Management Theory Analysis Of Case Study Business Essay
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Published: Mon, 5 Dec 2016
In present, the success of an organization significantly depends upon its management and the theories or designs adopted by it for successfully handling its different aspects. The concept of management is been used from last several years but applied in different manner. The different use of management has been evolved in the form of management theory. The concept of management theory has developed from classical theory, bureaucracy, human relations, and social psychological schools, systems and contingency approaches to contemporary management approaches.
All the above mentioned management theories have been given by different theorists with their own viewpoints and assumptions that can be applied in workplace according to the needs. Nowadays, application of management theory is important because it assist organizations with an approach to make its entire people more productive. IT facilitates individuals and professional with diverse approaches and tactics that they can use to manage their business and human resources. The vital key to an organization’s success is its people and if it is able to manage them, it can effectively attain its pre-determined goals.
All the aspects management, management theory, contemporary theories of management, organizational designs, enterprise within organizations and organizational structures are somehow related to each other. All of these are different but interrelated as these are used by a firm to manage its processes, operations and resources. All of these aspects and development of management theory will be discussed in detail in this assignment in concern to the given scenario of Computing for Commerce (CFC).
This assignment will be done with the help of analyzing all previous researches done in this field and its applicability in workplace. A number of theorists and researchers have analyzed the management theory and its practice at workplace. They have given several theories or approaches that can be used to improve the productivity of workplace. These different theories and approaches will be analyzed to understand the applicability of management theories and approaches in workplace.
The company selected for the discussion and applicability of management behaviour and theory is “Computing for Commerce”. It was established by Nico Van Barneveld in 1984. It was started as centralized payroll bureau that handle payroll transactions for companies who are too small to run their own payroll departments. It produce monthly payroll statements, transfer funds into employee’s bank accounts and calculate monthly tax deductions which are paid to the inland revenue on behalf of its clients. From the time of its origin, the size of its customers has grown from 50 customers to 300 customers. The company operates with a flat structure and still runs everything in a “hands on “manner.
Critical Review of CFC’s Management Style and Practices
In 1984, when ‘Nico Van Barneveld’ founded Computing for Commerce, it was serving only few customers. Now, as company has expanded in terms of its operations and customers it should adopt some different approach rather than only a flat organizational structure or conventional management styles and practices. The management practices and styles adopted by CFC was effective in old time but now, it is confronting severe issues and it is all because of its ineffective style of management.
The concept of management exists from past some centuries but it has become substantial from last few decades. This is because of the failures confronted by various organizations in concern to their management behaviour and practices. From last some decades, CFC has confronted several opportunities as well as challenges and it is all due to increasing globalization and rising level of competition. For capitalizing on existing opportunities and minimizing the effect of heightening challenges, it adopted different expansion strategies.
The expansion strategies assisted the company in enlarging its customer base, but it didn’t help it in managing its operations and resources. The company employees were dissatisfied that evidences that it should have adopted some effective management theory as from last several years a number of management theories have emerged. Theories like classical theory, bureaucracy, human relations, and social psychological schools, systems and contingency approaches could significantly assist business organizations (Miner 2007). The adoption of different management theories would have facilitated CFC with an appropriate management style or practice to manage their operations and as well as their resources like finance and human resources.
This could also be understood with the help of discussion of the development of management theory, different schools of management and their implications for the organisation of CFC’s challenges and opportunities.
Classical Organizational Theory:
The classical organizational theory developed throughout the first half of this century. This management theory is merger of Taylor’s scientific management, Weber’s bureaucratic theory and Fayol’s administrative theory (Almashaqba & Al-Qeed 2010). Classical organization theories pertain to formal organization and concepts for increasing management efficiency. Taylor introduced scientific management concepts in 1917, Weber gave the bureaucratic approach and Fayol explicated the administrative theory of the organization (Walonick n.d.).
With the help of all these theories or some of these theories, CFC would have easily resolved its troubles related with the management of its employees’ and their distributions in the management of their work. These theories could significantly assist CFC in increasing its management efficiency as it is vital for the company with its increasing expansion (Organizational Theories n.d.). The advantages and disadvantages of these different classical theories in concern to CFC can be understood with their discussions:
Taylor’s Scientific Management Approach:
The scientific management approach was developed by Taylor and it is grounded on the conception of planning of work for attaining efficiency, standardization, specialization and simplification. This approach concentrated on the need of increasing mutual trust among management and workers as it is a key to increase productivity (Rimer 1993). If CFC also makes use of this approach, it can effectively plan all its operations and distributions of its employees or trainers. Taylor explicated the subsequent four principles of scientific management through which business organizations can improve their productivity:
Old rules-of-thumb should be replaced by a scientific approach.
