Midterm Pointer - Reviewer - Principles of Management and Organization PDF

According to Corporate Finance Institute (CFI), Management theories are concepts surrounding recommended management strategies, which may include tools such as frameworks and guidelines that can be implemented in modern organizations. Generally, professionals will not rely solely on one management t...

According to Corporate Finance Institute (CFI), Management theories are concepts surrounding recommended management strategies, which may include tools such as frameworks and guidelines that can be implemented in modern organizations. Generally, professionals will not rely solely on one management theory alone, but instead, introduce several concepts from different management theories that best suit their workforce and company culture. Definition and Functions of Management Management exists to some degree in the factory, office, school, bank, store, labor union, hotel, church, armed forces, hospital or home Management is defined in so many ways depending upon the viewpoints, beliefs and interpretations of the manager. Management is the process of coordinating and overseeing the work performance of individuals working together in an organization, so that they can accomplish their chosen aims/goals. Management functions include planning, organizing, staffing, leading, and controlling (POSDICON). Planning is the determining of the organization’s goals, defining strategic actions to accomplish them, developing coordination/integration activities, and allocating appropriate organizational resources needed to achieve them. Organizing is the assigning of tasks, setting a part of funds, and bringing harmonious relations among the individual s and work groups/teams in the organization. Staffing is the filling-up of the different job positions in the organization’s structure. Leading is the influencing /motivating of others to do their best so that their work efforts result in the achievement of organizational goals. Controlling involves the evaluating and correcting, if necessary, of the work performance of individuals or work groups /teams in order to make sure that they all are working towards a common goal. Figure 1.1 The Five Functions of Management Management is a distinct process of planning, organizing, staffing, directing and controlling (POSDICON), performed to determine and accomplish stated objectives by the use of human being and other business resources. Figure 1.2 The Meaning of Management Management is both art and science. It is an art because it results in the accomplishment of objectives using human efforts. It requires skill and careful study in the management of any endeavor. It is a science because it is systematic body of knowledge. It gathers and analyzes facts and formulates general laws of principles from these facts. As an art and science, therefore, management seeks to integrate into a unified, coordinated whole the essential factors that make up an organization. Evolution of Management Theories Evolution of Management Theories involves the improvement of work management methods from simple to more complex ones which also focus on customer satisfaction and conduct of people at work. The expansion and development of these theories are necessary in order to adapt to the changing times. Management theories include the following: Scientific Management Theory makes use of the step by step, scientific methods for finding the single best way for doing a job. Frederick W. Taylor (1856-1915) is known as the Father of Scientific Management. Taylor’s Scientific Principles are as follows: 1. develop a science for each element of individual’s work to replace the old rule of thumb method. 2. scientifically select and then train, teach and develop the workers; 3. heartedly cooperate with the workers so as to ensure that all work is done in accordance with the principles of the science that has been developed; and 4. divide the work and responsibility almost equally between management and workers. General Administrative Theory concentrate s on the manager’s functions  and what makes up good management exercises or implementation. Henry Fayol (1841-1925) and Max Weber (1864-1920) are the personalities most associated with it. Henry Fayol’s Management Principles: 1. Work division or specialization 8. Centralization 2. Authority 9. Scalar chain of authority 3. Discipline 10. Maintenance of order 4. Unity of command 11. Equity/fairness 5. Unity of direction 12. Stability/security of tenure 6. Subordination of individual of workers interest to general interest 13. Employee initiative 7. Renumeration/pay 14. Promotion of team spirit de corps According to Weber, bureaucracy is an organizational form distinguished by the following components: division of labor  hierarchical identification of job positions detailed rules and regulations impersonal connections with one another Total Quality Management (TQM) is a philosophy of management that focuses on the satisfaction of customers, their needs and expectations. W. Edwards Deming (1900-1993) and Joseph M. Juran(1904-2008) were behind this philosophy. Deming’s 14 Points for Juran’s Fitness of Quality top Management 1.Create constancy of purpose for 1. Quality of design-through market improvement of products and research, product and concept services. 2.Adapt the new TQM philosophy 2. Quality of Conformance -through management, manpower and technology 3.Cease dependence on mass 3. Availability -through reliability, inspection by doing things right and maintainability, and logistic support doing right the first time. 4.End the practice of awarding 4. Full service – through business on the basis of price tag promptness, competence, and alone. integrity 5.Constantly improve the system of Juran’s Quality Planning production and services. Roadmap 6.Institute training. 