Question No. 2 MMPC-001 - Management Functions and Organisational Processes

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MMPC -001 - Management Functions and Organisational Processes

Question No. 2 - What is the concept of organising? Briefly discuss and describe different approaches to organising and analysing work.

Organizing is a managerial process that defines the role of each person in an organization to achieve objectives set by the management of the organization. Regarding establishing a rights-responsibility relationship among all and to provide harmonious group action to coordinate as an inbuilt device in the enterprise. It affects how relationships working between individuals and groups within an organization complete and coordinate their activities. Effective organizing depends on many important concepts like work expertise, delegation, duration of control, a chain of command, authority, and decentralization versus centralization. Many of these concepts are based on the principles developed by Henri Fayol. In order to understand the concept of an organization, it is necessary to define the following words.

- Organizing as a structure:

Organizing a structure refers to a hierarchical arrangement of the position of the members and the department. Of an organization, It reflects the relationship between rights and responsibilities among the members. It recognizes who is to command and what to believe? It is a mechanism to direct, coordinate and control activities. It is a static a concept that can not be changed easily and quickly.

- Organizing as a process:

Organizing in the form of a process means grouping the duties to identify and work. People, authorization, responsibility to build relationships and coordinate activities between members and departments It usually determines, organizes, groups and assigns its members the task. It is a dynamic activity that can be arranged and changed according to the needs of the company.

- Organizing as a function:

Organizing is an important task after planning. The manager of the company organizes or collects resources like manpower, money, material, machines, methods, etc., it is necessary to take action on the track.

- Organizing as a group of people:

An event is a group or association of some people created for certain economic interests or non-economic interests. This is guided by the policy or company, school, college, hospital, government rules, Office, club, etc.

Five Approaches to Organizational Design

Managers must make choices about how to group people together to perform their work. Five common approaches — functional, divisional, matrix, team, and networking—help managers determine departmental groupings (grouping of positions into departments). The five structures are basic organizational structures, which are then adapted to an organization's needs. All five approaches combine varying elements of mechanistic and organic structures. For example, the organizational design trend today incorporates a minimum of bureaucratic features and displays more features of the organic design with a decentralized authority structure, fewer rules and procedures, and so on.

1. Functional structure

The functional structure groups positions into work units based on similar activities, skills, expertise, and resources (see Figure 1 for a functional organizational chart). Production, marketing, finance, and human resources are common groupings within a functional structure.

As the simplest approach, a functional structure features well‐defined channels of communication and authority/responsibility relationships. Not only can this structure improve productivity by minimizing duplication of personnel and equipment, but it also makes employees comfortable and simplifies training as well.

But the functional structure has many downsides that may make it inappropriate for some organizations. Here are a few examples:

The functional structure can result in narrowed perspectives because of the separateness of different department work groups. Managers may have a hard time relating to marketing, for example, which is often in an entirely different grouping. As a result, anticipating or reacting to changing consumer needs may be difficult. In addition, reduced cooperation and communication may occur.

Decisions and communication are slow to take place because of the many layers of hierarchy. Authority is more centralized.

The functional structure gives managers experience in only one field—their own. Managers do not have the opportunity to see how all the firm's departments work together and understand their interrelationships and interdependence. In the long run, this specialization results in executives with narrow backgrounds and little training handling top management duties.

2. Divisional structure

Because managers in large companies may have difficulty keeping track of all their company's products and activities, specialized departments may develop. These departments are divided according to their organizational outputs. Examples include departments created to distinguish among production, customer service, and geographical categories. This grouping of departments is called divisional structure (see Figure 2). These departments allow managers to better focus their resources and results. Divisional structure also makes performance easier to monitor. As a result, this structure is flexible and responsive to change.

However, divisional structure does have its drawbacks. Because managers are so specialized, they may waste time duplicating each other's activities and resources. In addition, competition among divisions may develop due to limited resources.

3. Matrix structure

The matrix structure combines functional specialization with the focus of divisional structure. This structure uses permanent cross‐functional teams to integrate functional expertise with a divisional focus.

Employees in a matrix structure belong to at least two formal groups at the same time—a functional group and a product, program, or project team. They also report to two bosses—one within the functional group and the other within the team.

This structure not only increases employee motivation, but it also allows technical and general management training across functional areas as well. Potential advantages include

Better cooperation and problem solving.

Increased flexibility.

Better customer service.

Better performance accountability.

Improved strategic management.

Predictably, the matrix structure also has potential disadvantages. 

Here are a few of this structure's drawbacks:

The two‐boss system is susceptible to power struggles, as functional supervisors and team leaders vie with one another to exercise authority.

Members of the matrix may suffer task confusion when taking orders from more than one boss.

