Chapter 5 - General Management and Corporate Governance

The general manager operates at TOP management level, the functional managers operate as the MIDDLE
management, while supervisors are at LOWER level management.

Entrepreneurship and Intrapreneurship

Entrepreneur:
 Person who combines the three factors of production (capital, labour and raw material) in order to start a business
venture
 They see an opportunity in the market and assume their risk of starting a new business by investing their capital
in order to make a profit
 They will usually operate at top management level
Intrapreneur
 They work within the business and uses entrepreneurial qualities combined with the business’ resources to
transform innovative ideas into profit
 They will often implement a new and profitable idea within the department with the approval of their manager
(if they are not at top level)
Entrepreneurial qualities, characteristics and skills
 Ability to identify an opportunity with potential and pursue it, even if it’s risky. They need to take risks to reap
rewards
 Understand the target market and they need to continuously scan the internal and external environment to be
proactive
 They need to know their customers (LSM), their needs and be willing to change the business plan in order to
satisfy these needs
 They must be able to anticipate trends, identify the positives and use these to the advantage of the business
(opportunist)
 Commitment and perseverance
 Creativity and innovation (differentiation strategy may lead of a successful business).
 The ability to prepare and implement a plan to achieve realistic goals. Being proactive by preparing a contingency
plan is an important risk management tool
 Must be able to obtain and coordinate the required resources in the optimal manner
 Must be able to convince and motivate other to buy into the plan
 Evaluate achievements and progress to initiate corrective measures if needed
 Make quick decisions
 Communicate clearly and accurately
 Personally motivated

Leadership vs. Management

Manager: appointed in a position of authority which enables him to insist on people doing as they instruct
Leader: has the expertise to make people aware of the advantages of pursuing a certain course of action, thereby creating
a desire in people to follow them to achieve a common goal
Ideally, a manager should strive to be a leader too in order to be successful.
Manager Leader
Maintains systems Develops new methods
Focuses on systems and structure Focuses on people
Relies on control Inspires trust
Accepts the status quo Challenges the status quo

Management styles
1. Democratic
 Allows subordinates to provide input and participate in the decision-making process
 Also called the participative-leadership style
 Advantage: ensures “buy-in” and commitment
 Disadvantage: slower decision-making
2. Autocratic
 Seldom allows input from subordinates and makes all decisions
 If there’s a crisis and quick decision-making is needed, this may be the best approach
 Disadvantage: low morale of employees as they feel undervalued
 3. Laissez-faire
 They believe they should not interfere in the process of carrying out a task
 This may yield excellent results if the workforce is highly-skilled
 Tells them what is expected of them but not how to do it
4. Transactional
 “Give and take”
 The manger motivates employees to do their tasks in return for possible benefits (i.e. salary or bonus)
 Employees may start to view reward as insufficient and it may lead to labour unrest
5. Transformational
 Charismatic by nature
 They help employees to stay motivated by helping them to understand the meaning of their work
 Emphasis on teamwork
 Builds confidence and trust between employees and management which improves creativity, problem-
solving and productivity
 People may even surpass their own expectations especially if the manager not only leads the team, but
empowers them too.
6. Situational leadership style
 Combination of all the others. The manager adapts the management style to the situation
 Disciplinary action would require an autocratic style
 Artistic employees who don’t like structure will respond well to laizzes-faire
 Disadvantage: it can lead to confusion
Motivational factors: monetary vs. non-monetary factors
Advantages of a motivated work-force
 More likely to provide good customer service
 Productive, which may lead to a lower cost per unit and, therefore, more opportunities for profit
 Lower levels of absenteeism or lower staff turnover
 Less likely to embark on industrial action
 Happy workers will say positive things about the business which may improve the image of the business
 Positive impact on other departments, boosting their morale as well
Monetary factors to motivate employees:
 Salary increase may temporarily raise the motivation levels of some workers but may eventually brome
demotivated if the prospect of a future increase is slim
 Performance bonus, profit sharing or commission
 If performance is inadequate, the additional monetary reward may be withheld
 Paid holiday to an exotic destination
Non-monetary factors to motivate employees:
Not every factor will apply to all employees
 Job enlargement: additional tasks are added to the original job. It’s important to make sure the employee doesn’t
get demotivated if they feel they make more work for the same salary
 Job enrichment: more response and often more authority. It may be necessary to give the employee additional
training so that their their levels match the requirements of the task
 Empowerment and advancement of the employee: employees are given the opportunity to develop new skills
and gain wider knowledge (win-win situation: business gains and employee has more competencies to put on
their CV’s
 Flexible hours (if possible): motivation levels may increase to get the work done efficiently, speedily and to a high
standard (example: think of a mother who needs afternoons to help her kids. She will make sure her work is done
earlier so that she has the afternoons to be with her kids)
 Recognition of good work should be done publicly but reprimanding should be done in private. Example:
employee of the week/month
 Including employees in decision-making
 Wellness programs: child care facilities, time off and assistance with household problems

