Scope of Management Functions and Relationship With the Controlling
What is management and definition of management scope?
Management is a term variously defined by different authors. For this reason, below we first present some of its definition to be able to export them from links.
Thus, Donnelly, Gibson and Ivancevich Management define it as, “the process as it is made by one or more persons, and consists in coordinating the activities of other persons in order to achieve the results that one person could not achieve alone.”(1)
Weihrich and Koontz, in addition, define it as, “the process of shaping and maintaining an environment in which individuals, working together in groups, efficiently achieve desired outcomes.”(2)
James A. O’Brien Management function describes as a leadership process that involves managerial functions of planning, organizing, directing, and controlling. In doing so, managers plan organizational activities, organize the staff and activities, direct and control their own management activities by using feedback loops. Feedback has a duty to point out the discrepancies and to direct towards the implementation of necessary modifications in order to achieve business goals (3). Also the definition of management can be quoted with definition in the lexicon of Economics, where was stated “activity aimed at achieving specific, pre-set goals, but with the efforts of other people. Management is the process of guiding the behavior of others toward the execution of a task. It combines the factors of production to achieve certain goals and deals with “overcoming complexity”. Basic functions of management scope are: planning, organizing, setting up staff, leadership, and control.“(4)
Looking at these definitions as the basic scope of management functions (and others not listed here), it can be noticed that all emphasize that the scope of management is a process in which individuals are joining forces with the aim of achieving a more efficient target. This goal can be expressed quantitatively (profit contribution of cover, income) and qualitatively (environmentally friendly production, high product quality, employee care, good post-sales service of products). In general, these goals are overlapping, so a high-quality product delivers a positive image of a business entity, and that indirectly brings higher profits due to higher sales. To accomplish the desired goals, that persons (hereinafter to be called managers) are responsible for managing and performing certain functions, as already stated in the definition of the lexicon of Economics.
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(1) Donnelly, Gibson, Ivancevich: Fundamentals of Management; BPI Iorwing, Boston, USA, Seventh Edition, 1990, page. 7. Quote from Avelini Holjevac I.: Kontroling upravljanje poslovnim rezultatom; Hotelijerski fakultet Opatija, 1998. page.1.
(2) Weihrich H. i Koontz H.: Management; 10th edition, Publisher MATE Zagreb, 1994, page.4
(3) O’Brien James.A.:Management information system, a managerial end user perspective; 2nd edition, Richard D Irwing, INC, 1993. page.338.
(4) Baletić, Z.: Ekonomski leksikon; Leksikografski zavod Miroslav Krleža Zagreb i Masmedia, Zagreb, 1995., page. 511.
List of Management Functions
Briefly, there are five core functions that constitute Scope of Management functions: Planning, Organizing, Staffing, Leadership and Controlling.
The first management function in scope of management functions that managers must perform is PLANNING. This function plan is created to accomplish the mission and vision of the business entity. Under the mission is considered the reason for the establishment, while under the vision is considered where a business entity is aiming. The plan must define the time component and plan necessary resources to fulfill the plan. Here can also be shaped goal / s that are to be achieved and strategy to be used at the same time. Accordingly, a plan of organization is developed together with required personnel; the method of leading people is defined and controlling instruments for monitoring the realization of plans. The guiding idea in the making of mentioned items is the realization of the objectives and fulfilling the mission and vision of the business entity.
As is evident from the previous paragraph, each organization should make a good first step, a good plan because without it, the organization takes a great risk of mistakes and thus compromises their business.
Organizing is the second function manager. Where he had previously prepared a plan, he now establishes an appropriate organizational structure in the business organization. In part, it determines the ranges of management, type of organizational structure, authority in the organization, types and ways of delegating and developing lines of communication. The organization and its subsystems are placed under the plan, which was created as part of the functions, i.e. planning. In performing construction and organization, in particular, one must pay attention to formal and informal lines of communication because if these lines are not adequately monitored, the possibility of collision between them will result in delays and / or even failure to achieve the goal.
