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Managers up on joining an organization or having promoted to a managerial post within the organization are required to posses certain managerial skills in order to effectively and successful carry out the tasks they face. In several ways the skills managers' posses are the most valuable asset in the organization. Some management thinkers believe that intangible assets such as the skills managers' posses are more valuable than that of tangible assets such as the warehouse, plant, machinery. A manager's job is broad and multifaceted. Poor managerial skills can defeat the most successful activities and may also result in costly decisions due to poor envisage of opportunities that would benefit the organization to a great extent.
The productivity of the employees working under a manager highly depends up on the skills the manager applies to guide, direct and motivate his subordinates. Handling subordinates and getting things done efficiently and effectively to attain organizational goals are extremely challenging and this can hardly be achieved unless the managers are responsive to the situations as they arise and tackles them in the manner which best fits to the circumstance.
Robert L. Katz has presented a classical view of managerial skills which are essential for successful delivery of given tasks. 'Katz states that 'managers' ability to perform is a result of managerial skills.' A manager with the required skills is more likely to be successful and a manager who lacks managerial skill is more likely to perform poorly and be unsuccessful in a given situation'. (Certo and Certo 2009). Katz suggested that three essential skills are to be cultivated and enhanced in the organization and they are:
Technical skills are the most fundamental type of skill. Technical skill gives the expertise knowledge of carrying out specific tasks. Technical skills are vital important for lower level managers who mostly supervise and are responsible to carry out the day to day operations. They need to have this skill in order to provide technical support to the top level management who are more focused strategically and conceptually. Examples of technical skills involve writing computer programs, preparing financial statements, writing legal documents and people like medical practitioners and engineers should have sufficient technical skills in these fields. These skills are usually obtained through attaining training programs the organization may offer or by getting a college degree on a particular field. Many the businesses give due emphasis in providing training to their employees through in house programs or by sending abroad so that organizational technical capacity can be enhanced.
Technical skills are essential to be a successful manager. Technical competence is one of the prerequisites for promotions to a managerial post.
Most often, individuals are expected to spend months or even several years in non-managerial roles before getting promoted to managerial position.
Human or interpersonal skills are the ability to work cooperatively with others, communicate effectively, motivate and direct team members and resolve conflict within the team or in the organization. Human skill therefore is related to the individual expertise in interacting with others in such a way that will achieve successful completion of the tasks. In other words the individual should be a team player.
The organizational goals would hardly be achieved even if the individuals working in that organization have got good technical and conceptual skills but lack the human or interpersonal skill, because the organizational goals cannot be achieved if the individuals all work in different directions. Thus human skills are imperative in bringing all the individual efforts towards one direction. Individual in a team must know how to effectively communicate, collaborate and respect others as personalities, social belief and work style of every individual may greatly differs. Human skills can be developed through an understanding of individual and group behavior. These skills are not easy to develop as each individual team member possesses a unique character and behavior.
Conceptual skill involves the ability to see the organization as a whole. A manager with conceptual skills is able to understand how various function of the organization complement one another, how the organization relates to environment, and how changes in one part of the organization affect the rest of the organization. (Certo and Certo 2009). Conceptual skills require a manger to understand the complexity of situation and simplify it to a level so that specific causes of actions can be derived. Conceptual skills stand out other skills required by a manager. A manger must have the ability to use the internal and external information available to tackle organizational issues, identify opportunities and set the directions for the courses of actions. Managers with conceptual skills should be able to anticipate changes in the external environment that may affect the organization such as government policies, new laws and regulation, consumer and employee rights that may demand the organization to adjust its internal operation and procedures.
A managerial skill of conceptual ability is essential to be a good entrepreneur and to perform the planning function of management. However conceptual skill alone would not make individual a successful manager. One needs to have a certain level of technical as well as human skills. It is only through good evaluation of technical and human skills, the importance of conceptual skills is better perceived.
