TOPIC 3: THE CONTEXT OF MANAGEMENT

3.1 Learning objectives

By the end of this topic, the learners should be able to;

a) List the desirable characteristics of a manager

b) Explain the three essential skills for managers
c) Describe the managerial roles
d) Illustrate the managerial levels
e) Discuss the influence of internal and external environment on management

Characteristics of Managers
1. Ability to achieve desired results

2. Resource allocation and optimization capability

3. Ability to provide direction

4. Change management ability

5. Ability to work with people

6. Self management/Self motivation

7. Ability to make sound decisions

8. Customer orientation

9. Integrity and trustworthy

10. Dependability

11. Sound knowledge of the industry

Managerial skills
• Management skills identify those abilities or behaviours that are crucial to success in a
managerial position.

Managers need 3 essential skills

 1) Technical skills

This refers to knowledge of and proficiency in a specialized field. It refers to a manager’s ability to
use the tools, procedures, and techniques of a specialized field. These skills are needed more in
lower levels of management

2) Human skills/Interpersonal Skills

This is the ability to work well with other people individually and in a group. It includes
communication and mentoring ability. This category of skills is important at all levels of
management. This is because management entails working with and through people

3) Conceptual skills

This refers to the ability to think and conceptualize about abstract and complex situation. These
skills are most important when dealing with a complex situation

Conceptual skills are very important at top management level

Managerial Roles
• These refer to specific categories of managerial behaviour. Henry Mintzberg provided a
categorization of managerial roles in reference to what managers do. These roles are grouped
into 3 categories with a total of ten roles

Interpersonal roles

• Roles that managers assume to provide direction and supervision to both employees and the
organization as a whole:

– Figurehead: symbolic head, face of the company

– Leader: training, counseling, and mentoring high employee performance.

– Liaison: linking and coordinating the activities of people and groups both inside and
outside the organization/department
Informational roles
• Roles associated with the tasks needed to obtain and transmit information in the process of
managing the organization:

Monitor: analyzing information from both the internal and external environment. As a
monitor, the manager has to perpetually scan the environment for information, interrogate
his liaison contacts and his subordinates, and receives unsolicited information, much of it
as a result of the network of personal contacts he has developed

Disseminator: transmitting information to influence the attitudes and behavior of

employees.

Spokesperson: using information to positively influence the way people in and out of the
organization respond to it.

A manager advices shareholders about financial performance, assures consumer

groups that the organization is fulfilling its social responsibilities and satisfies
government that the organization is abiding by law

Decisional Roles

• Roles associated with methods managers use in planning strategy and utilizing resources:

– Entrepreneur—deciding which new projects or programs to initiate and to invest

resources in.

– Disturbance handler—managing an unexpected event or crisis. The manager acts like a

firefighter.

– Resource allocator—assigning resources between functions and divisions, setting the

budgets of lower managers.

– Negotiator—reaching agreements between other managers, unions, customers, or

shareholders
Levels of Management
The top level management

• Generally occupied by the ownership group. In a joint stock company, equity shareholders
are the real owners of the company. Thus, they elect their representatives as directors, form
a board, known as board of directors, which constitutes the top level of management.
Besides the board, other functionaries including managing director, general manager or Chief
executive Officer to help directors, are included in this level. It is the highest level in the
managerial hierarchy and the ultimate source of authority in the organization.

• The top level managers are accountable to the owners and responsible for overall
management of the organization. The major functions of the top level management are as
under:

(i) To make a corporate plan for the entire organization covering all areas of
operations.
(ii) To decide upon the matters which are vital for the survival, profitability and growth
of the organization such as introduction of new product, shifting to new technology
and opening new plant etc
(iii) To decide corporate goals.
(iv) To decide structure of organization
(v) To exercise overall managerial control through the process of reviewing over all
financial and operating results.
(vi) To make decisions regarding disposal and distribution of profits.
(vii) To select key officials and executives for the company.
(viii) To coordinate various sub-systems of the organization.
(ix) To maintain liaison with outside parties having a stake in business such as
government, trade union and trade associations etc.
(x) To formulate basic policies and providing direction and leadership to the
organization as a whole.
Middle Level Management
 • In order to fill up the gap which exists between functional and operative level, some
managerial positions are created at the middle level of management. Middle level
management consists of departmental managers, deputy managers, administrative officers
etc. These executives are mainly concerned with the overall functioning of their respective
departments. They act as a link between top and lower level managers. The activities of
middle level managers centers around determining departmental goals and devising ways and
means for accomplishing them.

