Management Theory

Management Overview

Management in its general sense is a very fundamental human activity, in its most basic sense, we can understand management as being about organization. That is to say, it is the activity of organizing or arranging things so as to achieve some desired functional outcome. As such management is a pervasive activity that we are all engaged in almost all the time. When we get up in the morning we manage our appearance, choosing what clothes to wear in order to project a certain image, we manage our house by organizing the different elements so as to achieve the desired functionality of a living space, we organize our time in order to achieve something in the day. In all of these cases, we have a set of elements and we are trying to arrange them in order to achieve some desired outcome. This is the same on the micro-level of organizing ourselves as it is on the macro level of managing an entire organization, such as a mayor managing a city, or for the management of a production process, a business or country. This is the idea of management within the most generalized sense but when we talk about management in the professional sense we understand the term management within a more narrow context, that is to say, we understand it to mean the management of an organization of people towards performing some collective function, in order to achieve some desired outcome.1

Management Process

Management is then of course not a static event, but it is a process and we can think about a number of stages or activities within that process. We need to firstly understand and create some model of the system we wish to manage and the environment within which it operates. We need to bring people together and define some system to coordinate their activity towards the desired end, and this organization of people needs processes and procedures that enable it to execute on projects, and finally the organization needs to be able to adapt and respond to the changing circumstances within its environment.


The first element required for management is some kind of model to the system we wish to manage, one cannot begin to try and manage something if you do not know whatever it is you wish to manage. In order to manage something one has to understand the system to some extent, and knowing the system means building a model of it. If we want to management something we have to have experience of that system and it is through that experience that we learn how the organization behaves. The first time we get on a bike and try and manage to cycle, we fall off, because we do not really understand how that system behaves. If you were sent into manage a busy restaurant tomorrow without any experience of it the outcome would be almost certainly a failure because you have no model for how the system operates. But if you have been working in that restaurant for ten years you would have over that time gained the experience required to build up a model of how it functions and thus become capable of managing it. Because whatever it is we are trying to manage does not exist in isolation we have to have both a model of the system and its environment. A business needs to know about the industry they are in or a government needs to know about the international political environment within which they operate.


The process of management involves the organizing of people into a functional unit. In order to have an effective organization, we need to integrate and coordinate a set of people with differentiated capabilities. Both of those terms integration and differentiation are important. Integration means they are working together, differentiation means they do different things. Without either of those, we do not have an organization. If everyone performs different functions but they are not coordinated, then we do not have an organization. Likewise, if everyone performs exactly the same function we do not really have an organization. The organization is in how we arrange different functional capabilities in order to work together, it is only when we are able to do that we get something that is more than simply a sum of the parts and thus we actually get an organization not simply as a set of people. And thus we can say trying to create systems that enable different people to work together constructively is a central activity of professional management. How well the organization achieves in doing this is central to its success and overall functionality. For example, if we take two economies like that of Germany and Peru, we might ask, how is Germany capable of producing all sorts of complex products and services, sophisticated chemicals, manufacture airplanes, produce advanced financial services etc. but the Peruvian economy is not capable of producing many of these things. If we look closely we will see that within the German economy there are very many people who know how to do a very many different specialized functions. While also they have many large public and private organizations capable of coordinating all these diverse activities towards producing these complex products. While the Peruvian economy lacks both this wide variety and abundance of differentiated occupations and many of the institutions required to successfully coordinate them. Why and how we get people to come together and coordinate their activities will be a defining factor in the makeup of the organization.


We have then been largely talking about the internal structure and workings of the organization but at the end of the day, this organization needs to perform some function within its environment. That is to say, deliver some outcome in the form of goods or services that are of value and this can be defined as the systems operations. As such we can understand operations as another distinct activity of management. According to Wikipedia “Operations management is an area of management concerned with designing, and controlling the process of production and redesigning business operations in the production of goods or services.” The function of operations management is to execute on the organization’s projects, and this will require the designing, implementing and monitoring of a set of processes and procedures to facilitate production of some kind.2


Organizations are dynamic entities subject to internal and external change and in order to persist over time, they have to be able to navigate this changing environment. The organization needs to be able to define long­term desirable objectives and be capable of adapting to changes within its environment. This is strategic management, it requires business intelligence and decision-­making capabilities. Within a typical corporation, this is the function of the C­-level suite of executives. Who are expected to have a full overview of the internal workings of the organization, have a broad understand of the industry they operate in and a long­term vision as to what is the best general direction for the organization to go in, in order for it to develop and grow over time. Strategic management is the awareness, intelligence and leadership of the organization. Of course, this does not have to be at the top of some hierarchy, the organization may become corrupted in which case those in positions of leadership are no longer aware of the organization or environment or for other reasons do not act in the long­term interest of the organization as a whole. Thus leadership can come from any position, it can be anyone in the organization that is aware of how the organization works and takes leadership by acting in a way that is in the best interests of that organization in that environment, irrespective of how others may act. Strategic leaders need to define what is the function or desired state of that system and be able to ascribe some metric to that in order to receive information about the system and its state with respect to its objectives.

Systems Innovation

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