Read the case below attentively, then respond to the questions at the conclusion.
Role Reversal
EF Ltd. was one of the affiliates of the AL Group of Firms, which had six sister companies. A general manager ran each business. The other five businesses, including EF Ltd., were providing auxiliary components to the primary company, AL Ltd. The Managing Directors of the many firms in the group got along well with one another. The Managing Director of EF Ltd. was Mr. Swami.
A recognised union affiliated with one specific state-wide governing party was present at EF Ltd. The flagship AL Ltd. and the other five businesses all have unions affiliated with different political parties. The administration, including the one that belonged to EF Ltd., and the unions typically got along well. When Mr. Swami served as the managing director of EF Ltd., the company’s output exceeded its objective by 200%.
As a consequence, AL Ltd. likewise expanded production, with attendant advantages for the workers’ perks. The unions’ contribution to the higher output level was proportionately equal. The managing director of EF Ltd. and the managing director of AL Ltd. had a disagreement on one specific occasion at one of the coordination meetings. Being the central figure of the whole group, the Managing Director of AL Ltd. had more influence. He and the family members had a significant portion of the enterprises.
Mr. Swami, the EF Ltd.’s managing director, as well as other individuals listed on the company’s registers, were in fact compensated managing directors. Because of his outstanding management and engineering credentials as well as the expertise he had acquired through his numerous travels overseas, Mr. Swami was renowned for his integrity, forthrightness, and enormous knowledge.
However, his technical advice was not taken into consideration in one of the sessions, which led to a significant difference of opinion. The other four Managing Directors of the group backed the Managing Director of AL Ltd., and Mr. Swami was flatly informed that his technical advise would not be taken into account. Mr. Swami volunteered to resign after feeling offended.
As a result of ongoing arguments, Mr. Swami departed the company. The Executive Director was coordinating with the organisational work since no new Managing Director had been hired. Even while output remained above the desired level while Mr. Swami was in office, it significantly decreased after he departed, but the desired minimum level was maintained.
A meeting between the Union of EF Ltd. and the Management was scheduled after roughly a month. The Management, including the Managing Director, was taken aback to find Mr. Swami, the Chairman of the Union of EF Ltd., seated on the opposite bench. Mr. Swami promised the management that the relationship would be friendly. However, he gave the Management six requests.
The identical technical advise that Mr. Swami offered as Managing Director was proposed by the Union, and Mr. Swami emphasised that if the proposal was carried out, output would not suffer. The top management disagreed. When the issue of paying bonuses to the workers arose after roughly a month, the management noted that EF Ltd.’s output had decreased by 20%, which was less than the targeted production, which was down by 180% from the prior level.
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It was also said that AL Ltd., the major group, is also suffering as a result of EF Ltd.’s poor output. The Management stated that the Union’s lack of cooperation is the primary cause of the current situation. The Union emphasised that they have not changed at all and that the aim of the Managing Directors of the other organisations, as well as the Executive Director and other Directors of the AL Ltd., is what has caused the output to decrease.
The case study mentioned above raises the following questions:
(A) Do you share the Union’s position?
(a) Examine Mr. Swami’s actions both as the Union’s chairman and as its managing director.
(c) Examine the Managing Director of AL Ltd., the principal corporation, and his actions.
Review the case below, analyse it, and then create a report:
Selection and Recruitment
Tin-plated steel is produced by the Southern Steel Company particularly for the canning industry. It has roughly 5,000 employees. The business uses cutting-edge scientific techniques wherever applicable.
One such scientific approach was used by the personnel department to choose management trainees. The individuals’ hobbies, emotional stability, general intellect, and personalities were evaluated using a battery of tests.
.A company that excels in creating and analysing tests was used to administer the exams. The business obtained the exams from the organisation, distributed them to the candidates, and then handed them back to the organisation for evaluation.
The personnel director examined the information on the application forms in addition to the exams. The candidate who scored the highest on the exams and had a positive application rating was chosen for an interview with the personnel director. Following the interviews, decisions were made.
The business used this strategy to recruit 30 candidates by the end of the first year. The organisation was shocked to discover that 14 of these trainees lacked the credentials deemed essential for senior employees after evaluating them. Approximately Rs. 26,000 was spent on these incompetent trainees in total.
The recruiting and testing process was then put under scrutiny by the personnel department. It was discovered that other steel firms had successfully utilised the testing. Neither the administration nor the testing were determined to be flawed. The director of people wasn’t sure what to do.
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He raised the issue with the executive committee, which consists of the leaders of eight departments. The head of the department in charge of industrial relations advised abandoning the tests and devising a different system for choosing management trainees because they contained errors.
QUESTIONS
1) What are the flaws in the recruiting process at the company?
2) What steps should the business take to address the selection issue in light of the facts provided?
Write a report analysing the case presented below.
In order to meet the growing market demand for colour television sets, Southern Manufacturing Company has begun producing them. When it comes to making deliveries on schedule, the corporation has trouble keeping up with demand. Amirthalingam began working as a General Manager at Southern Manufacturing Company Ltd. two months ago.
He was compelled to take the necessary actions to ensure that the sales delivery timeline was closely adhered to. To determine the reasons for the delay in the delivery of the items, he had to look at the company’s data.
Amirthalingam discovers that the manufacturing division paints a picture of increased expenses, missed delivery deadlines, and an uptick in quality complaints. He immediately dialled Mr. Bhaktavasalam, the works manager, to have a conversation and discuss the facts in order to find a solution to the issue. Bhaktavasalam acknowledged his poor performance but said that the sales department’s excessive promises and disregard for the production schedules were mostly to blame for his inability to achieve the delivery deadline.
The majority of the quality issues, according to him, are caused by the constant stream of engineering modifications that appear without notice and provide little time to iron out the manufacturing issues that are inherent in all new products. Amirthalingam acknowledged that he had given his approval for the most recent round of engineering improvements.
As a further step, Deeran, the engineering manager, was summoned to Amirthalingam’s chamber for discussion. He described to Deeran the difficulty in putting the authorised engineering improvements into practise. Mr. Deeran stated that since the engineering improvements with top management permission arrive to him one at a time, separated by a few days, it is impossible to adopt them all at once.
As a result, Amirthalingam instructed Deeran to implement all the agreed adjustments into production right away in order to boost output and adhere to the sales department’s timeline.
Amirthalingam summoned Mr. Nayar, the sales manager who is in charge of maintaining the sales calendar, during the problem-solving exercise so they could speak. Mr. Nayar acknowledged that he was unable to completely adhere to the sales timeline since he was unaware of the production schedules.
Additionally, he expressed dissatisfaction at the engineering division’s repeated changes to product standards without discussing or telling the sales division. He also complained that the sales department was not notified in advance when the finance department tightened the credit requirements, which delayed the delivery of the goods.
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Amirthalingam acknowledges once again that the identical engineering modification that produced issues for the sales department and rendered the stock of replacement components outdated. Additionally, he discovers that the credit standards were tightened by the finance department at his request because of an exceptionally low cash situation.
QUESTIONS
What led to the issue?
Describe the main coordination issue that Amirthalingam is experiencing.
How can the company’s many divisions continue to coordinate?
The term “strategic intent” refers to the predetermined future state that the organisation intends to achieve within a certain time frame.
Gary Hamel and C.K. Prahalad are credited with popularising the phrase “strategic purpose.” They described strategic intent as an organization’s purpose for being and the goals it seeks to accomplish. It displays an organization’s principles and ideals.
The organisation should follow particular paths in order to attain a certain future state and specific goals. These goals may be long-term or short-term in nature. The short-term aims are focused narrowly whereas the long-term ends have a wide emphasis.
It is crucial for every employee to comprehend the strategic objective for an organisation to function effectively. Therefore, the strategic aim should be both realistic and clear.
The three interrelated key concepts that answer the question are, in the words of Burgelman and Grove, “strategic dissonance (misalignment between a firm’s strategic intent and strategic action), strategic inflection point (the switch from one winning strategy into another), and strategic recognition (the ability of top managers to recognize the strategic importance of managerial initiatives after they have arisen but before unambiguous environmental feedback is available).”
As stated by Prahalad and Doz, “Long-term objectives and aspirations are referred to as intentions rather than disinterested plans. To pursue objectives that are impossible to prepare for, one must have a strategic purpose. That perspective (strategic purpose) must be distinguished from strategic planning or plans. A company may achieve long-term objectives by using strategic purpose to meticulously create layers of competitive advantage “.
“Strategic intent” is defined by Lovas and Ghoshal as long-term objectives that represent the desired future position of the company as expressed by its senior management.
It is crucial to keep in mind that everyone in the organisation should share the strategic objective. Another name for it is “collective awareness,” which denotes a goal that all of the personnel share. The wide mutual aim is attained by following the route that is indicated by the strategic purpose.
Hierarchy of Strategic Intent
According to the hierarchy of strategic purpose, the following components are present:
Vision
Mission
Purpose
Commercial Definition
Goals
Objectives
The components of the strategic intent assist to align the resources and ideas in a certain direction. These components serve as both starting places and different level milestones.
These components serve as the framework for organizing and managing activities. Additionally, strategic purpose offers a path and guarantees that all efforts result in advancement for the whole organization.
All stakeholders should be adequately informed of the company’s strategic aim to increase their confidence in the company’s services and its capacity to dominate a certain market sector.
A stakeholder is a person, group, or organisation having a stake in the organisation, either financially or otherwise. This is a stake, either direct or indirect. Some of an organization’s key stakeholders include its employees, directors, creditors, suppliers, owners, customers, the government, and the general public.
There is a two-way communication between the organisation and the stakeholder. On the one hand, the stakeholder may affect the organization’s decisions, policies, practises, and activities; on the other hand, they are also affected by these factors.
Therefore, one definition of a stakeholder is “a person, a group, or an organisation that is influenced by or impacts the company’s operations, policies, or objectives.”
An organization’s product marketing has an impact on a variety of stakeholders, including customers (better products), employees (higher salaries, incentives), suppliers (orders for raw materials, packaging), creditors (credit for the organization’s growth plans), owners (returns on equity), the government (increased corporate taxation revenue), and others.
