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 David Boddy David Boddy

Essentials of management
Essentials of Essentials of
Management Management
A Concise Introduction
A Concise Introduction
This concise, readable book offers an unparalleled introduction to the theory and practice
of management. Packed with examples and questions to catch your interest, it shows how
ideas and theories of management relate to the real world.

Essentials of Management introduces the themes and functions of management, showing

them within the clear framework of planning, organising, leading and controlling. It
incorporates the latest research, and uses recent and topical examples of management
in practice to bring the topic to life.

This textbook is relevant to students from all subject areas. Whether you are specialising in
business, or an engineering student taking a single module in the area, this book will offer
you an engaging and clear introduction to management.

Key features to aid your learning include:

• Case studies from many international organisations, including well-known
multinationals, start-up businesses and small to medium sized enterprises.
• A clear, attractive text design that is easy to read and learn from.
• Exercises throughout the book inviting you to think critically and reflect on real-life
management situations and problems.
• A focus on key current issues and debates around internationalisation, sustainability,
and corporate governance.

Boddy
About the author
David Boddy is a Research Fellow at the School of Business and
Management, University of Glasgow. He is also the author of two
other market-leading textbooks by Pearson Education: Managing
Information Systems (2009) and Management (2011).

Cover image © Getty Images www.pearson-books.com

CVR_BODD9289_01_SE_CVR.indd 1 06/12/2011 10:27

 ESSENTIALS OF
MANAGEMENT

Visit the Essentials of Management Companion Website at www.pearsoned.co.uk/boddy

to find valuable student learning material including:

z Self assessment multiple choice questions for each chapter

z Links to relevant websites
z An online glossary to explain key terms
z Flashcards to test your knowledge of key terms and definitions
David Boddy University of Glasgow

ESSENTIALS OF
MANAGEMENT
A Concise Introduction
Pearson Education Limited
Edinburgh Gate
Harlow
Essex CM20 2JE
England

and Associated Companies around the world

Visit us on the World Wide Web at:

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First published 2012

© Pearson Education Limited 2012

The right of David Boddy to be identified as author of this work has been asserted by him in
accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,
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ISBN 978-0-273-73928-9

British Library Cataloguing-in-Publication Data

A catalogue record for this book can be obtained from the British Library.

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A catalog record for this book is available from the Library of Congress.

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Typeset in 10.5/12.5pt Minion by 73

Printed by Rotolito Lombarda, Italy

The publisher’s policy is to use paper manufactured from sustainable forests.

BRIEF CONTENTS

Preface xi
Guided tour of the book xii
Acknowledgements xv

PART 1 AN INTRODUCTION TO MANAGEMENT 2

1 MANAGING IN ORGANISATIONS 4

2 THEORIES OF MANAGEMENT 26

PART 2 THE ENVIRONMENT OF MANAGEMENT 48

3 ORGANISATION CULTURES AND CONTEXTS 50

4 MANAGING INTERNATIONALLY 70

5 CORPORATE RESPONSIBILITY 90

PART 3 PLANNING 108

6 PLANNING 110

7 DECISION-MAKING 126

8 MANAGING STRATEGY 148

PART 4 ORGANISING 170

9 ORGANISATION STRUCTURES 172

10 INFORMATION SYSTEMS AND E-BUSINESS 194

11 MANAGING INNOVATION AND CHANGE 212

vi BRIEF CONTENTS

PART 5 LEADING 232

12 INFLUENCING 234
13 MOTIVATING 254

14 COMMUNICATING 276

15 WORKING IN TEAMS 296

PART 6 CONTROLLING 316

16 MANAGING OPERATIONS AND QUALITY 318

17 CONTROLLING AND MEASURING PERFORMANCE 336

Glossary 353
References 361
Index 369
CONTENTS

Preface xi Further reading 45

Guided tour of the book xii Weblinks 45
Acknowledgements xv Case study: Robert Owen –
an early management innovator 46

PART 1 AN PART 2 THE

INTRODUCTION ENVIRONMENT
TO MANAGEMENT OF MANAGEMENT

CHAPTER 1
CHAPTER 3
MANAGING IN ORGANISATIONS 4
ORGANISATION CULTURES
1.1 Introduction 5
AND CONTEXTS 50
1.2 Managing to add value to resources 6
3.1 Introduction 51
1.3 Meanings of management 7
1.4 Specialisation between areas 3.2 Cultures and their components 52

of management 9
3.3 Types of culture 54

1.5 Influencing through the process 3.4 The competitive environment –

of managing 12
Porter’s five forces 57

1.6 Influencing through the tasks 3.5 The general environment – PESTEL 59

of managing 15 3.6 Stakeholders 62

1.7 Influencing through shaping 3.7 Corporate governance 63

the context 17 Summary 65
1.8 Critical thinking 19 Review questions 65
Summary 20 Further reading 65
Review questions 21 Weblinks 66
Further reading 21 Case study: Nokia 67
Weblinks 22
Case study: Ryanair 23 CHAPTER 4
MANAGING INTERNATIONALLY 70
CHAPTER 2 4.1 Introduction 71
THEORIES OF MANAGEMENT 26
4.2 Ways to conduct business internationally 73
2.1 Introduction 27 4.3 The contexts of international business –
2.2 Why study management theory? 28 PESTEL 75
2.3 The competing values framework 29 4.4 Legal context – trade agreements
2.4 Rational goal models 31 and trading blocs 78
2.5 Internal process models 34 4.5 Hofstede’s comparison of national cultures 79
2.6 Human relations models 37 4.6 Contrasting management systems 81
2.7 Open systems models 40 4.7 Forces driving globalisation 82
Summary 43 Summary 85
Review questions 44 Review questions 85
 viii CONTENTS

Further reading 86 7.4 Decision-making conditions 134

Weblinks 86 7.5 Decision-making models 135
Case study: Starbucks 87 7.6 Biases in making decisions 139
7.7 Group decision-making 140
CHAPTER 5 Summary 142
CORPORATE RESPONSIBILITY 90 Review questions 144

5.1 Introduction 91 Further reading 144

5.2 Contrasts in business practice 92 Weblinks 144

5.3 Perspectives on individual actions 94 Case study: IKEA 146

5.4 Perspectives on corporate actions 96

5.5 An ethical decision-making model 97
CHAPTER 8
5.6 Stakeholders and corporate MANAGING STRATEGY 148

responsibility 99 8.1 Introduction 149

5.7 Corporate responsibility and strategy 100 8.2 Strategy – process, content and
5.8 Managing corporate responsibility 103 context 150
Summary 104 8.3 Planning, learning and political
Review questions 104 processes 151

Further reading 105 8.4 Making sense – external and internal

Weblinks 105 analysis 154

Case study: The Ford Pinto 106

8.5 Making choices (1) – deciding
strategy at corporate level 158
8.6 Making choices (2) – deciding strategy
at business unit level 161
8.7 Making things happen – deciding
PART 3 PLANNING how to deliver strategy 162
8.8 Making revisions – implementing
and evaluating 163
Summary 164

CHAPTER 6 Review questions 165

PLANNING 110 Further reading 165

Weblinks 166
6.1 Introduction 111
Case study: HMV Group 167
6.2 Purposes of planning 112
6.3 The content of plans 113
6.4 The process of planning 115
6.5 Gathering information 116
6.6 Setting goals (or objectives) 118 PART 4
6.7 Identifying actions and communicating ORGANISING
the plan 120
6.8 Implementing plans and monitoring results 121
Summary 122
Review questions 123 CHAPTER 9
Further reading 123 ORGANISATION STRUCTURES 172

Weblinks 123 9.1 Introduction 173

Case study: Crossrail 124 9.2 Structure, strategy and performance 174
9.3 Designing a structure 175
CHAPTER 7 9.4 Grouping jobs into functions and
DECISION-MAKING 126 divisions 180

7.1 Introduction 127 9.5 Grouping jobs in matrices, teams

7.2 Stages in making decisions 128 and networks 181

7.3 Programmed and non-programmed 9.6 Co-ordinating work 182

decisions 132 9.7 Mechanistic and organic structures 184

 CONTENTS ix

Summary 189 12.3 Traits models 239

Review questions 190 12.4 Behavioural models 240
Further reading 190 12.5 Situational (or contingency) models 243
Weblinks 191 12.6 Using personal and positional power 244
Case study: GlaxoSmithKline (GSK) 192 12.7 Using interpersonal skills
and networks 248
CHAPTER 10 Summary 249
INFORMATION SYSTEMS AND Review questions 250
E-BUSINESS 194 Further reading 250
10.1 Introduction 195 Weblinks 251

10.2 Converging technologies bring Case study: Apple Inc. 252

new ways to add value 196

10.3 Managing the new opportunities CHAPTER 13
to add value 198 MOTIVATING 254
10.4 Types of information system 201
13.1 Introduction 255
10.5 The internet and e-business 202 13.2 Perspectives on motivation – targets
10.6 IS, strategy and organisation – and the psychological contract 256
the big picture 205
13.3 Behaviour modification 259
Summary 207
13.4 Content theories of motivation 260
Review questions 208
13.5 Process theories of motivation 265
Further reading 209
13.6 Designing work to be motivating 269
Weblinks 209
Summary 272
Case study: Asos 210
Review questions 273
Further reading 273
CHAPTER 11
Weblinks 273
MANAGING INNOVATION AND CHANGE 212
Case study: The Eden Project 274
11.1 Introduction 213
11.2 Initiating innovation and change 214
CHAPTER 14
11.3 Forms of innovation and change 216
COMMUNICATING 276
11.4 The interaction of context and change 217
14.1 Introduction 277
11.5 Four models of change 219
14.2 Communicating to add value 278
11.6 Sources of innovation 223
14.3 Communication processes 280
11.7 Organisational factors in innovation 224
14.4 Selecting communication channels 282
Summary 226
14.5 Communication networks 285
Review questions 227
14.6 Interpersonal skills for communication 289
Further reading 227
Summary 291
Weblinks 228
Review questions 292
Case study: Google 229
Further reading 292
Weblinks 292
Case study: Facebook 294

PART 5 LEADING CHAPTER 15

WORKING IN TEAMS 296

15.1 Introduction 297

15.2 Types of team 298
CHAPTER 12
15.3 Crowds, groups and teams 300
INFLUENCING 234
15.4 Team composition 301
12.1 Introduction 235 15.5 Stages of team development 304
12.2 Purposes, targets and outcomes 236 15.6 Team processes 305
 x CONTENTS

15.7 Outcomes of teams (1) – for the 16.6 Understanding quality 328
members 307 16.7 Managing quality 330
15.8 Outcomes of teams (2) – for the Summary 332
organisation 309 Review questions 333
Summary 311 Further reading 333
Review questions 312 Weblinks 333
Further reading 312 Case study: Zara 334
Weblinks 312
Case study: Cisco Systems 313 CHAPTER 17
CONTROLLING AND MEASURING
PERFORMANCE 336

17.1 Introduction 337

17.2 What is control and how to achieve it? 338
PART 6 17.3 How do you know you are in control? 343
CONTROLLING 17.4 How to measure performance 345
17.5 Human considerations in control 348
Summary 349
Review questions 350
CHAPTER 16 Further reading 350
MANAGING OPERATIONS AND QUALITY 318
Weblinks 350
16.1 Introduction 319 Case study: A Foundation Hospital 351
16.2 What is operations management? 319
16.3 The practice of operations management 323 Glossary 353
16.4 Operations processes 325 References 361
16.5 The main activities of operations 327 Index 369

SUPPORTING RESOURCES
Visit www.pearsoned.co.uk/boddy to find valuable online resources

Companion Website for students

z Self assessment multiple choice questions for each chapter
z Links to relevant websites
z An online glossary to explain key terms
z Flashcards to test your knowledge of key terms and definitions

For instructors
z Customisable PowerPoint slides which are downloadable and available to use for teaching
z Complete downloadable Instructor’s Manual

