Main Functions of Management

There are four main functions of management.

1. Planning.
2. Organizing.
3. Leading.
4. Controlling.

Planning.

Main Functions of Management

Planning is an important managerial function. It provides the design of a desired future state and the means of bringing about that future state to accomplish the organization's objectives. In other words, planning is the process of thinking before doing. To solve the problems and take the advantages of the opportunities created by rapid change, managers must develop formal long- and short-range plans so that organizations can move toward their objectives.

It is the foundation area of management. It is the base upon which the all the areas of management should be built. Planning requires administration to assess; where the company is presently set, and where it would be in the upcoming. From there an appropriate course of action is determined and implemented to attain the company's goals and objectives

Planning is unending course of action. There may be sudden strategies where companies have to face. Sometimes they are uncontrollable. You can say that they are external factors that constantly affect a company both optimistically and pessimistically. Depending on the conditions, a company may have to alter its course of action in accomplishing certain goals. This kind of preparation, arrangement is known as strategic planning. In strategic planning, management analyzes inside and outside factors that may affect the company and so objectives and goals. Here they should have a study of strengths and weaknesses, opportunities and threats. For management to do this efficiently, it has to be very practical and ample.

Characteristics of planning.

Ø Goal oriented.
Ø Primacy.
Ø Pervasive.
Ø Flexible.
Ø Continuous.
Ø Involves choice.
Ø Futuristic.
Ø Mental exercise.
Ø Planning premises.

Importance of planning.

* Make objectives clear and specific.
* Make activities meaningful.
* Reduce the risk of uncertainty.
* Facilitators coordination.
* Facilitators decision making.
* Promotes creativity.
* Provides basis of control.
* Leads to economy and efficiency.
* Improves adoptive behavior.
* Facilitates integration.

Formal and informal planning.

Formal planning usually forces managers to consider all the important factors and focus upon both short- and long-range consequences. Formal planning is a systematic planning process during which plans are coordinated throughout the organization and are usually recorded in writing. There are some advantages informal planning. First, formalized planning forces managers to plan because they are required to do so by their superior or by organizational rules. Second, managers are forced to examine all areas of the organization. Third, the formalization it self provides a set of common assumptions on which all managers can base their plans.

Planning that is unsystematic, lacks coordination, and involves only parts of the organizations called informal planning. It has three dangerous deficiencies. First, it may not account for all the important factors. Second, it frequency focuses only on short range consequences. Third, without coordination, plans in different parts of the organization may conflict.

Stages in planning.

The sequential nature of planning means that each stage must be completed before the following stage is begun. A systematic planning progress is a series of sequential activities that lead to the implementation of organizational plans.

The first step in planning is to develop organizational objectives. Second, planning specialists and top management develop a strategic plan and communicate it to middle managers. Third, use the strategic plans to coordinate the development of intermediate plans by middle managers. Fourth, department managers and supervisors develop operating plans that are consistent with the intermediate plans. Fifth, implementation involves making decisions and initiating actions to carry out the plans. Sixth, the final stage, follow-up and control, which is critical.

The organizational planning system.

A coordinated organizational planning system requires that strategic, intermediate, and operating plans be developed in order of their importance to the organization. All three plans are interdependent with intermediate plans based on strategic plans and operating planes based on intermediate plans. Strategic plans are the first to be developed because they set the future direction of the organization and are crucial to the organization's survival. Thus, strategic plans lay the foundation for the development of intermediate and operating plans. The next plans to be developed are the intermediate plans; intermediate plans cover major functional areas within an organization and are the steppingstones to operating plans. Last come operating plans; these provide specific guidelines for the activities within each department.

Organizing.

The second function of the management is getting prepared, getting organized. Management must organize all its resources well before in hand to put into practice the course of action to decide that has been planned in the base function. Through this process, management will now determine the inside directorial configuration; establish and maintain relationships, and also assign required resources.

While determining the inside directorial configuration, management ought to look at the different divisions or departments. They also see to the harmonization of staff, and try to find out the best way to handle the important tasks and expenditure of information within the company. Management determines the division of work according to its need. It also has to decide for suitable departments to hand over authority and responsibilities.

Importance of the organization process and organization structure.

Promote specialization. Defines jobs. Classifies authority and power. Facilitators' coordination. Act as a source of support security satisfaction. Facilitators' adaptation. Facilitators' growth. Stimulators creativity.

Directing (Leading).

Directing is the third function of the management. Working under this function helps the management to control and supervise the actions of the staff. This helps them to assist the staff in achieving the company's goals and also accomplishing their personal or career goals which can be powered by motivation, communication, department dynamics, and department leadership.

Employees those which are highly provoked generally surpass in their job performance and also play important role in achieving the company's goal. And here lies the reason why managers focus on motivating their employees. They come about with prize and incentive programs based on job performance and geared in the direction of the employees requirements.

It is very important to maintain a productive working environment, building positive interpersonal relationships, and problem solving. And this can be done only with Effective communication. Understanding the communication process and working on area that need improvement, help managers to become more effective communicators. The finest technique of finding the areas that requires improvement is to ask themselves and others at regular intervals, how well they are doing. This leads to better relationship and helps the managers for better directing plans.

Controlling.

Managerial control is the follow-up process of examining performance, comparing actual against planned actions, and taking corrective action as necessary. It is continual; it does not occur only at the end of specified periods. Even though owners or managers of small stores may evaluate performance at the end of the year, they also monitor performance throughout the year.

Types of managerial control:

* Preventive control.

Preventive controls are designed to prevent undesired performance before it occurs.

* Corrective control.

Corrective controls are designed to adjust situations in which actual performance has already deviated from planned performance.

Stages in the managerial control process.

The managerial control process is composed of several stages. These stages includes

Determining performance standards. Measuring actual performance. Comparing actual performance against desired performance (performance standards) to determine deviations. Evaluating the deviations. Implementing corrective actions.

2) Describe how this each function leads to attain the organizational objectives.

Planning

Whether the system is an organization, department, business, project, etc., the process of planning includes planners working backwards through the system. They start from the results (outcomes and outputs) they prefer and work backwards through the system to identify the processes needed to produce the results. Then they identify what inputs (or resources) are needed to carry out the processes.

* Quick Look at Some Basic Terms:

Planning typically includes use of the following basic terms.

NOTE: It is not critical to grasp completely accurate definitions of each of the following terms. It is more important for planners to have a basic sense for the difference between goals/objectives (results) and strategies/tasks (methods to achieve the results).

Goals

Goals are specific accomplishments that must be accomplished in total, or in some combination, in order to achieve some larger, overall result preferred from the system, for example, the mission of an organization. (Going back to our reference to systems, goals are outputs from the system.)

Strategies or Activities

These are the methods or processes required in total, or in some combination, to achieve the goals. (Going back to our reference to systems, strategies are processes in the system.)

Objectives

Objectives are specific accomplishments that must be accomplished in total, or in some combination, to achieve the goals in the plan. Objectives are usually "milestones" along the way when implementing the strategies.

Tasks
Particularly in small organizations, people are assigned various tasks required to implement the plan. If the scope of the plan is very small, tasks and activities are often essentially the same.

Resources (and Budgets)

Resources include the people, materials, technologies, money, etc., required to implement the strategies or processes. The costs of these resources are often depicted in the form of a budget. (Going back to our reference to systems, resources are input to the system.)

