Notes on Functional Areas of Management

This article throws light upon the top four functional areas of management. The functional areas are: 1. Production Management 2. Financial Management 3. Personnel/Human Resource Management 4. Marketing Management.

Functional Area # 1. Production Management:

The term ‘production’ was closely associated with manufacturing physical goods and, therefore, production management was also known as manufacturing management. Today, goods are not only physical goods but also services.

Production is related to both goods and services and, therefore, production management is known as operations management. It deals with conversion of inputs into outputs. It is a “set of components whose function is to transform a set of inputs into some desired output.”

“It is the management of productive processes that convert inputs into goods and services.” The inputs are the men, material, equipment, technical knowledge etc. The conversion process that transforms the inputs can be physical transformation in manufacturing operations, locational transformation in transportation, exchange transformation in retailing, storage transformation in warehousing, informational transformation in legal firms, physiological transformation in medicine, and gratification transformation in entertainment.

Outputs are the goods and services produced through the conversion process. Outputs also include by-products of goods, whether in the form of pollutants or wastes. This input-output conversion process is also affected by the environmental forces like Government regulations, economic-political-legal framework of the country, policies of competitors, international policies, etc. The feedback mechanism helps to know effectiveness of the conversion process and whether or not it requires changes in its components.

The working of the operations management is shown below:

Functional Area # 2. Financial Management:

All activities (production, marketing or personnel) require constant flow of funds. Finance department takes care of financial requirements of the enterprise. It makes arrangements for acquisition and effective utilisation of funds.

With increase in the size of business, its relationship with the internal and external environment, product diversification and differentiation, Government regulations and technological developments, finance manager assumes important role in management of finance. Financial management deals with management of finance. It is “the operational activity of a business that is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.”

Functional Area # 3. Personnel/Human Resource Management:

Traditionally what was known as personnel management is now replaced with human resource management (HRM) today. Initially, in small organisations all the managerial functions of planning, organising, staffing, directing, and controlling (for all the functional areas of management) were performed by the managers but with increase in size of the organisations, managers could not look after all the functional areas. Personnel specialists or senior managers were appointed to look into matters related to personnel policies and separate departments called personnel departments were created.

Human resource department performs the following functions:

(a) Human resource planning or manpower planning balances the demand for employees in qualitative and quantitative terms and its supply from various internal and external resources. Internal sources fill organisational posts from within the organisation and external sources provide labour from outside sources such as labour market.

(b) Recruitment analyses requirements of the job, prepares job description and invites applications from those whose qualifications match the job description.

(c) Selection selects the most suitable person out of those who have applied for the job. Written tests and interviews are conducted to select the suitable candidates.

(d) Performance appraisal assesses the performance with the targeted performance to check deviations and provide training to improve the performance.

(e) Training enhances the knowledge and skills of employees. It enables them to effectively manage the organisational positions and promotes their growth. Training programmes can be conducted on-the-job or external agencies can provide training to the employees.

(f) Rewards deal with the pay structure for each job. Rewards vary with the skill, knowledge and competence for each job position.

(g) Industrial relations maintain harmonious relations between the management and employees. Grievances or disputes are settled by the personnel manager by following legal provisions and rules.

(h) Employee communication and participation communicates managerial decisions to employees and allows them to participate in the decision-making processes.

(i) Personnel records maintain record of employees regarding their qualification, experience and achievements. It is maintained by the personnel department. This serves as the basis for internal recruitment where employees can be placed at jobs within the organisation. These records help in matching job description with job specification, that is, matching the requirement of the job with qualifications of the person.

The focus of HRM is growth and development of the organisation along with its work force.

Features of HRM:

Following are the features of HRM:

(a) It views employees as important organisational resource that is committed to organisational needs and works towards its goals.

(b) It aims to satisfy individual needs by providing challenging, lucrative and meaningful jobs to employees.

(c) It follows the concept of ‘mutuality’ where managers focus on mutual goals, mutual respect, mutual rewards etc.

(d) It allows employees to participate in the decision-making processes.

(e) It caters to the interests of people internal (labour force) and external to the organisation (customers, suppliers, shareholders etc.)

Objectives of HRM:

HRM aims at the following:

(a) Effective utilisation of human resource.

(b) Motivate people to make them committed to organisational goals.

(c) Frame policies and procedures that fulfill the needs of employees.

(d) Aim at growth and development of employees through teamwork, co-operation, creativity and innovation.

(e) Maintain human flexibility in the jobs they are placed at and the number of hours they spend on each job to achieve quality management.

Functional Area # 4. Marketing Management:

Traditionally, markets were a place for exchange of goods and services between sellers and buyers to the mutual benefit of both. Today, marketing is exchange of values between the seller and the buyer. Value implies worth related to the goods and services being exchanged. The buyer will pay for the goods if they have value for him.

Marketing management is “planning, organising, controlling and implementing of marketing programmes, policies, strategies and tactics designed to create and satisfy the demand for the firms’ product offerings or services as a means of generating an acceptable profit.” It deals with creating and regulating the demand and providing goods for which customers are willing to pay a price worth their value.

Elements of marketing management:

The basic elements of marketing management are:

(a) Customer orientation:

The focus of marketing function is to sell goods desired by consumers; the goods that satisfy their needs.

(b) Integrated effort:

Marketing function should be co-ordinated with other functional areas of production, finance and personnel management.

(c) Profitability:

While the consumer wants a product that satisfies his needs, seller sells a product which provides profit. A successful marketing strategy should provide profits to the marketer along with customer satisfaction.

(d) Viability:

The goods should not only earn profits, they should also build reputation of the firm in terms of quantity, quality and the price at which goods are sold.

Marketing mix:

Marketing plans are made within the constraints of controllable and non- controllable variables. The non-controllable variables are social, technological, political, cultural and legal factors which affect the marketing strategies. Controllable factors are the product, price, promotion and channels of distribution. Marketing mix is the combination of controllable variables that make a successful marketing programme.

(a) Product mix:

It deals with physical attributes and benefits of the product. Ownership gives a sense of pride and satisfaction to the consumer and, therefore, the product should be properly designed, coloured and packed.

(b) Pricing mix:

Pricing is an important marketing decision. Pricing is affected by factors such as costs, legal framework, prices charged by competitors and the prices that consumers are ready to pay. Price should recover the costs and earn a reasonable return on capital. This ensures long-run survival and growth of the enterprise.

(c) Promotion mix:

It refers to communication with the consumers regarding the product. It motivates them to buy the goods.

Sales can be promoted in three ways:

(i) Advertisement:

It presents the product details to consumers through media. It is a non-personal means of communication.

(ii) Personal selling:

The seller directly contacts the buyer and convinces him to buy the goods.

(iii) Sales promotion:

It supplements advertisement and personal selling as a means of promoting sales. It increases sales by holding contests, lotteries etc. Different combinations of sales promotion techniques can be used at a point of time.

Channel mix:

After the product is designed, priced and advertised, it arouses consumers’ interest to buy. The channel mix identifies the path through which goods are transferred from sellers to buyers. The seller may sell directly to the buyer or through intermediation of wholesalers and retailers.

More than one channel of distribution can be adopted at the same time; for example, a wholesaler can sell through retailers and also directly to consumers. The channel mix selects and maintains the channel to ensure consistency in selling practices followed by the sales people.