1. Identify your customer. 7.Adopt and institute leadership. 2. Determine their needs. 8.Drive our fear. 3. Translate them into one’s language. 9.Breakdown barriers between staff 4. Develop a product responds to areas. their needs. 10. Eliminate slogans, focus on 5. Develop processes which are correction of defects in the system. able to produce those product features. 11. Eliminate numerical quota for 6. Prove that process can produce the work force. the product. 12. Remove barriers that rob people 7.Transfer the resulting plans to the of “pride of workmanship”. operating forces. 13. Encourage education and self- improvement for everyone. 14. Take action to accomplish the transformation. Organizational Behavior Approach (OB) is the study of the conduct, demeanor, or action of people at work. 4  An individual engaged in management activities is called a manager. It is safe to assume that organizational success depends upon managers who practice optimal utilization of their human and material resources, and who encourage high levels of performance, effectiveness, and efficiency among the individuals under their care. Functions, Roles and Skills of a Manager Managers supervise, sustain, uphold, and assumes responsibility for the work of others, in his or her work group, team, department, or the organization, in general. Manager is an individual engaged in management activities such as supervising, sustaining, upholding, and assuring responsibilities for the work of others in his/her work group, team, department, on the organization in general. Managerial Levels Organization typically has three levels of management with their respective managers- top level managers, middle-level managers, and frontline or lower-level managers. Top- Level managers are the strategic managers who focus on long term organization concerns: its stability, development, progress, and over- all efficiency and effectiveness. Middle -level managers are tactical managers in-charge of the organization’s departments. They formulate specific objectives and activities based on strategic goals set by top-level managers. Lower-level managers are front-line operational managers. They are responsible for supervising the organization’s day to day activities. 5 Figure 1.3 The Three Levels of Management  FUNCTIONS OF A MANAGER A manager must perform functions like planning, organizing, staffing, directing, and controlling. All these functions are essential for running an organization smoothly and achieving enterprise objectives. The manager’s job is very crucial in an organization. He is a planner, coordinator, producer, and a marketer. The success of an organization will depend upon the caliber of the manager in utilizing the resources for achieving business goals. A manager is a pivotal figure in the task of creating wealth. There are rapid changes in technology, methods of production, marketing techniques, financial set up and the manager should be competent enough to cope with the changes. Managerial Roles the various roles played by managers, such as interpersonal, informational, and decision-making roles. Categories of Managerial Roles according to Mintzberg Leader Interpersonal Liaison figurehead spokesperson Informational monitor disseminator disturbance handler Decisional or Decision-making resource allocator negotiator entrepreneur 6 Managerial Skills: A manager has to perform a number of jobs. It necessitates that a manager should have proper skills to perform different jobs. Managerial skills are conceptual, human and technical. Conceptual skill is the ability to analyze and solve complex problems. Conceptual skills are helpful in decision-making. Since all managers have to take decisions so these skills are essential for all managers, but these become more important as they make up the organizational hierarchy. Human skill is the ability to work well with other people. Managers with human skills can get best out of the people working with them. They know how to communicate, motivate, lead and inspire enthusiasm and trust. These skills are needed by managers at every level but top managers need them the most. Technical skill is the ability to one’s expertise. A manager must have the necessary technical skills or the ability to work with the resources, tools, techniques, procedures etc. First line managers as well as many middle managers have involved in technical aspects of the organization’s operations. These skills can be depicted in a diagram: 7  A manager undertakes several functions from planning to controlling. He must take decisions for every type of activity. The decisions of the manager influence the working of an organization. Intelligence will help a manager in assessing the present and future possibilities for the business. He will be able to foresee the things in advance and take necessary decisions at appropriate time. THE FIRM AND ITS ENVIRONMENT Business firm may be visualized as an institution in society surrounded by environment example are various external forces influencing its functioning. It is said that business is a product of environment or Business is the creation of its environment. Business Environment refers to the factors or elements affecting a business organization. It may be divided into the External and Internal Business Environments Both external (outside) and internal (inside) business environment