Definition of management

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Definition of Management

Management is based on scientific theories and today we can say that it is a developing science.

But knowledge of theories and principles doesn't provide practical results. It is necessary to know how to apply this knowledge. Practical application of knowledge in the management area requires certain abilities or skills. Here is an example:

Depending on its size, an organization may employ a number of specialized managers who are responsible for particular areas of management. A very large organization may employ many managers, each responsible for activities of one management area. In contrast, the owner of a sole proprietorship may be the only manager in the organization. He or she is responsible for all levels and areas of management.

What is important to an organization is not the number of managers it employs but the ability of these managers to achieve the organization's goals, and this ability requires a great skill.

In other words, management is the process of coordinating the resources of an organization to achieve the primary organizational goals.

MAIN RESOURCES

Managers are concerned with the following main resources:

1. Material resources are physical materials and the equipment used by an organization to make a product. For example, cars are made on assembly lines. These assembly lines and the buildings that house them are material resources.

The most important resources of any organization are its human resources -- people. Some firms believe that their employees are their most important assets. To keep employees content, a variety of incentives are used, including higher-than-aver-age pay, flexible working hours, recreational facilities, lengthy paid vacations, cafeterias offering inexpensive meals, etc.

Financial resources are the funds the organization uses to meet its obligations to various creditors. A grocery store obtains money from customers and uses a portion of that money to pay the wholesalers from which it buys food. A large bank» borrows and lends money. A college obtains money in the form of tuition, income from its endowments, and federal grants. It uses the money to pay utility bills, insurance premiums, and professors' salaries. Each of these transactions involves financial resources.

Finally, many organizations increasingly find they cannot ignore information. External environment -- including the economy, consumer markets, technology, politics, and cultural forces -- are all changing so rapidly that an organization that does not adapt will probably not survive. And, to adapt to change, the organization must know what is changing and how it isjchanging. Companies are finding it increasingly important to gather information about their competitors in today's business environment.

It is important to realize that these are only general categories of resources. Within each category are hundreds or thousands of more specific resources, from which management must choose those that can best accomplish its goals. Managers must coordinate this complex group of specific resources to produce goods and services.

Levels and Areas of Management

1. LEVELS OF MANAGEMENT

Each organization can be represented as a three-story structure or a pyramid. Each story corresponds to one of the three general levels of management: top managers, middle managers, and first-line managers. At the basic level of this pyramid there are operating employees.

TOP MANAGEMENT

MIDDLE MANAGEMENT

FIRST-LINE MANAGEMENT

OPERATING EMPLOYEES

A top manager is an upper-level executive who guides and controls the overall activities of the organization. Top managers constitute a small group. They are generally responsible for the organization's planning and developing its mission. They also determine the firm's strategy and its major policies. It takes years of hard work as well as talent and good luck, to reach the ranks of top managers. They are president, vice president, chief executive officer, and member of the Board.

A middle manager is a manager who implements the strategy and major policies handed down from the top level of the organization. Middle managers develop tactical plans, policies, and standard operating procedures, and they coordinate and supervise the activities of first-line managers. Titles at the middle-management level include division manager, department head, plant manager, and operations manager.

A First-line manager is a manager who coordinates and supervises the activities of operating employees. First-line managers spend most of their time working with employees, answering questions, and solving day-to-day problems. Most first-line managers are former operating employees who, owing to their hard work and potential, were promoted into management. Many of today's middle and top managers began their careers on this first management level. Common titles for first-line managers include office manager, supervisor, foreman and project manager?"

Operating employees are not managers. They are qualified and non-qualified persons working for the organization. For their labour or services they get salaries or wages. They represent the work force of the organization.

2. AREAS OF MANAGEMENT

An organizational structure can also be divided more or less horizontally into areas of management. The most common areas are finance, operations, marketing, human resources, and administration. Depending on its purpose and mission, an organization may include other areas as well -- research and development, for example, or risk management.

A financial manager is primarily responsible for the organization's financial resources. Accounting and investment are specialized areas within financial management. Because financing affects the operation of the entire firm, many of the presidents of the largest companies are people who got their "basic training" as financial managers.

An operations manager creates and manages the systems that convert resources into goods and services. Traditionally, operations management is equated with the production of goods. However, in recent years many of the techniques and procedures of operations management have been applied to the production of services and to a variety of non business activities. Like financial management, operations management has produced a good percentage^ today's company presidents.

A marketing manager is responsible for the exchange of products between the organization and its customers or clients. Specific areas witlnnmariceting are marketing research, advertising, promotion, sales, and distribution.

A human resources manager is the charge of the organization's human resources programs. He or she engages in human resources planning, design systems for hiring, training, and appraising the performance of employees, and ensures that the organization follows government regulations concerning employment practices.

An administrative manager (also called a general manager) is not asspcmted with any specific functional area but provides overall administrative leadership. A hospital administrator is a good example of an administrative manager. He or she does not specialize in operations, finance, marketing, or human resources management but instead coordinates the activities of specialized managers in all these areas.

Management Skills

Effectiveness of a manager's activity depends on certain important skills. These skills can be divided into seven different categories: conceptual, decision making, analytic, administrative, communicational, interpersonal and technical.