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PREFACE

This book is intended for students who are taking their Integrated perspective
first course in management. Most will be undergraduates
taking the subject as part of a qualification in another To help the reader see management as a coherent whole,
discipline (such as engineering, accountancy, law, in- the material is presented within an integrative model
formation technology, science, nursing or social work). of management and demonstrates the relationships
Others will be following a course in management as an between the many academic perspectives. The central
element in their professional association’s examination integrating theme is of managers interacting with their
schemes. The book should also be useful to readers contexts – which they interpret and shape as they do
with a first degree or equivalent qualification in a non- their work. This should help students to develop the
management subject who are taking further studies practice of contextual awareness, which should give
leading to Certificate, Diploma or MBA qualifications. valuable support in whatever career they follow.
The book has the following three main objectives:
z to provide those new to the formal study of manage- Relating to personal experience
ment with a clear introduction;
z to show that ideas on management apply to most ar- The text assumes that many readers will have little if any
eas of human activity, not just to commercial enter- experience of managing in conventional organisations,
prises; and and equally little prior knowledge of relevant evidence
z to make the topic attractive to students from many and theory. However, all will have experience of being
backgrounds and with diverse career intentions. managed and all will have managed activities in their
domestic and social lives. The activities in each chap-
ter encourage readers to use and share such experiences
European context from everyday life to explore the ideas presented. In this
way, the book tries to show that management is not a
While many management concepts have developed in remote activity performed by others, but a process in
the United States, the text encourages readers to con- which all are engaged in some way.
sider how their particular context shapes management Most readers’ careers are likely to be fragmented and
practice. National and cultural differences influence uncertain, and many will work for medium-sized and
practice – not only as part of an increasingly integrated smaller enterprises. They will probably be working close
Europe but as part of a wider international management to customers and in organisations that incorporate di-
community. The cases and Management in Practice verse cultures, values and interests. The activities may
features should build an awareness of cultural diversity also help to develop their skills of gathering data, com-
and the implications of this for working in organisa- paring evidence and generally enhancing self-awareness
tions with different managerial styles and backgrounds. and confidence.
GUIDED TOUR OF THE BOOK

The book has 17 chapters, in

six parts.

PART 3 Chapter openers set out learning out-

comes. These are usually 5 or 6 in number,
PLANNING and the sections in the chapter match closely
these learning outcomes, giving each chapter
a strong and consistent structure.
Introduction These are followed by the first part of a
This part examines the generic management activities of planning and decision-making,
and then looks at their application to the task of managing strategy. This depends on two-part chapter Activity. This is designed
understanding the environment of the business and on building an internal capability
to deliver whatever strategy management decides upon.
Chapter 6 provides an overview of planning in organisations, setting out the purposes
to encourage students to reflect at the outset
of planning, the types of plan and the tasks of planning. While all these tasks are likely
to be part of the process, their shape will always depend on the circumstances for on what they think or know about the topic: it
which a plan is being made.
Decision-making is closely linked to planning, made necessary by finite resources and
infinite demands. People in organisations continually decide on inputs, transformation
also encourages them to identify one or two
processes and outputs – and the quality of those decisions affects organisational per-
formance. Chapter 7 therefore introduces the main decision-making processes, and people (family or friends) with some experi-
contrasts several theories of decision-making in organisations.
Chapter 8 outlines the strategy process, and introduces techniques that managers use
to analyse the options facing businesses of all kinds. This analysis can then lead to
ence of organisations, who may be willing to
clearer choices about future direction.
discuss the topic with them. There is a sec-
ond part to the activity at the end of the main
material in the chapter, containing questions
which help them to make close connections
between what they have found and the topics
covered in the chapter.

INTRODUCTION 5

CHAPTER 1 Activity 1.1 What is ‘management’?

Before reading this chapter, write some notes on what you understand ‘management’
to mean.

MANAGING IN ORGANISATIONS Choose the organisation or people who may be able to help you learn about the
topic. You may find it helpful to discuss the topic with a manager you know, or reflect
on an activity you have managed.

zIdentify a situation in which someone has been ‘managing’ an activity, and describe
it briefly.
zHow did they go about achieving the task?
zCan they identify the types of activities they worked on?
Learning outcomes zWhat clues does that give you about what ‘management’ may mean in the
organisation?
zKeep these notes as you will be able to use them later.
When you have read this chapter you should be able to:
1 Explain that the role of management is to add value to resources in diverse settings
2 Give examples of management as a universal human activity and as a distinct role
3 Compare the roles of general, functional, line, staff and project managers, and of entrepreneurs
4 Compare how managers influence others to add value
5 Use ideas from the chapter to comment on the management issues in the Ryanair case study 1.1 Introduction

Ryanair (the Chapter case study) illustrates several aspects of management. A group of entre-
preneurs saw an opportunity in the market for air travel, and created an organisation to take
advantage of it. They bring resources together and transform them into a service which they
sell to customers. They differ from their competitors by using different resources (e.g. sec-
ondary airports) and different ways to transform these into outputs (e.g. short turnrounds).
They have been innovative in the way they run the business, such as in identifying what some
customers valued in a flight – cost rather than luxury – and carried a record 74 million pas-
sengers in the year to April 2011.
Entrepreneurs like Michael O’Leary of Ryanair are always looking for ways to innovate
to create new products, services and ways of working, to make the most of new opportu-
nities. Other managers face a different challenge – more demand with fewer resources.
Those managing the United Nations World Food Programme struggle to raise funds from
donor countries – aid is falling while hunger is increasing. In almost every public health-
care organisation managers face a growing demand for treatment, but fewer resources with
which to provide it.
Organisations of all kinds – from rapidly growing operations like Facebook to established
businesses like Shell UK or Marks & Spencer – depend on people at all levels who can run the
things efficiently now, and make changes to prepare for the future. This book is about the
knowledge and skills that enable people to meet these expectations, and so build a satisfying
and rewarding management career.
Figure 1.1 illustrates the themes of this chapter. It represents the fact that people in organi-
sations bring resources from the external environment and transform them into outputs that
they hope are of greater value. They pass these back to the environment, and the value they
obtain in return (money, reputation, goodwill etc.) enables them to attract new resources to
continue in business (shown by the feedback arrow from output to input). If the outputs do
not attract sufficient resources, the enterprise will fail.
The chapter begins by examining the significance of managed organisations in our world.
It then outlines what management means and introduces theories about the nature of mana-
gerial work.
 GUIDED TOUR OF THE BOOK xiii

54 CHAPTER 3 ORGANISATION CULTURES AND CONTEXTS

become embedded as basic underlying assumptions. When the group holds these strongly,
members will act in accordance with them, and reject actions based on others:
z‘We need to satisfy customers to survive as a business’
z‘Our business is to help people with X problem live better with X problem’
z‘People can make mistakes, as long as they learn from them’
z‘We employ highly motivated and competent adults’
z‘Financial markets worry about the short-term: we are here for the long-term’

Difficulties arise when people with assumptions developed in one group work with people
from another. Staff in companies that merge with another business sometimes find it difficult
to work with their new colleagues because of historic cultural differences.

Management in practice A strong culture at Bosch www.bosch.com

Franz Fehrenbach is chief executive of Bosch, Germany’s largest privately owned engineering group, and the
Management in practice boxes
world’s largest supplier of car parts. In 2009 he said:
The company culture, especially our high credibility, is one of our greatest assets. Our competitors
provide real-world examples and
cannot match us on that because it takes decades to build up.
The cultural traditions include a rigid control on costs, an emphasis on team thinking, employees being
responsible for their errors, cautious financial policies and long-term thinking. For example, to cope with the
encourage students to identify and
recession in 2009 Mr Fehrenbach explained that:
We have to cut costs in all areas. We will reduce spending in the ongoing business, but we will not cut
engage with managerial issues and
back on research and development for important future projects.

Source: Adapted from Space to breathe amid the crisis (Daniel Schaefer), Financial Times, 2 March 2009, p. 16. challenges.
3.3 Types of culture

This section outlines three ways of describing and comparing cultures.

Competing values framework

The competing values model developed by Quinn et al. (2003) reflects inherent tensions between
flexibility or control and between an internal or an external focus: Figure 2.1 (p. 30) shows four
cultural types.

Rational goal
Members see the organisation as a rational, efficiency-seeking unit. They define effectiveness
in terms of production or economic goals that satisfy external requirements. Managers cre- 46 CHAPTER 2 THEORIES OF MANAGEMENT
ate structures to deal with the outside world. Leadership tends to be directive, goal-oriented
and functional. Key motivating factors include competition and the achievement of goals.
Examples are large, established businesses – mechanistic.
Case study Robert Owen – an early management innovator www.newlanark.org.uk
Internal process
Here members focus on internal matters. Their goal is to make the unit efficient, stable and Robert Owen (1771–1856) was a successful manufac-
controlled. Tasks are repetitive and methods stress specialisation, rules and procedures. Lead- turer of textiles, who ran mills in England and at New
ers tend to be cautious and spend time on technical issues. Motivating factors include security, Lanark, about 24 miles from Glasgow, in Scotland.
stability and order. Examples include utilities and public authorities – suspicious of change. David Dale built the cotton-spinning mills at New
Lanark in 1785 – which were then the largest in Scot-
land. Since they depended on water power, Dale had
built them below the Falls of Clyde – a well-known
tourist attraction throughout the 18th century. Many
people continued to visit both the Falls and New
Lanark, which combined both manufacturing and
social innovations.
Creating such a large industrial enterprise in the
Cases: Each chapter ends with a case, which illus- countryside meant that Dale (and Owen after him)
had to attract and retain labour – which involved
building not just the mill but also houses, shops,
trates themes from the chapter. With one exception schools and churches for the workers. By 1793, the
mill employed about 1200 people, of whom almost
Reproduced with kind permission of New Lanark Trust. – www
.newlanark.org.

800 were children, aged from 6 to 17: 200 were un-

(Chapter 2 – Robert Owen) students should recognise der 10 (McLaren, 1990). Dale provided the children
with food, education and clothing in return for work-
At this stage of the Industrial Revolution, most
adult employees had no experience of factory work,
or of living in a large community such as New Lanark.
ing 12 hours each day: visitors were impressed by
these contemporary and up-to-date accounts, and these facilities.
One visitor was Robert Owen, who shared Dale’s
Owen found that many ‘were idle, intemperate, dis-
honest [and] devoid of truth’ (quoted in Butt, 1971).
Evening patrols were introduced to stop drunken-
views on the benefits to both labour and owner of
gain insights into the management of these enter- good working conditions. By 1801 Dale wanted to
sell New Lanark to someone who shared his prin-
ness, and there were rules about keeping the resi-
dential areas clean and free of rubbish. He also
had ‘to deal with slack managers who had tolerated
ciples and concluded that Owen (who had married
prises, and the connections between theory and his daughter) was such a man. Owen had built a
reputation for management skills while running mills
widespread theft and embezzlement, immorality and
drunkenness’ (Butt, 1971).
During Owen’s time at the mill it usually employed
in England, and did not approve of employing chil-
current practice. dren in them.
Having bought the very large business of New
about 1500 people, and soon after taking over he
stopped employing children under 10. He introduced
other social innovations: a store at which employ-
Lanark, Owen quickly introduced new management
ees could buy goods more cheaply than elsewhere
and production control techniques. These included
(a model for the Co-operative Movement), and a
daily and weekly measurements of stocks, output
school which looked after children from the age of 1
and productivity; a system of labour costing; and
– enabling their mothers to work in the mills. Owen
measures of work-in-progress. He used a novel con-
actively managed the links between his business
trol technique: a small, four-sided piece of wood,
and the wider world. On buying the mills he quickly
with a different colour on each side, hung beside ev-
became part of the Glasgow business establish-
ery worker. The colour set to the front indicated the
ment, and was closely involved in the activities of the
CASE STUDY 47 previous day’s standard of work – black indicating
Chamber of Commerce. He took a prominent role in
bad. Everyone could see this measure of the work-
the social and political life of the city. He used these
er’s performance, which overseers recorded to iden-
links in particular to argue the case for reforms in the
tify any trends in a person’s work:
poverty. and promoted the case for wider education- educational and economic systems, and was critical
al provision. He also developed several experiments Questions Every process in the factory was closely of the effect that industrialisation was having upon
in co-operation and community building, believing 1 Refer to Section 2.2, and make notes on watched, checked and recorded to increase working-class life.
that the basis of his successful capitalist enterprise which theory may have (implicitly) guided labour productivity and to keep costs down. Owen believed that education in useful skills
at New Lanark (education, good working conditions Owen’s approach to business. (Royle, 1998, p. 13) would help to release working-class children from
and a harmonious community) could be applied to
2 What ‘rational goal’ practices did he use at
society as a whole.
New Lanark? (Refer to Section 2.4.)
Sources: Butt (1971); McLaren (1990); Royle (1998); Donachie
(2000).
3 What ‘human relations’ practices did he use?
(Refer to Section 2.6.)
4 Draw a systems diagram showing the main
inputs, transformation and outputs of Robert
Owen’s mill. (Refer to Section 2.7, especially
Figure 2.3.)
Case questions (in a structured form) encourage
students to connect issues in the case with specified
Sections in the chapter.
xiv GUIDED TOUR OF THE BOOK

