safety and health: Ensuring a safe and healthy work environment
o Quality: Embracing quality-improvement initiatives

Role of a mission statement:

• Purpose and reason for existence
• States nature of business
• Behavior standards
• Values, Believes and Morale

Key pointers on a mission statement:

• A mission statement should set an organisation
• apart from similar organisations
• All mission statements will be unique
• Mission statements will state clearly the areas that all managers and workers should focus on
• Mission statements should reflect the strengths, weaknesses, opportunities and threats

Assessing the internal (micro) environment

To ensure the mission statement is realistic, management must:

- Evaluate the company’s internal capabilities
- Evaluate the external environment

∆ Step 1: Identify strategic internal factors

The following approaches can be used to determine which factors are strategic and necessary for
the survival of a business:

1.1) The evaluation of the business functions

® Thorough analysis of its marketing, financial, production and human resources
® Potential strengths and weaknesses

1.2) The value chain approach

® 2 activities in the value- chain approach
o Primary activities: activities involved in physical production
o Secondary activities: platform that allow primary activities to take place
 1.3) The resource-based view of an organisation
® Tangible Assets
• Organization’s location
• Buildings and equipment
• Is visible
• Example: Kulula

® Intangible Assets
• Assets that cannot be touched
• Often critical to create a competitive advantage
• Reputation and trust
• Example: Coke and Wimpey

® Capabilities
- It is the complex network of processes and skills that determine how effective and
efficient the inputs of the organization will be transferred into outputs
- Dynamic capability: Organizations ability to build, integrate and re-structure
capabilities to adapt to change. Example: FNB: e Wallet
§ Distinctive Organizational Capabilities
o Special and unique
o Distinguish organization from its competitors
o Example: McDonalds

® Core Competencies
- only possessed by organizations that is superior to industry average
- Example: BMW, Mercedes

The 3 most important resources in business:

• Access to markets
• Supply of human capital
• Access to funding

1.4) The product/market evolution

® One of the reasons for success in an organization is the product – market relationship
® Apply the concept of a product life cycle concept

1.5) Using financial analysis

∆ Step 2: Evaluate strategic internal factors

The aim of this step is to determine the potential strengths and weaknesses of a company.
Management can use the following yardsticks to do so:
• The previous performance of the organisation
• Competitor performance comparison
• A comparison with industry ratios
• Benchmarking

∆ Step 3: Develop input for the strategic planning process

Based on the findings of step 2, determine the internal factors that:
• Provide a business with a competitive advantage
• Are important for a business, but can be found in every competing business in your industry
• Are weaknesses (avoid strategies that rely on your weaknesses)
The external (macro and market) environment
® An organisation does not operate in isolation. There are various environmental factors that change
all the time, which impact on a business; these variables are uncontrollable. A company’s survival
depends largely on whether management can anticipate these changes and adapt their operations to
prepare for them.

Management must forecast environmental changes by implementing the following steps:

1) Select critical environmental variables
2) Select the source of information
3) Evaluate forecasting techniques
4) Develop an environmental profile
5) Monitor forecasts

Identify key variables in the external environment:

• PESTIE analysis
• Identify any trends that is a threat or opportunity
• Select critical environmental variables
• Sources of information to do forecast: Research Centers and Publications
• Develop an environmental profile
• Monitor the critical aspects

Translating the mission into long-term goals

® The mission statement still has to be translated into MEASURABLE long-term goals

Balance Scorecard: A balanced scorecard

& is a strategic management performance metric that helps companies identify and improve their internal
operations to help their external outcomes. It measures past performance data and provides
organizations with feedback on how to make better decisions in the future

Kaplan and Norton

® Created a new tool called ‘Strategy maps’
® Strategy map represents how an organisation creates value
® Visually links the processes to the desired outcome

4 key internal processes:

• Operations
• Customer relationships
• Innovation
• Regulatory and social processes

® The balanced scorecard (BSC) is used by organisations for this purpose.

® The four BSC perspectives measure:
• The financial perspective
- Measures operating income, return on capital employed and economic value added.
• The customer perspective
- Measures number of new customers, customer retention, customer defection and customer
satisfaction.
• The internal business processes
- Deals with continuous improvement, throughput and quality.
- Measures number of mistakes made during certain processes, number of new processes
incorporated into business and productivity measures.
• The learning and growth perspective
- Focuses on competency of employees, innovated ideas generated by employees, managers
and staff retention.
Choosing a strategy
® Strategists will first determine the generic strategy for a business, which can include:
• Low-cost leadership strategy
- This strategy attempts to maximize sales by minimizing costs per unit and hence prices.
- To minimize costs:
o As workers gain more experience in producing a particular product, productivity
should increase, and unit costs decrease. This is called a Learning curve OR
Experience curve.
o An organisation can expand the size of its operations. As the size of operations
increase, the costs per unit decrease because the fixed costs are shared by a large
number of products

• Differentiation strategy
- Differentiation consists of creating differences in the organization’s products or services
- The rationale of differentiation is that the organisation can charge higher prices for a
product that customers perceive to be different from similar products offered by their
rivals.
- Differentiation can include quality, production process, design, reputation, product
reliability, unique taste, brand name, technology etc.
- Example: Carol boyes, Apple etc.

• Focus strategy
- Focuses on a specific product line or segment of the market that gives an organisation a
competitive edge.
- A focus strategy based on cost leadership aims at securing a competitive advantage by
serving buyers at a lower cost
- A focus strategy based on differentiation aims at securing a competitive advantage by
offering customers a unique product
- Example: Harley Davidson focuses on motorcycles.

Grand strategy
® Once a business has decided on a core idea, they need to choose a grand strategy for it. There are
three components to a grand strategy, namely:
∆ Growth strategies
∆ Decline strategies
∆ Corporate combination strategies

∆ Growth strategies
Internal growth strategies
• Concentration growth strategy
- Involves concentrating on improving what one was already doing.
- Resources are directed towards the continued and profitable development of a known
product, in a known market, using a known technology

• Market development
- When an organisation wants to grow but still focus on what they are currently doing.
- Builds on existing strengths and weaknesses.
- Sells present products in new markets by opening additional new outlets or attracting
other market segments.

• Product development
- Implies modification of existing products or additions to present products to increase
market penetration within customer groups.
- Example: Toyota prius hybrid car runs on petrol and electricity.
 • Innovation
- Focuses on creating innovative products, creating new ways of getting their products
into the market, designing new processes, or it could focus on any other area in whichh
they can innovate.
- Example: the first bank that made cellphone banking possible.

External growth strategies

• Integration
o Vertical Integration:
- extends the scope and operations of an organization to other activities within
the industry
o Backward integration:
- Gaining control over the suppliers
- Backward Vertical integration is common where:
§ Low costs, and
§ Certainty of supply exists
- Backward Vertical integration is effective when: Suppliers are:
§ Unreliable
§ Costly
- Benefits: Reduce economics uncertainty and costs
- Risk: Can over commit resources to an activity that can become absolute

o Forward integration:
- Gaining control over OUT distributers or retailers
- Forward Vertical integration is effective when: Existing retailers is:
§ unreliable,
§ have high profit margins, and
§ are incapable of servicing the customers
- Example: a car manufacturer purchasing a car dealership to sell their cars.
o Horizontal integration:
- is a long-term growth strategy by which one or more similar organisations are
taken over for reasons such as scale of operations benefits or a large
market share.

• Diversification
® May be appropriate to organisations that cannot achieve their growth objectives in their
current industry with their current products and markets

Why businesses diversify:

§ To manage risk by minimizing potential harm to the business during economic
downturns
§ The markets of current businesses are approaching the saturation or decline phase of
the product life cycle
§ Risk can be distributed more evenly
§ Current businesses are generating excess cash that can be invested more profitably
elsewhere
§ Synergy is possible when diversifying into new businesses.

o Concentric diversification:
- Involves the addition of a business related to an organisation in terms of
technology, markets or products.
- The new business selected must possess a high degree of compatibility with the
current business
- Key to success: take advantage of at least one of the organisations major
strengths. (Could be organisations knowledge of the market or its processes
which can easily be adapted).
 o Conglomerate diversification:
- Involves seeking growth by acquiring a business because it represents the most
promising investment opportunity available.
- New markets nor new products have to be technologically related
- Can be chosen to offset deficiencies such as seasonality, lack of cash or a lack of
opportunities in the market
- Primary disadvantage: lack of managerial experience in the new business.

∆ Decline strategies
• Turnaround
- Focuses on eliminating inefficiencies in an organisation.
- Top management looks at cost and asset reduction to reverse declining sales and
profits.
- Activities focus on:
§ Reducing the costs and improve the financial position of the company
§ Selling of assets
§ Reducing staff
§ Outsourcing non-core activities
§ Cut on management perks
- Example: SAA (pg.114)
• Divestiture
- Involves the sale of a business or a major part of it, to achieve a permanent change in
the scope of operations.
- Reasons: Business represents a mismatch with their other businesses or financial needs
of the organisation.
- Example Edcon selling CNA and Boardman’s
• Harvesting
- When an organisation seeks to maximize cash flow in the short run regardless of the
long-term effect.
- Generally pursued in organisations that are unlikely to be sold for a profit but are
capable of yielding cash during harvesting.
- Management can decrease investments, cut maintenance and reduce advertising and
research.
- This strategy can have detrimental effects on the organisations long-term survival
• Liquidation
- When owners and strategic managers of an organisation admit failure and recognise that
this least attractive of all strategies is the best way of minimizing the loss to the
stakeholders.
- Most extreme form of the decline strategies.

∆ Corporate combination strategies

• Joint ventures
- Joint Ventures is temporally partnerships between two or more organizations to
capitalize on a specific opportunity
- Each partner contributes his part of the capital, distinctive skills and technology
- Joint Ventures is useful when:
§ Vertical integration with cost benefits
§ To acquire or learn a particular skill
§ To upgrade a specific skill,
§ To develop technology that can bring significant change to the industry
- Advantage: Partners are not trapped in the long-term business partnerships or
shareholding scenarios.
- In SA: Helps to achieve the BBBEE level required in businesses.
 • Strategic alliance
- Strategic alliance strategies differ from joint ventures in the way that companies do not
take a stake in ownership
- Companies share specific skills and expertise for mutual benefit
- Very popular in motor manufacturing industry
- Example: protes hotel and budget cars fromed a strategic alliance which enables both
businesses to gain competitive advantage through access to the partners resources, markets,
databases, technologies etc.

• Mergers - Total pooling of resources by two or more organisations

• Acquisitions - Bring separate business organisations together to form a larger one

The selection of grand strategies

Steps:
1) Identify the present Grand Strategy
2) Conduct a portfolio analysis
3) Select a grand strategy
4) Evaluate the selected strategy

Factors affecting the strategy choice

® The following factors can influence the choice of strategy:
• Corporate governance
• Previously strategy chosen
• Dependence on external variables
• Attitude towards risk
• Personalities of strategists
• Alignment with the organization’s mission and long-term objectives
• Proper timing

ê Strategic planning involves a process and is future-focused, meaning it can take several years to
complete. During this process managers will have to plan and formulate goals in an ever-changing
business environment.
 Planning
Study unit 2 part 2
The nature and importance of planning
® Every organisation aims to achieve a return on investment for its shareholders.
® Planning forces managers to set objectives and to be proactive for any possible changes that
may occur.
® Planning assists management and staff to focus on achieving the same goals and where necessary to
take note of any deviations that may occur.
® Plans are needed for:
o Structuring the organisation Planning

o Determining what kind of people, we need

o Determining how we should lead them
o Furnishing standards of control.

Kinds of organisational plans

§ Top management comes up with plans for the entire organisation
§ Middle management formulates the tactics for specific functional areas in the organisation
§ Lower management formulates operational plans for sections in the organisation

Strategic plans
& These are long-term plans that ensure the entire company is in line with the ever-changing
environment.

Planning at strategic level includes:

• Creating a future vision for the organisation as a whole
• Translating the vision into a realistic mission statement
• Translating the mission statement into long-term objectives
• Selecting a strategy to achieve these objectives

Characteristics of strategic planning:

• Strategic plans have a long-term focus
• Strategic plans are focused on the business as a whole
• Strategic plans match the organization’s resources and capabilities with threats and opportunities
from the external environment
• Strategic plans assist with crafting a competitive advantage for the company
• Strategic plans focus on synergy
Tactical plans
® The focus is on specific functions or departments in an organisation.
® Deals primarily with people and action
® These plans should be congruent among all the different departments so that the goals of the
organisation can be achieved.

