Functional area of Management

10/03/2020 1 By indiafreenotes

Functional areas of management mean the sum total of all those activities which are performed in an organisation to achieve the objectives of the organisation. These functions can be of different types but personnel, finance, marketing and production activities have a special importance.

Different management experts have created separate functional management areas.

Some major functional areas are given below:

  1. Personnel Management
  2. Financial Management
  3. Marketing Management
  4. Production Management
  5. Purchase Management
  6. Development Management
  7. Maintenance Management
  8. Office Management

1. Personnel Management:

All means of production (men, materials, machines, money, etc.) may be divided into two parts – active and passive. Active means include men while machines, materials, money etc. belong to passive means of production. An enterprise may have large quantity of passive means of production, such as, machines, materials and money but the same are of no use if not properly utilized. These can be utilized properly only with the help of active means, that is, human beings.

What is needed is that such human resource be made available as is perfectly efficient. It is the job of personnel management to make efficient human resource available. In order to fulfil this task, personnel department is established in large organisations. This department functions under the supervision of personnel manager.

Meaning of Personnel Management:

Personnel Management is that branch of management which is concerned with the recruitment, selection, development and the optimum use of the employees. In other words, personnel management is concerned with the employees engaged at all levels of an organisation.

Objectives of Personnel Management:

Main objectives of personnel management are as follows:

(1) To Provide able Employees:

First objective of personnel management is to provide able employees to the organisation. Able employees alone can contribute to the achievement of the objectives of the organisation.

(2) To Increase Employees’ Efficiency:

Proper selection of the employees is not sufficient for the success of the organisation. Rather it is necessary to add to their efficiency continuously. Personnel manager performs this function by arranging training for the employees.

(3) To Develop Team-Spirit:

It is the objective of personnel management to inculcate team-spirit among all the persons employed in the organisation. Objectives of the enterprise can easily be achieved in this way.

(4) To Develop Cordial Industrial Relations:

The aim of the personnel management is to develop a spirit of goodwill, confidence and mutual respect between the labourers and the employers. Such a spirit makes industrial relations cordial.

(5) To Develop Congenial work Environment:

The environment of work in which the employees have to work has great effect on their efficiency. Clean and healthy environment increase their efficiency. It is, therefore, the function of personnel management to provide good work environment.

Nature of Personnel Management:

Nature of personnel management is clear from the following facts:

(1) It is Related with People:

Personnel management is concerned with human resource. Its scope extends to employees working in an organisation at all levels. It includes recruitment of employees, selection, training, job evaluation, determination of remuneration, provision of good working conditions etc. In short, every activity of personnel management relates with people.

(2) It is a Pervasive Function:

Nature of personnel management is all pervasive. Pervasive here means that the function of personnel management is performed at all levels of management. In other words, managers at all levels perform this function with respect to their employees. In fact, the function of personnel management is performed by a separately established personnel department.

But it is necessary here to make it clear that establishment of this department does not relieve other managers of their personnel management function. Rather the objective of the establishment of this department is only to help other managers to accomplish their function of personnel management. However, its final responsibility remains with all the concerned managers.

(3) It is a Multiple-Objective Function:

Nature of personnel management is multi-objective.

It has to achieve three objectives at the same time:

(i) Organisational Objective:

As an organisational objective, personnel management has to make maximum utilisation of the available labour resources possible in an organisation.

(ii) Employee Satisfaction Objective:

Another objective of personnel management is to satisfy the employees by ensuring proper remuneration, promotion, training, etc.

(iii) Social Objective:

To maintain industrial peace is the social objective of personnel management.

(4) It is a Group of Personnel Activities:

Under personnel management comes several activities concerning employees. It is therefore called a group of personnel activities. Main personnel activities are recruitment, selection, training, job evaluation, fixation of remuneration, etc.

(5) It Requires the knowledge of Psychology:

Personnel management deals with human resource of production. Every individual working in an organisation has his own desires, expectations and tastes. In order to get maximum work out of his subordinates, a manager has to keep in mind all these things. Managers must, therefore, have knowledge of human psychology.

Role of Personnel Manager:

In modern organisations, a personnel manager performs not one but many roles which are mentioned below:

(1) As a Line Executive:

Personnel manager is the head of personnel department. In order to discharge the responsibility of his department when he performs the functions of recruitment, selection, training, etc. he acts as a line executive. The characteristic of a line executive is that he is directly responsible for his activities.

(2) As a Staff Executive:

When a personnel manager advises heads of other departments regarding solution to the problems relating to their employees, then he acts as a staff executive. It is the feature of a staff executive that he is not answerable for the results of his advice.

(3) As a Counsellor:

When a personnel manager listens to the problems of different employees working in the organisation and brings the same to the notice of general manager, then he plays the role of a counsellor. He gives his advice to the general manager regarding solution to these problems.