Organizations should select employees on the basis of some analysis, and then should be taught, trained and developed.
Concentrate on the need of cooperation among management and labor so that all work can be done in accordance to the developed scientific principles.
Scientific training of the workers so that work can be divided effectively between workers and managers with effective planning and control (Walonick n.d.).
With the help of this approach CFC may also plan and control all its business operations like payroll transactions and PC Application training. The allocation of local centre managers and trainers would also be done on scientific basis. This will assist the company in making formal divisions among its workers and managers and as well as in adopting systematic procedures (Almashaqba & Al-Qeed 2010). On the other hand, this approach also has some limitations like in modern time it is not very much relevant as nowadays concentration on production is replaced by people. In modern time, companies cannot use their employees just as a mean of production they have to treat their employees in a fair and imperative manner (Miner 2007).
Weber’s Bureaucratic Approach:
Bureaucratic approach was given by Max Weber in 1947. He elaborated theories given by Taylor and emphasized on the need to abbreviate diversity and uncertainty in organizations. As well, he concentrated on the establishment of clear lines of authority and control. This bureaucratic theory also stressed on the need of a hierarchical structure of power (Walonick n.d.). It assisted the businesses in identifying the significance of division of labor and specialization. In addition to this, a formal set of rules was also bounded into the hierarchy structure so that companies can effectively insure stability and uniformity (Organizational Theories n.d.).
By making use of this approach CFC can easily and effectively modify its flat organizational structure that is not suitable nowadays as it is expanding its operations. With the help of bureaucratic approach, the company can significantly develop as a formal organization based on structure, specialization, certainty and stability, rationality and uniformity. This formal structure will assist the company in resolving all its present challenges and capitalizing on available opportunities.
In addition to the above discussed advantages, this approach also has some limitations as it will not assist the company in the management of aspects like inflexibility, impersonality, displacement of aims, limitation of classification and self-protraction. It will bring forth a vertical organizational structure that will give rise to many levels of management. Many levels of management will increase complexity and difficulty in attaining coordination.
The last significant classical theory is Administrative theory that is also known as principles of management. This theory was validated in 1930. It was developed by Fayol in 1949. This theory stressed on the development of a universal set of management principles that could be applied to all organizations (Organizational Theories n.d.). The different elements of this theory are associated to the accomplishment of tasks, principles of management, the conception of line and staff, committees and functions of management.
This theory assisted in the identification of the management principles rather than personal traits. Other theorists only shared their beliefs but Fayol was first that recognized management as an ongoing process of evaluation. By making use of this theory CFC can significant attain several advantages in terms of functions of management (planning, organizing, training, commanding and coordinating), line and staff and principles of management (Sapru 2006). All these concepts will assist the company in managing its business operations, customers, stakeholders and other associates.
The 14 principles of management will help the company and Nico in an effective management of its organization and its resources. The company will become able in dealing with all its existing issues related with management of operations and resources (Walonick n.d.). In addition to all these advantages, the company may also confer some disadvantages if these principles are not managed in an appropriate manner. It may increase chaos and confusion among the company and its employees.
With the discussion of classical theory, it can be said that it can help CFC in the management of its organization but it is very rigid and mechanistic. In this theory, employees’ have minimum power over their jobs and working conditions that is not relevant with modern era. In modern era employees are given significant preferences in spite of production as until or unless they are not happy, a firm may not attain its objectives.
Neoclassical Organization Theory:
Neoclassical theorist stressed on the significance of individual or group behaviour and accentuated on human relations. On the basis of the Hawthorne experiments the neoclassical approach stressed on the development of social or human relationships among the operators, researchers and superiors (Organizational Theories n.d.). The considerations of this theory were more pertinent to rendering productivity rather than only making changes in working conditions. The neoclassical theorists argued that business can attain productivity increases by developing high morale. High morale is affected by the amount of individual, personal and close attention workers receive (Mirowski 1983).