factors and elements may affect the business firm’s performance, either positively or negatively. The external or environmental factors are beyond the control of the business firm and the success of the firm will depend to a very large extent on its adaptability to the environment its ability to properly design and adjust the internal factors/variables to take advantage of the opportunities and to combat the threats of the environment. COMPONENTS OF THE EXTERNAL BUSINESS ENVIRONMENT A. GENERAL EXTERNAL BUSINESS ENVIRONMENT includes the: economic, sociocultural, politico legal, demographic, technological, and world and ecological situations. ❖ Economic situations may affect management practices in an organization. Inflation, rate of interest, changing options in stock market, 8  people’s spending habit are some examples of factors elements of economic situations. ❖ Sociocultural situations include the customers’ changing values and preferences; customs can also affect management practice s in the companies. ❖ Politico-legal situations refers to national or local laws, international laws, and rules and regulations that influence organizational management. ❖ Demographic situations may also influence some managerial decisions in organization such as gender, age, education level, income, number of family members geographic origin, etc. ❖ Technological situations of companies involve the use of varied types of electronic gadgets and advanced technology such as computers, microprocessors and others have revolutionized business management. ❖ World and ecological situations are related number of global competitors and markets, as well as the nature and conditions of the changing natural environment. All of these must be considered as managers plan, organize, staff, lead and control their respective organizations. B. GENERAL SPECIFIC BUSINESS ENVIRONMENT includes stakeholders, customers, suppliers, pressure groups, investors or owners and employees. Stakeholders are parties likely to be affected by the activities of the organization. Customers are those who patronized the organization’s products and services. Suppliers are those who ensure the organization’s continuous flow of needed and reasonably priced inputs or materials required for producing their goods and rendering their services. Pressure groups are special-interest groups that try to exert influence on the organization’s actions and decisions. Investors or owners provide the company with the financial support it needs. Employees are comprised of those who work for another or for an employer in exchange of salaries/wages or other considerations. The business firm consists of a set of internal factors and is confronted with a set of external factors. This is the relation between a firm and its environment. The internal factors are regarded as controllable factors, as the firm has got control over these factors. COMPONENTS OF THE INTERNAL BUSINESS ENVIRONMENT An organizational Internal business environment is composed of its: resources, research and development, production, procurement of supplies and products and services it offers. 9  The organization’s internal environment is must also be subjected to internal analyses, internal strengths and weaknesses, opportunities and threats (SWOT)with regards to its: ▪ Resources (financial. Physical, mechanical, technological, and human resources ▪ Research and development endeavors ▪ Production of goods ▪ Procurement of supplies (materials, inputs and finance) ▪ Products and services All of these must be considered prior to organizational planning ENVIRONMENTAL FORCES AND ENVIRONMENTAL SCANNING ENVIRONMENTAL SCANNING involves the seeking for and sorting through date about the organization’s environment. It is the process of conducting research through surveys, observation, and other methods, and gathering and analyzing information for the organization. COMPONENTS OF ENVIRONMENTAL SCANNINNG ✓ Developing a competitive Mindset -adapting to environmental uncertainties. ✓ Considering Business scenarios- consider both unfavorable and favorable future conditions. ✓ Business Prediction or business forecasting ✓ SWOT Analysis- SWOT analysis or matrix is one of the most structured and used planning method to evaluate business ventures. ✓ Benchmarking – the process of measuring and comparing one’s own products, services, and practices with those of the recognized industry leaders to identify areas for improvement. Figure 3.1 The SWOT ANALYSIS or MATRIX SWOT ANALYSIS- is a basic straight forward model in environmental scanning which helps the company identifying four key elements: Strengths – it is the quality that produces a competitive advantage with the company. It belongs to internal environment and expects to affect the company in a positive manner. Weaknesses- It is quality that puts the company at a disadvantage. It belongs to internal environment and expects to affect the company in a negative manner. Opportunities – it is a factor in the external environment that is expected to work favorably and positive effect towards company operation. 