Teams may develop strong team loyalties that cause a loss of focus on larger organization goals.

Adding the team leaders, a crucial component, to a matrix structure can result in increased costs.

4. Team structure

Team structure organizes separate functions into a group based on one overall objective (see Figure 4). These cross‐functional teams are composed of members from different departments who work together as needed to solve problems and explore opportunities. The intent is to break down functional barriers among departments and create a more effective relationship for solving ongoing problems.

The team structure has many potential advantages, including the following:

Intradepartmental barriers break down.

Decision‐making and response times speed up.

Employees are motivated.

Levels of managers are eliminated.

Administrative costs are lowered.

The disadvantages include:

Conflicting loyalties among team members.

Time‐management issues.

Increased time spent in meetings.

Managers must be aware that how well team members work together often depends on the quality of interpersonal relations, group dynamics, and their team management abilities.

5. Network structure

The network structure relies on other organizations to perform critical functions on a contractual basis (see Figure 5). In other words, managers can contract out specific work to specialists.

This approach provides flexibility and reduces overhead because the size of staff and operations can be reduced. On the other hand, the network structure may result in unpredictability of supply and lack of control because managers are relying on contractual workers to perform important work.

Question No. 1 MMPC-001 - Management Functions and Organisational Processes

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MMPC -001 - Management Functions and Organisational Processes

Question No. 1 - Describe the characteristics of Management and it’s importance. Briefly discuss the challenges faced by Manager in the present day context. 

Management is an essential to life, in order to organize it we need to manage. In every turn of life, we need to manage. Be it business or household, ‘management’ plays an important function. In the business world, good management is the backbone of every organization. 

“Management is the art of getting things done through and with the people in formally organized groups.” – this means that management is the way to get things done by the employees of an organization where they function in an organized way.

Characteristics of Management

To know the true nature of any system we should check the characteristic features of the same. Similarly, to know the management system we need to analyze its characteristics. The characteristics of management are as follows – 

1. Universal: Every organization irrespective of their financial position requires management to manage their activities, thus it is universal in nature.
2. Goal Oriented: Management helps the organization achieve goals systematically and without any fuss. 
3. Continuous Process: Management is an ongoing process which is required in every facet of an organization to function good, be it production system, human resource, finance or marketing
4. Multi-dimensional: Management not only manages the workforce but also manages every sphere of the organization whether it is production, human resource. 
5. Group Activity: The groups in an organization work together also the members in different groups work in a system, they belong to different backgrounds, culture and they have different aspirations, to work evenly without any difference issue they need to adopt the management.
6. Dynamic Function: Business environments have different factors like social, political, legal, technological and economical, with these factors in force an organization is open to changes frequently, with management in their system they can apprehend the changes and work towards responding to it.
7. Intangible Force: Management cannot be touched or seen, its effect can only be experienced and the benefit can only be enjoyed.

Precisely, all the functions, activities and processes of the organization are intertwined to one another. So, it is the task of the management to bring them together in sync in such a way that they help in reaching the already set result.

Importance of Management

1. It helps in Achieving Group Goals - It arranges the factors of production, assembles and organizes the resources, integrates the resources in effective manner to achieve goals. It directs group efforts towards achievement of pre-determined goals. By defining objective of organization clearly there would be no wastage of time, money and effort. Management converts disorganized resources of men, machines, money etc. into useful enterprise. These resources are coordinated, directed and controlled in such a manner that enterprise work towards attainment of goals.
2. Optimum Utilization of Resources - Management utilizes all the physical & human resources productively. This leads to efficacy in management. Management provides maximum utilization of scarce resources by selecting its best possible alternate use in industry from out of various uses. It makes use of experts, professional and these services leads to use of their skills, knowledge, and proper utilization and avoids wastage. If employees and machines are producing its maximum there is no under employment of any resources.
3. Reduces Costs - It gets maximum results through minimum input by proper planning and by using minimum input & getting maximum output. Management uses physical, human and financial resources in such a manner which results in best combination. This helps in cost reduction.
4. Establishes Sound Organization - No overlapping of efforts (smooth and coordinated functions). To establish sound organizational structure is one of the objective of management which is in tune with objective of organization and for fulfillment of this, it establishes effective authority & responsibility relationship i.e. who is accountable to whom, who can give instructions to whom, who are superiors & who are subordinates. Management fills up various positions with right persons, having right skills, training and qualification. All jobs should be cleared to everyone.
5. Establishes Equilibrium - It enables the organization to survive in changing environment. It keeps in touch with the changing environment. With the change is external environment, the initial co-ordination of organization must be changed. So it adapts organization to changing demand of market / changing needs of societies. It is responsible for growth and survival of organization.
6. Essentials for Prosperity of Society - Efficient management leads to better economical production which helps in turn to increase the welfare of people. Good management makes a difficult task easier by avoiding wastage of scarce resource. It improves standard of living. It increases the profit which is beneficial to business and society will get maximum output at minimum cost by creating employment opportunities which generate income in hands. Organization comes with new products and researches beneficial for society.

