April 15, 2019

Management Principles - Application in Operations Management


Fundamental Management Principles - Application in  Operations Management

Elements of Management - Henri Fayol

Planning - Organizing - Commanding - Coordinating - Control

Functions of Management - Koontz and O'Donnell


Planning - Organizing - Staffing -   Directing - Control

Functions of Management - Narayana Rao K.V.S.S.


Planning - Organizing (Material - Human) - Resourcing (Material - Human) -   Directing - Control

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Harold Koontz and Cyril O’Donnell, in their book,  Principles of Management: An Analysis of Managerial Functions, clearly described the principles to be used in performing various functions of management.

Managers have to set in a procedure to revise these principles periodically so that they can recollect the relevant principles when performing the managerial tasks and explicitly consider the relevance and application of these principles in their practice.


Many of us use them implicitly. But a professionally educated and trained manager must use them explicitly. He has to ensure that these principles are applied and if any exceptional situation is there, managers should ignore the principles consciously and be clear in their mind they chose not to use them due to the exceptional nature of the situation. Operations managers also have to use these fundamental principles. The methods and techniques of operations management are to be used keeping the principles of management in focus.

 

The need for Principles of Management


To Increase Efficiency
To Crystallize the Nature of Management
To Improve Research
To Attain Social Goals


Video - Principles of Management - Koontz and O'Donnell - Quick Review

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Principles of Planning


Principles of planning are relevant for the chapters, Strategy, Strategic Capacity Management, Forecasting, Sales and Operations Planning, Material Requirement Planning and Work Center Planning and Scheduling (Chapters in Chase & Jacobs, Operations and Supply Chain Management, 14 Edition)

Related to Purpose and nature

Principle of contribution to objectives
          Every plan has to contribute positively toward the accomplishment of enterprise objectives.

Principle of efficiency of plans
          Efficiency is measured by the contribution of the plan to objectives of the enterprise minus the costs and unsought for consequences in formulating and implementing the plan.

Principle of primacy of planning
          Planning is the primary prerequisite for all other functions of management. Every action of the manager follows a planning step.

Application to Operations


Operations managers have to first know the enterprise objectives. The plans made by operations managers have to positively contribute to the accomplishment of enterprise objectives. Operations managers have to prepared the cost of production budget and this budget in combination with sales budget gives the gross profit made by the company. Hence principle of efficiency comes into picture.
Operations managers have to first plan and based on the plan only give instructions for resource use in the organization. Even in governmental activities, unless a budget is approved by congress/parliament/body of elected representatives expenditure can not be made. Planning is the first step.

Principles Applicable to Structure of plans

Principle of planning premises
          If more people in an organization use common and consistent planning premises, the enterprise planning will be more coordinated.

Principle of policy framework
          If more policies, appropriate to the organization, are expressed in clear terms and form and if managers understand them, the plans of the enterprise will be more consistent.

Principle of timing
          If plans are structured to provide a network of derivatives plans in sequence, there will be more effectiveness in attainment of enterprise objectives.

Application to Operations

Presently sales and operations planning is being used in most of the companies. This practice ensures that sales and operations functions use the same planning premises. Policies related locations, capacity, employment levels, and inventory levels have to be expressed in clear terms.  I once observed in an ABB plant, budget is available from the level of the total plan to each subsection. Thus all plans are derivatives of the total plant plan.


Principles Applicable to Process of Planning

Principle of alternatives
          Select the plan which is the most effective and the most efficient to the attainment of a desired goal.

Principle of limiting factor
          Consider limiting factor in generating alternatives and selection from alternatives.

The commitment Principle
          Planning can cover a period over which commitment of resources can be clearly visualized.

The flexibility Principle
          Building flexibility in planning is beneficial, but cost of building flexibility needs to be evaluated against the benefits.

The Principle of navigational change
          Manager needs to periodically check events of the plan and redraw plans to maintain the move toward a desired goal.

Principle of competitive strategies
          In a competitive arena, it is important to choose plans in the light of what competitor will or will not do and navigate based on what competitors are doing or not doing.


Application to Operations


The first step in planning to find or identify the limiting factor. Can it be changed and its capacity increased in the planning period?  Number of alternatives to solve the challenges identified are to be generated. The best alternative that contributes maximum to the effectiveness and efficiency is to be selected. But first number of alternatives are to be developed.  Plan for which resources can be visualized and allocated has the maximum chance of success from the resource perspective. Flexibility has to be built into the plan but its cost has to be recognized. Flexibility is part of risk management. Every managers has to compare his plans to actual events and to take care of discrepancies must develop contingency plans. Plans have to made taking into consideration competitor's potential strategies and control actions also have to consider competitors' tactics and ongoing actions.