10  Threats - it is a factor in the internal environment that is expected to have a negative effect on the company operation. SAMPLE SWOT ANALYSIS The Local and International Business Environment of the Firm The Worldwide Environment refers to the external business environment (such us sociocultural, natural, politico-legal and economic, technological factors) around the world. While the Globalization refers to changes in the dimensions of external environment that result increased interdependence and integration among people and integration among people and organizations around the world. Understanding the local and international business environment of the firm requires managers of organizations to sharpen their cultural intelligence. Cultural Intelligence is an individual’s ability to favorably receive and adjust to an unfamiliar way of doing things. This will enable them to develop their ability to accept and adapt to different cultures, both local and international, that may affect the organization to which they belong. Anthropologist Edward T. Hall, as cited by Schermerhorn (2008) noted that the way people approach and deal with the time varies across cultures. MONOCHRONIC CULTURES refer to cultures where people tend to do one thing at a time. It emphasizes punctuality and sticking to set rules. POLYCHRONIC CULTURES are cultures more flexible on time and it is used to accomplish many different things at one time. The culture of different countries is rooted in their history, religion, traditions, beliefs, and deep- seated values, and because of these, managing globally can be very complicated. And beside the cultural environment, the politico-legal and economic environments must also be considered. Some countries have stable laws and good political climate while others have an opposite -unstable and risky political climate. 11  PHASES OF ECONOMIC DEVELOPMENT Economic development is a total process which includes not only economic growth or in the increase in the amount of goods and services produced by the country’s economy but also consider the socio-cultural, political, and spiritual aspects of the country’s growth. Although material wealth accumulation is among the concerns of genuine economic development. Its greater concern is the total improvement of the quality of people’s lives. This, in turn is related to sustainable economic development issues in a country which greatly influences business management. Sustainable economic development ensures that the present needs of a particular generations to also fully met without endangering the ability of future generations to also meet their own needs fully. Business managers must be conscious of their decision s to avoid the abuse of ecological elements- air, water, and soil -as this will threaten sustainable economic development. Economic development phases/stages in a particular country includes economic growth, improvement of human development index, availability of benefits provided by science and technology, societal improvement of the opportunities, and general welfare of its members. Economic growth means increase in the given amount of goods and services produced by the country’s earnings. Human development index is a measure of country’s socio-economic development based on data regarding life expectancy, at birth, educational attainment, literacy, and adjusted real income per capita. PHASES OF ECONOMIC DEVELOPMENT The transition of economic development from one phase to another is usually gradual, and a country may find itself under economic phases at different points of time. Economic development is only possible if a country has maximized the used of its human and natural resources. Since these resources differ greatly in quality and quantity, some countries, experience drastic development. 12  CRITERIA IN CLASSIFYING PHASES OF ECONOMIC DEVELOPMENT A. Means of livelihood B. Extent of Economic C. Medium of Exchange Activity 1.Hunting and fishing Phase 1. Household economy- 1. Barter Economy – during – our ancestors obtained food The needs of the family were primitive era, exchange was by hunting and fishing taken satisfied largely by the efforts done through barter with was directly from the mountains, and contributions of all the the direct exchange of goods seas and the bounties of nature family members. for goods, services to services or services for goods. 2.Pastoral Phase – the 2. Village Economy- When 2. Money Economy- Through creation of groups and the several families organize a time and evolution, money was presence of a large number of village, economic and social used, as a medium of livestock have made man settle relations spread among the exchange. Consequently, a in an area for a longer various families. monetary system period of time. evolved. 3.Handicraft Phase- Items are 3. National Economy- this 3. Money and Credit made by skilled and trained phase involves the grouping Economy- When transactions manual laborers. They made of village into bigger and continued to increase in excellence workmanship of broader social Units. It volume and frequency, it sculpture, jewelry, furniture develops economic activities became imperative to allow porcelain and other wares. on a nationwide scale. others to purchase one’s good or engage one’s services With payments to be paid at some future date. 4.Agricultural Phase- Man’s 4. International Economy- need continuous supply of food with better and modern led to the development of means of transportation and agriculture and the concept of communication, a country land ownership. Man begin to expands its economic work as farmer and fisherman. relationship through international trade and diplomatic cooperation. 