Applied Business Revision

  • Created by: becca159
  • Created on: 21-06-16 14:14

Roles of the Manager

4 roles of the manager: 

  • Planning
  • Organising
  • Monitoring and evaluating
  • Reporting
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Key Management Skills

4 key management skills:

  • Technical
  • Communication
  • Organisational
  • Interpersonal
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Levels of Hierarchy

The number of layers of authority within a company. 

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Flat/Tall Structures

An organisation with a wide span of control will have few layers of hierarchy and will be flat. Tall organisations have many levels of hierarchy but narrow spans of control. 

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A centralised organisation is one where the majority of decisions are taken by senior managers at the top (or centre of the business). This can provide rapid decision making with most managers working at a head office. Decentralisation gives greater authority to staff lower down the organisational structure, to employees in branch offices and other locations. This can improve motivation for junior employees. It also reduces the workload for senior managers and improves communication. 

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Matrix Structures

A matrix structure is a fluid one which teams of employees with appropriate skills are assembled to carry out particular tasks. This allows individuals to use their skills to best effect. Project managers bring teams together for a short time until a task is complete. People are drawn from various areas in the business to bring their skills together. They improve communication between different levels of the organisation. However employees can find it difficult working for two managers. They are also expensive to operate. 

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Delayering is the removal of one or more layers of hierarchy from the organisational structure. 

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What do leaders do?

  • Set objectives and a direction for the business. They must have vision and know where the business is going. 
  • They should set standards for the business. They can lead by setting an example in ters of commitment, professionalism and ethical behaviour. 
  • They need to recognise the skills that exist within the organisation and to make effective use of the human talent available to them. 
  • They become role models for individuals within the organisation and may choose to build alliances of senior individuals to protect their position. 
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Autocratic / Authoritarian Leaders

Common characterisitics:

  • They give little freedom to junior employees. 
  • Communication tends to be downwards; they give junior employees instructions and tasks.
  • They state objectives that they expect employees to pursue; in other words they allocate tasks and demand that subordinates act on their decisions. 

Employees often become very dependent on their leaders. This can slow down decision making. It can also lead to staff avoiding 'putting themselves on the line' due to fear of being criticised by their leader. Senior managers tend to be overworked. 

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Paternalistic Leadership

Paternlastc leadership is broadly autocratic but paternalistic leaders take the interests of thhe workforce into account when making decisions. They take notice of views put forward by subordinates and consult junior employees over decisions. 

They regard their staff as an extended family and they feel that they have a duty of care to their employees. They often have loyal subordinates because staff feel protected and cared for. It is not unrealistic for companies with paternalistic leaders to have a low rate of labour turnover. 

However they do not encourage the use of initiative, which means that the business does not make the most effective use of its human resources. 

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Democratic Leadership

Democratic leadership is a broad ranging term covering a range of similar styles of leadership. More generally, democratic leaders allow subordinates some role in decision making. Some organisations take a form of voting for some decisions but most make decisions on a more formal basis. Typical leaders:

  • Delegate some decision making powers to subordinates. 
  • Encourage junior employees to express views and ideas which can help enhance the creativity of the management team. 
  • Listen to junior employees' views and explain why particular decisions have been taken. 

Successful democratic leaders normally possess excellent communicational skills and encourage communication up and down the organisational structure. Staff are generally motivated working for democratic leaders. 

However it can result in slower decision making and result in less consistent decision making. 

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Participative Leadership

Participation is a style of leadership in which business leaders fully involve one or more employees in determining what to do and how to do it. This is a highly democratic style and gives employees a high degree of control over decision making. It allows managers to utilise the talents and creativity of subordinates. It also has slower decision making and less consistency like democratic leadership too.

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Laissez-faire leadership

Laissez-faire literally means 'leave alone'. This is the most extreme type of democratic leadership. Leaders have a relatively small say in the management of the business. Subordinates are empowered to make many decisions without any reference to their managers. This means that they can lack co-ordination and possibly a clear sense of direction. Laissez-faire leadership can be successful in certain situations, such as when:

  • the leader or manager leads a well-qualified and experienced team of employees.
  • subordinates are highly motivated and supportive of the manager.
  • the leader and the employees are all pursuing the same objectives. 
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Skills of Leadership

Qualities and attributes of a leader include:

  • physical vitality and stamina
  • intelligence and judgement
  • eagerness to accept responsibility
  • understanding of subordinates and their needs
  • skill in dealing with people and the capacity to motivate people
  • courage and resolution
  • trustworthiness
  • decisiveness
  • self-confidence and assertiveness
  • adaptability and flexibility
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Style Versality

The best leaders are those who adopt a style appropriate to the situation that they face. The most talented are arguably the most versatile, able to call on one or more of the styles when needed. 

