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What is management, and what are traditional ways of management? What are the tasks and goals of management? This is what we will explore in this video. We want to understand the general purpose of management and examine the principles and goals that guide organizations and their management. Furthermore, we will reflect on the implications of these principles for organizations and their structures. Finally, we aim to understand the context of different management levels that must be taken into account.

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Why Do Organizations Exist?

From an economic perspective, competition is the driving force behind decision-making in organizations. For organizations, the overarching goal might be maximizing the value for those who own the organization—often referred to as shareholder value. Because companies in a market face competitive pressure, they need to adjust to market circumstances and competitors.

In essence, the organization that survives is the one producing the product customers demand at the lowest price while covering its own costs. Successful companies tend to be imitated by others. For example, in the beverage industry, whenever Coca-Cola or Pepsi introduces a new flavor or a low-calorie drink, the other quickly offers a similar product. Over time, routines, processes, and organizational structures across the industry become more similar due to this imitation.

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Adapting to Change

Because organizations must constantly adapt to change, we ask: What is management, and how can it ensure organizations survive in a changing environment? What is the manager’s responsibility in this regard?

There are many definitions of management. One definition (1986) states:

“Management is the organ of society specifically charged with making resources productive by planning, motivating, and regulating the activities of persons toward the effective and economical accomplishment of a given task.”

Another definition (1995) says:

“Management is the process of planning, organizing, leading, and controlling the efforts of organizational members and the use of other organizational resources in order to achieve stated organizational goals.”

Summing up, management involves being goal-oriented, focusing on effectiveness, planning, regulating, emphasizing organization, seeking profitability, and motivating people.

A famous doctrine by Milton Friedman suggests that only individuals have responsibilities, and that businesses’ main responsibility is to make as much money as possible for their shareholders. This idea leads to an emphasis on integrating shareholder value into organizational activities at all levels. Various measures and indicators exist (from the CEO down to team level) to monitor how well an organization pursues shareholder value.

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Balancing Efficiency and Effectiveness

Organizations must balance two core principles:

Minimize Input

Maximize Output

The difference between input and output determines a company’s profit or value. In this sense, organizations strive for:

Efficiency: Doing things right—using resources effectively so the relationship between what is achieved and what is spent is optimized.

Effectiveness: Doing the right things—ensuring that results align with the company’s desired goals and the quality of outcomes is high.

Thus, management is about profitability (maximizing shareholder value) by choosing the right things to do and doing them in the right way.

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What Is an Organization?

Managers work in firms, and each firm has an organization—its specific way of arranging parts and people. We also use “organization” to refer to a company itself, as well as the process of ordering individual activities (i.e., procedures within a company). When we organize, we define structures and processes that regulate how employees behave. This standardizes actions, ensures compliance with rules, and may involve sanctions or rewards.

Establishing organizational structures is a central management tool to ensure efficiency and effectiveness.

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Three Layers of Management

Management pursues three primary aims or layers:

Normative Management

Externally and future-oriented.

Aims at gaining legitimacy (being accepted by society).

Sets standards and values based on external requirements and needs.

Strategic Management

Translates legitimacy concerns into effectiveness goals: “doing the right things.”

Defines where the organization wants to go (mission, vision, structure, culture).

Operative Management

Concerned with processes and day-to-day operations: “doing things right.”

Implements strategic objectives through concrete procedures and business processes.

These layers move from the external/future perspective (normative) to the internal/present focus (operative).

Normative management typically occurs at the highest hierarchy levels, defining an organization’s norms, values, and legitimacy.

Strategic management addresses how to compete, laying out potentials for success and translating broader goals into concrete directions.

Operative management is carried out by lower-level managers, turning plans into actual success and profit in the day-to-day business environment.

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Tasks Within Management

We have discussed various dimensions, such as planning, organizing, and motivating, all of which can span normative, strategic, or operative levels. Management also ensures information flows between these levels and across different activities.

At the higher (normative and strategic) levels, managers must:

Define ethical values and ensure legitimate, socially accepted corporate behavior.

Outline corporate politics, guidelines, and goals (normative management).

Develop mission and vision (strategic management), aligning culture and identity with these goals.

Thus, normative and strategic management shape how the organization and its individuals behave.

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Key Takeaways

Companies face continuous competitive pressure and must adapt optimally to external forces.

Companies strive for efficiency and effectiveness, aiming to maximize shareholder value.

Establishing organizational structures is key to corporate management.

Different management levels (normative, strategic, operative) must address various considerations and contexts.

Thank you for watching this video. We look forward to seeing you in the next one.

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