There is a high probability that a startup will fail within the first five years after it is launched, and lack of awareness of importance of management in business is the key factor that contributes to this fate.
Regardless of the type of business, management has always been a key component. On the other hand, the management of an organization is more challenging because of the increasing level of competition in an organization’s internal and external environments.
A company with good management can make money and improve its reputation, contrary to poor management forcing a firm out of business.
Take this example of management, for instance:
Take for a moment a hypothetical situation where John is the owner of a humble eatery.
The goal of John is to deliver high-quality meals to the clients and earn their continued patronage; however, his responsibilities do not end there.
He must take care of various tasks to ensure his business’s smooth operation. These tasks include the following: planning menus, keeping an inventory, ordering what is required, planning the budget, maintaining standards, addressing complaints from customers, hiring and training staff, and a great deal more.
Even if just one of these is neglected, his company will take a significant hit.
The expansion of enterprises is of critical significance to the economic health of a nation. However, the procedures that make up a firm are notoriously difficult to understand.
The parameters of a firm’s potential for success are largely determined by how the business administration is managed.
When running a company, there are a great number of considerations that need to be kept in mind. There must be someone knowledgeable in the field.
The role of management becomes important at this point. John and his crew can divide the responsibilities and work together to achieve the restaurant’s objective.
The team must work together in a coordinated and organized manner to avoid failure. The firm functions without hiccups as a result of not neglecting any responsibility.
What Is Management?
Management is the process of planning, organizing, directing, and controlling an organization or corporation’s actions and resources to achieve its purpose in a dynamic, unpredictable, and efficient environment.
It oversees and exercises control over the organization’s financial and commercial dealings.
Management also entails constructing a business environment for employees and employers to facilitate collaborative effort toward accomplishing the organization’s objective effectively and competently.
It directs a group of people to combine their efforts in a predetermined manner to achieve the organization’s objective.
What Is Business Management?
The primary focuses of business management are the organization, planning, and analysis of the various business operations necessary for a business’s successful administration and operation.
Business Management will equip you with the skills and knowledge needed to work with firms of any size, from multinational corporations to start-up firms, as you explore what makes an organization successful in today’s competitive and saturated global business environment.
Businesses have a variety of tasks that need to be carried out in the correct sequence to ensure the company’s smooth operation, which is essential if the company is to expand in all aspects and have a strong reputation in the industry.
Many businesses fail due to a failure in the administration and activities of the business, especially where many businesses never have the opportunity to compete successfully in their target markets.
Market dynamics and factors contributing to success can be challenging to comprehend when considering the various markets. There can be quite a lot of shifting in market demands frequently.
The management of a company is the process of coordinating and organizing the activities of the company. Managers of businesses are responsible for overseeing operations and assisting workers in maximizing their production levels.
A firm manager may also be responsible for training and supervising newly hired employees and assisting an organization with its operations and finances.
Business management is concerned with managing all business activities, including those that include and apply to customers, as well as the monitoring and administration of a company’s financial, accounting, and marketing facets.
Business management has emerged as a viable career option compared to more traditional options, such as engineering or medicine.
What is the Importance of Management in Business?
The importance of management in business success is directly correlated with its quality of management, so management cannot be minimized or ignored under any circumstances.
The following are some of the reasons why management is essential for any business:
Achieve Business Goals
A firm comprises its owners, managers, and staff, all of whom collaborate on various projects.
Everyone strives to do something different. The management provides them a unified path to follow to reach their goal together.
It organizes the factors of production, gathers and organizes the resources, and efficiently integrates them to meet objectives. It guides the efforts of a group towards the accomplishment of predetermined objectives.
If the company’s aim is defined explicitly, there will be no wasted time, money, or effort. Management transforms the unorganized resources of personnel, machines, money, and other things into useful enterprises.
The coordination, direction, and control of these resources are carried out in such a way as to ensure that the enterprise is working towards the achievement of its goals.
Take, for instance:
A corporation should strive to achieve the highest possible output and profit levels. The objective of an employee should be to maximize their benefits from the organization, both in terms of financial compensation and public acknowledgment. By utilizing powerful employee motivation tactics that inspire him to offer his absolute best to the organization, management contributes to better aligning these two aims.
An organization that functions in a highly competitive setting must emphasize the efficient management of its available resources.
Management assists in the distribution of work and help to ensure that workers are neither underperforming or becoming overburdened with their responsibilities.
Every worker is an expert in one or more areas related to their job. The management ensures that the staff works within their areas of expertise by assigning them relevant tasks. Work can be completed more quickly and accurately as a result.
Management is responsible for the efficient utilization of all of the available physical and human resources. Because of this, management becomes more effective.
Management ensures the most efficient use of limited resources by determining the most beneficial alternative within an industry from several potential applications.
It utilizes professionals and subject matter specialists, and as a result, their expertise, knowledge, and proper application are put to good use, and unnecessary waste is prevented.
When workers and machines operate at their highest productivity levels, there is no underemployment of any resources.
In addition, management ensures that all aspects of the work are standardized to cut down on the number of wasted resources.
Take, for instance:
The management makes it a point to assign the individual who is successful in sales to work exclusively in the sales department and not in any other departments.
