Importance of the Organizational Management


Importance of the Organizational Management

Organizations are parts in the society structure. They are part of the community in which they function. They exist for fulfilling the specific needs of the society as well as for satisfying some of the societal purpose. Hence, it is important that the organizations function successfully so that they can fulfill the tasks for which they are set up. They are to effectively and efficiently fulfill those needs of the society for which they have come into existence.

Management, in turn, is an important part of the organization. It has no function in itself, indeed, no existence in itself. Management separated from the organization it serves is not a management. Management does not function efficiently and effectively when it becomes bureaucratic, or when it start serving some special interests in the society or when it fails in making the organization to function successfully so that it can fulfill the tasks for which it has been set up. Such a management has misconceived itself as an end and the organization as a means. This is a degenerative disease to which managements are prone, and especially those managements which do not stand under the discipline of the market test. The prime objective of an effective management is to prevent this disease to arrest it, and, if get caught in the disease then it is better to get cured.

The existence of the management in the organization is since there is a necessity for it to fulfill certain tasks. The success of the management is determined by how they fulfill these tasks. These tasks are three in number, equally important but essentially different, which management has to perform to enable the organization in its charge to efficiently function and to make its contribution to the society. These tasks are shown in Fig 1 and include (i) to satisfy the specific purpose and mission of the organization, (ii) to make the work in the organization productive and the workforce efficient and effective for the achievement of the results, and (iii) to manage the social impacts and to fulfill social responsibilities.

Fig 1 Important tasks of the organizational management

The first task of the management – It is to fulfill the specific purpose and mission of the organization for which it exists in the society. This can be achieved only through the economic performance of the organization. Without economic performance the existence of the organization comes in danger. Hence for the organizational management, the economic performance is the rationale as well as the purpose. Though it is by no means the only task to be discharged by the management in society, it is a priority task, because all other tasks depend on the surplus of economic resources, i.e., profits and other savings, which only successful economic performance can produce. The more of these other satisfactions needed, and the more the higher value assigned to them, the more is the dependence on the economic performance of the organization.

Organizational management in every of its decisions and actions, is required to put economic performance in the front. It can justify its existence and its authority only by the economic results it produces. The management has failed if it fails to produce economic results. It has failed if it does not supply goods and services desired by the customer at a competitive price which the customer is willing to pay. It has failed if it does not improve, or at least maintain, the wealth-producing capacity of the economic resources of the organization entrusted to it. And this, whatever the economic or political structure or ideology of the society, means responsibility towards profitability.

The first definition of the organizational management is that it is an economic organ, the specifically economic organ of an industrial society. Every act, every decision, every deliberation of the management, has to have the economic performance as its first dimension.

The second task of management – it is to make the work in the organization productive and the workforce achieving which means to make it efficient and effective for the achievement of the results. Everyone knows that the true resource of the organization is its workforce. Organization performs when its human resource is productive since it accomplishes its performance through work. Hence, to make workforce productive is an essential function of the management. But at the same time, the organization in the present day society is increasingly the means through which individual human beings find their livelihood, find their access to social status, to community and to individual achievement and satisfaction. Therefore, for making the workforce achieving is more and more important and is a measure of the performance of the organization. Hence, The second task is also a very important task of the organizational management.

Organization of work in the organization according to its own logic is only the first step. The second and far more difficult step is making the work suitable for human beings and their logic is radically different from the logic of work. Making the workforce achieving the results implies consideration of the workers being human beings as an entity who are having peculiar physiological and psychological qualities, abilities, and limitations, as well as a distinct style of action. It implies consideration of the human resource as human beings and not as objects and things, and as having (different any other resource) personality, citizenship, control over whether they work how much and how well, and thus requiring responsibility, motivation, participation, satisfaction, incentives and rewards, leadership status, and function etc. Management, and management alone, can satisfy these requirements. It is necessary that the organizational workforce is satisfied through its achievement in work and job, that is, within the organization, and it is the management which is the agency in the organization to activate this.

The third task of management – It is managing the social impacts and the fulfilling the social responsibilities of the organization. Management is to understand that the organization has no existence by itself and it is a part of the society in which it is functioning. The existence of the organization is due to the society and it is functioning for the sake of the society. If the organization works independent of the society then it lands itself into wilderness.

The organization is to be concerned about the environment around it. It has to take responsibility for it, try to do good, and even take the leadership for it. Present day organization exists to contribute outside of itself, to supply and satisfy the people who are not part of the organization. It exists to supply goods and services to customers, rather than to supply jobs to workers and managers, or even dividends to the stockholders. For a management to forget this becomes a high level of mismanagement. Hence, no organization can exist outside of community and society. In fact, it is to be psychologically, geographically, culturally, and socially be a part of the community.