(4) As a Mediator:

When a personnel manager seeks to solve dispute between management and employees, then he plays the role of a mediator.

(5) As a Representative:

A personnel manager represents his organisation in the meeting convened by the government and non-government organisations to find solution to the problems of employees. Thus he also plays the role of a representative.

2. Financial Management:

The major objective of any business concern is to make profit for its owners by selling goods or services. To reach this goal finance is required. In this context it can be said that finance is the soul of any business concern. Keeping this in view, the proper management of finance is absolutely necessary.

In every business, three main questions which arise regarding finance are – (i) How much finance will be required for different business activities? (ii) How much of it will be obtained from different sources? and (iii) How profit earned from different business activities will be distributed? Answer to all these questions is inherent in financial management.

In other words, it can be said that under financial management, first of all, need for finance is estimated and then different sources of obtaining finance and its quantum are determined and finally arrangements are made for the distribution of profit.

To conclude, it can be said that under financial management, financial needs of a business are met in such a manner that its goals can easily be achieved.

Scope or Aspects of Financial Management:

Regarding scope or aspects of financial management there are two approaches. One, traditional approach and two, modern approach. According to traditional approach, procurement of necessary finance for a business is called financial management. Under modern approach scope of financial management is seen in a wider perspective. It includes not only procurement of finance but also its efficient utilization. Modern thinkers have made a mention of three important decisions taken by a financial manager.

The same area as under:

(1) Investment Decision:

Investment decision refers to the selection of those assets in which investment is to be made by the business or the assets which are to be purchased for running the business.

Assets which are obtained by the business are of two types:

(i) Fixed assets and

(ii) Current assets.

On the same basis, investment decision is also divided into two parts:

(i) Fixed Assets Investment Decision:

In order to take this decision, the financial manager must know what assets are required to be bought for other departments like production department, purchase department, sale department, etc. For example- production department is in need of a machine for producing a particular commodity. On receipt of this information from production department, financial manager has to decide which of the different alternatives (different machines) available in the market is the best for producing that particular commodity.

In order to make selection of the best alternatives, cost-benefit analysis of different alternatives is undertaken. That alternative is selected which yields more profit at less cost. Decision regarding investment in fixed assets is called Capital Budgeting.

(ii) Current Assets Investment Decision:

Current assets include mainly Cash, Stock, Debtors, etc. Financial manager has to ensure that there is adequate investment in current assets. By adequate investment is meant that investment in these assets should be so much as to meet the daily liabilities of the business on time. In other words, liquidity of the business must be maintained. It may however be mentioned here that if the amount of current assets is large, liquidity position of the business will improve but profitability will go down.

On the contrary, if the amount of current assets is less than required, it will add to the profitability of the business but liquidity position is adversely affected. Thus, the financial manager has to decide about the optimum amount of investment in current assets. Decision regarding investment in current assets is called management of working capital.

(2) Financing Decision:

The other decision by financial manager relates to different sources from where finance is to be procured to meet the requirements of the business. He is to ascertain the different sources from where the necessary finance is to be mobilized and in what amount. This question relates to capital structure. Capital structure is the sum of debt capital and share capital.

There should be a proper balance between debt and share capital as it influences the market price of the shares and cost of capital. Such a capital structure as makes use of proper amount of debt capital is called optimum capital structure. Such a capital structure has the attribute of maximum market price of shares and minimum cost of capital.

(3) Dividend Decision:

How much of the total profit be distributed among the shareholders as dividend and how much be retained by the business as reserve, is another decision that a financial manager has to take. Shareholders want that they should get maximum dividend and the managers want that maximum profit be retained as reserve to meet the future requirements of the business.

The financial manager has to strike a balance between these two demands on profit, so that both the parties are satisfied. This decision is also called disposal of surplus decision.

3. Marketing Management:

Marketing management refers to all managerial activities relating to marketing. Marketing includes all those activities ranging from knowing the needs of the consumers to their satisfaction. On the other hand, management includes planning, organising, staffing, directing and controlling. Performing of all managerial functions in the context of marketing is called Marketing Management.

Thus, main activities of marketing management are as under:

(i) Planning of marketing activities.

(ii) Organising of marketing activities.

(iii) Staffing for accomplishing marketing activities.

(iv) Directing of marketing activities.

(v) Controlling of marketing activities.

Objectives of Marketing Management:

Main objectives of marketing management are as under:

(1) To Ensure Consumer Satisfaction:

Prime objective of marketing management is to ensure consumer satisfaction. To achieve this objective, marketing manager makes an intensive study of the needs of the consumers. Production and distribution of goods are in tune with their needs.

(2) To Serve the Society:

Under marketing management, marketing manager plays an important role in discharging the social obligation of the business. To this end, his constant endeavour is to produce good quality products, to supply goods and services at reasonable prices, to avoid false promises through publicity media, to ensure good behaviour to the customers, etc. As a result of this effort, on the one hand, social obligation of the business is fulfilled and on the other, its goodwill is enhanced.