An organization’s stakeholders all have distinct objectives. The top management of the company is relied upon by stakeholders to maximise earnings. The management of the company often has to find a balance between fulfilling the needs of the company and maximising returns to stakeholders.
Stakeholders, for instance, are motivated to maximise the dividends, bonuses, salaries, and incentives they get in exchange for their investment. The leadership, on the other hand, would like to spend more money on the research and development division, which would increase the company’s productivity and prepare it for the future.
To do this, stakeholders will have to give up some short-term rewards. The company’s leadership must find a balance between the organization’s long-term investments and its short-term benefits to stakeholders.
According to Bisset, “a stakeholder is a person who is interested in or concerned about a certain issue.”
According to R. Edward Freeman, “A stakeholder in an organisation is (by definition) any group or individual who may influence or be impacted by the fulfilment of the organization’s objectives.”
Post, Preston, and Sachs define stakeholders as “persons and constituencies that contribute, either willingly or involuntarily, to a company’ wealth-creating skills and activities, and who, as a result, are its potential beneficiaries and risk bearers.”
Roles of Stakeholders in Strategic Management
1) Voting and Decision-Making: By voting on various issues, stakeholders may significantly influence the organization’s direction. The decision-making and voting procedure, which occurs annually or at a meeting, is open to stakeholders.
The management of the firm, which is in charge of formulating the company’s strategy and making decisions, is subject to influence from stakeholders. If the organisation is not working effectively, stakeholders, such as the Board of Directors, may step in and make the necessary modifications and develop appropriate initiatives.
2) Positions in Managing and Supervising the Organization: Stakeholders may also be important members of management who directly affect the operations and policies of the company. They could be directly answerable to the director, CEO, or CFO of the business.
Since their actions may affect the performance of a certain department within the organisation, managers of multiple departments may be stakeholders. Additionally, they could be in responsible of recruiting, training, and informing their departments of changes to organization-wide policy.
3) Meeting Social and Environmental Responsibilities: Because businesses are a part of society, they have social responsibilities. The interests of society and the environment must not be jeopardised by the organization’s strategy, policies, or operations, according to stakeholders. This might take many different shapes. Stakeholders may choose to switch to another energy source if the current one runs out.
They could also decide to donate money to a worthwhile cause or a country that deserves it. The public good should be a company’s main motive in addition to its own self-interest. Stakeholders have a moral responsibility to ensure that the corporation puts the interests of society above their own interests.
4) Project Planning: The project planning process involves active participation from stakeholders. The project planning process includes determining the project’s objectives, outlining and allocating resources, selecting project methods, analysing significant events, and ultimately evaluating the results. Stakeholder participation in project planning enhances the transparency of the project and its process.
Classification of Stakeholders
Based on their relationship with the organisation, stakeholders may be categorised into two groups:
1) Internal Stakeholders
2)External Stakeholders
Internal Stakeholders
Individuals that work for or interact directly with an organisation are considered internal stakeholders. Some of the most significant internal stakeholders are listed below:
1) Shareholders: Shareholders are individuals or entities that own equity in the corporation. They are referred to as “business owners” as a consequence. Shareholders are treated the same as other employees and partners in the business.
These investors contributed money to the business in order to aid it in achieving its objectives. The company’s main responsibility is to look out for the interests of its shareholders. Shareholders get a portion of the profits as compensation for their investments.
2) Workers/Employees: People who work for a corporation and expect payment, benefits, and security in return are known as employees. The arrangement between employees and the firm is governed by the employment contract. Employees donate their time and effort to the firm, which places certain obligations on the business.
Now it is up to the company to honour its commitments to its employees. One of the organization’s main responsibilities is to treat employees with respect and acknowledge their value as a resource for achieving organisational goals.
3) Management: The management of an organisation affects both the company and external stakeholders. A written or verbal agreement exists between management and the organisation.
The main responsibility of management is to ensure that an organization’s operations function smoothly and to create strategies for its long-term success. The task of balancing the rights of the many stakeholders falls to management.
External Stakeholders
External stakeholders are individuals, groups, or businesses that are not affiliated with the organisation yet have indirect interactions with it. be able to influence External stakeholders may be impacted by organisational changes. Some of the most significant external stakeholders include: the
1) Customers: Customers, also known as consumers, are people or organisations who purchase things from a firm. Customers are thus one of a company’s most crucial revenue streams. Since these funds are reinvested in many aspects of the business operations, customers are the main asset indirectly involved in the creation of new products and services.
By purchasing the company’s products and fostering positive word-of-mouth, they boost sales for the company. As a consequence, ensuring customer satisfaction is one of an organization’s most important long-term goals.
2) Suppliers: Suppliers are individuals or business owners that give raw materials or semifinished goods to the organisation for use in the final production process. Distributors are service companies that deliver finished goods to their customers.
The materials supplied by the suppliers determine the final product’s quality and value. As a consequence, the company should exercise vigilance in its business dealings with suppliers. In order to lower production costs while boosting efficiency and quality, the firm must build strong connections with its suppliers.
3) Creditors: Companies that provide raw materials or semi-finished goods to an organisation on credit are known as creditors.
Given that a strong connection between the business and its suppliers is one of the most essential drivers of success, the company runs the danger of losing its competitive edge if it does not pay the proper amount on time. In the case of dissatisfaction, suppliers may harm a company’s business by ceasing to operate or by providing subpar goods.
4) Competitors: The organisation is grateful to its rivals in the same way as it is to its stakeholders. Any company’s competitive strategy might either benefit or hurt its competitors’ businesses and vice versa. As a consequence, a business must always exercise ethical vigilance in order to compete in a cutthroat market.
5) Government: By passing various laws and establishing restrictions, the government regulates the acts and policies of organisations. Compliance with the laws and rules that govern an organization’s activities is one of its main responsibilities. Planning should take into account how the government will execute its legislation.
Management may be impacted by taxes, laws, and obligations imposed on the company, and management may also be impacted by them. By using fair trade practises, paying taxes on time, and abstaining from abusive trade practices, management may help the government.
6) Society/Community: The society or community in which the organisation works has an impact on its operations. The management is responsible for educating and enlightening society as well as ensuring its welfare by raising the standard of living in general. Organizations shouldn’t engage in practices that harm society, such as polluting the environment and dumping hazardous waste.
Issues with Stakeholder Management
Stakeholder management tries to link previously unrelated managerial topics such as corporate social responsibility, marketing, organisational management, and human resource management. This connection enables the organisation to create strategies and resolve any disagreements that can hinder the effectiveness of the stakeholders.
When managing stakeholders, it’s important to recognise and address numerous issues including relationships, communication, leadership, devotion, and others to foster understanding and a sense of community among the group’s many stakeholders.
Otherwise, stakeholders may jeopardise the organization’s aims by thwarting significant reforms, projects, etc. in their haste to accomplish their own specific goals.Some of the main issues that must be resolved while managing stakeholders include the following:
1) Stakeholder Relationships: In order to understand stakeholders and their interests, organisations must comprehend the characteristics of stakeholder relationships and how they interact within the business system. This requires figuring out the culture of the firm as well as the power relationships among its many stakeholders.
More than just convincing stakeholders to participate in company activities, managing stakeholders also requires managing complex relationships that, if handled well, might provide the organisation a competitive advantage over its competitors.
The goal is to foster an environment of understanding that promotes respect for one another’s viewpoints and, as a result, reduces the likelihood of conflict. The organisation may also benefit from organising the stakeholders according to a power hierarchy to better understand how better relationship and communication management among the stakeholders influences the accomplishment of the organization’s objectives. The project will be carried out and implemented effectively as a consequence.
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2) Organizational and Stakeholder Communication: One of the most crucial aspects of every business is communication. It is a way for people to communicate their ideas and views to one another. It uses a number of strategies and is essential for guaranteeing the flow of information among the different levels of the organisation.
Stakeholders interact with one another through a range of channels and exchange knowledge on a range of subjects, such as products, services, enabling the flow of information, and giving directions.
Managers must interact with all stakeholders, not only those that are cooperative since they might provide serious obstacles to a project’s success. Effective and active stakeholder communication may help an organisation identify possible problems and risks.
Project managers may play a crucial role in keeping stakeholders engaged and averting significant issues in the organisation if they are successful in creating an efficient channel of communication with them.
3) Leadership and Commitment: Effective leadership is based on a number of crucial elements, including the organization’s management, fundamental values, and guiding principles. A statement based on successful short- and medium-term goals plays a crucial role in creating a sense of commitment among the employees and stakeholders. In addition to strong leadership, there should be the employees management towards the achievement of preVision determined organisational commitment and among goals.
4)Stakeholder Influence and Interests: Stakeholders have a variety of interests, and they work to meet those interests through influencing organisational procedures. Stakeholders often work together to sway and change the organization’s behaviour. The organisation is unable to take into account the interests of all stakeholders.
Strong stakeholder relationships allow them to have a say in organisational decisions and activities. Therefore, an organisation should make an effort to maintain the maximum number of stakeholders, since the difficulty of achieving each stakeholder’s specific interest grows as the number of stakeholders rises.
5) Perception and Impact of Stakeholders: The organization’s operations are significantly impacted by how stakeholders see it. Positive or negative perceptions are also possible. Negative impression may result in disputes and disagreements between the stakeholders and the management, whilst good view may increase the stakeholders’ desire to cooperate.
Similar to this, the influence of stakeholders may be divided into good and negative categories. Positive impacts may result in improved communication and increased living standards, but negative impacts can disrupt the organization’s working environment and cause one group of stakeholders to negatively affect another group of stakeholders.
6) Aligning Stakeholder Values and Motivation: One of the best methods for successful stakeholder management is to align stakeholder values and provide motivation via incentive programmes.
The values of an organisation must be in line in two ways: by having same values and beliefs; and by creating these values via clear and effective communication.
Stakeholder motivation may be achieved in a number of ways. One of the best ways to inspire stakeholders is via incentives. Rewards serve as an incentive for improved performance and help reach predetermined goals and objectives.
Combining the words “strategy” with “management” creates the phrase “strategic management.” The development of a vision, objectives, strategy, and execution of that plan are all parts of strategic management, as are adjustments to the strategic intent in response to changing organisational demands.