• The main functions performed by these managers are :

(i) To prepare departmental plan covering all activities of the department within the
basic framework of the corporate plan.
(ii) To establish departmental goals and to decide upon various ways and means for
achieving these goals to contribute to organizational goals.
(iii) To perform all other managerial functions with regard to departmental activities for
securing smooth functioning of the entire department.
(iv) To issue detailed orders and instructions to lower level managers and coordinate the
activities of various work units at lower level.
(v) Middle level managers explain and interpret policy decisions made at the top level to
lower level managers

Lower Level or Supervisory Level Management

Lower-level management is known as supervisory management, because it is concerned

mainly with personal oversight and direction of operative employees. It consists of factory
supervisors, superintendents, foremen, sales supervisors, accounts officers etc.

They directly guide and control the performance of rank and file workers. They issue
orders and instructions and guide day to-day activities. They also represent the
grievances of the workers to the higher levels of management

Supervisory management performs the following functions:

(i) Planning of day to day work

(ii) Assignment of jobs and issuing orders and instructions
 (iii) Supervising and guiding workers
(iv) Maintaining close personal contacts with workers to ensure discipline and team-work
(v) Evaluating operating performance
(vi) Sending reports and statements to higher authorities
(vii) Communicating the grievances and suggestions of workers to higher authorities

Organizational Levels

Top level management (Board of Directors,

CEO, MD, GM)

Middle level management

(Functional heads, administrators)

Lower level managers

Operatives (non managers)

Internal and External Environment

Introduction
For the manager to perform his work effectively, he/she must understand how the organization’s environment is
structured.

Types of Environment
On the basis of the extent of intimacy with the firm, the environmental factors may be classified into
different types-internal and external.
Internal Environment
The internal environment is the environment that has a direct impact on the business. Here there
are some internal factors which are generally controllable i.e. the company has control over these
factors. It can alter or modify such factors as its personnel, physical facilities, and organization and
functional means, like marketing, to suit the environment. The important internal factors which have
a bearing on the strategy and other decisions of internal organization are discussed below.

Organizational Aspects
The factors that are important for managers to consider include the hierarchy of objectives (Mission,
vision, and goals), the value system, the organizational structure, the ability of the management team,
the record of success etc.
Value system
The value system of the founders and those at the helm of affairs has important bearing on the
choice of business, the mission and the objectives of the organization, business policies and
practices.
Mission and vision and objectives
Vision means the ability to think about the future with imagination and wisdom. Vision is an
important factor in achieving the objectives of the organization. The mission is the medium through
which the objectives are achieved. It is about the mandate of the organization and answers the
question of “in what business are we?’
Organizational structure and nature
The structure of the organization also influences the business decisions. The organizational structure
like the composition of board of directors influences the decisions of business as they are internal
factors. The structure and style of the organization may delay or hasten decision making.

Internal power relationships

The relationship among the three levels of the organization also influences on the business. The
mutual co-ordination among those three is important for a business. The relationship among the
people working in the three levels of the organization should be cordial.
Human Resource /Personnel aspects
The human resource is an important factor for any organization as it contributes to the strength or
weakness of any organization. The human resource in any organization must have characteristics like
skills, quality, high morale, commitment towards the work, attitude, etc. The involvement and
initiative of the people in an organization at different levels may vary from organization to
organization. The managers must consider issues like recruitment and selection, Training and
development, performance management systems, labour turnover and absenteeism. The
organizational culture and overall environment have bearing on them.
Marketing aspects
The factors that are important for the manager include market segmentation, the product strategy,
the pricing strategy, the promotion strategy and the distribution strategy. The manager should seek
solutions to the following questions:
a) Is market research used to the best advantage?
b) Is advertising used effectively and efficiently?
c) Can product distribution of the company be improved?
Production aspects

The factors that are important include facility layout, research and development, the use of
technology, purchasing of raw materials and inventory control. The managers should seek
solutions to 3 basic questions.

a) Can the organization increase its level of technology?

b) Can the flow of work be made more efficient?
c) Can the organization lower its reject rates in terms of quality products

Financial aspects
The factors that are important for the manager include liquidity, profitability, activity and investment
opportunities. The manager must seek answers to the following questions
a) Does an analysis of the income system of he company point out at improvements that can
be made?
b) Does an analysis of the balance sheet also point out on improvements that can be made?
c) Can costs be brought down in relation to profits?
External Environment

It refers to the environment that has an indirect influence on the business. The factors are
uncontrollable by the business. The manager must be aware of the factors in this environment and
how they affect the organization. There are two types of external environment.

Micro Environment
The micro environment is also known as the task environment or operating
environment because the micro environmental forces have a relatively direct bearing on the
operations of the firm. The micro environment consists of the factors in the company’s immediate
environment that affects the performance of the company. These include the suppliers; competitors,
customers labour and the international component. The micro environmental factors are more
intimately linked with the company than the macro factors. The micro forces need not necessarily
affect all the firms in a particular industry in the same way. Some of the micro factors may be
particular to a firm. When the competing firms in an industry have the same micro elements, the
relative success of the firms depends on their relative effectiveness in dealing with these elements
Supplier component
An important force in the micro environment of a company is the suppliers. This includes all
variables that are related to those who supply resources to the organization. These resources are
normally purchased and transformed into final goods and services through the organization’s
production process. The factors that must be monitored for purposes of strategy development
include the following:
1. How many suppliers offer specified resources for sale to the organization
2. What is the relative quality of the materials that are offered by company suppliers
3. How reliable are their deliveries in terms of lead time
4. What are their payment and credit terms
These issues are important in managing the supply function of an organization efficiently
and effectively.