The focus is on functional areas, like:

• Production
• Marketing
• Finance
• HR
• Product Development

Operational plans
® Operational Plans is developed by lower-level managers. Like supervisors or first-line managers

There are two types:

∆ Single-use plans
∆ Standing plans.

& Single-use plans are for non-recurring activities

o Programmes, projects and budgets are single-use plans.

& Standing plans are for activities that stay the same for longer periods of time.
o Policies, standard procedures and methods and rules are standing plans.

& A program is a single–use plan for large sets of activities. These programmes can become projects.
o A Program consists of Projects: develop new products or buy new products

5 phases of a project:
• Initiating
• Planning
• Executing
• Controlling
• Closing

® A Project is a unique once off undertaking, whereas general management is an ongoing process
® Budgets is not just a financial document but is also use for the utilization of human-, physical-, and
information resources.

The timeframe of planning

® The reason for the different time frames has to do with the future impact of the decisions. Like the
impact fashion and seasons has on clothing

§ Top management develops long-term plans

§ Middle management develops medium term
(tactical) plans
§ First-line management develops short term
(operational) plans
Steps in the planning process
1) Identify the changes that necessitate planning
2) Establish objectives
3) Draw up assumptions
4) Develop various courses of action
5) Evaluate the various courses of action
6) Selecting a course of action
7) Formulate alternative plans
8) Draw up a Budget

Barriers to effective planning

® Managers are often not keen to engage in planning.

Barriers to effective planning:

• A lack of knowledge of the constantly changing external environment
• Lack of understanding of the business’s strategic plan
• Poor understanding of the principles of goal formulation
• Resistance to change
• Managers believe that crises management is inevitable
• Planning is too expensive and time-consuming

There are guidelines that management can implement to overcome these barriers, namely:
• Effective planning should start at top management level
• Management should understand the limitations of planning
• The role that lines managers play in the planning process must not be under estimated
• Communicate what the strategy is to all involved in an organisation
• Constantly review plans
• Have back-up plans in place for changes in a changing environment

Planning tools
® There are planning tools that managers can use to ensure that plans are:
o Realistic
o Attainable
o Challenging

These tools include:

Ñ Forecasting
- Forecasting is a projection technique. It can be based on past or present information. It
starts with identifying factors that can present opportunities or challenges to a business in
the future. Anticipation and experience are two key elements needed for forecasting.
- A forecast is a projection of conditions to prevail in the future
- Forecasting can be based on past trends
- Forecasting starts with factors that provides opportunities and threats
- Most important areas in forecasting:
§ Sales and revenue
§ Technology
 Ñ Budgeting
- A budget is a financial plan that indicates how resources will be allocated and used in the
future.
- They cover a specific year, are stated in monetary terms and are often reviewed and
variations monitored.
- It helps with allocation of:
§ Raw material
§ Labor
§ Office space
§ Machine hours
- A budget exercise control in two ways:
§ Sets limits on resources that can be used
§ Sets standards for performance

Ñ Scheduling and Monitoring

- Scheduling and monitoring allow for various techniques to be used. These include Gantt
charts and PERT.

The Gantt charts

- The GANT CHART is a graphic planning and control method in which a project is broken
down into separate tasks.
- Estimates are then made about how much time each task will take
- The starting dates and end dates of each task is indicated on the chart.
- Managers can monitor the progress by comparing actual progress with planned progress

PERT = Program Evaluation and Review Technique

- A planning tool that uses a network to plan projects, involving numerous activities and
interrelationships

Step 1: List all the activities and events: all the activities and events that must be completed
Step 2: Determine completion times: the time to complete each activity
Step 3: Arrange tasks chronologically: arrange tasks in the sequence that they must be
completed
Step 4: Critical path: Determine the critical path. Calculate the time it takes to complete each
path from beginning to end.

Goal formulation
® Every organisation should have goals or objectives, as this indicates where the business would like to
be in the future.
® An organisation can set strategic plans, tactical plans and operational plans.
® The key drivers for the strategic goals of an organisation are the vision and mission statement.
® The strategic goals are expressed in terms of finances, customers, internal processes and learning and
innovation.
® Goals need to be:
o Specificity – goals should be specific
o Measurability – goals should be stated in such a way that it can be measured
o Flexibility – the turbulent environment makes it necessary to modify goals regularly
o Attainability – goals should be realistic and attainable
o Congruency – goals should be congruent with one another.
o Acceptability – managers are more positive about goals that are consistent with their
values and perceptions
The process of goal setting
® Goal setting can be centralized or decentralized.
o When goals are set centrally, it is done for the organisation as a whole, by top
management.
§ Advantage: it is set by specialized people.
§ Disadvantage: Goal setters may be out of touch with reality
o Decentralised goal setting can follow two approaches, namely, top-down and bottom-up,
when setting goals.

Techniques for goal setting

® A technique designed to achieve the integration of individual and organisational goals is referred to as
Management by Objectives (MBO).
® The belief is that individuals will be more motivated to perform efficiently in a business, if they
contribute towards establishing their own individual goals. The focus is on the end result and not the
activity.

The MBO process consists of:

• The goal hierarchy
• Job output
• Performance targets
• Discussion of goals
• Determination of checkpoints
• Evaluation and feedback

Advantages of implementing MBO’s:

• Improved employee morale
• Buy in strategic goals
• Clarity
• Increased communication
• Development areas for individuals
• Training and development

ê All plans should be aligned to meet the overall company objectives. There are different kinds of plans in
an organisation. The planning process can assist managers when determining the course of action for an
organisation, either long-term or short-term.
 Organising and delegating
Study unit 2 part 3

Organising
Introduction
& Organising can be defined as the process of creating a structure for the organisation that will enable
its people to work effectively towards its vision, mission and goals. Organising is concerned with
coordinating all tasks that must be completed in the business.

Organising, organisation and organisational structure

® Organising is concerned with creating a structure within a business in order for people to work
effectively and help the business achieve its goals.
® Organisation is the end result of the organizing process.
® The organisational structure refers to the formal relationship between responsibilities, tasks and
people in a business.

An organizational chart has vertical and horizontal dimensions

• Vertical: chain of command
• Horizontal: functions and specialization

Reasons for organizing

• Allocation of responsibilities – who is responsible for what • Accountability – responsible
employees will be expected to account for outcomes
• Establish clear channels of communication
• Resource deployment – deploy resources meaningly • The principle of synergy enhances the
effectiveness and quality of the work performed – 1 + 1 = 3
• Division of work – workload is divided into activities
• Departmentalization – tasks and activities are grouped together
• Coordination – coordinate all the activities

The organizing process

& The starting point is the company’s vision, mission, objectives and strategies that were drafted during
the strategic planning phase.

Step 1: outline the tasks and activities to be completed to achieve organizational goals
Step 2: develop an organizational structure
Step 3: implement a control mechanism

The principles of organizing

Managers will organise human, physical, financial and information resources in a business.

Managers will be guided by the following principles:

• Unity of command and direction
• Chain of command
• Span of control
• Division of work
• Standardization
• Coordination
• Responsibility
• Authority
 • Accountability
• Power
• Delegation
• Downsizing
• Delayering

Authority
& Authority is the right to make decisions, issue orders and use resources.
® Authority can be found in positions and not in people.
® Managers have authority based on their position in the organisation.

There are three types of authority, namely:

• Formal and informal authority
o Making decisions down the line of authority
o The responsibility to assist and advice
• Line and staff authority
o Staff managers can have line and staff authority
o Refers to organizational chart
o Relationships between employees
• Centralized and Decentralised authority
o Centralized authority – decisions are taken at the top
o Decentralized authority – lower levels can decide on certain issues

Factors whether to centralize or decentralize

§ The external environment =-the more complex an environment, the more the complexity
§ The history of the organization – there is a tendency to follow the history
§ The nature of the decision – the riskier the decision and the higher the cost
§ The strategy of the organization – types of markets, technology etc.
§ Skills of lower-level managers – skills level determine amount of centralization
§ Size and growth of organization – big organizations must decentralize

Advantages of decentralization
§ Reduced workload for top managers
§ Improved decision making
§ Improved training, morale and initiative
§ Faster and flexible decision making
§ A competitive climate

Disadvantages of decentralization
§ Defeats integration of subunits
§ Potential loss of control
§ Danger of duplication
§ More expensive and training required
§ Demands sophisticated training
Organisational design
& Organisational design can be defined as the arrangement of positions into different departments
and the interrelationship among them within an organisation.

Departmentalization can be based on different aspects, namely:

• Functional departmentalization (Marketing, Finance, HR)
• Product departmentalization (Food brands, Pet brands, Health brands)
• Location departmentalization (Africa, Europe, Asia)
• Customer departmentalization (Individuals, Industrial)
• Multiple departmentalization – a mixture of structures can be used, and these include:
- Matrix departmentalization
- Strategic Business Units
- Network structures (new venture units, team structures, virtual network structures)

Once the organisational structure is in place, management will contemplate job design, job specialization
and job expansion.

Delegation
Introduction
& Delegation occurs when management passes on a portion of their total workload to other staff
members. Authority is then passed on to the staff member who must complete the task.

Managers delegate because it helps with succession planning:

• They get more management work done
• Staff members develop their decision-making and problem-solving skills by taking on tasks
Management will, however, always be accountable for the completion of a job.

Principles of delegation
• Explain the reasons for delegation
• Set clear standards and goals
• Ensure clarity of authority and responsibility
• Involve subordinates
• Request the completion of the tasks
• Provide performance training
• Provide feedback to the subordinate

Advantages of delegation
• Managers who delegate can accept more authority and responsibility from higher levels of
management.
• Staff can practice judgement and accept accountability
• Better decision-making
• Faster decision-making

Obstacles to effective delegation

• Managers may fear that staff members will do a better job
• Managers may think that staff members will not do a proper job or as well as he or she can
• Managers can be inflexible and disorganized, therefore, they don’t delegate
• Managers may feel their performance evaluation will suffer if a staff member did not do a proper job
Overcoming obstacles to effective delegation
• Managers must allow staff to use their own methods and not be prescriptive
• Managers must clearly state the desired outcome
• Clear communication between managers and staff members
• Training
• Tell staff how their contribution will assist the business in achieving their goals
• Trust staff members to do the job properly

Delegation process
1) Decide on the tasks to be delegated
2) Decide who should perform the tasks
3) Provide resources
4) Delegate
5) Step in
6) Feedback
 Leadership
Study unit 2 part 4
Introduction
® The key ingredient in effective management is leadership.
® When leaders are effective, their subordinates or employees are highly motivated, committed and high
performing.
® They focus their efforts on the attainment of the organization’s goals. Leadership is, therefore, a key
ingredient for managerial success, for both large and small organisations.

& Leadership is an influence process that produces acceptance or commitment on the part of
organisational members to willingly participate in courses of action that contribute to the effectiveness
of the organisation.

Leadership and management

The differences between leadership and management:

Leaders cope with change Managers cope with complexity

• Setting a directive • Planning and budgeting
• Aligning people • Organising and staffing
• Motivating and inspiring people • Controlling and problem solving

The components of leadership

∆ Authority – the right of managers to give commands to and demand actions from staff
∆ Responsibility – obligation of staff to attain company goals by performing specified tasks, defined
by their job description
∆ Accountability – evaluation regarding how well individuals meet their responsibilities
∆ Delegation – process whereby the manager assigns responsibility and authority to a subordinate
for achieving the goals of a business
∆ Power – to get people to do what they would not otherwise do

Power
∆ Formal sources of power:
• Legitimate power
- People accrue legitimate power because of their formal positions in organisations
• Reward power
- Reward power rest with a person. A manager may have the ability to give compensation
to reward/reinforce desirable behaviour.
• Coercive power
- A person who is in a position to offer / restrict benefits, inflict punishment or control the
behaviour of another person, has coercive power.
- Based on fear

∆ Personal sources of power:

• Referent power
- Power of a person because of their personal characteristics or charisma
- People follow them because they like / respect them.
• Expert power
- Persons power that stems from the possessions of scarce and valued expertise
Other sources of power in the organisation stem from:
• Control of scarce resources – control and allocate resources
• Organizational structure – people in places
• Control of decision processes – a person can control the outcome
• Control of knowledge and information – it is a source of power
• Control of boundaries – internal and external boundaries
• Coping with uncertainty – interdependence
• Control of technology – new technology
• Strong informal interpersonal alliances and networks – social media
• Liaison with organizations outside the organization – labor unions
• Symbolism and the management meaning – symbols, rituals and
• stories
• The deep structure of power - choices

ê There are two key terms associated with power

o Interest
- Employees will protect their individual and collective interests.
o Influence
- Influencing is the process leaders follow to communicate ideas, gain acceptance and
inspire followers to support and implement the ideas through change.