Principles of Organizing


Principles of organizing are relevant for chapters Design of Products and Services, Manufacturing and Service Processes, Supply Chain Design (Chapters in Chase & Jacobs, Operations and Supply Chain Management, 14 Edition)

Principles in Relation to Purpose

Principle of unity of objectives
          An organization structure is effective if it as a whole, and every part of it, make possible accomplishment of individuals in contributing toward the attainment of enterprise objectives.

Principle of efficiency
          An organization or organization structure is efficient if it is structured to make possible accomplishment of enterprise objectives by people with minimum unsought consequences or costs.
  

Application to Operations     
Operations managers have the maximum number of employees of the organization under them. Hence organizing has to be done keeping various principles in mind. Departments in the organization have to done in such a way that each contributes to the attainment of enterprise objectives. The role of each department and each employee in the department has to be described in such a way that its contribution to enterprise objective is clearly indicated.



The organization structure should not lead to frictions and turf wars that increase inefficiency in the system.

Principles  Related to the Cause of Organizing

Span of management Principle
          There is a limit at each managerial position on the number of persons an individual can effectively manage. But this number is not a fixed number and it will vary in accordance with underlying variables of the situation.


Application to Operations 


Operations managers have to decide how many operators can be directly supervised by a first line supervisor. How many supervisors can be managed by an engineer? How many engineers can be managed by the production manager? This number may keep changing with the life of the technology. When the technology is new one may require more managers to train. In the later days the requirements of technology training and communication may come down.




Principles in Developing the Structure of Organization



The scalar Principle

          The more clear the line of authority from the ultimate authority for management in an enterprise (CEO)  to every subordinate position, the more effective will be decision making and organization communication at various levels in the organization.

Principle of delegation

          Authority is a tool for managing to contribute to enterprise objectives. Hence authority delegated to an individual manager should be adequate to assure his ability to accomplish results expected of him.

Principle of responsibility

          The responsibility of the subordinate to his superior for authority received by delegation is absolute, and no superior can escape responsibility for the activities of his subordinate to whom he in turn has delegated authority.


Principle of parity of authority and responsibility

The responsibility exacted for actions taken under authority delegated cannot be greater than that implied by the authority delegated, nor should it be less.



Principle of unity of command

          The more completely an individual has a reporting relationship to a single superior, the less the problem of conflict in instructions and the greater the feeling of personal responsibility.

         

The authority level Principle

          Maintenance of authority delegation requires that decisions within the authority competence of an individual manager be made by him and not be referred upward in the organization.

Application to Operations 

The communication lines have to be clearly understood by every body in the organization. When a superior issues an instruction, there should be confidence in the subordinates that the instruction follows relevant communication from above.

Authority is the power to acquire and use resources. No manager can succeed if adequate resources are not provided to him. Therefore, relevant budget approvals are important. Every task entrusted to somebody in the operations department must have a budget approval. Superiors are responsible for achievement of plans of their section or department. When they entrust the job to a subordinate, they have to monitor and take control actions. They can't blame subordinates and explain their failure.


Superiors have to make sure their communication mismatches are not there even in situations where more persons in higher levels are directing a task. Organizational levels are created because all decisions can't be taken by person by observing and understanding the actions of many persons. Hence, managers at lower levels have to take decisions which are their authority.



Principles in Departmentizing Activities


Principle of division of work

       The better an organization structure reflects a classification of the tasks and activities required for achievement of objectives and assists their coordination through creating a system of interrelated roles; and the more these roles are designed to fit the capabilities and motivations of people available to fill them, the more effective and efficient an organization structure will be.

Principle of functional definition

        The more a position or a department has clear definition of results expected, activities to be undertaken, organization authority delegated, and authority and informational relationships with other positions, the more adequately individual responsible can contribute toward accomplishing enterprise objectives.

Principle of separation

        If an activity is designed to be a check on the activities of another department, the individual charged with such activity cannot adequately discharge his responsibility if he reports to the department whose activity he is expected to evaluate.

Application to Operations 

Division work is important in operations function as large number of employees work in it. The roles have to clear, resources allocated has to be clear and a check has to be made for coordination. When staffing is done to fill these roles, once again a check has to be done and required modifications are to be done to fit the roles to the person appointed for that role. These modifications may be temporary and they may be reversed or changed when persons change.

