Management activities - Mr Murphys Business



Unit 3 Leaving Cert Business: Management Activities

(Planning; Organizing; Controlling)

Planning

Planning involves selecting organisational goals and finding ways to best achieve them. It maps out a successful route to achieve goals or targets. For example, TV3’s strategic (long term) plan is to gain more viewers, and Diageos plan for its Guinness brand is to increase its share of the lucrative 18-30 year old market. Carlsberg also have a strategic plan to increase/maintain its share of this segment of the market.

Planning is important to a business because it provides:

• Direction: The plan sets the direction for the business by clearly identifying the objectives, e.g., to Expand (Ryanair has announced plans to open up new routes and to buy new jets).

• Coordination: The plan is used to coordinate the activities of the different departments, e.g., the sales department must not take orders that the production department is unable to meet. Planning links all the departments in an organization together.

• Targets: Planning sets targets for the business and chooses the best way to achieve these targets. Management can then compare the actual results to the planned targets. Good performance can be rewarded (bonuses) and failure to meet targets should be investigated.

• Finance: A plan can be used when approaching potential investors for money as it demonstrates how the money will be used and how funds will be generated for repayment. Planning can help forecast any future finance problems that may occur e.g cash flow problems.

• Awareness: An organisation that plans by consulting all relevant stakeholders becomes aware of its Strengths, Weaknesses, Opportunities and Threats (SWOT) and is therefore more adaptable to change. Planning should take in the views of employees as they will stick to the plan and be more likely to co-operate thereby reducing conflict.

Types of Planning

1. Strategic Planning: this is a long term plan for the business. Example – Diageo have a strategic plan of targeting consumers in the 18-30 age bracket. There marketing strategy has identified this section of the market as having the greatest potential. As part of this strategy Diageo have sponsored All Ireland Hurling Championship for the last 10 years.

2. Tactical Planning: this could be described as a short term aim of the business – e.g a half price sale to gain attention and boost sales.

3. Contingency Planning: this type of plan is used to deal with emergencies in the business. Example - dealing with a computer systems crash in the office/bank would include a plan of using back-up computer servers and systems.

Planning helps a business deal with changes such as:

• Technology changes

• Changes in the needs and wants of society

• New competitors joining the industry

Planning Process

The four stages in the planning process are:

1. Analyse the situation: This involves conducting a SWOT analysis (Strengths; Weaknesses; Opportunities; and Threats) and forecasting future events. Accurate forecasting can lead to success. Bill Gates founder of Microsoft forecast a computer on every desk and planned Microsoft's strategy to match. He failed to predict the importance of the Internet and lost ground to Netscape but later changed his view and hence the Explore / Netscape "war".

• Strengths: forecasted growth in use of computers and technology

• Weaknesses: didn’t forecast the growth of Internet

• Opportunities: computer software applications unique to Microsoft

• Threats: competition from other internet providers such as Netscape.

1. Identify the Objectives/Goals: Goals and Objectives are what the firm is trying to achieve. They should be Specific, Measurable, Achievable, Realistic and Timed (SMART). Objectives are agreed before policies are agreed.

• Example - a goal of Apple (Apple iPhone) would be to increase its share of the mobile phone market by 25% and its policy to do this is to sell the iPhone exclusively through the O2 Retail shops by tying customers into an 18months 02/iphone contract.

Objectives or goals must be SMART!

|Specific |

|Measurable |

|Achievable |

|Realistic |

|Timed |

3. Draft the plan: The plan should consist of a strategic (long term) plan, a tactical (operational) plan and a contingency (for unseen events) plan.

4. Implement the plan: Putting the plan to work in the organization using policies. Plans are implemented by putting policies in place. The policies of the organisation detail how the objectives are to be achieved. Policies must be adaptable to outside forces such as competitors or government legislation.

• Example - another example would be TV3’s objective to increase its market share in certain age groups (to win advertisers) and its policy to achieve this objective was buying “Coronation Street”.

• Example - another example would be Setanta Sports objective to increase its market share in certain groups and its policy to achieve this objective was buying the rights to show National GAA competitions (NHL, NFL, All Ireland Colleges series) and cross channel football matches.

Mission Statements: used to communicate future aims and objectives of the business to stakeholders.

Mission Statement

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Organizing

Organising means bringing people and resources together to achieve a common objective.

