BBPP1203

Principles of Management
for Non-Business Majors

Copyright © Open University Malaysia (OUM)

 BBPP1203
PRINCIPLES OF
MANAGEMENT FOR
NON-BUSINESS
MAJORS
Shahrol Aman Ahman
Azhari
Ramli Nasri
Nalimi
Azelin Aziz
Assoc Prof Dr Santhi Raghavan

Copyright © Open University Malaysia (OUM)

Project Director: Prof Dato’ Dr Mansor Fadzil
Open University Malaysia

Module Writers: Shahrol Aman Ahmad

Azhari
Ramli Nasri
Nalimi
Azelin Aziz
Universiti Utara Malaysia

Assoc Prof Dr Santhi Raghavan

Open University Malaysia

Enhancer: Norhayati Shuib

Open University Malaysia

Developed by: Centre for Instructional Design and Technology

Open University Malaysia

First Edition, August 2017

Copyright © Open University Malaysia, August 2017, BBPP1203
All rights reserved. No part of this work may be reproduced in any form or by any means without
the written permission of the President, Open University Malaysia (OUM).
Table of Contents
Course Guide ix–xiv

Topic 1 Introduction to Management 1

1.1 Definition of Management 2
1.2 Who are Managers? 3
1.2.1 Types of Managers 3
1.2.2 Management Functions 4
1.2.3 Roles of a Manager 6
1.2.4 Skills of a Manager 9
1.3 Evolution of Management Theory 11
1.3.1 Classical Perspective 11
1.3.2 Human Perspective 16
1.3.3 Quantitative Management Approach 18
1.3.4 Contemporary Approach 19
1.4 Globalisation and Cross-cultural Management 20
Summary 22
They Terms 23

Topic 2 Planning and Decision-making 24

2.1 Definition of Planning 25
2.2 Effective Planning 26
2.3 Types of Planning 29
2.4 Advantages and Disadvantages of Planning 31
2.5 Organisational Decision-making 33
2.6 Decision-making Environment 34
2.6.1 Decision-making in Certain Conditions 34
2.6.2 Decision-making in Uncertain Conditions 35
2.6.3 Decision-making in Risky Conditions 35
2.7 Rational Decision-making Process 36
2.7.1 Limitations in Rational Decision-making 38
2.8 Group Decision-making 39
2.8.1 Brainstorming 39
2.8.2 Nominal Group Technique 40
2.8.3 Delphi Technique 40
2.8.4 Advantages and Disadvantages of Group 41
Decision-making
Summary 42
They Terms 43
iv  TABLE OF CONTENTS

Topic 3 Organisational Structure and Change 44

3.1 Factors that Influence Organisational Structure 45
3.2 Designing Organisational Structures 46
3.3 Authority 52
3.4 Centralisation and Decentralisation 55
3.5 Work Design 56
3.6 Mechanistics and Organic Structures 58
3.7 Organisational Change 59
3.7.1 Managing Change 59
3.7.2 Barriers to Change 61
3.7.3 Overcoming the Barriers to Change 62
Summary 63
They Terms 64

Topic 4 Human Resource Management 65

4.1 Essential Functions of HRM 66
4.2 Human Resource Planning 67
4.3 Recruitment 68
4.4 Selection 69
4.5 Training and Development 71
4.6 Performance Appraisal 72
4.7 Compensation 74
4.8 Employee Separation 76
4.8.1 Employee Termination 76
4.8.2 Downsizing 77
4.8.3 Retirement 77
4.8.4 Employee Turnover 78
Summary 78
They Terms 79

Topic 5 Communication in Organisations 80

5.1 Definition of Communication 81
5.2 Types of Communication 83
5.3 Communication Channels 85
5.3.1 Formal Communication 85
5.3.2 Informal Communication 86
5.4 Increasing Communication Effectiveness 87
Summary 89
They Terms 90
 TABLE OF CONTENTS  v

Topic 6 Motivation 91
6.1 Approaches to Motivation 92
6.2 Need-based Models 93
6.2.1 MaslowÊs Hierarchy of Needs 93
6.2.2 Two-factor Model 95
6.3 Process-based Models 96
6.3.1 Expectancy Theory 97
6.3.2 Equity Theory 98
6.3.3 Goal-setting Model 98
6.3.4 Reinforcement Model 99
Summary 100
They Terms 101

Topic 7 Leadership 102

7.1 Leadership Approaches 103
7.1.1 Leader-centred Approach 103
7.1.2 Follower-centred Approach 106
7.1.3 Interactive Approaches 106
7.2 Strategic Leadership 108
Summary 110
They Terms 111

Topic 8 Controlling 112

8.1 Definition of Controlling 112
8.2 Steps in the Control Process 113
8.3 Basic Methods of Control 115
8.4 Forms of Control 117
Summary 118
They Terms 119

Topic 9 Managing Teams 120

9.1 Differences between Teams and Groups 121
9.2 Advantages and Disadvantages of Teams 121
9.3 When is a Team Needed? 123
9.4 Types of Teams 124
9.5 Phases of Team Development 128
Summary 129
They Terms 130

References 131
vi  TABLE OF CONTENTS
COURSE GUIDE

Copyright © Open University Malaysia (OUM)

Copyright © Open University Malaysia (OUM)
 COURSE GUIDE  ix

COURSE GUIDE DESCRIPTION

You must read this Course Guide carefully from the beginning to the end. It tells
you briefly what the course is about and how you can work your way through
the course material. It also suggests the amount of time you are likely to spend in
order to complete the course successfully. Please keep on referring to Course
Guide as you go through the course material as it will help you to clarify
important study components or points that you might miss or overlook.

INTRODUCTION
BBPP1203 Principles of Management for Non-Business Majors is one of the
courses offered at Open University Malaysia (OUM). This course is worth 3
credit hours and should be covered over 8 to 15 weeks.

COURSE AUDIENCE
This is a compulsory basic course for Open University Malaysia. As an open
and distance learner, you should be able to learn independently and optimise
the learning modes and environment available to you. Before you begin this
course, please confirm the course material, the course requirements and how
the course is to be conducted.

As an open and distance learner, you should be acquainted with learning

independently and being able to optimise the learning modes and environment
available to you. Before you begin this course, please ensure that you have the
right course materials, and understand the course requirements as well as how
the course is conducted.

STUDY SCHEDULE
It is a standard OUM practice that learners accumulate 40 study hours for every
credit hour. As such, for a three-credit hour course, you are expected to spend
120 study hours. Table 1 gives an estimation of how the 120 study hours could be
accumulated.
x  COURSE GUIDE

Table 1: Estimation of Time Accumulation of Study Hours

Study
Study Activities
Hours
Briefly go through the course content and participate in initial discussions 3
Study the module 60
Attend 4 tutorial sessions 10
Online participation 12
Revision 15
Assignment(s), Test(s) and Examination(s) 20
TOTAL STUDY HOURS ACCUMULATED 120

COURSE OUTCOMES
By the end of this course, you should be able to:

1. Describe the basic concepts, functions and basic skills in management;

2. Describe the management of an organisation including employees, and

physical resources;

3. Explain the changes in management and the current management practice

of todayÊs business; and

4. Apply the principles of management to the workplace.

COURSE SYNOPSIS
This course is divided into nine topics. The synopsis for each topic is listed as
follows:

Topic 1 gives an overview of management and the roles that must be played by
the manager. The management skills required at different levels of management
will also be introduced. Learners will be exposed to the evolution of management
thoughts that explains the thinking contributed by the main management
thinkers over the years.
 COURSE GUIDE  xi

Topic 2 deliberates planning as one of the most significant functions in

management. The processes involved in effective planning, forms of planning
as well as the advantages and disadvantages of planning are discussed. This
topic also explains decision making – the process of identifying problems,
generating alternative solutions, and selecting and implementing the best
solutions available. Other than that, it also discusses the situations of decision
making – certain conditions, uncertain conditions and risky conditions – and
the steps involved in rational decision making. The types of limitations in the
process of decision making, which are bounded rationality, common mistakes
and risky environment, will also be discussed. Finally, the topic will look
into the two methods to improve the quality of decisions to be made using
specific rules and tests and group decision making.

Topic 3 describes the design of an organisation. Several factors that influence the
structure of an organisation such as strategies, size, environment and technology
will be discussed. The types of organisations such as departmentalisation
grounded on functions, products, customers, geographical location and matrix
will also be clarified. This is followed by management of organisations which
includes authority, chain of command, span of control, delegation, centralisation
and decentralisation. Apart from that, it will also converse work design that
involves work specialisation, job rotation, job enrichment and job enlargement.
Finally, this topic will explain the mechanistic and organic organisational designs
and several other types of new structures. This topic will also deliberate the
forces of changes in organisations. The factors that can cause changes to
organisations, ways to manage changes, resistance to change and tactics to
overcome resistance to change will also be explained.

Topic 4 focuses on human resource management (HRM). This topic discusses

the essential functions of HRM which include human resource planning and
forecasting, recruitment of potential employees, the use of different selection
techniques to select employees, the types of training and development use to
increase employeesÊ skills and abilities, performance appraisal, compensation
strategies and employee separation. The importance of all functions will also be
explained.

Topic 5 covers communication, where the basic elements in a communication

process are defined. The types of communication that are frequently used in
organisations, such as verbal, non-verbal and electronic communication are also
presented. Also discussed are the communication channels that cover formal and
informal communication. Learners will be exposed to effective communication
and also the classification of barriers to communication.
xii  COURSE GUIDE

Topic 6 explains motivation models. Two types of motivation models that will be
discussed are the needs based and process based models. These include Maslow's
Hierarchy of Needs Model, HerzbergÊs Two Factor Theory, McClellandÊs
Needs Achievement Model, Expectancy Model, Equity Theory, Goal-setting and
Reinforcement Theory.

Topic 7 reviews leadership. This topic will discuss leadership based on three
approaches which are leader-centred approach, follower-centred approach and
interactive approach. The leader-centred approach focuses on the characteristics
of the leaderÊs personality, behaviour of the leader and style of leadership. Under
the behavioural approach, the Management Grid and the researches by the Ohio
State University and Michigan University will be discussed. The follower-centred
approach focuses on the variables of replacement and neutralisation of
leadership. In the interactive approach, the Situation Leadership Model, Fiedler
Contingency Model, and the Path-Goal and the Continuum of Leadership
Behaviour will also be discussed. At the end of this topic, strategic leadership
will be presented and it covers the characteristics of visionary leaders,
charismatic leaders, transactional leaders and transformational leaders.

Topic 8 covers control. This topic discusses the steps in the control process. Also
discussed are the basic methods of control and five forms of control.

Topic 9 focuses on teams. This topic starts with the differences between
teams and groups, the advantages and disadvantages of teams and when teams
are used. Also discussed are the types of teams that exist in an environment.
Several features of teams and phases of team development will also be
elaborated.

TEXT ARRANGEMENT GUIDE

Before you go through this module, it is important that you note the text
arrangement. Understanding the text arrangement will help you to organise
your study of this course in a more objective and effective way. Generally, the
text arrangement for each topic is as follows:

Learning Outcomes: This section refers to what you should achieve after you
have completely covered a topic. As you go through each topic, you should
frequently refer to these learning outcomes. By doing this, you can continuously
gauge your understanding of the topic.
 COURSE GUIDE  xiii

Self-Check: This component of the module is inserted at strategic locations

throughout the module. It may be inserted after one sub-section or a few sub-
sections. It usually comes in the form of a question. When you come across this
component, try to reflect on what you have already learnt thus far. By attempting
to answer the question, you should be able to gauge how well you have
understood the sub-section(s). Most of the time, the answers to the questions can
be found directly from the module itself.

Activity: Like Self-Check, the Activity component is also placed at various

locations or junctures throughout the module. This component may require you
to solve questions, explore short case studies, or conduct an observation or
research. It may even require you to evaluate a given scenario. When you come
across an Activity, you should try to reflect on what you have gathered from the
module and apply it to real situations. You should, at the same time, engage
yourself in higher order thinking where you might be required to analyse,
synthesise and evaluate instead of only having to recall and define.

Summary: You will find this component at the end of each topic. This
component helps you to recap the whole topic. By going through the
summary, you should be able to gauge your knowledge retention level.
Should you find points in the summary that you do not fully understand, it
would be a good idea for you to revisit the details in the module.

They Terms: This component can be found at the end of each topic. You should
go through this component to remind yourself of important terms or jargon used
throughout the module. Should you find terms here that you are not able to
explain, you should look for the terms in the module.

References: The References section is where a list of relevant and useful

textbooks, journals, articles, electronic contents or sources can be found. The list
can appear in a few locations such as in the Course Guide (at the References
section), at the end of every topic or at the back of the module. You are
encouraged to read or refer to the suggested sources to obtain the additional
information needed and to enhance your overall understanding of the course.

PRIOR KNOWLEDGE
This is an introductory course. There is no prior knowledge needed.
xiv  COURSE GUIDE

ASSESSMENT METHOD
Please refer to myINSPIRE.

TAN SRI DR ABDULLAH SANUSI

(TSDAS) DIGITAL LIBRARY
The TSDAS Digital Library has a wide range of print and online resources for
the use of its learners. This comprehensive digital library, which is accessible
through the OUM portal, provides access to more than 30 online databases
comprising e-journals, e-theses, e-books and more. Examples of databases
available are EBSCOhost, ProQuest, SpringerLink, Books247, InfoSci Books,
Emerald Management Plus and Ebrary Electronic Books. As an OUM learner,
you are encouraged to make full use of the resources available through this
library.
Topic  Introduction to
1 Management
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Describe the meaning of management;
Describe who managers are and the nature of their work;
Discuss the different perspectives in management; and
Explain how globalisation affects management principles and practices.

 INTRODUCTION
Management is an essential element in every organisation. Management means
ensuring that a job is carried out well until completion by working with and
through people using organisational resources.

This means a manager may not necessarily need to know how to perform a
specific job but he needs to act as a coordinator to ensure that the task is carried
out smoothly.

For example, the manager of a shoe factory may not necessarily know the details
of shoemaking but he needs to ensure that all resources allocated to him,
including human resources – the employees under him – function satisfactorily
and that the objectives set by the organisation are achieved. Furthermore, the
manager needs to make sure that the objectives are achieved efficiently and
effectively.
2  TOPIC 1 INTRODUCTION TO MANAGEMENT

1.1 DEFINITION OF MANAGEMENT

Management is the process of overseeing and coordinating resources efficiently
and effectively in line with the goals of an organisation. Effectiveness is the
attainment of goals which enables the realisation of the objectives of an
organisation or to put it briefly, „doing the right thing‰. A manager, who
decides on an inappropriate goal, for instance, to produce a large number of
multipurpose vehicles (MPV) when the demand for compact cars is soaring, is an
ineffective manager.

Efficiency is performing a job with minimum effort, cost and wastage or simply,
„doing things right‰. Managers who are capable of minimising the cost of the
resources (labour, materials and time) required to attain goals are acting
efficiently.

The end result of an efficient and effective management is a successful

organisation. Both efficiency and effectiveness cannot be excluded from the
definition of management as these are essential elements in defining
management.

SELF-CHECK 1.1

Why do organisations need managers?

ACTIVITY 1.1
What is management? Discuss with your coursemates.
 TOPIC 1 INTRODUCTION TO MANAGEMENT  3

1.2 WHO ARE MANAGERS?

A manager is an individual who is directly responsible for ensuring that tasks are
performed by people or employees in an organisation. In the following subtopics
you will be able to understand what managers do by learning about the different
types of managers.

1.2.1 Types of
Managers
Most organisations have a few types of managers. In a university, for example,
there are the vice-chancellor, deputy vice-chancellors, deans, deputy deans,
heads of departments and heads of courses or programmes. Corporate sectors,
on the other hand, have presidents, vice presidents, operations managers, sales
managers, finance managers, supervisors and so forth.

Each manager has a different set of jobs and responsibilities but all are geared
towards fulfilling a goal or set of goals. Managers at different levels utilise their
time differently. Figure 1.1 shows three types of managers.

Figure 1.1: Three types of managers

4  TOPIC 1 INTRODUCTION TO MANAGEMENT

These managerial levels have many similarities. Managers at all the levels
plan, organise, lead and control their employees and tasks in the organisation.
Managers also spend time with their employees through conversations and
discussions, provide guidance and motivation as well as attend conferences and
committee meetings.

1.2.2 Management Functions

Managers are in charge of getting activities accomplished efficiently, setting
and accomplishing the organisationÊs objectives through the implementation of
four basic management functions, namely planning, organising, leading and
controlling.

In short, management refers to the process of delegating tasks to employees to be

performed successfully. These functions are illustrated in Figure 1.2.

Figure 1.2: Main functions of

management Source: Adapted from
Lewis et al. (2001)
 TOPIC 1 INTRODUCTION TO MANAGEMENT  5

Table 1.1 explains each management function.

Table 1.1: Management Functions

Management
Description
Function
Planning Defining objectives to be achieved for a given period and what
needs to be done to achieve the objectives. All management levels
in an organisation need to be involved in planning. Managers need
to develop objectives in line with the overall strategies of the
organisation.
Organising Determining what tasks are to be done, who will implement and
coordinate them, how the tasks are to be grouped, who reports to
whom as well as what decisions are to be made and by whom. The
manager needs to logically and effectively organise the information,
resources and workflow so that he will be able to react positively to
changes in the business environment.
Leading This involves motivating the subordinates, selecting the most effective
communication channels, resolving conflicts, directing as well as
guiding the actions of others in order to achieve all the objectives. The
effective leader has to be visionary, sharing the vision with and
motivating the employees towards realising the vision.
Controlling The measuring of performance in all predetermined objectives,
determining reasons for deviations and taking appropriate actions,
where necessary. Controlling is an important function in the
management process as it provides ways to ensure that the
organisation moves towards achieving its objectives.
6  TOPIC 1 INTRODUCTION TO MANAGEMENT

1.2.3 Roles of a Manager

The functions of management uniquely describe the managersÊ jobs. Managers
at all levels in the organisation are involved in planning, organising, leading
and controlling resources. A manager does not necessarily have to know how to
perform a specific job because he only acts as a coordinator to ensure the smooth
running of the operations.