Auditors should not report to the department managers.

Principles in the Process of organizing


Principle of balance
    the application of principles or techniques must be balanced in the light of the over-all effectiveness of the structure in meeting enterprise objectives.

Principle of flexibility
    The task of managers is to provide for attaining objectives in the face of changing environments. The more provisions are made for building organization flexibility, the more adequately organization structure can fulfill its purpose.

Principle of leadership facilitation
    The more an organization structure an authority delegations within it make possible for various managers to design and maintain an environment for performance, the more it will facilitate leadership abilities of managers.


Application to Operations 

There has to check regarding the effectiveness of the organization structure. Certain amount of flexibility has to be there in organization structure to take care of contingencies. One contingency is the person filling the role. Each manager must be able to exhibit leadership, that is behavior that persuades department people to put in effort to realize objectives of the organization.

Staffing Principles

In the operations books there should be chapter on staffing operations management function right from COO to the operators. Also there has to be a chapter devoted to procurement of land and buildings, equipment, related services and materials. Presently procurement of materials is part of operations management textbooks.

Related to the Purpose of Staffing



Principle of staffing objectives    

    The positions provided by the organization structure must be staffed with personnel able and willing to carry out the assigned functions.

Principle of staffing
    The quality of management personnel can be ensured through proper definition of the job and its appraisal in terms of human requirements, evaluation of candidates and incumbents, and appropriate training.


Application to Operations


Operations managers have to understand the requirements of the role and the capabilities of a candidate to decide the recruitment. Training needs are also identified during this step.

The process of staffing



Principle of job definition


    Specifications for the job rest on organization requirements and on provision for incentives to induce effective and efficient performance of the tasks involved.

Principle of managerial appraisal


    Performance must be appraised against the management action required by superiors and against the standard of adherence in practice to managerial principles.

Principle of open competition in promotion


    Managers should be selected from among the best available candidates for the job, whether they are inside or outside the enterprise.

Principle of management development
    The objective of management development is to strengthen existing managers. The most effective means of developing managers is to have the task performed primarily by a manager's superior.

Principle of universal development
    The enterprise can tolerate only those managers who are interested in their continuous development.

Application to Operations

Operations managers have to develop job specifications. They have to appraise the employees agains the job specifications. Recruitment has to be open for external candidates also. They have to develop interest in all persons to increase their capabilities. To develop subordinates, managers have to objectively demonstrate the required behavior (F.W. Taylor indicated it training operators in new more productive methods).

Principles of Directing


Direction and communication are important in operations management. There has to be at least a chapter in operations management textbooks discussing directing and communication processes related to suppliers, customers and employees.  ERP chapter can be one such chapter as it is related to digital communication among various parties in operations function.

Related to the Purpose of Directing



Principle of harmony of objectives
    Effective directing depends on the extent to which individual objectives in cooperative activity are harmonized with group objectives.

Application to Operations

Harmony must be there are the initial staffing time and harmony has to be maintained subsequently. There is a need to check on this harmony on continuous basis.

Principles  Applicable to Process of directing



Principle of unity of command
    The more completely an individual has a reporting relationship to a single superior, the less the problem of conflict in instructions and the greater the feeling of personal responsibility for results.

Principle of direct supervision
    Effective direction requires that management supplement objective methods of supervision with direct personal contact.

Principle of supervisory techniques
    Since people, tasks, and organizational environment vary, techniques of supervision will be most effective if appropriately varied.


Application to Operations

Operations managers have to directly observe and direct subordinates. Ultimately, only one superior must direct a person. The supervision according to the maturity of the subordinate has to be followed.

Principles of Delegation



Principle of functional delegation
    The more a position or department has clear definitions of results expected, activities to be undertaken, organization authority delegated, and authority and informational relationships with other positions, the more adequately individuals responsible can contribute toward accomplishing enterprise objectives.

Principle of delegation by results expected
    The authority delegated to an individual managers should be adequate to assure his ability to accomplish the results expected of him.

Principle of absoluteness of responsibility
    No superior can escape, through delegation, responsibility for the activities of subordinates, for it is he who delegated authority and assigned duties.

Principle of parity of authority and responsibility
    The authority delegated has to be consistent with the responsibility assigned to a subordinate.


Principles of Control

Performance measurement and control is vital in operations management to assure deliveries to customers as per agree dates. Also control is essential for quality, cost, productivity and profit. Controls highlight constraints or bottlenecks and help in increasing capacity at the bottleneck stages.

