What are the four basic activities that comprise the management process?

In 1916, a French coal mine director named Henri Fayol wrote a book entitled “Administration Industrielle et Generale,” which set forth five distinct functions of managing that Fayol insisted were applicable in any industry. In the 1950’s, management textbooks began to incorporate some of Fayol’s ideas into their content. The process school of management was born and, today, management courses still use many of Fayol’s ideas to teach management to business students.

Tip

Originally, there were five management functions, but management book authors have condensed them to four: planning, organizing, leading and controlling. The fifth function was staffing.

Function One: Planning

Planning involves deciding where to take a company and selecting steps to get there. It first requires managers to be aware of challenges facing their businesses, and it then it requires managers to forecast future business and economic conditions. They then formulate objectives to reach by certain deadlines and decide on steps to reach them. They re-evaluate their plans as conditions change and make adjustments as necessary. Planning helps allocate resources and reduce waste as well.

Function Two: Organizing

Managers organize by bringing together physical, human and financial resources to achieve objectives. They identify activities to be accomplished, classify activities, assign activities to groups or individuals, create responsibility and delegate authority. They then coordinate the relationships of responsibility and authority.

Function Three: Leading

Leading requires managers to motivate employees to achieve business objectives and goals. It requires the use of authority to achieve those ends as well as the ability to communicate effectively. Effective leaders are students of human personalities, motivation and communication. They can influence their personnel to view situations from their perspectives. Leading also involves supervision of employees and their work.

Function Four: Controlling

Controlling is a function of management that involves measuring achievement against established objectives and goals. It also requires managers to be able to identify sources of deviation from successful accomplishment and to provide a corrective course of action. Managers first establish objectives and goals, then measure achievement of them, identify anything that is keeping the company from achieving them, and provide means of correction if necessary.

Controlling does not necessarily involve achieving only monetary goals and objectives. It can also relate to nontangible goals and objectives like meeting a production quota or reducing customer complaints by a certain amount.

Learning Outcomes

• Explain the primary functions of management.
• Differentiate between the planning, organizing, leading, and controlling functions of management.

We have defined management as a process to achieve organizational goals. A process is a set of activities that are ongoing and interrelated. Ongoing means that the activities are not done in a linear, step-by-step fashion where responsibility is passed from one activity to the next. Instead, the activities are continued as new activities are started. Interrelated means that the results of each activity influence the other activities and tasks. It is the responsibility of management to see that essential activities are done efficiently (in the best possible way) and effectively (doing the right thing).

The management process consists of four primary functions that managers must perform: planning, organizing, leading, and controlling. It is important to realize that the management process is not always linear. It does not always start with planning and continue through each step until organizational goals are achieved because it is not possible to plan for every problem the organization will face. As the management process proceeds, changes and modifications are made when unforeseen events arise. Managers make sure the necessary changes are implemented and that the unity and integrity of the entire process is maintained.

The key functions in the management process are connected, but not always linear.

Planning

Planning means defining performance goals for the organization and determining what actions and resources are needed to achieve the goals. Through planning, management defines what the future of the organization should be and how to get there. Strategic plans are long-term and affect the entire organization. A strategic plan bridges the gap between what an organization is and what it will become. Tactical plans translate strategic plans into specific actions that need to be implemented by departments throughout the organization. The tactical plan defines what has to be done, who will do it, and the resources needed to do it.

For instance, recall the example used at the beginning of this module. It described how ThyssenKrupp AG decided to become an elevator manufacturing and servicing company because of increased competition from Chinese steel. The management of the company set a goal of deriving the majority of its revenue from elevator-related activities. To do this, the management team made plans to create partnerships or take over existing elevator companies. The team devised plans to develop new human resources and to acquire other material resources. The company also had to divest existing steel-related resources to raise capital for the new initiative. This example is a long-term strategic plan that will take years to complete and require many changes along the way. But it starts by defining a goal and a preliminary path to achieve it.

Organizing

Once plans are made, decisions must be made about how to best implement the plans. The organizing function involves deciding how the organization will be structured (by departments, matrix teams, job responsibilities, etc.). Organizing involves assigning authority and responsibility to various departments, allocating resources across the organization, and defining how the activities of groups and individuals will be coordinated.

In the case of ThyssenKrupp AG, the management had to determine how to support two very different sets of activities if it were to achieve its long-term goal. Management needed to continue steel production activities to provide continuity of funds as the emphasis gradually shifted to elevator production. It also had to develop new skills and resources to build the company’s elevator capabilities. A new organizational structure was needed that could support both business activities as one was downsized and the other built up.

Leading

Nearly everything that is accomplished in an organization is done by people. The best planning and organizing will not be effective if the people in the organization are not willing to support the plan. Leaders use knowledge, character, and charisma to generate enthusiasm and inspire effort to achieve goals. Managers must also lead by communicating goals throughout the organization, by building commitment to a common vision, by creating shared values and culture, and by encouraging high performance. Managers can use the power of reward and punishment to make people support plans and goals. Leaders inspire people to support plans, creating belief and commitment. Leadership and management skills are not the same, but they can and do appear in the most effective people.

It is very difficult to motivate people when plans involve radical change, particularly if they include downsizing and layoffs. Many people are naturally resistant to change. When the change means loss of jobs or status, people will be very resistant. At ThyssenKrupp, the labor unions vehemently opposed the shift from steel production to elevator manufacturing. Although the people involved in the new business functions were excited by the plans, people involved with steel production felt abandoned and demotivated. Management would have been wise to get union support for its vision of the company’s new future.

Controlling

There is a well-known military saying that says no battle plan survives contact with the enemy. This implies that planning is necessary for making preparations, but when it’s time to implement the plan, everything will not go as planned. Unexpected things will happen. Observing and responding to what actually happens is called controlling. Controlling is the process of monitoring activities, measuring performance, comparing results to objectives, and making modifications and corrections when needed. This is often described as a feedback loop, as shown in the illustration of a product design feedback loop.

Product design feedback loop

Controlling may be the most important of the four management functions. It provides the information that keeps the corporate goal on track. By controlling their organizations, managers keep informed of what is happening; what is working and what isn’t; and what needs to be continued, improved, or changed. ThyssenKrupp had little experience in elevator manufacturing when it was making plans. It was developing new products and processes and entering new markets. The management knew it could not anticipate all the difficulties it would encounter. Close monitoring as the plan progressed allowed the company to make changes and state-of-the-art innovations that have resulted in a very successful transition.

Watch the following video for an overview of the management process and a simple example of how the management functions work together.

Who Directs Each Function?

Although these functions have been introduced in a particular order, it should be apparent that the different activities happen at the same time in any one organization. The control function ensures that new plans must be created. Leaders often step up as needed when a crisis or unexpected bump demands immediate action. All managers perform all of these functions at different times, although a manager’s position or level in the organization will affect how much of his or her time is spent planning as opposed to leading or to controlling. We will look more closely at different types of managers in the next section.

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