While discharging its function, consisting of the production of economic goods and services, the organization has to have impacts on people, on the communities surrounding it, and also on the society. It has to have power and authority over people, e.g., employees, whose own ends and purposes are not defined by and within the organization. It has to have impact on the community as a neighbor. It is impacts the society as the source of jobs and tax revenue, but also of waste products and pollutants. And, increasingly, in the present day pluralist society of organizations, it has to add to its fundamental concern for the quantities of life which include economic goods and services and concern for the quality of life, that is, for the physical, human, and social environment of modern man and modern community.

This aspect of the management is integral in the work of the organizational management, since all the organizations equally have impacts, equally have responsibilities but many of them by and large have been far less aware of them, far less concerned with their human, social, and community responsibilities than what the responsibilities they have towards their business. However, more and more organizations are now looking to the management for leadership with regard to the quality of life. Hence, management of the social impacts is now becoming a third major task and a third major dimension of the management.

These three tasks are required to be done always at the same time and within the same managerial action. It cannot even be said that one task predominates or requires greater skill or competence. No doubt, the organizational performance has higher importance since it is the goal of the organization and the reason for its existence. But if work and workforce are not managed properly then there is no organizational performance, no matter how good is the chief executive in managing the organizational customers.

Economic performance achieved by mis-managing work and workforce is deceptive and actually results into the destruction of the capital even in a fairly short time. Such performance usually raises the costs to the point where the organization ceases to be competitive, and it will, by creating class hatred and class warfare, make it impossible in the end for the organization to operate at all. Also, mismanagement of the social impacts ultimately destroys the support of the society for the organization and with it the organization as well.

Each of these three tasks has its own importance. Managing of the business has importance since the organization is an economic unit, but making work productive and workforce achieving has importance precisely because society is not an economic unit and looks to the management for the realization of basic beliefs and values. Management of the social impacts of the organization has importance since the organization serves the society and it cannot survive without the society because it is a part of the society and community.

In these areas also, there are neither actions nor results except of the entire organization. There are no ‘functional’ results and no ‘functional’ decisions. There is only organizational investment and organizational risk, organizational profit and organizational loss, organizational action or organizational inaction, organizational decision and organizational information. It is not a plant that pollutes, but it is the entire organization. Nevertheless, work and efforts are always specific. Hence, there is always tension between two realities consisting of the performance and the work. Therefore the continuous task of the management is to resolve this tension, or at least to make it productive.

The dimension of time

One complication which is always present in every management issue, every decision, and every action, is the dimension of time. This is sometimes is known as the fourth task of the management. Management has to consider always both the present and the future. It has to weigh the effect of its actions both in the short run as well as in the long run. A management problem is not solved if immediate results are achieved by endangering the long-range organizational health, perhaps even its survival. The decision of the management is irresponsible if it risks disaster this year for the sake of a grand future. It is witnessed very often that the organizational management think of producing economic results till it runs the organization but leaves behind nothing but a sinking ship when it passes the baton to the next management. This presents an example of irresponsible managerial action and of failure to balance the present and the future. The immediate economic results are actually fabricated and are achieved by paying out capital. In every case where present and future are not both satisfied, where their requirements are not harmonized or at least balanced, capital, that is, wealth producing resource, is endangered, damaged or destroyed.

Hence the organizational management is to be particularly conscious of the time dimension in respect to the long-range impact of short-run economic decisions on the environment and on natural resources. But the same problem of harmonizing today and tomorrow exists in all areas, and especially with respect to the human resources.

The time dimension is integral to the management since the management is concerned with decisions for action. And action always aims at results in the future. Anyone whose has responsibility to act, rather than to think or to know, commits himself to the future.

There are two reasons why the time dimension is having the specific importance in the management job and also having certain difficulty. In the first place, it is the heart of the economic and technological progress which the time span for the ‘fruition and proving out’ of a decision is steadily increasing. Around 120 years to 150 years ago, an inventor needed around two to three years between the start of laboratory work on an idea and the start of pilot-plant operations. Today it may well take around fifteen to twenty years. Around 50 years to 60 years back a new plant was expected to pay for itself in three to five years, while today, with capital investment per worker many times that of those years, the payoff period often runs to even 15 years.

The second peculiar characteristic of the time dimension is that management (almost alone) has to live always in both present and future. Management is to prepare the organization for the future as well as to overcome the present difficulties faced by the organization so that it does not lose its bearings. The management is to keep the organization performing in the present or else there may be no organization capable of performing in the future. It has also to make the organization capable of performance, growth, and change in the future. Otherwise it has destroyed capital which is the capacity of resources to produce wealth tomorrow.

The only thing which is known about the future is that it is going to be different. Management of an organization operates within time spans of conscious decision and action which are, and hence the uncertainty of the future is of importance. The long-run continuity is not relevant; and anyhow, it can be evaluated only in retrospect for finding out how it came out. For the management the future is discontinuity. And yet the future, however different, can be reached only from the present. The greater the leap into the unknown, the stronger the foundation for the takeoff has to be. The time dimension provides the managerial decision with its special characteristics. It is the act in which the management integrates present with the future.