Staffing, as the next function of management, consists of a selection of appropriate staff for the organization to reach a goal / goals easier and more efficient. According to today’s experience is well known that it is difficult to financially evaluate, quality and efficient staff. Staff is one of the more valuable, if not the most valuable resource in any successful organization. For this reason, good planning of personnel policies, as a function of management, and corresponding execution of that selection of high quality people is becoming increasingly important. The task of this management function is to set rules related to employment and personnel policies. Within rules following items are determined:
- policy of employment (whether the target organization’s development of own staff to develop within the organization or the staff mostly taken from other organizations),
- required expertise and theoretical knowledge to perform certain tasks (identification of necessary skills),
- the policy of promotion ,
- assessment of employees,
- training of staff,
- conflict resolution,
- and other settings of personnel policies.
Leadership as the penultimate function is the cornerstone of management. As part of this function methods are determined of encouraging people (staff) to achieve their common goal / s of a business entity. Entity (unit, division, department and etc.) on its head must have the person who is ready to lead and to transfer to assistants and colleagues own enthusiasm for the goal / goals. Briefly, this means to motivate them. Otherwise there is a great opportunity and incentive to report a jump ball in the final achievement of results which lead to a miscarriage of goals. There are many motivation theories, among them Maslow’s famous hierarchy of needs and the Herzberg Two-Factor Theory. All of them aim to try to explain a way of encouraging staff to perform tasks more efficiently, and to find factors that will give personnel satisfaction, to motivate them. To perform this function, managers are often additionally educated in the field of psychology because the motivation and motivators are very complex issue. The reason for this is the individuality of each person, and therefore a combination of motivators for everyone else affected.
For example, certain individuals may be motivated by the possibility of promotion (which is closely related to personnel functions), while others may be motivated by a pleasant business environment (organizational function) and / or better bonuses (including organizational function).
For defining leadership also should be stressed that there are different ways (styles) of leadership that are still classified versatile by different authors. So, if we look at the styles of authority there are three basic types: autocratic style of leadership, democratic or participative style and laissez faire.
In the scope of autocratic style, superior is responsible for giving instructions to subordinates without expectations and needs for feedback, ie, the one-sided communication is implemented. As part of that subordinates also do not communicate with each other, but it unfolds through their superiors.
Unlike the previous, Democratic or participative leadership style supports two-way communication superior-subordinate, and subordinate to communicate with each other. However, decisions are made at top management level, although the participation and taking into account the opinion of the lower levels of management.
In Laissez Faire system superior lets his subordinates great freedom in their decision-making and serves as a support, whereby the working communication is completely free within and outside the organization. In this system communication is one of its most important factors. If the leader (manager) is not well trained in communication there is a great opportunity not to “hear” people in close working environment, and for this reason to endanger the achievement of goals.
Control of plans and performance is the last function of management, but by no means the least important. This function has the task of monitoring the achievement of tasks and approaching the goal. The basis on which this function is based on is the business plan (and therefore reiterates that the organization without a successful plan is in a great risk in failing to achieve its goals), and its next task is to monitor the plan and control the proper direction of movement toward a goal – to analyze deviation from that goal.
In case of discrepancies task management must as soon as possible decide to apply corrective actions. As part of this function monitoring is done of all other functions together with deviations from the plan in each of them. However, it should be noted that the plan is just a guideline and that any deviation from it doesn’t necessarily mean plan is negative. This is reason why control function exists for analyzing of deviations and investigating of its positive and negative effects. There should be noted that as part of this function are the most important roles for information:
- information must be accurate,
- and reliable.
Only in this way can be implemented corrective actions.
This function works on the principle of feedback by which the observed variation in a particular function, and based on the analysis indicates the possible need for timely correction.
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Overview of the management functions includes also list of prerequisites that should have a specific person to be a successful manager. Thus, a successful manager must be fluent in all the above functions (planning, organizing, staffing, management and control for achieving the set goals) and in all aspects of these functions. However, it should be noted that although all managers involved in the above-mentioned functions, do not deal with them equally in time. The time they spend on each function depends on hierarchical level at which they are located.
