Keys to management

When an organization is centralized, a limited amount of authority is delegated, If it is decentralized, a greater degree of authority is given to staff and divisions.

In a decentralized company, the divisions will have wider responsibilities and authority. In decentralized organizations, more important decisions can be made at lower levels. There are fewer controls from Head Office.

To sum up, a centralized business has a 'tight' structure, whereas a decentralized business has a 'looser' structure.

No enterprise chooses complete centralization or decentralization. In practice, it tries to find a balance between the two forms.

When Alfred Sloan took over the running of General Motors, he inherited a corporation which was already decentralized. The previous Chief Executive, William Durant, had founded the company. Durant brought many businesses into General Motors and gave their managements a lot of independence. Alfred Sloan believed in decentralization and practiced it in the corporation. He made sure his division managers had self-contained divisions. Each handled its own manufacturing, marketing, staff recruitment etc. However, Sloan did not give the divisions complete freedom. He wanted Head Office to coordinate action and keep a measure of control over the units. Therefore, he decided that certain functions would be controlled centrally control finance more tightly. When he arrived, each division controlled its own cash, having its own accounts and paying its own bills. This meant the corporation was getting little direct income. When it had to pay things like taxes and dividends, the treasurer used to ask the divisions for cash. Sometimes, he had to go to a division, first talk about general business matters, and then later on bring up the subject of cash. The division's staff would often show surprise at the amount asked for, and delay handing it over! Clearly, with that system, cash was never available where and when it was needed in the corporation.

Alfred Sloan set up a new, centralized cash system. Cash accounts were controlled by the financial staff at Head Office, Cash receipts were made to them. And they authorized payments made from the corporation's accounts. With this system, money could be quickly transferred to units needing it. The central staff also decided how much would be kept in local accounts, to be used by the divisions.

As time went on, Alfred Sloan and his top managers worked out a balance between central control and delegated authority. Head Office controlled things like cash, capital expenditure and stock control. In addition, it controlled the profitability of divisions by developing measures of efficiency. But the divisions had a great deal of autonomy, being responsible for designing, making and marketing the cars.

Nowadays, decentralization is the fashion, the 'buzz' word. Believers in decentralization argue along these lines: they say that it helps to 'develop people' because staff gets more responsibility, make more decisions, and so gain experience for later managerial positions. Decentralization allows top managers to delegate jobs, so these managers will have more time to work on setting goals, planning corporate strategy and working out policies.

It is normal for people to like independence, to dislike control. The more educated staff is, the more they will want to make decisions, to have authority. However, it is not easy to have more decentralization if the right staff is not available.

11 Communication

In recent years, few books on management have been more acclaimed than In Search of Excellence. Written by two business consultants, Thomas Peters and Robert Waterman.

One of the points made by the writers is that communications in excellent companies are different from those in other companies. Excellent companies have a 'vast network of informal, open communications'. In the best-run businesses, few barriers exist to prevent people talking to each other. The companies do everything possible to ensure that staff meet easily and frequently.

The book is full of examples of companies who believe in 'keeping in touch': firms like IBM where the Chairman personally answers any complaint which is addressed by members of staff; other companies where managers are encouraged to get out of the office and walk around and some which make a point of informality, like Walt Disney Productions, where everyone wears a name-tag with his/her first name on it.

One problem with communication is that people think they have got their message across when in fact they have not. We do not, in fact, communicate as effectively as we think we do. This finding is important for managers. It suggests that, when giving instructions, managers must make sure that those instructions have been understood and interpreted correctly.

A breakdown in communication is quite likely to happen if there is some kind of 'social distance' between people. In organizations, people may have difficulty communicating if they are different in status, or if one person has a much higher position than the other.

For this reason, staff often ‘filters' information. They deliberately alter the facts, telling the boss what he/she wants to hear. They do not want to give bad news, so they give their superior too good an impression of the situation.

One way of reducing social distance - and improving communications - is to cut down on status symbols. It is possible, for example, to have a common dining-room for all staff.

Physical surroundings and physical distance limit or encourage communication. Studies show that the further away a person is, the less he/she communicates. At the Massachusetts Institute of Technology (MIT), Thomas Allen studied the effect of location on communication in engineering and research departments. He showed that if people were more than ten meters apart, the probability of communicating at least once a week was about 8%. When they were five meters apart, the probability was 25%.

The physical layout of an office must be carefully planned. Open-plan offices are designed to make communication easier and quicker. However, it is interesting to note that employees in such offices will often move furniture and other objects to create mini-offices.

Another important barrier to communication is selective perception. Put simply, this means that people perceive things in different ways. The world of the sender is not the same as the world of the receiver. Because their knowledge and experience is different, sender and receiver are always on slightly different .wavelengths.

Communication problems will arise, from time to time, in the best-run companies. However, to minimize such problems, managers must remember one thing. Communication should, be a two-way process. Managers should encourage staff to ask questions and to react to what the managers are saying. Feedback is essential.

13 Multinationals

To be a true multinational, experts say, that an organization should operate in at least six countries and have no less than 20% of its sales or assets in those countries. The large enterprises like IBM, British petroleum and Mobil Oil, have subsidiaries in sixty to eighty countries.

              Because of their global approach multinationals often make decisions which are against the interest of their host countries. Difficulties often arise when multinationals wishes to transfer its earnings back to Head Office, it may have a bad effect on the exchange rate of its currency, or it may want the multinationals to reinvest profits in the business

              The list of complaints against multinationals is a long one; so many countries have tried to restrict their operations.

              Multinationals managers will spend much of their time working in a strange environment

And they will find that they can not do things the way they did at home.

              Managers working abroad need various skills. A recent study has shown that first of all they need human relations skills, an understanding of the culture and ability to adapt.

              Human relations skills are vital because to be effective, the manager must persuade local staff to cooperate with him.

Differences in culture are important when a manager is negotiating in a foreign country. For instance many Europeans and Americans like to get to the point quickly when negotiating. But in countries like Brazil, where people prefer to beat around the bush more, trying to create a relationship of trust.

              Finally, those working abroad must remember that even written contracts, in some areas, may not be a worth much.

14 Social responsibility

Thirty o so ears ago, discussions of social responsibility were of three types. Firstly there were a lot of talks about the behavior on the work. Should they have the same ethical standards, principles, as they had in the privet life? Secondly people discussed the social responsibility of business towards its employees. And finally, social responsibility included the idea that business people should contribute to cultural activities

              These days, there is a new approach to social responsibility. Many people say that a business should try to meet the needs and interests of society. For example, to provide a safer environment even if this means educed profits or offer work opportunities to unemployed youngsters.

              The new concept of social responsibility means that businesses and business people must have integrity. They must deal honestly with their employees, and with the outside world

                 Successful companies are very sensitive if their integrity is attacked, they usually respond sharply.

              A lot of business people agree wit the wide-concept of social responsibility. They accept that businesses should help to solve social problems – even if they don’t create them. But it is certainly true that social actions cost money. And businesses have to bear that cost often by raising prices, lowering wages or having less profit. In the end someone has to pay for the social actions.

              Of course, by showing social responsibility, the company may well benefit in the long term. For example Rank Xerox was engaged in wide range of social projects like: grants of equipment to universities, information technology project and seminars etc. And, since it was knowledge-based company, it needed to hire highly skilled people. There was no doubt that, in the long run, these activities were profitable to the organizations.