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Power exists when one person can get another person to do something that otherwise they would not want to do. Managers exercising power can get staff to act in a way that they want, irrespective of the subordinates' views on the matter. 

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Authority is a special form of power, in the sense that it gives people the right to give commands which others accept as legitimate.It is a speical form of power in the sense that it implies voluntary agreement by subordinates who recognise the legitimate right of their superiors to give orders. 

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Traditional Authority

Some people have authority because of tradition or custom. The most obvious examples are royalty, with succession arranged through birthright not any particular ability. This often happens with entrepreneurs children (e.g. Rupert Murdoch's children). 

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Charismatic Authority

This arises out of an individual's personality. 

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Rational/Legal Authority

This form of authority relates to someone's position within the organisation, rather than the person as such (e.g. chief executive). 

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Sources of power

5 sources of power:

  • Coercive
  • Reward
  • Expert
  • Legitimate
  • Referent
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Coercive Power

This is based on the subordinates fear of the leader. This is usually maintained by the use of threats and punishment. They will use a hostile attitude and threaten subordinates with loss of status or loss of jobs. Coercive managers use this fear to ensure that their orders are carried out. Many people do not perform well in this environment, employees can not express their skills and ability when being controlled by a manager with coercive power. Some will not tolerate it and it can result in a high labour turnover. It doesn't encourage open communication.

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Reward Power

The ability to provide rewards to followers gives leaders a form of power. Subordinates comply with  manager's requests because they expect to benefit through improved pay, promotion or recognition as a consequence. Other rewards can be quite subtle including praise, compliments or flattery from the leaders. It is the opposite to coercive power in that it encourages good perfromance through incentives rather than threats. This can be effective in many circumstances. 

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Expert Power

Possession of particular expertise, skills and knowledge can give power. Leaders with these attributes have the power to make decisions. Managers with expert power may seek to prevent other employees acquiring their particular knowledge and skills. They will maintain respect if they do not seek to abuse their power. 

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Legitimate (position) power

Legitimate power derives from a person's position or job in an organisation. Legitimate power increases as you go up an organisation's hierarchy: a director would normally exercise more legitimate power than a middle manager. This also gives power based on position not skills. 

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Referent Power

Referent power derives from a leader's charisma. People are more likely to follow the lead of someone that they like and admire. This means that subordinates work hard for the leader. It also encourages interaction between subordinates and managers. Referent power can be exercised by people at all levels within the organisation. 

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Motivation can be defined in two ways. As the willingness to achieve a target or goal. Or as the will to work because of enjoying work for its own sake. Motivation is important to all businesses. Businesses with highly motivated workforces benefit in several ways:

  • Worker absenteeism is likely to be low, ensuring that the supply of goods and services is not interrupted. 
  • The workforce is more likely to be highly productive and to supply a high quality product.
  • Motivated employees are more likely to offer ideas and suggestions to improve the production.
  • Labour turnover is more likely to be low.
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Maslow's hierarchy of needs

Maslow set out the 5 levels of need which he believed every employee wants satisfied through work. It is a triangle with basic needs at the bottom and higher needs at the top. Maslow argued that only once a lower level need has been met would employees want to have needs higher up the hierarchy satisfied. Maslow's central point was that managers can motivate workers by satisfying their basic needs then working upwards.

1. Physiological needs - (e.g. basic needs such as shelter, food, warmth and sleep)

2. Safety needs - (e.g. working in a healthy and safe environment)

3. Social needs - (e.g. relationships with colleagues, working in groups)

4. Esteem needs - (e.g. achievement, status, reputation)

5. Self actualisation - (e.g. personal growth and complete fulfillment)

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Frederick Herzberg's two-factor theory (Part 1)

Herzberg found that the factors that might enhance job satisfaction and motivation include:

  • achievement
  • recognition for achievement
  • work itself
  • responsibility
  • growth advancement

Herzberg's view was that managers should seek to motivate people by giving opportunities for achivement and that they should recognise and celebrate achievement by employees. He believed that jobs should be designed to allow employees to achieve personal targets and goals.