For example, the manager of a clothes manufacturing factory does not

necessarily have to know in detail the techniques of making clothes. However, he
needs to ensure that each resource under his control such as capital, factory
and manpower functions properly and that the objectives outlined by the
organisation are met.

As stated earlier, there are many ways to identify a manager. A management

expert and professor, Henry Mintzberg, carried out a comprehensive analysis of
managers by walking around and observing what managers do while at work.
He observed that managers not only planned, organised, led and controlled
but also played other important roles as detailed (Lewis et al., 2001) in Table 1.2:

Table 1.2: Management Roles

Role Description
1. Figurehead  A manager must carry out ceremonial duties and represent
the organisation in all matters of formality.
 For example, the vice-chancellor of a university must be
involved in the launching of programmes to be conducted at
the university; the head of the department is responsible for
entertaining his clients.
2. Leader  A manager indirectly functions as a leader. Each manager
must function as a leader to motivate and encourage his
subordinates.
 As a leader, he is also involved in directing and coordinating
the activities of his subordinates to effectively achieve the
goals of the unit and organisation besides resolving problems
and issues.
 TOPIC 1 INTRODUCTION TO MANAGEMENT  7

3. Liaison Officer  A manager conveys relevant information to individuals

outside his unit or to other relevant parties outside his
organisation. This role may include interactions with both
parties inside and outside the organisation.
 Thus, a manager acts as a channel of communication between
his department and those within the organisation as well as
those outside the organisation.
 Top level managers use the liaison role to obtain help and
information while the supervisor uses it to uphold the daily
flow of work.
4. Spokesperson  Managers represent and speak on behalf of their organisation.
In this role, managers are liable for conveying information
about the organisation and its goals to the public.
 For instance, the supervisor will usually make sure that the
operations manager is equipped with up-to-date information
regarding the running of his production plant. Likewise, the
general manager of a factory will lobby the local authorities
for a new tender.
5. Negotiator  No organisation is without problems. A manager is required
to find a solution for each of its problems regardless of
complexities.
 The manager needs to spend a lot of time in discussions as he
plays the role of a negotiator.
 For example, a manager will negotiate with the trade union
representative to reach an amicable agreement on the salaries.
8  TOPIC 1 INTRODUCTION TO MANAGEMENT

6. Initiator  Two management experts, Sumantra Ghoshal and

Christopher Bartlett, emphasised an additional role of a
manager as an initiator of corporate actions and
transformations (Dessler, 2001). In addition, an excellent
manager is one who is able to initiate and cultivate the three
processes that can steer his employees towards achieving
change. These processes are:
– Entrepreneurship Process
The manager will try to improve his unitÊs performance
and when he gets a good idea, he will launch a programme
to realise the idea. To meet the objective of having
employees to think like an entrepreneur, the manager
needs to empower, support and provide incentives for
employees to attain self-direction.
– Capability Development Process
A successful manager will focus on creating a favourable
environment that inspires employees to shoulder
additional responsibilities. He will also focus on preparing
the essential training and guidance to build their self-
confidence and encourage them to learn from their
mistakes.
– Reformation Process
A successful manager will identify situations that might
challenge the strategies of the organisation and
assumptions made. In other words, the manager is capable
of supporting a querying disposition such as why
something is done in a certain way and whether there are
alternative ways of doing it.
 TOPIC 1 INTRODUCTION TO MANAGEMENT  9

1.2.4 Skills of a
Manager
Managers require skills that will help them manage people and technology in
order to ensure an effective and efficient understanding of their working
tasks. Therefore, the third approach to understanding the tasks of managers is
to analyse the skills required to carry out the tasks.

Figure 1.3 shows three types of essential skills needed at each level of
management. The arrow pointing upwards shows the type of skills that are
increasingly needed by top-level management. The arrow pointing downwards
shows the type of skills that are increasingly needed by lower-level management
or line managers.

Figure 1.3: Skills required of a manager

10  TOPIC 1 INTRODUCTION TO MANAGEMENT

Let us now go through each of these skills one by one.

(a) Conceptual Skill

Conceptual skill refers to a managerÊs ability to view the organisation
as a whole, to recognise the interactions among various subunits and to
visualise how the organisation fits into its larger environment. The need
for conceptual skills becomes increasingly crucial when a manager climbs
higher in the management hierarchy.

(b) Interpersonal Skill

Interpersonal skill refers to the managerÊs ability to get along with
others while getting the job done. Interpersonal skills include everything
from communication and listening skills to attitudes and mannerisms.
Interpersonal skills are critical regardless of the level of management.
However, low-level managers will be more occupied in solving technical
problems while managers at the middle and higher levels will mainly be
occupied with dealing directly with others.

(c) Technical Skill

Technical skill is the ability to apply procedures, techniques and specialised
knowledge required for a certain task. For example, a data analyst manager
needs to understand not only how to analyse data but how to store it, code
it, and retrieve it because data analysts are engaged in all of these tasks.
Technical skills tend to be more important for lower-level managers. This is
because lower-level managers usually manage employees who use tools
and techniques to produce the organisationÊs products and services.

SELF-CHECK 1.2

Describe the relationship between the levels of management and the skills required.
 TOPIC 1 INTRODUCTION TO MANAGEMENT  11

1.3 EVOLUTION OF MANAGEMENT THEORY

From the start of the 19th century until the 20th century, managers and scholars
formed theoretical frameworks to explain what they believed to be good
practices of management. Their effort led to five different classes of perspectives
on management, namely classical, behavioural (human), quantitative and
contemporary. Each perspective is based on different assumptions with respect
to the objectives of the organisation and human behaviour. Figure 1.4 will help
you understand the chronological sequence of the perspectives.

Figure 1.4: Evolution of management theory

1.3.1 Classical Perspective

This perspective came about in the 19th century and early 20th century. It
focused on the rational and scientific approaches to the study of management
and on finding ways to mould an organisation to become more efficient.
There are three subclasses in this perspective, namely scientific management,
bureaucratic management and administrative management.
12  TOPIC 1 INTRODUCTION TO MANAGEMENT

(a) Scientific Management

Scientific management is based on the work of an American engineer,
Frederick Winslow Taylor (1856–1915). In his 1911 book The Principles
of Scientific Management, he laid down the fundamental principles of
large-scale manufacturing through assembly-line factories. It emphasised
rationalisation and standardisation of work through division of labour,
time and motion studies, work measurement and piece-rate wages. This
approach emerged at a time when productivity was deemed critical by
businessmen. Figure 1.5 shows a picture of Frederic Winslow Taylor.

Figure 1.5: Frederick Winslow Taylor

From research findings, Taylor identified five principles of management

that could boost production efficiency. The five principles are:

(i) Using the scientific approach to determine best practices and not
relying on rule of thumb;

(ii) Selecting suitable employees to perform a particular task. Suitability

here refers to mental and physical aspects;

(iii) Training and developing an employee so that he is able to perform a

given task according to established procedures;

(iv) Giving monetary incentives to ensure that employees perform a task

accordingly; and

(v) Reassigning all responsibilities pertaining to planning and organising

to the manager.
 TOPIC 1 INTRODUCTION TO MANAGEMENT  13

(b) Bureaucratic Management

Max Weber (1864–1920), a German social theorist (refer to Figure 1.6),
introduced many bureaucratic concepts. The Max Weber theory of
management, sometimes called bureaucratic management theory, was built
on principles outlined by Frederick Taylor in his scientific management
theory. Like Taylor, Weber advocated a system based on standardised
procedures and a clear chain of command. Weber stressed efficiency, as did
Taylor, but also warned of the danger of emphasising technology at the
expense of emotion. The bureaucratic approach strives to increase
efficiency and ensure continuity of all operations in the organisation.

Figure 1.6: Max Weber

Among the components of bureaucracy are:

(i) Authority and clearly defined responsibilities;

(ii) Positions in the organisation which are structured according to

hierarchy;

(iii) Promotions based on qualifications;

(iv) Records of all administrative actions and decisions to ensure

continuity of organisational rules;

(v) Separation of ownership and management; and

(vi) Implementation of guidelines for all employees without bias.

14  TOPIC 1 INTRODUCTION TO MANAGEMENT

(c) Administrative Management

Administrative management theory attempts to find a rational way to
design an organisation as a whole. Henry Fayol (see Figure 1.7) defined
administration and management as planning, organising, directing,
coordinating and controlling. He identified 14 principles of management.

Figure 1.7: Henry Fayol (1841–1925)

The 14 principles identified by Henry Fayol are as follows:

(i) Division of labour;
(ii) Unity of command;
(iii) Unity of direction;
(iv) Subordination of individual interests to the general interests;
(v) Remuneration;
(vi) Centralisation;
(vii) Scalar chain;
(viii) Discipline;
(ix) Order;
(x) Equity;
(xi) Stability of tenure;
(xii) Initiative;
 TOPIC 1 INTRODUCTION TO MANAGEMENT  15

(xiii) Esprit de corps; and

(xiv) Authority and responsibility.

Mary Parker Follet (1868–1933) was trained in the field of philosophy and
political science. Her approach focused on the involvement of employees
and sharing of information among managers.

Figure 1.8: Mary Parker Follet

Chester I Barnard (1886–1961) introduced the informal organisation

concept. An informal organisation exists within a formal organisation. He
believed that organisations are not mere machineries and that informal
relations could be a powerful tool and an asset to an organisation if
properly managed. He also introduced the Acceptance Theory of Authority
which states that employees have options when it comes to complying with
the directives of the management.

Figure 1.9: Chester I Barnard

16  TOPIC 1 INTRODUCTION TO MANAGEMENT

Overall, the classical perspective towards management is very important and

has given organisations a basic approach to increase productivity and garner
effective support from employees.

SELF-CHECK 1.3

Explain the five principles of management identified by Frederick Winslow Taylor.

1.3.2 Human Perspective

The categories of the human perspective are human relations movement, human
resource approach and social science approach.

(a) Human Relations Movement

Elton MayoÊs contributions came as part of the Hawthorne studies (1924–
1932), a chain of experimentations which carefully applied the classical
management theory only to disclose its weaknesses.

Figure 1.10: Elton Mayo (1880–1949)

 TOPIC 1 INTRODUCTION TO MANAGEMENT  17

Three experiments were conducted and the results of all the experiments
contradicted expected outcomes. In the first experiment, the brightness of
lighting served as a physical situation. It was assumed that higher levels of
brightness would facilitate higher output for the employees. Interestingly, it
was found that when the lighting was brightened or dimmed, production
output continued to increase. This meant that there were other factors
that might have caused the increase in productivity. It was the same for
the second and third experiments where other physical situations were
chosen. The results could not clearly explain the causes for the increase in
production.

In conclusion, the Hawthorne research showed that the productivity of

employees increased because they received special treatment from
management. The human relationship had a connection to the increase in
output.

(b) Human Resource Approach

The human resource approach stressed that employee productivity will
increase when employeesÊ satisfaction regarding basic requirements are
met. This approach is likened to a dairy farm whereby satisfied cows
produce more milk. From the managementÊs point of view, satisfied
employees will increase their work performance. This approach combined
work structure with motivation theories. Among the main motivators of
this approach were Abraham Maslow and Douglas McGregor.

(c) Social Science Approach

The social science approach developed the theories of human behaviour
based on the scientific and learning methods. It was derived from the fields
of sociology, psychology, anthropology, economics and other disciplines in
order to understand the behaviour of employees and their interactions in
the organisation.

This approach can be widely seen in most organisations. The economic and
sociological aspects have significantly influenced how managers probe
further into the organisationÊs strategy and structure. Psychology has
influenced the managementÊs approach through motivation, communication,
leadership and personnel management.
18  TOPIC 1 INTRODUCTION TO MANAGEMENT

1.3.3 Quantitative Management Approach

This theory which began in the era of World War II is concerned with
applying quantitative management tools focusing on decision-making, economic
effectiveness, mathematical models and the use of computers. The three main
concepts of this approach are the management of science, management of
operations and management of information systems.

(a) Management of Science

It is also called Operations Research and it is the approach that increases
decision effectiveness by using specified statistical methods and
mathematical models. For example, motor manufacturers such as Toyota
use realistic computer simulations to study collision damage to cars.
These simulations give them precise information and avoid the costs of
„crashing‰ many test cars.

(b) Management of Operations

Operations management techniques are generally concerned with helping
the organisation produce its products or services more efficiently and can
be applied to a wide range of problems. It can be used to deal with
decisions involving plant layout, plant location, inventory control and
distribution of finished goods. For example, linear programming (which
involves computing simultaneous solutions to a set of linear equations)
helps airlines plan their flight schedules.

(c) Management of Information Systems

It helps managers design information systems that provide information
about events occurring within the organisation as well as the external
environment, information that is vital for effective decision-making.
 TOPIC 1 INTRODUCTION TO MANAGEMENT  19

1.3.4 Contemporary Approach

Contemporary viewpoint is a school of thought which includes major ideas
regarding management or organisation. It emerged in the 1950s. The two main
theories under this perspective are the systems and contingency theories.

(a) Systems Theory

It is an approach based on the idea that organisations are subsystems
which operate in segments to achieve a common target or goal. The five
components of a system are:

(i) Input – Equipment, people, finance or information sources that are

used to produce products or services;

(ii) Transformation process – The use of production technology to

transform input into output;

(iii) Output – Comprises products and services of an organisation;

(iv) Feedback – Responses and information given that will influence the
selection of input used in the next process cycle; and

(v) Environment – Includes social, political and economic influences.

A system can be either closed or open but most approaches treat an

organisation as an open system. An open system interacts with its
environment by way of inputs, throughputs and outputs. The following are
some terms which are associated with systems theory:

(i) Open system – A system that interacts with the external environment
in order to survive;

(ii) Closed system – A system that does not interact with the external
environment in order to survive and often fails;
20  TOPIC 1 INTRODUCTION TO MANAGEMENT

(iii) Entropy – The tendency for a system to become obsolete;

(iv) Synergy – Individuals, groups and organisations that can achieve

more if they cooperate compared to working independently; and

(v) Subsystem – Sections of a system that are interdependent.

(b) Contingency Theory

A contingency approach to management is based on the theory that
management effectiveness is contingent or dependent upon the interplay
between the application of management behaviours and specific situations.
In other words, the way a manager manages should change depending on
the circumstances.

1.4 GLOBALISATION AND CROSS-

CULTURAL MANAGEMENT
Nowadays, organisations are becoming more global. As a result, cross-cultural
management is no longer a „nice to have‰ but rather it is a „must have‰.
Globalisation is a popular issue in the business world today. Much attention is
given to the rise in imports and exports as organisations continue to grow
through the global marketplace. Understanding the global economy underlines
highly significant managerial and business level applications that offer useful
business insights to modern-day managers. The simplicity of modern
globalisation is often attributed to rapid technological advances.

From a managerial standpoint, the global workplace involves a significant

amount of diversity management. As a manager, this means developing a
globally minded perspective that offers itself well to specific geographical needs,
values and customs in which the business operates. Developing this global skill
set will be a powerful and significant managerial skill for todayÊs managers.

Are Managers Prepared for the Challenges of Working in Different Business

Environments?
Multinational companies have to deal with cross-cultural issues either as a result
of having divisions located in other countries or because the people whom they
hired speak English as a second language. The cultural mix within departments,
in project teams and even through the ranks of management creates an entirely
new set of challenges for organisations. The impact of cultural differences on
teamwork, communication, conflict resolution, support for authority and
problem-solving is profound and often confusing. Even simple things like
brainstorming or holding a working lunch have a wider impact than originally
envisaged. The traditional strategies used by management to manage culturally-
 TOPIC 1 INTRODUCTION TO MANAGEMENT  21

diverse workforce are proving to be inadequate and may not be able to solve
the problems of cross-cultural diversity in the era of globalisation. To achieve
organisational goals and avoid potential risks, managers should be culturally
sensitive and promote creativity and motivation through flexible leadership.

IThEA is an example of a growing multinational company which has expanded

its business into different markets. IThEA pays close attention to the cultures of
the countries that it has expanded into especially when considering its employees
in the foreign markets. It is also manifested in the way it chooses to hire its
diverse workforce (refer to Figure 1.11). Its intention is to bring its values to
wherever it opens up stores and this requires a fundamental understanding of the
different cross-cultural theories.

„Being an IThEA manager overseas is not just running the stores and distribution
systems smoothly. Managers must be able to explain to employees and managers
why things are to be done that way and win peopleÊs hearts and minds to the
ÂIThEA-WayÊ. They are expected to be ambassadors and must educate their non-
Swedish co-workers through patience, common understanding and example. It is
not always easy to transmit IThEAÊs egalitarian management style‰.

Figure 1.11: IThEAÊs diverse employees

Source: http://fortune.com/2016/03/10/ikea-corporate-culture-best-companies
 22  TOPIC 1 INTRODUCTION TO MANAGEMENT

ose of a management course is to teach students about management, not to teach them to be managers.‰ Do you agre

SELF-CHECK 1.4

Explain how the teaching of management could prepare future managers to deal with workforce diversity.

 Management is the art of directing other people to perform the work by

emphasising the aspects of effectiveness and efficiency in implementation.

 Effectiveness is achieving the objectives that enable the realisation of an

organisationÊs objective or doing the job the right way.

 Efficiency is implementing the work with minimum ability, cost and wastage
or doing things right.

 Managers are known for their management functions which can be grouped
into planning, organising, leading and controlling.

 A manager plays several roles in an organisation which include figurehead,

leader, liaison officer, spokesperson, negotiator, idea initiator, capability
developer and motivator for transformation.