Related to the purpose of control



Principle of assurance of objective
    The task of control is to assure accomplishment of objectives by detecting potential or actual deviation from plans early enough to permit effective corrective action.

Principle of efficiency of controls
    The more control approaches and techniques detect and illuminate the causes of potential or actual deviations from plans with the minimum of costs or other unsought consequences, the more efficient these controls will be.

Principle of control responsibility
    The primary responsibility for the exercise of control rests in the manager charged with the execution of plans.

Principle of direct control
    The higher the quality of managers and their subordinates, the less will be the need for indirect controls.
(The principle may termed as principle of reduced controls. A superior can spend less time in control activities if he has more higher quality managers and their subordinates in his department.)

Application to Operations

Managers have to assure the achievement of plans. Controls or measurements of results and observation  of processes are to be related to achievement of plans

Principles related to Structure of control



Principle of reflection of plans
    The more controls are designed to deal with and reflect the specific nature and structure of plans, the more effective they will serve the interests of the enterprises and its managers.

Principle of organizational suitability
The more controls are designed to reflect the place in the organization structure where responsibility for action lies, the more they will facilitate correction of deviation of events from plans.

Principle of individuality of controls
    Controls have to be consistent with the position, operational responsibility, competence, and needs of the individuals who have to interpret the control measures and exercise control.

Application to Operations

Controls or measurements have to be linked to plans and milestones. Also measurements are to be made at role which have managerial authority over the task. Controls are to be tailored to the persons holding the job.


Process of control



Principle of standards
    Effective control requires objective, accurate, and suitable controls.

Principle of critical-point control
    Effective control requires attention to those factors critical to appraising performance against an individual plan.

The exception Principle
    The more a manager concentrates his control on exceptions, the more efficient will be the results of this control.

Principle of flexibility of controls
    If controls are to remain effective despite failure or unforeseen changes in plans, flexibility is required in the design of controls.

Application to Operations

Measurements have to objective and accurate. All critical outputs are to be measured. Exceptions must be tackled first. Controls also have to be flexible.

Principle of action

Principle of Action
    Control is justified only if indicated or experienced deviations from plans are corrected through appropriate planning, organizing, staffing and directing.

Application to Operations

If a cost is incurred in control actions or process, the value must be realized through the correction of deviations. If deviations are happening and not getting corrected, the expenditure made on control has no rationale.


References



Harold Koontz and Cyril O’Donnell, Principles of Management: An Analysis of Managerial Functions,  4th Ed., McGraw-Hill, New York, 1968


Harold Koontz and Cyril O’Donnell, Principles of Management: An Analysis of Managerial Functions, 2nd  Ed., McGraw-Hill, New York, 1959

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Material Organization and Resourcing


Fayol included both material organization and people organization in organizing function. But he developed in his book only people organization. Koontz also elaborated people organization only. There is need for principles of material organization and also as a follow up principles of resourcing.

Principles of Material Organization

Resourcing - A Function of Management

Lean Leadership Principles  -  Lean Management according to Narayana Rao K.V.S.S. -
Lean management gives importance to both effectiveness and efficiency. Lean Managers simultaneously take care of customer satisfaction and productivity/ cost reduction responsibilities. Hence in a theoretical sense, no new principles are required. Koontz and O'Donnell stressed efficiency in number of principles.

Principle of efficiency of plans
          Efficiency is measured by the contribution of the plan to objectives of the enterprise minus the costs and unsought for consequences in formulating and implementing the plan.

Principle of efficiency of organization

          An organization or organization structure is efficient if it is structured to make possible accomplishment of enterprise objectives by people with minimum unsought consequences or costs.


Principle of efficiency of controls
    The more control approaches and techniques detect and illuminate the causes of potential or actual deviations from plans with the minimum of costs or other unsought consequences, the more efficient these controls will be.

But still in management practice, efficiency was neglected by managers in trying to achieve sales, markets share or higher production quantity or meeting deadlines. Toyota became a glorious example of a company which has given efficiency due importance in management. It involved line managers in efficiency improvement through process improvement for cost reduction and it has taken the necessary staff help as recommended by F.W. Taylor and Harrington Emerson at their time. Hence, lean leadership principles are necessary now to explicitly state some more principles that force managers to focus on efficiency issues also adequately.


14 Principles of Management - Henri Fayol 
Principles of Management - Revision Articles - Based on Koontz and O'Donnells Book updated by Weirich and Kannice

Koontz, Weihrich and Cannice - 14 Edition - Principles of Management - Brief Notes













 

         

7 comments:

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