Basic Overview of Typical Phases in Planning

Whether the system is an organization, department, business, project, etc., the basic planning process typically includes similar nature of activities carried out in similar sequence. The phases are carried out carefully or -- in some cases -- intuitively, for example, when planning a very small, straightforward effort. The complexity of the various phases (and their duplication throughout the system) depends on the scope of the system. For example, in a large corporation, the following phases would be carried out in the corporate offices, in each division, in each department, in each group, etc.

1. Reference Overall Singular Purpose ("Mission") or Desired Result from System.

During planning, planners have in mind (consciously or unconsciously) some overall purpose or result that the plan is to achieve. For example, during strategic planning, it is critical to reference the mission, or overall purpose, of the organization.

2. Take Stock Outside and Inside the System.

This "taking stock" is always done to some extent, whether consciously or unconsciously. For example, during strategic planning, it is important to conduct an environmental scan. This scan usually involves considering various driving forces, or major influences, that might effect the organization.

3. Analyze the Situation.

For example, during strategic planning, planners often conduct a "SWOT analysis". (SWOT is an acronym for considering the organization's strengths and weaknesses, and the opportunities and threats faced by the organization.) During this analysis, planners also can use a variety of assessments, or methods to "measure" the health of systems.

4. Establish Goals.

Based on the analysis and alignment to the overall mission of the system, planners establish a set of goals that build on strengths to take advantage of opportunities, while building up weaknesses and warding off threats.

5. Establish Strategies to Reach Goals.

The particular strategies (or methods to reach the goals) chosen depend on matters of affordability, practicality and efficiency.

6. Establish Objectives Along the Way to Achieving Goals.

Objectives are selected to be timely and indicative of progress toward goals.

7. Associate Responsibilities and Time Lines with Each Objective.

Responsibilities are assigned, including for implementation of the plan, and for achieving various goals and objectives. Ideally, deadlines are set for meeting each responsibility.

8. Write and Communicate a Plan Document.

The above information is organized and written in a document which is distributed around the system.

9. Acknowledge Completion and Celebrate Success.

This critical step is often ignored -- which can eventually undermine the success of many of your future planning efforts. The purpose of a plan is to address a current problem or pursue a development goal. It seems simplistic to assert that you should acknowledge if the problem was solved or the goal met. However, this step in the planning process is often ignored in lieu of moving on the next problem to solve or goal to pursue. Skipping this step can cultivate apathy and skepticism -- even cynicism -- in your organization. Do not skip this step.

To Ensure Successful Planning and Implementation:

A common failure in many kinds of planning is that the plan is never really implemented. Instead, all focus is on writing a plan document. Too often, the plan sits collecting dust on a shelf. Therefore, most of the following guidelines help to ensure that the planning process is carried out completely and is implemented completely -- or, deviations from the intended plan are recognized and managed accordingly.

Involve the Right People in the Planning Process

Going back to the reference to systems, it is critical that all parts of the system continue to exchange feedback in order to function effectively. This is true no matter what type of system. When planning, get input from everyone who will responsible to carry out parts of the plan, along with representative from groups who will be effected by the plan. Of course, people also should be involved in they will be responsible to review and authorize the plan.

Write Down the Planning Information and Communicate it Widely

New managers, in particular, often forget that others do not know what these managers know. Even if managers do communicate their intentions and plans verbally, chances are great that others will not completely hear or understand what the manager wants done. Also, as plans change, it is extremely difficult to remember who is supposed to be doing what and according to which version of the plan. Key stakeholders (employees, management, board members, founders, investor, customers, clients, etc.) may request copies of various types of plans. Therefore, it is critical to write plans down and communicate them widely.

Goals and Objectives Should Be SMARTER

SMARTER is an acronym, that is, a word composed by joining letters from different words in a phrase or set of words. In this case, a SMARTER goal or objective is:

Specific:

For example, it is difficult to know what someone should be doing if they are to pursue the goal to "work harder". It is easier to recognize "Write a paper".

Measurable:

It is difficult to know what the scope of "Writing a paper" really is. It is easier to appreciate that effort if the goal is "Write a 30-page paper".

Acceptable:

If I am to take responsibility for pursuit of a goal, the goal should be acceptable to me. For example, I am not likely to follow the directions of someone telling me to write a 30-page paper when I also have to five other papers to write. However, if you involve me in setting the goal so I can change my other commitments or modify the goal, I am much more likely to accept pursuit of the goal as well.

Realistic:

Even if I do accept responsibility to pursue a goal that is specific and measurable, the goal will not be useful to me or others if, for example, the goal is to "Write a 30-page paper in the next 10 seconds".

Time frame:

It may mean more to others if I commit to a realistic goal to "Write a 30-page paper in one week". However, it will mean more to others (particularly if they are planning to help me or guide me to reach the goal) if I specify that I will write one page a day for 30 days, rather than including the possibility that I will write all 30 pages in last day of the 30-day period.

Extending:

The goal should stretch the performer's capabilities. For example, I might be more interested in writing a 30-page paper if the topic of the paper or the way that I write it will extend my capabilities.

Rewarding:

I am more inclined to write the paper if the paper will contribute to an effort in such a way that I might be rewarded for my effort.

Build in Accountability (Regularly Review Who is Doing What and By When?)

Plans should specify who is responsible for achieving each result, including goals and objectives. Dates should be set for completion of each result, as well. Responsible parties should regularly review status of the plan. Be sure to have someone of authority "sign off" on the plan, including putting their signature on the plan to indicate they agree with and support its contents. Include responsibilities in policies, procedures, job descriptions, performance review processes, etc.

Note Deviations from the Plan and Replan Accordingly

It is OK to deviate from the plan. The plan is not a set of rules. It is an overall guideline. As important as following the plan is noticing deviations and adjusting the plan accordingly.

Evaluate Planning Process and the Plan

During the planning process, regularly collect feedback from participants. Do they agree with the planning process? If not, what do not they like and how could it be done better? In large, ongoing planning processes (such as strategic planning, business planning, project planning, etc.), it is critical to collect this kind of feedback regularly.

During regular reviews of implementation of the plan, assess if goals are being achieved or not. If not, were goals realistic? Do responsible parties have the resources necessary to achieve the goals and objectives? Should goals be changed? Should more priority be placed on achieving the goals? What needs to be done?

Finally, take 10 minutes to write down how the planning process could have been done better. File it away and read it the next time you conduct the planning process.

Recurring Planning Process is at Least as Important as Plan Document

Far too often, primary emphasis is placed on the plan document. This is extremely unfortunate because the real treasure of planning is the planning process itself. During planning, planners learn a great deal from ongoing analysis, reflection, discussion, debates and dialogue around issues and goals in the system. Perhaps there is no better example of misplaced priorities in planning than in business ethics. Far too often, people put emphasis on written codes of ethics and codes of conduct. While these documents certainly are important, at least as important is conducting ongoing communications around these documents. The ongoing communications are what sensitize people to understanding and following the values and behaviors suggested in the codes.

Nature of the Process Should Be Compatible to Nature of Planners

A prominent example of this type of potential problem is when planners do not prefer the "top down" or "bottom up", "linear" type of planning (for example, going from general to specific along the process of an environmental scan, SWOT analysis, mission/vision/values, issues and goals, strategies, objectives, timelines, etc.) There are other ways to conduct planning. For an overview of various methods, see (in the following, the models are applied to the strategic planning process, but generally are eligible for use elsewhere).