Skills needed at different management levels
While successful managers should posses a high level of expertise in technical, human and conceptual skills, it is also true that each skill will vary in importance depending on the level of managerial position the manager holds in the organization. The level of skills which requires in different managerial level can best be explained with the help of the following diagram
Source: Modern Management Concepts and Skills, Seventh Edition by Samuel C. Certo and S. Treis Certo
As it can be seen from the diagram, as a manager moves from supervisory to top-management, the conceptual skills become more important and less of technical skill is needed. However the human skills remain equally important.
Technical skills are the most important skill in the supervisory or operational level of management, because first line managers are closer to production process where technical knowledge is in greatest demand. As managers climb up the managerial ladder, the demand for technical expertise diminishes and the top level managers require a minimal technical skill. This is because top managers are more concerned about the strategic development of the organization which requires a more conceptual mind.
Human skills are equally important no matter what the managerial level is. This is due to the fact that team work efforts are equally important in all managerial levels. Failure to collaborate with the subordinates would result in alienation of that individual which would ultimately lead to dismissal, because no organization could afford to pay an individual whose efforts are ineffective in achieving organizational goals.
Top managerial roles require more conceptual skills and a minimal technical knowledge, as top managers are expected to see the organization as a whole rather than individual divisions. Top managers need to envisage the internal and external factors that may directly or indirectly affect the organization and make the best decision based on the situations that would benefit the organization. For example the chairman of Villa Groups need not have the technical skills but rather conceptual skills and strategic decision making are expected from him to take the business to the next level.
2. POPULAE VARIABLES IN CONTINGENCY APPROACH
The contingency approach to management is based on the idea that there is no ideal or tailor made way to deal with the management issues that an organization confronts. Effective planning, organizing, leading and controlling can only be achieved after careful analysis of the situation and to come up with the most suitable solutions to that situation. Managers are constantly confronted with questions such as should we have a vertical or horizontal structure, wide or narrow span of control, functional or divisional structure. Whether to use labour intensive or capital intensive production technique? What motivational approaches to use in the organization. The situational approach assumes that there is no one best way to answer such questions due to the fact that every organization, the employees and the magnitude of the issues faced in each organization differs and constantly change over time. Thus the search for 'the one best way' or 'the correct answer' is illusory (Buchanan & Huczynski 2004).
Contingency approach provides four popular variables such as change and uncertainty, size of the organization, task technology are all identified as environmental factors impacting the effectiveness of different organizational forms. According to contingency approach viewpoint, stable environment provides room for mechanistic structure that provides room for centralizations of activities, formalization of works and task specialization to achieve efficiency and consistency. In such a circumstance the application of policies and procedures to guide decision making for routine tasks are possible. One the other hand however, unstable environment suggests for an organic structure which stress more decentralization and flexibility to adopt the changing situations thus standardized or tailor made tactics are incompatible to tackle the issues. This can be summarized as in the following diagram
Each individual organization is different in size and complexity and the issues these organization experiences vary and are highly dependent of the behavior of the environment it operates. The four popular variables in the contingency theory are
Routineness of the task technology
As organizations pass through different stages in their life cycle, their goals, level of innovations, management styles and control systems keep on changing. Large and small organizations as measured by the number of employees and volume of sales usually have very different management styles and organization structure.
Organization size is one of the contingency variables which influence the efficiency and effectiveness of the organizational form and the style of its management. Small organizations can afford to function informally, the owner having control over all the aspects of the management and decisions making. However large companies cannot efficiently function in such a style of management, decision making becomes extremely sluggish resulting in lost opportunities and elevated cost. Thus large organizations would apply a more formal management approach. Large organizations can have a more specialized workforce, units while in a small organization a specialized divisional structure would be ineffective and costly to operate.
For instance it would be highly impracticable and costly for a small entrepreneur such as Three Choice to have a divisional approach in managing the business which is similar to that used by Coca Cola Company, even though these two companies are in the same market dealing with soft drinks which are substitutes to each other. Three Choice have a more informal management style where the entrepreneur makes most of the decisions. A divisional management approach is too costly and inappropriate for them. However Coca-Cola Company cannot have an informal management approach because of the size of the market it has to cater. The company can only be efficiently managed with a divisional management approach, such as having marketing, sales, finance, human resource divisions, and each division having their own goals and making their own decisions. Thus the contingency approach emphasizes that managers first need to analyze the size of the organization and then make the most appropriate decision that would best fit the circumstance of the organization.