The initial stages in strategic management are the creation of a mission statement and the setting of organisational objectives. The process concludes with the execution of functional activities to satisfy predetermined goals and targets after which a company portfolio or business model is produced.
According to Ansoffs, “strategic management is a systematic approach to a critical and increasingly important responsibility of general management to position and bind the company to its environment in a way that assures its continued success and shields it from shocks.”
According to Glueck, “strategic management” is a set of decisions and actions that result in the development of an effective plan or set of strategies that help a firm accomplish its objectives.”
According to Lloyd Le Byars, “strategic management is involved with making decisions about the future course of a company and carrying those decisions through “.
The ideas of strategic management have changed throughout time. Strategic management is an ongoing process that is often examined and put into action. It is a thorough plan that ensures harmony between the organisation and its environment.
As a consequence, strategic management is concerned with a range of organisational activities, including environment analysis, direction-giving, the creation and execution of plans, and the adoption of strategic control mechanisms.
Characteristics of Strategic Management
1) Long-Term Issues: Long-term concerns are a common focus of strategic management. Although these issues may not have an immediate effect on the organisation, they will benefit it in the long term.
For instance, if a business invests in the education of its employees, it may not see an increase in productivity right away, but in the long run, highly educated people will provide better results and help to increase profits.
2) Competitive Edge: Managers that are looking for new ways to gain a long-lasting competitive edge are helped by strategic management. Applying the principles of strategic management systematically to an organization’s operations enables managers to increase the number of happy customers, provide goods and services at competitive pricing, and foster a highly satisfied workforce.
3) Impact on Operations: Strategic management practises that are effective have a positive impact on operational issues. For instance, if compensation increases and performance are linked, staff members would be motivated to put in additional hours, which would raise operational productivity.
Determining the best way to handle sales with a certain consumer group or deciding whether to provide items on credit are examples of operations decisions. Operations-related decisions are made by managers at a lower level.
4) Uncertain and Future-Focused: Makes strategic management decisions addressing issues that will arise in the future but are unrelated to current operations. The dynamic and unsteady business environment causes managers to be unaware of the consequences of their decisions.
5) Complicated: Strategic management becomes complex as a consequence of its unpredictability. There are situations in the business world that managers find challenging to understand. Analyzing both the internal and external environments is necessary.
6) Organization-Wide: Strategic management application affects the whole organisation, not simply the operation where the principles are employed. It follows a deliberate process and incorporates strategic choices.
7) Long-Term Effects: Strategic management has long-term effects that have little bearing on an organization’s daily operations. The organization’s purpose, vision, and objectives are addressed by the strategic management principles.
8) Aids in the Implementation of Strategies: Strategic management makes sure that action-oriented plans are employed to effectively carry out and implement strategies.
Conceptual Framework For Strategic Management
The creation of the organization’s strategy is the main emphasis of the strategic management process. Management chooses solutions that will help the organisation improve its performance using a distinct process.
It is a never-ending activity to evaluate the businesses and sectors connected to the organisation and its rivals. To compete with current and potential competitors, the organisation has to set realistic goals with the aid of strategic management.
1) Environmental scanning: Environmental scanning is the process of keeping an eye on, analysing, and disseminating information to the relevant individuals of the company from both the external and internal environments.
Its goal is to pinpoint the internal and external factors that will determine the organization’s destiny as strategic considerations. The simplest method for doing an environmental scan is SWOT analysis. A company’s unique Strengths, Weaknesses, Opportunities, and Threats—which are strategic aspects—are expressed by the acronym SWOT.
i) External Environment: The external environment consists of elements (opportunities and threats) that are external to the organisation and often out of the immediate control of senior management. The environment in which the organisation functions is made up of several elements.
ii) Internal Environment: An organization’s internal environment consists of elements (Strengths and Weaknesses) that are unique to the organisation and are often out of the immediate control of top management.
The working environment is determined by these traits. Structure, culture, and assets of the company make up these components. By using its main strengths, which comprise a set of core competencies, the company may gain a competitive advantage.
2) Strategy Formulation: The creation of a strategy The creation of long-term organisational plans that enable the best execution of organisational duties is a need for the formulation of a strategy. The creation of a strategy is essential for the successful running of a company. Plans are created at this phase by visualising the organization’s long-term future.
The SWOT analysis is used to determine the organization’s core competences and strategic capabilities, as well as to outline the order in which objectives must be reached, after the strategists have analysed the organization’s current and future situations.
The strategy is then developed with these objectives in mind. Strategies outline the course an organisation would follow to accomplish its goals. An organization’s strategy should be developed to enable environmental analysis, realisation of the organization’s vision, and achievement of the targeted objectives.
In order to establish a strategy, it is necessary to effectively manage external opportunities and threats while creating long-term plans for the organization’s strengths and weaknesses. This include developing the company’s vision, deciding on its purpose, setting realistic objectives, developing strategies, and defining norms for commercial conduct.
i) Vision of the Organisation: A vision statement for an organisation should outline the position it hopes to achieve in the future. A vision statement is developed by the senior management, which may include the CEO, president, managing director, chairman, etc. A vision statement conveys the organization’s future position in terms of its goals, scope, and competitive leadership.
It creates a framework for encouraging the growth of relationships between the organisation and its stakeholders, which include its investors, employees, suppliers, customers, and other entities directly or indirectly connected with the organisation. It assists in the creation of broad objectives related to the performance of the organisation and its diversification into other industries, both of which are essential to its development.
A vision statement’s primary goal is to provide a clear image of the organisation. It is a challenging statement for the whole organisation and all of the many sectors that are each striving toward their own objectives. This declaration provides employees with a common goal and inspires them to do routine jobs competently. It motivates employees to act morally and ethically in conformity with the norms of the company.
ii) Organizational Mission: A mission statement explains the purpose of the organisation. It sets the guiding principles for managing the business organization’s operations and describes the organisational culture and values. Based on its mission statement, the organisation develops its strategy.
A company’s purpose is a standout statement that details its products, target audiences, and geographic reach in addition to its market price and other aspects. This remark becomes solely focused on the specifics at the corporate level. The elements of the mission statement represent the organization’s vision for developing strategies, its goal, and the degree of excellence required to achieve market leadership.
iii) Goals / Objectives: Organizational plans are often long-term in nature, and thus produce long-term objectives. These objectives include things like the company’s profitability, position in the market, reputation, return on investment, productivity, and personnel development, among other things. These objectives must to be specific and quantifiable rather than vague. The organization’s goals should be both challenging and doable.
The results envisioned for business activities are called objectives. The organization’s goals show how committed the management is to achieving the desired results within a certain time period. They also assist in developing the performance standards used to evaluate performance. These objectives encourage cohesiveness between options and decision-makers, which aids in the design of strategies.
iv) Strategies: A business’s strategy is a comprehensive plan that helps it accomplish its goals and objectives. creation of plans for gaining a competitive edge and reducing factors that contribute to the organization’s downfall.
When Tata Group of Compartments realised its current diversification strategy would not allow it to achieve its goals, it sold Hindustan Lever Limited its subsidiary companies, including Tomco, Lakme, and other brands. It made the decision to stick with its more core sectors, including steel and automobiles, which offered greater potential for growth and development.
v) Policies: Policies are a thorough set of guidelines for decision-making that link strategy, formulation, and implementation. Policies ensure corporate guidelines that make sure decisions are made with the organization’s purpose, objectives, and strategy in mind.
Policies prioritise the best use of resources while also emphasising the accomplishment of organisational goals. An organization’s policy refers to the responsibilities of corporate-level management, long-term strategic decisions, and factors influencing the success of the organisation.
3) Strategy Implementation: The third step in the strategic management process is to ensure that strategies are successfully executed once they have been formulated and a sound strategic plan has been created.
Strategists must take into account a variety of implementation-related aspects since the selected strategy must be correctly executed in order to fulfil the organization’s business objectives. Ineffective implementation renders even the best-laid plans meaningless. Therefore, strategic implementation is the process that makes it possible to execute the selected strategy effectively.
The execution of strategies is facilitated by programmes, finances, and procedures. The organization’s culture, structure, or management system may all alter as a consequence of this process. Following an assessment by senior management, middle or lower management often executes the plan. Following through on plans is necessary for a strategy to be executed successfully:
i) Programmes: The actions or activities necessary to carry out a single-use plan are referred to as programmes. Programs assist in putting concepts into action. Programs might include restructuring an organization’s operations, changing its culture, launching a new research effort, etc.
ii) Budgets: A budget is a financial statement of a programme for an organisation. The expenses related to each programme are listed separately in a budget. Budgets are often used for management and planning. A budget employs financial statements to emphasise the anticipated impact on the organization’s financial future in addition to outlining the full plan of the strategy that will be used.
iii) Procedures: Also referred to as Standard Operating Procedures (SOP), are detailed instructions on how to carry out a task. Procedures often include an explanation of how many operations are necessary to finish a programme.
4) Evaluation and Control: It’s critical to regularly evaluate a strategy once it has been successfully carried out. Since it makes it easier to oversee the implementation of the plan, evaluation must be included into the strategic management process. The effectiveness of the adopted strategy is assessed in light of strategic objectives and performance indicators.
It is an essential step in getting an objective assessment of the expected and actual results. The manager is in charge of keeping track of the expected responses from the different organisational divisions and business units where the plans are put into effect. Analysis of market responses is also an essential part of evaluating and managing strategies.
Strategic control requirements vary depending on factors such the organization’s size, business activity, number of business divisions, organisational structure, etc. Implementing control should result in the required corrective action. The difference between expected and actual results determines the amount of required control.
All of the steps used throughout the strategic management process lead to performance. Since the strategic management method enhances organisational performance, it has acquired significant appeal. Managers need timely, accurate, and intelligible information from their subordinates in order to carry out the tasks related to strategic evaluation and control. Managers may use this data to compare the final result to the expectations set throughout the plan-making process.
Input that is relevant and timely is necessary for effective strategy appraisal. The information provided by subordinates will determine how well a strategy evaluation is conducted. It plays a critical part in assessing the feasibility of the chosen strategy. Regular feedback on the effectiveness of the previously planned approach would be provided via continuous assessment.