By making use of this theory, CFC can effectively develop its employees rather than only adopting changes in work pattern or conditions. This theory can facilitate company and Neo on concentrating on human nature aspects. With the help of this management practice, CFC will become able in establishing an informal organization structure and focussing on the development of its employees (Walonick n.d.). With the implication of this theory, Neo will become able in understanding that an employee is not a mechanical tool. An employee is a social being who have several aspirations that affect his performance and productivity.
This understanding would assist Neo in developing the productivity of his employees by providing them effective opportunities and motivation. With the application of this theory Neo will also become able in understanding the importance of work group and participative management. Participative management will assist CFC in attaining all available opportunities and in expansion and resolving issues of employee dissatisfaction. Work group will assist it in deriving the benefits of synergy. In this way, this theory will substantially help CFC in the management of its employees that are most vital aspect of a business growth.
In addition to above discussed advantages, this theory also has some disadvantages. The management behaviour and practices rendered by this theory sometimes may create failure as there is lack of monitoring that is vital. This theory implies for loose control over subordinates that is not applicable in present competitive environment. At some extent it is essential to monitor subordinates as otherwise they may divert from the given duties or responsibilities.
This theory is a kind of behavioural theory that asserts that in general there is no effective way to systematize a corporation, to direct it and undertake decisions. In spite of this, the best way to manage an organization depends upon its internal and external situation. It was developed by Chandler in 1962 and Lawrence and Lorsch in 1969. In respect to this theory different contingent approaches were developed in the late 1960 (Bacher 2007). Contingency theorists suggested that previous theories like Weber’s bureaucracy and Taylor’s scientific management had broke down because they overlooked the environment (Walonick n.d.).
In modern time, management style and organizational structure of a firm is substantially influenced by its internal and external environment or contingency factors. If CFC make use of this theory can effectively resolve all its troubles related with expansion and management of its operations. An analysis of its environment will significantly help the company in its future business decisions (Organizational Theories n.d.). With an internal environment analysis, the company can easily identify the substantial reasons of its employee dissatisfaction and level of their performance.
On the other hand, external environment will assist it in its future business planning and decisions. With the use of contingency theory, the company will effectively become able in managing its conflicts rather than avoiding it. In addition to these advantages, this theory also has some disadvantages like it is applicable only in a situation when organizational environment is unstable or changing (Jacques 2007). As well, this also demands management time, money, and effort so that coordination can be attained.
This theory was suggested by Hungarian biologist Ludwig von Bertalanffy in 1928. This theory emphasised that all the elements of an organization are interconnected and if there occurs change in a variable it might affect several others also (Northouse 2009). In concern to this theory, organization is considered as open system that is continually interacting with its environment. By applying this theory CFC can effectively derive immense success.
It will assist the company in shaping its reality on the basis of its actions. It will help Neo in understanding how its own actions have shaped its present position and that in turn will boost his confidence. With this, he will become able in understanding that its success is related to all its business elements (Kast & Rosenzweig 1972). If it makes changes in an element it has to evaluate other elements also so that determined objective can be attained effectively (Walonick n.d.). This theory will help CFC in focussing on all its business elements rather than at a single element.
Additionally, it also has disadvantages like its concept of nonlinearity adds massive complexity to understanding of organizations. Its nonlinearity introduces significant complexity and that makes it difficult to understand the relationships between variables. This may also drive CFC towards confusion so it is better to understand its affectivity so that complexity may not arise (Organizational Theories n.d.). The relationship among all its business variables needs to be identified for effective functioning.
Approaches to Contemporary Issues in Management
Nowadays, the new conception of management has entirely replaced the traditional perspectives of management. In present managers from all around the world are trying to seek new insights about how they can lead in a much better manner and how they can motivate, organise and manage their organisations (McKenna 2000). All these efforts of universal managers are highly affected by the contemporary issues of management confronted by them.
With the increasing globalization and healthy world trade conditions, more and more companies are trying to operate at international level. All companies want to reach at the benefits of global expansion so that they can reap the existing opportunities. The effect of globalization has forced companies to move into foreign markets that in turn present several issues in front of managers in concern to management (Daft 2009). They are confronting issues like decreasing level of motivation, downsizing, managing diversity, and management of rapid change and meeting with the competing demands of all stakeholders. Similar is the situation with CFC and need to be managed effectively.
All these contemporary issues in management can be resolved effectively at CFC by making use of advanced approaches towards employee motivation, management style, change management and fulfilling competing demands of all stakeholders. For motivating its employees the company can make use of approach of employee empowerment. This will develop self-leadership among CFC’s employees and they will become authorized to lead others (Jacques 2007). The deliverance of authority to employees will increase their motivation towards the fulfilment of CFC goals.