Person A may use on of the following tactics:

§ Rational persuasion – logical arguments
§ Inspirational appeals – appeal to B’s values and ideals
§ Consultation tactics – participation
§ Ingratiating – friendliness, humor and behavior
§ Upward appeals – persuading B to higher level of management
§ Exchange – promising: explicit
§ Coalition – seeking the aid of others
§ Pressure – threatening, intimidating

The theoretical foundations of leadership

Strong leadership is important in business success
® There are three approaches to leadership:
o Trait theory
o Behavioural approach
o Contingency/situational approach.

∆ Trait theory
® The focus in this approach is on the characteristics and personal qualities of successful leaders.
® The assumption was that some people are born leaders.
® A key component in management and leadership is trustworthiness. If a leader is to be
trusted, he/she should display integrity, competence, consistency, loyalty and openness.

Trustworthy traits:
• Integrity – honesty and truthfulness
• Competence – technical knowledge and skills
• Consistency – good judgement
• Loyalty – willingness to protect another person
• Openness – tell the truth
∆ The behavioural approach to leadership
® The assumption in this approach stated that successful leaders behave differently to
unsuccessful leaders.

The following are behavioural leadership styles / studies:

• University of Iowa’s leadership style
- Autocratic leadership style – leader makes decisions. Minimal employee
participation
- Democratic leadership style – involves employee decision making
• Ohio State University studies
- Initiating structure – the degree to which a leader provides responsibility
- Consideration – degree of mutual trust and liking
• The University of Michigan leadership studies
- Production centered – emphasize on technical production aspects
- Employee centered – focus on human relations
• The Leadership Grid
- Concern for people – indicates that the leader maintains good relations with
subordinates
- Concern for results – indicates that the major concern of theh leader is to
accomplish the task
Summary:

These studies could not pinpoint specific behaviours, that distinguished successful leaders from
unsuccessful leaders, but it did result in a better understanding of the different styles of leader
behaviour.

∆ The contingency or situational approach to leadership

® This approach established that predicting leadership success is more complex than examining
the traits or behaviours of successful leaders.
® The emphasis in this approach is to find the most effective leadership style for any given
situation.

The research focused on specific situations that could enhance the relationship between specific
leader behaviour and leadership effectiveness.
• Least preferred co-worker theory LPCW (Fred Fiedler)
- First ask leader with which co-worker he works the least well
- Then rate the coworker on a scale of 18 sets of adjectives. From friendly to unfriendly
- From this result it can be obtained whether the leader is task orientated or relationship
orientated
Situational criteria
§ Leader-member – indicate the degree to which the leader has the support and
loyalty from the employees
§ Position of power of the leader – degree to which the leader has the authority
to evaluate performance
§ Task structure – May range from structured to unstructured, depending on:
o Whether employee has clear objectives,
o The degree of standard operating procedures
o Existence of detail description of product or service
o Criteria to manage performance
 • The path-goal theory of leadership (Robert House)

• Situational leadership model (Paul Hersey and Kenneth Blanchard)

- Ability relates to knowledge, experience and skills
- Willingness relates to confidence, commitment and motivation

Summary:

Contemporary approaches to leadership

• Charismatic leadership
- Have traits such as:
o Self confidence
o Ability to articulate their visions
o Unconventional behaviour
o Environmental sensitivity
o Excellent communication skills
o Enthusiastic
o Optimistic
o Energetic

• Transactional leadership
- Transactional leaders motivate their followers by appealing to their self interest
- Exchange pays and status to employees
 • Transformational leadership
- More an emotion base leadership
- Bass and Steidlmeier - 2 types of transformational leaders:
o Moral, ethical and authentic
o Psuedo, unethical and manipulative

• Emotional intelligence and leadership

- Emotional intelligence - ability to monitor one's own and other’s feelings and emotions and to
use this info to guide thinking actions.

- 4 Clusters of EQ:
o Self-awareness: emotional self-awareness, accurate self
o assessment, and self confidence
o Self-management: self-control, trustworthiness, conscientiousness, adaptability and
achievement drive
o Social awareness: empathy, service orientation, organisational awareness
o Relationship management: developing others, influence, communication leader,
change catalyst, building bonds, teamwork, collaboration

Value based leadership

• Servant leadership
- Servant leaders ensure that other people’s needs are addressed
- Servant leaders:
o Put service before self interest
o Trustworthy
o Focus on growth and well-being of people
o Ensure that other people’s needs are addressed

• Peer-to-Peer leadership
- Peer to peer leadership is effective in an interconnected network
- Big accounting firms use peer to peer leadership. Central interconnected networks.
- Leadership roles shift when the situation changes.

Leadership and political behaviour in organisations

A manager can use one of the following to influence another person in the business:
• Rational persuasion (logical argument and factual evidence is used)
• Inspirational appeals (make an emotional appeal or boost another person’s confidence)
• Consultation tactics (seeking another person’s participation when making decisions)
• Ingratiating (using humour or flattery before making a request)
• Upwards appeals (persuading a person that higher level management requested his or her
participation)
• Exchange (promising a reward for participation or reminding a person that he/she received a
prior favour and that this should be returned)
• Coalition (getting the support of other people to convince a person to comply)
• Pressure (threatening, intimidating or demanding that another person complies)
ê Leadership influences people in the organisation and there is no best leadership style. We examined various contemporary leadership styles in organisations.
 Individuals in the organisation
Study unit 2 part 5
Introduction
® Management must ensure that the mission and goals of the organisation are met.
® They do this with the assistance of the employees in the business. In order to understand human
behaviour in the workplace, management must understand the nature of the relationship between the
individual and the organisation.

The importance of the human dimension in management

& It is managers responsibility to:
o Motivate staff
o Resolve conflict
o Negotiating contracts
o Keeping staff informed
o Sharing ideas with them.

Staff is crucial to the success of an organisation.

Staff must be optimized for the following reasons (IMPORTANCE):

• Organisations are social institutions.
• People spend a big portion of their day and life at work
• Employees are the lifeblood of the business
• Knowledge workers are at the centre of success for a business
• People are part of a social system

People as a sub-system
An individual as a subsystem:
• A system is complex
• A system can be open or closed
• People influence the environment in which they function
• People strive for equilibrium

People in the organisation

& Managers should take note of the differences that exist between employees and with specific reference
to the following variables:

Key variables that determine the behvaiour of employees:

• Values and attitudes - values are basic beliefs that a certain way of doing things is preferable
to another. A moral principle lays the foundation of how individuals decide what is right and wrong.
Values influence attitudes, levels of motivation, perception and individual behaviour. An attitude
can be defined as a collection of feelings and beliefs.

There are three components to an attitude:

§ Affective component of the person’s attitude
§ Behavioural component by working creative and productive
§ Cognitive component where discrimination in workplace is not acceptable
• Personality – an individual’s personality determines how they perceive, evaluate and react to the
environment.

Management must evaluate personalities and can be looked at from different angles, namely:
o the MBTI
o Type A and Type personalities
o Locus of control
o Authoritarianism
o Self-monitoring
o Achievement orientation
o Self-esteem
o Risk profile.

• Ability – no two people have exactly the same abilities. Management prefers to evaluate an
individual’s competency.

This entails:
o Knowledge
o Skills
o Value orientation
o Applied in context.

• Motivation – management needs to understand:

o Positive reinforcement
o Discipline poor performance
o Motivate employees
o Structure jobs
o Reward performance

• Perception – this is the process in which individuals arrange and interpret sensory impressions, in
order to make sense of their environment.

Managers and employees may have different perceptions of the organisations mission and goals .
They depend on:
o The person - who perceives
o The object - what is being perceived
o The context - in which perception occurs

• Learning – not all staff members learn in the same way.

o Some staff will learn by reading, some by listening, some by observing and some by doing.
Emotional intelligence (ei)
& Emotional intelligence refers to the ability of a person to identify and manage their own emotions,
as well as the emotions of others.

The emotional competencies that differentiate superior from average performers are:
• Self-awareness
• Self-management - managing own emotions
• Social awareness - empathy
• Social skills - managing relationships

According to Daniel Goleman the competencies associated with being socially aware are:
o Empathy - understanding other’s emotions needs and concerns
o Organisational awareness - the ability to understand politics within the organisation

Mentoring and coaching

& Mentoring addresses the whole person and his career.
& Coaching, on the other hand, is about the job at hand.

Types of workplace behaviour

• Performance behaviours: derive from the psychological contract between an individual and
the organisation
• Withdrawal behaviours: absenteeism and employee turnover
• Organisational citizenship: behaviour of individuals that makes a positive contribution to the
company
• Dysfunctional behaviours: Include:
o Theft
o Withholding information from other employees
o Harassment
o Spreading rumors
o Violence
 Groups and teams in the organization
Study unit 2 part 6
& Managers do not function in isolation and spend much of their time on group activities, therefore their
understanding of groups and how to improve group performance is needed.

Groups and teams

& Groups can be defined as two or more people, interacting and being interdependent, who come
together to reach a certain goal.
& A team is a special kind of group.
® Turning groups into teams is a process that requires special management skills
® A team comprises of a small number of people with complimentary competencies working
together, committed to a common purpose, and individually and collectively accountable for
performing tasks that contribute to attaining a specific goal

Types of organisational groups

There are informal and formal groups.
∆ Informal groups
® Not part of the organisational hierarchy
® Develops out of the day-to-day activities and interactions between people in the work place
® Goals are not necessarily the same as organisation
® Formal groups often have considerable influence on formation of informal groups

2 types:
• Interest groups
- Emphasis is on the needs of the group
- Shared interest of members
- Examples:
§ Older workers campaigning for better pension
§ Environmentalist groups

• Friendship groups
- Can range from a social club that organize events, to a few people that just play cards
together
- People with the same interest

∆ Formal groups
® Creates this group to accomplish specific tasks and attain specific goals
® Structure of an organisation defines formal groups and determines the allocation of work
assignments to specific groups
® Also known as work group: a unit of 2 or more people who interact primarily to share
information and make decisions that will help each group member perform within their area of
responsibility.

2 types:
• Command group
- Comprises a manager and the employees who report directly to him
- A functional department
• Task group
- Comprises of people working together to complete a specific task, and it can cross
hierarchical boundaries.
A work group has the following characteristics:
• The skills of group members are random and varied
• There is a strong leader, such as a manager
• Individual members are accountable and rewarded for their own performance
• The group performance is the sum of all individual group members’ performance

Stages in group and team development

® A newly developed group will not perform in the same way as a well-established group and managers
must understand and recognise the development stage of the group.
® Each stage of group development demands specific actions and poses different challenges for the
manager of a group

The 5 stages are:

1) Forming (not yet a group and must still establish what is expected of them, the tasks they are
expected to perform and what rules the group must follow)
2) Storming (stage characterized by conflict and disagreement; reluctant to accept the restrictions
that group places on individuality)
3) Norming (starts to function as a unit, preliminary sense of closeness as a group)
4) Performing (mature, organized and well-functioning group)
5) Adjourning (well-integrated group can be disbanded if work is complete)

Variables that influence group behaviour

Organisational context

Group
Group Group Group task
member
structure processes
resources

Group performance

∆ Organisational context
• Goals and strategies:
o The strategic goals of the organization define the goals of
o the group at the time
o Groups need to compete for scarce resources to complete
o tasks
o Groups are dependent on one another to complete tasks. Like production and marketing
departments.
o Limitations can create conflict
• Authority structures: The organizational structure determines the authority relations and
the place of the group in the organizational hierarchy
• Policies, procedures, rules and regulations: Groups must follow the policies and
procedures that governs the organization
o These policies and procedures must be sensible
o It must not inhibit creativity and innovation
• Organisational resources: Available resources (skilled people, money , raw material ,
machines) effects the group performance
• Personnel selection process:
o The HR departments appoints certain people according to capabilities and criteria to the
group
o This effects the group performance due to different personality types, values etc.
 • Performance management system:
o The performance management system implemented by the organization effects group
behavior
o Is the focus individual performance or group performance?
• Organisational culture: Organizational culture defies how group members is expected to
behave in a given contex
• Physical work setting:
o The physical layout of the workspace can create barriers or opportunities on how to interact
in the group
o The greater the proximity of group members, the more they will interact

