Role of Management and Leadership in Business Risk

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Abstract

The role of management and the functions of management in business administration and businesses processes has become a subject of scholarly debates. Critical analysis of the functions of the management, the management process, and their effect on global business can establish the effectiveness of leadership. It will explain how these functions help curb risks, cutting costs, and insulating the company against bad business weather.

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Chester (1998) observed that it is interesting to learn how the functions of management affect and drive the business process. Good management practices and proper dispensation of management functions can help minimize risks and increase organizations’ effectiveness.

On the other hand, critically evaluating the role of leadership in organizations can expose flaws in management and how management can be streamlined to impact issues of global business. In what ways can improved management effectiveness be achieved?

Introduction

The functions of management and the process of management remain the single largest expense in an organization. Without a proper management structure, it is impossible to delegate duties, plan, and carry out business processes. It means organizations are dead without management. A management structure and culture insulates an organization from constraints. Prospects of growth and employee effectiveness are observed if management is effective.

Organizations have struggled to achieve a global presence. How to become effective in the global market worries many organizations’ executives. The research aims to identify how management influences global business. The research critically examines how managers can reduce exposure to employee dissonance to achieve effectiveness. Research on professional management processes shows that proper management can effectively improve employee effectiveness and the management process.

This research further establishes management as leadership. We touch on issues of leadership and leadership importance in the management process. The organization is defunct without a leader; hence, we seek to identify how leadership influences organizations and their competitiveness in the global platform. As such, the research touches on two areas, the context of the role of management in an organization’s competitive edge, and the context of a leadership role in organizational effectiveness.

Background information

In pursuit of improved management effectiveness, organizations have sought to approach management from a professional perspective. It is believed that good governance can lead organizations to success. Improved management effectiveness is a vital ingredient of organizational success. The relationship between employees and their managers determines the success of an organization. Success is an indicator of functionality and ease of implementation of policy and administrative requirements in an organization.

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Employee output is determined by the employee’s attitude towards his work. Employee output is often undervalued and overlooked when managers or business leaders associate gains of the organization with employees’ roles. It is an aspect of professionalism that many business leaders fail to identify. Corporations need to value employee output, especially, how employees perceive their positions and feel about their roles in the organization. This is much more than employee commitment and loyalty to the organization.

Professional managers and leaders will have management teams working with the organization’s leadership cohesively to implement the organization’s business strategy. This leadership collaboration further helps in the execution of strategy, creation of new strategies, and practice management. This impacts management positively since exercise carried out during such important sessions brings about management oversight over the organization staff and teams.

Reducing risk to scale organization global effectiveness is pegged on management. By critically examining risk reduction, acquiring better skills is seen as a cost-effective solution. Management plays a key role in evaluating if gaining additional skills is cost-effective. It is important to understand that management and organizations leadership is critical in global business competitiveness. Managers should facilitate success through brokering for better employee treatment, a working environment that inspires creativity and innovation, and most importantly, how to reduce costs and risks.

Research shows that risks and costs in the global business process carried out by organizations can be effectively reduced through organizational effectiveness through value, quality, and strategy. The problem of organizational effectiveness in providing quality and value is determined by management practices. How can an organization in global business go into creating organizational effectiveness through management? Research developing around risk management show it is possible by delegating the role of management and effectively liaising with all arms of the organization to work as a team to achieve global effectiveness. This facilitates the provision of quality and value while the organization executes its business plan, expansion strategy, and increase profitability.

Reducing risks through management

This should not be confused with risk management rather should be viewed as the role of management in trimming agents of risk in an organization. Risks can be identified as threats to the profitability, growth, and development of an organization. There are various methods of stemming risks. Each method depends on the nature of the risk or rather; the nature of the risk that determines the risk management approach. In all undertakings, it is important to understand what could instigate a process of risks to the corporation well being.

Risks can be termed as the fore bindings that arrogantly eat into profitability, credibility, and organization strategy eventually paralyzing or forcing the organization out of its competitive position. This could mean losses, inertia, or even closure. What can factor such incidents or rather what poses these risks? This goes down to the employee level where most of the production happens. Employees might be unhappy with their managers leading to dissonance. Such a scenario can stop employees from doing their duties effectively. They will be instrumental in the creation of a faulty product which when sold could lead to mass consumer dissonance.