How organization size affects the business management approach can best be explained with the help of the following table which shows different phases of growth and how it affect the management style, focus, issues and how management tackles the crisis it confronts.
Top management style
Individualistic and entrepreneurial
Make and sell
Efficiency of Operations
Expansion of market
Consolidation of organization
Problem solving and innovation
Management in crisis
Locate and install a business manager
Delegate responsibility to lower-level managers
Use of special co-ordination techniques
Use of teams and confrontation of interpersonal differences
Creation of structures allowing employees to rest, reflect and revitalize themselves
Centralized and functional
Decentralized and geographical
Line, staff and product groups
Matrix of teams
Source: Organizational Behavior An Introductory Text fifth edition by David Buchanan and Andrzej Huczynski; which was originally published by Harvard Business Review in 'Evolution and revolution as organization grow' by Larry E. Grainer 1998.
In the first face of the business entrepreneurs main focus is to produce and sell their new products. At this stage staffs are few, product volume and number are low and communications are informal. However when growth comes, more technical expertise are employed, better procedures and a totally different way of managing the business. This is the point where the entrepreneur appoints a business manager to handle the operation.
In the second phase the business will be managed by dividing the organization according to functions or divisions specializing on various activities and communication becomes informal. Top management only sets the direction and assumes decisions making from the functional specialists
In the third phase of growth top management only deals with exceptional issues giving divisional managers greater responsibility while lower level managers are responsible of searching new markets and catering customer needs more efficiently.
In the fourth phase co-ordination of business activities becomes more formal and organization is managed through a decentralized management approach. The span of control increases as more employees are hired.
In the fifth phase of growth the organization have a matrix structure and behavioral management approach is used. Managing the business and staff through formal control system is abandoned and cross sectional teams are used for problem solving.
Routineness of Task Technology
Joan Woodward was the first person to discover that the organization's performance, its structure and management style was contingent or depended on the level and type of technology used by the firm. Woodward found that as the technology became more complex, the length of chain of command increased and the management levels increased from an average of three to six. (Buchanan & Huczynski 2004 p. 522). As the organization becomes more technologically advanced and complex, the proportion of managers to total number of employees increases as well as the proportion of indirect labour compared with that of direct labour. This results in the top managers or the chief-executives and lower level managers at the supervisory level having an increased span of control. The span of control of first level managers would be high if the firm uses mass production techniques. On the contrary it will be the lowest if process production techniques are used.
The level of technological use in the organization determines the nature of jobs, work groupings, hierarchy, skills, values and attitudes in the organization setting'. (Buchanan & Huczynski 2004, p. 521). Thus the managerial activities in an organization would be based on the routineness of the task technology.
Routine task technology refers to repetitive use of technology in performing the same activity. The level of managerial complexities and decision making highly depends on how routine the task is and how complex the technology used is to perform the task. If routine task technology is used, the managerial activities of planning, controlling, communicating and organizing the activities become easy. Standard rules and procedures can be used to communicate and control the activity as well as problem solving. A classical example of the use of routine task technology is a crane operator who loads and unloads cargo to the ships. The operations and management decision making can be standard. Communication and controlling can be achieved by implementing rules and procedures.
Use of non-routine technology in performing various tasks demands a high level of management. Managerial functions become more complex as the issues faced by the managers would be unique and the manger cannot apply a standard problem solving approach. Every time the manager has to analyze the issue, use his judgment, intelligence, and past experience and make decisions that will best fit the circumstance. For example the technical issues faced by pilots during flight would be non- routing which are difficult to manage and demands judgmental decisions based on his intelligence past experience and training.
Technology also creates task interdependence. Use of technology which links one function to another creates fixed orderly tasks which demands for more co-ordination and effective communication. For example in a car factory where chain production technique is used, the car can be painted only when assembling is completed. Any mismanagement in the assembly line would delay the painting hence the finishing of the car. Here the production process would be managed through different teams specialized in different tasks and encouraging team effort. The management would focus more on co-ordination and effective communication.