Entrepreneurship and administration

There is another dimension to the performance of the management. The management is always required to administer. It has to manage and improve what already exists and is already known. But it also has to be an entrepreneur. It is required to redirect the resources from the regions of low or diminishing returns to the areas of high or increasing returns. It has to cast off yesterday and to render obsolete what already exists and is already known. It has to create tomorrow.

In the present day environment, what exist are the technologies, the products, and the services. Facilities and equipment are needed to be in place. Capital is required to be invested and is to be serviced. People are to be employed and are to be in specific jobs, and so on. The administrative part of the management job is to optimize the yield from these resources. This is often called as efficiency which means doing better than what is already being done. It means focus on costs. But the optimizing approach is to focus on effectiveness and effectiveness focuses on opportunities to produce revenue, to create markets, and to change the economic characteristics of existing products and markets. It does not ask how to do this or that better but it asks which of the products really produce extraordinary economic results or are capable of producing them. It asks which of the markets and/or end uses are capable of producing extraordinary results.

Then the question arises that to what results, therefore, the resources and efforts of the organization are to be allocated so as to produce extraordinary results rather than the ‘ordinary’ ones which all the efficiency can possibly produce. This does not criticize efficiency. Even the healthiest organization operating with the greatest effectiveness, can well perish of poor efficiency. But even the most efficient organization cannot survive, let alone succeed, if it is doing the wrong things, that is, if it lacks effectiveness. No amount of efficiency can enable the manufacturer of an obsolete product to survive.

Effectiveness is the foundation of success and the efficiency is the minimum condition for the survival after success has been achieved. Efficiency is concerned with doing things right while the effectiveness is doing the right things. While the efficiency concerns itself with the input of effort into all areas of activity, the effectiveness starts out with the realization that in an organization, as in any other area of the society, 10 % or 15 % of the phenomena (such as products, orders, customers, markets, or people) produce 85 % to 90 % of the results. The other 85 % to 90 % of the phenomena, no matter how efficiently taken care of, produce nothing but costs (which are always proportionate to transactions, that is, to busy-ness). Hence it is important that the management concentrates on those 10 % or 15 % of the phenomena which produce 85 % to 90 % of the results.

The first administrative job of the management is, hence, to make effective the very small core of worthwhile activities which is capable of being effective. At the same time, it neutralizes (if it does not abandon) the very large uncertainty of transactions such as products or control activities, research work or sales efforts, which, no matter how well done, do not yield extraordinary high results (whether they represent the realized opportunities of the past, mere busy-ness, or unfulfilled hopes and expectations of the past, that is, the mistakes of yesterday).

The second administrative task of the management is to bring the organization all the time a little closer to the full realization of its potential. Even the most successful organization works at a low coefficient of performance as measured against its potential which means that the economic results which can be obtained are the efforts and resources used to produce the maximum yield they are naturally capable of.

This task of the management is not innovation but it actually takes the organization as it is today and asks what its theoretical optimum and what inhibits it for attaining the same. In other words to find out where the limiting and restraining factors are which hold back the organization and prevent it in getting the full return on its resources and efforts.

One basic approach, as an example, is to find out what relatively minor changes in product, technology, process, and market etc. can significantly improve or alter the economic characteristics and results of the organization. This is similar to the carrying out of the vulnerability analysis. There can be several examples which can be given to show that a relatively minor change does not necessarily have to be easy to make. In fact, management may not know how to do it. But it is still minor for the organization since it remains essentially as it is now, yet it has different economic results. Further, while many examples may show clearly that the changes can need innovation, though they are not, in themselves, innovations. They are primarily modifications of the existing working methods in the organization.

At the same time, integral to the management task is entrepreneurship which means making of the organization of tomorrow. Essential in the task is innovation. Making of the organization of tomorrow starts out with the belief that the organization of tomorrow is going to be and must be different. But it also starts out of necessity with the organization of today. Making the organization of tomorrow cannot be a flash out of brilliance. It needs systematic analysis and hard, rigorous work today and this means that it is to be done by people in the organization of today and also operating within it.

The specific job of entrepreneurship in today’s organization is to make it capable of making the future, of making itself into a different organization. It is the specific job of entrepreneurship in the today’s organization is to enable it to retain the today’s already existing and especially today’s already successful organization to remain existing and also to remain successful in the future.

Success cannot be everlasting as one may say, be continued forever. Organizations are, after all, creations of man which have no true permanence. Even the oldest organizations are creations of recent centuries. But an organization must continue beyond the lifetime of the individual or of the generation to be capable of producing its contributions to the economy and to the society. The continuance of the organization is a central entrepreneurial task and ability to do so well is the most pointed and definitive task of the management.