Introduction

Management is one of the most widely used buzzwords in business. It has been felt that management is essential in all business categories, irrespective of size, industry, objectives, etc. Failing to ensure proper management results in the extinction of businesses. So, it is mandatory to know about the Importance of management in your organization. In this article, I will discuss why management is important in all kinds of organizations, especially in small businesses, and its key functions.

What is management?

Management is the process individuals/organizations use to achieve their objectives by coordinating their resources efficiently and through proper mechanisms of planning, organizing, leading, and controlling performance & manpower. It is like a brain in a human body. Just like the brain commands our body what to do, the management commands all the entities of an organization.

Elaboration -

According to the modern business scholar HBS Dean, Nitin Nohria, "I think of management as working with other people to make sure the goals an organization has articulated are executed." [1] It means the organization's management chooses the path the company should take, and it's their responsibility to manage the business across internal and external environments. Sometimes, management works with the people in the organization and gets work done through proper guidance and monitoring. Or sometimes it involves deciding what the company should produce, how it should go to market, who it should sell its solutions to, and so on. It is a concept of dynamic rather than stagnant existence in which events and interactions must be viewed as dynamic, continuous, and adaptable as a whole. As a result, management as a process encompasses a wide range of actions and sub-activities.

 To illustrate the concept more clearly, let's take the case of Netflix and examine how management is an integral part of this organization. Suppose the company's administration has planned to launch a new series for its consumers in the first month of next year. Here, they have decided, after evaluating suitability, to acquire a new customer base. Then they organized the necessary resources for the project, hired staff, properly trained them to operate all involved activities, led them during production, and finally monitored the outcomes that helped the company achieve its goals. So, in this whole process, all the decisions made by responsible individuals at all levels of the hierarchy, and the processes they used to achieve Netflix's business objective, are the core activities of management. That's what management does continuously in every organization in different ways. 

Functions of management -

1. Planning: The process of thinking and setting in place what the organization will do in the future to achieve its goals.
2. Organizing: It refers to assigning tasks, grouping work into departments, delegating power with appropriate accountability, and distributing resources across the company to achieve shared objectives.
3. Staffing: It concerns employee recruitment, selection, training, development, appraisal, and compensation.
4. Directing: The process of training, guiding, and overseeing workers’ performance to achieve predefined goals.
5. Controlling: Controlling is the process of ensuring that actual actions match the standards set earlier.[2]

Types of business management in small businesses –

• Financial management: The process of planning, sourcing, regulating, and controlling an organization's financial assets to utilize its resources efficiently. It concerns investment, financing, and related decisions.
• Marketing management: The study, planning, execution, and monitoring of programs designed to achieve desired interactions with target markets to achieve organizational goals. In small businesses, this department includes sales management, brand management, and supply chain management. [3]
• Accounting: The process of acquiring and evaluating financial data on business activities, documenting transactions, and preparing financial statements is known as business accounting. Sometimes, small businesses do not distinguish between financial management and accounting.
• HRM: Human Resource Management refers to the systematic processes designed to assist in managing workers and other stakeholders within a business. This Important function concerns staff recruitment, remuneration, and work assignments.
• Strategic management: Strategic management is the systematic use of a company's resources to achieve its goals and objectives. This type of management is essential in a small business to achieve its goals successfully.
• Operations management: It is a branch of business that deals with the management of business processes to increase an organization's efficiency. It entails planning, managing, and supervising the organization's procedures in order to generate the best feasible operational profit by balancing income and expenses.This function has significant Business importance, as it ensures maximum efficiency by properly utilizing resources. 

Importance of management in small business -

Management is an integral part of every business organization. But when it comes to small businesses, the Importance of managementbecomes much more intense. A single decision by the management can completely change the route of the business. In this section of the article, I will discuss why management is important in small businesses.

Ensures maximum Efficiency: In every small business, it is mandatory to ensure efficiency for greater profitability and proper resource utilization. Management can help your organization be more efficient and productive in its operations. Generally, operations management is concerned with tasks such as these. This important function ensures that the production output is maximized with the minimum possible input. Management provides the right person with the right skills at the right time, enabling the organization to achieve maximum productivity in the production of goods or services. It also fosters synergy across different production systems and ensures a smooth supply chain, preventing production from being hindered. [4]

For example, suppose you have a software firm that develops different software for its clients. Previously, you needed 15 software engineers per month to meet market demand. But you have predicted that the demand will increase in the next quarter. So here, you need to increase the number of devices, machinery, and, definitely, manpower. Here comes the magic of operations management. Proper operations management can help you hire staff with the right skills and equipment to deliver optimal output. Also, the same number of devices and manpower can be used to produce more output with the right management. Proper management practices will ensure maximum efficiency and help your business become more profitable.