 Management skills are crucial to ensure the success of a manager. They are
conceptual, interpersonal and technical skills.

 Managers are divided into three types, namely top management, middle
management and lower management.

 Management evolved in tandem with the beginning of human civilisations in

Egypt, China and Babylon.
 TOPIC 1 INTRODUCTION TO MANAGEMENT  23

 The management methods in the olden days are quite different from those of
today.

 Modern management significantly expanded with the emergence of the

Industrial Revolution in Europe.

 Generally, there are two well-known systems pertaining to the trend or

management of mindsets, namely the rational system and the social system.

Administrative management Human resource approach

Bureaucratic management Initiator
Classical perspective Leader
Contemporary approach Liaison
Effectiveness officer
Efficiency Negotiator
Figurehead Quantitative management approach
Globalisation Scientific management
Human perspective Social science approach
Human relations Spokesperson
movement
Topic  Planning and
2 Decision-
making
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Describe the meaning of planning;
Explain the processes involved in effective planning;
Identify the types of planning;
Compare the advantages and disadvantages of planning;
Explain what decision-making is about;
Identify the types of environment for decision-making;
Discuss the processes involved in making rational decisions; and
Explain group decision-making.

 INTRODUCTION
Planning is one of the basic functions of management. According to C. W. Roney
(Certo, 2000), planning is generally done for two purposes. Firstly, it is done as a
protection for the organisation. This means that a manager can forecast the effects
of each of the suggestions or alternative actions of the plan that will be carried
out. Secondly, planning is done to increase the affirmative levels of the
organisation. For example, when an organisation opens a new branch, it is not a
matter of coincidence but the result of detailed planning.
 TOPIC 2 PLANNING AND DECISION- MAKING  25

Planning requires managers to be responsive to environmental situations

facing their organisation and to forecast future conditions as well as being good
decision makers.

In the following subtopics, we will discuss the definitions of planning, how

to make effective plans, types of planning as well as the advantages and
disadvantages of planning.

2.1 DEFINITION OF PLANNING

Before we discuss organisational planning, it is appropriate to first analyse the
definition of planning. The following are several definitions of planning which
have been proposed by Western management intellectuals:

(a) Planning means determining the objectives that are desired to be

achieved and deciding on the actions that are needed to be taken in order
to achieve the objectives (Lewis et al., 2001);

(b) Planning is a proposal of actions that need to be made by an organisation to

achieve its objectives (Certo, 2000); and

(c) Planning is a process to determine the objectives that an organisation

desires to achieve in the future, including the actions that need to be taken
in order to achieve them (Rue & Byars, 2000).

In summary, planning is the determination of the courses of action to accomplish

the desired goals. This includes not only knowing how to allocate employee
resources and delegate responsibilities but also setting realistic timelines and
standards for accomplishment.

SELF-CHECK 2.1

Define planning.
26  TOPIC 2 PLANNING AND DECISION- MAKING

2.2 EFFECTIVE PLANNING

According to Williams (2000), effective planning involves five main processes as
shown in Figure 2.1.

Figure 2.1: Effective planning processes

(a) Determining Objectives

The first step in planning is to determine the objectives to be achieved. A
good objective should have the S.M.A.R.T. features – specific, measurable,
attainable, realistic and timely. Refer to Figure 2.2 for a description of the
features.

Figure 2.2: S.M.A.R.T. objective

 TOPIC 2 PLANNING AND DECISION- MAKING  27

(b) Building Individual Commitment

After determining the objectives, the next step that needs to be taken is to
inculcate a sense of commitment in each employee towards achieving the
objectives. Table 2.2 explains the four ways to establish commitment in an
organisationÊs employees.

Table 2.1: Methods of Establishing Employee Commitment

Method Explanation
1. Determining Usually when a decision has been made through the
objectives by cooperation between management and employees, it will
cooperating create a sense of ownership towards the decision made
with all and employees will develop a sense of commitment to
members of the ensure the success of its implementation. This method
organisation is the best approach to increase the commitment of
employees.
2. Setting The objective has to be reasonable so that employees will
reasonable be motivated to perform their tasks until the planned
objectives objective is achieved. Objectives that are unrealistic with
high targets are difficult to achieve and will demotivate
employees while objectives that are too low will bore
them.
3. Announcing Generally, when an objective is publicly known, the
the objectives employees will be embarrassed if they fail to achieve it.
to members in Hence, everyone (managers and employees) will work
the harder to ensure that the planned objective is achieved.
organisation
4. Getting To facilitate work operations, it is essential to have the
support from support of top management. This support can be in the
top form of money, opinion, advice and/or others. With the
management support, all dealings will be made easier and this will
indirectly motivate employees to achieve the objectives.

(c) Preparing an Action Plan

Action plans will be prepared after members of the organisation have
identified their commitment towards achieving the set objectives. The
action plan will explain the steps to be taken to implement the tasks, the
individuals who will be involved as well as the resources and time needed
to achieve the objectives.
28  TOPIC 2 PLANNING AND DECISION- MAKING

(d) Monitoring the Progress

Monitoring the progress aims to determine whether the plans are working
well or otherwise. Two methods to monitor progress are:

(i) Determining Long-term and Short-term Objectives

Long-term objectives are actual objectives that need to be achieved
while short-term objectives are formed for the purpose of motivating
the organisationÊs members temporarily while they work towards the
attainment of the long-term objectives.

For example, the long-term objective of Organisation A is to generate

a net profit of RM10,000 for the year 2017. The short-term objective
that has been determined is to increase the net profit in the account
every month throughout the year 2017. If the net profit increases
every month, it will motivate the employees to continue generating
more profits until it reaches the targeted of RM10,000 by December
2017.

(ii) Obtaining Performance Feedback from Participating Parties

Frequent performance feedback enables employees and managers to
monitor their progress levels. Feedback also ensures that managers
do not divert from the original objectives and identifies the mistakes
made so that corrective actions can be undertaken.

(e) Maintaining Flexibility

Good planning is planning that has flexibility or elasticity. Sometimes,
after the initial implementation the manager realises that the objectives are
difficult to achieve. In such cases, action must be taken to modify the plan.
Such flexibility in planning is important because if there are any problems
related to the planning or implementation process, it will not damage
the overall planning and maybe only a portion of the plan needs to be
improvised.

SELF-CHECK 2.2
What do you see as the main difference between effective and ineffective planning?
Explain the criteria of a good objective.
 TOPIC 2 PLANNING AND DECISION- MAKING  29

2.3 TYPES OF PLANNING

Dessler (2001) categorised planning into three main dimensions – planning based
on format, organisational hierarchy and frequency of use. Figure 2.3 summarises
the types of planning based on these dimensions.

Figure 2.3: Types of planning

Let us now go through each of these dimensions.

(a) Format
Planning differs from the aspect of format, that is, the way it is presented.

 If planning is written in the form of statements regarding what

needs to be achieved and how it is to be achieved, it is called
descriptive planning.

 Financial statements planning is called budgeting as the plan is

stated quantitatively using financial terms.

 Graphic planning refers to planning that explains what needs to be

achieved and how to achieve it in the form of charts.
30  TOPIC 2 PLANNING AND DECISION- MAKING

(b) Hierarchy
Please refer to Figure 2.4 to understand the hierarchy dimension.

Figure 2.4: Hierarchy of managers

(c) Frequency of Use

Planning is also different from the aspect of frequency of use as described
in the following:

(i) Planning that is only used once is known as one-time usage planning.
It is prepared to fulfil specific purposes such as the opening of a new
branch.

(ii) Planning that is repeatedly used is known as standing plans. The plan
is used to manage situations that frequently arise in an organisation
such as dealing with employee disciplinary problems. There are three
types of standing plans:

 Policy
Policy is the general guidelines or principles which are used to
manage a situation.

 Procedure
Procedure refers to the action or process that must be followed if a
certain situation arises. It is more specific compared to policy.

 Regulation
Regulations are the specific guidelines when an action is being
taken. Regulations are generally more specific than procedures.
 TOPIC 2 PLANNING AND DECISION- MAKING  31

SELF-CHECK 2.3
What impact do organisational levels have on managerial planning activities?
What are the key differences between strategic, tactical and operational plans?

2.4 ADVANTAGES AND DISADVANTAGES OF

PLANNING
Even though planning provides certain advantages, it also has its disadvantages.
By understanding the advantages and disadvantages of planning, a manager will
be able to assess the quality of the planning implementation. Tables 2.2 and 2.3
summarise the advantages and disadvantages of planning.

Table 2.2: Advantages of Planning

Advantage Description
Generates Employees will be more diligent if there is a plan stating the
intensive effort objectives and work strategies. Work performance can be further
improved because they are aware of the direction and goal in which
they need to move towards.
Continuous Planning involves a specific time frame. Managers who engage in
effort planning know that the objectives can only be achieved when the
time comes. Hence, intensive efforts will continue until the planned
objectives are successfully achieved. Thus, the managers and the
employees will work more enthusiastically throughout the duration
to achieve the objectives.
Unity of With planning, employees will know the objectives which need
direction to be achieved including the strategies that must be followed.
Indirectly, all members of the organisation know the direction and
will move towards that same direction or objective.
Establishes When a senior manager sets an objective to be achieved,
work strategy automatically the managers at the middle and lower level will
question the ways to achieve the targeted objective. In order to
achieve it, senior managers will establish strategies which will
serve as guidelines in determining the activities that need to be
implemented.
32  TOPIC 2 PLANNING AND DECISION- MAKING

Positive impact Planning has been proven to be effective for organisations as well
on individuals as individuals. Generally, organisations that engage in planning
and will obtain more profits and expand much faster compared to
organisation organisations that do not engage in planning. This also applies to
individuals regardless of manager or employee. Generally, work
performance is much better if they have objectives and strategies
when conducting their work.

Table 2.3: Disadvantages of Planning

Disadvantage Description
Restricts Planning is made for a specific time period. When changes take
changes and place in the environment, the existing plan needs to be updated.
adaptation The environmental changes can occur from the aspect of change
in consumer taste, changes in technology, legislation and others.
Failure to realise this need for change will cause implementation
failure in the present plans.
Uncertainty Planning is usually based on the assumptions of future
towards occurrences. For example, if a manager presumes that the
assumptions demand will increase in the future, plans will be made to increase
the production of products in order to meet the demand. In order
to accomplish the plan, assumptions on future issues must be
accurate. If the forecast is wrong, then the planning based on that
assumption will also fail in the end.
Separation Generally, the planning is done by top-level managers while its
between implementation is carried out by the employees at the lower levels.
planner and This segregation can sometimes cause the plans made to be
implementer incompatible with the capabilities of the employees especially when
the person who plans is not directly involved in the operations
division. As such, the planners do not really know the capability
levels and constraints at the operation level, resulting in
unsuccessful planning.
 TOPIC 2 PLANNING AND DECISION- MAKING  33

SELF-CHECK 2.4
Explain how planning restricts changes and adaptation.

ACTIVITY 2.1
Discuss the benefits of planning.

2.5 ORGANISATIONAL DECISION-MAKING

Managers have to make decisions every day and the process used in making
a decision is important to their bottom line. Decision-making is defined as a
process to identify problems, generate alternative solutions, select the best
solutions available and implement them. In other words, decision-making is a
process of selecting the best among the different alternatives.

When discussing decision-making, another important concept that needs to be

taken into consideration is the making of rational decisions. Rational decision-
making refers to making decisions based on facts, opinions and reasonable
reasons. Generally, decisions that are made based on facts and opinions are the
best decisions.

2.2
sion-making helps managers make good decisions. Explain what rational decision-making is and discuss your answer with y
34  TOPIC 2 PLANNING AND DECISION- MAKING

2.6 DECISION-MAKING ENVIRONMENT

A good decision is not only influenced by the experience, efficiency and skills
of the decision maker but also the adequacy and validity of the information
obtained that are related to the business environment. There are three types of
environment in which decisions are made. They are shown in Figure 2.5.

Figure 2.5: Decision-making environment

2.6.1 Decision-making in Certain Conditions

A situation of certainty occurs when the decision maker knows with reasonable
certainty what the choices are, what situations are linked to each of the
alternatives and the result of each alternative. Under conditions of certainty,
information which is accurate, measurable and reliable is available for the
manager to base his decisions on. The cause and effect relationships are
known and the future is highly predictable under conditions of certainty.
Such conditions exist in situations that require routine and repetitive decisions
concerning the day-to-day operations of the business. An example of decision-
making in certain conditions is the decision to replenish food supplies when the
goods in stock decrease to below a predetermined level.
 TOPIC 2 PLANNING AND DECISION- MAKING  35

2.6.2 Decision-making in Uncertain Conditions

Uncertain conditions happen when the future environment is unpredictable and
everything is in a state of flux. The decision maker is not aware of all available
alternatives and the risks are linked to each alternative as well as the significance
of each alternative or its probability. The manager does not have ample
information about the options and whatever information available may not be
entirely trustworthy. In the face of such uncertainties, managers need to make
certain assumptions about the situation in order to deliver a practical framework
for decision-making. They have to depend on their intuitive and experience
when making decisions under such conditions.

2.6.3 Decision-making in Risky Conditions

When a manager lacks perfect information or whenever information irregularity
exists, risk emerges. Under risky conditions, the decision maker has inadequate
information about current alternatives but he has a good idea of the probability
of the outcome for each alternative. While making decisions under a state of risk,
managers must determine the probability associated with each alternative on the
basis of the available information and his experience. Usually, the situations can
only be assumed to occur based on the information obtained and the percentage
of probability that the situations will occur.

For example, testing for nuclear leakage in Japan after the 2011 tsunami is a risky
decision made by the Japanese government because they did not know how wide
the affected area was. Moreover, the nuclear substance used is a life-threatening
element.

SELF-CHECK 2.5
Explain the difference between making decisions under uncertain conditions and risky conditions.
Explain the three types of decision-making environment.
36  TOPIC 2 PLANNING AND DECISION- MAKING

2.7 RATIONAL DECISION-MAKING PROCESS

Even though decision-making looks simple, the decision made must be rational.
The process of rational decision-making favours logic and objective analyses
over subjective insights. In summary, making a rational decision can be defined
as a systematic process of defining problems, evaluating decision alternatives and
selecting the best alternative decision available. Williams (2000) specified that
six steps or processes need to be followed when making rational decisions. The
six steps are:

(a) STEP 1: Defining the Problem

The first and foremost step in the decision-making process is to define the
real problem. A manager needs to identify the problem, the source of the
problem and how to resolve it.

For example, your office is facing work delay problem. It was found that
the problem originates from a shortage of computers in the office.
Therefore, the management agrees to purchase more computers for office
use.

(b) STEP 2: Identifying the Decision Criteria

The next step is to establish the decision criteria. The decision criteria refer
to the standards or features that will be considered when making a
decision.

Since the management has decided to purchase new computers, what are
the criteria that will be taken into consideration when selecting new
computers? Price, quality, compatibility and warranty are the decision
criteria.

(c) STEP 3: Allocating Weights to Each Criterion

The next step is to allocate weights to each of the criteria. One method that
is normally used for this purpose is to make relative comparisons. This
means ranking the criteria from the most important to the least important
criterion for the decision maker.
 TOPIC 2 PLANNING AND DECISION- MAKING  37

Based on the example given earlier, you might place the quality factor as
the most important, followed by the compatibility factor, pricing factor and
lastly, the warranty factor.

(d) STEP 4: Generating Alternative Solutions

The next step is to develop alternative solutions whereby potential
solutions need to be considered. The more alternatives generated, the better
it is.

Based on the example, in order to purchase a new computer, the

alternatives that can be taken into consideration will be Acer, IBM, NEC
and Compaq.

(e) STEP 5: Evaluating Alternatives

At this step, every alternative will be compared to each decision criterion.
This is to determine the extent of the alternatives to fulfil the decision
criteria that has been set. Usually, this step takes the longest time as there is
a lot of information that must be collected first before comparisons can be
made.

This means that all the alternative solutions – Acer, IBM, NEC and Compaq
– will be evaluated from the aspects of quality, compatibility, pricing and
warranty (decision criteria).

(f) STEP 6: Selecting the Optimal Decision

The last step is to select the best alternative solution available. The best
alternative is the alternative that fulfils all the decision criteria according to
the ranked importance.

ACTIVITY 2.3
Discuss the six steps that need to be followed when making rational decisions.
38  TOPIC 2 PLANNING AND DECISION- MAKING

2.7.1 Limitations in Rational Decision-making

Decision-making will become better if the manager or the decision maker
carefully follows all the steps that have been discussed earlier. Nevertheless,
sometimes there are problems that complicate the decision-making process. For
instance, the lack of information can cause difficulties in defining the problem.

Based on Williams (2000), the limitations of rational decision-making can be

divided into three categories as illustrated in Figure 2.6:

Figure 2.6: Limitations in rational decision-making

 TOPIC 2 PLANNING AND DECISION- MAKING  39

SELF-CHECK 2.6
Have you ever used the rational decision-making model to make a decision? How well did the model work for you?

2.8 GROUP DECISION-MAKING

Generally, there are three main methods that a group uses to generate results
as summarised in Figure 2.7.

Figure 2.7: Methods of making group decisions

2.8.1 Brainstorming
Brainstorming is a group decision-making process in which negative feedback on
any alternatives presented is forbidden until all alternatives have been studied
(Certo, 2000). Brainstorming blends a comfortable, casual method of problem-
solving with lateral thinking. It persuades people to come up with point of
views and ideas that can, at first glance, seem a bit crazy. During brainstorming
sessions, people should avoid criticising or rewarding the ideas put forth.

However, brainstorming also has weaknesses. For example, it restricts the

production of ideas. As members in the group voice their ideas by taking turns,
sometimes an idea that had spontaneously arisen might be lost while the member
waits for his turn to speak. At times, group members may feel that their ideas are
not good enough and feel shy about expressing them to the group.
40  TOPIC 2 PLANNING AND DECISION- MAKING

2.8.2 Nominal Group Technique

The nominal group technique is a technique of decision-making whereby group
members propose and evaluate their ideas individually before sharing them with
the other group members. Please refer to Figure 2.8.