20 CHAPTER 1 MANAGING IN ORGANISATIONS

Activity 1.2 Understanding management

‘Before and after’ Activities enable
Recall the organisation you used in Activity 1.1.
Having read the chapter, make brief notes summarising what you now think ‘manag-
ing’ involves in this company:
students to engage with the material
zDescribe what resources it uses and how it adds value to them. (Refer to
Section 1.2.)
zList examples of some of the specialist roles of management (such as a functional or
by connecting ideas in the chapter to a
a line manager) and describe what they do in this company. (Refer to Section 1.4.)
zCan you identify examples of managers performing one or more of Mintzberg’s
roles? (Refer to Section 1.5.)
management situation they have identified.
zWhat have you been able to find out about how they perform ONE of the manage-
ment tasks (planning, organising, leading, controlling)? (Refer to Section 1.6.)

Compare what you have found with other students on your course.

Summary

1 Explain that the role of management is to add value to resources in diverse settings
zManagers create value by transforming inputs into outputs of greater value: they do
this by developing competences within the organisation which, by constantly adding
value (however measured) to resources is able to survive and prosper. The concept of
creating value is subjective and open to different interpretations. Managers work in an
infinite variety of settings, and Table 1.1 suggested how each setting raises relatively
unique challenges.

2 Give examples of management as a universal human activity and as a distinct role

zManagement is an activity that everyone undertakes as they manage their daily lives. In
another sense management is an activity which many people conduct, not just those
called ‘managers’. People create the distinct role when they separate the management
of work from the work itself and allocate the tasks. The distinction between manage-
ment and non-management work is fluid and the result of human action.

3 Compare the roles of general, functional, line, staff and project managers and of
entrepreneurs
zGeneral managers are responsible for a complete business or a unit within it. They
depend on functional managers who can be either in charge of line departments meet-
ing customer needs, such as manufacturing and sales, or in staff departments such
as finance which provide advice or services to line managers. Project managers are in
charge of temporary activities usually directed at implementing change. Entrepreneurs
are those who create new businesses to exploit opportunities.

4 Explain how managers influence others to add value to resources through

zThe processes of managing. Henry Mintzberg identified ten management roles
in three groups which he labelled informational, interpersonal and decisional.
Luthans and, more recently, Wolff and Moser observed that successful manag-
ers were likely to be those who networked with people inside and outside the
organisation.

FURTHER READING 65

Chapter Summaries aid Summary

revision by supplying a concise 1 Identify the main elements of the environments in which organisations work
zThey include the immediate competitive environment, the wider general (or macro)

synopsis of the main chapter environment and the organisation’s stakeholders.

2 Compare the cultures of two organisational units, using Quinn’s or Handy’s typologies
zQuinn et al. (2003) – rational goal, internal process, human relations and open systems.
topics. zHandy (1993) – power, role, task and person.

3 Use Porter’s five forces model to analyse the competitive environment of an organisation
zThisidentifies the degree of competitive rivalry, customers, competitors, suppliers and
potential substitute goods and services.

4 Use the PESTEL framework to analyse the wider environment of an organisation

zThe PESTEL model of the wider external environment identifies political, economic,
social, technological, environmental and legal forces.

5 Explain the meaning and purpose of corporate governance

zCorporate governance frameworks are intended to monitor and control the perfor-
mance of managers to ensure they act in the interests of organisational stakeholders,
and not just of the managers themselves.

Review questions enable Review questions

students to check their under- 1 Describe an educational or commercial organisation that you know in terms of the competing values
model of cultures.
2 What is the significance of the idea of ‘fragmented cultures’ for those who wish to change a culture to

standing of the main themes support performance?

3 Identify the relative influence of Porter’s five forces on an organisation of your choice and compare your
results with a colleague’s. What can you learn from that comparison?
and concepts. 4 How should managers decide which of the many factors easily identified in a PESTEL analysis they
should attend to? If they have to be selective, what is the value of the PESTEL method?
5 Since people interpret the nature of environmental forces from unique perspectives, what meaning can
people attach to statements about external pressures?
6 Illustrate the stakeholder idea with an example of your own, showing their expectations of an organisation.
7 Explain at least two of the mechanisms which Mallin (2007) recommends should be part of a corporate
governance system.

Further reading

Tapscott, E. and Williams, A. D. (2006), Wikinomics: How mass collaboration changes every-
thing, Viking Penguin, New York.
Best-selling account of the radical changes which convergent technologies bring to soci-
ety, especially the relationship between producers and consumers.
ACKNOWLEDGEMENTS

This book has benefited from the comments, criticisms Finally, I gratefully acknowledge the support and
and suggestions of many colleagues and reviewers. It help that my wife, Cynthia, has provided throughout
also reflects the reactions and comments of students this project.
who have used the material on their courses. Their
advice and feedback have been of immense help.
David Boddy
University of Glasgow
May 2011

Publisher’s acknowledgements
We are grateful to the following for permission to re- of Simon & Schuster, Inc., from COMPETITIVE
produce copyright material: ADVANTAGE: Creating and Sustaining Superior Per-
formance by Michael E. Porter, 5e, Simon & Schuster
Figures (Inc) (Porter, M.E. 1980) Copyright © 1985, 1988 by
Figure 2.1 from Becoming a Master Manager 3ed, (Quinn Michael E. Porter. All rights reserved; Figure 8.3 adapted
et al 2003) p.13 Copyright © 2003 John Wiley & Sons, from Corporate Strategy, Penguin (Ansoff, H. 1988);
Inc. Reproduced with permission of John Wiley & Sons, Figure 10.1 from Managing information systems: An or-
Inc.; Fig 3.2 Reprinted with the permission of Free Press, ganisational perspective, 2ed., (Boddy, D., Boonstra, A.
a Division of Simon & Schuster, Inc., from COMPETI- & Kennedy, G. 2005) FT/Prentice Hall © Pearson Educa-
TIVE STRATEGY: Techniques for Analyzing Industries tion Ltd 2005; Figures 10.2, 10.3 from Managing Informa-
and Competitors by Michael E. Porter, 5e, Simon & tion Systems: Strategy and Organisation, 3ed., (Boddy, D.,
Schuster (Inc) (Porter, M.E. 1980) Copyright © 1980, Boonstra, A. & Kennedy, G. 2009) FT/Prentice Hall ©
1988 by The Free Press. All rights reserved; Figure 4.2 Pearson Education Ltd 2009; Figure 12.3 Reprinted by per-
from Clustering Countries on Attitudinal Dimensions, mission of Harvard Business Review from How to choose
vol. 10 no. 3, Academy of Management Review (Ronen, a leadership pattern: should a manager be democratic or
S. & Shenkar, O. 1985) pp. 435–454 The Academy of autocratic – or something in between?, by Tannenbaum,
Management review by ACADEMY OF MANAGE- R. and Schmidt, W.H. 37 (2) 1973, pp. 95–102 Copy-
MENT. Copyright 1985. Reproduced with permission right © 1973 by the Harvard Business School Publishing
of ACADEMY OF MANAGEMENT (NY) in the for- Corporation; all rights reserved; Figure 14.3 from The
mat Textbook via Copyright Clearance Center.; Fig- selection of communication media as an executive skill,
ure 5.1 from Management, 5ed., South-Western (Daft 11 (3), pp. 225–232 (Lengel, R.H. and Daft, R.L. 1988) The
2000) 135, From Daft. Management, 5E.© 2000 South- Academy of Management perspectives by ACADEMY
Western, a part of Cengage Learning, Inc. Reproduced OF MANAGEMENT. Copyright 1988. Reproduced with
by permission. www.cengage.com/permissions; Figure permission of ACADEMY OF MANAGEMENT (NY)
5.2 adapted from Business & Society, South-Western in the format Textbook via Copyright Clearance Center.;
Publishers (Carroll, A.B. 1989) 84, From CARROLL. Figure 15.3 adapted from The Human Organization: Its
BUSINESS AND SOCIETY. Ethics and Stakeholders, Management and Value, McGraw-Hill New York (Likert, R.
1E. © 1989 South-Western, a part of Cengage Learn- 1967), © The McGraw-Hill Companies Inc.; Figure 16.3
ing, Inc. Reproduced by permission. www.cengage.com/ Reprinted by permission of Harvard Business Review
permissions; Figure 8.1 from Closing the gap between adapted from Link Manufacturing Process and Product
strategy and execution, MIT Sloan Management Re- Lifecycles, Hayes, R.H. and Wheelwright, S.C. 57 (1) 1979,
view, 48 (4), pp. 30–38 (Sull, D.N. 2010); Figures 8.2, 8.4 pp. 133–140 Copyright © 1979 by the Harvard Business
Reprinted with the permission of Free Press, a Division School Publishing Corporation; all rights reserved
 xvi ACKNOWLEDGEMENTS