∆ Group member resources

Staff skills needed to perform their tasks:
• Technical skills
• Interpersonal skills
• Problem-solving skills
• Decision-making skills
• Conflict resolution

∆ Group structure
Variables defining the structure and often effectiveness of the group:
• Leadership:
o Leadership is a critical factor in the success of the group
o Leaders give direction
o Leaders creates an environment in which workers are motivated to attain their goals
• Roles:
o Each team member fulfills a certain role that other team members expect of him
o Each team member has to understand his role and commit to it
• Norms:
o Over time and because of interaction with group members, group norms develop
o A norm is a generally accepted standard or behavior which groups expect their members to
adhere to
• Status:
o Factors such as: knowledge, aggression, power and seniority determine status of each
member in the group
o The group as a whole also has a status in the organization
• Cohesiveness:
o Cohesiveness refers to group solidarity and the way a group stands together as a unit,
rather than the individuals in the group
o To encourage group cohesiveness, managers can:
§ Keep groups small as possible
§ Encourage individuals to identify with the goals of the group
§ Stimulate competition
§ Include people who are similar
§ Ensure that one or two group members do not dominate the group
§ Motivate the group to become successful
• Size:
o Smaller groups are usually more productive than bigger groups
• Diversity:
o Generally diverse groups with more variety of skills and knowledge tend to be more
effective.
∆ Group processes
The factors that need to be considered are:
• Group decision-making
o 2 Consequences of Group Decision Making:
§ Groupthink: where group members do not express their own vies, where the
individuals view is different than the group.
§ Group shift: when group members take a decision that will either take more or less risk
than the individual will take.
• Communication
o Effective communication clarifies the groups tasks
• Power, interest, influence and politics
o Some group members have more power than others and they can influence group members
positively or negatively
o To avoid politics in a group, managers must ensure that group members commit to the
group interest
• Conflict
o Conflict is often the result of disagreement in groups
o However, if dealing correctly with conflict, positiveness can come from it

∆ Group tasks
® Groups can perform a variety of tasks ranging from routine to new tasks.
® Depending on the nature of the tasks team members will need to work together and
communicate in a clear manner.

Group interdependence is the most powerful base of communication.

3 kinds of interaction:
o Pooled interdependence: team members pool their output to have a group output
o Sequential interdependent: when one team member cannot complete his task before
the other team member has not completed his task
o Reciprocally interdependent : when the output of the one team member becomes the
input of the other

Organisational teams
® A work team consists of a small number of staff members with complementary competencies who
work together on a project, are committed to a common purpose and are accountable for performing
tasks that contribute to attaining organisational goals.

Characteristics of effective work teams

• Complementary competencies
• Commitment to common purpose
• Shared mission and collective responsibility
• Individual and mutual accountability and rewards
• Synergy
• Shared leadership
• Equality
• Size
• Selection
Why organisations use teams
Teams are effective during the following conditions:
• The problem is complex
• The problem requires intergroup cooperation and coordination
• The problem and solution have important consequences for the organization
• Heir are tight but not immediate deadlines
• Widespread acceptance and commitment are critical

The advantages of using teams are:

• Innovation
- Teams enhance creativity when people with a variety of experience and expertise work on a
common problem/task
• Speed
- Teams can reduce the time required to complete a task because they replace several
developments with parallel development
• Cost
- Self-managing teams have the ability to reduce costs and respond faster to customer requests
because of their ability to make decisions quickly and meet demands of changing situations
• Quality
- Teams have shared accountability and commitment to their joint effort, with the consequences
that excellent quality is a primary goal of work teams

Types of teams
There are different types of teams in an organisation.
These include:
• Problem-solving teams
- Are typically composed of employees from the same department who meet for a few hours
each week to discuss ways of improving quality, efficiency and the work environment

• Self-managed work teams

- Function autonomously because they make and implement decisions and take full responsibility
for the outcomes
• Cross-functional teams
- Comprise employees on the same hierarchical level, such as marketing manager , financial
manager etc.
- Usually consist of people in the same organisation but could also include people from others

• Virtual teams
- Comprise geographically and/or organizationally dispersed co-workers who operate remotely
to accomplish an organisational task.

Effective teams have several qualities:

o Multidisciplinary: through experience we know that a crisis asks for complexity that requires
combined expertise to work together
o Design to act: experts must gather information, devise solutions, put them into practice and
refine them as they go
o Adaptable: a team learns more about a crisis as conditions change. They reorganize, expand and
contract.
Developing individuals into team members
® An organisation must make sure they employ the correct people, provide training to new and existing
staff, and implement a reward structure that encourages teamwork.

The selection processes

® Candidates applying for positions involving teamwork must possess suitable personality attributes
enabling them to fulfil their team roles.
® Personality traits are difficult to change and therefore team-based organizations often use intensive and
sophisticated selection procedures when hiring employees

Training
® Team building programs are often effective before hiring team members

Reward systems
® The evaluation and reward system influence the behavior of the group.
 Motivation
Study unit 2 part 7
® Motivation has an impact on a staff members’ performance.
® A manager cannot motivate a staff member to perform better, as motivation comes from within.

& Motivation can be described as the willingness of a staff member to achieve common organisational
objectives.

The motivation processes

® Comprises an inner state of mind that channels an employee’s behaviour and energy towards the
attainment of goals
® If managers understand what motivates the behaviour of their employees, they can influence their
work performance

• Need
- An employee has an unfulfilled need for higher status in the organisation where she works.
• Motive
- Her desire (motive) is to advance to a managerial position.
• Behaviour
- This need motivates her to engage in specific behaviour. She works overtime and enrols for a
management development course.
• Consequence
- The consequence of her behaviour may be positive or negative. She may or may not be
promoted.
• Satisfaction / dissatisfaction
- The consequence of the behaviour would lead to satisfaction or dissatisfaction. The staff
member will be satisfied if promoted but dissatisfied if not.
• Feedback
- If dissatisfaction is the outcome, the need remains unsatisfied. This will lead to the motivation
process starting over. Motivation (goal or desire) x ability x opportunity equals performance.

The variables that determine performance are:

• Motivation (goal/desire)
• Ability (training, knowledge, skills)
• Opportunity to perform

The classification of motivation theories

Content theories Process theories Reinforcement theories

Focus • Identify the needs that • The process of goal setting ® Behaviour as a function
employees want to satisfy of its consequences
• Evaluation of satisfaction
• Identify the factors that after goals have been
influence the behaviour of staff achieved
Theories • Maslow’s hierarchy of needs • Equity theory ® Reinforcement theory
model • Expectancy theory
• Herzberg’s two-factor model
• ERG model
• Acquired needs theory
The Content Theories
∆ Abraham Maslow’s hierarchy of needs
® Maslow based his needs theory on two important functions:
• People always want more, and their need depends on what they have
• Peoples needs arise in order of importance

The 5 levels of the Maslow's hierarchy of needs model:

o Physiological needs: salary and wages and basic working conditions
o Security needs: job security, medical security, pension security
o Social needs: love, friendship, acceptance, understanding people
o Esteem needs: the need for self-respect and recognition
o Self-actualization needs:
§ Full development of your potential.
§ Most difficult to achieve.
§ Management must create environment for employee to achieve: like training

∆ 2 herzberg two-factor motivation theory

® In the 1950’s Fredrick Herzberg studied the relationship between job satisfaction and productivity
® He found that the factors leading to job satisfaction were different to this leading to job
dissatisfaction, hence the 2-factor model:

∆ Acquired needs model

® David McClelland’s model’s assumptions is that all people have the need for achievement, affiliation
and power
o Achievement: need to excel
o Affiliation: friendly and close relationships
o Power: make others behave in a way they would otherwise not have behaved

The Process Theories

∆ The Equity Theory Of Motivation
® According to the equity theory, a person must be able to perceive a relationship between:
o Reward
o His or her own performance

If a person feels unrewarded, he will restore the balance by:

• Reduce own inputs and performance
• Increase reward by asking for a raise
• Distort ratios by rationalizing
• Attempt to persuade the other individual to change his inputs
• Find a person with whom you compare the situation
Management application of the equity theory:
• Makes a significant contribution understanding motivation and performance
• Feelings of unfairness is biggest reason for dissatisfaction
• Reward will only motivate employees if they see it as fair
• People’s perception about fairness is not realistic, because it is bias

∆ The Expectancy Theory Of Motivation

® According to Victor Vroom’s expectancy theory, people will act according to:
o The expectation that their work efforts will lead to a certain outcome
o How much they value these outcomes

According to the expectancy theory, the following three factors determines motivation:
• Expectancy (effort – performance relationship): The believe from a person that a certain
performance is expected given a certain effort
• Instrumentality (performance – reward relationship): The degree to which a person believe
that a certain performance will lead to a certain outcome
• Valence (reward – personal relationship): The value a person attaches to various outcomes

Management implications of the expectancy theory:

• Links performance of employees to reward
• Employees are motivated to achieve outcomes that they desire, and management should
determine what is these outcomes

A controversial view: from performance management to performance motivating (presented by

Christine Comerford):
• Performance management is: performance and scoring and feedback by the leader and evaluating
the team
• It is impersonal, painful, costly and not motivating and for a LONG TIME

Comafort’s Gallop poll: a powerful tool is to focus on the outcome that employees want.
An action plan can be:
• Impact descriptions, rather than job descriptions. Each team member must understand the
impact he or she has on the organization
• Clear goals must be set
• Individual development plans (IDP). IDP is a commitment from the company to help the
company grow
• Performance self-evaluations. Teams of employees do self-evaluations

∆ The Reinforcement Theory Of Motivation

® Managers can use various strategies to schedule such reinforcement:
• Continuous reinforcement by reinforcing desired behavor
• The fixed interval schedule provides reinforcement at fixed times
• The variable interval schedules the interview schedule differ in time
• The fixed ratio schedule provides reinforcement after a fixed number of performances
• The variable ratio is where the manager varies the NUMBER of interviews.

Management can reinforce behavior by:

o Positive reinforcement: reward behavior either intrinsic or extrinsic
o Avoidance: avoiding undesirable behavior, example employee that sticks to target date to avoid
reprimanding
o Negative reinforcement: use punishment or disciplinary action
o Extinction: certain unwanted behavior can become extinct
 Managers application of theory:
- Identify the observable, performance-related behavior that is most critical to implementing the
theory
- Measure how many times managers engage in this type of behavior
- Analise the causes and consequences of this behavior
- Use positive and negative reinforcement
- Evaluate the extent to which the worker’s behavior changed

Money as a motivator
® Management often places emphasis on factors such as challenging tasks, recognition for achievement
and creativity in the workplace as motivators.
® These factors satisfy the higher-order needs of people in the work place but there is evidence that
money influences people’s work performance

All theories of motivation imply that under certain circumstances money motivates:
• Money satisfies the lower order needs of Maslow.
• Herzberg explains that if a company adds a monetary reward to recognise performance, it acts as
a motivator.
• Staff uses their pay to judge whether they are being treated fairly in an organisation and this is
explained by the Equity Theory.
• Money acts as a motivator if staff perceives that good performance results in a monetary reward
they value. This is explained by the Expectancy Theory.
• The reinforcement theory suggests that money is a reward to reinforce behaviour that leads
to positive job performance.

Designing jobs that motivate

® If jobs are designed so that staff can grow and enhance personal achievement and receive recognition
for performance, it will serve as a motivator for employees to achieve company goals.

Two key concepts that will be investigated are

Ñ Job enlargement
Ñ Job enrichment

Ñ Job enlargement
® Involves horizontal work loading, adding greater variety of tasks to an existing job
® Disadvantage: increases variety of tasks however doesn’t alter the challenge the work offers to
the job incumbent

Ñ Job enrichment
® Vertical extension (Herzberg) of a job by adding the planning and control of work, previously
performed by the job incumbent’s manager.
® This process involves setting measurable goals, making decisions and taking responsibility for the
decisions, the performance of the vertically extended job and control and feedback.
® Job enrichment as a motivation technique provides scope for personal achievement and
recognition of workers and leads to greater job satisfaction.