Figure 2.8: Steps in nominal group technique decision-making

2.8.3 Delphi Technique

Delphi technique is a systematic forecasting method where sequences of
questionnaires or surveys are sent to carefully chosen respondents (the Delphi
group) through a facilitator who oversees the responses of the panel of experts.
The identity of the group members is not revealed and they do not meet face-to-
face. Members of the group are carefully chosen because they are the experts or
they have relevant information.

The steps involved in this technique are:

(a) Experts in related sectors are identified and selected as panel members;

(b) Problems are composed in the form of a questionnaire comprising open-

ended questions;

(c) The questionnaire is given to the panel members requesting them to

propose their solutions;

(d) Each expert completes the questionnaire and returns it to the manager or
facilitator;

(e) All the answers are summarised and bound together in the form of a report.
It is returned to all panel members together with a more specific and
detailed questionnaire form that has been reviewed;
 TOPIC 2 PLANNING AND DECISION- MAKING  41

(f) Panel members read the report to find out the opinions and proposals of
the other panel members. They are also requested to complete the second
questionnaire; and

(g) This process is repeated until a unanimous decision is achieved by the

panel members on the selection of the best solution.

2.8.4 Advantages and Disadvantages of

Group Decision-making
Group decision-making offers several advantages compared to individual
decision-making. However, it also has certain disadvantages. Table 2.4 explains
the advantages and disadvantages of group decision-making.

Table 2.4: Advantages and Disadvantages of Group Decision-making

Advantages Disadvantages
1. Group offers more knowledge and 1. Group decision-making is time
skills compared to individuals. consuming especially if a problem
or conflict which arises requires
immediate attention.
2. More knowledge, skills and 2. The discussion may also be
alternatives can be generated from controlled by certain individuals and
the group which will help them to may limit the involvement of other
solve the problem better. members.
3. The backgrounds of the group 3. May have to compromise group
members are varied and this enables objective.
the problem to be viewed from
various perspectives.
4. Group will accept the decisions 4. High costs involved if the group is
that have been made and will be large and group members have to
committed to accomplishing its meet up for discussions.
implementation.
5. Groupthink is another common
problem whereby some members
are pressured to agree with the
group decision.
 42  TOPIC 2 PLANNING AND DECISION- MAKING

date or sell their shares to other companies due to their failure to maintain their position in the commercial world. Could t

K 2.7
on, is collective or group decision better than individual decision? Why? Compare your answer with your coursematesÊ ans

 There are several planning definitions by management intellectuals. In

summary, planning is the determination of the courses of action to
accomplish the desired goals.

 There are five steps or processes to effective planning. Firstly, determine

the objectives that need to be achieved. Secondly, establish individual
commitments towards achieving the said objectives. Thirdly, establish action
plans. Fourthly, monitor the progress of planning and lastly, ensure that
planning is flexible.

 Although all planning is defined as determining the objectives which

includes establishing the work strategies, there are several types of planning
and they differ in the aspects of format, organisational hierarchy or its
frequency of use.

 Planning has its advantages as well as disadvantages.

 Decision-making can occur in three types of environment, namely certain

conditions, uncertain conditions and risky conditions.
 TOPIC 2 PLANNING AND DECISION- MAKING  43

 Decision-making in a situation is determined by the adequacy of information

obtained in the process of decision-making.

 The process of rational decision-making encompass six steps, namely

defining the problem, identifying the decision criteria, allocating weights to
each criterion, generating alternative solutions, evaluating each alternative
and selecting the optimal decision.

 Rational decision-making also has specific limitations such as bounded

rationalities, common mistakes and making decisions in a risky environment.

 There are several methods to group decision-making such as brainstorming,

nominal group technique and the Delphi technique.

 Although group decision-making has many advantages, it also has specific

disadvantages.

Brainstorming Nominal group technique

Delphi technique Operational plan
Format Organisation hierarchy
Frequency of use Strategic plan
Groupthink Tactical plan
Topic  Organisational
3 Structure and
Change
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Identify the four factors that influence organisational structure;
Explain the concept of organisational structure;
Describe authority in organisations;
Compare between centralised and decentralised structures;
Evaluate the different types of work design;
Discuss the mechanistic and organic structures;
Explain how change is managed; and
Examine the barriers to change in organisations and ways to overcome them.

 INTRODUCTION
Welcome to Topic 3 of this module. In this topic you will be learning about
organisation structure and change. We will be looking at how the elements of an
organisational structure can be combined to make mechanistic and organic
structures. Let us first begin by looking at the factors that influence
organisational structure.
 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  45

3.1 FACTORS THAT INFLUENCE

ORGANISATIONAL STRUCTURE
There are four factors that influence the structure of an organisation. They are
organisational strategy, size, technology and environmental factors.

(a) Organisational Strategy

Logically an organisational structure follows the strategy because
organisational structures are built to achieve the objectives by implementing
the strategies. When strategies change, the organisational structure must
also change. At the corporate level, strategies are formulated based on the
companyÊs mission and strategic goals or objectives.

(b) Size of the Organisation

The number of employers working in an organisation indicates its size. It
is observed that large organisations differ structurally from small ones in
terms of division of labour, rules and regulations, performance appraisal
and budgeting procedures. Organisations that are larger in size have a
tendency towards work specialisation, standardisation and decentralisation
in decision-making.

(c) Technology
Each organisation uses some form of technology to convert the resources
into outputs. Technology includes the knowledge, machineries, work
processes and resources that are used to transform inputs into outputs.
The technology used to produce the products determines the kind of
organisation suitable for its production system. Routine activities create
structures that are more centralised whereas non-routine activities depend
largely on the expertise of an individual which requires a more
decentralised structure.

If the operation is based on technology that is routine where the production

of products and services are produced in bulk such as a garment factory
that operates in a more formal way, then more departmentalisation, work
specialisation and compliance towards rules and regulations will be made.
Organisations that operate on non-routine technologies (for example,
barbers) do not need a lot of departmentalisation, work specialisation and
strict compliance to rules, as required by a factory.
46  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

(d) Environment
Every organisation will face external influences known as environmental
influences or factors that are specific or general which will affect its
survival. Why do environmental factors have an impact on the structure of
an organisation? This is because changes in the environment cannot be
determined. Some organisations operate in static environments while others
operate in environments that are dynamic. Static environment provides
less concern on uncertainties compared to a dynamic environment.
Uncertainties in the environment can threaten the effectiveness of the
organisation. As such, management will try its best to reduce the threats.
One of the ways of reducing uncertainties in the environment is by making
changes to the organisational structure.

SELF-CHECK 3.1
Why does the environment have an impact on the structure of an organisation?
Explain the factors that influence organisational structure.

3.2 DESIGNING ORGANISATIONAL

STRUCTURES
Departmentalisation is an aspect of organisational structure which includes the
subdivision of a business into units based on their functions or other criteria.
There are five types of departmentalisation based on functions, products,
customers, geographical locations and matrix. Figure 3.1 illustrates the five types
of departmentalisation.

Figure 3.1: Types of departmentalisation

 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  47

(a) Functional Departmentalisation

In functional departmentalisation, an organisation is structured into
departments based on the relevant functions performed in the organisation.
For example, a manufacturing company may form a production department,
sales and marketing department, accounting department and human
resources department. Functional departmentalisation may be advantageous
because it can increase efficiency and expertise since all related activities
are performed in one place by one group of people that specialises in
that activity. Refer to Table 3.1 for the advantages and disadvantages of
functional departmentalisation.

Figure 3.2: Example of functional departmentalisation

Table 3.1: Advantages and Disadvantages of Functional Departmentalisation

Advantages Disadvantages
1. It allows work to be carried out by 1. Difficulty in coordinating
individuals who are qualified and between departments.
skilled in the areas concerned.
2. It reduces cost by reducing work 2. Can cause delays in decision-
duplication and use of resources in making.
the organisation.
3. Each individual in the same 3. Produce managers and employees
department will acquire the same who are restricted in experience
work experiences or training, and expertise.
communication and coordination,
thereby reducing problems for
management.
48  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

(b) Product Departmentalisation

In product departmentalisation, departments are divided based on the
types of products manufactured by the company (see Figure 3.3). Here,
every department is accountable for producing and selling the type of
product assigned to them.

Figure 3.3: Example of product departmentalisation

Product departmentalisation has its advantages and disadvantages as

shown in Table 3.2.

Table 3.2: Advantages and Disadvantages of Product Departmentalisation

Advantages Disadvantages
1. It allows managers and employees 1. Managers may too focused on
to expand their experience and their product to the exclusion of
expertise related to the overall the rest of the products in the
activity of the product or service organisation.
produced.
2. The product departmentalisation 2. Administration costs may also
structure allows management to increase due to each product
evaluate the work performance of having its own functional-area
each work unit. experts.
 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  49

(c) Customer Departmentalisation

In customer departmentalisation, departments are separated from each
other based on the types or groups of customers to be handled or dealt
with.

Figure 3.4: Example of consumer departmentalisation

Table 3.3: Advantages and Disadvantages of Customer Departmentalisation

Advantages Disadvantages
1. The organisation will focus all its 1. Duplication of work and use of
efforts on fulfilling the needs of its resources.
consumers.
2. The ability of the organisation to 2. Difficulty to coordinate between
react with speed and efficiency to departments that provide services to
the requirements of the specific different types of consumers.
markets.
3. Helps to reduce costs by 3. May cause employees to
positioning the organisational overemphasise efforts to fulfil
resources nearer to the targeted customer needs to the extent that it
consumers. affects the organisationÊs business
performance.
50  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

(d) Geographic Departmentalisation

When the organisation has its business or branches all over the world or in
many parts of the country, departmentalisation by geographical areas (see
Figure 3.5) may offer better service to customers and can be more cost
effective. Other advantages and disadvantages are listed on Table 3.4.

Figure 3.5: Example of geographic departmentalisation

(e) Matrix Departmentalisation

A matrix departmentalisation is an organisational structure in which the
reporting relationships are set up as a grid or matrix rather than in the
traditional hierarchy (see Figure 3.6). There are several factors that
differentiate the matrix departmentalisation from the other types of
structures, the main one being that the employees report to two different
supervisors or managers. Apart from that, matrix departmentalisation also
leads to cross interactive functions which cannot be done in the other types
of departmentalisation.

Figure 3.6: Example of matrix departmentalisation

 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  51

The advantages and disadvantages of matrix departmentalisation are listed in

Table 3.4.

Table 3.4: Advantages and Disadvantages of Matrix departmentalisation

Advantages Disadvantages
1. It allows the organisation to 1. It requires a higher level of
efficiently manage projects or coordination to manage the
activities that are large scale and complexities involved in big projects.
complex.
2. Conflict of authority and confusion
among employees who have to
report to more than one supervisor
or manager.
3. It requires higher-level management
skills compared to other types of
departmentalisation.

3.2
cept of functional and geographic departmentalisation and state one advantage and one disadvantage for these types of d

ACTIVITY 3.1
Which type of departmentalisation is practised by your organisation? Briefly explain.
52  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

3.3 AUTHORITY
Authority is described as the right to give commands, administer the work of
others and make certain decisions. It is associated with the managerial position to
give orders and directly influence the actions of others. Authority is normally
channelled from top to bottom, that is, from top-level management to lower-level
management.

(a) Chain of Command

The chain of command refers to levels of authority in the organisation from
the top position, namely the CEO or business owner, down to frontline
workers. It explains who reports to whom in the said organisation as shown
in Figure 3.7.

Figure 3.7: Chain of command

In order for employees to avoid confusion and conflict of authority due to

the need to report to more than one manager, unity of command is needed
in an organisation. Unity of command is the management principle which
states that employees report to only one manager at a time.
 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  53

(b) Line and Staff Authority

The next authority dimension differentiates between line authority and
staff authority. Line authority and staff authority must work together to
maintain the efficiency and effectiveness of the organisation. Table 3.5
differentiates between line authority and staff authority.

Table 3.5: Differences between Line Authority and Staff Authority

Line Authority Staff Authority

 Line authority has the right to make  Staff authority involves the right
decisions and give directives to to provide advice and assistance
employees who are placed under in to parties that have line authority
the chain of command. as well as other employees even
 For example, the Director, who has though they are not under the
line authority, has the right to give chain of command.
directives to the managers under  Always remember that staff
him. authority only gives advice and
 Generally, line authority is related to assistance but not directives.
matters involving the organisationÊs  Staff authority enables certain
management system especially in all parties to assist in increasing the
aspects related to work and conduct effectiveness of line authority in
which are linked to efforts in implementing the duties that are
achieving objectives. under their responsibility.
 Line authority helps those who are
under its authority in their work and
ensures efficiency of the activities
under their responsibilities.

(c) Line and Staff Functions

Line function is an activity that directly contributes to the production and
selling of the organisationÊs products and services to consumers. This
involves production and sales, and sometimes marketing as well.

Staff function refers to activities that do not contribute directly to the

production and selling of the organisationÊs products and services to
customers but assists line functions to accomplish their targets. Specifically,
staff functions in an organisation are the support activities which are
conducted by the accounting, human resources and legal departments.
54  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

(d) Span of Control

Span of control refers to the number of employees that a manager or
supervisor directly controls. It can be divided into two types, namely
restricted and broad span of control (see Table 3.6).

Table 3.6: Restricted and Broad Span of Control

Restricted Broad
 Restricted span of control allows  Broad span of control means a
the organisation to increase its single manager or supervisor
efforts to monitor its employees by oversees a large number of
allowing small number of subordinates. This gives rise to a
employees placed under the flat organisational structure.
managerÊs supervision.  It reduces costs, expedites the
 Will incur higher costs especially decision-making process, increases
the employeesÊ salaries. creativity and flexibility, narrows
 The high cost is the result of the gap towards consumers and
vertical organisation structure as it empowers employees.
requires multiple levels of  The organisation will strive to
management. ensure that broad span of control
 Multiple levels of management can does not jeopardise the
cause delays in decision-making. organisationÊs operations by
IN addition, staff and managers providing training to all employees
have the tendency to refer their so that they will have a better
problems to upper management. understanding of their job
requirements and use the assistance
 Creativity among employees will of colleagues to resolve issues that
be limited due to stringent controls arise.
and lack of freedom given by
management.

SELF-CHECK 3.3

Briefly explain the following:

The meaning of chain of command.
The differences between line authority and line function.
The meaning of span of control.
 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  55

3.4 CENTRALISATION AND

DECENTRALISATION
Before we begin this subtopic, let us take a look at the meaning of centralisation
and decentralisation.

decision-making, to one party who is usually the top level people in an organisation. Organisations that practise this meth

authority is handed down to subordinates or employees at the lower levels of an organisation. Organisations that practise

Large organisations will gain more advantages by practising decentralisation.

Delegation is effective to help managers manage the increases in their workload.
Decentralisation is also able to place the organisationÊs resources closer to
consumers. By doing so, the organisation will be able to react more quickly to
changes in consumer preferences. Decentralisation can also reduce red tapes and
allow employees at the lower levels to make decisions faster when faced with a
problem. Besides that, the freedom in decentralisation encourages creativity and
innovation in business operations and new product developments.

.2

think are the key advantages for both centralisation and decentralisation in organisational structure? Discuss this with
56  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

3.5 WORK DESIGN

Work design specifies the activities that are done by employees or a group of
employees. It determines how and where the work has to be done as well as by
whom. Besides that, work design also includes the tools and equipment that will
be used when carrying out the work activities. Work design is significant because
of the effect the design has on productivity.

(a) Work Specialisation

Work specialisation refers to the act of dividing individual tasks into
separate jobs. Each employee is trained on how to best perform one small,
specific task. After a while, the employee will become skilled and effective
at performing the task. Table 3.7 highlights the advantages and
disadvantages of work specialisation.

Table 3.7: Advantages and Disadvantages of Work Specialisation

Advantages Disadvantages
 It is more economical.  The person performing the task will
 It takes a shorter time to learn and be easily bored.
become skilful.  It can lead to low job satisfaction
 When the work design is simple, and high absenteeism rates.
the wage or salary offered is also  It can result in high employee
low. turnover in the organisation.
 Organisation will only face a small
drop in the productivity rate when
employees are absent or when they
resign.
 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  57

(b) Job Rotation, Job Enlargement and Job Enrichment

Redesigning work is essential in order to maintain the advantages of work
specialisation. Three methods have been introduced – job rotation, job
enlargement and job enrichment. Please refer to Figure 3.8.

Figure 3.8: Job rotation, job enlargement and job enrichment

 58  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

SELF-CHECK 3.4
Explain the three methods involved in redesigning work. Which one is practised by your organisation?

ACTIVITY 3.3
Explain the advantages and disadvantages of work specialisation. Discuss this with your coursemates.

3.6 MECHANISTICS AND ORGANIC

STRUCTURES
There are two types of organisational designs – mechanistic organisation and
organic organisation. Refer to Figure 3.9.

Figure 3.9: Mechanistic organisation and organic organisation

 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  59

SELF-CHECK 3.5

Explain the differences between mechanistic organisations and organic organisations.

All else being equal, would you prefer to work in a mechanistic or an organic organisation? Why?

3.7 ORGANISATIONAL CHANGE

Organisations generally face two forms of environments, namely stable and
dynamic. It is practically challenging these days to find a business environment
that is entirely stable. Organisations nowadays face a vibrant environment where
the environmental factors, either specific or general, change rapidly. If an
organisation is not proficient in handling environmental changes, it has a poor
chance of maintaining its business position. Therefore, organisations must
continuously monitor and view the effects of each of the changes.

3.7.1 Managing Change

Organisational change refers to the need for an organisation to change from one
condition to another to take advantage of opportunities or to avoid threats
caused by environmental changes in order to survive.