Tables adapted from M&S brand value, The Financial Times,

Table 17.4 adapted from Operations Management, 10/11/2010 (Emiko Terazono), Copyright © The Finan-
6th ed., (Slack, N., Chambers, S. and Johnston, R. 2010) cial Times Ltd.; Box on page 179 adapted from A healthy
Financial Times Prentice Hall © Pearson Education attitude to risk-taking, The Financial Times, 04/08/2008
Ltd 2010 (Andrew Jack and Haig Simonian), Copyright © The
Financial Times Ltd.; Box on page 186 adapted from
Text Prepared to wait for a bigger yield, The Financial Times,
15/06/2009 (Hal Weitzman), Copyright © The Finan-
Box on page 225 Reprinted by permission of Harvard
cial Times Ltd.; Box on page 199 from Bringing busi-
Business Review from How Pixar Fosters Collective
ness technology out into the open, The Financial Times,
Creativity, by Catmull, E. 86 (9), 2008, pp. 64-72 Copy-
17/09/2003 (Fiona Harvey), Copyright © The Finan-
right © 2008 by the Harvard Business School Publishing
cial Times Ltd.; Box on page 248 adapted from News
Corporation; all rights reserved; Box on page 258 from
Corp’s wooing of Beijing pays off, The Financial Times,
www.IKEA.com
09/01/2003 (James Kynge), Copyright © The Financial
Times Ltd.; Box on page 248 adapted from Chairman
The Financial Times
knows the value of a little help from his friends, The
Box on page 7 adapted from Turnaround ace shows Financial Times, 21/02/2003 (Mure Dickie and Kathrin
his metal, Financial Times, 27/05/2009 (Peter Marsh Hille), Copyright © The Financial Times Ltd.; Box on
and Andrew Bounds), Financial Times; Box on page page 287 adapted from ‘Catastrophic safety risks’ remain
29 adapted from Secrets of the maverick cobbler, The for BP, The Financial Times, 31/10/2006 (Sheila McNul-
Financial Times, Copyright © The Financial Times Ltd.; ty), Copyright © The Financial Times Ltd.
Box on page 54 adapted from Space to breathe amid
the crisis, FT, 02/03/2009, 16 (Daniel Schaefer); Box
on page 77 after Insurgency in India—how the Mao- Photographs
ist threat reaches beyond Nepal, FT, 26/04/2006, p.13 23 Corbis: Thierry Tronnel/Sygma; 46 Reproduced
(Jo Johnson); Box on page 100 adapted from Lobbyist by kind permission of New Lanark Trust www.
driving a hard bargain, The Financial Times, 16/06/2009 newlanark.org; 67 Courtesy of Nokia; 87 Alamy Images:
(Joshua Chaffin), Copyright © The Financial Times Purestock. 106 Corbis: Bettmann. 124 By kind permis-
Ltd.; Box on page 113 adapted from BA cuts costs as sion, Crossrail; 146 IKEA Ltd; 192 Alamy Images: Roger
it anticipates two years of recession, The Financial Bamber; 210 Alamy Images: M4OS Photos; 252 Corbis:
Times, 06/03/2009 (Kevin Done), Copyright © The KIMBERLEY WHITE/Reuters; 274 Eden Project; 294
Financial Times Ltd.; Box on page 115 adapted from The Corbis: Kim Komenich/San Francisco Chronicle; 351
Man who has to shake up Merck, The Financial Times, Getty Images.
27/03/2006, p.10 (Christopher Bowe), Copyright © The
Cover image: Front: Getty Images
Financial Times Ltd.; Box on page 155 adapted from 3G
wrong number forces change of strategy, The Financial In some instances we have been unable to trace the
Times, 02/03/2009 (Andrew Parker and Paul Taylor), owners of copyright material, and we would appreciate
Copyright © The Financial Times Ltd.; Box on page 160 any information that would enable us to do so.
PART 1
AN INTRODUCTION
TO MANAGEMENT

Introduction
This part considers why management exists and what it contributes to human wealth
and well-being. Management is both a universal human activity and a distinct occupa-
tion. We all manage in the first sense, as we organise our lives and deal with family and
other relationships. As employees and customers we experience the activities of those
who manage in the second sense, as members of an organisation with which we deal.
This part offers some ways of making sense of the complex and contradictory activity
of managing.
Chapter 1 clarifies the nature and emergence of management and the different ways in
which people describe the role. It explains how management is both a universal human
activity and a specialist occupation. Its purpose is to create wealth by adding value to
resources, which managers do by influencing others – the chapter shows how they
do this. It concludes with some ideas about managing your study of the topic. You
are likely to benefit most by actively linking your work on this book to events in real
organisations, and the chapter includes a two-part activity which helps you to do this.
Chapter 2 sets out the main theoretical perspectives on management and shows how
these can complement each other despite the apparently competing values about the
nature of the management task. Be active in relating these theoretical perspectives to
real events as this will help you to understand and test the theory.
CHAPTER 1
MANAGING IN ORGANISATIONS

Learning outcomes
When you have read this chapter you should be able to:
1 Explain that the role of management is to add value to resources in diverse settings
2 Give examples of management as a universal human activity and as a distinct role
3 Compare the roles of general, functional, line, staff and project managers, and of entrepreneurs
4 Compare how managers influence others to add value
5 Use ideas from the chapter to comment on the management issues in the Ryanair case study
 INTRODUCTION 5

Activity 1.1 What is ‘management’?

Before reading this chapter, write some notes on what you understand ‘management’
to mean.
Choose the organisation or people who may be able to help you learn about the
topic. You may find it helpful to discuss the topic with a manager you know, or reflect
on an activity you have managed.

z Identify a situation in which someone has been ‘managing’ an activity, and describe
it briefly.
z How did they go about achieving the task?
z Can they identify the types of activities they worked on?
z What clues does that give you about what ‘management’ may mean in the
organisation?
z Keep these notes as you will be able to use them later.

1.1 Introduction

Ryanair (the Chapter case study) illustrates several aspects of management. A group of entre-
preneurs saw an opportunity in the market for air travel, and created an organisation to take
advantage of it. They bring resources together and transform them into a service which they
sell to customers. They differ from their competitors by using different resources (e.g. sec-
ondary airports) and different ways to transform these into outputs (e.g. short turnrounds).
They have been innovative in the way they run the business, such as in identifying what some
customers valued in a flight – cost rather than luxury – and carried a record 74 million pas-
sengers in the year to April 2011.
Entrepreneurs like Michael O’Leary of Ryanair are always looking for ways to innovate
to create new products, services and ways of working, to make the most of new opportu-
nities. Other managers face a different challenge – more demand with fewer resources.
Those managing the United Nations World Food Programme struggle to raise funds from
donor countries – aid is falling while hunger is increasing. In almost every public health-
care organisation managers face a growing demand for treatment, but fewer resources with
which to provide it.
Organisations of all kinds – from rapidly growing operations like Facebook to established
businesses like Shell UK or Marks & Spencer – depend on people at all levels who can run the
things efficiently now, and make changes to prepare for the future. This book is about the
knowledge and skills that enable people to meet these expectations, and so build a satisfying
and rewarding management career.
Figure 1.1 illustrates the themes of this chapter. It represents the fact that people in organi-
sations bring resources from the external environment and transform them into outputs that
they hope are of greater value. They pass these back to the environment, and the value they
obtain in return (money, reputation, goodwill etc.) enables them to attract new resources to
continue in business (shown by the feedback arrow from output to input). If the outputs do
not attract sufficient resources, the enterprise will fail.
The chapter begins by examining the significance of managed organisations in our world.
It then outlines what management means and introduces theories about the nature of mana-
gerial work.
 6 CHAPTER 1 MANAGING IN ORGANISATIONS

External environment

Organisation

Output
Input • Goods
• People Managing • Services
• Finance transformation • Reputation
• Materials processes • Waste
etc. etc.

Figure 1.1
Managing
organisation Feedback
and environment

1.2 Managing to add value to resources

An organisation is a We live in a world of managed organisations. We experience many every day – domestic
social arrangement for
achieving controlled per- arrangements (family or flatmates), large public organisations (the postal service), small
formance towards goals businesses (the newsagent), well-known private companies (the jar of coffee) or a voluntary
that create value.
group (the club we attend). They affect us and we judge their performance. Did the transac-
tion work smoothly or was it chaotic? Was the service good, reasonable or poor? Will you go
there again?
As human societies become more specialised, we depend more on others to satisfy our
needs. We meet some of these by acting individually or within family and social groups:
organisations provide the rest. Good managers make things work – so that aid is delivered,
roads are safe, shops have stock, hospitals function and all the rest. They don’t do the work
themselves, but build an organisation with the resources and competences to deliver what
Tangible resources people need. Tangible resources are physical assets such as plant, people and finance –
are the physical assets things you can see and touch. Intangible resources are non-physical assets such as informa-
of an organisation such
as plant, people and tion, reputation and knowledge.
finance. To transform these resources into valuable goods and services people need to work
Intangible resources together. They need to know what to do, understand their customers, deal with enqui-
are non-physical assets ries properly and generally make the transaction work well. Beyond that they look for
such as information, rep-
utation and knowledge. opportunities to improve, be innovative and learn from experience. Good managers
bring out the best in their staff so that they willingly ‘go the extra mile’: together they
Competences are the develop effective ways of working that become second nature. These ‘ways of working’
skills and abilities by
which resources are
are competences – skills, procedures or systems which enable people to use resources
deployed effectively – productively. A manager’s role is to secure and retain resources and competences so that
systems, procedures the organisation adds value – it is producing an output that is more valuable than the
and ways of working.
resources it has used.
Value is added to
resources when they are
Well-managed organisations create value in many ways. If you buy a ticket from
transformed into goods Ryanair, you can easily measure the tangible value of a cheap flight. In other purchases the
or services that are worth value is intangible, as people judge a product by its appearance, what it feels or smells like,
more than their original
cost plus the cost of how trendy it is, or whether it fits their image. Others value good service, or a clear set of
transformation. instructions. Good managers understand what customers value and build an organisation
to satisfy them.
 MEANINGS OF MANAGEMENT 7

Management in practice Creating value at DavyMarkham

www.davymarkham.com

Kevin Parkin is Managing Director (and part-owner) of DavyMarkham, a small engineering company. Although the
company has a long history, by the mid-1990s it was making regular losses, and its survival was in doubt. Since
Mr Parkin joined the company he has returned it to profit, and in 2009 was predicting a 10 per cent increase in
sales the following year. He has concentrated on identifying what the company is good at, and then using tough
management and financial discipline to make sure staff follow the recipe for success. Mr Parkin has removed poor
managers, walks the shop floor twice a day to check on progress, and engages with the workforce.
It has been essential to tell people the truth about the business, whether it’s good or bad, and giving
them the enthusiasm they require to make them want to succeed . . . I also ask [my ‘mentors’ – people I
have known in previous jobs] about key strategic decisions, people issues, market penetration, capital
spending and general business solutions.

Source: Adapted from Turnaround ace shows his metal (Peter Marsh and Andrew Bounds), Financial Times, 27 May 2009.

Commercial organisations of all kinds (business start-ups, small and medium-sized enter-
prises, on-line firms and international enterprises) aim to add value and create wealth. So do
voluntary and not-for-profit organisations – by educating people, counselling the troubled
or caring for the sick.
There are over 160,000 charities in England and Wales, with annual incoming resources
of over £52 billion (equal to about 3 per cent of Gross Domestic Product), and employ-
ing over 660,000 staff (Charities Commission Annual Report for 2009–10, at www.
charitycommission.gov.uk). Managing a large charity is at least as demanding a job as man-
aging a commercial business, facing similar challenges of adding value to limited resources.
Donors and recipients expect them to manage resources well so that they add value to them.
Theatres, orchestras, museums and art galleries create value by offering inspiration, new
perspectives or unexpected insights – and often do so in situations of great complexity (imag-
ine the complexity in staging an opera, concert or major exhibition). Others add value by cre-
ating businesses or challenging projects through which people develop new skills or insights,
and build long-term friendships.
While organisations aim to add value, many do not do so. If people work inefficiently they
will use more resources than customers will pay for. They may create pollution and waste,
and so destroy wealth. Motorway builders create value for drivers, residents of by-passed vil-
lages and shareholders – but destroy value for some people if the route damages an ancient
woodland rich in history and wildlife. The idea of creating value is subjective and relative.
Managers face some issues that are unique to the setting in which they operate (charities
need to maintain the support of donors) and others which arise in most organisations (busi-
ness planning or ensuring quality). Table 1.1 illustrates some of these diverse settings, and
their (relatively) unique management challenges – which are in addition to challenges that
are common to all.
Whatever its nature, the value an organisation creates depends on how well those who
work there obtain resources and develop their competences.

1.3 Meanings of management

Management as a universal human activity

Management as a uni-
Management is both a universal human activity and a distinct occupation. In the first sense, versal human activity
occurs whenever people
people manage an infinite range of activities: take responsibility for an
activity and consciously
When human beings ‘manage’ their work, they take responsibility for its purpose, try to shape its progress
progress and outcome by exercising the quintessentially human capacity to stand back and outcome.
 8 CHAPTER 1 MANAGING IN ORGANISATIONS

Table 1.1 Where people manage

Setting – industry or type Examples in this book ‘Unique’ challenges

Business start-ups Inamo Restaurant – see Securing funding to launch, creating

Chapter 6, p. 116 and Chapter 7, good internal systems, selling enough
p. 130 to bring in enough cash to continue.