Ñ The job characteristics model

® Developed by Hackman and Oldham
® Suggests that certain job dimensions create critical psychological states which lead to beneficial
personal and work outcomes.
The core dimensions of this model are:
1) Skill variety
- The more a worker uses his various skills to perform a greater variety of tasks, thher more
challenge the job offers
2) Task identity
- Extent to which a worker performs her job in its entirety.
3) Task significance
- Denotes the extent to which the task influences the lives or work of other people and relates
to the workers sense of significance of the task.
4) Autonomy
- Control a worker exercise over decision making and the way she performs the task is related
to the sense of responsibility she cultivates for the task
5) Feedback
- Relates to the extent to which the worker receives direct and clear feedback on the
effectiveness of their performance

Leadership and motivation

How the leadership of an organization can influence the motivation of employees:
• A transformational leader can focus on the motivation and personal development by achieving
the companies’ goals
• Authentic leaders that are trustworthy and honest and employees trust and follows him
• Ethical leaders focus on job satisfaction and dedication and willingness to solve problems
 Communication and Interpersonal relationship
Study unit 2 part 8
® This chapter explores organisational communication, ways in which managers can become better
communicators, and the impact of information technology on the communication process. This chapter
also looks at interpersonal relationships in an organisation, as well as the potential for conflict that can
arise and ways of managing conflict in an organisation. We will also focus on negotiation as a means of
managing conflicting interests in an organisation.

The communication process

& The communication process is the process of transmitting information and meaning. The steps in
the communication process are interactive and do not occur in a sequential order.
® The communication process indicates that communication takes place between a sender of a
message and a receiver of a message. The sender of the message will encode the message using a
series of symbols that can include words or pictures. The sender will also decide on the channel to
be used to transmit the message.

® It must be remembered that noise interferes with the transmitting of a message. The receiver of the
message will have to decode the message.

The process:
1. Sender - initiates the communication

2. Encoding - when the manager translates the information regarding the organisation’s goals into a
series of symbols for communication
- Symbols could be pictures
- Encoding is a big challenge for SA managers
- The official language: English, may be some people’s 2nd, 3d or 4th language
- Employees come from different backgrounds, have different interests and education levels.
- Encoding is necessary because information can be transferred from one person to another
with symbols

3. Channel - the sender has to select a channel for transmitting the message.
- The following channels can be chosen: oral or written, one to one, face to face

4. Noise - any factor that disturbs, confuses, or interfere with the message
• Internal noise - discomfort, stress, exhaustion
• External noise - phone rings, noisy air conditioner

5. The Receiver is the person whose senses perceive the sender’s message.
- There may be one or many receivers

6. Decoding
& Decoding can be described as the process in which the receiver interprets the message and
translates it into meaningful information.
This is a two-step process:
• The receiver must first perceive the message and interpret it.
• Decoding is affected by the receivers past experience, personal assessment of symbols and
gestures used, expectations.

7. The final step in the communication process is feedback.

Organisational communication
There are three categories of managerial communication:
• Intrapersonal communication
- Receive, process and transmit information to themselves
• Interpersonal communication
- Are transmitted directly between two or more people, on a person-to-person basis
• Organisational communication
- Information is transferred between organisations or between different units or departments in
the same organisation

ê Effective communication is often the key to establishing a competitive advantage.

Organisational communication networks

® The two primary networks include the formal and the informal communication networks.

∆ Formal communication
® Communication that follows the hierarchical structure of the organisation, or the ‘chain of
command’.
® Follows formal, established, official lines of contact
® “Who should be talking to whom about what”

® Communication in an organisation can flow in four directions, namely:

o Downwards
o Upwards
o Horizontally (Informal, rumors, “through the grapevine”)
o Laterally

∆ Informal communication
® Communication that does not follow the hierarchical path of chain of command.
® “Who is really talking to whom and about what”
® This is commonly referred to as the grapevine in a business. Hence, this is not official
communication.
® Communication that is not official or not sanctioned by management
® Derives from the existence from employees social and personal interest
Barriers to effective communication
® It is common for misunderstandings to take place when people in a business communicate with each
other.

These barriers to effective communication can be placed in four categories:

∆ Category 1: Intra-personal factors

• Perception: the process in which individuals arrange and interpret sensory impressions in order
to make sense of the environment
• Individual differences in communication skills

∆ Category 2: Interpersonal factors

• Climate
• Trust
• Credibility
• Sender/receiver similarity

∆ Category 3: Structural factors

• Status
• Serial transmission
• Group size
• Spatial constraints

∆ Category 4: Technological factors

• Language and meaning
• Non-verbal cues
• Media effectiveness
• Information overload

3 Basic communication media:

o Written: e –mail, faxes, newsletter
o Oral: face-to-face
o Multi-media: written / oral / visual

How managers can become better communicators

® Managers need to be aware of the communication process and the barriers that can impact on the
communication.
® Managers should be aware of information overload, therefore, keep messages simple.
® Noise and timing must be considered, and trust and respect should be in place to foster better
communication skills.

Organisational communication in virtual organisational structures

& A virtual organisation is a collection of geographical distributed, functionally and or culturally
diverse entities that are linked by electronic forms of communications and rely on lateral, dynamic
relationships and coordination

® The virtual organisations is managed by teams that are assembled and disassembled
® Organisations are using more virtual communication than in the past

® Advantages: adaptability, faster response, task spinalization

® Disadvantages: decreased organisational loyalty and staff turnover

Choosing Communication Technology
Many communication tools:
- E mail
- Chat platforms
- Web conferencing
- Video conferencing

® The complexity of the message is a function of the numerous variables

® Rule is to use lean media like : e-mail for one way direction
® Conferencing is for more group communicating and complex issues

Message content
® Most messages are text based. Can lead to mis interpretation and misunderstandings
• People tend to be more negative when writing
• Negativity cuts both ways. From sender to receiver
• People interpret messages differently

Frequency of communication
® When team member does not meet face to face, the risk is greater of losing touch with each other
Can overcome this by:
• Meeting frequently
• Share information regally

Diversity in virtual organisations

• Language
• Culture
• Background
• Experience

The impact of information technology on the communication process

® Major changes have developed over the past 25 years regarding the way people communicate and
make decisions.

Some of these trends are:

• 5G (faster speeds and the connection of billions of devices and people)
• Fibre everywhere (Fibre is used to improve connectivity)
• Everywhere connectivity for Internet of things and Internet of everything
• Cognitive networks and big data
• Cyber security (hacking remains a concern)
• Green communication (Reduce, reuse and recycle)
• Smarter smartphones and connected sensors

Interpersonal relationships
® A common phenomenon in the workplace is conflict between co-workers, management and staff, as
well as staff and consumers.
® Conflict can arise in an organisation as a result of the interpersonal relationships that exist
in the work environment.

& Conflict can be defined as the interaction of interdependent people who perceive opposition of goals,
aims, and values, and who see the other party as potentially interfering with the realisation of these
goals.
THE THREE CHARACTERISTICS OF CONFLICT ARE:
• Incompatible goals
• Interdependence
• Interaction

MANAGING ORGANISATIONAL CONFLICT

• Conflict can be managed by way of:
• Avoidance
• Problem-solving
• Formulation of shared goals
• Expanding resources
• Smoothing and compromise
• Authoritative command
• Changing the organisational structure
• Negotiation

NEGOTIATION
& Negotiation is a communication process by which people settle their differences and aim to reach
some form of agreement or compromise that is based on their shared interests, with the purpose of
resolving conflict, despite widely dividing differences. Agreement or compromised is achieved through
the establishment of common ground and the creation of alternatives.
• Negotiation is an exchange of information
• Negotiation is not an event but a process
• Process should aim to reach an agreement, preferably a win-win situation
• Common ground refers to what parties can become together
• Alternatives must be created, hence, parties must be flexible
• Agreements must be able to be upheld

THE NEGOTIATION PROCESS

® This process has a preparation phase and is followed by the actual negotiation phases.

∆ Preparation phase of negotiation

• Step 1: Setting goals
• Step 2: Analyse the situation
• Step 3: Identify issues
• Step 4: Analyse information on opponents
• Step 5: Consider legal and financial implications
• Step 6: Decide on tactics
• Step 7: Schedule feedback

∆ Phases of the actual negotiation

• Phase 1: Emotional phase
• Phase 2: Political phase
• Phase 3: Problem-definition phase
• Phase 4: Constructive phase
• Phase 5: Final socio-emotional phase
 Control
Study unit 2 part 9
& Control can be defined as the regulatory task of management that determines whether or not there
has been a deviation in the organisational plans so that steps can be taken to prevent or rectify errors
or deviations from the plans.

The importance of control

• Control provides a coordinating mechanism that links planning and control in an organisation
• Control ensures that the organisations resources are used in such a way that it achieves its goals
• Control helps a business to deal with environmental change and uncertainty
• Complex organisations need control to avoid costly mistakes
• Control can help reduce costs and increase outputs
• Control can assist with delegation and teamwork

The control process

This process entails four key steps:
1) Step 1: Establish standards of performance
® Criteria for standards:
o Be expressed in measurable terms
o Be consistent with the organisation’s goals
o Be realistic
o Identify performance indicators
2) Step 2: Measure actual performance.
® Collecting data and reporting on actual performance
® Data should be reliable and quantifiable to make a meaningful comparison
® Observation and measurement should be in accordance to a control system
3) Step 3: Evaluate deviations
® Comparing actual results against standards
® Only exceptional differences should be communicated to top management (also known as
control by exception)
® Subordinates deal with less significant deviations
4) Step 4: Take corrective action
® Determine the need for corrective action
® Aim to better performance standard and ensure differences do not recur.

The levels of control

There are two main levels of control in a business.
∆ Strategic control
∆ Operations control.

∆ Strategic control
Top management must study the following elements in a business:
• Total effectiveness of an organisation (Balanced Scorecard; Financial dimensions;
Customer dimension; Internal business processes dimension; learning and growth dimension)
• Productivity in an organisation (This is expressed as a ratio of outputs to inputs)
• Effectiveness of management (Critical success factors are identified and measured by an
external consultant on a yearly basis; management receives feedback on these factors; the factors
could include profitability and market share).
Strategic control is important because:
• It provides a coordinating mechanism that links strategic formulation, implementation and control in
the organisation
• Ensure that resources are employed in such a way that it achieves is overall objectives
• Enables management to cope with environmental change and uncertainty
• Complex organisations need strategic control to ensure that costly mistakes are avoided.
• Ensure a balance between organisations effectiveness and efficiency
o Effectiveness: doing the right thing.
o Efficiency: doing things right

4 types of strategic control:

• Premise control
- Every strategy is bases on a certain planning premises and predictions about the
environment and its conditions.
- Through premise control, the environment is check systematically and continuously

• Strategic surveillance
- This type of strategic control is designed to observe a wide range of events within and
outside the organisation that are likely to affect the strategy.
- Various sources : internet, journals, magazines

• Special alert control

- The management environment is often characterised by unforeseen events.
- Therefore, rapid reassessment is required.

• Implementation control
- This control takes place when various activities, initiatives and programmes occur over a
period of time.

∆ Operations control
® This element of control is concerned with processes that entail transforming resources into
products and services.
® This is done at different points in the transformation process, specifically when inputs are made,
when transformation takes place and when outputs are produced.

Different types of control are needed, and these include:

• Preliminary control: designed to anticipate and prevent possible problems. It involves
control over resources and inputs
• Concurrent control: to meet quality of quantity standards
• Rework control: focus on the output of the organisation where the final product can be
inspected before they are sold.
• Damage control: action is taken to minimise the negative impacts on customers or
stakeholders due to faulty outputs. Like: refunds or replacing the product.
• Feedback control: measurement of the attainment of the organizations mission

Functional area control systems

Control can be applied in all major functional areas in a business, namely: (pg. 488)
• Financial control by means of budgets, financial statements, ratio analysis and financial audits.
• Human Resources control by way of performance measurement, coaching, counselling and
disciplining.
• Physical resource control by looking at inventory, operations and quality control.
• Operational control includes linear programming, PERT and quality control.
• Information resources control occurs when data is collected and transformed in order for people
to use the information.
Characteristics of an effective control system
For control to be effective it must have the following characteristics:
• Integrated with planning
• Flexible
• Accurate
• Timely
• Objective
• Not too complex
 Managing change and diversity
Culture, innovation, and technology
Study unit 3 part 1

Introduction
® The business and the environment in which it operates are not closed systems; they depend on each
other for survival.
® The organisation cannot function independently and needs to adjust and formulate strategies to
manage changes and challenges in the micro-, macro-, and market environment.

Change inside the organisation

Management has two options:
• Reactive change (hurried, poorly planned and sometimes called crises management)
• Planned change (management anticipated change and planned accordingly)

The change process

1) Recognise/identify the trigger for change
2) Determine the desired outcome of the change intervention Unfreeze
3) Diagnose the causes
4) Select an appropriate change technique
Change
5) Plan for the implementation
6) Implement
Refreeze
7) Evaluate and follow-up.