A feedback activity is a component of the strategic management process that enables management to get the feedback required for performance evaluation and the implementation of necessary corrective actions. When an organisation creates plans, programmes, etc., it should assess its earlier decisions and correct any errors.
For instance, performance that falls short of expectations suggests problems with the creation or implementation of the strategy. It’s also possible that environmental scanning and analysis missed a crucial element, like a fresh opponent.
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Importance of Strategic Management
1) Board Member Responsibilities: Relieving board members of their duties is one of the most important benefits of implementing strategic management in an organisation.
2) Aids in Objective Assessment: Strategic management relieves the board and senior management of some of their routine duties so they may focus on securing the organization’s future. Organizations may adopt a wider perspective via the use of strategic management disciplines rather of limiting their attention to the current problems at hand.
3) Creates a Framework for Decision-Making: With the assistance of a sound strategy, employees are able to make routine decisions inside a framework while making sure that those actions move the firm in a certain direction.
In addition to examining an organization’s mission and fundamental values and outlining its objectives, strategy also helps an organisation identify its risks and opportunities and provides tactics to strengthen and improve upon its weaknesses. As a result, it creates parameters and a framework within which decisions may be made.
4) Aids in Measuring Progress: By using the strategic management process, the organisation is forced to establish objectives and construct measures of organisational success. The organisation must analyse the factors that have led to its current performance in order to develop success measures.
The organisation must then revise, reassess, or update its objectives before putting them into action. The corporate level management and the board of directors must also be aware of these performance measures.
5) Offers an Organizational Perspective: Managers often focus on operational issues while ignoring interdepartmental or organizational-wide issues. In order to create an organizational-wide strategy, strategic management emphasises interrelated sectors while taking into consideration the organization’s viewpoint.
6) Increases Stability: Some strategies work to fortify an organisation by generating more room for growth. For instance, if a business only has a few clients, it cannot survive if any of them leave. Strategic management works to help organisations attract more customers so they are less dependent on a select group of clients.
By implementing strategies like releasing a new product line, buying a new business, and catering to a new market segment, among others, a corporation may strengthen its stability by using strategic management.
7) Strong Labor Supply: Strategic management makes it easier to put into practise practical staffing methods that improve the quantity and quality of labour. By creating thorough job descriptions for employees, improving hiring procedures, conducting annual reviews, planning training sessions, taking steps to lower the employee turnover rate, creating succession plans, creating compensation packages that are competitive, and abiding by federal and state laws and regulations, an organisation can develop a strong workforce.
8) Improves Brand Management: A company’s brand image may be damaged by the introduction of a new product in its line or by the acquisition of a business that does not fit with its image in the market. When choosing an organisational structure, strategic management takes brand management objectives into account.
9) Identifies SWOT: Strategic management analyses the environment of the company to determine both the organization’s overall SWOT and the SWOTs of each of its divisions. It is straightforward to pinpoint issues with the product line, marketing channels, pricing plans, marketing methods, hiring practises, e-commerce operations, etc. once they have been identified.
Limitations of Strategic Management
1) Time Consuming: The process of strategic management takes a lot of time. An organisation must devote a lot of effort and money into implementing strategic management.
2) Difficult Procedure: The implementation process for strategic management is rather intricate. To establish and carry out a strategy, specialised professionals with good qualifications are needed. A doctorate or master’s degree in the same discipline is needed to work as a strategist. For a business, hiring these strategists or working with a firm that offers strategic advice is often quite expensive.
3)Absence of Short-term Benefits: The advantages of employing strategic management ideas are only realised over the long term, despite the fact that investors expect quick gains. In order to produce long-term profits for an organisation, strategic management sometimes causes short-term losses. These immediate losses can diminish the organization’s value, which might result in its death.
4) Unexpected Results: Predicting the future is connected to several strategic management ideas. The future is not always predictable, however. Any significant political or financial adjustment in the environment might lead to consequences that vary greatly from what was originally anticipated.
It is incredibly challenging to predict future company success because of how quickly the environment changes. Strategic management may therefore be harmful to the organisation under such circumstances.
5) Lack of Adaptability: Strategic management may encourage bureaucracy and rigidity inside an organisation, making it more difficult for that organisation to adapt to environmental changes. As a result, the organisation is unable to take advantage of environmental opportunities and mitigate environmental risks.
6) Limited by a Set of Rules: A company cannot use the strategic management process in accordance with established guidelines, plans, or deadlines. It is based on a philosophy that has a preset approach for every situation.
As a result, rather than being a practical approach, strategic management becomes a business and management idea or doctrine. This makes it difficult to develop plans.
7) Assists in Achieving Objectives: Strategies help a business achieve its goals and forge a market position by allocating resources, providing workers with the right training, expanding production capacity, etc.
Difference between strategy and policy
Basis of Difference
Strategy
Policy
Meaning
A strategy provides a direction in which the organisation needs to go for achieving the organisational goals by employing various resources.
A policy provides guidelines to the employees for smooth operations and decisions making.
Nature
With the help of strategy, the formulated policies are applied practically within a stipulated time frame.
A policy just instructs in work but is not associated with any time frame.
Features
Strategies are formulated for those situations which have yet not occurred and hence the organisations have no formal response
Policies are formulated for activities which are repetitive in nature.
Orientation
Strategy is formulated for critical issues and requires constant attention from the top management
Policies are formulated by the top management for day-to-day activities. After the policies are formulated it becomes the responsibility of subordinates to implement those without the involvement of top management.
Scope
Strategies are formulated on the basis of actions
Policies are formulated on the basis of thoughts
Implementation at Levels of Organisation
Strategy is implemented at every level in the organisation
Policies are implemented by middle and lower-level employees.
Focus/ Objectives
Strategies are the ways to achieve the organisational objectives
Policies are the instructions to achieve the objectives.
Overall Goal
Strategies are formulated to utilise the available resources to achieve the organisational goals efficiently
Policies are formulated to direct the operations and activities of the organisation.
The Greek word “strategia” is where the word “strategy” originates. The term “strategia” comes from the Greek word “generalship.” The military was where the term “strategy” was originally used, and it has subsequently entered the business world. The strategy of an organisation acts as a road map for establishing its vision and purpose as well as directing its future course of action.
A company’s strategy enables it to minimise the shortcomings of its competitors while maximising its own strengths. By maximising the allocation and utilisation of internal resources and collaborating on multiple organisational goals, strategy helps an organisation achieve its current goals.
Strategy seeks to create harmony and balance between objectives, resources, and ideas in order to increase the likelihood of success and positive consequences. In a larger sense, strategy refers to determining the crucial long-term goals of the company as well as developing plans, acquiring, allocating, and deploying resources to meet those objectives.
An organization’s activities should be consistent and aligned, and strategy development may achieve this through a range of methods, tools, and resources.
According to George A. Steiner, “Strategy entails establishing the primary aim of a corporation, the goals it plans to achieve, and the rules guiding the use of resources at the firm’s disposal to achieve its objectives.”
According to Alfred D. Chandler, “Strategy is the determination of an enterprise’s fundamental long-term purpose and objectives, as well as the choice of actions and resource allocation necessary to attain these goals.”
According to William F. Glueck, “Plan is a coherent, complete, and integrated strategy designed to assure that the fundamental objectives of the organisation are realised.”
Igor Ansoff claims that strategy is the “common thread” that connects the company’s operations and product markets, establishing the fundamental sort of business the organisation was or was anticipated to be in the future.
Although strategy is not as straightforward as it first seems, a logical understanding of its theory helps to comprehend it and work more comfortably. Theories facilitate understanding of a wide range of strategy ideas, including terminology, definitions, explanations of assumptions and assertions, related hypotheses, and procedures for testing and changing them.
1) Establishes and Communicates the Organization’s Image: Through its numerous goals and objectives, strategy seeks to establish and communicate the organization’s image. The firm’s strategy establishes a fundamental course to follow in order to make sensible decisions and accomplish organisational goals.
2) Integrated Approach: A clever strategy employs an integrated method for allocating internal resources and putting them to use for the benefit of the whole business. It directs and aids the business in making the crucial decisions needed to maximise its advantages and boldly address environmental threats.
A strategy enables an organisation to interact with elements of its external environment, enabling management to take the necessary steps to achieve the company’s goals. As a consequence, developing strategy is a crucial task that allows the business to engage with its environment.
4) Set of Activities: A strategy is a collection of numerous activities utilised in different contexts to accomplish certain objectives or solve challenges.
5) Future-focused: Strategies are created to solve problems that the organisation has never faced before. It may thus be characterised as future-focused.
6) Combination of Internal and External Factors: Strategy seeks to strike a balance between Internal Strengths and External Opportunities and Risks. As a consequence, it combines factors from both the internal and exterior environments.
7) System-Oriented: A strategy must go by a set of guidelines and standards that are followed by everyone in the organisation in order to be successful.
8) Involves Inconsistent Activities: Since strategic activities are influenced by external factors, certain decisions made in accordance with the strategy may be inconsistent. These things might occur simultaneously or in order.
Levels of Strategy
The existence of strategy at various levels of an organisation must be noted. What is our business, what will it be, and what should it be? is something that managers must determine. the question “what is our business, what will it be, and what should it be?” has been answered.
They will then be able to develop challenging but achievable performance objectives and come up with strategies for achieving them. The intended outcome is the creation of a hierarchy of goals covering the whole organisation from top to bottom, along with a corresponding hierarchy of ways to achieve the goals at each level.
Corporate Strategy
Corporate level strategies, sometimes referred to as corporate strategies, are plans created by senior management to control every aspect of the business operation and achieve the required degree of performance.
These plans go into depth on how an organization’s many departments, product lines, technology, customers and their needs, etc. operate and what their aims are. Corporate strategies assist a company in becoming what it wants to be in order to function at the best levels.
Business strategy
A kind of business strategy is a business strategy, commonly referred to as company strategies or Strategic Business Unit (SBU) level strategies. Recognizing the numerous market sectors that the organisation operates in is the foundation of a Strategic Business Unit (SBU). Because of the differences in their settings, each industry has its own set of business tactics.
The company-level plans are created to satisfy the needs of customers across a range of categories while also enhancing their experience. As a consequence, serving the demands of customers in several categories helps the business grow and keep its competitive advantage.