Management tasks
These are tasks that managers have to perform. The aim of management if to ensure employees perform in an efficient
and effective way to achieve the goals of the business
1. Planning
 Businesses needs to plan to ensure that actions are geared towards the desired outcome. The plan should have
the aim of achieving goals and objectives but should be flexible
 Steps in planning process: understand and define the problem, get all the relevant information, analyse the
information and consider all possible eventualities. Decide on a plan of action but have alternative plans.
Implement plan. If plan is unsuccessful, implement contingency plan.
 Planning of different management levels:
- Top management: overall, long-term strategic business plan (incl. vision, mission, objectives and
strategies for overall business)
- Middle management: tactical plans, which involves the acquisition of resources needed by the
departments that they control. Responsible for medium-term planning and has to snare that lower levels
of management align their daily planning with middle and top
- Lower management! Planning work schedules and programs on a daily basis
 Principles to keep in mind when planning:
- Managers are help accountable for the development and implementation of plans but they must receive
support and guidance from managers above them.
- Planning must be aimed at the future
- Clear communication
- Keep it straight and simple
- A guide for employees towards the end goal
2. Leading
 Manager has to ensure that guidance and support is given to employees
 A good leader will strive to maintain a balance between being risk orientated and people orientated
 General rules for good leadership:
- Workers should always understand what goals they need to achieve
- Allow subordinates to provide input and their opinion
- Employees should feel respected and supported by management
- Good work should always be recognised openly. Criticism should be constructive and in private
- Explain changes and why certain procedures need to be followed
3. Organisation
 Arranging activities in such a way that all factors of production (employees, working capital and raw materials)
contribute towards a systematic and successful business
 The general manager/CEO has to ensure that all managers below them realise that their tasks are interdependent
and they need to work together
 Also refers to reporting structures in the business. Reporting lines need to be clear in order to avoid confusion
and blame-shifting
4. Control
 Control will provide the manager with feedback to determine for problems can be addressed
 A good control system
- Step 1: Set standards which can be used as a benchmark to compare with actual performance. (What will
be evaluated and how it will be done)
- Step 2: Actual performance is measured against predetermined standards
- Step 3: Deviations (if there are any) must be corrected by trained people or at least discussed to prevent
repetition of sub-standard work
5. Coordination
 Cooperation between different departments
 Clear communication to ensure everybody understands the expectations required
 Ultimate goal: create synergy (combined effect greater than the sum of their separate effects)
6. Communication
 Transfer and receding of ideas and attitudes internally and externally
 Without good communication, it’s not possible to build good relationships with stakeholders
 Clear communication enables workers to inform management about problems and ideas
 At also improve overall performance
7. Delegation
 This reduces the work load of senior employees and to achieve a more meaningful distribution of tasks and
responsibilities
 Delegate duties, responsibilities and authority to subordinates
 The person must be able to perform the tasks and may need additional training
 The worker should also be authorised to handle situations that arise from the added responsibility
 The employee and manager will be held accountable for the quality of the work done
8. Decision making
 All relevant facts must be considered
  A choice is made regarding what will be the best in a particular situation
 Designs should be objective
 Assess the decision by considering its feasibility and viability
9. Discipline
 Purpose: improve future behaviour
 Everybody must know what is regarded as misconduct and what the consequences will be if rules are broken or
performance standards aren’t met
 Disciplinary measures must be consistently implemented
 Minor offence: verbal warning (may be multiple)
 If the employee continues with this behaviour, a written warning may be issued and maybe a second or final
written warning
 Serious offence: immediate suspension until the disciplinary hearing is held
 The “code of conduct” will specify the disciplinary action for different offences
 *human capital chapter for requirements of substantive and procedural fairness
10. Motivation
 Refer to motivational factors and advantages of a motivated work-force
Management competencies
These are skills that should be learnt and developed
1. Global awareness
 Understanding political, language or cultural differences between countries in order to avoid general assumptions
about other people
 Understanding exchange rates that appreciate and depreciate and the effect on the cost of production
 An awareness of the entire supply chain is crucial. The business may not trade directly with other countries but
the business world is interrelated
2. Organisational awareness
 Requires management to be aware of internal and external factors that may have an impact on the success of the
business
 Internal:
- Understanding strengths and weaknesses of the business
- Understanding of what happens in the entire business because the departments are interdependent
- Have empathy and accommodate people where possible
- Understand the organisational culture of the business