In light of the above discussion therefore if an organization's tasks and technology used throughout the organization are routine, the organization is likely to have a tall hierarchy, few managers with more span of control. Standard rules and procedures can be used for communication and controlling. On the other hand if non routine tasks and technology are used than the organization will have a flatter hierarchy, with more managers having low span of control and few rules and procedures which encourages more face to face contact and a decentralized management approach and more room for flexibility in decision making.
As open systems, business organizations are in constant interaction with its environment. The volatility of the surrounding business environment affects the style of management approach to be used. Each organization has a unique environment. The more diversified and the more activates the organization undertakes the more complex its environment becomes. Some of the internal and external factors which affect the internal operation of the business include;
1. Competitors 2. Customers 3. Technological
4. Distributors 5. Suppliers 6. Employees
6. International forces 7. Political & legal 9. Economic forces
Each of the factors has a unique effect on the operation of the organization. For example before the Maldivian Audit Act was passed, Audit General's Office had tall hierarchy with few audit managers controlling two to three audit teams. However once the audit act was passed it required the office to submit report within 60 days after the reception of financial statements. Thus in order to cope with the change in legal environment and statutory requirements, the organization was restructured which lead to a more flat organization with increased managerial posts and managers having just one audit team to manage, all the managers directly reporting to the auditor general without any intermediary between. More authority delegated to managers, this management approach enabled quicker decision making. Since the auditor general was in constant contact with his managers it eliminated the intermediary review and report editing by review committees.
If the organization operates in relatively stable market where the technological and other factors are unchanging, a mechanistic management structure is more suitable, which will enable the organization to control its activities through implementation of strict rules and procedures. for example most of the government offices are more likely to have such a management approach. However in contrast if the environment the organization operates is volatile and constantly changing than an organic management approach is more suitable which creates more flexibility to adjust the changing environment. Few rules and regulations encourage face to face interaction of individuals in solving the issues rather than the superior commanding on what to be done in such situations.
The presence of individual human characteristics makes people different from one another. What is more challenging in a diverse workforce is respecting individual ideas, social values contributions and promoting a shared sense of vision in achieving organizational goals. Globalization and easy mobility of labour has resulted in more diversity and multicultural workforces, which paves way for stereotyping. Managing to create a work environment where everyone feels they are valued and accepted despite of their gender, social value, race, colour etc are indeed very challenging. Similarly the management approach would also differ from industry to industry as the knowledge and skills the individuals possess will vary in different industries.
A manger needs to understand the differences among the individuals, for example compared to men, women are more conforming, have lower expectation of success, and have higher absenteeism. Old workers are often inflexible, sometimes complain that their experience and skill are not valued, have lower turnover and lower avoidable absences. (McCudd. 2003). Similarly an individuals' capability to learn and their ability to carry out different task will vary.
The management approach also varies depending on the diversity of workforce, the professions or sectors. For example the management level and approach needed in a professional audit firm would vastly differ from the level of management and the management approach which has to be applied by a firm in the construction industry. The individuals in an audit firm would be highly skilled and professional. Tight control, close monitoring and supervision are not needed. Organizing and communicating with them are easy. However in contrast labours in the construction firm will be more difficult to manage. Tight controlling, close supervision and monitoring are essential while organizing and communicating with them would be difficult due to low level of literacy.
Therefore, the management structure and approach of an organization has to be designed after analyzing the diversity of the individuals, skills and professions and the industry in which the organization functions. Any resistance to diversity management in an organization will have to be addressed. Diversity also brings creativity and better customer service. The organization will benefit from its diverse workforce only if it can be properly managed.
3. PLANNING IN A CONTINUALLY CHANGING ENVIRONMENT
Creativity, innovation and the passion for success through continuous development of ambitious ideas and implementing them to create wealth are the traits of today's entrepreneurs. Modern entrepreneurs have redefined the way of doing business.
Entrepreneurs operate in open systems which are in a continuous interaction with the external environment. The trend of globalization and economic transformation has huge influence on businesses which operates domestically as well as internationally. Globalization results more fierce competition to the domestic business while it created immense opportunities for multinational companies. Governments encourage flow of foreign investments through abolishment of trade barriers and encouraging flow of business investments, provide numerous incentives for Small and Medium Enterprises.