Example

Recent Toyota motor vehicles faults are indicative of management failing to identify employee needs at the bottom of the echelon leading to faulty engineering and production. Toyota has lost its credibility and billions worth of dollars. It will take years to recover both money and consumer confidence in its products. This is a case of management failing to follow a standard production procedure. It shows that managers trust their employees yet can fail o identify the employee needs. the employee needs that are truly profound in the business process rather than the product since the employee is the quality determinant in this case. Employees can compromise the quality of products and services subsequently jeopardizing an entire business process.

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Hammer et al (1994) point out that organizations function only if the management structure is complete. The completeness of the structure is seen through leadership and management that works closely and collaborates to execute strategy. The system can follow procedures and all guidelines to ensure the objectives of the organization are met. It is important to realize that, by following procedures, the organization can seal loopholes that can affect the production of quality. Sizeable amounts of risks are reduced through such an approach. However, management has a greater role to play apart from managing people at work. It spearheads the planning, design, and implementation of strategic plans and execution of core business processes aimed at bringing business profitability.

The objective of every business is to grow consistently. The context of global presence touches both value and competitiveness. The role of management, in this case, is to maintain the operational ability of an organization and create business resiliency. As such, management controls the operational resiliency of an organization across the organization’s dependencies like the teams and the staff of the organization. According to Kotter et al (1992), this role is not limited to the organization’s system only rather checks dependencies such as supply chain and vendors of the organization’s output.

Literature review

According to Kutzke (2010), Microsoft for which he works approaches management with caution. Kutzke argues that an organization’s success is entirely dependent on commitment and support across the organization. He asserts that the credibility of the organization’s business process is achievable through high-level management and the showing of direction by the board. According to Baker and Branch (2002), organizations are composed of people who operate under a system. This draws out the role of management in organizations in a more clear manner.

The role of management, according to Baker and Branch (2002) is to operate the system under which employees work. Employees depend on their managers for direction. Implementation of various business strategies is because of management executing strategy policies and agreeing on going about it. Developing operations standards is what spearheads management’s role in reducing risks in global business processes. Kutzke (2010) explains how management is vital in turning the global business around through keeping standards. Kutzke further explains how a standard bears a usual taxonomy that applies across the organization. This is vital if the organization is global (Kutzke 2002).

Grusky et al (1970) explains that management can significantly increase profitability through cutting costs. Cost reduction is one of the most effective ways of achieving profits. Theoretically, companies are likely to save by compliance with standards. Emphasis on the vendor’s ability to be resilient is also instrumental. Reducing costs and focusing on key business functions of an organization are important. Management has to identify means of cost reduction to cushion the organization from high costs of production and doing business. Outsourcing is one of the options that managers are opting for today.

Outsourcing is currently the most popular approach organizations are using to reduce costs. It is important to understand that, these strategies are helping the global business of an organization to achieve distinctiveness. Unfortunately, these strategies are introducing new risks. Risk reduction cannot be misconstrued for operations risk reduction. As such, management should identify mechanisms that can be effective when addressing emerging threats on business functionality, especially where transfer of risk is involved as seen in outsourcing.

Management concepts today are generic. Generic because emerging management concepts cannot replace earlier ones. What has been observed through research developing such context is that emerging concepts only create richer ones meant to reinterpret the old models or theories. It is like redefining theories. Global business and multiple functionalities require management practices with a dynamic policy to meet the dynamic business weather. Employees cannot remain at par with such processes if the management does not guide them.

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According to Baker and Branch (2002), organizations are directed towards achieving their objectives formally and rationally. Employees in these organizations are seen as able and dependent on proper decision-making tasked to the management (Baker& Branch 2002). As such, management is vital in the identification of cost and risk reduction. Employees will be productive if management effectively demonstrates good leadership and rational decision-making.

Leadership role in global organizational effectiveness

Leadership plays a pivotal role in delegating and charting the direction of management in an organization. Leaders are best described, from a corporate perspective, as senior-level leaders. How should they carry out their duties? What are their roles in organizations? Research shows that a good leader can have a very positive impact on employees. This impact can increase employee productivity significantly. Business leaders must invoke a positive impact on their employees.

This makes employee engagement have an impact on the organization. Good leaders value their employees. They set examples and lead by them. However, the impact on employees’ productivity is determined by leadership style. In most cases, leaders have demonstrated an ability to turn things. Research shows that employees like working for successful organizations. This means leaders in this organization can inspire and lead change and progress that attracts employees.

This should set an example for other business leaders. They should emulate these leaders. By concentrating on leadership from an organizational perspective, we can critically examine the role of leadership in organizations’ effectiveness. Cross-sections of business leaders explain their roles from the context of effectiveness. Leadership effectiveness is what is truly profound. You need to be respected to be a leader. Respect comes when you bring change into an organization, oversee growth, bring about profitability, and most importantly, steer the organization ahead of competitors. This leader is effective.

