The Four Functions of Management: Planning, Organizing, Directing, Controlling

The Four Functions of Management: Planning, Organizing, Directing, Controlling Managing Construction Operations

Management Functions • Planning • Organizing • Directing • Controlling • And always .. Leading and communicating

Overview of Planning • Objectives • End states or targets • Plans • Means to hit the desired targets • Strategic, Tactical, Operational • Planning • Decision-making process focused on the future of an organization and how it will achieve its goals

Types of Plans • Strategic plans • Broad future of the organization • External environmental demands • Internal resources • Tactical plans • Translate strategic plans into specific goals • Specific parts of the organization

Types of Plans • Operational plans • Translate tactical plans into specific goals and actions • Small units of the organization • Near term

Types of Plans Time horizon Strategic Plans Tactical Plans Operational Plans Typically 3-5 years Often focused on 1-2 years in the future Usually focused on the next 12 months or less. Scope Broadest,originating with a focus on the entire organization Rarely broader than a strategic business unit Narrower, usually centered on departments or smaller units of the organization Complexity The most complex and general, because of the different industries and business potentially covered Somewhat complex but more specific, because of the more limited domain of application The least complex, because they usually focus on small homogenous units Adapted from Exhibit 8.1: Types of Plans: Key Differences

Types of Plans Impact Strategic Plans Tactical Plans Operational Plans Have the potential to dramatically impact, both positively and negatively, the fortunes and survival of the organization Can affect specific businesses but generally not the fortunes or survivability of the entire organization Impact is usually restricted to specific department or organization unit Interdependence High interdependence, must take into account the resources and capabilities of the entire organization and its external environments Moderate interdepen-dence, must take into account the resources and capabilities of several units within a business Low interdependence, the plan may be linked to higher-level tactical and strategic plans but is less interdependent with them Adapted from Exhibit 8.1: Types of Plans: Key Differences

Organizational Levels • Corporate level (Strategic) • What industries should the firm be in? • What markets should the firm be in? • In which businesses should the firm invest money? • Business level (Tactical0 • Who are our direct competitors? • What are their strengths and weaknesses? What advantages do we have over them? • What are our own strengths and weaknesses? • What do customers value in our products/services?

Organizational Levels • Functional level (Operational) • What activities must my unit perform well in order to meet customer expectations? • What information about competitors does my unit need in order to help the firm compete effectively? • What are our unit’s strengths and weaknesses?

The Planning Process Analyzing the Environment • Analyzing the environment • Forecasts: what does the future look like? • Environmental uncertainty • Contingency plans: identify key factors that could affect the desired results and specify what actions will be taken if key events change • Benchmarking • Investigation of the best results among competitors and noncompetitors and the practices that lead to those results

Setting Objectives The Planning Process • Setting objectives • Priorities and multiple objectives • Establish which objectives are most important and which have temporal priorities, • Measuring objectives • Financial performance • Profits relative to sales • Profits relative to assets • Many others • Non-financial performance

Determining Requirements The Planning Process • Determining requirements • Assess current performance • What will it take in order to get from current levels of performance to that level specified in the objectives? • What drives market share? • What capital will be required?

Assessing Resources The Planning Process • Assessing resources • Resources required • What resources are needed to achieve the stated objectives? • Resources available • Do we have the needed human talent to meet the requirements? • Do we have the financial resources available? • Do we have the required technology?

Developing Action Plans The Planning Process • Developing action plans • Sequence and timing • Raw materials, manpower and components must be brought together in the right amounts and sequences • Accountability • Who is accountable for which actions?

Implementing Plans The Planning Process • Implementing Plans • Monitoring the implementation • Monitor the progress of the plan and its implementation • Monitor the level of support that the plan receives as it is being implemented • Monitor the level of resistance • Real-time adjustment

Monitoring Outcomes The Planning Process • Monitoring outcomes • Unanticipated consequences • Negative unanticipated consequences • Positive unanticipated consequences • Feedback loop • Apply what has been learned to modify and improve the planning process

Planning Tools • Budgets • Capital expenditure budget • Specifies the amount of money to be spent on specific items that have long-term use and require significant amounts • Expense budget • Includes all primary activities on which a unit or organization plans to spend money and the amount allocated for the upcoming year

Planning Tools • Budgets • Proposed budget • Provides a plan for how much money is needed, and is submitted to a superior or budget review committee • Approved budget • Specifies what the manager is actually authorized to spend money on and how much

Planning Tools • Two budgetary approaches • Incremental budgeting approach • From the approved budget of the previous year present arguments for why the upcoming budget should be more or less • Zero-based budgeting approach • Justify all allocations of funds from zero each year