Customer component
The major task of a business is to create and sustain customers. A business exists only because of its
customers. This reflects the characteristics and behaviour of those who buy goods and services
offered by the organization. Describing in details those who buy the company products is common
business practice. It is important because it helps the manager to generate ideas on how to improve
acceptance of organizational goods and services. The choice of customer segments should be made
by considering a number of factors including the relative profitability, dependability, stability of
demand, growth prospects and the extent of competition.

Competitive component
This consists of those with whom an organization must fight in order to obtain resources including
finances, raw materials, employees and customers. Understanding competitors is a key factor in
developing effective strategies in management. Analyzing the competitive environment is normally a
fundamental challenge to most managers. It is however necessary to analyze the competitors
because this will help the manager to appreciate the strengths, weaknesses and capabilities of existing
and potential competitors and predict the strategies that they are likely to adopt in the future. Within
any given industry the manager should analyze completion by focusing on five major factors (five
forces analysis according to Michael Porter):
1. Rivalry among existing firms
2. Threat of substitute products
3. New entrants into the market
4. Bargaining power of suppliers (particularly for high prices of raw materials or inputs)
5. Bargaining power of buyers (for more discounts or services)
It is necessary to consider competition not only in terms of the other firms that produce same
product but also those firms which compete for the income of the consumers.

The labour component

This is made up of factors that influence the supply of the workers available to perform needed organization’s tasks.
Issues such as skill levels, trainability, desired wage rates and average age of potential employees are important to the
operations of an organization. The human resource is vital in strategy development and value delivery system. The
desire to work for a particular organization as perceived/ demonstrated by potential employees is important.
Presence/strength of trade unions is also worth consideration
The international component
Significant aspects of the international component include the legal, political, cultural and economic aspects that prevail
in those countries that a firm operates. Within the legal environment, the international component, issues like patents,
trademarks, laws and treaties with foreign nations are important. For purposes of culture, the language, the customs,
norms, beliefs and values are important. Within the political aspect, the political system, the form of government and
the foreign policies are important.

Macro Environment
Macro environment is also known as General environment. Macro factors are generally more
uncontrollable than micro environment factors. When the macro factors become uncontrollable,
the success of company depends upon its adaptability to the environment. Some of the macro
environment factors are discussed below:
Economic Environment
Economic environment refers to the aggregate of the nature of economic system of the country,
business cycles (recession or boom), the GNP, corporate profits, inflation rates, taxation rates,
employment rates, productivity, balance of payments, national debts and consumer income and
spending etc. The manager must visualize the economic factors affecting the business; anticipate
prospective market situations and seize the available opportunities
The social component
The social dimension or environment of a nation determines the value system of the society which,
in turn affects the functioning of the business. Factors like age distribution, literacy rates, education
levels, population structure and characteristics (demographics), customs and conventions, cultural
values and beliefs, religion etc have a bearing on work culture, ethics and the products that an
organization can produce.

Political Environment
The political environment of a country is influenced by the political organizations such as
philosophy of political parties, ideology of government or party in power, nature and extent of
bureaucracy influence of primary groups etc. The political environment of the country influences the
business to a great extent. Peace and conflict have a bearing on the performance of business.

Legal Environment
Legal environment includes flexibility and adaptability of law and other legal rules governing the
business. It may include the exact rulings and decision of the courts, laws on waste disposal, energy
consumption, pollution monitoring and environmental laws, employment laws, health and safety
laws, product safety laws, advertising regulations etc. These affect the business and its managers to a
great extent.
Technical Environment
The business in a country is greatly influenced by the technological development. The technology
adopted by the industries determines the type and quality of goods and services to be produced and
the type and quality of plant and equipment to be used. Technological environment influences the
business in terms of investment in technology, consistent application of technology and the effects
of technology on markets. The rapid changes in technology present opportunities as well as threats
to the organizations
Conclusion
A manager must be aware of the organization’s environment and align the organization to the
environment. Environmental scanning helps the manager to assess the strengths and the weaknesses
of the organization as well as the opportunities and threats that exist in the environment. The
manager can then seek ways of minimizing the weaknesses and capitalize on the strengths to seize
the opportunities in the environment. The strengths can also be used in converting the
environmental threats into opportunities or at least reduce or neutralize their effects.
Review Questions

1. What are the desirable characteristics of managers

2. Describe the various managerial levels and the skills appropriate for effective performance at
each level
3. Explain the managerial roles
4. Describe the components of the organizational environment and their influences on
management