For instance, Domino’s Pizza attributes its accomplishments to a Turnaround strategy that produced outstanding outcomes as a consequence of the company’s efforts to realise a straightforward and obvious objective: “have a clear triumph vs a competitor in a taste test.”
Functional Startegy
The functional level of an organisation refers to the operational division levels and departments, such as marketing, finance, human resources, R&D, and so on. Numerous strategic decisions made at functional levels are related to business practises and the value chain. The goals of the functional level strategies are to increase and coordinate resources in order to effectively carry out the plans at the business level.
An organization’s functional level contributes to higher-level strategies, such as corporate and business strategies, and transforms them into action plans for specific departments. The approach cannot succeed unless these plans are carried out.
Information regarding resources and capabilities is gathered at the functional level and utilised by higher-level strategies to create business and corporate plans. The functional level strategies that may be subdivided into a marketing strategy include pricing strategies, distribution strategies, promotion strategies, sales strategies, and so on.
Strategy Formation Process
Strategy formulation is the act of creating long-term strategies for an organisation in order to produce a well-organized and unified corporate process. The cornerstone for developing a plan is the organization’s long-term potential. The success or health of the company depends on how the strategy is designed.
Strategists start the process of developing a strategy once they have predicted and analysed the present and the future, conducted SWOT analysis, looked into strategic capabilities and key competencies, and finalised and sequentially ordered the strategic objectives.
Through strategies, the organisation shows how it plans to take the position it wants in the market. The strategy has to take the findings of the environmental study into consideration. The aims and vision of the company should be realised as a consequence of this well considered strategy.
Thus, choosing an effective course of action for attaining organisational objectives and, as a consequence, accomplishing organisational purpose, may be characterised as the process of developing a strategy. The strategic planning and management system is a tool that businesses may use to create and carry out successful corporate strategies.
1) Organizational Mission and Goals: The organization’s mission and goals are the first and most crucial factors to consider while establishing a plan. A firm’s mission is its unique reason for being, and its objective is what the organisation hopes to achieve. It is important to develop a mission statement that expresses the core idea driving the organization’s existence.
A strategy is often thought of as a way to accomplish organisational objectives. Objectives identify the position that an organisation wants to be in, while strategy describes the steps and methods needed to get there. The organization’s goals and the method for accomplishing them are determined by the strategy.
As a consequence, strategy is a wide concept that refers to deciding how to utilise resources in the most effective way to accomplish objectives. Together, the strategy’s purpose and objectives provide guidance for the other critical components.
2) Environmental Analysis: Environmental analysis is the second essential step in developing a plan. Strategists must first evaluate the circumstances since strategy connects an organisation and its surroundings. The competitive position of the company is also examined at this level.
It is necessary to assess the firm’s competitive position in terms of the quality and quantity of the present product range. The main objective of such an assessment is to make sure that all the elements required for commercial success can be identified.
The process of doing an environmental analysis comprises gathering pertinent information from the outside environment and analysing it to determine the environment’s advantages and disadvantages (opportunities and threats) that are significant to the organisation.
Gathering environmental data may be aided by forecasting, snooping, speaking with individuals or organisations, conducting interviews, and looking through different periodicals. Environmental analysis becomes more precise with continued environmental monitoring.
3) Corporate Analysis: Much to environmental analysis, corporate analysis is a crucial step in developing a strategy. Corporate analysis focuses on internal issues, while environmental analysis examines external factors.
A SWOT analysis, which entails evaluating strengths, weaknesses, opportunities, and threats, is what both of these evaluations are known as. determining the requirements of the organisation. To maximise chances and reduce risks, it’s also essential to examine organisational strengths and weaknesses, as well as to recognise environmental opportunities and dangers. Additionally, it identifies the organization’s potential commercial fields.
Corporate analysis is a methodical procedure that first determines the elements that are crucial to the organization’s current and future operations before determining whether they will have a good or negative effect. Strengths are described as having a positive effect on the company; weaknesses are described in the opposite way.
4) Finding Alternative Strategies: Different strategies may be found when business and environmental concerns are combined. In general, this approach offers a wide range of choices.
Once an organization’s internal and external features have been established, the focus turns to evaluating the available strategic alternatives. Stabilizing, expanding, retrenching, or even combining the many organisational tasks are common strategy options (concerning its markets, services, or goods).
5) Finest Alternative Selection: Several criteria are taken into consideration while selecting the best options. When deciding on the best course of action, it is crucial to take into account the structure of organisational objectives, ETOP (Environmental Threat and Opportunity Profile), the strategy itself, and the strategic advantage profile.
6) Strategy Selection: Choosing the optimal strategy for the organisation is the last phase in any strategy design process. The best course of action is chosen after considering all available alternatives in light of the organization’s strengths, weaknesses, opportunities, threats, and long-term objectives.
The sort of connections between internal and external parties, previously used techniques, power lobbying, managers’ risk-management philosophies, and other factors all play a role in this strategy selection. The decision-maker choose the approach in accordance with his or her attitude, beliefs, and personal values.
Roles of Startegies
1) Act as a Framework for Operational Planning: In organisations, strategies are often employed as a framework for operational planning. Such a framework would enable strategic decision-makers to guide and predetermine operational decisions. Managers or decision-makers who extensively research and create a variety of strategies may provide a solid basis for their operational goals.
It is possible to make the most of organisational resources with the help of such a solid framework. Using the strategic framework, the resources may be allocated where they will be most useful. These industries are described in terms of the customer bases and geographic regions that the strategy covers.
The appropriateness of the chosen area will directly affect how well resources are deployed. For instance, a business should invest in market research and development if it is creating plans to launch a new product.
2) Clarity in Activity Direction: One more purpose of strategies is to clearly define the actions that must be carried out in order to achieve the various objectives of the company. The priorities set during strategic planning are shown here. Consequently, strategies may help to make organisational objectives more precise and thorough.
A business or non-profit organisation could specify a profit-making or social goal, for instance. However, given that the organization’s operational aims are still unclear, such a definition is too general and imprecise. With the use of techniques that more accurately and realistically characterise each operational aim, such goals may be better defined.
In the case of the aforementioned example, strategies may help define the overall level of profit that the organisation seeks, as well as the resources to be used in opposition to and in support of these objectives.
Once these objectives are established, they may be utilised to direct those responsible for carrying out the duties. Additionally, by outlining what is expected of individuals and the organization’s future ambitions, the whole process helps to improve personal performance.
3) Increasing Organizational Effectiveness: Strategies may increase an organization’s effectiveness in a number of different ways. An organization’s performance in achieving its stated objectives within the allotted time and resource constraints may be used to gauge effectiveness.
Because of this, the organisation must allocate its resources in a way that maximises their efficacy and maximises their contribution to the accomplishment of the company’s overarching objectives.
Each of the organization’s resources has a particular use in a particular circumstance. It is thus urged that these materials be used in line with their original purpose. The achievement of organisational efficiency will be aided by this.
4) Employee Happiness: Ensuring employee pleasure is another task carried out by strategies in the framework of strategic management. Because formal strategic management approaches help to clarify each employee’s role, employees are happier in organisations that apply them.
By doing this, the potential for disagreement and ambiguity when establishing each employee’s role is substantially reduced. Systematic decisions linked to strategic management influence personnel.
It details things like how they could contribute to the accomplishment of organisational objectives, where to get crucial information, who will make decisions, and more. Effectiveness is boosted in this way on both an individual and an organisational level.
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Approaches to Strategy Making
1) Autocratic Method: In this technique, the decision-making and development of strategy are completely in the authority of the leader. The strategic leader is in charge of establishing the strategies, defining the objectives, and selecting the most effective course of action. This method is centralised since top management has the reins of authority.
2) Transformational Approach: In this strategy, the strategic leader employs a compelling vision and purpose to inspire employees to achieve the goals of the firm. He enthuses organisational members to care about achieving the common goal by using a variety of examples and analogies. The creation of mutually acceptable objectives and an inspiring vision statement results in the alignment of business activities.
3) Rational Approach: The rational approach to strategy formulation emphasises weighing the advantages and disadvantages of each potential plan before selecting the best one.
4) Learning Approach: The focus of the learning approach is on the organization’s flexibility and responsiveness. Given the very dynamic nature of the business environment, the learning methodology lays a heavy emphasis on ongoing learning and matching it with market demands.
5) Political Method: In this strategy, strategic leaders create plans based on novel product ideas, and strategies are put into action in accordance with employee preferences. When selecting a strategy, the organization’s internal and political environments are taken into consideration. The way the method must be used depends on how employees behave in terms of self-regulation.
Importance of Strategy
1) Offers Direction: Strategies assist a company in achieving its goals. Insufficient guiding strategies cause organisations to lose their mission.
2) Facilitates Decision-Making: Since strategy and strategic initiatives operate as a point of reference for all activities, strategy facilitates decision-making.
3) Facilitates Effective Resource Allocation: A clever plan helps the organisation allocate resources effectively. Before agreeing on one course of action, strategists must take into account the facts at their disposal and examine all potential outcomes.
4) Coordinates Activities: Creating a master plan that covers the whole organisation may be advantageous. This comprehensive approach helps the organisation coordinate strategic goals at multiple levels.
A company-wide strategy ensures that all departments are working toward the same goal with the least amount of conflicts, overlaps, and contradictions feasible, and that there are no discrepancies.
5) Enhances Communication and Commitment: By clearly defining the goals and responsibilities, a strategy helps to shape overall business operations, communication, and the level of commitment among all parts of the organisation.
6) Allows for Comparison of Alternative Actions: Strategies let top management analyse the results of previously carried out strategic initiatives, enabling them to consider alternative actions and choose the best option for different company divisions. By doing this, it is ensured that crucial resources are used as effectively as possible.
A case study must be solved utilising in-depth analytical abilities, the capacity to research the present issue, consider the best solution, and the use of the most persuasive and practical evidence. It is crucial to make notes, highlight important details, and emphasise the key issues at hand.
Nowadays, you may get online case study assistance by contacting professionals via their websites. We use a step-by-step process to make things simpler and more clear. Therefore, to acquire the appropriate and desired outcomes, follow the step-by-step approach before you start writing the case.