Reduces costs significantly: Management can significantly reduce your business's costs by properly utilizing the organization's financial resources and other assets. Cost is a major factor for small businesses and can affect profitability more than for big corporations. This is why management is important for small businesses. Organizations' management teams put a lot of work into differentiating the costs that genuinely drive their competitive advantage from those that don't. They make judgments about where to trim and where to invest based on the need to sustain their most valuable assets: the capabilities that allow them to provide distinctive value to consumers. Especially, the cost management department identifies opportunities to minimize costs, and the financial management team makes decisions that reduce your organization's cost of capital. It is really important for small businesses to be cost-efficient in order to compete in the market.

For example, if you have a business organization that manufactures pet food and distributes it to the local market. Your products need to be cost-efficient for the consumers. Otherwise, they will go for the solutions of the big companies that have more reputation in this field. Only management can help you in such cases by minimizing the costs of your raw materials, by selecting proper sourcing, reducing the marketing expenditure and optimizing it according to the market situation, increasing the productivity rate of your labour by proper motivation and leadership, monitoring the operations and solving the deviated results for constant improvement.

Ensures Long-term growth: Managementensures your business grows continuously andachieves its long-term goals. Strategic management is concerned with this kind of objective. The primary goal of strategic management is to improve the firm's long-term strategic competitiveness. It is feasible to devise and implement strategies that add value to the firm. It focuses on identifying opportunities and risks, as well as the firm's strengths and limitations, to build plans for its survival, development, and expansion. To sustain in the long term and grow consistently, your small business needs to achieve both short-term and long-term goals. Only proper management can ensure this by making appropriate & timely decisions and properly utilizing your organization's resources. 

Reduces the risk to your business: Management is essential to reduce risks of all types. Management helps a business to maintain a balance between its risks and profit. Especially, financial management is involved in risk mitigation activities. By creating a diversified investment portfolio and selecting appropriate business routes, management reduces risk and ensures the farm does not go extinct due to its decisions. Also, proper monitoring and controlling minimize the risk of making a mistake again in the future. In small businesses, it's highly important that the organization have a proper risk management team. Otherwise, it can easily wind up, as small businesses have weaker financial capabilities. Only adroit management can ensure that.

Helps build a Consumer-Centric business: To strengthen their market position, small businesses need to deliver the value consumers want. A consumer-centric business can grow rapidly and expand into other forms of business. Efficient management can be the most effective way to build a consumer-centric business. The introduction of MIS can help your management team use consumer data to make data-driven decisions that best serve consumers.  

Ensures Constant improvement: Management boosts your business’s performance and the products or services you produce, which continue to improve. The business performance improved through the management's proper control and monitoring practices. After each business period or project, the management team evaluates performance and compares it with the standard they previously set. They also compare it with the previous performance. Then they identify loopholes and areas for improvement. Small businesses need to continually improve their performance to grow. In that case, only management can help your small business grow by improving its performance.

Build an enriched Workplace culture: Human resources are considered the most valuable asset of any business organization. Especially in small businesses, the organization's fate largely depends on its human resources. Thus, the HRM dimension was created to utilize manpower effectively. Management can make the best use of your small business’s human resources by staffing, leading, motivating, and directing. Mainly, the HRM function is involved with these managerial actions. Management trains employees according to organizational needs, directs them under effective leadership, and motivates them to increase productivity and reduce turnover. Effective management practices help small businesses build a rich workplace culture and fully utilize their human resources.

Getting Social Goals Accomplished: Any organization receives resources from society for its operations, such as people, transportation, communication, and infrastructure. In exchange, the organization should meet its social obligations by paying the right taxes, paying fair salaries, reducing waste and pollution, providing high-quality products and services, and avoiding unfair trade practices, among other things. Small businesses are more involved with societal factors. Management helps the organization to meet its social responsibilities and build goodwill in society.

Bottom line

Efficient management is the key to the success and growth of small businesses. It helps your organization make effective decisions at every stage and in every department. Ensuring a proper management system in the organization from the initial stage will minimize its barriers to growth and sustain it in the long term.

References:

1. Leadership vs management - Harvard Business School official website;

• Management: Principles and Practice - Book by Ricky W Griffin;
• Principles of Marketing - book by Philip Kotler;
• Operations Management- book by William J Stevenson (14th edition);
• How to cut costs more strategically – HBR;