Small and medium-sized DavyMarkham – MIP feature Generating enough funds to survive,
enterprises (SMEs) above innovate and enter new markets.

Professional business services Iris (advertising) – MIP feature Managing highly qualified staff delivering
in Chapter 7, p. 130 customised, innovative services.

Voluntary, not-for-profit Eden Project – Chapter 13 Providing visitors with visit to encourage
organisations and charities case study, pp. 274–5 return visit, raising funds for educational
work, fulfilling mission.

Public sector organisations Crossrail – Chapter 6 case Managing high-profile political and
study, pp. 124–5 commercial interests.
A Foundation Hospital – Chapter 17
Establishing suitable control systems
case study, pp. 351–2
to ensure quality.

Large private businesses Ryanair – Chapter 1 case Responding to changing economic and
study, pp. 23–4 political environments, managing diverse
activities.

High-tech businesses Google – Chapter 11 case Maintaining constant innovation in

study, pp. 229–30 rapidly changing markets.
Apple – Chapter 12 case study,
pp. 252–3

International businesses Starbucks – Chapter 4 case Managing diverse activities across many
study, pp. 87–8 cultures; balancing central control and
Zara – Chapter 16 case study, local initiative.
pp. 334–5

Note: MIP ⫽ management in practice

from experience and to regard it prospectively, in terms of what will happen; reflectively,
in terms of what is happening; and retrospectively, in terms of what has happened. Thus
management is an expression of human agency, the capacity actively to shape and direct
the world, rather than simply react to it. (Hales, 2001, p. 2)
A manager is someone Rosemary Stewart (1967) expressed this idea when she described a manager as someone
who gets things done
with the aid of people
who gets things done with the aid of people and other resources, so defining management
and other resources. as the activity of getting things done with the aid of people and other resources. So described,
Management is the it is a universal human activity – domestic, social and political – as well as in formally estab-
activity of getting lished organisations.
things done with the
aid of people and other
In pre-industrial societies people typically work alone or in family units, controlling their
resources. time and resources. They decide what to make, how to make it and where to sell it, combin-
ing work and management to create value. Self-employed craftworkers, professionals in small
practices and those in a one-person business do this every day.
 SPECIALISATION BETWEEN AREAS OF MANAGEMENT 9

As individuals we run our lives and careers: in this respect we are managing. Family mem-
bers manage children, elderly dependants and household tasks. We do it in voluntary or
charity activities where we do the work (planting trees or selling raffle tickets) and the man-
agement activities (planning the winter programme).

Management as a distinct role

Human action can separate the ‘management’ element of a task from the ‘work’ ele-
ment, thus creating ‘managers’ who are in some degree apart from those doing the work.
Management as a distinct role emerges when external parties, usually private or public Management as a dis-
tinct role develops when
owners of capital, gain control of a work process that people used to complete themselves. activities previously em-
The owners are likely to specify what to make, how to make it and where to sell it – control- bedded in the work itself
ling the time, behaviour and skills of their employees. The latter now sell their labour, not become the responsibil-
ity not of the employee,
their products. but of owners or their
This happens when someone starts an enterprise, initially performing the technical aspects agents.
of the work itself – writing software, designing clothes – and also more conceptual tasks such
as planning which markets to serve, or deciding how to raise money. If the business grows
and the entrepreneur engages staff, they will need to spend time on interpersonal tasks such as
training and supervising their work. The founder progressively takes on more management
roles – a role being the expectations that others have of someone occupying a position. It A role is the sum of the
expectations that other
expresses the specific responsibilities and requirements of the job, and what someone holding people have of a person
it should do (or not do). occupying a position.
This separation of management and non-management work is not inevitable or perma-
nent. People deliberately separate the roles, and can also bring them together. As Henri Fayol
(1949) (of whom you will read more in Chapter 2) observed:
Management . . . is neither an exclusive privilege nor a particular responsibility of the head
or senior members of a business; it is an activity spread, like all other activities, between
head and members of the body corporate. (p. 6)

Someone in charge of part of, say, a production department will usually be treated as
a manager, and referred to as one. The people who operate the machines will be called
something else. In a growing business like Ryanair, the boundary between ‘managers’ and
‘non-managers’ is likely to be very fluid, with all being ready to perform a range of tasks, irre-
spective of their title. Hales’ (2006) research shows how first-line managers now hold some
responsibilities traditionally associated with middle managers. They are still responsible for
supervising subordinates, but often also have to deal with costs and customer satisfaction –
previously a middle manager’s job.

1.4 Specialisation between areas of management

As an organisation grows, senior managers usually create separate functions and a hierarchy,
so that management itself becomes divided.

Functional specialisation
General managers typically head a complete unit of the organisation, such as a divi- General managers
sion or subsidiary, within which there will be several functions. The general manager are responsible for the
performance of a distinct
is responsible for the unit’s performance, and relies on the managers in charge of each unit of the organisation.
function. A small organisation will have just one or two general managers, who will also
manage the functions.
 10 CHAPTER 1 MANAGING IN ORGANISATIONS

Functional managers Functional managers are responsible for an area of work – either as line managers or staff
are responsible for the
performance of an area managers. Line managers are in charge of a function that creates value directly by supplying
of technical or profes- products or services to customers: they could be in charge of a retail store, a group of nurses,
sional work.
a social work department or a manufacturing area. Their performance significantly affects
Line managers are business performance and image, as they and their staff are in direct contact with customers
responsible for the
performance of activities or clients. At Shell, Mike Hogg was (in 2011) the General Manager of Shell Gas Direct, while
that directly meet cus- Melanie Lane was General Manager, UK Retail.
tomers’ needs.

Management in practice The store manager – fundamental to success

A manager with extensive experience of retailing commented:

The store manager’s job is far more complex that it may at first appear. Staff management is an impor-
tant element and financial skills are required to manage a budget and the costs involved in running a
store. Managers must understand what is going on behind the scenes – in terms of logistics and the
supply chain – as well as what is happening on the shop floor. They must also be good with customers
and increasingly they need outward-looking skills as they are encouraged to take high-profile roles in
the community.

Source: Private communication from the manager.

Staff managers are Staff managers are in charge of activities like finance, personnel, purchasing or legal
responsible for the
performance of activities affairs which support the line managers, who are their customers. Staff in support depart-
that support line ments are not usually in direct contact with external customers, and so do not earn income
managers.
directly for the organisation. Managers of staff departments operate as line managers within
their unit. At Shell, Bob Henderson was Head of Legal and Kate Smith was Head of UK Gov-
ernment Relations.
Project managers are Project managers are responsible for a temporary team created to plan and implement a
responsible for managing
a project, usually in-
change, such as a new product or system. Mike Buckingham, an engineer, managed a project
tended to change some to implement a new manufacturing system in a van plant. He still had line responsibilities for
element of an organisa- aspects of manufacturing, but worked for most of the time on the project, helped by a team
tion or its context.
of technical specialists. When the change was complete he returned to full-time work on his
line job.
Entrepreneurs are Entrepreneurs are people who are able to see opportunities in a market which others have
people who see op-
portunities in a market,
overlooked. They quickly secure the resources they need, and use them to build a profitable
and quickly mobilise business. John Scott (Managing Director of Scott Timber, now the UK’s largest manufacturer
the resources to deliver of wooden pallets – www.scott-timber.co.uk) recalls the early days:
the product or service
profitably.
I went from not really knowing what I wanted to do . . . to getting thrown into having to
make a plant work, employ men, lead by example. We didn’t have an office – it was in my
mum’s house, and she did the invoicing. The house was at the top of the yard, and the
saw mill was at the bottom. (Financial Times, 11 July 2007, p. 18)

Management hierarchies
As organisations grow, senior managers usually create a hierarchy of positions. The amount
of ‘management’ and ‘non-management’ work within these positions varies, and the bound-
aries between them are fluid.

Performing direct operations

People who perform direct operations do the manual and mental work to make and deliver
products or services. These range from low paid cleaners or shop workers to highly paid pilots
 SPECIALISATION BETWEEN AREAS OF MANAGEMENT 11

or lawyers. The activity is likely to contain some aspects of management work, though in
lower-level jobs this will be limited. People running a small business combine management
work with direct work to meet customer requirements.

Supervising staff on direct operations

Supervisors (sometimes called first-line managers) typically direct and control the daily work
of a group or process. They ensure that front-line staff perform the essential, basic activities
correctly – by paying attention to their job, noticing detail, keeping things moving efficiently
and courteously to provide the quality of goods or services the customer expects. Supervisors
are responsible for monitoring and reporting on work performance in an area, and working
to improve it. They allocate and co-ordinate work, monitor the pace and help with problems.
Sometimes they work with middle managers to making operational decisions on staff or work
methods. Examples include the supervisor of a production team, the head chef in a hotel, or
a nurse in charge of a hospital ward. They may continue to perform some direct operations,
but will spend less time on them than subordinates.

Managing supervisors and first-line managers

Usually referred to as middle managers, they – such as an engineering manager at
Ryanair – are expected to ensure that first-line managers work in line with company
policies. They translate strategy into operational tasks, mediating between senior man-
agement vision and operational reality. They may help to develop strategy by presenting
information about customer expectations, or suggesting alternative strategies to senior
managers (Currie and Proctor, 2005). They provide a communication link – telling first-
line managers what they expect, and briefing senior managers about current issues – one
of the reasons banks got into difficulty in 2008 was because senior managers had no idea
of the risks being taken by their traders and loan officers: good middle managers ensure
that their bosses know what is going on.
Others face the challenge of managing volunteers. Charities depend on their time and
effort, yet commonly face problems when they don’t turn up, or work ineffectively – but
cannot draw on the systems commonly used to reward and retain paid staff.

Managing the managers

The most senior employee is usually called the ‘managing director’ or ‘chief executive’. Their
main responsibility is to ensure that the middle managers work in ways that add value to
their resources. In smaller organisations they will deal directly with middle managers, but in
larger ones they will work through a team of senior executives in charge of functional areas
like marketing or manufacturing. Chief executives influence performance largely by deciding
who to appoint to executive positions, and by how they manage this top team. They report
to the board of directors about developments in the business, and about issues which require
board approval.

Managing the business

Managing the business is the work of a small group, usually called the board of directors.
They establish policy and have a particular responsibility for managing relations with people
and institutions in the world outside, such as shareholders, national media or government
ministers. They need to know broadly about internal matters, but spend most of their time
looking to the future or dealing with external affairs. Depending on local company law, the
board usually includes non-executive directors – senior managers from other companies who
should bring a wider, independent view to discussions. Such non-executive directors can
enhance the effectiveness of the board, and give investors confidence that the board is acting
in their interests. The board will not consider operational issues.
 12 CHAPTER 1 MANAGING IN ORGANISATIONS

1.5 Influencing through the process of managing

Whatever their role, people add value to resources by influencing others, including internal
Stakeholders are and external stakeholders – who affect, or who are affected by, an organisation’s actions and
individuals, groups or
organisations with an
policies. Some stakeholders have different priorities from the managers, so the latter need to
interest in, or who are influence them to act in ways they believe will add value.
affected by, what the They do this directly and indirectly. Direct methods are the interpersonal skills (see Chapter 12)
organisation does.
which managers use – persuading a boss to support a proposal, a subordinate to do more work, or
a customer to change a delivery date. Managers also influence others indirectly through:
z the process of managing;
z the tasks of managing (Section 1.6); and
z shaping the context (Section 1.7).
Rosemary Stewart (1967) was one of the first to study the process of management – how
managers work. She asked 160 senior and middle managers to keep a diary for four weeks,
which showed that they typically worked in a fragmented, interrupted way – with very little
time for thinking and working on their own. More recently, Henry Mintzberg found that
within that fragmented pattern of work, managers focus on one or more distinct roles.

