How to Maintain Firm's Efficiency in Terms of Profit Generation?

Maintaining Firm's Efficiency in Terms of Profit Generation in not an easy task. Efficiency is the ratio of output to the input. A manager has not only to perform and produce results, but to do so in the most efficient manner possible. To produce results a manager requires inputs in the form of money, men, materials and machines. The more output that the manager can produce with the same input, the greater will be the profit generated. Profit is the surplus or difference the manager can generate between the value of inputs and outputs.

Profit is essential for the survival and growth of a business. A manager may decide to forego some profit today for the profits which he is seeking tomorrow but in the long run he must understand that no business can survive if it does not make profits Business activity is undertaken to satisfy a need of the society in a manner which yields profits. A business is not a philanthropic or charitable activity which is run merely to provide some goods and services irrespective of whether it is making a profit.

Profit generated can be used for expansion, upgrading of technology, growth or paying dividends. Profits are one of the cheapest sources of financing growth, as they involve no interest liability nor putting the freedom at stake by having representatives of financial institutions sit on your board of directors. Profit gives you the cushion to take risk, think big and venture into relatively unknown areas.

A profitable firm can turn unprofitable because of obsolete technology, inability to meet high fixed cost structures, high levels of wastage, or simply because the product is no longer in demand by customers. We have illustrated how the traditional textile mills became unprofitable and the fate they eventually met. A similar fate awaits all unprofitable businesses. The consistent failure of, Engineering Projects India, a public sector company, to generate profits and. execute international projects within the time limits has threatened the very existence of this company.

In contrast, companies such as Colgate-Palmolive, Tata Engineering and Locomotive Company (TELCO), Century Enka, Richardson Hindustan Limited, etc. has been showing consistently good profits.

How to Manage Survival & Growth in Competitive Market?

"Survival of the fittest" is the law of the jungle which is equally applicable to the competitive market place where firms struggle and fight for survival. Ensuring survival of the firm is a critical task of the manager. But that alone is not enough. The manager has also to actively seek growth. No matter how big or powerful a firm may be today, it is sure to be left behind in the race by newer, healthier and more efficient firms if it does not pursue growth.

Two sets of factors impinge upon the firm's survival and growth. The first is the set of factors which are internal to the firm and are largely controllable. These internal factors are choice of technology, efficiency of labor, competence of managerial staff, company image, financial resources, etc.

Most of the old traditional textile mills were setup in India around the late 19th or early 20th century based on the then prevalent technology. These mills continued to flourish till the late 1960s. The early and mid-seventies witnessed a dramatic revolution in textile technology all over the world. Ignorant of this changing trend, the Indian mills continued with the old technology. But some new companies (notable among them Reliance Textiles with its 'Vimal' brand of textiles) entered this field with the latest technology, offering superior quality textiles in a wide range of polyester and cotton blends. The traditional mills could not match these new entrants in terms of either product or price. And one of the oldest and the most prosperous industry was faced with unprecedented levels of sickness. Most of the old mills became unprofitable and had to be bailed out or taken over by the government, or finally shut down. Failure of managing technological change sounded the death knell of the textile mills.

The second set of factors influencing the firm's ability to ensure survival and growth are those which are external to the firm and over which it has little or no control. These external, environmental factors refer to government policy, laws and regulations, changing customer tastes, attitudes and values, increasing competition etc. Hindustan Lever Limited (HLL) is a subsidiary of a multinational company which, till some years ago, was manufacturing and marketing detergents (Surf, Rin), soaps (Lux, Liril, Lifebuoy, etc.) and Dalda Vanaspati, groundnut oil, and agroproducts. Most of these are low-technology lines. Being a foreign company in lowtechnology areas, further growth opportunities were restricted under the Foreign Exchange Regulations Act (FERA) unless HLL diluted its foreign equity to 40 per cent. Not willing to dilute the equity holding to 40 per cent level HLL had to find a way to manage its survival and growth. HLL sold off its line of vanaspati and cooking oil to Lipton India and diversified into the production of basic chemicals-a high-technology area where foreign companies are allowed to invest and grow as per FERA. Thus by changeover from low-tech to hi-tech area HLL has ensured its future in India.

How to Provide Purposeful Direction to the Firm?

A manager can be compared to the captain of a ship who has first to set the course to reach the destination and then steer the ship along the course. Similarly, a manager has to, first of all, set objectives which the firm must achieve. Objectives provide the direction in which the firm must move. Having decided upon the objectives, the manager must constantly monitor the progress and activities of the firm to ensure that it is moving in the desired direction. This is the first and foremost task of every manager.