5.Industrial Phase- the presence of manufacturing companies in the certain areas of Metro Manila It was the period when machineries were used in factories and industrial plants. All countries have economic problems. We have economic problems because of our resources, money, materials, and machines are limited while our human needs are unlimited. The unfair distribution of productive resources and population explosions have created more economic problems. Some of economic problems to address are income poverty, hunger, disease, lack of adequate shelter, and exclusion, while promoting gender 13 equality, education, and environmental stability. The National Economic and Development Authority (NEDA) has laid out the Philippine Development Plan (PDP) 2011-2016 which “adopts a framework, which is high growth that is sustained generates mass employment and reduces poverty.” The PDP is focused on the following areas: 1. Pursuit of Inclusive Growth 2. Macroeconomic Policy 3. Competitive Industry and Services Sectors 4. Competitive and sustainable Agriculture and Fisheries Sector 5. Accelerating Infrastructure Development 6. Resilient and Inclusive Financial Sector 7. Good Governance and Rule of Law 8. Social Development 9. Peace and Security 10. Conservation, Protection, and Rehabilitation of the Environment and Natural Resources It is evidently from the PDP focused areas as they cover not only in economic and industrial goals of the Philippines but also social, environmental, and peace and security aspects. FORMS OF BUSINESS ORGANIZATION Basically, the role of business is to produce goods and services which consumer needs, therefore business has relationship with the economy. The business firm produces goods and services from the factors of production provided by society. Consumer, in turn buy these goods and services. Business firm thus contribute to the country’s economic growth. One measure of economic growth is the Gross National Product (GNP) defined as the total market value of goods and services produced by a country in any given period. A business enterprise is part of larger economic system. Other groups and individuals affect the way business is managed. They are the owners of the business, employees working for the enterprise, customers buying the goods and services selling machinery, equipment, or materials to the enterprise. The responsibility of a business to the community is a general one. The business should strive to promote the social, economic, and cultural welfare of the community. Kinds of Business 14  1. INDUSTRIES – involved the conversion of raw materials into finished products or goods and the application of labor upon raw materials so that the greater usefulness becomes possible after the process. Manufacturing industries use materials and supplies turned out by the extractive industries and changed these raw materials into various articles of materials for production of goods and new products. Examples: Nokia, Honda, Sony, San Miguel Corp., Shell, Purefoods, etc. 2. COMMERCE – Involves the process of buying and selling where goods are moved from point of production to the point of consumption. Examples: Shoe Mart, National Bookstores, Webster, Robinsons Department Store 3. SERVICE ENTERPRISE- are primarily concerned with the satisfaction of the needs and wants of the customers. a. Public and community services Examples: MERALCO, transportation companies, newspaper publisher b. Professional and trade services Examples: repair shops, building contractor, law offices c. Recreation services Examples: TV stations, theaters, movie productions d. Personal services Examples: restaurants, schools, beauty parlors Forms of Business Organization – may depend on its purpose, nature of operations and resources. However, a business organization’s firm may change with the changing times and the demands they present. CHANGING FORMS OF BUSINESS ORGANIZATIONS 1. Simple business organizations – is an organization with few departments, centralized authority with wide span of control, and with few formal rules and regulations. 2. Functional business organizations – group together people with similar or related duties, practices delegation of authority to functional managers like the personnel managers, sales managers or financial managers but allow CEOs to retain authority for strategic decisions. 3. Divisional business organizations – are made up semi-autonomous, separate business units, with a division head responsible for his or her unit’s performance. 4. Profit business organization-are organizations designed for the purpose of achieving their goals and achieving stability through income generation and profit- making. 5. Non-profit organizations are organizations designed to give service to clients without expecting monetary gains or financial benefits for their endeavors. 6. Open/Flexible business organizations are formed to meet today’s changing 15 work environment. They include team structures, matrix business organizations, project business structures, boundaryless business organizations, and virtual business organizations. Other basic forms of business that are legal in the Philippines are: These are forms of business organizations according to ownership 1. Single Proprietorship- a form of business ownership organized and managed by only one person. 2. Partnership-a business organization where to or more persons contribute money, property, or talent, to carry on a business. 3. Corporation- is an artificial being created by the operation of law, having the rights of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. 4. Cooperative - is a private business owned and operated by the same people that use its products and or services. The purpose of a cooperative is to fulfill the needs of the people running it. Different organizations have different preferences as to business form that is appropriate for their needs and the purpose of their existence. Managers, therefore, must be creative in finding ways to structure or design and organize work in their respective firms. 16