In addition to employee empowerment, the CFC may also make use of different types of management styles and change management approaches. Both of these will assist the company in responding to change in its internal and external environment. For managing its internal environment the company should make use of participative management style as this will assist in the development of flexible management (Holbeche 2006). It will heighten the communication among company managers and employees that in turn will increase their level of performance. The changed management approach like planned change will assist the company in dealing with its external environment and effect of globalization (Luthans 1998).
Participative approach towards management and effective modes of communication will assist, CFC in significantly meeting with the competing demands of all its stakeholders. Internal and external environment analysis will assist it in understanding the needs and requirements of its customers, suppliers, employees and shareholders (Harris & Hartman 2001). In this way, it can be said that in present there are various approaches that can be used by CFC for dealing with the contemporary issues of management.
Evaluation of CFC’s Enterprise Culture & Consideration of its Operating Structure
CFC is a small size firm and its enterprise culture is not as effective as it need to be in present time. The company operates in the simplest manner and does not give importance to social values of employees, associates and its stakeholders. Due to its weak enterprise culture it confronts several issues in concern to its employees, associates, stakeholders’ satisfaction. The company operates as a sole trader that has several advantages as well as disadvantages for it (Murray, Poole & Jones 2006).
The only person that owns the CFC is Neo. In this type of company structure, Neo being a sole proprietor has absolute control over his business and he is totally responsible for its management. This type of structure has little start up costs and it is elementary. All the profits made by this type of company structure are kept by Neo only and it is quite flexible as whatever changes are required can be made easily.
On the other, this structure also render Neo with several disadvantages like he has to manage all business related tasks and as his business is expanding, it will become difficult for him only to manage all business operations. He is exclusively responsible for paying all debts and it is also difficult for a sole trader to raise funds for expansions (Spedding & Rose 2008). With the discussion of these disadvantages of sole trading, it can be said that the CFC should make use of some other company structure. Now as company is increasing in its size and customer base than it should make use of following company structures:
Limited companies subsist with their own right. The company’s finances are distinguished from the personal finances of their proprietors. Shareholders may be people or other companies and they are not accountable for the company’s debts unless they have given guarantees. The main types of limited company are private limited companies, public limited companies and private unlimited companies (Pride, Hughes & Kapoor 2009).
In this type of business structure, there is limited liability. It means that each shareholder or member is liable only at the extent of the amount invested by him. This type of structure also avoids double taxation. On the other hand, it also has some limitations like restrictive transfer of ownership (Needham & Dransfield 1994).
In this type of company structure, two or more people share the risks, costs and responsibilities of business. Each associate is self-employed and enjoys a share of the profits. In this type of company structure, partners make decisions by coordinating with each other that usually results in assured success. It reduces the risk of individually running and managing a business (Spedding & Rose 2008). It is a relatively simple and flexible way to manage a business. On the other hand, it also has some disadvantages like it is not essential that both the partners follow all established rules and ethics. They may take advantage of other for fulfilling their own needs.
It is a distinct type of business structure that is user-owned and user-controlled business that allocates margins to its users on the basis of use of patronage. This structure authorizes its users to attain ownership by patronizing the business. It also has risks like uncertainty, and follows up of established code of conduct (Pride, Hughes & Kapoor 2009).
With the above discussion of different types of business structures, it can be said that CFC should make use of some other operating structure in spite of sole trading. As now, the size of company is increasing in terms of its operations, customer base and overseas expansion; it is not possible for Neo only to manage each business aspect. In this situation, he should adopt some other company structure like partnership or limited company.
Analysis of CFC’s Organization Structure
From the time of its origin, CFC is operating with flat organizational structure. In the company everything runs in a “hands on “manner. The company has four key staff in the centre of the company that handle management functions like finance and marketing. As well, the company also has a dedicated central IT team of three people handling the payroll service. The company is running on flat organizational structure because it feels this structure is appropriate in accordance to its small size.
With the help of this flat structure the company is able in attaining effective communication among its employees and management. It also assists CFC in the development of effective team spirit, less bureaucracy and rational decision making (Furnham 2005). In addition to these advantages of flat organizational structure, the company also confronts several disadvantages like it may limit its growth and structure. Functions of an individual or department could be blurred and merge with the job roles of others as there are not any distinctions between individual’s roles (Daft & Marcic 2008).
