The Four Functions of Management: Planning, Organizing, Directing, Controlling

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The Four Functions of Management Planning,
Organizing, Directing, Controlling

• Managing Construction Operations

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Management Functions

• Planning
• Organizing
• Directing
• Controlling
• And always .. Leading and communicating

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Overview of Planning

• Objectives
• End states or targets
• Plans
• Means to hit the desired targets
• Strategic, Tactical, Operational
• Planning
• Decision-making process focused on the future of
  an organization and how it will achieve its goals

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Types of Plans

• Strategic plans
• Broad future of the organization
• External environmental demands
• Internal resources
• Tactical plans
• Translate strategic plans into specific goals
• Specific parts of the organization

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Types of Plans

• Operational plans
• Translate tactical plans into
  specific goals and actions
• Small units of the organization
• Near term

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Types of Plans
Strategic Plans Tactical Plans Operational
Plans

• Time horizon

Typically 3-5 years
Often focused on 1-2 years in the future
Usually focused on the next 12 months or less.
Scope
Broadest,originating with a focus on the entire
organization
Rarely broader than a strategic business unit
Narrower, usually cen- tered on departments or
smaller units of the organization
Complexity
The most complex and general, because of the
different industries and business potentially
covered
Somewhat complex but more specific, because of
the more limited domain of application
The least complex, because they usually focus on
small homogenous units
Adapted from Exhibit 8.1 Types of Plans Key
Differences
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Types of Plans
Strategic Plans Tactical Plans Operational
Plans

• Impact

Have the potential to dramatically impact, both
positively and negatively, the fortunes and
survival of the organization
Can affect specific businesses but generally not
the fortunes or survivability of the entire
organization
Impact is usually restricted to specific
department or organization unit
Interdependence
High interdependence, must take into account the
resources and capabilities of the entire
organization and its external environments
Moderate interdepen-dence, must take into account
the resources and capabilities of several units
within a business
Low interdependence, the plan may be linked to
higher-level tactical and strategic plans but is
less interdependent with them
Adapted from Exhibit 8.1 Types of Plans Key
Differences
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Organizational Levels

• Corporate level (Strategic)
• What industries should the firm be in?
• What markets should the firm be in?
• In which businesses should the firm invest money?
• Business level (Tactical0
• Who are our direct competitors?
• What are their strengths and weaknesses? What
  advantages do we have over them?
• What are our own strengths and weaknesses?
• What do customers value in our products/services?

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Organizational Levels

• Functional level (Operational)
• What activities must my unit perform well in
  order to meet customer expectations?
• What information about competitors does my unit
  need in order to help the firm compete
  effectively?
• What are our units strengths and weaknesses?

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The Planning Process
Analyzing the Environment

• Analyzing the environment
• Forecasts what does the future look like?
• Environmental uncertainty
• Contingency plans identify key factors that
  could affect the desired results and specify what
  actions will be taken if key events change
• Benchmarking
• Investigation of the best results among
  competitors and noncompetitors and the practices
  that lead to those results

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The Planning Process

• Setting objectives
• Priorities and multiple objectives
• Establish which objectives are most important and
  which have temporal priorities,
• Measuring objectives

• Financial performance
• Profits relative to sales
• Profits relative to assets
• Many others
• Non-financial performance

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The Planning Process

• Determining requirements
• Assess current performance
• What will it take in order to get from current
  levels of performance to that level specified in
  the objectives?
• What drives market share?
• What capital will be required?

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The Planning Process

• Assessing resources
• Resources required
• What resources are needed to achieve the stated
  objectives?
• Resources available
• Do we have the needed human talent to meet the
  requirements?
• Do we have the financial resources available?
• Do we have the required technology?

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The Planning Process

• Developing action plans
• Sequence and timing
• Raw materials, manpower and
  components must be brought together in the
  right amounts and sequences
• Accountability
• Who is accountable for which actions?

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The Planning Process

• Implementing Plans
• Monitoring the implementation
• Monitor the progress of the plan and its
  implementation
• Monitor the level of support that the plan
  receives as it is being implemented
• Monitor the level of resistance
• Real-time adjustment

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The Planning Process

• Monitoring outcomes
• Unanticipated consequences
• Negative unanticipated consequences
• Positive unanticipated consequences
• Feedback loop
• Apply what has been learned to modify and improve
  the planning process

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Planning Tools

• Budgets
• Capital expenditure budget
• Specifies the amount of money to be spent on
  specific items that have long-term use and
  require significant amounts
• Expense budget
• Includes all primary activities on which a unit
  or organization plans to spend money and the
  amount allocated for the upcoming year

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Planning Tools

• Budgets

• Proposed budget
• Provides a plan for how much money is needed, and
  is submitted to a superior or budget review
  committee
• Approved budget
• Specifies what the manager is actually authorized
  to spend money on and how much

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Planning Tools

• Two budgetary approaches
• Incremental budgeting approach
• From the approved budget of the previous year
  present arguments for why the upcoming budget
  should be more or less
• Zero-based budgeting approach
• Justify all allocations of funds from zero each
  year