Henry Mintzberg – ten management roles

Mintzberg (1973) observed how (five) chief executives spent their time, and used this data to
identify ten management roles, in three categories – informational, interpersonal and deci-
sional. Managers use one or more of these roles as they try to influence other people. Table 1.2
describes them, and illustrates each with a contemporary example provided by the manager
of a school nutrition project.

Informational roles
Managing depends on obtaining information about external and internal events, and passing
it to others. The monitor role involves seeking out, receiving and screening information to
understand the organisation and its context. It comes from websites and reports, and espe-
cially from chance conversations – such as with customers or new contacts at conferences and
exhibitions. Much of this information is oral (gossip as well as formal meetings), building
on personal contacts. In the disseminator role the manager shares information by forwarding
reports, passing on rumours or briefing staff. As a spokesperson the manager transmits infor-
mation to people outside the organisation – speaking at a conference, briefing the media or
giving the department’s view at a company meeting. Michael O’Leary at Ryanair is renowned
for flamboyant statements to the media about competitors or officials in the European Com-
mission when he disagrees with their policies.

Interpersonal roles
Interpersonal roles arise directly from a manager’s formal authority and status, and shape rela-
tionships with people within and beyond the organisation. In the figurehead role the manager is
a symbol, representing the unit in legal and ceremonial duties such as greeting a visitor, signing
legal documents, presenting retirement gifts or receiving a quality award. The leader role defines
the manager’s relationship with other people (not just subordinates), including motivating,
communicating and developing their skills and confidence – as one commented:
I am conscious that I am unable to spend as much time interacting with staff members
as I would like. I try to overcome this by leaving my door open whenever I am alone as an
invitation to staff to come in and interrupt me, and encourage them to discuss any prob-
lems. (private communication)
 INFLUENCING THROUGH THE PROCESS OF MANAGING 13

Table 1.2 Mintzberg’s ten management roles

Category Role Activity Examples from a school

nutrition project

Informational Monitor Seek and receive information, Collect and review funding
scan reports, maintain applications; set up database
interpersonal contacts to monitor application process
Disseminator Forward information to Share content of applications
others, send memos, make with team members by email
phone calls
Spokesperson Represent the unit to outsiders Present application process at
in speeches and reports internal and external events

Interpersonal Figurehead Perform ceremonial and Sign letters of award to

symbolic duties, receive visitors successful applicants
Leader Direct and motivate Design and co-ordinate process
subordinates, train, advise with team and other managers
and influence
Liaison Maintain information links in Become link person for
and beyond the organisation government bodies to contact
for progress reports

Decisional Entrepreneur Initiate new projects, spot Use initiative to revise

opportunities, identify areas application process and
of business development to introduce electronic
communication
Disturbance handler Take corrective action during Holding face-to-face meetings
crises, resolve conflicts with applicants when the
amongst staff, adapt to changes outcome was negative; handling
staff grievances
Resource allocator Decide who gets resources, Ensure fair distribution of grants
schedule, budget, set priorities nationally
Negotiator Represent unit during Working with sponsors
negotiations with unions, and government to ensure
suppliers, and generally consensus during decision-
defend interests making
Source: Based on Mintzberg (1973), and private communication from the project manager.

The liaison role focuses on contacts with people outside the immediate unit. Manag-
ers maintain a network in which they trade information and favours for mutual benefit
with clients, government officials, customers and suppliers. Some managers, such as chief
executives and sales managers, spend a high proportion of their time and energy on the
liaison role.

Decisional roles
In the entrepreneurial role managers demonstrate creativity and initiate change. They see Creativity is the ability
opportunities and create projects to deal with them. The three friends who created Inno- to combine ideas in a
unique way or to make
cent Drinks in 1998 have faced many such choices – such as whether to widen the range of unusual associations
products beyond the original ‘smoothie’ drinks (and if so, which products), and/or whether between ideas.
to expand into continental Europe (and if so, into which countries). Managers play the
disturbance-handler role when they deal with problems and changes that are unexpected.
14 CHAPTER 1 MANAGING IN ORGANISATIONS

Management in practice Handling disturbance www.bt.com

In early 2009, Ian Livingston, BT’s chief executive, surprised financial markets by reporting a pre-tax
loss for the first quarter. The main cause was Global Services, which supplies telecoms networks to
international companies and public bodies, but also severe competition and the recession – the share
price had fallen by 60 per cent in the previous year. To recover, Global Services was split into three units,
each focused on one market; capital spending was cut; and 15,000 jobs would go by the end of the next
financial year.

Source: Financial Times, 30 April 2009.

The resource-allocator role involves choosing among competing demands for money,
equipment, personnel and other resources. In early 2011 Marks and Spencer (www.
marksandspencer.com) announced a new strategy, which reflected decisions by the chief
executive (and the board) on where to invest funds available for capital projects (such as how
much to spend on refurbishing the physical stores, and how much to spend on upgrading
the website). In another business a manager has to decide whether to pay overtime to staff to
replace an absent team member, or let service quality decline until a new shift starts. This is
close to the negotiator role, in which managers seek agreement with other parties on whom
they depend. Managers at Ryanair regularly negotiate with airport owners to agree on services
and fees for a subsequent period.
Mintzberg proposed that every manager’s job combines these roles, with their relative
importance depending on the manager’s level and type of business. Managers usually com-
bine several of these roles as they try to influence others.
They sometimes note two omissions from Mintzberg’s list – manager as subordinate and
manager as worker. Most managers have subordinates but, except for those at the very top,
they are subordinates themselves. Part of their role is to advise, assist and influence their
boss – over whom they have no formal authority. Managers often need to persuade people
higher up the organisation of a proposal’s value or urgency. A project manager:
This is the second time we have been back to the management team, to propose how
we wish to move forward, and to try and get the resources that are required. It is worth
taking the time up front to get all members fully supportive of what we are trying to do.
Although it takes a bit longer we should, by pressure and by other individuals demon-
strating the benefits of what we are proposing, eventually move the [top team] forward.
(private communication)

Many managers spend time doing the work of the organisation. A director of a small
property company helps with sales visits, or an engineering director helps with difficult
technical problems. A lawyer running a small practice performs both professional and
managerial roles.

Managers as networkers
Does the focus of a manager’s influencing activities affect performance? Mintzberg’s
study gave no evidence on this point, but work by Luthans (1988) showed that the rel-
ative amount of time spent on specific roles did affect outcomes. The team observed
292 managers in four organisations for two weeks, recording their behaviours in four
categories – communicating, ‘traditional management’, networking and human resource
management. They also distinguished between levels of ‘success’ (relatively rapid promotion)
 INFLUENCING THROUGH THE TASKS OF MANAGING 15

and ‘effectiveness’ (work-unit performance and subordinates’ satisfaction). They concluded

that successful managers spent much more time networking (socialising, politicking, inter-
acting with outsiders) than the less successful. Effective managers spent most time on com-
munication and human resource management.
Wolff and Moser (2009) confirmed the link between networking and career success, Networking refers to
showing building, maintaining and using internal and external contacts was associated with behaviours that aim to
build, maintain and use
current salary, and with salary growth. Effective networkers seek out useful connections and informal relationships
contacts, and use the information and ideas they gather to create something valuable. (internal and external) that
may help work-related
activities.

1.6 Influencing through the tasks of managing

A second way in which managers influence others is when they manage the transformation
of resources into more valuable outputs. Building on Figure 1.1, this involves the manage- Management tasks
ment tasks of planning, organising, leading and controlling the transformation of resources. are those of planning,
organising, leading and
The amount of each varies with the job and the person, and they do not perform them in controlling the use of
sequence: they do them simultaneously, switching as the situation requires. resources to add value
to them.
Figure 1.2 illustrates the definition. It expands the central ‘transforming’ circle of Fig-
ure 1.1 by showing that people draw inputs (resources) from the environment and transform
them into outputs by planning, organising, leading and controlling. They pass the resulting
outputs back into the environment – the feedback loop indicates that this is the source of
future resources.

External environment
Organisations depend on the external environment for the tangible and intangible resources
they need, so they also depend on people in that environment being willing to buy or other-
wise value their outputs. Commercial firms sell goods and services and use the revenue to
buy resources. Public bodies depend on their sponsors being sufficiently satisfied with their

External environment

Organisation

Tasks in
managing
transformation
Output
Input • Goods
• People • Services
• Finance Controlling Planning • Reputation
• Materials • Waste
etc. Leading etc.

Organising

Figure 1.2
Feedback The tasks of
managing
16 CHAPTER 1 MANAGING IN ORGANISATIONS

performance to provide their budget. Most managers are now facing the challenge of how
they manage their organisations to ensure that they use natural resources not just efficiently,
but sustainably. Part 2 of the book deals with the external environment.

Planning
Planning sets out the overall direction of the work to be done. It includes forecasting future
trends, assessing resources and developing performance objectives. It means deciding on
the scope and direction of the business, the areas of work in which to engage and how to use
resources. Managers invest time and effort in developing a sense of direction for the organi-
sation, or their part of it, and express this in a set of objectives. Part 3 deals with planning.

Management in practice Planning major rail projects www.networkrail.co.uk

More than most civil engineering projects, rail projects depend on extensive and detailed advance planning.
In 2010 the UK government announced the preferred route for the first stage of a high-speed West Coast rail-
way line. The first stage will run from London to Birmingham, but construction is not expected to begin unto
2015 at the earliest, with completion about four years later. The Crossrail project in London (see Chapter 6
case study, p. 124) also illustrates the scale and complexity of the planning required to build a large railway
through (and below) the centre of London.

Source: Company website.

Organising
This is the task of moving abstract plans closer to reality by deciding how to allocate time and
effort. It includes creating a structure for the enterprise, developing policies for finance and
people, deciding what equipment people need and how to implement change. Part 4 deals
with organising.

Leading
Leading is the task of generating effort and commitment – influencing people of all kinds,
generating commitment and motivation, and communicating – whether with individu-
als or in teams. These activities focus on all of the other tasks – planning, organising and
controlling – so appear in the middle of Figure 1.2. Part 5 deals with this topic.

Controlling
Control is the task of checking progress, comparing it with a plan, and acting accordingly.
Managers set a budget for a housing department, an outpatients’ clinic or for business travel.
They then ensure that there is a system to collect information regularly on expenditure or
performance – to check they are keeping to budget. If not, they need to decide how to bring
actual costs back into line with budgeted costs. Are the outcomes consistent with the objec-
tives? If so, they can leave things alone. But if by Wednesday it is clear that staff will not meet
the week’s production target, then managers need to act. They may deal with the deviation
by a short-term response – such as authorising overtime. Control is equally important in
creative organisations. Ed Catmull, cofounder of Pixar comments:
Because we’re a creative organization, people [think that what we do can’t be mea-
sured]. That’s wrong. Most of our processes involve activities and deliverables that can
 INFLUENCING THROUGH SHAPING THE CONTEXT 17

be quantified. We keep track of the rates at which things happen, how often something
had to be reworked, whether a piece of work was completely finished or not when it was
sent to another department . . . Data can show things in a neutral way, which can stimulate
discussion. (Catmull, 2008, p. 72)

That discussion to which Catmull refers is the way to learn from experience – an essential
contributor to performance – so good managers create and use opportunities to learn from
what they are doing. Part 6 deals with control.