Effectiveness determines the ability to enact policies, effect changes, and steer the organization away from risks. The leader should effectively communicate the organization’s strategy to the managers and employees. Good leaders stand out. A clear picture of their employee’s roles presents the leader’s capabilities. Organizations can only achieve effectiveness if the leadership can carry out their roles. This involves the execution of strategies and the creation of success. These leaders make sure the organization’s strategy is communicated to them so they can invest their time and skills in facilitating its success.

Leaders need to have healthy relationships with their employees. Communication is important for this to be achieved. Communication helps employees, managers, and business leaders build trust. Trust is a component of commitment. Committed employees will be productive and effective enough to bring business and profitability. Employees should trust their leader and their leader’s capabilities. To win trust among employees, Leaders must demonstrate the ability to implement and enact changes in organizations’ business strategy and along with these changes, succeed. This portrays the leader as a policy make and the role model of his employees.

However, for employees to realize this, leaders should show some degree of trust in their employees. In return, employees will develop a sense of trust as well. Trust in the organization can be a driver. It can assist in driving the organization’s success. A leader should make sure that employees realize that they are valued partners in the company.

How can this reduce risks, improve employee productivity, and boost profits? Leadership is about charting and leading the way to corporate success. This is only in business. The organization depends on the people to make a profit. Consumers of services and products provided by the organization treat low-quality services and products as poor or low value. Kotter et al (1994) argue that leaders should strive to steer the organization from a low-value cluster to a high-value status. Business leaders should be able to provide guidance and regularly communicate strategies to employees.

Establishing trust across all departments of an organization and driving engagement is the role of leaders. Such an effort allows for interaction, communication, and orientation with how the process of work and execution of standards is carried out. Business leaders should limit their communication and use of word of mouth, rather, should discuss issues directly with the organization and lead by example. Such leaders score high and are seen as able and effective.

Summary

Risk reduction in an organization should focus on changing processes that allow the emergence of risks. Outsourcing is a cost reduction process however, it only transfers risks. Either way, the organization is faced with real problems.

Management should focus on process, strategy execution, and employee productivity. In comparison to leadership, management has a bigger role, especially in providing the organization with internal leadership and innovating ways to improve functionality. Both leadership and management should put efforts to look beyond current situations and future objectives and opportunities for the organization. It should be about current opportunities and the future direction of the organization.

Adoption of new technologies like information management and office automation can significantly improve efficiency in strategy execution in an organization. The underlying need for creativity by leaders and managers is a vital ingredient of success in the organization. Managers should emphasize research and creative innovations focusing on reducing the cost of doing business, production, and provision of products and services. Blau and Scott (1972) insist that management should focus on smart solutions to the organization’s internal constraints like poor employee productivity, execution of strategy, and increasing capacity.

It is right to conclude that, management and leadership are core in shaping the future of an organization. Each can help the organization reduce risks associated with the organization, for example, loss of market share, decline in sales, or competition. It is the role of leaders and managers to effectively manage and lead the organization. Management practices can seek and implement cost reduction strategies and improve the organization’s capacity to grow and perform as a leader in a sector. On the other hand, it is the role of organizations to put able leaders and managers in charge.

References

Baker Kathryn and Branch Kristi 2002. Concepts Underlying Organizational Effectiveness: Trends in the Organization and Management Science Literature (Ed).

Chester. Barnard 1938. The Functions of the Executive. Cambridge, MA: Harvard University Press.

Blau, Peter M., and W. Richard Scott. 1962. Formal Organizations: A Comparative Approach. San Francisco: Chandler Publishing Company.

Grusky, Oscar, and George A. Miller. 1970. The Sociology of Organizations. New York: The Free Press.Kaplan, R.S., and D.P. Norton. The Balanced Scorecard. Boston, MA: Harvard Business School Press.

Hammer, Michael, and James Champy. 1994. Reengineering the Corporation: A Manifesto for Business Revolution. New York: Harper business.

Kotter, John, and James L. Heskett. 1992. Corporate Culture and Performance. New York: The Free Press.

Kutzke Todd 2010. Reducing Operational Risk through Business Continuity Management; Information Security. Thoughts & Experiences from Todd Kutzke. Web.

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BusinessEssay. 2021. "Role of Management and Leadership in Business Risk." December 8, 2021. https://business-essay.com/role-of-management-and-leadership-in-business-risk/.

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