Areas of organisational change

The areas where change can take place include:
• Strategy
- Goals
- Corporate strategy
- Functional strategy
- Strategic redirection
• Structure
- Bureaucracy
- Authority
- Decision-making
- Organisational design
• Technology
- Production technology
- Information technology
- System technology
- Operations technology
- Control systems
• People
- Knowledge and skills
- Motivation
- Performance
- Reward allocation
- Behaviour
- Culture
Different models can be used to implement change in a business. Lewin’s change model consists of
three stages:
1) Unfreezing current behaviour
2) Changing behaviour
3) Refreezing behaviour

Resistance to change
There are many reasons why employees resist change, and these include:
• Threatened self-interest
• Uncertainty
• Lack of trust and misunderstanding
• Different perceptions
• Low tolerance for change
• General reasons such as inertia, timing, surprise, temporary fad
• Peer pressure

OVERCOMING RESISTANCE TO CHANGE

The following methods may be useful in decreasing the resistance to change:
• Training and education and communication
• Involvement and participation
• Facilitation and support
• Negotiation and rewards.

The psychological reactions to change, over time, comprise:

• Denial
• Anger
• Confusion
• Depression
• Crises
• Acceptance
• New confidence

WHY EFFORTS TO CHANGE FAIL

• Too much complacency
• Failing to create a sufficient coalition to make change happen
• The absence of an existing vision
• Under-communicating the vision
• Permitting the obstacles to block the vision
• Failing to create short-term wins
• Neglecting to anchor changes firmly in the corporate culture
 Culture and change
® Every business has a specific culture.
® Shared values and beliefs form the basis of a specific culture that influences the actions and activities in
that organisation.

DEFINITION OF CULTURE
& Corporate culture can be defined as the beliefs and values shared by people in an organisation.

ELEMENTS THAT DETERMINE AND EXPRESS A CORPORATE CULTURE

® The culture of a business is portrayed by various elements.
These include:
• Symbols
• Rituals
• Ideologies
• Language
• Tales
• Assumptions
• Relationships
• Humor

® When conducting an Organisational Culture Analysis (OCA) we measure three conditions

for competence in terms of an organization’s culture. These are:
• Collaboration
• Commitment
• Creativity

CHANGING THE ORGANISATIONAL CULTURE

® When aiming to change the corporate culture, management must evaluate four factors and
conditions that affect it, namely:
o Structure
o Process
o People
o Incentives and controls.

Organisational development
& Organisational development can be defined as an ongoing, planned effort by management to
manage change as a means of improving organisational performance. It involves planned interventions
to improve the skills of staff and to eliminate aspects of the organisation that limit employee and
organisational growth and performance.

ê Change is inevitable and happens in every organisation. People are renowned for resisting change.
Managers should understand when and how to implement change in an organisation.
 Managing diversity
Study unit 3 part 2
Introduction
® Organisations employ people who come from different backgrounds, cultures, languages, beliefs, attitudes
and customs.
® This can lead to many differences, conflict and misunderstandings amongst people in an organisation.

Misconceptions of diversity
• Diversity is not culture
- A crucial mistake people make is to confuse diversity with culture
- It reinforces stereotypes (this is what you people are like)
- This is exactly what we want to overcome

• Diversity is neither equal employment opportunities nor Affirmative Action

• Diversity is not an absence of standards

- People think that diversity means anything goes and that we give up our standards for hiring and
promoting people. Diversity is the opposite.

• Diversity is not a vendetta against white males

- A focus on only culture, race and gender, which ignores ability and competence, and which only
blames white males for injustice, only intensify the tension between groups, instead of bringing
them together.
- Changes in international and national environment regarding diversity force organisations to
change

® The primary dimensions of diversity include

o Race
o Age
o Gender
o Physical ability
o Sexual orientation
o Ethnicity

® The secondary dimensions of diversity include

o Education
o Religious beliefs
o Military experience
o Geographic location
o Income
o Work background
o Parental status
o Marital status.
What is diversity?
Diversity is about:
• Demographics
- In SA the human rights of people are protected by a modern constitution
- This has a major impact on the way a company functions, whom they employ and with whom they
do business
• Profitability
- Valuing diversity is a bottom-line issue about increasing productivity and profitability
- Valuing diversity is where the business community is leading the way. Why? Because it is profitable
- It fosters teamwork
- Helps an organisation to identify and meet the needs of customers
• Values
- Diversity has to do with human rights, civil rights, peoples believes and their differences
- How do we balance people’s rights to their personal values within the organisation and create a
productive workplace?
• Behaviour
• A long-term process
- Diversity is a large-scale change effort that extends far beyond training and must be viewed as a
long - term process
• Inclusive leadership
Bourke and Espedido describe diversity inclusive leaders with:
- Visible commitment: commitment to diversity, hold others accountable, makes diversity and
inclusion a personal priority
- Humility: about capabilities, admit mistakes and create the space for others contribute
- Awareness of bias: awareness of personal blind spots and as well as flaws in the system
- Curiosity about others: demonstrate an open mindset and deep curiosity
- Cultural intelligence: attentive to other cultures and adapts required
- Effective collaboration: they empower others, pay attention to diversity of thinking and
psychological safety and focus on cohesion

In general:
Diversity is about:
o Diversity is not a problem, but a mixture of people with different group identities
o Diversity is not only a HR responsibility but everyone's
o Diversity is not just about race and gender and previously disadvantage
o Diversity is not exclusive but inclusive
o Diversity is about creating a culture where watch individual can thrive
o Diversity and inclusion are not another fad

What is workforce diversity?

® It means that organisations are becoming heterogeneous in terms if gender, race, ethnicity, ability, age
and other aspects of differences.
® Diversity refers to the mosaic of people who bring a variety of back groups, styles, perspectives , values,
and believes as asserts to the groups and organisations with whom they interact.
® Inclusion is the achievement of a work environment in which all individuals are treated fairly and
respectfully, have equal opportunities and resources and can contribute fully to the organization’s
success.

Diversity defined
& Diversity refers to the mosaic of people who bring a variety of backgrounds, styles, perspectives, values
and beliefs as assets to the groups and organisations with which they interact. Employees are able to
maintain their individuality whilst contributing the organisation as a whole. No staff member is excluded
in this definition and finally, the definition acknowledges that staff members are assets in an organisation,
even if there are differences.
THE PLATINUM RULE
® Key component of ‘what diversity is’ revolves around the use of the platinum rule
® Extension of the golden rule
® Treat others as they want to be treated.
® This rule demonstrates respect and takes diversity beyond culture.
® If this rule is applied, it ensures that everybody is included and everybody wins.

GENERAL DIMENSIONS OF DIVERSITY

® Diversity will impact on the productivity of the workforce in South Africa.
® Management must take note of general dimensions of diversity:
o Gender issues:
- Woman are entering the labour market in increasing numbers
- Deal with work-family conflict, childcare, dual career couples and sexual harassment
- Seven out of ten woman in the labour force have children
- Glass ceiling syndrome - difficulty that woman have to advance themselves
o Age:
- In SA also youth unemployment is high
- Older workers: more cautious, take less risks and less open to change
o Marital status:
- Marital status adds to the complexity
- Single-parent families
- Management recognizes these differences and use them as strength
o Physical ability:
- Disabilities are subject to stereotyping, prejudice, and discrimination
o Language:
- Having 12 official languages in SA is a great challenge

Reasons for increased focus on managing workforce diversity

® Many companies spend vast amounts of money to sensitise their staff to diversity issues.
® A major factor that must be taken into consideration is the changing composition of the labour force.
® Another factor that leads to diversity in the workplace is the trend of globalization.
® Many organisations expand to different continents and countries and employ more staff from outside
their home base.
® Managers must acquire new skills and be aware as to how they should handle cross-cultural
understanding, build new networks and understand geopolitical forces.

The need for diversity management in South Africa

® Race and ethnicity are the two most visible dimensions of diversity in South Africa.

∆ Imbalances in SA business world

• Affirmative Action - policy or strategy on diversity management. Aims to ensure that SA
institutions reflect the character of the country
• Economic empowerment - pressure to transfer economic power
• Quest for a new management philosophy.

∆ Benefits of managing diversity and inclusion

• Managing the issues of diversity, inclusion and multiculturalism is crucial to success.
• Organisations that is successful in above will have a competitive edge.
Managing workforce diversity
® Businesses have realized that staff members do not set aside their cultural values or their lifestyle
preferences when they come to work.
® Management must ensure that they create a work environment in which different lifestyles, family needs
and work styles are accommodated.

There are six arguments for managing cultural diversity and these are:
• Cost argument: as organisations becomes more diverse, the cost of a poor job integration of
workers will increase
• Resource acquisition argument: companies develop favourable reputations as prospective
employers for woman and previously disadvantage groups.
• Marketing argument: the insight that members with roots in other countries bring to the
marketing effort should improve
• Creativity argument: should improve the level of creativity
• Problem-solving argument: diversity in decision making produces better decisions
• System flexibility argument: system becomes less determinant, less standardised and more
fluid.

APPROACHES TO MANAGING DIVERSITY AND INCLUSION

Ñ The Golden Rule Approach (treat others as you want to be treated)
Ñ The right-the-wrongs Approach (hire more people from previously disadvantaged backgrounds)
Ñ The value-of-differences Approach (recognise differences and acknowledge that they exist)

Alternative work schedules can be used to respond to diverse needs:

• Flexi time - increases employee autonomy and responsibility
• Job sharing - meets the needs of employees that cannot work in a full-time basis
• The compressed workweek - is a week of 4 ten-hour days which aloes employee’s more private
time

DIVERSITY PARADIGMS: STRATEGIES FOR DIVERSITY MANAGEMENT

Discrimination - Access - legitimacy Learning – effectiveness
fairness
Focus Creating equal opportunity, Match internal employee Incorporate diversity into the heart
assuring fair treatment and demographics to marketplace and fabric of the mission, work and
compliance with equal served culture of the organisation
opportunity laws
HR Practices Recruitment, mentoring and Recruitment of employees Redesigned and transformed to
career development of from diverse groups to match enhance performance of all
women and PDGs external demands employees
Effectiveness Recruitment Niche markets All employees feel respected,
numbers. Retention rates of captured. Degree of diversity valued and included
women and PDGs amongst employees
Weaknesses Does not capitalize on Does not affect mainstream All employees respected, valued
Strengths diversity of all of company business; and included
employees. Emphasis on diversity confined to specific
assimilation market segments
Cultural diversity
Culture is:
• A shared system of meanings
- Culture dictates what groups pay attention to and how the world is perceived
• Relative
- There is no cultural absolute
- People in different cultures perceives the world differently
• Learned
- Culture is derived from your social environment
• Collective
- Culture is a collective of shared values

The Onion Approach to culture:

• The outer layer reflects the visible aspects of culture (artefacts and products)
• The middle layer consists of norms and values
• The inner layer consists of the unconscious aspects of culture (implicit basic assumptions)

There are various views based on cultural dimensions of diversity identified in organisations.
These include:
• Ethnocentrism
- is the belief that one’s own groups culture or sub- culture is more superior than the other.
- This is racism.
- The following 3 perceptual attitudes are related to ethnocentrism / racism:
§ Stereotyping - assumption about group tendencies
§ Generalist - perception that a group of people has certain collectible characteristics
§ Prejudice - preconceived judgement or opinion
• Monoculture
- A monoculture is produced by a standard of cultural practices
- A culture that only accepts one way of doing things
- This creates problems for diverse groups
• Pluralism
- Accommodation of several cultures or subcultures in an organisation or company
- Movement to integrate fully
• Ethno-relativism
- The believe that all cultures or subcultures is equal

ê SA has 5 cultural influences

South African cultural values
Dimensions Afrocentric Eurocentric
Social orientation Collectivism Individualism
Power distance Large power distance Large power distance
Uncertainty avoidance High Low
Goal orientation Quality of life Career success
Relationship and rules Particularism Universalist
Degree of involvement and Diffuse and effective Specific and neutral
expression of feelings
How status is accorded Ascription Achievement
Time orientation Past, present, future Present as a means for future
(Synchronous) (Sequential)

Synergistic solutions to problems of cultural differences

Guidelines for doing business across cultures in South Africa:
• Obtain appropriate information - do research
• Be formal and respectful

Diversity training
There are reasons why businesses are designing and implementing diversity training initiatives.
These are:
• Increasingly diverse customer population
• Increasingly diverse employee population
• Retain top talent
• Minimise the risk of litigation
• It is the right thing to do and is an aspect of corporate social responsibility
• It fosters learning and effectiveness in businesses

APPROACHES TO DIVERSITY TRAINING

The focus should be on:
• Programmes designed to raise participants’ consciousness and awareness about differences in
values, attitudes, patterns of behaviour and communication that may exist across cultures
• Programmes designed to develop new skills and competencies, including communication
competence

MANAGEMENT SUPPORT
Top management must lead by example and support training through:
• Declaration of commitment to diversity in the mission statement
• An organisational climate that supports diversity
• Managers who have diversity skills and competence
• Awareness raising
• Peer support in the workplace
• Open communication between staff and management on issues of diversity
• Recognition for staff development of diversity
skills and competencies
• Recognition for staff contributions to enhancing
diversity goals
• Organisational rewards for managers’
implementation of organisational diversity goals
SPHERES OF ACTIVITY FOR DIVERSITY MANAGEMENT
Once management accepts the need for strategy to develop a diverse workplace, they need to:
• Build a corporate culture that values diversity
• Change structure, policies and systems to support diversity
• Provide diversity awareness and cultural competency training

The following aspects must be addressed for managing diversity:

Ñ Organisational culture
Ñ Mind-sets about diversity
Ñ HR management
Ñ Cultural differences
Ñ Greater career involvement of women
Ñ Education problems
Ñ Heterogeneity in race / ethnicity / nationality
 Managerial decision-making
Study unit 4 part 1
® All managers perform the four key management functions, namely: planning, organising, leading and
control.
® Decision-making is part of each of these activities. In each of these activities a problem will
present itself and this will need a solution.
® Management will have to make a decision on how to best solve these problems.