First Step: Determine The Case
Making notes, highlighting the important variables that are involved, and introducing the pertinent components that are required are the initial steps.
Second Step: Focus Your Analysis
Identify the main issues. Discover the cause of their existence. How may they impact the business or the client? Determine what is to blame and implement the appropriate remedies.
Third Step: Consider Potential Solutions
Review all of the case study course’s readings, relevant conversations, seek advice from other sources, and draw on your own experience.
Fourth Step: Select the ideal response
Think about the strongest arguments. benefits, disadvantages, and degree of viability. Reread the information that has been obtained, being sure to pay attention to each detail.
Following these well-studied techniques will help you solve a case study step-by-step and quickly come to a conclusion that will benefit your customers. One may also get acquainted with how to write case study assignments by following these procedures, which will also result in less uncertainty.
Advantages and Drawbacks of Case Studies
A case study may offer advantages as well as disadvantages. Here, we list its positive and negative aspects in the form of bullets. We first learn about its advantages.
It enables researchers and investigators to acquire advanced information.
Give them an opportunity to learn useful knowledge from extraordinary and uncommon circumstances.
Allow the study subjects to construct their own hypotheses in order to test them in experiments.
Case studies offer advantages and disadvantages. Let’s go through them in bullet points.
The case study is unable to succinctly explain cause and effect.
In public, it cannot be generalized.
Additionally, prejudice may result.
Conclusion
In general, case studies may be used in a wide range of disciplines, including anthropology, political science, psychology, and education. In the article above, we covered the concept of a case study, how to deal with it, and provided examples for you to better understand. I’m hoping that this post will help you become more knowledgeable about case study analysis.
Review the case below, analyze it, and then create a report:
Interpersonal Communication
Ms. Shina oversaw the administrative division of a large company. There were a lot of female typists. They were all proficient at their jobs and completed all of their daily tasks before leaving the workplace. There was no need for typing labour in this portion to be done after hours.
The manager of the administration department, Mr. Mohan, was summoned one day by the company’s managing director, who told him that people in his division had begun to err on the side of laxity when it came to being on time for work.
He said that on one specific day, around 9.40 in the morning, he arrived at work and saw two stenos/typists arriving late. He claimed that this was not the first time he had seen this.
He desired that his managers become knowledgeable in this area. Mr. Mohan committed to maintain timeliness after carefully listening to the Managing Director’s directions.
When the two latecomers event occurred, Mr. Mohan phoned Ms. Shina to inform her of the situation and the Managing Director’s remarks. Additionally, he said that timeliness must always be respected. Ms. Shina said that while she was aware of the circumstances, she did not believe that any action was necessary.
She said that the stenos/typists put in a lot of effort and did not mind staying late for a few hours in the office if there was a lot of work to be done. They were determined to accomplish the day’s work before leaving the workplace, and they normally kept their appointments and did not often arrive late.
She also argued that in the interest of excellent functioning, it should not be taken into account when one or two typists are sometimes ten to fifteen minutes late due to personal reasons.Nevertheless, Mr. Mohan demanded that she follow the Managing Director’s directions.
Ms. Shina became confused. The Managing Director urged them to be at the office on time and is opposed to any relaxation in this regard, so she returned to her area and told her typists the full scenario. She also warned them that the latecomers would face punishment.
This did not make the typists happy. Since they were the typists who arrived later that day, Ms. Sarla and Ms. Rama spoke about this issue at lunch. They believed they had not received sufficient care.
It is extremely odd that things have been gone too far, Ms. Sarla added. I’ve made up my mind to leave the workplace at 5.30 p.m. if I’m requested to stay later than that and leave the job undone.
Just two days later, at 5:15 p.m., the Managing Director’s Private Secretary delivered Ms. Rama some urgent typing work. To type the whole document would take at least two typists an hour.
With these crucial documents, the Managing Director was scheduled to meet with the Chairman in the evening. In any event, he needed the typed document returned by 6.30 p.m.
Ms. Shina gave Ms. Sarla and Ms. Rama the task, but both said they could not do it since it would take an hour to complete and they could only remain in the office for a maximum of fifteen minutes.
At 5.30 p.m., the office shuts. Since “the commanders sometimes urged them to sit late, why such hue and cry should have been created when someone was late by a few minutes and that too on a few occasions,” both typists did not forget to ask.
Ms. Shina had trouble getting the materials typed. She worried that other typists may respond in the same way. She then returned to the Private Secretary and informed the Managing Director that she and the Private Secretary may need to split the job and complete it even though the Private Secretary had other more important tasks to do.
QUESTIONS
(a) What do you think of Ms. Rama, Ms. Sarla, and Ms. Shina’s actions?
(b) Has there been a communication breakdown? If so, how and where?
(c) How can this scenario be made better?
(d) What are your thoughts about the Managing Director’s demeanour?
(e) How do you see Mr. Mohan’s demeanour?
(f) In such a circumstance, how would you respond?
SOLVING THE CASE
Brief Description of the Case
Ms. Shina oversees a team of female typists in a large company, where the workers are efficient and complete their tasks on time. However, the Managing Director observed that some typists, including Ms. Sarla and Ms. Rama, were occasionally arriving late, prompting him to raise concerns about punctuality with Mr. Mohan, the administration manager.
Mr. Mohan, in turn, asked Ms. Shina to address the issue, but she initially dismissed it as unnecessary since the typists always finished their work. This led to frustration among the typists, who felt unfairly criticized.
When asked to stay late to complete urgent work, Ms. Sarla and Ms. Rama refused in protest, citing the inconsistency of management’s approach to lateness versus staying late.
Ms. Shina struggled to resolve the conflict while trying to meet the Managing Director’s expectations. Eventually, she warned the typists that further lateness would lead to consequences, but the overall situation highlighted deeper issues of communication, employee dissatisfaction, and managerial challenges.
Problem Description
The issue revolves around punctuality and communication failures in a large company’s administrative division. The Managing Director observed late arrivals by the typists, raising concerns about their discipline.
Despite the typists’ efficiency and the completion of their tasks, the emphasis was placed on their punctuality. The tension escalated when two typists, Ms. Sarla and Ms. Rama, refused to stay late for urgent work as a form of protest against being called out for minor instances of tardiness. The managers—Ms. Shina and Mr. Mohan—struggled to balance the demands for punctuality and work completion.
Brief Description of the Problems:
Punctuality Issues: The Managing Director noticed that some typists were arriving late to work, which he viewed as a sign of growing laxity, even though their work was consistently completed on time.
Communication Breakdown: There was poor communication between management and employees regarding expectations about punctuality and flexibility in staying late for urgent work. This led to misunderstandings and resentment, particularly among the typists.
Employee Dissatisfaction: The typists, particularly Ms. Sarla and Ms. Rama, felt undervalued and unfairly criticized for minor lateness, despite their hard work and willingness to stay late when needed. Their dissatisfaction escalated into a refusal to cooperate during a critical task.
Managerial Conflict: Ms. Shina struggled to balance the demands of her superior, Mr. Mohan, and the expectations of her team. This created confusion and tension as she was caught between enforcing punctuality and acknowledging the typists’ contributions.
SWOT Analysis
Strengths:
Efficiency of Typists: All typists, including Ms. Sarla and Ms. Rama, are highly proficient and ensure their daily tasks are completed before leaving.
Strong Team Spirit: The typists are generally willing to stay late when work demands are high.
Leadership Commitment: Both Ms. Shina and Mr. Mohan are focused on maintaining discipline and productivity.
Weaknesses:
Punctuality Issues: Some typists, including Ms. Sarla and Ms. Rama, are arriving late, which the Managing Director finds problematic.
Communication Breakdown: The issue of lateness and after-hours work expectations is poorly communicated, causing resentment among employees.
Poor Handling of Feedback: Ms. Shina’s initial reaction to the punctuality issue did not address the typists’ concerns, making them feel unvalued.
Opportunities:
Enhanced Communication: Implementing better communication channels could improve the relationship between managers and typists.
Policy Clarification: Establishing clear guidelines for punctuality and after-hours work could help set expectations and reduce confusion.
Employee Motivation: Recognizing the efforts of typists when they stay late could enhance morale and promote punctuality.
Threats:
Employee Dissatisfaction: The current frustration with management could lead to decreased motivation and future conflicts.
Work Delays: If typists refuse to stay late for urgent tasks, critical work may be delayed.
Escalation of Conflict: The punitive approach towards tardiness could escalate tension, leading to high employee turnover or strikes.
Answers to the Questions
(A) What do you think of Ms. Rama, Ms. Sarla, and Ms. Shina’s actions?
Ms. Rama and Ms. Sarla: Their protest by refusing to stay late highlights a larger issue of feeling undervalued. They believe the lateness issue is minor compared to the flexibility they usually show, which suggests that they feel unfairly treated.
Ms. Shina: While she is trying to balance discipline and productivity, her initial dismissal of the lateness issue may have contributed to the growing dissatisfaction. Later, she recognized the need to communicate better with her team but was still caught in the middle of conflicting demands.
(a) Has there been a communication breakdown? If so, how and where?
Yes, the communication breakdown occurred:
Between management and employees: The typists were not informed clearly about the company’s strict expectations on punctuality, especially when their work performance was otherwise efficient.
Between Mr. Mohan and Ms. Shina: There seems to be a lack of a cohesive message on how to handle tardiness. Ms. Shina did not emphasize the importance of punctuality to her team, creating confusion.
Between Ms. Shina and the typists: Ms. Shina’s delayed response to the Managing Director’s concerns and the typists’ dissatisfaction resulted in mistrust.
How can this scenario be made better?
Clear Policy on Punctuality: There needs to be an explicit policy regarding arrival times, with a balance of flexibility for personal issues.
Better Communication Channels: A meeting between the typists and management should be organized to discuss expectations and concerns openly, ensuring employees feel heard.
Recognition and Flexibility: Acknowledging the typists’ hard work while setting fair expectations for punctuality would help to improve morale and discipline.
(d) What are your thoughts about the Managing Director’s demeanour?