(3) To Increase the Market Share:

Increase in market share means increase in sales. Aim of a marketing manager is to bring under his possession a large part of the market. With a view to increasing the sale of goods and services, he adopts all means of sales promotion, such as, free samples, exhibition, discount sales, etc.

(4) To Generate Maximum Earning for the Business:

Marketing alone is such a business activity as yields income. It is quite clear, that in the absence of profit no business can last for long. It is, therefore, the objective of the marketing manager to generate maximum earning for the business while keeping in mind full satisfaction of the consumers.

(5) To Perform the Marketing Function Efficiently:

Marketing functions include – marketing research, product planning, purchase, sale, branding, packing, pricing, advertising, etc. Marketing manager is responsible for performing all these functions. He is expected to accomplish it efficiently. Thus, an important function of the marketing manager is to perform efficiently all these functions.

(6) To Perform the Managerial Activities in Reference to the Marketing Efficiently:

With a view to performing marketing functions, marketing manager has to plan, organise, direct and control them. It is the objective of the marketing manager that he should perform all managerial activities efficiently.

Functions of Marketing Management:

Functions of marketing management refer to those activities which are carried out to achieve the objectives of marketing. In the first instance, marketing objectives are determined. Then to achieve the same, need is felt for planning, organising, staffing, directing and controlling of marketing activities. These are, as a matter of fact, functions of marketing management.

Their brief description is as under:

(1) Planning of Marketing Activities:

First of all, planning of marketing activities is done in order to achieve marketing goals or to perform marketing activities. Here planning means to determine when, how, where and by whom different marketing activities are to be conducted.

(2) Organising of Marketing Activities:

In order to conduct different activities (purchase, assemble, sale, storage, transportation, packing, pricing, advertising, marketing research, etc.) the same are divided into some groups. Under grouping, a special post is created to carry out similar kind of activities. Rights and duties of different posts so created are clearly defined. Who will be the officer and who will be the subordinates are also decided?

(3) Staffing for Marketing Activities:

Under this function, appointments are made to do different marketing activities. In big organisations, personnel department is established for making appointments. Marketing manager helps personnel manager to secure staff for his department.

(4) Directing of Marketing Activities:

Directing refers to giving of proper guidance to persons working on different posts so that they may discharge their duties efficiently. Under this function, marketing manager supervises his subordinates, provides them good leadership and from time to time motivates them.

(5) Controlling of Marketing Activities:

By controlling of marketing activities is meant review of marketing activities from time to time so that deviations could be traced out. In case of negative deviation, the same is removed by taking corrective action immediately.

4. Production Management:

The production management is needed by the manufacturing organisations. These organisations change the form of the raw material and make it more useful.

This functional area of management includes the following activities:

(i) To anticipate the production activities,

(ii) To determine the kind and quantity of the goods to be produced,

(iii) To make provision for the raw material well in time,

(iv) To plan and control production,

(v) To determine the need of the employees of the production department and arrange for the recruitment and selection process,

(vi) To conduct the time and motion study,

(vii) To determine the method of production,

(viii) To control the quality of the goods produced, etc.

5. Purchase Management:

Purchase management means planning and controlling purchase. It means to determine as to what goods are to be purchased, where to purchase from, when to purchase, etc.

The following are the main functions to be performed under the purchase management:

(i) To obtain the requisition letter of purchase,

(ii) To make enquiry before purchase,

(iii) To place orders for purchase of goods,

(iv) To receive the goods,

(v) To arrange for the storing of goods,

(vi) To control the receipt of goods, its stock and issue.

6. Development Management:

Development management is related with the management of research activities.

The following activities are performed under it:

(i) To develop new production process,

(ii) To carry on research in relation to the goods, machines and implements used in the process of production,

(iii) To develop new products,

(iv) To discover new substitutes for raw material, etc.

7. Maintenance Management:

It is the responsibility of this functional area of management to keep the organisation in working condition. If the building and the machines of the factory are not in proper condition, the efficiency of the employees will certainly be reduced. It will, therefore, not be satisfying both for the owner and the employees. Therefore, maintenance management is important for both the categories.

The chief functions of the maintenance management are given below:

(i) To keep the machines and implements in proper condition,

(ii) To ensure the cleanliness of the building,

(iii) To plan for ensuring maintenance,

(iv) To control the maintenance activities, etc.

8. Office Management:

Office means a place for where the different activities of the organisation are planned and controlled. To run this place in a planned manner is called office management. It is the place from where the employees are given directions and guidance.

The office management includes the following activities:

(i) To prepare accounts and keep them safe

(ii) To provide for effective communication,

(iii) To lay down plans,

(iv) To establish coordination among different departments

(v) To provide all the necessary equipments in the office,

(vi) To correspond, and

(vii) To ensure the best use of the services of employees, and of all other sources.