With the discussion of these advantages and disadvantages of flat organizational structure, it can be said that CFC should adopt some other organizational design. As now company’s operations and customer base is increasing day by day and it is also planning to establish its operations in overseas locations, the company should change its old organizational structure. Subsequent are the various organizational designs that can be considered by CFC for the effective management of its new overseas ventures:
It is a type of departmentalization in which positions are grouped on the basis of their main functional area. In other words, in this type of structure positions are grouped into units on the basis of similarity of expertise, acquisitions and work activities (Montana & Charnov 2000). It is most common method of grouping activities. CFC can also make use of this structure as it will assist it in running its overseas operations effectively. With the help of this structure, the company will become able in grouping its several employees on the basis of their functions like marketing, finance, operations, management etc.
It is a logical structure and can help the company in managing its increasing size and employee base. With the help of this functional structure, Neo will effectively utilize its greater variety of skills. This structure will provide clarity to its members regarding their roles and duties and with this they will get specialization in specific business area (Drucker 2008). This role clarity and specialization will develop employees’ leadership skills.
A divisional organizational structure is a type of departmentalization in which positions are grouped according to similarity of products, services or markets. With the help of this organizational structure, CFC can divide its complex functional units into smaller, more flexible and administrative units. The functions of its payroll departments can be classified into different divisions (Luthans 1998). This will assist the company in promoting independent and self-contained units in its overseas ventures.
This can also be used for managing its increasing size and technology. Employees satisfaction level will also increase with this type of structure as they will became independent and will operate according to their own rationality in concern to given goals. Each division or unit of the company will react quickly that is vital for operating successfully in overseas ventures. In addition to this, organization and coordination will also become easy and speedy (Storey 2004).
Other substantial organization structure that can be used by CFC for managing its increasing size and customer base is hybrid structure. This structure will assist the company in adopting both the functional and divisional structure at the same level of management (Agarwal 1983). With the help of functional structure, the company will become able in deriving advantages of economies of scale, greater competence of managers and competence in resource utilization (Murphy & Saal 1990). As well, with the help of divisional structure it will become able in concentrating on its services and markets.
The last significant organizational structure that can be used by CFC for managing its overseas ventures is matrix organizational structure. It is type of departmentalization that superimposes a horizontal set of divisions reporting relationships onto a hierarchical functional structure. With the help of this structure the CFC can take advantages of decentralized decision making. In addition to this, it will facilitate the company in attaining strong project or product coordination (Griffin & Moorhead 2009). With this structure the company will become able in quickly responding to changes and making a flexible use of human resources.
With the discussion of all substantial organizational designs, it can be said that CFC can easily make use of above discussed structures. With the help of these advanced organizational designs the company will become able in managing its overseas ventures by analyzing goals, values, cultures, size, technology and tasks.
Evaluation of Global Issues that affect CFC and its New Venture
In the last few years, Nico has seen the evolution of outsourcing as a most important new way of doing business. He has also decided that CFC must grab this opportunity on an international scale. In this concern he has determined to open an outsourced IT support centre in the far east to take account of the lower wage structure in that part of the world. He also have plan to open an outsourced call centre of more or less 200 people working from the overseas territory on behalf of approximately 50 UK based companies.
For its global ventures, Neo has discovered three countries of interest that are Vietnam, Cambodia and Philippines. Nico knows very little about these countries working practices and environment that can negatively affect its operations. For handling with these global issues, it is essential that the company take into account existing market forces, barriers to trade and related aspects.
Nowadays more and more countries are adopting and signing different agreements so that they can operate without any limits or constraints in foreign locations. The concept of free economy has emerged with the evolution of aspects like protectionism, trading blocs (EU, NAFTA etc) and importation quotas and import duties. By analyzing all these aspects and benefits & limitations of free market, CFC can effectively enter the selected foreign countries (Pride, Hughes & Kapoor 2009).
It is the economic policy that limits trade between states with the use of techniques like tariffs on imported goods, protective quotas and a kind of other government ordinances. These constraints in this economic policy were planned to deter imports, and preclude foreign take-over of domestic markets and companies. This policy is intimately coordinated with anti-globalization (Hill 2008). It is a contrast to free trade that is still used in some nations but is been abolishing from last several years with increasing globalization.
A trade bloc is a kind of intergovernmental placement that is mostly part of a regional intergovernmental organization. With these agreements regional impediments to trade like tarif
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