The relationship between problems, problem solving and decision-making

® When an organisation does not achieve its goals, a problem exists.

& Problem solving is the process of taking corrective action that will solve the problem and will realign
the organisation to its goals
® Problem solving occurs when management decides to take corrective action and realign a business
with its objectives.

& Decision making is the process of selecting an alternative course of action that will solve the problem
® Decision-making happens when an alternative course of action has been identified to solve the
problem and management must decide whether they are faced with a problem or not.

Types of managerial decisions

There are two types of decisions, namely:
• Programmed decisions
- Repetitive and routine
- Number of programmed decisions which is part of daily operations
- Like at Shoprite: mark up of products, re -order of products
- Usually handle programmed decisions by means of policies standards and procedures

• Non-programmed decisions
- Have never occurred before
- Complex and elusive
- No established way to deal with them
- All managers makes non programmed decisions
- Need to seek new sources for products
- Companies - especially small businesses - had to lay of people

Decision-making conditions
There are three decision-making conditions, namely:
∆ Certainty
® A decision is made under the condition of certainty when the outcome of the decision is known in
advance.
® Managers are simply faced with identifying consequences of available options with most beneficial
outcome

∆ Risk
® The manager does not know the outcome of each alternative in advance, but a probability can
be assigned to each outcome.
® Objective probability is based on historical evidence
® Subjective probability is based on personal estimates or beliefs.
∆ Uncertainty
® There is a lack of information, and each alternative is unpredictable and no probability can be
assigned to the alternatives.
® These are the most difficult type of decisions to make.
® Various crises can be sources of uncertainty and risk in a business.
These include:
o Economic crises
§ A situation in which the economy of a country
§ experience a sudden downturn.
§ Economic recessions and stock market crashes
§ Examples: Russian war = Oil crisis
o Physical crises
§ Organisations experiencing industrial accidents, problems surrounding the supply of
raw material and components and product failure.
§ Example: Marmite
o Personnel crisis
§ Personnel crisis during strikes , workplace violence
§ Example: Covid = doctors and nurses at hospital
o Criminal crisis
§ Theft of money, goods and product tampering
§ Examples: Kodak, Gillette, Intellectual property
o Information crises
§ Theft of money, data
o Reputation crises
§ Example: Tiger brands
o Natural crises
§ Oceans are becoming warmer and more acidic ice caps are melting and sea levels are
rising
§ Example: Climate change

Decision-making models

THE DECISION-MAKING PROCESS

• Stage 1: Recognise, classify and define the problem or opportunity
- Problem or opportunity can be classified as programmed or not programmed
- After classification the opportunity or problem must be defined
- An important part of defining problem is to distinguish the symptoms from the cause of the
problem

• Stage 2: Set goals and criteria

 • Stage 3: Generate creative alternative courses of action
- Identify the various courses of action to deal with the situation
- Innovation and creativity play a major part in various courses of action
- Managers must balance time and expense

• Stage 4: Evaluate alternative courses of action

- Evaluate the options
- Evaluate in terms of strengths and weaknesses, advantages and disadvantages, benefits and costs

• Stage 5: Select the best course of action

- Success rate in closing best option is rarely more than 50 %
- Evaluate each option careful

• Stage 6: Implement the chosen option

- Decision needs to be put into action
- Implementation decisions will be enhanced by:
§ Suitable organizational structure
§ Good leadership
§ Strong organisational culture
§ Fair reward system

• Stage 7: Conduct follow-up evaluation

- Provide feedback on outcome
- Adjustments are needed to ensure that actual results compare favourable with planned results

Group decision-making
® Stages 2 and 3 listed above require creativity and innovation.
® Groups are subject to social factors when making decisions and these include social conformity, levels
of communication skills and dominance by a specific group member.

Advantages of group decision-making:

• Variety of skills and specialized knowledge can be used to define and solve a problem or recognize
and opportunity
• Multiple and conflicting views can be taken into account
• Beliefs and values can be taken into consideration
• More organisational members will be committed to decisions, as they were part of the decision-
making process
• Improved morale and motivation among staff as a result of group decision-making participation
• Developing group process skill

Disadvantages of group decision-making:

• Time consuming and slower decision-making
• It may inhibit creativity and lead to “group-think”
• One member may dominate a group
• Groups are more likely to sacrifice, especially when meetings are not run well
Techniques for improving group decision-making
∆ Brainstorming (a technique to gather as many possible options as possible to solve an
organisational problem)
- The following is the rules for brainstorming:
o Criticism is prohibited
o No Yes but comments are allowed
o Imaginative solutions are welcome
o Quantity is important
o Combination of various solutions is encouraged

∆ Nominal group technique (when using this group technique, the interaction between
individuals is limited)
- The following steps takes place:
o 7 to 10 members meet as a group
o Group leader systematically gather information from all participants
o The ideas are clarified through a guided discussion
o The group leader instructs participants to vote on their preferred solutions
o Each member silently and independently ranks the ideas
o Process may conclude with a possible solution

∆ Delphi technique (use confidential questionnaires to gather solutions, and respondents do not
have to be in same location)
- Steps in Delphi technique:
1) Identify problem and ask members to provide potential solutions
2) Each member anonymously and independently completes first questioners
3) Results of first questionnaire is combined and reproduced
4) Each member gets a copy
5) After reviewing the first results members are again asked for solutions
6) The last 2 steps is repeated until consensus is reached

∆ Group decision support systems (respondents use computer terminals to provide their input)
- Group members sit around a horseshoe shaped table with computer terminals
- Issues are resented and they type their responses in the computer screen
- Electronic meetings are 55 % faster than face to face meetings

Tools for decision-making

There are two main tools for decision-making:
∆ Kepner-Fourie method
® This method combines the objective quantitively approach with some subjectivity
1) Compare each alternative to the must criteria
2) Rate each criterion on a scale
3) Assign a value from 1 to 10
4) Compute the weighted score
5) Select alternative with highest value

∆ Cost-benefit analysis
® This method makes the minimum use if mathematics to make the decision
® It compares cost of action to benefit
QUANTITATIVE DECISION-MAKING TOOLS
∆ Decision-making tools in conditions of certainty
• Linear programming
- this is a tool for optimally allocating scarce resources among competing options in order to
maximize benefits and minimize losses
- mathematical modelling technique
- Linear programming is the most frequently used technique
- It is a quantitively technique for allocating scarce resources

• Queuing theory
- this is a tool for analysing the cost of waiting in queues
- Objective: achieve optimal balance between cost of service and the time people must wait.
- Example: airlines

∆ Decision-making tools in conditions of risk and uncertainty

• Probability analysis (this tool estimates the likelihood that an outcome will occur)
• Pay-off matrix (this tool indicates possible returns from different outcomes)
• Decision tree (this tool is a graphic illustration of different solutions to a problem)
• Break-even analysis (this tool involves calculating the volume of sales that will lead to a profit
being made)
• Capital budgeting (this tool evaluates alternative investment opportunities)
• Simulation (this tool imitates a real-life scenario, so that the possible outcomes can be
compared)
 Information management
Study Unit 4 Part 2
Introduction
When making decisions, managers need information. The quality of a decision depends on the quality of
the information that exists. This in turn depends on the accuracy of the data collected, how it was analysed
and presented. These are the main elements of the information system.

The link between decision-making and information

& An information system transforms data from the external and internal environment into useful
information for managers to use in decision-making.
• External data includes:
o Consumer data
o Competitor data
o Supplier data
o Intermediaries’ data
o Economic data
o Technological data
o Social change data
o Ecological data
o International data.

• Internal data includes:

o Marketing data
o Financial data
o HR data
o Procurement and Operations data
o General organisational resource data.

What is an information system?

& Data refers to raw, unanalyzed numbers and facts about events or conditions from which information
is drawn. An example of data is an organization’s financial statements.
® As soon as data is processed and analyzed, decision-makers will have information that is accurate,
timely and relevant to a particular situation.
® Software resources:
• System software: software that manages the operations of the computer
• Application software: performs specific data processing like Pastel
• Procedures: operating instructions and manuals

The basic components of an information system

® An information system makes use of hardware, software and human resources to perform the
basic activities.

1) INPUT data: example sales figures

2) Data must then be organized and analyzed and produce INFORMATION for use
3) Finally, an information system provides FEEDBACK about its activities to make sure that
performance meets standards.
THE FOUR MAIN COMPONENTS OF A COMPUTER SYSTEM ARE:
• Input devices (such as keyboards)
• Central processing unit (brain of the computer)
• Output devices (such as printers)
• Auxiliary storage (such as optical disks)
• Computers utilize software programmes to operate and these include system software,
such as Windows or IOS; application software such as Microsoft Office; and procedures that entail
the operating instructions.

Characteristics of useful information

Information must be:
• Quality / Accurate: information must be accurate of high quality and useful
• Relevant: must be relevant for the specific problem solving
• Quantity / Sufficient: must be sufficient information to take the decision
• Timeliness / Currency: information must be received in time

Classification of information systems

∆ Operations information systems

- Transaction processing systems: produce a variety of documents and reports for
external and internal use
- Process control systems: routine decisions that control the physical processes
- Office automation systems: e-mail, desktop publishing and teleconferencing

® Example: The operations information system LeiDis-FI collects operational information on train runs
(current positions, timetable data), train formation or routes. It analyses and links this data and transmits
it to the sites where it is needed

∆ Management information systems

® Management information systems supports the decision making at different levels:
o Operational level: decisions are structured and MIS process transactions. Like internal
records and documents
o Tactical level: decisions are semi structured and middle management operational managers
receive results from
o Strategic level: decisions are unstructured. Top management needs information to focus on
strong and weak points, opportunities and threats.