 External:
- Understanding of opportunities and/or threats
- National and international trends may have an impact on the business
3. Analysis
 The manager should be able to identify important sources of information, gather the relevant information,
interpret the influence that different events may have on one other and compare alternative plans of action
 When information is analysed, potential problems should be identified and solutions pre-empted to manage risks
 Decisions should not be made impulsively, but only after the consideration of all relevant facts
4. Strategic thinking leading to strategic action
 This entails the manager’s ability to look at the business’ current position in relation to the rest of the market
 Strategic planning requires a vision, mission, long-term and short-term objectives and the development of a
strategy that will make these goals a reality
 The manager needs to understand the industry and market trends that will affect the business’ competitive
position. SWOT analysis
 The manager must be able to anticipate and forecast what will happen in the future and be proactive
 The outcomes of the situations should also be evaluated in order to implement corrective action if needed
5. Teamwork
 Teams should be designed so that members will complement each other’s strengths and weaknesses
 The manager has to ensure that members of the team listen to each other, express disagreement in a constructive
manner and then find a way to work cooperatively (functional conflict)
 Team members must have a clear understanding of the goals and must be empowered with the necessary skills
to achieve these goals.
 Team members must be trained if they lack certain skills and must be held accountable for their performance
6. Empowerment and talent development
  This means that the business is investing time and resources to assist with employees’ development to achieve
the goals and objectives of the business
 Employees will have better morale and higher levels of motivation
 Ways to empower and develop talent of employees:
- New skills through training
- New responsibilities and authority to perform a new challenging task
- Freedom to choose how to do a task provided that pre-determined standards are met
- Monitoring performance and giving constructive feedback
7. Initiative
 Shows that the manager is not waiting for other people to think of new ways to improve
 The manger will not only question the conventional methodology but also encourage subordinates to think of
new ideas and innovations before a situation demands it
 It means being proactive and pre-emptying issues before they arise in order to create a competitive advantage
8. Judgement/ decision-making
 All relevant facts have to be evaluated in an objective manner before a decision is made
 A manger needs to apply logical reasoning when they are required to make quick decisions
 The manager needs to employ integrity when making decisions. This demonstrates leadership and a willingness
to acknowledge accountability for their decisions
9. Negotiation
 A successful negotiator is able to convey their opinions in a clear and accurate manner and then use these skills
to persuade their audience to understand their point of view
 A manager who is a skilled negotiator will try to facilitate a win-win situation, using compromise to resolve
problems
 It’s important to obtain buy-in from the most influential role-players because these informal leaders may
influence others in the negotiation process
 This is a skill most people can acquire
10. Customer service orientation
 Customers and their needs should be the primary focus areas and should be considered in all decisions
 Managers need to listen and respond to customer’s feedback, questions and problems.
 A productive customer relationship based on trust and credibility will ensure customer loyalty

Corporate Governance and the King Reports

Corporate governance: set of rules and processes test are used by top management to direct and control the business. It
provides a framework and control measures to look after the bottom line of the business and all stakeholders