If you are a part of the top management team then you will be very actively involved in this task through the process of defining the mission and objectives for the entire organisation. If you are a manager reporting to the top manager, it is your task to see that the actions of the people who work for you in your department or division are in the desired direction. It is your task as a manager to prevent all such actions which take your company away from the direction set by the top management.

A large American multinational company has its subsidiary in India which manufactures and markets a popular line of cosmetics and cough and cold medication. It maintains a large farm in Uttar Pradesh for production of a medicinal plant which is used as an active ingredient in all its medication. Control over this essential raw material gives the company a substantial cost advantage. To derive further cost advantage it was proposed that the company set up its own printing press for printing the packaging labels. The proposal was in the final stage of approval till the top management team realized that printing was not their business. Diversification into printing would only .take the company farther away from, and not closer to, the desired direction. Production and marketing of medication was their main line of business and the farm made an essential contribution. However, printing was not such a critical activity that it required the company to have full control over it.

This illustration highlights the fact that all actions and decisions must be evaluated on the basis of their contribution towards achievement of the company's objectives. However, this illustration should not give you the idea that objectives or direction once set will hold well for all times to come or that any movement away from the current line of production or activity is always undesirable. The key point is that all movements and actions must be consistent with achievement of the objectives. To ensure consistency it is important that the manager carefully thinks through each alternative course of action, to evaluate its potential to contribute towards attainment of objectives.

What are the tasks of a Professional Manager?

As a reader of this article you are either a practicing manager or are aspiring to be one. Your, first concern, therefore, is to know the tasks which you are expected to fulfill as a professional manager. These various tasks are discussed in this unit.

There is a lot of confusion over the much widely used terms-professional management and professional managers. Some researchers contend there is nothing like professional management. Management is a discipline. There are practitioners of this discipline who practice management as a profession and 'thus are, professional managers. Just as there are doctors and lawyers by profession similarly there are professional managers. As doctors practice medicine, managers practice management.

The only difference between professional managers and other professionals is that, while the latter must possess a formal degree in their discipline, a professional manager need not have a formal degree or education in management. He may have learnt the necessary skills and gained competence from his experience. The second characteristic of a professional manager is that his primary concern is the organisation or the company with which he works. This is true whether the manager works for a private or public sector or a multinational company; whether he is the executive director or the personnel manager reporting to the executive director. The professional manager always has his company's overall perspective in his mind and all his actions are guided by the company's objectives.

The third and the most important characteristic of a professional manager is that he is responsible for performance. Managing involves collecting and utilizing resources (money, men, materials and machines) in. the most optimal manner for achievement of some pre-determined objectives or results. It is the professional manager's responsibility to utilize resources to produce the required results. Responsibility and performance are really the key words in defining a manager's role. Performance implies action, and action necessitates taking specific steps and doing certain tasks. Let us first take up the various tasks which a manager is expected to do to produce results.

Tasks of a Professional Manager

1. Providing Purposeful Direction to the Firm
2. Managing Survival and Growth
3. Maintaining Firm's Efficiency In Terms of Profit Generation
4. Meeting the Challenge of Increasing Competition
5. Managing for Innovation
6. Building Human Organisation
7. Retaining Talent and Inculcating Sense of Loyalty
8. Sustaining Leadership Effectiveness
9. Maintaining Balance between Creativity and Conformity
10. Postponing Managerial Obsolescence
11. Meeting the Challenge of Change
12. Coping With Growing Technological Sophistication
13. Coping with Growing Public Critics and Political Opposition-Both Objective and Irrational
14. Coping with Increasing Levels of Aspiration
15. Maintaining Relations with Various Society Segments

The specific tasks which a manager has to perform flow out of his job description. The tasks may vary depending upon the managerial level, function and industry to which the manager belongs. In this unit we have discussed an exhaustive list of tasks which every manager has to perform. It is possible that you may not be performing all the tasks described here but confining yourself to only a few. Also, some tasks may be of greater importance than others.

Given the wide range of diverse tasks which a manager is called upon to perform it is essential that the manager be a thinker, a doer and a people-oriented man all rolled into one. However, it is rare that you find a manager who has the ideal combination of all three dimensions in equal parts. To be effective you must recognize your strong dimension and look for an opening where your strength can be best utilized.