Critical -- But Frequently Missing Step -- Acknowledgement and Celebration of Results

It's easy for planners to become tired and even cynical about the planning process. One of the reasons for this problem is very likely that far too often, emphasis is placed on achieving the results. Once the desired results are achieved, new ones are quickly established. The process can seem like having to solve one problem after another, with no real end in sight. Yet when one really thinks about it, it is a major accomplishment to carefully analyze a situation, involve others in a plan to do something about it, work together to carry out the plan and actually see some results.

Organizing.

Organizing can be viewed as the activities to collect and configure resources in order to implement plans in a highly effective and efficient fashion. Organizing is a broad set of activities, and often considered one of the major functions of management. Therefore, there are a wide variety of topics in organizing. The following are some of the major types of organizing required in a business organization.

A key issue in the design of organizations is the coordination of activities within the organization.

Coordination

Coordinating the activities of a wide range of people performing specialized jobs is critical if we wish avoid mass confusion. Likewise, various departments as grouping of specialized tasks must be coordinated. If the sales department sells on credit to anyone who wished it, sales are likely to increase but bad-debt losses may also increase. If the credit department approves sales only to customers with excellent credit records, sales may be lower. Thus there is a need to link or coordinate the activities of both departments (credits and sales) for the good of the total organization.

Coordination is the process of thinking several activities to achieve a functioning whole.

Leading

Leading is an activity that consists of influencing other people's behavior, individually and as a group, toward the achievement of desired objectives. A number of factors affect leadership. To provide a better understanding of the relationship of these factors to leadership, a general model of leadership is presented.

The degree of leader's influence on individuals and group effectiveness is affected by several energizing forces:

Individual factors. Organizational factors. The interaction (match or conflict) between individual and organizational factors.

A leader's influence over subordinates also affects and is affected by the effectiveness of the group.

* Group effectiveness.

The purpose of leadership is to enhance the group's achievement. The energizing forces may directly affect the group's effectiveness. The leader skills, the nature of the task, and the skills of each employee are all direct inputs into group achievement. If, for example, one member of the group is unskilled, the group will accomplish less. If the task is poorly designed, the group will achieve less.

These forces are also combined and modified by leader's influence. The leader's influence over subordinates acts as a catalyst to the task accomplishment by the group. And as the group becomes more effective, the leader's influence over subordinates becomes greater.

There are times when the effectiveness of a group depends on the leader's ability to exercise power over subordinates. A leader's behavior may be motivating because it affects the way a subordinate views task goals and personal goals. The leader's behavior also clarifies the paths by which the subordinate may reach those goals. Accordingly, several managerial strategies may be used.

First, the leader may partially determine which rewards (pay, promotion, recognition) to associate with a given task goal accomplishment. Then the leader uses the rewards that have the highest value for the employee. Giving sales representatives bonuses and commissions is an example of linking rewards to tasks. These bonuses and commissions generally are related to sales goals.

Second, the leader's interaction with the subordinate can increase the subordinate's expectations of receiving the rewards for achievement.

Third, by matching employee skills with task requirements and providing necessary support, the leader can increase the employee's expectation that effort will lead to good performance. The supervisor can either select qualified employees or provide training for new employees. In some instances, providing other types of support, such as appropriate tools, may increase the probability that employee effort leads to task goal accomplishment.

Fourth, the leader may increase the subordinate's personal satisfaction associated with doing a job and accomplishing job goals by

Assigning meaningful tasks; Delegating additional authority; Setting meaningful goals; Allowing subordinates to help set goals; Reducing frustrating barriers; Being considerate of subordinates' need.

With a leader who can motivate subordinates, a group is more likely to achieve goals; and therefore it is more likely to be affective.

Controlling.

Control, the last of four functions of management, includes establishing performance standards which are of course based on the company's objectives. It also involves evaluating and reporting of actual job performance. When these points are studied by the management then it is necessary to compare both the things. This study on comparison of both decides further corrective and preventive actions.

In an effort of solving performance problems, management should higher standards. They should straightforwardly speak to the employee or department having problem. On the contrary, if there are inadequate resources or disallow other external factors standards from being attained, management had to lower their standards as per requirement. The controlling processes as in comparison with other three, is unending process or say continuous process. With this management can make out any probable problems. It helps them in taking necessary preventive measures against the consequences. Management can also recognize any further developing problems that need corrective actions.

Although the control process is an action oriented, some situations may require no corrective action. When the performance standard is appropriate and actual performance meets that standard, no changes are necessary. But when control actions are necessary, they must be carefully formulated.

An effective control system is one that accomplishes the purposes for which it was designed.

Controls are designed to affect individual actions in an organization. Therefore control systems have implications for employee behavior. Managers must recognize several behavioral implications and avoid behavior detrimental to the organization.

It is common for individuals to resist certain controls. Some controls are designed to constrain and restrict certain types of behavior. For example, Dress codes often evoke resistance. Controls also carry certain status and power implications in organizations. Those responsible for controls placed on important performance areas frequently have more power to implement corrective actions. Control actions may create intergroup or interpersonal conflict within organizations. As stated earlier, coordination is required for effective controls. No quantitative performance standards may be interpreted differently by individuals, introducing the possibility of conflict. An excessive number of controls may limit flexibility and creativity. The lack of flexibility and creativity may lead to low levels of employee satisfaction and personal development, thus impairing the organization's ability to adapt to a changing environment.

Managers can overcome most of these consequences through communication and proper implementation of control actions. All performance standards should be communicated and understood.

Control systems must be implemented with concern for their effect on people's behavior in order to be in accord with organizational objectives. The control process generally focuses on increasing an organization's ability to achieve its objectives.

Effective and efficient management leads to success, the success where it attains the objectives and goals of the organizations. Of course for achieving the ultimate goal and aim management need to work creatively in problem solving in all the four functions. Management not only has to see the needs of accomplishing the goals but also has to look in to the process that their way is feasible for the company.

Main Functions of Management
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Basic Principles of Management

When taking on a management position, there are three essential levels you must recognize are a part of being a manager. Working on polishing your skill in these separate levels will help you in becoming a well-rounded manager that can take on any job duty and handle them with ease. These principles of management are crucial if you would like to be viewed as a person of good integrity, work ethic and communicative with fellow workers. These three levels for being a high-quality manager are as follows: Technical Skill, Human Skill, and Conceptual Skill and the necessary functions of a manager are planning, organizing, directing and controlling.

Technical skill is the ability to process the technical side of a job or part of your work. Proficiency in the technical knowledge of your job and company is critical if your job requires you to be more "hands on" with your work. Many managers find themselves less educated on the technical side of the job than the rest of their employees and upon losing their managerial position they are forced to come to the reality that there are far more people educated in technical work than they are and slowly fall down the ladder. In order to not let this happen, you must stay up to date with the technical aspects of your job in order to assure your bosses and your company that you are the right person for the position.