Goal Setting • Attributes of effective goals • Specific • Measured • Agreed • Realistic • Time bound

Organizing • Even very small companies need to organize. • If you have a one-body construction company, you should still have an organization chart showing all of the different hats that you wear. • For larger organizations, the organization chart will show: • Position titles: should be descriptive. • The chain of command: authority for each area, accountabilityfor actions • Who occupies each position

The Organization Chart • First Step: decide on the type of organization, consider span of control, tall vs. flat, functional vs. geographic • Second Step: decide what positions you need, create position titles • Third Step: assign people to fill the positions. • TIP 1: Try to avoid picking the people first and then designing a position to fit the person. • TIP 2: Careful about Span of Control

Organizational Chart of a Manufacturing Firm Board member Board member Board member Board member Chief Executive Officer Legal counsel President V.P Sales/ Marketing V.P Human Resources V.P Production V.P Research and Development Consumer Products Director- Sales Industrial Products Director- Sales Industrial Products Director- Human Resources Consumer Products Director- Human Resources Industrial Products Director- Production Consumer Products Director- Production Industrial Products Director- R&D Consumer Products Director- R&D Western Region Industrial Products Sales Manager Eastern Region Industrial Products Sales Manager Western Region Consumer Products Sales Manager Eastern Region Consumer Products Sales Manager etc. etc. etc. etc. etc. etc. etc. etc. etc. etc.

Directing • Using authority to cause plans to be implemented • Delegating authority to increase efficiency and effectiveness • Coordinating a company’s activities • Selecting and training employees • Preparing organization charts

Authority • Authority is a legal term: the right to take action, make decisions, and direct the work of others • How effective formal authority is depends on many factors. • How badly does the subordinate need the job? • How badly does the authority need the subordinate? • Does the subordinate agree with the bosses’ decisions?

Types of Authority • Line Supervisors • Line supervisors • President, Director of Construction Activities, Project Managers, Superintendents, Foremen. • Staff supervisors • Chief estimator • Accountant • Office manager

Delegating • You can delegate the authority. • You cannot delegate the responsibility. • Do not set up departments or divisions unless you are will to delegate the day-to-day control of them to the managers. • Train people to do the jobs • Assign the jobs to them and get out of the way • Check to see if they are making acceptable progress. • If not correct the situation “You can sub-out everything except the blame.”

Coordination • Making sure that all departments are working together toward goals • Coordination is a function of communication • Rules or Procedures • Might work for routine activities • Will still need meetings and conversations

Coordination – How? • Meetings • Internet • Email • Newsletters • Staff Assistants • Liaisons • Teams & Committees

Controlling • Control is the task of ensuring activities have the desired results • Control requires targets and goals be set • Controlling involves setting targets, measuring performance, and taking corrective action • Enron and financial controls: Artur Andersen

Types of Control Systems • Steering control (feedforward or precontrol • Corrective action before problem occurs • Preventive in nature • Intermediate milestones • Concurrent control (yes/no) • Control as the activity takes place • Rules and procedures • Feedback control (post-action) • Compare results to standard • Profit at end of project

Checklist for Effective Control System • Controls should reflect nature/needs of activity • Should report deviations promptly • Should be forward-looking • Should point out exceptions at strategic points • Should be objective • Should be flexible • Should reflect the organizational structure • Should be economical • Should be understandable • Should indicate corrective action

Two Basic Control Approaches • The Traditional Approach: • Set a standards, target, or goal • Measure actual performance against standards • Take corrective action • The Commitment-Based Approach: • Getting people to want to build in quality • Hire the right people and invest in them • Foster self-control • People centered, sense of community, shared fate • Guarantee organizational justice • Use financial rewards and profit-sharing • Encourage self-actualization

Control Exercise 1 • You are one of the 4 founders of an innovative firm focusing on design-build as a delivery system for high performance building. The firm is 2 years old and growing rapidly, and has 24 employees. • Your founding group values quality, relationships, transparency, excellence, and environmental awareness and these shared core values are largely responsible for your success. • You envision doubling the number of employees in the next two years and want to maintain your focus on your core values. • How do you maintain your values and your growth rate? What type of control system will you use? Why?

Control Exercise 2 • College students deal with professors but it is not obvious how autonomous professors are. • Duties include teaching, research, proposal preparation, supervising grad students, writing papers and books, committee work, service, etc. • The Dean wants to be sure professors are conducting themselves professionally and, knowing you are a student and studying leadership and management, tells you that perhaps you can suggest a control system that addresses professorial duties and how they might be controlled.

The Four Functions of Management: Planning, Organizing, Directing, Controlling