Challenges faced by Managers in the present day

1. Communicating effectively with employees: As a manager, there can often be an element of distance from the rest of the team. This creates one of the biggest challenges for managers – bridging the distance with effective and timely communication skills. Good managers need to develop advanced listening and speaking skills as they play a huge role in the success of their team. ‘A lack of interdepartmental communications’ has been found to be one of the biggest causes of stress for UK employees in 2020. This means that when a manager isn’t communicating well with their team about business matters or individual progress, not only could it be damaging the manager-employee relationship, but it could also be greatly adding to employees’ work-related stress.
2. Confronting performance problems: Performance problems are always going to be a concern for any manager. But in today’s fierce business environment, if your teams aren’t performing to a high standard, a competitor could easily come in and take your customer’s business. You need to get to the root of any problems quickly. But be careful – managers have the tricky job of finding the balance of getting the results you need and not damaging any relationships with your team members in the process. If you put your ‘strict manager’ hat on too soon, you risk damaging the trust with other members of your team too.
3. Letting employees go: This will probably always be the hardest part of any manager’s job – and it’s something you never want to get too comfortable doing. Unfortunately, there’s no easy way around this one and it doesn’t become any easier, no matter how much experience you have.
4. Making the right hiring decisions: So many candidates out there might have the experience and skills that you might be looking for and they’re probably perfectly capable to do the job. But this doesn’t mean they’re a perfect match to join your team. A good manager is able to decipher between a good skills hire and a good cultural fit. Finding the right blend of both. If you make a wrong decision in the hiring process, it can quickly affect your team's morale and performance. You'll also have to deal with the other problems we've outlined here, so making the right decision in the first place is a must.
5. Managing conflicts within your team: In a dream world, your team works well together. They’re great collaborators, feel comfortable being creative together and get on socially. Unfortunately, this dream doesn’t always come true. And when a conflict arises between two colleagues, it can be felt throughout the team. When conflicts aren’t resolved, they can quickly affect productivity and morale – and even lead to top performers leaving the company. Managers are tasked with nipping any conflicts in the bud early, before they become bigger concerns.
6. Retaining star employees in a competitive environment: Today, skills are becoming more and more specialised, so if you have a talented employee, you’ll want to do your utmost to keep them. But if you’re not offering your employees what they’re worth, someone else will. A challenge as a manager today is ensuring that your talented staff are supported, learning new skills, have a clear path of progression and are happy in their role. A further challenge comes as remote working continues to rise, employees are no longer limited to roles by location – so you’ll have to work even harder to retain your star employees.

MMPC -001 - Management Functions and Organisational Processes - MBA and MBA (Banking & Finance)

Solutions to Assignments 

MMPC -001 - Management Functions and Organisational Processes

Question No. 1 -  Describe the characteristics of Management and it’s importance. Briefly discuss the challenges faced by Manager in the present day context.          CLICK HERE 

Question No. 2 - What is the concept of organising? Briefly discuss and describe different approaches to organising and analysing work.                             CLICK HERE 

Question No. 3 - Discuss and describe different leadership styles and their relevance in the present scenario of organisations.                        CLICK HERE 

Question No. 4 - Describe and discuss various channels of communication and their role in organisations. Discuss how to overcome barriers to effective communication with relevant examples.           

                                                                    CLICK HERE 

Question No. 5 - Discuss the concept of change in organisations and the reasons for resistance to change. Briefly discuss the strategies to overcome resistance to change.               CLICK HERE 

Question No. 5 - BCOE - 143 Fundamentals of Financial Management

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BCOE - 143 Fundamentals of Financial Management

Question No. 5

Explain Baumol’s Model and Miller and Orr’s Model of cash management. 

1. Baumol’s EOQ Model of Cash Management:

William J. Baumol (1952) suggested that cash may be managed in the same way as any other inventory and that the inventory model could reasonably reflect the cost – volume relationships as well as the cash flows. In this way, the economic order quantity (EOQ) model of inventory management could be applied to cash management. It provides a useful conceptual foundation for the cash management problem. 

In the model, the carrying cost of holding cash-namely the interest forgone on marketable securities is balanced against the fixed cost of transferring marketable securities to cash, or vice- versa. The Baumol model finds a correct balance by combining holding cost and transaction costs, so as to minimize the total cost of holding cash.