The Managing Director is focused on discipline and is concerned about lateness, which is understandable from a leadership perspective. However, his approach could be more flexible. Focusing solely on punctuality without considering the team’s productivity might seem rigid. A more balanced approach that recognizes both punctuality and hard work would help foster a positive work environment.
(e) How do you see Mr. Mohan’s demeanour?
Mr. Mohan is caught between following the Managing Director’s orders and supporting his team. He seems to be taking a strict stance on punctuality because he is under pressure from the top, but he does not appear to have offered much flexibility or support to his employees, making him seem somewhat distant from their concerns.
(f) In such a circumstance, how would you respond?
If I were in this situation, I would:
Hold a meeting with the typists to clarify expectations about punctuality and after-hours work, ensuring that employees understand the company’s requirements.
Encourage open communication where employees can express their concerns without fear of punishment.
Develop a fair policy that balances productivity with personal flexibility, recognizing that occasional lateness can be managed if overall performance remains high.
Three Solutions to Solve the Problem
Implement a Flexible Work Policy:
How it works: Introduce a system where employees are allowed occasional flexibility in arrival times, with the understanding that they make up the lost time within the same day or week. Establish a clear framework for when flexibility is allowed, such as for personal reasons, while ensuring that employees consistently meet overall productivity targets.
Why it works: This addresses the typists’ dissatisfaction over strict punctuality rules, while still maintaining a focus on the timely completion of work. It acknowledges that life circumstances sometimes interfere with punctuality but balances this with professional responsibilities.
Improve Communication and Feedback Channels:
How it works: Organize regular meetings between management and the typists where expectations and feedback can be openly discussed. Managers should clearly communicate any new policies, expectations regarding work hours, and their reasons. Employees should also have a space to voice concerns or suggest improvements without fear of backlash.
Why it works: Clear communication helps prevent misunderstandings, like those between Ms. Shina, Mr. Mohan, and the typists. It also promotes a culture of transparency and trust, allowing employees to feel heard and valued.
Introduce a Recognition and Rewards Program:
How it works: Create a system where employees are acknowledged for both their punctuality and their dedication when staying late for urgent work. Rewards can be in the form of time off, bonuses, or public recognition during staff meetings.
Why it works: Positive reinforcement encourages both punctuality and willingness to stay late when necessary. Recognizing the extra effort put in by typists can increase motivation and reduce resentment, as employees will feel appreciated rather than solely critiqued for minor lateness.
Steps to Implement:
Meet with staff to clarify expectations and discuss the new flexible work policy.
Set up regular communication sessions to keep everyone on the same page.
Launch the recognition program to boost morale and motivate staff towards punctuality and dedication.
Ensure fair and consistent enforcement of both punctuality and rewards for extra work, keeping a balanced approach.
Compared to statutory audit, management audit is a more modern practise. Operational audit is another name for management audit. The necessity for a review of the management process developed as the duties of the statutory auditor grew.
The statutory auditor’s initial duties were stating whether the balance sheet and profit and loss account were produced based on the Companies Act and providing a true and objective analysis of the company’s financial situation.
The statutory auditor never crosses this boundary. The explanation is that a new management audit was developed due to the corporate organization’s expanding size and complexity.
Additionally, the statutory auditor is not expected to confirm whether the management’s policies are correctly implemented or not; to assess how well different management functions and processes are being carried out in order to increase their efficiency; to determine whether a change in the company’s purchasing strategy is advantageous; and he is not expected to suggest that a change in the way the business is run would be advantageous.
A company’s or a business’s ability to succeed or fail is entirely dependent on its management. A management audit is a comprehensive, scientific evaluation of the management’s effectiveness.
The management auditor must take into account the different cost aspects and production-related issues in the current corporate environment.
The reason is that in order to compete in the cutthroat business world, each corporation seeks to reduce production costs by reducing waste and using all available workforce.
The business seeks management consulting services to identify performance issues with management tasks in the modern digital environment.
Business concerns lack access to competent employees in the management cadre or some specialised fields like operation research, electronic data processing, production control, and similar fields.
A specialist in these fields won’t want to work for a company that conducts business. His career goal is to work as a management consultant. He also wants to act as a management auditor and charge exorbitant fees.
Because the customer may make profits greater than what he really spends on advice, the client is willing to pay him hefty rates.
A recent development in auditing is the notion of management audit. Management Audit currently refers to the development of internal audit. However, there are some distinctions between internal audit and management audit.
Meaning
The term “management audit” refers to an investigation, a review of numerous policies, and management action based on a set of predetermined goals.
The management audit is carried out to assess the effectiveness and operations of the management. It is a self-directed evaluation process.
Definition
To comprehend the notion, it would be helpful to learn a few definitions of management audit. The following definitions include some of them:
“Management audit is a comprehensive and constructive examination of an organisational structure of a company, institution, or branch of government, or of any component thereof, such as a division or department, and its plans and objectives, its means of operation, and its use of human and physical facilities,” says William P. Leonard.
“A Management audit is a future-focused, independent and systematic evaluation of the activities of all levels of management for the purpose of increasing organisational profitability and increasing the attainment of other organisational objectives through improvements in the performance of the management function, achievement of programme purpose, social objectives, and employee’s development,” according to The Institute of Internal Auditors Inc.
According to Washbrook, “The whole examination, or part of it, include checks on the effectiveness of managers, their compliance with company or professional standards, the reliability of the management data, the quality of performance of duties, and recommendations for improvement.
According to Leslie R. Howard, “Management audit is an investigation of the business from the top down to determine whether sound management prevails, facilitating the most effective relationship with the outside world as well as the most efficient organisation and smooth operation of the internal organisation.”
“Management auditing is a diagnostic appraisal process for analysing goals, plans, policies, and activities in every phase of operation to turn over unsuspected weaknessess and to develop ideas for improvement in areas that have escaped management attention,” according to the American Institute of Management.
According to Taylor and Perry, “Management auditing is a method to evaluate the effectiveness of management at all levels throughout the organisation; more specifically, it comprises the investigation of a business by a non-governmental entity from the highest executive level downward, in order to ascertain whether sound management prevails throughout, and to report as to its efficiency or otherwise, with recommendations to ensure its effectiveness where such is not the case.”
A management audit, according to William F. Kelly, “is a critical review of an organisational structure and administration with the goal of making recommendations for adjustment and improvement. An audit may involve the entire company structure or be limited to one of its parts, such as a division or department.”
According to Michael Stephen R., “The management audit is the business equivalent of the human physical examination. In many ways, it is similar to a financial audit in that it tests a company’s financial operations against generally accepted standards and practises. In the same way, management audit is an examination of a company’s administrative operations and organisational arrangements using generally accepted standards of good management for evaluation.”
“A systematic independent appraisal activity within an organisation for a review of the entire departmental operations as a service to management,” is how the Federal Financial Officers’ Institute of Canada defines operational auditing.
“The overall objective of operational auditing is to assist all levels of management in the effective discharge of their responsibilities by furnishing them with objective analyses, appraisals, recommendations, and pertinent comments concerning the activities reviewed.”
By using personnel who are not subject-matter experts, Roy A. Lindberg and Theodore Cohn define “a technique for regularly and systematically evaluating units or function effectiveness against corporate and industry standards with the objectives of assuring a given management that its goals are being carried out and/or identifying conditions that can be improved.”
An in-depth examination of the aforementioned expert definitions allows one to determine that management audit includes the following areas:
Examining the whole or a portion of the organisational structure
evaluating the management’s efficiency and operations.
a critical evaluation of management leaders’ actions.
Experts must conduct the impartial examination.
evaluation of the management board’s performance.
examining the management’s objectives, plans, policies, and operations.
a determination of the management’s profit potential.
Identifying areas of managerial weakness and offering appropriate solutions.
preparing management to deal with any issue successfully in the future.
The following list includes the fundamental goals of management audits:
To determine the extent to which the organization’s primary goals have been achieved.
To identify management leaders’ flaws or inconsistencies.
To make sure the management will accomplish the goals.
To assist the management in effective operation management.
To assist management leaders in carrying out their duties effectively.
To recommend to management the available strategies and tools for achieving the goals.
To increase the organization’s profitability.
To get or make use of the management’s utmost efficiency.
To assist the management leaders in carrying out their responsibilities effectively.
Scope of Management Audit
The goals of the management audit and the management’s needs will determine the audit’s scope. The evaluation of the operations for the whole organisation or just a portion of it is covered by management audit. The following is a succinct concise explanation of the management audit’s scope:
Review of the management’s objectives, goals, plans, and policies.
review of department-specific activities’ performance.
Review and evaluation of the planning process.
Review and evaluation of the use of the financial and human resources
Analyze the organisational structure.
Evaluation of management choices and their effects are reviewed.
Management leaders evaluate the authority-delegation and responsibility-assignment procedure.
Review and evaluation of physical actions and processes.
Review of the organization’s systems and processes, including its rules, regulations, and practises.
Evaluation of the management information system’s performance.
Examining office activities and evaluating their efficacy.
review of the management’s approved personnel policy.
Review of the management’s internal control procedures and systems.
Reviewing the selling and distribution process and evaluating its efficiency.
Review and evaluation of buying operations’ efficiency
Reviewing the manufacturing process and evaluating its efficacy.
Importance or Need for Management Audit
Management audit is crucial and necessary right now for a number of reasons. Following are the primary reasons why management audit is now necessary:
The purpose of management audit is to determine whether or not the company’s established policies are being followed correctly.
It aids in the performance enhancement of all managers, including the general manager.
A management audit provides recommendations for reducing production costs or eliminating waste.
Independent performance analysis is helpful for the general manager or managing director.
The methods available to maximise profit and ensure optimal use of all resources are highlighted by management audit.
It identifies the areas of weakness or deficiency that lead to ineffective performance and improves performance.
A management audit may determine if a firm is financially stable.
Sorting out financial and non-financial incentive programmes and connecting them to performance aids management.
Banks and other financial institutions may demand a management audit to determine whether or not the loan monies have been used correctly.
The management audit helps the international collaborators evaluate the effectiveness and development of the management of the company with whom they have entered into partnership.
Public businesses in India adhere to regulations and practises but show little interest in their accomplishments or outcomes. The management audit advises the public firms to alter their perspective and insist on increasing their productivity.
The management audit is required to determine the most effective techniques.