Human skill is the power to communicate to your fellow co-workers. This is a skill that 99% of all companies look for in a manager because if you do not possess the ability to correspond with other employees then you will not work out in a manager position. You must be a "people person" in order to hold a job as a manager because on a daily basis you will be working with various other associates and you will need to know how to hold conversations and help your employees. Learning how to effectively communicate with people is a key principle of management that you will need in order to be successful in your position.

Basic Principles of Management

Conceptual skills involve the formulation of ideas and concepts. Managers that have great conceptual skills generally possess the power to create innovative ideas and deliver abstract theories. This form of management will give your company the edge it needs against its competitors if you can formulate groundbreaking concepts for your company that will push them ahead of the competition.

Managers also have duties no matter what their skill level is. These responsibilities include planning, organizing, directing and controlling. These functions are necessary when working as a manager in any level you are performing in. You might view your principles of management as the separate skill levels or the basic duties of a manager. Whichever you hold as the most important, you must also keep in account that a great manager will possess all of these skills and be a vital asset to their company.

Basic Principles of Management
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Jeff Blackwell is the founder of http://www.SalesPractice.com, an online Sales Training community that assists sales practitioners in mastering the art of sales by providing professional sales training resources including a collection of leading articles, sales script book, industry source book, and sales forum.

Management - How to Conquer the Difficult Job of Middle Manager

Middle management is a difficult place to occupy. It is often the place where careers are either broken or made. In fact, many business professionals find middle management roles more difficult than entry level or senior level management positions. The middle manager is not really in charge of setting direction and whatever direction is set must be done by working through others. It makes perfect sense why this role is difficult! Being a middle manager is difficult, but it is not an impossible role, however.

The first step a middle manager must take to be effective is to understand that this role requires more emphasis on other skills than the manager has used at the entry level. Specifically, the technical skills that were instrumental in her promotion are less important to her at this higher level. She must excel in her interpersonal and big picture (conceptual) skills to succeed. Her communication, judgment, conflict resolution, decision making, delegation, planning, and analytical skills are more important at this level than her technical skills. Her success as a middle manager is tied to her ability to influence and collaborate with others at all levels of the organization. If she tries to get by on her superior technical skills alone, she will set herself up for failure.

The second step a middle manager must take to be effective is to improve his interpersonal and conceptual skills. Unless this area is addressed, he will lack the proper planning, problem solving, analytical, and judgment skills to work at this level in the organization. The best methods for improving interpersonal and conceptual skills are continuing education and mentorship. Taking high quality management seminars, attending quality internal training, doing volunteer work, and joining a professional association are all viable continuing education methods. The middle manager should also find a mentor whom he respects to serve as a resource to him. Many times making the request of a higher level manager who has shown interest in his success is all that it takes. This individual should not be his boss, however. Boss and mentor roles can conflict!

Management - How to Conquer the Difficult Job of Middle Manager

The third step a middle manager must take to be effective is to find reliable sources for ongoing feedback on her performance. A 360 degree review is preferable. The key is to identify individuals who will provide the manager with honest feedback and who do not have their own political agenda. Peers with whom the manager has an effective relationship are a source. Her boss is always a source of feedback. Of course, the better the relationship with her boss, the better the feedback is generally.

Often, the best source of feedback for a middle manager is the managers she directs, however. This does not happen easily. First, she must create a no-penalty environment where her direct reports are free to give feedback to her. This means she must be prepared to hear some frank feedback from her direct reports, act on it appropriately without emotion, and not penalize her managers for what they had to say. After several instances of this behavior, the middle manager will start building credibility with her managers. She will find they appreciate her giving them a voice in the operations. And, her direct reports will likely begin to look out for her best interests as well.

The first level manager who is promoted to a middle manager must realize that the skills that brought him success in his former role are less critical at this higher level. Next, through education and mentorship, he must develop his interpersonal and conceptual skills which are more critical to his success. Finally, the middle manager must embrace 360 degree feedback. By taking these three steps, the middle manager can improve his chances of being successful in this difficult role.

Management - How to Conquer the Difficult Job of Middle Manager
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Robert Tanner is President of Business Consulting Solutions LLC, the author of Why Smart People Fail at Management, and an Adjunct Professor of Management. He provides training and development, managerial and organizational assessments, and management coaching services. With over 20 years of management experience, Robert is a seasoned business practitioner. His clients include Fortune 100 firms, start-up firms, and public agencies.

He is a frequent seminar trainer on management and leadership and was featured in Smart Business Magazine. Robert is professionally certified to administer a variety of behavioral and psychological type assessments including Myers Briggs Type Indicator™ (MBTI®) and Fundamental Interpersonal Relations Orientation-Behavior™ (FIRO-B®). If you enjoyed this article, visit the Management is a Journey blog

And join the management discussion. To learn more about his professional services, visit Business Consulting Solutions LLC.

What is the Purpose of Dr. Deming's Theory of Management?

After World War II American industry returned to the peacetime production of consumer goods, for which there was unparalleled demand and no competition. Untouched by war, the industrial heartland produced cars, washing machines, vacuum cleaners, mixers, lawnmowers, refrigerators, furniture, carpet, and all the goods for the growing postwar suburbs inhabited by a generation of prosperous Americans.

The American corporation had fulfilled the promise of 'scientific management,' formulated by an influential industrial engineer named Frederick Winslow Taylor more than three decades earlier. Taylor had held that human performance could be defined and controlled through work standards and rules. He advocated the use of time and motion studies to break jobs down into simple, separate steps to be performed repeatedly without deviation by different workers. Minimizing complexity would maximize efficiency, although it was as bad to overperform as it was to underperform on a Taylor-style system.

Scientific management evolved during a period of mass immigration, when the workplace was being flooded with unskilled, uneducated workers, and it was an efficient way to employ them in large numbers. This was also a period of labor strife, and Taylor believed that his system would reduce conflict and eliminate arbitrary uses of power because so little discretion would be left to either workers or supervisors. Hence the evolution of the rule-bound, top-heavy American corporate management structure.

What is the Purpose of Dr. Deming's Theory of Management?

Quality in these postwar years took a backseat to production. Quality control came to mean end-of-the-line inspection. If there were defects and rework, there would be profit enough to cover them. Although some quality control lingered for a time, particularly in defense industries, for the most part the techniques taught by Dr. Deming were regarded as time consuming and unnecessary, and they faded from use. By 1949, Dr. Deming says mournfully, "there was nothing not even smoke." This setback only served to strengthen Dr. Deming's conviction, as he considered what had gone awry.

Purpose of Dr. Deming's Theory of Management

As a statistician, Dr. Deming's lifelong mission had been to seek sources of improvement. World War II had quickened the pace of quality technology, but as World War II ended, progress in quality control began to wane. Many companies saw it as a wartime effort and felt that it was no longer needed in a booming market. Given the failure of statistical methods for quality control to endure, he figured out what might have caused the failure and how to avoid it in the future. He gradually concluded that what was needed was a bedrock philosophy of management, with which statistical methods were consistent. He was ready with new principles to teach when the Japanese called him in 1950 to aid in the reconstruction of their country.

The aim of Dr. Deming's theory of management also known as, 'System of Profound Knowledge,' challenges leaders to embrace a new paradigm based on the following three major points:

The purpose of the new paradigm transformation is to 'unleash the power of human resource contained in intrinsic motivation,' and to foster an environment of full cooperation between people, departments, companies, governments, and countries to achieve win-win scenarios through process improvement, team work, and innovation.