The optimum level of cash balance is found to be:

Where,

C = Optimum level of cash balance

A = Annual cash payments estimated

T = Cost per transaction of purchase or sale of marketable securities

I = Interest on marketable securities p.a. (i.e., carrying cost per rupee of cash)

According to the model, optimum cash level is that level of cash where the carrying costs and transaction costs are the minimum. The carrying costs refers to the cost of holding cash i.e. interest forgone on marketable securities. The transaction cost refers to the cost involved in getting the marketable securities converted into cash and vice versa.

Assumptions:

The Baumol’s model holds good if the following assumptions are fulfilled:

(a) The rate of cash usage is constant and known with certainty. The model has limited use in times of uncertainty and firms whose cash flows are discontinuous or bumpy.

(b) The surplus cash is invested into marketable securities and those securities are again disposed of to convert them again into cash. Such purchase and sale transactions involve certain costs like clerical, brokerage, registration and other costs. The cost to be incurred for each such transaction is assumed to be constant/fixed. In practice, it would be difficult to calculate the exact transaction cost.

(c) By holding cash balance, the firm is would incur the opportunity cost of interest forgone by not investing in marketable securities. Such holding cost per annum is assumed to be constant.

(d) The short-term marketable securities can be freely bought and sold. Existence of free market for marketable securities is a prerequisite of the Baumol model.

2. Miller-Orr Cash Management Model:

Miller and Orr model (1966) assumes that the cashflow of the firm is assumed to be stochastic, i.e. different amounts of cash payments are made on different points of time. It is assumed that the movements in cash balance occur randomly. Miller and Orr suggested a model with control limits, which sets control points for time and size of transfers between an Investment Account and Cash Account.

The model asserts that transfer money into or out of the account to return the balance to a predetermined ‘normal point whenever the actual balance went outside a lower or upper limit.

The lower limit would be set by management, and the upper limit and return points by way of formulae which assume that cash inflows and outflows are random, their dispersion usually being assumed to repeat a pattern exhibited in the past.

The model specifies the following two control limits:

h = Upper control limit, beyond the cash balance should not be carried.

0 = Lower control limit, sets the lower limit of cash balance, i.e. the firm should maintain cash resources atleast to the extent of lower limit.

z = Return point for cash balance

The Miller-Orr model, will work as follows:

(i) When cash balance touched the upper control limit (h), securities are bought to the extent of Rs. (h-z).

(ii) Then the new cash balance is z.

(iii) When cash balance touches lower control limit (o), marketable securities to the extent of Rs. (z-o) will be sold.

(iv) Then the new cash balance again return to point z.

Assumptions:

The basic assumptions of the model are:

(a) The major assumption with this model is that there is no underlying trend in cash balance over time.

(b) The optimal values of ‘h’ and ‘z’ depend not only on opportunity costs, but also on the degree of likely fluctuations in cash balances.

The model can be used in times of uncertainty and random cash flows. It is based on the principle that control limits can be set which when reached trigger off a transaction. The control limits are based on the day-to-day variability in cash flows and the fixed costs of buying and selling government securities.

Question No. 3 - BCOE - 143 Fundamentals of Financial Management

 

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BCOE - 143 Fundamentals of Financial Management

Question No. 3

Explain the different approaches for calculating cost of capital. 

The cost of capital can be calculated by different methods these are discussed as below:

(I) Computation of cost by specific source of finance

1) Cost of debt: cost of debt means the interest payable on the debentures. 

2) Cost of preference share capital: a fixed rate of dividend is paid to the preference shareholders at regular intervals. If it is not paid to them than it affects the fund raising capacity of the firm.

3.) Cost of equity share capital: it is not legally binding upon the company to pay dividend to the equity shareholders. They are not paid dividend at fixed rate. Shareholders invest money with the hope that they will get the dividend and the firm must earn minimum rate of return to keep the market price of shares stable. The return may be in different form

a) dividend per share

            Ke =D/P

b) Dividend per share + growth

            Ke =D/P + g

c) Earning per share

             Ke =EPS/NP

d) Realized yield method: the earlier methods fail to estimate future dividend and earning correctly. To overcome this limitation actual average rate of return realized in the past is used. Average rate of return is found out with the help of dividend received in the past along with gain realized at the time of the sale of the shares.

4.) Cost of retained earning: it is the opportunity cost of dividend foregone by the shareholders.

Kr =D/NP + g

(II) Weighted average cost of capital: it is also called overall cost of capital or composite cost of capital as it is the composite cost of various source of capital. In this kind of cost of capital weights are given to specific cost of capital. The weights may have book value or market value. As market value represents the true value of the investors, so market value weights are preferred than the book value.

Kw =∑ XW/∑W