Qualification of Management Audit
There is no set educational requirement for management auditors. The cause management audit is the newest internal auditing technique and regulations do not mandate it. Supposedly, the internal auditor may do the management audit as well. As a result, the internal auditor might be given the management audit task for the following reasons:
Internal auditors are well-versed in organisational structure, business principles, actual management issues, and related topics. He may thus be able to provide insightful recommendations.
The internal auditor discovers a chance to learn more about the management team’s performance across the board.
The internal 4 is fully aware of the relationships between the staff. The internal auditor is fully aware of the workers’ strengths and shortcomings personally.
The internal auditor looks at how each department in an organisation operates.
The internal auditor will have little trouble understanding the reasons why management audit is necessary.
Some claim that the following factors warrant assigning the management audit task to someone other than the internal auditor:
The company’s affairs may be seen differently or from a different perspective by an external auditor.
He does not get anything from the business. So he boldly makes recommendations to get rid of the performance bottlenecks.
He would be well-versed in many different professions. He is very knowledgeable about the best techniques for increasing staff productivity.
He is technically savvy.
These two points of view may be supported for good reasons. Finding someone who will do management auditing effectively and cheaply is really tough. In any event, statutory audit is not applicable to the management audit.
There is currently no regulatory authority that establishes any requirements for a management auditor. A management audit will be conducted by management professionals.
They’ve been given the title of management consultants. When choosing a management auditor, management should take into account the technical expertise of the management consultants.
As a management auditor, it is desirable to choose someone different than the internal auditor and statutory auditor.
If the management adopts this method, it will undoubtedly get insightful recommendations for enhancing the effectiveness of the management leaders.
Approach of Management Audit
Before beginning a management audit, a management auditor should set up an audit plan. The management auditor may effectively carry out his tasks with the aid of an effective audit programme if he adheres to the techniques listed below:
He needs to assess the formal organisational structure and flowcharts.
He needs to evaluate the current management information system.
He has to research the different management policies.
He has to take a look at the management executives’ scope of power and their allocated duties.
He has to review the policies and guidelines for leaves.
He should see how different management leaders interact with one another.
He should research the organization’s current structure.
He need to consider the many
He has to evaluate the effects of the management leaders’ choices.
He has to familiarise himself with the legal guidelines used in the management of the business.
He need to examine the management executives’ working circumstances and atmosphere.
He need to research the primary goals and auxiliary
He has to go through the different organisational levels.
The management auditor’s expertise and competence are wholly responsible for the management audit’s success.
Preliminaries of Management Audit
It is impossible for one individual to hold all the necessary abilities for audit. To get the best outcomes, a team of professionals should perform the management audit.
As a result, the management audit team should be made up of individuals with expertise in a variety of disciplines, including accounting, engineering, science, psychology, and the like.
These individuals need to get appropriate training. Top management should provide them all possible assistance and the resources they need to develop the abilities needed to evaluate the many management areas.
Before beginning the auditing task, the management auditor needs carry out a number of responsibilities, such as preparation work. Here’s a quick explanation of each:
He has to be aware of the workplace culture.
He ought to research how management leaders are chosen.
He need to research the mentalities of top management.
He needs to recognise the natural abilities of management leaders.
He has to learn how much management executives are involved in the task being done.
He has to adjust the requirements for different kinds of activity.
He should pay attention to how management treats CEOs and employees.
He has to learn how much discretion is granted to management leaders while carrying out their duties.
He has to learn about the management’s control methods.
He needs to determine the degree of work satisfaction that management leaders may have.
He needs to determine if the personnel is adequate.
The management should provide the auditor the necessary power to certify his evaluation actions. In other words, he ought to have asked the management for a clearly defined authority.
Duties of Management Audit
Fixing the responsibilities of a management auditor is really challenging. He will, however, deal with his job areas. The management auditor might then examine the following things:
The management’s purchasing procedures.
Sales procedures, such as accepting and carrying out orders.
Examining the production process critically.
Factory inspection, or the cleanliness of the manufacturing area.
Storage spaces.
safety measures for a company’s numerous assets, including its final products, raw materials, and raw materials.
internal transportation system for people and goods.
keeping of records.
customer support
after-sale support.
the handling of client concerns
Publicity.
Quality control procedures for both final items and raw resources.
Production and sales departments now use a communication system.
actions taken to reduce manufacturing costs.
The company’s chosen distribution method.
made a cash payment to creditors.
Cash was recovered from creditors.
Acceptance of bad debts and the process for writing them off. 20. Workers’ access to safety measures at the industrial site.
Management Auditor Report
The management auditor must accurately examine how the organisation operates.
He should draught a report including the management audit’s findings and recommendations for this purpose. He must clearly and unambiguously give his report.
are mentioned in the report need to be accurate. The statement’s accuracy is determined by the data the management auditor acquired while conducting the audit.
He need to criticise the management without holding back. The management auditor uses polite language and avoids needless pungency while presenting his report.
He should voice his opinions on the current dynamic between the workforce and the management. Generally speaking, the report must address the following topics:
Share your thoughts on investment returns.
contrasting the actual performance with the benchmarks he or the management have established.
Comment about the company’s operational expenses.
Share your thoughts on the use of equipment and machinery.
suggestions for development.
Conclusion and findings.
Advantages of Management Audit
The following is a discussion of the key benefits of management audits:
Identification of management’s current, prospective, and weak points is helpful. With this knowledge, significant advancements or flaw corrections can be made.
It helps an organisation build and evaluate its planning system. It then assigns accountability for planning.
It aids in enhancing the command and control system. One may adhere to efficient management information systems. A good control system guarantees that standards are not violated.
It examines the decision-making process and decision quality. It aids management in making decisions with more impartiality.
By continually evaluating every part of the organisation and raising the bar, it safeguards the interests of the organisation.
It aids management in maintaining open lines of communication among the responsibility centres.
In light of changes in the corporate environment, it helps management find chances for innovations.
It aids management in enhancing coordination and assessing control methods.
It helps the management identify the problems that hinder profitability and suggests solutions to get rid of them so that profitability may increase.
It advises management to increase overall effectiveness and efficiency.
In any organisation, human resources are essential. Management audit supports the development of human resources and the improvement of the performance evaluation system.
It makes managing pressure easier. As a result, the management may give essential and unique issues greater attention.
Disadvantages of Management Audit
The parameters of a management audit are vague.
An annual management audit is not always carried out. Therefore, nothing can be improved during the interim time.
There are no industry-specific standards for management audit.
Finding a capable and experienced management auditor to undertake a management audit is quite challenging.
Authority relationships may become more complicated as a result of management audit.
The management auditor has to have cross-disciplinary expertise. In reality, finding an auditor with such competence is really challenging.
Management dislikes having its decisions and actions evaluated.
An extra expenditure for the business unit is the management audit expense. As a result, practically all business units think it’s unnecessary to cover these extra costs.
In reality, the management audit hinders CEOs’ initiative instead of supporting it.
A huge firm is unable to carry out an extensive management audit. As a consequence, the findings are unreliable.
Management leaders are not prepared to take the management auditor’s criticism. Therefore, the management executives oppose conducting the management audit.
The competency of management executives cannot be evaluated by a management auditor.
To support his hiring, a management auditor could attempt to bring out other people’s mistakes.
The management auditor’s recommendations can provide a chance for controversy. The management leaders do not have a same viewpoint. According to Bradford Cadmus, “the auditor is not in a position to make specific recommendations as to change his primary responsibility, which is fulfilled when he has brought the results of the policy to attention through his report, which should present the facts in such a way that the situation may not be overlooked or dismissed without adequate review at a suitable management level.”
If the management auditor makes suggestions carelessly or casually, the expected outcomes could not be achieved.
The goal of the management audit is thwarted when management modifies the recommendations before implementing them rather than implementing them as intended.
The manager will constantly focus on maintaining accurate books of accounts rather than increasing productivity and efficiency.
The company can gain more benefits if the management adopts a system to link incentives to the efficiency of the management executives who will also favour the management audit assessing their performance.
Under these circumstances, the management audit is an effective and efficient tool for the management to exercise control if the management audit is properly conducted.
Differences between Management Audit and Statutory Audit
The statutory audit and the management audit have many similarities, but there are also some key distinctions, which are covered below:
The statutory auditor looks at the books of accounts to learn about previous performance, whereas the management auditor analyses and assesses management policies and performance to assure its future success.
The goal of a management audit is to guarantee that management performance is improved, while a statutory audit looks at whether or not the books of accounts are kept up to date.
The statutory auditor reports the financial situation of a corporation as of a certain date, whereas the management auditor reports the performance of executives over a specific time period.
Statutory audit is a post-mortem investigation, while management audit implements preventative measures.
Statutory audit does not provide an opinion on the company’s state of affairs, however management audit offers strategies for achieving the predetermined goals in the days to come.
The data for the management auditor comes from both internal and external sources, but the data for the statutory auditor exclusively comes from internal sources.
The conclusion of the statutory audit triggers the start of the management audit.
Management audits are optional; statutory audits, which are mandated by law, are mandatory.
Legal laws and regulations must be followed when performing statutory audit, but there are no clear-cut rules and regulations controlling the performance of management audit.
In contrast to statutory audit, which solely takes into account financial factors, management audit also takes into account non-financial factors including organisational structure, manufacturing procedures, buying policies, and the like.
While the Companies Act specifies the requirements for statutory auditors, there is no such need for management auditors.
In the event of a management audit, management standards or norms are adhered to, whereas in the case of a statutory audit, accounting principles, conventions, and postulates are followed.
A management audit may only look at a portion of an organisation, but a statutory audit should look at all of the organization’s financial records.
Statutory audits are performed once a year, whereas management audits are performed as needed.
The statutory auditor presents his report to the shareholders, and the management auditor presents his report to the management.
The management selects the management auditor, and the majority of the shareholders choose the statutory auditor.
The management determines the management auditor’s compensation, while the shareholders determine the compensation of the statutory auditor.
The statutory auditor shall write and submit the report in accordance with the standard or in the required form; there is no set structure for management auditor reports.
Under the Companies Act of 1956, only the statutory auditor is subject to criminal prosecution; the management auditor is not.