The system of profound knowledge is a fitting theory for leadership in any culture or business. In some circles people think incorrectly of Total Quality Management with industrial connotations. For example, in the health care arena the customer is the patient, and production could be equated to the quality of patient care. Indeed many of the concepts which are espoused by TQM relate to interpersonal interaction as much as they do to other more production oriented criteria.

Therefore the key dimensions of TQM can be identified as: team development, statistical quality control, process management, assessment of customer's needs, fact-based decision making, continuous quality improvement, and benchmarking. Applying this management theory requires a focus to the new kind of world of interdependence that we are in now. The prevailing paradigm in the Western world is not based on any holistic or comprehensive theory; it is just the cumulative result of assorted reactive experiences and methods:

Managers basing their leadership in the above listed paradigms will be lost in the new economic age. Such leaders need to open their minds and change to be able to learn the new paradigms of Total Quality Management (TQM).

Assumptions of Dr. Deming's Theory of Management

Dr. Deming's theory of management is based on four assumptions:

1. Management's function is to optimize the whole system, not just your components

E.g., Western-style management: Reward-punishment performance appraisal systems optimize components of the system.

E.g., Deming-style management: A better way is to evaluate an individual long-term virtue, to know if they are in the system or out of the system, and to understand the performance issues as special or common cause. According to statistical research by Deming, Ishikawa, and Juran over 80% of problems are related to common cause or system problems of the organization.

2. Cooperation works better that competition

E.g., Western-style management: Internal competition to recognize the top 10% sales people in an organization creates a system where 90% of the population is labeled substandard performers or worse yet losers for those on the bottom half.

E.g., Deming-style management: In any distribution curve, 50% of the population is going to be below average, and only 10% are going to be top performers. It does not make sense to grow an organization of malcontents because nobody wants to labeled a loser. If the system is stable and has good hiring policies in place, a better way to manage is to have a goal to shift the distribution curve to the right by continuous improvement and removing common causes of variation. All employees in the system should be recognized for the accomplishments of the enterprise, rather than just the top 10%.

3. Manage using both a process and results orientation, not only a results orientation

E.g., Western-style management: Asking to sell 30% more (by a MBO goal) without understanding the process that allows that goal to be attained, or providing a process for goal attainment, creates a fail syndrome (demanding unreasonable greater results has the opposite effect that contradict the Pygmalion effect).

E.g., Deming-style management: A better way is to analyze historical performance using statistics. Then basing sales growth goals within +/- 3 standard deviations from the mean, where 99% of the sample population is predicted to attain the goal, and shifting the curve to the right by improving the sales process. If a stable system is pushed beyond its limits, the system typically breaks down.

4. People are motivated by a mix of intrinsic and extrinsic motivation

E.g., Western-style management: Recognizing people solely through extrinsic motivation by giving plaques, letters of commendation, bonuses, and pats in the back to motivate employees.
E.g., Deming-style management: A better way is for management to combine extrinsic and intrinsic motivation to increase quality and pride in the work. Intrinsic motivation is the enthusiasm and positive stimulation an individual experiences from the sheer joy of an endeavor. Management can release intrinsic motivation by creating a culture that encourages employee involvement in using process improvement tools such as the Deming wheel (SDSA and PDSA) to innovate and improve quality.

Each of these assumptions are directly associated with the interrelationships between people. They all revolve around a key concept, receptivity of the management style by those who are not only managing but those who are being managed. The implementation of management philosophies obviously revolves around employee motivation, and not all employees are either easily motivated or receptive to management styles that differ from those to which they have been accustomed.

What motivates an individual, therefore, is at the center of Total Quality Management philosophy. Motivational theory in itself has a long history of both direct and indirect applicability to many aspects of management in general and to Total Quality Management in particular. Indeed, the importance of teamwork in the organizational atmosphere cannot be underestimated. Before employees can effectively interact as a team, however, they must be able to function independently in an efficient and productive manner.

Such independence revolves around numerous factors, some of which were learned in childhood and some of which can be instilled in the professional environment. An important part of this independence is being able to relate to one's peers and to turn criticism and resistance, which exists from some peers, into a positive factor in influencing team performance.

Leaders applying the Deming-style management need to be experts at molding independent workers and teams. A high performing team is to some degree the product of the individual player's personalities, personalities that had roots as far back as childhood. Deming's teachings recognize that an individual's qualities or lack of them could be refined in the professional workplace. Lastly, Deming has influenced my thinking in a variety of ways. What stands out is the wisdom behind the value of teamwork, process improvement, individual versus systemic issues, and the pervasive power of continuous improvement.

What is the Purpose of Dr. Deming's Theory of Management?
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Definition of Stress Management

Understanding the core factors in producing stress takes you closer to eliminating it. But since the most common conception of stress takes into account something we all know, then the definition of stress management should be obvious - except that it isn't.

We define it as our conscious knowledge of things that effect stress and the methods to divest stress harmlessly out of our body system. It is also a set of techniques that professionals do to help us in coping with various kinds of stress. Furthermore, we can also say that it is an equipping of knowledge, a conditioning, or a change of a lifestyle that allows only the most minimum instances where stress can actually set in.

Before we start, what is stress? Stress is a nervous system reaction of your body towards certain stimulus. This nervous system reaction could be easily viewed as an unconscious preparation of the body for a certain activity, like for instance releasing adrenaline chemicals onto your muscles whenever you feel alarmed, for example triggering auto response duck and adrenaline rush quickness on the muscles as you hear and process a gunfire shot; or else shutting down some of your pain receptors while you're in a fight.

Definition of Stress Management

The problem with stress response is that it also triggers psychologically. Anxiety of approaching deadlines, nervousness over the outcome of a completing project, surmounting unpaid bills, or the nervous anticipation of any event, any situation that's going to happen in the near future may trigger stress response. Over time, these repeated stress experiences can severely deplete energy which could be used for other health functions like digesting meals, functioning body defense system, and such.

Returning on track, the definition of stress management is a system that is aimed to reduce stress and/or facilitate the person to cope with these instances. Because stress falls into a complex assortment of emotions and sources of them are even more profuse, the definition of stress management has become so broad, but all of them are aimed to relieve stress and divert these energies elsewhere harmless, and sometimes, even productive. All in all, the definition of stress management falls into three categories: action oriented stress management, emotionally oriented stress management, and acceptance oriented stress management.

Definition of Stress Management
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9 Management Philosophies to Develop Teams Into Elite High Performers

I met with a prospect the other day and he asked me "What do high performance managers do differently than average managers?"

I paused for a moment, scanned the long list of behaviors in my mind; distilled my answer down to the critical few things and told my prospect...

High performance managers:

9 Management Philosophies to Develop Teams Into Elite High Performers

clarify their understanding of their roles and responsibilities set non-conflicting short and long term priorities use a logical, transparent and duplicable decision-making process create a well thought out plan of action - they don't wing it create a realistic schedule for executing their plans

We discussed my answer in relation to the challenges his company was facing and agreed to involve the final person I needed to meet to close the deal.

I started the hour long drive back to the Atlanta airport and pondered a much deeper question.

Why do high performance managers behave the way they do?

I remembered asking my mentor and colleague Alex Nicholas, (the author of Applied Concepts Institutes' Sales Management Leadership Program), this very question.