According to Robbin (1998), there are two goals for organisational change, which
are as follows:

(a) To increase the capability of the organisation in order to be able to accept

challenges and changes in the environment; and

(b) To change the behaviour of individuals within the organisation.

 60  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

If an organisation wishes to stay in business, it must respond to the changes in

the environment. Generating innovation, granting power to employees and
introducing teamwork are some of the examples of planned changes as a
response towards the changes in the environment.

Since the success of an organisation depends on the efficiency and effectiveness

of employees, planned changes are also concerned with changing the behaviour
of individuals or groups within the organisation.

In implementing changes within the organisation, there are two types of changes:

(a) Change of first order – First order change is a linear change, slow in
nature and implemented in stages. This change is made without any
apparent change in the basic structure of the organisation. It is also
conducted that same way assuming there is no strong pressure from the
environment.

(b) Change of second order – The second order change is a change that is
radical in nature, multidimensional and multilevel. This type of change
requires high-level leadership in order to realise the changes. It takes place
when there is intense pressure from the environment which might disrupt
the survival of the organisation.

second order requires a leader who is charismatic and has a clear vision in order to ensure the continuity of the organisati
changes that can take place in organisations.
 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  61

3.7.2 Barriers to Change

Understanding barriers to change management can help any business to build
successful approaches when identifying and executing change. Table 3.8 lists out
the individual and organisational barriers to change.

Table 3.8: Organisational and Individual Barriers to Change

ividual Barriers
at are able to provide stability. When an organisation faces the need for change, the organisation fears that the stability felt all this wh
man habit – Habit is a behaviour performed by an individual periodically. The inability of individuals to carry out the behaviour known
akes changes to a certain subsystem only. An organisation is formed from the combination of interdependentsubsystems. Therefore, m
r of job insecurity – For

example, anorganisation
if
introduces equipment
the use of robotic intheproduction

process, individuals will develop

the feeling that their work is no longer secure.

made towards onesubsystem

3. Economics – Individuals will assume that the change will affect their incom
without involving the other

example, individuals may have already agreed to accept the changes but the employee union does not want any change, which then c
4. Anxiety –Anxietytowards
something that is unknown
causesindividualstooppose
changes. They are unsure whether they can perform under the new approach.

5. Selective nature – Individuals only want to hear and process information that they desire or information that
 62  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

ad implications for an organisation. In your opinion, what is the most difficult barrier to change? Share your opinion with y

3.7.3 Overcoming the Barriers to Change

There are seven issues related to teams that you need to know in detail in the
context of overcoming the barriers to change. These issues can influence the level
of performance of teamwork. (Refer to Figure 3.10).

Figure 3.10: Issues that influence the level of performance in teamwork

 TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE  63

ACTIVITY 3.6
If you are the general manager of an organisation, what are the factors needed to overcome barriers towards change? Exp

 Organisations need to be structured in the best possible way to promote

efficiency and effectiveness of activities.

 The organisational design needs to be adapted to the factors that influence

the effectiveness of the strategies.

 Organisational strategy influences the organisational structure as strategy

determines the types of duties that are undertaken by employees.

 Organisational structures can also help to explain authority and the transfer
of authority within the organisation. Furthermore, it will also help in the
design of work involved in an organisation.

 A mechanistic organisation is usually found to be most suitable in a stable

environment whereas an organic organisation is most suitable in an
environment that is turbulent or dynamic.

 Innovation helps organisations to build their own competition advantages.

 It is the duty of every organisation to create a creative work environment to

encourage the emergence of creative ideas from its human resources. It is
these creative ideas that will assist organisations in discovering new
technologies.

 In order to guarantee the survival of the organisation, changes must be made

from time to time in order for it to be in line with the changes in the business
environment.

 Organisation change must be planned in order for it to benefit instead of

being a detriment to the organisation.
64  TOPIC 3 ORGANISATIONAL STRUCTURE AND CHANGE

Centralisation Job enrichment

Chain of command Job rotation
Co-optation Manipulation
Creativity Mechanistic organisation
Decentralisation Span of control
Encouragement Virtual organisation
Job enlargement
Topic  Human
4 Resource
Management
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Describe human resource managementÊs essential functions;
Clarify the needs of human resources through human resource planning;
Describe the recruitment process;
Define the selection process;
Describe effective training and the development process;
Discuss the common methods of managing performance;
Explain the various compensation and reward systems commonly used; and
Discuss the separation strategies in an organisation.

 INTRODUCTION
Every organisation needs people to plan and implement all its activities to
achieve the goals that have been set. Therefore, employees are one of the
resources needed by an organisation. If an organisation uses high technology,
sophisticated tools and equipment, and has strong financial resources but lacks
skilful, knowledgeable and capable workforce, it will still not attain the success it
desires.
66  TOPIC 4 HUMAN RESOURCE MANAGEMENT

Human resource management is a process of obtaining, developing and

maintaining a sufficient number of qualified employees in order to achieve goals
that have been set.

4.1 ESSENTIAL FUNCTIONS OF HRM

Organisations need human resources (HR) in identifying, attracting, and hiring
the type of employees who will be most qualified to help the company achieve its
goals. Among the key roles of Human Resource Management or HRM are to
attract the right employees to the company, identify metrics to help employees
stay on target to meet the companyÊs goals, and reward them appropriately for
their efforts so that they stay engaged and motivated. Once all these components
are in place – designing a high-performance work system – improves
organisational performance and unleashes employeesÊ talent.

In todayÊs dynamic employment market, more and more HR planners require

periodical adjustments, making HR a crucial department in an organisation.
Essentially, HR planning is part of an organisationsÊ strategic planning. The
following are the functions of HRM:

Figure 4.1: Functions of HRM

SELF-CHECK 4.1
What are the key roles of HRM at which a manager must be skilled?
List down the functions of HRM.
 TOPIC 4 HUMAN RESOURCE MANAGEMENT  67

4.2 HUMAN RESOURCE PLANNING

Human Resource Planning (HRP) is the process of forecasting the forthcoming
human resource requirements of the organisation and defining as to how the
existing human resource capacity of the organisation can be utilised to
accomplish these requirements. Therefore, it focuses on the elementary economic
concept of demand and supply in context to the human resource capacity of the
organisation.

HRP process helps the management of the organisation in achieving the future
demand of human resource in the organisation with the supply of the applicable
people in appropriate numbers at the appropriate time and place. Further, it is
only after proper analysis of the HR requirements can the process of recruitment
and selection be initiated by the management.

Planning human resources begins with considering the mission, strategies and
objectives of an organisation. Fundamentally, human resource planning consists
of two main components – job analysis and forecasting.

(a) Job Analysis

Job analysis is a process to identify and determine in detail the particular
job responsibilities and requirements of human resources needed to
perform the job. It is used to gather information about the obligations,
responsibilities, necessary skills, outcomes, tools and equipment and also
work environment of a particular job. Information regarding job analysis
can be obtained by asking employees using questionnaires, observations,
and interviews or filming the tasks being done. The results of the job
analysis will form the job description and job specification.

(i) Job description is a written statement that clearly explains the job,
duties, responsibilities, activities and performance results required
from the job holder.

(ii) Job specification is a written statement stating the qualifications

required from the job holder. Qualifications here include level of
academic achievements, work experience, skills and abilities that need
to be fulfilled by the future job holder.
68  TOPIC 4 HUMAN RESOURCE MANAGEMENT

(b) Forecasting
Forecasting is a process of predicting the total number and types of
employees with the knowledge, skills and abilities needed by an
organisation in the future. There are two types of forecasting – internal and
external.

Figure 4.2: Internal and external forecasting

SELF-CHECK 4.2
What are the principle aspects of job analysis?
Explain two types of forecasting of total number and types of employees.

4.3 RECRUITMENT
The process of recruitment involves developing a group of candidates who are
interested and qualified for a position offered by an organisation. Recruitment
can be carried out using two methods: internal recruitment and external
recruitment.

(a) Internal Recruitment

Internal recruitment gives existing employees and volunteers the
opportunity to apply for the job opening. It is linked to succession planning
and career development. Internal recruitment can include promotions to a
 TOPIC 4 HUMAN RESOURCE MANAGEMENT  69

higher level position, and also lateral moves to the same level position. To
keep the process positive is very important to be fair and consistent in how
you go about recruiting internally.

Many organisations favour this technique because it is capable to increase

the commitment, self-esteem and motivation of the employees. Firms use
such strategies as job posting panels, emails, intranet posts and brochures
to instruct current employees of positions they may apply for.

(b) External Recruitment

External recruitment is a process of developing candidates from outside the
organisation who are interested and qualified for the position offered. The
methods for external recruitment include job advertising (through
newspapers, magazines, letters, radio stations and television), employee
referral, walk-in, job fairs, government and private employment agencies,
career seminars and websites.

ecruiters are more inclined towards hiring their own friends to fill job vacancies even if there are many other qualified cand

4.4 SELECTION
Once you have developed your recruitment plan, recruited people and now have
plenty of people to choose from, you can begin the selection process. The
selection process refers to the steps involved in choosing people who have the
right qualifications to fill a current or future job opening. Usually, managers and
supervisors will be ultimately responsible for the hiring of individuals, but the
role of human resource management (HRM) is to define and guide them in this
process. The four steps are explained as follows:

(a) Application and Résumé Review

The first step is developing the criteria, and once it is developed
applications can be reviewed. People have different methods of going
through this process, but there are also computer programmes that can
search for keywords in résumés and narrow down the number of résumés
that must be looked at and reviewed.
 70  TOPIC 4 HUMAN RESOURCE MANAGEMENT

(b) Interviewing
After the HR manager and/or manager have determined which
applications meet the minimum criteria, he or she must select those people
to be interviewed. Most people do not have time to review twenty or thirty
candidates, so the field is sometimes narrowed even further with a phone
interview.

(c) Test Administration

Any number of tests may be administered before a hiring decision is made.
These include drug tests, physical tests, personality tests and cognitive
tests. Some organisations also perform reference checks, credit report
checks and background checks.

(d) Making the Offer

The last step in the selection process is to offer a position to the chosen
candidate. Development of an offer via e-mail or letter is sometimes a more
formal part of this process.

ons. He would already have ready-made answers before entering the interview room. In this scenario, what is your opinio

SELF-CHECK 4.3
Explain two types of forecasting of total number and types of employees.
 TOPIC 4 HUMAN RESOURCE MANAGEMENT  71

4.5 TRAINING AND DEVELOPMENT

Training is about providing opportunities for employees to develop the job
specific skills, experience and knowledge they need to do their jobs or improve
their performance.

The first step in training is employee orientation. Employee orientation is the

process used for welcoming a new employee into the organisation. The
importance of employee orientation is two-fold. First, the goal is for employees to
gain an understanding of the company policies and learn how their specific job
fits into the big picture. Some companies use employee orientation as a way to
introduce employees not only to the company policies and procedures but also to
the staff.

Organisations can provide internal or external training for their staff.

In-house training programmes are learning opportunities developed by the

organisation in which they are used. This is usually the second step in the
training process and often is ongoing. In-house training programmes can be
training related to a specific job, such as how to use a particular software.

External training includes any type of training that is not conducted in-house.
This is usually the last step in training, and it can be ongoing. It can include
sending an employee to a seminar to help further develop leadership skills or
helping pay tuition for an employee who wants to take a marketing class.

Several training methods can be used to fulfil training needs and objectives.
Listed below are a few methods that are frequently used.

(a) On-the-job Training

It is a form of training taking place in a normal working situation.
Employees learn in an environment in which they will need to practice the
knowledge and skills taught. One of the advantages of on-the-job training is
that it does not require any specific facility. Besides that, new employees
are able to perform productive jobs during the learning process. However,
one of the drawbacks of this method of training is that the pressure at the
workplace can cause the training to be dangerous or easily forgotten.
72  TOPIC 4 HUMAN RESOURCE MANAGEMENT

(b) Apprentice Training

This is a training programme system that requires an apprentice to work for
a certain period before he is allowed to perform a job or specialisation in a
particular area. It is the combination of on the job and classroom training,
wherein the workers get the knowledge about the job in a classroom and
then they are required to perform the lessons learnt in the workshops.

(c) Off-the-job Training

Unlike on-the-job training, off-the-job training is done outside the location
of the job area. The location of training might be in a classroom with the
same facilities or in other different locations. This form of training allows
the demonstrator to focus on a particular education subject without any
interference and in a controlled environment. The downside of this form of
training is that it is unable to depict the real conditions of the workplace to
the trainees.

SELF-CHECK 4.4
List the training methods that can be used by an organisation.
Explain the importance of employee orientation.

4.6 PERFORMANCE APPRAISAL

Performance appraisal is a systematic evaluation of an individual with respect to
performance on the job and individualÊs potential for development. It is a
prescribed, organised system of assessing, appraising job-related behaviours and
results to discover reasons of performance and how to perform effectively in
future so that employee, organisation and society all benefits.

The performance is measured against such factors as job knowledge, quality and
quantity of output, initiative, leadership abilities, supervision, dependability, co-
operation, judgment, versatility and health. Assessment should be confined to
the past as well as potential performance also.
 TOPIC 4 HUMAN RESOURCE MANAGEMENT  73

Performance evaluation of an employee can be done by the following people:

(a) Supervisors
An employee is evaluated by the person who supervises him. For example,
an operator is evaluated by his supervisor; an executive is evaluated by a
senior executive or manager; and, a general manager is evaluated by the
board of directors of the company.

(b) Colleagues
Evaluation by colleagues is considered a reliable approach. This is because
colleagues are close to the employee being evaluated and can observe his
daily job performance. Evaluation by colleagues could add to the
effectiveness of evaluation made by supervisors. However, colleagues may
give a biased evaluation of the employee.

(c) Subordinates
Subordinates can provide important and detailed information regarding
the behaviour of their superiors due to their close relationship. The problem
is that subordinates may be afraid to provide accurate evaluation because
they are aware of the power held by their superiors and fear retaliation.

(d) 360-Degree Evaluation

It provides feedback on performance from all parties related to the job of
the employee being evaluated which covers general workers, customers,
colleagues and managers.

Let us now look at the methods for performance evaluation. This is as explained
in Table 4.1.

Table 4.1: Methods for Performance Evaluation

Method Explanation
Essay Writing This method requires the employee being evaluated to
explain about the strengths, weaknesses, earlier
performances, potential and suggestions in increasing
performance. But the results will usually portray the ability
of the writer. A good or poor performance is determined by
the writing skill and level of true performance of the
evaluated employee.
Critical Incidents A method of performance appraisal involving identifying
and describing specific events (or incidents) where the
employee did something really well or something requiring
improvement.
 74  TOPIC 4 HUMAN RESOURCE MANAGEMENT

Measurement of This is a simple and countable performance measurement.

Objective Performance Objective performances that are frequently used are outputs,
scraps, wastes, sales, customer complaints or level of default.
Employee Comparisons Under this method, the evaluators rank employees according
to such factors as performance and value to the organisation.
Only the employee can occupy a particular ranking.

n is clear, accurate and fair because the performance evaluation will become the guidance and determinant for an employ

4.7 COMPENSATION
An organisation can retain a capable employee if it offers rewards that fit the job
and needs of the employeeÊs personal objectives. Employee reward refers to
the payment granted to the employee as an exchange for the job that is
carried out. This reward may be financial or non-financial. In general, there are
four types of decisions of reward granting – payment level, variable payment,
payment structure and employee benefits.

Let us now learn about them one by one.

(a) Payment Level

Payment level is a decision of making payment to employees whether at a
level below, level above or at the same rate with the payment of salary in
the labour market. An organisation uses job evaluation to determine the
payment structure. Job evaluation determines the value or sum that must
be paid for each job by determining the market value for the knowledge,
skills and needs required to perform that particular job.
 TOPIC 4 HUMAN RESOURCE MANAGEMENT  75

(b) Variable Payment

Variable payment is a decision that focuses on how far the payment of
salary differs from the job performance of an individual employee and
organisation. The purpose of relating payment with organisation
performance is to increase motivation, effort and job performance of
employees. Piecework, sales commissions, profit-sharing and employee
share ownership plans are the options available in variable payment.

(i) Piecework payment plan is the payment based on the amount they
produce. The amount paid per unit is set at a level that rewards
employees for above-average production volume.

(ii) Sales commission is a percentage of the value of the goods he sold.

The more sales he makes, the more commission he will receive.

(iii) Profit sharing is the payment taken from a part of the organisationÊs
profit. This payment is divided among the employees and is usually
above the level of reward that they normally receive. The more profit
the organisation makes, the more reward the employees will receive.

(iv) Employee share ownership plan grants employees with companyÊs

shares in addition to the rewards that they usually receive.
Meanwhile, share option provides the opportunity for employees to
buy company shares at a fixed price tier where the price is usually
lower than the market value.

(c) Payment Structure

Payment structure is a decision related to internal payment distribution.
This refers to how far individual employees in an organisation receive
different levels of salary. Individuals at the top level will receive a higher
pay compared to those at lower levels. For example, a director enjoys a
higher payment structure than the assistant director and a much higher
structure than his subordinate officers.

(d) Employee Benefits

Employment benefit includes various types of non-wage compensation
provided to employees in addition to their normal wages or salaries. Many
organisations offer various forms of benefit choices to employees such as
retirement and pension plans, paid leave, sick leave, health insurance, life
insurance, health treatment, discounts on products and services of the
company, etc.
 76  TOPIC 4 HUMAN RESOURCE MANAGEMENT

4.4
ad or currently have a job, do you feel the compensation plan motivated you? Why or why not? Discuss with your coursem

4.8 EMPLOYEE SEPARATION

Employee separation happens when an employer or employee ends an
employeeÊs employment with a particular employer. Separation may be
voluntary on the employeeÊs part, or it may be influenced by the employer, often
in the form of dismissal (firing) or layoff.

