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MGT603 - Strategic Management - Lecture Handout 13

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This lecture provides all the information regarding what are the core functions of management in a business firm.

Functions of management

Functions of management


Planning is the:

  • Start of the process
  • Bridge between present and future
  • Increases likelihood of achieving desired results


The only thing certain about the future of any organization is change, and planning is the essential bridge between the present and the future that increases the likelihood of achieving desired results. Planning is the process by which one determines whether to attempt a task, works out the most effective way of reaching desired objectives, and prepares to overcome unexpected difficulties with adequate resources. Planning is the start of the process by which an individual or business may turn empty dreams into achievements. Planning enables one to avoid the trap of working extremely hard but achieving little.
Planning is an up-front investment in success. Planning helps a firm achieve maximum effect from a given effort. Planning enables a firm to take into account relevant factors and focus on the critical ones. Planning helps ensure that the firm can be prepared for all reasonable eventualities and for all changes that will be needed. Planning enables a firm to gather the resources needed and carry out tasks in the most efficient way possible. Planning enables a firm to conserve its own resources, avoid wasting ecological resources, make a fair profit, and be seen as an effective, useful firm. Planning enables a firm to identify precisely what is to be achieved and to detail precisely the who, what, when, where, and why needed to achieve desired objectives. Planning enables a firm to assess whether the effort, costs and implications associated with achieving desired objectives are warranted. Planning is the cornerstone of effective strategy formulation. But even though it is considered the foundation of management, it is commonly the task that managers neglect most. Planning is essential for successful strategy implementation and strategy evaluation, largely because organizing, motivating, staffing, and controlling activities depend upon good planning.
The process of planning must involve managers and employees throughout an organization. The time horizon for planning decreases from two to five years for top-level to less than six months for lower-level managers. The important point is that all managers do planning and should involve subordinates in the process to facilitate employee understanding and commitment.
Planning can have a positive impact on organizational and individual performance. Planning allows an organization to identify and take advantage of external opportunities and minimize the impact of external threats. Planning is more than extrapolating from the past and present into the future. It also includes developing a mission, forecasting future events and trends, establishing objectives, and choosing strategies to pursue.
An organization can develop synergy through planning. Synergy exists when everyone pulls together as a team that knows what it wants to achieve; synergy is the 2 1 2 5 5 effect. By establishing and communicating clear objectives, employees and managers can work together toward desired results. Synergy can result in powerful competitive advantages. The strategic-management process itself is aimed at creating synergy in an organization.

Planning allows a firm to adapt to changing markets and thus shape its own destiny. Strategic management can be viewed as a formal planning process that allows an organization to pursue proactive rather than reactive strategies. Successful organizations strive to control their own futures rather than merely react to external forces and events as they occur. Historically, organisms and organizations that have not adapted to changing conditions have become extinct. Swift adaptation is needed today more than ever before because changes in markets, economies, and competitors worldwide are accelerating.


  • Achieve coordinated effort
  • Defining task and authority relationships
  • Departmentalization
  • Delegation of authority


The purpose of organizing is to achieve coordinated effort by defining task and authority relationships. Organizing means determining who does what and who reports to whom. There are countless examples in history of well-organized enterprises successfully competing against, and in some cases defeating, much stronger but less-organized firms. A well-organized firm generally has motivated managers and employees who are committed to seeing the organization succeed. Resources are allocated more effectively and used more efficiently in a well-organized firm than in a disorganized firm.
The organizing function of management can be viewed as consisting of three sequential activities: breaking tasks down into jobs (work specialization), combining jobs to form departments (departmentalization), and delegating authority. Breaking tasks down into jobs requires development of job descriptions and job specifications. These tools clarify for both managers and employees what particular jobs entail.
Combining jobs to form departments’ results in an organizational structure, span of control, and a chain of command. Changes in strategy often require changes in structure because new positions may be created, deleted, or merged. Organizational structure dictates how resources are allocated and how objectives are established in a firm. Allocating resources and establishing objectives geographically, for example, is much different from doing so by product or customer.
The most common forms of departmentalization are functional, divisional, strategic business unit, and matrix.

Delegating authority is an important organizing activity, as evidenced in the old saying "You can tell how good a manager is by observing how his or her department functions when he or she isn't there." Employees today are more educated and more capable of participating in organizational decision making than ever before. In most cases, they expect to be delegated authority and responsibility, and to be held accountable for results. Delegation of authority is embedded in the strategic-management process.