Here's his answer - High performance managers have a set of management philosophies at the root of their priorities and decisions. This keeps them focused on achieving results through development of themselves, the team environment and individual team members.

All management behavior is based on daily, demonstrable, non-negotiable standards, values and ethics.

Personal conduct, decision-making and daily activities must consistently reflect the values and high ethical standards embodied by the company
Leadership skills focus on vision, strategy, values and spirit

Leadership includes communicating a clear direction for the team, in concert with the corporate vision, strategy, values and goals. Leadership also entails developing and executing longer term business plans and promoting a strong sense of the importance of individual and team contributions.
Management skills target tactical, shorter term development

Emphasis is on improving results by using proactive behavior, making sound tactical business decisions, improving near term planning, enhancing the daily work environment, and fostering developmental relationships with individual team members.
Focus on team development

The most important priority for managers is the development of an elite, high-performance team. While accommodating individual employee's needs are important, business and employee decisions should primarily be made to support the greater good of the team.

Team performance improvement begins with the manager's acceptance of personal responsibility for team actions and outcomes.

Improving team performance starts with improving one's self in personal management/leadership skills, job adaptability and business maturity.
The foundation of employee performance improvement is daily development that addresses their behavior.

All employees are recognized as having unique personalities. Management focuses primarily on developing employee behaviors that are required to successfully perform the job.
Communication between Managers and employees become more effective through a collaborative communication style.

Situations require differing styles of decision-making and communication, however collaborative communication and decision-making processes can be synergistic.
Develop employees using nurturing relationships

By consistently using a collaborative coaching process, managers help employees take personal ownership of the job and their productivity. Managers treat employees as "major accounts" for development and coach in the areas of job skills, business maturity and personal adaptability.
Improved employee productivity results in increased employee tenure and sense of self worth

Leading and managing employees to work through a focused, disciplined, high-energy, and consistent approach is the most effective way to increase results for the team and build employee job satisfaction and tenure.

So it all comes down to the congruency between your management practice and the value system that underpins the priorities you set and the decisions you make.

I would love to hear about the management philosophies that underpin your approach to making the numbers?

Add your voice to the discussion at my blog.

9 Management Philosophies to Develop Teams Into Elite High Performers
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Role of MIS in Business Management

Despite the vast improvements in information technology, computers (on which modern IT is based) cannot as yet take over business management. However, business information systems have transformed the effectiveness, power and efficiency of management.

In an earlier article on business management software, we looked at surface aspects of how modern management information systems help businesses. We saw how computers speeded up and improved the quality of operations. We also mentioned the existence of broad categories of business software - office suites, functional software such as accounting and inventory, and industry software such as retail management software. In this article, we seek to look more analytically at the role of information management systems.

Decision Support, Problem Analysis and Overall Control

Role of MIS in Business Management

Business managers often need to make decisions that can affect the business' fortunes one way or other. For example, a company with sales outlets or distributors spread over a wide geographic area might want to optimize the logistical operations of delivering merchandise to the outlets. The best solution might be affected by numerous factors such as demand patterns, availability of merchandise, distances involved and the option of using external carriers (who can find two way loads and might prove a lesser cost option over long distances) instead of own vehicles.

While it might be possible to use complex mathematical formulas by hand to compute the best solution, computers transform the whole process into a routine task of feeding certain information as input and obtaining suggestions for best solutions as output. The task can typically be done in a few minutes (instead of hours or even days) and it becomes possible to examine several alternatives before deciding upon one that seems most realistic.

Identifying problems and analyzing the factors that cause them also has been transformed by modern computer information systems. In a typical MIS environment, standard reports are generated in a routine manner comparing actual performance against original estimates. The software that generates the report can be instructed to highlight exceptions, i.e. significant variations between original estimates and actual performance. Managers will thus become aware of problem areas in the daily course of their work simply by looking at the reports they receive, without having to do detailed data collection and computations themselves.

Identifying the factors responsible for the problem can also be routinized to some extent by using such tools as variance analysis. Variance analysis is an element of standard costing system that splits deviations from estimates (or standards) into causative factors such as increase in price of materials used, excessive usage of materials, unexpected machine downtimes, etc. With such a detailed report, managers can delve deeper into the problem factor, such as why there was excessive usage of materials.

Control is also exercised through variance analysis. Budgets are prepared for all business operations by concerned managers working in a coordinated fashion. For example, estimated sales volumes will determine the levels of production; production levels will determine raw material purchases; and so on. With good information system management, it then becomes possible to generate timely reports comparing actual sales, production, raw material deliveries, etc against estimated levels.

The reports will help managers to keep a watch on things and take corrective action quickly. For example, the production manager will become aware of falling sales (or rising sales) of particular products and can prepare to make adjustments in production schedules, and purchasing and inventory managers will become quickly aware of any mounting inventories of unused materials. MIS thus enhances the quality of communication all around and can significantly improve the effectiveness of operations control.

Effective MIS Involves Humans and Computers Working together

The major aspect to note is that MIS provides only the information; it is the responsibility of concerned managers to act on the information. It is the synergy between efficient, accurate and speedy equipment and humans with commonsense, intelligence and judgment that really gives power to MIS.

Role of MIS in Business Management
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Risk Management Within an Organisation

Introduction

This manual is written to advise on an approach to managing risk, with regards to procedures to follow in conducting risk analyses and treatment.

Background of my Organisation

Risk Management Within an Organisation

I will focus my attention on the management of risks for my company in general. My company is involved in the trading of steel products, mainly for construction purposes, as well as the sales and purchases of agricultural products such as beans, maize and rice. With regards to these products, letters of credit (LCs) have to be initiated regularly for such products to be sold overseas. As part of the accounting and finance function, my responsibilities are not only in the proper accounting treatment of such transactions, but also as part of the team involved in a new trade financing project to ensure the smooth flow of these transactions from the opening of LCs, the financing as well as the delivery of these products. Such a flow will involve the cooperation of both the operations and the accounting and finance departments.

Purpose of Risk Management

Business risk relates to exposure to certain events that will have a negative impact on the strategies and objectives of the company. Hence business risk is due to two factors: the probability of an event occurring as well as the seriousness of the consequences (Bowden, Lane and Martin, 2001). There are several risks that are more specific to my organization, and are shown as follows:

1. Strategic risk, such as poor marketing strategy and poor acquisition strategy, as a result of poor planning (Bowden et. al, 2001). Poor marketing and acquisition of different grades of steel and agricultural products can prove the downfall of the organization.

2. Financial risk, such as lack of credit assessment and poor receivables and inventory management, as a result of poor financial control (Bowden et. al, 2001). Inadequate credit assessment of potential trade and other debtors as well as low debtors' turnover can be a poor reflection of the company's strategy and objectives.

3. Operational risk, such as poor practices and routine actions, as a result of poor human actions (Bowden et. al, 2001). Non-conformity to the organization's safe practices or even willful actions by employees can create potential operational and financial losses to the company.

4. Technical risk, such as equipment and infrastructure breakdown and fire destruction, as a result of failure of physical assets (Bowden et. al, 2001). Such risks can be prevalent in my organization if appropriate actions are not taken to prevent these technicalities. Unfortunately, many organizations tend to focus too much on the performance and cost dimensions of technical risk and manage them too heavily (Smith and Reinertsen, year unknown).