4.8.1 Employee Termination

Termination is a symbol of humiliation in many cultures, and may impede the
jobseekerÊs probabilities of finding new employment. Thus, the manager must
do a few things to minimise problems related to employee termination.

(a) Firstly, in most situations, termination or dismissal cannot be the first

choice. The employee must be given a chance to change his behaviour
when a problem arises. The employee should receive a series of specific
warnings on the seriousness of the problem that he caused. After warnings
have been given, the problematic employee must be given time to make
changes or correct his mistakes. If the problem persists, he needs to be
given consultation on employee performance, what needs to be done to
increase it and the results that will arise if the problem continues (for
example, show-cause letter, warning letter, suspension without payment or
termination).

(b) Secondly, the employee should be terminated based on sensible and

rational reasons. The termination of an employee without sensible reasons
can result in the employee taking court action against the organisation, with
a claim of wrongful discharge. This would require the employer to state the
job-related reasons for discontinuing the services of the employee.
 TOPIC 4 HUMAN RESOURCE MANAGEMENT  77

(c) Thirdly, the organisation needs to monitor the reaction of other employees
when one of them is terminated. This is because termination can affect the
performance and motivation of existing employees because it may increase
the sense of anxiety towards the security of their job.

4.8.2 Downsizing
Downsizing is a reduction in organisational size and operating costs executed by
management in order to increase organisational competence, efficiency and
effectiveness. Corporate downsizing results from both deprived economic
situations and company decisions to eliminate jobs in order to cut costs and
maintain or achieve specific levels of profitability.

Downsizing commonly goes along with some kind of reformation and

reorganising, either as a fragment of the downsizing plan or as a result of
downsizing. Since companies often lose a substantial amount of employees when
downsizing, they usually must rearrange the tasks and responsibilities of
employees within the affected departments.

Top-level management must explain in detail why downsizing is necessary and

choose a suitable time to inform the employees. The news of downsizing should
be delivered to the employees by the management of the company. The
employees should not have to find out from the media such as television and
newspapers. Besides that, the organisation must assist the affected employees by
helping them to find other jobs or providing centres for counselling services.

4.8.3 Retirement
Retirement is the time when an employee decides to leave his job permanently.
An employee may select retirement for reasons other than the desire to
discontinue working. Employees may suffer ill health or incapacitating physical
problems that necessitate leaving because the employee is no longer able to
perform his job. Family difficulties and responsibilities may also require
retirement. An employer also may need employees to take early retirement in
order to cut costs and preserve the business. In some cases, companies who try to
cut costs and headcount may enquire employees to volunteer to retire.
 78  TOPIC 4 HUMAN RESOURCE MANAGEMENT

4.8.4 Employee Turnover

Employee turnover takes place when an employee voluntarily ends his service
with an organisation. Generally, an organisation tries to retain a low turnover
rate in order to reduce cost in terms of recruiting, employing, training and
seeking replacement. However, not all turnovers harm the organisation. For
instance, functional turnover happens in the condition where a poorly
performing employee decides to resign voluntarily. This enables the organisation
to replace the staff with poor performance with a new or better staff. On the other
hand, dysfunctional turnover takes place when a high-performance employee
chooses to leave voluntarily. This condition adversely affects the organisation
and it will lose a talented employee.

f he promised to change his behaviour and expressed regret over his actions, should he be given a second chance? What is

SELF-CHECK 4.5
Explain how managers minimise problems related to employee termination.

 Human resource is the most valuable resource for an organisation. Therefore,

it must be managed properly.

 Excellent human resource management can assist in the implementation of

organisational strategies at a high level of efficiency and effectiveness.

 Human resource management is a process that comprises four key

components: determining the needs of human resource and the organisation,
attracting the interest of qualified candidates, developing qualified employees
and retaining qualified employees.
 TOPIC 4 HUMAN RESOURCE MANAGEMENT  79

 These processes must be implemented with proper planning to ensure that

they make a significant contribution and fulfil the goals and objectives of the
organisation.

Apprentice training Internal recruitment

Commission Job analysis
Downsizing On-the-job Training
Employee orientation Piecework payment plan
External recruitment Turnover
Forecasting
Topic  Communication in
5 Organisations
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Explain the importance and definition of communication in an organisation;
Differentiate between the types of communications;
Differentiatebetweenformalcommunicationandinformal communication;
Evaluate the steps in forming effective communication; and
Discuss the barriers to communication.

 INTRODUCTION
Communication in organisations includes all the means, both formal and
informal, by which information is delivered up, down, and across the system
of managers and employees in a business. These numerous manners of
communication may be used to distribute official information between
employees and management, to exchange unfounded information and rumours,
or anything in between.

According to Rue et al. (2000), a study found that 50 to 90 per cent of the time a
manager is used to communicate. Unfortunately, according to another study,
almost 70 per cent of business communications failed to achieve the objectives
desired.
 TOPIC 5 COMMUNICATION IN ORGANISATIONS  81

5.1 DEFINITION OF COMMUNICATION

Let us begin by looking at the definition of communication:

knowledge from one individual or party to another person or party using meaningful symbols. It is a method of exchangin

The communication process includes the sender, transmission of a message

through a selected channel and the receiver. Figure 5.1 describes the elements in
the process of communication.

Figure 5.1: Process of communication

Sources: Jones, G. R., George, J. M., & Hill, C. W. L. (2000). Contemporary
management (2nd ed.). Boston: McGraw-Hill/Irwin

Communication is a process where an exchange of information takes place

between two or more people. The elements of the communication process are as
follows:

(a) Information Sender

Also known as the message source, the sender is a person who has a piece
of information and wishes to deliver it to other parties.

(b) Encode
Encoding takes place when the sender translates the information to be
delivered into a series of symbols that can be identified and understood by
the receiver.

(c) Message
The message comprises symbols in the form of verbal, written or sign
language that symbolise the information to be delivered by the sender to
the receiver.
82  TOPIC 5 COMMUNICATION IN ORGANISATIONS

(d) Channel
Channel is the method of delivery from one person to another. The channel
must suit the message to be delivered to ensure that the communication
process occurs smoothly, effectively and efficiently.

(e) Decoding
Decoding is the process where the receiver translates the message
received into a form that can be understood and brings meaning to the
receiver.

(f) Receiver
The receiver is the individual or party who receives the message delivered
by the sender. The message formed is based on the background of the
receiver.

(g) Feedback
It refers to the reaction of the receiver towards the message received
from the sender. It is a process of returning the message to the sender
that depicts the level of understanding of the receiver towards the
particular message. Providing feedback is the best way of showing that
a particular message has been received and whether the message has
been understood or otherwise.

(h) Disruption or Noise

Any factor that disrupts, confuses and restricts the delivery of message is
considered as disruption or noise. Interference may be internal or external.
Internal factors are related to the individual himself, such as a receiver who
does not pay attention to the message delivered. Meanwhile, external
factors are environmental and physical factors outside that cause the
message delivered not to be perfectly understood by the receiver.

SELF-CHECK 5.1
Explain how miscommunication might be related to an accident at work.
Explain the main reasons why a manager communicates.
 TOPIC 5 COMMUNICATION IN ORGANISATIONS  83

5.2 TYPES OF COMMUNICATION

Figure 5.2 shows three types of communication that are used in organisations:

Figure 5.2: Types of communication in an organisation

(a) Verbal Communication

Verbal communication occurs either orally or writing. Oral communication
is in form of spoken information, which is the most preferred type of
communication used by organisational members to transmit information.
Written communication allows organisational members to share information
by disseminating messages (letters, memos, policy manuals, reports, forms
and other documents).

(b) Non-verbal Communication

Non-verbal communication is a type of communication that does not use
words, either verbal or written. Non-verbal communication is an important
addition to verbal communication and sometimes can alter the meaning
of verbal communication. These non-verbal signals can give clues and
additional information over and above spoken (verbal) communication.
Refer to Figure 5.3 for examples of non-verbal communication.
84  TOPIC 5 COMMUNICATION IN ORGANISATIONS

Figure 5.3: Examples of non-verbal communication

(c) Electronic Communication

Electronic communications are the diffusion of information using radical
techniques such as computer modems, facsimile machines, voice mail,
email, teleconferencing and private television network.
 TOPIC 5 COMMUNICATION IN ORGANISATIONS  85

that they should rely on written information and computer reports because these yield more accurate data than face-to-f

5.3 COMMUNICATION CHANNELS

Let us now focus our attention on communication channels. In the following
subtopics, we will be looking at formal communication and informal
communication.

5.3.1 Formal Communication

Formal communication happens in formal and official style. Most of the time
professional settings, corporate meetings and conferences will be held in formal
ways. In formal communication, the use of jargon and vulgar language is
avoided and accurate articulation is necessary. Authority lines are necessary to
be followed in formal communication.

The three systems of formal communication frequently used are:

(a) Vertical communication;

(b) Horizontal communication; and

(c) Diagonal communication.

For the purpose of this module, we will only be discussing vertical and
horizontal communication.

(a) Vertical Communication

Vertical communication refers to two types of communication – downward
and upward flow of message:

(i) Downward Communication

 This occurs when information and messages flow down through

an organisation's formal chain of command or hierarchical
structure.
86  TOPIC 5 COMMUNICATION IN ORGANISATIONS

 This channel of communication is frequently used by managers to

deliver messages to subordinates or customers.

 Problems in downward communication arise when it is misused,

for example, when managers do not provide opportunities for
subordinates to give feedback or do not provide complete
information needed by subordinates to perform their work
effectively.

(ii) Upward Communication

 The flow of information from frontline employees to managers,

supervisors and directors.

 Upward vertical communication contains messages or

information from the lower level of the hierarchy or subordinates
to upper management level.

 The main function of this type of communication is to provide

information to upper management regarding what is happening
at the lower level.

(b) Horizontal Communication

Horizontal communication refers to the flow of messages across functional
areas on the same level of an organisation. This type of communication is
important for coordination among departments and to ensure the perfect
functioning of downward communication, which covers instructions
from upper management; and upward communication, which consists
of feedback from the subordinates to upper management. Horizontal
communication occurs formally in meetings, presentations, and formal
electronic communication, and informally in other, more casual exchanges
within the office.

5.3.2 Informal Communication

According to Rue et al. (2000), there are many informal paths of communication
in an organisation. Most of this communication happens outside the chain of
command. These informal communication channels are known as grapevine.
Grapevine is an informal network of information among employees. The
grapevine in organisations does not emphasise power and rank as it may connect
members of the organisation in any direction of communication, either vertically,
 TOPIC 5 COMMUNICATION IN ORGANISATIONS  87

horizontally or diagonally. Even though the grapevine can be defined as

rumours, it is also useful to management. Through the grapevine, management is
able to deliver information and receive feedback faster without involving a high
cost. Based on the feedback, management can evaluate whether to carry out
further investigation on the matter at hand.

SELF-CHECK 5.2
Whatarethedifferencesbetweenformalandinformal communication channels? When would you use each?
Should grapevine be eliminated? How might managers control information that is processed through the grapevine?
What is meant by formal communication? State the different types of formal communication channels in an organisatio

5.4 INCREASING COMMUNICATION

EFFECTIVENESS
The first step in forming effective communication is to identify and overcome
barriers in the communication process. There are five barriers in communication
as depicted in Figure 5.4.

Figure 5.4: Barriers of communication

88  TOPIC 5 COMMUNICATION IN ORGANISATIONS

Figure 5.5 explains the barriers of communication in detail.

Figure 5.5: A detailed look at communication barriers

 TOPIC 5 COMMUNICATION IN ORGANISATIONS  89

of misunderstanding between your employee and yourself, or between your manager and yourself? What was your action

 Communication is an act of sending or spreading information.

Communication is a dynamic and complex process which involves many
factors.

 There are eight elements involved in the process of communication: the

sender, encoding, message, channel, decoding, receiver, feedback and
disruption.

 There are three types of communication which are frequently used: verbal,
non-verbal and electronic communications.

 Communication channel consists of two types: formal and informal channels.

 Formal channel can be divided into three types: downward communication,

upward communication and horizontal communication.

 The informal communication channel in an organisation is referred to as the

grapevine.

 Verbal communication is a type of communication that uses speech or

writing.

 Non-verbal communication consists of kinesics, physical characteristics,

space, time and vocal.

 There are many barriers which interfere with the formation of effective
communication including selective perception, disruption, emotions,
communication skills and suspicion.
90  TOPIC 5 COMMUNICATION IN ORGANISATIONS

Decoding Noise
Diagonal communication Non-verbal
Disruption Selective perception
Emotion Suspicion
Encode Verbal
Horizontal communication Vertical communication
Thinesics Vocal
Topic  Motivation
6
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Describe what is meant by motivation at the workplace;
Explain the need-based and process-based models of motivation; and
Discuss the contributions of the different models of motivation.

 INTRODUCTION
According to Williams (2000), motivation refers to the power that is able to
move, direct and enable a person to be diligent in their efforts to achieve the
desired goals. Employees who are motivated and happy about their jobs carry out
their responsibilities to the best of their ability and productivity increases as a
result. Some employees are motivated by monetary gains while others find
recognition and rewards personally motivating.
92  TOPIC 6 MOTIVATION

6.1 APPROACHES TO MOTIVATION

According to Lewis et al. (2001), there are several approaches to motivation.
Models of motivation can be categorised into two types, namely need-based
models and process-based models (see Figure 6.1).

Figure 6.1: Approaches to motivation

Need-based models are motivation models which emphasise the specific needs of
humans or the internal factors that drives the individual to direct or stop his
action. Need-based models explain motivation as a phenomenon which comes
from the individual himself (internally). There are three important models in this
approach, namely hierarchy of needs model, two-factor model and achievement
of needs model.

Process-based models are motivation models that focus on the understanding of

thinking or the cognitive process that exist in the mind of an individual and the
actions that affect his behaviour.
 TOPIC 6 MOTIVATION  93

SELF-CHECK 6.1
How do need-based models differ from process-based models?
Explain motivation.

6.2 NEED-BASED MODELS

In this subtopic we will be discussing two important need-based models, namely:
MaslowÊs hierarchy of needs and the Two-factor model.

6.2.1 Maslow’s Hierarchy of Needs

According to Lewis et al. (2001), MaslowÊs hierarchy of needs model is the most
famous model for motivation. According to the hierarchy of needs model, an
individual has five basic needs – physiological, safety, social, esteem and self-
actualisation. Maslow stated that people are motivated to achieve certain needs
and that some needs take precedence over others. As soon as the lower need is
significantly satisfied, the next of level need will serve to motivate the individual.

Figure 6.2: MaslowÊs hierarchy of needs

Source: Certo (2000)
94  TOPIC 6 MOTIVATION

Table 6.1 gives a detailed explanation for each level of the hierarchy of needs.

Table 6.1: MaslowÊs Hierarchy of Needs

Need Explanation
Physiological This need exists at the lowest level of the hierarchy. These needs
Need are necessary to maintain life such as oxygen, food and water.
Organisations can help individuals to fulfil this need by providing
sufficient income for their employees to obtain food, shelter and a
comfortable working environment.
Safety Need This need is closely related to acquiring a safe physical and
emotional environment. Examples of this need are employment
network, health insurance and retirement plans which can fulfil
the safety needs of employees.
Social Need Social need contributes to the spread of tribal nature. Individuals
have needs for a sense of belonging, love, affection as well as for
relationships with family and friends, and companionship.
Esteem Need The needs at this level include the needs for acquiring status and
recognition. This need can be fulfilled through attaining success.
Esteem needs are fulfilled when one is given recognition and
respect by other people. For example, organisations can help to
fulfil this need through promotion or providing spacious
workstations to their employees.
Self-actualisation This need is at the highest level of the hierarchy. This need means
Need that people value high achievement based on their self-potential
by using their capability and interest to the maximum level in
order to perform the work in the environment. As an example,
successful completion of a challenging task can assist in satisfying
a personÊs self-actualisation needs.

MaslowÊs model identified that individuals have different needs which can be
motivated by different matters or activities. Unfortunately, this model can only
provide basic guidelines to managers. Many studies conducted thereafter found
that the hierarchy levels differ between individuals in different cultural
environments. When a particular need has been fulfilled it will no longer
motivate the behaviour of the employee.
 TOPIC 6 MOTIVATION  95

6.2.2 Two-factor Model

According to Rue and Byars (2004), the study conducted by Frederick Herzberg,
Bernard Mausner and Barbara Snyderman produced an approach towards
motivation that is widely accepted in the field of management. This approach is
known by several names such as motivation and care approach, two-factor or
motivation-hygiene approach. Refer to Figure 6.3.

Figure 6.3: Two-factor model

Source: Lewis et al. (2001)

Intrinsic motivators and extrinsic motivators have an opposite or inverse

relationship. Intrinsic motivators have a tendency to create motivation when they
are present whereas extrinsic motivators tend to reduce motivation when they
are absent.

This theory suggests that managers should use two approaches in order to
increase employee motivation. Firstly, they must ensure that hygiene factors
(such as work environment and salary) are policies that are clearly stated and can
be accepted by the employees. This practice will reduce the dissatisfaction of the
employees. Secondly, managers must use motivational factors (such as
recognition and additional responsibilities) as tools to increase satisfaction and
motivation.
 96  TOPIC 6 MOTIVATION

This theory makes a distinction between what it calls motivational and hygiene
factors. Refer to Figure 6.4 for a description of what motivational and hygiene
factors are.

Figure 6.4: Motivational and hygiene factors

loyee is underperforming, the reason must be due to the lack of motivation. What is the problem with this assumption? D
needs model.