The tasks in practice

Managers typically switch between tasks many times each day. They deal with them intermit-
tently and in parallel, touching on many different parts of the job, as this manager in a not-
for-profit housing association explains:
My role involves each of these functions. Planning is an important element as I am part
of a team with a budget of £8 million to spend on promoting particular forms of housing.
So planning where we will spend the money is very important. Organising and leading are
important too, as staff have to be clear on which projects to take forward, clear on objec-
tives and deadlines. Controlling is also there – I have to compare the actual money spent
with the planned budget and take corrective action as necessary. (private communication
from the manager)

And a manager in a professional services firm:

As a manager in a professional firm, each assignment involves all the elements to
ensure we carry it out properly. For example, I have to set clear objectives for the
assignment, organise the necessary staff and information to perform the work, super-
vise staff and counsel them if necessary, and evaluate the results. All the roles inter-
relate and there are no clear stages for each one. (private communication from the
manager)

1.7 Influencing through shaping the context

A third way in which managers influence others is through changing aspects of the context
in which they work. Changing an office layout, a person’s reporting relationships, or the
rewards they obtain, alter their context and perhaps their actions. The context is both an
influence on the manager and a tool with which to influence others:
It is impossible to understand human intentions by ignoring the settings in which they
make sense. Such settings may be institutions, sets of practices, or some other contexts
created by humans – contexts which have a history, within which both particular deeds
and whole histories of individual actors can and have to be situated in order to be intel-
ligible. (Czarniawska, 2004, p. 4)

Managers aim to create contexts to influence others to act in ways that meet their objectives.

Dimensions of context
Internal context
Figures 1.1 and 1.2 showed the links between managers, their organisation and the external
context. Figure 1.3 enlarges the ‘organisation’ circle to show more fully the elements that
make up the internal context (or environment) – the immediate context within which people
 18 CHAPTER 1 MANAGING IN ORGANISATIONS

External environment

Organisation
Business
processes
People Structure

Output
Input • Goods
• People Finance Managing Objectives • Services
• Finance transformation
• Reputation
• Materials processes
• Waste
etc. etc.
Technology Culture

Power

Figure 1.3 Feedback

The internal and
Organisation’s past present and future
external contexts
of management

work. As Mark Zuckerberg built Facebook into the world’s largest social networking site, he
and his team would have dealt with all of the elements shown in the figure:
z Culture (Chapter 3) – distinctive norms, beliefs and underlying values;
z Objectives (Chapters 6 and 8) – a desired future state of a business or unit;
z Structure (Chapter 9) – how to divide and co-ordinate tasks to meet objectives;
z Technology (Chapter 10) – facilities and equipment to turn inputs into outputs;
z Power (Chapter 12) – the amount and distribution of power with which to influence others;
z People (Chapter 13) – their knowledge, skills, attitudes and goals;
z Business processes – activities to transform materials and information; and
z Finance – financial resources available and how best to use them.
Figure 1.3 also implies that managers work within constraints – some of the elements will
help, while others will hinder them. Effective managers do not accept their context passively –
they try to change these elements so that they support their objectives (Chapter 11).

Historical context
Managing takes place within the flow of history as what people do now reflects past events and
future uncertainties. Managers typically focus on current issues, ensuring that things run properly
and that the organisation works. At the same time, history influences them through the structure
and culture within which they work, and by affecting how people respond to proposals.
Effective managers also look to the future, questioning present systems and observing
external changes. The arrow at the foot of the figure represents the historical context.

External context
Chapter 3 shows that the external context includes an immediate competitive (micro) environ-
ment and a general (or macro) environment. These affect performance and part of the man-
ager’s work is to identify, and adapt to, external changes. Managers in the public sector are
expected to deliver improved services with fewer resources, so they seek to influence people to
 CRITICAL THINKING 19

change the internal context (such as how staff work) to meet external expectations. They also
seek to influence those in the external context about both expectations and resources.

1.8 Critical thinking

Brookfield (1987) stresses the benefits of thinking critically, in that it:

involves our recognizing the assumptions underlying our beliefs and behaviors. It means
we can give justifications for our ideas and actions. Most important, perhaps, it means
we try to judge the rationality of these justifications . . . by comparing them to a range of
varying interpretations and perspectives. (p. 13)

Critical thinking is positive activity that enables people to see more possibilities, rather than Critical thinking identi-
a single path. Critical thinkers ‘are self-confident about their potential for changing aspects fies the assumptions
behind ideas, relates
of their worlds, both as individuals and through collective action’ (p. 5). He identifies four them to their context,
components of critical thinking. imagines alternatives and
recognises limitations.

Identifying and challenging assumptions

Critical thinkers look for the assumptions that underlie taken-for-granted ideas, beliefs and
values, and question their accuracy and validity. They are ready to discard those that no lon-
ger seem valid guides to action, in favour of more suitable ones. A manager who presents a
well-supported challenge to a strategy that seems unsuitable to their business, or who ques-
tions the need for a new structure, is using this aspect of critical thinking.

Recognising the importance of context

Critical thinkers are aware that context influences thought and action. Thinking uncritically
means assuming that ideas and methods that work in one context will work equally well in
others. What we regard as an appropriate way to deal with staff reflects a specific culture:
people in another culture – working in another place or at a different time – will have other
expectations. Critical thinkers look for such approaches suitable for the relevant context.

Imagining and exploring alternatives

Critical thinkers develop the skill of imagining and exploring alternative ways of managing.
They ask how others have dealt with a situation, and seek evidence about the effectiveness
of different approaches. This makes them aware of realistic alternatives, and so increases the
range of ideas which they can adapt and use.

Seeing limitations
Critical thinking alerts people to the limitations of knowledge and proposals. They recognise that
because a practice works well in one situation does not ensure it will work in another. They are
sceptical about research whose claims seem over-sold, asking about the sample or the analysis.
They are open to new ideas, but only when supported by convincing evidence and reasoning.
Thinking critically will deepen your understanding of management. It does not imply a
‘do-nothing’ cynicism, ‘treating everything and everyone with suspicion and doubt’ (Thomas,
2003, p. 7). Critical thinking lays the foundation for a successful career, as it helps to ensure
that proposals are supported by convincing evidence and reasoning.

Managing your studies

Studying management is itself a task to manage. Each chapter specifies learning outcomes. The
text, the case study and the ‘before and after’ activities should help you to achieve these, and you
can check your progress with the review questions at the end of each chapter. Working on these
will help develop your confidence to think critically in your studies and in your career.
20 CHAPTER 1 MANAGING IN ORGANISATIONS

Activity 1.2 Understanding management

Recall the organisation you used in Activity 1.1.

Having read the chapter, make brief notes summarising what you now think ‘manag-
ing’ involves in this company:

z Describe what resources it uses and how it adds value to them. (Refer to
Section 1.2.)
z List examples of some of the specialist roles of management (such as a functional or
a line manager) and describe what they do in this company. (Refer to Section 1.4.)
z Can you identify examples of managers performing one or more of Mintzberg’s
roles? (Refer to Section 1.5.)
z What have you been able to find out about how they perform ONE of the manage-
ment tasks (planning, organising, leading, controlling)? (Refer to Section 1.6.)

Compare what you have found with other students on your course.

Summary

1 Explain that the role of management is to add value to resources in diverse settings
z Managers create value by transforming inputs into outputs of greater value: they do
this by developing competences within the organisation which, by constantly adding
value (however measured) to resources is able to survive and prosper. The concept of
creating value is subjective and open to different interpretations. Managers work in an
infinite variety of settings, and Table 1.1 suggested how each setting raises relatively
unique challenges.

2 Give examples of management as a universal human activity and as a distinct role

z Management is an activity that everyone undertakes as they manage their daily lives. In
another sense management is an activity which many people conduct, not just those
called ‘managers’. People create the distinct role when they separate the management
of work from the work itself and allocate the tasks. The distinction between manage-
ment and non-management work is fluid and the result of human action.

3 Compare the roles of general, functional, line, staff and project managers and of
entrepreneurs
z General managers are responsible for a complete business or a unit within it. They
depend on functional managers who can be either in charge of line departments meet-
ing customer needs, such as manufacturing and sales, or in staff departments such
as finance which provide advice or services to line managers. Project managers are in
charge of temporary activities usually directed at implementing change. Entrepreneurs
are those who create new businesses to exploit opportunities.

4 Explain how managers influence others to add value to resources through

z The processes of managing. Henry Mintzberg identified ten management roles
in three groups which he labelled informational, interpersonal and decisional.
Luthans and, more recently, Wolff and Moser observed that successful manag-
ers were likely to be those who networked with people inside and outside the
organisation.
 FURTHER READING 21

z The tasks of managing. Planning develops the broad direction of an organisa-

tion’s work, to meet customer expectations, taking into account internal capabili-
ties. Organising sets out how to deploy resources to meet plans, while leading
seeks to ensure that people work with commitment to achieve plans. Control
checks activity and results against plans, so that people can adjust either if
required.
z The contexts of managing. The internal (organisational) context consists of eight ele-
ments which help or hinder the manager’s work – objectives, technology, business
processes, finance, structure, culture, power and people. The historical context also
influences events, as does the external context, which consists of competitive and
general environments.

Review questions

1 How do non-commercial organisations add value to resources?

2 What is the difference between management as a general human activity and management as a
specialised occupation? How has this division happened?
3 Describe, with examples, the differences between general, functional, line, staff and project managers.
4 How does Mintzberg’s theory of management roles complement that which identifies the tasks of
management?
5 Give examples from your experience or observation of each of the four tasks of management.
6 What is the significance to someone starting a career in management of Luthans’ theory about roles and
performance?
7 How can thinking critically help managers do their job more effectively?
8 Review and revise the definition of management that you gave in Activity 1.1.

Further reading

Birkinshaw, J. (2010), Reinventing Management: Smarter choices for getting work done,
Jossey-Bass, San Fancisco, CA.
A small book by a leading management academic gives a short account of the work of
general management.

Handy, C. (1988), Understanding Voluntary Organisations, Penguin, Harmondsworth.

A valuable perspective on management in the voluntary sector.

Drucker, P. (1999), Management Challenges for the 21st Century, Butterworth/Heinemann,

London.
Valuable observations from the enquiring mind of this great management theorist.

Scott, D. M. and Halligan, B. (2010), Marketing Lessons from the Grateful Dead: What every
business can learn from the most iconic band in history, Wiley, Hoboken, NJ.
Practical insights into management generally from two authors with deep insights into
how the legendary band achieved its success.
22 CHAPTER 1 MANAGING IN ORGANISATIONS

Weblinks

These websites have appeared in, or are relevant to, the chapter:

www.davymarkham.com
www.charitycommission.gov.uk
www.scott-timber.co.uk
www.bt.com
www.marksandspencer.com
www.networkrail.co.uk
www.facebook.com/facebook
www.ryanair.com

Visit two of the business sites in the list above, or those of other organisations in which you
are interested, and navigate to the pages dealing with recent news, press or investor relations.

z What are the main issues which the organisation appears to be facing?
z Compare and contrast the issues you identify on the two sites.
z What challenges may they imply for those working in, and managing, these organisations?