A conceptual skill is the ability of a manager to see the 'general picture" of an organization. Managers must understand how their duties and the duties of other managers fit together to plan their activity in a proper way and get the required results. This skill is very important for top managers because it helps them plan "super goals" and develop proper strategies for the whole ^ ^ organization.

A decision making skill is the ability of a manager to choose the best course of actions of two or more alternatives. A manager must decide the following: management organizational structure skill

What objectives and goals must be reached?

What strategy must be implemented?

What resources must be used and how they must be distributed?

What kind of control is needed?

In short, managers are responsible for the most important decisions which are required to carry out any organizational activity.

An analytic skill is the ability to determine the most important problem of many other problems and identify the causes of each problem before implementing a proper action plan. This ability is especially important for top managers because they have to solve complex problems.

An administrative skill is the ability of a manager to keep to the organizational rules specified for the production process, within a limited budget, and coordinate the flow of information and paper work in his group and in other groups.

5. A communicational skill is the ability of manager to sharehis ideas and opinions with other people both orally and in writing. This skill is a decisive factor of a manager's success. Some investigations show that top managers and middle managers spend approximately 80% (percent) of their work time in communicating
with each other.

Thus, a communication skill enables managers to hold meetings, write clear letters and explanatory notes, make reports, etc.

An interpersonal skill (psychological skill) is the ability to deal effectively with other people both inside and outside the organization. It is the ability to understand the needs and motives of other people. This skill is very important for a good psychological atmosphere for successful activity in the common work in future. If the interpersonal relations are good, a manager will be successful in getting a support in the development and implementation of organizational plans.

A technical skill is a specific competence to accomplish a task. The lower is a manager's level in the organization, the closer is his/her connection with the production process. Thus first-line managers have the closest connection with the production process. They need high technical skills to provide technical guidance for the subordinates. Top managers don't need these skills as much as first-line managers but the knowledge of the technical sphere is useful for all the managers.

The Basis of Financial Management

The basis of financial management is a financial plan. A plan is an outline of the actions by which an organization intends to accomplish its goals.

A financial plan is a plan for obtaining and using the money needed to implement an organization's goals. Once a financial plan is developed and put into action, the firm's performance must be monitored and evaluated. And, like any other plan, it must be modified if necessary.

Financial planning (like all planning) begins with the establishment of goals and objectives. Next, planners must assign costs to these goals and objectives. That is, they must determine how much money is needed to accomplish each one. Finally, financial planners must identify available sources of financing and decide which to use. In the process, they must make sure that financing needs are realistic and that sufficient funding is available to meet those needs.

THREE STEPS OF FINANCIAL PLANNING

Establishing Organizational Goals and Objectives. Establishing goals and objectives is an important management task. A goal is an end state that the organization wants to achieve. Objectives are specific statements detailing what the organization intends to accomplish within a certain period of time. If goals and objectives are not specific and measurable, they cannot be translated into costs, and financial planning cannot proceed. They must also be realistic. .Otherwise, it may be impossible to finance or achieve them.

Budgeting for Financial Needs. A budget is a financial statement that projects income and/or expenditures over a specified future period of time. Once planners know what the firm's goals and objectives are for a specific period of time - say, the next calendar year- they can estimate the various costs the firm will incur and the revenues it will receive. By combining these items into a companywide budget, financial planners can determine whether they must seek additional funding from sources outside the firm.

Usually the budgeting process begins with the construction of individual budgets for sales and for each of the various types of expenses: production, human resources, promotion, administration, and so on. Budgeting accuracy is improved when budgets are first constructed for individual departments and for shorter periods of time. These budgets can easily be combined into a companywide cash budget. In addition, departmental budgets can help managers monitor and evaluate financial performance throughout the period covered by the overall cash budget.

Most firms today use one of two approaches to budgeting. In the traditional approach,, each new budget is based on the dollar amounts contained in the budget for the preceding year. These amounts are modified to reflect any revised goals, and managers must justify only new expenditures. The problem with this approach is that it leaves room for the manipulation of budget items to protect the (sometimes selfish) interests of the budgeter or his or her department.

This problem is essentially eliminated. through zero-base budgeting.

Zero-base budgeting is a budgeting approach in which every expense must be justified in every budget. It can dramatically re^ duce unnecessary spending. However^ some managers feel that zero-base budgeting requires too much time-consuming paperwork.

3. Identifying Sources of Funds. The four primary sources of funds are sales revenue, equity capital, debt capital, and the sale of assets. Future sales generally provide the greatest part of a firm's financing.

Sales revenue is the first type of funding.

The second type of funding is equity capital, which is money received from the sale of shares of ownership in the business. Equity capital is used almost exclusively for long-term financing. Thus it might be used to start a business and to fund expansions or mergers. It would not be considered for short-term financing needs.

The third type of funding is debt capital, which is money obtained through loans. Debt capital may be borrowed for either short- or long-term use. be a reasonable last resort when neither equity capital nor debt capital can be found. Assets may also be sold when they are no longer needed.

MONITORING AND EVALUATING FINANCIAL PERFORMANCE

It is important to ensure that financial plans are being implemented and to catch minor problems before they become major problems. Accordingly, the financial manager should establish a means of monitoring and evaluating financial performance. Interim budgets (weekly" monthly, or quarterly) may be prepared for comparison purposes. These comparisons point up areas that require additional or revised planning.

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