CONCEPTS AND PRINCIPLES IN MANAGEMENT

Concepts In Management

May 2014

Alemayehu Desalegne (MPH)

AAU, SPH

CONCEPTS

Effectiveness

Efficiency

Scarcity of resource

Scarcity ... the fundamental problem of any organization

Resources are limited ... wants are not

Scarcity is always relative to human wants, hence it is always with us.

Scarcity = not enough resources to produce the goods to satisfy our wants.

Resources: Adam Smith in his Wealth of Nations (1776), divided resources into land, labor and capital.

LAND: used as shorthand for any natural resource, not simply for agricultural land.

LABOR: manual power + skill ("human capital")

CAPITAL: produced means of production for example, hammers, drill presses, computers

Although money is used to BUY all the above, money is not itself a productive resource. Capital grows through investment – and requires foregoing current consumption.

₋Scarcity means that choices are necessary.

₋Choices always involve tradeoffs

₋ “Production Possibility Frontier”, showing the choices which are

possible (on or within the frontier)

efficient (exactly on the frontier)

inefficient (within the frontier)

impossible (beyond the frontier)

PRODUCTION POSSIBILITIES CURVE (FRONTIER)

Each point represents Productive Efficiency

This means that this economy is allocating ALL of it productive resources in the least costly way

0

100

1000 100 200 300 400 500 600 700 800 900

.A

.B

.C

.D

PRODUCTION POSSIBILITIES CURVE (FRONTIER)

There are an infinite number of points on the PPC. Where a society decides to produce is called Allocative Efficiency

This represents the combination of Capital and Consumer Goods most desired by the society

Consumer Goods

0

100

1000 100 200 300 400 500 600 700 800 900

.A

.B

.C

.D

1–8

EFFICIENCY, EFFECTIVENESS, AND PERFORMANCE IN AN ORGANIZATION

Figure 1.1

PRINCIPLES

IN MANAGEMENT

Management by objective

Learning from Experience

Division of labor

Substitution of resource

Delegation

Management by exception

Shortest decision-path

Convergence of work

Functions determine structure

MANAGEMENT BY OBJECTIVE (MBO)

Management sees that objectives are specified and then that they are achieved.

The objective should state:

• What is to be accomplished

• How much of it

• Where it is to be done

• When it is to be completed.

A clear statement of objectives makes it possible to evaluate how effective one is in approaching and reaching the objectives.

LEARNING FROM EXPERIENCE

Analysis of the results between the objectives and achievement made.

For better performance there should be feedback to learn form the experience gained.

DIVISION OF LABOR

Management attempts to bring about balance of work among the different people concerned

SUBSTITUTION OF RESOURCE

Often when the resources that are normally used to provide service became scarce or too expensive, different resources may be used to provide the intended results.

CONVERGENCE OF WORK

Working relations should contribute to the success of each activity and so to general effectiveness.

These working relations of activities are:-

The logical relations with each other

Time relations or sequence

Spatial relations between activities

Functional and structural-working relations between people

FUNCTIONS DETERMINE STRUCTURE

When the work is defined i.e. the function and duties of the individual members of the team are clearly defined and known to all.

The working relations (the structure)

The exact nature of authority will be clearly delineated on the structure.

DELEGATION

Delegation takes place when some body's authority is lent, so as to enable that person to take responsibility when the occasion arises.

MANAGEMENT BY EXCEPTION

In effect this means two things:-

1. Don't be overloaded with the routine, unnecessary information, be selective.

2. Make BIG decision first.

In short management by exception means

Selectivity in information

Priority in decision

SHORTEST DECISION-PATH

This principle deals with issue Who should make which decision?

When and where?

Decision must be made as closely as possible in time and place to the object of decision and to those affected by it

HENRI FAYOL’S 14 PRINCIPLES OF MANAGEMENT

1. Division Of Work: Specialization allows the individual to build up experience, and to continuously improve his skills. Thereby he can be more productive.

2. Authority: The right to issue commands, along with which must go the balanced responsibility for its function.

3. Discipline: Employees must obey, but this is two-sided: employees will only obey orders if management play their part by providing good leadership.

4. Unity Of Command: Each worker should have only one boss with no other conflicting lines of command.

5. Unity of Direction: People engaged in the same kind of activities must have the same objectives in a single plan. This is essential to ensure unity and coordination in the enterprise. Unity of command does not exist without unity of direction but does not necessarily flows from it.

6. Subordination of individual interest: Management must see that the goals of the firms are always paramount.

7. Remuneration: Payment is an important motivator although by analyzing a number of possibilities, Fayol points out that there is no such thing as a perfect system

8. Centralization (Or Decentralization): This is a matter of degree depending on the condition of the business and the quality of its personnel.

9. Scalar chain (Line of Authority): A hierarchy is necessary for unity of direction. But lateral communication is also fundamental, as long as superiors know that such communication is taking place. Scalar chain refers to the number of levels in the hierarchy from the ultimate authority to the lowest level in the organization. It should not be over-stretched and consist of too-many levels

10. Order: Both material order and social order are necessary. The former minimizes lost time and useless handling of materials. The latter is achieved through organization and selection.

11. Equity: In running a business a ‘combination of kindliness and justice’ is needed. Treating employees well is important to achieve equity.

12. Stability of Tenure of Personnel: Employees work better if job security and career progress are assured to them. An insecure tenure and a high rate of employee turnover will affect the organization adversely.

13. Initiative: Allowing all personnel to show their initiative in some way is a source of strength for the organization. Even though it may well involve a sacrifice of ‘personal vanity’ on the part of many managers.

14. Esprit de Corps: Management must foster the morale of its employees. He further suggests that: “real talent is needed to coordinate effort, encourage keenness, use each person’s abilities, and reward each one’s merit without arousing possible jealousies and disturbing harmonious relations.

THE ROLE OF HEALTH MANAGERS

MANAGERIAL ROLES

Intrapersonal roles Figurehead Leader Liaison

Informational role Monitor Disseminator Spokesperson

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1.INTERPERSONAL ROLES:

There are three interpersonal roles

A. figurehead - they engage in activities that are:

Symbolic in nature

As a symbol of legal authority,

Attending ceremonies,

Signing documents, etc.

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B. Liaison role:

involves formal/ informal contacts

beyond the vertical chain of command

(inside and outside).

links in horizontal/vertical chain of

communications

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C. Leader role- includes:

leadership.

accountable,

responsible, and motivator

2.INFORMATIONAL ROLES:

There are three informational roles:

A. Monitor

Constantly looking for useful information.

Filter,

Evaluate and choose to act or react to that information.

B. Disseminator:

involves choosing to disseminate the information.

communicating selected information 5/20/2014 28

C. Spokesperson –

represent and speak on behalf of the organization.

communicating selected information to outsiders

3. DECISION-MAKING ROLES

There are four decision maker roles:

A. Entrepreneur/ Change agent:

Designing

Initiating changes within the organization

B. Disturbance Handler:

They handle both internal and external disturbances.

They anticipate disturbances and resolve conflicts.

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C. Resource allocator: Managers decide who gets what based on priority setting.

D. Negotiator: managers choose how to interact with their:

Superiors,

Peers,

Subordinates

Negotiating with other parties representing the organizational interests

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