the contribution of managers to business performance

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2.3 Management – Management and Managers

Objective: The contribution of managers to business performance

1. Definition of Management (Cambridge syllabus)

Management is the process of planning, organising, directing and controlling the resources of an organisation so that its objectives are achieved efficiently and effectively.

2. Levels of Management

  • Top‑level managers – set overall direction, formulate strategic goals and decide on major investments.
  • Middle‑level managers – translate strategic plans into operational plans, coordinate departments and allocate resources.
  • First‑line managers – supervise day‑to‑day activities, direct frontline staff and ensure that tasks are performed to standard.

3. Core Management Functions (Cambridge)

  • Planning – deciding what to achieve, setting objectives and choosing the actions required.
  • Organising – arranging resources, establishing structures and assigning tasks.
  • Directing – motivating, communicating and guiding staff to accomplish the plan.
  • Controlling – monitoring performance, comparing with standards and taking corrective action.
Function Typical Activities Concrete Business Example
Planning Market‑share forecasting, setting sales targets, budgeting for the next 3 years. Developing a 5‑year growth plan for a retail chain.
Organising Designing organisational structure, allocating staff, establishing procedures. Creating a new product‑development department with clear reporting lines.
Directing Communicating objectives, motivating teams, providing leadership. Running weekly sales‑team briefings to align effort with quarterly targets.
Controlling Setting KPIs, variance analysis, corrective actions. Monitoring inventory turnover and adjusting reorder levels to reduce holding costs.

4. Fayol’s Functions & 14 Principles of Management

Fayol identified the same four functions above and added 14 principles that underpin effective management. The most relevant for A‑Level strategic analysis are highlighted.

  • Division of work
  • Authority & responsibility
  • Discipline
  • Unity of command
  • Unity of direction
  • Subordination of individual interests to the general interest
  • Remuneration
  • Centralisation vs. decentralisation
  • Scalar chain (line of authority)
  • Order
  • Equity
  • Stability of personnel
  • Initiative
  • Esprit de corps (team spirit)

5. Mintzberg’s Managerial Roles

Role Category Specific Role Typical Activities Linked Performance Indicator
Interpersonal Figurehead Representing the firm at official events, signing contracts. Stakeholder satisfaction / brand reputation
Leader Motivating staff, conducting performance appraisals, coaching. Employee productivity & turnover rate
Liaison Networking with suppliers, customers and other departments. Number of strategic partnerships / supply‑chain reliability
Informational Monitor Scanning the environment for market trends, competitor moves. Timeliness of market‑entry decisions
Disseminator Communicating policies, performance data and market information to teams. Information‑flow efficiency (e.g., % of staff receiving updates within 24 h)
Spokesperson Presenting the company’s results to shareholders, media and the public. Investor confidence / share‑price movement
Decisional Entrepreneur Initiating new product‑development projects, seeking improvement opportunities. Number of new products launched / R&D ROI
Disturbance Handler Resolving a sudden supply‑chain disruption or labour dispute. Recovery time from disruption (days)
Resource Allocator Deciding how much budget to assign to each department or project. Cost‑efficiency ratio (budget variance %)
Negotiator Agreeing contract terms with a major client or supplier. Contract‑cost savings / profit margin improvement

Critical comment: Mintzberg’s role framework captures the breadth of managerial work but can be overly descriptive for highly digital organisations where data‑analytics, virtual collaboration and rapid decision‑making blur traditional role boundaries. Managers now often perform several roles simultaneously through integrated information systems.

6. Management Styles

Style Key Characteristics Impact on Performance Typical Example
Autocratic Decisions made by the manager alone; tight control of staff. Fast decision‑making but can lower morale and increase turnover. Factory floor where safety protocols must be strictly followed.
Democratic (Participative) Manager seeks input from staff before deciding. Higher employee engagement, creativity and ownership. Product‑development team brainstorming sessions.
Laissez‑faire Minimal managerial direction; staff work autonomously. Encourages innovation but may lead to coordination problems. Research laboratory with senior scientists.
Paternalistic Manager looks after staff welfare; expects loyalty in return. Low turnover and strong loyalty, but can reduce initiative. Family‑owned business offering on‑site childcare.