Annotated weblinks, multiple choice questions and other use-

ful resources can be found on www.pearsoned.co.uk/boddy
 CASE STUDY 23

Case study Ryanair www.ryanair.com

In 2011 Ryanair, based in Dublin, was Europe’s larg-

est low fare airline, and despite the recession, it had
carried over 74 million passengers in the 12 months
to the end of April, a record for that period. In 1985,
the company began offering services between Dublin
and London, in competition with the established na-
tional carrier, Aer Lingus. In the early years the airline
changed its business several times – initially a con-
ventional competitor for Aer Lingus, then a charter
company, at times offering a cargo service. The Gulf
War in 1990 discouraged air travel and deepened the
company’s financial problems. In 1991, senior man-
© Thierry Tronnel/Sygma/Corbis.
agers decided to focus the airline as a ‘no-frills’ op-
erator, in which many traditional features of air travel z Simplified operations – not assigning seats at
(free food, drink, newspapers and allocated seats) check-in simplifies ticketing and administrative
were no longer available. It aimed to serve a group of processes, and also ensures that passengers
flyers who wanted a functional and efficient service, arrive early to get their preferred seat.
not luxury. z Flying directly between cities avoids transferring
In 1997 changes in European Union regulations passengers and baggage between flights, where
enabled new airlines to enter markets previously mistakes and delays are common.
dominated by established national carriers such as z Cabin staff collect rubbish before and after land-
Air France and British Airways. Ryanair quickly took ing, saving the cost of cleaning crews which es-
advantage of this, opening new routes between tablished carriers choose to use.
Dublin and continental Europe. Although based in Ire-
land, 80 per cent of its routes are between airports in The company has continued to grow rapidly,
other countries – in contrast to established carriers regularly opening new routes to destinations it
which depend heavily for passengers travelling to and thinks will be popular. It now refers to itself as ‘the
from the airline’s home country (Barrett, 2009, p. 80). world’s largest international scheduled airline’, and
Managers were quick to spot the potential of the continues to seek new bases from which to oper-
internet, and in 2000 opened Ryanair.com, a book- ate its network.
ing site. Within a year it sold 75 per cent of seats The airline’s success depends on balancing low
online and now sells almost all seats this way. It also costs, fare levels and load factors. Airline seats are
made a long-term deal with Boeing to purchase 150 what is known as a perishable good – they have no
new aircraft over the next eight years. value if they are not used on the flight, so compa-
Several factors enable Ryanair to offer low fares: nies aim to maximise the proportion of seats sold on
a flight. Ryanair use a technique known as dynamic
z Simple fleet – using a single aircraft type (Boeing pricing, which means that prices change with cir-
737 – most of which are quite new) simplifies cumstances. Typically fares rise the nearer the pas-
maintenance, training and crew scheduling. senger is to the departure date, though if a flight is
z Secondary airports – using airports away from under-booked, the company encourages sales by
major cities keeps landing charges low, some- lowering fares.
times as little as £1 per passenger against £10 at They also earn a growing proportion of revenue
a major airport; it also avoids the delays and costs from charges and services such as refreshments,
caused by congestion at major airports. and in 2009 sharply increased the cost of checked
z Fast turnarounds – staff typically turn an aircraft in bags: it prefers customers to carry hand baggage
round between flights in 25 minutes, compared into the cabin. Each time a passenger rents a car or
to an hour for older airlines. This enables aircraft books a hotel room on the Ryanair website, it earns
to spend more time in the air, earning revenue a commission. It sells scratch cards on board, of-
(11 hours compared to 7 at British Airways). fers in-flight gambling and on-line gaming over its
24 CHAPTER 1 MANAGING IN ORGANISATIONS

website: the chief executive thinks that gambling

2 Refer to Section 1.4 and note what those
could double Ryanair’s profits over the next decade.
occupying the specialist roles are likely to be
The company expects revenue from ancillary activi-
doing in Ryanair.
ties will continue to grow more rapidly than passen-
ger revenue. 3 Refer to Section 1.5 and write down which of
Mintzberg’s management roles can you iden-
Sources: The Economist, 10 July 2004; Independent, 7 October 2006;
Financial Times, 7 June 2006; Barrett (2009); Kumar (2006); O’Connell tify in the Ryanair case? Support your answer
and Williams (2005); Doganis (2006); and company website. with specific examples.
4 Which aspects of the external general envi-
Questions ronment have affected the company? (Refer
to Section 1.6.)
1 Identify examples of the resources that
Ryanair uses, and of the competences that 5 Go to the Ryanair website and look for evi-
have enabled managers to add value to them. dence of the work that managers have been
(Refer to Section 1.2.) doing to help the company continue to grow.
CHAPTER 2
THEORIES OF MANAGEMENT

Learning outcomes
When you have read this chapter you should be able to:
1 Explain why understanding a good theory helps people to make better choices
2 State the structure of the competing values framework, which relates theories to each other
3 Summarise the:
z rational goal
z internal process
z human relations and
z open systems perspectives
4 Use ideas from the chapter to comment on the management issues in the Robert Owen case study
 INTRODUCTION 27

Activity 2.1 What are ‘theories of management’?

Before reading this chapter, write some notes on what you understand by the term
‘theories of management’.
Choose the organisation or people who may be able to help you learn about the
topic. You may find it helpful to discuss the topic with a manager you know, or reflect
on an activity you have managed.

z Identify a situation in which someone had to make a decision or deal with a problem,
and describe it briefly.
z What ideas seem to have guided the way they dealt with the task?
z Did they think consciously about why they did it that way?
z Keep these notes, as you will be able to use them later.

2.1 Introduction

Robert Owen was an entrepreneur. His attempts to change worker behaviour were innova-
tive, and he was equally creative in devising management systems and new ways of working.
The story of his time at New Lanark illustrates three aspects of management. First, he devised
systems to help manage the people he employed and to improve mill performance. Second,
Owen engaged with the wider social context, such as when he tried to influence Parliament to
prohibit employers from using children in their mills and factories. Third, he was managing
at a time of transition from an agricultural to an industrial economy, and many of his innova-
tions tried to resolve the tensions between those systems – as we now face tensions between
industrial and post-industrial systems.
Managers today cope with similar issues. HMV need to recruit willing and capable
people to work in their stores, and ensure that they add value. Co-operative Financial
Services (CFS) try (like Owen) to follow ethical principles throughout their business and
still earn profits. Managers know that working conditions affect family life – and try to
balance the two by subsidising childcare and offering flexible hours to those with family
responsibilities. They also operate in a world experiencing changes equal to those facing
Owen. The internet is enabling people to organise economic activity in new ways, sus-
tainability is now on the agendas of most management teams, as is the move to a more
connected international economy.
Facing such changes, managers continue to search for new ways to manage their business
so that they add value to their resources. They make assumptions about the best way to do
things – and through trial and error develop methods of working which seem to work reason-
ably well, and which they tend to repeat. Although they probably do not use the term, they
gradually develop their theory of management – their ideas about the relationship between
cause and effect, how a change in (say) working methods will affect (say) staff commitment.
The more accurate their theory (the better the evidence and experience they use), the more
likely they are to obtain the results they want. A manager using inaccurate theory to guide
their actions is likely to have less success.
The next section introduces the idea of theories of management, and why they are useful.
Section 2.3 presents the ‘competing values’ framework, which is a convenient way of seeing
the relationship between theories, which the following sections outline.
 28 CHAPTER 2 THEORIES OF MANAGEMENT

2.2 Why study management theory?

A theory (or model) A theory (or model) represents a more complex reality. Focusing on the essential elements
represents a complex
phenomenon by identify- and their relationship helps to understand that complexity, and how change may affect it.
ing the major elements Most management problems can only be understood by examining them from several points
and relationships
of view, so no theory offers a complete solution. The management task is to choose those
most likely to work, and combine them into an acceptable solution.

Theories support purpose and values

Managers have different views about the purpose of their role in society, and this affects the
theories they use. A feature of many societies is that they have established a balance of power
between governments, companies and the ‘social sector’ – co-operatives, social entrepre-
neurs, voluntary organisations. Each reflects a different set of challenges, and has encouraged
the development of theories about how best to manage in those circumstances.
The theory (or mental model) which a person uses reflects their view of the purpose of
their particular job – ranging from serving shareholder interests at one extreme to serving
society at the other (Chapter 5, Section 5.4). Their personal values also influence this – some
see their job as a technical or financial task, whereas others see that being a manager brings
wider responsibilities, including those of dealing fairly and ethically with other people.

Theories identify variables

Whichever broad model of management a person is using, they will use (implicitly) one or
more theories, as these help to identify the main variables in a situation, and the relation-
ships between them. The more accurately they do so, the more useful they are. Since every
situation is unique, many experienced managers doubt the value of theory. Magretta’s
answer is that:
without a theory of some sort it’s hard to make sense of what’s happening in the world
around you. If you want to know whether you work for a well-managed organization – as
opposed to whether you like your boss – you need a working theory of management.
(Magretta, 2002, p. 10)

We all use theory, acting on (perhaps implicit) assumptions about the relationships between
cause and effect. Good theories help to identify variables and relationships, providing a mental
toolkit to deal consciously with a situation. The perspective we take reflects the assumptions
we use to interpret, organise and make sense of events. As managers influence others to add
value they use their mental model (theory) of the situation to decide where to focus effort. The
Management in Practice feature below contrasts two managers’ mental models.

Management in practice Practice reflects theory

These examples illustrate contrasting theories about managing staff.

Motivating managers: Tim O’Toole, who became chief executive of London Underground in 2003, put in a
new management structure, appointing a general manager for each line to improve accountability.

Now there’s a human being who is judged on how that line is performing and I want them to feel that
kind of intense anxiety in the stomach that comes when there’s a stalled train and they realise that it’s
their stalled train.

Source: From an article by Simon London, Financial Times, 20 February 2004.

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NOMINATING THE DEMOCRATIC CANDIDATE FOR VICE-PRESIDENT

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statesman, that grand old Jeffersonian Democrat, that wealthy patriot, Mr.—Mr.—
ahem—Mr.—”

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 A SAD CASE OF DESERTION

Late Wednesday night a dark figure was seen to emerge from the neighboring
gloom and deposit a mysterious bundle in the middle of a vast and lonely prairie.
Plaintive cries were heard to issue from the bundle.

The figure then stealthily departed, leaving the bundle in the midst of the prairie.
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traced. A close search developed several slight clues, which, though slight, may
lead to detection. A copy of the Kansas City platform was found nearby; also a
copy of “The Commoner”; also a card marked “W.J.B.”; also a well-thumbed
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 DOWN WITH THE WORKINGMAN
To Patrick Mc Graw, President Amalgamated Order of Honest Workmen.
Sir:—
Your letter received. Personally, I consider the request that you make
should more appropriately be presented to the mayor or your city. At the
same time I cannot miss this opportunity to say a few things about labor
organizations in general. I think organized labor is a serious menace to
the welfare of our institutions; and I further think that any man who
belongs to a Union should be treated as a criminal. There is no good in
Unions. Every man who belongs to one is worse than an anarchist. If I
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HURRAH FOR WALL STREET

ROSEMONT FARM
Mr. J. Pierpont Morgan, 952 Wall Street, New York City.
Dear Friend:—
Thanks for your very friendly letter. I am much encouraged by the
news you send and am very glad to hear that the sentiment is so
favorable to me. John D. called on me yesterday and left a substantial
check, which, of course, will not be recorded in his name. It is needless
to say that if I am elected my gratitude will assure a very substantial
form and my friends in Wall Street need never fear that their prosperity
will be jeopardized by any official act of mine. I shall be in New York
Saturday and should like to see you privately at the Metropolitan Club.
Mr. Baer, of the Reading Road, will also join us there.
Yours gratefully, Alton P. Barker [** signature]

THE HONEST FARMER IS A JAY.

George K. Jamison, Chairman Hancock County Republican Control Com.
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 I regret very much that I cannot manage to speak before the Farmers’
Institute next Thursday afternoon. I have a luncheon engagement with
the President of the Michigan Northern Road and cannot break it. Please
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Yours respectfully, [** signature illegible]

THE LABORING CLASSES ARE GETTING TOO MUCH MONEY.

OFFICE OF THE
CONSOLIDATED COAL MINING CO.
To Stephen Elkins, Washington.
Dear Son-in-Law:—
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SEVILLE, NEW YORK

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of Illinois. And more than that—”

“I promise you the electoral vote of Wisconsin! And that is not all—”
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“I might as well promise you the electoral vote of Ohio, Pennsylvania, Iowa,
Michigan, etc.”
 DESERTED; OR, THE TRAGEDY OF THE DESERT ISLAND

Mr. Bryan—“You’re a bad lot and you’re all in cahoots with the wicked Wall
Streeters.”

“You got your nomination by crooked and indefensible means. Your platform is
straddling and meaningless BUT”
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for my forsaken comrade.”
“HOMELESS”
THE MYSTERIOUS STRANGER
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THE GRAND INAUGURAL PARADE AS SEEN FROM A DISTANCE OF
900 MILES
DROPPING DOWN TO THE FAIR FOR CHICAGO DAY
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