6.3 PROCESS-BASED MODELS

Employee motivation is a complex matter. Managers need to understand the
reasons why people have different needs and goals, why individuals need to
change their behaviour and how employees change their behaviour in order to
satisfy their needs through various methods. Several models that can help us
understand the complex motivational process are expectancy model, equity
model, goal-setting model and reinforcement model.
 TOPIC 6 MOTIVATION  97

6.3.1 Expectancy Theory

According to Rue and Byars (2004), this model was developed by Victor H.
Vroom. This theory assumes that behaviour results from the conscious selection
among options whose purpose it is to maximise pleasure and to reduce pain. The
motivational level of employees depends on three basic beliefs which are
expectancy, instrumentality and valence. Figure 6.5 shows the association
between expectancy, instrumentality and valence.

Figure 6.5 Association between expectancy, instrumentality and valence

Source: Jones, George and Hill (2000)

Let us have an understanding of the important terms first:

(a) Expectancy is the belief that better effort will lead to increased
performance, for example, if I work harder the results of the performance
will be better.

(b) Instrumentality is the faith that if you perform well, you will receive a
valued outcome. In other words, the degree to which a first level outcome
will lead to the second level outcome.

(c) Valence is the importance that the individual places upon the expected
outcome.

This model suggests that in order to become a highly motivated person, the three
factors or beliefs must also be high. If any one of the factors declines, the overall
motivation will also decline. Managers are able to use this model to motivate
employees through systematic gathering of information regarding what
employees want out of their jobs by creating a clear and simple association
between rewards and individual performance as well as granting power or
authority for the employee to make decisions.
98  TOPIC 6 MOTIVATION

6.3.2 Equity Theory

According to Rue and Byars (2004), this theory was proposed by J. Stacey
Adams. It was based on the idea that people want to be treated equally in their
relationship with other people.

This theory appeals for a rational balance between an employeeÊs input (such as
hard work, skill level, acceptance and enthusiasm) and output (such as salary,
benefits and intangibles such as recognition). Have a look at the equity formula
in Figure 6.6.

Figure 6.6: The equity formula

Source: Adams (1965)

To illustrate the equity formula, assume that two employees are doing the same
job and putting in equal amounts of input (say, time and effort). If employee X
gets a raise and employee Y does not, the latter may feel unfairly treated,
resulting in diminishing job satisfaction and quality of work.

This theory also states that the existence of inequality can result in work pressure
equivalent to the level of inequality felt by the employee. This pressure will
motivate a person to achieve equality or to reduce inequality.

6.3.3 Goal-setting Model

According to Williams (2000), the goal-setting model states that people will be
motivated up to a certain level when they are given a specific goal which is
challenging and obtain feedback regarding their development towards achieving
the particular goal. Goal setting is fundamentally related to task performance and
the willingness to work towards the achievement of goal which is the main cause
of job motivation.
 TOPIC 6 MOTIVATION  99

The basic components for goal-setting model are:

(a) Goals must be specific, challenging and acceptable;

(b) There is performance feedback; and

(c) Feedback should be given at the right time.

As a motivational tool, goal-setting model can help employees in three ways:

(a) As a guideline and propeller of behaviour to support the goals of the

organisation;

(b) To provide challenges and standards that can be used to make evaluations;
and

(c) For stating something important and preparing the framework for
planning.

6.3.4 Reinforcement Model

According to Rue and Byars (2004), the growth of the reinforcement model was
pioneered by B. F. Skinner. There are two assumptions for this theory – the
behaviour of the individual is determined by the environment and it is associated
with related laws that can be expected and altered.

This theory focuses entirely on what happens as a result of an individualÊs

action. Thus, the external environment of the organisation must be planned
effectively and positively so as to encourage the employee to behave in a desired
manner. This theory is a strong tool for analysing, controlling and shaping an
individualÊs behaviour. The reinforcement model revolves around four important
concepts as follows:

(a) Positive Reinforcement

This indicates giving a positive response when an individual shows positive
and desired behaviour. For example, immediately praise an employee when
he comes early for work. This will increase the probability of the
outstanding behaviour occurring again.
 100  TOPIC 6 MOTIVATION

(b) Negative Reinforcement

This involves rewarding an employee by eliminating negative or
undesirable consequences.

Both the positive and negative reinforcement can be used for increasing
desirable or required behaviour.

(c) Punishment
It implies removing positive consequences so as to lower the probability
of repeating undesirable behaviour in the future. For example, suspend
employees who break organisational rules after sufficient warning has been
issued.

(d) Elimination
This involves the absence of a positive outcome or effect, or
withdrawing the positive outcome that used to give effect from the
desired behaviour.

re fairness in reward distribution is to treat employee salary as confidential information. How would you respond to this a

SELF-CHECK 6.2
Explain the main differences between expectancy theory and equity theory.

 There are two main approaches which can be used to explain motivation –
need-based and process-based approaches.

 Need-based approaches explain that motivation exists and comes from the
individual himself (internally) and personal needs truly motivate people.
 TOPIC 6 MOTIVATION  101

 The need-based models discussed are the MaslowÊs hierarchy of needs

model and the two-factor model.

 Process-based approaches explain the cognitive process that affects human

behaviour.

 The four main process-based approaches are the expectancy theory, equity
theory, goal-setting model and reinforcement model.

Equity theory MaslowÊs hierarchy of needs

Expectancy Reinforcement model
Expectancy theory Two-factor model
Goal-setting model Valence
Instrumentality
Topic  Leadership
7
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Explaintheapproachesandmodelsrelatedtointeractive leadership; and
Discuss the four strategic leadership styles.

 INTRODUCTION
Leadership is a process of influencing other people to achieve group or
organisation goals. It is essential to understand that leadership is an essential
part of effective management. It is also important to understand that leaders are
different from managers.

According to Williams (2000), the main differences are that a leader emphasises
on the quality of work so that the treatment given is fair, has a long-run focus, is
more inclined towards changes, gives inspiration and is able to motivate other
people in overcoming their problems. Meanwhile, a manager emphasises more
on performing a matter in the correct way, has a short-run focus, maintains the
status quo and acts to solve other peopleÊs problems. Figure 7.1 illustrates the
differences between a manager and a leader.
 TOPIC 7 LEADERSHIP  103

Figure 7.1: Differences between a manager and a leader

Source: Williams, C. (2000). Management. South Western: Thomson Learning

7.1 LEADERSHIP APPROACHES

There are three types of leadership styles, namely, autocratic, laissez-faire
and democratic. Generally, autocratic leaders make more decisions for the
group. Meanwhile, laissez-faire leaders allow the members of the group to make
all the decisions. Approaches to leadership can be divided into three categories
namely the leader-centred approach, follower-centred approach and interactive
approach.

7.1.1 Leader-centred Approach

A democratic leader, on the other hand, guides and encourages the group to
make decisions. Leader-centred styles achieve organisational success through the
self-realisation and self-projection of the leader.

(a) Personality Features of a Leader

Early studies on leadership theory tried to identify the specific
personality features related to an excellent leader. The focus on
personality is based on the assumption that some leaders have certain
physical features (height, weight and self-appearance), personality aspects
(self-appreciation, economic stability, knowledge, initiative and diligence)
and abilities (creative, articulate, patient and sympathy). Examples of
leader-centred styles are authoritarian, transactional and charismatic
leadership.
104  TOPIC 7 LEADERSHIP

(b) Focus Towards Leadership Behaviour

This approach to leadership behaviour is conducted through studies on
what had been done by an effective leader and not based on the features
possessed by the particular leader. There are three studies on leadership
behaviour those conducted at the Ohio State University and Michigan
University and the study of leadership behaviour using the Managerial
Grid (refer to Figure 7.2).

(i) Studies by Ohio State University

According to Rue et al. (2000), several series of studies on leadership
were conducted by this university to obtain a summary regarding
the most important and effective behaviours to become successful
leaders. These studies found that there are two consistent and
important behaviours of leaders: consideration behaviour and
structural behaviour.

Consideration behaviour refers to the behaviour of leaders that

show feelings of consideration towards members of the group
or subordinates and fulfilling their needs. Meanwhile, structural
behaviour refers to the behaviour of leaders in forming the work
procedures of subordinates and guiding them towards goal
achievement.

This study found that leaders with a high level of consideration are
more inclined to have satisfied subordinates compared to leaders with
a low level of consideration.

(ii) Studies by Michigan University

According to Rue et al. (2000), the purpose of the study conducted by
The Institute of Social Studies, Michigan University, led by Rensis
Likert, was to identify basic principles that contribute towards
productivity and satisfaction of the members of a group. The study
found that consideration behaviour (work-oriented) and structural
behaviour (task-oriented) are exclusive and separated behaviours.
Both of these behaviours are on the same continuum but at opposite
ends. The conclusion from this study was that leaders who are
inclined towards the feeling of consideration must reduce the
structural behaviour and vice versa. Meanwhile for leaders who
are inclined towards work, they need to reduce their consideration
behaviour.
 TOPIC 7 LEADERSHIP  105

(iii) The Managerial Grid by Blake and Mouton

Also known as the Managerial Grid, or Leadership Grid, it was
developed in the early 1960s by management theorists Robert
Blake and Jane Mouton. It plots a managerÊs or leaderÊs degree of
task-centredness versus her person-centredness and identifies five
different combinations of the two and the leadership styles they
produce. The Blake Mouton Managerial Grid is based on two
behavioural dimensions as shown in Figure 7.2:

 People Concern: this is the degree to which a leader considers

team membersÊ needs, interests and areas of personal
development when deciding how best to accomplish a task.

 Task Concern: this is the degree to which a leader emphasises

concrete objectives, organisational efficiency and high productivity
when deciding how best to accomplish a task.

Blake and Mouton suggested that the position of leadership at the

matrix 9-9 is the best. They named this style of leadership as team
management.

Figure 7.2: The Managerial Grid by Blake and Mouton

106  TOPIC 7 LEADERSHIP

7.1.2 Follower-centred Approach

Follower-centred styles accomplish organisational success through the
realisation, progress and development of the followers. These leadership styles
are practised in organisations that treat employees as the most valuable
organisational assets, investing available resources in them. Organisations that
use follower-centred styles tend to have a flat structure, where leaders and
followers are treated equally.

7.1.3 Interactive Approaches

Another method used is by looking at the ways a particular leader interacts with
his followers, either directly or indirectly. There are four interactive approaches
as shown in Figure 7.3.

Figure 7.3: Four models of interactive approaches

(a) Situational Leadership Model

According to Rue et al. (2000), this model as shown in Figure 7.4 is
also known as leadership life-cycle model, and it was introduced by Paul
Hershey and Then Blanchard. This model is based on the assumption that
leadership styles should portray the maturity level of subordinates. This
model studies the interaction between behaviour, leadership, situation or
condition and competency of followers. This model then combined the task
behaviour and relationship behaviour to create four different leadership
styles: telling or directing style, selling or coaching style, facilitating or
counselling style, and delegating style.
 TOPIC 7 LEADERSHIP  107

Figure 7.4: Situational leadership model

(b) FiedlerÊs Contingency Theory

According to Williams (2000), this theory is one of the earliest studies
using the contingency approach. It was introduced by Fred Fiedler. It is one
of the contingency theories that state that effective leadership hinges not
only on the style of leading but on the control over a situation.

FiedlerÊs contingency theory embraces that situational factors interrelate

with leader traits and behaviour to affect leadership effectiveness.
According to Fiedler, there is no ideal leadership behaviour. Both task-
oriented and relationship-oriented leaders can be effective if their
orientation (favourability) fits the situation. Favourability is determined by:

(i) Leader-Member Relations – the respect and trust that followers have
for the leader
 108  TOPIC 7 LEADERSHIP

(ii) Task Structure – the extent to which subordinatesÊ responsibilities

can be structured and performance measured

(iii) Leader Position Power – the control the leader has over subordinatesÊ
rewards

(c) Path-goal Theory

According to Williams (2000), this theory was introduced by Martin Evans
and Robert House. This theory stated that a leader is able to increase the
satisfaction and performance of his subordinates by explaining and setting
up the path towards behavioural goals by increasing the number and forms
of rewards towards the achievement of goals.

SELF-CHECK 7.1
Describe the four types of and BlanchardÊs situational components of each?
1. behaviour identified in Hershey
leadership model. What are the

2. Explain what is meant by favourable situation in FiedlerÊs

contingency theory.

7.2 STRATEGIC LEADERSHIP

According to Williams (2000), strategic leadership refers to the competency of a
leader in making predictions, retaining flexibility, thinking strategically, having
visionary ideas and co-operating with others in forming a positive future for the
organisation. Strategic leadership refers to the way leaders are able to change the
attitude of employees in order to achieve the goals that have been set. The
following are four strategic leadership styles:

(a) Visionary Leadership

Visionary leadership is a leadership style that is able to create a positive
image for the future of the organisation by motivating employees and is
able to depict the direction of the organisation based on the planning and
goals that have been set.
 TOPIC 7 LEADERSHIP  109

(b) Charismatic Leadership

Charismatic leadership refers to the features of leaders in creating a strong
relationship between themselves and subordinates. A charismatic leader is
a leader having high levels of reference force; whereby half of the force
comes from his need to influence others. This type of leader has a high level
of self-confidence, is dominant and believes in the truth of everything that
he does.

(c) Transactional Leadership

Transactional leaders will determine what should be done by employees to
achieve their own objectives and the objectives of the organisation. They
also classify and aid employees to be confident so that they are able to
achieve the objectives by making certain efforts. This type of leadership is
based on the process of exchange, where subordinates are given rewards
for good achievements and punished for poor achievements.

(d) Transformational Leadership

Transformational leaders are capable of enlightening and accepting
suggestions and visions of the group and are able to encourage employees
to look beyond their own needs and own interest for the well-being of the
group. Transformational leaders will motivate their employees to perform
more than expected by initiating feelings of importance and value of the
task in each individual. This can be done by creating interest in employees
to perform for the sake of the group and the organisation besides fulfilling
their own needs of self-achievement.

What traits does this person have? Are they consistent with the traits discussed in this topic? If not, why is this person eff

SELF-CHECK 7.2
In what way does a transactional leader differ from a transformational leader?
110  TOPIC 7 LEADERSHIP

 Leaders are different from managers. The main differences are that leaders
emphasise more on performing tasks effectively while managers emphasise
more on performing tasks efficiently or correctly.

 Leader-centred approach focuses on personality features of leaders, leader

behaviour and leadership styles.

 The main results from the studies on personality features of a leader found
that successful leaders usually have certain personal features that are better
when compared to followers.

 On leadership behaviour, three important studies were discussed, namely,

the Managerial Grid studies and the studies conducted by Ohio State
University and Michigan University.

 These three studies linked the two main dimensions portraying the behaviour
of a leader, namely, task dimension and relations dimension.

 Other than that, leadership styles associated with decision making gave
rise to three forms of leadership styles: autocratic style, laissez-faire and
democratic style.

 The follower-centred approach or also referred to as self-leadership is a

paradigm that is based on the presence of leaders in organisations who are
ready to lead their own selves.

 Meanwhile, interactive approach is related to the studies between leaderÊs

behaviour with the situation and favourableness of the followers.

 In this approach, four main models such as leadership situational model, path-
goal model, FiedlerÊs contingency model and continuum of leader behaviour
model had been discussed.

 Finally, the four strategic leadership styles involving visionary leadership,

charismatic leadership, transactional leadership and transformational
leadership were also discussed in detail.
 TOPIC 7 LEADERSHIP  111

Autocratic Transformational
Charismatic Interactive Transactional Visionary
Visionary leadership
Topic  Controlling
8
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Explain what controlling means;
Describe the main purpose of control;
Examine the steps involved in the control process;
Explain the basic methods of control; and
Describe the forms of control.

 INTRODUCTION
Controlling is an important managerial function which all managers are required
to perform. Controlling is a managerial function which helps managers to ensure
that activities in the organisation are performed according to the plan.
Controlling also ensures efficient and effective use of organisational resources to
achieve organisational goals. Hence, it is a goal-oriented function.

8.1 DEFINITION OF CONTROLLING

According to Rue and Byars (2004), controlling is the process of ensuring that
organisational activities operate according to plan. This process can be carried
out by comparing the actual performance against the standard that has been
established and taking corrective actions in order to rectify any distortion that
does not comply with the standard.
 TOPIC 8 CONTROLLING  113

The main purpose of controlling in organisations is to prepare managers to

face existing or future problems before they become critical. In general, an
organisation with a good control mechanism will have a competitive advantage
compared to organisations without good control systems. The importance of
controlling for organisations includes:

(a) Quality Assurance

The smooth running of a particular process can be monitored and problems
can be avoided by having controls. Controlling allows the organisation to
monitor and increase the quality of products and services offered. Through
activities related to the control process, members of the organisation will
always be driven to act according to the plans that have been established.

(b) Preparation to Face Changes

Change cannot be avoided. Changes in environmental factors such as
competitors, technology and legislation force managers to take controlling
function seriously so that they can respond to opportunities and threats more
effectively. Controlling helps the organisation to tailor its products to the
changing needs and wants of consumers in the market.

SELF-CHECK 8.1
Why is it important for managers to understand the process of organisational control?
What is meant by controlling in the context of management?

8.2 STEPS IN THE CONTROL PROCESS

According to Rue and Byars (2004), the control process has three basic needs:

(a) Establishing standards to be used in measuring the level of growth;

(b) Monitoring decisions and comparing them to the standards, that is, the
comparison of the organisationÊs actual performance against planned
performance; and

(c) Taking corrective actions to rectify any disadvantages and weaknesses that
occurred during the process of achieving the performance target that has
already been set.
114  TOPIC 8 CONTROLLING

Figure 8.1 shows the steps in a control process.

Figure 8.1: Steps in a control process

Source: Lewis et al. (2001)

Let us now go through these steps in the process one by one.

(a) Establishing Standards

Standard is the base used for comparison in order to measure the
performance level of an organisation to find out whether the company is
compliant. Standard is the point of reference when making comparison to
another value. Standard can be explained as the requirement of a particular
job. In management control, standards are usually derived from the
objectives.