With leadership in a larger time scale are involved more managers at lower levels because they have a greater number of subordinate rather than top management. On a contrary, planning function is more present at higher level of management (top management). The reason is the formulation of strategic plans at higher levels, while lower level management mostly make operational plans that require less time consumption.
Organizing and personnel activities are also functions which are mainly present in higher levels of management because they are the ones who determine the organizational structure that is best suited for achieving the goal. Based on this, lower level only makes operational adjustments to certain organizational structure, which requires less expenditure of time. Also, at lower management levels do not exist wide range of jobs that should be organized as opposed to top management who must create the entire organizational structure and to determine strategies and to adapt the structure to the company’s goals.
When talking about control, most of the time for control is spent on those levels of management which plan and organize more. Consequently, on control most of the time spends higher level of administration.
It appears that the managerial job very complex and demanding, and the above function is linked to another function that extends and combines them all together, and it is making decisions.
Decision Making Management Function
Decision Making function, though not often mentioned, because most of the authors imply it automatically, is the basis of manager job. It is in core Scope of Management. Management is the one who decides:
- which plan and type of organization will be adopted,
- what types of personnel are needed,
- which management system will be used,
- which control methods to achieve results will be used
- and what corrective action will be taken to correct the discrepancies.
To make such decisions management need information from internal and external environment of company.
Here is raised importance of Business Intelligence and Decision Support Systems that provide information from internal and external resources.
Yet the information that managers receive should not be too extensive, otherwise may cause saturation of information that leads to losing the possibility of proper and timely decision-making.
Controllers and Management
For this reason, management has a need for information related to its function to be filtered by specific departments or processes in a business organization. Another reason, often the case, is that managers are not fully qualified to perform all of the above functions (for example, because they are not adequately trained to monitor economic and financial analysis or actual sales results) and are in need of support in that area.
For the mentioned reasons, seeing own limitations and common encountered problems, managers have decided to introduce their businesses function of Controlling and / or department. The reason is the need for a function that will provide adequate assistance in carrying out their tasks, provide them with timely and accurate information and make coordination and integration of functions within and between them.
When we talk about controlling coordination function then it refers to the consolidation of different actions in an enterprise in order to achieve the goals on same hierarchical level (horizontal consolidation).
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Integration is on the other side of the connection, unification, of the different parts into whole, ie the consolidation at different hierarchical levels (vertical consolidation). Integration resolve conflicts that exist between parts and whole.
Thus, through the coordination that follows actions such as purchase of machinery and training of personnel to operate the machine, goal is to raise sell of new types of products. At the same time connection of various departments and functions within a business entity is being made with aim to avoid the mismatch between them. In this way following situation can be avoided: production has a production capacity of 100,000 pieces of products, sales has the plan of sale for 200,000 pieces, produced and sold is only 25,000 because the acquisition has not acquired enough raw materials. Integrative function of controlling is the one who is responsible for ensuring that the purchase of machinery and all related activities to achieve the stated goal of a business entity (determined by the profit or market share). In doing so, controlling has the task of harmonizing the goals of higher level (top management) with goals that are set for each process function or department.
While the manager is responsible for the success of the company (which is achieved by performing their functions), controlling is responsible for transparency of that success. So when manager decides on the specific goals that will be achieved for the company (for example, profit growth of 10%) controlling cares to define steps to achieve this goal and method of monitoring of movement toward that goal. Also, controlling cares about adjustment of the goal to the global vision of the company and that all the functions of management and all departments of companies will be adapted for this purpose.
Affiliation of controlling and management can be seen in the following view where can be see that the controlling is link between the tasks of managers (responsible for the success) and the controller (which is responsible for the transparency of that success).
Source: Osmanagić Bedenik, N. Kontroling abeceda poslovnog uspjeha, Školska knjiga, Zagreb, 1994.godina, page.85. sl.42.