The King I report recommended standards of conduct for companies listed on the JSE and State-owned businesses
regarding their responsibilities towards citizens in the societies in which they function. Triple bottom line reporting
(Integrated reporting) requires managers to focus on all stakeholders (not just shareholders) when strategies are
formulated and implemented. Management should consider the consequences of decisions for society (people) and the
environment (planet).
King II describes seven principles of good corporate governance
- Transparency
o Decisions being taken in accordance with a set of rules and with which everybody is familiar and that these rules
are understood by everybody
o Pre-condition for accountability
- Accountability
o Person taking responsibility for their actions
o Accountability increases the level of confidence that stakeholders have in the business and the decisions they
make
- Independence
o No conflict of interest and there are no unfair influences from any stakeholder that will result in a biased or
unethical decision that will favour a particular person or organisation
o Networking is important but should not reduce the independence of the business decisions
- Discipline
o Starting point is always self-discipline
o Market discipline: the market will punish the business if management does not make responsible decisions.
Punishment could be to stop using the business’ products and/or services and possibly sell shares owned in the
business (lower market capitalisation)
o Regulatory discipline can only be imposed once the damage has already been done
- Social Responsibility
o A business that follows a process of good governance, will be publicly accountable, because they will act
responsibly when it comes to social issues
o Social issues: exploitation of natural resources, child labour, paying fair salaries, support of employees suffering
from diseases
- Fairness
o The business will be considerate when evaluating all relevant parties’ interests when decisions are taken
o But the business should still do what is most feasible or realistic even if one group isn’t benefitted as much
o Utilitarian approach
- Responsibility (of directors)
o The King reports promote responsible management
o The Board of Directors is a key driver of the success of the company and shareholders hold high expectations of
those directors to “do the right thing”
o Responsibilities of directors include:
- Act with skill and care
- Act in good faith and honesty (fiduciary duty)
- Pre-empt risks and put proper risk management procedures in place
- Ethical leadership
- Audit committees need to be established and used to monitor finances, as well as other aspects such as the
responsible use of technology
- Ensuring Integrated reporting (Triple Bottom Line) and the disclosure of relevant information is important. A holistic
view of the company’s financial performance within the context of sustainable social and environmental development
is done

King III includes the above and:

 It applies to all businesses, regardless of whether it is a public, private or non-profit business
 The directors may be liable in the case of misrepresentation
 The focus is on “Apply or Explain” where the Board of Directors have to motivate why they are not
implementing the King report’s recommendations
 It requires companies that are listed on the JSE to report on sustainability in accordance with the Global
Reporting Initiative. The Audit Committee has to ensure that they obtain an external option to verify the
degree of sustainability indicated in the integrated report.
 There’s a bigger emphasis on Independent directors
 King III requires an Independent Audit Committee apart from the Board of Directors
 King III stipulates that the company should maintain an ethical relationship with the society in which it
operates
Sustainability: the business meeting the current needs of the business, without compromising the potential of future
generations to meet their needs

King IV states that the Board of a company is accountable to make sure there are four broad outcomes that are achieved:
(there are 17 principles but you only have to know a few)
 Ethical culture
- The Governing Body should lead ethically and effectively
- The business must be managed in a way that ensures an ethical culture is created
- The organisation needs to be seen as a responsible corporate citizen
 Good performance
- The core business purpose, the business strategy and all risks and opportunities taken, are geared towards
sustainable value creation
- Reports issued by the organisation must help stakeholders to make informed assessments of value creation
over the short, medium and long-term
 Trust and good reputation
- The governing body should adopt a stakeholder-inclusive approach that balances the needs, interests and
expectations of stakeholders and the best interests of the organisation over time
- Institutional investors are businesses where money is pooled to buy securities, real estate or other assets
that aim to invest money in the pool. They include banks, insurance companies and pension funds.
 Adequate and effective control
- The governing body has to initiate, manage and look after all corporate governance principles in the
organisation
- There should be a balance of knowledge, skills, experience, diversity and independence within the Governing
Body
 - The Governing Body must ensure that it delegates power and responsibilities to sub-committees of the
governing body, but final accountability will lie with the Governing Body
- All risks and opportunities taken must align with achieving strategic objectives
- The Governing Body should comply with applicable laws, rules and standards in a way that it supports the
organisation being ethical and a good corporate citizen
In King IV, the focus is on “Apply AND Explain”, so it is now assumed that principles of Corporate Governance are
implemented. The Board of Directors have to explain how these Corporate Governance principles were implemented.
“Apply and Explain” is important, because:
- It will create more trust with investors
- It ensures there is sustainability in the business
King IV also provides guidelines to help organisations such as Municipalities, non-profit organisation to understand how
they should also implement the King Principles