In addition, it gives him the appropriate training so that during the real sales visits, as little time as possible is wasted on trying to teach him new things.
Management assists in bringing together and organizing all of the components that contribute to production.
It entails making the most efficient use of available resources, eliminating time and effort, and lowering squandered financial resources. Therefore management delivers better ROI (Return on investment).
Through careful planning and strategic execution, it achieves maximum results while consuming the bare minimum of resources while generating a possible output.
The management of an organization makes use of its physical, human, and financial resources in such a way as to produce the finest combination possible. This aids in reducing overall costs.
A decrease in expenses assists in securing a favorable position in the market and ensures that the business remains one step ahead of its rivals.
Improves Employees Efficiency
The primary objective of the business is to generate the highest possible level of profitability, which can be accomplished by maximizing the number of goods or services sold while simultaneously cutting costs wherever possible.
There will be no duplication of efforts (smooth and coordinated functions). It is one of the objectives of management, which is in tune with the organization’s objective, to establish a sound organizational structure.
Effective authority and responsibility relationships are established by management to achieve this objective.
A hierarchy determines who is accountable, who can give instructions to whom, who is superior to whom, and so on.
The management team ensures that the appropriate people with the necessary experience, education, and training are hired for each role. Everyone should be allowed to apply for every job.
Management entails making the most efficient use of available resources and contributes to the reduction of costs. These two aspects, in turn, contribute to a rise in the effectiveness of the business.
A business operates in a fluid setting, which is influenced by a variety of outside forces on a variety of fronts, including political, social, and economic issues, among others.
The organization must therefore be adaptable and modify its short-term objectives and working practices to accommodate these changes.
Management assists in the adaptation process so that the business continues to be successful despite the constantly changing environment.
It makes it possible for the company to thrive in an always-shifting environment. It maintains a connection with the ever-evolving environment.
The initial coordination of the organization needs to be altered to accommodate the shifting external environment.
As a result, the organization can adjust to the shifting demands of the market and the evolving requirements of societies. It is accountable for the organization’s continued development and existence.
Take, for instance:
McDonald’s, the industry leader in fast food, was forced to make numerous adjustments to its menu to remain competitive in the Indian market, which vegetarians dominated.
The goal of good management should always be to ensure that the organization functions smoothly and to cut down on the number of failed attempts.
The organization is thus able to overcome challenging circumstances and maintain its competitive edge.
A sound management system can help an organization pursue its goals in large markets in the current era of contemporary commerce.
Essentials for Prosperity of Society
The effectiveness of management makes the task easier and also prevents the waste of precious resources, which are expensive and hard to obtain.
Effective management contributes to a better standard of living by resulting in a more economically sound output. Management can simplify tough work by preventing the waste of limited resources.
This results in an improvement in quality of life. It will maximize production at minimal cost by creating employment opportunities that create income.
Businesses benefit from this because profits rise. This organization is involved in developing new products and conducting research that is helpful to the community.
The provision of high-quality goods and services, which contributes to an improved standard of living, is facilitated by management.
It also results in a greater profit for the organization, which allows for the payment of reasonable wages and further employment prospects.
Here are some examples of businesses failing due to ineffective management
Compaq Management Failure
Compaq was one of the most successful corporations in the 1980s and 1990s, and it was the largest supplier of personal computer (PC) systems.
Eckhard Pfeiffer was an early adopter of diversification as his priority as CEO of the company. In 1998, Compaq spent $9.6 billion on acquiring a service company, Digital Equipment Corporation.
The issue here was that the management of Compaq, even though the merger appeared to be a smart idea on the surface, failed to consider that DEC had produced several products that Compaq had no use for, which would have added more work for the company.
Even though the corporation successfully divested some elements of DEC and other ventures that did not generate a profit, such as Altavista, the organization lacked direction and honesty.
The top executives, notably Chief Financial Officer Earl Mason and Chief Executive Officer Eckhard Pfeiffer, were implicated in many scandals, which led to their forced resignations. Consequently, the company was unsuccessful against Dell first and later against other competitors.
As a result of the CEO’s ineffective leadership, the company lost its CEO in 1998 and was eventually acquired by Hewlett-Packard the following year.
Enron Management Failure
At the beginning of 2001, Enron’s annual sales were $100 billion, and the company employed 29,000 people. On December 2, 2001, however, the company filed for bankruptcy.
When Enron filed for bankruptcy on December 2, 2001, its share price was $0.26, compared to its all-time high of $90.75 per share, which occurred during its most profitable period.
Enron’s management concealed billions of dollars in debt by exploiting accounting loopholes and filing false reports.
They deceived the company’s management and compelled the auditors to remove the evidence and keep it hidden from the board.
As a result of poor management, corporate officials failed to recognize all of these potential vulnerabilities, which ultimately contributed to the company’s demise.
Final Words on Importance of Management in Business
Management plays a critical role in all companies because it has the power to either make or break the business.
A competent management team can enhance performance and give the company an edge over its competitors. The only option is to ignore or pretend it doesn’t exist.
Management abilities are essential in every sector of the economy and every sphere of life. Therefore, it is essential to have a solid understanding of the function that management plays and the magnitude of the effect it can have on a company’s operations.