3.2 Managers, leadership and decision making

• Managers


  Their role is to plan, organise, and coordinate people and resources to follow orders
• Leaders


  Decide on a direction for the firm and inspire & motivate staff to achieve aims that are set
• Managers have subordinate


  Leaders have followers
• The role of managers


  • Setting objectives (e.g. attendance, financial and growth)
  • Analysing (e.g. analyse data for future decisions)
  • Leading (e.g. human resources, staff attendance, duties, qualifications)
  • Making decisions (e.g. rewards, expansion)
  • Reviewing (e.g. appraisals, decision making)
• Influences on management and leadership styles


  • Company structure and the span of control
  • Particular situation
  • Organisational culture and structure
  • Nature of the tasks involved
  • Employees and their skills & abilities
  • Group size
  • Personalities and skills of managers and leaders
  • Time frame

  
• McGregor's Theory X


  An authoritarian approach to leadership, which is adopted by those leaders who believe that workers dislike work and therefore need to be controlled to improve their performance. They tell them what to do and supervise them doing it.
• Theory X managers assume that workers


  • Are lazy, dislike work and are motivated by money
  • Need to be supervised and controlled or they will underperform
  • Have no wish or ability to help make decisions or take on responsibility
  • Aren't interested in the needs of the organisation and lack ambition
• Theory Y


  An approach to leadership that assumes that workers have both initiative and self-control, which can be used to achieve the goals of a business. Consequently, the role of management is to maximise the commitment of the workers.
• Theory Y managers assume that workers


  • Have many different needs, enjoy work, and seek satisfaction from it
  • Will organise themselves and take responsibility if they are trusted to do so
  • Think that poor performance is due to boring and monotonous work and poor management
  • Wish to, and should, contribute to decisions
• Leadership styles


  • Authoritarian
  • Democratic
  • Paternalistic
  • Laissez-faire
• Authoritarian leadership


  • Autocratic leaders hold onto as much power and decision-making as possible
  • Focus of power is with the manager
  • Communication is top-down & one-way
  • Formal systems of command & control
  • Minimal consultation
  • Use of rewards & penalties
  • Very little delegation
  • McGregor Theory X approach
• Democratic leadership


  • Focus of power is more with the group as a whole
  • Leadership functions are shared within the group
  • Employees have greater involvement in decision-making – but potentially this slows-down decision-making
  • Emphasis on delegation and consultation – but the leader still has the final say
• Paternalistic leadership


  • Leader decides what is best for employees
  • Links with Mayo – addressing employee needs
  • Akin to a parent/child relationship – where the leader is seen as a "father-figure"
  • Still little delegation
  • A softer form of authoritarian leadership, which often results in better employee motivation and lower staff turnover
• Laissez-faire leadership


  • Laissez-faire means to "leave alone"
  • Leader has little input into day-to-day decision-making
  • Conscious decision to delegate power
  • Managers / employees have freedom to do what they think is best
• Management theories


  • Tannenbaum-Schmidt Continuum Theory
  • The Blake Moulton Grid
• Tannenbaum-Schmidt Continuum Theory


  The continuum represents a range of action related to the degree of authority used by the leader or manager and the area of freedom available to non-managers
• Four main styles of leadership in the Tannenbaum and Schmidt Continuum


  • Tells
  • Sells
  • Consults
  • Joins
• Blake Mouton Grid


  Maps the position in terms of concern for people (High = 9 Low = 1) and concern for task (High = 9 Low = 1)
• The Blake Mouton grid is an effective way to analyse different leadership styles due to its format which make it more applicable to a wider audience. It also highlights the motives and impact for each leadership style. This helps managers and leaders to assess the effects of their leadership styles and if they shouldn't adapt it. However, it doesn't appreciate context and so many condemn some leadership styles even though they may work in certain situations.
• The Tannenbaum and Schmidt continuum concentrates more on delegation & freedom in decision making to subordinates and there by on the team development. As the team's freedom increases, the manager's authority decreases. This is a positive way for both teams and managers to develop delegations skills
• Steps in scientific decision making


  • Set the objective
  • Gather and interpret information (market research)
  • Select the chosen option
  • Implement the decision
  • Review
• Advantages of a scientific approach


  • Provides a clear sense of direction for all involved in the business
  • Decisions are made and based on business logic
  • It is flexible – at any stage in making a decision, it can be reviewed and changed if needed
• Non-scientific decision making (intuition)


  • The ability to understand something without the need for conscious reasoning; similar to a 'hunch'
  • Making decisions with a lack of evidence to prove it is the right thing to do
• Factors that influence the choice between scientific and intuitive decision making


  • Speed of decisions
  • Information available
  • Size of business
  • Predictability of situation
  • Character of person or culture
• Decision trees


  • They are good at choosing between several courses of action
  • Provides a highly effective structure within which you can lay out options and investigate the possible outcomes of choosing these options
  • It uses estimates and probabilities to calculate likely outcomes
  • It helps to decide whether the net gain from a decision is worthwhile
• Expected Value


  The financial value of an outcome = the estimated financial effect x its probability
• Net Gain


  The value to be gained from taking a decision = the expected value of each outcome – the costs associated with the decision
• Advantages of decision trees


  • Gives you a decision
  • Evidence to gain a source of finance
  • Set out logically
  • Easy to understand and results are tangible
  • Likely costs considered as well as benefits
  • Assesses risks
  • Potential options and choices are considered at the same time – direct comparison
• Disadvantages of decision trees


  • Always probe to arrow
  • Calculating probability can be rad
  • Could be inaccurate or unreliable as only estimates
  • Doesn't necessarily reduce the amount of risk
  • Prone to bias
  • Uses quantitative data only – ignores qualitative aspects such as effects on employee motivation and brand image
• Influences on decision making


  • The business' mission and objectives
  • Ethics
  • The risk involved
  • The external environment
  • Resource constraints (e.g. information, time, labour, and materials)
  • Stakeholders
• Stakeholder


  Anyone with an interest in the business and its operations
• Stakeholder groups


  • Customers
  • Employees
  • Investors/banks
  • Suppliers/distributors
  • Shareholders
  • Owners/managers
  • Competitors
  • The government
  • Local communities
  • Environmental pressure groupies
  • The media
• Stakeholder mapping


  • Power = their part in decision making or how much they would negatively affect you
  • Purpose = helps you when making decisions and prioritise stakeholders where there will be potential conflict
• Stakeholder needs


  • Employees – happy environment, high wage, keeping their job, good & safe working conditions
  • Suppliers – regular orders, contractual agreement, security
  • Customers – low price, high quality, good customer service, value for money
  • Competitors – price, customers, (affected by other decisions)
  • Government – wants them to do well, collect taxes (and raise them)
  • Local communities – local environment, friendly firms
  • Owners and managers – dividends, potential benefits, expansions, happy employees, profit
  • Investors and banks – repayments on time and with full interest
  • Shareholders – regular dividends, how much profit the firm makes
• There is potential for conflict between different stakeholder needs
• Factors that affect stakeholder relationships


  • Quality of products made
  • Information available
  • How easy it is to communicate with them
  • Their status
  • Customer service
  • Influence or power
  • Workplace environment for employees
  • How much money they have invested into the business
  • Views on the environment
  • Revenue produced
  • Prices of products being sold
  • Decisions made by the firm
• Ways to communicate with stakeholders


  • General meetings
  • Letters
  • Email and social networking
  • Posters of advertising
  • Public forums
  • Media release