Liberalization of trade regimes continues, tariffs have fallen and will continue to fall, and there will be stronger pressure to remove non-tariff barriers. Liberalization of countries economies are increasingly integrated within the global economy. Multilateral and bilateral trade agreements between countries are accelerating this integration and changing the behavior of trade and capital flows among countries. (SME Annual Report 2006, Malaysia). Business organizations need to be aware and vigilant about these emerging opportunities and the threats which come along. In essence, the entrepreneurs can be successful only if business is appropriately matched to its surrounding environment.
In order to plan for environmental changes efficiently and effectively entrepreneurs need to understand how their environments are structured. The organizational environments are generally divided in to three categories as shown in the diagram below. In this paper only the components of the general environment are discussed.
The organization and its environment
Source: Modern Management Concepts and Skills, Seventh Edition by Samuel C. Certo and S. Treis Certo
The economic environment determines the opportunities, availability, allocation and distribution of economic resources entrepreneurs can utilize in creating wealth. The important issues which are to be considered in analyzing the economic environment are generally the wages paid to labour, inflation and unemployment, the tax paid by business as well as individuals, cost of raw material, interest rates, exchange rates etc. Entrepreneurs also need to understand the general economic condition that prevails. Whether the economy is booming or is in a recession because the economic condition is the determinant of all the other factors.
The above mentioned economic factors can significantly affect the way business functions, thus needs to adjust the plan accordingly. During the time of recession entrepreneurs may loose from all direction. Sales are expected to decline, expenses will raise, valuable customers and employees may go. Following are some important measures the entrepreneurs can take to diffuse recession.
If revenue starts to decline, identify all the expenses that can be cut down. However loans and mortgages should be paid despite the financial difficulties.
Customers are the first to be hit during recession, encourage them to continue doing business by giving discounts, gift vouchers, special offers etc.
Retention of well-trained and talented key employees, otherwise they may change jobs to one of the competitors.
If competitors are weak during recession, be aggressive in marketing, this will help to pay off even after recession.
Develop new ideas and get feedback from customers on what they want and cater their needs.
Economic boom is a period which brings immense opportunities, entrepreneurs should be ready to capitalize on the demand boost, tap new markets, diversify business or open new ventures.
The social factor describes the characteristics of the society in which the organization exists. The two important factors of the society which affect business decision making are demographics and social values of that society. Social and demographic factors influence the type of goods produced and the manner in which they are produced.
Most of the developed counties such as the UK are confronted with ageing population, changing demographic structure and geographic distribution. Decline in birth rate combined with advanced health care have resulted in a large proportion of the society becoming old. Lone parent families have increased and more people on high income have been moving from urban to rural areas. This demographic change will have a dramatic effect on the pattern of spending, employment, production, saving and investments. Such changes can influence the reception of goods and services hence the organization will have to alter its plans to suite the changes. For example recruiting new employees would be challenging as the working population is limited therefore the entrepreneur may have to plan recruiting from developing counties where skilled labours can be hired at low cost. Similarly while demand for certain goods may decline due to ageing population while demand for others such as retirement housing may increase dramatically. The entrepreneurs have to change its business direction so that these changes in its environment can be addressed.
In addition to the demographic aspects mentioned above, entrepreneurs need to be aware of the changes to social and cultural factors in order to remain as productive and profitable. It is important for entrepreneurs to know that social changes are inevitable. Economic recessions and booms often lead to some households in the society moving from one social class to another. Similarly cultural patters of a society also affect the production, promotion and marketing methods used as well as colour and packing of the products sold. The entrepreneurs therefore need to understand the social values and demographic patters of the business environment, and constantly monitor the changes and adjust the business strategy to capture niche markets based on new consumer preferences.
