1.3 The Four Main Management Functions

The functions of management can be divided into four main areas: planning, organizing, leading, and controlling. Of these every organization should start with planning. It is the most basic of the four functions. Planning is the process of determining organizational direction to achieve a desired performance. It involves goal setting and strategies for how the goals are to be fulfilled. A goal is a desired future state of the organization; a plan is a roadmap for how to meet the goal. Plans also include the resources needed to meet the goals of the organization. Traditionally, planning was done by senior management and then passed down to the organization. Today's progressive companies adopt a more participative planning process involving individuals from many levels and departments of the organization. This may be accomplished by the creation of planning teams. Research suggests that participative planning is more effective because it includes a broader base of ideas and participation increases acceptance of goals and plans once they are introduced. Regardless of who does the planning, it is the responsibility of senior management to make sure that it happens. Additionally, planning cannot be static. Plans and goals must be continually reviewed and revised. No single plan can foresee all the inevitabilities the organization may face. In the words of Jeff Bezos, founder of Amazon, "You know the business plan won't survive its first encounters with reality. It will always be different. The reality will never be the plan, but the discipline of writing the plan forces you to think through some of the issues and to get sort of mentally comfortable in the space."1 Part of the discipline and diligence of a good manager is a process of continual review of the organization's goals and corresponding plans (planning will be discussed more deeply in a future chapter).

The next function of management is organizing, also known as structuring. Structuring always follows strategy (planning). Organizing involves the deployment of resources, the assignment and grouping of tasks, the delegation of responsibility, and the implementation of hierarchical and reporting channels. The two main resources that a manager has to work with are capital (money) and people. Both are finite and therefore must be deployed in the most efficient manner allowing for the most effective achievement of organizational goals. Capital must be used in such a way that it provides a return for either the shareholders (in the form of dividends) or the debtors (in the form of interest). Invested capital must be put to good use. Likewise, the skills, knowledge, and networks that an organization's people possess are known as human capital and must be put to use as well. Finding the right people is a task that good managers must perform. Jim Collins defined this as "getting the right people on the bus" and then "getting them in the right seat on the bus." Many organizations group their people and tasks in functional departments.

Functional departments are usually assigned similar tasks with people that have similar skills, like an accounting department. This is mainly done for synergistic effect. Synergy is defined as the sum of the whole being greater than the sum of the parts. Think of it this way. If you are about to graduate in accounting, do you have the skills necessary to run all the accounting functions of an organization? Probably not. You are likely to get hired by an organization and start in an accounting department being assigned a few specific tasks. Within that department you have the knowledge and skills of your coworkers and supervisors to help you perform your job. As you master some of the skills, you are then assigned a greater variety of tasks. Ultimately, you become the one mentoring others. Synergy is created when each individual is able to draw on the strengths of others. This principle can be applied to all departments. Structuring involves the formation of departments and the assignment of tasks to those departments. It also involves the assignment of formal authority for the departments and the creation of a scalar chain—a reporting chain extending from bottom to top for every individual within the organization. In other words everyone has a boss; there is a clear line of authority.

Mary Parker Follett called management "the art of getting things done through people." In many minds management is about leading people. Leading involves the use of power and persuasion to motivate and unite people in the attainment of organizational goals. Leading includes the coordination of the efforts of departments. It involves communication and performance. The best way for a manager to lead is to lead out. For example, after a national search Jim Davis was hired to lead the management department at Utah State University. In his first few weeks, Jim, working with his 30+ faculty members, determined that the curriculum and majors needed to be drastically revised. Jim was told it would take two years to get all the proposed revisions through all the channels for approval. He worked many 18 hour days and ultimately gained approval from the board of trustees in just over three months. Leadership is leading out, setting the example and pace for others to follow. Leading also involves establishing the culture of the organization. In the example above, what type of culture do you think Jim Davis established in the management department?

Controlling is the process of monitoring the progress and correcting the deficiencies of the organization as it moves towards the fulfillment of its goals. It includes checking employee performance, watching for changes in a market and in technology, looking for best practices, increasing efficiency, and boosting overall performance. Controlling is what keeps us on track. Without proper controls organizations tend to fall apart. Many managers are deficient in this area. It takes a lot of diligence and discipline on the part of the manager to actively control the company.