® Information reporting systems: Provides managerial end users with the information reports
that they need for decision making
 ® Decision support systems are computerized information reporting systems that provides
management with information for decision making
o Decision support systems are:
§ Analytical models
§ Specialised databases
§ The decision makers own insights and judgements
§ An interactive computer bases modelling process

® Executive information system: Information systems that are tailormade for the strategic
information that is needed by top management. Executives usually consider various critical
factors like socio economic trends, technology, legislation and innovative thinking

∆ Other classifications of information systems

• Expert systems
& Is a programme that is designed to solve problems within a specialised domain that normally
requires an expert opinion

Components of an expert system:

o Human expert - expert engineer that transfer his knowledge to the knowledge engineer
o Knowledge engineer that transfers his knowledge to the knowledge base
o The knowledge base has both factual and heuristic knowledge
o Next step is Interference engine. Also known as reasoning engine. The goal is to deliver a
recommendation
o The last step is the Interface that refers to the hardware and software that is being used un
the interaction

• Artificial Intelligence
® Artificial intelligence is a field of computer science that is devoted to giving machines
features that is associated with humans.
® Luke reasoning, evaluation, learning, language, recognition, decision making and problem
solving

• Virtual Reality
® Virtual reality is the simulation of a real imagined environment that can be experienced
visually in dimensions
® Originally VR referred to artificial computer generated 3 D.
® Examples buildings, sculptures or a crime scene

• Business function information systems

® Are information systems that directly support the business functions of accounting, finance,
marketing
® Information needed by managers

• The Internet
® The internet is a loosely configured, rapidly growing web of thousands of corporate
educational and research computer networks around the world.
® Internet access usually provides four primary capabilities:
o E- mail enables users to send receive and forward messages
o Telnet enables users to log in from remote computers
o File transfer protocol. Download of books and magazines
o World Wide Web is a set of standards and protocols that enables users to access
information
 • The Extranet
® A wide area network that links an organisation employees’, suppliers, customers and other
key stakeholders electronically.
® The general public does not have access to the extranet
® Purpose is to provide vast, reliable, secure, and low-cost computer to computer
communication.

• The Intranet
® Is a semi private internal network where access is limited to an organisations employees.
® It uses the infrastructure and standards of the internet and the web.
® Sensitive information such as employee salaries and performance appraisals can be restricted

• Electronic Commerce
® E commerce can be defined as the process of buying and selling goods and services
electronically by means of computerized business transactions
® Three types if e-commerce:
o Business to consumer: involves the selling of products and services to customers
over the internet. (Like Take a Lot)
o Business to business: occurs when a business is sourcing materials for their
production process/ Like
o Consumer to consumer: e commerce that allows customers that interact directly
with each other. Like gumtree

Ethical issues of information systems

® A number of technology trends are responsible for the rise in technical issues.
® The following are considered the most important current trends:

∆ Dependence on computerized information systems

• More and more organisations depend on information systems for their critical operations.
• Their dependence makes them vulnerable
• Rules and laws have not yet adjusted this vulnerability

∆ Decline in data storage

• Advances in data storage techniques and rapidly declining in storage costs have been
responsible for multiple databases on individuals.
• These advances made routine violation of individual privacy cheap and effective
• Data storage and data security

∆ Advances in data analysis techniques

• The advances in data analysis techniques for large pools of data make it possible for
organisations to access highly detailed personal information about individuals. like at Cambridge
Analytica.
• Companies sell this personal info.

∆ Networking advances
• Copying data from one location to another and accessing personal data from remote
locations is much easier. This advancement also raises ethical questions.

∆ Growth in mobile devices

• The growth in the use of cell phones and especially smart phones increases ethical issues.
• Individuals’ cellphones may be tracked without their knowledge
Developing an information system
• Systems investigation

• Systems analysis
- System analyses is involving many activities used when a feasibility study is done.
1) First. the system analysis which is a study of the information requirements
2) Second. Understand the system analysis. Must it be replaced?
3) Third. Determine the system requirements for a new or improvement IS

• Systems design
- Design of the system and how it will accomplish the goal

• Systems implementation, maintenance, and security

- System implementation involves the training of personnel
- System maintenance involves minoring evaluating and modifying
- System security must be address during the design
 Ethics, Corporate Social Responsibility and Corporate Governance
Study Unit 5 Part 1
Introduction
These principles guide organisations in being responsible citizens of the world. The actions of organisations
affect the prosperity of all their stakeholders and the health of environments in which they operate. Future
managers need to understand these issues as they guide the behaviour of managers and workers, ensuring
that they act in the interests of the organisation and all involved. Ethics, corporate social responsibility and
corporate governance provide guidance on how to be responsible organisational citizens.

The components of Ethics

& Ethics can be described as that which entails the code of moral principles and values that directs the
behaviour of an individual or a group in terms of what is right or wrong.
® The three areas of human behaviour are:
o Behaviour directed by law
o Behaviour directed by ethics
o Behaviour directed by free choice.

In SA 3 documents define ethical businesses:

o Companies Act of 2008
o Companies’ regulations of 2011
o King Cod 4 of 1994

Good corporate governance can only be achieved if:

• Leaders live by iCraft values
- I: Integrity
- C: Competence
- R: Responsibility
- A: Accountability
- F: Fairness
- T: Transparency

• Good governance requires stakeholder inclusivity

Business ethics
Morality, ethics and business ethics
& Business ethics and morality: evaluation of the standards that we employ to distinguish
between right and wrong, good or bad, and what deserves respect and what not, within the context of
the business operations.

∆ Normative ethical approaches:

& Normative ethics is a branch of ethics that defines and systematizes the principles that we
employ when making moral decisions and judgements

• Consequentialism: Whether an act is morally right depends only on consequences

• Deontology: Ethical theory that says actions are good or bad according to a clear set of rules
• Virtue ethics: is person rather than action based: looks at the virtue or moral character of the
person carrying out an action, rather than at ethical duties and rules, or consequences of
particular actions
∆ Descriptive ethics and contextual influences
& Descriptive ethics is a branch of ethics that empirically investigates the moral attitudes and
decision-making processes of individuals and groups of people.

& The micro economic level is the level at which the ethical evaluation of the economic
activities is studied, including the informal norms, formal policies, decisions and actions that occur
within the business
® Active monitoring of ethical risk
® Shape our business practices

& Macro ethics is the level of study and evaluation of the social, economic, political,
environmental and cultural systems which enable, shape and constrain business practices.

& Meso-economic level is the level between the micro and macro-economic level. The impact
that the business has on society.

LEVELS OF ETHICAL DECISION-MAKING

Issues can occur on five levels, namely:
• Individual
• Organisational
• Associate
• Societal
• International level.

DIFFERENT APPROACHES TO ETHICAL DECISION-MAKING

There are three fundamental ethical approaches that managers can use in decision-making on
ethical matters. These are:
• Utilitarian approach
• Justice approach
• Human rights approach

In addition, people can ask themselves the following questions to determine whether a decision is ethical
or not:

STEPS IN THE ETHICAL DECISION-MAKING PROCESS

• Step 1: Identify the problem
• Step 2: Determine whose interests are involved
• Step 3: Determine the relevant facts
• Step 4: Determine the expectations of those involved
• Step 5: Weigh up the various interests
• Step 6: Determine the range of choices
• Step 7: Determine the consequences of these choices for all those involved
• Step 8: Make a choice

GOVERNING ETHICS IN THE ORGANISATION

The four key aspects to consider in this regard are:
• Lead by example
• Create ethical structures
• Develop an ethics management process
• Assess the ethics management process by means of external reporting
Businesses in society
• The promissory relation: refers to the agreement that executives will act in the economic
interest of the shareholders
• Externalities: comprise the unintended consequences that an economic transaction has on an
independent third party
• The social contract: refers to the implicit agreement whereby society grants business the ‘license
to operate’ through public consent, in the expectation that business will address certain societal
needs.

CORPORATE SOCIAL RESPONSIBILITY

® Corporate social responsibility implies that a business decision maker in the process of serving his own
business interests is obliged to take actions to protect and enhance society’s interests.
® The net effect is to improve the quality of life in the broadest possible way, however, quality is
defined by society.

∆ The narrow view of CSR

- Friedman
- In this regard, the business has no social responsibility other than to maximise profits within the
legal framework of society.
- If executives would accept more social responsibilities they would compromise the obligation to
shareholders

∆ The broader view of CSR

- The broader view of Corporate Social Responsibility is that organisations have a duty not to harm
society and that they should contribute positively to society.

ETHICS AND SOCIAL RESPONSIBILITY

® A strong relationship exists between a manager’s ethical standards and the organisation’s social
responsibility.
® A manager will combine his own ethical standards with the organisation’s code of ethics to guide him
to assess the “rightness” of potential actions by the business.

CORPORATE GOVERNANCE
® Good corporate governance is built on the pillars of:
o Responsibility
o Accountability
o Fairness
o Transparency
 New challenges for management
Study Unit 5 Part 2
Introduction
Organisational hierarchies are different from organisational structures ten years ago. It is important that
we understand why organisations change and which elements are affected the most. Many ‘new’ South
African organisations are global companies at the technological forefront, that focus on quality and service
excellence, and that align performance of individuals and groups to strategic goals of the business. These
organisations are innovative, and they manage change effectively.

Variables influencing contemporary organisations to change

® In order to remain relevant in an ever-changing environment, it is necessary that organisations adapt
to variables that necessitate change.

These variables are:

• Globalization and the global economy (death of distance)
• Technological advances (3D printing)
• Radical transformation of the world of work (leaner and more flexible structures)
• Increased power and demands of customers (due to digitalisation customers can compare prices
and buy from anywhere in the world)
• The growing importance of intellectual capital and learning (structural capital, customer capital
and human capital)
• Workers have new roles and new expectations (in the knowledge era, different abilities and
skills are required from workers)
• Environmental crises (irreversible climate change)
• The digital revolution (advancement of technology and the explosion of mobile and other
network-dependent devises have changed how people consume media and communicate within an
organisation)
• Demographic change (Businesses have to look for talent outside of their home structures)

The traditional model of the formal organisation

® In most instances the bureaucracy was the model used in formal organisations.
® Strong points of bureaucracy:
o Predictability
o Reliance
o Impartiality
o Expertise through specialization
o Clear lines of control

The new organisational model

The new model suggests that:
• Critical tasks are embedded in knowledge
• Businesses should have a global mindset
• Develop a diverse workforce
• Implement a participative management style
• Use innovation as its strategic focus.
Characteristics of contemporary organisations
• Global
- Managers must have an understanding of the differences between local and international
environments.
- The differences include cultural diversity, as well as political and legal factors.
- Managers will need leadership skills to manage a diverse workforce and communication will be a
challenge as different organisational structures will be in place.

Managers need specific qualities in contemporary organisations

o A strategic awareness and interest in the socioeconomic and political aspects of the countries
in which you operate
o Outstanding interpersonal and cross-cultural verbal and nonverbal skills
o Physical fitness for extensive travelling
o Flexibility to accept uncertainty and frustration
o Cultural relativity and awareness of one’s own prejudices
o Interest in different cultures
o Interpersonal quality reflecting trustworthiness
o Ability to keep quiet and listen to others

• Networked
Digitalization enables the disruption of boundaries:

Internally networked:
o Individuals and organizations are interdependent
o Information is widely shared
o Teams are the majority of units

Externally networked:
o Suppliers: share information
o Customers: direct contact with customers
o Other organizations: alliances and cooperative networks
o Stakeholders: alliances and cooperative networks

Management challenges:
Internally networked: (extensive use of teams)
o Develop skills of team members
o Understand and observe team dynamics
o Diagnose team problems
o Create team structures and processes
 Externally networked:
o Maintain a balance between cooperating
o with other organizations
o Develop and maintain systems to manage
o flow of information
o Manage employee’s interaction
o Manage the power shift of customers

• Flat and Lean

® To flatten structures, organizations remove several layers of management
The reasons for flatter structures:
o The need to be flexible and more agile to respond quickly
o Information systems replace the traditional roles of middle management to distribute
information
o Increased global competition
o Pressure from shareholders for increase in profits

Management challenges:
Managers need to
o Develop strong negotiation skills
o Provide incentive schemes
o Create communication channels for effective communication

• Flexible
® Organizations needs to be flexible to respond to the changing environments
® Flexible organisations have the following features:
o Respond to changing customer needs
o Cater to different needs of diverse workforce
o Systems and processes respond differently to different situations
o Flexible organizations have less rules and standard procedures
o Work on more than one project at the same time

Management challenges:
Managers can do the following:
o Encourage initiatives from employees for innovation and change
o Develop flexible labor practices
o Use knowledge effectively for learning
o Create opportunities for employees to develop their skills

• Diverse Workforce
® Workforce diversity describes a workforce that is diverse in terms of gender, race and ethnicity

A diverse workforce has the following features:

o Workforce includes current permanent employees and former employees working as
consultants
o Conflict may be a problem, but if managed well, can have the positive effect of various
viewpoints
o The importance of the managing of the HR due to workers with different needs and
expectations
 Management challenges:
To meet these challenges, managers must do the following:
o Attend diversity training programmes
o Develop listening skills
o Ensure that organization utilize the potential of diverse employees
o Develop systems for proper conflict resolution
o Introduce changes in HR policies to meet needs
o Essential to develop cultural sensitivity
o Change culture to embrace values, rituals and assumptions

New corporate structures and forms are emerging as a result of the turbulent business environment.
Businesses should take note of these new structures.