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Goal Setting

• Attributes of effective goals
• Specific
• Measured
• Agreed
• Realistic
• Time bound

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Organizing

• Even very small companies need to organize.
• If you have a one-body construction company, you
  should still have an organization chart showing
  all of the different hats that you wear.
• For larger organizations, the organization chart
  will show
• Position titles should be descriptive.
• The chain of command authority for each area,
  accountability for actions
• Who occupies each position

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The Organization Chart

• First Step decide on the type of organization,
  consider span of control, tall vs. flat,
  functional vs. geographic
• Second Step decide what positions you need,
  create position titles
• Third Step assign people to fill the positions.
• TIP 1 Try to avoid picking the people first and
  then designing a position to fit the person.
• TIP 2 Careful about Span of Control

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Organizational Chart of a Manufacturing Firm
Board member
Board member
Board member
Board member
Chief Executive Officer
Legal counsel
President
V.P Research and Development
V.P Sales/ Marketing
V.P Human Resources
V.P Production
Consumer Products Director- Sales
Industrial Products Director- Human Resources
Consumer Products Director- Human Resources
Industrial Products Director- Production
Consumer Products Director- Production
Industrial Products Director- RD
Consumer Products Director- RD
Industrial Products Director- Sales
Western Region Industrial Products Sales Manager
Eastern Region Industrial Products Sales Manager
Western Region Consumer Products Sales Manager
Eastern Region Consumer Products Sales Manager
etc.
etc.
etc.
etc.
etc.
etc.
etc.
etc.
etc.
etc.
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Directing

• Using authority to cause plans to be implemented
• Delegating authority to increase efficiency and
  effectiveness
• Coordinating a companys activities
• Selecting and training employees
• Preparing organization charts

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Authority

• Authority is a legal term the right to take
  action, make decisions, and direct the work of
  others
• How effective formal authority is depends on many
  factors.
• How badly does the subordinate need the job?
• How badly does the authority need the
  subordinate?
• Does the subordinate agree with the bosses
  decisions?

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Types of Authority

• Line Supervisors
• Line supervisors
• President, Director of Construction Activities,
  Project Managers, Superintendents, Foremen.
• Staff supervisors
• Chief estimator
• Accountant
• Office manager

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Delegating

• You can delegate the authority.
• You cannot delegate the responsibility.
• Do not set up departments or divisions unless you
  are will to delegate the day-to-day control of
  them to the managers.
• Train people to do the jobs
• Assign the jobs to them and get out of the way
• Check to see if they are making acceptable
  progress.
• If not correct the situation
• You can sub-out everything except the blame.

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Coordination

• Making sure that all departments are working
  together toward goals
• Coordination is a function of communication
• Rules or Procedures
• Might work for routine activities
• Will still need meetings and conversations

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Coordination How?

• Meetings
• Internet
• Email
• Newsletters
• Staff Assistants
• Liaisons
• Teams Committees

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Controlling

• Control is the task of ensuring activities have
  the desired results
• Control requires targets and goals be set
• Controlling involves setting targets, measuring
  performance, and taking corrective action
• Enron and financial controls Artur Andersen

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Types of Control Systems

• Steering control (feedforward or precontrol
• Corrective action before problem occurs
• Preventive in nature
• Intermediate milestones
• Concurrent control (yes/no)
• Control as the activity takes place
• Rules and procedures
• Feedback control (post-action)
• Compare results to standard
• Profit at end of project

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Checklist for Effective Control System

1. Controls should reflect nature/needs of activity
2. Should report deviations promptly
3. Should be forward-looking
4. Should point out exceptions at strategic points
5. Should be objective
6. Should be flexible
7. Should reflect the organizational structure
8. Should be economical
9. Should be understandable
10. Should indicate corrective action

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Two Basic Control Approaches

• The Traditional Approach
• Set a standards, target, or goal
• Measure actual performance against standards
• Take corrective action
• The Commitment-Based Approach
• Getting people to want to build in quality
• Hire the right people and invest in them
• Foster self-control
• People centered, sense of community, shared fate
• Guarantee organizational justice
• Use financial rewards and profit-sharing
• Encourage self-actualization

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Control Exercise 1

• You are one of the 4 founders of an innovative
  firm focusing on design-build as a delivery
  system for high performance building. The firm is
  2 years old and growing rapidly, and has 24
  employees.
• Your founding group values quality,
  relationships, transparency, excellence, and
  environmental awareness and these shared core
  values are largely responsible for your success.
• You envision doubling the number of employees in
  the next two years and want to maintain your
  focus on your core values.
• How do you maintain your values and your growth
  rate? What type of control system will you use?
  Why?

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Control Exercise 2

• College students deal with professors but it is
  not obvious how autonomous professors are.
• Duties include teaching, research, proposal
  preparation, supervising grad students, writing
  papers and books, committee work, service, etc.
• The Dean wants to be sure professors are
  conducting themselves professionally and, knowing
  you are a student and studying leadership and
  management, tells you that perhaps you can
  suggest a control system that addresses
  professorial duties and how they might be
  controlled.