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Frederick Herzberg's two-factor theory (Part 2)

The second key element of the two factor theory is finding that there are many factors in a workforce that do not motivate staff. He called these 'hygiene factors' and they include:

  • company policy
  • administration
  • supervision
  • interpersonal relationships
  • working conditions
  • salary
  • status
  • security

Herzberg's research classified that pay does not motivate staff. 

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Douglas McGregor's Theory X and Theory Y (Part 1)

McGregor examined how managers view their subordinates. He labelled the managers Theory X managers and Theory Y managers. 

Theory X managers would carry out their work based on the belief that:

  • the average employee dislikes work and will avoid it if they can
  • unsupervised employees will not perform efficiently
  • employees are motivated by money
  • the average person prefers to be told what to do, and wants to avoid responsibility.
  • employees are not ambitious
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Douglas McGregor's Theory X and Theory Y (Part 2)

In contrast, managers with Theory Y beliefs and attitiudes make entirely different asumptions about their employees. These are that:

  • effort in work is as natural as work and play
  • employees are able to work efficiently without constant supervision
  • commitment to objectives is a function of rewards associated with thier achievement
  • employees usually accept and often seek responsibility
  • most employees possess ingenuity and creativity, and they want to use these skills in their work
  • employees seek satisfaction from work and not merely financial rewards
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Is the process of allowing subordinates to have greater control over their working lives by, for example, leetting them make many of their own decisions. 

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Is the passing down of authority to a junior employee for a particular task. This is often limited to specific tasks and activities; in contrast, empowerment is a more general philosophy of passing down authority and control.

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Job Enrichment

Is the process of designing jobs containing tasks of varying complexity that allow employees to use their abilities to a greater extent. 

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Job Enlargement

Extends the range of duties associated with a particular job. 

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Routine and non-routine decisions

Routine decisions are ones that are taken regularly. They are not unexpected so managers expect and are prepared for them as part of their regular duties (e.g. agreeing staff rotas, ordering stock, reducing prices by making special offers). These are usually low level decisions which can be taken by junion members of staff. However some routine decisions like financial decisions are major and have to be made by a senior member of staff. 

Non-routine decisions occur irregularly and may be needed because of an unexpected event, these can be taken by managers at all levels (e.g. deciding how to respond in an emergency/ fire/ break in, making location decisions, deciding to cease production of a product that has been popular for many years, taking a decision to enter a new market)

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Tactical and strategic decisions

Tactical decisions are based on short-term factors (e.g. a short term price cut) and are normally taken by middle managers. Strategic decisions are those that have long-term implications, often for the entire businesss. These are made by senior managers. 

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Proactive and Reactive Decisions

A proactive decision is one taken in advance of events, managers at all levels can take proactive decisions. (e.g. to hold extra stock of a certain product in case of a sudden rise in demand). One type of proactive decision is putting in place contigency plans to deal with crisis threats (e.g. terrorism, natural disasters) before they occur. 

Reactive decisions are taken when businesses respond to events rather than trying to shape them. (e.g. deciding how to rival a product once it has been released). These are taken at all levels in the business. 

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Critical Path Analysis

It is a type of network analysis which calculates and illustrates how complex projects can be completed as quickly as possible. 

Advantages - it helps managers use time efficiently, it helps to minimise costs and reduce the time a project takes to complete. It plans the start times of each tasks so you can have resources ready. It can help to rectify any problems with timings.

Disadvantages - some complex projects may be difficult or impossible to represent on a network. External factors may change (e.g. availability of resources). Depends on the time durations being accurate. 

The benefits often outwweigh the drawbacks. 

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Statistical Process Control

This uses monitoring systems based on statistics to make sure that production is efficient and meets quality standards. Can graph information from customer satisfaction surveys (e.g. would you fly with this airline again?) Can also monitor the quality of products. 

Can allow decisions to be made before the products reach the customers. 

Implementing it can be expensive and some employees may resent what they perceive as an electronic spy checking up on their work.

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Decision Trees

More general technique that can help managers to make decisions. 

Advantages - enocurages managers to be logical and consider all possibilities, discourages managers to rely too heavily on instinct. If a manager has access to accurate data then they can be particularly valuable. More suited and accurate for routine decisions. 

Disadvantages - they can be problematic if the business environment is too changeable. This makes it very difficult to assess the various outcomes with any degree of confidence. 

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