Political and Legal Components:
Political stability is vital for business to flourish. Political environment largely depends up on the political party in power and the government's attitude towards various industries. Changes in tax rates have an immediate effect on the business profits and the higher the lower the retained profits. There may also be severing regulations on advertising certain products as Canada has done on the advertising of Alcohol and tobacco products. One of the classical examples of government regulation which affect business is the recent Chinese policies to favor local tech companies which resulted some of the US Tech companies leaving the booming market. (witiger.com/internationalbusiness). However most of the countries today encourage entrepreneurs by opening various path ways to develop for instance Malaysia has identified the following potential growth areas for Small and Medium Enterprises and provides several incentives.
Halal food and other products trade; this is a huge potential areas for new entrepreneurs and existing ones to diversify as there is huge market of around 2 billion people. Malaysia aims at becoming the international Halal hub which creates immense opportunities
Franchising- government is proactive in promoting franchising amongst local entrepreneurs
ICT; government aims to create greater number of local technology based companies providing incentives for growth
Thus, entrepreneurs should plan to benefit from these opportunities through undertaking of new ventures and tapping these new opportunities, because in developing countries out of 10 people launching business, six are opportunity driven. (Harvard Business Review Sept 2010 issue). Political environment around the world seems to be positive creating opportunities for new business as well as encouraging local entrepreneurs to go international.
Entrepreneurs also need to be vigilant about the changes to the existing laws as well as new laws which may affect the business operations. Some of these laws include consumer and employee protection acts, occupational safety regulation, product-safety regulations. If the legal environment changes, entrepreneurs should plan to adopt the laws in order to avoid law suits, which may otherwise cost more in terms of money as well as loss of reputation and customer confidence. Entrepreneurs should foresee the coming legal changes. For instance the Maldivian entrepreneurs should now foresee the coming of business profit tax law and get ready, because there are no shortcuts when it comes to legal matters.
Technological factor is another environmental component which is constantly changing and demands the entrepreneurs to keep pace. New equipments with more sophisticated technology are introduced; the production techniques of goods and services are changing rapidly and the managers have to plan adopting the new techniques and the sooner the better. Early adoption of new techniques ahead of competitors will give an edge over the rivals which will help to capture a greater market share. Unwillingness or sluggishness to adopt new procedures, new equipments and production techniques will cost the business dearly which ultimately may even result in exiting the market because the high intensity of today's competition. A classical example of delaying the adoption of new techniques which cost the entrepreneur is the Three Choice of Maldives, the only local soft drink producer. When Three Choice delayed moving from glass bottle to pat bottle while the competitors swiftly adopted the new technique, resulted Three Choice to temporarily exit the market. When Three Choice came back to the market with new technique the competition has increased, customers have moved on to competitors, Three Choice had to start from the beginning.
As creative innovators, entrepreneurs must constantly monitor the changes in the environment. The changed may not always be favorable, thus the entrepreneurs should plan and foresee the surrounding environment. There are some common approaches used by successful entrepreneurs which are in explained in the article 'The High Intensity Entrepreneur'. These entrepreneurs shielded the business from external environmental changes and even global economic down turns. These include,
Diversify the business- start new ventures of the same business or diversify the business so that unfavorable changes in the surrounding environment can be absorbed and risk shared as often not all types of business are hit during economic recessions or changes in other factor.
Focus on to constantly create new products, new supply or distribution channels, and new customers, and generate economic value.
Tap new markets with high growth potentials which are unscrutinized by investors or multinationals
The entrepreneurs also need to know their short comings in order to sail through changing environments as well as to grow big and be successful. David Finkel have identified the following three greatest challenges that entrepreneurs need to overcome to be successful;
Overcoming the self employment trap; most entrepreneurs create a job for themselves instead of creating a business.
Building wealth independent of the business; having all the economic eggs in the basket of the business is too shortsighted and risky. It is important to develop wealth skills in parallel to business skills and have financial fluency to manage wealth and invest wisely.
Seeing the business more than just money; have a deeper meaning, to have a sustainable business help the employees and customers find that deeper meaning.
Entrepreneurs should prepare for the changes in external environment, not when the changes arise, but the business must be made ready for such changes before hand. It is imperative to maintain a harmonious internal environment where employees are valued so that a team of committed employees would be there to diffuse the external threats and take the business through the changes to a stable environment.