5. Market risk, such as inadequate market research, which is the risk of not meeting the needs of the market, assuming that the specification has been satisfied (Smith and Reinertsen, year unknown). This risk may be more important compared to others, however it is less manageable due to the risk being less objective and quantifiable compared to say technical risk

As a result of such risks mentioned above, coupled with the advancement in technology and competitive pressures, risk management has taken a more important role in the existence of businesses today (Bowden et. al, 2001). Risk management relates to the logical and systematic way of establishing context, identifying risks, analyzing risks, evaluating risks and lastly, treating risks. This approach also involves communicating and consulting the findings as well as monitoring and reviewing the treatment of risks. This approach to managing risks is known as the AS 4360 method (Bowden et. al, 2001).

Risk Management

Step 1: Definition of Context

This relates to the establishment of context in terms of strategic, organizational and risk management (Bowden et. al, 2001). The strategic context is concerned with the relationship between the organization and its parameters in terms of financial, operational, competitive and social context (Bowden et. al, 2001). In the case of my organization, we are concerned with our financial objectives (i.e. sales turnover of US million with a profit margin of at least 12% annually), products with high quality and good customer satisfaction, as well as good market position (one of the top suppliers of steel in the regional construction industry). The strategic context also requires the organization to identify the stakeholders, which includes the owners, employees, customers, suppliers as well as the local community (Bowden et. al, 2001). In addition to that, my organization will have to be accountable to our shareholders and the media as well, since we are a local listed company.

The organizational context will be concerned with wider goals, objectives and strategies of the company as a whole (Bowden et. al, 2001). In this context, we have to establish and implement sufficient key performance indicators (KPIs) and critical success factors (CSFs) that are suitable to the different aspects of the business. There are a couple of KPIs that are commonly used in my organization:

1. Revenue and profit targets: These are mentioned above.
2. Customer satisfaction: Surveys are sent quarterly to our suppliers and customers to ensure at least 90% customer overall satisfaction.
3. Stocks update and on-time deliveries of goods: Sufficient stocks are maintained and retrieved from suppliers and deliveries have to be made on time to customers at least 98% of all sales orders.
4. Timely submission of monthly accounting and sales records to head office: The deadline of submission of such reports is usually the 5th of each month, which has to be strictly adhered to.

On a wider basis, such KPIs are also linked to CSFs in my organization, which includes the following:

1. Maintaining a healthy position in our markets: This is mentioned above.
2. Supportive top management open to marketing and financing ideas: The directors and senior management have a fortnightly meeting with lower management on possible ideas and brainstorming on ideas and possible financing from banks on certain products.
3. Sufficient funds and resources in place: Funds have to be in place for LCs, which are converted to trust receipts, which have to be settled within certain tenure, coupled with adequate manpower and technologies for proper functioning of the organization.

With these KPIs and CSFs in mind, the various activities of the can be further segregated into smaller teams and activities to provide a more logical flow for better analysis (Bowden et. al, 2001). In my organization, the sales teams are broken up into smaller groups in charge of various products for steel and agricultural aspects. This is also done likewise for the finance department, which has smaller teams in charge of receivables, payables and other administrative functions.

Step 2: Identification of Risks

This process aims to identify all events, which might affect the organization as a whole. In such a scenario, there is a need to identify all causes and potential situations (Bowden et. al, 2001). After which, we will proceed to link the risks, both threats and opportunities, with key criteria that will have a direct impact on the organization (Bowden et. al, 2001). There is also a requirement to approach these risks with proactive and reactive responses (Bowden et. al, 2001). There are several tools that can help with identifying risks, namely brainstorming, checklists and judgements based on experience.

In my organization, there are several tools used to identify risks. For the finance department, there is a quarterly checklist used on different risks involved, which can include the amount of tax incurred and tax credits agreed with the tax authorities, the amount of receivables and stock updates and how efficient their respective turnovers are. Provisions for such items are also raised based on prior experience. For the marketing and operations department, weekly meetings are conducted whereby brainstorming and systems analysis are used to identify possible risks with regards to competition, changes in prices and tastes of customers as well as the safe-guarding of stocks at our premises. It is further recommended that a product plan with a product manager be put in place, with rankings are given to the priority of such risks and the inputs, processes and outputs should be investigated in greater depth (Bowden et. al, 2001).

It is mentioned that a test market will be useful if there is a high degree of uncertainty about the eventual sales of the new product as the launch date approaches (Cooper, year unknown). My organization is currently looking at possible new sales of liquor and diesel for its overseas markets. However, these possible sales are not considered new products in the existing markets. With speed and the competitive environment being important facts, a test market may not be applicable in our scenario (Cooper, year unknown).

In addition to the launch of possible new products, there are several pitfalls in considerations for my organization:

1. Lack of market orientation. These are possible risks considering insufficient market analysis and not understanding customer needs and wants.
2. Poor quality of execution. With regards to my organization, the grades or quality of the flammable new products might be filled with deficiencies, hence not meeting customers' needs.
3. Moving too quickly. A too hasty approach to launch these products might render too many mistakes in the process and compromise the quality and timing of the promotional activities (Cooper, year unknown).

Step 3: Risk Analysis

This step involves the estimation of the likelihood and consequence of possible risk events. These are often evaluated using the current controls in place (Bowden et. al, 2001). Such controls are needed to ensure effective operations, reliable reporting systems and proper compliance with rules and regulations (Bowden et. al, 2001). In my organization, controls in place will include past records, market analysis given by traders from different countries, published literature in the form of accounting and marketing magazines and internal and external auditors' reports.

There are several techniques that are used to establish likelihood and consequence, namely structured interviews, multi-disciplinary groups of experts, assessments using questionnaires and computer modelling (Bowden et. al, 2001).

The decision tree technique can also be used whereby the expected net present value (NPV) of cash flows associated with each individual outcome is shown (Vlahos, 2001). This technique is useful for the following reasons:

1. It improves our understanding of each outcome and makes assumptions more forthcoming.
2. It is useful for documenting and communicating thoughts on uncertainty and also helps generate alternatives for better value enhancement.
3. Managers can monitor each stage of the project and make appropriate analysis with regards to decisions made at each point
4. The outputs in terms of expected NPVs generated can be used as potential inputs for projects selection (Vlahos, 2001).

This technique is highly recommended for my organization in two ways:

1. This can be used in decisions made by the marketing department in terms of which products to obtain for potential markets.
2. The finance department will also find it useful in terms of the different ways of financing (i.e. direct cash financing, using LCs or trust receipts) in consideration for the building of the trade finance project.

There are two types of risk analysis, mainly qualitative and quantitative (Bowden et. al, 2001).

Qualitative Technique

A qualitative method makes use of words or descriptive scale and comes in the form of a ranking structure, alternating between Rare and Almost Certain. Such a method is concerned with raking likelihoods and consequences (Bowden et. al, 2001). With regards to construction projects, which can be applicable to my organization, the consequences can range from insignificant (whereby there is no injuries and minimum financial loss), moderate (injuries with medical help required and moderate financial loss) to catastrophic (death with significant financial loss). Such a qualitative table with various likelihood and risk levels matrix can be useful in the following scenarios:

1. Initial screening guide to identify possible risks for further analysis.
2. Where the level of risk does not justify the time and effort required for more analysis.
3. Insufficient numerical data, which renders a quantitative analysis useless.