  • Influencing people to accomplish specific objectives
  • Communication is a major component

Motivating can be defined as the process of influencing people to accomplish specific objectives. Motivation explains why some people work hard and others do not. Objectives, strategies, and policies have little chance of succeeding if employees and managers are not motivated to implement strategies once they are formulated. The motivating function of management includes at least four major components: leadership, group dynamics, communication, and organizational change.


When managers and employees of a firm strive to achieve high levels of productivity, this indicates that the firm's strategists are good leaders. Good leaders establish rapport with subordinates, empathize with their needs and concerns, set a good example, and are trustworthy and fair. Leadership includes developing a vision of the firm's future and inspiring people to work hard to achieve that vision. Kirkpatrick and Locke reported that certain traits also characterize effective leaders: knowledge of the business, cognitive ability, self-confidence, honesty, integrity, and drive.

Research suggests that democratic behavior on the part of leader’s results in more positive attitudes toward change and higher productivity than does autocratic behavior.
Group dynamics play a major role in employee morale and satisfaction. Informal groups or coalitions form in every organization. The norms of coalitions can range from being very positive to very negative toward management. It is important, therefore, that strategists identify the composition and nature of informal groups in an organization to facilitate strategy formulation, implementation, and evaluation. Leaders of informal groups are especially important in formulating and implementing strategy changes.

Communication, perhaps the most important word in management, is a major component in motivation. An organization's system of communication determines whether strategies can be implemented successfully. Good two-way communication is vital for gaining support for departmental and divisional objectives and policies. Top-down communication can encourage bottom-up communication. The strategic-management process becomes a lot easier when subordinates are encouraged to discuss their concerns, reveal their problems, provide recommendations, and give suggestions. A primary reason for instituting strategic management is to build and support effective communication networks throughout the firm.


  • Personnel management
  • Human resources management

The management function of staffing, also called personnel management or human resource management, includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, and managing union relations.


Staffing activities play a major role in strategy-implementation efforts, and for this reason human resource managers are becoming more actively involved in the strategic-management process. Strengths and weaknesses in the staffing area are important to identify.
The complexity and importance of human resource activities have increased to such a degree that all but the smallest organizations now need a full-time human resource manager. Numerous court cases that directly affect staffing activities are decided each day. Organizations and individuals can be penalized severely for not following federal, state, and local laws and guidelines related to staffing. Line managers simply cannot stay abreast of all the legal developments and requirements regarding staffing. The human resources department coordinates staffing decisions in the firm so that an organization as a whole meets legal requirements. This department also provides needed consistency in administering company rules, wages, and policies.
Human resources management is particularly challenging for international companies. For example, the inability of spouses and children to adapt to new surroundings has become a major staffing problem in overseas transfers. The problems include premature returns, job performance slumps, resignations, discharges, low morale, marital discord, and general discontent.

Strategists are becoming increasingly aware of how important human resources are to effective strategic management. Human resource managers are becoming more involved and more proactive in formulating and implementing strategies. They provide leadership for organizations that are restructuring or allowing employees to work at home.


  • Ensure actual operations conform to planned operations


The controlling function of management includes all those activities undertaken to ensure that actual operations conform to planned operations. All managers in an organization have controlling responsibilities,such as conducting performance evaluations and taking necessary action to minimize inefficiencies. The controlling function of management is particularly important for effective strategy evaluation. Controlling consists of four basic steps:

  1. Establishing performance standards
  2. Measuring individual and organizational performance
  3. Comparing actual performance to planned performance standards
  4. Taking corrective actions

Measuring individual performance is often conducted ineffectively or not at all in organizations. Some reasons for this shortcoming are that evaluation can create confrontations that most managers prefer to avoid, can take more time than most managers are willing to give, and can require skills that many managers lack. No single approach to measuring individual performance is without limitations. For this reason, an organization should examine various methods, such as the graphic rating scale, the behaviorally anchored rating scale, and the critical incident method, and then develop or select a performance appraisal approach that best suits the firm's needs.

Management Audit Checklist of Questions

The checklists of questions provided below can help determine specific strengths and weaknesses in the functional area of business. An answer of no to any question could indicate a potential weakness, although the strategic significance and implications of negative answers, of course, will vary by organization, industry, and severity of the weakness. Positive or yes answers to the checklist questions suggest potential areas of strength.

  1. Does the firm use strategic-management concepts?
  2. Are company objectives and goals measurable and well communicated?
  3. Do managers at all hierarchical levels plan effectively?
  4. Do managers delegate authority well?
  5. Is the organization's structure appropriate?
  6. Are job descriptions and job specifications clear?
  7. Is employee morale high?
  8. Are employee turnover and absenteeism low?
  9. Are organizational reward and control mechanisms effective?

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