In general, there are three types of standards:

(i) Physical standard such as quantity of products and services, number

of customers and quality of products and services;

(ii) Financial standard is stated in monetary form and includes labour

cost, sales cost, material cost, sales revenue, profit margin and others;
and

(iii) Time standard which includes the performance rate of a particular

task or the time period required to complete a particular task.

(b) Measuring Performance and Making Comparisons

Performance measurement is a type of control. Actual results need to be
monitored to ensure that the output produced is according to the specific
standard. The main purpose of performance monitoring is to gather data
and detect deviations and problem areas. Measurement has no meaning if it
is not compared to the standard. Comparison against the standard is a
process whereby comparisons are made between actual performances with
the standards set. This step is important because it allows any deviations or
 TOPIC 8 CONTROLLING  115

distortions to be detected and corrective actions can be taken in order to

achieve the goals that have been set.

(c) Corrective Actions

The first and second steps in the control process will be meaningless if
corrective actions are not taken. Before taking any corrective actions,
detailed analysis must be carried out in order to find out the factors that
caused the particular deviation.

Corrective action is the process of identifying the distorted performance,

analysing the distortion, developing and implementing programmes in
order to rectify it. It may involve changes in one or more operational
activities of the organisation such as modification, repairing of machines,
preparation of certain courses or it might also involve a change in the fixed
standard.

ng the level of performance in a particular organisation. What do you understand about this term and do you know how t

8.3 BASIC METHODS OF CONTROL

According to Williams (2000), the control process consists of three basic
methods which are identified as pre-control, concurrent control and feedback
control. This is shown in Figure 8.2.

Figure 8.2: Three basic methods of control

Source: Adapted from Jones, George & Hill (2000)
 116  TOPIC 8 CONTROLLING

Let us look at these three methods of control in more detail.

(a) Pre-control
Pre-control is also known as preventive control or feed-forward control. It
focuses on the regulation of inputs (human, material and financial
resources that flow into the organisation) to ensure that they meet the
standards necessary for the transformation process. Feed-forward controls
are desirable because they help managers prevent problems rather than
having to cure them later.

(b) Concurrent Control

Concurrent control takes place while an activity is in progress. It involves
the regulation of ongoing activities that are part of the transformation
process to ensure that they conform to organisational standards.
Concurrent control is designed to ensure that employee work activities
produce the correct or desired results. Examples of this method of control
are mid-term examination, control of accounts and control of inventories.

(c) Feedback Control

Feedback control focuses on the output of the organisation after the
transformation is complete. This type of control is implemented after the
transformation process has been completed with the purpose of finding out
whether the whole activity operated accordingly with the expected results.
This control is also able to determine whether the plan that is going to be
carried out has the aspect of continuity with the previous programme.

ween pre-control, concurrent control and feedback control. Which method of control do you think is the best? Discuss wit
 TOPIC 8 CONTROLLING  117

8.4 FORMS OF CONTROL

According to Williams (2000), there are five forms of control that managers can
use when implementing the control process – bureaucratic, objective, normative,
concertive and self-control. Figure 8.3 illustrates these five forms of control.

Figure 8.3: Forms of control

Let us now understand in better detail these five forms of control.

(a) Bureaucratic Control

This method uses hierarchical authority to influence employees. Rewards
are given to employees who obey and punishment is meted out to
employees who do not obey the policies, regulations and procedures of the
organisation.

(b) Objective Control

This method uses the measurement of observation towards the behaviour
of employees or output produced to evaluate work performance. Objective
control consists of two forms of control, namely behavioural control and
output control. Behavioural control refers to the rule of behaviour and
actions that control the behaviour of employees in their tasks. Output
control is the form of control that monitors the output of employees by
granting rewards and incentives.
118  TOPIC 8 CONTROLLING

(c) Normative Control

Normative control is a method that arranges the behaviour of employees
and results through norms and beliefs shared together among all the
members within the organisation. There are two main elements in this type
of control – sensitivity towards the selection of employees based on their
attitudes and norms, and obtaining inspiration based on experiences and
observations of employees.

(d) Concertive Control

This is a method that is based on norms and behaviours which are formed
and agreed by the work group.

ACTIVITY 8.3
Is bureaucratic control effective? Discuss with your coursemates.

 The main purpose of management control is to prepare managers to face

existing or future problems before it becomes critical.

 Management control has three basic needs – establishing standards,

measuring performance and comparing it to the established standards, and
making corrective actions on any distortions that occurred between the actual
performance and the standard performance.

 Controlling is a dynamic process because it is a continuous process.

 The control process consists of three basic methods, namely pre-control

which is also known as preventive control, concurrent or present control and
feedback control.

 There are five forms of control that managers can use when implementing the
control process – bureaucratic control, objective control, normative control,
concertive control and self-control.

 In order to ensure that the organisation can achieve its goals, several
important perspectives must be controlled. They are finance, human
resource, quality and customers.
 TOPIC 8 CONTROLLING  119

Autonomous work group Feedback control

Behavioural control Normative control
Bureaucratic control Objective control
Concertive control Output control
Concurrent control Pre-control
Corrective action Preventive control
Topic  Managing
9 Teams
LEARNING OUTCOMES
By the end of this topic, you should be able to:
Examine the differences between groups and teams;
Identify the advantages and disadvantages of teams;
Discuss the best time to form teams;
Distinguishthetypesofteamsavailableinthecurrent environment;
Discuss the characteristics of teams; and
Discuss the phases involved in team development.

 INTRODUCTION
The practice of teams is applied nowadays because there is indication showing
that teams are more proficient in performing tasks compared to individuals
when dealing with tasks that involve a variety of skills, considerations and
experiences. Many organisations have changed their structures in order to
develop teams to utilise the talents of the employees optimally. Besides that,
some management have discovered that a team is more flexible and responsive
towards changes in the environment compared to traditional structures.
 TOPIC 9 MANAGING TEAMS  121

9.1 DIFFERENCES BETWEEN TEAMS AND

GROUPS
Teams and groups are not the same entities. A group is defined as two or more
individuals who interact and are independent of each other towards achieving a
certain objective. A team is an interdependent and complementary entity in all
aspects among the members, with a partnership commitment towards achieving
the same goals.

The definitions above clarify that the success of a team depends on the
interdependent relationships and collective effort of the team members.
Therefore, team members have mutual influence and significant impact on each
other when working together.

9.2 ADVANTAGES AND DISADVANTAGES OF

TEAMS
Let us now look at the advantages and disadvantages of teams. Table 9.1 details
the advantages, while Table 9.2 looks at the disadvantages.

Table 9.1: Advantages of Teams

Advantages Description
Enhanced customersÊ One of the ways teams help to enhance customersÊ satisfaction
satisfaction towards organisations is by forming a team that is specially
trained to fulfil certain needs of the customers. Through this
method, customers are directly connected to the team in order
to fulfil their needs.
Increased quality of Teams also assist organisations to increase the quality of
products and products and services. Unlike organisations with traditional
services structures where the management is fully responsible towards
decisions and performances, teams take direct responsibility
regarding the quality of products and services produced.
The need for speed One thing that makes the concept of teams popular these
and efficiency days is the need for speed and efficiency in designing and
producing products. In the present business environment,
prompt changes in customersÊ preferences demand that an
organisation has speed and efficiency to make the necessary
changes.
122  TOPIC 9 MANAGING TEAMS

Increased level of job The implementation of teams can also increase the levels of job
satisfaction satisfaction. It gives employees the opportunity to enhance
their skills. This is done by cross training. Cross training is an
exercise that trains team members to perform all or most of the
work done by other workers. This exercise allows teams to
function under normal conditions with no interruption even
with the absence or resignation of a team member.
Team members always enjoy job satisfaction due to leadership
responsibility which cannot be gained from traditional
organisations. Teams are allowed to determine their working
manner, scheduling, maintenance, equipment, leave schedule,
quality control and others. This freedom is very meaningful to
the workers.
Diversity in Teams share various advantages especially in the aspect of
decision decision making. Problems can be viewed from various
making perspectives since a team consists of individuals having
different knowledge, skills, abilities and experience. Diversity
from this angle is able to increase the probability of solving the
real problem.

Table 9.2: Disadvantages of Teams

Disadvantages Description
High turnover Turnover rate is high especially at the initial stage of a team
rate formation. A team is not necessarily accepted by everyone. Inability
to adapt to other members and the internal environment of a team
are the main factors for high turnover rates at the initial stage of
team formation. Besides that, inability to take responsibility,
inability to contribute effort and lack of experience are some other
factors that contribute to this disadvantage.
Leads to social This happens when employees fail to contribute towards job
loafing sharing. In other words, social loafing means that a person becomes
a sleeping partner in the team. Social loafing usually takes place
in a large team where it is difficult to identify and monitor the
efforts contributed by each member of the team. In other words,
members that practise social loafing will try hard to hide their
activities and this condition causes the phenomenon of social
loafing which is difficult to be detected.
Leads to the The condition that leads to the behaviour of self-restriction is
behaviour of self- when there are team members who do not have their own opinions
restriction or views and do not take part in discussions. All these can
diminish the performance levels of the team. This matter is seen to
be similar to the condition of social loafing but actually, it is not.
Social loafers try to ensure that other members do not know about
their activities but the behaviour of self-restriction does not.
 TOPIC 9 MANAGING TEAMS  123

ACTIVITY 9.1
What is social loafing? Can managers do anything to minimise or eliminate it? Discuss this with your coursemates.

9.3 WHEN IS A TEAM NEEDED?

Firstly, a team can be used when the objective or meaning of usage is clear.
Many organisations implement the concept of teams because it is popular or due
to the assumption that a team is able to resolve all kinds of problems.

Secondly, a team is needed for tasks that cannot be carried out individually but
through the merging of these individuals. This means that a team is needed
when a task is complex, needing diversity of perspectives or requiring repetitive
interaction with other people in order to complete it.

Thirdly, a team can be used when rewards can be provided for teamwork or
team performance. Team rewards depend on the team performance rather than
individual performance. This is the key to providing rewards for the team
behaviour or effort. If the level of reward is not in line with the level of
performance, the team will not be able to function as required.

Fourthly, a team can be used when there are many resources readily available.
Resources needed by teams include training, time, place and collaboration
methods, equipment and consistent information and feedback regarding
teamwork processes and work performance. Failure in obtaining these resources,
such as lack of training to support the transition from individual work to
teamwork will result in the failure of team implementation.

Finally, a team is needed when it has a clear authority in managing and

modifying the working method. This means the team is given the freedom to
determine the working method, making the work schedule, training and
maintenance, or finding ways to resolve customersÊ problems.
 124  TOPIC 9 MANAGING TEAMS

Table 9.3 shows when teams can or cannot be used.

Table 9.3: When Teams Can or Cannot be Used

Use Teams When Do Not Use Teams When

 The objectives and reasons for its  The objectives and reasons for its
formation are clear formation are not clear
 Work cannot be carried out individually  Work can be carried out individually
 Rewards can given based on  Rewards are only given based on
be teamwork individual effort and performance
 There are plenty of resources available  Resources needed are not available
 The team has the power to manage  The management is still monitoring
and alter the working methods carried and influencing the working methods
out being carried out

ACTIVITY 9.2
In your opinion, how important are teams in organisations? Why cannot a task be carried out by an individual?
Based on your understanding, describe the condition where the use of a team is unnecessary.

9.4 TYPES OF TEAMS

A company may use different types of teams depending on its needs and goals.
Figure 9.1 illustrates the seven types of teams which may exist in an organisation.

Figure 9.1: Types of teams

 TOPIC 9 MANAGING TEAMS  125

Let us now learn about these different types of teams in greater detail.

(a) Employee Involvement Team

This is a team that provides advice and suggestions to management relating
to certain matters. Meetings among members of the team are held during
working hours and are done periodically. Issues such as safety at the
workplace, customer relations or quality of product are often raised by this
team. This team can only give advice and suggestions but does not have the
power to make decisions. Membership in this team is voluntary but the
selection is from a circle of experts.

(b) Semi-autonomous Team

This team has the authority to make decisions and resolve problems
relating to the main tasks of product and services production is known as a
semi-autonomous team. This team receives information regarding budgets,
work quality, performance and also information regarding products
produced by competitors. Team members are trained in various skills and
tasks. This team has the power to make decisions just like a supervisor or a
manager but the authority received is not complete.

(c) Self-managed Team

A self-managed team differs from a semi-autonomous team. A self-
managed team is a team that manages and controls the overall main tasks
in the production of products and services. This team can do anything
related to production without having to refer to or wait for instructions
from management. This includes matters in managing and controlling the
allocation of materials, product making, providing services, and ensuring
the accuracy of delivery and others.

(d) Self-designed Team

This is a team that possesses the characteristics of a self-managed team but
also controls the design of the team, work activities and team memberships.
This type of team is involved in operational matters related to the team
which exceeds the self-managed team. This team has the power to
determine the work schedule, leave, how and when a task should be
performed.

(e) Cross-functional Team

This team consists of employees from different fields or functions in the
organisation. Since team members have different functions, knowledge and
experiences, a cross-functional team is able to identify the real problems
and see them through various perspectives, and are able to generate more
ideas and alternatives. This type of team can be used in any organisation
and can be formed whether part-time, temporarily or permanently.
126  TOPIC 9 MANAGING TEAMS

(f) Virtual Team

A virtual team has members in different geographical areas or organisations
and uses telecommunications and information technology to carry out
activities of the organisation. Meetings among team members are not
conducted face to face but instead use a combination of communication and
information technology. This type of team is still new and can become a
reality with the development of communication technology such as e-mail,
the Internet, video conferencing and more.

(g) Project Team

Project team is a team formed to carry out a task or project in a particular
time period. This type of team is usually used for the purpose of
developing new products, upgrading existing products, developing new
information systems or in building new offices and factories. A project team
is usually led by a project manager who has full responsibility for planning,
membership and team management.

SELF-CHECK 9.1

How does a self-managed team differ from a semi-autonomous team?

State the type of team based on the characteristics given:
A team having the authority to determine the memberships in the team.
A team where its members are in different geographical areas or organisations.

The understanding of the aspects of team characteristics is crucial to ensure

the success of a particular team formation in an organisation. The aspects are
illustrated in Figure 9.2.

Figure 9.2: Aspects of team characteristics

 TOPIC 9 MANAGING TEAMS  127

For a better understanding of these characteristics, refer to Table 9.4.

Table 9.4: Team Characteristics

Characteristic
Description
Aspects
Team Norms Team norms are informal rules or standards which are agreed upon
in order to control the behaviour of team members. Team norms
concern how team members will interact, communicate and conduct
themselves as members of the team. Norms express intentions; they
help team members agree on how they would like to get along before
situations emerge that might otherwise prevent them from getting
along.
Team Unity Team unity refers to how far team members are attracted to becoming
members of the team and motivated to stay permanently in the team.
Team unity is able to sustain and reduce the turnover rate of team
membership. When teams possess high unity levels, each member is
more motivated to contribute to the team and is confident other team
members will contribute as well. This will accelerate the achievement
of high performance.
Team Conflict Conflicts and misunderstandings do exist in any teams. Conflicts
can be caused by fighting over limited resources, arguments
regarding certain issues, discrepancy in opinions and others.
Usually, conflict is viewed as a negative matter. The key here is
that, rather than trying to avoid conflicts in a team, try to ensure
that a team faces a suitable conflict instead.
Team The development and growth of a team will undergo four phases.
Development The phases consist of forming, storming, norming and performing as
depicted in Figure 10.3. However, not all teams who undergo these
four phases are able to produce high levels of performance. If a team
is not perfectly managed, the team will face a decline and quickly go
through the phases of de-norming, de-storming and de-forming.

what way do the characteristics of teams relate to the teamÊs ability to achieve success in attaining its goals? Discuss this
128  TOPIC 9 MANAGING TEAMS

9.5 PHASES OF TEAM DEVELOPMENT

In this final subtopic, we will be looking at the phases of team development.
Refer to Figure 9.3 to see the phases of a teamÊs development.

Figure 9.3: Phases of team development

Let us now understand these phases in greater detail.

(a) Forming
This is the beginning of the first meeting among team members, forming
the first perceptions and trying to discover the feelings and conditions if
they continue to become members of the team.

(b) Storming
Storming is the second development phase that is characterised by conflicts
and disagreement where team members have different opinions regarding
with, what and how a task should be carried out.

(c) Norming
Norming is the third phase in the development of a team. Each member
will start to resolve any conflict or misunderstanding as one of their roles as
a member of the team.

(d) Performing
Performing is the final phase of the team development process. During
this phase, performance will start to increase since the team becomes
more matured and fully functional. At this stage, members must be fully
committed and start thinking as a member of the team.
 TOPIC 9 MANAGING TEAMS  129

(e) De-norming
In de-norming, which is the repetition of the norming phase, team
performance starts to decline in terms of time, size, scope, goal and
membership.

(f) De-storming
De-storming is a condition where the team comfort starts to decline. Team
unity becomes weaker when team members refuse to follow the team
norms and do not participate in team activities.

(g) De-forming
In the de-forming phase, members of the team will position themselves in
order to control fragmentation in the team. Thus, factions start to form in
the team. Members will avoid meeting each other and the team leader.

wnturn of a team. Based on your understanding of what you have learned so far, what are the factors that influence the

 A team is an entity that is able to provide synergy to the development of

organisations.

 It has its own advantages and disadvantages. If a team is formed at the

right time, the advantages gained might outweigh the disadvantages.

 The formation of a team must be carried out with proper planning to

maximise its advantages.

 Therefore, knowledge regarding the types of teams and understanding on the

team characteristics is very important for the purpose.

 Besides that, organisations also need to have knowledge regarding the issues
that will help towards forming high-performance teams.
130  TOPIC 9 MANAGING TEAMS

Cross-functional team Self-managed team

De-norming Social loafing
De-storming Storming
Forming Team norms
Norming Team unity
Project team Teamwork
Self-designed team Virtual team
  ANSWERS 131

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Learning.
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