An organisational structure identifies the different functions in an organisation and sets out the chain of command. Traditional firms use chain of command based on the army with several layers, but modern firms have delayered the system into project/matrix teams which we will look at later.

Organising is important because:

• It makes it easier to achieve objectives.

A well organized firm will have a leader guiding the subordinates in the right direction. The firm will constantly aim towards achieving specific objectives.

• Better staff morale

A well organized firm has less conflict and good morale. This in turn boosts customer relations and sales and profits.

• Reduced Costs

A well-organised firm is more efficient and resources are wisely used. Staff are arranged around plans and must obey certain controls. This reduces waste and costs.

Line Structure

Organization of a business can be represented in an organisational chart. Line organization divides the organization into traditional departments based on a chain of command with the most important (Chief Executive/Managing Director) at the top and the least important (operatives) at the bottom. These workers contribute directly to the production process.

1. Functional Structure

The simplest organisational chart is the functional structure, which divides a business according to management functions at senior, middle management and junior levels.

[pic]

There are three layers of management in this chart: top, middle, and junior management.

• It indicates where authority and responsibility have been delegated.

• It illustrates the chain of command, i.e., who is answerable to who.

• It shows the managing director's span of control (the number of people reporting directly to a manager).

2. Geographical Structure

Departments are divided based on geographical areas – e.g. Stena Line Ferries has three geographical departments:

• Area Scandinavia

• Area North Sea

• Area Irish Sea

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3. Product Structure

Firms such as C&C plc divide the firm by product:

• Alcohol

• International Spirits and liquers

• Soft Drinks and snacks

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Matrix Structure

A matrix structure combines the main elements of a functional organization structure but also includes a horizontal structure which combines the various departments into teams. It was developed by NASA, and recognizes that for a project to be successful it needs committed people with a variety of skills and expertise e.g. financial people, IT people, marketing people, HR people. The benefits of a matrix structure are:

• It reduces communications barriers

• It improves morale

• It improves quality and service

• It improves efficiency and reduces costs

Matrix Chart

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De-layering

De-layering the organisation refers to the reduction in the number of layers in the management structure of the organisation.

De-layering Advantages:

• It simplifies the structure.

• It increases the speed and accuracy of internal communication, which means the organisation can respond more rapidly to change.

• De-layering gives more power to subordinates. This increase in responsibility can release creativity and initiative.

• It reduces the total wage bill paid to managers.

De-layering Disadvantages:

• Senior managers have to deal with a wider span of control and an increased workload. This may cause stress.

• Managers' jobs may be lost through redundancies and this may lead to industrial relations problems.

• Control becomes more difficult as the span of control increase.

Delegation

This is the sharing out of tasks among the subordinates by the superior with the objective of improving efficiency – e.g. the owner of a factory hires a production manager to oversee factory operations. (Delegation is closely linked to Leadership and Organisation)

There will be a span of control which is the ideal number of subordinates under the instruction of a supervisor.

Wide Span

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Narrow Span

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Sample Exam Question

Explain the factors that influence a firms span of control? (15m)

Outline Solution:

Skills of manager

The personality skills and attitude of the manager will affect the span of control ,as some charismatic managers can handle larger groups of employees.

Type of work

If a task is simple and involves unskilled labour, then the span can be large, but if the job is complex with greater interaction needed it should be narrow

Type of employee

The education, commitment and experience and expertise of those being controlled will have a major bearing on a firms span of control. Highly trained motivated staff would be suited to a ____________ span of control, while inexperienced & unmotivated staff would need a _______________ span of control.

Controlling

Management control refers to the monitoring and checking of results to see that they agree with the targets set out in the plan.

Control is important to managers because:

1. Correction: A good control system allows management detect and correct problems before they get out of control. If Barings Bank had better control systems, Nick Leeson would not have been able to bankrupt the company.

2. Quality: The control system will ensure service to the customers remains at the highest level. This may be achieved by creating a total quality management system in the organisation and by the introduction of quality awards.

3. Efficiency: Waste is reduced in all areas of the organisation when corrective action is prompt.

4. Profits: Profits should increase due to a reduction in costs associated with waste and defective products. Sales revenue may increase due to the ability to charge a premium price for a high quality product.

The control process involves:

• Setting targets

• Measuring performance against the targets

• Investigating any variance

• Correcting problems

• Preventing deviations by anticipating problems

The Leaving Cert student should be familiar with the following types of management control:

|Stock control |

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|Credit control |

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|Quality control |

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|Financial control |

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