Principles of Management (lesson #01) – Introduction to Organization & Management

What is an organization?

There are many definitions for the term organization in different contexts but there are some common attributes in every context to become an organization. As in the Cambridge Advanced Learner’s Dictionary, Organization is defined as, “A group of people who work together in a structured way for a shared purpose”. By Stoner and Freeman, 2009 elaborates this as, “An organization is a two or more people who work together in a structured way to achieve a specific goal or set of goals” and by Robbins and Coulter,2007 elaborates this as, “An organization is a deliberate arrangement of people to accomplish some specific purpose”.

For the common understanding, the key points of becoming an organization are having a group of people which is two or more in a structured way or as an arrangement of them to achieve their common goal or to accomplish the shared purpose.

Other Perspectives of Understanding an organization.

  1. Organization as a Socio-economic entity

This perspective views that organizations are entities which are engaged in economy as well as social activities.

  1. Organization as a social sub system

This perspective views an organization as a sub-system of the society. When the organization is a system within the social system it automatically becomes a subsystem of the society. System perspective views the organization as a unified, purposeful system composed of interrelated parts.

What is a system? 

A system is an assemblage of interconnected, interrelated and interdependent elements working together to achieve a common purpose. As the main features of the system there must be a set of interacting components which are integrated as a whole which operate within a certain boundary to work together to achieve a common goal.

What is a Business?

A business is any economic activity carried out to satisfy human needs and wants.

Business Organization

A business organization is a cluster of individuals and deliberately structured entities which produces goods and/or services utilizing limited resources to achieve its specific goals and objectives.

Business organizations can be classified according to their objectives, Product Variety, Ownership, Scale of the business, Technology, Market etc.  

Objectives of a Business Organization

The main objectives of Business organization can be recognized as survival of the business, profit maximization, sales maximization through provision of service, social responsibility and increased market share/ market dominance through customer satisfaction. These objectives can be classified based on the level of significance and the time horizon. Business organizations should be able to achieve multiple objectives at a time to gain competitive advantage.

To achieve these objectives interference of the stakeholders is a major factor.  Simply the stakeholders are a party which is directly or indirectly responsible or interested in any activity in an organization. There are four categories of stakeholders which are users, providers, influencers, governance (UPIG). Stakeholders of an organization may be Customers, Political parties, Debtors, Employees, Suppliers, Educational institutions, Creditors, Trade associations, financial institutions, Owners, Media, Competitors, General community etc.

What is Management? 

Management can be broadly defined as a process of planning, organizing, leading and controlling the limited resources efficiently and effectively to achieve predetermined goals and objectives in an ever-changing business environment. In Fayol,1930 management is defined as “the process of planning, organizing, commanding, coordinating and controlling” and by Koontz it is defined as “the art of getting things done through and with people in formally organized groups”.

Management in Organizations

When the organization is well managed, the inputs of an organization such as human resources, financial resources, physical resources and information resources go through the process of planning, organizing, leading and controlling such that the goals will be attained effectively and efficiently. Since the resources are limited, those resources should be managed in a proper manner to achieve the optimum productivity of them. Efficiency is the degree to which the limited resources are optimally used and Effectiveness is the degree to which the intended results are achieved. 

Four Functions of Management (Jones and George, 2008)

  1. Planning – Choose appropriate organizational goals and courses of action to best achieve those goals.
  2. Organizing – Establish and authority relationships that allow people to work together to achieve organizational goals.
  3. Leading – Motivate, coordinate and energize individuals and groups to work together to achieve organizational goals.
  4. Controlling – Establish accurate measuring and monitoring systems to evaluate how well the organization has achieved its goals.

Who is a Manager?

In general, we can define a manager as someone who performs management functions in an organization. By Stoner, Freeman and Gilbert, 2008, managers are defined as “The people responsible for directing the efforts aimed at helping organizations achieve their goals”, by Robbins and Coulter, 2012, manager is “Someone who coordinates and oversees the work of other people so that organizational goals can be accomplished” and by Griffin,2012 manager is “Someone whose primary responsibility is to carry out the management process”.

Types of Managers

Mainly managers can be classified according to their level of authority, scope of their activity and responsibility of their activities. In proportion to the level of authority, managers can be classified as first line managers, middle managers and top-level managers. Top level managers need more conceptual skills, middle level managers need conceptual, human relation and technical skills equally and lower level or first line managers need more technical skills to perform their roles effectively. General managers and Functional managers (Production Manager, Marketing Manager, Finance Manager and HR Manager) are the two types of managers when they are categorized according to the scope of activity.  In responsibility vise Line managers and staff managers are the two types. Normally the Production manager and the Marketing Manager have direct responsibility, so they can be determined as line managers. On the other hand, the Finance manager and HR Manager have indirect responsibility on the organization, so those managers will be staff managers in accordance with the context of responsibility.   

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