For the qualitative analysis, the management and staff with regards to the risk events at different levels must work through the risk-ranking matrix. Each likelihood and consequence criteria should be considered in order to put events in the appropriate category (Bowden et. al, 2001).

However, there are several disadvantages associated with this technique:

1. It may not be too accurate as events within the same category may have substantially different levels of risk.
2. There may not be a common basis for comparison of risk i.e. on dollar basis or number of deaths.
3. There is no clear justification with regards to the process of 'weighing' risks
4. There could be different interpretations with regards to the meaning of different consequences i.e. the word catastrophic can mean a great deal to some people, while others might take it more lightly.
5. It can be difficult to translate the findings from this technique to match that of a quantitative method (Bowden et. al, 2001).

With these pitfalls mentioned above in mind, I would think that it will be better to consider the qualitative technique as more of an initial screening exercise which should be used concurrently with the quantitative technique.

Quantitative Technique

This approach takes the product of likelihood and consequence, with the consequence expressed as an actual variable (Bowden et. al, 2001). Such a technique is more reliable as it relies on numerical values, with estimates of frequency being made in terms of event frequency (Bowden et. al, 2001).

There are several drivers of risks, namely, technology, people, systems, organizational factors and external factors (Bowden et. al, 2001). In my organization, some drivers of risk might include how updated my computer versions of accounting and sales systems, the competency and educational levels of the employees, the number of new ideas by lower management accepted by higher management and possibly the amount of pollution our products might cause to the environment.

The quantitative analysis is further broken down into likelihood and consequence criteria. For the likelihood criteria, it is expressed as a probability instead of frequency, thus ensuring that risks are compared on a similar basis (Bowden et. al, 2001). With similar small events likely to occur, the likelihood of them occurring can be considered as one event. With regards to my organization, examples of such similar events might include:

1. 20 deliveries which are not made on time (more than 30 minutes) to customers resulting in losses of ,000 each for transportation costs
2. 5 deliveries of wrong grades of products to customers resulting in losses of ,500 for transportation and bank charges.

For the consequence criteria, it can be considered in terms of an event leading to possible death or severe losses i.e. financial or reputation losses. In the case of the two examples for likelihood criteria given above, the related consequence criteria are as follows respectively:

1. Free deliveries made for the next trip.
2. Appropriate discounts given for these batches of products sold.

The consequence criteria can also be expressed quantitatively in terms of non-performance or failure to achieve certain KPIs, reflecting on the organisation's priorities in accepting varying degrees of risks. In my organisation's case, the free deliveries and discounts given could jeopardize not only the revenue and profit targets, but also in terms of customer satisfaction (which are important KPIs). As such the consequence criteria can be expressed as the mean or expected value (Bowden et. al, 2001). This is consistent with the Monte Carlo method, which can be used to obtain the distribution of the project or product value associated with trading operations (Vlahos, 2001).

Step 4: Risk Evaluation

Risk evaluation is concerned with identifying which risks must be treated and can be calculated using the product of likelihood and consequence (Bowden et. al, 2001). The risks can be compared with previously established criteria. Different softwares such as the Monte Carlo approach, the sensitivity analysis and the probability distribution can be used to show the effects of major risks for evaluation (Bowden et. al, 2001).

Step 5: Treating Risks

There are several methods of treating risks, namely avoidance, accepting, reduction and transfer of risks (Bowden et. al, 2001).

1. Avoiding risks. In my organization, avoiding such risks would involve possibly not importing highly flammable products such as liquor or diesel (which are part of the consideration for new products) as part of sales and speculating in foreign exchange fluctuations.
2. Accepting risks. Certain risks may be unavoidable. In my organisation's case, we have huge sales transactions in Myanmar, which has just experience a major military and governmental coup. Hence sales in Myanmar may be volatile. These are potential risks, which are already factored in our business considerations.
3. Reducing risks. Currency fluctuations are imminent when trading with overseas counterparts for my organization. Hence LCs and hedging are done frequently in order to mitigate such risks for products purchased and sold to other countries.
4. Transfer risks. For my organization, this is done in terms of insurance coverage for stocks, which are housed in our premises.

Some other popular treatment of risks will include audit compliance programs, contractual obligations and conditions, preventive maintenance, quality assurance and contingency planning (Bowden et. al, 2001). Such treatments of risk are also maintained within my organization.

The different options for treatment of risks should be evaluated and risk treatment plans should be planned and prepared (Bowden et. al, 2001). Such a plan should consider detailed base implementations, risk assessment in terms of threats and opportunities in terms of priorities and recommended proactive and reactive contingency plans. (Bowden et. al, 2001).

The risk treatment schedule and action plan should include the following:

1. The different duties and responsibilities for implementation of plan. Preferably, the plan should involve a project leader and different members in charge of one aspect of the project reporting to the leader.
2. The resources to be utilized.
3. Work breakdown structure for the activities
4. Budget allocation
5. Schedule for implementation
6. Details of the mechanism and frequency for proper compliance to the treatment schedule (Bowden et. al, 2001).

Step 6: Communicating and Consulting

For this stage, stakeholders need to have a common understanding of the project or product situation. Consultation from stakeholders as well as experts is required for better opinions, with communication needed for better coordination (Bowden et. al, 2001).

Such an approach is required for several reasons:

1. To prove that the process is conducted in a systematic manner.
2. To provide records of risks and proper organizational records.
3. To provide relevant decision makers with a proper risk management and action plan for approval and implementation.
4. To provide accountability.
5. To facilitate further monitoring and review.
6. To provide audit trail.
7. To share information (Bowden et. al, 2001).

This report should include the following:

1. Executive summary
2. Scope of project
3. Methodology of study
4. Contextual issues of the project including the restraints
5. Success factors chosen
6. KPIs for each success factor chosen
7. Target and tolerance
8. Any assumptions
9. Top ten risks across all CSFs for the project or product plan
10. Vulnerabilities in phases of the project
11. Responsibilities for managing risks in phases
12. Primary and secondary drivers triggering each risk
13. Existing controls
14. Tables and figures (Bowden et. al, 2001)

Step 7: Monitoring and Reviewing

For the final step, there is a need to develop and apply mechanisms to ensure ongoing review of risks i.e. project leaders should provide a consistent update of the current situations (Bowden et. al, 2001). The effectiveness of the risk management process should be consistently monitored and reviewed (Bowden et. al, 2001).

Conclusion

Risk should be managed on an active basis. Risk management will involve identification of areas of high risks ahead of time, interpreted to the greatest degree possible, with the best technical or marketing talent allocated to the problem, have the problems solved as quickly as possible, and be provided with a contingency plan in case something cannot be resolved (Smith and Reinertsen, year unknown).

Reference List

Bowden, A., Lane, M. and Martin, J. (2001) Triple Bottom Line Risk Management. Wiley.

Cooper. (year unknown). New Products: Problems and Pitfalls. Pg 22-49.

Cooper. (year unknown). To test or Not to Test. Pg 123-129.

Smith, P. and Reinertsen, D. (year unknown). Managing Risk. Pg 207-21.

Vlahos, K. (2001). Tooling up for Risky Decisions. Pg 47-52.

Risk Management Within an Organisation
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