Strengths‑vs‑Weaknesses Matrix

Style Strengths Weaknesses
Autocratic Quick decisions; clear authority Low morale; risk of employee disengagement
Democratic Higher commitment; diverse ideas Slower decision‑making; possible conflict
Laissez‑faire High creativity; empowerment Potential lack of direction; coordination issues
Paternalistic Strong loyalty; low turnover Dependence on manager; limited autonomy

Real‑world case snippet

Toyota’s lean production system blends a paternalistic concern for employee welfare (e.g., continuous improvement training, job security) with democratic elements such as suggestion‑scheme meetings. The result is high quality, low waste and a culture of collective problem‑solving.

7. Motivation Theories – McGregor’s Theory X & Theory Y

Theory Assumptions about Employees Implications for Management Style Mapping to Management Styles
Theory X People dislike work, avoid responsibility, need close supervision. Authoritative, control‑oriented management. Autocratic style (sometimes paternalistic when “protective”).
Theory Y Work is as natural as play; people can be self‑motivated and seek responsibility. Participative, empowerment‑focused management. Democratic or laissez‑faire styles.

While useful for illustrating contrasting managerial attitudes, Theory X/Y are simplistic. Modern textbooks also reference Maslow’s hierarchy of needs, Herzberg’s two‑factor theory and Self‑Determination Theory, which provide a richer understanding of employee motivation.

8. How Managers Contribute to Business Performance

  • Strategic Decision‑Making (Planning & Resource Allocation) – choosing markets, products and capital projects that improve profitability.
  • Organising & Coordinating – designing structures and processes that reduce waste and enhance cost‑efficiency.
  • Directing & Leadership – applying appropriate styles and motivation techniques to raise productivity and lower staff turnover.
  • Controlling & Monitoring – setting KPIs, analysing variance and taking corrective action (e.g., improving inventory turnover).
  • Innovation Management (Entrepreneurial role) – encouraging idea generation, R&D investment and new‑product launches that create a competitive edge.

9. Example: Impact of Effective Controlling on a Financial Ratio

Improved inventory management (a controlling activity) can be illustrated with the inventory‑turnover ratio:

Inventory Turnover = Cost of Goods Sold ÷ Average Inventory

If average inventory falls from £500,000 to £400,000 while COGS remains £2,000,000, turnover rises from 4 times to 5 times, signalling better efficiency and a likely improvement in gross‑profit margin.

10. Links to Other Business Areas

  • Human Resource Management – directing, motivation and leadership directly affect recruitment, training, performance appraisal and employee relations.
  • Finance – planning and resource allocation determine capital budgeting, cost control and profitability ratios.
  • Operations – organising and controlling influence production schedules, quality management and supply‑chain reliability.

11. Summary Table – Managerial Activities, Key Actions & Expected Performance Impact

Management Activity Key Actions Performance Impact
Strategic Planning Market analysis, long‑term goal setting, scenario planning Higher market share, sustainable growth, improved ROI
Organising Resources Designing structures, allocating budgets, delegating authority Reduced waste, better cost‑efficiency, clearer accountability
Directing & Motivation Communication, incentives, training, appropriate management style Increased productivity, lower staff turnover, higher morale
Controlling & Monitoring Setting KPIs, performance reviews, variance analysis Improved quality, quicker corrective action, stronger financial ratios
Innovation Management R&D investment, idea‑generation systems, product‑launch planning New product introductions, enhanced competitive advantage, revenue growth
Suggested diagram: Flowchart linking the four management functions (Planning → Organising → Directing → Controlling) to key performance indicators such as market share, cost‑efficiency, employee productivity and financial ratios.

12. Key Take‑aways

  • Management links strategy with day‑to‑day execution through the four core functions.
  • Fayol’s functions, Mintzberg’s roles, management styles and motivation theories provide a framework for analysing managerial impact.
  • Effective managers improve efficiency, profitability and long‑term sustainability by aligning resources, people and processes with organisational objectives.
  • All levels of management must work cohesively; each level adds a distinct but complementary contribution to overall business performance.

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